UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March~~June 3130, 2016

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 000-26309

INTEGRATED ENVIRONMENTAL TECHNOLOGIES, LTD.

(Exact name of registrant as specified in its charter)

Nevada

98-0200471

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

4235 Commerce Street
Little River, South Carolina		29566
(Address of principal executive offices)		(Zip Code)

(843) 390-2500

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

	Large accelerated filer [ ]	Accelerated filer [ ]

	Non-accelerated filer [ ] (Do not check if a smaller reporting company)	Smaller reporting company [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

As of ~~May~~August 1310, 2016, there were 320,571,243 shares of the registrant’s common stock, par value $0.001 per share, outstanding.

INTEGRATED ENVIRONMENTAL TECHNOLOGIES, LTD.

INDEX TO FORM 10-Q

		~~Page~~	Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements	4	4
	Consolidated Condensed Balance Sheets (Unaudited) as of March 31, 2016 and December 31, 2015	5
	Consolidated Condensed Balance Sheets (Unaudited) as of June 30, 2016 and December 31, 2015		5
	Consolidated Condensed Statements of Operations (Unaudited) for the Three Months Ended March 31, 2016 and 2015	6
	Consolidated Condensed Statements of Operations (Unaudited) for the Three and Six Months Ended June 30, 2016 and 2015		6
	Consolidated Condensed Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2016 and 2015	7
	Consolidated Condensed Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 2016 and 2015		7
	Notes to the Unaudited Consolidated Condensed Financial Statements	8	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15	16
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	19	22
Item 4.	Controls and Procedures	19	22
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	20	23
Item 1A.	Risk Factors	20	23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	20	23
Item 3.	Defaults upon Senior Securities	20	23
Item 4.	Mine Safety Disclosures	20	23
Item 5.	Other Information	21	23
Item 6.	Exhibits	21	23
Signatures		22	24
Index of Exhibits		~~E-1~~	25

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain information included in this quarterly report on Form 10-Q 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” or “anticipate” or other similar words. These forward-looking statements present our estimates and assumptions only as of the date of this quarterly report on Form 10-Q. 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.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

The consolidated condensed balance sheet as of ~~March~~June 3130, 2016 and the related consolidated condensed statements of operations ~~and~~for the three and six months ended June 30, 2016 and 2015 and cash flows for the ~~three~~six months ended ~~March~~June 3130, 2016 and 2015 for Integrated Environmental Technologies, Ltd. and its wholly-owned subsidiary I.E.T., Inc. (collectively referred to herein as “IET” or the “Company”) included in Item 1, have been prepared by us, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures required under accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted from the following consolidated condensed financial statements pursuant to the rules and regulations of the SEC. The consolidated condensed financial statements include our wholly-owned subsidiary and all significant inter-company transactions and balances have been eliminated. In the opinion of management, the accompanying consolidated financial statements include all adjustments, which are of a normal and recurring nature, necessary to present fairly our financial position and results of operations. It is suggested that the following consolidated financial statements be read in conjunction with the consolidated condensed financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2015.

The results of operations for the three and six months ended ~~March~~June 3130, 2016 and 2015 are not necessarily indicative of the results of the entire fiscal year or of any other period.

Integrated Environmental Technologies, Ltd.

Consolidated Condensed Balance Sheets

(Unaudited)

	March 31, 2016			December 31, 2015
	June 30, 2016			December 31, 2015
Assets
Current assets:
Cash	$	~~274~~79,~~542~~144		$	838,107
Accounts receivable, net		3577,~~261~~825			36,223
Prepaid expenses and other		1032,~~057~~052			14,948
Inventory		~~100~~104,~~918~~251			103,220
Total current assets		~~420~~293,~~778~~272			992,498
Property and equipment, net		~~228~~220,~~227~~642			245,621
Total assets	$	~~649~~513,~~005~~914		$	1,238,119
Liabilities and Stockholders’ Deficiency
Current liabilities:
Accounts payable	$	~~341~~505,~~053~~722		$	209,774
Accrued expenses		~~220~~298,~~299~~336			199,893
Customer deposits		2,000			2,000
Convertible debentures		~~501~~25,~~125~~000			501,125
Total current liabilities		1,064,477			912,792
Note payable		22,497			—
Convertible debentures		815,605			788,501
Total current liabilities		853,555			912,792
Total liabilities		1,880,082			1,701,293
Convertible debentures		1,318,834			788,501
Total liabilities		2,172,389			1,701,293
Commitments and contingencies
Stockholders’ deficiency:
Common stock, $.001 par value; 600,000,000 shares authorized; 311,404,576 shares issued and outstanding		311,405			311,405
Common stock, $.001 par value; 600,000,000 shares authorized; 320,571,243 and 311,404,576 shares, respectively, issued and outstanding		320,571			311,405
Additional paid-in capital		24,~~006~~145,~~704~~434			24,005,008
Accumulated deficit		(2526,~~549~~124,~~186~~480	)		(24,779,587	)
Total stockholders’ deficiency		(1,~~231~~658,~~077~~475	)		(463,174	)
Total liabilities and stockholders’ deficiency	$	~~649~~513,~~005~~914		$	1,238,119

The accompanying notes are an integral part of these unaudited consolidated condensed financial statements.

Integrated Environmental Technologies, Ltd.

Consolidated Condensed Statements of Operations

(Unaudited)

	Three Months Ended March 31,
	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Revenues:
Sales	$	2773,~~798~~338		$	~~144~~151,~~077~~545		$	101,136		$	295,622
Leasing and licensing fees		6,000			6,000			12,000			12,000
		33,798			150,077
		79,338			157,545			113,136			307,622
Cost of sales		1430,~~258~~417			5652,~~430~~411			44,676			108,840
Gross profit		1948,~~540~~921			93105,~~647~~134			68,460			198,782
Operating expenses:
General and administrative		~~276~~235,~~775~~830			~~587~~446,~~709~~286			512,605			1,033,995
Sales and marketing		~~387~~276,~~685~~736			~~422~~249,~~682~~837			664,421			672,519
Research and development		5743,~~369~~839			~~134~~59,~~010~~169			101,208			193,179
		721,829			1,144,401
		556,405			755,292			1,278,234			1,899,693
Loss from operations		(~~702~~507,~~289~~484	)		(1650,~~050,754~~158	)		(1,209,774	)		(1,700,911	)
Other income (expense):
Interest income		7322			~~120~~271			95			390
Interest expense		(67,~~383~~832	)		(11,~~011~~123	)		(135,214	)		(22,134	)
Total other income (expense)		(67,~~310~~810	)		(10,~~891~~852	)		(135,119	)		(21,744	)
Net loss	$	(~~769~~575,~~599~~294	)	$	(1661,~~061,645~~010	)	$	(1,344,893	)	$	(1,722,655	)
Net loss per share, basic and diluted	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.01	)
Weighted average shares outstanding, basic and diluted		~~311~~318,~~404~~657,~~576~~324			~~279~~304,~~195~~160,~~053~~495			315,030,950			291,746,739

The accompanying notes are an integral part of these unaudited consolidated condensed financial statements.

Integrated Environmental Technologies, Ltd.

Consolidated Condensed Statements of Cash Flows

(Unaudited)

	Three Months Ended March 31,
	Six Months Ended June 30,
	2016			2015
Cash flows from operating activities:
Net loss	$	(~~769~~1,~~599~~344,893	)	$	(1,~~061~~722,~~645~~655	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		2247,~~745~~330			2246,~~608~~965
Stock-based compensation expense		13,~~696~~392			~~375~~443,~~088~~378
Interest accreted on convertible debentures		2754,~~104~~208			—
Gain on settlement of accrued expense		(13,550	)		—
Changes in operating assets and liabilities:
Accounts receivable		~~191~~(42,373	)		(5936,~~441~~518	)
Inventory		2(1,~~302~~031	)		(268,~~267~~276	)
Prepaid expenses and other		4(17,~~891~~104	)		~~(7,967~~169	)
Other receivable		—			111,200
Accounts payable		~~132~~296,~~050~~719			~~101~~184,~~319~~533
Accrued expenses		20120,~~406~~693			(~~100~~201,~~210~~454	)
Net cash used in operating activities		(~~558~~896,~~214~~609	)		(~~621~~1,~~315~~242,658	)
Cash flows used in investing activity:
Purchase of equipment		(522,351	)		(1523,~~052~~828	)
Cash flows from financing activities:
Proceeds from sale of common stock, net of offering costs		—137,500			1,913,950
Repayment of note payable		—			(19,717	)
Proceeds from issuance of note payable		24,650			—
Net cash provided by financing activities		—			1,894,233
Repayment of note payable		(2,153	)		(39,780	)
(Decrease) increase in cash		(563,565	)		1,257,866
Net cash provided by financing activities		159,997			1,874,170
(Decrease) increase in cash		(758,963	)		607,684
Cash - beginning of period		838,107			371,292
Cash - end of period	$	~~274~~79,~~542~~144		$	1978,~~629,158~~976
Supplemental disclosure of cash flow information:
Cash paid for interest	$	~~320~~561		$	~~6,909~~1.504
Cash paid for income taxes	$	650		$	900
Noncash operating activities:
Issuance of 171,428 shares of common stock as payment of director fees	$	—		$	12,000
Noncash investing activity:
Parts and materials inventory used in production equipment	$	—		$	35,225
Non-cash financing activities:
Issuance of 1,055,303 shares of common stock as payment of offering costs related to private placements	$	—		$	56,000
Issuance of warrants to purchase 1,450,303 shares of common stock as payment of offering costs related to private placements	$	—		$	47,100

The accompanying notes are an integral part of these unaudited consolidated condensed financial statements.

Integrated Environmental Technologies, Ltd.

Notes to Unaudited Consolidated Condensed Financial Statements

1. Basis of Presentation

The accompanying consolidated condensed 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 $~~643~~560,~~699~~283 and an accumulated deficit of $2526,~~549~~124,~~186~~480 as of ~~March~~June 3130, 2016. The Company also ~~has~~ 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 condensed 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 unprofitable operations and limited assets. The Company continues to execute its strategy of selling Excelyte^® and Catholyte Zero^™ 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.

2. Inventory

As of ~~March~~June 3130, 2016 and December 31, 2015, inventory consisted of parts and materials totaling $~~100~~104,~~918~~251 and $103,220, respectively.

3. Property and Equipment

As of ~~March~~June 3130, 2016 and December 31, 2015, property and equipment, on a net basis, consisted of the following:

	March 31, 2016			December 31, 2015
	June 30, 2016			December 31, 2015
Leasehold improvements	$	328,977		$	328,977
Equipment		~~520~~537,658			515,307
		849,635			844,284
		866,635			844,284
Less: Accumulated depreciation		(~~621~~645,~~408~~993	)		(598,663	)
	$	~~228~~220,~~227~~642		$	245,621

4. Accrued Expenses

As of ~~March~~June 3130, 2016 and December 31, 2015, accrued expenses consisted of the following:

	March 31, 2016		December 31, 2015
	June 30, 2016		December 31, 2015
Accrued compensation	$	~~116~~174,~~455~~990	$	116,455
Accrued interest (see Note 5)		79119,~~267~~346		39,188
Accrued professional fees		24,~~750~~000		22,000
Accrued consulting fees and other expenses		~~21,827~~—		22,250
	$	~~220~~298,~~299~~336	$	199,893

5. Convertible Debentures

April 2007 Convertible Debenture

On April 26, 2007, the Company issued a convertible debenture to an individual investor in the principal amount of $25,000. This convertible debenture matured on January 2, 2009 and remains unpaid and, as a result, such obligation can be placed in default by the holder. 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.

~~During~~For the three and six months ended ~~March~~June 3130, 2016 ~~and 2015~~, the Company recorded a$748 ~~total~~and $1,496, respectively, of interest expense related to this convertible debenture. For the three and six months ended June 30, 2015, the Company recorded $748 and $~~740~~1,488, respectively, of interest expense related to this convertible debenture. As of ~~March~~June 3130, 2016 and December 31, 2015, the outstanding principal on this convertible debenture was $25,000, which was included as a component of current convertible debentures, and the accrued and unpaid interest was $17,~~189~~937 and $16,441, respectively, which was included as a component of accrued expenses (see Note 4).

Zanett Convertible Debenture

On August 21, 2012, the Company issued to Zanett Opportunity Fund, Ltd. an 8% convertible debenture in the amount of $476,125 (the “Zanett August 2012 Debenture”). The Zanett August 2012 Debenture ~~has~~bears interest at a rate of 8% per annum, had a three-year term maturing on August 21, 2015 and ~~bears~~was ~~interest~~originally atconvertible ainto ~~rate of 8% per annum. An aggregate of~~ 4,761,250 ~~shares~~ of the Company’s common stock ~~can be issued~~ ~~upon~~at ~~the~~a conversion price of ~~the~~$0.10 ~~outstanding~~per ~~principal~~share. ~~amount~~Effective ~~due~~July on7, 2016, the Zanett August 2012 Debenture. ~~The~~was ~~Company~~amended ~~has~~to ~~not~~extend ~~made~~the ~~payment~~maturity ondate ~~the~~to ~~outstanding~~December ~~balance~~31, ~~due~~2017 onand reduce the ~~Zanett~~conversion ~~August~~price ~~2012~~to ~~Debenture~~$0.07 ~~and,~~per asshare. As a result of this amendment, ~~such~~the ~~obligation~~Zanett ~~can~~August 2012 beDebenture ~~placed~~is inconvertible ~~default by~~into 6,801,786 shares of the ~~holder~~Company’s common stock.

During the three months ended March 31, 2016 and 2015, the Company recorded $9,496 and $9,392, respectively, of interest expense related to the Zanett August 2012 Debenture. As of March 31, 2016 and December 31, 2015, the outstanding principal on the Zanett August 2012 Debenture was $476,125, which was included as a component of current convertible debentures, and the accrued and unpaid interest was $23,376 and $13,880, respectively, which was included as a component of accrued expenses (see Note 4).

For the three and six months ended June 30, 2016, the Company recorded $9,496 and $18,993, respectively, of interest expense related to the Zanett August 2012 Debenture. For the three and six months ended June 30, 2015, the Company recorded $9,496 and $18,888, respectively, of interest expense related to the Zanett August 2012 Debenture. As of June 30, 2016, the outstanding principal on the Zanett August 2012 Debenture was $476,125, which was included as a component of non-current convertible debentures, and the accrued and unpaid interest was $32,873, which was included as a component of accrued expenses (see Note 4). As of December 31, 2015, the outstanding principal on the Zanett August 2012 Debenture was $476,125, which was included 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 4).

November and December 2015 Convertible Debentures and Warrants

On November 11, 2015, December 3, 2015 and December 18, 2015, the Company issued 12% convertible debentures (the “2015 Debentures”) in the aggregate principal amount of $997,222 to five institutional investors and three individual investors. In connection with the issuance of the 2015 Debentures, the Company issued warrants (the “2015 Debenture Warrants”) to purchase an aggregate of 7,123,014 shares of its common stock. The gross proceeds received in connection with these private placements were $897,500.

The 2015 Debentures mature on the date that is two years from the issuance date, bear interest at a rate of 12% per annum and contain an original issue discount of 10% of the principal amount ($99,722 in aggregate). The entire principal amount of each of the 2015 Debentures is convertible at any time into shares of the Company’s common stock at the option of the respective debenture holder at a conversion price of $0.07 per share. An aggregate of 14,246,029 shares of the Company’s common stock can be issued pursuant to the 2015 Debentures at the current conversion price of $0.07 per share.

The Company separately accounted for the liability and equity components of the 2015 Debentures based upon the relative fair value of the liability and equity components on the respective dates of issuance. As a result, the Company recorded a discount of $117,708 for the 2015 Debentures to account for the relative fair value attributable to the 2015 Debenture Warrants, which is being accreted as interest expense using the effective interest method over the respective two-year terms of each of the 2015 Debentures. In addition, the $99,722 original issue discount is also being accreted as interest expense using the effective interest method over the respective two-year terms of each of the 2015 Debentures.

For the three and six months ended ~~March~~June 3130, 2016, the Company recorded a total of $56,939 ($27,104 accreted) and $113,878 ($54,208 accreted), respectively, of interest expense related to the 2015 Debentures. As of ~~March~~June 3130, 2016 and December 31, 2015, $3868,~~702~~ 536 and $8,867, respectively, of interest due on the 2015 Debentures was accrued and recorded as a component of accrued expenses (see Note 4). As of ~~March~~June 3130, 2016, the unamortized discount on the 2015 Debentures related to the fair value of the 2015 Debenture Warrants was $9883,~~021~~347, the unamortized discount on the 2015 Debentures related to the original issue discount was $8371,~~596~~166 and the net carrying value of the 2015 Debentures was $~~815~~842,~~605~~709, which was recorded as a component of non-current convertible debentures. As of December 31, 2015, the net carrying value of the 2015 Debentures was $788,501, which was recorded as a component of non-current convertible debentures.

6. Stockholders’ Deficiency

Sale of Common Stock

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 ~~March~~June 3130, 2016, 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 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. Effective January 29, 2016, 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 31,140,458 shares. As of ~~March~~June 3130, 2016, options to purchase 2,518,150 shares of the Company’s common stock were outstanding under ~~the~~ the 2012 Equity Incentive Plan and up to 28,622,308 shares of the Company’s common stock remain available for awards under ~~the~~ the 2012 Equity Incentive Plan.

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 three months ended March 31, 2016 is set forth below:

	Stock Option Shares			Weighted Average Exercise Price Per Common Share		Aggregate Intrinsic Value
Outstanding at December 31, 2015		8,365,070		$	0.11	$	—
Granted during the period		—			—		—
Exercised during the period		—			—		—
Terminated during the period		(2,000,000	)	$	0.04		—
Outstanding at March 31, 2016		6,365,070		$	0.13	$	—
Exercisable at March 31, 2016		6,115,070		$	0.13	$	—
Exercisable at December 31, 2015		6,002,570		$	0.13	$	—

~~Information~~A ~~with~~summary ~~respect~~of to stock ~~options~~option ~~outstanding~~transactions ~~and~~under ~~stock~~the ~~options~~Equity ~~exercisable~~Incentive asPlans ofduring ~~March~~the 31six months ended June 30, 2016 is asset ~~follows~~forth below:

				Stock Options Outstanding										Stock Options Exercisable
		Stock Option Shares				Weighted Average Exercise Price Per Common Share				Aggregate Intrinsic Value
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)
Outstanding at December 31, 2015			8,365,070			$	0.11			$	—
$	0.07				2,068,150			$	0.07				4.0		2,068,150	$	0.07		4.0
Granted during the period			—				—				—
$	0.08				450,000			$	0.08				8.9		200,000	$	0.08		8.9
Exercised during the period			—				—				—
$	0.10				2,180,253			$	0.10				2.9		2,180,253	$	0.10		2.9
Terminated during the period			(2,000,000	)		$	0.04				—
$	0.20				833,333			$	0.20				6.0		833,333	$	0.20		6.0
Outstanding at June 30, 2016			6,365,070			$	0.13			$	—
$	0.30				833,334			$	0.30				6.0		833,334	$	0.30		6.0
Exercisable at June 30, 2016			6,115,070			$	0.13			$	—
					6,365,070			$	0.13				4.5		6,115,070	$	0.13		4.3
Exercisable at December 31, 2015			6,002,570			$	0.13			$	—

AInformation ~~summary~~with ofrespect ~~the non-vested shares subject~~ to stock options ~~granted~~outstanding ~~under~~and ~~the~~stock ~~Equity~~options ~~Incentive~~exercisable ~~Plans~~ as of ~~March~~June 3130, 2016 is as follows:

		Stock Option Shares				Weighted Average Grant Date Fair Value Per Share
				Stock Options Outstanding								Stock Options Exercisable
Non-vested at December 31, 2015			2,362,500			$	0.03
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)
Granted during the period			—				—
$	0.07				2,068,150			$	0.07		3.8		2,068,150	$	0.07		3.8
Vested during the period			(112,500	)		$	0.05
$	0.08				450,000			$	0.08		8.7		200,000	$	0.08		8.7
Terminated during the period			(2,000,000	)		$	0.03
$	0.10				2,180,253			$	0.10		2.7		2,180,253	$	0.10		2.7
Non-vested at March 31, 2016			250,000			$	0.05
$	0.20				833,333			$	0.20		5.8		833,333	$	0.20		5.8
$	0.30				833,334			$	0.30		5.8		833,334	$	0.30		5.8
					6,365,070			$	0.13		4.2		6,115,070	$	0.13		4.1

AsA ofsummary ~~March 31, 2016, there was $14,212~~ of ~~total~~the ~~unrecognized~~non-vested ~~compensation~~shares ~~cost~~subject ~~related~~ to ~~non-vested,~~ stock~~-based~~ ~~compensation~~options ~~arrangements~~ granted under the Equity Incentive Plans. ~~That~~as ~~cost~~of isJune ~~expected~~30, to2016 beis ~~recognized~~as ~~over a weighted average period of twenty-six months.~~follows:

	Stock Option Shares			Weighted Average Grant Date Fair Value Per Share
Non-vested at December 31, 2015		2,362,500		$	0.03
Granted during the period		—			—
Vested during the period		(112,500	)	$	0.05
Terminated during the period		(2,000,000	)	$	0.03
Non-vested at June 30, 2016		250,000		$	0.05

As of June 30, 2016, there was $12,516 of total unrecognized compensation cost related to non-vested, stock-based compensation arrangements granted under the Equity Incentive Plans. That cost is expected to be recognized over a weighted average period of twenty-three months.

Warrants to Purchase Common Stock

A summary of warrant transactions during the ~~three~~six months ended ~~March~~June 3130, 2016 is as follows:

	Warrant Shares			Weighted Average Exercise Price Per Common Share		Aggregate Intrinsic Value
Outstanding at December 31, 2015		25,454,701		$	0.08	$	3,459
Issued during the period		—1,833,333		$	—0.02		—
Exercised during the period		—			—		—
Terminated during the period		(~~500~~1,250,000	)	$	0.0405		—
Outstanding at March 31, 2016		24,954,701		$	0.08	$	—
Outstanding at June 30, 2016		26,038,034		$	0.08	$	—
Exercisable at March 31, 2016		24,954,701		$	0.08	$	—
Exercisable at June 30, 2016		26,038,034		$	0.08	$	—
Exercisable at December 31, 2015		25,454,701		$	0.08	$	3,459

Warrants issued by the Company contain exercise prices that were approved by the Company’s board of directors. Such exercise prices are generally not less than the quoted market price of the Company’s common stock on the date of issuance. Warrants currently issued either vested immediately or over a period of up to three years and have a maximum term of ten years from the date of issuance.

Information with respect to warrants outstanding and warrants exercisable at ~~March~~June 3130, 2016 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 Remaining Contractual Life (Years)		Weighted Average Exercise Price Per Common Share
$	0.0302 - 0.04		12,~~167~~750,~~442~~775		2.06	$	0.0403		12,~~167~~750,~~442~~775		2.06	$	0.0403
$	0.06 - 0.07		109,~~344~~844,244		3.21	$	0.07		109,~~344~~844,244		3.21	$	0.07
$	0.08 - 0.10		13,443,015		3.86	$	0.10		13,443,015		3.86	$	0.10
			24,954,701		3.5	$	0.08		24,954,701		3.5	$	0.08
			26,038,034		3.3	$	0.08		26,038,034		3.3	$	0.08

As of March 31, 2016, there were no non-vested shares subject to warrants and no unrecognized compensation cost related to warrants.

As of June 30, 2016, there were no non-vested shares subject to warrants and no unrecognized compensation cost related to warrants.

7. Stock-Based Compensation

During the three and six months ended ~~March~~June 3130, 2016 and 2015, the Company recorded stock-based compensation expense as follows:

	Three Months Ended March 31,
	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
General and administrative	$	299	$	~~187~~66,~~357~~894	$	598	$	254,251
Sales and marketing		1,397		~~131~~1,~~554~~396		2,794		132,951
Research and development		—		~~56,177~~—		—		56,176
	$	1,696	$	~~375~~68,~~088~~290	$	3,392	$	443,378

For the three and six months ended ~~March~~June 3130, 2016, the Company recorded stock-based compensation expense related to stock options granted to employees of $1,696 and $3,392, respectively. For the three and six months ended June 30, 2015, the Company recorded stock-based compensation expense related to common stock and stock options granted to employees and directors of $168,~~696~~290 and $~~375~~443,~~088~~378, respectively. For each of the three and six months ended ~~March~~June 3130, 2016 and 2015, the Company did not record any stock-based compensation expense for non-employees.

8. 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 three and six months ended ~~March~~June 3130, 2016, diluted net loss per share did not include the effect of 6,365,070 shares of common ~~stock~~ stock issuable upon the exercise of outstanding stock options, 2426,~~954~~038,~~701~~034 shares of common stock issuable upon the exercise of ~~outstanding~~ outstanding warrants and 19,069,779 shares of common stock issuable upon the conversion of convertible debt, as their effect would be anti-dilutive.

For the three and six months ended ~~March~~June 3130, 2015, diluted net loss per share did not include the effect of 46,~~296~~365,~~920~~070 shares of common ~~stock~~ stock issuable upon the exercise of outstanding stock options, 2322,~~472~~440,~~061~~811 shares of common stock issuable upon the exercise of ~~outstanding~~ outstanding warrants and 4,823,750 shares of common stock issuable upon the conversion of convertible debt, as their effect would be anti-dilutive.

9. Subsequent Events

The warrants have a three-year term, are exercisable at $0.02 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 $0.20.

9. Subsequent Events

Issuance of Zero Coupon Secured Convertible Debentures

On July 14, 2016, the Company issued zero coupon secured convertible debentures to eight individual investors and one institutional investor (each a “July 2016 Debenture” and collectively, the “July 2016 Debentures”) in the aggregate principal amount of $670,557. In connection with the issuance of the July 2016 Debentures, the Company issued warrants (the “July 2016 Debenture Warrants”) to purchase an aggregate of 67,055,700 shares of its common stock. The gross proceeds received in connection with this private placement were $603,500.

The July 2016 Debentures have a one-year term maturing on July 14, 2017, contain an original issue discount of 10% and are secured by the Company’s assets. The entire principal amount of a July 2016 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 $0.01 per share (the “July 2016 Debenture Conversion Price”). If at any time subsequent to the issuance of the July 2016 Debentures and prior to the conversion of the July 2016 Debentures into shares of the Company’s common stock, the Company closes on a financing involving the issuance of convertible debentures or shares of its common stock with or at a per share conversion price or purchase price that is less than the July 2016 Debenture Conversion Price (the “Subsequent Financing Per Share Price”), then the July 2016 Debenture Conversion Price will be reduced to seventy-five percent (75%) of the Subsequent Financing Per Share Price. The quoted market price of the Company’s common stock on July 14, 2016 was $0.009 per share. An aggregate of 67,055,700 shares of the Company’s common stock can be issued pursuant to the July 2016 Debentures at the current conversion price of $0.01 per share.

The July 2016 Debenture Warrants have a five-year term and provide the holders with the right to purchase an aggregate of 67,055,700 shares of the Company’s common stock at $0.01 per share. All of the shares of the Company’s common stock underlying the July 2016 Debenture Warrants are fully vested. The July 2016 Debenture Warrants contain a cashless exercise provision and are callable in the event the closing price of the Company’s common stock averaged over a period of ten (10) consecutive trading days is equal to or greater than $0.04 per share. The exercise price of the July 2016 Debenture Warrants is subject to adjustment for stock dividends, stock splits, or similar events.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

IET was originally incorporated in Delaware on February 2, 1999 and is now a Nevada corporation. IET is headquartered in Little River, South Carolina and operates 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-based solution, commonly known as anolyte, that it markets and sells under the brand name Excelyte^®, as well as an anti-oxidizing, mildly alkaline solution, commonly known as catholyte, that it markets under the brand name Catholyte Zero^™. Both Excelyte^® and Catholyte Zero^™ provide an environmentally friendly and effective alternative for cleaning, sanitizing and disinfecting as compared to the hazardous chemicals traditionally prevalent in commercial use. IET manufactures proprietary equipment, which it markets under the brand name EcaFlo^™, to produce Excelyte^®and Catholyte Zero^™ for distribution by IET and, under certain circumstances, such equipment is leased by IET to customers for use at their facilities.

Products

We produce Excelyte^®, which is effective as a disinfectant without leaving a harmful residue. The naturally occurring properties and less-corrosive nature of Excelyte^® make it an excellent replacement for quaternary ammonia, sodium hypochlorite (bleach) and other hazardous chemicals traditionally used as biocides/disinfectants and sanitizers. Excelyte^®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.

Excelyte^®is registered with the U.S. Environmental Protection Agency (the “EPA”) as a tuberculocidal hospital-level, hard non-porous surface disinfectant (EPA Registration No. 82341-1). Our EPA registration for Excelyte^®includes kill claims for: (1) various pathogens including, but not limited to, Mycobacterium bovis (Tuberculosis), Salmonella enterica, Pseudomonas aeruginosa, Staphylococcus aureus, methicillin-resistant Staphylococcus aureus (MRSA), H1N1 influenza virus (swine flu) and Respiratory Syncytial virus (RSV); (2) 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); (3) high-risk blood-borne pathogen human immunodeficiency virus (HIV); (4) the food-borne pathogens Listeria monocytogenes and Escherichia coli (E. coli); (5) Yeast, Candida albicans; and (6) the non-enveloped viruses adenovirus, norovirus, rhinovirus and rotavirus. Our EPA registration for Excelyte^®also includes approval for use in oil and gas applications as a hydrogen sulfide (H₂S) scavenger/eliminator and biocide. Excelyte^® is also 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.

15We also produce Catholyte Zero™, which is an anti-oxidizing, mildly alkaline solution that is effective as an industrial degreaser and surfactant. We have recently developed a new proprietary oil well treatment protocol that consists of a dual treatment regimen utilizing both Excelyte® and Catholyte Zero™. The protocol has significantly increased oil production, while substantially reducing hydrogen sulfide, iron sulfide scales (FeS), bacteria and bacterial deposits present in oil wells.

We also produce Catholyte Zero™, which is an anti-oxidizing and mild alkaline solution that is effective as an industrial degreaser and surfactant. We have recently developed a new proprietary oil well treatment protocol that consists of a dual treatment regimen utilizing both Excelyte® and Catholyte Zero™. The protocol has significantly increased oil production, while substantially reducing hydrogen sulfide, iron sulfide scales (FeS), bacteria and bacterial deposits present in oil wells.

IET will also lease EcaFlo^® equipment to a customer in certain situations if the customer’s business model and required volume of solution 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 solution 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 solution 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 Excelyte^® and Catholyte Zero^™ directly to customers. In certain situations, a customer’s business model and required volume of solution may make it advantageous for us to 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 equipment.

Currently, we are primarily focused on selling large volumes of Excelyte^® and Catholyte Zero^™ to the upstream oil and gas production market (exploration and production companies), and the majority of our sales, marketing, research and development, and administrative resources are dedicated to this endeavor. However, we also sell smaller volumes of Excelyte^® to the healthcare and food production markets, and we maintain long-term interest in developing these business segments further.

Critical Accounting Policies and Estimates

The discussion and analysis of the Company’s financial condition and results of operations are based upon the interim consolidated financial statements contained elsewhere herein, which have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements required us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and 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.

The critical accounting estimates that we believe affect the more significant judgments and estimates used in preparation of the consolidated financial statements contained elsewhere herein are described in the Management’s Discussion and Analysis of Financial Condition and Results of Operations and in the Notes to the Consolidated Financial Statements included in the Company’s annual report on Form 10-K for the year ended December 31, 2015. There have been no material changes to the critical accounting policies.

Results of Operations

Revenue. Revenue for the three months ended March 31, 2016 was $33,798, as compared to $150,077, for the three months ended March 31, 2015. The $116,279, or 77%, decrease in revenue for the three months ended March 31, 2016 was primarily the result of a $96,641 decrease in Excelyte® sales and a $16,055 decrease in sales of EcaFlo® equipment parts and related supplies. The decrease in Excelyte® sales was primarily the result of a $115,725 decrease in sales to two of our oil and gas customers who reduced their respective well maintenance budgets and closed down low producing wells due to the significant drop in the price of oil.

Cost of Sales. Cost of sales for the three months ended March 31, 2016 was $14,258, as compared to $56,430 for the three months ended March 31, 2015. The $42,172, or 75%, decrease in cost of sales for the three months ended March 31, 2016 was primarily the result of the decrease in Excelyte® sales to oil and gas customers.

Gross Profit. For the three months ended March 31, 2016 and 2015, gross profit was $19,540 and $93,647, respectively, and gross profit margins were 58% and 62%, respectively. The $74,107 decrease in gross profit for the three months ended March 31, 2016 was primarily the result of the decrease in Excelyte® sales to oil and gas customers. The decrease in gross profit margins for the three months ended March 31, 2016, as compared to the three months ended March 31, 2015, was primarily the result of increased start-up costs at our production facilities during 2016.

General and Administrative Expenses. For the three months ended March 31, 2016, general and administrative expenses were $276,775, as compared to $587,709 for the three months ended March 31, 2015. The $310,934, or 53%, decrease in general and administrative expenses for the three months ended March 31, 2016 was primarily the result of a $187,058 decrease in stock-based compensation expense for employees, a $78,325 decrease in consulting fees related to investor and public relations, a $20,881 decrease in travel and conference expenses primarily related to fundraising and business development activities, an $8,000 decrease in director compensation and a $5,796 decrease in employee payroll and associated benefit costs.

Sales and Marketing Expenses. For the three months ended March 31, 2016, sales and marketing expenses were $387,685, as compared to $422,682 for the three months ended March 31, 2015. The $34,997, or 8%, decrease in sales and marketing expenses for the three months ended March 31, 2016 was primarily the result of a $130,157 decrease in stock-based compensation expense for employees and a $13,749 decrease in travel and conference expenses related to sales activities, offset by a $50,146 increase in employee payroll and associated benefit costs related to new employees, a $26,000 increase in consulting expenses related to sales and marketing initiatives and a $25,069 increase in rent expense and maintenance expenses related to additional facilities.

~~Research~~Results and Development Expenses. For the three months ended March 31, 2016, research and development expenses were $57,369, as compared to $134,010 for the three months ended March 31, 2015. The $76,641, or 57%, decrease in research and development expenses for the three months ended March 31, 2016 was primarily the result of aOperations ~~$56,177 decrease in stock-based compensation expense for employees and a $22,906 decrease in laboratory testing fees.~~

~~Loss~~Revenue. ~~from~~Revenue ~~Operations.~~for ~~For~~ the three months ended ~~March~~June 3130, 2016, ~~the loss from operations~~ was $~~702~~79,~~289~~338, as compared to $1157,~~050~~545,~~754~~ for the three months ended ~~March~~June 3130, 2015. The $~~348~~78,~~465~~207, or 3350%, decrease in ~~the~~revenue ~~loss from operations~~ for the three months ended ~~March~~ 31June 30, 2016 was primarily the result of a $~~310~~71,~~934~~ 356 decrease in ~~general~~Excelyte® sales and ~~administrative expenses,~~ a $346,~~997~~565 decrease in sales of EcaFlo® equipment parts and ~~marketing~~related ~~expenses~~supplies. ~~and~~The $71,356 decrease in Excelyte® sales was primarily the result of a $76110,~~641~~400 decrease in ~~research~~sales to two of our oil and ~~development~~gas ~~expenses~~customers who reduced their well maintenance budgets and/or closed down low-producing wells, offset by a $7436,~~107~~855 increase ~~decrease~~ in ~~gross~~sales ~~profit~~to onan ~~sales~~existing customer that expanded Excelyte® well maintenance treatments to additional wells in a second basin.

~~Interest~~Revenue ~~Expense.~~for ~~For~~ the ~~three~~six months ended ~~March~~June 3130, 2016, ~~interest expense~~ was $67113,~~383~~136, as compared to $11307,~~011~~622, for the ~~three~~ six months ended ~~March~~June 3130, 2015. The $56194,~~372~~486, or ~~512~~63%, ~~increase~~decrease in ~~interest~~revenue ~~expense~~ for the ~~three~~six months ended ~~March~~June 3130, 2016 was primarily the result of a $56167,~~939~~997 ~~increase~~decrease in ~~interest~~Excelyte® sales ~~expense~~and (a $2722,~~104~~619 ~~accreted~~decrease ~~interest~~in onsales ~~debt~~of ~~discount)~~EcaFlo® equipment parts and related tosupplies. The $167,997 decrease in Excelyte® sales was primarily the ~~2015~~result of a $226,125 decrease in sales to two of our oil and gas customers ~~Debentures~~who reduced their well maintenance budgets and/or closed down low-producing wells, offset by a $36,855 increase in sales to an existing customer that expanded Excelyte® well maintenance treatments to additional wells in a second basin.

~~Net~~Cost ~~Loss~~of Sales. ~~For~~Cost of sales for the three months ended ~~March~~June 3130, 2016, ~~the Company’s net loss~~ was $~~769~~30,~~599~~417, as compared to $152,~~061,645~~411 for the three months ended ~~March~~June 3130, 2015. The $~~292~~21,~~046~~994, or 2842%, decrease in ~~the~~cost ~~net~~of ~~loss~~sales for the three months ended ~~March~~June 3130, 2016 was primarily the result of athe ~~$310,934~~ decrease in ~~general~~Excelyte® ~~and administrative expenses, a $34,997 decrease in~~ sales ~~and~~to ~~marketing expenses~~oil and agas ~~$76,641 decrease in research and development expenses, offset by a $74,107 decrease in gross profit on sales and a $56,372 increase in interest expense~~customers.

Cost of sales for the six months ended June 30, 2016 was $44,676, as compared to $108,840 for the six months ended June 30, 2015. The $64,164, or 59%, decrease in cost of sales for the six months ended June 30, 2016 was primarily the result of the decrease in Excelyte^® sales to oil and gas customers.

Gross Profit. For the three months ended June 30, 2016 and 2015, gross profit was $48,921 and $105,134, respectively, and gross profit margins were 62% and 67%, respectively. The $56,213 decrease in gross profit for the three months ended June 30, 2016 was primarily the result of the decrease in Excelyte^® sales to oil and gas customers. The decrease in gross profit margins for the three months ended June 30, 2016, as compared to the three months ended June 30, 2015, was primarily the result of increased start-up costs at new production facilities during 2016.

For the six months ended June 30, 2016 and 2015, gross profit was $68,460 and $198,782, respectively, and gross profit margins were 61% and 65%, respectively. The $130,322 decrease in gross profit for the six months ended June 30, 2016 was primarily the result of the decrease in Excelyte^® sales to oil and gas customers. The decrease in gross profit margins for the six months ended June 30, 2016, as compared to the six months ended June 30, 2015, was primarily the result of increased start-up costs at new production facilities during 2016.

General and Administrative Expenses. For the three months ended June 30, 2016, general and administrative expenses were $235,830, as compared to $446,286 for the three months ended June 30, 2015. The $210,456, or 47%, decrease in general and administrative expenses for the three months ended June 30, 2016 was primarily the result of a $66,595 decrease in stock-based compensation expense for directors, a $63,473 decrease in consulting fees primarily related to investor and public relations, a $38,605 decrease in travel and conference expenses primarily related to fundraising and business development activities, a $22,896 decrease in expenses related to the annual meeting of stockholders, a $7,650 decrease in director compensation, a $7,285 decrease in office-related expenses and a $4,483 decrease in employee payroll and associated benefit costs.

For the six months ended June 30, 2016, general and administrative expenses were $512,605, as compared to $1,033,995 for the six months ended June 30, 2015. The $521,390, or 50%, decrease in general and administrative expenses for the six months ended June 30, 2016 was primarily the result of a $187,058 decrease in stock-based compensation expense for employees, a $140,329 decrease in consulting fees primarily related to investor and public relations, a $66,595 decrease in stock-based compensation expense for directors, a $59,486 decrease in travel and conference expenses primarily related to fundraising and business development activities, a $22,896 decrease in expenses related to the annual meeting of stockholders, a $15,650 decrease in director compensation, a $10,828 decrease in employee payroll and associated benefit costs and a $7,233 decrease in office-related expenses.

Sales and Marketing Expenses. For the three months ended June 30, 2016, sales and marketing expenses were $276,736, as compared to $249,837 for the three months ended June 30, 2015. The $26,899, or 11%, increase in sales and marketing expenses for the three months ended June 30, 2016 was primarily the result of a $28,979 increase in consulting expenses related to sales and marketing initiatives and a $28,554 increase in rent expense and maintenance expenses related to additional facilities, offset by a $28,197 decrease in travel and conference expenses related to sales activities.

For the six months ended June 30, 2016, sales and marketing expenses were $664,421, as compared to $672,519 for the six months ended June 30, 2015. The $8,098, or 1%, decrease in sales and marketing expenses for the six months ended June 30, 2016 was primarily the result of a $130,157 decrease in stock-based compensation expense for employees and a $34,400 decrease in travel and conference expenses related to sales activities, offset by a $59,483 increase in consulting expenses related to sales and marketing initiatives, a $53,622 increase in rent expense and maintenance expenses related to additional facilities and a $44,609 increase in employee payroll and associated benefit costs related to new employees.

Research and Development Expenses. For the three months ended June 30, 2016, research and development expenses were $43,839, as compared to $59,169 for the three months ended June 30, 2015. The $15,330, or 26%, decrease in research and development expenses for the three months ended June 30, 2016 was primarily the result of a $5,383 decrease in consulting fees related to regulatory and patent activities, a $4,737 decrease in supplies and a $3,053 decrease in laboratory testing fees.

For the six months ended June 30, 2016, research and development expenses were $101,208, as compared to $193,179 for the six months ended June 30, 2015. The $91,971, or 48%, decrease in research and development expenses for the six months ended June 30, 2016 was primarily the result of a $56,176 decrease in stock-based compensation expense for employees, a $25,960 decrease in laboratory testing fees, an $8,555 decrease in supplies and a $7,409 decrease in consulting fees related to regulatory and patent activities.

Loss from Operations. For the three months ended June 30, 2016, the loss from operations was $507,484, as compared to $650,158 for the three months ended June 30, 2015. The $142,674, or 22%, decrease in the loss from operations for the three months ended June 30, 2016 was the result of a $210,456 decrease in general and administrative expenses and a $15,330 decrease in research and development expenses, offset by a $56,213 decrease in gross profit on sales and a $26,899 increase in sales and marketing expenses.

For the six months ended June 30, 2016, the loss from operations was $1,209,774, as compared to $1,700,911 for the six months ended June 30, 2015. The $491,137, or 29%, decrease in the loss from operations for the six months ended June 30, 2016 was the result of a $521,390 decrease in general and administrative expenses, a $91,971 decrease in research and development expenses and an $8,098 decrease in sales and marketing expenses, offset by a $130,322 decrease in gross profit on sales.

Interest Income. For the three months ended June 30, 2016, interest income was $22, as compared to $271 for the three months ended June 30, 2015. For the six months ended June 30, 2016, interest income was $95, as compared to $390 for the three months ended June 30, 2015.

Interest Expense. For the three months ended June 30, 2016, interest expense was $67,832, as compared to $11,123 for the three months ended June 30, 2015. The $56,709, or 510%, increase in interest expense for the three months ended June 30, 2016 was primarily the result of a $56,939 increase in interest expense ($27,104 accreted interest on debt discount) related to the 2015 Debentures.

For the six months ended June 30, 2016, interest expense was $135,214, as compared to $22,134 for the six months ended June 30, 2015. The $113,080, or 511%, increase in interest expense for the six months ended June, 2016 was primarily the result of a $113,878 increase in interest expense ($54,208 accreted interest on debt discount) related to the 2015 Debentures.

Net Loss. For the three months ended June 30, 2016, the Company’s net loss was $575,294, as compared to $661,010 for the three months ended June 30, 2015. The $85,716, or 13%, decrease in the net loss for the three months ended June 30, 2016 was primarily the result of a $210,456 decrease in general and administrative expenses and a $15,330 decrease in research and development expenses, offset by a $56,709 increase in interest expense, a $56,213 decrease in gross profit on sales and a $26,899 increase in sales and marketing expenses.

For the six months ended June 30, 2016, the Company’s net loss was $1,344,893, as compared to $1,722,655 for the six months ended June 30, 2015. The $377,762, or 22%, decrease in the net loss for the six months ended June 30, 2016 was primarily the result of a $521,390 decrease in general and administrative expenses, a $91,971 decrease in research and development expenses and an $8,098 decrease in sales and marketing expenses, offset by a $130,322 decrease in gross profit on sales and a $113,080 increase in interest expense.

Liquidity and Capital Resources

As of ~~March~~June 3130, 2016, ~~IET~~the Company had a working capital deficiency of $~~643~~560,~~699~~283 and cash on hand of $~~274~~79,~~542~~144. The $~~563~~758,~~565~~963 decrease in cash on hand from December 31, 2015 was primarily the result of payments to fund our continuing operating expenses.

During the past several years, we 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 and the issuance of convertible debentures.

On April 20, 2016, the Company ~~sold~~received gross proceeds of $137,500 in connection with the sale of an aggregate of 9,166,667 shares of common stock and warrants to purchase 1,833,333 shares of common stock ~~to two individual investors for an aggregate purchase price of $137,500, or $0~~.~~015 per share. The Company incurred an aggregate of $6,875 of offering costs in connection with these transactions.~~

18On July 14, 2016, the Company received gross proceeds of $603,500 in connection with the issuance of the July 2016 Debentures.

As of ~~May~~August 1610, 2016, our cash position was approximately $~~200~~418,000. If we are not able to generate profitable operations from ~~the~~ 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 four ~~two~~ months from the filing date of this quarterly report on Form 10-Q. We ~~did~~have ~~not~~reduced ~~make~~operating ~~$501,125~~expenses ofand ~~principal~~effective July ~~payments~~1, ~~due~~2016, onDavid ~~certain~~R. ~~convertible~~LaVance, ~~debentures~~our President and Chief Executive Officer and Thomas S. Gifford, asour aExecutive ~~result~~Vice President and Chief Financial Officer, ~~these~~each ~~obligations~~agreed ~~can~~to bereduce ~~placed~~their ~~into~~respective ~~default~~annual bysalary to $110,000. Prior to the ~~holders~~reduction, Mr. LaVance’s ~~Our~~annual ~~independent~~salary ~~registered~~was ~~public~~$235,000 ~~accounting~~and ~~firm~~Mr. ~~included~~Gifford’s anannual ~~emphasis~~salary ofwas a$200,000. ~~matter~~The ~~paragraph~~reduced insalaries ~~its~~will ~~report~~remain ~~included~~ in ~~our~~effect ~~annual~~until: ~~report~~(a)(i) onIET ~~Form~~reaches 10positive earnings before interest, taxes, depreciation and amortization, adjusted for non-Kcash expenses (“Adjusted EBITDA”), for one calendar quarter, and (ii) the ~~year~~subsequent ~~ended~~calendar ~~December~~quarter 31Adjusted EBITDA is projected to remain positive, factoring ~~2015~~in the increased salaries for each of Mr. LaVance and Mr. Gifford, ~~which~~or ~~expressed~~(b) ~~substantial~~some ~~doubt~~other ~~about~~corporate ~~our~~activity ~~ability~~occurs towhereby an ~~continue~~adjustment is justified, as ~~a going~~determined ~~concern~~by our compensation committee. ~~Our~~We ~~consolidated~~also ~~condensed~~deferred ~~financial~~certain ~~statements~~vendor ~~included~~payments ~~herein~~until doour cash flow position improves. We did not ~~include~~make ~~any~~a ~~adjustments~~$25,000 ~~related~~principal topayment due on a convertible debenture and, as a result, this obligation ~~uncertainty~~can be placed into default by the holder.

WeOur ~~have~~independent noregistered ~~lending~~public ~~relationships~~accounting ~~with~~firm ~~commercial~~included ~~banks~~an ~~and~~emphasis ~~are~~of ~~dependent~~a onmatter ~~our~~paragraph ~~ability~~in toits ~~attain~~report ~~profitable~~included ~~operations~~in ~~and~~our ~~raise~~annual ~~additional~~report ~~capital~~on ~~through~~Form ~~one~~10-K ~~or more equity and/or debt financings in order to continue operations. While we are working toward attaining profitability~~ for ~~our~~the ~~continuing~~year ~~operations~~ended ~~and~~December ~~pursuing~~31, ~~potential equity and/or debt investors~~2015, ~~there~~which ~~can~~expressed besubstantial nodoubt ~~assurance that~~about ~~we will be successful in~~ our ~~efforts.~~ability ~~From time~~ to ~~time,~~continue weas ~~engage placement agents to assist us in our financing initiatives.~~a ~~Any~~going ~~additional equity financing may result in substantial dilution to our stockholders~~concern. IfOur weconsolidated ~~are~~condensed ~~unable~~financial tostatements ~~attain~~included ~~profitable operations~~herein ordo ~~secure~~not ~~additional~~include ~~capital,~~any weadjustments ~~will~~related ~~explore strategic alternatives, including, but not limited~~ to, ~~the sale of IET~~this uncertainty.

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 sale of the Company.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

IET is a smaller reporting company and is therefore not required to provide this information.

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures

As required by Rule 13a-15 under the Exchange Act, as of the end of the Company’s last fiscal quarter, the Company carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of the Company’s current management, including the Company’s President and Chief Executive Officer and the Company’s Executive Vice President, Chief Financial Officer and Secretary (Principal Financial and Accounting Officer), who concluded that the Company’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 the Company reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in Company reports filed under the Exchange Act is accumulated and communicated to management, including the Company’s President and Chief Executive Officer and the Company’s Executive Vice President, Chief Financial Officer and Secretary (Principal Financial and Accounting Officer), as appropriate, to allow timely decisions regarding required disclosure.

Changes in internal control over financial reporting

Management reviews the Company’s system of internal control over financial reporting and makes changes to the Company’s processes and systems to improve controls and increase efficiency, while ensuring that the Company maintains an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, consolidating activities and migrating processes.

During the Company’s last fiscal quarter, there was no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

IET is a smaller reporting company and is therefore not required to provide this information.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

There were no sales of unregistered securities during the three months ended ~~March~~June 3130, 2016, other than those set forth below or otherwise reported on Forms 8-K filed by IET during the three months ended June 30, 2016.

On April 20, 2016, the Company sold an aggregate of 9,166,667 shares of common stock and warrants to purchase 1,833,333 shares of common stock to two individual investors for an aggregate purchase price of $137,500, or $0.015 per share. The Company will use the proceeds received from this transaction for working capital purposes. In connection with these issuances of common stock, the Company 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.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

The warrants have a three-year term, are exercisable at $0.02 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 $0.20.

The Company will use the proceeds from the sales of common stock described above for working capital purposes, including the continued roll out of its previously disclosed sales and marketing strategy for its oil and gas operations.

In connection with the issuances of shares of common stock and the warrants to purchase common stock described above, the Company relied on the exemption from registration for a private transaction not involving a public distribution provided by Section 4(2) of the Securities Act.

Item 6. Exhibits

See Index of Exhibits Commencing on Page E-1.

2123

SIGNATURES

In accordance with the requirements of the Exchange Act, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	INTEGRATED ENVIRONMENTAL
	INTEGRATED ENVIRONMENTAL TECHNOLOGIES, LTD.
	TECHNOLOGIES, LTD.
August 12, 2016	By:	/s/ David R. LaVance
May 16, 2016	By:	/s/ David R. LaVance
		David R. LaVance
		President and Chief Executive Officer
August 12, 2016	By:	/s/ Thomas S. Gifford
		Thomas S. Gifford
		Executive Vice President,
		Chief Financial Officer and Secretary

May 16, 2016	By:	/s/ Thomas S. Gifford
		Thomas S. Gifford
		Executive Vice President,
		Chief Financial Officer and Secretary

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 29, 2015).
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).
4.3.1		Addendum dated July 7, 2016 to the 8% Convertible Debenture dated August 21, 2012 between Zanett Opportunity Fund, Ltd. and the Company (incorporated by reference to Exhibit 4.3 to the Company’s current report on Form 8-K that was filed with the SEC on July 18, 2016).
4.4		Form of 12% Convertible Debenture issued on: November 11, 2015 in the principal amount of $275,000; December 3, 2015 in the aggregate principal amount of $222,222; and December 18, 2015 in the aggregate principal amount of $500,000 (incorporated by reference to Exhibit 4.5 to the Company’s quarterly report on Form 10-Q for the quarter ended September 30, 2015 that was filed with the SEC on November 13, 2015).
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).
4.5		Form of Zero Coupon Secured Convertible Debenture issued to eight individual investors and one institutional investor on July 14, 2016 in the aggregate principal amount of $670,577 (incorporated by reference to Exhibit 4.1 to the Company’s current report on Form 8-K that was filed with the SEC on July 18, 2016).
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).
10.1		Amended and Restated Registration Rights Agreement between the Company and E. Wayne Kinsey, III and Zanett Opportunity Fund, Ltd. 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).
10.3		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).

~~E-1~~25

Exhibit No.		Description
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).
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 (incorporated by reference to Exhibit 10.7 to the Company’s annual report on Form 10-K for the year ended December 31, 2014 that was filed with the SEC on March 27, 2015).
10.8		Building Lease Agreement, dated November 14, 2014, by and between I.E.T., Inc. and Duchesne Crossing, LLC (incorporated by reference to Exhibit 10.8 to the Company’s annual report on Form 10-K for the year ended December 31, 2014 that was filed with the SEC on March 27, 2015).
10.9		Building Lease Agreement, dated August 31, 2015, by and between I.E.T., Inc. and Wally Moon (incorporated by reference to Exhibit 10.9 to the Company’s annual report on Form 10-K for the year ended December 31, 2015 that was filed with the SEC on March 30, 2016).
10.10		Building Lease Agreement, dated January 28, 2016, by and between I.E.T., Inc. and Ray C. Luna (incorporated by reference to Exhibit 10.9 to the Company’s annual report on Form 10-K for the year ended December 31, 2015 that was filed with the SEC on March 30, 2016).
10.9.1		Addendum dated July 13, 2016 to the Building Lease Agreement dated August 31, 2015 by and between I.E.T., Inc. and Wally Moon.
10.11		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).

~~E-2~~26

Exhibit No.		Description
10.10		Building Lease Agreement, dated January 28, 2016, by and between I.E.T., Inc. and Ray C. Luna (incorporated by reference to Exhibit 10.9 to the Company’s annual report on Form 10-K for the year ended December 31, 2015 that was filed with the SEC on March 30, 2016).
10.11		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).
10.12		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).
10.13		Form of Warrant issued to eight individual investors and one institutional investor on July 14, 2016 in connection with the issuance on July 14, 2016 of Zero Coupon Secured Debentures in the aggregate principal amount of $670,577 (incorporated by reference to Exhibit 4.2 to the Company’s current report on Form 8-K that was filed with the SEC on July 18, 2016).
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.
101		The following materials from the Company’s quarterly report on Form 10-Q for the period ended ~~March~~June 3130, 2016, formatted in Extensible Business Reporting Language (XBRL): (i) consolidated balance sheets; (ii) consolidated statements of operations; (iii) consolidated statements of cash flows; and (iv) notes to the consolidated financial statements.

~~E-3~~27

Filing Compare · INTEGRATED ENVIRONMENTAL TECHNOLOGIES, LTD.