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Earthfirst Technologies Inc – ‘SB-2/A’ on 1/19/07

On:  Friday, 1/19/07, at 5:05pm ET   ·   Accession #:  1193125-7-9344   ·   File #:  333-125339

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 1/19/07  Earthfirst Technologies Inc       SB-2/A                 3:1.3M                                   RR Donnelley/FA

Document/Exhibit                   Description                      Pages   Size 

 1: SB-2/A      Amendment No 3 to Form SB-2                         HTML   1.19M 
 2: EX-5.1      Opinion of Sichenzia Ross Friedman Ference LLP      HTML      9K 
 3: EX-23.2     Consent of Aidman Piser & Company Pa                HTML      7K 

As filed with the Securities and Exchange Commission on January 19, 2007

Registration Number 333-125339

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 3 to

FORM SB-2

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

EARTHFIRST TECHNOLOGIES, INCORPORATED

(Name of Small Business Issuer in its Charter)

Copies to:

Darrin M. Ocasio, Esq.

Yoel Goldfeder, Esq.

Sichenzia Ross Friedman Ference LLP

1065 Avenue of the Americas, 21^st Floor

New York, New York 10018

(212) 930-9700

Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this Registration Statement.

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. x

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨ ______

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. ¨ ________

If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. ¨

CALCULATION OF REGISTRATION FEE

The registrant hereby amends this registration statement on such date or date(s) as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the commission acting pursuant to said Section 8(a) may determine.

The information in this prospectus is not complete and may be changed. The securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

PROSPECTUS

Subject to Completion, Dated January 19, 2007

EARTHFIRST TECHNOLOGIES, INCORPORATED

75,679,135 Shares of Common Stock

The selling stockholder named in this prospectus are offering to resell up to 75,679,135 shares of common stock of EarthFirst Technologies, Incorporated, including up to 19,000,000 shares of common stock, 21,052,632 shares of common stock underlying secured convertible notes, 11,162,790 shares of common stock underlying warrants to purchase common stock, 5,570,668 shares of common stock underlying options to purchase common stock which were previously issued by us to the selling stockholder in private transactions and 18,893,045 shares as a good faith estimate of additional shares that may be issued to the selling stockholder pursuant to our obligations under a registration rights agreement. We will not receive any proceeds from the resale of shares of our common stock.

Our common stock currently trades on the Over the Counter Bulletin Board (“OTC Bulletin Board”) under the symbol “EFTI”.

On January 18, 2007, the last reported sale price for our common stock on the OTC Bulletin Board was $0.05 per share.

The securities offered in this prospectus involve a high degree of risk. See “Risk Factors” beginning on page 3 of this prospectus to read about factors you should consider before buying shares of our common stock.

The selling stockholder is offering these shares of common stock. The selling stockholder may resell all or a portion of these shares from time to time in market transactions through any market on which our common stock is then traded, in negotiated transactions or otherwise, and at prices and on terms that will be determined by the then prevailing market price or at negotiated prices directly or through a broker or brokers, who may act as agent or as principal or by a combination of such methods of sale. The selling stockholder will receive all proceeds from the sale of the common stock. For additional information on the methods of resale, you should refer to the section entitled “Plan of Distribution.”

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined whether this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this Prospectus is ________, 2007

TABLE OF CONTENTS

You may only rely on the information contained in this prospectus or that we have referred you to. We have not authorized anyone to provide you with different information. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities other than the common stock offered by this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any common stock in any circumstances in which such offer or solicitation is unlawful. Neither the delivery of this prospectus nor any sale made in connection with this prospectus shall, under any circumstances, create any implication that there has been no change in our affairs since the date of this prospectus or that the information contained by reference to this prospectus is correct as of any time after its date.

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus. You should read the entire prospectus carefully, including, the section entitled “Risk Factors” before deciding to invest in our common stock. EarthFirst Technologies, Incorporated is referred to throughout this prospectus as “EarthFirst” “we” or “us.”

General

We were incorporated in the State of Florida in 1997. We are a specialized holding company engaged in the research, development and commercialization of technologies for the production of alternative fuel sources and the destruction and/or remediation of liquid and solid waste. We are committed to technologies that will produce economically and environmentally superior products from carbon-rich solid and liquid materials considered wastes. As part of our efforts, we are also attempting to develop and commercialize applications of our technologies for the efficient production of alternative fuels. Additional applications of our technologies are focused on the environmentally desirable processing, destruction, purification, and/or remediation of harmful liquid and solid wastes. We also supply electrical contracting services through Electric Machinery Enterprises, Inc., a wholly owned subsidiary acquired in August of 2004. Electric Machinery is a 75 year old electrical contracting company with well established relationships in the construction industry in North, Central and South America as well as the Caribbean islands and various parts of Europe. The types of electrical contracting work performed ranges from small service related repairs and installation to multi-million dollar contracts sometimes spanning multiple years. Current contracts in progress are being performed primarily in Florida and in the Caribbean

We maintain our principal executive offices at 2515 Hanna Avenue, Tampa, Florida 33610 and our phone number is (813) 238-5010 and our facsimile number is (813) 238-8490. We maintain an internet web site at http://www.earthfirsttech.com. The information on our web site is not part of this prospectus. You can review our periodic public filings including financial statements at the Securities and Exchange Commission (“SEC”) internet web site at http://www.sec.gov.

This Offering

* The above information regarding common stock to be outstanding after the offering is based on 604,010,294 shares of common stock outstanding as of January 18, 2007 and assumes the subsequent conversion of our issued secured convertible notes and exercise of warrants by our selling stockholder.

To obtain funding for general corporate purposes we entered into agreements with Laurus Master Funds, Ltd, a Cayman Islands corporation (“Laurus”), pursuant to which we sold convertible debt, an option and a warrant to purchase our common stock to Laurus in a private offering pursuant to exemption from registration under Section 4(2) of the Securities Act of 1933, as amended. The securities sold to Laurus include the following:

1

At the closing of the foregoing financing from Laurus, on March 31, 2005, we received $3,000,000 in connection with the convertible term note. In addition, we are permitted to borrow an aggregate principal amount not to exceed $5,000,000, based upon our eligible accounts receivable and inventory, pursuant to the convertible minimum borrowing note and the revolving note. Accordingly at the closing, we received an additional $3,600,000 for an aggregate of $6,600,000 in financing from Laurus. As of January 18, 2007 the principal amount outstanding under the revolving note is $4,000,000.

RISK FACTORS

An investment in our shares involves a high degree of risk. Before making an investment decision, you should carefully consider all of the risks described in this prospectus. If any of the risks discussed in this prospectus actually occur, our business, financial condition and results of operations could be materially and adversely affected. If this were to happen, the price of our shares could decline significantly and you may lose all or a part of your investment. Our forward-looking statements in this prospectus are subject to the following risks and uncertainties. Our actual results could differ materially from those anticipated by our forward-looking statements as a result of the risk factors below. See “Forward-Looking Statements.”

Risks Related to Our Business :

We have had a history of losses and may never commercialize any of our products or services or earn a profit.

We have incurred losses since we were formed. At December 31, 2005, our accumulated deficit was $(67,675,072). Our losses to date have resulted principally from expenses incurred in our research and development programs, including beta testing, and from general and administrative and sales and marketing expenses. Our first revenues from operations were generated in the fourth quarter of 2004, subsequent to our acquisition of Electric Machinery Enterprises, Inc. We do not expect to incur substantial net losses for the foreseeable future as a result of this acquisition and the prospect of finally commercializing our solid waste technology products. We cannot predict the extent of future net losses, or when we may attain profitability, if at all. If we are unable to generate significant revenue from our electrical contracting business or the sale of our solid waste technology products or attain profitability, we will not be able to sustain operations.

We may need to raise additional capital to fund our operations, and our failure to obtain funding when needed may force us to delay, reduce or eliminate our product development programs or collaboration efforts.

To date, our sources of cash have been primarily limited to related party funding and the sale of our equity securities. On March 30, 2005, we closed on an $8,000,000 credit facility as a committed source of capital. If in the future, our capital resources are insufficient to meet future requirements, we may have to raise additional funds to continue the development, commercialization, marketing and sale of our technologies.

We cannot be certain that additional funding will be available on acceptable terms, or at all. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience significant dilution. Any debt financing, if available, may involve restrictive covenants that impact our ability to conduct our business. If we are unable to raise additional capital if required or on acceptable terms, we may have to significantly delay, scale back or discontinue the development and/or commercialization of one or more of our product candidates, restrict our operations or obtain funds by entering into agreements on unattractive terms.

We have a limited operating history which makes it difficult to analyze our future prospects.

We were organized on August 4, 1997 and up until 2004 when we acquired both World Environmental Solutions Company, Inc. and Electric Machinery Enterprises, Inc., we have conducted only limited operations consisting of negotiating licenses to use our technologies, further research and development, including beta testing, and limited sales efforts. Subsequent to the acquisition of these two subsidiaries, we have generated a consistent revenue stream from electrical contracting and have moved closer to the commercialization of our solid waste technologies. However, there are no assurances that can be given that we will develop a marketing and sales program which will generate significant revenues from the licensing and sales of our solid waste technologies.

2

Improvements or changes in technology may make our products obsolete or difficult to sell at a profit or at all.

There are many competitors seeking to develop efficient means of recycling and disposing of various forms of solid wastes. The effect of numerous federal and state environmental regulations has been to encourage the originators of the waste, governmental entities, and entrepreneurial enterprises to seek to develop more effective and efficient solutions. It is therefore always possible that competitors might develop more effective and efficient waste treatment processes that would render the Company’s technology obsolete.

We have limited manufacturing experience and will rely upon third party contract manufacturers.

To be successful, we must manufacture, or contract with third parties for the manufacture of our current and future products in sufficient quantities and on a timely basis, while maintaining product quality and acceptable manufacturing costs. Should for some reason our third party manufacturers be unable to fulfill their obligation to us, or are no longer able to obtain key elements from a supplier, this could cause us a delay in producing solid waste systems for sale or distribution. These delays could adversely affect our operations or sales or make continued operations or sales unprofitable.

The nature of our products subjects us to product liability risks and any liability for damages resulting from product liability may have a material adverse effect on our business and operating results.

A malfunction of or design defect in certain of our products or improper design, construction, installation or servicing of facility and equipment infrastructure could result in liability, tort or warranty claims. Although we attempt to reduce the risk of exposure from such claims through warranty disclaimers and liability limitation clauses in our sales agreements and by maintaining product liability insurance, we cannot assure you that these measures will be effective in limiting our liability for any damages. Any liability for damages resulting from product malfunctions or services provided could be substantial and could have a material adverse effect on our business and operating results. In addition, a well-publicized actual or perceived malfunction or impropriety involving our products or service could adversely affect the market’s perception of our products in general, regardless of whether any malfunction or impropriety is attributable to our products or services. This could result in a decline in demand for our products and services, which would have a material adverse effect on our business and operating results.

Competition from companies with already established marketing links to our potential customers may adversely affect our ability to market our products.

Current and potential competitors have longer operating histories, larger customer bases, greater brand name recognition and significantly greater financial, marketing and other resources than we have. Certain of our competitors may be able to secure product from vendors on more favorable terms, devote greater resources to marketing and promotional campaigns, and adopt more aggressive pricing or inventory availability policies, than we will. There can be no assurance that we will be able to compete successfully against current and future competitors, and competitive pressures faced by us are likely to have a materially adverse affect on our business, results of operations, financial condition and prospects.

Our failure to maintain the proprietary nature of our technology, intellectual property and manufacturing processes could have a material adverse effect on our business, operating results and financial condition and on our ability to compete effectively.

We principally rely upon patent, trademark, copyright, trade secret and contract law to establish and protect our proprietary rights. While management believes that it has adequately maintained its intellectual property rights necessary to commercialize and further develop its products there is a risk that third parties could be challenged, invalidated or circumvented. We are currently involved in litigation concerning certain aspects of our liquid waste technologies, in connection with a claim by another entity that it owns the intellectual property rights to one or more aspects of our liquid waste technologies. While management is currently attempting to settle this matter it may be forced to go forward with litigation. Further litigation could be very costly and divert management’s attention. An adverse outcome in any litigation may have a severe negative effect on our financial results and stock price. To determine the priority of inventions, we may have to participate in interference proceedings declared by the United States Patent and Trademark Office or oppositions in foreign patent and trademark offices, which could result in substantial cost to us and limitations on the scope or validity our patents or trademarks. If we lose the use of our intellectual property or the use of such is impaired it would likely have a materially adverse affect on our business, results of operations, financial condition and prospects.

3

Risks Relating to Our Current Financing Arrangements:

There are a large number of shares underlying warrants and options that may be available for future sale and the sale of these shares may depress the market price of our common stock.

As of the date of this prospectus, we had approximately 604,010,294 shares of common stock issued and outstanding and we had convertible notes which could require the issuance of approximately 45,000,000 additional shares of common stock to Laurus Master Fund, Ltd., and options and warrants which could require the issuance of 25,100,187 additional shares of common stock. All of the shares, including all of the shares issuable upon conversion of the convertible notes and upon exercise of our warrants and option, are being registered hereunder. Upon registration such shares may be sold without restriction. The sale of these shares may adversely affect the market price of our common stock.

The Issuance of Shares Upon Conversion of the Convertible Notes and Exercise of Outstanding Warrants and Options May Cause Immediate and Substantial Dilution to Our Existing Stockholders.

The issuance of shares upon conversion of the convertible notes and exercise of warrants and options may result in substantial dilution to the interests of other stockholders since the selling stockholder may ultimately convert and sell the stock at a price lower than the current market prices. Although Laurus may not convert their convertible notes and/or exercise their warrants if such conversion or exercise would cause them to beneficially own more than 4.99% of our outstanding common stock, this restriction does not prevent Laurus from converting and/or exercising some of their holdings and then converting the rest of their holdings. In this way, Laurus could sell more than this limit while never holding more than this limit.

If We Are Required for any Reason to Repay Our Outstanding Secured Convertible Notes to Laurus at an Unexpected Time, We Could Deplete Our Working Capital. Our Inability to Repay the Secured Convertible Notes, If Required, Could Result in Legal Action Against Us, Which Could Require the Sale of Substantial Assets.

In March 2005, we entered into various agreements with Laurus for the sale of convertible debt, an option and a warrant to purchase our common stock. The $3,000,000 of secured convertible term notes are due and payable, with interest, on a monthly basis over a three-year period, unless sooner converted into shares of our common stock. The secured revolving note and minimum borrowing note in the aggregate maximum amount of $5,000,000 are due in three years, unless sooner converted into shares of our common stock. Any event of default such as our failure to repay the principal or interest when due, our failure to pay any taxes when due, our failure to perform under and or commit any breach of the security agreements or any ancillary agreement, any event of default under any other indebtedness by us or any of our subsidiaries could require the early repayment of the secured convertible notes at a rate of 120%, including a default interest rate on the outstanding principal balance of the notes if the default is not cured within the specified grace period. If we are required to repay the secured convertible notes, we would be required to use our limited working capital and we would need to raise additional funds. If we were unable to repay the notes when required, the note holders could commence legal action against us and foreclose on all of our assets to recover the amounts due. Any such action would require us to curtail or cease operations.

If an Event of Default Occurs under the Security Agreement, Secured Convertible Notes, Warrants, Stock Pledge Agreement or Subordination Agreement, the Investors Could Take Possession of all Our and Our Subsidiaries’ Assets.

In connection with the security agreement we entered into in March 2005 we executed a stock pledge agreement in favor of Laurus granting them a first priority security interest in the common stock of our subsidiaries all of our and our subsidiaries’ goods, inventory, contractual rights and general intangibles, receivables, documents, instruments, chattel paper, and intellectual property. The security agreement and stock pledge agreement state that if an event of default occurs under any agreement with the lenders, the lenders have the right to take possession of the collateral, to operate our business using the collateral, and have the right to assign, sell, lease or otherwise dispose of and deliver all or any part of the collateral, at public or private sale or otherwise to satisfy our obligations under these agreements.

If We Sell any Securities at an Effective Price below $0.19 Per Share, the Conversion Price of Our Laurus Notes and Exercise Price of Our Laurus Warrants Will be Lowered, Resulting in Additional Dilution to Shareholders.

We shall allocate approximately 76,000,000 shares of common stock to cover the conversion of the notes and exercise of warrants and options by Laurus in this offering. If we engage in a lower priced transaction than our current financing arrangements with Laurus while the convertible notes or warrants are outstanding, then the conversion price of the notes and exercise price of the warrants will be adjusted to the lower transaction price and we may be required to issue additional shares of common stock to the investors. If this occurs, the number of shares which are registered pursuant to this prospectus may not be adequate. Accordingly, we may be required to file a subsequent registration statement covering additional shares. If the shares we have allocated and are registering herewith are not adequate and we are required to file an additional registration statement, we may incur substantial costs in connection therewith.

4

Risks Relating to Our Common Stock:

There is a limited market for our common stock which would adversely effect the ability to sell our common stock.

Our common stock is quoted on the OTC Bulletin Board under the symbol “EFTI.OB.” There is a limited trading market for our common stock. Accordingly, there can be no assurance as to the liquidity of any markets that may develop for our common stock, the ability of holders of our common stock to sell our common stock, or the prices at which holders may be able to sell our common stock.

Our stock price may be volatile which would adversely affect the market price of our common stock.

The market price of our common stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including:

Our stock price may fluctuate widely as a result of any of the above.

In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.

We have not paid dividends in the past and do not expect to pay dividends in the future. Any return on investment may be limited to the value of our common stock.

We have never paid cash dividends on our common stock and do not anticipate paying cash dividends in the foreseeable future. The payment of dividends on our common stock will depend on earnings, financial condition and other business and economic factors affecting it at such time as the board of directors may consider relevant. If we do not pay dividends, our common stock may be less valuable because a return on your investment will only occur if its stock price appreciates.

Our common stock may be deemed penny stock with a limited trading market.

Our common stock is currently listed for trading on the OTC Bulletin Board which is generally considered to be a less efficient market than markets such as NASDAQ or other national exchanges, and which may cause difficulty in conducting trades and difficulty in obtaining future financing. Further, our securities are subject to the “penny stock rules” adopted pursuant to Section 15 (g) of the Securities Exchange Act of 1934, as amended, or Exchange Act. The penny stock rules apply to non-NASDAQ companies whose common stock trades at less than $5.00 per share or which have tangible net worth of less than $5,000,000 ($2,000,000 if the company has been operating for three or more years). Such rules require, among other things, that brokers who trade “penny stock” to persons other than “established customers” complete certain documentation, make suitability inquiries of investors and provide investors with certain information concerning trading in the security, including a risk disclosure document and quote information under certain circumstances. Many brokers have decided not to trade “penny stock” because of the requirements of the penny stock rules and, as a result, the number of broker-dealers willing to act as market makers in such securities is limited. In the event that we remain subject to the “penny stock rules” for any significant period, there may develop an adverse impact on the market, if any, for our securities. Because our securities are subject to the “penny stock rules,” investors will find it more difficult to dispose of our securities. Further, for companies whose securities are traded in the OTC Bulletin Board, it is more difficult: (i) to obtain accurate quotations, (ii) to obtain coverage for significant news events because major wire services, such as the Dow Jones News Service, generally do not publish press releases about such companies, and (iii) to obtain needed capital.

5

A sale of a substantial number of shares of our common stock may cause the price of our common stock to decline.

If our stockholders sell substantial amounts of our common stock in the public market, including shares issued upon the exercise of outstanding options or warrants, the market price of our common stock could fall. These sales also may make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate. Approximately 75,679,135 shares of common stock to be registered under this registration statement will be freely tradable upon effectiveness of this registration statement.

FORWARD-LOOKING STATEMENTS

Statements contained in this prospectus include “forward-looking statements”, which involve known and unknown risks, uncertainties and other factors which could cause actual financial or operating results, performances or achievements expressed or implied by such forward-looking statements not to occur or be realized. These forward-looking statements generally are based on our best estimates of future results, performances or achievements, based upon current conditions and assumptions. Forward-looking statements may be identified by the use of forward-looking terminology such as “may,” “can,” “could,” “project,” “expect,” “believe,” “plan,” “predict,” “estimate,” “anticipate,” “intend,” “continue,” “potential,” “would,” “should,” “aim,” “opportunity” or similar terms, variations of those terms or the negative of those terms or other variations of those terms or comparable words or expressions.

USE OF PROCEEDS

We will not receive any proceeds from the resale of the common stock. However, we will receive up to an aggregate of $2,902,218.13 for the exercise price of the common stock we sell to the selling stockholder upon exercise of the warrants and options. We expect to use the proceeds received from the exercise of their warrants and options, if any, for general working capital purposes.

6

MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The following discussion and analysis provides information which management believes is relevant for an assessment and understanding of the results of operations and financial condition. The discussion should be read in conjunction with the audited consolidated financial statements and notes thereto.

Revenue Reporting for Acquired Entities

The revenue from Electric Machinery Enterprises, Inc., included in the accompanying audited financial statements for the year ended December 31, 2004, reflects only those amounts earned from the date of acquisition (August 20, 2004), and are not representative of an entire year of its operations.

Electrical Contracting – Electric Machinery Enterprises

The Company performs electrical contracting and subcontracting services on commercial and municipal projects primarily in Florida and the Caribbean through its subsidiary Electric Machinery Enterprises, Inc. (“EME”).

EME was profitable in the fourth quarter of 2004, and each quarter of 2005. Accordingly, we are optimistic about the prospects for EME’s future profitability and believe its recent emergence from the jurisdiction of the Bankruptcy Court will enable it to obtain contracts that may previously have not been available.

EME’s revenues are generated through three separate sources: Offshore, Domestic, and Domestic Services.

Offshore work includes electrical contract work performed on commercial properties throughout the Caribbean. The damage caused throughout the Caribbean during the Hurricane Season of 2004 has resulted in a sharp increase in the contracts obtained by EME and we currently have a backlog of approximately $19 million. During 2004, EME entered into a joint venture agreement to operate Peleme, Ltd. to perform electrical contracting work in the Cayman Islands. This joint venture performed work on a sizable contract to repair hurricane damage on one of the major hotels in the Caymans through the end of 2005. The Company has been able to secure significant additional contract work for the continuing development of the Caymans.

Domestic work includes electrical contract work performed principally in the State of Florida. The Company is attempting to improve profitability in this segment of its business by introducing enhanced technology in the bidding process for these contracts and in monitoring the progress with budgeted amounts as work is performed. The Company is optimistic that these and other enhancements will enable it to be the successful bidder on an increased number of financially attractive contracts.

Domestic services include numerous small projects for electrical contract work on a time and materials basis for commercial projects located in Florida.

During calendar 2005, EME entered the market as an electrical contractor for residential real estate. Initially these services were provided on a small scale to allow the Company to evaluate the economic viability of this market. In response to management’s evaluation of early demand from the custom residential home building market, EME formally established Prime Power Residential, Inc., a wholly owned subsidiary in the electrical contracting business of the Company, which now manages 15 actively engaged residential crews on the job throughout the State of Florida.

Catalytic Activated Vacuum Distillation Process (“CAVD”) Reactors

EarthFirst developed the Catalytic Activated Vacuum Distillation Process Reactor. The CAVD Reactor offers a unique solution to the problem of disposing of harmful solid wastes in and environmentally friendly manner and allows raw materials from the wastes to be recycled and reused.

We believe that the CAVD Reactor can be designed to process a number of harmful solid waste products. We anticipate that governmental and nongovernmental entities who are faced with the problem of disposing of various types of solid waste products through conventional means will conclude that the CAVD Reactors can provide a superior, safe and effective means of eliminating these materials.

Initially, we are focusing on the processing of rubber tires. However, other uses are also being pursued. Such uses include the recycling of carpet materials, the destruction of animal waste and remains, transuranic wastes (e.g. gloves, overalls, tools, etc. that have been exposed to low levels of radiation), and medical wastes.

In general, the Company processes used tires by having shredded tires added to a low pressure, heated, catalytically driven process in the CAVD Reactor. The tires are converted to a high quality carbon and a light hydrocarbon mix that can be used as a fuel. Scrap steel and gases that can be used as a fuel are also recovered.

7

Traditionally, tires have been disposed of in landfills, placed in stockpile areas, or recycled using low-level technologies to produce products such as tire-derived fuel and mulch. Stockpiles of discarded tires are particularly vulnerable to catching fire. Fires at tire dumps are extremely difficult to extinguish and may take years to burn themselves out. Such fires can release significant amounts of pollution into the atmosphere.

The owners of these dumping areas have long sought a cost-effective means of disposing of the unwanted tires. We believe the CAVD Reactor provides a solution for the environmentally safe and efficient problem of the disposal of used tires.

The Company’s first CAVD Reactor was constructed at a facility in Mobile, Alabama and processes shredded tires.

During processing in the CAVD Reactor, carbon, scrap steel, gas and oil are recovered and are available for resale. The processing of a 20-pound tire yields approximately 5.5 to 8.5 pounds of carbon, 1.2 to 2 gallons of fuel oil, 12 to 16 cubic feet of gas, and .36 pounds of scrap steel. The amounts recovered depend upon the type of tire and the length of time in the reactor.

The financial viability of the CAVD Reactor for use in processing used tires is dependant upon the successful sale of the by-products recovered. We believe that the carbon and oil by-products represent the greatest value of this process. With current oil pricing reaching levels as high as $72 per barrel, the attractiveness of the CAVD technology has grown beyond the prior emphasis on carbon. It is expected that the steel recovered from the process will be sold for scrap and the oil recovered can be used as an industrial oil or other fuel. Optimal operation of the CAVD Reactor may include the use of a generator with the reactor which can utilize the gas produced from the processing to produce electricity that can be both used by the operator of the reactor and additional electricity sold to the electrical grid.

Testing of the carbon recovered from our CAVD Reactor has led us to believe that the carbon has certain unique qualities that will prove valuable in the development of high-performance polymers in various industrial uses. Researchers concluded that due to the unique formation method through the CAVD Reactor, the carbon can be used as is or economically modified to produce a functionalized polymer that can replace petroleum based chemical polyurethanes with a less expensive recycled product made from reclaimed tires. Work is being conducted to improve the carbons’ performance by adding reactive compounds that improve the product’s ability to bond with the urethane matrix.

As with most new products, it is time consuming for the end users of the carbon to satisfy themselves as to the advantages of this product over the products that they are currently using. To hasten the acceptance of our carbon in the marketplace, the Company is working with several potential end users who are conducting substantive testing of the carbon for use in their operations. The Company is currently working with carpet manufacturers, producers of asphalt and shingles, with third parties in automotive applications, and with producers of other products to prove the advantages of the carbon produced by the CAVD Reactor as a polymer with their products.

The carbon recovered through the CAVD Reactor is rapidly gaining acceptance with potential end users as a polymer. We believe that the carbon has unique qualities that may ultimately enable its acceptance as a substitute for certain high-end polymers currently being used in addition to use in the more traditional roles currently being explored.

Provisional Patent Application US60/681,701 filed on May 17, 2005 describes the CAVD technology as a unique process for producing carbon and other products, and also contains several claims for novel components in the system. The technology is the cumulative result of six years of research and development.

Three new provisional patents are being filed based on the Company’s recycled carbon being placed into plastic and rubber as an additive and as a replacement for the current petrochemical products used.

The Company has several letters of intent with unrelated entities to license the technology for CAVD Reactors. Based upon our experiences thus far, we expect that there is considerable interest in the CAVD Reactor from potential users. We believe that delays in the creation of definitive agreements with the end users of the CAVD Reactors have centered around the evaluation of the financial viability of the alternative uses of the carbon product recovered from the process. In addition to the efforts described above, the Company is also seeking to work with one or more nationally recognized scientific and technology enterprises to further commercialize the technology for the CAVD Reactor for additional uses. It is expected that such an arrangement could allow our technology to gain immediate credibility in the marketplace with both a variety of potential end users of the CAVD Reactors as well as the end users of carbon products recovered in the process. It is envisioned that joint efforts would include work on adapting the CAVD Reactors to process other solid waste streams such as municipal solid wastes, animal remains, and certain types of industrial waste products.

Liquid Waste Technologies

The Company is continuing to attempt to identify and implement commercially viable applications of its plasma arc converter technologies embodied in the BigSpark™ converter. The Company’s BigSpark™ plasma based technology splits apart the complex molecular bonds of water and hydrocarbon wastes to produce the clean burning, hydrogen-based fuel. BigSpark™ compares favorably

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with conventional combustion technologies used in the disposal of liquid wastes in several significant areas. First, the waste is subjected to higher temperatures for longer periods of time (7,000 degree temperature of the plasma arc; and materials spend minutes, not seconds, in the reaction zone). Second, BigSpark™ has a second stage combustion in a very high temperature oxygen flame. Third, BigSpark™ converters are compact and can be moved to the source of contaminated waste.

One application of the plasma arc technology that the Company has been investigating involves the destruction of Poly-Chlorinated Biphenyls, commonly referred to as “PCBs”. PCBs have many stable qualities that led to its use in various industrial applications before it was learned that long-term exposure to PCBs may increase the risk of cancer in humans.

Preliminary tests have indicated that passing PCB laden liquids through a plasma arc similar to that found in the BigSpark™ converters results in the destruction of the PCB molecules. While the results of such tests are encouraging, in order to be commercially successful, the technology will need to be adapted to destroy PCBs in surroundings where such elements are commonly found and on a sufficient scale to economically address the problems faced in PCB disposal.

The Company is also considering commercial adaptations for the plasma arc converters to develop solutions to issues involving the disposal and / or remediation of other liquid wastes including waste oils and antifreeze.

Carbon Technologies

The Company’s efforts in commercializing the technologies it has developed for carbon products have been slowed due to the current emphasis on our solid waste technologies. The technology developed is promising and the Company intends to pursue commercialization in the future. We believe that the research and development efforts conducted by the Company have yielded results that may produce superior qualities in a wide range of water treatment applications.

Prime Power of Tampa, Inc.

EME, a wholly owned subsidiary of EarthFirst, and Triad Companies have consummated the formation of Prime Power of Tampa, Inc. (“Prime”), a strategic alliance created by the companies to jointly pursue major utility projects, large offshore projects, and/or major design/build opportunities. Through this strategic alliance, Prime has the unique ability to address large electrical contracting projects from design through build to maintenance and support, offering a fully integrated contracting solution. Management believes that the combination of the strengths of these two companies will create a competitive advantage when pursuing work on large projects.

SolarDiesel Corporation (formerly EarthFirst Americas, Incorporated)(Biofuels)

Through the vast network of business relationships maintained by the Company, management has determined an opportunity relative to the utilization of its CAVD technology in the harvesting and production of African Palm Oil. To facilitate the pursuit of this endeavor, the Company has formed a new wholly owned subsidiary corporation name SolarDiesel Corporation. Its purpose will be the development of the market opportunities available associated with palm oil.

Palm oil is an edible oil made from the fruit of the African oil palm, which grows only in regions within 15 degrees from the equator, where annual rainfall is high. Palm oil, the world’s second largest oilseed crop, is less expensive than soybean or canola oil, principally because the African palm is incredibly productive.

The principal palm oil producers are Malaysia and Indonesia, with significant production in Central Africa, Central and South America. The largest palm oil consumers are India, China, and the European Union. Although concerns over saturated fat content have limited sales in the United States in the past, palm oil use is now growing in the U.S. because the oil is free of “trans” fats and cholesterol.

Preliminary analysis demonstrates that palm fruit treated by the CAVD process may result in a higher yield palm oil with significant and productive by-products. If proven applicable to produce palm oil, the CAVD reactor could become a significant American made import to all palm oil producing nations.

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2006 COMPARED TO THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2005

Revenues for the three month period ending September 30, 2006 in the amount of $8,746,062, represents a decrease of $1,779,947 or approximately 17% when compared to $10,526,009 for the three month period ending September 30, 2005. Biofuel sales for this three month period of $198,106 represent approximately 2% of total sales for the quarter. Revenues for the nine month period ending September 30, 2006 exceeded those of 2005 by $4,639,293, an increase of 16%. Biofuel sales for the nine month period of $989,258 represent approximately 3% of total sales for the nine month period ending September 30, 2006. Substantially all revenues are generated from contracting and subcontracting services.

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The Company sustained a negative gross profit for the three month period ended September 30, 2006 in the amount of $349,107. This was partially due to declines in profitability in several contracting/subcontracting jobs which were in process at December 31, 2005 for which actual costs recorded during the first three quarters of 2006 exceeded those previously estimated. Management does not believe that any similar situations exist for open contracts at September 30, 2006. Management does not believe that any similar situations exist for open contracts at September 30, 2006. Other factors affecting this negative gross profit include excessive costs in the residential electrical contracting business operated through Prime Power Residential, Inc., a wholly owned subsidiary of EME in developing its business model. Also, the biodiesel business has sustained negative gross profits while in the process of marketing and developing sales and distribution outlets. Gross profit for the nine month period ended September 30, 2006 decreased from $7,943,609 to $2,855,455, or approximately 64%. Gross profit percentages for the nine month periods ended September 30, 2006 and 2005 were approximately 9% and 28% respectively.

Selling, general and administrative expenses for the three-month period ending September 30, 2006 increased by $937,815, from $1,947,815 in the prior year, to $2,885,000 in the current period, or an increase of approximately 48% compared to the three-month period ending September 30, 2005. Selling, general and administrative expenses for the nine month period ending September 30, 2006 increased by $2,721,939 from $5,186,367 in the prior year, to $7,908,306 in the current year, or an increase of approximately 52% compared to the nine month period ending September 30, 2005.

Selling, general and administrative expenses for the current year included administrative expenses supporting the new biofuels business that were not in the prior year in the amount of approximately $525,000. Also during the third quarter of 2006, management negotiated a final settlement with Stingray Construction, the general contractor on the Ritz Carlton project in Grand Cayman. A charge in the amount of $983,400 was recorded the third quarter of 2006 to reflect this transaction. This is not a recurring transaction and has had the effect of distorting selling, general and administrative expenses for the three and nine month periods ending September 30, 2006 and 2005. The remaining increase is primarily attributable to higher labor, consulting and insurance costs than in the prior year.

Stock based compensation in the amount of $18,260,000 for the three months and nine months ending September 30, 2005 was a one time transaction representative of compensation for the services of John Stanton, Chairman of the Board, Chief Executive Officer and President. There was no stock based compensation for the three months and nine months ending September 30, 2006.

Research and development expenses for the three months ended September 30, 2006 increased from $104,064 to $400,509, or a 284% increase when compared to the three month period ended September 30, 2005. Research and development expenses for the nine months ended September 30, 2006 increased from $424,715 to $595,803, or a 40% increase when compared to the nine month period ended September 30, 2005. This increase is due to an increase in the development of the CAVD technology.

Loss from operations decreased by $14,029,732 from a loss for the three months ended September 30, 2005 of $17,664,348 to a loss of $3,634,616 for the three months ended September 30, 2006. Loss from operations decreased by $10,278,819 from a loss for the nine months ended September 30, 2005 of $15,927,473 to a loss of $5,648,654. This decrease is due to the results of operations from the consolidated subsidiary of EME as explained above as well as those items of expense pertaining to the new biofuels business.

Gain on extinguishment of debt, bankruptcy for the three months ended September 30, 2006 decreased to zero from $180,433 for the three months ended September 30, 2005. Gain on extinguishment of debt, bankruptcy for the nine months ended September 30, 2006 decreased to $81,020 from $4,163,740 for the nine months ended September 30, 2005. These amounts are attributable to the settlement of the unsecured creditors in EME’s plan of reorganization. The amounts recognized for the current year are diminishing due to the progress of wrapping up the remainder of the bankruptcy plan

During the first quarter of 2006, the company realized income from the settlement of a claim that the company had been pursuing for approximately two years in the amount of $1,100,000. This amount was recognized as income upon receipt of the funds.

Interest expense increased from $746,722 for the three-month period ended September 30, 2005 to $738,729 for the three months ended September 30, 2006. Interest expense increased from $1,292,398 for the nine months ended September 30, 2005 to $2,956,378 for the nine months ended September 30, 2006. These increases in interest expense are primarily due to amortization of the debt discounts associated with the new credit facility.

Derivative gain (loss) fluctuated from a loss of $1,219,761 for the three month period ended September 30, 2005 to a gain of $279,280 for the three month period ended September 30, 2006. Derivative gain fluctuated from a gain of $377,390 for the nine month period ended September 30, 2005 to a gain of $3,906,048 for the nine month period ended September 30, 2006. The derivative gain is associated with the new credit facility and fluctuations occur normally in the fair value adjustment of the derivatives each reporting period, which result primarily from fluctuations in the Company’s stock price.

Majority and minority interest expense for the three month period ended September 30, 2006 is a result of the negotiated settlement on the Ritz Carlton project in Grand Cayman causing an income in the amount of $237,695. Majority and minority interest

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expense for the three month period ended September 30, 2005 was $286,084. Majority and minority interest expense decreased $1,151,066 from $1,244,592 for the nine month period ended September 30, 2005 to $93,526 for the nine month period ended September 30, 2006. The majority and minority interest expense is a function of the net income of the entities, which the Company does not wholly own.

Loss on disposal of discontinued operations was $137,636 for the nine month period ended September 30, 2005. This loss is associated with the disposal of EME’s General Contractors division in 2005 and there were no related expenses during 2006.

FISCAL 2005 COMPARED TO FISCAL 2004

Revenue for the year ended December 31, 2005 increased by $29,476,619, as the revenues for the year ended December 31, 2004 only reflected revenues from Electric Machinery Enterprises, Inc. from its acquisition date on August 20, 2004.

Cost of Sales for the year ended December 31, 2005 increased by $23,224,788 when compared to 2004, as the cost of sales for the year ended December 31, 2004 only reflected costs from Electric Machinery Enterprises, Inc. from its acquisition date on August 20, 2004.

Selling, general and administrative expenses for the year ended December 31, 2005 increased to $7,654,036 from $2,992,773 for the year ended December 31, 2004, an increase of approximately 155%. This increase was due primarily to a full year of operations for EME and WESCO, the creation of new subsidiaries, as well as a general increase in the level of activities undertaken by the Company during 2005.

Related party stock based compensation for the year ended December 31, 2005 in the amount of $18,260,000 was a one time transaction representative of compensation for the services of John Stanton, Chairman of the Board, Chief Executive Officer and President.

Direct research and development expenses for the year ended December 31, 2005 decreased to $582,430 from $2,474,949 for the year ended December 31, 2004, a decrease of approximately 76%. This decrease was due primarily to the “in progress research and development” purchased with the acquisition of WESCO in the amount of $1,800,000 in 2004 as well as a decrease in the level of activities undertaken by the Company during 2005 due to the maturity of the CAVD technologies.

Gain on debt restructure increased to $4,163,740 for the year ended December 31, 2005 from $1,298,068 for the year ended December 31, 2004. These gains are a result of the Plan of Reorganization of Electric Machinery Enterprises, Inc., which was approved by the Bankruptcy Court during the fourth quarter of 2004. Most of the debt restructure took place in 2005.

Miscellaneous income for the year ended December 31, 2005 and 2004, in the amounts of $397,071 and $325,961 respectively represent non operational sources of income.

Interest expense for the year ended December 31, 2005 increased to $2,760,202 from $466,215 for the year ending December 31, 2004, an increase of approximately 492%. This increase was due to the higher balances of debt related to the Company’s borrowings from the Laurus fund and the amortization of debt discount accounted for as interest expense as compared to the revolving line of credit loans from a related party.

Reorganization item, professional fees related to bankruptcy and pursuit of claims expense for the years ended December 31, 2005 and 2004, in the amounts of $1,919,288 and $1,202,829 represent non-recurring expenses associated with the preparation, presentation and implementation of the Plan of Reorganization incurred from the date of acquisition of Electric Machinery Enterprises, Inc., and the pursuit of claims.

Majority interest income for the year ended December 31, 2005, in the amount of $377 represents the net effect of the income/expense interests of the Joint Venture Partners in the variable interest entities the Company has with Peleme, Ltd., and Prime Power of Tampa, Inc. The joint venture partner interests in the net profits of each of these companies are; 30% in Peleme, Ltd., and 49% in Prime Power of Tampa, Inc. For the year ended December 31, 2004, the majority interest expense in the amount of $430,230 represents the expense associated with the 30% interest in profits of the joint venture partner in Peleme, Ltd. incurred from the date of acquisition of Electric Machinery Enterprises, Inc.

Net loss increased by $15,418,111 to $17,685,100 for the year ended December 31, 2005 from $2,266,989 for the year ended December 31, 2004. This increased net loss resulted primarily from the previously discussed items, specifically the related party stock based compensation.

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LIQUIDITY AND CAPITAL RESOURCES

Prior to its acquisition of EME in late 2004, the Company experienced net losses and, as such, experienced negative operating cash flows. The Company has historically funded these negative operating cash flows with proceeds from sales of common and preferred stock, as well as notes and convertible debentures and related party loans.

Commencing with the Company’s acquisition of EME in late 2004, the Company has restructured many of EME’s liabilities with funding provided by the Laurus credit facility as well as additional related party loans (all related party loans as of December 31, 2005, had been converted to common stock.)

The Company generated a net income in the fourth quarter of 2004 of $1,096,136 and a net operating profit, net of stock-based compensation, of $1,423,259 for the year ended December 31, 2005. While the Company’s profitability suffered during the first three quarters of 2006 due to certain contract losses and substantially greater selling and administrative expenses associated with the expansion into the biofuels segment and electrical contracting for the residential housing market, management expects EME’s business volume and profitability to continue to grow through 2006 and beyond.

In January 2006, the Company secured a $5,000,000 line of credit with an entity related to the Company’s Chairman and Chief Executive Officer to facilitate the new biofuels business. Approximately $1,736,000 of this credit facility remains available at September 30, 2006.

Management believes that the Company’s existing cash and available line of credit along with the expected profitability from EME’s operations will be adequate to fund the Company’s operations for the foreseeable future. However, management may seek additional, alternatives to fund growth opportunities in its Biofuels and Waste Disposal business segments.

INCOME TAXES

The Company has a net operating loss carry forward for federal income tax purposes of approximately $38,000,000 that is available to offset federal taxable income through fiscal 2024. A 100% valuation allowance has been provided on deferred tax assets resulting from the net operating loss carry forwards discussed above.

EFFECTS OF INFLATION

Management does not believe that inflation has had a significant impact on our financial position or results of operations since our inception.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. We evaluate our estimates and judgments on an on-going basis. We base our estimates on historical experience and on assumptions that we believe to be reasonable under the circumstances. Our experience and assumptions form the basis for our judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may vary from what we anticipate and different assumptions or estimates about the future could change our reported results. We believe the following accounting policies are the most critical to us, in that they are important to the portrayal of our financial statements and they require our most difficult, subjective or complex judgments in the preparation of our financial statements:

Revenue Recognition: Revenues from solid waste transactions recognized during the year ended December 31, 2004 are the result of contracted monthly minimum draws against sales commissions on the products of a polymer manufacturing company, and the receipt of license fees granting the exclusive option to purchase total rights to the CAVD technology for use in certain geographical areas. License revenue is recognized upon receipt as there are no future obligations associated with such revenue.

The Company uses the percentage-of-completion method of accounting for contract revenue from electrical contracts where percentage of completion is computed on the cost to total cost method. Under this method, contract revenue is recorded based upon the percentage of total contract costs incurred to date to total estimated contract costs, after giving effect to the most recent estimates of costs to complete. Revisions in costs and revenue estimates are reflected in the period in which the revisions are determined. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined without regard to the percentage-of-completion. Because of the inherent uncertainties in estimating costs, it is at least reasonably possible that these estimates used will change within the near term.

Employee Stock-Based Compensation: Effective January 1, 2006, we adopted Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment,” (“FAS 123(R)”) using the modified-prospective-transition method. Under this transition method, compensation cost in 2006 includes cost for options granted prior to but not vested as of December 31, 2005, and options vested in 2006. Therefore results for prior periods have not been restated.

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Impairment of Goodwill and Long-Lived Assets: In accordance with Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”), and Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS No. 144”), the Company reviews its non-amortizable long-lived assets, including intangible assets and goodwill for impairment annually, or sooner whenever events or changes in circumstances indicate the carrying amounts of such assets may not be recoverable. Other depreciable or amortizable assets are reviewed when indications of impairment exist. Upon such an occurrence, recoverability of these assets is determined as follows. For long-lived assets that are held for use, the Company compares the forecasted undiscounted net cash flows to the carrying amount. If the longlived asset is determined to be unable to recover the carrying amount, than it is written down to fair value. For long-lived assets held for sale, assets are written down to fair value. Fair value is determined based on discounted cash flows, appraised values or management’s estimates, depending upon the nature or the assets. Intangibles with indefinite lives are tested by comparing their carrying amounts to fair value. Impairment within goodwill is tested using a two step method. The first step is to compare the fair value of the reporting unit to its book value, including goodwill. If the fair value of the unit is less than its book value, the Company than determines the implied fair value of goodwill by deducting the fair value of the reporting unit’s net assets from the fair value of the reporting unit. If the book value of goodwill is greater than its implied fair value, the Company writes down goodwill to its implied fair value. The Company’s goodwill relates to the acquisition of Electric Machinery Enterprises, Inc.

Derivative Financial Instruments: The Company generally does not use derivative financial instruments to hedge exposures to cash-flow risks or market-risks that may affect the fair values of its financial instruments. However, certain other financial instruments, such as warrants and embedded conversion features that are indexed to the Company’s common stock, are classified as liabilities when either (a) the holder possesses rights to net-cash settlement or (b) physical or net-share settlement is not within the control of the Company. In such instances, net-cash settlement is assumed for financial accounting and reporting, even when the terms of the underlying contracts do not provide for net-cash settlement. Such financial instruments are initially recorded at fair value and subsequently adjusted to fair value at the close of each reporting period.

The caption Derivative Financial Instruments consists of (i) the fair values associated with derivative features embedded in the Laurus Convertible Secured Term Notes and (ii) the fair values of the detachable warrants and options that were issued in connection with those financing arrangements.

RECENT ACCOUNTING PRONOUNCEMENTS

In December 2004, the FASB issued Statement No. 123R, Accounting for Share Based Payments. Statement 123R establishes revised accounting standards for employee-stock based compensation measurement that requires employee stock-based compensation be measured at the fair value of the award, replacing the intrinsic approach currently available to companies under Statement 123. Compensation cost continues to be recognized over the period during which the employee is required to provide service. The provisions of the revised statement are effective for financial statements issued for the first interim or annual reporting period beginning after December 15, 2005. The Company accounts for options issued to employees using the intrinsic approach. Implementation of this new standard is currently expected to result in increases in future compensation expense. However, such effect is not currently estimable.

In March 2005, the FASB issued interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations, an interpretation of FASB Statement No. 143” (“FIN 47”), which requires an entity to recognize a liability for the fair value of a conditional asset retirement obligation when incurred if the liability’s fair value can be reasonably estimated. FIN 47 is effective for fiscal years ending after December 15, 2005. The Company is currently evaluation the effect that the adoption of FIN 47 will have on its consolidated results of operations and financial condition but does not expect it to have a material impact.

In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Correction (“SFAS 154”), which replaces Accounting Principles Board Opinions No. 20 “Accounting Changes and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements – An Amendment of APB Opinion No. 28.” SFAS 154 provides guidance on accounting for and reporting of accounting changes and error corrections. It establishes retrospective application, or the latest practicable date, as the required method for reporting a change in accounting principle and the reporting of a correction of an error. SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005 and are required to be adopted by the Company in the first quarter of fiscal 2006. The Company is currently evaluating the effect that the adoption of SFAS 154 will have on its consolidated results of operations and financial condition, but does not expect it to have a material impact.

In February 2006, the FASB issued Statement of Financial Accounting Standard (SFAS) No. 155 (SFAS No. 155), ACCOUNTING FOR CERTAIN HYBRID FINANCIAL INSTRUMENTS—AN AMENDMENT OF FASB STATEMENTS NO. 133 AND 140, to simplify and make more consistent the accounting for certain financial instruments. Specifically, SFAS No. 155 amends SFAS No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, to permit fair value

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remeasurement for any hybrid financial instrument with an embedded derivative that otherwise would require bifurcation, provided that the whole instrument is accounted for on a fair value basis. Prior to fair value measurement, however, interests in securitized financial assets must be evaluated to identify interests containing embedded derivatives requiring bifurcation. The amendments to SFAS No. 133 also clarify that interest-only and principal-only strips are not subject to the requirements of the SFAS, and that concentrations of credit risk in the form of subordination are not embedded derivatives. Finally, SFAS No. 155 amends SFAS No. 140, ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS, to allow a qualifying special-purpose entity (SPE) to hold a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. SFAS No. 155 applies to all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006, with earlier application allowed. The Company does not anticipate that the adoption of this statement to have a material impact on its consolidated financial statements.

The Financial Accounting Standards Board (“FASB”) has recently announced a new interpretation, FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (FIN 48”), which will be effective for fiscal years beginning after December 15, 2006, FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes”. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company has not determined the impact of the adoption of FIN 48 on its consolidated financial statements.

In September 2006, the FASB issued FASB 157, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements and accordingly, does not require any new fair value measurements. The statement is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The Company is currently evaluating the requirements of this standard and does not expect its provisions to have a material effect on its financial statements.

OFF BALANCE SHEET ARRANGEMENTS AND CONTRACTURAL OBLIGATIONS

The following chart summarizes our contractual payment obligations as of December 31, 2005. The long-term and short-term debts are reflected as liabilities on our balance sheet as of December 31, 2005. Operating leases and real property rentals are accrued and paid on a monthly basis.

The Company conducts its operations in a facility leased from a related corporation owned by stockholders of EarthFirst Technologies, Incorporated. This lease was assumed through the acquisition of EME for a period of two years.

BUSINESS

We were incorporated in the State of Florida in 1997. We are a specialized holding company owning subsidiaries engaged in a number of business activities. We, along with our subsidiaries, are a researched-based enterprise committed to the development and commercialization of technologies that will produce economically and environmentally superior products from carbon-rich solid and liquid materials considered wastes. As part of our efforts, we are also attempting to develop and commercialize applications of our technologies for the efficient production of alternative fuels. Additional applications of our technologies are focused on the environmentally desirable processing, destruction, purification, and/or remediation of harmful liquid and solid wastes.

Through our subsidiary Electric Machinery Enterprises, Inc., we perform services as an electrical contractor and subcontractor in the construction of commercial and municipal projects primarily located in Florida and the Caribbean.

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SOLID WASTE TECHNOLOGIES—CATALYTIC ACTIVATED VACUUM DISTILLATION PROCESS (“CAVD”) REACTORS

We developed the Catalytic Activated Vacuum Distillation Process Reactor. The CAVD Reactor embodies the results of several years of research and development with respect to disposal of solid wastes. The CAVD Reactor offers a unique solution to the problem of disposing of harmful solid wastes in an environmentally friendly manner and allows raw materials from the wastes to be recycled and reused.

We believe that the CAVD Reactor can be designed to process a number of harmful solid waste products. We anticipate that governmental and nongovernmental entities who are faced with the problem of disposing of various types of solid waste products through conventional means will conclude that the CAVD Reactors can provide a superior, safe and effective means of eliminating these materials.

Initially, we are focusing on the processing of rubber tires. However, other uses are also being pursued. Such uses include the recycling of carpet materials, the destruction of animal waste and remains, transuranic wastes (e.g. gloves, overalls, tools, etc. that have been exposed to low levels of radiation), and medical wastes.

ELECTRIC MACHINERY ENTERPRISES

We perform electrical contracting and subcontracting services for commercial and municipal projects primarily in Florida and the Caribbean through its subsidiary Electric Machinery Enterprises, Inc. (EME). We have extensive expertise in performing electrical contracting services for water, sewer, and power generating facilities. EME has provided electrical contracting services over a broad spectrum of industries and technologies, including projects such as the State Capitol Building in Tallahassee, Florida, utility company buildings, wastewater treatment plants, bridges, pumping stations, seaport terminals, international airports, hospitals department stores, shopping centers, correctional facilities, large civic centers, hotels and resorts, schools, universities, sports stadiums apartment complexes, condominium buildings, tourism sites and theme parks.

Electric Machinery Enterprises, and its predecessors, has been in business for over 75 years. The Company acquired EME after EME had sought protection from creditors under Chapter 11 of the United States Bankruptcy Code. In August of 2004, the Company acquired the stock of EME in exchange for 40 million shares of the Company’s common stock. The Bankruptcy Court subsequently approved the plan of reorganization for EME and that entity has successfully emerged from bankruptcy.

During the third quarter of 2005, EME expanded into the residential electrical contracting arena, first assessing the new growth opportunity via a limited, small scale roll-out of residential services and support in the Tampa, Florida market. In response to management’s evaluation of early demand from the custom residential home building market, EME formally established Prime Power Residential, Inc., a wholly owned subsidiary in the electrical contracting business of the Company.

Electric Machinery obtains contracts through a competitive bid process as well as design negotiations. With its 75 year history, EME has established a reputation through completion of prior contracts, for various levels of service and construction types similar to the ones listed above. The competitive bid process by its nature would generally be awarded to the lowest bidder; however EME has obtained contracts for its expertise and experience when not being the lowest bidder. Negotiated contracts generally arise from relationships with customers, contractors and developers who have had a favorable experience with EME over its history. This history of success has afforded EME a competitive edge over other electrical contracting companies in the past

The costs of compliance with any laws and regulations with any governmental entity, whether foreign or domestic, are investigated and identified in the estimating process, and accounted for in the pricing of EME’s services. This insures not only compliance, but also profitability, as compliance issues not properly identified could be costly, and have a negative impact on the Company’s gross margins.

BIOFUELS

In the second quarter of 2005, we formed “EarthFirst Americas Incorporated” (“EFA”), a wholly owned subsidiary which is primarily focused on facilitating commercial scale production and distribution of biofuels produced from palm oil, soy and rapeseed in the US, Latin America, the Caribbean and Europe. EFA has organized an international consortium of businesses involved with commercial scale biodiesel production, and is arranging distribution to customers in the United States, Latin America, the Caribbean and the European Union.

LIQUID WASTE TECHNOLOGIES

We have developed technologies for the treatment of liquid waste products. The technologies involve the use of high temperature plasma through which the liquid waste products are passed. The harmful properties contained in the liquid waste products are broken down at the molecular level as they pass through the plasma and a clean burning gas is produced.

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CARBON TECHNOLOGIES

Our efforts in commercializing the technologies we have developed for carbon products have been slowed due to the current emphasis on our solid waste technologies. The technology developed is promising and we intend to pursue commercialization in the future. We believe that the research and development efforts conducted by us have yielded results that may produce superior qualities in a wide range of water treatment.

INTELLECTUAL PROPERTIES

We have performed extensive research and development on various technologies focused on deriving solutions for liquid and solid waste problems and in creating alternative fuels. Our efforts have been conducted through the work performed by our employees and consultants. We have developed the technology for the CAVD Reactor.

Management believes that we own all of the intellectual rights to commercialize and further develop our liquid and solid waste technologies.

We have engaged outside legal counsel to review our history of our development of our liquid waste technologies and the contractual arrangements entered into by us with respect to such technologies. Legal counsel has advised that it believes that we currently possesses all of the intellectual property rights to commercialize our liquid waste technologies and to further develop these technologies in additional applications.

Legal counsel has also reviewed in detail all aspects of the claims and allegations made by a former consultant with respect to the underwater carbon arc technology embodied in our technologies. Legal counsel also reviewed our consulting agreements with the former consultant and entities related to this individual.

Based upon its review of these agreements and the relevant law, it is the opinion of outside legal counsel that the former consultant, or entities related to him, neither own nor control any US patents that are relevant to our technologies, and have no legal standing to assert any claims as to patent infringement or misappropriation of any trade secrets.

The former consultant and an entity affiliated with the former consultant are involved in legal proceedings that were initiated by us to resolve issues of ownership.

Management believes that we have taken appropriate steps to protect our intellectual property rights. However, the steps taken might not prove sufficient to prevent misappropriation of our technology rights. Third-party development of similar technologies using different discoveries remain a risk that could limit our legal protection. The laws of certain foreign countries might not protect our services or intellectual property rights to the same extent as do the laws of the United States.

Third parties could claim infringement by us with respect to current or future uses. As the number of entrants into the market increases, the possibility of an infringement claim against us might increase, and the possibility either exists that we could, now or in the future, inadvertently infringe on a third-party’s patent. In addition, because patent applications can take many years to allow, it is possible that we could, now or in the future, infringe upon a third-party’s patent application now pending of which we are unaware. Any infringement claim, whether meritorious or not, could consume a significant amount of management’s time and attention, could result in costly litigation, cause service delays or require us to enter into royalty or licensing agreements which might or might not be available on commercially acceptable terms, if at all. As a result, any claim of infringement against us could have a material adverse effect upon our business, financial condition or results of operations.

RESEARCH AND DEVELOPMENT

Research and development costs incurred in 2005 and 2004 aggregated $582,430 and $2,474,949, respectively, and are centered on the aforementioned technologies. The CAVD plant completion in mid 2004 allowed development to switch from the plant process to the products produced by the plant. Extensive tests were done on the physical and chemical properties of the carbon, oil, and gas. Application tests were completed at the customers’ location to assure product acceptance, feasibility, and compliance.

COMPETITION

There are competitors to our solid waste business seeking to develop efficient means of recycling and disposing of various forms of solid and liquid wastes, as well as the production of alternative fuels. The effect of numerous federal and state environmental regulations has been to encourage the originators of the waste, as well as governmental entities and entrepreneurial enterprises, to seek to develop more effective and efficient solutions.

The EPA says two to three billion scrap tires fill 2,800 landfills and stockpiles across the U.S. An additional 250 million scrap tires are generated yearly. Scrap sites are environmental hazards and security threats — they catch fire easily, producing noxious

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smoke and toxic liquid waste, and they are often breeding grounds for mosquitoes and rodents. When tires are recycled, they are either shredded for highway construction or playground use, burned in kilns, or destroyed through pyrolysis – burned in the absence of oxygen, at high temperature (around 2,200°) and high pressure. This typically destroys or degrades many valuable components (including carbon, which makes up 40% of a tire) and generates air-polluting emissions.

Our proprietary tire processing system is unique, in that it produces usable energy and a broad range of valuable products, including steel, carbon, oil and a high energy gas. Different from our competitors, we burn tires in a vacuum at a third of the typical pyrolysis temperature, preserving tire components and satisfying even the strictest emissions regulations. Our process relies on a proprietary catalyst to convert tires at rapid rates. We believe that these factors position us in our own market niche. We intend to compete through communication, education and demonstration. Our CAVD plant in Mobile, Alabama is being utilized not only for demonstrations, but to also generate by-products that can be sold, sampled and tested to validate our technology.

We have limited resources and will likely need substantial infusions of capital in order to effectively commercialize our technologies. There are no assurances that even if such financial resources can be obtained that our technology will be financially successful. There are no assurances that even if such financial resources can be obtained that our technology will be financially successful.

EMPLOYEES

As of January 18, 2007, we had 230 full-time employees. Management considers its relations with our employees to be satisfactory. None of the employees is represented by a union.

DESCRIPTION OF PROPERTY

Our executive offices are located at 2515 E. Hanna Ave., Tampa, Florida. This location is also occupied by EME. This lease obligation was assumed pursuant to EME’s reorganization plan for a period of two years, at which time we have the option to re-evaluate. We lease and rent the real property, building, and all other improvements at this location from Hanna Properties Corp., a related party affiliated with the President of EME. This property consists of 29,680 sq. ft. of office space, 80,320 sq. ft. of warehouse space and 26,992 sq. ft. of garage and workshop space. Monthly rental including sales tax, but excluding real estate taxes and insurances is $52,133.

We own approximately 25 acres of land located at 1603 Grove Avenue, Haines City, Florida. This property houses various office, warehousing and manufacturing buildings.

LEGAL PROCEEDINGS

We are involved in litigation with Ruggero Maria Santilli (“Santilli”), The Institute for Basic Research, Inc. (“IBR”), and Hadronic Press, Inc. (“Hadronic”) concerning certain aspects of our liquid waste technologies. The matters contemplated above will be referred to as the “Hadronic Suit.” Hadronic claims to own the intellectual property rights to one or more aspects of our liquid waste technologies.

Management continues to believe that we own all of the intellectual property rights necessary to commercialize and further develop our liquid and solid waste technologies without resorting to a license from any third parties.

During 2004, we attempted to reach agreement with Santilli and his related parties to resolve the differences between the parties. As of this date, the parties are continuing their efforts to resolve their differences.

The litigation described above does not involve the technology we are developing in connection with our efforts for the processing of used automotive tires.

We are also involved in disputes with vendors for various alleged obligations associated with operations that were discontinued in prior years. Several disputes involve deficiency balances associated with lease obligations for equipment acquired by us for our contract manufacturing and BORS Lift operations that were discontinued during calendar 2000. The machinery and equipment associated with many of these obligations has been sold with the proceeds paid to the vendor or the equipment has been returned to the vendor. Several of the equipment leasing entities claim that balances on the leases are still owed.

Included in the balance of accrued expenses and other current liabilities is our estimate of the amount at which the matters contemplated above will ultimately be resolved. Approximately $300,000 of the balance is attributable to the disputed matters contemplated above.

The Company is currently involved in an adversary proceeding pending in the Bankruptcy Court in the Middle District of Florida, Tampa division. The action was filed on December 23, 2003 and is entitled “Electric Machinery Enterprises, Inc. vs. Hunt,

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Clark/Construct Two, a Joint Venture, and Orange County (Adversary No. 03-00811)”. In August of 2001, EME was contracted to perform services on the construction project of Phase V of the Orlando Orange County Convention Center. During the project, various disputes arose relative to the work required, and many unforeseen disruptions not caused by EME resulted in a severe delay in the prosecution of the work. EME completed the job, and in doing so incurred substantial costs far in excess of estimated. The dollar amount of the claim is approximately $8,600,000. The entire amount is disputed. EME expects to collect the full amount of this claim plus interest and attorney’s fees. The defendants have asserted various technical contract related defenses. Therefore, EME cannot estimate when the recovery if any is expected, as EME cannot predict whether or not Defendants will appeal any judgment entered in EME’s favor. This amount is not carried as an asset on the balance sheet, and will only be recorded as revenue when the claim is settled.

Other Litigation and Disputes

We have other litigation and disputes that arise in the ordinary course of our business. We have accrued amounts for which we believe all of our disputes will ultimately be settled.

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DIRECTORS AND EXECUTIVE OFFICERS

Directors and Executive Officers

The following table sets forth information regarding our executive officers and directors as of January 18, 2007:

John D. Stanton assumed the role of Chairman of the Board of Directors, President and Chief Executive Officer on May 15, 2000 in connection with the acquisition of SAC-1. On July 30, 2001, Mr. Stanton brought in James V. Mahoney to assume the role of President and Chief Executive Officer but resumed these roles upon Mr. Mahoney’s resignation in August 2002 until the appointment of Leon H. Toups as President on October 9, 2003. From 1987 through the present, Mr. Stanton has served as the President and Chief Executive Officer of Florida Engineered Construction Products, Corporation. Since the early 1990’s, Mr. Stanton has been, and continues to be, involved in turn-around management for financially distressed companies, providing both management guidance and financing. In 1981, Mr. Stanton assumed the role of Chief Financial Officer for Florida Engineered Construction Products, Corporation, a privately held manufacturer of residential and commercial construction products, located in Tampa, Florida. Mr. Stanton worked as an auditor with the international professional services firm that is now known as Ernst & Young, LLP from 1973 through 1981. Mr. Stanton, a Vietnam veteran of the United States Army, graduated from the University of South Florida with a Bachelors Degree in Marketing and Accounting in 1972, and with an MBA in 1973. Mr. Stanton earned the designation of Certified Public Accountant in 1974 and was a Sells Award winner in the CPA examination. Mr. Stanton also serves on the Board of Directors of MTS Medication Technologies, Inc. (MPP), Online Sales Strategies, Inc. (OSSG), Hybrid Fuel Systems, Inc. (HYFS), PowerCerv Corporation (PCRV), and Nanobac Pharmaceuticals, Inc. (NNBP).

Jaime Jurado joined the Board of Directors with the acquisition of EME. Mr. Jurado began working with EME in 1957 after serving as an electronics specialist in the United States Army. Mr. Jurado became president of EME in 1977 and has served in that capacity ever since. Through Mr. Jurado’s leadership, EME grew from $1,000,000 in annual sales to more than $90,000,000 in 1998, and has helped to establish a niche in the Caribbean, Central and South American Markets.

Nicholas R. Tomassetti joined the Board of Directors effective August 1, 2001. Mr. Tomassetti has served as the President and Chief Operating Officer of Airbus Industrie of North America, Inc. Mr. Tomassetti’s former business associations include serving as Vice President and General Manager of Twin-Jet Business Development for McDonnell Douglas Corporation and Vice President of Pratt & Whitney’s Commercial Engine Business Organization. Mr. Tomassetti served with Pratt & Whitney for over 30 years during which time he held various positions including Vice President, Commercial Engine Organization and Vice President Sales and Service, Commercial Products Division. In 1987, Mr. Tomassetti was tapped to serve as President for the International Aero Engines, a five nation consortium formed to develop and market the LAE V2500 aircraft engine. Mr. Tomassetti earned a degree in Engineering from the General Motors Institute and a Master’s Degree in Engineering from MIT. Mr. Tomassetti also serves on the Board of Directors of Pinnacle Airlines Corp. (PNCL)

Dr. David E. Crow first joined us through an appointment to our Technical Advisory Board in 2002 after he left his position as Senior Vice President – Engineering for UTC-Pratt & Whitney. Dr. Crow was responsible for all technical aspects of commercial and military gas turbine and rocket products. Dr. Crow spent some time working at G.M. Research improving automotive gas turbine combustors to meet stricter emission standards. Much of his career has been devoted to improving advanced combustion technology with special emphasis on the fluid dynamic characteristics of gases under pressure and at higher temperatures. His work has lead to a number of patents and special honorary recognitions. Dr. Crow earned a Bachelors Degree in Mechanical Engineering form the University of Missouri-Rolla, a Masters Degree from Rensselaer Polytechnic Institute, and his PhD Degree from the University of Missouri-Rolla.

Barry G. Markowitz was appointed to the Board of Directors on October 3, 2005. Mr. Markowitz founded DTE Energy Services in 1994 and served as its President from 1994 through 2004, and expanded it to include diversified energy investments (40 projects/facilities) in power generation, on-site energy, and coal-based fuels processing. The company developed, acquired, built, owned and operated businesses generating over $1 billion in annual revenue and $200 million in net income after taxes. After leaving DTE Energy Services in 2004, Mr. Markowitz worked as an independent consultant. Mr. Markowitz was awarded a Bachelor of Civil Engineering and Master of Business Administration by City College of New York

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Frank W. Barker, Jr. is a Certified Public Accountant licensed to practice in the State of Florida, and has been in practice since 1978. He was co-founder of the accounting firm of Peel, Barker, Schatzel & Wells, PA in 1979, and went on to form the consulting firm of Frank W. Barker, Jr., CPA in 1993. Mr. Barker has been providing assistance to us as an independent consultant since May of 2000. From 1993 until the present Mr. Barker has also been providing services as an independent consultant to various other entities in connection with their design and implementation of reorganization strategies. Mr. Barker received a B.A. in Accounting and Finance from the University of South Florida, Tampa, Florida in 1978.

Audit Committee

Our Board of Directors currently does not have an Audit Committee.

Code Of Ethics

We have adopted a Code of Ethics and have posted our Code of Ethics on our internet web site at http://www.earthfirsttech.com. Our Code of Ethics applies to all our employees and those doing business with our Company and specifically applies to our Chief Executive Officer, Chief Financial Officer and all persons serving in similar capacities.

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EXECUTIVE COMPENSATION

The following summary compensation table sets forth certain information concerning compensation paid to our Chief Executive Officer and our four most highly paid executive officers (the “Named Executive Officers”) whose total annual salary and bonus for services rendered in all capacities for the year ended December 31, 2006 was $100,000 or more.

SUMMARY COMPENSATION TABLE - 2005 and 2004

No stock options were issued during calendar 2005 or 2004 to any of the individuals identified in the table above.

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The following table summarizes the options awards granted to each of the named executive officers identified above in the summary compensation table as of December 31, 2006. No stock options were exercised in 2006.

The following table summarizes Director Compensation for the members of the Board during 2006. The amounts of compensation included in this table are also included in the Summary Compensation Table for those named executive officers included in that table.

Employment Agreements

We have no employment agreements with any of our executive officers, who serve at the discretion of our board of directors and hold office until their successor is elected and qualified or until their earlier resignation or removal.

CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

We have never had a disagreement with our accountants on accounting or financial disclosure.

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MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information

Our common stock trades on The National Association of Securities Dealers (“NASD”) OTC Bulletin Board (the “Bulletin Board”) under the trading symbol “EFTI”. The following table sets forth, for the periods indicated, the range of high and low closing bid quotations as reported by the Bulletin Board for each quarter during the last two fiscal years.

Number of Stockholders

On January 18, 2007, the last reported sales price for our shares on the Bulletin Board was $.0.05 per share. On January 18, 2007, we had approximately 453 stockholders of record. We estimate that there are approximately 4,000 beneficial owners of our common stock.

Dividend Policy

We have never paid cash dividends on our common stock and it is not expected that any such dividends will be paid in the foreseeable future. We currently intend to retain any future earnings for use in our business. The payment of any future dividends on our common stock will be determined by the Board of Directors in light of future conditions then existing, including our financial condition, funding requirements for activities, future prospects, restrictions in financing agreements, business conditions and other factors deemed relevant by our Board.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding ownership of our common stock as of January 18, 2007 by each person known to us to own beneficially more than 5% of our outstanding common stock, by each person who is a director, by each person listed in the Summary Compensation Table and by all directors and officers as a group.

The information reflected in the following table was furnished by the persons listed therein. The calculations of the percent of shares beneficially owned are based on 604,010,294 shares of common stock outstanding on January 18, 2007 plus, with respect to each such person, the number of additional shares that will be outstanding upon exercise of the warrants and options exercisable within sixty (60) days set forth herein.

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SELLING SHAREHOLDER

This prospectus only covers the 75,679,135 shares of common stock issued or to be issued to the investor who is a party to those certain convertible secured notes, warrants and options. The following table lists certain information with respect to the selling stockholder as follows: (i) the selling stockholder’s name, (ii) the number of outstanding shares of common stock beneficially owned by the selling stockholder prior to this offering; (iii) the number of shares of common stock to be beneficially owned by the selling stockholder after the completion of this offering assuming the resale of all of the shares of the common stock offered by the selling stockholder; and (iv) if one percent or more, the percentage of outstanding shares of common stock to be beneficially owned by the selling stockholder after the completion of this offering assuming the resale of all of the shares of common stock offered by the selling stockholder. Except as noted, the selling stockholder has not had any position, office, or other material relationship with us or any of our predecessors or affiliates within the past three years.

The selling stockholder may resell all, or none of their shares in this offering. See “Plan of Distribution.”

* These columns represent the aggregate maximum number and percentage of shares that the selling stockholder can own at one time (and therefore, offer for resale at any one time) due to their 4.99% limitation.

The number and percentage of shares beneficially owned is determined in accordance with Rule 13d-3 of the Securities Exchange Act of 1934, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rule, beneficial ownership includes any shares as to which the selling stockholder has sole or shared voting power or investment power and also any shares, which the selling stockholder has the right to acquire within 60 days. The actual number of shares of common stock issuable upon the conversion of the secured convertible notes is subject to adjustment depending on, among other factors, the future market price of the common stock, and could be materially less or more than the number estimated in the table.

(1) The actual number of shares of common stock offered in this prospectus, and included in the registration statement of which this prospectus is a part, includes such additional number of shares of common stock as may be issued or issuable upon conversion of the secured convertible notes and exercise of the related warrants by reason of any stock split, stock dividend or similar transaction involving the common stock, in accordance with Rule 416 under the Securities Act of 1933. However the selling stockholder has contractually agreed to restrict its ability to convert their secured convertible notes or exercise their warrants and receive shares of our common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock as determined in accordance with Section 13(d) of the Exchange Act. Accordingly, the number of shares of common stock set forth in the table for the selling stockholder exceeds the number of shares of common stock that the selling stockholder could own beneficially at any given time through their ownership of the secured convertible notes, options and the warrants. In that regard, the beneficial ownership of the common stock by the selling stockholder set forth in the table is not determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended.

(4) Laurus Capital Management, L.L.C. may be deemed a control person of the shares owned by such entity. David Grin and Eugene Grin are the principals of Laurus Capital Management, L.L.C. The shares of common stock that are being registered includes: (i) 19,000,000 shares of common stock; (ii) 11,162,790 common stock purchase warrants exercisable at an average of $0.255 per share;

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(iii) an option to purchase 5,570,668 shares of common stock exercisable at $0.01 per share, and (iv) up to 15,789,474 shares underlying $3,000,000 principal amount of a convertible term note; and (v) up to 5,263,158 shares underlying $1,000,000 principal amount secured convertible minimum borrowing note. We have been notified by the selling stockholder that it is not a broker-dealer or an affiliate of a broker-dealer and it does not believe that it is required to be a broker-dealer.

Terms of Secured Convertible Notes

To obtain funding for general corporate purposes we entered into agreements with Laurus on March 30, 2005, pursuant to which we sold convertible debt, an option and a warrant to purchase our common stock to Laurus in a private offering pursuant to exemption from registration under Section 4(2) of the Securities Act of 1933, as amended. This prospectus relates to the resale of the common stock underlying the securities sold to Laurus, which consist of the following:

At the closing of the foregoing financing, on March 31, 2005, we delivered all the relevant executed documents and agreements relating to the foregoing transaction and Laurus deposited $6,600,000 with the escrow agent, in accordance with the escrow agreement between us, Laurus and Loeb & Loeb LLP, acting as escrow agent. We then delivered joint instruction executed by us and Laurus to the escrow agent and Laurus informed the escrow agent that all closing conditions have been satisfied. Thereupon we received $3,000,000 in connection with the convertible term note from the escrow agent. In addition, we are permitted to borrow an aggregate principal amount not to exceed $5,000,000, based upon our eligible accounts receivable and inventory, pursuant to the convertible minimum borrowing note and the revolving note. Accordingly at the closing, we received an additional $3,600,000 for an aggregate of $6,600,000 in financing from the escrow agent. As of January 18, 2007 the principal amount outstanding under the revolving note is $4,000,000.

The notes mature on March 30, 2008. Annual interest on the convertible minimum borrowing note and the revolving note is equal to the “prime rate” published in The Wall Street Journal from time to time, plus 2.0%, provided, that, such annual rate of interest may not be less than 7.0%, subject to certain downward adjustments resulting from certain increases in the market price of our common stock. Annual interest on the convertible term note is equal to the “prime rate” published in The Wall Street Journal from time to time, plus 2.5%, subject to certain downward adjustments resulting from certain increases in the market price of our common stock.

The principal amount of the secured convertible term note is repayable at the rate of $100,000 per month together with accrued but unpaid interest, commencing on October 1, 2005. Such amounts may be paid, at the holder’s option (i) in cash with a 2% premium; or (ii) in shares of common stock, assuming the shares of common stock are registered under the Securities Act of 1933. If paid in shares of common stock the number of shares to be issued shall equal the total amount due, divided by $0.19. If the average closing price of the common stock for five consecutive trading days prior to an amortization date is equal to or greater than $.209, we may require the holder to convert into common stock an amount of principal, accrued interest and fees due under the term note equal to a maximum of 25% of the aggregate dollar trading volume of the common stock for the 22 consecutive trading days prior to a notice of conversion. We may redeem the term note in cash by paying the holder 125% of the principal amount, plus accrued interest during the first year of the note, 115% of the principal amount, plus accrued interest during the second year of the note and 110% of the principal amount, plus accrued interest thereafter. The holder of the term note may require us to convert all or a portion of the term note, together with interest and fees thereon at any time. The number of shares to be issued shall equal the total amount to be converted, divided by $0.19.

The principal amount of the secured convertible minimum borrowing note is due on March 30, 2008 and accrued interest thereon is payable monthly commencing on April 1, 2005. The secured convertible minimum borrowing note may be redeemed by us in cash by paying the holder 103% of the principal amount, plus accrued interest during the first year of the note, 102% of the principal amount, plus accrued interest during the second year of the note and 101% of the principal amount, plus accrued interest thereafter. The holder of the term note may require us to convert all or a portion of the term note, together with interest and fees thereon at any time. The number of shares to be issued shall equal the total amount to be converted, divided by $0.19.

The principal amount of the secured revolving note, without duplication of any amounts owing under the secured convertible minimum borrowing note, is due on March 30, 2008 and accrued interest thereon is payable monthly commencing on April 1, 2005. We may continue to draw additional funds under the secured revolving note, subject to availability based upon our eligible accounts receivable and inventory. The holder of the term note may require us to convert all or a portion of the term note, together with interest and fees thereon at any time. The number of shares to be issued shall equal the total amount to be converted, divided by $0.20.

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Upon an issuance of shares of common stock below the fixed conversion price, the fixed conversion price of the notes will be reduced accordingly. The conversion price of the secured convertible notes may be adjusted in certain circumstances such as if we pay a stock dividend, subdivide or combine outstanding shares of common stock into a greater or lesser number of shares, or take such other actions as would otherwise result in dilution.

120% of the full principal amount of the convertible notes are due upon default under the terms of convertible notes. Laurus has contractually agreed to restrict its ability to convert the convertible notes would exceed the difference between the number of shares of common stock beneficially owned by the holder or issuable upon exercise of the warrant and the option held by such holder and 4.99% of the outstanding shares of our common stock.

The Company paid a fee at closing to Laurus Capital Management LLC, the manager of Laurus Master Funds, Ltd, equal to 3.6% of $8,000,000, the total maximum funds to be borrowed under the Company’s agreements with Laurus. This fee of $288,000 was deducted from the proceeds at closing.

In addition to the 3.6% management fee paid to Laurus Capital Management, LLC, $23,125 was also paid to Laurus Capital Management, LLC as due diligence and documentation fees. $40,000 was paid to Sichenzia Ross Friedman Ference LLP for the Company’s legal counsel fees, and $2,000 was paid to Loeb & Loeb LLP as an excrow agent fee. These fees were also deducted from the proceeds at closing.

Conversion Calculation

The number of shares of common stock issuable upon conversion of the notes is determined by dividing that portion of the principal of the notes to be converted and interest, if any, by the fixed conversion price of each of the notes. Assuming conversion of the full principal amount available under the notes the number of shares issuable upon conversion at the relevant fixed conversion prices would be:

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In December 2000 and again in January 2003, we entered into multiple revolving line of credit promissory notes with Florida Engineered Construction Products Corporation, an entity in which John Stanton is a majority shareholder, secured by all of our assets. The amount of the December 15, 2000 agreement was $2,500,000 at the time it was made, and the amount of the January 28, 2003 agreement was $2,500,000 at the time it was made. Each revolving note was a demand loan, which meant that the lender could demand full repayment of the loan at any time. The promissory notes related to each revolving line of credit merely provided for a loan up to a stated amount. There was no obligation on the part of the related party to make any loans pursuant to these agreements if the loan balance was less than the stated amount. There was no obligation on the part of the related parties to make any additional loans.

Historically, the related party lender has periodically agreed to convert portions of the loan balances into shares of our common stock. During 2004, the related party converted $5,334,010 of these notes into shares of our common stock.

As of December 31, 2004, we owed $6,672,519 pursuant to these agreements. Subsequent to December 31, 2004, additional loans were made under these notes to help secure the outcome of the reorganization of EME. On February 23, 2005 the full balance of $9,204,157 notes payable to related parties was converted into 189,643,210 shares of our common stock, and these agreements were cancelled.

The Company leases and rents the real property, building, and all other improvements located at 2515 E Hanna Avenue, Tampa, Florida 33610 from Hanna Properties Inc., a related party affiliated with Jaime Jurado, the President of EME. Mr. Jurado owns 45.425% of the common stock of Hanna Properties, Inc. This property consists of 29,680 sq. ft. of office space, 80,320 sq. ft. of warehouse space and 26,992 sq. ft. of garage and workshop space. Monthly rental including sales tax, but excluding real estate taxes and insurances is $52,133. This lease obligation was assumed pursuant to EME’s reorganization plan for a period of two years, at which time EarthFirst has the option to re-evaluate. This location is the corporate headquarters of EarthFirst Technologies Incorporated and its subsidiaries.

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On March 31, 2005, the Company purchased 7,500,000 shares of Hybrid Fuel Systems, Inc. common stock. Upon issuance of the stock, the Company owned 9.83% of Hybrid. Hybrid is related to the Company in that John Stanton, who owns 54.7% of EFTI owns 23.3% of Hybrid and further, John owns 92% of White Knight SST, Inc., who in turn owns 24% of Hybrid. Mr. Stanton is also Chairman of the Board of Hybrid Fuel Systems, Inc. On November 4, 2005 the Company sold its investment in Hybrid Fuel Systems, Inc., and Nanobac Pharmaceuticals, Inc. to our Chairman of the Board, John Stanton for $1,050,000, which is equal to the original investment in these companies, to avail the Company access to the cash used to make the original investment.

On August 29, 2005, the Company issued 83,000,000 shares of common stock as stock based compensation to entities affiliated with or controlled by John Stanton, Chairman of the Board, for services rendered from the inception of his involvement with the Company through the acquisition and reorganization of EME. Included in this issuance were those shares entitled to be issued by EFTI as a plan proponent to the EME bankruptcy, and authorized by the Fourth Amended Plan of Reorganization of EME pursuant to Section 1145 of the Bankruptcy Code. Compensation expense associated with this transaction, calculated based upon the market price of the Company’s stock on the date of grant was $18,260,000.

We believe that the terms of all of the above transactions are commercially reasonable and no less favorable to us than we could have obtained from an unaffiliated third party on an arm’s length basis.

DESCRIPTION OF SECURITIES TO BE REGISTERED

Common Stock

We are authorized to issue up to 750,000,000 shares of common stock, par value $.0001, pursuant to our Articles of Incorporation which were amended on June 20, 2005. As of January 18, 2007, there were 604,010,294 shares of common stock outstanding. Holders of the common stock are entitled to one vote per share on all matters to be voted upon by the stockholders. Holders of common stock are entitled to receive ratably such dividends, if any, as may be declared by the Board of Directors out of funds legally available therefore. Upon the liquidation, dissolution, or winding up of our company, the holders of common stock are entitled to share ratably in all of our assets which are legally available for distribution after payment of all debts and other liabilities and liquidation preference of any outstanding common stock. Holders of common stock have no preemptive, subscription, redemption or conversion rights. The outstanding shares of common stock are validly issued, fully paid and nonassessable.

Transfer Agent and Registrar

We have appointed Continental Stock Transfer & Trust Company, 17 Battery Place, New York, New York 10004, as transfer agent for our shares of Common Stock.

INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

Our bylaws provide for the indemnification of our directors to the fullest extent permitted by the Florida Business Corporation Act. Our bylaws further provide that our Board of Directors has sole discretion to indemnify our officers and other employees. We may limit the extent of such indemnification by individual contracts with our directors and executive officers, but have not done so. We are required to advance, prior to the final disposition of any proceeding, promptly on request, all expenses incurred by any director or executive officer in connection with that proceeding on receipt of an undertaking by or on behalf of that director or executive officer to repay those amounts if it should be determined ultimately that he or she is not entitled to be indemnified under our bylaws or otherwise. We are not, however, required to advance any expenses in connection with any proceeding if a determination is reasonably and promptly made by our Board of Directors by a majority vote of a quorum of disinterested Board members that (a) the party seeking an advance acted in bad faith or deliberately breached his or her duty to us or our stockholders and (b) as a result of such actions by the party seeking an advance, it is more likely than not that it will ultimately be determined that such party is not entitled to indemnification pursuant to the applicable sections of our bylaws.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the “Act” or “Securities Act”) may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.

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PLAN OF DISTRIBUTION

The selling stockholder, or its pledgees, donees, transferees, or any of their successors in interest selling shares received from a named selling stockholder as a gift, partnership distribution or other non-sale-related transfer after the date of this prospectus (all of whom may be selling stockholders) may resell the common stock offered by this prospectus from time to time on any stock exchange or automated interdealer quotation system on which the common stock is listed or quoted at the time of sale, in the over-the-counter market, in privately negotiated transactions or otherwise, at fixed prices that may be changed, at market prices prevailing at the time of sale, at prices related to prevailing market prices or at prices otherwise negotiated. The name of any pledgee, donee, transferee, or any of their successors in interest selling shares would be added, by name, in a post-effective amendment. The selling stockholder may sell the common stock by one or more of the following methods, without limitation:

These transactions may include crosses, which are transactions in which the same broker acts as an agent on both sides of the trade. The selling stockholder may also transfer the common stock by gift. We do not know of any arrangements by the selling stockholder for the sale of any of the common stock.

The selling stockholder may engage brokers and dealers, and any brokers or dealers may arrange for other brokers or dealers to participate in effecting sales of the common stock. These brokers or dealers may act as principals, or as an agent of a selling stockholder. Broker-dealers may agree with a selling stockholder to sell a specified number of the stocks at a stipulated price per share. If the broker-dealer is unable to sell common stock acting as agent for a selling stockholder, it may purchase as principal any unsold shares at the stipulated price. Broker-dealers who acquire common stock as principals may thereafter resell the shares from time to time in transactions in any stock exchange or automated interdealer quotation system on which the common stock is then listed, at prices and on terms then prevailing at the time of sale, at prices related to the then-current market price or in negotiated transactions. Broker-dealers may use block transactions and sales to and through broker-dealers, including transactions of the nature described above. In order to comply with the securities laws of some states, if applicable, the shares of common stock may be sold in these jurisdictions only through registered or licensed brokers or dealers.

The selling stockholder may also sell the common stock in accordance with Rule 144 or Rule 144A under the Securities Act, rather than pursuant to this prospectus. In general, under Rule 144 a person or persons whose shares are aggregated including an affiliate, who has beneficially owned the shares for one year or more, may sell in the open market within any three-month period a number of shares that does not exceed 1% of the then outstanding shares of our common stock. Sales under Rule 144 are also subject to limitations on the manner of sale, notice requirements and the availability of our current public information. A person who is deemed not to have been our affiliate at any time during the three months preceding a sale by him and who has beneficially owned his or her shares for at least two years, may sell the shares in the public market under Rule 144(k) without regard to the volume limitations, manner of sale provisions, notice requirements, or the availability of current information we refer to above. After restricted shares are properly sold in reliance upon Rule 144, they will be freely tradeable without restrictions or registration under the Securities Act, unless thereafter held by one of our affiliates.

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From time to time, the selling stockholder may pledge, hypothecate or grant a security interest in some or all of the shares owned by them. The pledgees, secured parties or person to whom the shares have been hypothecated will, upon foreclosure in the event of default, be deemed to be a selling stockholder. The number of a selling stockholder’s shares offered under this prospectus will decrease as and when it takes such actions. The plan of distribution for that selling stockholder’s shares will otherwise remain unchanged. In addition, a selling stockholder may, from time to time, sell the shares short, and, in those instances, this prospectus may be delivered in connection with the short sales and the shares offered under this prospectus may be used to cover short sales.

To the extent required under the Securities Act, the aggregate amount of selling stockholder’s shares being offered and the terms of the offering, the names of any agents, brokers, dealers or underwriters, any applicable commission and other material facts with respect to a particular offer will be set forth in an accompanying prospectus supplement or a post-effective amendment to the registration statement of which this prospectus is a part, as appropriate. Any underwriters, dealers, brokers or agents participating in the distribution of the common stock may receive compensation in the form of underwriting discounts, concessions, commissions or fees from a selling stockholder and/or purchasers of selling stockholder’s shares, for whom they may act (which compensation as to a particular broker-dealer might be less than or in excess of customary commissions). Neither we nor any selling stockholder can presently estimate the amount of any such compensation.

The selling stockholder and any underwriters, brokers, dealers or agents that participate in the distribution of the common stock may be deemed to be “underwriters” within the meaning of the Securities Act, and any discounts, concessions, commissions or fees received by them and any profit on the resale of the securities sold by them may be deemed to be underwriting discounts and commissions. If a selling stockholder is deemed to be an underwriter, the selling stockholder may be subject to certain statutory liabilities including, but not limited to Sections 11, 12 and 17 of the Securities Act and Rule 10b-5 under the Exchange Act. If the selling stockholder is a deemed underwriter within the meaning of the Securities Act it be subject to the prospectus delivery requirements of the Securities Act. The SEC staff is of a view that selling stockholders who are registered broker-dealers or affiliates of registered broker-dealers may be underwriters under the Securities Act. We will not pay any compensation or give any discounts or commissions to any underwriter in connection with the securities being offered by this prospectus.

A selling stockholder may enter into hedging transactions with broker-dealers and the broker-dealers may engage in short sales of the common stock in the course of hedging the positions they assume with that selling stockholder, including, without limitation, in connection with distributions of the common stock by those broker-dealers. A selling stockholder may enter into option or other transactions with broker-dealers, who may then resell or otherwise transfer their common stock. A selling stockholder may also loan or pledge the common stock offered by this prospectus to a broker-dealer and the broker-dealer may sell the common stock offered by this prospectus so loaned or upon a default may sell or otherwise transfer the pledged common stock offered by this prospectus.

The selling stockholder and other persons participating in the sale or distribution of the common stock will be subject to applicable provisions of the Exchange Act, and the rules and regulations under the Exchange Act, including Regulation M. This regulation may limit the timing of purchases and sales of any of the common stock by the selling stockholder and any other person. The anti-manipulation rules under the Exchange Act may apply to sales of common stock in the market and to the activities of the selling stockholder and its affiliates. Regulation M may restrict the ability of any person engaged in the distribution of the common stock to engage in market-making activities with respect to the particular common stock being distributed for a period of up to five business days before the distribution. These restrictions may affect the marketability of the common stock and the ability of any person or entity to engage in market-making activities with respect to the common stock.

We cannot assure you that the selling stockholder will resell all or any portion of the common stock offered by this prospectus.

PENNY STOCK

The Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require:

In order to approve a person’s account for transactions in penny stocks, the broker or dealer must

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The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission relating to the penny stock market, which, in highlight form:

Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

TERMS OF SECURED CONVERTIBLE NOTES

To obtain funding for general corporate purposes we entered into agreements with Laurus, pursuant to which we sold convertible debt, an option and a warrant to purchase our common stock to Laurus in a private offering pursuant to exemption from registration under Section 4(2) of the Securities Act of 1933, as amended. The securities being sold to Laurus include the following:

At the closing of the foregoing financing, on March 31, 2005, we delivered all the relevant executed documents and agreements relating to the foregoing transaction and Laurus deposited $6,600,000 with the escrow agent, in accordance with the escrow agreement between us, Laurus and Loeb & Loeb LLP, acting as escrow agent. We then delivered joint instruction executed by us and Laurus to the escrow agent and Laurus informed the escrow agent that all closing conditions have been satisfied. Thereupon we received $3,000,000 in connection with the convertible term note from the escrow agent. In addition, we are permitted to borrow an aggregate principal amount not to exceed $5,000,000, based upon our eligible accounts receivable and inventory, pursuant to the convertible minimum borrowing note and the revolving note. Accordingly at the closing, we received an additional $3,600,000 for an aggregate of $6,600,000 in financing from the escrow agent. As of January 18, 2007 the principal amount outstanding under the revolving note is $4,000,000.

In the event that the facility is terminated prior to expiration we must pay Laurus a fee in an amount equal to (1) $150,000 if terminated prior to the first anniversary of the closing of the facility, (2) $100,000 if terminated on or after the first anniversary of the closing of the facility and prior to the second anniversary of the closing of the facility and (3) 50,000 if such termination occurs thereafter during the term of the facility. Our obligations under the notes are secured by all of our assets, including but not limited to inventory, accounts receivable and a pledge of the stock of Electric Machinery Enterprises, Inc., EarthFirst Resources, Inc., World Environmental Solutions Company, Inc., EarthFirst Investments, Inc., EM Enterprise Resources, Inc. and EME Modular Structures, Inc., our active subsidiaries. The notes mature on March 30, 2008. Annual interest on the convertible minimum borrowing note and the revolving note is equal to the “prime rate” published in The Wall Street Journal from time to time, plus 2.0%, provided, that, such annual rate of interest may not be less than 7.0%, subject to certain downward adjustments resulting from certain increases in the market price of our common stock. Annual interest on the convertible term note is equal to the “prime rate” published in The Wall Street Journal from time to time, plus 2.5%, subject to certain downward adjustments resulting from certain increases in the market price of our common stock.

The principal amount of the secured convertible term note is repayable at the rate of $100,000 per month together with accrued but unpaid interest, commencing on October 1, 2005. Such amounts may be paid, at the holder’s option (i) in cash with a 2% premium; or (ii) in shares of common stock, assuming the shares of common stock are registered under the Securities Act of 1933. If paid in shares of common stock the number of shares to be issued shall equal the total amount due, divided by $0.19. If the average closing price of the common stock for five consecutive trading days prior to an amortization date is equal to or greater than $.209, we may require the holder to convert into common stock an amount of principal, accrued interest and fees due under the term note equal to a maximum of 25% of the aggregate dollar trading volume of the common stock for the 22 consecutive trading days prior to a notice of conversion. We may redeem the term note in cash by paying the holder 125% of the principal amount, plus accrued interest during the first year of the note, 115% of the principal amount, plus accrued interest during the second year of the note and 110% of

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the principal amount, plus accrued interest thereafter. The holder of the term note may require us to convert all or a portion of the term note, together with interest and fees thereon at any time. The number of shares to be issued shall equal the total amount to be converted, divided by $0.19.

The principal amount of the secured convertible minimum borrowing note is due on March 30, 2008 and accrued interest thereon is payable monthly commencing on April 1, 2005. The secured convertible minimum borrowing note may be redeemed by us in cash by paying the holder 103% of the principal amount, plus accrued interest during the first year of the note, 102% of the principal amount, plus accrued interest during the second year of the note and 101% of the principal amount, plus accrued interest thereafter. The holder of the term note may require us to convert all or a portion of the term note, together with interest and fees thereon at any time. The number of shares to be issued shall equal the total amount to be converted, divided by $0.19.

The principal amount of the secured revolving note, without duplication of any amounts owing under the secured convertible minimum borrowing note, is due on March 30, 2008 and accrued interest thereon is payable monthly commencing on April 1, 2005. We may continue to draw additional funds under the secured revolving note, subject to availability based upon our eligible accounts receivable and inventory. The holder of the term note may require us to convert all or a portion of the term note, together with interest and fees thereon at any time. The number of shares to be issued shall equal the total amount to be converted, divided by $0.20.

Upon an issuance of shares of common stock below the fixed conversion price, the fixed conversion price of the notes will be reduced accordingly. The conversion price of the secured convertible notes may be adjusted in certain circumstances such as if we pay a stock dividend, subdivide or combine outstanding shares of common stock into a greater or lesser number of shares, or take such other actions as would otherwise result in dilution.

120% of the full principal amount of the convertible notes are due upon default under the terms of convertible notes. Laurus has contractually agreed to restrict its ability to convert the convertible notes would exceed the difference between the number of shares of common stock beneficially owned by the holder or issuable upon exercise of the warrant and the option held by such holder and 4.99% of the outstanding shares of our common stock.

A complete copy of the Securities Purchase Agreement and related documents are filed with the SEC as exhibits to our Form SB-2 relating to this prospectus.

LEGAL MATTERS

Sichenzia Ross Friedman Ference LLP, New York, New York will issue an opinion with respect to the validity of the shares of common stock being offered by this prospectus.

EXPERTS

Our financial statements as of December 31, 2005, and for each of the years in the two year period then ended, have been included herein in reliance upon the report of Aidman, Piser & Company, P.A., independent registered public accounting firm, appearing elsewhere herein, and upon authority of said firm as experts in accounting and auditing.

AVAILABLE INFORMATION

We have filed a registration statement on Form SB-2 under the Securities Act of 1933, as amended, relating to the shares of common stock being offered by this prospectus, and reference is made to such registration statement. This prospectus constitutes the prospectus of EarthFirst Technologies, Incorporated, filed as part of the registration statement, and it does not contain all information in the registration statement, as certain portions have been omitted in accordance with the rules and regulations of the Securities and Exchange Commission.

We are subject to the informational requirements of the Securities Exchange Act of 1934 which requires us to file reports, proxy statements and other information with the Securities and Exchange Commission. Such reports, proxy statements and other information may be inspected at public reference facilities of the SEC at 100 F Street N.E., Washington D.C. 20549. Copies of such material can be obtained from the Public Reference Section of the SEC at 100 F Street N.E., Washington, D.C. 20549 at prescribed rates. Because we file documents electronically with the SEC, you may also obtain this information by visiting the SEC’s Internet website at http://www.sec.gov.

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INDEX TO FINANCIAL STATEMENTS

EARTHFIRST TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES

EARTHFIRST TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

See notes to condensed consolidated financial statements.

F-2

EARTHFIRST TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)