Earthfirst Technologies Inc – ‘10QSB’ for 9/30/07

On:  Thursday, 12/20/07, at 4:01pm ET   ·   For:  9/30/07   ·   Accession #:  1201800-7-221   ·   File #:  0-23897

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Quarterly Report — Small Business   —   Form 10-QSB
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10QSB       Quarterly Report -- Small Business                    38    190K 

Document Table of Contents

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 FORM 10-QSB

(Mark One)                                                                      

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

For the quarterly period ended - September 30, 2007                             

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

For the transition period from                    to                            
                     ------------------    -----------------

Commission File Number 0-23897
 EARTHFIRST TECHNOLOGIES, INCORPORATED
 -------------------------------------
 (Exact name of small business issuer as specified in its charter)

   Florida                                    59-3462501
------------------------------------           ---------------------------------
(State or other jurisdiction of                (IRS Employer Identification No.)
incorporation or organization)                                                  

 2515 E Hanna Ave., Tampa, Florida 33610
 ---------------------------------------
(Address of principal executive offices)

(813) 238-5010
--------------
 (Issuer's telephone number)

Check  whether the issuer (1) filed all reports  required to be filed by Section
12, 13 or 15 (d) of the  Exchange Act during the past 12 months (or such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days. Yes  X    No          
                                                        ---      ---
Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No X                                   

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity,  as of December  7, 2007:  611,791,246  shares $ .0001 par value  common
stock.                                                                          

Transitional Small Business Disclosure Format (check one) Yes     No  X         
                                                      ---    ---

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EXPLANATORY NOTE                                                                

As set forth in a Form 8-K filed on October 9, 2007,  the Company's  independent
auditors  resigned  on  October  2, 2007.  The  reports  of Aidman  Piser on the
Company's financial statements for the past two fiscal years, did not contain an
adverse opinion or a disclaimer of opinion and were not qualified or modified as
to uncertainty,  audit scope, or accounting principles,  except that substantial
doubt was raised as to the Company's ability to continue as a going concern.  In
connection with the audits of the Company's financial statements for each of the
two fiscal years ended December 31, 2006 and 2005, and in the subsequent interim
periods,  there  were no  disagreements  with  Aidman  Piser on any  matters  of
accounting principles or practices,  financial statement disclosure, or auditing
scope and procedures which, if not resolved to the satisfaction of Aidman Piser,
would have caused Aidman Piser to make reference to the matter in their report. 

The Company is in the process of selecting new auditors,  but has not yet made a
final determination.  Accordingly,  there is currently no auditor to conduct the
review required by Rule 10-01(d) of Regulation S-X.                             

The Company understands that the staff of the Securities and Exchange Commission
(the "staff") has taken the position  that this report is deficient  because the
interim financial  statements contained in this report have not been reviewed by
an  independent  registered  public  accountant  as required by Rule 10-01(d) of
Regulation  S-X.  Pursuant to the  position  taken by the staff,  the Company is
deemed not to be current in its filings  required under the Securities  Exchange
Act of 1934, as amended.  The Company understands that completion of a review of
its interim  financial  statements and the filing of an amendment will make this
report current,  although it will not be deemed timely for purposes of the rules
governing eligibility to use registration  statements on Forms S-2 and S-3. When
the review is complete,  the Company will file an amendment to this report which
will  include the  required  certifications  of the  Company's  Chief  Executive
Officer and Acting Chief  Financial  Officer as required by Sections 302 and 906
of the Sarbanes-Oxley Act.                                                      

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NOTE ON FORWARD-LOOKING STATEMENTS                                              

Investors are cautioned that certain statements contained in this document,  and
the Company's Form 10-KSB, as well as some statements in periodic press releases
and some oral statements of Company  officials  during  presentations  about the
Company  are  forward-looking  statements  within  the  meaning  of the  Private
Securities  Litigation  Reform  Act of  1995  (the  Act).  The  words  believes,
anticipates, plans, expects, intends, estimates, and similar expressions in this
report are intended to identify  forward-looking  statements.  In addition,  any
statements concerning future financial performance,  ongoing business strategies
or prospects,  and possible  future  Company  actions,  which may be provided by
management,  are also  forward-looking  statements  as defined by the Act.  Such
forward-looking statements involve known and unknown risks,  uncertainties,  and
other factors which may cause the actual results, performance or achievements of
the  Company to  materially  differ  from any future  results,  performance,  or
achievements expressed or implied by such forward-looking statements and to vary
significantly  from reporting period to reporting period.  Such factors include,
among  others,  those listed  under Item 1 of the Form 10-KSB and other  factors
detailed  from time to time in the Company's  other filings with the  Securities
and Exchange Commission.  Although management believes that the assumptions made
and  expectations  reflected in the  forward-looking  statements are reasonable,
there is no assurance that the underlying assumptions will, in fact, prove to be
correct  or  that  actual  future   results  will  not  be  different  from  the
expectations expressed in this report.                                          

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 FORM 10-QSB

 EARTHFIRST TECHNOLOGIES, INCORPORATED

 TABLE OF CONTENTS

                                                        [Enlarge/Download Table]

                                                                                                             PAGE 
PART I.  Financial Information                                                                                    

Item 1 - Financial Statements                                                                                     

                                                                                                                  
                  Condensed Consolidated Balance Sheets as of September 30, 2007 (Unaudited)                      
                  and December 31, 2006.....................................................................    1 

                  Condensed Consolidated Statements of Operations for the three months and                        
                  the nine months ended September 30, 2007 and 2006 (Unaudited).............................    2 

                  Condensed Consolidated Statements of Cash Flows for the nine months                             
                  ended September 30, 2007 and 2006 (Unaudited).............................................    3 

                  Condensed Consolidated Statement of Stockholders' Equity (Deficit) for                          
                  the nine months ended September 30, 2007 (Unaudited)......................................    4 

                  Notes to Unaudited Condensed Consolidated Financial Statements............................  5-18

Item 2 - Management's Discussion and Analysis or Plan of Operation.......................................... 19-28

Item 3 - Controls and Procedures............................................................................    28

PART II. Other Information                                                                                        

Item 1. - Legal proceedings.................................................................................    29

Item 2. - Unregistered Sales of Equity Securities and Use of Proceeds.......................................    30

Item 3. - Defaults upon Senior Securities...................................................................    31

Item 4. - Submission of Matters to a Vote of Security Holders...............................................    31

Item 5. - Other Information.................................................................................    31

Item 6. - Exhibits and Reports on Form 8-K..................................................................    31

Signatures..................................................................................................    32

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EARTHFIRST TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
 CONDENSED CONSOLIDATED BALANCE SHEETS

                                                        [Enlarge/Download Table]


                                     ASSETS                                                             
                                                                      September 30,                     
                                                                          2007           December 31,   
                                                                       (Unaudited)           2006       
                                                                     --------------      ------------   
                                                                                                        
Current assets:                                                                                         
   Cash                                                            $         247,538  $          115,000
   Accounts receivable - net                                               3,884,269           8,649,533
   Cost and estimated earnings in excess of                                                             
     billings on uncompleted contracts                                         -               1,692,063
Inventory                                                                  2,154,148           2,745,543
Prepaid expenses and other current assets                                     96,153             101,599
                                                                   -----------------  ------------------
     Total current assets                                                  6,382,108          13,303,738

Property and equipment, net                                                4,055,778           4,746,416
Goodwill                                                                                       6,000,000
Loan costs and discounts                                                     141,292             353,230
Other assets                                                                 663,151             263,775
                                                                   -----------------  ------------------
                                                                   $      11,242,329  $       24,667,159
                                                                   =================  ==================

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                                         
Current liabilities:                                                                                    
    Notes payable                                                  $         655,756  $           23,064
    Secured convertible notes payable                                      6,624,159           4,393,812
    Accounts payable and accrued expenses                                  9,439,381          11,256,232
    Billings in excess of cost and estimated                                                            
     earnings on uncompleted contracts                                       783,356           2,662,655
                                                                   -----------------  ------------------
     Total current liabilities                                            17,502,652          18,335,763

Secured convertible notes payable, non current                                 -                 315,340
Derivative liabilities                                                       973,287           1,005,596
Notes payable, related parties                                             4,083,394           4,561,660
                                                                   -----------------  ------------------
     Total liabilities                                                    22,559,333          24,218,359

Minority interest                                                                -               118,820
Commitments and contingencies (Note 10)                                          -                   -  

Stockholders' equity (deficit):                                                                         
   Common stock, par value $.0001, 750,000,000 shares authorized,                                       
   611,791,246 and 604,260,294 shares issued and outstanding                 61,179               60,426
   Additional paid-in capital                                             89,134,627          87,816,914
   Accumulated deficit                                             (    100,512,810)  (      87,547,360)
                                                                   -----------------  ------------------
     Total stockholders' equity (deficit):                         (     11,317,004)             329,980
                                                                    ----------------  ------------------

                                                                   $      11,242,329  $       24,667,159
                                                                   =================  ==================

See notes to condensed consolidated financial statements. 

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EARTHFIRST TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (UNAUDITED)

                                                        [Enlarge/Download Table]

                                                            Three Months Ended               Nine Months Ended         
                                                            ------------------               -----------------         
                                                                September 30                   September 30            
                                                             2007           2006            2007           2006        
                                                        -------------  -------------   -------------  -------------    
                                                                                                                       
Revenue                                                 $   3,901,009  $   8,746,062   $  18,254,491  $  33,086,463    
Cost of sales                                               4,244,392      9,095,169      15,572,527     30,231,008    
                                                        -------------  -------------   -------------  -------------    
Gross profit                                            (    343,383)  (     349,107)      2,681,964      2,855,455    

Selling, general and administrative expenses                1,947,322      2,885,000       6,603,239      7,908,306    
Impairment of goodwill                                      6,000,000                      6,000,000                   
Research and development expenses                              91,697        400,509         336,043        595,803    
                                                        -------------  -------------   -------------  -------------    

Loss from operations before reorganization item,                                                                       
   income taxes and majority and minority interest      (  8,382,402)  (   3,634,616)   ( 10,257,318)  (  5,648,654)   
                                                         ------------   ------------    ------------   ------------    

Other income (expense):                                                                                                
   Gain on extinguishment of debt, bankruptcy                   -              -               -             81,020    
   Claims recovery                                              -              -               -          1,100,000    
   Miscellaneous income                                        95,458         19,949         121,153        193,369    
   Derivative gain (loss)                                     562,970        279,280          32,309      3,906,048    
   Interest expense                                     (     268,604)  (    738,729)   (  2,584,242)  (  2,956,378)   
                                                         ------------   ------------    ------------   ------------    

Income (loss) before reorganization item, income taxes                                                                 
 and minority interest                                  (   7,992,578)  (  4,074,116)   ( 12,688,098)  (  3,324,595)   

   Reorganization item, professional fees related to                                                                   
     bankruptcy and pursuit of claims                   (      14,601)  (    130,030)   (    277,352)  (    377,727)   
                                                         ------------   ------------    ------------   ------------    

Income (loss) before income taxes and                                                                                  
   minority interest                                    (   8,007,179)  (  4,204,146)   ( 12,965,450)  (  3,702,322)   
Provision for income taxes                                     -              -               -              -         
                                                        -------------  -------------   --------------------------------

Income (loss) before minority interest                  (   8,007,179)  (  4,204,146)   ( 12,965,450)  (  3,702,322)   
   Minority interest                                           -             237,695           -       (     93,526)   
                                                        -------------  -------------   -------------   ------------    

Net Income (loss)                                       ($  8,007,179)  ($ 3,966,451)   ($12,965,450)  ($ 3,795,848)   
                                                        -------------  -------------    ============   ============    

Net Income (loss) per common share/basic and diluted    ($        .01)  ($       .01)   ($       .02)  ($       .01)   
                                                         ============  =============   =============   ============    

Weighted average shares outstanding                                                                                    
   basic and fully diluted                                609,436,174    602,375,424     606,798,686    599,817,547    
                                                        =============  =============   =============  =============    

See notes to condensed consolidated financial statements. 

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EARTHFIRST TECHNOLOGIES, INCORPORATED AND SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (UNAUDITED)

                                                        [Enlarge/Download Table]

                                                                              Nine Months Ended                
                                                                                 September 30,                 
                                                                  -------------------------------------------- 
                                                                         2007                      2006        
                                                                  -----------------         ------------------ 
                                                                                                               
Cash flows from operating activities:                                                                          
    Net income (loss)                                             ($     12,965,450)        ($       3,795,848)
    Adjustments to reconcile net income (loss) to                                                              
       net cash flows from operating activities:                                                               
         Share based compensation                                           393,566                    -       
         Intangible asset impairment                                      6,000,000                    -       
         Expenses funded through issuance of stock                          156,000                     37,500 
         Minority interest in joint venture                       (          43,820)                    93,526 
         Derivative (gain) loss                                   (          32,309)         (       3,906,048)
         Amortization of debt discount                                    1,915,007                  2,287,076 
         Depreciation and amortization                                      900,472                    377,962 
         Gain on cancellation of debt                                        -              (           81,020)
     Increase (decrease) in cash due to changes in:                                                            
       Current assets                                                     7,428,796         (        1,967,403)
       Current liabilities                                        (       3,696,150)                 4,151,584 
                                                                   ----------------         ------------------ 
Net cash flows from operating activities                                     56,112         (        2,802,671)
                                                                  -----------------          ----------------- 

Cash flows from investing activities:                                                                          
    Acquisition of property and equipment                         (           3,000)        (          214,981)
                                                                   ----------------          ----------------- 
Net cash flows from investing activities                          (           3,000)        (          214,981)
                                                                  -----------------         ------------------ 

Cash flows from financing activities:                                                                          
    Proceeds from note payable, related party                               -                        3,263,874 
    Proceeds from notes payable                                             993,418                    -       
    Distribution to minority interest in consolidated subsidiary  (          75,000)        (          101,739)
    Repayment of note payable, related party                      (         478,266)                   -       
    Repayment of long-term debt                                   (         360,726)        (          907,053)
                                                                   ----------------          ----------------- 
Net cash flows from financing activities                                     79,426                  2,255,082 
                                                                  -----------------         ------------------ 

Increase (decrease) in cash                                                 132,538         (          762,570)
Cash, beginning of period                                                   115,000                  1,202,480 
                                                                  -----------------         ------------------ 

Cash, end of period                                               $         247,538         $          439,910 
                                                                  =================         ================== 

Supplemental schedule of non-cash financing and investing activities:           

During 2007, the Company                                                        

     o    Issued 1,950,000 shares of common stock, as partial  satisfaction of a
judgment.                                                   
     o    Acquired  $768,900 of  inventory  as a capital  contribution  from the
principal stockholder                                       

During 2006, the Company:                                                       

     o    Issued  700,000 shares of common stock,  as a cashless  exercise of an
option to purchase 1,000,000 common shares.                 
     o    Issued 5,013,601  shares of common stock as a cashless  exercise of an
option to purchase 5,570,668 common shares.                 

See notes to condensed consolidated financial statements. 

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 EARTHFIRST TECHNOLOGIES, INCORPORATED
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
NINE MONTHS ENDED SEPTEMBER 30, 2007
 (UNAUDITED)

                                                        [Enlarge/Download Table]

                                              Common Stock                  Additional            Accumulated                       
                                          Shares           Amount          Paid-in Capital           Deficit                Total   
                                        ------------ --------------------- -------------------- ----------------------- ------------
                                                                                                                                    
Balances, December 31, 2006             604,260,294     $    60,426        $87,816,914         ($  87,547,360)              329,980 

Stock issued as partial satisfaction                                                                                                
of judgment                               1,950,000             195            155,805                                      156,000 

Share based compensation                  5,580,952             558            393,008                                      393,566 

Contribution of inventory by principal                                                                                              
stockholder                                                                    768,900                                      768,900 
                                        ------------ --------------------- -------------------- ----------------------- ------------
Net loss                                                                                          (12,965,450)          (12,965,450)
                                        ------------ --------------------- -------------------- ----------------------- ------------
Balances September 30, 2007 (unaudited) 611,791,246     $    61,179        $89,134,627          ($100,512,810)         ($11,317,004)
                                        ===========   ===================  ===================   =====================  ============

See notes to condensed consolidated financial statements. 

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 EARTHFIRST TECHNOLOGIES, INCORPORATED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006
 (UNAUDITED)

1.   Nature of  business,  basis of  presentation  and  summary  of  significant
accounting policies:                                                  

Nature of business:                                                   

     EarthFirst  Technologies,  Incorporated,  a Florida  Corporation  formed in
     1997, is a  specialized  holding  company  owning  subsidiaries  engaged in
     developing  and   commercializing   technologies   for  the  production  of
     alternative fuel sources and the destruction  and/or  remediation of liquid
     and  solid  waste,  and  in  supplying   electrical   contracting  services
internationally.                                                      

     The Company's solid waste division,  operated  through World  Environmental
     Solutions  Company,  Inc.  (WESCO),  a wholly  owned  subsidiary,  remained
     focused on the  commercialization of its "Solid Waste Remediation Plant" in
     Mobile,  Alabama.  This unit is known as the  "Catalytic  Activated  Vacuum
     Distillation Process ("CAVD") Reactor". This plant can process rubber tires
     on a  demonstration  basis  extracting  carbon and other raw  materials for
     resale.   This   process   efficiently   disposes   of  the   tires  in  an
     environmentally compliant manner that allows raw materials from those waste
     products  to  be  recycled  and  reused.   This   process   also   requires
     significantly  less energy and causes  significantly  less CO2 emissions to
produce certain of its by-products than standard commercial methods.  

     The Company seeks to provide additional CAVD plants to customers in various
     industries.  The Company expects to bring proven  technology in replicating
     its  production  plants and  distribution  network for the  disposal of the
     by-products  produced  in the  process.  To date,  no  revenues  have  been
generated through the solid waste division.                           

     The Company has  developed  technologies  for the treatment of liquid waste
     products.  The  technology  involves  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.
  No revenues have been generated through liquid waste product treatments.

     The Company's biofuels division,  operated through SolarDiesel Corporation,
     a wholly owned subsidiary,  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,  Europe and Asia, as
     well as other bio-refined products.  Because bio-refinery products are made
     from vegetable based  feedstock,  they release almost no CO2 on a lifecycle
     basis. To date, only a small percentage of the Company's total revenue have
     been generated from biofuel sales.  Further,  increased biodiesel feedstock
     prices  for soy,  palm  and  other  traditional  feedstock's  have  made it
     impractical  to proceed  with this  project at this time.  To this end, the
     Company is currently  seeking to renegotiate its agreements,  including its
lease obligations, with respect to its biofuels operations.           

     Through its Electric  Machinery  Enterprises,  Inc.  subsidiary  (EME), the
     Company performs services as an electrical  contractor and subcontractor in
     the  construction  of  commercial,   residential  and  municipal   projects
     primarily located in Florida and the Caribbean.  These operations have been

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EARTHFIRST TECHNOLOGIES, INCORPORATED 
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006
 (UNAUDITED)

     substantially  effected  by  cash  flow  difficulties  and the  Company  is
     currently  reviewing  what  steps  should  be taken in this  subsidiary  to
     curtail the  substantial  losses being incurred.  Substantially  all of the
Company's revenues were generated by EME in 2007 and 2006.            

Basis of presentation:                                                

     The interim  condensed  consolidated  financial  statements  of  EarthFirst
     Technologies,  Incorporated  and  its  subsidiaries  ("EarthFirst"  or  the
     "Company") that are included herein are unaudited and have been prepared in
     accordance  with  accounting  principles  generally  accepted in the United
     States  of  America  for  interim   financial   information  and  with  the
     instructions to Form 10-QSB.  The December 31, 2006 condensed balance sheet
     data was derived from audited financial statements but does not include all
     disclosures  required by generally  accepted  accounting  principles in the
     United  States of America.  Certain  information  and footnote  disclosures
     normally  included in  financial  statements  prepared in  accordance  with
     generally  accepted  accounting  principles  have been condensed or omitted
     pursuant to the Securities and Exchange  Commission  rules and regulations,
     although we believe the  disclosures  which have been made are  adequate to
     make  the  information   presented  not  misleading.   In  the  opinion  of
     management,  these interim financial  statements  include all the necessary
     adjustments  to fairly  present the results of the periods  presented.  The
     interim financial statements should be read in conjunction with the audited
     financial  statements  for the year ended December 31, 2006 included in the
     Company's Annual Report on Form 10-KSB for the year then ended. The interim
     results  reflected  in  the  accompanying   financial  statements  are  not
     necessarily  indicative of the results of operations  for any other interim
period or for a full fiscal year.                                     

     Accounts   Receivable,    allowance   for   doubtful   accounts,   customer
concentrations and foreign revenues:                                  

     Accounts receivable are customer  obligations due under normal trade terms.
     Retainage  on  construction   contracts,   which  aggregate  $1,614,553  at
     September  30,  2007,  and  are  included  in  accounts   receivable,   are
     contractual  obligations  of the customer  that are withheld  from progress
     billings until project  completion and are generally  collected  within one
     year. The Company performs  continuing credit evaluations of its customers'
financial condition and does not require collateral.                  

     Senior management reviews receivables on a weekly basis to determine if any
     amounts may become uncollectible. Any contract receivable balances that are
     determined to be uncollectible,  along with a general reserve, are included
     in the allowance for doubtful  accounts.  After all reasonable  attempts to
     collect a receivable have failed, the receivable is written off against the
     allowance.  Based on the information  available,  the Company  believes the
     allowance  for doubtful  accounts of $3,043,254 is adequate as of September
30, 2007. However, actual write-offs could exceed this estimate.      

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EARTHFIRST TECHNOLOGIES, INCORPORATED 
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006
 (UNAUDITED)

     Accounts receivables from five customers accounted for approximately 75% of
     the  Company's  trade  accounts  receivable  balance at September 30, 2007.
     Included in the balances pertaining to these five customers is an amount of
     approximately  $2,200,000  from EBR Holding Limited for a project in Exuma,
     the Bahamas. This project was ceased due to lack of funding near the end of
     2006, and a bad debt expense  deduction was taken at that time. The Company
     received  communication in July 2007 that a receiver has been appointed for
     the purpose of selling the project. It is the hope of the Company, that the
     buyer will  require our  services to  complete  the project  which had been
     estimated  at  approximately   $12,000,000.   The  Company  has  filed  all
documentation with the receiver to substantiate our position.         

Contract Claims                                                       

     As of September  30, 2007 the Company has certain  contracts  and claims in
     various  stages  of   negotiation,   arbitration   and  litigation  in  the
     approximate  amount of  $9,000,000.  The Company is  attempting  to resolve
     these  matters,  and expects to be successful in recovering  these amounts.
     However,  as in all matters in  litigation,  the outcome is not certain and
     amounts recovered, if any, could be materially different than expected. The
     Company  does not record  contract  claims  until such claims are  realized
     pursuant  to  guidance  in  Statement  of  Position  81-1   Accounting  for
     Performance  Construction-Type and Certain Production-Type  Contracts.  The
     guidance states that "recognition of amounts of additional contract revenue
     relating to claims is  appropriate  only if it is  probable  that the claim
     will  result  in  additional  contract  revenue  and if the  amount  can be
     reliably  estimated." Those two requirements are satisfied by the existence
     of  all of  the  conditions  described  in  the  pronouncement.  All of the
     conditions were not present so these claims are considered to be contingent
     gains and will be recorded  when  realized.  These  amounts,  which are not
     carried as assets on the balance  sheet,  will be recorded as revenue  when
such claims are settled.                                              

     During the first  quarter of 2006,  the Company  recognized  $1,100,000  in
     revenue for amounts that were  collected  in relation to such claims.  This
     claim recovery is included in other income in the accompanying statement of
operations for the nine months ended September 30, 2006.              

Net income (loss) per share:                                          

     The Company  computes  income (loss) per share under Statement of Financial
     Accounting  Standards No. 128, "Earnings Per Share." The statement requires
     presentation of two amounts;  basic and diluted loss per share.  Basic loss
     per share is computed by dividing  the income or loss  available  to common
     stockholders  by the weighted  average common shares  outstanding.  Diluted
     earnings  per share  would  include  all common  stock  equivalents  unless
     anti-dilutive.  The  Company has not  included  the  following  outstanding
     options and warrants, or convertible debentures as common stock equivalents
as of September 30, 2007 because the effect would be anti-dilutive.   

                                                                [Download Table]
                                                                    
Shares issuable upon exercise of outstanding options      15,533,800
Shares issuable upon exercise of outstanding warrants     29,562,790
Shares issuable upon conversion of debentures             33,726,060
                                                          ----------
    Total                                                 78,822,650
                                                          ==========

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EARTHFIRST TECHNOLOGIES, INCORPORATED 
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006
 (UNAUDITED)

2.   Management's plans regarding liquidity and capital resources:              

     The Company has historically  funded any negative operating cash flows with
     proceeds from sales of stock, as well as notes,  convertible debentures and
     related party loans.  Commencing  with the Company's  acquisition of EME in
     late 2004, the Company  restructured many of EME's liabilities with funding
     provided  by the  Laurus  credit  facility  discussed  in Note 4 as well as
additional related party loans.                                       

     As discussed in Note 8, 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.  Approximately  $900,000 of this credit facility remains
available at September 30, 2007.                                      

     The Company  experienced  significant  losses and negative  cash flows from
     operations  during  2006 as a result of bad debt  expense of  approximately
     $2,800,000,  a  loss  on a  negotiated  settlement  on a  contract  in  the
     Caribbean of approximately  $1,000,000,  and several jobs not realizing the
     profitability  originally  estimated,  all of which have caused the Company
     difficulty in meeting cash  requirements.  In  evaluating  the factors that
     caused these 2006 negative  results of operations,  the Company in 2007 has
     taken steps seeking to improve operating results in the contracting segment
     by improving the quality of job estimating and  implementation,  as well as
     reducing selling, general and administrative  overhead.  However, cash flow
     difficulties have substantially  impaired the ability of this subsidiary to
     operate and the Company is currently  reviewing  what steps should be taken
in this subsidiary to curtail the substantial losses being incurred.  

     While the Company  believed that  anticipated  revenues  earned during 2007
     accompanied by its restructuring  efforts would ultimately be sufficient to
     bring profitability and a positive operating cash flow back to the Company,
     the age of certain  accounts  payable with large  suppliers  has created an
     inability to purchase  materials and has limited the  Company's  ability to
     procure  new jobs.  Although  our  gross  profit  percentage  significantly
     increased  for the nine months ended  September  30,  2007,  our volume has
     significantly  decreased. As such, the Company continues to experience cash
     flow  difficulties  and is  delinquent  on  payment  of many  of its  trade
     creditors,  its  secured  convertible  notes  (see  note 4) and a  $100,000
     unsecured note payable (see note 7). Accordingly,  the Company will have to
     raise  additional  capital to operate.  There can be no assurance that such
     capital will be  available,  or that it will be  available on  satisfactory
terms.                                                                

     As described in the report of our independent registered public accountants
     for the year ended  December  31,  2006,  as reported in our form 10KSB for
     2006, the foregoing  factors raise  substantial  doubt as to the ability of
the Company to continue as a going concern.                           

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EARTHFIRST TECHNOLOGIES, INCORPORATED 
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006
 (UNAUDITED)

3.     Inventory                                                                

                                                                [Download Table]
Inventory consists of the following at September 30, 2007:           
                                                                     
           Electrical and construction supplies           $ 1,262,567
           B-100, biodiesel fuel                              122,681
           Water filtration equipment                         768,900
                                                          -----------
                                                          $ 2,154,148
                                                          ===========

4.   Goodwill                                                                   

     Goodwill as of December 31, 2006 was  $6,000,000,  and consisted  solely of
     the amount  resulting  from the  acquisition on August 20, 2004 of Electric
Machinery Enterprises, Inc.                                           

     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 of
     Disposal of Long-Lived  Assets" (SFAS No.  144'),  the Company  reviews the
     carrying amount of the goodwill  associated with the acquisition of EME for
     impairment annually,  or sooner whenever events or changes in circumstances
     indicate that the carrying  amount may not be  recoverable.  This amount is
     tested by  comparing  its  carrying  amount to fair  value.  Impairment  of
     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 then
     determines  the implied fair value of goodwill by deducting  the fair value
     of the reporting  unit's net assets,  exclusive of goodwill,  from the fair
     value of the reporting unit to determine the implied value of goodwill.  If
     the book value of goodwill  is greater  than its  implied  fair value,  the
     Company writes down goodwill to its implied fair value. As of September 30,
     2007, the Company has determined  that the implied fair value was less than
its book value and has recorded an impairment charge of $6,000,000.   

4.   Secured Convertible Notes Payable                                          

     The following table reflects balances of the secured convertible notes with
Laurus Master Fund, Ltd. at September 30, 2007:                       

                                                        [Enlarge/Download Table]
---------------------------------------------------------------------------------------- ---------------------
                                                                                                              
Face value $1,300,000 Secured  Convertible Term Note,  variable rate of prime plus 2.5%                       
(10.25% at September  30, 2007),  due in stated  monthly  payments of $100,000  through                       
March 30, 2008.                                                                          $         1,300,000  

---------------------------------------------------------------------------------------- ---------------------
Face value $1,000,000  Secured  Convertible  Minimum Note,  variable rate of prime plus                       
2%,  subject to 7% floor (9.75% at September  30,  2007),  due at maturity on March 30,                       
2008.                                                                                              1,000,000  

---------------------------------------------------------------------------------------- ---------------------
Face value $4,324,159 Secured  Convertible  Revolving Note, variable rate of prime plus                       
2%,  subject to 7% floor (9.75% at September  30,  2007),  due at maturity on March 30,                       
2008.                                                                                              4,324,159  
---------------------------------------------------------------------------------------- ---------------------

                                                                                                   6,624,159  
---------------------------------------------------------------------------------------- ---------------------
Less current maturities                                                                    (       6,624,159) 
---------------------------------------------------------------------------------------- ---------------------
                                                                                         $               --   
---------------------------------------------------------------------------------------- =====================

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EARTHFIRST TECHNOLOGIES, INCORPORATED 
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006
 (UNAUDITED)

     Subsequent to December 31, 2006, the Company  defaulted on certain terms of
     the Laurus credit facility in that it ceased making  principal and interest
     payments  on a  monthly  basis.  On April 18,  2007,  the  Company  made an
     interest payment in the amount of $123,985,  and pursuant to correspondence
     received on that date,  the Company was no longer in payment  default,  and
     Laurus  agreed  to defer  the past due  principal  payments  while  working
     together on a plan  acceptable to both parties.  At September 30, 2007, the
     Company is delinquent in interest  payments in the amount of  approximately
$291,326.                                                             

     On  October  2,  2007 the  Company  entered  into a  Forbearance  Agreement
     ("Agreement")  with Laurus  Master Fund Ltd. The purpose of this  Agreement
     was to obtain a waiver of any possible  pre-existing  defaults,  extend the
     term of the Laurus  financing  arrangement  through 12/31/08 and to clearly
     define the principal and interest  obligations of the Company  through Loan
Maturity.                                                             

     On November 8, 2007,  the Company  received  notice from LV  Administrative
     Services,  Inc. as agent for Laurus Master Fund, Ltd., that the Company had
     defaulted on the terms of the  Forbearance  Agreement,  and that Laurus had
elected to accelerate all obligations owed to Laurus by the Company.  

     On November 21,  2007,  the Company was served with a lawsuit in the United
     States  District Court for the Middle  District of Florida  entitled Laurus
     Master Fund, Ltd. v. EarthFirst Technologies, Incorporated ("EarthFirst") ,
     et al. Case # 8 07 CV 2723-T27EA. In its complaint Laurus is seeking relief
     against   EarthFirst  and  certain  of  its  subsidiaries,   not  including
     SolarDiesel Corporation ("SolarDiesel"). In Count I Laurus seeks to recover
     damages in excess of a claimed  $8,500,000 for the Company's alleged breach
     of loan and forbearance  agreements.  In Counts II and III, Laurus seeks to
     foreclose on all collateral  pledged to Laurus by EarthFirst and certain of
     its subsidiaries, except SolarDiesel. If successful, Laurus could force the
     judicial  sale of all  EarthFirst  and  certain  of its  subsidiaries  (not
     including  SolarDiesel's)  assets to satisfy its  indebtedness,  and if any
     balance remained, seek to obtain a deficiency judgment for this balance. If
     successful,  Laurus could also seek to obtain a money  judgment in the full
     amount of its indebtedness, unpaid interest and legal fees. On December 18,
     2007, the Company filed a motion to dismiss this action on a jurisdictional
basis.                                                                

     Since the notes are immediately  callable due to the payment  default,  the
     Company has recorded any previously  unamortized  debt discount as interest
expense and now carries the notes at their face value.                

5.   Derivative Financial Instruments                                           

     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 that were issued in connection with those financing arrangements.

     The following  tabular  presentation  reflects the components of Derivative
     financial instruments on the Company's balance sheet at September 30, 2007:

                                                        [Enlarge/Download Table]

           --------------------------------------------------------------------- -------------------------
           (Assets) Liabilities:                                                                          
           --------------------------------------------------------------------- -------------------------
                                                                                                          
             Embedded derivative instruments                                                 $    588,730 
           --------------------------------------------------------------------- -------------------------
             Freestanding derivatives (warrants and options)                                      384,557 
           --------------------------------------------------------------------- -------------------------
                                                                                             $    973,287 
           --------------------------------------------------------------------- =========================

The  following  tabular  presentation  reflects the number of common shares                               
into which the  aforementioned  derivatives  are indexed at  September  30,                               
2007:                                                                                                     
           --------------------------------------------------------------------- -------------------------
           Common shares indexed:                                                                         
           --------------------------------------------------------------------- -------------------------
             Embedded derivative instruments                                                   33,726,060 
           --------------------------------------------------------------------- -------------------------
             Freestanding derivatives (warrants and options)                                   11,162,790 
           --------------------------------------------------------------------- -------------------------
                                                                                               44,888,850 
           --------------------------------------------------------------------- =========================

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EARTHFIRST TECHNOLOGIES, INCORPORATED 
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006
 (UNAUDITED)

6.   Contracts in progress                                                      

Uncompleted contracts are summarized as follows:                      

                                                        [Enlarge/Download Table]

                                                                                              
                Costs incurred on uncompleted contracts                          $ 22,946,066 
                Estimated earnings on uncompleted contracts                         4,584,301 
                                                                                 ------------ 
                                                                                   27,530,367 
                Less billings to date                                             (28,313,723)
                                                                                 -------------
                                                                                ($    783,356)
                                                                                 ============ 
   The  components  of this  amount are  included  on the  September  30, 2007                
   balance sheet under the following captions:                                                

                Costs and estimated earnings in excess of billings                            
                  on uncompleted contracts                                       $      -     
                Billings in excess of costs and estimated earnings on                         
                uncompleted contracts                                           (     783,356)
                                                                                 -------------
                                                                                ($    783,356)
                                                                                 ============ 

7.   Notes payable                                                                            

     Notes payable at September 30, 2007 consists of the following:                           

       Insurance premium finance agreements payable in monthly                                
       payments of $6,393 bearing interest at 11.1%                              $     41,053 

       $500,000 revolving credit facility payable monthly to Fifth Third Bank,                
       secured by biodiesel inventory, interest at LIBOR                                      
       plus 2.5% to 2.75%, with a maturity of April 2008                               15,418 

       $500,000 revolving credit facility payable monthly to Fifth Third Bank,                
       secured by water filtration equipment inventory, interest at LIBOR plus                
       2.5% to 2.75%, with a maturity of                                                      
       November 2007                                                                  499,285 

       $100,000 unsecured note payable dated March 14, 2007, bearing interest                 
       at 8.00%, payable in full with accrued interest at maturity                            
       on May 7, 2007 (unpaid as of November 14, 2007)                                100,000 
                                                                                 ------------ 
                                                                                 $    655,756 
                                                                                 ============ 

8. Notes payable, related party                                                 

     In January 2006, the Company through its subsidiary SolarDiesel Corporation
     entered into a revolving  line of credit  promissory  note in the amount of
     $3,000,000,  with "US  Sustainable  Energy Corp., an entity related to John

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EARTHFIRST TECHNOLOGIES, INCORPORATED 
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006
 (UNAUDITED)

     Stanton,  the Company's Chairman of the Board, Chief Executive Officer, and
     President.  In June  2006,  the  amount  of the  revolving  line of  credit
     promissory note was increased to $5,000,000, and the terms were modified to
     require no  payments  until  January  2009.  The  Promissory  note  accrues
     interest  at the  rate of 6%.  Simultaneously  with  the  execution  of the
     promissory note, the Company entered into a security  agreement pledging as
     collateral  all of debtor's right title and interest in and to all Palm Oil
     and Palm Methyl Ester Products,  and any and all assets associated with the
biofuels business of SolarDiesel Corporation.                         

     In April 2007, John Stanton made a capital  contribution of twenty two (22)
     Water  Purification  Plants  to be held for  resale.  The  transaction  was
recorded at $768,900, the cost basis of the related party.            

     As of  September  30,  2007,  the balance  including  accrued  interest was
$4,083,394.                                                           

9.   Stockholders equity:                                                       

     The  following  information  pertains  to  stock  options  outstanding  and
exercisable at September 30, 2007:                                    

                                                        [Enlarge/Download Table]


                                             Options outstanding    Options exercisable 
                                             -------------------    ------------------- 
                                                                                        
Total options                                          15,533,800             13,325,800
Weighted average exercise price            $                 0.08  $                0.08
Weighted average contracted term in years                     7.4                    7.1
Intrinsic value                            $              350,000  $             272,650

     As of  September  30,  2007  the  Company  expects  to  record  $41,990  of
 compensation expense through March 31, 2008 for options not yet vested.

     On May 4, 2007 the  Company  issued  3,200,000  shares  of common  stock to
outside directors                                                     

     On August 24, 2007 the Board  approved the issuance of 2,380,952  shares of
     common stock to various employees of Electric  Machinery  Enterprises,  Inc
     for  accrued  bonuses  in lieu of cash.  See Note 10 for  stock  issued  as
partial settlement of claim.                                          

10.  Commitments and Contingencies                                              

Lease obligations:                                                    

     The  Company   leases   vehicles  and  certain   office   equipment   under
     noncancellable  operating leases for periods up to four years. In addition,

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EARTHFIRST TECHNOLOGIES, INCORPORATED 
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006
 (UNAUDITED)

     the Company  conducts the majority of its  operations in a facility  leased
  from a related corporation owned by certain stockholders of the Company.

     The total rent  expense for the nine months  ended  September  30, 2007 and
     2006  was  approximately  $734,464  and  $754,139,  respectively,  of which
     approximately  $571,505  and  $571,505  respectively,  was for the facility
leased from the related corporation.                                  

     The  Company,  through its  subsidiary,  SolarDiesel  Corporation,  made an
     initial $500,000  refundable  deposit on a facility lease agreement for the
     purpose of  constructing  a biodiesel  manufacturing  plant on these leased
     facilities in Illinois.  The agreement requires further refundable deposits
     of $200,000 in 2008 and 2009.  The lease term is initially  for a period of
     three years  commencing on October 1, 2007, with four additional three year
     renewal  options.  Monthly  rentals  under  the  terms of the lease for the
     initial  three  year term range from  $187,500  for the first year  through
     September  30, 2008,  $250,000 for the second year  through  September  30,
     2009,  and  $333,333  for  the  third  year  through  September  30,  2010.
     Subsequent  rentals are subject to increases based upon the Producers Price
     Index for Industrial  commodities.  The lease  agreement  contains  certain
     obligations of both parties in order to effectuate the lease. This lease is
currently being renegotiated to reduce the monthly expense.           

     The Company through its subsidiary, SolarDiesel Corporation, entered into a
     lease  for  office  space  in  Tampa,  Florida  for a period  of 15  months
     commencing  July 31, 2007 and  continuing  until October 31, 2008. The base
rent is $3,299 per month.                                             

     The Company  through its  subsidiary,  Prime Power Design,  Inc.  (formerly
     Prime Power Residential,  Inc.), entered into a facilities lease for office
     and  warehouse  space in  Clearwater,  Florida  for a period of 56  months,
     commencing on April 1, 2007 and  continuing  until  December 31, 2011.  The
     initial  base rent is $3,866  per month for a period of eight  months,  and
$7,732 for the balance of the lease.                                  

     Approximate future minimum rentals on non-cancelable  leases for five years
at September 30, 2007 are as follows:                                 

                                                                [Download Table]

Year ending September 30,                       
-------------------------                       

                                                
        2008                        $  2,582,147
        2009                           3,281,811
        2010                           4,118,186
        2011                              92,784
        2012                              23,196
                                   -------------
                                   $  10,098,124
                                   =============

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EARTHFIRST TECHNOLOGIES, INCORPORATED 
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006
 (UNAUDITED)

Legal proceedings:                                                    

     On November 21,  2007,  the Company was served with a lawsuit in the United
     States  District Court for the Middle  District of Florida  entitled Laurus
     Master Fund, Ltd. v. EarthFirst Technologies, Incorporated ("EarthFirst") ,
     et al. Case # 8 07 CV 2723-T27EA. In its complaint Laurus is seeking relief
     against   EarthFirst  and  certain  of  its  subsidiaries,   not  including
     SolarDiesel Corporation ("SolarDiesel"). In Count I Laurus seeks to recover
     damages in excess of a claimed  $8,500,000 for the Company's alleged breach
     of loan and forbearance  agreements.  In Counts II and III, Laurus seeks to
     foreclose on all collateral  pledged to Laurus by EarthFirst and certain of
     its subsidiaries, except SolarDiesel. If successful, Laurus could force the
     judicial  sale of all  EarthFirst  and  certain  of its  subsidiaries  (not
     including  SolarDiesel's)  assets to satisfy its  indebtedness,  and if any
     balance remained, seek to obtain a deficiency judgment for this balance. If
     successful,  Laurus could also seek to obtain a money  judgment in the full
     amount of its indebtedness, unpaid interest and legal fees. On December 18,
     2007, The Company filed a motion to dismiss this action on a jurisdictional
basis.                                                                

     The  Company  is  involved  in  litigation   with  Ruggero  Maria  Santilli
     ("Santilli"),  The Institute for Basic  Research,  Inc. and Hadronic Press,
     Inc. ("Hadronic")  concerning certain aspects of the Company's liquid waste
     technologies.  Hadronic claims to own the  intellectual  property rights to
     one or more aspects of our liquid waste technologies.  Management continues
     to believe that the Company owns all of the  intellectual  property  rights
     necessary to  commercialize  and further develop its liquid and solid waste
     technologies without resorting to a license from any third parties.  During
     2004,  the Company  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. This litigation does not involve the technology the Company is
     developing  in  connection  with its  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  the  Company  for  its  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.            

     CNC Associates, Inc. obtained a judgment in September 2000 in the amount of
     approximately $400,000 relative to one of these deficiency balances. On May
     9, 2007,  and  pursuant to Florida  Statutes  section  56.29,  the Pinellas
     County  Circuit  Court  has  ordered  by  May  19,  2007,  that  EarthFirst
Technologies, Incorporated;                                           

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EARTHFIRST TECHNOLOGIES, INCORPORATED 
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006
 (UNAUDITED)

     (a)  turn  over to CNC the EFTI  treasury  shares or if there are no issued
          treasury shares, then EFTI is directed to reissue the shares to CNC in
partial satisfaction of the judgment; and                   
     (b)  turn  over to the  Pinellas  County  Sheriff,  100% of the  shares  of
          SolarDiesel Corporation,  and such shares are to be sold by a publicly
advertised sheriff sale.                                    

     The Company has issued  1,950,000  shares of common stock to CNC in partial
     satisfaction  of the judgment,  and has filed a motion for  reconsideration
     relative to the shares of  SolarDiesel  Corporation to be heard on December
     14, 2007.  The Company  believes the Solar Diesel  shares may not be turned
     over as they are being held by a secured lender of SolarDiesel  pursuant to
     a stock pledge.  The Company's  biofuels  business  segment is conducted by
     SolarDiesel Corporation.  Should the Company ultimately be forced to convey
     these shares as ordered by the court, the ability to conduct  operations in
that business segment could be significantly reduced or eliminated.   

     Included in the balance of accrued  expenses and other current  liabilities
     is our estimate of the remaining  amount at which the matters  contemplated
     above  will  ultimately  be  resolved.  Approximately  $700,000,  less  the
     $156,000  fair value of the common  stock  issued  has been  recorded  as a
     liability in the September 30, 2007 balance  sheet as  attributable  to the
     disputed matters  contemplated above. While management believes the amounts
     recorded are adequate,  there can be no assurance  that actual  liabilities
     that may  result  from the  resolution  of these  matters  will not  exceed
recorded amounts                                                      

     We are involved in litigation  with the liquidator of Amwest Surety Company
     based on a final judgment  entered against Amwest in the amount of $432,471
     in favor of Sunhouse Construction. Amwest is seeking recovery from Electric
     Machinery Enterprises,  Inc. for this amount. There is no reasonable manner
     to  determine  with  any  degree  of  certainty  as to the  outcome  of the
     objection to Amwest's claim.  As this claim pertains to  transactions  that
     occurred prior to EME's bankruptcy, settlements if any would fall under the
     reorganization  plan for unsecured creditors capping the amount to 55.5% of
     the  allowed  claim,  payable  over 5 years.  At this time,  management  is
     aggressively  defending  against this claim, and has not made any provision
for a liability associated with it.                                   

     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, 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

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EARTHFIRST TECHNOLOGIES, INCORPORATED 
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006
 (UNAUDITED)

     completed the job, and in doing so incurred substantial costs far in excess
     of those  estimated.  The  dollar  amount  of the  claim  is  approximately
     $9,000,000.  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 and if the claim is favorably settled.    

     The Company has other  litigation  and disputes  that arise in the ordinary
     course of its business,  including  significant vendor litigations  seeking
     payment of past due trade  balances.  The Company  has accrued  amounts for
which it believes all of its litigation will ultimately be settled.   

11.  Segment Information                                                        

     The Company operates in three business segments. The waste disposal segment
     is  focused  on  research  and   development   and  bringing  the  existing
     technologies to commercial  realization.  The Contracting  segment operates
     electrical   contracting   and   subcontracting   services  on  commercial,
     residential and municipal  construction  projects  primarily in Florida and
     the Caribbean. The Caribbean projects are all denominated in U.S. currency.
     The Biofuels segment is focused on the importing and producing of biodiesel
fuels.                                                                

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EARTHFIRST TECHNOLOGIES, INCORPORATED 
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006
 (UNAUDITED)

SEGMENT INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007 IS AS FOLLOWS: 

                                                        [Enlarge/Download Table]

                                                     Waste                                               
                                                   Disposal     Contracting     Biofuels        Total    
                                                 ------------  ------------     ----------  ------------ 
                                                                                                         
Revenue                                          $        -    $ 17,320,425     $  934,066  $ 18,254,491 
Cost of Sales                                                    14,569,714      1,002,813    15,572,527 
                                                 ------------  ------------     ----------  ------------ 
Gross profit (loss)                                         -     2,750,711        (68,747)    2,681,964 
Selling, general and administrative expenses          761,830     3,331,194        979,506     5,072,530 
Impairment of intangible asset                                    6,000,000                    6,000,000 
Research and development expenses                     283,897                       52,146       336,043 
                                                 ------------  ------------     ----------  ------------ 
Income (loss) from operations before reorganization                                                      
    item, income taxes and majority interest       (1,045,727)   (6,580,483)    (1,100,399)   (2,726,609)
Other income (expense)                                                                                   
    Miscellaneous income                                            120,498                      120,498 
    Interest expense                                   (5,468)      (88,977)      (119,443)     (213,888)
                                                 ------------  ------------     ----------  ------------ 
Income (loss) before reorganization item, Income                                                         
    taxes and majority and monority interests      (1,051,195)   (6,548,962)    (1,219,842)   (8,819,999)
Reorganization item, professional fees related to                                                        
    bankruptcy and pursuit of claims                               (277,352)                    (277,352)
                                                 ------------  ------------     ----------  ------------ 
Income (loss) before majority and minority interest(1,051,195)   (6,826,314)    (1,219,842)   (9,097,351)
                                                 ------------  ------------     ----------  ------------ 
    Majority interest and minority interests                              -                            - 
                                                 ------------  ------------     ----------  ------------ 
Income (loss) from operations                      (1,051,195)   (6,826,314)    (1,219,842)   (9,097,351)
                                                 ------------  ------------     ----------  ------------ 
Net Income (loss)                                $ (1,051,195) $ (6,826,314)  $ (1,219,842) $ (9,097,351)
                                                 ============  ============   ============  ============ 
Total Assets                                     $  2,241,380  $  7,188,958    $ 1,511,574  $ 10,941,912 
                                                 ============  ============   ============  ============ 
Goodwill                                                       $        -                   $        -   
                                                 ============  ============   ============  ============ 

Reconciliation of Segment Amounts Reported to Condensed Consolidated Amounts                             
Revenue                                                                                                  
    Total revenues for reportable segments                                    $ 18,254,491               
                                                                              ------------               
    Total consolidated revenue                                                $ 18,254,491               
                                                                              ------------               
Net loss                                                                                                 
    Total loss for reportable segments                                        $ (9,097,351)              
    Unallocated amounts relating to corporate operations                                                 
              Miscellaneous income                                                     655               
              Selling, general and administrative expenses                      (1,530,709)              
              Interest expense                                                  (2,370,354)              
              Derivative loss                                                       32,309               
                                                                              ------------               
              Total consolidated net income                                   $(12,965,450)              
                                                                              ============               
Assets                                                                                                   
    Total assets for reportable segments                                      $ 10,941,912               
    Corporate investments and other assets                                         300,417               
                                                                              ------------               
    Total consolidated assets                                                 $ 11,242,329               
                                                                              ============               

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EARTHFIRST TECHNOLOGIES, INCORPORATED 
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006
 (UNAUDITED)

                                                        [Enlarge/Download Table]

SEGMENT INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 IS AS FOLLOWS:                          

                                                     Waste                                               
                                                   Disposal     Contracting     Biofuels        Total    
                                                 ------------  ------------     ----------  ------------ 
                                                                                                         
Revenue                                           $         -   $32,097,205      $ 989,258   $33,086,463 
Cost of Sales                                               -    29,068,523      1,162,485    30,231,008 
                                                 ------------  ------------     ----------  ------------ 
Gross profit (loss)                                         -     3,028,682       (173,227)    2,855,455 
Selling, general and administrative expenses          629,406     4,933,415        525,659     6,088,480 
Research and development expenses                     452,538             -              -       452,538 
                                                 ------------  ------------     ----------  ------------ 
Income (loss) from operations before reorganization                                                      
    item, income taxes and majority interest       (1,081,944)   (1,904,733)      (698,886)   (3,685,563)
Other income (expense)                                                                                   
    Gain on extinguishment of debt, bankruptcy              -        81,020              -        81,020 
    Claims recovery                                         -     1,100,000              -     1,100,000 
    Miscellaneous income                                    -       122,294         56,334       178,628 
    Interest expense                                   (3,481)       (2,543)       (94,862)     (100,886)
                                                 ------------  ------------     ----------  ------------ 
Income (loss) before reorganization item, Income                                                         
    taxes and minority interests                   (1,085,425)     (603,962)      (737,414)   (2,426,801)
Reorganization item, professional fees related to                                                        
    bankruptcy and pursuit of claims                        -      (374,248)                    (374,248)
                                                 ------------  ------------     ----------  ------------ 
Income (loss) before minority interest             (1,085,425)     (978,210)      (737,414)   (2,801,049)
    Minority interest                                       -       (93,526)                     (93,526)
                                                 ------------  ------------     ----------  ------------ 
Income (loss) from operations                      (1,085,425)   (1,071,736)      (737,414)   (2,894,575)
                                                 ------------  ------------     ----------  ------------ 
Net Income (loss) for reportable segments        $ (1,085,425) $ (1,071,736)   $  (737,414)  $(2,894,575)
                                                 ============  ============   ============  ============ 
Total Assets                                     $  2,978,293   $30,758,793    $ 1,799,469   $35,536,555 
                                                 ============  ============   ============  ============ 
Goodwill                                                       $ 15,323,152                  $15,323,152 
                                                 ============  ============   ============  ============ 

Reconciliation of Segment Amounts Reported to Condensed Consolidated Amounts                             
Revenue                                                                                                  
    Total revenues for reportable segments                                    $ 33,086,463               
                                                                              ------------               
    Total consolidated revenue                                                $ 33,086,463               
                                                                              ------------               
Net loss                                                                                                 
    Total loss for reportable segments                                        $ (2,894,575)              
    Unallocated amounts relating to corporate operations                                                 
              Miscellaneous income                                                  16,732               
              Selling, general and administrative expenses                      (1,825,296)              
              Research and development expense                                    (143,265)              
              Interest expense                                                  (2,855,492)              
              Derivative gain                                                    3,906,048               
                                                                              ------------               
              Total consolidated net income                                    $(3,795,848)              
                                                                              ============               
Assets                                                                                                   
    Total assets for reportable segments                                      $ 35,536,555               
    Corporate investments and other assets                                         488,628               
                                                                              ------------               
    Total consolidated assets                                                  $36,025,183               
                                                                              ============               

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EARTHFIRST TECHNOLOGIES, INCORPORATED 
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006
 (UNAUDITED)

12.  Subsequent Events                                                          

     On  October  2,  2007 the  Company  entered  into a  Forbearance  Agreement
     ("Agreement")  with  Laurus  Master  Fund Ltd.  Laurus is owed a balance of
     approximately  $6.6 million under the term and revolving  provisions of its
existing financing with the Company.                                  

     The  purpose  of this  Agreement  was to  obtain a waiver  of any  possible
     pre-existing defaults,  extend the term of the Laurus financing arrangement
     through   12/31/08  and  to  clearly  define  the  principal  and  interest
obligations of the Company through Loan Maturity.                     

     On November 8, 2007,  the Company  received  notice from LV  Administrative
     Services,  Inc. as agent for Laurus Master Fund, Ltd., that the Company had
     defaulted on the terms of the  Forbearance  Agreement,  and that Laurus had
elected to accelerate all obligations owed to Laurus by the Company.  

     The debt to Laurus is evidenced by a Secured Convertible Term Note, Secured
     Revolving Note and Secured Minimum Borrowing Note ("Notes"). The Notes have
     an approximate remaining outstanding balance due of $6,6 million. The Notes
     are secured by virtually all of the tangible and intangible assets of EFTI,
   with the exception of the shares of the Company's SolarDiesel subsidiary.

     On November 21,  2007,  the Company was served with a lawsuit in the United
     States  District Court for the Middle  District of Florida  entitled Laurus
     Master Fund, Ltd. v. EarthFirst Technologies, Incorporated ("EarthFirst") ,
     et al. Case # 8 07 CV 2723-T27EA. In its complaint Laurus is seeking relief
     against   EarthFirst  and  certain  of  its  subsidiaries,   not  including
     SolarDiesel Corporation ("SolarDiesel"). In Count I Laurus seeks to recover
     damages in excess of a claimed  $8,500,000 for the Company's alleged breach
     of loan and forbearance  agreements.  In Counts II and III, Laurus seeks to
     foreclose on all collateral  pledged to Laurus by EarthFirst and certain of
     its subsidiaries, except SolarDiesel. If successful, Laurus could force the
     judicial  sale of all  EarthFirst  and  certain  of its  subsidiaries  (not
     including  SolarDiesel's)  assets to satisfy its  indebtedness,  and if any
     balance remained, seek to obtain a deficiency judgment for this balance. If
     successful,  Laurus could also seek to obtain a money  judgment in the full
     amount of its indebtedness, unpaid interest and legal fees. On December 18,
     2007, the Company filed a motion to dismiss this action on a jurisdictional
basis.                                                                

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ITEM 2. 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.                                                              

Electrical Contracting - Electric Machinery Enterprises               

     The Company performs electrical contracting and subcontracting  services on
     commercial, residential and municipal projects primarily in Florida and the
     Caribbean  through its  subsidiary  Electric  Machinery  Enterprises,  Inc.
     ("EME").   Substantially  all  of  the  Company's  revenues  are  currently
generated through EME's contracting and subcontracting services.      

     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.                                  

     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 Design,  Inc.  (formerly Prime Power  Residential,  Inc.) as a wholly
 owned subsidiary in the electrical contracting business of the Company.

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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 produces recyclable and reusable by-products.                     

     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 processing these waste products into recyclable material.       

     Initially,  we are focusing on the  processing  of rubber tires through our
     demonstration plant in Mobile, Alabama. We have also processed carbon laden
     non-waste products. The typical results of processing materials in our CAVD
     reactor is the  production of alternative  fuels  consisting of a synthetic
     gas, oil products and some form of carbon based powder or crumb. 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,  on a demonstration basis, 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.              

     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 on a demonstration  basis. No revenues
have been generated to date from this facility.                       

     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.

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     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 $98
     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 various carbon recovered from our CAVD Reactor has led us to
     believe that, at the current time,  the best carbon  product to market is a
substitute for certain series of commodity grade carbon black         

     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.  An added  advantage is that the CAVD carbon may qualify
     for "Carbon" or "Green" credits,  because it reduces CO2 production  during
manufacturing and creates a recycled carbon.                          

     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.                                                      

     New  provisional  patents are being filed based on the  Company's  Reactor,
Reactor Process and By-Products.                                      

     Based upon our  experiences  thus far, we expect that there is considerable
     interest in the CAVD Reactor from potential users. The Company has executed
     two MOU's  pursuant to which each  customer  has  expressed  an interest in
     purchasing  multiple units from  Renewable  Carbon  Technologies,  LLC (Our
     50/50 venture with Orion Industrial Services). However, the actual ordering
     of CAVD units and  execution of license  agreements  under these MOU's will
     depend on the  operating  success  of the  renovated  and  upgraded  Mobile
     reactor.  We believe that delays in the creation of  definitive  agreements
     with other end users of the CAVD Reactors are waiting for the  finalization
     of our renovated and upgraded design for our Mobile reactor. We then expect
     our technology to gain  credibility in the marketplace  with both a variety
     of  potential  end users of the CAVD  Reactors  as well as the end users of
     carbon and other products  recovered in the process.  It is envisioned that
     future  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.  However,  there can be no
     assurance that the Company will  ultimately be successful in achieving such
arrangements / agreements.                                            

     On August 6, 2007,  the Company  and its  subsidiary,  World  Environmental
     Solutions  Company,  Inc.  (WESCO)  entered  into an  agreement  with Orion
     Industrial  Services   Corporation  to  joint  venture  the  final  design,
     construction and commercial roll-out of its next generation tire processing
facility.                                                             

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     Under the terms of the Agreement WESCO will contribute certain intellectual
     property  rights  relating  to  CAVD  tire  technology,  use of the  Mobile
     facility and up to $650,000 cash. Orion  contributes  certain  intellectual
     property,   construction  and  operational  resources  plus  cash  or  cash
     equivalents  of up to  $850,000.  Profits  from the venture  will be shared
equally.                                                              

     The Company has made the two initial,  scheduled  payments under the August
     6th  Agreement  with OIS and  engineering  and  dismantling  of the  Mobile
     Reactor  are  underway.  WECO  and  OIS are  currently  in the  process  of
     finalizing a formal LLC operating  agreement with OIS. If such an agreement
     cannot be finalized for any reason, the project may be delayed or prevented
     from moving  forward.  In addition,  because  neither the Company nor WESCO
     have  any  operating  capital,   WESCO's  continued  participation  in  and
     completion  of the joint venture with OIS will likely depend on third party
     funding being received.  Currently,  the most likely source of this funding
would be affiliated entities.                                         

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(TM)  converter.   The  Company's  BigSpark(TM)  plasma  based
     technology   splits  apart  the  complex   molecular  bonds  of  water  and
     hydrocarbon  wastes to  produce  the clean  burning,  hydrogen-based  fuel.
     BigSpark(TM) compares favorably 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(TM) has a second stage
     combustion in a very high  temperature  oxygen flame.  Third,  BigSpark(TM)
     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(TM)  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.

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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,  it was believed that Prime would have the
     unique ability to address large electrical contracting projects from design
     through  build to  maintenance  and  support,  offering a fully  integrated
     contracting solution.  This Company is currently inactive. The only project
remaining is the one in receivership in Exuma, the Bahamas.           

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

     SolarDiesel    Corporation    ("SDC"),    (formerly   EarthFirst   Americas
     Incorporated),  was originally  formed to develop the market  opportunities
     available and associated  with Palm Oil as a feed stock for bio-fuels.  The
     Company  initially  imported  palm oil biodiesel  from Central  America for
     research,  development  and  resale.  While the Company  continues  to sell
     biodiesel  on a  wholesale  basis,  the focus of its efforts are now geared
     toward the  establishment of a bio-refinery  capable of producing  multiple
     products,  primarily the  production of ASTM 6751  biodiesel,  which can be
used as a substitute for petroleum diesel in all markets.             

     The Company  entered into a pilot  program for  biodiesel  use in municipal
     markets with the City of Coral  Gables,  Florida.  The City has dedicated a
     portion of its fleet to operate using a "B20" blend  consisting of 20% palm
     oil biodiesel  (purchased from SDC) and 80% petroleum  diesel.  The Company
     provides the City with all technical  support in  coordination of the pilot
     program.  Negotiations  are also underway with other municipal  governments
     and agencies for similar pilot programs  toward the end of becoming a major
governmental biodiesel supplier.                                      

     In April 2007, the Company through its subsidiary,  SolarDiesel Corporation
     made an initial $500,000  refundable  deposit on a facility lease agreement
     for  the  purpose  of  constructing  a  biodiesel  manufacturing  plant  in
     Channahon,  Illinois. The agreement requires further refundable deposits in
     2008 and 2009.  The lease  term is  initially  for a period of three  years
     commencing  on October 1, 2007,  with four  additional  three year  renewal
     options. Monthly rentals under the terms of the lease for the initial three
     year term range from $187,500 to $333,333.  Subsequent  rentals are subject
     to  increases   based  upon  the  Producers   Price  Index  for  Industrial
     commodities.  The lease  agreement  contains  certain  obligations  of both
parties in order to effectuate the lease.                             

     On July 24, 2007, the Company and its subsidiary,  Solar Diesel Corporation
     ("Solar")  entered  into an agreement  with Ultra Green Energy  Corporation
     ("Ultra  Green")  to co-own  and  operate  the  Company's  bio-refinery  in
Channahon, Illinois.                                                  

     Pursuant  to the  terms of the  agreement,  Ultra  Green  has the  right to
     acquire  up to  35%  in  either  Solar  or a  newly  formed  entity,  to be
    determined by the parties, based on meeting certain performance standards.

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     More  specifically,  Ultra  Green has the right to acquire  this  ownership
interest as follows:                                                  

     (a)  17.5% shall be issued on the assignment from Ultra Green of 60 million
          gallons of Ultra Green's right to place biodiesel  produced by a third
party under a master off-take contract;                     
     (b)  4% shall  be  issued  upon the  execution  of a  management  agreement
          wherein  Ultra  Green  shall be  providing  experienced  personnel  to
          develop and operate the Channahon  facility,  including its President,
Thomas M. Campone;                                          
     (c)  2% shall be issued upon the completion by Ultra Green, at its own cost
          and expense,  of certain  preliminary work on the facility,  including
          planning  and  implementation  action  and using its best  efforts  to
obtain financing for the project.                           
     (d)  2% shall be  issued  on the  facility  receiving  government  building
grants of at least $3 million; and                          
     (e)  9.5%  shall be issued  upon Ultra  Green  successfully  operating  the
          facility  at a minimum  level of 5 million  gallons  per month and the
receipt of certain certifications for the facility.         

     As  additional  consideration,  Ultra  Green  shall be  entitled to receive
     warrants to acquire 4.9% of EFTI's  currently  outstanding  common stock at
     $.07 per share on the successful completion of (a) through (d) above, which
     includes the minimum  government grant of $3,000,000.  Additional  warrants
     for EFTI's common stock would be issuable based on certain benchmarks to be
negotiated among the parties.                                         

     The agreement also provides for certain funding commitments by the parties,
     provisions  for day-to-day  management,  certain  restrictions,  rights and
     obligations  of the  shareholders,  including  transfer  restrictions,  and
     corporate   governance   provisions,   including   a  required   two-thirds
     shareholder  vote for certain  actions,  including acts not deemed to be in
the ordinary cause of business.                                       

     Increased  biodiesel  feedstock prices for soy, palm and other  traditional
     feedstock have risen to such a level that the Company has delayed its plans
     to start-up Biodiesel production.  In fact an industry journal has reported
     that even in the Midwest most existing  producers  have scaled back or even
     terminated their biodiesel  production  operations because of the inability
     to operate [GRAPHIC OMITTED][GRAPHIC  OMITTED]profitably.  To address these
     issues and because  the  Channahon  facility  leased by the Company has the
     capability  of  producing  other  bio-refined  products,   the  Company  is
     negotiating  a restructure  of the Channahon  Lease and a moratorium on the
     Channahon  Supply  Agreement.  The  goal of these  negotiations  will be to
     obtain a  restructured  lease  that will  financially  allow the  immediate
     production of  non-biodiesel  bio-refinery  products at a profit.  If these
     negotiations  prove  unsuccessful,  then it is unlikely the Company will be
     able to make the  payments  due  under  the  Channahon  Lease as  currently
     structured  or meet the  minimum  purchase  requirements  under the  Supply
     Agreement.  It is also anticipated that the Company will have to modify its
     existing  arrangement  with UGE and raise funds from third  parties to make
     the  capital  improvements  necessary  to upgrade the  Channahon  facility.
     Negotiations  are underway with various third parties at this time to raise
     these funds and the  contribution of these funds, if successful,  will most
     likely result in a reduction of  participation  and or profit  interest the
Company may retain at Channahon.                                      

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     The Company continues to explore the use of it's CAVD technology to process
     vegetable feed stocks such as palm fruit, soy beans and corn into a biofuel

     THREE AND NINE MONTHS ENDED  SEPTEMBER  30, 2007  COMPARED TO THE THREE AND
NINE MONTHS ENDED SEPTEMBER 30, 2006.                                 

     Revenues for the three month period ending September 30, 2007 in the amount
     of $3,901,009 represents a decrease of $4,845,053 or approximately 56% when
     compared to  $8,746,062  for the three month period  ending  September  30,
     2006.  Revenues for the nine month period ending  September 30, 2007 in the
     amount  of   $18,254,491   represents   a  decrease  of   $14,831,972,   or
     approximately  45% when compared to  $33,086,463  for the nine month period
     ending  September 30, 2006.  Substantially  all revenues are generated from
     contracting and  subcontracting  services.  Biofuel sales for the three and
     nine month periods ending September 30, 2007 in the amounts of $404,500 and
     $934,066 respectively represent approximately 11% and 5% of total sales for
the periods.                                                          

     Gross profit is negative for the three month period  ending  September  30,
     2007 in the amount of $343,383,  as compared to a negative  gross profit in
     the amount of $349,107  for the three month  period  ending  September  30,
     2006.  Gross profit for the nine month  period  ending  September  30, 2007
     decreased  from  $2,855,455  to  $2,681,964,  or  approximately  7.4%  when
     compared to the nine month period ending  September 30, 2006.  Gross profit
     percentages  for the nine  months  ended  September  30, 2007 and 2006 were
     approximately 14.5% and 8.6% respectively.  Although revenues for the three
     and nine months ended September 30, 2007 have declined  significantly  when
     compared to the three and nine months ended September 30, 2006, the Company
has improved its gross profit percentages.                            

     Selling,  general and  administrative  expenses for the three-month  period
     ending  September  30, 2007  decreased by $937,678  from  $2,885,000 in the
     prior  year,  to  $1,947,322  in  the  current  period,  or a  decrease  of
     approximately  33% compared to the three-month  period ending September 30,
     2006.  Selling,  general  and  administrative  expenses  for the nine month
     period ending  September 30, 2007 decreased by $1,305,067  from $ 7,908,306
     in the prior year,  to  $6,603,239.  These  decreases are a result of staff
reductions and cost controls implemented by management.               

     Impairment of goodwill for the  three-month  period and  nine-month  period
     ending  September  30,  2007 in the  amount of  $6,000,000  represents  the
     remaining  balance of goodwill that had been carried on the balances  sheet
     pertaining to the acquisition of Electric  Machinery  Enterprises,  Inc. in
     2004. Due to the substantial doubt associated with the electric contracting
     segment,  the  Company  has  elected to reflect  this  charge  during  this
quarter.                                                              

     Research  and  development  expenses  for the three and nine  months  ended
     September 30, 2007  decreased from $400,509 to $91,697 and from $595,803 to
     $336,043 when compared to the three and nine month periods ended  September
     30,  2006.  This is due to a decrease in  expenses  relative to the current
development efforts in both the solid waste and bio fuels segments.   

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     Loss from  operations  increased  by  $4,787,984  from a loss for the three
     months ended  September 30, 2006 of $3,634,616 to a loss of $8,382,402  for
     the three months ended September 30, 2007.  Loss from operations  increased
     by $4,608,664  from a loss for the nine months ended  September 30, 2006 of
     $5,648,654 to a loss of $10,257,318.  These increased  losses are primarily
     due to the impairment of goodwill.  Loss from operations  exclusive of this
     impairment  charge would have been  $2,382,402 and $4,257,318 for the three
months and nine months ended September 30, 2007.                      

     Gain on  extinguishment  of debt for the nine month period ended  September
     30,  2006  was  attributable  to the  settlement  of  liabilities  with the
     unsecured creditors in EME's plan of reorganization.  There are no gains on
     extinguishment  of debt for the three and nine months ended  September  30,
2007                                                                  

     During the nine months  ended  September  30,  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.  The  Company  has not
   realized any claims recovery for the nine months ended September 30, 2007

     Derivative  gain  increased  from a gain of  $279,280  for the three  month
     period ended  September  30, 2006 to a gain of $562,970 for the three month
     period ended  September 30, 2007.  Derivative gain decreased from a gain of
     $3,906,048  for the  nine  months  ended  September  30,  2006 to a gain of
     $32,309 for the nine month period ended  September 30, 2007. The derivative
     gain or loss is associated  with the Company's  Laurus 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.                                                

     Interest  expense  decreased from $738,729 for the three month period ended
     September  30, 2006 to $268,604 for the three months  ended  September  30,
     2007.  Interest expense decreased from $2,956,378 for the nine month period
     ended  September  30, 2006 to  $2,584,242  for the nine month  period ended
     September 30, 2007.  These changes in interest expense are primarily due to
     amortization  of the  debt  discounts  associated  with the  Laurus  credit
     facility, and the reduction in the amount of principal when compared to the
prior year.                                                           

     Majority  and  minority  interest  expense  was zero for the three and nine
     month periods  ended  September 30, 2007, as compared to a gain of $237,695
     for the three month period  ended  September  30,  2006,  and an expense of
     $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. (i.e.,  the other party's
share of earnings in these entities)                                  

LIQUIDITY AND CAPITAL RESOURCES                                       

     The Company has historically  funded any negative operating cash flows with
     proceeds  from  sales of  common  and  preferred  stock,  as well as notes,
     convertible  debentures  and  related  party  loans.  Commencing  with  the

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     Company's acquisition of EME in late 2004, the Company restructured many of
     EME's  liabilities  with  funding  provided by the Laurus  credit  facility
     discussed  in Note 4 to the  financial  statements  as  well as  additional
related party loans.                                                  

     As discussed in Note 8 to the financial  statements,  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.                       

     The Company  experienced  negative cash flows from operations  during 2006.
     During  2006,  the  Company  incurred a bad debt  expense of  approximately
     $2,800,000,  a  loss  on a  negotiated  settlement  on a  contract  in  the
     Caribbean of approximately  $1,000,000,  and several jobs not realizing the
     profitability  originally  estimated,  all of which have caused the Company
difficulty in meeting cash requirements.                              

     In  evaluating  the factors  that  caused  these 2006  negative  results of
     operations,  the Company in 2007 has taken steps to improve the contracting
     segment by increasing the quality of job estimating and implementation,  as
well as reducing selling, general and administrative overhead.        

     While the Company  believes that  anticipated  revenues  earned during 2007
     accompanied  by its  restructuring  efforts  could be  sufficient  to bring
     profitability and a positive cash flow back to the Company, it is uncertain
     that these  results  will be achieved  (while our gross  profit  percentage
     significantly  increased  in the first two  quarters  of 2007  versus  that
     achieved in 2006,  revenues have significantly  declined in 2007). As such,
     the  Company   continues  to  experience  cash  flow  difficulties  and  is
     delinquent  on  payment  of  many  of  its  trade  creditors,  its  secured
     convertible  notes (see Note 4 to the financial  statements) and a $100,000
     unsecured   note  payable  (see  Note  7  to  the  financial   statements).
     Accordingly,  the Company will have to raise additional capital to operate.
     There can be no assurance  that such capital will be available when needed,
or that it will be available on satisfactory terms.                   

     As described in the report of our independent registered public accountants
     for the year ended  December  31,  2006,  as reported in our form 10KSB for
     2006, the foregoing  factors raise  substantial  doubt as to the ability of
the Company to continue as a going concern.                           

EFFECTS OF INFLATION                                                  

     Management does not believe that inflation has had a significant  impact on
     the  financial  position or results of  operations of the Company since its
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

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     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: 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.  

     Stock-Based Compensation and other stock based valuation issues (derivative
     accounting):   We  account  for   stock-based   awards  to  employees   and
     non-employees  using the  accounting  provisions of SFAS 123R -- Accounting
     for  Share-Based  Payments,  which  provides  for the use of the fair value
     based method to determine compensation for all arrangements where shares of
     stock or equity  instruments  are issued for  compensation.  Fair values of
     equity securities  issued are determined by management based  predominantly
     on the trading  price of the Company's  common  stock.  The values of these
     awards are based upon their grant-date fair value.  That cost is recognized
     over the period during which the employee is required to provide service in
exchange for the award.                                               

     We use the Black-Scholes  options-pricing model to determine the fair value
     of stock option and warrant  grants.  We also use the Black Scholes  option
     pricing model as the primary basis for valuing our  derivative  liabilities
     at each reporting date (both embedded and free-standing  derivatives).  The
     underlying assumptions used in this determination are primarily the same as
     are used in the determination of stock-based  compensation discussed in the
     previous paragraph except  contractual lives of the derivative  instruments
     are utilized rather than expected option terms as discussed in the previous
paragraph.                                                            

     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,

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     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 of
     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.

ITEM 3. CONTROLS AND PROCEDURES                                                 

     Evaluation of Disclosure Controls and Procedures: As of September 30, 2007,
     the Company's  management carried out an evaluation,  under the supervision
     of the Company's Chief Executive  Officer and the Chief Financial  Officer,
     of the effectiveness of the design and operation of the Company's system of
     disclosure  controls and procedures pursuant to the Securities and Exchange
     Act, Rule  13a-15(d) and 15d-15(d)  under the Exchange Act. Based upon that
     evaluation,  the  Chief  Executive  Officer  and  Chief  Financial  Officer
     concluded  that the  Company's  disclosure  controls  and  procedures  were
     effective,  as of the  date  of  their  evaluation,  for  the  purposes  of
     recording,   processing,   summarizing   and  timely   reporting   material
     information  required to be disclosed in reports filed by the Company under
the Securities Exchange Act of 1934.                                  

     Changes in  internal  controls:  There  were no  changes  in the  Company's
     internal controls over financial reporting, that occurred during the period
     covered by this report that have  materially  affected,  or are  reasonably
     likely to materially  effect, the Company's internal control over financial
reporting.                                                            

PART II.  OTHER INFORMATION                                                     

ITEM 1. LEGAL PROCEEDINGS                                                       

     On November 21,  2007,  the Company was served with a lawsuit in the United
     States  District Court for the Middle  District of Florida  entitled Laurus
     Master Fund, Ltd. v. EarthFirst Technologies, Incorporated ("EarthFirst") ,
     et al. Case # 8 07 CV 2723-T27EA. In its complaint Laurus is seeking relief
     against   EarthFirst  and  certain  of  its  subsidiaries,   not  including
     SolarDiesel Corporation ("SolarDiesel"). In Count I Laurus seeks to recover
     damages in excess of a claimed  $8,500,000 for the Company's alleged breach
     of loan and forbearance  agreements.  In Counts II and III, Laurus seeks to
     foreclose on all collateral  pledged to Laurus by EarthFirst and certain of
     its subsidiaries, except SolarDiesel. If successful, Laurus could force the
     judicial  sale of all  EarthFirst  and  certain  of its  subsidiaries  (not
     including  SolarDiesel's)  assets to satisfy its  indebtedness,  and if any
     balance remained, seek to obtain a deficiency judgment for this balance. If
     successful,  Laurus could also seek to obtain a money  judgment in the full

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     amount of its indebtedness, unpaid interest and legal fees. On December 18,
     2007, the Company filed a motion to dismiss this action on a jurisdictional
basis.                                                                

     The  Company  is  involved  in  litigation   with  Ruggero  Maria  Santilli
     ("Santilli"),  The Institute for Basic  Research,  Inc. and Hadronic Press,
     Inc. concerning certain aspects of the Company's liquid waste technologies.
     Management   continues  to  believe  that  the  Company  owns  all  of  the
     intellectual property rights necessary to commercialize and further develop
     its liquid and solid waste technologies without resorting to a license from
     any third parties.  During 2004, the Company  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 its 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  the  Company  for  its  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.            

     CNC Associates, Inc. obtained a judgment in September 2000 in the amount of
     approximately $400,000 relative to one of these deficiency balances. On May
     9, 2007,  and  pursuant to Florida  Statutes  section  56.29,  the Pinellas
     County  Circuit  Court  has  ordered  by  May  19,  2007,  that  EarthFirst
Technologies, Incorporated;                                           

          (a)  turn  over to CNC the EFTI  treasury  shares  or if there  are no
               issued  treasury  shares,  then EFTI is  directed  to reissue the
        shares to CNC in partial satisfaction of the judgment; and
          (b)  turn over to the Pinellas County  Sheriff,  100% of the shares of
               SolarDiesel  Corporation,  and  such  shares  are to be sold by a
publicly advertised sheriff sale.                 

     The Company has issued  1,950,000  shares of common stock to CNC in partial
     satisfaction  of the judgment,  and has filed a motion for  reconsideration
     relative to the shares of SolarDiesel Corporation to be heard on October 4,
     2007.  The Company  believes the Solar Diesel shares may not be turned over
     as they are being held by a secured  lender of  SolarDiesel  pursuant  to a
stock pledge.                                                         

     Included in the balance of accrued  expenses and other current  liabilities
     is our estimate of the remaining  amount at which the matters  contemplated
     above  will  ultimately  be  resolved.  Approximately  $700,000,  less  the
     $156,000  fair value of the common  stock  issued  has been  recorded  as a
     liability in the September 30, 2007 balance  sheet as  attributable  to the
     disputed matters  contemplated above. While management believes the amounts
     recorded are adequate,  there can be no assurance  that actual  liabilities
     that may  result  from the  resolution  of these  matters  will not  exceed
recorded amounts.                                                     

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     We are involved in litigation  with the liquidator of Amwest Surety Company
     based on a final judgment  entered against Amwest in the amount of $432,471
     in favor of Sunhouse Construction. Amwest is seeking recovery from Electric
     Machinery Enterprises,  Inc. for this amount. There is no reasonable manner
     to  determine  with  any  degree  of  certainty  as to the  outcome  of the
     objection to Amwest's claim.  As this claim pertains to  transactions  that
     occurred prior to EME's bankruptcy, settlements if any would fall under the
     reorganization  plan for unsecured  creditors  capping the amount to 75% of
     the  allowed  claim,  payable  over 5 years.  At this time,  management  is
     aggressively  defending  against this claim, and has not made any provision
for a liability associated with it.                                   

     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, 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 those  estimated.  The  dollar  amount  of the  claim  is  approximately
     $9,000,000.  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 and if the claim is favorably settled.    

     The Company has other  litigation  and disputes  that arise in the ordinary
     course of its business,  including  significant  vendor litigation  seeking
     payments of past due balances. The Company has accrued amounts for which it
believes all of its litigation will ultimately be settled.            

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.            

     (A)  On May 4, 2007 the  Board of  Directors  authorized  the  issuance  of
          1,600,000  shares of  restricted  common  stock to each of its outside
          board  members,   Dr.  David  E.  Crow  and  Nicholas  R.  Tomassetti,
          representing  compensation for their service on the board for 2006 and
          2007.   These  shares  were  issued  pursuant  to  an  exemption  from
          registration  under  Section 4(2) of the  Securities  Act of 1933,  as
amended.                                                    

     (B)  On July 25, 2007,  the Company issued  1,950,000  shares of restricted
          common stock to CNC  Associates,  Inc. in partial  satisfaction of the
          judgment previously  referenced.  These shares were issued pursuant to
          an exemption  from  registration  under Section 4(2) of the Securities
Act of 1933, as amended.                                    

     (C)  On August 24, 2007, the Board of Directors  authorized the issuance of
          2,380,592  shares of  restricted  common stock to various  officers of

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          Electric Machinery  Enterprises,  Inc.  representing  compensation for
          services.  These  shares were issued  pursuant  to an  exemption  from
          registration  under  Section 4(2) of the  Securities  Act of 1933,  as
amended.                                                    

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.                                        

     The Laurus Credit  Facility has a balance  outstanding  of $6,624,159 as of
     September 30, 2007.  With the cash flow  difficulties  the Company has been
     experiencing,  the Company became delinquent on both principal and interest
payments.                                                             

     On  October  2,  2007 the  Company  entered  into a  Forbearance  Agreement
     ("Agreement")  with Laurus  Master Fund Ltd. The purpose of this  Agreement
     was to obtain a waiver of any possible  pre-existing  defaults,  extend the
     term of the Laurus  financing  arrangement  through 12/31/08 and to clearly
     define the principal and interest  obligations of the Company  through Loan
Maturity.                                                             

     On November 8, 2007,  the Company  received  notice from LV  Administrative
     Services,  Inc. as agent for Laurus Master Fund, Ltd., that the Company had
     defaulted on the terms of the  Forbearance  Agreement,  and that Laurus had
     elected to accelerate all  obligations  owed to Laurus by the Company.  See
"Item 1. Legal Proceedings".                                          

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                     

     No matters were submitted to the Security Holders of the Company for a vote
during the nine months ended September 30, 2007.                      

ITEM 5. OTHER INFORMATION                                                       

The Company has no other information to report.                       

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K                                       

(a)  Exhibits None                                                    

(b)  Reports on Form 8-K (incorporated by reference) None.            

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(c)  Signatures                                                       

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

                                       EarthFirst Technologies, Incorporated
              (Registrant)

Date: December 20, 2007                                                         

                          By: /s/  John D. Stanton
                                        --------------------------------------

                 John D. Stanton
                                       Chief Executive Officer and President

34

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘10QSB’ Filing		Date		First		Last			Other Filings
		12/31/11		17
		9/30/10		17
		9/30/09		17
		10/31/08		17
		9/30/08		17
		3/31/08		16					NT 10-K
		3/30/08		13
Filed on:		12/20/07		38
		12/18/07		14		35
		12/14/07		19
		12/7/07		1
		11/21/07		14		34			8-K
		11/14/07		15
		11/8/07		14		37
		10/9/07		2					8-K
		10/4/07		35					8-K
		10/2/07		2		37			8-K,  8-K/A
		10/1/07		17		28
For Period End:		9/30/07		1		37			NT 10-Q
		8/24/07		16		36
		8/6/07		26
		7/31/07		17
		7/25/07		36
		7/24/07		28
		5/19/07		18		35
		5/9/07		18		35
		5/7/07		15
		5/4/07		16		36			4,  8-K
		4/18/07		14
		4/1/07		17
		3/14/07		15
		12/31/06		2		32			10KSB,  NT 10-K
		9/30/06		4		31			10QSB
		12/31/05		2					10KSB,  10KSB/A
		5/17/05		26
		8/20/04		13					8-K,  8-K/A
		12/23/03		19		36
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