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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________________________________________
 
FORM 10-K
                                   
(Mark One)
 
 x ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For The Fiscal Year Ended December 31, 2012
 
 o TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 

ENERGY & TECHNOLOGY, CORP.
(Exact name of registrant as specified in Charter)
 
DELAWARE
 
333-143215
 
26-0198662
(State or other jurisdiction of
incorporation or organization)
 
(Commission File No.)
 
(IRS Employee Identification No.)

Petroleum Towers, Suite 530
3639 Ambassador Caffery Blvd Lafayette, LA 70505
P.O. Box 52523
Lafayette, LA 70505
 (Address of Principal Executive Offices)
 _______________
 
337- 984-2000
 (Issuer Telephone number)

337- 988-1777
Issuer Fax Number
_______________
 
www.engt.com 
www.energyntechnology.com
 
Securities registered under Section 12(b) of the Exchange Act:
None.
   
Securities registered under Section 12(g) of the Exchange Act:
Common stock, par value $0.001 per share.
 
(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 the Securities Act.
Yes o   No x
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes o   No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve 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 o
 
 
 

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of S-K (§229.405 of this chapter)  is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x
 
Large accelerated filer
¨
Accelerated filer
¨
Non-accelerated filer
¨
Smaller reporting company
x
(Do not check if a smaller reporting company)
     
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o   No x
 
State issuer’s revenues for its most recent fiscal year:  $7,124,671.

The aggregate market value of Common Stock held by non-affiliates of the Registrant on March 31, 2013 was $72,732,329 based on a $0.43 closing price for the Common Stock on March 12, 2013. For purposes of this computation, all executive officers and directors have been deemed to be affiliates. Such determination should not be deemed to be an admission that such executive officers and directors are, in fact, affiliates of the Registrant.

Number of the issuer’s Common Stock outstanding as of March 12, 2013: 169,144,950.

Documents incorporated by reference: None.
 
 
 

 

TABLE OF CONTENTS
 
PART I
 
  PAGE
   ITEM 1.
DESCRIPTION OF BUSINESS
  3
   ITEM 1A
RISK FACTORS
  4
   ITEM 1B
UNRESOLVED STAFF COMMENTS
  5
   ITEM 2.
PROPERTIES
  5
   ITEM 3.
LEGAL PROCEEDINGS
  5
   ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  5
     
PART II
   
   ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY; RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
  5
   ITEM 6.
SELECTED FINANCIAL DATA
  6
   ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  6
   ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  11
   ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  12
   ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  13
   ITEM 9A.
CONTROLS AND PROCEDURES
  13
     
PART III
   
   ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
  14
   ITEM 11.
EXECUTIVE COMPENSATION
  15
   ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
  15
   ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
  16
   ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
  16
     
PART IV
   
   ITEM 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
  17
     
SIGNATURES
  18

 
 

 
 
PART I
 
ITEM 1.            DESCRIPTION OF BUSINESS.
 
Technical Industries & Energy, Corp. (“TIE” or the “Company”) was founded in the State of Delaware on November 29, 2006.  On January 3, 2007, we entered into a Stock Purchase and Share Exchange Agreement with Technical Industries, Inc., (“TII”) a Louisiana corporation founded May 11, 1971 whereby TII became our wholly owned operating subsidiary. On September 9, 2008 we changed our name to Energy & Technology Corp.  The Company’s activities are directed towards manufacturing, reclamation of essential commodities, energy, technology, sugar, biofuel, oil & gas equipment and products. We plan to expand our operations and may acquire other companies with services and products which complements existing services and products and offer our latest technology exploration or other where needed, help the energy company reach deep energy reserves that present technology cannot reach and increase opportunities for income, growth and financing.  Our business offices are located at Petroleum Towers, Suite 530 P.O. Box 52523, Lafayette, LA, 70505. Our telephone number is (337) 984-2000.

We are headquartered in Lafayette, Louisiana with a branch office and production facilities in Houston, Texas. We offer several services, which can be described as engineering, manufacturing, reclamation, sales, and non-destructive testing (“NDT”) services, storage, maintenance for pipe and equipment utilized in the energy industry.

NDT is more fully described as the application of industry-wide and/or proprietary test methods to examine pipe and equipment utilized in the energy industry, or any object, material or system associated therewith, without impairing their future usefulness. An essential characteristic of NDT is that the examination process does not change the composition, shape, integrity or properties of the test object, thus allowing the object to be utilized for the purpose for which it was manufactured. The end result is less time involved in testing, lower costs and less waste of materials than other forms of pipe inspection that require that the test object be destroyed.

Through our staff of industrial, electrical and computer engineers, we offer engineering services to assist our customers in the design, improvement, installation, and/or integration of NDT components and systems.  The services, which vary according to the needs of the customer, focus on design, layout, testing, and troubleshooting of NDT systems hardware and software.

We also manufacture our own proprietary ultrasonic NDT electronic equipment systems, which perform the NDT services including ultrasonic inspection, electromagnetic inspection and others. The layout and design of the systems’ physical components are produced and tested by our engineers. Once the design has passed testing, the individual components are built into the design. Some of the components, such as the circuit boards, may be assembled by a third party before being incorporated into the design. Last, the final assembly is integrated with proprietary inspection software developed by our programmers.

Another component of our business consists of selling pipe and equipment used in exploration, drilling, and production of oil and gas.  The manufactured pipe and equipment is supplied to us by various steel mills in finished or unfinished form for us to process. Before the pipe and equipment is offered to our customers for sale, it must undergo further processing, such as blasting, threading, coating, and non-destructive testing inspection before being turned into a final product.  We only sell oilfield pipe and equipment that has passed inspection and meets or exceeds API (American Petroleum Institute) and/or customer specifications.
 
Lastly, we provide manufacturing, reclamation including ultrasonic pipe inspection technology. Services include full-length electromagnetic inspection for pipe and equipment utilized in the energy industry, and full length ultrasonic inspection systems for new and used pipe including drill stem, tubing, casing, and line pipe. We offer several different types of electromagnetic and ultrasonic inspection processes, each of which is tailored to the inspection of a particular pipe characteristic, such as size, length, wall thickness, ovality, or detection of a particular pipe defect. The type of process is determined by the customer according to their particular needs.

All of the pipe and equipment that enters our facilities are carefully documented and incorporated into our propriety inventory tracking system, which is accessible to customers on the World Wide Web. Through this system, the customer is able to obtain real-time storage and inspection information on his pipe that is located at our facilities.

We operate year-round, 24 hours a day, seven days a week when needed, and the number of employees has exceeded 200; however, due to the market slowdown and the BP accident in the Gulf of Mexico, the number of current employees is down to approximately 55.
 
Today, we continue to serve the energy industry by manufacturing and maintaining proprietary systems that detect, and collect all available defects and wall thickness and outside diameter/ovality readings and store them in their proper position on the pipe, produce a three-dimensional image of the pipe, and allow the engineer to simulate burst, collapse, and pull apart the pipe on the computer prior to drilling.  This helps energy companies reach reserves that otherwise cannot be reached with present technology. As a result of this advanced technology, the American Petroleum Institute (API) appointed Mr. George M. Sfeir, to serve on their 2008 committee for non-contact inspection. Technical Industries, Inc. developed US Patent No. 7,263,887 and international patent pending inspection technology needed in order to reach deep energy reserves present technology cannot reach. The U.S. patent is current until 2039.
 
 
3

 
 
We serve customers in Houston, Texas, Newfoundland, Canada, and Lafayette, Abbeville, Louisiana, the Rockies, and we are expanding to Saudi Arabia, Egypt, UAE, Mexico, and other parts of the World. Our customer base of over 50 accounts consists of oil companies, steel mills, material suppliers, drilling companies, material rental companies, and engineering companies. We handle regular projects and specialize in deep water projects including BP Crazy Horse, ExxonMobil Alabama Bay and ExxonMobil Grand Canyon, Sakhalin Island and Caspian Sea, Texas A&M University Ocean Explorer, and other projects.
 
Additional services include full-length electromagnetic inspection for oil-field pipe and equipment and full length ultrasonic inspection systems for new and used tubing, casing and line-pipe, wet or dry Magnetic Particle Inspection ("MPI"); Dye Penetrant Testing ("PT"), or Ultrasonic Testing of the End Areas ("UT SEA") of plain end and threaded connections, including drill collars and drilling rig inspection; mill systems and mill surveillance; testing and consulting services. Today we continue to serve the energy industry niche by manufacturing and maintaining proprietary systems that are capable of detecting defects through the use of our patented technology.

ITEM 1A.         RISK FACTORS

COMPETITORS MAY DEVELOP SIMILAR TECHNOLOGY OR PATENT SIMILAR TECHNOLOGY, AND MAKE THIS TECHNOLOGY AVAILABLE TO OUR CUSTOMERS.

Competitors may develop similar technology or similar patents and make the technology available to our current customers at a lower cost or on better contractual terms. If this were to occur our customer base would be reduced which would in turn lower our revenues.
 
OUR FUTURE SUCCESS IS DEPENDENT, IN PART, ON THE PERFORMANCE AND CONTINUED SERVICE OF GEORGE M. SFEIR, WITHOUT HIS CONTINUED SERVICE, WE MAY BE FORCED TO INTERRUPT OR EVENTUALLY CEASE OUR OPERATIONS.
 
We are presently dependent to a great extent upon the experience, abilities and continued services of George M. Sfeir our Chief Executive Officer and director. We currently do not have an employment agreement with Mr. Sfeir. The loss of his services could have a material adverse effect on our business, financial condition or results of operation.
 
GEORGE M. SFEIR HAS MAJORITY VOTING CONTROL OF OUR COMMON STOCK.

Mr. Sfeir and family members have the voting proxy for the majority of the voting stock of the Company, which includes Sfeir Family Trust and American Interest, LLC. Majority of our shares are held by three entities (the Sfeir Family Trust, American Interest, LLC and AM Financials).  
 
WE ARE IN A HIGHLY COMPETITIVE MARKET AND WE ARE UNSURE AS TO WHETHER OR NOT THERE WILL BE ANY CONSUMER DEMAND FOR OUR PRODUCTS AND SERVICES.

Some of our competitors are much larger and better capitalized than we are. It may be possible that our competitors will better address the same market opportunities that we are addressing. These competitors, either alone or with collaborative partners, may succeed in developing business models that are more effective or have greater market success than our own. The Company is especially susceptible to larger manufacturers that invest more money in research and development. Moreover, the market for our products is large but highly competitive. There is little or no hard data that substantiates the demand for our products or how this demand will be segmented. It is possible that there will be low consumer demand for our products, or that interest in our products could decline or die out, which would cause us to be unable to sustain our operations.
 
We primarily serve the energy industry, which is a highly volatile and politically driven industry.  Significant decreases in oil prices or changes in the political landscape could adversely affect the demand for our products and services.

WHILE NO CURRENT LAWSUITS ARE FILED AGAINST THE COMPANY, THE POSSIBILITY EXISTS THAT A CLAIM OF SOME KIND MAY BE MADE IN THE FUTURE.

The Company has resolved one suit and is involved in one lawsuit and the possibility exists that additional claims of some kind may be made in the future.  While we will work to insure high product quality and accuracy in all marketing and labeling, no assurance can be given that some claims for damages will not arise. While we plan to properly insure ourselves with standard product liability insurance, there can be no assurance that this insurance will be adequate to cover litigation expenses and any awards to plaintiffs.
 
The types of claims that could be made against the Company consists primarily of product liability claims associated with a failure of pipe stem and oil country tubular products used for exploration.  The Company maintains general liability insurance with an annual aggregate of $4,000,000, and an additional $4,000,000 umbrella policy. 
 
 
4

 

ITEM 1B.         UNRESOLVED STAFF COMMENTS

Not Applicable

ITEM 2.            DESCRIPTION OF PROPERTY.

We presently maintain our principal offices at Petroleum Towers, Suite 530 P.O. Box 52523, Lafayette, LA, 70505.  Our telephone number is (337) 984-2000.
 
Our main manufacturing, reclamation, inspection and maintenance facility in Houston, Texas, consists of approximately 50 acres and includes a building capable of performing all inspection work in an environmentally protected area, and providing storage areas for pipe and equipment.

We have constructed a similar facility in Abbeville, Louisiana on property leased from the City of Abbeville for a 25 year term plus another 25 year option at the same rate beginning in 2005 with payments that began on November 1, 2008. This facility consists of a building which houses the manufacturing, reclamation, testing, engineering, storage and maintenance is expected to employ an additional 32 people. Both facilities provide excellent year-round pipe and equipment storage and maintenance services.
 
ITEM 3.            LEGAL PROCEEDINGS.
 
We are currently not involved in any litigation that we believe could have a materially adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our Company or any of our subsidiaries, threatened against or affecting our Company, our common stock, any of our subsidiaries or of our Company’s or our Company’s subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

ITEM 4.            SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
 
None.
 
PART II
 
ITEM 5.            MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

Market Information

A symbol was assigned for our securities so that our securities may be quoted for trading on the OTCBB under symbol ENGT. Minimal trading has have occurred through the date of this Report.

The following table sets forth the high and low trade information for our common stock. The prices reflect inter-dealer quotations, do not include retail mark-ups, markdowns or commissions and do not necessarily reflect actual transactions.
 
Quarter ended
 
Low Price
   
High Price
 
December 31, 2011
   
0.20
     
0.75
 
March 31,  2012
   
0.25
     
0.75
 
June 30, 2012
   
0.50
     
0.77
 
September 30, 2012
   
0.55
     
0.56
 
December 31, 2012
 
$
0.06
   
$
0.75
 

Holders

As of March 31, 2013 in accordance with our transfer agent records, we had 182 record holders of our Common Stock.
 
Dividends

To date, we have not declared or paid any dividends on our common stock. We currently do not anticipate paying any cash dividends in the foreseeable future on our common stock, when issued pursuant to this offering. Although we intend to retain our earnings, if any, to finance the exploration and growth of our business, our Board of Directors will have the discretion to declare and pay dividends in the future.
 
 
5

 
 
Payment of dividends in the future will depend upon our earnings, capital requirements, and other factors, which our Board of Directors may deem relevant.

Stock Option Grants

To date, we have not granted any stock options.

Registration Rights

We have not granted registration rights to the selling shareholders or to any other persons.
 
ITEM 6.             SELECTED FINANCIAL DATA.

   
2012
   
2011
   
2010
   
2009
   
2008
 
                               
Revenues
  $ 7,124,671     $ 4,128,319     $ 3,392,298     $ 6,863,367     $ 10,027,953  
Cost of Revenues
    5,596,893       3,788,365       2,686,998       3,815,256       6,031,965  
                                         
Gross Profit (Loss)
    1,527,778       339,954       705,300       3,048,111       3,995,988  
                                         
Operating  Expenses
                                       
     General & Administrative Expenses
    1,737,819       1,693,847       2,846,900       2,110,989       1,470,700  
     Depreciation
    164,835       164,839       78,097       189,082       87,444  
                                         
          Total Operating Expenses
    1,902,654       1,858,686       2,924,997       2,300,071       1,558,144  
                                         
Income (Loss) from Operations
    (374,876 )     (1,518,732 )     (2,219,697 )     748,040       2,437,844  
                                         
Other Income (Expense)
    (123,215 )     907,193       (61,533 )     (92,902 )     (99,590 )
                                         
Income (Loss) Before Income Taxes
    (498,091 )     (611,539 )     (2,281,230 )     655,138       2,338,254  
                                         
Provision for Income Taxes
    (144,115 )     (366,036 )     (758,685 )     309,077       879,598  
                                         
Net Income (Loss)
  $ (353,976 )     (245,503 )     (1,522,545 )   $ 346,061     $ 1,458,656  
 
ITEM 7.             MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

General

We have a patented process which can help companies within the energy industry reach deep energy reserves other equipment cannot. 

The following list highlights a few areas of opportunity to expand the Company's business:

Sales and marketing efforts: Although we have been impacted by the downturn in the national and global economies, we have grown over the historical period without an aggressive marketing and sales effort.  Currently, new business is generated from referrals, technical sessions given to oil & gas and energy related companies, a website and through the use of a marketing company on a limited basis.  To date, we have hired one in-house salesperson based in Houston, and two sales persons based in Louisiana who visit with customers. Currently, we have three employees whose duties are focused on sales, marketing, and promotional activities for the Company. Management believes revenue can be increased by expanding the Company's sales force and forming a marketing department in order to increase our market share.
 
Applying for additional patents to protect proprietary rights:  We have developed international patent-pending new inspection technology needed in order to reach deep energy reserves present technology cannot reach.  Our expandable inspection technology helps the companies in the energy industry retrieve a large amount of energy reserves that cannot be retrieved with current technology.  We have manufactured several pieces of equipment in-house that have enabled us to successfully serve the energy industry.  Due to proprietary infringement risk, we have discontinued manufacturing the equipment for sale to third parties.  By securing a patent protecting our proprietary technology, we could consider manufacturing equipment for sale again, which would open a new line of revenue.
 
 
6

 
 
Introduction of complementary services: We are continually adding new services in order to meet customer demand. Most recently, we began drilling equipment inspection services and added a manufacturing facility and pipe and equipment sales company. Other areas management has identified as potential growth avenues include vessel inspection and inspection of pipelines in service. In 2010, we opened our pipe threading facility containing threading equipment which can be attached to the inspection assembly line to provide additional services for a very low increased cost to our customers.
 
Geographic expansion in the domestic and international markets: We currently derive the majority of revenue from customers located in Texas, Oklahoma, North Dakota, Pennsylvania, California, and Calgary and Ontario Canada. There are several other markets that could be better served, such as in Louisiana where a new plant in Abbeville, Louisiana has been constructed in order to serve the deep wells in the Gulf of Mexico. Other expansions are being considered through the opening of additional full-service, local plants. Furthermore, we maintain relations with sales representatives in the Mexico, Saudi Arabia, and Middle East markets that could be better utilized if we are able to locally serve customers. Lastly, we have Canadian customers that utilize our services on a limited basis, due to the high cost of shipping heavy pipes. To date, we have not had the capital or human resources to establish plants in these potential markets.
 
We continue to seek other companies which can complement essential commodities, energy, technology manufacturing, reclamation, pipe and inspection business with the goal of securing these businesses through a combination of cash and stock payments.  All of these expansion plans rely heavily on raising capital through a public offering of additional stock which would be used to fund our acquisitions. 

We have a customer base of approximately 150 plus accounts, and are continually expanding our customer base to increase revenue growth. Currently, we serve customers that are oil companies, steel mills, material suppliers, drilling companies, material rental companies and engineering companies. Our customer relationships average over ten years which provides us repeat business.

Critical Accounting Policies

The Company has identified the following accounting policies to be the critical accounting policies of the Company:

Revenue Recognition.  Revenue for inspection services is recognized upon completion of the services rendered.  Revenue for the sales of pipe is recognized when pipe is delivered and the customer takes ownership and assumes the risks of loss, collection of the relevant receivable is probable, persuasive evidence of an arrangement exists, and the sales price is fixed or determinable.

Inventory.  Inventory is stated at the lower of average cost or market.  At December 31, 2012 and 2011, inventory consisted of pipe available for sale.
  
Property and Equipment. Property and equipment are stated at cost.  Expenditures for property and equipment and items that substantially increase the useful lives of existing assets are capitalized at cost and depreciated. Routine expenditures for repairs and maintenance are expensed as incurred.  The cost and related accumulated depreciation of property and equipment disposed of are eliminated from the accounts, and any resulting gain or loss is recognized.  Depreciation is provided utilizing the straight-line method over the estimated useful lives of the assets capitalized.

Valuation of Long-Lived Assets.  In the event facts and circumstances indicate that carrying amounts of long-lived assets may be impaired, the Company evaluates the recoverability of its long-lived assets using the estimated future undiscounted cash flows associated with the asset compared to the asset’s carrying amount to determine if a write-down is required.  Any impairment loss is measured as the difference between the carrying amount and the fair value of the impaired asset.

Discussion of Changes in Financial Condition from December 31, 2011 to December 31, 2012

At December 31, 2012, total assets amounted to $13,065,758 compared to $11,069,539 at December 31, 2011, an increase of 1,996,219, or 18.0%.  The increase is primarily due to an increase in the Company’s cash of $1,935,301, an increase in deferred tax asset of $62,277, and an increase in property and equipment held for investment of $1,095,583.  These increases were partially offset by a decrease in the accounts receivable of $703,667 and a decrease in property and equipment held for operations of $359,671.

Our liabilities at December 31, 2012, totaled $8,269,270 compared to $5,978,805 at December 31, 2011, an increase of $2,290,465, or 38.3%.  The increase is primarily due to a by an increase in accounts payable of $1,847,234, an increase in notes payable of $253,195, an increase in due to affiliates of $127,466, and an increase in accrued rent of $150,000.  These increases were partially offset by a decrease in deferred tax payable of $101,206.

Total stockholder’s equity decreased from $5,090,734 at December 31, 2011, to $4,796,486 at December 31, 2012.  This decrease was due to net loss generated for the year ended December 31, 2012 of $353,976, partially offset by the issuance of 92,550 shares of the Company’s common stock in exchange for services performed in the amount of $59,728
 
 
7

 
 
Cash and Cash Equivalents

The Company’s cash increased from $943,894 at December 31, 2011, to $2,879,195 at December 31, 2012. The increase in cash and cash equivalents was primarily due to the Company’s increase in financing it’s accounts payable.

Inventory

We began purchasing pipe for sale to customers in late 2007.  This was an opportunity for us to expand our services to our customers.  Inventory of pipe at December 31, 2012 was $2,878,085 compared to 2,941,152 at December 31, 2011.  It is anticipated that the Company will continue its efforts to expand its sales of oilfield pipe.  This decrease is primarily attributable to the increase in pipe sales.
 
Property and Equipment

The increase in property and equipment of $735,915 is primarily due to purchase of investment property for $1,095,583, and the purchase of new equipment of $509, 256, partially offset by depreciation of $868,924 at December 31, 2012.
 
Deferred Tax Asset/Income Taxes Payable

Due to the Company’s loss for the year ended December 31, 2012, our deferred tax asset associated with the net operating loss, federal contributions, capital loss carryforwards, and general business credits have been increase by $62,277 to a balance of $875,441 at December 31, 2012.  This balance includes a provision of $39,534 associated with certain net operating losses recognized at the state level for which there is not sufficient net income generated to fully offset the balance.

Accounts Payable

Accounts payable at December 31, 2012 totaled $2,220,045 compared to $370,399 at December 31, 2011, an increase of $1,849,646.  This increase is primarily attributable to the cost of a vendor’s pipe which was accrued as a liability when sold in addition to other pipe purchased and not paid at year end.

Common Stock Outstanding

On April 1, 2009, we entered into an agreement with American Interest, LLC and the Sfeir Family Trust whereby the two stockholders agreed to cancel 118,046,500 common shares and 47,053,500 common shares, respectively, for the consideration to be re-issued in the future.  In 2010, the Company re-issued 115,100,000 of those shares.  On December 30, 2009, we agreed to issue 3,850,000 shares of our common stock in exchange for the remaining balance due to a supplier of equipment to the Company, which totaled $3,935,217 at December 31, 2009.  Although the stock certificate was issued to the supplier on March 19, 2010, we considered the stock to be “paid but not issued” at December 31, 2009.  In 2011, the Company issued 256,900 shares to key managers and others who management felt were responsible for helping the company return to profitability. In 2012, the Company issued an additional 92,550 shares to key managers and others.

 
8

 

Discussion of Results of Operations for the Year Ended December 31, 2012 compared to the Year Ended December 31, 2011
 
Revenues

Our revenue for the year ended December 31, 2012, was $7,124,671 compared to $4,128,319 for the year ended December 31, 2011, an increase of $2,996,352, or 72.6%.  The increase is attributable primarily to the increase in pipe sales of $1,705,379, and an increase of inspection fees which increased $608,517 from $1,616,788 for the year ended December 31, 2011 to $2,225,305 for the year ended December 31, 2012.  This increase was a result of the recovery from the moratorium on deep water drilling in the Gulf of Mexico due the British Petroleum oil disaster.  This increase was accompanied by an increase of additional income from re-billable job supplies (included in Other Income) which increased $204,983 from $273,311 in 2011 to $478,294 for the year ended December 31, 2012.  We store pipe and equipment inventory for our customers.  During 2011, we expanded our yard to accommodate other pipe manufacturers and distributors.  Our storage fees increased $460,153 in the year ending December 31, 2012.

The following table presents the composition of revenue for the year December 31, 2012 and 2011:

Revenue:
 
2012
Dollars
   
Percentage
   
2011
Dollars
   
Percentage
   
Variance
Dollars
 
                               
  Inspection Fees
  $ 2,225,305       31.2 %   $ 1,616,788       39.2 %   $ 608,517  
  Sale of Pipe
  $ 3,517,737       49.4 %   $ 1,812,358       43.9 %   $ 1,705,379  
  Storage Fees
  $ 832,863       11.7 %   $ 372,710       9.0 %   $ 460,153  
  Other Income
  $ 548,766       7.7 %   $ 326,463       7.9 %   $ 222,303  
Total Revenue
  $ 7,124,671       100.0 %   $ 4,128,319       100.0 %   $ 2,996,352  

Cost of Revenue and Gross Profit

Our cost of revenue for the year ended December 31, 2012, was $5,596,893, or 78.6% of revenues, compared to $3,788,365, or 91.8% of revenues, for the year ended December 31, 2011.  The overall increase in our cost of revenue is primarily due to our increase in payroll and related contract costs due to the increase in inspection work and pipe sales.  The primary reason for the decrease in cost of sales as a percentage of revenues was due to the increase in inspection fees in relation to the amount of fixed costs included in our cost of revenue, such as depreciation on equipment and facilities, and insurance.  Additionally, pipe is sold at a lower margin in relation to our service revenues.
 
The following table presents the composition of cost of revenue for the year ended December 31, 2012 and 2011:
 
Cost of Revenue:
 
2012
Dollars
   
Percentage
   
2011
Dollars
   
Percentage
   
Variance
Dollars
 
                                    
                             
  Labor and Related Costs
  $ 458,927       8.2 %   $ 452,193       11.9 %   $ 6,734  
  Materials and  Supplies
  $ 3,084,066       55.1 %   $ 1,810,244       47.8 %   $ 1,273,822  
  Subcontract Labor
  $ 817,867       14.6 %   $ 523,631       13.8 %   $ 294,236  
  Depreciation and amortization
  $ 704,089       12.6 %   $ 682,325       18.0 %   $ 21,764  
  Maintenance
  $ 216,126       3.9 %   $ 100,648       2.7 %   $ 115,478  
  Insurance
  $ 151,028       3.2 %   $ 103,986       2.7 %   $ 47,042  
  Other
  $ 164,790       2.4 %   $ 115,338       3.1 %   $ 49,452  
    Total Cost of  Revenue
  $ 5,596,893       100.0 %   $ 3,788,365       100.0 %   $ 1,808,528  
 
Due to the economy, we were unable to maintain our permanent employees and were forced to lay off employees in 2011 and utilized the services of subcontractors to assist us as needed to provide timely and quality service to our customers.  We will continue our efforts to attract employees and retain qualified individuals to serve the needs of our customers.  The increase in depreciation expense was the result of additional equipment pipe threading and manufacturing facility placed in service during 2011 and 2012.  The increase in other materials and supplies is due primarily to the increase in sales of pipe.
 
Operating Expenses

For the year ended December 31, 2012, our operating expenses totaled $1,902,654, as compared to $1,858,686 in 2011, representing an increase of $43,968. or 2.3%.  The largest component of our operating expenses for 2012 consists of salaries and wages, professional fees, rent, depreciation, and other costs.  Salaries and wages for general and administrative personnel was $555,527 for the year ended December 31, 2012, compared to $453,199 for the year ended December 31, 2011, an increase of $47,683, or 10.5%.  The increase is primarily due to the increase in inspection fee services.
 
 
9

 
 
Professional services expense decreased from $459,876 for the year ended December 31, 2011, to $280,621 for the year ended December 31, 2012, a decrease of $179,255, or 39.0%.  The decrease is primarily a result of a decrease in attorney fees resulting from less fees related to the application for free zone and management’s desire to decrease expenses.

Rent expense totaled $244,131 for the year ended December 31, 2012, as compared to $252,726 for the year ended December 31, 2011, a decrease of $8,595, or 3.4%.  Rent expense for both the year ended December 31, 2012, and for the year ended December 31, 2011, pertains primarily to our rental of office space for our headquarters in Lafayette as well as our rental of land and facilities for operating purposes. 
 
Other Income and Expense

Other income and expense consists of investment income, gain or loss on sale of assets, and interest expense.  For the year ended December 31, 2012, other expense, net of other income, totaled $123,215, as compared to other income, net of other expense, of $907,173 for the year ended December 31, 2011.  The decrease is attributable primarily to the previous year’s recovery of income from the outcome of the lawsuits that were previously pending.

Investment income, which consists of interest, dividends, realized gains and losses, and unrealized gains and losses, amounted to $31,758 for the year ended December 31, 2012, compared to an investment loss of $35,685 for the year ended December 31, 2011.   For the year ended December 31, 2012, investment income consisted primarily of interest income of $29,497and dividend income of $1,491.  At December 31, 2012, the investment account consisted solely of cash equivalents.

Interest expense totaled $154,973 for the year ended December 31, 2012, as compared to $157,954 for the year ended December 31, 2011, a decrease of $2,981, or 1.9%.  Interest expense pertains primarily to amounts due to affiliates as well as to our notes payable with third parties.

 Provision for income taxes

For the year ended December 31, 2012, we reported an income tax benefit of $144,115 , compared to an income tax benefit of $366,036 for the year ended December 31, 2011, a decrease of $221,921, or 60.6%, which was attributable to the reduced net loss for the year.
  
Capital Resources and Liquidity
 
At December 31, 2012, we had $2,879,195 in cash and cash equivalents, which included two investment accounts, consisting of cash equivalents, with a fair value of $8,353.  Our cash outflows have consisted primarily of expenses associated with continued operations.  Cash outflows for investing purposes have consisted primarily the acquisition of equipment and other technology to better serve our customers.  Most of the costs of those acquisitions have been offset by the sale of excess equipment.  Currently, we have been able to utilize our relationships with affiliated entities to stabilize our liquidity needs.

We believe we can satisfy our cash requirements for the next twelve months with our current cash and expected revenues. However, completion of our plan of operation is subject to attaining adequate revenue.  We cannot assure investors that adequate revenues will be generated. In the absence of our projected revenues, we may be unable to proceed with our plan of operations. Even without adequate revenues within the next twelve months, we still anticipate being able to continue with our present activities, but we may require financing to potentially achieve our growth goals.

In the event we are not successful in reaching our initial revenue targets, additional funds may be required, and we may not be able to proceed with our business plan for the development and marketing of our core services.  Should this occur, we would likely seek additional financing to support the continued operation of our business.
 
 
10

 

Critical Accounting Policies

Our financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States (“GAAP”). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenue and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.

Our significant accounting policies are summarized in Note 3 of our consolidated financial statements. While all these significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates. Our management believes that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause effect on our consolidated results of operations, financial position or liquidity for the periods presented in this report.
 
Revenue Recognition

The Company recognizes revenue on arrangements in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements and No. 104, Revenue Recognition.  In all cases, revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed and collectability is reasonably assured.

Recent Accounting Pronouncements

In June 2011, the FASB issued Accounting Standards Update (“ASU”) No. 2011-05, “Comprehensive Income – Presentation of Comprehensive Income.”  ASU No. 2011-05 eliminated the option to present the components of other comprehensive income as part of the statement of stockholders’ equity.  It requires an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements.  In December, 2011, the FASB issued ASU 2011-12, “Comprehensive Income – Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in ASU 2011-05” to defer the effective date of the specific requirement to present items that are reclassified out of accumulated other comprehensive income to net income alongside their respective components of net income and other comprehensive income.  All other provisions of this update, which are to be applied retrospectively, are effective for fiscal years, and interim periods within those years, beginning December 15, 2011, The Company is currently evaluating the impact that the adoption will have on their consolidated financial statements.
 
In December 2011, the FASB issued ASU No. 2011-11, “Balance Sheet – Disclosures about Offsetting Assets and Liabilities.”  ASU 2011-11 requires entities to disclose information about offsetting and related arrangements of financial instruments and derivative instruments and will be applied retrospectively for all comparative periods presented.  ASU 2011-11 is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods.  The Company is currently evaluating the impact that the adoption will have on its consolidated financial statements.
 
On January 1, 2012, the Company adopted guidance issued by the FASB on accounting and disclosure requirements related to fair value measurements. The guidance limits the highest-and-best-use measure to nonfinancial assets, permits certain financial assets and liabilities with offsetting positions in market or counterparty credit risks to be measured at a net basis, and provides guidance on the applicability of premiums and discounts.    Additionally, the guidance expands the disclosures on Level 3 inputs by requiring quantitative disclosure of the unobservable inputs and assumptions, as well as description of the valuation processes and the sensitivity of the fair value to changes in unobservable inputs.   Adoption of this new guidance did not have a material impact on our financial statements.
 
Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as “special purpose entities” (SPEs).
 
Item 7A.           QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We do not hold any derivative instruments and do not engage in any hedging activities.
 
 
11

 

Item 8.              FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
 
ENERGY & TECHNOLOGY, CORP.

Financial Statements

December 31, 2012 and 2011

Contents
 
     
     
Reports of Independent Registered Public Accounting Firms
F-1 - F-2
     
     
Basic Financial Statements
 
     
 
Consolidated Balance Sheets
F-3 - F-4
     
 
Consolidated Statements of Operations
F-5
     
 
Consolidated Statements of Changes in Stockholders’ Equity
F-6
     
 
Consolidated Statements of Cash Flows
F-7
     
 
Notes to Consolidated Financial Statements
F-8 - F-22
 
 
12

 

Report of Independent Registered Public Accounting Firm

To the Board of Directors
Energy & Technology, Corp.
Lafayette, Louisiana

We have audited the accompanying consolidated balance sheet of Energy & Technology, Corp. (the “Company”) and its subsidiaries, Technical Industries, Inc. (TII), Energy Technology Manufacturing & Threading, LLC, and Energy Pipe, LLC (a variable interest entity) as of December 31, 2012, and the related consolidated statement of operations, changes in stockholders’ equity, and cash flows for the year then ended.  These consolidated financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with the auditing standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Energy and Technology, Corp. and subsidiaries as of December 31, 2012, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

We were not engaged to examine management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2012, included in the Form 10-K and, accordingly, we do not express an opinion thereon.
 
The Hall Group, CPAs
Dallas, Texas
March 29, 2013
 
 
F-1

 
 
Report of Independent Registered Public Accounting Firm
 
To the Board of Directors
Energy & Technology, Corp.
Lafayette, Louisiana

We have audited the accompanying consolidated balance sheet of Energy & Technology, Corp. (the “Company”) and its subsidiaries, Technical Industries, Inc. (TII), Energy Technology Manufacturing & Threading, LLC, and Energy Pipe, LLC (a variable interest entity) as of December 31, 2011, and the related consolidated statement of operations, changes in stockholders’ equity, and cash flows for the year then ended.  These consolidated financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with the auditing standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Energy and Technology, Corp. as of December 31, 2011, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

We were not engaged to examine management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2011, included in the Form 10-K and, accordingly, we do not express an opinion thereon.
 
LaPorte
A Professional Accounting Corporation
Metairie, Louisiana
March 28 2012
 
 
F-2

 
 
ENERGY & TECHNOLOGY, CORP.
Consolidated Balance Sheets
As of December 31, 2012 and 2011
           
   
2012
   
2011
 
             
Assets
           
Current Assets
           
Cash and Cash Equivalents
  $ 2,879,195     $ 943,894  
Accounts Receivable
               
Trade, Net of Allowance for Doubtful Accounts of $16,640 and $36,147 at December 31, 2012 and 2011, respectively
    197,158       900,825  
Other
    16,324       15,574  
Inventory
    2,878,085       2,941,152  
Prepaid Expenses
    99,001       50,996  
Deferred Tax Asset
    875,441       813,164  
                 
Total Current Assets
    6,945,204       5,665,605  
                 
Property and Equipment
               
Held for Operations, Net of Accumulated Depreciation of $4,474,876 and $3,605,956 at December 31, 2012 and 2011, respectively
    4,581,403       4,941,071  
Held for Investment
    1,095,583       -  
                 
Total Property and Equipment
    5,676,986       4,941,071  
                 
Other Assets
               
Patent, Net of Accumulated Amortization of $153,524 and $124,738 at December 31, 2012 and 2011, respectively
    422,191       450,977  
Deposits
    4,988       4,988  
Other Assets
    16,389       6,898  
                 
Total Other Assets
    443,568       462,863  
                 
Total Assets
  $ 13,065,758     $ 11,069,539  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
F-3

 
 
ENERGY & TECHNOLOGY, CORP.
Consolidated Balance Sheets
As of December 31, 2012 and 2011
           
   
2012
   
2011
 
             
Liabilities and Stockholders' Equity
           
Current Liabilities
           
Current Maturities of Notes Payable
  $ 491,557     $ 226,020  
Accounts Payable
    2,220,045       370,399  
Accrued Payroll and Payroll Liabilities
    62,348       61,418  
Accrued Rent
    1,787,500       1,637,500  
Income Taxes Payable
    41,342       28,496  
                 
Total Current Liabilities
    4,602,792       2,323,833  
                 
Long-Term Liabilities
               
Notes Payable, Less Current Maturities
    405,422       417,764  
Deferred Taxes Payable
    811,025       912,231  
Due to Affiliates
    2,450,033       2,324,977  
                 
Total Long-Term Liabilities
    3,666,480       3,654,972  
                 
Total Liabilities
    8,269,272       5,978,805  
                 
Stockholders' Equity
               
Preferred Stock - $.001 Par Value; 10,000,000 Shares Authorized,
         
None Issued
    -       -  
Common Stock - $.001 Par Value; 250,000,000 Shares Authorized, 169,144,950
         
Shares and 169,052,400 shares Issued and Outstanding at December 31,
         
 2012, and 2011, respectively
    169,145       169,052  
 Discount on Common Stock
    (115,100 )     (115,100 )
Paid-In Capital
    4,288,830       4,229,195  
Retained Earnings
    453,611       807,587  
                 
Total Stockholders' Equity
    4,796,486       5,090,734  
                 
Total Liabilities and Stockholders' Equity
  $ 13,065,758     $ 11,069,539  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
F-4

 
 
ENERGY & TECHNOLOGY, CORP.
Consolidated Statements of Operations
For the Years Ended December 31, 2012 and 2011
             
   
2012
   
2011
 
             
             
Revenues
  $ 7,124,671     $ 4,128,319  
Cost of Revenues
               
Materials and Supplies
    3,084,066       1,810,244  
Subcontract Labor
    817,867       523,631  
Depreciation
    704,089       682,325  
Labor and Related Costs
    458,927       452,193  
Repairs and Maintenance
    216,126       100,648  
Insurance
    151,028       103,986  
Other Costs
    136,004       86,552  
Patent Amortization
    28,786       28,786  
                 
Total Cost of Revenues
    5,596,893       3,788,365  
                 
Gross Profit
    1,527,778       339,954  
                 
Operating Expenses
               
Salaries and Wages
    555,427       453,199  
Taxes, Fees and Other
    305,621       236,490  
Professional Services
    280,621       459,876  
 Rent
    244,131       252,726  
Depreciation
    164,835       164,839  
Travel, Lodging and Meals
    93,824       76,527  
Utilities
    88,265       48,698  
Office Supplies and Expenses
    74,344       65,531  
Repairs and Maintenance
    48,097       22,352  
Communications
    47,489       48,445  
Bad Debts
    -       30,003  
                 
Total Operating Expenses
    1,902,654       1,858,686  
                 
Income (Loss) from Operations
    (374,876 )     (1,518,732 )
                 
Other Income (Expense)
               
Other Income (Expense)
    -       1,100,832  
Investment Income (Expense)
    31,758       (35,685 )
Interest (Expense)
    (154,973 )     (157,954 )
                 
Total Other Income (Expense)
    (123,215 )     907,193  
                 
Income (Loss) Before Provision for Income Taxes
    (498,091 )     (611,539 )
                 
Provision for Income Taxes Expense (Benefit)
    (144,115 )     (366,036 )
                 
Net Income (Loss)
  $ (353,976 )   $ (245,503 )
                 
Earnings (Loss) per Share - Basic
  $ NM     $ NM  
                 
Earnings (Loss) per Share - Diluted
  $ NM     $ NM  
  
The accompanying notes are an integral part of these consolidated financial statements.
 
 
F-5

 
 
ENERGY & TECHNOLOGY, CORP.
Consolidated Statements of Changes in Stockholders' Equity
For the Years Ended December 31, 2012 and 2011
                                   
         
Discount on
   
Additional
         
Total
 
    Common Stock    
Capital
   
Paid-In
   
Retained
   
Stockholders'
 
   
Shares
   
Amount
   
Stock
   
Capital
   
Earnings
   
Equity
 
                                     
Balance at January 1, 2011
    168,795,500     $ 168,796     $ (115,100 )   $ 4,237,741     $ 1,053,090     $ 5,344,527  
                                                 
Bonus shares issued
    256,900       256       -       63,974       -       64,230  
                                                 
IPO Expenses
                            (72,520 )     -       (72,520 )
                                                 
Net (Loss)
    -       -       -       -       (245,503 )     (245,503 )
                                                 
Balance at December 31, 2011
    169,052,400     $ 169,052     $ (115,100 )   $ 4,229,195     $ 807,587     $ 5,090,734  
                                                 
Bonus shares issued
    92,550       93       -       59,635       -       59,728  
                                                 
Net (Loss)
    -       -       -       -       (353,976 )     (353,976 )
                                                 
Balance at December 31, 2012
    169,144,950     $ 169,145     $ (115,100 )   $ 4,288,830     $ 453,611     $ 4,796,486  
  
The accompanying notes are an integral part of these consolidated financial statements.
 
 
F-6

 
 
ENERGY & TECHNOLOGY, CORP.
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2012 and 2011
             
   
2012
   
2011
 
Cash Flows from Operating Activities
           
Net (Loss) Income
  $ (353,976 )   $ (245,503 )
Adjustments to Reconcile Net Income to Net Cash Provided by
         
Operating Activities
               
Bad Debts
    -       30,003  
Depreciation
    868,924       847,164  
Amortization of Patent Costs
    28,786       28,786  
Deferred Income Taxes
    (163,483 )     (393,144 )
Issuance of Stock as Bonus
    59,728       64,230  
Changes in Assets and Liabilities
               
Trade Receivables
    703,667       (486,805 )
Other Receivables
    (750 )     2,064  
Inventory
    63,067       553,011  
Prepaid Expenses
    (48,005 )     (2,105 )
Accounts Payable
    1,849,646       217,242  
Customer Deposits
    -       (551,075 )
Accrued Payroll and Payroll Liabilities
    930       4,693  
Income Taxes Payable
    12,846       9,474  
Accrued Rent
    150,000       150,000  
                 
Net Cash Provided by (Used in) Operating Activities
    3,171,380       228,035  
                 
 Cash Flows from Investing Activities
               
 Increase (Decrease) in Other Assets
    (9,491 )     94,930  
 Purchase of Property and Equipment
    (1,604,839 )     (96,946 )
                 
Net Cash Provided by (Used in) Investing Activities
    (1,614,330 )     (2,016 )
                 
Cash Flows from Financing Activities
               
Borrowings from Affiliates
    125,056       448,979  
Proceeds from Notes Payable
    546,213       70,106  
Payments on Notes Payable
    (293,018 )     (254,868 )
                 
Net Cash Provided by (Used in) Financing Activities
    378,251       264,217  
                 
Net Increase (Decrease) in Cash and Cash Equivalents
    1,935,301       490,236  
                 
Cash and Cash Equivalents, Beginning of Year
    943,894       453,658  
                 
Cash and Cash Equivalents, End of Year
  $ 2,879,195     $ 943,894  
                 
Supplemental Disclosure of Cash Flow Information
               
Cash Paid During the Period for Interest
  $ 29,917     $ 42,161  
                 
Cash Paid During the Period for Income Taxes
  $ 29,915     $ 17,634  
                 
 Stock Issued for Services
  $ 59,728     $ 64,230  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
F-7

 
 
ENERGY & TECHNOLOGY, CORP.
Notes to Consolidated Financial Statements

 
Note 1.    Organization

Energy and Technology, Corp (the Company) was founded as Technical Industries & Energy, Corp. (the Company) was formed November 29, 2006 under the laws of the State of Delaware in order to acquire and to take over the assets and business of Technical Industries, Inc. (TII).  On that date, the Company issued 125,000,000 shares of common stock to American Interest, LLC, in exchange for founder services rendered.  The fair value of these services was considered immaterial, and no amounts were recognized in the financial statements.  At the time the shares were issued to American Interest, LLC, the Company had no assets, operations, or cash flows.  As such, the stock had no value at the time the Company was established.  The par value was arbitrarily established in order to comply with the State of Delaware laws.  In order to reflect the par value of the shares issued, the Company has recognized a discount on capital stock as a contra-equity account within the equity section of the consolidated balance sheets.

On January 3, 2007, the Company entered into a Stock Exchange Agreement and Share Exchange (the Agreement) whereby the sole shareholder of TII exchanged all of the outstanding shares of the TII to the Company in exchange for 50,000,000 shares of Company stock.  Accordingly, TII became a wholly-owned subsidiary of the Company.  The assets acquired and liabilities assumed were recorded at the carrying value to TII since TII and the Company were under common control prior to the acquisition.

TII specializes in the non-destructive testing of vessels, oilfield equipment and mainly pipe, including ultrasonic testing, utilizing the latest technologies.  These technologies enable TII to (i) provide detailed information to customers regarding each pipe tested, and (ii) reach energy reserves present technology cannot reach without extra cost to the oil and gas companies.  Because of the intense scrutiny applied to each section of pipe, TII is able to generate data which allows the pipe to be used in the most extreme conditions, and has been proven especially useful in deep water drilling operations in the Gulf of Mexico.

On August 29, 2009, the Company effected a name change from Technical Industries & Energy Corp. to Energy & Technology Corp. to better reflect the nature of the Company’s business.

Note 2.    Summary of Significant Accounting Policies

Basis of Presentation and Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Technical Industries, Inc. and Energy Technology Manufacturing & Threading, LLC, and the accounts of Energy Pipe, LLC (a variable interest entity). All significant intercompany balances and transactions have been eliminated.

 
F-8

 
 
ENERGY & TECHNOLOGY, CORP.
Notes to Consolidated Financial Statements


Additionally, the Company has accounted for a joint venture with ITO Ventures, L.L.C, which owned a 50% interest on an equity basis. In the year ending December 31, 2011, the company gave up its’ 50% interest in this joint venture and wrote off a total of $68,375 as an investment expense.

The Company determines whether it has a controlling financial interest in an entity by first evaluating whether the entity is a voting interest entity or a variable interest entity (VIE) under accounting principles generally accepted in the United States.  Voting interest entities are entities in which the total equity investment at risk is sufficient to enable the entity to finance itself independently and provides the equity holders with the obligation to absorb losses, the right to receive residual returns and the right to make decisions about the entity’s activities.  As defined in applicable accounting standards, VIE’s are entities that lack one or more of the characteristics of a voting interest entity.  A controlling financial interest in a VIE is present when an enterprise has both the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and an obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.  The enterprise with a controlling financial interest, known as the primary beneficiary, consolidates the VIE.  Energy Pipe, LLC is considered to be a VIE since it is thinly capitalized and is dependent upon the Company for cash flow of operations, and the Company is considered to the primary beneficiary.

Basis of Accounting
Assets, liabilities, revenues and expenses are recognized on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America.

Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect amounts reported in the financial statements.  Accordingly, actual results could differ from those estimates due to information that becomes available subsequent to the issuance of the financial statements or for other reasons.

Revenue Recognition
Revenue for inspection services is recognized upon completion of the services rendered.  Revenue for the sales of pipe is recognized when pipe is delivered and the customer takes ownership and assumes the risks of loss, collection of the relevant receivable is probable, persuasive evidence of an arrangement exists, and the sales price is fixed or determinable.

Trade Receivables
Trade accounts receivable are carried at their estimated collectible amounts. Trade credit is generally extended on a short-term basis; thus receivables do not bear interest, although a finance charge may be applied to amounts past due.  Trade accounts receivable are periodically evaluated for collectability based on past credit.
 
 
F-9

 
 
ENERGY & TECHNOLOGY, CORP.
Notes to Consolidated Financial Statements

 
Allowance for Doubtful Accounts
The company calculates the allowance based on the history with customers and their current financial condition. Provisions of uncollectible amounts are determined based on management’s estimate of collectability.  Allowance for doubtful accounts was $14,640 and $36,147, for the years ended December 31, 2012 and 2011, respectively.

Inventory
Inventory is stated at the lower of cost determined by the average cost or market.  At December 31, 2012 and 2011, inventory consisted of pipe available for sale.

Property and Equipment
Property and equipment are stated at cost.  Expenditures for property and equipment and items that substantially increase the useful lives of existing assets are capitalized at cost and depreciated. Routine expenditures for repairs and maintenance are expensed as incurred.  The cost and related accumulated depreciation of property and equipment are eliminated from the accounts when disposed of, and any resulting gain or loss is recognized.  Depreciation is provided utilizing the straight-line method over the estimated useful lives of the assets capitalized ranging from three to twenty years.

Valuation of Long Lived Assets
In the event facts and circumstances indicate that carrying amounts of long-lived assets may be impaired, the Company evaluates the recoverability of its long-lived assets using the estimated future undiscounted cash flows associated with the asset compared to the asset’s carrying amount to determine if a write-down is required, pursuant to the provisions of Financial Accounting Standards Board (FASB) ASC 360-10-35.  Any impairment loss is measured as the difference between carrying amount and the fair value of the impaired asset.

Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of temporary cash investments and trade receivables.  Concentration of credit risk with respect to trade receivables is limited due to the Company’s large number of customers.  At December 31, 2012, the balance due from three customers represented 76% of receivables, and sales to two customers represented 52% of revenues for the year ended December 31, 2012.

The Company periodically maintains cash in bank accounts in excess of insured limits.  The Company has not experienced any losses and does not believe that significant credit risk exists as a result of this practice.

Advertising
The Company charges the costs of advertising to expense as incurred.  Advertising expense was $8,524 and $5,282, for the years ended December 31, 2012 and 2011, respectively.

 
F-10

 

ENERGY & TECHNOLOGY, CORP.
Notes to Consolidated Financial Statements

 
Cash Flows
For purposes of the consolidated statements of cash flows, the Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.

Income Taxes
Deferred income tax assets and liabilities are determined using the liability (or balance sheet) method.  Under this method, the net deferred tax asset or liability is determined based on the tax effects of the temporary differences between the book and tax bases of the various balance sheet assets and liabilities and gives current recognition to change in tax rates and laws.

When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained.  The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any.

Tax positions taken are not offset or aggregated with other positions.  Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement with the applicable taxing authority.  The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above would be reflected as a liability for unrecognized tax benefits in the consolidated balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination.  Interest and penalties associated with unrecognized tax benefits would be classified as additional income taxes in the statement of operations

Emerging Growth Company Critical Accounting Policy Disclosure
The Company qualifies as an “emerging growth company” under the 2012 JOBS Act.  Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards.   As an emerging grown company, the Company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.     The Company  may elect to take advantage of the benefits of this extended transition period in the future.    

Recent Accounting Pronouncements
In June 2011, the FASB issued Accounting Standards Update (“ASU”) No. 2011-05, “Comprehensive Income – Presentation of Comprehensive Income.”  ASU No. 2011-05 eliminated the option to present the components of other comprehensive income as part of the statement of stockholders’ equity.  It requires an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements.  In December, 2011, the FASB issued ASU 2011-12, “Comprehensive Income – Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in ASU 2011-05” to defer the effective date of the specific requirement to present items that are reclassified out of accumulated other comprehensive income to net income alongside their respective components of net income and other comprehensive income.  All other provisions of this update, which are to be applied retrospectively, are effective for fiscal years, and interim periods within those years, beginning December 15, 2011, The Company is currently evaluating the impact that the adoption will have on their consolidated financial statements.
 
 
F-11

 
 
ENERGY & TECHNOLOGY, CORP.
Notes to Consolidated Financial Statements

 
In December 2011, the FASB issued ASU No. 2011-11, “Balance Sheet – Disclosures about Offsetting Assets and Liabilities.”  ASU 2011-11 requires entities to disclose information about offsetting and related arrangements of financial instruments and derivative instruments and will be applied retrospectively for all comparative periods presented.  ASU 2011-11 is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods.  The Company is currently evaluating the impact that the adoption will have on its consolidated financial statements.
 
On January 1, 2012, the Company adopted guidance issued by the FASB on accounting and disclosure requirements related to fair value measurements. The guidance limits the highest-and-best-use measure to nonfinancial assets, permits certain financial assets and liabilities with offsetting positions in market or counterparty credit risks to be measured at a net basis, and provides guidance on the applicability of premiums and discounts.    Additionally, the guidance expands the disclosures on Level 3 inputs by requiring quantitative disclosure of the unobservable inputs and assumptions, as well as description of the valuation processes and the sensitivity of the fair value to changes in unobservable inputs.  Adoption of this new guidance did not have a material impact on our financial statements.
 
Comprehensive Income
 
The Company had no components of comprehensive income. Therefore, net loss equals comprehensive loss for the periods presented.
 
Note 3.   Patent

On September 4, 2007, the Company’s chief executive officer was awarded a patent from the United States Patent and Trademark Office pertaining to his development of specialized testing procedures for tubing casing, line pipe and expandable liners utilized by oil-exploration companies which was subsequently transferred to the Company.

The Company’s costs associated with its development of these testing procedures and application for patent have been capitalized and recognized as an asset in the Company’s balance sheet, and are being amortized over 20 years.  Amortization expense for 2012 and 2011 was $28,786 and $28,786, respectively.  Estimated amortization expense for each of the ensuing years through December 31, 2017 is $28,786 per year.
 
 
F-12

 
 
ENERGY & TECHNOLOGY, CORP.
Notes to Consolidated Financial Statements


Note 4.   Property and Equipment

Property and equipment consists of the following at December 31, 2012 and 2011 respectively:
 
   
2012
   
2011
 
             
Buildings and Improvements
  $ 3,042,385     $ 3,042,385  
Equipment
    5,747,749       5,246,261  
Autos and Trucks
    248,394       240,630  
Office Furniture
    17,751       17,751  
      9,056,279       8,547,027  
                 
Less:  Accumulated Depreciation
    (4,474,876 )     (3,605,956 )
                 
Total
  $ 4,581,403     $ 4,941,071  
 
Depreciation expense amounted to $868,924 and $847,164 for the years ended December 31, 2012 and 2011, respectively.
 
Note 5.   Related Party Transactions

Included in due to affiliates at December 31, 2012 and 2011, is $1,688,253 and $1,563,197, respectively, in acquisition debts paid by affiliates upon the acquisition of the Company in 1999.  The affiliates maintain a lien on the Company’s accounts receivable and equipment to secure this loan.  The amounts due to the affiliates have no set terms of repayment and bear interest at 8.00%.  Interest expense associated with this obligation totaled $125,056 and $115,792 for the years ended December 31, 2012 and 2011, respectively.

Note 6.   Notes Payable

Notes payable at December 31, 2012 and 2011 consist of the following:
 
      2012       2011  
Doosan Global Finance, $109,350 non-interest bearing note dated October 13,2010, due April 15, 2012, payable in monthly installments of $2,604, secured by equipment.
  $ -     $ 10,414  
General Motors Acceptance Corp., $23,363 note dated May 1, 2008, due May 15, 2008, payable in monthly installments of $472, interest rate 7.69%, secured by vehicle.
    -       6,175  
Gulf Coast Bank and Trust, $13,045 note dated March 7, 2010, due February 7, 2012, payable in monthly installments of $394, interest rate 5.45%, secured by vehicle.
    -       641  
Imperial Credit Corp, Insurance, $96,213 note dated October 15, 2012, due August 15, 2013 payable in monthly installments of $9,975, interest rate 7.95%, secured by insurance.
    77,475       29,532  
 
 
F-13

 
 
ENERGY & TECHNOLOGY, CORP.
Notes to Consolidated Financial Statements

 
      2012       2011  
Regions Bank, $213,226 note dated October 15, 2010, due October 15, 2014, payable in monthly installments of $4,120, interest rate 5.98%, secured by equipment.
    83,892       128,570  
                 
U.S. Bancorp, $340,990 note dated December 29, 2010 due December 29, 2014, payable in monthly installments of $6,585, interest rate 5.93%, secured by equipment.
    145,899       216,602  
                 
U.S. Bancorp, $260,000 note dated May 17, 2011 due May 17, 2015, payable in monthly installments of $4,954, interest rate 5.4%, secured by equipment.
    131,275       185,110  
                 
BMW Credit, $60,303 note dated November 18, 2011 due November 18, 2015, payable in monthly installments of $1,081, interest rate 2.9%, secured by vehicle.
    32,048       46,397  
                 
Ally Bank, $23,968 note dated February 25, 2011 due February 25, 2016, payable in monthly installments of $463, interest rate 6.0%, secured by vehicle.
    14,807       20,343  
                 
Wells Fargo Bank, $449,000 note dated October 18, 2012 due October 18, 2014, payable in monthly installments of $18,708, interest rate 0.0%, secured by vehicle.
    411,583       -  
                 
      896,979       643,784  
Less: Current Portion
    491,557       226,020  
                 
Long-Term Portion
  $ 405,422     $ 417,764  
 
 
F-14

 
 
ENERGY & TECHNOLOGY, CORP.
Notes to Consolidated Financial Statements

 
Following are maturities of long-term debt at December 31, 2012:

Fiscal Year Ending
     
December 31,
 
Amount
 
2013
  $ 491,557  
2014
    374,766  
2015
    30,656  
         
Total
  $ 896,979  

Note 7.    Income Taxes

The provision for income taxes for 2012 and 2011 consists of the following:
 
   
2012
   
2011
 
             
Current Tax Expense
  $ 19,368     $ 27,108  
Deferred Tax (Benefit) Expense
               
  Federal
    (147,316 )     (371,540 )
  State
    (16,167 )     (21,604 )
                 
Total Provision for Income Taxes
  $ (144,115 )   $ (366,036 )
 
A reconciliation of income tax expense at the federal statutory rate to the Company’s actual income tax expense at December 31, 2012 and 2011 follows:
 
   
2012
   
2011
 
Tax (Benefit) Provision at Expected
           
  Federal Statutory Rate of 34%
  $ (163,483 )   $ (393,144 )
                 
Deferred State Taxes and Adjustment
               
  of State Income Tax Allocation
    19,368       27,108  
                 
    Income Tax  (Benefit) Expense
  $ (144,115 )   $ (366,036 )

The deferred tax asset and deferred tax liability comprised the following at December 31, 2012 and 2011:
 
    2012    
2011
 
Deferred Tax Asset - Net Operating
           
  Loss Carryforwards
  $ 875,441     $ 813,164  
                 
Deferred Tax Liability - Fixed Assets
               
  (Excess Depreciation)
    (811,025 )     (912,231 )
                 
Net Deferred Tax Asset (Liability)
  $ 64,416     $ (99,067 )
 
The Company has unused federal operating loss carryforwards of $2,142,650, available as of December 31, 2012.  This net operating loss can be carried forward to offset future taxable income.  These carryforwards will expire starting in 2029 through 2032.  The Company has capital loss carryovers of $95,969 that expire in 2028 and unused contribution carryforwards that expire in 2020 through 2012.  Additionally, the Company has general business credits totaling $49,343 that expire in 2029.

No valuation allowance has been set up against the deferred tax asset as the Company believes that it will be able to fully utilize the net operating loss carryforwards that have generated the deferred tax asset.
 
 
F-15

 
 
ENERGY & TECHNOLOGY, CORP.
Notes to Consolidated Financial Statements

 
Note 7.    Income Taxes (Continued)

At December 31, 2012, and December 31, 2011, the Company did not have any tax positions which resulted in unrecognized tax benefits.  In addition, the Company had no amount of interest and penalties recognized in the statements of Operations for the years ended December 31, 2012 and 2011, nor any amount of interest and penalties recognized in the Balance Sheets as of December 31, 2012 and 2011.

As of December 31, 2012, the tax years that remain open for examination by tax jurisdictions include 2011, 2010, and 2009.
 
Note 8.    Equity
 
The Company is authorized to issue 250,000,000 shares of common stock at a par value of $.001 per share.  As of December 31, 2012 and 2011, there were 169,144,250 and 169,052,400 shares issued and outstanding, respectively.

The Company is authorized to issue 10,000,000 shares of preferred stock.  As of December 31, 2012 and 2011, there were no shares issued and outstanding.

In 2011 the Company issued a total of 256,900 shares of common stock valued at an average of $.25 a share to employees as compensation.

In 2012 the Company issued a total of 92,550 shares of common stock valued at an average of $.645 a share to employees as compensation.

Note 9.    Earnings per Common Share
 
Earnings (loss) per share are calculated in accordance with ASC 260 “Earnings per Share”. The weighted average number of common shares outstanding during each period is used to compute basic earnings (loss) per share. Diluted earnings per share are computed using the weighted average number of shares and potentially dilutive common shares outstanding. Dilutive potential common shares are additional common shares assumed to be exercised. Potentially dilutive common shares consist of stock options and are excluded from the diluted earnings per share computation in periods where the Company has incurred a net loss, as their effect would be considered anti-dilutive.

There were no potentially dilutive common stock equivalents as of December 31, 2012, therefore basic earnings per share equals diluted earnings per share for the year ended December 31, 2012. . As the Company incurred a net loss during the year ended December 31, 2012, the basic and diluted loss per common share is the same amount, as any common stock equivalents would be considered anti-dilutive.
 
As the Company incurred a net loss during the year ended December 31, 2011, the basic and diluted loss per common share is the same amount, as any common stock equivalents would be considered anti-dilutive.
 
The weighted average number of common shares outstanding were 169,087,296 and 169,052,400 for the years ended December 31, 2012 and 2011, respectively.
 
 
F-16

 
 
 
ENERGY & TECHNOLOGY, CORP.
Notes to Consolidated Financial Statements

 
Note 10.  Commitments

The Company leases office premises, operating facilities, and equipment under operating leases expiring in various years through 2030.  The Company also leases land for operating purposes on a month to month basis.  Rent expense for the year ended December 31, 2012 and 2011 was $244,131 and $252,726, respectively.
 
Minimum future rental payments under operating leases having remaining terms in excess of one year as of December 31, 2012 are as follows:
 
2013
  $ 6,000  
2014
    6,000  
2015
    6,000  
2016
    6,000  
2017
    6,000  
Thereafter
    76,500  
         
Total
  $ 106,500  
 
Note 11.  Litigation and Contingent Liabilities

In 2011, the Company was granted a judgment against a customer regarding returned inventory and subsequently reached a final settlement with the customer under which the Company retained the inventory in exchange for writing off the Company’s invoices for storage and repairs to the pipe.  The judgment resulted in a net gain of $504,952 reported as other income in 2011.  The Company is currently involved in litigation with a supplier regarding a contract agreement for the Company to serve as a distributor for the suppliers products.  The Company has recorded a liability of $1,846,618 for net proceeds due the supplier from sales of its product.
 
Note 12.  Major Customers

For the year ended December 31, 2012, the Company had two customers which generated revenues in excess of 10% of the Company’s total revenues.  Revenues for these two customers were approximately 52% of total revenues, and total balance due from these two customers at December 31, 2012 was $134,493.  For the year ended December 31, 2011, the Company had two customers for which revenue generated from the customer amounted to approximately 55% of the Company’s total revenue.  At December 31, 2011, these customers had a trade receivable balance of $788,251.
 
 
F-17

 
 
ENERGY & TECHNOLOGY, CORP.
Notes to Consolidated Financial Statements

 
Note 13.  Estimated Fair Value of Financial Instruments

The following disclosure is made in accordance with the requirements of FASB ASC 825, Financial Instruments.  Financial instruments are defined as cash and contractual rights and obligations that require settlement, directly or indirectly, in cash.  In cases where quoted market prices are not available, fair values have been estimated using the present value of future cash flows or other valuation techniques.

The results of these techniques are highly sensitive to the assumptions used, such as those concerning appropriate discount rates and estimates of future cash flows, which require considerable judgment.  Accordingly, estimate presented herein are not necessarily indicative of the amounts the Company could realize in a current settlement of the underlying financial instruments.  ASC 825 excludes certain financial instruments and all non-financial instruments from its disclosure requirements. These disclosures should not be interpreted as representing an aggregate measure of the underlying value of the Company.

   
December 31,
 
   
2012
   
2011
 
   
Carrying
   
Fair
   
Carrying
   
Fair
 
   
Amount
   
Value
   
Amount
   
Value
 
Financial Assets
                       
     Cash
  $ 2,879,195     $ 2,879,195     $ 943,894     $ 943,894  
                                 
Financial Liabilities
                               
     Notes Payable
  $ 896,979     $ 896,979     $ 643,784     $ 643,784  
     Due to Affiliates
    2,450,033       2,450,033       2,324,977       2,324,977  

The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments:

Cash and Cash Equivalents – The carrying amount of cash and cash equivalents approximates fair values.

Notes Payable – The carrying amount of notes payable approximates fair values.

Due to Affiliates – The carrying amount of due to affiliates approximates fair values.

Note 14.  Subsequent Events

In accordance with FASB ASC 855-10, Subsequent Events, the Company evaluates events and transactions that occur after the balance sheet date for potential recognition in the financial statements.  The effect of all subsequent events that provide additional evidence of conditions that existed at the balance sheet are recognized in the financial statements as of December 31, 2012.  In preparing these financial statements, the Company evaluated the events and transactions that occurred from December 31, 2012 through March 29, 2013, the date these financial statements were available to be issued and no significant subsequent events were noted.

 
F-18

 
 
ITEM 9.           CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Our accountant is The Hall Group. We do not presently intend to change accountants. At no time have there been any disagreements with such accountants regarding any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure.
 
ITEM 9A.         CONTROLS AND PROCEDURES
 
Evaluation of disclosure controls and procedures
 
As of the end of the period covered by this Annual Report, under the supervision and with the participation of management, including our Chief Executive Officer and principal financial officer, we conducted an evaluation of the Company’s disclosure controls and procedures.  As defined by Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act), the term “disclosure controls and procedures” means our controls and other procedures that are designed to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms.  Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is accumulated and communicated to our Company’s management, including Certifying Officers, to allow timely decisions regarding required disclosure.  Based on this evaluation, we have concluded that our disclosure controls and procedures were effective as of December 31, 2010.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is also responsible for establishing ICFR as defined in Rules 13a-15(f) and 15(d)-15(f) under the Exchange Act.  Our ICFR are intended to be designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.  Our ICFR are expected to include those policies and procedures that management believes are necessary that:

(i)    
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
(ii)   
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and our directors; and
(iii)  
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Management recognizes that there are inherent limitations in the effectiveness of any system of internal control, and accordingly, even effective internal control can provide only reasonable assurance with respect of financial statement preparation and may not prevent or detect misstatements.  In addition, effective internal control at a point in time may become ineffective in future periods because of changes in conditions or due to deterioration in the degree of compliance with our established policies and procedures.

As of December 31, 2012, management assessed the effectiveness of our internal control over financial reporting (ICFR) based on the criteria for effective ICFR established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and SEC guidance on conducting such assessments by smaller reporting companies and non-accelerated filers.  Based on that evaluation and the criteria set forth in the COSO Report, management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2012.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this Annual Report.

Changes in internal controls

There have been no changes in our internal control over financial reporting that occurred during our fiscal quarter ended December 31, 2012 that have materially affected, or are likely to materially affect, our internal control over financial reporting.

 
13

 
 
PART III
 
ITEM 10.         DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS: COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

Our executive officer’s and director’s and their respective ages as of March 31, 2012 are as follows:
 
NAME
AGE
POSITION
     
George Sfeir
56
President, Chief Executive Officer and Director
Amer Salhi
28
Chief Financial Officer and Secretary
Edmund J. Baudoin, Jr.
57
Treasurer

Set forth below is a brief description of the background and business experience of our executive officers and directors for the past five years.
 
George M. Sfeir is a 1972 graduate of Saint George College (Lebanon) and has worked in the oil and gas industry since May 1972.  Mr. Sfeir graduated from the University of Louisiana at Lafayette, Louisiana with a degree in general & legal studies in 1994.  He has worked on numerous projects throughout the Middle East, Africa, Europe, North and South America, and China.  Mr. Sfeir is fluent in English, French, Arabic, Spanish, and Italian.  Mr. Sfeir has worked with Technical Industries, Inc. as a consultant since January of 1980 and as a CEO since 1998.
 
Edmund J. Baudoin, Jr. is a 1979 graduate of the University of Southwestern Louisiana where he earned a B.S. in Business Administration.  After graduation, Mr. Baudoin joined Technical Industries, Inc. and served as Vice President before resigning in 1999 to perform title research and abstracting work as an oil and gas Landman, before rejoining Technical Industries, Inc. in 2009.  Mr. Baudoin has over 32 years of experience in the oilfield industry.  He currently serves as Administrator of Technical Industries, Inc., and was appointed Treasurer of the Company on August 29, 2009.
 
Amer T. Salhi was born in The Kingdom of Saudi Arabia. He attended Hashemite University of the Kingdom of Jordan 2002 to 2006, and received his Bachelor’s degree in Business Administration. Following graduation, Mr. Salhi enrolled at the Southeastern Louisiana University in Hammond Louisiana and received his MBA minor in accounting in December 2009. Mr. Salhi joined Energy & Technology, Corp. October of 2010, where he currently serves in the capacity as Accountant. He was appointed C.F.O. and Secretary of the Company on April 12, 2011.
 
Term of Office
 
Our directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board
  
Current Issues and Future Management Expectations

No board audit committee has been formed as of the filing of this Annual Report.
 
Compliance With Section 16(A) Of The Exchange Act.
 
Section 16(a) of the Exchange Act requires the Company’s officers and directors, and persons who beneficially own more than 10% of a registered class of the Company’s equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission and are required to furnish copies to the Company. To the best of the Company’s knowledge, any reports required to be filed were timely filed in fiscal year ended December 31, 2012.
 
Code of Ethics
 
The Company has adopted a Code of Ethics applicable to its Chief Executive Officer and Chief Financial Officer. This Code of Ethics is incorporated by reference to Form 10-K filed on March 30, 2009.
 
 
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ITEM 11.          EXECUTIVE COMPENSATION

The table below summarizes all compensation awarded to, earned by, or paid to our executive officers by any person for all services rendered in all capacities to us from the date of our inception until the fiscal year ended December 31, 2012 and 2011. The following summary compensation table sets forth all compensation awarded to, earned by, or paid to the named executive officers paid by us during the years ended December 31, 2012, and 2011 in all capacities for the accounts of our executives, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO): 
 
SUMMARY COMPENSATION TABLE
 
Name and Principal Position
Year
 
Salary
($)
 
Bonus
($)
 
Stock
Awards
($)
 
Option Awards
($)
 
Non-Equity Incentive Plan Compensation ($)
 
Non-Qualified Deferred Compensation Earnings
($)
 
All Other Compensation
($)
 
Totals
($)
 
George Sfeir,
President, Chief Executive Officer
2012
 
$
0
   
0
   
0
 
0
   
0
 
0
 
0
 
$
0
 
and Director
2011
 
$
0
   
0
   
0
 
0
   
0
 
0
 
0
 
$
0
 
                                               
Amer Salhi,
2012
 
$
42,306
  $
1,800
   
0
 
0
   
0
 
0
 
0
 
$
44,106
 
Chief Financial Officer and Secretary
2011
 
$
34,367
 
300
   
0
 
0
   
0
 
0
 
0
 
$
34,667
 
                                               
Edmund J. Baudoin, Jr.,
2012
 
$
58,080
  $
1,800
   
0
 
0
   
0
 
0
 
0
 
$
59,080
 
Treasurer
2011
 
$
54,410
  $
300
   
0
 
0
   
0
 
0
 
0
 
$
54,710
 
 
Option Grants Table. There were no individual grants of stock options to purchase our common stock made to the executive officer named in the Summary Compensation Table through December 31, 2012.
 
Aggregated Option Exercises and Fiscal Year-End Option Value Table. There were no stock options exercised during period ending December 31, 2012 by the executive officer named in the Summary Compensation Table.
 
Long-Term Incentive Plan (“LTIP”) Awards Table. There were no awards made to a named executive officer in the last completed fiscal year under any LTIP
 
Compensation of Directors

Directors are permitted to receive fixed fees and other compensation for their services as directors. The Board of Directors has the authority to fix the compensation of directors. No amounts have been paid to, or accrued to, directors in such capacity.

Employment Agreements

We do not have any employment agreements in place with our officers or directors.
 
ITEM 12.         SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
The following table provides the names and addresses of each person known to us to own more than 5% of our outstanding shares of common stock as of December 31, 2012 and by the officers and directors, individually and as a group. Except as otherwise indicated, all shares are owned directly.
 
 
Title of Class
Name and Address
of Beneficial Owner
Amount and Nature
of Beneficial Owner
Percent of
Class (1)
       
Common Stock
Restricted
American Interest, LLC (2)
Petroleum Towers, Suite 530
P.O. Box 52523
Lafayette, LA 70505
149,146,255
 
88.2%
       
Common Stock
Restricted
Sfeir Family Trust (2)
Petroleum Towers, Suite 530
P.O. Box 52523
Lafayette, LA 70505
13,732,500
8.1%
       
Common Stock
 
 
Edmund J. Baudoin, Jr.
Petroleum Towers, Suite 530
P.O. Box 52523
Lafayette, LA 70505
14,000
Less than 1%
 
 
       
Common Stock
All executive officers and directors as a group
14,000
Less  than 1%
 
 
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TRANSACTIONS WITH RELATED PERSONS, PROMOTERS AND CERTAIN CONTROL PERSONS

In November of 2006, we issued 125,000,000 restricted shares of common stock to American Interest, LLC (controlled by George Sfeir) for founder services rendered pursuant to the exemption from registration set forth in section 4(2) of the Securities Act of 1933.  
 
On January 3, 2007 we entered into a Stock Purchase and Share Exchange agreement with TII, whereby TII became our wholly owned subsidiary.  We exchanged 50,000,000 restricted shares of common stock for all the issued and outstanding shares of TII.  Mr. George Sfeir was the sole shareholder of TII.

On June 17, 2009, American Interests, LLC and the Sfeir Family Trust agreed to cancel 165,100,000 shares of stock, effectively reducing the total shares outstanding to 10,000,000.

Subsequently, on December 17, 2009, the directors of the Company authorized a 5 for 1 stock split effective for shareholders of record dated January 15, 2010, raising the total issued and outstanding shares to 50,000,000.

The Company’s management negotiated a settlement whereby it issued 3,580,000 shares of stock in exchange for allowing the Company to return $3,300,500 of equipment ordered and cancellation of debt in the amount of $3,935,217, which represented the balance owed on equipment for the Abbeville facility.

On March 11, 2010, the Company issued 88,000 shares to 93 employees, advisors, and supporters for services rendered.

On August 23, 2010 the Company reissued 115,100,000 shares to American Interest, LLC as per the cancellation agreement.

On October 6, 2010 the Company issued 50,000 shares to Globex transfer as part of a Service Agreement. Those shares were later returned and cancelled as no services were rendered.

On December 7, 2010 the Company issued 500 shares each to the 12 members of its Advisory Board for services rendered.

On January 19, 2011 the Company issued 100,000 shares as compensation to Mirador Consulting for services subsequently never rendered. Those shares are under litigation.

On January  14, 2011 the Company issued 14,000 shares as bonuses to key employees.

On April 25, 2011 the Company issued 54,400 shares as compensation for loss in value of shares.

On September 23, 2011 the Company issued 88,500 shares as bonuses to employees, advisors, and supporters for services rendered.

On August  20, 2012 the Company issued 92,550 shares as bonuses to employees, advisors, and supporters for services rendered.
 
Stock Option Grants
 
We have not granted any stock options to our executive officer since our incorporation. 
  
ITEM 13.         CERTAIN RELATIONSHIPS AND RELATED TRANSACTION, AND DIRECTOR INDEPENDENCE

None.

ITEM 14.         PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees
 
This category includes the aggregate fees billed for professional services rendered for the audits of our financial statements for fiscal years 2012 and 2011, for the reviews of the financial statements included in our reports on Form 10-Q, and for services that are normally provided by the independent auditors in connection with statutory and regulatory filings or engagements for the relevant fiscal years.  Audit fees pertaining to services provided to the Company for the fiscal years ended December 31, 2012 and 2011, amount to $46,046 and $40,736.
 
 
16

 
 
Audit Related Fees

There were no fees for audit related services for the years ended December 31, 2012 and 2011.
  
Tax Fees
 
For the Company’s fiscal years ended December 31, 2012 and 2011, we were not billed for professional services rendered for tax compliance, tax advice, and tax planning.
 
All Other Fees
 
The Company did not incur any other fees related to services rendered by our principal accountant for the fiscal years ended December 31, 2012 and 2011.
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Effective May 6, 2003, the Securities and Exchange Commission adopted rules that require that before our auditor is engaged by us to render any auditing or permitted non-audit related service, the engagement be:

-approved by our audit committee; or

-entered into pursuant to pre-approval policies and procedures established by the audit committee, provided the policies and procedures are detailed as to the particular service, the audit committee is informed of each service, and such policies and procedures do not include delegation of the audit committee's responsibilities to management.

We do not have an audit committee.  Our entire board of directors pre-approves all services provided by our independent auditors.

The pre-approval process has just been implemented in response to the new rules. Therefore, our board of directors does not have records of what percentage of the above fees were pre-approved.  However, all of the above services and fees were reviewed and approved by the entire board of directors either before or after the respective services were rendered.
 
PART IV

ITEM 15.         EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
 
a) Documents filed as part of this Annual Report
 
1. Consolidated Financial Statements
 
2. Financial Statement Schedules
 
3. Exhibits
 
31.1 Certification of President, Chief Executive Officer, Chief Financial Officer, Chairman of the Board of Directors Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
   
32.1
Certification of President, Chief Executive Officer, Chief Financial Officer, Chairman of the Board of Directors Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 
17

 

SIGNATURES
 
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.

ENERGY & TECHNOLOGY CORP.
 
Dated:  March 28, 2013
 
By   /s/ George M. Sfeir                                                              
George M. Sfeir,
President,
Chief Executive Officer,

By   /s/ Amer T. Salhi                                                              
Amer T. Salhi,
Chief Financial Officer,
Secretary
 
By   /s/ Edmund J. Baudoin, Jr.                                                              
Edmund J Baudoin, Jr.,
Treasurer
 
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
 
Signature
 
Title
 
Date
         
/s/ George M. Sfeir
 
President,
 
March 28, 2013
George M. Sfeir
 
Chief Executive Officer,
Chief Financial Officer,
Principal Accounting Officer
   
 
Signature
 
Title
 
Date
         
/s/ Amer Salhi
 
Chief Financial Officer,
 
March 28, 2013
Amer T. Salhi
 
Secretary
   
         
 
 
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