Attached files
| file | filename |
|---|---|
| EX-31.1 - CERTIFICATION - ENERGY & TECHNOLOGY CORP. | f10q0313ex31i_energytech.htm |
| EX-32.1 - CERTIFICATION - ENERGY & TECHNOLOGY CORP. | f10q0313ex32i_energytech.htm |
| EXCEL - IDEA: XBRL DOCUMENT - ENERGY & TECHNOLOGY CORP. | Financial_Report.xls |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
FORM 10-Q
_______________
| x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2013
| o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Transition period from __________ to __________ .
ENERGY & TECHNOLOGY, CORP.
(Exact name of registrant as specified in Charter)
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DELAWARE
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333-143215
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26-0198662
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||
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(State or other jurisdiction of incorporation or organization)
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(Commission File No.)
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(IRS Employee Identification No.)
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Petroleum Towers, Suite 530
3639 Ambassador Caffery Blvd
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
| 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 of the Securities Act.
Yes o No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 14 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 Exchange Act during the preceding 12 months (or for such shorter period that the issuer 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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):
Large Accelerated Filer o Accelerated Filer o Non-Accelerated Filer o Smaller Reporting Company x
Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act.
Yes o No x
State the number of shares outstanding of each of the issuer’s classes of common equity, as of May 14, 2013: 169,144,950 shares of common stock.
ENERGY & TECHNOLOGY, CORP.
FORM 10-Q
March 31, 2013
INDEX
PART I—FINANCIAL INFORMATION
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Item 1.
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Financial Statements
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1 |
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Item 2.
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Management’s Discussion and Analysis of Financial Condition
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12 |
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Item 3
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Quantitative and Qualitative Disclosures About Market Risk
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16 |
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Item 4T.
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Control and Procedures
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16 |
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PART II—OTHER INFORMATION
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17 | |
| 17 | ||
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Item 1
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Legal Proceedings
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17 |
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Item 1A
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Risk Factors
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17 |
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Item 2.
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Unregistered Sales of Equity Securities and Use of Proceeds
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17 |
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Item 3.
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Defaults Upon Senior Securities
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17 |
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Item 4.
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Submission of Matters to a Vote of Security Holders
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17 |
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Item 5.
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Other Information
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17 |
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Item 6.
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Exhibits and Reports on Form 8-K
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17 |
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SIGNATURE
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18 | |
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 about Energy & Technology, Corp. (the “Company”) and our subsidiary, Technical Industries, Inc. (TII), and Energy Pipe, LLC (a variable interest entity), that are subject to risks and uncertainties. Forward-looking statements include information concerning future financial performance, business strategy, projected plans and objectives. Statements preceded by, followed by or that otherwise include the words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “may increase,” “may fluctuate” and similar expressions of future or conditional verbs such as “will,” “should,” “would,” and “could” are generally forward-looking in nature and not historical facts. Actual results may differ materially from those projected, implied, anticipated or expected in the forward-looking statements. Readers of this quarterly report should not rely solely on the forward-looking statements and should consider all uncertainties and risks throughout this report. The statements are representative only as of the date they are made. The Company, TII, and Energy Pipe, LLC (sometimes referred to herein on a consolidated basis as the Company, we, us, or similar phrasing) undertakes no obligation to update any forward-looking statement.
These forward-looking statements, implicitly and explicitly, include the assumptions underlying the statements and other information with respect to the Company's beliefs, plans, objectives, goals, expectations, anticipations, estimates, financial condition, results of operations, future performance and business, including management's expectations and estimates with respect to revenues, expenses, return on equity, return on assets, efficiency ratio, asset quality and other financial data and capital and performance ratios.
Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, these statements involve risks and uncertainties that are subject to change based on various important factors, some of which are beyond the control of the Company. The following factors, among others, could cause the Company's results or financial performance to differ materially from its goals, plans, objectives, intentions, expectations and other forward-looking statements:
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●
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general economic and industry conditions;
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●
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our capital requirements and dependence on the sale of our equity securities;
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●
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the liquidity of the Company’s common stock will be affected by the lack of a trading market;
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●
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industry competition;
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●
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shortages in availability of qualified personnel;
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●
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legal and financial implications of unexpected catastrophic events;
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●
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regulatory or legislative changes effecting the industries we serve; and
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●
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reliance on, and the ability to attract, key personnel.
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For a discussion of these and other risks and uncertainties that could cause actual results to differ from those contained in the forward-looking statements, see “Risk Factors” in the Company’s S-1 Report filed with the SEC, which is available on the SEC’s website at www.sec.gov. All forward-looking statements are qualified in their entirety by this cautionary statement, and the Company undertakes no obligation to revise or update this Quarterly Report on Form 10-Q to reflect events or circumstances after the date hereof. New factors emerge from time to time, and it is not possible for us to predict which factors, if any, will arise. In addition, the Company cannot assess the impact of each factor on the Company’s business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
PART I. Financial Information
ITEM 1. Financial Statements
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ENERGY & TECHNOLOGY, CORP.
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||||||||
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Consolidated Balance Sheets
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||||||||
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As of March 31, 2013 and December 31, 2012
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March 31,
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December 31,
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|||||||
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2013
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2012
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(Unaudited)
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(Audited)
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Assets
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Current Assets
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||||||||
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Cash and Cash Equivalents
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$ | 2,348,146 | $ | 2,879,195 | ||||
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Accounts Receivable
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Trade, Net of Allowance for Doubtful Accounts of $16,640 and $16,640 at March 31, 2013 and December 31, 2012, respectively
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209,217 | 197,158 | ||||||
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Other
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17,524 | 16,324 | ||||||
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Inventory
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2,377,202 | 2,878,085 | ||||||
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Prepaid Expenses
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106,505 | 99,001 | ||||||
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Deferred Tax Asset
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1,051,179 | 875,441 | ||||||
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Total Current Assets
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6,109,773 | 6,945,204 | ||||||
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Property and Equipment
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||||||||
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Held for Operations, Net of Accumulated Depreciation of 4,719,069 and $4,474,876 at March 31, 2013 and December 31, 2012, respectively
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4,337,210 | 4,581,403 | ||||||
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Held for Investment
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1,114,311 | 1,095,583 | ||||||
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Total Property and Equipment
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5,451,521 | 5,676,986 | ||||||
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Other Assets
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Patent, Net of Accumulated Amortization of $160,761 and $153,524 at March 31, 2013 and December 31, 2012, respectively
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414,995 | 422,191 | ||||||
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Deposits
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4,988 | 4,988 | ||||||
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Other Assets
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20,504 | 16,389 | ||||||
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Total Other Assets
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440,487 | 443,568 | ||||||
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Total Assets
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$ | 12,001,781 | $ | 13,065,758 | ||||
The accompanying notes are an Intergal part of these consolidated financial statements.
1
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ENERGY & TECHNOLOGY, CORP.
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Consolidated Balance Sheets
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As of March 31, 2013 and December 31, 2012
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March 31,
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December 31,
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|||||||
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2013
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2012
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(Unaudited)
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(Audited)
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Liabilities and Stockholders' Equity
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Current Liabilities
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Current Maturities of Notes Payable
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$ | 510,754 | $ | 491,557 | ||||
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Accounts Payable
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1,898,252 | 2,220,045 | ||||||
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Accrued Payroll and Payroll Liabilities
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50,504 | 62,348 | ||||||
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Accrued Rent
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1,825,000 | 1,787,500 | ||||||
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Income Taxes Payable
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34,502 | 41,342 | ||||||
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Total Current Liabilities
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4,319,012 | 4,602,792 | ||||||
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Long-Term Liabilities
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Notes Payable, Less Current Maturities
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293,207 | 405,422 | ||||||
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Deferred Taxes Payable
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747,854 | 811,025 | ||||||
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Due to Affiliates
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2,329,441 | 2,450,033 | ||||||
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Total Long-Term Liabilities
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3,370,502 | 3,666,480 | ||||||
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Total Liabilities
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7,689,514 | 8,269,272 | ||||||
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Stockholders' Equity
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Preferred Stock - $.001 Par Value; 10,000,000 Shares Authorized,
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None Issued
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- | - | ||||||
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Common Stock - $.001 Par Value; 250,000,000 Shares Authorized, 169,144,950
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Shares and 169,144,950 shares Issued and Outstanding at March 31,
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||||||||
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2013, and December 31, 2012, respectively
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169,145 | 169,145 | ||||||
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Discount on Common Stock
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(115,100 | ) | (115,100 | ) | ||||
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Paid-In Capital
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4,288,830 | 4,288,830 | ||||||
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Retained Earnings
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(30,608 | ) | 453,611 | |||||
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Total Stockholders' Equity
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4,312,267 | 4,796,486 | ||||||
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Total Liabilities and Stockholders' Equity
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$ | 12,001,781 | $ | 13,065,758 | ||||
The accompanying notes are an Intergal part of these consolidated financial statements.
2
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ENERGY & TECHNOLOGY, CORP.
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Consolidated Statements of Operations
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For the Three Months Ended March 31, 2013 and 2012
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Three Months Ended
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March 31,
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March 31,
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2013
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2012
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Revenues
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$ | 960,675 | $ | 3,438,678 | ||||
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Cost of Revenues
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Materials and Supplies
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535,853 | 1,754,757 | ||||||
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Subcontract Labor
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161,737 | 256,849 | ||||||
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Depreciation
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203,174 | 171,646 | ||||||
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Labor and Related Costs
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101,555 | 140,094 | ||||||
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Repairs and Maintenance
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10,057 | 150,627 | ||||||
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Insurance
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56,272 | 24,381 | ||||||
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Other Costs
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25,931 | 19,055 | ||||||
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Patent Amortization
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7,196 | 7,196 | ||||||
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Total Cost of Revenues
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1,101,775 | 2,524,605 | ||||||
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Gross Profit
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(141,100 | ) | 914,073 | |||||
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Operating Expenses
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||||||||
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Salaries and Wages
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108,564 | 133,466 | ||||||
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Taxes, Fees and Other
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0 | 57,907 | ||||||
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Professional Services
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207,043 | 98,752 | ||||||
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Rent
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49,780 | 59,616 | ||||||
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Depreciation
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41,019 | 41,140 | ||||||
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Travel, Lodging and Meals
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29,023 | 14,028 | ||||||
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Utilities
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12,936 | 33,699 | ||||||
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Office Supplies and Expenses
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26,696 | 16,699 | ||||||
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Communications
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11,045 | 12,799 | ||||||
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Other
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62,828 | 35,646 | ||||||
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Total Operating Expenses
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548,934 | 503,752 | ||||||
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Income (Loss) from Operations
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(690,034 | ) | 410,321 | |||||
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Other Income (Expense)
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||||||||
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Investment Income (Expense)
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7,407 | 4,316 | ||||||
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Interest (Expense)
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(40,501 | ) | (39,537 | ) | ||||
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Total Other Income (Expense)
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(33,094 | ) | (35,221 | ) | ||||
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Income (Loss) Before Provision for Income Taxes
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(723,128 | ) | 375,100 | |||||
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Provision for Income Taxes Expense (Benefit)
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(238,909 | ) | 125,952 | |||||
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Net Income (Loss)
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$ | (484,219 | ) | $ | 249,148 | |||
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Earnings (Loss) per Share - Basic
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NM
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NM
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||||||
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Earnings (Loss) per Share - Diluted
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NM
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NM
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||||||
The accompanying notes are an Intergal part of these consolidated financial statements.
3
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ENERGY & TECHNOLOGY, CORP.
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Consolidated Statements of Changes in Stockholders' Equity
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For the Year Ended December 31, 2012 and the Three Months Ended March 31, 2013
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Discount on
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Additional
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Total
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||||||||||||||||||||||
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Common Stock
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Capital
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Paid-In
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Retained
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Stockholders'
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||||||||||||||||||||
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Shares
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Amount
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Stock
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Capital
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Earnings
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Equity
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|||||||||||||||||||
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Balance at December 31, 2011
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169,052,400 | $ | 169,052 | $ | (115,100 | ) | $ | 4,229,195 | $ | 807,587 | $ | 5,090,734 | ||||||||||||
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Bonus shares issued
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92,550 | 93 | - | 59,635 | - | 59,728 | ||||||||||||||||||
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Net (Loss)
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- | - | - | - | (353,976 | ) | (353,976 | ) | ||||||||||||||||
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Balance at December 31, 2012
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169,144,950 | 169,145 | (115,100 | ) | 4,288,830 | 453,611 | 4,796,486 | |||||||||||||||||
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Net (Loss)
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- | - | - | - | (484,219 | ) | (484,219 | ) | ||||||||||||||||
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Balance at March 31, 2013
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169,144,950 | $ | 169,145 | $ | (115,100 | ) | $ | 4,288,830 | $ | (30,608 | ) | $ | 4,312,267 | |||||||||||
The accompanying notes are an Intergal part of these consolidated financial statements.
4
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ENERGY & TECHNOLOGY, CORP.
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Consolidated Statements of Cash Flows
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||||||||
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For the Three Months Ended March 31, 2013 and 2012
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Three Months Ended
|
||||||||
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March 31,
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March 31,
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|||||||
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2013
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2012
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Cash Flows from Operating Activities
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||||||||
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Net (Loss) Income
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$ | (484,219 | ) | $ | 249,148 | |||
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Adjustments to Reconcile Net Income to Net Cash Provided by
|
||||||||
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Operating Activities
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||||||||
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Depreciation
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244,193 | 212,786 | ||||||
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Amortization of Patent Costs
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7,196 | 7,196 | ||||||
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Deferred Income Taxes
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(238,909 | ) | 125,952 | |||||
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Changes in Assets and Liabilities
|
||||||||
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Trade Receivables
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(12,059 | ) | 824,549 | |||||
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Other Receivables
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(1,200 | ) | (750 | ) | ||||
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Inventory
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500,883 | (108,546 | ) | |||||
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Prepaid Expenses
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(7,504 | ) | 14,998 | |||||
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Accounts Payable
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(321,793 | ) | 1,385,144 | |||||
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Accrued Payroll and Payroll Liabilities
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(11,844 | ) | (5,376 | ) | ||||
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Income Taxes Payable
|
(6,840 | ) | - | |||||
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Accrued Rent
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37,500 | 37,500 | ||||||
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Net Cash Provided by (Used in) Operating Activities
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(294,596 | ) | 2,742,601 | |||||
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Cash Flows from Investing Activities
|
||||||||
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Increase (Decrease) in Other Assets
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(4,115 | ) | (1,422 | ) | ||||
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Purchase of Property and Equipment
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(18,728 | ) | (11,226 | ) | ||||
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Net Cash Provided by (Used in) Investing Activities
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(22,843 | ) | (12,648 | ) | ||||
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Cash Flows from Financing Activities
|
||||||||
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Borrowings from (Payments to) Affiliates
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(120,592 | ) | (28,317 | ) | ||||
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Proceeds from Notes Payable
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134,006 | - | ||||||
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Payments on Notes Payable
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(227,024 | ) | (68,490 | ) | ||||
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Net Cash Provided by (Used in) Financing Activities
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(213,610 | ) | (96,807 | ) | ||||
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Net Increase (Decrease) in Cash and Cash Equivalents
|
(531,049 | ) | 2,633,146 | |||||
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Cash and Cash Equivalents, Beginning of Year
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2,879,195 | 943,894 | ||||||
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Cash and Cash Equivalents, End of Year
|
$ | 2,348,146 | $ | 3,577,040 | ||||
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Supplemental Disclosure of Cash Flow Information
|
||||||||
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Cash Paid During the Period for Interest
|
$ | 6,737 | $ | 8,273 | ||||
|
Cash Paid During the Period for Income Taxes
|
$ | - | $ | - | ||||
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Stock Issued for Services
|
$ | - | $ | - | ||||
The accompanying notes are an Intergal part of these consolidated financial statements.
5
ENERGY & TECHNOLOGY, CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
Note 1. Organization
Technical Industries & Energy, Corp. (the Company) (TIE) 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, TIE had no assets, operations, or cash flows. As such, the stock had no value at the time TIE 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 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, 2008, 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 subsidiary, Technical Industries, Inc., and the accounts of Energy Pipe, LLC (a variable interest entity). All significant intercompany balances and transactions have been eliminated.
The consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of financial information for the interim periods presented. These adjustments are of a normal recurring nature and include appropriate estimated provisions.
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: a) pipe is delivered and the customer takes ownership and assumes the risks of loss, b) collection of the relevant receivable is probable, c) persuasive evidence of an arrangement exists, and d) 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 history with customers and their current financial condition. Provisions for uncollectible amounts are determined based on management’s estimate of collectability
6
ENERGY & TECHNOLOGY, CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
Note 2. Summary of Significant Accounting Policies (Continued)
Inventory
Inventory is stated at the lower of cost determined by the average cost or market. At March 31, 2013 and at December 31, 2012, 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 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 the 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. For the three months ended March 31, 2013, three customers made up approximately 52% of the Company’s revenues, and five customers made up approximately 70% of the Company’s receivable balance at March 31, 2013. For the three months ended March 31, 2012, four customers made up approximately 77% of the Company’s revenues, and two customers made up approximately 80% of the Company’s receivable balance at March 31, 2012.
The Company maintains cash balances at several financial institutions, and 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. For the quarters ending March 31, 2013 and 2012 $1,619 and $0, respectively, was expensed.
Cash and Cash Equivalents
For purposes of the consolidated statement 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
The Company recognizes income taxes in accordance with FASB ASC 740, “Income Taxes” (formerly Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes). ASC 740 uses the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred income taxes are recognized for the tax consequences of “temporary differences” by applying enacted statutory tax rates applicable to future years to the difference between financial statement carrying amounts and the tax basis of existing assets and liabilities. Deferred taxes are also recognized for operating losses and tax credits that are available to offset future income taxes.
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.
7
ENERGY & TECHNOLOGY, CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
Note 2. Summary of Significant Accounting Policies (Continued)
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. As of March 31, 2013 and December 31, 2012 management does not believe it has taken any tax positions that would not be sustained upon examination.
Comprehensive Income
The Company had no components of comprehensive income. Therefore, net income (loss) equals comprehensive income (loss) for the periods presented.
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.
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.
8
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 drilling pipe 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 is being amortized over 20 years. Amortization expense for 2012 and 2011 was $7,196 and $7,196, respectively.
Note 4. Property and Equipment
Property and equipment consists of the following at March 31, 2013 and December 31, 2012, respectively:
|
2013
|
2012
|
|||||||
|
Buildings and Improvements
|
3,042,385 | $ | 3,042,385 | |||||
|
Equipment
|
5,747,749 | 5,747,749 | ||||||
|
Autos and Trucks
|
248,394 | 248,394 | ||||||
|
Office Furniture
|
17,751 | 17,751 | ||||||
| 9,056,279 | 9,056,279 | |||||||
|
Less: Accumulated Depreciation
|
(4,719,069 | ) | (4,474,876 | ) | ||||
|
Total
|
$ | 4,337,210 | $ | 4,581,403 | ||||
Depreciation expense amounted to $244,193 and $212,786 for the three months ended March 31, 2013 and 2012, respectively.
Note 6. Notes Payable
Notes payable at March 31, 2013 and December 31, 2012 consist of the following:
|
2013
|
2012
|
|||||||
|
Imperial Credit Corp, Insurance, $96,213 note dated January 18, 2013, due October 18, 2013 payable in monthly installments of $13,754, interest rate 6.99%, secured by insurance.
|
94,070 | 77,475 | ||||||
|
|
||||||||
|
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.
|
70,117 | 83,892 | ||||||
|
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.
|
125,524 | 145,899 | ||||||
|
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.
|
115,031 | 131,275 | ||||||
9
|
2013
|
2012
|
|||||||
|
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.
|
29,800 | 32,048 | ||||||
|
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.
|
13,961 | 14,807 | ||||||
|
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 Hyundai Milling Machine
|
355,458 | 411,583 | ||||||
| 803,961 | 896,979 | |||||||
|
Less: Current Portion
|
510,754 | 491,557 | ||||||
|
Long-Term Portion
|
$ | 293,907 | $ | 405,422 | ||||
Following are maturities of long-term debt at December 31, 2012:
|
Fiscal Year Ending
December 31,
|
Amount
|
||||
|
|
|||||
|
2013
|
$ | 398,539 | |||
|
2014
|
374,766 | ||||
|
2015
|
30,656 | ||||
|
Total
|
$ | 803,961 | |||
Note 6. Related Party Transactions
Included in due to affiliates is $1,688,253 and $1,722,013 at March 31, 2013 and December 31, 2012, 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 $33,765 and $31,264 for the three month periods ended March 31, 2013 and 2012, respectively.
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 March 31, 2013 and December 31, 2012, there were 169,144,250 and 169,144,250 shares issued and outstanding, respectively.
The Company is authorized to issue 10,000,000 shares of preferred stock. As of March 31, 2013 and December 31, 2012, there were no shares issued and outstanding.
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 7. Earnings per Share
The weighted average common shares outstanding amounted to 169,144,950 and 169,052,400 for the three months ended March 31, 2013 and March 31, 2012, respectively.
Note 8. Commitments
The Company leases office premises, operating facilities, and equipment under several operating leases expiring in various years through 2030. The Company also leases land for operating purposes on a month to month basis.
10
Note 9. Major Customers
For the three months ended March 31, 2013, the Company had three customers which generated revenues in excess of 10% of the Company’s total revenues. Revenues for these three customers were approximately 52% of total revenues, and the total balance due from these three customers at March 31, 2013 was $34,856, of which none was included in the allowance for bad debts.
Note 10. Fair Value Disclosures
The following methods and assumptions were used by the Company in estimating fair values for financial instruments:
Cash and cash equivalents: The carrying amount reported in the balance sheet approximates fair value.
Notes Payable: The fair value of notes payable approximates the carrying amount reported in the balance sheet.
Due to Affiliates: The carrying amount approximates fair values.
While these estimates of fair value are based on management's judgment of appropriate factors, there is no assurance that if the Company had disposed of such items at March 31, 2013 or December 31, 2012, the estimated fair values would have been achieved. Market values may differ depending on various circumstances not taken into consideration in this methodology. The estimated fair values at March 31, 2013 and December 31, 2012, should not necessarily be considered to apply at subsequent dates.
In addition, other assets and liabilities that are not defined as financial instruments are not included in the following disclosures, such as property and equipment. The estimated fair values of the Company's financial instruments are as follows:
|
March 31, 2013
|
December 31, 2012
|
|||||||||||||||
|
Carrying
|
Fair
|
Carrying
|
Fair
|
|||||||||||||
|
Amount
|
Value
|
Amount
|
Value
|
|||||||||||||
|
Financial assets:
|
||||||||||||||||
|
Cash and cash equivalents
|
$
|
2,348,146
|
$
|
2,348,146
|
$
|
2,879,195
|
$
|
2,879,195
|
||||||||
|
Financial liabilities:
|
||||||||||||||||
|
Notes Payable
|
$
|
803,961
|
$
|
803,961
|
$
|
896,979
|
$
|
896,979
|
||||||||
|
Due to Affiliates
|
2,329,441
|
2,329,441
|
2,450,033
|
2,450,033
|
||||||||||||
|
$
|
3,133,402
|
$
|
3,133,402
|
$
|
3,347,012
|
$
|
3,347,012
|
|||||||||
Note 11. Subsequent Events
In accordance with the subsequent events topic of the FASB ASC, Topic No. 855, “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 date are recognized in the financial statements as of March 31, 2013. In preparing these financial statements, the Company evaluated the events and transactions through the date these financial statements were issued.
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
Headquartered in Lafayette, Louisiana, with production facilities in Houston, Texas and Abbeville, Louisiana, Energy & Technology, Corp. provides non-destructive testing (NDT) services, OCTG and oilfield pipe sales, service and storage, and rig and equipment sales. Originally founded on May 11, 1971 as an inspection company, Energy & Technology, Corp. currently serves customers throughout the oil patch of Louisiana and Texas as well as in Canada, Mexico, and in the Gulf of Mexico. The Company’s customer base of over 150 accounts consists of major oil companies, steel mills, material suppliers, drilling companies, tool rental companies, and natural gas storage operators. Due to the nature of its technology, the Company maintains competitive advantages in offshore deep water and other onshore critical projects.
Technical Industries, Inc., a wholly owned subsidiary of Energy & Technology, Corp., manufactures its own proprietary NDT equipment. The Company’s patented ultrasonic systems have some of the largest OD and pipe length capabilities in the industry and the deepest penetration capability offered for wall thickness measurement. The Company holds patents on certain exclusive inspection technology that allows oil and gas companies to use their current drill strings and other equipment to reach depths that were previously unreachable. This technology can make wells safer, increase the success rate for critical wells, and greatly reduce the chances of a failure. As the industry moves to ever deeper reserves and makes advances in horizontal drilling, oil and gas wells are becoming more and more expensive and difficult to drill, making this technology more of a necessity.
In the oilfield pipe sales and storage segment, Energy & Technology, Corp utilizes a state-of-the-art web based inventory management system that allows each client to view and track projects during processing, to locate inventory throughout the plant, and access reports, bill of ladings, tally sheets, logs and other required information.
Energy Technology Manufacturing & Threading, LLC’s new facility has been completed and is fully operational. This facility is capable of threading, bucking, and repair of drill pipe, casing, and tubing up to 11 7/8” diameter. The plant is equipped with saws, bucking units, material handling units, and computer controlled lathes accurate to within the most critical of tolerances, and has the capability to manufacture, thread, repair, and manufacture pup joints and marker joints to any length the customer requires, as well as to machine any threads for which specs can be furnished. Technicians have between 10 and 34 years of experience in the manufacturing and threading industry. This new facility brings ENGT one step closer to its goal of supplying all tubular services under one roof.
Key Ongoing Operational Processes:
Update ISO Certification
Energy & Technology, Corp. recognizes that quality is every bit as important as price and prompt service. This is even truer of the Company’s typical client, who often contracts for services that other companies are not able to provide. In response to our client’s requirements, the Company has obtained the latest ISO:9001 certification by Moody’s, recognized in the industry as representing the highest quality control available. As the Company’s business lines are very synergistic, management feels that it can leverage this dominant position to increase share in the markets in which it competes, and likely more in the critical service arena.
Foreign Trade Zone Status
Energy & Technology, Corp. has selected the well known auditing and financial consulting firm KPMG to assist the Company in meeting the requirements to establish a Foreign Trade Zone at its Houston, Texas facility. KPMG has started the initial feasibility analysis with the formal application to follow. The establishment of a Foreign Trade Zone is expected to produce a substantial increase in the Company’s ability to sell to overseas markets, and make the Company a far more attractive distribution partner for foreign manufacturers. Management feels that market share could be taken through a successful designation as an FTZ subzone.
Increased Sales and Marketing Effort
Energy & Technology, Corp. has grown over the historical period without an aggressive marketing and sales effort. New business was generated from referrals, technical sessions given to oil and gas and industry related companies, the Company website, and through the use of a marketing company on a limited basis. Recently, several new deep water well permits were issued in the Gulf of Mexico. As a result, ENGT has experienced significant new interest from major oil and gas companies - including site visits and evaluations - for its VisonArray™ deep water and critical well technologies, and ENGT Manufacturing facilities. Currently, there are several employees whose duties are focused on sales, and one marketing and promotional activity director. Management believes revenue can be greatly increased by expanding the Company's sales force. ENGT has added Rachel Shen, who holds an MBA from the University of Texas, to execute marketing from our Houston location, and Charlotte Crosswhite to assist in Louisiana in-house sales.
12
Diversification
Energy & Technology, Corp. has diligently worked to diversify its business model by adding sales, service, and storage of OCTG and all types of oilfield pipe and equipment leasing and sales. The Company’s new manufacturing, threading and repair facility, located on our Houston campus, became operational during the end of the second quarter of 2010 and on September 30, 2011 received numerous ISO and API certifications. Additional growth will come domestically, and through acquisition and intercompany growth, but management feels that overseas expansion is necessary.
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 cost determined by the specific identification method or market. At March 31, 2013, 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, pursuant to the provisions of SFAS Financial Accounting Standards Board (FASB) ASC 360-10-35. 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, 2012 to March 31, 2013
At March 31, 2013, total assets amounted to $12,001,781 compared to $13,065,758 at December 31, 2012, a decrease of $1,063,977 or 8.1%. The decrease is primarily due to a decrease in cash of $531,049, a decrease in inventory of $500,883, and a decrease in property held for operations of $244,193, partially offset by an increase in deferred tax asset of $175,738.
Our liabilities at March 31, 2013, totaled $7,689,514 compared to $8,269,272 at December 31, 2012, a decrease of $579,758 or 14.2%. The decrease is primarily due to a decrease in accounts payable of $321,793, a decrease in notes payable of $93,018, a decrease in due to affiliates of $120,592, and a decrease in deferred taxes payable of $63,171, partially offset by the increase in accrued rent of $37,500.
Total stockholder’s equity decreased from $4,796,486 at December 31, 2012, to $4,312,267 at March 31, 2013. This decrease was due to the net loss for the quarter.
Cash and Cash Equivalents
Cash and Cash Equivalents totaled $2,348,146 at March 31, 2013, a decrease of $531,049 from the balance of $2,879,195 at December 31, 2012. The decrease in cash and cash equivalents was primarily due to our loss of $484,219 resulting in a use of cash by operations of $294,596 and our net reduction of long term debt of $213,210.
13
Inventory
We began purchasing pipe for sale to customers in December, 2007. This was an opportunity for us to expand our services to our customers. It is anticipated that the Company will continue its efforts to expand its sales of pipe, even though the market has contracted substantially due to the current economy.
Property and Equipment
The decrease in property and equipment is primarily due to the depreciation for the three months ended March 31, 2013 of $244,193.
Deferred Tax Asset/Income Taxes Payable
Due to the Company’s loss for the three months ended March 31, 2013, our deferred tax asset was increased by $175,738. We have decreased our deferred income tax liability by $63,171 due to the change in book and tax depreciation differences.
Accounts Payable
Accounts payable at March 31, 2013 totaled $1,898,252 compared to $2,220,045 at December 31, 2012, a decrease of $321,793 due primarily to the pay down of trade creditors
Discussion of Results of Operations for the Three Months Ended March 31, 2013 compared to the Three Months Ended March 31, 2012
Revenues
Our revenue for the three months ended March 31, 2013, was $960,975 compared to $3,438,678 for the three months ended March 31, 2012, a decrease of $2,478,003 or 72.1%. The decrease is attributable primarily to the decline in pipe sales and inspection services.
The following table presents the composition of revenue for the three months ended March 31, 2012 and 2011:
|
2013
|
2012
|
Variance
|
||||||||||||||||||
|
Revenue:
|
Dollars
|
Percentage
|
Dollars
|
Percentage
|
Dollars
|
|||||||||||||||
|
Inspection Fees
|
$
|
167,090
|
17.4
|
%
|
$
|
1,102,330
|
32.1
|
%
|
$
|
(935,240
|
)
|
|||||||||
|
Storage Fees
|
$
|
143,383
|
14.9
|
%
|
$
|
87,088
|
2.5
|
%
|
$
|
56,295
|
||||||||||
|
Pipe and Other Equipment Sales
|
$
|
518,752
|
54.0
|
%
|
$
|
1,947,195
|
56.6
|
%
|
$
|
(1,428,443
|
)
|
|||||||||
|
Other Income
|
$
|
131,450
|
13.7
|
%
|
$
|
302,065
|
8.8
|
%
|
$
|
(170,605
|
)
|
|||||||||
|
Total Revenue
|
$
|
960,675
|
100.0
|
%
|
$
|
3,438,678
|
100.0
|
%
|
$
|
(2,478,003
|
)
|
|||||||||
Our cost of revenue for the three months ended March 31, 2013, was $1,101,725 or 114.7% of revenues, compared to $2,524,605, or 73.4% of revenues, for the three months ended March 31, 2012. The overall increase in our cost of revenue is primarily due to decline and mixture of sales. Fix cost for depreciation and labor remain consistent despite the decline in sales.
The following table presents the composition of cost of revenue for the three months ended March 31, 2013 and 2012:
|
2013
|
2012
|
Variance
|
||||||||||||||||||
|
Cost of Revenue
|
Dollars
|
Percentage
|
Dollars
|
Percentage
|
Dollars
|
|||||||||||||||
|
Materials and Supplies
|
$
|
535,853
|
49.0
|
%
|
$
|
1,754,757
|
69.7
|
%
|
$
|
(1,218,904
|
)
|
|||||||||
|
Subcontract Labor
|
$
|
161,737
|
14.8
|
%
|
$
|
256,849
|
10.2
|
%
|
$
|
(95,112
|
)
|
|||||||||
|
Depreciation
|
$
|
203,174
|
18.6
|
%
|
$
|
171,646
|
6.8
|
%
|
$
|
31,528
|
||||||||||
|
Repairs and Maintenance
|
$
|
10,057
|
0.9
|
%
|
$
|
150,627
|
6.0
|
%
|
$
|
(140,570
|
)
|
|||||||||
|
Labor and Related Costs
|
$
|
101,555
|
9.3
|
%
|
$
|
140,094
|
5.6
|
%
|
$
|
(38,539
|
)
|
|||||||||
|
Insurance
|
$
|
56,272
|
5.1
|
%
|
$
|
24,381
|
1.0
|
%
|
$
|
31,891
|
||||||||||
|
Other Costs
|
$
|
33,127
|
2.3
|
%
|
$
|
26,251
|
0.8
|
%
|
$
|
6,876
|
||||||||||
|
Total Costs of Revenues
|
$
|
1,101,775
|
100.0
|
%
|
$
|
2,524,605
|
100.0
|
%
|
$
|
(1,422,830
|
)
|
|||||||||
14
Due to limitations with the pool of qualified individuals, we utilized the services of subcontractors to assist us in providing timely and quality service to our customers. We will continue our efforts to attract employ and retain qualified individuals to serve the needs of our customers.
Operating Expenses
For the three months ended March 31, 2013, our operating expenses totaled $548,934 as compared to $503,752 in 2012, representing an increase of $45,182, or 8.8%. The largest components of our operating expenses for 2013 consist of salaries and wages, professional fees, rent, property taxes, and depreciation expense. Salaries and wages for general and administrative personnel was $108,564 for the three months ended March 31, 2013, compared to $133,466 for the three months ended March 31, 2012, a decrease of $24,903, or 18.7%. During the three months ended March 31, 2012, the Company did not issue any shares of common stock. During the three months ended March 31, 2013, the Company did not issue any shares of common stock.
Professional services expense increased from $98,752 for the three months ended March 31, 2012, to $207,043 for the three months ended March 31, 2013, an increase of $108,291, or 109.7%. The increase is primarily a result of increased accounting, auditing, and legal fees, resulting from issues relating to settlement of a lawsuit regarding pipe, and the associated issues with reporting these transactions.
Rent expense totaled $49,780 for the three months ended March 31, 2013, as compared to $59,616 for the three months ended March 31, 2012, a decrease of $9,836, or 16.5%. Rent expense decreased due to the decrease in rent for the Company’s Lafayette office. Rent expense for both the three months ended March 31, 2013, and for the three months ended March 31, 2012, 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.
Remaining operating expenses increased from $219,213 for the three months ended March 31, 2012 to $190,745 for the three months ended March 31, 2013, an increase of $28,369, or 13.0%. Other operating expenses consist primarily of property taxes, depreciation, office expenses, sales, and travel expenses.
Other Income and Expense
Other income and expense consists of investment income, and interest expense. Investment income, which consists of interest, dividends, realized gains and losses, and unrealized gains and losses, amounted to a gain of $7,407 for the three months ended March 31, 2013, compared to income of $4,316 for the three months ended March 31, 2012.
Interest expense totaled $40,502 for the three months ended March 31, 2013, as compared to $39,837 for the three months ended March 31, 2012, an increase of $965, or 2.4%. Interest expense pertains to amounts due to affiliates as well as to our notes payable with third parties.
Provision for income taxes
For the three months ended March 31, 2013, we reported an income tax benefit of $238,909 compared to income tax expense of $125,952 for the three months ended March 31, 2012, a difference of $364,861 or 289.7% which is the result of the a net loss for the quarter ended March 31, 2013 and a profit for the quarter ended March 31, 2012.
15
Comparative financial information for the first quarters ending March 31:
|
March
|
March
|
March
|
March
|
March
|
||||||||||||||||
|
31, 2013
|
31, 2012
|
31, 2011
|
31, 2010
|
31, 2009
|
||||||||||||||||
|
Revenues, for the first quarter
|
$
|
960,675
|
$
|
3,438,678
|
$
|
180,732
|
$
|
888,659
|
$
|
2,446,072
|
||||||||||
|
Cost of Revenues
|
1,101,775
|
2,524,605
|
520,867
|
656,736
|
1,133,015
|
|||||||||||||||
|
Gross Profit (Loss)
|
(141,100
|
)
|
914,073
|
(340,135
|
)
|
231,923
|
1,313,057
|
|||||||||||||
|
Operating Expenses:
|
||||||||||||||||||||
|
General & Administrative Expenses
|
507,915
|
462,612
|
339,098
|
560,768
|
429,800
|
|||||||||||||||
|
Depreciation
|
41,019
|
41,140
|
40,952
|
30,263
|
36,733
|
|||||||||||||||
|
Total Operating Expenses
|
548,934
|
503,752
|
380,050
|
591,031
|
466,533
|
|||||||||||||||
|
Income (Loss) from Operations
|
(690,034
|
)
|
410,321
|
(720,185
|
)
|
(359,108
|
)
|
846,524
|
||||||||||||
|
Other Income (Expense)
|
(33,095
|
)
|
(35,221
|
)
|
(38,908
|
)
|
444,386
|
(22,560
|
)
|
|||||||||||
|
Income Before Income Taxes
|
(723,128
|
)
|
375,100
|
(759,093
|
)
|
85,278
|
823,964
|
|||||||||||||
|
Provision for Income Taxes
|
(238,909
|
)
|
125,952
|
(263,454
|
)
|
33,125
|
291,652
|
|||||||||||||
|
Net Income(Loss)
|
$
|
(484,219
|
)
|
$
|
249,148
|
$
|
(495,639
|
)
|
$
|
52,153
|
$
|
532,312
|
||||||||
Capital Resources and Liquidity
As of March 31, 2013 we had $2,348,146 in cash and cash equivalents. Our cash outflows have consisted primarily of expenses associated with our operations, and the construction on our Houston facility. These outflows have been offset by the timely inflows of cash from our customers regarding sales that have been made. 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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company is subject to certain market risks, including changes in interest rates and currency exchange rates. The Company does not undertake any specific actions to limit those exposures.
Item 4. Controls and Procedures
a) Evaluation of Disclosure Controls. Our management evaluated the effectiveness of our disclosure controls and procedures as of the end of our first fiscal quarter 2012 pursuant to Rule 13a-15(b) of the Securities and Exchange Act. Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, as appropriate to allow timely decisions regarding required disclosure. Based on the evaluation, management concluded that our disclosure controls and procedures were effective as of March 31, 2013.
It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
(b) Changes in internal control over financial reporting. There have been no changes in our internal control over financial reporting that occurred during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
16
PART II - OTHER INFORMATION
Item 1. 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 1A. Risk Factors.
None.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None
Item 6. Exhibits and Reports of Form 8-K.
(a) Exhibits
|
31.1
|
Certifications pursuant to Section 302 of Sarbanes Oxley Act of 2002
|
|
32.1
|
Certifications pursuant to Section 906 of Sarbanes Oxley Act of 2002
|
(b) Reports of Form 8-K
None.
Item 7. Up-dates and Clarifications to prior non-financial information
None
17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
ENERGY & TECHNOLOGY CORP.
|
|||
|
Date: May 13, 2013
|
By:
|
/s/ George M. Sfeir
|
|
|
George M. Sfeir
|
|||
|
President, Chief Executive Officer,
and Director
|
|||
|
Date: May 13, 2013
|
By:
|
/s/ Amer Salhi
|
|
|
Amer Salhi
|
|||
|
Chief Financial Officer
|
|||
18