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 June 30, 2010
 
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)
 
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)

334- 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 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 Filero       Smaller Reporting Companyx
 
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
 
According to the Company’s only transfer agent of record, Olde Monmouth Stock Transfer Agent’s latest records, the number of shares outstanding of each of the Company’s classes of common equity, as of August 13, 2010, is 53,689,500 shares of common stock.   
 
 
 
 
 
ENERGY & TECHNOLOGY, CORP.
 
FORM 10-Q
 
June 30, 2010
 
INDEX
 
PART I—FINANCIAL INFORMATION
 
Item 1.
Financial Statements
  1
Item 2.
Management’s Discussion and Analysis of Financial Condition
  11
Item 3
Quantitative and Qualitative Disclosures About Market Risk
  16
Item 4T.
Control and Procedures
  16
 
PART II—OTHER INFORMATION
 
 Item 1
Legal Proceedings
  17
 Item 1A
Risk Factors
  17
 Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
  17
 Item 3.
Defaults Upon Senior Securities
  18
 Item 4.
Submission of Matters to a Vote of Security Holders
  18
 Item 5.
Other Information
  18
 Item 6.
Exhibits and Reports on Form 8-K
  18
 
SIGNATURE
 
 
 
 
 
INTRODUCTORY NOTE

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:

·  
general economic and industry conditions;
·  
our capital requirements and dependence on the sale of our equity securities;
·  
the liquidity of the Company’s common stock will be affected by the lack of a trading market;
·  
industry competition;
·  
shortages in availability of qualified personnel;
·  
legal and financial implications of unexpected catastrophic events;
·  
regulatory or legislative changes effecting the industries we serve; and
·  
reliance on, and the ability to attract, key personnel.

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

ENERGY & TECHNOLOGY, CORP.
            
Consolidated Balance Sheets
            
             
             
   
June 30,
    
December 31,
  
   
2010
    
2009
  
   
(Unaudited)
    
(Audited)
  
Assets
            
Current Assets
            
  Cash and Cash Equivalents   $ 1,394,476     $ 1,657,330  
  Accounts Receivable                
  Trade, Net     428,941       1,067,037  
  Other     20,438       23,246  
  Inventory     3,696,780       5,563,557  
  Prepaid Expenses     25,383       52,150  
  Deferred Tax Asset   120,525       73,511  
                 
  Total Current Assets     5,686,543       8,436,831  
                 
Property and Equipment, Net
     6,369,664       6,817,040  
                 
Other Assets
                
  Patent, net     537,442       508,548  
  Deferred IPO Expenses     72,520       72,520  
  Deposits     4,988       4,988  
  Other Assets     700       43,414  
                 
  Total Other Assets     615,650       629,470  
                 
  Total Assets   $ 12,671,857     $ 15,883,341  
 
                
Liabilities and Stockholders' Equity
                
Current Liabilities
                
  Current Maturities of Notes Payable   $ 194,381     $ 178,553  
  Accounts Payable     176,869       3,345,076  
  Accrued Payroll and Payroll Liabilities     61,403       65,917  
  Accrued Rent     1,412,500       1,337,500  
  Customer Deposits     551,075       551,075  
  Income Taxes Payable     65,814       46,318  
                 
  Total Current Liabilities     2,462,042       5,524,439  
                 
Long-Term Liabilities
                
  Notes Payable     645,592       508,451  
  Deferred Taxes Payable     1,184,040       1,343,432  
  Due to Affiliates     1,794,690       1,765,692  
                 
  Total Long-Term Liabilities     3,624,322       3,617,575  
                 
Stockholders' Equity
                
    Preferred Stock - $.001 Par Value; 10,000,000 Shares Authorized,                
    None Issued     -       -  
    Common Stock - $.001 Par Value; 250,000,000 Shares Authorized,                
    53,668,000 Shares and 53,580,000 shares Issued and Outstanding at June 30, 2010 and                
    December 31, 2009, respectively, with 196,332,000 Shares and 196,420,000 Shares                
    unissued at June 30, 2010 and December 31, 2009, respectively     53,668       53,580  
  Paid-In Capital     4,207,064       4,112,112  
  Retained Earnings     2,324,761       2,575,635  
                 
  Total Stockholders' Equity     6,585,493       6,741,327  
                 
  Total Liabilities and Stockholders' Equity   $ 12,671,857     $ 15,883,341  

See notes to consolidated financial statements.
 
 
1
 

 
ENERGY & TECHNOLOGY, CORP.
                        
Consolidated Statements of Operations
                        
(Unaudited)
                        
   
Three Months Ended June 30,
    
Six Months Ended June 30,
  
   
2010
    
2009
    
2010
    
2009
  
                         
                         
Revenues
   $ 715,407     $ 2,237,591     $ 1,604,066     $ 4,683,663  
Cost of Revenues
                                
Labor and Related Costs
     123,620       415,648       294,872       787,450  
Subcontract Labor
     161,192       196,124       330,596       408,389  
Depreciation
     210,305       164,479       430,887       340,176  
Repairs and Maintenance
     4,902       83,273       23,356       156,855  
Materials and Supplies
     12,183       36,459       28,423       91,127  
Other Costs
     26,433       137,296       61,077       350,073  
Insurance
     29,109       41,641       60,595       73,865  
Patent Amortization
     7,197       7,197       14,393       7,197  
                                 
Total Cost of Revenues
     574,941       1,082,117       1,244,199       2,215,132  
                                 
Gross Profit
     140,466       1,155,474       359,867       2,468,531  
                                 
Operating Expenses
                                
Salaries and Wages
     242,043       270,318       557,245       469,014  
Professional Services
     121,746       80,575       196,423       150,719  
Rent
     65,774       81,794       132,496       149,196  
Depreciation
     8,793       52,489       26,534       89,222  
Travel, Lodging and Meals
     59,168       24,083       90,327       32,339  
Office Supplies and Expenses
     14,446       35,608       29,798       54,543  
Utilities
     9,283       5,653       21,524       30,853  
Communications
     12,076       17,634       22,847       30,454  
Repairs and Maintenance
     23,182       26,858       31,650       33,242  
Other
     50,550       24,483       76,726       46,446  
                                 
Total Operating Expenses
     607,061       619,495       1,185,570       1,086,028  
                                 
Income (Loss) from Operations
     (466,595 )     535,979       (825,703 )     1,382,503  
                                 
Other Income (Expense)
                                
Other Income
     -       -       475,323       -  
Gain (Loss) on Sale of Assets
     23,248       (575 )     23,676       (575 )
Investment Income
     3,572       1,985       8,212       3,243  
Interest Expense
     (36,965 )     (25,309 )     (72,970 )     (49,127 )
                                 
Total Other Income (Expense)
     (10,145 )     (23,899 )     434,241       (46,459 )
                                 
Income (Loss) Before Provision for Income Taxes
     (476,740 )     512,080       (391,462 )     1,336,044  
                                 
Provision for Income Taxes
     (173,713 )     200,882       (140,588 )     492,534  
                                 
Net Income (Loss)
   $ (303,027 )   $ 311,198     $ (250,874 )   $ 843,510  
                                 
Earnings (Loss) per Share - Basic
   $ (0.006 )   $ 0.03     $ (0.005 )   $ 0.01  
                                 
Earnings (Loss) per Share - Diluted
   $ (0.006 )   $ 0.03     $ (0.005 )   $ 0.01  

See notes to consolidated financial statements.
 
 
2
 
 
ENERGY & TECHNOLOGY CORP.
                                    
Consolidated Statements of Changes in Stockholders' Equity
                    
                                     
                                     
   
Common Stock
                          
               
Discount on
    
Additional
          
Total
  
               
Capital
    
Paid-In
    
Retained
    
Stockholders'
  
   
Shares
    
Amount
    
Stock
    
Capital
    
Earnings
    
Equity
  
                                     
Balance at January 1, 2009
     175,100,000     $ 175,100     $ (125,000 )   $ 180,375     $ 2,229,574     $ 2,460,049  
                                                 
 Cancellation of Shares-Majority Shareholders
     (165,100,000 )     (165,100 )     125,000       40,100       -       -  
                                                 
Net Income
     -       -       -       -       843,510       843,510  
                                                 
Balance at June 30, 2009
     10,000,000     $ 10,000     $ -     $ 220,475     $ 3,073,084     $ 3,303,559  
                                                 
Balance at January 1, 2010
     53,580,000     $ 53,580     $ -     $ 4,112,112     $ 2,575,635     $ 6,741,327  
                                                 
 Bonus shares issued
     88,000       88       -       94,952       -       95,040  
                                                 
 Net (Loss)
     -       -       -       -       (250,874 )     (250,874 )
                                                 
Balance at June 30, 2010
     53,668,000     $ 53,668     $ -     $ 4,207,064     $ 2,324,761     $ 6,585,493  
 
See notes to consolidated financial statements.
 
 
3
 
 
ENERGY & TECHNOLOGY, CORP.
            
Consolidated Statements of Cash Flows
            
For the Six Months Ended June 30, 2010 and 2009
            
             
             
   
2010
    
2009
  
Cash Flows from Operating Activities
            
Net (Loss) Income   $ (250,874 )   $ 843,510  
Adjustments to Reconcile Net Income to Net Cash Provided by                
Operating Activities                
Depreciation     457,421       415,005  
Amortization of Patent Costs     14,393       14,393  
Gain on Sale of Property and Equipment     (23,248 )     -  
Deferred Income Taxes     (206,406 )     214,776  
Issuance of Stock     95,040       -  
Changes in Assets and Liabilities                
Trade Receivables     638,096       (346,764 )
Other Receivables     2,808       193  
Inventory     1,866,777       -  
Prepaid Expenses     26,767       48,979  
Accounts Payable     (3,168,207 )     (502,669 )
Accrued Payroll and Payroll Liabilities     (4,514 )     (38,569 )
Income Taxes Payable     19,496       211,611  
Accrued Rent     75,000       75,000  
                 
Net Cash Provided by (Used in) Operating Activities     (457,451 )     935,465  
                 
Cash Flows from Investing Activities
                
Increase in Other Assets     42,714       (19,772 )
Increase in Patent Costs     (43,287 )     -  
Sale of Property and Equipment     262,431       -  
Purchase of Property and Equipment     (249,228 )     (380,968 )
                 
Net Cash Provided by (Used in) Investing Activities     12,630       (400,740 )
                 
Cash Flows from Financing Activities
                
Borrowings from Affiliates     28,998       8,064  
Borrowings (Principal Repayments) on Notes Payable     152,969       (10,656 )
                 
Net Cash Provided by (Used in) Financing Activities     181,967       (420,826 )
                 
 Net Increase (Decrease) in Cash and Cash Equivalents
     (262,854 )     113,899  
                 
Cash and Cash Equivalents, Beginning of Year
     1,657,330       603,275  
                 
Cash and Cash Equivalents, End of Year
   $ 1,394,476     $ 717,174  
                 
Cash Paid During the Period for Interest   $ 72,970     $ 2,913  
                 
Cash Paid During the Period for Income Taxes   $ 46,322     $ -  

See notes to consolidated financial statements.
 
 
4
 
 
 
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) a Louisiana Corporation established on May 12, 1971.  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 pipe, tools and equipment, 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 collectibility 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.
 
 
5
 
 
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 specific identification method or market.  At June 30, 2010 and at December 31, 2009, inventory consisted of drilling and casing 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 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 six months ended June 30, 2010, three customers made up approximately 47% of the Company’s revenues, and two customers made up approximately 66% of the Company’s receivable balance at June 30, 2010.  For the six months ended June 30, 2009, four customers made up approximately 55% of the Company’s revenues, and approximately 52% of the Company’s receivable balance at June 30, 2009.  

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.

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.

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.
 
 
6
 
 
ENERGY & TECHNOLOGY, CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

Note 2.   Summary of Significant Accounting Policies (Continued)

Recent Accounting Pronouncements
In June 2009, the FASB issued Accounting Standards Update (ASU) No. 2009-01 (formerly FAS No. 168), The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles.  The Accounting Standards Codification (ASC) is the single source of authoritative non governmental U.S. generally accepted accounting principles (GAAP).  Rules and interpretive releases of the Securities and Exchange Commission (SEC) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants.  The Codification does not change current GAAP, but is intended to simplify user access to all authoritative GAAP by providing all the authoritative literature related to a particular topic in one place.  All existing accounting standard documents are superseded and all other accounting literature not included in the Codification is considered non-authoritative.  The Codification is effective for financial statements issued for interim and annual periods ending after September 15, 2009.  The adoption of this ASU did not have a material impact on the results of operations or financial position of the Company as it only required changes to GAAP references in our financial statements 

ASC 320-10 (formerly Staff Position (FSP) No. 115-2 and No. 124-2, Recognition and Presentation of Other-Than-Temporary Impairments), amends existing guidance for determining whether impairment is other-than-temporary (OTTI) for debt securities.  The ASC requires an entity to assess whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of these criteria is met, the entire difference between amortized cost and fair value is recognized in earnings. For securities that do not meet the aforementioned criteria, the amount of impairment recognized in earnings is limited to the amount related to credit losses, while impairment related to other factors is recognized in other comprehensive income.  Additionally, the ASC expands and increases the frequency of existing disclosures about other-than-temporary impairments for debt and equity securities.  ASC 320-10 was effective for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009.  The adoption of the ASC did not have a material impact on the results of operations or financial position of the Company because the Company did not hold any other-than-temporary impaired debt securities.

ASC 820-10 (formerly FSP No. 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly), emphasizes that even if there has been a significant decrease in the volume and level of activity, the objective of a fair value measurement remains the same.  Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants. ASC 820-10 provides a number of factors to consider when evaluating whether there has been a significant decrease in the volume and level of activity for an asset or liability in relation to normal market activity.  In addition, when transactions or quoted prices are not considered orderly, adjustments to those prices based on the weight of available information may be needed to determine the appropriate fair value.  The ASC also requires increased disclosures.  ASC 820-10 was effective for interim and annual reporting periods ending after June 15, 2009, and was applied prospectively.  The adoption of ASC 820-10 did not have a material impact on the results of operations or financial position of the Company.

ASC 825-10 (formerly FSP No. 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments), requires disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies that were previously only required in annual financial statements.  ASC 825-10 is effective for interim reporting periods ending after June 15, 2009.  The adoption of ASC 825-10 did not have a material impact on the results of operations or financial position of the Company.

On January 1, 2009, the Company adopted new guidance that related to accounting for non-controlling interests in consolidated financial statements.  The new accounting guidance states for entities to provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the non-controlling owners separately within the consolidated statement of financial condition within equity, but separate from the parent’s equity and separately on the face of the consolidated statement of operations.  Further, the new guidance states that changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary should be accounted for consistently and when a subsidiary is deconsolidated, any retained non-controlling equity investment in the former subsidiary should be initially measured at fair value.  The adoption of this guidance had no impact on the Company.
 
 
7
 
 
ENERGY & TECHNOLOGY, CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

Note 2.   Summary of Significant Accounting Policies (Continued)

Recent Accounting Pronouncements (Continued)

In June 2008, the FASB issued guidance which addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, included in the earnings allocation in computing earnings per common share (EPS) under the two-class method.  Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of EPS pursuant to the two-class method.  This guidance was effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years.  All prior period EPS data presented, were to be adjusted retrospectively (including interim financial statements, summaries of earnings, and selected financial data) to conform to the provisions of this guidance.  Since the Company's unvested restricted stock awards do not contain non-forfeitable rights to dividends, they are not included under the scope of this pronouncement, and therefore, the adoption of this guidance had no impact on the Company.

ASC 855-10 (formerly FAS No. 165, Subsequent Events), establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. In particular, ASC 855-10 sets forth:

·  
the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements;
·  
the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements; and
·  
the disclosures that an entity should make about events or transactions that occurred after the balance sheet date.
 
The Company has adopted the new guidance that was effective for financial statements issued for interim and annual periods ending after June 15, 2009.

FAS No. 166, Accounting for Transfers of Financial Assets-an amendment of FASB Statement No. 140, removes the concept of a qualifying special-purpose entity from Statement 140 and removes the exception from applying FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities, to qualifying special-purpose entities.  The objective in issuing this Statement is to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferor's continuing involvement, if any, in transferred financial assets.  This Statement must be applied as of the beginning of each reporting entity's first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. The impact of adoption is not expected to be material.

FAS No. 167, Amendments to FASB Interpretation No. 46(R), seeks to improve financial reporting by enterprises involved with variable interest entities.  The statement addresses (1) the effects on certain provisions of FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities, as a result of the elimination of the qualifying special-purpose entity concept in FASB Statement No. 166, Accounting for Transfers of Financial Assets, and (2) constituent concerns about the application of certain key provisions of Interpretation 46(R), including those in which the accounting and disclosures under the Interpretation do not always provide timely and useful information about an enterprise's involvement in a variable interest entity.  This Statement is effective as of the beginning of each reporting entity's first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter.  The impact of adoption is not expected to be material.


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.

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.

 
8
 

ENERGY & TECHNOLOGY, CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

Note 4.   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.


Note 5.   Major Customers

For the six months ended June 30, 2010, 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 47% of total revenues, and the total balance due from these three customers at June 30, 2010 was $200,668.


Note 6.   Related Party Transactions

Included in due to affiliates is $1,393,797 and $1,340,190 at June 30, 2010 and December 31, 2009, 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 $17,869 and $15,404 for the six month periods ended June 30, 2010 and 2009, respectively.


Note 7.   Earnings per Share

The weighted average common shares outstanding amounted to 53,668,000 and 53,634,453 for the three months ended and the six months ended June 30, 2010, and 175,100,000 for the three months ended and six months ended June 30, 2009, respectively.


Note 8.   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 June 30, 2010 or December 31, 2009, 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 June 30, 2010 and December 31, 2009, 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:

   
June 30, 2010
    
December 31, 2009
  
   
Carrying
Amount
    
Fair
Value
    
Carrying
Amount
    
Fair
Value
  
Financial assets:
                        
  Cash and cash equivalents
   $ 1,394,476     $ 1,394,476     $ 1,657,330     $ 1,657,330  
                                 
Financial liabilities:
                                
  Notes Payable
   $ 839,972     $ 839,972     $ 687,004     $ 687,004  
  Due to Affiliates
     1,794,690       1,794,690       1,765,692       1,765,692  
    $ 2,634,662     $ 2,634,662     $ 2,452,696     $ 2,452,696  

 
9
 

ENERGY & TECHNOLOGY, CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

Note 9.                 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 June 30, 2010.  In preparing these financial statements, the Company evaluated the events and transactions through the date these financial statements were issued.

 
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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 130 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 reser