UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE YEAR ENDED DECEMBER 31, 2009.

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER 001-31433

ENDEVCO, INC.
(Exact name of registrant as specified in its charter)

Texas	74-2142545
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

Three Riverway , Suite 825, Houston, TX 77056
(Address of principal executive offices, including zip code)

(713) 977-4662
(Registrant's telephone number, including area code)

Securities registered under Section 12(b) of the Exchange Act:
None

Securities registered pursuant to 12(g) of the Exchange Act:
Common Stock, no par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes [ ]   No [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. [ ]

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X]   No [ ]

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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer  [ ]		Accelerated filer  [ ]
Non-accelerated filer  [ X ]		Smaller reporting company  [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ]   No [X].

The aggregate market value of common stock held by non-affiliates of the registrant at June 30, 2009, based upon the last closing price on the OTCBB on June 30, 2009, was $15,248,939. As of March 31, 2010, there were 87,077,774 shares of Common Stock outstanding. The total number of Common shares authorized is 500,000,000 and the total number of Preferred shares authorized is 10,000,000.

Transitional Small Business Disclosure Format: Yes [ ]   No [X]

 

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ENDEVCO, INC.
AND SUBSIDIARIES

TABLE OF CONTENTS
DECEMBER 31, 2009

PART I	Page
Item 1.  Description of Business	4
Item 2.  Description of Properties	4
Item 3.  Legal Proceedings	8
Item 4.  Submission of Matters to a Vote of Security Holders	8
PART II
Item 5.  Market for Common Equity and Related Stockholder Matters	9
Item 7.  Management's Discussion and Analysis of Financial Condition and Results of Operations	10
Item 8.  Financial Statements.	16
Item 9.  Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	17
Item 9A(T). Controls and Procedures	17
PART III
Item 10. Directors, Executive Officers, Promoters and Control Persons	18
Item 11. Executive Compensation	22
Item 12. Security Ownership of Certain Beneficial Owners and Management	23
Item 13. Certain Relationships and Related Transactions	24
Item 14. Principal Accountant Fees and Services	24
Item 15. Exhibits	25
Signatures	26

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PART I

ITEM 1. DESCRIPTION OF BUSINESS

INTRODUCTION AND BUSINESS PLAN

EnDevCo, Inc. (the "Company") was originally incorporated in the state of Texas on November 7, 1980, as Roberts Oil and Gas, Inc. Roberts Oil and Gas, Inc. registered its shares of common stock with the Securities and Exchange Commission ("SEC") and began filing periodic reports pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"). In July 1997, Roberts Oil and Gas, Inc. changed its name to Adair International Oil and Gas, Inc., which was traded on the Over the Counter Bulletin Board ("OTCBB") under the stock symbol AIGI. In September 2003, the Company changed its name to EnDevCo, Inc. and its stock symbol to ENDE. On March 11, 2008 the Company executed a reverse stock split and the trading symbol was changed to EDVC. EnDevCo, Inc., a shortened version of the "Energy Development Company", establishes an identity that is consistent with the Company's current business development activities. The Company is actively negotiating to participate in several oil and gas projects both domestically and internationally within the traditional industry scope of oil and gas exploration and production. These activities include production of oil and gas from interests held by the Company in the United States and South America. The Company is also investigating investment in the development of new technologies for the enhancement of oil and gas production and the utilization of that technology to further acquire oil and gas production.

ITEM 2. DESCRIPTION OF PROPERTIES

OIL & GAS EXPLORATION

Block XXIV, Peru - Following an extensive bidding process, a consortium including EnDevCo was awarded the exclusive concession to develop the Block XXIV prospect area located in northwest Peru. EnDevCo owns 20% of the consortium. Covering more than 276 thousand acres, the block contains both onshore and offshore prospects. The area is bracketed by recent discoveries to the immediate north (Olympic) and south (Olympic and Petrotech). The primary target horizon for the off shore area is the naturally fractured Amotape formation of Paleozoic age (quartzites, slates, etc.). This target formation boasts similar characteristics to those that have produced oil in the nearby Portachuelo Field and, more recently, the offshore San Pedro discovery. The reinterpretation of well logs using new technology indicates pay in target formation. Northwest Peru has solid infrastructure and substantial power demand, creating a ready-market for gas. For EnDevCo, the region represents an excellent opportunity for an integrated gas-to-power project.

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Cleveland County, Oklahoma - On April 13, 2006, the Company acquired a 98.712% working interest with a 70.085% net revenue interest in the West Short Junction Unit and a 100% working interest with a 71% net revenue interest in the Central Short Junction Unit hereinafter referred to as the ("Short Junction Field and/or the Field") located in Oklahoma City, Oklahoma through its subsidiary EnDevCo Eureka, LLC for a purchase price of $11.5 million. EnDevCo Eureka, LLC is owned 55% by its parent EnDevCo, Inc. and 45% by private investors who are related parties. These investors contributed $3.0 million in equity to enable EnDevCo to consummate the transaction. EnDevCo Eureka, LLC, managed by EnDevCo personnel, is the Operator for the Field which has an acquisition date of January 1, 2006.

Project financing was provided by GasRock Capital, LLC of Houston, Texas and takes the form of a $50.0 million credit facility. GasRock Capital provides project based mezzanine debt financing to the oil and gas industry by backing proven management teams that identify high quality exploitation projects like the Short Junction Field.

The 12,000 acre fully unitized Field currently consists of 24 oil wells and 2 gas wells, 4 central collection and metering stages and 4 salt water disposal wells. The Field is currently producing 47 barrels of oil equivalent (BOE) per day comprised of 41 barrels of oil and 35 Mcf of gas from 25 vertical wells. Production from the single horizontal well is currently shut-in awaiting repair of the electric submersible pump.

Since acquiring the Field, the Company has methodically performed maintenance activities on all oil wells to include improved chemical and hot oil treatments; new pump jacks, existing pump jack re-alignment, bearing and rod replacement, beam compressor installation and pipeline integrity testing and cleanout. EnDevCo has also installed new pumps, a new water knockout and two new heater treaters for improved oil separation at the central collection and metering stages and terminated the re-injection of water into the Hunton reservoir by re-piping and installing a new salt water disposal well.

The Field purchase included full ownership rights to a field wide gas pipeline and gathering system that offers two independent taps to the interstate gas transmission system.

Short Junction Field was originally developed by Conoco using vertical wells drilled on a 40 acre well spacing, resulting in oil and gas production from 270 active wells within the 12,000 acre leasehold. The Field currently contains 34 unplugged production well bores of which 26 are currently active.

Historically the primary zone of interest has remained the Hunton formation for oil production. However, above the Hunton, the Bartlesville, Prue, Red Fork and Skinner Sandstones along with the Pink Lime zones are present and most are indicated as productive based on well log analysis.

The DeGolyer & MacNaughton proved reserves evaluation for the Short Junction Field as of December 31, 2008 is 22,238,644 barrels of oil equivalent as follows:

Reserves Classification	Gross Oil (Bbl)	Gross Gas (Mcf)
Proved Developed Producing	345,574	182,305
Proved Developed Non-producing	0	5,691,032
Proved Undeveloped	14,380,076	39,204,625
Total:	14,725,650	45,077,962

Current bottom hole pressures recently measured in the Hunton indicate that formation pressure today is essentially the same as when the Field was originally placed on production. This unique characteristic occurs as a result of the fact that Conoco instituted a water flood pressure maintenance program in the early stages of developing the field. As a result of this pressure maintenance, the original gas cap in the Hunton reservoir has never been produced.

EnDevCo plans to implement a 3D seismic program over the leasehold later this year in order to pursue an aggressive horizontal drilling program in the Hunton formation to increase oil and gas production from that reservoir and to develop identified shallow gas sand reservoirs indicated on the subsurface well control.

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GOVERNMENTAL REGULATION

The Company's current and contemplated activities are in the areas of oil and gas exploration and production, and power generation. Federal, state and local laws and regulations have been enacted regulating these activities. Moreover, "toxic tort" litigation has increased markedly in recent years as persons allegedly injured by chemical contamination seek recovery for personal injuries or property damage. These legal developments present a risk of liability should the Company be deemed to be responsible for contamination or pollution. There can be no assurance that the Company's policy of establishing and implementing proper procedures for complying with environmental regulations will be effective at preventing the Company from incurring a substantial environmental liability. If the Company were to incur a substantial uninsured liability for environmental damage, its financial condition could be materially adversely affected.

EMPLOYEES

The Company currently has three full-time employees. The Company also utilizes outside consultants with the number varying according to project requirements.

TRANSFER AGENT AND REGISTRAR

On July 8, 2003, the Company appointed Superior Stock Transfer, Inc., Three Riverway, Suite 825, Houston, TX 77056, Tel: (713) 977-4662 as the Transfer Agent to handle securities transactions for EnDevCo, Inc.  Superior Stock Transfer, Inc. is a wholly owned subsidiary of EnDevCo, Inc.

RISK FACTORS

The prospects of the Company are subject to a number of risks. There may exist, however, other factors which constitute additional risks, but which are not currently foreseen or fully appreciated by management.

Liquidity and Capital Resources

The Company has incurred net operating losses since 1997. However, the Company currently has operations that provide working capital. The Company is also seeking further project based financing to develop its existing projects. There is no assurance that the Company will be able to secure adequate financing to fund those operations.

Insufficiency of Working Capital

As noted above, the Company has a historical working capital deficit which current operations are now reversing. In addition, a Securities Registration Statement will be prepared this year to allow for the sale of Common stock to raise additional working capital for the Company. No assurance can be given that funds will be available from any source when needed by the Company or, if available, upon terms and conditions reasonably acceptable to the Company.

Reliance on Efforts of Others

The Company forms joint ventures with industry participants in order to finance and facilitate its activities.  In some instances, the Company will depend on other companies to develop, provide financing, and operate its properties and projects. The prospects of the Company will be highly dependent upon the ability of such other parties. As indicated by the nature of the partners, with which the Company is participating in current projects, management believes the risk in relying on such partners is reasonable.

Foreign Political Climate

The Company has direct oil and gas interests in the United States and South America. Countries that the U.S. Government has placed on the list believed to harbor terrorists will be subjected to increased scrutiny by U.S. Federal authorities. As these types of events mature, the properties held by the Company in South America may be subject to embargo or other restrictions in support of U.S. Governmental policies.

Peru

Peru remains a challenging political climate for the conduct of international business. While the security and business climate remain sound, any negative changes in the political climate of Peru could have a negative impact on the Company, up to and including the complete loss of interests in the country.

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International Operations

The Company anticipates that a significant portion of its future international revenues could be derived from its oil and gas and other investment interests located in foreign countries.  Currency controls and fluctuations, royalty and tax rates, import and export regulations and other foreign laws or policies governing the operations of foreign companies in the applicable countries, as well as the policies and regulations of the United States with respect to companies operating in the applicable countries, could all have an adverse impact on the operations of the Company.

The Company's interests could also be adversely affected by changes in any contracts applicable to the Company's interests, including the renegotiating of terms by foreign governments or the expropriation of interests.

In addition, the contracts are governed by foreign laws and subject to interpretation by foreign courts.  Foreign properties, operations and investments may also be adversely affected by geopolitical developments.

Oil and Gas Price Volatility

Future revenues from oil and gas production that might be generated by the Company will be highly dependent upon the prices of crude oil and natural gas. Fluctuations in the energy market make it difficult to estimate future prices of crude oil and natural gas. Such fluctuations are caused by a number of factors beyond the control of the Company, including regional and international demand, energy legislation of various countries, taxes imposed by applicable countries and the abundance of alternative fuels. International political and economic conditions may also have a significant impact on prices of oil and gas. There can be no assurance of profitable operations even if there is substantial production of oil and gas.

Environmental Regulation

The U.S. oil and gas and power generation industries are subject to substantial regulation with respect to the discharge of materials into the environment, pollution, siting of operations or other factors relating to the protection of the environment. The exploration, development and production of oil and gas are regulated by various governmental agencies with respect to the storage and transportation of the hydrocarbons, the use of facilities for processing, recovering and treating the hydrocarbons and the clean up of drilling sites. Many of these activities require governmental approvals before they can be undertaken. The costs associated with compliance with the applicable laws and regulations have increased the costs associated with the planning, designing, drilling, installing, operating and plugging or abandoning of wells. To the extent that the Company owns an interest in a well it may be responsible for costs of environmental regulation compliance even after the plugging or abandonment of that well.

General Risks of the Oil and Gas and Power Generation Industries

The Company's operations will be subject to those risks generally associated with the oil and gas and power generation industries. Such risks include exploration, development and production risks, title risks, and weather risks, shortages or delay in delivery of equipment and the stability of operators and contractor companies.

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ITEM 3. LEGAL PROCEEDINGS

Legal Proceedings for the Year Ended December 31, 2009:

As of June 1, 2007, the law firm of Phillips & Akers, P.C. ("P&A"), are the attorneys of record for the Company in a case styled: Cause No: 2006-34662; Farzad Askari v. EnDevCo, Inc.

Mr. Askari filed a breach of contract case claiming the Company (the Defendant) had not paid Mr. Askari (the Plaintiff) for work he did as an alleged consultant in 2002 for John W. Adair and Adair International Oil & Gas, Inc. The Company believed that Mr. Askari was never a consultant for the Company and never performed any work for the Company and therefore was not entitled to receive any compensation from the Company.

The case went to trial and the jury's verdict was that Mr. Askari was not entitled to any compensation and that judgment was entered on January 11, 2008. All of Mr. Askari's post trial motions to date have been unsuccessful; however, he filed notice of appeal in the 14th Court of Appeals. Appellate briefs were filed by both parties and after receiving them the Court declined to hear oral arguments.

On July 02, 2009, the 14th Court of Appeals ruled that the trial court judgment in all things and in all ways was affirmed. The time for further appeals has expired and this matter is now closed.

P&A are the attorneys of record for the Company in a case styled: Cause No: CJ 07 1859 L; Basic Energy Services, LP v. EnDevCo Eureka, LLC. et al. Basic Energy Services has filed a breach of contract case claiming EnDevCo Eureka, LLC (the "Defendant") has not paid for goods and services, totaling $1,315,910, that are in dispute between the parties. Following a review of all disputed invoices, the Company signed a settlement agreement on July 07, 2008 with the Plaintiff. The Company has paid sixty (60) percent of the settlement amount, but remains in default until the remaining balance is paid.

P&A are the attorneys of record for the Company in a case styled: Cause No: CJ 07 1859 L; Basic Energy Services, LP v. EnDevCo Eureka, LLC. et al. Basic Energy Services has filed a breach of contract case claiming EnDevCo Eureka, LLC (the "Defendant") has not paid for goods and services, totaling $1,315,910, that are in dispute between the parties. Following a review of all disputed invoices, the Company signed a settlement agreement on July 07, 2008 with the Plaintiff. The Company has paid sixty (60) percent of the settlement amount, but remains in default until the remaining balance is paid.

P&A and J. John Hager, are the attorneys of record for the Company in a case styled: Cause No: CIV-08-0395-HE; KAL Drilling Inc. v. EnDevCo Eureka, LLC. et al. KAL Drilling has filed a breach of contract case claiming EnDevCo Eureka, LLC (the "Defendant") has not paid for goods and services that are in dispute between the parties. The Company has denied all of Plaintiff's allegations and filed a counterclaim against the Plaintiff on May 15, 2008 for breach of contract, misrepresentations, fraud, negligence and gross negligence.

P&A are the attorneys of record for the Company in a case styled: Cause No. 2009-16668; Hamm & Phillips Service, Co. Inc. v. EnDevCo, et al; in the 152nd Judicial District Court of Harris County, Texas. This is a case involving approximately $75,000 in past due bills, plus interest, and is a suit on sworn account. Judgment has been entered on this admitted due amount in the amount of $86,532.40.

P&A are the attorneys of record for the Company in a case styled: Cause No. CJ-2009-627L; Integrated Production Services, Inc. v. EnDevCo, et al; in the District Court of Oklahoma County, Oklahoma. This is a case involving $70,000 in past due bills, plus interest, and is a suit and is a suit on sworn account.

P&A are the attorneys of record for the Company in a case styled: Cause No. 944221; Pason Systems USA Corp. v. Endevco, Inc. aka Endevco Eureka, LLC, et al; in the County Civil Court at Law No. 2 of Harris County, Texas. This is a case involving $25,000 in past due bills, plus interest, and is a suit on sworn account.

The Company is a party to various claims, but is not a party to any other litigation at this time. Although no assurances can be given, the Company believes based on its experience to date, that the ultimate resolution of such items, individually or in the aggregate, would not have a material adverse impact on the Company's financial position or results of operations.

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

None.

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PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

PRICE RANGE OF COMMON STOCK

The Company's Common Stock is currently traded on the over the counter bulletin board ("OTCBB") under the symbol "EDVC." The following table sets forth, for the periods indicated, the high and low closing bid prices for the Common Stock of the Company as reported on the OTCBB. The bid prices reflect interdealer quotations, do not include retail mark ups, markdowns or commissions and do not necessarily reflect actual transactions.

 

COMMON STOCK PRICE RANGE
Year	Quarter Ended	High Bid	Low Bid
2009	Dec 31	0.55	0.21
	Sep 30	0.49	0.23
	Jun 30	0.59	0.33
	Mar 31	1.05	0.35
2008	Dec 31	$ 2.99	$ 0.82
	Sep 30	$ 4.55	$ 2.05
	Jun 30	$ 5.55	$ 2.50
	Mar 31	$ 14.00	$ 2.00
2007	Dec 31	$ 3.00	$ 1.00
	Sep 30	$ 3.00	$ 1.00
	Jun 30	$ 6.00	$ 3.00
	Mar 31	$ 5.00	$ 2.00

 

On December 31, 2009, the last trading day of the year, the closing price for the Common Stock of the Company on the OTCBB was  $0.24.  Also on that date, there were approximately 6,300 stockholders of record of the Common Stock, including broker/dealers holding shares beneficially owned by their customers.

REVERSE STOCK SPLIT

On March 10, 2008 at 5:00 P.M. CST the Company executed a 1 for 100 reverse stock split. The proposal to implement a reverse stock split was voted on by the shareholders at the October 15, 2004 annual shareholder meeting and passed by a majority vote. An amendment to the Company's articles of incorporation reflecting the reverse stock split was filed with the Texas Secretary of State on February 22, 2008.

DIVIDEND POLICY

The Company has not paid, and the Company does not currently intend to pay cash dividends on its Common Stock in the foreseeable future.  The current policy of the Company's Board of Directors is for the Company to retain all earnings, if any, to provide funds for operation and expansion of the Company's business.  The declaration of dividends, if any, will be subject to the discretion of the Board of Directors.

SALES OF UNREGISTERED SECURITIES DURING 2009

During the years ended December 31, 2009 and December 31, 2008, the Company issued unregistered securities in reliance upon exemptions from registration under the Securities Act of 1933 as amended (the "Act") as provided in Section 4(2) thereof. Each certificate issued for unregistered securities contained a legend stating that the securities have not been registered under the Act and setting forth the restrictions on the transferability and the sale of the securities. No underwriter participated in nor did the Company pay any commissions or fees to any underwriter in connection with any of these transactions. None of the transactions involved a public offering.

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The Company issued stock in lieu of cash in transactions summarized as follows for the years ended December 31, 2009 and December 31, 2008. The Summary Compensation Table included as Item 10, "Executive Compensation", details the number of shares issued for compensation to each Company officer during the respective time period that they have been employed by the Company.

	December 31, 2009				December 31, 2008
Nature of Transaction	Common Stock	Preferred Stock	Amount		Common Stock	Preferred Stock	Amount
Salaries & Director's Fees	1,214,947	--	$ 320,612		--	(169,250)	$ (169,250)
Other Obligations	14,917,921	--	5,664,825	-	1,457,078	(70,900)	5,247,589
Total Issued for Services	16,132,868	--	$ 5,985,437	-	1,457,078	(240,150)	$ 5,078,339
Issued for Investment	--	--	--	-	--	--	--
Totals	16,132,868	--	$ 5,985,437		1,457,078	(240,150)	$ 5,078,339
	=========	=========	=========		=========	=========	=========

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This report, including Management's Discussion and Analysis of Financial Condition and Results of Operations, includes certain forward-looking statements. The forward-looking statements reflect the Company's expectations, objectives and goals with respect to future events and financial performance. They are based on assumptions and estimates, which the Company believes are reasonable. However, actual results could differ materially from anticipated results. Important factors that may impact actual results include, but are not limited to, commodity prices, political developments, market and economic conditions, industry competition, the weather, changes in financial markets and changing legislation and regulations. The forward-looking statements contained in this report are intended to qualify for the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended. The notes to Consolidated Financial Statements sections contain information that is pertinent to the following analysis.

GENERAL COMMENTS ON BUSINESS PLAN

EnDevCo, Inc., a shortened version of the "Energy Development Company", establishes an identity that is consistent with the business development activities currently underway in the Corporation. The Company is actively negotiating to participate in several oil and gas projects both domestically and internationally within the traditional industry scope of oil and gas exploration and production. These activities include production of oil and gas from interests held by the Company in the United States and South America. The Company is also investigating investment in the development of new technologies for the enhancement of oil and gas production and the utilization of that technology to further acquire oil and gas production.

OIL AND GAS EXPLORATION AND DEVELOPMENT

The Company is pursuing oil and gas exploration and development opportunities in both domestic and international venues.  Domestically, the Company has secured certain development rights in two blocks in the Gulf of Mexico that will provide it with the opportunity to participate in the drilling of low risk development wells.  As a result of recently acquired 3D seismic data that has been integrated with previously known geological and engineering data, several low risk development drilling opportunities have been identified.  Participation in these types of relatively low risk and low cost wells will provide near term cash flow to support the activities of the Company.

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Internationally, the Company has identified several other exploration projects that carry significant upside potential (although at higher risk). The Company currently holds an interest in the Block XXIV in Peru. Our exploration teams are also evaluating other opportunities located in Canada, South America, North Africa and the Middle East.

Development and implementation of new energy technologies will become a key new business focus for the Company.  The identification of and early participation in the implementation of these types of technologies opens several avenues for potential revenue generation and profits.  In some instances, the technology can be manufactured and sold to end users once the market accepts the technology.  In other instances, the technology might provide a unique competitive advantage that can be successfully leveraged by the Company in the acquisition and development of existing energy projects.  Initially, the Company will limit its scope of investigation to those technologies that directly compliment the oil and gas, and power industries.

POWER GENERATION

EnDevCo's management team has extensive experience and expertise in the area of power plant development, operations and commercial management. The Company intends to leverage these capabilities by developing integrated gas-to-power and greenfield development projects in markets that create additional value through the gas-power delivery option.

RESULTS OF OPERATIONS

This report, including Management's Discussion and Analysis of Financial Condition and Results of Operations, includes certain forward-looking statements.  The forward-looking statements reflect the Company's expectations, objectives and goals with respect to future events and financial performance.  They are based on assumptions and estimates, which the Company believes are reasonable. However, actual results could differ materially from anticipated results. Important factors that may impact actual results include, but are not limited to, commodity prices, political developments, market and economic conditions, industry competition, the weather, changes in financial markets and changing legislation and regulations. The forward-looking statements contained in this report are intended to qualify for the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended. The notes to Consolidated Financial Statements sections contain information that is pertinent to the following analysis.

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COMPARISON OF YEARS ENDED DECEMBER 31,
Line	Description		2009	2008
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1	Revenues		$ 536,222	$ 3,130,441
2	Cost of Revenues		$ 283,758	$ 1,334,699
3	Costs and Expenses		$ 1,584,996	$ 1,540,671
4		General and Administrative Expense	$ 544,201	$ 960,010
5		Salaries and Wages	$ 1,040,000	$ 522,191
6		Shareholder Services	$ 795	$ 58,470
7	Other Income and (Expenses)		$ (2,222,436)	$ (4,497,778)
8		Interest and Other Income	$ 8,665	$ 62,403
9		Hedging Income/(Loss)	$ 0	$ 902,506
10		Write-off of Colombia option	$ 0	$ (1,000,000)
11		Interest Expense	$ (2,234,101)	$ (2,197,307)
12		Round-up Shares	$ 0	$ (2,465,380)
13		Lawsuit Settlement	$ 0	$ 200,000

 

Analysis of Comparison

Line 1 - During 2009 the Company generated from the Short Junction property $533,225 in oil sales, $1,180 in gas sales and $1,816 from pipeline transmission. The overall revenue decrease of $2,594,219 from 2008 consists of a $2,300,259 decrease in oil revenue, a $282,810 decrease in gas sales and an $11,151 decrease in pipeline revenue. During 2008 the Company generated from the Short Junction property $2,833,484 in oil sales, $283,990 in gas sales and $12,976 from pipeline transmission. The overall revenue increase of $1,345,182 from 2007 consists of a $1,417,036 increase in oil production, a $52,852 decrease in gas production and a $19,002 decrease in pipeline revenue.

Line 2 - Cost of Revenues during 2009 and 2008 was primarily due to the costs of running the Short Junction property. In 2009, lease operating expenses were $133,026, as compared to $722,905 in 2008 and to $985,709 in 2007. The variations in lease operating expenses were the direct result of the Company's activity under the work-over program which peaked in 2007. In the future, the Company will focus on increasing production by drilling additional wells. Management expects lease operating expenses to increase as more wells are brought on line. Production taxes are a direct function of the gross production figures. In 2009, production taxes were $42,775.

Depreciation, depletion and amortization ("DD&A") of proved oil and gas properties is calculated under the units of production method, following the successful efforts method of accounting. For the year ended December 31, 2009, depletion of our proved oil and gas properties was $107,958 as compared to $387,281, for the year ended December 31, 2008.

Line 3 - Costs and Expenses overall increased $44,325 during 2009 relative to those incurred in 2008. By comparison, Costs and Expenses overall were decreased by $575,643 during 2008 over 2007. The detail explaining this increase is shown on lines 4 through 6 below.

Line 4 - General and Administrative Expense decreased by $415,809 in 2009 over the previous year. In 2008, General and Administrative Expense decreased by $166,142 over the previous year. As the management continues to implement its strategy for the Company, it will look to bring more resources in-house, reducing the need for external consultants.

Line 5 - Salaries and Wages in 2009, were higher than 2008 by $517,809 owing to the write-down of accrued salaries that occurred in 2008. As management continues to implement its strategy for the Company, it will look to bring more resources in-house, which is expected to lead to increased salaries and wages in the future.

Line 6 - There was a decrease in Shareholder Services costs of $57,675 relating to the costs associated with the reverse stock split completed in March 2008.

Line 7 - Other Income and Expenses decreased overall by $2,272,342 in 2009 as compared to a decrease of $872,760 during 2008. The detail explaining this decrease is shown on lines 8 through 11 below.

Line 8 - Other Income during 2009 was $8,665 which was primarily due to the interst received on cash deposits.

Line 9 - There was no Hedging Loss during 2009 as compared to a gain of $902,506 in 2008. To mitigate revenue volatility associated with fluctuations in oil prices, the Company put in place certain swap arrangements. Any gain or loss under those instruments was the direct result of the changes in oil prices.

Line 10 - On September 25, 2003, the Company purchased from Harvest Production Company, LLC an option to participate in the acquisition and processing of 101 kilometers of 2D seismic, and a continuing option to participate on a joint venture basis in wells to be drilled after the interpretation of that seismic on their Rio Magdalena Association Contract comprising 58,546 hectares (144,600 acres) situated in the Upper Magdalena River region of Colombia. On June 25, 2005 the Company acquired an option from Harvest Production Company, LLC to purchase 50% of Seller's interest in the assets covered by the September 25, 2003 option, proven undeveloped reserves in the block and Seller's proprietary data previously acquired over the lease acreage described above, in consideration of the Company securing financing for development. This option expired on December 31, 2008 resulting in the write-off of $1 million of capitalized development costs.

Line 11 - During 2009 the Company incurred Interest Expense of $2,234,101. During 2008 the Company incurred Interest Expense of $2,197,307.

14

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Line 12 - A one-time charge of $2,435,960 was taken for shares issued to shareholders following the reverse split of March 10, 2008 to round up each shareholder's position to a full lot.

Line 13 - In 2008 lawsuit settlement proceeds were $200,000 due to the settlement of the Basic Energy Services lawsuit.

 

LIQUIDITY AND CAPITAL RESOURCES

COMPARISON OF YEARS ENDED DECEMBER 31,
Sources and Uses of Cash
		2009	2008
Net cash provided by/(used in)
	Operating activities	$ (1,093,883)	$ 1,861,710
	Investing activities	$ 11,326	$ (1,742,529)
	Financing activities	$   1,028,878	$   (73,925)
Increase/(decrease) in cash and cash equivalents		$ (53,679)	$ 45,256
		=========	=========
		At December 31,
Cash and cash equivalents		$ (7,288)	$  46,391
		=========	=========

    

Cash Flow from Operating Activities

2009
Cash used by operating activities totals $(1,093,883) in 2009, a decrease of $7,060,300 over 2008. Throughout most of 2009, the Company was forced to keep the WSJU 109StH well out of production due to needed repairs and a lack of working capital.

2008
Cash provided by operating activities total $1,861,710 in 2008, an increase of $2,793,895 when compared to 2007. During 2008, the Company shifted its focus away from its work-over program to increasing production by drilling additional wells, which resulted in lower operating costs and higher production and revenues. Additional factors contributing to the change in operating cash flow include:

• For the reasons discussed above, depletion expense decreased by $67,459 in 2008 with respect to 2007; and
  

• In 2008, salaries and wages were decreased by $427,309 over the previous year.
  

 

15

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Cash Flow from Investing Activities

2009
Cash provided by investing activities total $11,326 in 2008, an increase of $5,858,561 when compared to the 2008 investment in the Short Junction Field project.

2008
Cash used by investing activities total $1,742,529 in 2008, a decrease of $334,941 when compared to 2007.

Cash Flow from Financing Activities

2009
Cash provided by financing activities total $1,028,872 in 2009, an increase of $1,102,803 when compared to 2008.

2008
Cash used by investing activities total $73,925 in 2008, an increase of $1,716,784 when compared to 2007.

Directors and Officers Compensation

The Company currently has limited cash reserves and cash flow from operations. Until December 31, 2005 the Company's Directors and Officers received compensation payment in Series A Preferred stock in lieu of cash consideration for managing the Company. Beginning January 1, 2006, officer salaries were accrued.

In an effort to improve the Company's balance sheet, on September 30, 2008 the Company's employees and Directors were issued restricted shares of common stock as payment in kind for accrues salaries and Director's fees. 683,909 shares were issued at the closing price of the stock on September 30, 2008 ($2.70 per share) to settle accrued salaries and Director's fees in the amount of $1,846,556. Since September 30, 2008, all officer salaries and Director fees have been accrued.

Project Development Guidelines

In recognition of the status of current financial resources available to the Company, executive management is committed to identifying and implementing projects that can be primarily project financed. This strategy reduces financial risk to the Company, but necessarily adds additional lead time before projects can be secured and announced to the shareholders.

There are no assurances, however, that the Company will be able to identify and implement financing to develop its projects or that it will be able to generate sufficient revenue growth and improvements in working capital.

The Company intends to raise working capital through the sale of its Common stock. No assurance can be given that funds will be available from any source when needed by the Company or, if available upon terms and conditions reasonably acceptable to the Company. The Company is exploring debt and equity financing.

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ITEM 8. FINANCIAL STATEMENTS

The information required hereunder is included in this report as set forth on pages 26 - 44.

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

None.

ITEM 9A(T). CONTROLS AND PROCEDURES

As required by Rule 13a-15(b), Company's executive management, including the Chief Executive Officer, Chief Operating Officer and Chief Financial Officer, conducted an evaluation as of the end of the period covered by this report, of the effectiveness of the Company's disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e). Based on that evaluation, the Chief Executive Officer, Chief Operating Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of the end of the period covered by this report. As required by Rule 13a-15(d), the Company's executive management, including the Chief Executive Officer, Chief Operating Officer and Chief Financial Officer, also conducted an evaluation of the Company's internal control over financial reporting to determine whether any changes occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. Based on that evaluation, there has been no such change during the period covered by this report.

 

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

The following table sets forth the directors and executive officers of the Company.

Name	Age	Title
Richard G. Boyce	53	Director - Chief Operating Officer
John A. Brush	52	Director
Frederick Cedoz	34	Director
Charles R. Close	49	Director - Chief Financial Officer (from March 1, 2010)
Chris A. Dittmar	62	Director - Chief Executive Officer, Corporate Secretary
Joseph Lessard	44	Chief Financial Officer (prior to March 1, 2010), Vice President Americas

BIOGRAPHIES

Richard G. Boyce - Director and Chief Operating Officer: Mr. Richard G. Boyce is currently serving a three year term as a Director and additionally serves as the Chief Operating Officer for the Corporation.

Mr. Boyce maintained an active geological/geophysical consulting practice in Dallas, Texas serving both major and independent oil and gas companies world wide from 1996 - 2006. He is an internationally recognized leader in the application of computer technological advances to the field of geoscience.

In 1996, Mr. Boyce started Partners In Exploration, LLC ("PIE"), an exploration consulting company that provided seismic and geological interpretation services. Mr. Boyce negotiated a memorandum of understanding with the Republic of Yemen in 1998 for exploration on Blocks 20 and 42. In 1999, Mr. Boyce signed a 50/50 joint venture agreement with the predecessor company to EnDevCo to pursue Yemen Block 20 and successfully negotiated a production sharing agreement with the Yemen government. Mr. Boyce merged PIE with what has now become EnDevCo and through that merger became a substantial shareholder in the Corporation.

Mr. Boyce began his career in 1979 as a geophysicist for The Superior Oil Company ("Superior") with early training at the Geoscience Laboratory in Houston, Texas. In l980, Mr. Boyce transferred to Midland, Texas subsequently leaving Superior to work for both Conquest Exploration Inc. and Hunt Oil Company ("Hunt Oil") during his ten-year stay in the Permian Basin. In 1991, Mr. Boyce served as the Chief Geophysicist for Hunt Oil Company based in Dallas, Texas and in 1992 was appointed the Exploration Manager for the Yemen Hunt Oil Company ("Yemen Hunt"), the Operator of the Marib Area in Yemen which daily produces 140,000 barrels of oil. In addition to managing the daily Yemen Hunt exploration drilling operations and prospect generation activities, his responsibilities included the negotiation of international contracts, partner relationships, and representation of industry operating groups with foreign governments in the area. Under Mr. Boyce's leadership of the Yemen-Jannah exploration program, several new fields were discovered, resulting in the addition of booked reserves of over 200 million barrels of oil. At Yemen Hunt, Mr. Boyce was responsible for the introduction of the first 3-D seismic program in the Marib Area resulting in production increases of 50,000 barrels of oil per day. In 1996, Mr. Boyce left Hunt Oil and started Partners In Exploration, LLC.

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Mr. Boyce graduated from the Colorado School of Mines with a Bachelor of Science degree in Geophysical Engineering and currently maintains active membership in the American Association of Petroleum Geologists, the Society of Exploration Geophysicists and the Association of International Petroleum Negotiators professional organizations. Mr. Boyce is a registered geophysicist (No. 2179) licensed by the State of Texas Board of Professional Geoscientists.

John A. Brush -Independent Director: Mr. John A. Brush is currently serving a three year term as a non-executive independent Director of the Corporation. Mr. Brush brings the experience of a distinguished twenty-two year career in oil and gas law to the Board of Directors.

Mr. Brush is currently in private practice as an attorney and consultant in the energy business whose clients include CDX Gas International, LLC and Express Drilling Systems, LLC and other large and small oil and gas exploration and production companies, entrepreneurs and foreign government agencies. Earlier, Mr. Brush served as Vice President and General Counsel for Forcenergy, Inc. While serving in this capacity, Mr. Brush managed day to day corporate legal issues, designed and implemented land acquisition and marketing strategies, coordinated an initial public offering, and evaluated government marketing, transportation and royalty regulations.

Mr. Brush has extensive experience in business development activities having worked over nineteen years with several premier independent oil and gas companies including Apache Corporation, Hamilton Brothers Oil Co., The Superior Oil Company and Michigan Wisconsin Pipe Line Company. Areas of experience in this environment include dealing with multinational corporations, various U.S. and foreign government agencies and ministries, opposing counsels, co-venturers, insurers and financial institutions. Mr. Brush's legal experience during this time include joint operating agreements, oil and gas exploration concessions, natural gas, oil, sulfur and liquids sales royalties, processing plant agreements, joint bidding agreements, farm-out agreements, settlement agreements, public offerings and private financing, risk management including hedging strategies, acquisitions, divestitures and mergers. Mr. Brush also has extensive experience marketing oil, natural gas, liquids and sulfur in the United States, Asia, Canada and Europe.

Mr. Brush's international experience includes review and negotiation of deals in Albania, Aruba, Australia, Bangladesh, Belize, Brazil, Canada, Cameroon, Chile, Croatia, Dagastan, Ecuador, Egypt, England, Equatorial Guinea, Eritrea, Gabon, Ghana, India, Indonesia, Malaysia, Netherlands, Norway, Peru, Scotland, Suriname, Thailand, Turkey and Venezuela.

John A. Brush graduated from the South Texas College of Law, Houston, Texas with a Juris Doctor Degree. Mr. Brush completed his undergraduate studies at the University of Michigan, receiving a Bachelor of Arts degree in Political Science. Mr. Brush has been admitted to the State Bar of Texas and is a member of the American Bar Association and the Houston Bar Association. He is also a member of the American Corporate Counsel Association, the American Association of Professional Landmen, the Association of International Petroleum Negotiators, the Natural Gas Association of Houston and New Orleans and the Houston Producers Forum.

Frederick Cedoz - Independent Director: Mr. Frederick Cedoz is currently serving a three year term as a non-executive independent Director of the Corporation. Mr. Cedoz, a practicing attorney, is also Vice President for Operations and a Director of GWEST (Global Water & Energy Strategy Team). Mr. Cedoz is a co-founder of GWEST whose principal business is providing energy security policy analysis and business development consulting services to energy companies, financial institutions, and foreign governments.

In addition to writing on Alberta's oil sands projects and the importance of U.S.-Canadian energy relations, Mr. Cedoz was recently the keynote speaker at the world's largest oil and gas trade show, Calgary's Global Petroleum Show in June of 2006. He was also the keynote speaker for the Independent Power Producers Society of Alberta's Tenth Annual Conference in Banff in March of 2004. Since then he has made many presentations to prestigious groups on U.S. energy security issues including the New York Society of Security Analysts and the Heritage Foundation in Washington, DC.

In December 2005 he was interviewed on camera by Emmy winner Bob Simon of CBS News 60 Minutes for a story on the Albertan oil sands.

He has also been interviewed on several television and radio programs including Calgary's Global TV and the CBC, and for many publications including Canada's National Post and Macleans, and has written for others including the South China Morning Post and Alberta Oil Magazine. In March 2006, Mr. Cedoz's article "Thinking Beyond OPEC," which provides recommendations for American energy security and foreign policy strategy, was featured in the prestigious Journal of International Security Affairs. Portions of the article were featured in the 25th Anniversary issue of Oil and Gas Investor magazine.

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Charles R. Close - Director and Chief Financial Officer: Mr. Charles R. Close is currently serving a three year term as a director of the Corporation. On March 1, 2010, Mr Close also assumed the role of Chief Financial Officer for the Corporation. Mr. Close brings to the Corporation experience from a distinguished career in accounting and taxation expertise specific to the energy business.

Mr. Close is the owner of C. R. Close & Associates, PC ("Close & Associates"), a certified public accounting practice located in Houston, Texas specializing in the energy industry. Mr. Close has been continuously employed in that practice for thirteen years. The business activities of Close & Associates focus on tax financial reporting issues, federal and state tax planning and compliance, transaction analysis and support, and federal and state audit support. The client base includes large public independent oil and gas companies, a public multinational pipeline company and energy related service companies.

Close & Associates also provides full financial support for a privately owned domestic oil and gas company and an energy service company. Duties for the domestic oil and gas company include oversight and preparation of the monthly financials and joint interest billings, cash management, tax planning and compliance and coordination of banking relationships. Duties for the private energy service company include the oversight of daily accounting operations, preparation of the monthly financial package for investors, oversight and coordination of the annual operating budget, interaction and coordination of banking relationships, and management of working capital. Other management duties include business development, compensation planning to include structuring of employee non-qualified compensation plans, contract negotiations, international tax structuring, coordination and management of legal issues, and long term strategic planning.

Prior to starting Close & Associates in 1993, Mr. Close enjoyed a successful twelve year tenure with Price Waterhouse in Texas. During his time at Price Waterhouse, Mr. Close advanced to the position of Senior Tax Manager in the Petroleum Industry Services Group. Responsibilities included tax planning, transactional analysis, consultation and compliance for both multinational and domestic oil and gas exploration and production companies and for several oil field service companies.

Mr. Close's international experience includes negotiation and financial structuring to include financial reporting and tax compliance of deals in Argentina, Canada, Kazakhstan, Mexico, and Peru.

Mr. Close graduated from the University of Texas in 1980 with a Bachelor's Degree of Business Administration (Accounting) and is a Certified Public Accountant. He is a member of the American Institute of Certified Public Accountants and the Texas Society of Certified Public Accountants.

Chris A. Dittmar - Director and Chief Executive Officer: Mr. Chris A. Dittmar is currently serving a three year term as a Director and additionally is serving as Chief Executive Officer and Corporate Secretary of the Corporation.

Prior to his involvement with the Corporation, Mr. Dittmar served as CEO of Alliance Energy Corporation ("Alliance"), a privately held family corporation organized to acquire and develop vertically integrated energy assets. Alliance currently holds interests onshore Texas and Oklahoma and off shore Louisiana.

In 2006, Mr. Dittmar in his capacity as limited partner and financial advisor to East Cameron Partners, LP. completed the first ever Sharia-compliant securitized market financing of assets ("Sukuk") based in the United States. The $165.7 million dollar Sukuk securitized Gulf of Mexico leasehold interests and reserves in a producing natural gas and condensate field 20 miles offshore the State of Louisiana. The offering was led by Merrill Lynch as sole book runner, structured by BSEC, a Lebanese based investment bank and rated by Standard & Poor's. The Sukuk was structured so that Islamic investors effectively received a fixed rate of return while being considered owners of the underlying assets. The transaction attracted Islamic as well as several conventional investors in the United States and Europe.

Mr. Dittmar was the Chairman, President and CEO of Xavier Corporation from 1993-1997. Xavier was an independent exploration and production corporation principally engaged in the acquisition and development of natural resources in the Former Soviet Union. It entered into joint ventures and technical service agreements with Russian entities for the exclusive exploration, development, production, processing and marketing of oil and gas reserves in excess of two billion barrels. While with Xavier, Mr. Dittmar developed the corporate business plan and raised $100 million dollars of equity and debt financing for the Corporation. Mr. Dittmar also has extensive experience recruiting and managing senior management teams required to implement large-scale international operations.

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Prior to 1993, Mr. Dittmar managed family oil and gas investments and has held previous positions as Assistant Controller for Occidental Chemical Company and Audit Manager for Occidental Petroleum Corporation as well as Senior Accountant at Aluminum Company of America.

Mr. Dittmar graduated from Cleveland State University, Cleveland, Ohio with a Juris Doctor degree. Mr. Dittmar completed his undergraduate studies at Iowa State University graduating with a Bachelor of Science in Economics and Finance. He is an active member in the Association of International Petroleum Negotiators and the World Affairs Council of Houston.

Joseph Lessard previously served as Chief Financial Officer and Vice President Americas. While Mr. Lessard resigned from his role as Chief Financial Officer on March 1, 2010, he continues to serve as Vice President, Americas. Mr. Lessard has acquired 18 years of extensive financial and business development experience in energy development and power plant operations primarily in emerging markets.

Most recently, Mr. Lessard served as Vice President, Americas for Globeleq, Inc. ("Globeleq") where he led that Company's business development activities in Latin America. He was one of the driving forces behind the conception and formation of Globeleq in June 2002. In 2007, Globeleq successfully sold it Latin American portfolio. The proceeds of this sale, together with distributions to date, totalled more than three times Globeleq's original investment.

Under his direction, Globeleq successfully entered the power markets in Peru, Bolivia, Chile and Argentina. Mr. Lessard was directly responsible for originating, negotiating and closing a greenfield development project and four merger and acquisition transactions representing over $300 million dollars. He also arranged several bond and bank financings totalling $200 million dollars. In August 2002, he successfully placed the largest single bond issuance to date in Peru and the first ever by a holding company. In 2004, he completed the first bond issued by a branch company in Bolivia.

In 1999, together with two other principals, Mr. Lessard formed Hart Energy International ("HEI") to pursue a contrarian strategy of aggregating emerging market power assets. The principals of HEI accurately interpreted market trends that forecast a pending exodus by large energy companies from emerging markets and reasoned that high quality assets would be available at steep discounts. In line with their strategy, Mr. Lessard negotiated the exclusive right to buy Entergy's Latin American portfolio, including positions in Peru, Chile and Argentina. The Entergy transaction was closed in 2002, paving the way for the launch and success of Globeleq as the vehicle for implementing the HEI strategy.

From 1994 to 1999, Mr. Lessard was Regional Managing Director of Coastal Power Company, where he managed regional business units in the United States' Northeast region and Southeast Asia. As Regional Managing Director, Mr. Lessard had full profit-loss responsibility for the region, including business development, asset management and plant operations. In the United States' Northeast, he managed three power plants and successfully acquired a fourth. In Southeast Asia, Mr. Lessard established offices in Bangkok, Jakarta and Manila and successfully secured power projects in Thailand and Indonesia. Prior to his role as Regional Managing Director, he negotiated commercial agreements for Coastal Power's Central America and South East Asia operations.

Between 1987 and 1992, Mr. Lessard served as a nuclear-qualified officer onboard the U.S.S. Alabama, a trident-class nuclear submarine. During that time, he served as Reactor Controls Assistant, Damage Control Assistant and Quality Assurance Officer.

Mr. Lessard received his Masters in Business Administration degree from Texas A&M University, College Station, Texas. Mr. Lessard also completed his undergraduate studies at Texas A&M University, earning a Bachelor of Science degree in Electrical Engineering. He currently serves on the Board of Visitors advisory committee for the Corps of Cadets at Texas A&M University.

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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

DIRECTOR COMPENSATION

Beginning in August 2002, Director's annual compensation has been set at $30,000, such compensation is accrued.

EXECUTIVE COMPENSATION

Executives have no 401(k) or retirement plan through the Company.

The following table reflects executive officer compensation for services to the Company for the year ended December 31, 2009.

SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION					LONG TERM COMPENSATION
NAME/POSITION	YEAR	SALARY	BONUS	TOTAL	RESTRICTED STOCK	SECURITIES	LTIP	OTHER
	-	-	-	CMPSN	AWARDS	OPTIONS/SARS	PAYOUTS	-
Richard G. Boyce / COO	2009	$ 240,000 (1)	-----	$ 240,000
	2008	$ 240,000 (1)(2)	-----	$ 240,000	-----	-----	-----	-----
Chris A. Dittmar / CEO	2009	$ 240,000 (1)		$ 240,000
	2008	$ 240,000 (1)(2)	-----	$ 240,000	-----	-----	-----	-----
Joseph Lessard / CFO	2009	$ 200,000 (1)	$ 100,000 (3)	$ 300,000	-----	-----	-----	-----
	2008	$ 75,000 (1)(2)	-----	$ 75,000	-----	-----	-----	-----

(1) 2008 fourth quarter and 2009 full-year salary for Mr. Boyce, Mr. Dittmar and Mr. Lessard was accrued.

(2) Salaries accrued from January 1, 2006 through September 30, 2008 for Mr. Boyce, Mr. Dittmar, Mr Lessard and Mr. Swift were paid-in-kind with XX shares of common stock priced at the closing price on that date of $2.70 per share.

(3) On February 19, 2009, the Annual Bonus for Mr. Lessard was paid in-kind with shares of common stock priced at the closing price on that date.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information as of January 30, 2010, with respect to the beneficial ownership of shares of Common stock by (i) each person who is known to the Company to beneficially own more than 5% of the outstanding shares of Common stock, (ii) each director of the Company, (iii) each officer of the Company and (iv) all officers and directors of the Company as a group. Unless otherwise indicated, each stockholder has sole voting and investment power with respect to the shares shown.

Title of Class	Name and Address* of Beneficial Owner	Amount and Nature of Beneficial Owner	Percent of Class
Common Stock	Richard G. Boyce - Director, Chief Operating Officer	14,583,002	16.9%
Common Stock	John A. Brush - Director	1,744,444	2.0%
Common Stock	Frederick Cedoz - Director	375,000	0.4%
Common Stock	Charles R. Close - Director	1,280,496	1.5%
Common Stock	Chris A. Dittmar - Director, Chief Executive Officer	15,062,058	17.4%
Common Stock	Joseph Lessard - Chief Financial Officer, VP Americas	1,172,408	1.4%
Common Stock	Larry Swift - Chief Financial Officer/Controller	2,972,500	3.4%

* The address for all Officers and Directors is Three Riverway, Suite 825, Houston, TX 77056.

All Officers and Directors of the Company as a group hold 37,189,908 shares of Common stock, which represents 43.0% of the total outstanding shares of Common stock. As of the date of this report, the Company knows of no arrangement or understanding that will result in a change of control within the Company.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Board of Directors of the Company has adopted a policy that Company affairs will be conducted in all respects by standards applicable to publicly-held corporations and that the Company will not enter into loans between the Company and its officers or directors.

On June 7, 2004 ($400,000) and August 10, 2004 ($950,000) the Company entered into these Notes Payable and received a total of $1,350,000 from OCE Partners, LLC and OCE Interests, LLC. See Note 8 to the financial statements at page 36. These entities are all related parties managed by Campbell Evans.

As of April 11, 2006, Open Choke Energy Partners No. 1, LP and Chris A. Dittmar contributed $3,000,000 in equity to EnDevCo Eureka, LLC (Eureka) in order for EnDevCo Eureka to complete its purchase of the Short Junction Field in Oklahoma. EnDevCo Eureka is owned 55% by EnDevCo, Inc., 30% by Open Choke Energy Partners and 15% by Chris A. Dittmar. Open Choke Energy Partners is a related party managed by Campbell Evans. The Company entered into an advancing term credit agreement for $30,000,000 on April 13, 2006 through its subsidiary EnDevCo Eureka, LLC with GasRock Capital, LLC to fund the purchase of the Short Junction Field. The note is secured by all of EnDevCo Eureka's assets and certain personal assets owned by Chris A. Dittmar, CEO of the Company. EnDevCo Eureka's assets are cross-collateralized on a $3,469,000 loan made by GasRock Capital, LLC to Alliance Energy Corporation (AEC), a related party. This loan is currently in default, with interest only payments being made.

Principal accountant fees during 2009 were $0.

ITEM 15. EXHIBITS

1. Exhibits:
See index to Exhibits beginning on page 45 of this report.

2. Form 8-K.

None.

 

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SIGNATURES

In accordance with the requirements of Section 13 of 15(d) of the Exchange Act, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on April 15, 2010.

EnDevCo, Inc.

CHRIS A. DITTMAR
CHRIS A. DITTMAR
CHIEF EXECUTIVE OFFICER AND DIRECTOR

Pursuant to the requirements of the Exchange Act, this report has been signed below by the following persons in the capacities and on the dates indicated:

RICHARD G. BOYCE	JOHN A. BRUSH	FREDERICK CEDOZ
RICHARD G. BOYCE	JOHN A. BRUSH	FREDERICK CEDOZ
CHIEF OPERATING OFFICER AND DIRECTOR	DIRECTOR	DIRECTOR
April 15, 2010	April 15, 2010	April 15, 2010
CHARLES R. CLOSE	CHRIS A. DITTMAR
CHARLES R. CLOSE	CHRIS A. DITTMAR
CHIEF FINANCIAL OFFICER AND DIRECTOR	CHIEF EXECUTIVE OFFICER AND DIRECTOR
April 15, 2010	April 15, 2010

26

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EnDevCo, Inc. and Subsidiaries
Consolidated Balance Sheets
	December 31,
	2009	2008
	(Unaudited)	(Restated)
ASSETS
Current Assets
Cash	$         (7,288)	$         46,319
Accounts Receivable	36,303	111,676
Accounts Receivable - Joint	3,339	3,616
Accounts Receivable - Other	33,030	163,329
Prepaid Expense	3,068	3,068
Other - Hedging	-	-
Total Current Assets	68,453	328,080
Property and equipment
Oil and Gas Properties and Equipment under Full Cost Method	24,112,273	24,123,599
Less Accumulated Depletion	(1,335,479)	(1,227,521)
Net Property and Equipment	22,776,795	22,896,078
Total Assets	$  22,845,247	$  23,224,158
	==========	==========
LIABILITIES
Current Liabilities
Accounts Payable	$  4,863,933	$  4,728,580
Cash Overdraft	--	--
Accrued Liabilities	1,808,027	1,114,616
Hedging Liability	--	--
Revenue Payable	45,986	55,658
Taxes Payable	455,879	376,624
Payable to Related Party	643	4,556,055
Notes Payable - Current	$  15,064,950	$  13,423,221
Notes Payable - Related Party	1,313,224	1,813,224
Total Current Liabilities	23,552,643	26,067,978
Non-current Liabilities
Common Stock Issuance Liability	--	354,635
Notes Payable	--	--
Notes Payable - Related Party	--	--
Total Long Term Liabilities	--	354,635
Total Liabilities	23,552,643	26,422,613
STOCKHOLDERS' DEFICIT
"Series A" Convertible Preferred Stock
10,000,000 shares authorized, $0.01 par value,	--	--
0 Shares Outstanding December 31, 2009
0 Shares Outstanding December 31, 2008
Common Stock
500,000,000 shares authorized, without par value,	49,374,818	43,315,408
86,462,107 Shares Outstanding December 31, 2009
70,329,239 Shares Outstanding December 31, 2008
Additional Paid in Capital	6,826,682	6,826,371
Retained Deficit	(59,908,895)	(56,340,234)
Stockholders' Deficit	(3,707,396)	(6,198,455)
Non-controlling Interest	3,000,000	3,000,000
Total Stockholders' Deficit	(707,396)	(3,198,455)
Total Liabilities and Stockholders' Deficit	$ 22,845,247	$ 23,224,158
	==========	==========

The accompanying notes are integral part of the consolidated financial statements.

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EnDevCo, Inc. and Subsidiaries
Consolidated Statements of Operations
	Years Ended December 31,
	2009	2008
	(Unaudited)	(Restated)
	_______________________	_______________________
Revenues
Oil Sales	$  533,225	$  2,833,484
Gas Sales	1,180	283.990
Pipeline Transmission	1,816	12,967
Total Revenues	536,222	3,130,441
Cost of Revenues
Lease Operating Cost	113,026	722,905
Production Taxes	42,775	224,513
Depletion	107,958	387,281
Total Cost of Revenues	283,758	1,334,699
Gross Profit	252,463	1,795,742
Costs and Expenses
General and Administrative	544,201	960,010
Salaries and Wages	1,040,000	522,191
Shareholder Services	795	58,470
Total Costs and Expenses	1,584,996	1,540,671
Net Loss from Operations	(1,332,532)	255,071
Other Income and Expenses
Interest and Other Income	8,665	62,403
Lawsuit Settlement	--	200,000
Hedging Income(Loss)	--	902,506
Write-off of Colombia Option	--	(1,000,000)
Shareholder Roundup Expense	--	(2,465,380)
Interest Expense	(2,234,101)	(2,197,307)
Total Other Income(Expenses)	(2,225,436)	(4,497,778)
Net Loss	$ (3,557,968)	$ (4,242,707)
	===========	===========
Basic and Diluted Loss Per Common Share	$         (0.05)	$         (0.08)
Weighted Average Number of Common Shares
Used in Basic Loss Per Share Calculations	73,186,306	54,240,058
	=============	=============

The accompanying notes are integral part of the consolidated financial statements.

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EnDevCo, Inc. and Subsidiaries
Consolidated Statements of Cash flows
	Years Ended December 31,
	2009	2008
	(Unaudited)	(Restated)
Cash flows from Operating Activities:
Net loss	$  (3,557,968)	$  (4,242,707)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Issuance of stock for consulting, salaries & obligations	5,704,775	289,131
Issuance of stock for shareholder roundup	--	2,465,380
Depletion	107,958	387,281
Hedging activity	--	(1,471,334)
Amortization of net debt discount	112,851	123,236
Write-off of Colombia option	--	1,000,000
Changes in assets and liabilities
Accounts receivable	75,373	19,986
Accounts receivable - joint	277	24,099
Accounts receivable - other	130,299	(91,936)
Revenue payable	(9,671)	24,223
Accounts payable	135,353	3,109,049
Cash overdraft	--	(27,538)
Accrued liabilities	963,411	134,029
Taxes payable	79,255	118,192
Payable to related parties	(4,555,411)	4,104,706
Other	(10,385)	619
Net cash provided by Operating Activities	(1,093,883)	5,966,416
Cash flows from Investing Activities:
Purchase of oil and gas property	11,326	(5,847,235)
Net cash used by Investing Activities	11,326	(5,847,235)
Cash flows from Financing Activities:
Note payable payment	(500,000)	--
Increase in notes payable	1,528,878	(73,925)
Net cash provided by Financing Activities	1,028,878	(73,925)
Net Change in Cash	(53,679)	45,256
Cash and cash equivalents
Cash Balance, Begin Period	46,391	1,135
Cash Balance, End Period	$            (7,288)	$            46,391
	===========	===========
Supplemental Cash Flow information
Cash Paid for Interest	$    705,223	$     2,046,220

The accompanying notes are integral part of the consolidated financial statements.

32

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EnDevCo, Inc. and Subsidiaries
Notes To Consolidated Financial Statements
December 31, 2009

NOTE 1 - Summary of Significant Accounting Policies

Basis of Presentation -- EnDevCo, Inc. was originally incorporated under the laws of the state of Texas on November 7, 1980 as Roberts Oil and Gas, Inc. On September 30, 2003, the Company filed a Restated Articles of Incorporation with the Secretary of State of the State of Texas to change its name from Adair International Oil and Gas, Inc. to EnDevCo, Inc.

Principles of Consolidation -- The consolidated financial statements include the accounts of EnDevCo, Inc. and its subsidiaries, EnDevCo Eureka LLC, Superior Stock Transfer, Inc., EnDevCo Minerals, Inc., EnDevCo Colombia S.A., EnDevCo Eureka del Peru S.A.C., and Quachita Gas Company. (the "Company"). All material inter-Company balances and transactions have been eliminated in consolidation. All subsidiaries except EnDevCo Eureka LLC and Superior Stock Transfer, Inc. (the Company's transfer agent) were inactive at December 31, 2009.

Cash and Cash Equivalents -- The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

Fair Value of Financial Instruments - Management estimates that the carrying value of financial instruments reported in the financial statements approximates their fair values.

Derivative Instruments - The Company makes limited use of derivative instruments. The Company does not engage in speculative derivative activities or derivative trading activities nor does it use derivatives with leverage features. When the Company does enter into derivative transactions, it is to offset exposures associated with hydrocarbon prices that arise from existing assets, liabilities and transactions. The gains and losses resulting from changes in the fair value of derivatives are recorded in operations. The company had no outstanding derivatives as of December 31, 2009.

Oil and Gas Properties -- The Company follows the full cost method of accounting for oil and gas properties. Accordingly, all costs associated with acquisition, exploration, development of oil and gas reserves, including directly related overhead costs and related asset retirement costs, are capitalized.

All capitalized costs of oil and gas properties, including the estimated future costs to develop proved reserves, are amortized on the unit-of-production method using estimates of proved reserves. Investments in unproved properties and major development projects are not amortized until proved reserves associated with the projects can be determined or until impairment occurs. If the results of an assessment indicate that the properties are impaired, the amount of the impairment is added to the capitalized costs to be amortized.

In addition, the capitalized costs are subject to a "ceiling test," which basically limits such costs to the aggregate of the "estimated present value," discounted at a 10-percent interest rate of future net revenues from proved reserves, based on current economic and operating conditions, plus the lower of costs or fair market value of unproved properties.

Sales of proved and unproved properties are accounted for as adjustments of capitalized costs with no gain or loss recognized, unless such adjustments would significantly alter the relationship between capitalized costs and proved reserves of oil and gas, in which case the gain or loss is recognized in income.

Abandonments of properties are accounted for as adjustments of capitalized costs with no loss recognized, except for abandoned leases located outside of the United States. The Company recognized a $1,000,000 loss on an expired foreign lease option in December 2008.

Depletion expense for the years ended December 31, 2009 and 2008 was $107,958 and $387,281, respectively.

33

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EnDevCo, Inc. and Subsidiaries
Notes To Consolidated Financial Statements
December 31, 2009

NOTE 1 - Summary of Significant Accounting Policies (cont)

Income Taxes -- The Company accounts for income taxes pursuant to the asset and liability method of computing deferred income taxes. Deferred tax assets and liabilities are established for the temporary differences between the financial reporting bases and the tax bases of the Company's assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled. When necessary, valuation allowances are established to reduce deferred tax assets to the amount expected to be realized.

Loss Per Share -- Basic loss per share are computed by dividing the loss by the weighted average number of common shares outstanding.

Diluted loss per share is computed using the weighted average number of common shares and the dilutive securities outstanding. Dilutive securities having an anti-dilutive effect on diluted loss per share are excluded from the calculation.

Use of Estimates -- Management uses estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates.

Long-Lived Assets -- The Company routinely evaluates the carrying value of its long-lived assets. The Company records impairment losses when events or circumstances indicate that a long-lived asset's carrying value may not be recovered.

Reclassifications -- Certain amounts included in the financial statements for 2007 have been reclassified to comply with 2008 presentation.

Newly Issued Accounting Pronouncements - In July 2006, the FASB issued Interpretation No. 48 (FIN 48) "Accounting for Uncertainty in Income Taxes," which prescribes a recognition threshold and measurement process for recording in the financial statements uncertain tax positions taken or expected to be taken in a tax return. Additionally, FIN 48 provides guidance on the recognition, classification, accounting in interim periods and disclosure requirements for uncertain tax positions. The provisions of FIN 48 are effective in the current fiscal year for the Company. The adoption of FIN 48 did not have a material impact on the Company's financial statements.

In September 2006, the Securities and Exchange Commission issued SAB No. 108 "Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements." SAB No. 108 addresses quantifying the financial statement effects of misstatements, specifically, how the effects of prior year uncorrected errors must be considered in quantifying misstatements in the current year financial statements. The provisions of SAB No. 108 are effective in the current fiscal year for the Company. The adoption of SAB No. 108 did not have a material impact on the Company's financial statements.

In February 2007, the Financial Accounting Standards Boards ("FASB") issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities," including an amendment of FASB Statement No. 115. This statement provides companies with an option to report selected financial assets and liabilities at fair value. This statement is effective for fiscal years beginning after November 15, 2007 with early adoption permitted. The Company has fully adopted the provisions of SFAS No.159 beginning fiscal year 2008 and does not anticipate any material impact on its consolidated financial position and results of operations.

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements." This statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and requires additional disclosures about fair value measurements. This statement does not require any new fair value measurements, but the application of this statement could change current practices in determining fair value. The adoption of this guidance did not have any material impact on the Company's consolidated financial position and results of operations.

34

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EnDevCo, Inc. and Subsidiaries
Notes To Consolidated Financial Statements
December 31, 2009

NOTE 2 - Non-monetary Stock Transactions

Included in the Company's consolidated statement of operations for the years ended December 31, 2009 and 2008 were expenses that were paid with Company stock. The Company issued stock in lieu of cash in transactions summarized as follows for the years ended December 31, 2009 and 2008. See Item 13 Certain Relationships and Related Transactions at page 24 and Note 8 to these financial statements at page 41.

	December 31, 2009			December 31, 2008
	Common	Preferred	Value	Common	Preferred	Value
For Salaries	1,214,947		$ 320,612	--	(169,250)	$ (169,250)
Other Obligations	14,917,921		$ 5,664,825	1,457,078	(70,900)	4,966,866
	_________	________	__________	_________	________	__________
Total	16,132,868		$ 5,985,437	1,457,078	(240,150)	$ 4,797,616
	========	=======	=========	========	=======	========

NOTE 3 - Stockholders' Equity

The Board of Directors passed a Corporate Resolution that reads, "Pursuant to and in accordance with Article 2.13 of the Texas Business Corporation Act of the State of Texas the Company does hereby certify that, pursuant to the authority conferred on the Board of Directors by the Articles of Incorporation of the Corporation, and pursuant and in accordance with Article 2.13 of the Texas Business Corporation Act of the State of Texas, said Board of Directors, pursuant to unanimous written consent dated December 9, 2002, duly adopted a resolution providing for the authorization and issuance of 5,000,000 shares of "Series A" Convertible Preferred Stock, $0.01 par value per share (the "Series A" Preferred Stock). At the annual shareholders meeting held on October 15, 2004, the shareholders approved an increase in the total number of authorized "Series A" convertible preferred shares with a $0.01 par value to 10,000,000.

On April 20, 2008, all of the outstanding preferred shyares were converted to common shares at the subscribed 10 to 1 ratio. As of December 31, 2009 and December 31, 2008, there were no preferred shares outstanding.

On March 10, 2008, the Company effected a 1 for 100 reverse stock split of its common stock. The Board of Directors' resolution included the following provision:

"RESOLVED, that no fractional shares or less than an even hundred round lot of
common stock shall be issued as a result of the Reverse Split."

This provision has the effect of altering the ownership percentage of each shareholder. The outstanding number of common shares on March 10, 2008, was 257,295,087 which would convert to 2,572,951 shares of common stock, except that all shareholders are to receive even one hundred share lots. The rounding up of split shares to one hundred share lots resulted in an additional 493,076 shares of common stock being issued, with a fair value of $2,465,380 (March 11, 2008, opening trading value $5.00). The fair value of the extra common shares issued was recognized as a charge to operations in March, 2008. The consolidated statement of changes in stockholders' deficit, the weighted average number of common shares outstanding reflected in the statements of operations and the loss per share have been restated to reflect the reverse stock split.

36

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EnDevCo, Inc. and Subsidiaries
Notes To Consolidated Financial Statements
December 31, 2009

NOTE 4 - Commitments and Contingencies

Legal Proceedings for the Year Ended December 31, 2009:

The law firm of Phillips & Akers, P.C. ("P&A"), are the attorneys of record for the Company in a case styled: Cause No: 2006-34662; Farzad Askari v. EnDevCo, Inc.

Mr. Askari filed a breach of contract case claiming the Company (the "Defendant") had not paid Mr. Askari (the "Plaintiff") for work he did as an alleged consultant in 2002 for John W. Adair and Adair International Oil & Gas, Inc. The Company believed that Mr. Askari was never a consultant for the Company and never performed any work for the Company and therefore was not entitled to receive any compensation from the Company.

The case went to trial and the jury's verdict was that Mr. Askari was not entitled to any compensation and that judgment was entered on January 11, 2008. All of Mr. Askari's post trial motions to date have been unsuccessful; however, he filed notice of appeal in the 14th Court of Appeals. Appellate briefs were filed by both parties and after receiving them the Court declined to hear oral arguments.

On July 02, 2009, the 14th Court of Appeals ruled that the trial court judgment in all things and in all ways was affirmed. The time for further appeals has expired and this matter is now closed.

P&A are the attorneys of record for the Company in a case styled: Cause No: CJ 07 1859 L; Basic Energy Services, LP v. EnDevCo Eureka, LLC. et al. Basic Energy Services has filed a breach of contract case claiming EnDevCo Eureka, LLC (the "Defendant") has not paid for goods and services, totaling $1,315,910, that are in dispute between the parties. Following a review of all disputed invoices, the Company signed a settlement agreement on July 07, 2008 with the Plaintiff. The Company has paid sixty (60) percent of the settlement amount, but remains in default until the remaining balance is paid.

P&A and J. John Hager, are the attorneys of record for the Company in a case styled: Cause No: CIV-08-0395-HE; KAL Drilling Inc. v. EnDevCo Eureka, LLC. et al. KAL Drilling has filed a breach of contract case claiming EnDevCo Eureka, LLC (the "Defendant") has not paid for goods and services that are in dispute between the parties. The Company has denied all of Plaintiff's allegations and filed a counterclaim against the Plaintiff on May 15, 2008 for breach of contract, misrepresentations, fraud, negligence and gross negligence.

P&A are the attorneys of record for the Company in a case styled: Cause No. 2009-16668; Hamm & Phillips Service, Co. Inc. v. EnDevCo, et al; in the 152nd Judicial District Court of Harris County, Texas. This is a case involving approximately $75,000 in past due bills, plus interest, and is a suit on sworn account. Judgment has been entered on this admitted due amount in the amount of $86,532.40.

P&A are the attorneys of record for the Company in a case styled: Cause No. CJ-2009-627L; Integrated Production Services, Inc. v. EnDevCo, et al; in the District Court of Oklahoma County, Oklahoma. This is a case involving $70,000 in past due bills, plus interest, and is a suit and is a suit on sworn account.

P&A are the attorneys of record for the Company in a case styled: Cause No. 944221; Pason Systems USA Corp. v. Endevco, Inc. aka Endevco Eureka, LLC, et al; in the County Civil Court at Law No. 2 of Harris County, Texas. This is a case involving $25,000 in past due bills, plus interest, and is a suit on sworn account.

The Company is a party to various claims, but is not a party to any other litigation at this time. Although no assurances can be given, the Company believes based on its experience to date, that the ultimate resolution of such items, individually or in the aggregate, would not have a material adverse impact on the Company's financial position or results of operations.

37

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EnDevCo, Inc. and Subsidiaries
Notes To Consolidated Financial Statements
December 31, 2009

NOTE 4 - Commitments and Contingencies (cont)

Concentrations of Credit Risk

The Company has financial instruments that are exposed to concentrations of credit risk and consist primarily of cash and accounts receivable. The Company routinely maintains cash and temporary cash investments at certain financial institutions in amounts substantially in excess of FDIC insurance limits; however, management believes that these financial institutions are of high quality and the risk of loss is minimal. At December 31, 2009, the Company had no cash balances in excess of the FDIC limits. The accounts receivable represent balances due from oil and gas purchasers and are collected within thirty (30) days.

The Company's current and contemplated activities are in the areas of oil and gas exploration and production, and power generation. Federal, state and local laws and regulations have been enacted regulating these activities. Moreover, "toxic tort" litigation has increased markedly in recent years as persons allegedly injured by chemical contamination seek recovery for personal injuries or property damage. These legal developments present a risk of liability should the Company be deemed to be responsible for contamination or pollution. There can be no assurance that the Company's policy of establishing and implementing proper procedures for complying with environmental regulations will be effective at preventing the Company from incurring a substantial environmental liability. If the Company were to incur a substantial uninsured liability for environmental damage, its financial condition could be materially adversely affected.

NOTE 5 - Earnings Per Share

The following reconciles the components of the earnings per share (EPS) computation:

	2009			2008
	(Loss)	Common Shares	Loss Per Share	(Loss)	Common Shares	Loss Per Share
Net Income	$(3,557,968)	73,186,306	$(0.05)	$(4,242,707)	54,240,058	$(0.08)

Preferred Stock shares were not included in the calculation of diluted EPS.

38

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EnDevCo, Inc. and Subsidiaries
Notes To Consolidated Financial Statements
December 31, 2009

NOTE 6 - Income Taxes

The provision for income taxes has been calculated based on federal statutory rates of 34%.

	Years ended December 31,
	2009	2008
Income tax benefit calculated
using the statutory rates	$ 1,442,520	$ 1,442,520
Non-deductible expenses	(1,279,875)	(1,279,875)
Changes in valuation allowance	(162,645)	(162,645)
	$ --	$ --
	==========	==========
Temporary differences, which give rise to deferred tax assets and liabilities are as follows:
	Years ended December 31,
	2009	2008
Deferred Tax Liabilities:
Oil and Gas Properties	$(3,987,704)	$(3,987,704)
	(3,987,704)	(3,987,704)
Deferred Tax Asset:
Hedging Activity	--	--
Officer Salaries	70,380	70,380
Operating losses	18,718,435	18,718,435
Total Deferred Tax Asset	14,801,111	14,801,111
Valuation allowance	(14,801,111)	(14,801,111)
	___________	___________
	$ --	$ --
	==========	==========

Net operating losses are subject to IRS Sec 382 limitations because of greater than 50% ownership changes in 1997, 2002 and 2008. Unused net operating losses may be carried forward for 20 years from the year incurred and affect future income subject to IRS Sec 382 limitations. Because of the uncertainty of realization, the Company's management established a valuation allowance equal to the deferred tax asset.

39

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EnDevCo, Inc. and Subsidiaries
Notes To Consolidated Financial Statements
December 31, 2009

 

NOTE 7 - Note Payable - GASROCK CAPITAL LLC

The Company entered into an advancing term credit agreement for $30,000,000 on April 13, 2006 through its subsidiary EnDevCo Eureka, LLC with GasRock Capital, LLC to fund the purchase of the Short Junction Field in Cleveland County Oklahoma. This agreement was increased to $50,000,000 on April 2, 2007. The balance at December 31, 2009 was $15,064,950, net of debt discount of $41,077, and the Company paid interest of $705,223 for the year ended December 31, 2009. The note is secured by all of EnDevCo Eureka's assets and certain personal assets owned by Chris A. Dittmar, CEO of the Company. EnDevCo Eureka's assets are cross-collateralized on a $3,469,000 loan made by GasRock Capital, LLC to Alliance Energy Corporation, a related party. This loan is currently in default, with interest only payments being made.

On April 9, 2008, GasRock delivered to the Company a Notice of Events of Default and Unmatured Events of Default ("Default Notice") under the Credit Agreement. Due to these claimed Events of Default, interest under the Credit Agreement began accruing at the Default Rate of 15% and 100% of EnDevCo's Net Revenues were applied to Debt Service and other Obligations as of April 9, 2008. On April 16, 2008, GasRock delivered to the Company a Notice of Acceleration ("Acceleration Notice") under the Notes due to the continuing claimed Events of Default under the Credit Agreement. The Acceleration Notice declared the amounts due under the Note to be accelerated and due and owing in full as of April 16, 2008.

On July 22, 2008, GasRock, Eureka and Alliance Energy Corporation ("Alliance", and together with Eureka, the "Borrowers"), entered into that certain Limited Forbearance Agreement, pursuant to which GasRock agreed, subject to the terms thereof, to forbear from pursuing remedies under the Credit Agreement and Notes in respect of the Events of Default claimed as of that same date until the earlier of (i) November 15, 2008 and (ii) the date that GasRock gives Eureka notice of any additional payment default under the Credit Agreement. Alliance is controlled by the Company's CEO and is a guarantor of the Eureka Obligations under the Credit Agreement. GasRock is also a lender to Alliance under an Advancing Term Credit Agreement (the "Alliance Credit Agreement", and together with the Credit Agreement, the "Credit Agreements".

The Forbearance is subject to the following conditions to be fulfilled:

1) On or before November 15, 2008, (i) the Borrowers must repay all Obligations (as defined in the Credit Agreements) or (ii) EnDevCo must have entered an agreement for the full or partial sale of the Short Junction Field, the proceeds of which would fully repay the Obligations owing under the Credit Agreements, and such sale shall close and repayment of the Obligations shall be made by December 31, 2008;

2) If the Obligations are not repaid by November 15, 2008, EnDevCo must assign a 5.0% net profits interest in the Short Junction Field to GasRock, effective as of November 1, 2008. The form of this assignment and the potential assignments discussed in paragraph 3, below, will be substantially in the form of the Conveyance of Net Profits Overriding Royalty Interests, attached as Exhibit A to the Forbearance Agreement;

3) If the Obligations are not repaid by December 15, 2008, EnDevCo must assign an additional 1.0% net profits interest in the Short Junction Field to GasRock, effective as of December 1, 2008, and will assign to GasRock an additional 1.0% net profits interest each subsequent month if the Obligations are not repaid by the 15th of such month;

4) EnDevCo shall escrow one 5% net profits interest conveyance and five 1% net profits interest conveyances to ensure it's delivery of any potential obligations under paragraphs 2 and 3, above;

5) Any and all Net Proceeds (as defined in the Forbearance Agreement) from any equity issuance, refinancing, or asset sale will be applied first to outstanding fees and expenses of GasRock, second to the accrued and unpaid interest on the Notes, and third to the outstanding principal balances on the Notes; and

6) The Borrowers must ensure that its hydrocarbon purchasers make payments relating to any of GasRock's overriding royalty interests in the Short Junction Field directly to GasRock.

40

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EnDevCo, Inc. and Subsidiaries
Notes To Consolidated Financial Statements
December 31, 2009

NOTE 8 - Note Payable - Long Term - Related Party

The Company has two long term notes payable totaling $1,313,224. Both notes accrue interest at the LIBOR monthly average coupon rate (1.90%) at December 31, 2009. The two notes are in the amounts of $363,224 and $950,000 respectively and are due and payable December 31, 2009. The maker of these notes consists of the following related parties managed by Campbell Evans: OCE Partners, LLC, and OCE Interests, LLC. Both notes are unsecured.

NOTE 9 - Interest and Other Income

Interest and Other Income during 2009 was $8,665.

NOTE 10 - Payable to Related Party

On June 5, 2007, EnDevCo entered into a farm-out agreement with an effective date of September 5, 2007, with Alliance Energy Corporation (AEC), a related party, whereby AEC paid all costs to drill an initial well (the WSJU #109StH, which is in production at the time of filing this report) and up to three future development wells. On June 30, 2008, the parties agreed to terminate the farm-out agreement thereby cancelling AEC's right to drill three future wells and transferring 100 percent ownership of the WSJU #109StH well to EnDevCo effective March 1, 2008. In consideration, EnDevCo agreed to assume approximately $5.7 million in liabilities resulting from the actual cost of drilling the WSJU #109StH well.

On November 23, 2009, the Company issued 14,503,078 Shares of common stock to settle the amount payable to Alliance. The shares were priced at the closing price for the stock on that date.

NOTE 11 - Going Concern

The Company has reported operating losses aggregating $7,800,675 for the two (2) year period ended December 31, 2009. At December 31, 2009, the consolidated balance sheet reported a working capital deficit of $23,484,191. The Company must raise significant amounts of cash to pay its current liabilities and to provide investment funds to continue development of its oil and gas leases. There can be no assurance the Company's management will be able to secure funding.

41

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EnDevCo, Inc. and Subsidiaries
Notes To Consolidated Financial Statements
December 31, 2009

 

NOTE 12 - Supplemental Oil and Gas Information (Unaudited)

Costs Incurred and Capitalized Costs in Oil and Gas Producing Activities are as follows:

Description	Harvest	Pine Curtain	Short Junction	Total
Oil and Gas Properties	$ --	$ 1,000,000	$ 23,123,599	$ 24,123,599
Less Accumulated Depr/Depl	--	--	$   1,227,521	$   1,227,521
Total, December 31, 2008	$ --	$ 1,000,000	$ 21,896,078	$ 22,896,078
	=========	=========	=========	=========
Oil and Gas Properties	$ --	$ 1,000,000	$ 23,112,273	$ 24,112,273
Less Accumulated Depr/Depl	--	--	--	$   1,335,479
Total, December 31, 2009	$ --	$ 1,000,000	$ 21,776,795	$ 22,776,795
	=========	=========	=========	=========

42

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EnDevCo, Inc. and Subsidiaries
Notes To Consolidated Financial Statements
December 31, 2009

NOTE 12 - Supplemental Oil and Gas Information (Unaudited) (cont)

Block XXIV, Peru - Following an extensive bidding process, a consortium including EnDevCo was awarded the exclusive concession to develop the Block XXIV prospect area located in northwest Peru. EnDevCo owns 20% of the consortium. Covering more than 276 thousand acres, the block contains both onshore and offshore prospects. The area is bracketed by recent discoveries to the immediate north (Olympic) and south (Olympic and Petrotech). The primary target horizon for the off shore area is the naturally fractured Amotape formation of Paleozoic age (quartzites, slates, etc.). This target formation boasts similar characteristics to those that have produced oil in the nearby Portachuelo Field and, more recently, the offshore San Pedro discovery. The reinterpretation of well logs using new technology indicates pay in target formation. Northwest Peru has solid infrastructure and substantial power demand, creating a ready-market for gas. For EnDevCo, the region represents an excellent opportunity for an integrated gas-to-power project.
.
Cleveland County, Oklahoma - On April 13, 2006, the Company acquired a 98.712% working interest with a 70.085% net revenue interest in the West Short Junction Unit and a 100% working interest with a 71% net revenue interest in the Central Short Junction Unit hereinafter referred to as the ("Short Junction Field and/or the Field") located in Oklahoma City, Oklahoma through its subsidiary EnDevCo Eureka, LLC for a purchase price of $11.5 million. EnDevCo Eureka, LLC is owned 55% by its parent EnDevCo, Inc. and 45% by private investors who are related parties. These investors contributed $3.0 million in equity to enable EnDevCo to consummate the transaction. EnDevCo Eureka, LLC, managed by EnDevCo personnel, is the Operator for the Field which has an acquisition date of January 1, 2006.

Project financing was provided by GasRock Capital, LLC of Houston, Texas and takes the form of a $50.0 million credit facility. GasRock Capital provides project based mezzanine debt financing to the oil and gas industry by backing proven management teams that identify high quality exploitation projects like the Short Junction Field.

Since acquiring the Field, the Company has methodically performed maintenance activities on all oil wells to include improved chemical and hot oil treatments; new pump jacks, existing pump jack re-alignment, bearing and rod replacement, beam compressor installation and pipeline integrity testing and cleanout. EnDevCo has also installed new pumps, a new water knockout and two new heater treaters for improved oil separation at the central collection and metering stages and terminated the re-injection of water into the Hunton reservoir by re-piping and installing a new salt water disposal well.

The Field purchase included full ownership rights to a field wide gas pipeline and gathering system that offers two independent taps to the interstate gas transmission system.

Short Junction Field was originally developed by Conoco using vertical wells drilled on a 40 acre well spacing, resulting in oil and gas production from 270 active wells within the 12,000 acre leasehold. The Field currently contains 34 unplugged production well bores of which 26 are currently active.

Historically the primary zone of interest has remained the Hunton formation for oil production. However, above the Hunton, the Bartlesville, Prue, Red Fork and Skinner Sandstones along with the Pink Lime zones are present and most are indicated as productive based on well log analysis.

43

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EnDevCo, Inc. and Subsidiaries
Notes To Consolidated Financial Statements
December 31, 2009

NOTE 12 - Supplemental Oil and Gas Information (Unaudited) (cont)

Current bottom hole pressures recently measured in the Hunton indicate that formation pressure today is essentially the same as when the Field was originally placed on production. This unique characteristic occurs as a result of the fact that Conoco instituted a water flood pressure maintenance program in the early stages of developing the field. As a result of this pressure maintenance, the original gas cap in the Hunton reservoir has never been produced.

EnDevCo plans to implement a 3D seismic program over the leasehold later this year in order to pursue an aggressive horizontal drilling program in the Hunton formation to increase oil and gas production from that reservoir and to develop identified shallow gas sand reservoirs indicated on the subsurface well control.

 

EnDevCo, Inc.
Supplemental Information
Year Ended December 31, 2008
(Unaudited)
	FULL
	COST
Capitalized Costs Relating to Oil and Gas
Producing Activities at December 31, 2009
Unproved oil and gas properties	$    1,000,000
Proved oil and gas properties	22,345,334
Support equipment and facilities	766,939
	24,112,273
Less accumulated depreciation, depletion, amortization, and impairment	1,335,479
Net capitalized costs	$  22,776,795
	=========

44

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EnDevCo, Inc. and Subsidiaries
Notes To Consolidated Financial Statements
December 31, 2009

NOTE 13 - Restatement

In connection with the filing of the Company's March 31, 2009 quarterly consolidated financial statements the management of the Company became aware of the need to restate the consolidated financial statements for the year ended December 31, 2008.

The following summaries the restated amounts:

		Amounts
Account Description	As Reported	Difference	As Restated
Balance Sheet	$             1,177,001	$             (62,385) (3)	$             1,114,616
Accrued Liabilities	274,378	101,886 (3)	376,624
Taxes Payable
Common Stock Issuance Liability	--	354,635 (1)	354,635
Common Stock	43,596,206	(280,798) (2)	43,315,408
Retained Deficit	56,226,820	113,414	56,340,234
Statement of Operations
Oil Sales	2,859,232	(25,748) (2)	2,833,484
Gas Sales	286,345	(2,355) (2)	283,990
Pipeline Transmission	13,076	(109) (2)	12,967
Lease Operating Cost	733,510	(10,665) (2)	722,905
Production Taxes	226,566	(2,053) (2)	224,513
Interest and Other Income	136,320	(73,917) (1)	62,403
Hedging Income (Loss)	926,512	(24,006) (2)	902,506
Net (Loss)	(4,129,293)	(113,414)	(4,242,707)
Statement of Cash Flow
Net Cash Provided by Operating Activities	1,496,510	365,200 (3)	1,861,710
Net Cash Used by Investing Activities	(1,377,329)	(365,200) (3)	(1,742,529)

The differences are the result of the following:

(1) In July 2008, the Company entered into a settlement agreement with a vendor who was owed $439,115. The agreement required the immediate issuance of 88,000 shares of the Company's common stock and the issuance of additional shares of common stock so that the trading value of the cumulative number of shares issued would equal $439,115 on January 19, 2009.

Total Value		$ 439,000
Trading value, January 19, 2009		÷ $0.96
Shares Issued		457,292
Shares Issued -
July 2008	88,000	$ 84,480
January 2009	369,292	354,635
	457,292	$ 439,115

The Company had originally recognized an issue value of the 88,000 shares of $365,200 and a gain on settlement of debt (included in other income) of $73,917.

(2) In 2008 the Company assigned a net profits interest to a lender and the effect of the agreement on the 2008 consolidated results of operations was:

Oil and Gas Revenues	$ (28,103)
Pipeline Transmissions	(109)
Production Costs	12,718
Hedging Income	(24,006)
	$ (39,500)

Due to the material effect on the first quarter of 2009 results of operations, the 2008 consolidated financial statements were restated to reflect the above changes.

(3) Reclass of related party liabilities.

 

45

 

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EnDevCo, Inc. and Subsidiaries
December 31, 2009

INDEX TO EXHIBITS
-
21	Subsidiaries of the Registrant, see page 49 of this report.
31.1	Certification per Rule 13a-14(a) by Chief Executive Officer, see page 50 of this report.
31.2	Certification per Rule 13a-14(a) by Chief Financial Officer, see page 51 of this report.
32.1	Certification per Section 1350 by Chief Executive Officer, see page 52 of this report.
32.2	Certification per Section 1350 by Chief Financial Officer, see page 52 of this report.

46

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EnDevCo, Inc. and Subsidiaries
December 31, 2009

(a) designed those disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by other personnel employed by the Company and its subsidiaries, particularly within the Reporting Period;

(b) designed those internal control over financial reporting, or caused such internal control to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the Company's internal control over financial reporting that occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect the Company's internal control over financial reporting; and

5. The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company's auditors and the audit committee of the Company's board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal control over financial reporting.

April 15, 2010

CHRIS A DITTMAR
CHRIS A DITTMAR
CHIEF EXECUTIVE OFFICER

48

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EnDevCo, Inc. and Subsidiaries
December 31, 2009

EXHIBIT 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO RULE 13A-14(A) OR 15D-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934

I, Charles R. Close, certify that:

1. I have reviewed this Annual Report on Form 10K of EnDevCo, Inc. (the "Company");

2. Based on my knowledge, the report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

4. The Company's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f)) for the Company, and we have:

(a) designed those disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by other personnel employed by the Company and its subsidiaries, particularly within the Reporting Period;

(b) designed those internal control over financial reporting, or caused such internal control to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the Company's internal control over financial reporting that occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect the Company's internal control over financial reporting; and

5. The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company's auditors and the audit committee of the Company's board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal control over financial reporting.

April 15, 2010

CHARLES R. CLOSE
CHARLES R. CLOSE
CHIEF FINANCIAL OFFICER

49

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EnDevCo, Inc. and Subsidiaries
December 31, 2009

EXHIBIT 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO RULE 13A-14(B) OR 15D-14(B) UNDER THE SECURITIES EXCHANGE ACT OF 1934 AND SECTION 1350 OF CHAPTER 63 OF TITLE 18 OF THE UNITED STATES CODE

I, Chris A. Dittmar, Chief Executive Officer of EnDevCo, Inc. (the "Company"), certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The report on Form 10K for the period ended December 31, 2008 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the date and for the periods reported therein.

April 15, 2010

CHRIS A. DITTMAR
CHRIS A. DITTMAR
CHIEF EXECUTIVE OFFICER

 

EXHIBIT 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO RULE 13A-14(B) OR 15D-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934 AND SECTION 1350 OF CHAPTER 63 OF TITLE 18 OF THE UNITED STATES CODE

I, Charles R. Close, Chief Financial Officer of EnDevCo, Inc. (the "Company"), certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The report on Form 10K for the period ended December 31, 2008 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the date and for the periods reported therein.

April 15, 2010

CHARLES R. CLOSE
CHARLES R. CLOSE
CHIEF FINANCIAL OFFICER

50

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