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EX-32.1 - CERTIFICATION OF PRESIDENT, CHIEF EXECUTIVE OFFICER, CHIEF FINANCIAL OFFICER, CH - ENERGY & TECHNOLOGY CORP.f10k2017ex32-1_energytech.htm
EX-31.1 - CERTIFICATION OF PRESIDENT, CHIEF EXECUTIVE OFFICER, CHIEF FINANCIAL OFFICER, CH - ENERGY & TECHNOLOGY CORP.f10k2017ex31-1_energytech.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

 

FORM 10-K

 

(Mark One)

ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For The Fiscal Year Ended December 31, 2017

 

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

 

ENERGY & TECHNOLOGY, CORP.

(Exact name of registrant as specified in Charter)

 

DELAWARE   333-143215   26-0198662

(State or other jurisdiction of
incorporation or organization)

  (Commission File No.)   (IRS Employee
Identification No.)

 

Petroleum Towers, Suite 530

3639 Ambassador Caffery Blvd Lafayette, LA 70503

Mail: P.O. Box 52523

Lafayette, LA 70505

(Address of Principal Executive Offices)

 

 

 

+1337- 984-2000

(Issuer Telephone number)

 

+1337- 988-1777

Issuer Fax Number

 

 

 

www.engt.com

www.energyntechnology.com

 

Securities registered under Section 12(b) of the Exchange Act:   None.
     
Securities registered under Section 12(g) of the Exchange Act:   Common stock, par value $0.001 per share.
    (Title of class)

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 the Securities Act. Yes ☐   No  ☒

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐   No  ☒

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  ☒ No  ☐

 

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

 

Large accelerated filer Accelerated filer
Non-accelerated filer (Do not check if a smaller reporting company) Smaller reporting company
  Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Number of the issuer’s Common Stock outstanding as of December 31, 2017: 165,560,766

 

Documents incorporated by reference: None.

 

 

 

 

 

 

TABLE OF CONTENTS

 

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

 

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PART I

 

ITEM 1.DESCRIPTION OF BUSINESS.

 

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

 

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

 

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

 

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

 

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

 

Another component of our business consists of selling pipe and equipment used in exploration, drilling, and production of oil and gas.  The manufactured pipe and equipment is supplied to us by various steel mills and suppliers, such as: U.S.S. Steel, SB Int’l, and Premier Pipe: in finished or unfinished form for us to process. Before the pipe and equipment is offered to our customers for sale, it must undergo further processing, such as blasting, threading, coating, and non-destructive testing inspection before being turned into a final product.  We sell oilfield pipe and equipment that has passed inspection and meets or exceeds API (American Petroleum Institute) and/or customer specifications.

 

Lastly, we provide manufacturing and reclamation including threading, machining of pipe and equipment, and ultrasonic pipe inspection technology. Services include full-length electromagnetic inspection for pipe and equipment utilized in the energy industry, and full length ultrasonic inspection systems for new and used pipe including drill stem, tubing, casing, and line pipe. We offer several different types of electromagnetic and ultrasonic inspection processes, each of which is tailored to the inspection of a particular pipe characteristic, such as size, length, wall thickness, ovality, or detection of a particular pipe defect. The type of process is determined by the customer according to their particular needs.

 

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

 

We operate year-round, 24 hours a day, seven days a week when needed, and the number of people employed averages 50.

 

Today, we continue to serve the energy industry by manufacturing and maintaining proprietary systems that detect and collect all available defects and wall thickness and outside diameter/ovality readings and store them in their proper position on the pipe, produce a three-dimensional image of the pipe, and allow the engineer to simulate burst, collapse, and pull apart the pipe on the computer prior to drilling. This helps energy companies reach reserves that otherwise cannot be reached with present technology. As a result of this advanced technology, the American Petroleum Institute (API) appointed Mr. George M. Sfeir, to serve on their 2008 committee for non-contact inspection. Technical Industries, Inc. developed US Patent No. 7,263,887 and international patent pending inspection technology needed in order to reach deep energy reserves present technology cannot reach. The U.S. patent is current until 2039. We provide basic NDT services as well as highly technical services requiring our patented technology for major companies’ critical projects.

 

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Additional services include full-length electromagnetic inspection for oil-field pipe and equipment and full length ultrasonic inspection systems for new and used tubing, casing and line-pipe, wet or dry Magnetic Particle Inspection ("MPI"); Dye Penetrant Testing ("PT"), or Ultrasonic Testing of the End Areas ("UT SEA") of plain end and threaded connections, including drill collars and drilling rig inspection; mill systems and mill surveillance; testing and consulting services. Today we continue to serve the energy industry niche by manufacturing and maintaining proprietary systems that are capable of detecting defects through the use of our patented technology.

 

ITEM 1A.RISK FACTORS

 

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

 

Competitors may develop similar technology or similar patents and make the technology available to our current customers at a lower cost or on better contractual terms. If this were to occur, our customer base would be reduced which would in turn lower our revenues.

 

OUR FUTURE SUCCESS IS DEPENDENT, IN PART, ON THE PERFORMANCE AND CONTINUED SERVICE OF GEORGE M. SFEIR. WITHOUT HIS CONTINUED SERVICE, WE MAY BE FORCED TO INTERRUPT OR EVENTUALLY CEASE OUR OPERATIONS.

 

We are presently dependent to a great extent upon the experience, abilities, and continued services of George M. Sfeir, our Chief Executive Officer and director. We currently do not have an employment agreement with Mr. Sfeir. The loss of his services could have a material adverse effect on our business, financial condition, or results of operation.

 

GEORGE M. SFEIR HAS MAJORITY VOTING CONTROL OF OUR COMMON STOCK.

 

Mr. Sfeir and family members have the voting proxy for the majority of the voting stock of the Company.

 

WE ARE IN A HIGHLY COMPETITIVE MARKET AND WE ARE UNSURE AS TO WHETHER OR NOT THERE WILL BE ANY CONSUMER DEMAND FOR OUR PRODUCTS AND SERVICES.

 

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

 

We primarily serve the energy industry, which is a highly volatile and politically driven industry.  Significant decreases in oil prices or changes in the political landscape could adversely affect the demand for our products and services.

 

THERE ARE CURRENT LAWSUITS FILED AGAINST THE COMPANY AND THE POSSIBILITY EXISTS THAT A CLAIM OF SOME KIND MAY BE MADE IN THE FUTURE.

 

While we will work to insure high product quality and accuracy in all marketing and labeling, no assurance can be given that some claims for damages will not arise. While we plan to properly insure ourselves with standard product liability insurance, there can be no assurance that this insurance will be adequate to cover litigation expenses and any awards to plaintiffs.

 

The types of claims that could be made against the Company consists primarily of product liability claims associated with a failure of pipe stem and oil country tubular products used for exploration.  The Company maintains general liability insurance of $6,000,000, including a $5,000,000 umbrella policy. 

 

ITEM 1B.UNRESOLVED STAFF COMMENTS

 

None.

  

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ITEM 2.DESCRIPTION OF PROPERTY.

 

We presently maintain our principal offices at Petroleum Towers, Suite 530 Lafayette, LA 70503, Mail: P.O. Box 52523, Lafayette, LA, 70505.  Our telephone number is (337) 984-2000.

 

Our main manufacturing, reclamation, inspection, and maintenance facility in Houston, Texas, consists of approximately 50 acres and includes a building capable of performing all inspection work in an environmentally protected area, and provides storage areas for pipe and equipment.

 

The Abbeville, Louisiana facility consists of a building which houses the manufacturing, reclamation, testing, engineering, storage and maintenance. Both facilities provide excellent year-round pipe and equipment storage, manufacturing, testing, and maintenance services.

 

ITEM 3.LEGAL PROCEEDINGS.

 

We are currently not involved in any litigation that we believe could have a materially adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our Company or any of our subsidiaries, threatened against or affecting our Company, our common stock, any of our subsidiaries or of our Company’s or our Company’s subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect. Nevertheless, a disgruntled employee sued for the purchase back of his bonus stock which is in violation of applicable laws.  An adverse decision, which is not anticipated, would not have material adverse effect on our financial condition or results of operations.

 

ITEM 4.MINE SAFETY DISCLOURES.

 

None.

 

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PART II

 

ITEM 5.MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

 

Market Information

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

 

The following table sets forth the high and low trade information for our common stock. The prices reflect inter-dealer quotations, do not include retail mark-ups, markdowns or commissions and do not necessarily reflect actual transactions.

 

Quarter ended  Low Price   High Price 
December 31, 2016  $0.31   $0.35 
March 31, 2017  $0.01   $0.75 
June 30, 2017  $0.01   $0.25 
September 30, 2017  $0.25   $0.28 
December 31, 2017  $0.21   $0.45 

 

Holders

As of year-end, in accordance with our transfer agent, Olde Monmouth’s, records, we had 174 Common Stock holders not including CEDE & Co.

 

Dividends

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

 

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

 

Stock Option Grants

To date, we have not granted any stock options.

 

Registration Rights

We have not granted registration rights to the selling shareholders or to any other persons.

 

ITEM 6.SELECTED FINANCIAL DATA.

 

Not required for a smaller reporting company.

 

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ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

 

General

 

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

 

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

 

Sales and marketing efforts: Although we have been impacted by the downturn in the national and global economies, we are now implementing an aggressive marketing and sales effort. We have hired a new sales team who are aggressively pursuing the market and have successfully recruited new clients and rejuvenated existing clients. Currently, we are focused on sales, marketing, and promotional activities for the Company. Management believes revenue can be increased by expanding the Company's sales force and organizing a marketing department in order to increase our market share.

 

Applying for additional patents to protect proprietary rights:  We have developed international patent-pending new inspection technology needed in order to reach deep energy reserves present technology cannot reach.  Our expandable inspection technology helps the companies in the energy industry retrieve a large amount of energy reserves that cannot be retrieved with current technology.  We have manufactured several pieces of equipment in-house that have enabled us to successfully serve the energy industry.  Due to proprietary infringement risk, we have discontinued manufacturing the equipment for sale to third parties.  By securing a patent protecting our proprietary technology, we could consider manufacturing equipment for sale again, which would open a new line of revenue.

 

Introduction of complementary services: We are continually adding new services in order to meet customer demand. Most recently, we began drilling equipment inspection services and added a manufacturing facility and pipe and equipment sales company. Other areas management has identified as potential growth avenues include vessel inspection and inspection of pipelines in service.

 

Geographic expansion in the domestic and international markets: We currently derive the majority of revenue from the Houston, Texas market, where many of our clients are based. There are several other markets that could be better served, such as in Louisiana where a new plant in Abbeville, Louisiana has been constructed in order to serve the deep wells in the Gulf of Mexico. Other expansions are being considered through the opening of additional full-service, local plants. Furthermore, we maintain relations with sales representatives in the Mexico, Saudi Arabia, Qatar, and Middle East markets that could be better utilized if we are able to locally serve customers. Lastly, we have Canadian customers that utilize our services on a limited basis, due to the high cost of shipping heavy pipes. To date, we have not had the capital or human resources to establish plants in these potential markets.

 

We continue to seek other companies which can complement essential commodities, energy, technology manufacturing, reclamation, pipe and inspection business with the goal of securing these businesses through a combination of cash and stock payments.  All of these expansion plans rely heavily on raising capital through a public offering of additional stock which would be used to fund our acquisitions. 

 

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

 

Critical Accounting Policies and Estimates

 

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

 

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

 

Inventory.  Inventory is stated at the lower of cost determined by the specific identification method or market.  At December 31, 2017 and 2016, inventory consisted of pipe available for sale.

  

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

 

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

 

Estimates. We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the U.S. In doing so, we have to make estimates and assumptions that affect our reported amounts of assets, liabilities, revenues and expenses, as well as related disclosure of contingent assets and liabilities. In some cases, we could reasonably have used different accounting policies and estimates. In some cases changes in the accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ materially from our estimates. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations will be affected. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis.

 

Investments. We regularly review investment securities for impairment based on both quantitative and qualitative criteria that include the extent to which cost exceeds market value, the duration of that market decline, our intent and ability to hold to maturity or until forecasted recovery, and the financial health of and specific prospects for the issuer. We perform comprehensive market research and analysis and monitor market conditions to identify potential impairments.

 

Discussion of Changes in Financial Condition from December 31, 2016 to December 31, 2017

 

At December 31, 2017, total assets amounted to $3,842,274 compared to $4,238,898 at December 31, 2016, a decrease of $396,624, or 8.72%.  The decrease is primarily due to a decrease in the Company’s cash of $121,900, a decrease in property and equipment held for operations of $326,203, and a decrease in inventory of $104,748. These decreases were partially offset by an increase in accounts receivable of $28,810 and an increase in other assets of $92,455.

 

Our liabilities at December 31, 2017, totaled $8,788,538 compared to $7,877,136 at December 31, 2016, an increase of $911,402, or 11.57%.  The increase is primarily due to an increase in accounts payable of $364,154, and an increase in due to affiliates of $341,302. These increases were partially offset by a decrease in accrued liabilities of $90,107.

 

Total stockholder’s equity decreased from ($3,638,237) at December 31, 2016, to ($4,946,263) at December 31, 2017.  This increase was due to net loss generated for the year ended December 31, 2017 of $1,308,025.

 

Cash and Cash Equivalents

 

The Company’s cash decreased from $158,068 at December 31, 2016, to $36,168 at December 31, 2017. The decrease in cash and cash equivalents was primarily due to the Company’s use of cash for operations.

 

Inventory

 

We began purchasing pipe for sale to customers in late 2007.  This was an opportunity for us to expand our services to our customers.  Inventory of pipe at December 31, 2017 and December 31, 2016, was $903,373 and $1,008,123, respectively.  It is anticipated that the Company will continue its efforts to expand its sales of oilfield pipe.

 

Property and Equipment

 

The decrease in property and equipment of $332,452 is primarily due to depreciation of $367,953 at December 31, 2015 partially offset by the net purchase of equipment of $41,750.

 

Accounts Payable

 

Accounts payable at December 31, 2017 totaled $978,740 compared to $614,585 at December 31, 2016, an increase of $364,154. This increase is primarily attributable to the purchase of items used in the ordinary course of business and cost of goods sold.

 

Common Stock Outstanding

 

On April 1, 2009, we entered into an agreement with our majority stockholders whereby the stockholders agreed to cancel 165,100,000 common shares, respectively, for the consideration to be re-issued in the future. In 2010, the Company re-issued 115,100,000 of those shares with 50,000,000 still owed to the stockholders. On December 30, 2009, we agreed to issue 5,580,000 shares of our common stock in exchange for the remaining balance due to a supplier of equipment to the Company, which totaled $3,935,217 at December 31, 2009. In 2011, the Company issued 256,900 shares to key managers and others who management felt were responsible for helping the company return to profitability. In 2012, the Company issued an additional 92,550 shares to key managers and others. In 2013, the Company issued an additional 41,167 shares to key managers and others in consideration for their help in returning the Company to profitability and purchased 20,270 shares of common stock now held in Treasury. In 2014, the company purchased 3,617,075 shares which are now held in treasury. In 2016, the Company issued 12,000 shares to market promotor.

 

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Discussion of Results of Operations for the Year Ended December 31, 2017 compared to the Year Ended December 31, 2016

 

Revenues

 

Our revenue for the year ended December 31, 2017, was $2,559,826 compared to $1,905,711 for the year ended December 31, 2016, an increase of $654,115, or 34.32%.  The increase is attributable primarily to the decrease in exploration technologies of $414,386. This increase was a result of the industry’s market demand and decreased market competition. 

 

The following table presents the composition of revenue for the year December 31, 2017 and 2016:

 

   2017   2016   Variance 

Revenue:

  Dollars   Percentage   Dollars   Percentage   Dollars 
                     
Exploration Technologies  $1,385,010    54.1%  $970,624    50.9%  $414,386 
Drilling, OCTG, & Equipment Sales  $95,712    3.7%  $-    0.0%  $95,712 
Warehouse & Storage Fees  $293,220    11.5%  $293,382    15.4%  $(162)
Rebillable Income  $278,760    10.9%  $333,047    17.5%  $(54,287)
Manufacturing  $507,124    19.8%  $308,658    16.2%  $198,466 
Total Revenue  $2,559,826    100.0%  $1,905,711    100.0%  $654,114 

 

Cost of Revenue and Gross Profit

 

Our cost of revenue for the year ended December 31, 2017, was $2,367,411, or 92.48% of revenues, compared to $1,748,203, or 91.73% of revenues, for the year ended December 31, 2016.  The overall increase in our cost of revenue is primarily due to the increase in Subcontract Laor. The primary reason for the increase in cost of sales as a percentage of revenues was due to the increase in drilling, OCTG, & Equipment Sales and Exploration Technologies in relation to the amount of fixed costs included in our cost of revenue, such as depreciation on equipment and facilities, and insurance. Additionally, pipe is sold at a lower margin in relation to our service revenues.

 

The following table presents the composition of cost of revenue for the year ended December 31, 2017 and 2016:

 

   2017   2016   Variance 
Cost of Revenue:  Dollars   Percentage   Dollars   Percentage   Dollars 
                     
Employee and Related Costs  $436,564    18.4%  $341,587    19.5%  $94,977 
Materials and Supplies   300,639    20.3%   88,152    29.9%  $212,487 
Subcontract Labor   679,631    28.7%   344,501    19.7%  $335,130 
Depreciation   257,852    10.9%   269,570    15.4%  $(11,717)
Repairs and Maintenance   178,826    7.6%   45,929    2.6%  $132,898 
Insurance   44,835    1.9%   78,569    4.5%  $(33,734)
Other Costs   469,063    19.8%   579,896    33.2%  $(110,833)
Total Cost of Revenues  $2,367,411    100.0%  $1,748,203    100.0%  $619,207 

 

We have utilized the services of contractors to assist us as needed to provide timely and quality service to our customers.  We will continue our efforts to attract employees and retain qualified individuals to serve the needs of our customers.  

 

Operating Expenses

 

For the year ended December 31, 2017, our operating expenses totaled $1,479,596, as compared to $1,172,379 in 2016, representing an increase of $307,217, or 26.2%.  The largest component of our operating expenses for 2017 consists of salaries and wages, professional services, and other costs.  Salaries and wages for general and administrative personnel was $641,077 for the year ended December 31, 2017, compared to $420,154 for the year ended December 31, 2016, an increase of $220,923, or 52.58%.  The increase is attributable to the increase in administrative pay pertaining to the hiring of an operations manager and an additional salesman.

 

Professional services expense increased from $169,593 for the year ended December 31, 2016, to $181,715 for the year ended December 31, 2017, an increase of $12,122, or 7.15%.  The decrease is primarily a result of an increase in legal fees.

 

Other costs totaled $190,916 for the year ended December 31, 2017, as compared to $166,100 for the year ended December 31, 2016, an increase of $24,816, or 14.94%.  Other costs for both the year ended December 31, 2017, and for the year ended December 31, 2016, pertain primarily to medical expense costs, property taxes, and marketing and advertising, among other costs associated to our operating expenses. 

 

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Other Income and Expense

 

Other income and expense consists of income from lawsuit settlement, investment income, gain or loss on sale of assets, and interest expense.  For the year ended December 31, 2017, other expense totaled $20,845, as compared to other expense, net of other income, totaled $275,685 for the year ended December 31, 2016. The increase in Other Income/ (Expense) is attributable primarily to the increase of interest expense.

 

Investment income, which consists of interest, dividends, realized gains and losses, and unrealized gains and losses, amounted to $2,107 investment expense for the year ended December 31, 2017, compared to investment expense of $2,399 for the year ended December 31, 2016. For the year ended December 31, 2017, investment expense consisted primarily of interest income of $125 and unrealized loss of $2,232.  

 

Interest expense totaled $185,952 for the year ended December 31, 2017, as compared to $343,761 for the year ended December 31, 2016, a decrease of $157,809, or 45.91%.  Interest expense pertains primarily to amounts due to affiliates as well as to our notes payable with third parties.

 

Provision for income taxes

 

For the year ended December 31, 2017, the income tax return was not completed so no tax information is available at the time of the filing of this report.

 

Capital Resources and Liquidity

 

At December 31, 2017, we had $36,168 in cash and cash equivalents. Our cash outflows have consisted primarily of expenses associated with continued operations.  Cash outflows for investing purposes have consisted primarily of the acquisition of equipment and other technology to better serve our customers.  Most of the costs of those acquisitions have been offset by the sale of excess equipment. Currently, we have been able to utilize our relationships with affiliated entities to stabilize our liquidity needs.

 

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

 

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

 

Critical Accounting Policies

 

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

 

Our significant accounting policies are summarized in Note 2 of our consolidated financial statements. While all these significant accounting policies impact our financial condition and results of operations, we view certain policies as critical. Policies determined to be critical are those policies that have the most significant impact on our financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates. Our management believes that, given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause effect on our consolidated results of operations, financial position, or liquidity for the periods presented in this report.

 

Revenue Recognition

 

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

 

8

 

 

Revenue for Exploration Technologies is recognized when persuasive evidence of an arrangement exists, services have been rendered, the seller’s price to the buyer is fixed or determinable, and collectability is reasonably assured.

 

Revenue for manufacturing and threading services is recognized when persuasive evidence of an arrangement exist, services have been rendered, the seller’s price to the buyer is fixed or determinable, and collectability is reasonably assured.

 

Revenue for Warehouse and Storage service is recognized at the beginning of the month when billed.

 

Revenue for the sales of Drilling, OCTG, & Equipment is recognized when products are delivered and the customer takes ownership and assumes risk of loss, collection of the relevant receivable is reasonable, persuasive evidence of an arrangement exists and the sales price is fixed or determinable. The Company's pipe division sells pipe on trade accounts under terms common in the industry and the associated costs are included in cost of sales.

 

Recent Accounting Pronouncements

 

Management does not expect any impact from the adoption of new accounting pronouncements.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as “special purpose entities” (SPEs).

 

Item 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

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

 

9

 

 

Item 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

 

ENERGY & TECHNOLOGY, CORP.

 

Financial Statements

 

December 31, 2017 and 2016

 

Contents

 

 

 

Basic Financial Statements  
   
Consolidated Balance Sheets F-2
   
Consolidated Statements of Operations F-3
   
Consolidated Statements of Changes in stockholders’ Equity F-4
   
Consolidated Statements of Cash Flows F-5
   
Notes to Consolidated Financial Statements F-6 - F-10

 

F-1

 

 

ENERGY & TECHNOLOGY, CORP.

Consolidated Balance Sheets

December 31, 2017 and 2016

 

   2017   2016 
   (Unaudited)   (Unaudited) 
Assets        
Current Assets        
Cash and Cash Equivalents  $36,168   $158,068 
Investments   2,289    4,521 
Accounts Receivable        
Trade, Net   273,183    244,373 
Inventory, Net   903,373    1,008,121 
Prepaid Expenses   50,835    7,393 
Other Current Assets   126,168    33,713 
           
Total Current Assets   1,392,016    1,456,188 
           
Property and Equipment, Net          
Held for Operations, Net   2,099,840    2,426,044 
Construction in Progress   350,418    356,667 
    2,450,258    2,782,710 
           
Total Assets  $3,842,274   $4,238,898 
           
Liabilities and Stockholders' Equity          
Current Liabilities          
Accounts Payable  $978,740   $614,585 
Accrued Liabilities   82,035    172,142 
Accrued Rent   2,407,500    2,257,500 
Current Maturities of Notes Payable   4,425,147    4,270,179 
Due to Affiliates   856,687    515,385 
Income Taxes Payable   25,287    25,287 
           
Total Current Liabilities   8,775,396    7,855,079 
           
Long-Term Liabilities          
Notes Payable   13,142    22,057 
           
 Total Liabilities  $8,788,538   $7,877,136 
           
Stockholders' Equity          
 Preferred Stock - $.001 Par Value; 10,000,000 Shares Authorized,  None Issued   -    - 
 Common Stock - $.001 Par Value; 250,000,000 Shares Authorized, 169,198,117  Shares and 169,186,117 shares Issued at December 31, 2017, and 2016, respectively   169,198    169,198 
Paid-In Capital   4,209,592    4,209,592 
 Treasury Stock, at cost (3,637,351 Shares)   (4,076,441)   (4,076,441)
Retained Earnings   (5,248,612)   (3,940,587)
           
Total Stockholders' Equity   (4,946,263)   (3,638,237)
           
Total Liabilities and Stockholders' Equity  $3,842,274   $4,238,898 

 

 

F-2

 

 

ENERGY & TECHNOLOGY, CORP.

Consolidated Statements of Operations

For the Years Ended December 31, 2017 and 2016

 

   2017   2016 
         
Revenues  $2,559,826   $1,905,711 
Cost of Revenues          
Materials and Supplies   300,639    88,152 
Subcontract Labor   679,631    344,501 
Depreciation   257,852    269,570 
Employee and Related Costs   436,564    341,587 
Repairs and Maintenance   178,826    45,929 
Insurance   44,835    78,569 
Other Costs   469,063    579,896 
           
Total Cost of Revenues   2,367,411    1,748,203 
           
Gross Profit   192,415    157,508 
           
Operating Expenses          
Selling, General, and Administration   1,369,495    1,061,878 
Depreciation   110,101    110,501 
           
Total Operating Expenses   1,479,596    1,172,379 
           
Loss from Operations   (1,287,181)   (1,014,871)
           
Other Income (Expense)          
Income from Lawsuit Settlement   167,213    70,475 
Interest Income   125    865 
Interest Expense   (185,952)   (343,761)
Other Income   (2,232)   (3,264)
           
Total Other Expense   (20,845)   (275,685)
           
Loss Before Provision for Income Taxes   (1,308,026)   (1,290,556)
           
Benefit for Income Taxes   0    0 
           
Net Income (Loss)  $(1,308,026)  $(1,290,556)
           
Loss per Share - Basic  $-   $- 
           
Loss per Share - Diluted  $-   $- 

 

F-3

 

 

ENERGY & TECHNOLOGY, CORP.

Consolidated Statements of Changes in Stockholders' Equity

For the Years Ended December 31, 2016 and December 31, 2017

 

   Common Stock   Treasury Stock   Additional
Paid-In
   Retained   Total
Stockholders'
 
   Shares   Amount   Shares   Amount   Capital   Earnings   Equity 
                             
Balance at January 1, 2016   169,186,117   $169,186    (3,637,351)  $(4,076,441)  $4,204,564   $(2,650,031)  $(2,352,722)
                                    
Stock Issued   12,000   $12              5,027        $5,039 
                                    
Net (Loss)   -    -         -    -    (1,290,555)  $(1,290,555)
                                    
Balance at December 31, 2016   169,198,117   $169,198    (3,637,351)  $(4,076,441)  $4,209,591   $(3,940,586)  $(3,638,238)
                                    
Balance at January 1, 2017   169,198,117    169,198    (3,637,351)   (4,076,441)   4,209,591    (3,940,586)   (3,638,238)
                                    
Net (Loss)   -    -              -    (1,308,025)  $(1,308,025)
                                    
Balance at December 31, 2017   169,198,117   $169,198   $(3,637,351)  $(4,076,441)  $4,209,591   $(5,248,611)  $(4,946,263)

 

F-4

 

 

ENERGY & TECHNOLOGY, CORP.

Consolidated Statements of Cash Flows

For the Years Ended December 31, 2017 and 2016

 

   2017   2016 
Cash Flows from Operating Activities        
Net Income (Loss)  $(1,308,025)  $(1,290,556)
Adjustments to Reconcile Net Loss to Net Cash Provided by Operating Activities          
Depreciation   374,202    302,480 
Investments   2,232      
Accrued Rent   150,000    150,000 
Paid in Capital        5,027 
Common Stock Issued        12 
Changes in Assets and Liabilities          
Trade Receivables   (28,810)   2,295 
Other Receivables        187,366 
Inventory   104,748      
Prepaid Expenses   (43,442)   5,713 
Accounts Payable   274,048    17,119 
Accrued Payroll and Payroll Liabilities        101,880 
Income Taxes Payable          
Accrued Rent          
           
Net Cash Provided by Operating Activities   (475,047)   (518,664)
           
Cash Flows from Investing Activities          
Other Assets   (92,455)   14,737 
Other Receivable          
Sale of Property and Equipment          
Purchase of Property and Equipment   (41,750)     
           
Net Cash Provided by (Used in) Investing Activities   (134,205)   14,737 
           
Cash Flows from Financing Activities          
Purchase of Treasury Stock          
Borrowings (Principal Repayments) to Affiliates   341,299    326,321 
Borrowings (Principal Repayments) on Notes Payable   146,053    296,693 
           
Net Cash Provided by (Used in) Financing Activities   487,352    623,014 
           
Net Increase (Decrease) in Cash and Cash Equivalents   (121,900)   119,087 
           
Cash and Cash Equivalents, Beginning of Year   158,068    38,981 
           
Cash and Cash Equivalents, End of Year  $36,168   $158,068 
           
Supplemental Disclosure of Cash Flow Information          
Cash Paid During the Period for Interest  $28,543   $20,153 
           
Cash Paid During the Period for Income Taxes  $-      
           
Non-Cash Investing and Financing Activity          
Transfer of Property for Reduction of Notes Payable          

 

F-5

 

 

ENERGY & TECHNOLOGY, CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

 

Note 1.Organization

 

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

 

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

 

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

 

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

 

Note 2.Summary of Significant Accounting Policies

 

Basis of Presentation and Consolidation

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

 

The consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of financial information for the interim periods presented.  These adjustments are of a normal recurring nature and include appropriate estimated provisions.

 

Basis of Accounting

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

 

Use of Estimates

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

 

Revenue Recognition

Revenue for Exploration Technologies is recognized when persuasive evidence of an arrangement exist, services have been rendered, the seller’s price to the buyer is fixed or determinable, and collectability is reasonably assured.

 

Revenue for manufacturing services is recognized when persuasive evidence of an arrangement exist, services have been rendered, the seller’s price to the buyer is fixed or determinable, and collectability is reasonably assured.

 

Revenue for Warehouse & Storage Fees is recognized at the beginning of the month when billed.

 

F-6

 

 

ENERGY & TECHNOLOGY, CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

 

Note 2.Summary of Significant Accounting Policies (Continued)

 

Revenue for the sales of pipe is recognized when products are delivered and the customer takes ownership and assumes risk of loss, collection of the relevant receivable is reasonable, persuasive evidence of an arrangement exists and the sales price is fixed or determinable. The Company's pipe division sells pipe on trade accounts under terms common in the industry and

the associated costs are included in cost of sales.

 

Trade Receivables

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

 

Allowance for Doubtful Accounts

The company calculates the allowance based on the history with customers and their current financial condition. Provisions of uncollectible amounts are determined based on management’s estimate of collectability. Allowance for doubtful accounts was $3,078 for the years ended December 31, 2017 and 2016.

 

Inventory

Inventories are stated at the lower of cost or market. The company periodically reviews the value of items in inventory and provides write-downs or write-offs of inventory based on its assessment of market conditions. Write-downs and write-offs are charged to Loss on Inventory Valuation under Operating Expenses. At December 31, 2017 and 2016, inventory consisted of pipe available for sale.

 

Property and Equipment

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

 

Valuation of Long-Lived Assets

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

 

Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of temporary cash investments and trade receivables. At December 31, 2017, the balance due from three customers represented 55% of receivables, and sales to those three customers represented 47% of revenues for the year ended December 31, 2017.

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

 

Advertising

The Company charges the costs of advertising to expense as incurred. Advertising expense was $10,353 and $7,813, for the year ended December 31, 2017 and 2016, respectively.

 

Cash Flows

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

 

Income Taxes

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

 

F-7

 

 

ENERGY & TECHNOLOGY, CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

 

Note 2.Summary of Significant Accounting Policies (Continued)

 

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

 

Emerging Growth Company Critical Accounting Policy Disclosure

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

period in the future.

 

Patents

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

 

Recent Accounting Pronouncements

Management does not expect any impact from the adoption of new accounting pronouncements.

 

Comprehensive Income

The Company had no components of comprehensive income. Therefore, net income (loss) equals comprehensive

income (loss) for the periods presented.

 

Note 3.Property and Equipment

 

     2017   2016 
           
  Buildings and Improvements  $3,157,937   $3,157,937 
  Equipment   5,975,208    5,949,208 
  Autos and Trucks   276,682    260,932 
  Office Furniture   34,025    34,025 
  Construction in Progress   350,418    356,667 
      9,794,271    9,758,769 
  Less: Accumulated Depreciation   -7,344,013    -6,976,059 
  Total  $2,450,258   $2,782,710 

 

Depreciation expense amounted to $374,202 and $380,070 for the period ended December 31, 2017 and 2016, respectively.

 

Note 4.Related Party Transactions

 

Energy & Technology, Corp is a holding company. Its subsidiaries include: Technical Industries, Inc. (NDT Inspection Services are done in this company), Energy Technology Manufacturing & Threading, LLC (threading and manufacturing services are done in this company), and Energy Pipe, LLC (pipe sales are done in this company). All significant intercompany transactions are eliminated in consolidation.

 

Additionally, St. Charles Real Estate Corp LLC owns the land in Houston, Texas where the Company maintains its pipe inventory, as well as the Houston facility. The Company has a month to month lease for $12,500 with St. Charles Real Estate but is accruing rent instead of paying. As of December 31, 2017 and December 31, 2016 the total owed is $2,407,500 and $2,257,500, respectively. St. Charles Real Estate Corp LLC is owned by various members of the Sfeir family.

 

F-8

 

 

ENERGY & TECHNOLOGY, CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

 

Note 5.Notes Payable

 

Notes payable at December 31, 2017 and December 31, 2016 consist of the following:

 

     2017   2016 
  Secured fixed term note of $48,601.50 due November 2020; fixed interest rate of 3.39%   22,057    30,749 
  Unsecured variable term note of $3,935,217 ; fixed interest rate of 4.0%   4,416,232    4,258,823 
  Secured fixed term note of $31,905.36 due March 2018; fixed interest rate of 5.4%   -    2,664 
     $4,438,289   $4,292,236 
  Less: Current Portion   4,425,147    4,270,179 
  Long-Term Portion  $13,142   $22,057 

 

Following are maturities of long-term debt at December 31, 2017:

 

  Fiscal Year Ending December 31,  Amount 
  2018  $8,280 
  2019   4,862 
        
  Total  $13,142 

  

Note 6.Income Taxes

 

For the year ended December 31, 2017, the Company has filed an extension for income tax purposes. As of the date of this report, the Company does not have any information as to the nature of the provision for income taxes.

 

Note 7.Equity

 

The Company is authorized to issue 250,000,000 shares of common stock at a par value of $.001 per share. The number of shares issued and outstanding are 165,560,766 and 165,548,766 as of December 31, 2017 and December 31, 2016.

 

The Company is authorized to issue 10,000,000 shares of preferred stock. As of December 31, 2017 and December 31, 2016, there were no shares issued and outstanding.

 

Note 8.Earnings per Share

 

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

 

There were no potentially dilutive common stock equivalents as of December 31, 2017, therefore basic earnings per share equals diluted earnings per share for the year ended December 31, 2017. As the Company incurred a net loss during the year ended December 31, 2017, the basic and diluted loss per common share is the same amount, as any common stock equivalents would be considered anti-dilutive.

 

The weighted average common shares outstanding were 165,560,766 for the years ended December 31, 2017 and 2016.

 

Note 9.Commitments

 

The Company leases office premises, operating facilities, and equipment under operating leases expiring in various years through 2030. The Company also leases land for operating purposes on a month to month basis. Rent expense for the year ended December 31, 2017 and 2016 was $217,516, and $244,611, respectively.

 

Minimum future rental payments under operating leases having remaining terms in excess of one year as of December 31, 2017 are as follows:

 

  2018   6,000 
  2019   6,000 
  2020   6,000 
  2019   6,000 
  Thereafter   64,500 
        
  Total  $88,500 

 

F-9

 

 

ENERGY & TECHNOLOGY, CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

 

Note 10.Litigation and Contingent Liabilities

 

Presently, the company does have pending litigation filed against it involving a former employee suing for the purchase of his stock. In the ordinary course of our business, we are, from time to time, subject to various legal proceedings, including matters involving employees, customers, and suppliers. We may enter into discussions regarding settlement of claims or lawsuits, and may enter into settlement agreements, if we believe settlement is in the best interest of our stockholders. We do not believe that any existing legal proceedings or settlements, individually or in the aggregate, will have a material effect on our financial condition, results of operations, or liquidity.

 

Note 11.Major Customers

 

For the year ended December 31, 2017, the Company had three customers which generated revenues in excess of 10% of the Company’s total revenues. Revenues for these three customers were approximately 68% of total revenues, and total balance due from these two customers at December 31, 2017 was $121,171.

 

Note 12.Estimated Fair Value of Financial Instruments

 

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

 

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

 

     December 31, 
     2017   2016 
     Carrying   Fair   Carrying   Fair 
     Amount   Value   Amount   Value 
  Financial Assets                
  Investments  $2,289   $2,289   $4,521   $4,521 
                       
     $2,289   $2,289   $4,521   $4,521 

 

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

 

Investments: The carrying amount reported in the balance sheet approximates fair value.

 

Note 13.Subsequent Events

 

In accordance with the subsequent events topic of the FASB ASC, Topic No. 855, Subsequent Events, the Company evaluates events and transactions that occur after the balance sheet date for potential recognition in the financial statements. The effects of all subsequent events that provide additional evidence of conditions that existed at the balance sheet date are recognized in the financial statements as of December 31, 2017. In preparing these financial statements, the Company evaluated the events and transactions through the date these financial statements were issued. The following events should be noted:

 

The Company has filed a lawsuit against a competitor alleging patent infringement. To the date of this financial statement being issued, there is no response from our competitor in regards to this allegation.

 

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

 

Our accountant was MaloneBailey,LLP. We are presently looking to change accountants to timely comply with financial rules and regulations. At no time have there been any disagreements with such accountants regarding any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure.

 

ITEM 9A.CONTROLS AND PROCEDURES

 

Evaluation of disclosure controls and procedures  

 

As of the end of the period covered by this Annual Report, under the supervision and with the participation of management, including our Chief Executive Officer and principal financial officer, we conducted an evaluation of the Company’s disclosure controls and procedures. As defined by Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act), the term “disclosure controls and procedures” means our controls and other procedures that are designed to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is accumulated and communicated to our Company’s management, including Certifying Officers, to allow timely decisions regarding required disclosure. Based on this evaluation, we have concluded that our disclosure controls and procedures were effective as of year end.

 

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

 

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

 

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

 

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

 

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

 

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

 

Changes in internal controls

 

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

 

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PART III

 

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

 

Our executive officer’s and director’s and their respective ages as of December 31, 2017 are as follows:

 

NAME   AGE   POSITION
         
George Sfeir   59   President, Chief Executive Officer, Chief Financial Officer and Director

 

Set forth below is a brief description of the background and business experience of our executive officers and directors for the past year.

 

George M. Sfeir is a 1972 graduate of Saint George College (Lebanon) and the University of Louisiana at Lafayette, Louisiana in general & legal studies.  He has worked in the oil and gas industry since May 1972. He has worked for companies throughout the Middle East, North and South America, and Africa doing inspections on oil and gas fields.  Mr. Sfeir is fluent in English, French, Arabic, Spanish, and Italian.  Mr. Sfeir has worked with Technical Industries, Inc. as a consultant since January of 1980 and as CEO since 1998.

 

Term of Office

 

Our directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board

  

Compliance With Section 16(A) Of The Exchange Act.

 

Section 16(a) of the Exchange Act requires the Company’s officers and directors, and persons who beneficially own more than 10% of a registered class of the Company’s equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission and are required to furnish copies to the Company. To the best of the Company’s knowledge, any reports required to be filed were timely filed in the fiscal year.

 

Code of Ethics

 

The Company has adopted a Code of Ethics applicable to its Chief Executive Officer and Chief Financial Officer. This Code of Ethics is incorporated by reference to Form 10-K filed on March 30, 2009.

 

ITEM 11.EXECUTIVE COMPENSATION

 

The table below summarizes all compensation awarded to, earned by, or paid to our executive officers by any person for all services rendered in all capacities to us for the fiscal year ended December 31, 2017 and 2016. The following summary compensation table sets forth all compensation awarded to, earned by, or paid to the named executive officers paid by us during the years ended December 31, 2017, and 2016 in all capacities for the accounts of our executives, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO): 

 

SUMMARY COMPENSATION TABLE

 

                       Non-Equity   Non-Qualified     
             Stock   Option   Incentive Plan   Deferred   All Other     
     Salary   Bonus   Awards   Awards   Compensation   Compensation   Compensation   Totals 
Name and Principal Position  Year   ($)   ($)   ($)   ($)   ($)   ($)   ($)   ($) 
George Sfeir, President, Chief Executive Officer and Director   2017    120,640    0    0    0    0    0    0    120,640 
   2016    85,840    0    0    0    0    0    0    85,840 
                                              
Amer Salhi,   2014    0    0    0    0    0    0    0    0 
Chief Financial Officer  and Secretary   2013    52,400    300    0    0    0    0    0    52,700 
                                              
Edmund J. Baudoin, Jr., Treasurer   2014    60,320    200    0    0    0    0    0    60,520 
   2013    59,544    416    0    0    0    0    0    59,960 

 

Option Grants Table. There were no individual grants of stock options to purchase our common stock made to the executive officer named in the Summary Compensation Table through December 31, 2017.

 

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Aggregated Option Exercises and Fiscal Year-End Option Value Table. There were no stock options exercised during period ending December 31, 2017 by the executive officer named in the Summary Compensation Table.

 

Long-Term Incentive Plan (“LTIP”) Awards Table. There were no awards made to a named executive officer in the last completed fiscal year under any LTIP

 

Compensation of Directors

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

 

Employment Agreements

We do not have any employment agreements in place with our officers or directors.

 

ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table provides the names and addresses of each person known to us to own more than 5% of our outstanding shares of common stock as of December 31, 2017 and by the officers and directors, individually and as a group. Except as otherwise indicated, all shares are owned directly.

 

   Name and Address  Amount and Nature   Percent of 
Title of Class  of Beneficial Owner  of Beneficial Owner   Class (1) 
            
Common Stock  American Interest, LLC (2)   149,146,255    90.1%
Restricted  Petroleum Towers, Suite 530          
   P.O. Box 52523          
   Lafayette, LA 70505          
              
Common Stock  Sfeir Family Trust (2)   13,732,500    8.3%
Restricted  Petroleum Towers, Suite 530          
   P.O. Box 52523          
   Lafayette, LA 70505          
              
Common Stock  Edmund J. Baudoin, Jr.   3,000    Less than 1%
Restricted  Petroleum Towers, Suite 530          
   P.O. Box 52523          
   Lafayette, LA 70505          
              
Common Stock  George Sfeir   5,000    Less than 1%
Restricted  Petroleum Towers, Suite 530          
   P.O. Box 52523          
   Lafayette, LA 70505          
              
Common Stock  All executive officers   8,000    Less than 1%
Restricted  and directors as a group          

 

TRANSACTIONS WITH RELATED PERSONS, PROMOTERS AND CERTAIN CONTROL PERSONS

 

In November of 2006, we issued 125,000,000 restricted shares of common stock to American Interest, LLC (controlled by George Sfeir) for founder services rendered pursuant to the exemption from registration set forth in section 4(2) of the Securities Act of 1933.

 

On January 3, 2007 we entered into a Stock Purchase and Share Exchange agreement with TII, whereby TII became our wholly owned subsidiary.  We exchanged 50,000,000 restricted shares of common stock for all the issued and outstanding shares of TII.  Mr. George Sfeir was the sole shareholder of TII.

 

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

 

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

 

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

 

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

 

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

 

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

 

12

 

 

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

 

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

 

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

 

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

 

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

 

On August 20, 2012 the Company issued 92,550 shares as bonuses to employees, advisors, and supporters for services rendered.

 

On July 11, 2013, the Company issued 41,167 shares as bonuses to employees and compensation to supporters for services rendered.

 

On June 30, 2016, the Company issues 12,000 shares to Eversull Group for services rendered.

 

Stock Option Grants

 

We have not granted any stock options to our executive officer since our incorporation. 

  

ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTION, AND DIRECTOR INDEPENDENCE

 

None.

 

ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

Audit Fees

 

This category includes the aggregate fees billed for professional services rendered for the audits of our financial statements for fiscal years 2017 and 2016, for the reviews of the financial statements included in our reports on Form 10-Q, and for services that are normally provided by the independent auditors in connection with statutory and regulatory filings or engagements for the relevant fiscal years.  Audit fees pertaining to services provided to the Company for the fiscal years ended December 31, 2017 and 2016, amount to $0.00 and $0.00, respectively.

 

Audit Related Fees

 

There were no fees for audit related services for the years ended December 31, 2017 and 2016.

 

 Tax Fees

 

For the Company’s fiscal years ended December 31, 2017 and 2016, we were not billed for professional services rendered for tax compliance, tax advice, and tax planning.

 

All Other Fees

 

The Company did not incur any other fees related to services rendered by our principal accountant for the fiscal years ended December 31, 2017 and 2016.

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

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

 

-approved by our audit committee; or

 

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

 

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

 

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PART IV

 

ITEM 15.EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

 

a) Documents filed as part of this Annual Report

 

1. Consolidated Financial Statements

 

2. Financial Statement Schedules

 

3. Exhibits

 

31.1 Certification of President, Chief Executive Officer, Chief Financial Officer, Chairman of the Board of Directors pursuant to Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as Amended.
   
32.1 Certification of President, Chief Executive Officer, Chief Financial Officer, Chairman of the Board of Directors pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
   
101.INS XBRL Instance Document
   
101.SCH XBRL Taxonomy Extension Schema Document
   
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
   
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
   
101.LAB XBRL Taxonomy Extension Label Linkbase Document
   
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

 

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SIGNATURES

 

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized. The attached report is not audited and will soon amend by the audited report when received.

 

ENERGY & TECHNOLOGY CORP.

 

Dated: April 2, 2018

 

By /s/ George M. Sfeir  
  George M. Sfeir,  
  President,  
  Chief Executive Officer,  
  Chief Financial Officer  

 

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Signature   Title   Date
       
 /s/ George M. Sfeir   President,   April 2, 2018
George M. Sfeir  

Chief Executive Officer,

Chief Financial Officer,

Principal Accounting Officer

   

 

 

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