UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549


_______________





FORM
10-Q


_______________





x
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For
the quarterly period ended September 30, 2009





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





For the transition period from
______ to  ______.










ENERGY
& TECHNOLOGY, CORP.


(Exact
name of registrant as specified in Charter)





DELAWARE
            
            333-143215
            
            26-0198662(State
      or other jurisdiction of
              incorporation
      or organization)
            
            (Commission
      File No.)
            
            (IRS
      Employee Identification No.)




Petroleum Towers,
Suite 530


P.O. Box
52523


Lafayette,
LA 70505


(Address
of Principal Executive Offices)


_______________





(337)
984-2000


(Issuer
Telephone number)


_______________





(337)
988 1777


(Issuer
Fax number)


_______________





www.engt.com


www.enrgyNtechnoly.com


(Issuer
URL)


_______________





(Former
Name or Former Address if Changed Since Last Report)





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


Yes x No o





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).


Yes o No o





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





Large
Accelerated Filer o     Accelerated
Filer o     Non-Accelerated
Filer o     Smaller
Reporting Company x





Indicate
by check mark whether the registrant is a shell company as defined in Rule 12b-2
of the Exchange Act.


Yes o No x





State the
number of shares outstanding of each of the issuer’s classes of common equity,
as of November 16, 2009: 10,000,000











ENERGY
& TECHNOLOGY, CORP.





FORM
10-Q





September
30, 2009





INDEX





PART
I—FINANCIAL INFORMATION




Item
      1.
            Financial
      Statements
            4Item
      2.
            Management’s
      Discussion and Analysis of Financial Condition
            16Item
      3
            Quantitative
      and Qualitative Disclosures About Market Risk
            22Item
      4T.
            Control
      and Procedures
            22





PART
II—OTHER INFORMATION





Item
      1
            Legal
      Proceedings
            23Item
      1A
            Risk
      Factors
            23Item
      2.
            Unregistered
      Sales of Equity Securities and Use of Proceeds
            23Item
      3.
            Defaults
      Upon Senior Securities
            23Item
      4.
            Submission
      of Matters to a Vote of Security Holders
            23Item
      5.
            Other
      Information
            23Item
      6.
            Exhibits
            23





SIGNATURE











INTRODUCTORY
NOTE





This
Quarterly Report on Form 10-Q contains “forward-looking statements” about Energy
& Technology, Corp. (the “Company”) and our subsidiary, Technical
Industries, Inc. (TII), and Energy Pipe, LLC (a variable interest entity), that
are subject to risks and uncertainties.  Forward-looking statements
include information concerning future financial performance, business strategy,
projected plans and objectives.  Statements preceded by, followed by
or that otherwise include the words “anticipates,” “believes,” “estimates,”
“expects,” “intends,” “plans,” “may increase,” “may fluctuate” and similar
expressions of future or conditional verbs such as “will,” “should,” “would,”
and “could” are generally forward-looking in nature and not historical
facts.  Actual results may differ materially from those projected,
implied, anticipated or expected in the forward-looking
statements.  Readers of this quarterly report should not rely solely
on the forward-looking statements and should consider all uncertainties and
risks throughout this report. The statements are representative only as of the
date they are made.  The Company, TII, and Energy Pipe, LLC (sometimes
referred to herein on a consolidated basis as the Company, we, us, or similar
phrasing) undertakes no obligation to update any forward-looking
statement.





These
forward-looking statements, implicitly and explicitly, include the assumptions
underlying the statements and other information with respect to the Company's
beliefs, plans, objectives, goals, expectations, anticipations, estimates,
financial condition, results of operations, future performance and business,
including management's expectations and estimates with respect to revenues,
expenses, return on equity, return on assets, efficiency ratio, asset quality
and other financial data and capital and performance ratios.





Although
the Company believes that the expectations reflected in the forward-looking
statements are reasonable, these statements involve risks and uncertainties that
are subject to change based on various important factors, some of which are
beyond the control of the Company.  The following factors, among
others, could cause the Company's results or financial performance to differ
materially from its goals, plans, objectives, intentions, expectations and other
forward-looking statements:





·      general
economic and industry conditions;


·      our
capital requirements and dependence on the sale of our equity
securities;


·      the
liquidity of the Company’s common stock will be affected by the lack of a
trading market;


·      industry
competition;


·      shortages
in availability of qualified personnel;


·      legal
and financial implications of unexpected catastrophic events;


·      regulatory
or legislative changes effecting the industries we serve; and


·      reliance
on, and the ability to attract, key personnel.





For a
discussion of these and other risks and uncertainties that could cause actual
results to differ from those contained in the forward-looking statements, see
“Risk Factors” in the Company’s S-1 Report filed with the SEC, which is
available on the SEC’s website at www.sec.gov.  All
forward-looking statements are qualified in their entirety by this cautionary
statement, and the Company undertakes no obligation to revise or update this
Quarterly Report on Form 10-Q to reflect events or circumstances after the date
hereof.  New factors emerge from time to time, and it is not possible
for us to predict which factors, if any, will arise.  In addition, the
Company cannot assess the impact of each factor on the Company’s business or the
extent to which any factor, or combination of factors, may cause actual results
to differ materially from those contained in any forward-looking
statements.








3





PART
I.  Financial Information





ITEM
1. Financial Statements




ENERGY
& TECHNOLOGY, GROUP


Consolidated
Balance Sheets







Sept
      30,
                2009
              
              
              December
      31,
                2008(Unaudited)
              
              
              (Audited)AssetsCurrent
      AssetsCash and Cash
      Equivalents
              
              $
              1,679,713
              
              
              $
              603,275Accounts
      ReceivableTrade,
      Net
              
              
              1,805,688
              
              
              
              1,684,890Other
              
              
              21,108
              
              
              
              25,399Inventory
              
              
              7,102,294
              
              
              
              7,102,294Prepaid
      Expenses
              
              
              73,759
              
              
              
              73,968Deferred Tax
      Asset
              
              
              -
              
              
              
              170,622Total
      Current Assets
              
              
              10,682,562
              
              
              
              9,660,448Property
      and Equipment, Net
              
              
              9,487,460
              
              
              
              9,755,533Other
      AssetsPatent,
      net
              
              
              515,745
              
              
              
              537,335Deferred IPO
      Expenses
              
              
              79,555
              
              
              
              71,346Deposits
              
              
              4,988
              
              
              
              4,988Other
      Assets
              
              
              39,314
              
              
              
              17,648Total
      Other Assets
              
              
              639,602
              
              
              
              631,317Total
      Assets
              
              $
              20,809,624
              
              
              $
              20,047,298






The
accompanying notes are an integral part of these consolidated financial
statements.
 4




ENERGY
& TECHNOLOGY, GROUP
 Consolidated
Balance Sheets - Continued






Sept
      30,
                    2009
                  
                  
                  December
      31,
                    2008(Unaudited)
                  
                  
                  (Audited)Liabilities
      and Stockholders' EquityCurrent
      LiabilitiesCurrent Maturities
      of Notes Payable
                  
                  $
                  93,875
                  
                  
                  $
                  43,030Accounts
      Payable
                  
                  
                  4,846,066
                  
                  
                  
                  5,407,381Accrued Payroll and
      Payroll Liabilities
                  
                  
                  20,956
                  
                  
                  
                  110,661Accrued
      Rent
                  
                  
                  1,300,000
                  
                  
                  
                  1,187,500Customer
      Deposits
                  
                  
                  551,075
                  
                  
                  
                  551,075Income Taxes
      Payable
                  
                  
                  391,727
                  
                  
                  
                  66,147Accrued Liability
      for Capital Expenditures
                  
                  
                  7,235,717
                  
                  
                  
                  7,235,717Total
      Current Liabilities
                  
                  
                  14,439,416
                  
                  
                  
                  14,601,511Long-Term
      LiabilitiesNotes
      Payable
                  
                  
                  19,388
                  
                  
                  
                  92,393Deferred Taxes
      Payable
                  
                  
                  1,182,245
                  
                  
                  
                  1,181,929Due to
      Affiliates
                  
                  
                  1,742,586
                  
                  
                  
                  1,711,416Total
      Long-Term Liabilities
                  
                  
                  2,944,219
                  
                  
                  
                  2,985,738Stoch
      holders' EquityPreferred Stock -
      $.001 Par Value; 10,000,000 Shares AuthorizedNone
      Issued
                  
                  
                  -
                  
                  
                  
                  -Common Stock -
      $.001 Par Value; 250,000,000 Shares Authorized10,000,000 and
      175,100,000 Shares Issued and Outstanding at September 30, and December
      31, 2008, respectively
                  
                  
                  10,000
                  
                  
                  
                  175,100Discount on Capital
      Stock
                  
                  
                  -
                  
                  
                  
                  (125,000
                  )Paid-In
      Capital
                  
                  
                  220,475
                  
                  
                  
                  180,375Retained
      Earnings
                  
                  
                  3,195,514
                  
                  
                  
                  2,229,574Total Stockholders'
      Equity
                  
                  
                  3,425,989
                  
                  
                  
                  2,460,049Total
      Liabilities and Stockholders' Equity
                  
                  $
                  20,809,624
                  
                  
                  $
                  20,047,298


The
accompanying notes are an integral part of these consolidated financial
statements.
 5




ENERGY
& TECHNOLOGY, GROUP
 Consolidated
Statements of Operations
 (unaudited)






Three
      Months Ended
                September
      30,
              
              
              Nine
      Months Ended
                September
      30,2009
              
              
              
              2008
              
              
              
              2009
              
              
              
              2008Revenues
              
              $
              1,504,773
              
              
              $
              2,678,114
              
              
              $
              6,188,436
              
              
              $
              7,861,390Cost
      of RevenuesLabor
      and Related Costs
              
              
              263,452
              
              
              
              313,548
              
              
              
              1,050,902
              
              
              
              688,109Subcontract
      Labor
              
              
              132,714
              
              
              
              128,867
              
              
              
              541,103
              
              
              
              389,724Depreciation
      and Amortization
              
              
              177,419
              
              
              
              63,458
              
              
              
              517,595
              
              
              
              244,826Maintenance
              
              
              83,389
              
              
              
              54,486
              
              
              
              240,244
              
              
              
              150,686Materials
      and Supples
              
              
              27,583
              
              
              
              1,663,853
              
              
              
              118,710
              
              
              
              3,202,735Insurance
              
              
              51,686
              
              
              
              31,820
              
              
              
              125,551
              
              
              
              77,184Other
              
              
              30,419
              
              
              
              104,100
              
              
              
              387,689
              
              
              
              163,915Total
      Costs of Revenues
              
              
              766,662
              
              
              
              2,360,132
              
              
              
              2,981,794
              
              
              
              4,917,179Gross
      Profit
              
              
              738,111
              
              
              
              317,982
              
              
              
              3,206,642
              
              
              
              2,944,211Operating
      ExpensesSalaries
      and Wages
              
              
              213,991
              
              
              
              156,660
              
              
              
              683,005
              
              
              
              430,574Professional
      Services
              
              
              44,439
              
              
              
              32,641
              
              
              
              195,158
              
              
              
              102,849Rent
              
              
              78,130
              
              
              
              54,141
              
              
              
              227,326
              
              
              
              167,672Utilities
              
              
              33,914
              
              
              
              19,971
              
              
              
              95,337
              
              
              
              52,964Office
      Supplies and Expenses
              
              
              59,246
              
              
              
              20,031
              
              
              
              113,789
              
              
              
              61,540Other
              
              
              53,496
              
              
              
              35,224
              
              
              
              165,407
              
              
              
              140,971Depreciation
              
              
              42,384
              
              
              
              23,107
              
              
              
              131,606
              
              
              
              57,482Total
      Operating Expenses
              
              
              525,600
              
              
              
              341,775
              
              
              
              1,611,628
              
              
              
              1,014,052IncomefromOperations
              
              
              212,511
              
              
              
              (23,793
              )
              
              
              1,595,014
              
              
              
              1,930,159Other
      Income (Expense)Investment
      Income
              
              
              3,171
              
              
              
              (2,593
              )
              
              
              6,414
              
              
              
              6,461Interest
      Expense
              
              
              (23,746
              )
              
              
              (24,460
              )
              
              
              (72,873
              )
              
              
              (71,474
              )Loss
      on Sale of Assets
              
              
              625
              
              
              
              -
              
              
              
              50
              
              
              
              -Total
      Other Income (Expense)
              
              
              (19,950
              )
              
              
              (27,053
              )
              
              
              (66,409
              )
              
              
              (65,013
              )Income
      before Income Taxes
              
              
              192,561
              
              
              
              (50,846
              )
              
              
              1,528,605
              
              
              
              1,865,146Provision
      for Income Taxes
              
              
              70,131
              
              
              
              (6,949
              )
              
              
              562,665
              
              
              
              724,710Net
      Income
              
              $
              122,430
              
              
              $
              (43,897
              )
              
              $
              965,940
              
              
              $
              1,140,436EarningsperShare-Basic
              
              $
              0.012
              
              
              NM
              
              
              $
              0.015
              
              
              $
              0.007EarningsperShare-Diluted
              
              $
              0.012
              
              
              NM
              
              
              $
              0.015
              
              
              $
              0.007








The
accompanying notes are an integral part of these consolidated financial
statements.
 6




ENERGY
& TECHNOLOGY, GROUP
 Consolidated
Statements of Cahnges in Stockholders' Equity
 (unaudited)


Common
      Stock
              
              
              Discount
    on
              
              
              Additional
                Paid-In
              
              
              Retained
              
              
              Stock
              
              
              Total
                Stockholders'Shares
              
              
              Amount
              
              
              Capital
      Stock
              
              
              Capital
              
              
              Earnings
              
              
              Subscriptions
              
              
              EquityBalance
      atJanuary 1, 2008
              
              
              175,000,000
              
              
              $
              175,000
              
              
              $
              (125,000
              )
              
              $
              80,475
              
              
              $
              770,918
              
              
              $
              72,000
              
              
              $
              973,393Capital
      Stock Issued
              
              
              100,000
              
              
              
              100
              
              
              
              -
              
              
              
              99,900
              
              
              
              -
              
              
              
              (72,000
              )
              
              
              28,000Net
      Income
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              1,140,436
              
              
              
              -
              
              
              
              1,140,436June
      30, 2008
              
              
              175,100,000
              
              
              $
              175,100
              
              
              $
              (125,000
              )
              
              $
              180,375
              
              
              $
              1,911,354
              
              
              $
              -
              
              
              $
              2,141,829Balance
      at January 1, 2009
              
              
              175,100,000
              
              
              $
              175,100
              
              
              $
              (125,000
              )
              
              $
              180,375
              
              
              $
              2,229,574
              
              
              $
              -
              
              
              $
              2,460,049Capital
      Stock Cancelled
              
              
              (165,100,000
              )
              
              
              (165,100
              )
              
              
              125,000
              
              
              
              40,100
              
              
              
              -
              
              
              
              -
              
              
              
              -Net
      Income
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              965,940
              
              
              
              -
              
              
              
              965,940BalanceatJune30,2009
              
              
              10,000,000
              
              
              $
              10,000
              
              
              $
              -
              
              
              $
              220,475
              
              
              $
              3,195,514
              
              
              $
              -
              
              
              $
              3,425,989








The
accompanying notes are an integral part of these consolidated financial
statements.
 7






ENERGY
& TECHNOLOGY, GROUP
 Consolidated
Statements of Cash Flows
 (unaudited)


Nine
      Months Ended
                September
      30,2009
              
              
              2008Cash
      Flows from Operating ActivitiesNet
      Income
              
              $
              965,940
              
              
              $
              1,140,436Adjustments
      to Reconcile Net Income to Net Cash Provided byOperating
      ActivitiesDepreciation
              
              
              627,612
              
              
              
              302,308Amortization
      of Patent Costs
              
              
              21,589
              
              
              
              25,399Deferred
      Income Taxes
              
              
              170,938
              
              
              
              360,156Changes
      in Assets and LiabilitiesTrade
      Receivables
              
              
              (120,798
              )
              
              
              32,089Other
      Receivables
              
              
              4,291
              
              
              
              (19,310
              )Inventory
              
              
              -
              
              
              
              (2,145,179
              )Prepaid
      Expenses
              
              
              209
              
              
              
              (43,077
              )Accounts
      Payable
              
              
              (561,315
              )
              
              
              692,383Accrued
      Payroll and Payroll Liabilities
              
              
              (89,705
              )
              
              
              115,125Income
      Taxes Payable
              
              
              325,580
              
              
              
              364,555Increase
      in Customer Deposits
              
              
              -
              
              
              
              551,075AccruedRent
              
              
              112,500
              
              
              
              112,500Net
      Cash Provided by Operating Activities
              
              
              1,456,841
              
              
              
              1,488,460Cash
      Flows from Investing ActivitiesPurchase
      of Investments
              
              
              -
              
              
              
              (117,996
              )Increase
      in Other Assets
              
              
              (21,666
              )
              
              
              (4,622
              )Repayment
      on Accrued Liability for Capital Expenditures
              
              
              -
              
              
              
              (47,873
              )Purchase
      of Property and Equipment
              
              
              (359,538
              )
              
              
              (690,682
              )Net
      Cash Used in Investing Activities
              
              
              (381,204
              )
              
              
              (861,173
              )Cash
      Flows from Financing ActivitiesDecrease
      in Cash Overdraft
              
              
              -
              
              
              
              (52,900
              )Payment
      of IPO Costs
              
              
              (8,209
              )
              
              
              (37,428
              )Issuance
      of Stock/Stock Subscriptions
              
              
              -
              
              
              
              28,000Borrowings
      from Affiliates
              
              
              31,170
              
              
              
              298,004Proceeds
      from Notes Payable
              
              
              13,046
              
              
              
              -Principal Repayments
      on Notes Payable
              
              
              (35,206
              )
              
              
              (8,026
              )Net cash Provided by Financing Activities
              
              
              801
              
              
              
              227,650Net
      Increase in Cash and Cash Equivalents
              
              
              1,076,438
              
              
              
              854,937Cash
      and Cash Equivalents, Beginning of Period
              
              
              603,275
              
              
              
              437,997Cash
      and Cash Equivalents, End of Period
              
              $
              1,679,713
              
              
              $
              1,292,934





The
accompanying notes are an integral part of these consolidated financial
statements.
 8






ENERGY
& TECHNOLOGY, GROUP
 Consolidated
Statements of Cash Flows - Continued
 (unaudited)






Nine
      Months Ended
                September
      30,2009
              
              
              2008Supplemental
      Disclosure of Cash Flow InformationCash Paid During
      the Period for Interest
              
              $
              3,555
              
              
              $
              2,154Cash Paid During
      the Period for Income Taxes
              
              $
              -
              
              
              $
              -






The
accompanying notes are an integral part of these consolidated financial
statements.
 9







ENERGY
& TECHNOLOGY, CORP.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS.





Note
1.   Organization





Technical
Industries & Energy, Corp. (the Company) (TIE) was formed November 29, 2006
under the laws of the State of Delaware in order to acquire and to take over the
assets and business of Technical Industries, Inc. (TII).  On that
date, the Company issued 125,000,000 shares of common stock to American
Interest, LLC, in exchange for founder services rendered.  The fair
value of these services was considered immaterial, and no amounts were
recognized in the financial statements.  At the time the shares were
issued to American Interest, LLC, TIE had no assets, operations, or cash
flows.  As such, the stock had no value at the time TIE was
established.  The par value was arbitrarily established in order to
comply with the State of Delaware laws.  In order to reflect the par
value of the shares issued, the Company recognized a discount on capital stock
as a contra-equity account within the equity section of the consolidated balance
sheets.  On January 3, 2007, the Company entered into a Stock Exchange
Agreement and Share Exchange (the Agreement) whereby the sole shareholder of TII
(Sfeir Family Trust) 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.  On April 1, 2009, the Company entered into an agreement with
American Interest, LLC and the Sfeir Family Trust whereby the two stockholders
agreed to cancel 118,046,500 common shares for American Interest, LLC and
47,053,500 common shares for the Sfeir Family Trust for the consideration to be
re-issued in the future or compensated for according to American Interest, LLC
and Sfeir Family Trust wishes. As a result, the Company has at September 30,
2009, 10,000,000 shares of common stock issued and outstanding.





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





On August
29, 2008, the Company effected a name change from Technical Industries &
Energy Corp. to Energy & Technology, Corp. to better reflect the nature of
the Company’s business.





Note
2.   Acquisition





As
disclosed in Note 1, on January 3, 2007, the Company acquired all of the
outstanding common stock of Technical Industries, Inc, in exchange for
50,000,000 shares of $.001 par value common stock.  The assets and
liabilities assumed, which are summarized in the following paragraph, were
recorded at the carrying value to TII since TII and the Company were under
common control prior to the acquisition.





A summary
of the assets acquired and liabilities assumed in connection with the
acquisition of TII is as follows:




AssetsCash
      and Cash Equivalents
              
              $
              492,752Receivables
              
              
              570,801Prepaid
      Expenses
              
              
              42,555Deferred
      Tax Asset
              
              
              386,319Property
      and Equipment, net
              
              
              1,359,209Capitalized
      Patent Costs
              
              
              517,427Other
      Assets
              
              
              14,988




10






Note
2.   Acquisition (Continued)




LiabilitiesAccounts
      Payable and Accrued Expenses
              
              
              (956,825
              )Notes
      Payable
              
              
              (47,113
              )Obligations
      under Capital Leases
              
              
              (10,832
              )Deferred
      Tax Liability
              
              
              (85,779
              )Amounts
      due to Affiliates
              
              
              (1,877,693
              )


Note
3.   Summary of Significant Accounting Policies





Basis
of Presentation and Consolidation


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





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




Basis
of Accounting


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





Use
of Estimates


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





Revenue
Recognition


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





Trade
Receivables


Trade
accounts receivable are carried at their estimated collectible
amounts.  Trade credit is generally extended on a short-term basis;
thus receivables do not bear interest, although a finance charge may be applied
to amounts past due. Trade accounts receivable are periodically evaluated for
collectability based on past credit history with customers and their current
financial condition, and are charged against bad debt expense when they are
deemed uncollectible.  Use of this method does not result in a
material difference from the valuation method required by accounting principles
generally accepted in the United States of America.





Inventory


Inventory
is stated at the lower of cost determined by the specific identification method
or market.  At September 30, 2009 and at December 31, 2008, inventory
consisted of drilling 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.






11






Note
3.   Summary of Significant Accounting Policies
(Continued)





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 the Accounting Standards
Codification 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.





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





Advertising


The
Company charges the costs of advertising to expense as incurred.





Cash
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


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





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





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






12





Note
3.   Summary of Significant Accounting Policies
(Continued)





Recent Accounting
Pronouncements


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





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





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





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





ASC
855-10 (formerly FAS No. 165, Subsequent Events),
establishes general standards of accounting for and disclosure of events that
occur after the balance sheet date but before financial statements are issued or
are available to be issued. In particular, ASC 855-10 sets forth the period
after the balance sheet date during which management of a reporting entity
should evaluate events or transactions that may occur for potential recognition
or disclosure in the financial statements, the circumstances under which an
entity should recognize events or transactions occurring after the balance sheet
date in its financial statements, and the disclosures that an entity should make
about events or transactions that occurred after the balance sheet date. An
entity must apply the requirements to interim or annual financial periods ending
after June 15, 2009. The adoption of ASC 855-10 did not significantly change the
financial statements.






13





Effect
of Newly Issued But Not Yet Effective Accounting Standards:





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





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





Note
4.   Patent





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





The
Company’s costs associated with its development of these testing procedures and
application for patent have been capitalized and recognized as an asset in the
Company’s balance sheet, and is being amortized over 20 years.





Note
5.   Accrued Liability for Capital Expenditures





During
2008, the Company acquired a significant amount of equipment and other capital
assets for which the Company has recognized a liability for the outstanding
unpaid balance.  The Company intends to finance the acquisition of
these capital assets through a long-term financing arrangement.  The
Company has recognized the outstanding balance associated with the acquisition
of these capital assets as a current liability.





Note
6.   Commitments





The
Company leases office premises, operating facilities, and equipment under
several operating leases expiring in various years through 2030.  The
Company also leases land for operating purposes on a month to month
basis.





Note
7.   Major Customers





Even
though the Company has more than 60 active customers, for the nine months ended
September 30, 2009, the Company had four customers which generated revenues in
excess of 10% of the Company’s total revenues.  Revenues for these
four customers were approximately 50% of total revenues, and the total balance
due from these four customers at September 30, 2009 was $209,742.  For
the nine months ended September 30, 2008, the Company had four customers which
generated revenues in excess of 10% of the Company’s total
revenues.  Revenues for these four customers were approximately 59% of
total revenues, and the total balance due from these four customers at September
30, 2008 was $1,883,282.




14







Note
8.  Related Party Transactions





Included
in due to affiliates at September 30, 2009 and December 31, 2008, is $1,155,336
in acquisition debts paid by affiliates upon the acquisition of the Company in
1999.  The affiliates maintain a lien on the Company’s accounts
receivable and equipment to secure this loan.  The amounts due to the
affiliates have no set terms of repayment and bear interest at
5.00%.





Note
9.   Earnings per Share





The
weighted average common shares outstanding amounted to 10,000,000, and
64,428,571 for the three months and nine months ended September 30, 2009,
respectively, and 175,100,000 for the three months and nine months ended
September 30, 2009, respectively.





Note
10. Fair Value Disclosures




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





Cash and cash equivalents: The
carrying amount reported in the balance sheet approximates fair
value.





Notes Payable: The fair value
of notes payable approximates the carrying amount reported in the balance
sheet.





While
these estimates of fair value are based on management's judgment of appropriate
factors, there is no assurance that if the Company had disposed of such items at
September 30, 2009 or December 31, 2008, the estimated fair values would have
been achieved. Market values may differ depending on various circumstances not
taken into consideration in this methodology. The estimated fair values at
September 30, 2009 and December 31, 2008, should not necessarily be considered
to apply at subsequent dates.





In
addition, other assets and liabilities that are not defined as financial
instruments are not included in the following disclosures, such as property and
equipment.  The estimated fair values of the Company's financial
instruments are as follows:




September 30,
      2009
            
            
            December 31,
      2008Carrying
              Amount
            
            
            Fair
              Value
            
            
            Carrying
              Amount
            
            
            Fair
              ValueFinancial
      assets:Cash
      and cash equivalents
            
            $
            1,679,713
            
            
            $
            1,679,713
            
            
            $
            603,275
            
            
            $
            603,275Financial
      liabilities:Notes
      Payable
            
            
            (113,263
            )
            
            
            (113,263
            )
            
            
            (135,423
            )
            
            
            (135,423
            )





Note
11. Subsequent Events





In
accordance with the subsequent events topic of the ASC, the Company evaluates
events and transactions that occur after the balance sheet date for potential
recognition in the financial statements.  The effect of all subsequent
events that provide additional evidence of conditions that existed at the
balance sheet date are recognized in the financial statements as of September
30, 2009.  In preparing these financial statements, the Company
evaluated the events and transactions that occurred from September 30, 2009
through November 13, 2009.







15






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





General





We have a
patented process which can help companies within the energy industry reach deep
energy reserves by using their existing drilling rigs, platforms and equipment,
thus save the customers money.





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





Increased sales and marketing
effort:We have
grown over the historical period without an aggressive marketing and sales
effort.  Currently, new business is generated from referrals,
technical sessions given to oil and gas and industry related companies, a
website and through the use of a marketing company on a limited
basis.  Currently, we have one employee whose duties are focused on
sales, marketing, and promotional activities for the
Company.  Management believes revenue can be increased by expanding
the Company's sales force.





Applying for additional patents to
protect proprietary rights:We have recently developed new
technology that has been internationally patented including three issued patents
in the U.S.A., one in China, and one pending in Canada and another is pending
patent in Europe.  The new inspection technology is needed in order to
reach deep energy reserves.  Our expandable liners inspection
technology helps the oil and gas companies 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 oilfield market.  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.  Other areas management has identified as potential growth
avenues include vessel inspection and inspection of pipelines in
service.  We are working to acquire pipe threading equipment which
could be attached to the inspection assembly line and provide additional service
for a very low increased cost to our customers.





Geographic expansion in the domestic
and international markets:We currently derive the majority of
revenue from 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 is now
operational 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 agents in the Mexico and Saudi Arabia and the 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 and we are working on training and
raising the capital needed.  Mr. Steve Piper previously worked for U.S.
Steel as a threading technician and a manager, has more than 20 years experience
in this field.  Mr. Piper has been hired by our company to organize and
manage Highland Energy Threading LLC.





We
continue to seek other companies which can complement our 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.  Currently, we are in the process of
performing due diligence procedures on two of the companies.





We have a
customer base of over 60 accounts, and are continually expanding its customer
base to increase revenue growth.  Currently, we serve customers that
are oil companies, steel mills, material suppliers,drilling companies,
material rental companies and engineering companies.  Our customer
relationships average over ten years which provides us repeat
business.





Critical
Accounting Policies





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





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





Inventory.  Inventory
is stated at the lower of cost determined by the specific identification method
or market.  At September 30, 2009, 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.






16





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





Discussion
of Changes in Financial Condition from December 31, 2008 to September 30,
2009





At
September 30, 2009, total assets amounted to $20,809,624 compared to $20,047,298
at December 31, 2008, an increase of $762,326, or 3.8%.  The increase
is primarily due to an increase in cash and cash equivalents of $1,076,438,
which is partially offset by a decrease in our deferred tax asset of $170,622
and a decrease in property and equipment, net, of $268,073.





Our
liabilities at September 30, 2009, totaled $17,383,635 compared to $17,587,249
at December 31, 2008, a decrease of $203,614, or 1.2%.  The decrease
is primarily due to a decrease in accounts payable of
$561,315.  This decrease was partially offset by an increase in income
taxes payable of $325,580.





Total
stockholder’s equity increased from $2,460,049 at December 31, 2008, to
$3,425,989 at September 30, 2009.  This increase was due to net income
generated during the nine months ended September 30, 2009 of
$965,940.





Accounts
Receivable





Accounts
receivable increased approximately $120,798, or 7.2%, from December 31, 2008 to
September 30, 2009.  The increase in accounts receivable is primarily
due to the impact the current national and world wide economic conditions have
had on many of our customers.  Customers are taking longer to pay
invoices for product and services provided by us.    We will
continue our efforts to manage our receivables so that payments are received
timely.  Approximately 30.4% of the balance of trade receivables at
September 30, 2009 were outstanding for 60 days or less.





Property
and Equipment





During
the nine months ended September 30, 2009, we purchased approximately $359,538 of
property and equipment for our facilities.  This amount was offset by
approximately $627,611 of depreciation expense recognized during the nine months
ended September 30, 2009.  These transactions resulted in decrease in
our property and equipment, net, of approximately $268,073.





Deferred
Tax Asset/Income Taxes Payable





Due to
the Company’s profitability for the nine months ended September 30, 2009, our
deferred tax asset associated with net operating losses has been
eliminated.  In addition to reducing our deferred tax asset, we have
recorded income taxes payable for the estimated amount of income taxes
associated with our taxable income.





Accounts
Payable





Accounts
payable at September 30, 2009 totaled $4,846,066 compared to $5,407,381, at
December 31, 2008, a decrease of $561,315.  This decrease is due
primarily to payments made during the nine months ended September 30, 2009 to
our suppliers and the reduction in purchases of pipe inventory over the past
nine months.





Accrued
Rent





The
Company leases property for its Houston facility on a month-to-month basis at a
rate of $12,500 per month.  The lessor of the property has agreed not
to demand payment for the outstanding balance until we are able to enhance our
capital position, either through the issuance and sale of common stock or
through internally generated growth.






17





Discussion
of Results of Operations for the Three months Ended September 30, 2009 compared
to the Three months Ended September 30, 2008





Revenues





Our
revenue for the three months ended September 30, 2009, was $1,504,473 compared
to $2,678,114 for the three months ended September 30, 2008, a decrease of
$1,173,641, or 43.8%.  The decrease is attributable primarily to the
decrease in pipe sales of $1,527,741 and was partially offset by an increase in
storage fees and pipe inspection fees.  During late 2008, we placed in
service additional inspection equipment to enable us to meet the overall
increased demand for pipe inspection services.  In addition to our
inspection services, we provide logistics coordination and storage of tubular
goods at our Houston facility for customers and suppliers.





The
following table presents the composition of revenue for the three months ending
September 30, 2009 and 2008:




Revenue:
            
            2009
            
            Percentage
            
            2008
            
            Percentage
            
            VarianceDollars
            Dollars
            DollarsInspection
      Fees
            
            $
            1,017,768
            
            $67.6%
            
            $
            874,273
            
            32.6%
            
            $
            143,495Storage
      Fees
            
            $
            300,428
            
            20.0%
            
            $
            92,423
            
            3.5%
            
            $
            208,005Pipe
      Sales
            
            $
            -
            
            0.0%
            
            $
            1,527,741
            
            57.0%
            
            $
            (1,527,741)Other
      Income
            
            $
            186,277
            
            12.4%
            
            $
            183,677
            
            6.9%
            
            $
            2,600Total
      Revenue
            
            $
            1,504,473
            
            100.0%
            
            $
            2,678,114
            
            100.0%
            
            $
            (1,173,641)





Cost
of Revenue and Gross Profit





Our cost
of revenue for the three months ended September 30, 2009, was $766,662, or 50.9%
of revenues, compared to $2,360,132, or 88.1% of revenues, for the three months
ended September 30, 2008.  The overall decrease in our cost of revenue
is due to our decreased cost of pipe sold because we sold no pipe in
2009.  The decrease in cost of revenue as a percentage of revenues was
due to the lower markup on pipe sales in the prior year period, as well as due
to an adjustment made during the three months ended September 30, 2008 to the
value of certain pipe inventory which was damaged or had other
defects.  This decrease in cost of pipe sold was offset by increases
in depreciation, maintenance, and insurance.  The increase in
maintenance was due to roof repairs required on the Abbeville
shop.  The insurance increased because of the increase in sales and
payroll.  The increase in depreciation and amortization expense for
the three months ended September 30, 2009 compared to the three months ended
September 30, 2008 is primarily due to equipment purchased and placed in service
in the second half of 2008 and first quarter of 2009 as we continue the
expansion of our Abbeville, Louisiana and Houston, Texas
facilities.





The
following table presents the composition of cost of revenue for the three months
ended September 30, 2009 and 2008:




Cost
      of Revenue:
            2009
            
            
            
            2008
            
            
            
            VarianceDollars
            Percentage
            Dollars
            Percentage
            DollarsLabor
      and Related Costs
            
            263,452
            
            34.4%
            
            $
            313,548
            
            13.3%
            
            $
            (50,096)Subcontract
      Labor
            
            132,714
            
            17.3%
            
            
            128,867
            
            5.5%
            
            
            3,847Depreciation
      and Amortization
            
            177,419
            
            23.1%
            
            
            63,458
            
            2.7%
            
            
            113,961Maintenance
            
            83,389
            
            10.9%
            
            
            54,486
            
            2.3%
            
            
            28,903Materials
      and Supplies
            
            27,583
            
            3.6%
            
            
            1,663,853
            
            70.5%
            
            
            (1,636,270)Insurance
            
            51,686
            
            6.7%
            
            
            31,820
            
            1.3%
            
            
            19,866Other
            
            30,419
            
            4.0%
            
            
            104,100
            
            4.4%
            
            
            (73,681)Total Cost of 
      Revenue
            $
            766,662
            
            100.0%
            
            $
            2,360,132
            
            100.0%
            
            $
            (1,593,470)




Operating
Expenses





For the
three months ended September 30, 2009, our operating expenses totaled $525,600,
as compared to $341,775 for the three months ended September 30, 2008,
representing an increase of $183,825, or 53.8%.  The largest component
of our operating expenses consists of salaries and wages.  Rent,
professional services, utilities, office supplies and expenses, and depreciation
all increased from September 30, 2008 to September 30, 2009.  Salaries
and wages for general and administrative personnel was $213,991 for the three
months ended September 30, 2009, compared to $156,660 for the three months ended
September 30, 2008, an increase of $57,331, or 36.6%.  During the
second half of 2008, we hired a new salesman to concentrate on tubular sales and
began paying our founder, President, and CEO a conservative salary.






18





Rent
expense totaled $78,130 for the three months ended September 30, 2009, as
compared to $54,141 for the three months ended September 30, 2008, an increase
of $23,989, or 44.3%.  Rent expense for both the three months ended
September 30, 2009 and September 30, 2008, pertains primarily to our rental of
office space for our headquarters in Lafayette as well as our rental of land and
facilities for operating purposes.  The increase is attributable to
cost of additional land used at our Houston, Texas facility to enable the
company to store more tubular goods.





Professional
services expense increased from $32,641 for the three months ended September 30,
2008, to $44,439 for the three months ended September 30, 2009, an increase of
$11,798, or 36.1%.  The increase is primarily a result of an increase
in legal and accounting fees associated with the growth of the Company over the
past several months.





Other
Income and Expense





Other
income and expense consists of investment income, gains or losses on sale of
assets, and interest expense, respectively.





Interest
expense totaled $23,746 for the three months ended September 30, 2009, as
compared to $24,460 for the three months ended September 30, 2008,
a decrease of $714, or 2.9%.  Interest expense pertains primarily
to amounts due to affiliates as well as to our notes payable with third parties,
and the increase relates to the financing of new vehicles.





Provision
for income taxes





For the
three months ended September 30, 2009, we reported an income tax expense of
$70,131 compared to an income tax benefit of $6,949 for the three months ended
September 30, 2008.  This is due to having income before taxes of
$192,561 for the three months ended September 30, 2009, compared to a loss
before a provision for taxes of $50,846 for the three months ended September 30,
2008.  This loss is due primarily to the write-down in value of
inventory deemed to be damaged or to have other defects.




Discussion
of Results of Operations for the Nine months Ended September 30, 2009 compared
to the Nine months Ended September 30, 2008





Revenues





Our
revenue for the nine months ended September 30, 2009, was $6,188,136 compared to
$7,861,390 for the nine months ended September 30, 2008, a decrease of
$1,673,254, or 21.3%.  The decrease is attributable primarily to the
reduction in pipe sales in the amount of $4,522,398 brought on by the current
economy which resulted in low drilling activity and the complete lack of pipe
sales in 2009, partially offset by increased inspection fees and other income in
the amount of $2,849.144.  During late 2008, we placed in service
additional inspection equipment to enable us to meet the overall increased
demand for pipe inspection services.  In addition to our inspection
services, we provide hauling and storage of tubular goods at our Houston
facility for customers and suppliers.  During the nine months ended
September 30, 2009, we received significant quantities of tubular goods from one
of our primary vendors to store at our Houston facility.  This
resulted in an increase in storage fee revenue as well in the amount we charged
for the hauling and handling of these tubular goods, which is included in other
income.





The
following table presents the composition of revenue for the nine months
September 30, 2009 and 2008:





Revenue:
            
            2009
              Dollars
            
            Percentage
            
            
            2008
              Dollars
            
            Percentage
            
            
            Variance
              DollarsInspection
      Fees
            
            $
            4,307,573
            
            69.6%
            
            
            $
            2,715,110
            
            34.6%
            
            
            $
            1,592,463Storage
      Fees
            
            $
            841,229
            
            13.6%
            
            
            $
            222,767
            
            2.8%
            
            
            $
            618,462Pipe
      Sales
            
            $
            -
            
            0.0%
            
            
            $
            4,522,398
            
            57.5%
            
            
            $
            (4,522,398
            )Other
      Income
            
            $
            1,039,334
            
            16.8%
            
            
            $
            401,115
            
            5.1%
            
            
            $
            638,219Total
      Revenue
            
            $
            6,188,136
            
            100.0%
            
            
            $
            7,861,390
            
            100.0%
            
            
            $
            (1,673,254
            )








19






Cost
of Revenue and Gross Profit





Our cost
of revenue for the nine months ended September 30, 2009, was $2,981,794, or
48.2% of revenues, compared to $4,917.179, or 62.6% of revenues, for the nine
months ended September 30, 2008.  The overall decrease in our cost of
revenue is primarily due to our decreased costs of supplies and pipe sold in the
amount of $3,084,025 partially offset by increases in labor, depreciation, and
other costs in the amount of $1,148,640, including costs for hauling and fuel
for moving customers’ pipe onto our yard for storage.  The decrease in
cost of revenue as a percentage of revenues was due to the higher markup on
these services which are performed as a convenience to our customers and
suppliers of tubular goods as opposed to the markup on pipe.  In
addition to these decreases, labor and related costs increased by $514,172, or
47.7 %.  The increase is primarily attributable to the overall
increase in volume of inspection services, as well as the need for additional
personnel, including subcontract labor, to handle and store the amount of
tubular goods received during the nine months ended September 30,
2009.  The increase in depreciation and amortization expense for the
nine months ended September 30, 2009 compared to the nine months ended September
30, 2008 is primarily due to equipment purchased and placed in service in the
second half of 2008 and first quarter of 2009.





The
following table presents the composition of cost of revenue for the nine months
ended September 30, 2009 and 2008:





Cost
      of Revenue:
            
            2009
              Dollars
            
            Percentage
            
            
            2008
              Dollars
            
            Percentage
            
            
            Variance
              DollarsLabor
      and Related Costs
            
            $
            1,050,902
            
            35.2%
            
            
            $
            688,109
            
            14.0%
            
            
            $
            362,793Subcontract
      Labor
            
            
            541,103
            
            18.1%
            
            
            
            389,724
            
            7.9%
            
            
            
            151,379Depreciation
      and amortization
            
            
            517,595
            
            17.4%
            
            
            
            244,826
            
            5.0%
            
            
            
            272,769Maintenance
            
            
            240,244
            
            8.1%
            
            
            
            150,686
            
            3.1%
            
            
            
            89,558Materials
      and Supplies
            
            
            118,710
            
            4.0%
            
            
            
            3,202,735
            
            65.1%
            
            
            
            (3,084,025
            )Insurance
            
            
            125,551
            
            4.2%
            
            
            
            77,184
            
            1.6%
            
            
            
            48,367Other
            
            
            387,689
            
            13.0%
            
            
            
            163,915
            
            3.3%
            
            
            
            223,774Total Cost of 
      Revenue
            
            $
            2,981,794
            
            100.0%
            
            
            $
            4,917,179
            
            100.0%
            
            
            $
            (1,935,385
            )





Due to
limitations with the pool of qualified individuals, we utilized the services of
subcontractors to assist us in providing timely and quality service to our
customers.  We will continue our efforts to attract, employ, and
retain qualified individuals to serve the needs of our customers.





Operating
Expenses





For the
nine months ended September 30, 2009, our operating expenses totaled $1,611,628,
as compared to $1,014,052 in 2008, representing an decrease of $597,576, or
58.9%.  The largest component of our operating expenses for 2009
consists of salaries and wages, rent, professional services, and office supplies
and expenses.  Salaries and wages for general and administrative
personnel was $683,005 for the nine months ended September 30, 2009, compared to
$430,574 for the nine months ended September 30, 2008, an increase of $252,431,
or 58.6%.  During the second half of 2008, we hired a new salesman to
concentrate on tubular sales and began paying our founder, President, and CEO a
regular salary.





Rent
expense totaled $227,326 for the nine months ended September 30, 2009, as
compared to $167,672 for the nine months ended September 30, 2008, an increase
of $59,654, or 35.6%.  Rent expense for both the nine months ended
September 30, 2009, and for the nine months ended September 30, 2008, pertains
primarily to our rental of office space for our headquarters in Lafayette as
well as our rental of land and facilities for operating purposes.  The
increase is attributable to cost of additional land used at our Houston, Texas
facility.





Professional
services expense increased from $102,849 for the nine months ended September 30,
2008, to $195,158 for the nine months ended September 30, 2009, an increase of
$92,309.  The increase is primarily a result of expenses we incurred
throughout the nine months ended September 30, 2009 for consulting services
pertaining to training and certification classes for our employees and
consulting services for our compliance with ISO standards, as well as an
increase in accounting fees associated with the growth of the Company over the
past several months.





Other
Income and Expense





Other
income and expense consists of investment income and interest expense,
respectively.  Investment income, which consists of interest,
dividends, realized gains and losses, and unrealized gains and losses, amounted
to a gain of $6,414 for the nine months ended September 30, 2009, compared to
income of $6,461 for the nine months ended September 30, 2008.  The
decrease is due primarily to the lower yields being earned on our invested cash
balances.





Interest
expense totaled $72,873 for the nine months ended September 30, 2009, as
compared to $71,474 for the nine months ended September 30, 2008,
an increase of $2.0%.  Interest expense pertains primarily to
amounts due to affiliates as well as to our notes payable with third parties,
and the decrease relates to the principal payments on those debts and
obligations.






20





Provision
for income taxes





For the
nine months ended September 30, 2009, we reported an income tax expense of
$562,665 compared to income tax expense of $724,710 for the nine months ended
September 30, 2008, a decrease of $162,045 or 22.4%, which is the result of the
declining sales of pipe and lower profit for 2009.





Comparative
financial information for the nine months ended September 30:





SEPT. 30,
              2009
            
            
            SEPT. 30,
              2008
            
            
            SEPT.30,
              2007
            
            
            SEPT. 30,
              2006
            
            
            SEPT. 30,
              2005Revenues,
      for the first quarter
            
            $
            6,188,436
            
            
            $
            7,861,390
            
            
            $
            2,559,522
            
            
            $
            1,945,371
            
            
            $
            1,497,878Cost
      of Revenues
            
            
            2,981,794
            
            
            
            4,917,179
            
            
            
            1,143,257
            
            
            
            820,231
            
            
            
            687,011Gross
      Profit
            
            
            3,206,642
            
            
            
            2,944,211
            
            
            
            1,416,265
            
            
            
            1,125,140
            
            
            
            810,867Operating  ExpensesGeneral
      & Administrative Expenses
            
            
            1,480,022
            
            
            
            956,570
            
            
            
            511,501
            
            
            
            487,124
            
            
            
            551,643Depreciation
            
            
            131,606
            
            
            
            57,482
            
            
            
            54,663
            
            
            
            66,735
            
            
            
            69,237Total
      Operating Expenses
            
            
            1,611,628
            
            
            
            1,014,052
            
            
            
            566,164
            
            
            
            553,859
            
            
            
            620,880Income
      from Operations
            
            
            1,595,014
            
            
            
            1,930,159
            
            
            
            850,101
            
            
            
            571,281
            
            
            
            189,987Other
      Income (Expense)
            
            
            66,409
            
            
            
            (65,013
            )
            
            
            (71,116
            )
            
            
            (81,429
            )
            
            
            (89,336
            )Income
      Before Income Taxes
            
            
            1,528,605
            
            
            
            1,865,146
            
            
            
            778,985
            
            
            
            489,852
            
            
            
            100,651Provision
      for Income Taxes
            
            
            562,665
            
            
            
            724,710
            
            
            
            390,595
            
            
            
            255,634
            
            
            
            36,234Net
      Income
            
            $
            965,940
            
            
            $
            1,140,436
            
            
            $
            388,390
            
            
            $
            234,218
            
            
            $
            64,417






21




Capital
Resources and Liquidity





As of
September 30, 2009 we had $1,679,713 in cash and cash
equivalents.  Our cash outflows have consisted primarily of expenses
associated with our operations.  These outflows have been offset by
the timely inflows of cash from our customers regarding sales that have been
made.  Cash outflows for investing purposes have consisted primarily
of the development of our Abbeville, Louisiana facility, and the acquisition of
equipment and other technology to better serve our
customers.  Currently, we have been able to utilize our relationships
with affiliated entities to stabilize our liquidity needs.





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





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





Item
3.  Quantitative and Qualitative Disclosures About Market
Risk





The
Company is subject to certain market risks, including changes in interest rates
and currency exchange rates.  The Company does not undertake any
specific actions to limit those exposures.





Item
4.  Controls and Procedures





a)  Evaluation of Disclosure
Controls. Our Chief Executive Officer and Chief Financial Officer
evaluated the effectiveness of our disclosure controls and procedures as of the
end of our third fiscal quarter 2009 pursuant to Rule 13a-15(b) of the
Securities and Exchange Act.  Disclosure controls and procedures are
controls and other procedures that are designed to ensure that information
required to be disclosed by us in the reports that we file or submit under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the SEC’s rules and forms.  Disclosure controls
and procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by us in the reports that we
file under the Exchange Act is accumulated and communicated to our management,
as appropriate to allow timely decisions regarding required disclosure. 
Based on his evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures were effective as of
September 30, 2009.





It should
be noted that any system of controls, however well designed and operated, can
provide only reasonable, and not absolute, assurance that the objectives of the
system are met.  In addition, the design of any control system is
based in part upon certain assumptions about the likelihood of future
events.  Because of these and other inherent limitations of control
systems, there can be no assurance that any design will succeed in achieving its
stated goals under all potential future conditions.





(b)  Changes in internal control over
financial reporting.  There have been no changes in our
internal control over financial reporting that occurred during the last fiscal
quarter that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting. Our management team will
continue to evaluate our internal control over financial reporting in 2009 as we
implement our Sarbanes Oxley Act testing.





22








PART
II - OTHER INFORMATION





Item
1. Legal Proceedings.





We are
currently not involved in any litigation that we believe could have a material
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 companies or our subsidiaries’ officers or
directors in their capacities as such, in which an adverse decision could have a
material adverse effect.





Item
1A. Risk Factors.





There are
no material changes to our risk factors previously disclosed on Form 10-K, dated
December 31, 2008.





Item
2. Unregistered Sales of Equity Securities and Use of Proceeds





There
were no unregistered sales of Equity Securities and Use of Proceeds during the
period ended September 30, 2009.





Item
3. Defaults Upon Senior Securities.





There
were no defaults upon senior securities during the period ended September 30,
2009.





Item
4. Submission of Matters to a Vote of Security Holders.





There
were no matters submitted for a vote of our security holders during the period
ended September 30, 2009.





Item
5. Other Information.





There is
no other information required to be disclosed under this item which was not
previously disclosed.





Item
6. Exhibits





(a)           Exhibits





31.1
Certifications pursuant to Section 302 of Sarbanes Oxley Act of
2002





32.1
Certifications pursuant to Section 906 of Sarbanes Oxley Act of
2002








23











SIGNATURES





Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.





ENERGY
      & TECHNOLOGY CORP.Date:
      November 16, 2009
            By:
            /s/
      George M. SfeirGeorge
      M. SfeirPresident,
      Chief Executive Officer,
              DirectorDate:
      November 16, 2009
            By:
            /s/
      Chongyuan (Joyce) ZhuChongyuan
      (Joyce) ZhuChief
      Financial Officer














24