SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
 
FORM 10-KSB

x ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended DECEMBER 31, 2005

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
Commission file number 0-31981
 
ENERTECK CORPORATION
(Name of Small Business Issuer in Its Charter)

Delaware
47-0929885
(State or other jurisdiction
(I.R.S. Employer
of incorporation or
Identification
organization)
Number)

10701 Corporate Drive, Suite 150
 
Stafford, Texas
77477
(Address of principal
(Zip Code)
executive offices)
 

Issuer’s telephone number, including area code: (281) 240-1787

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

Securities registered under Section 12(g) of the Exchange Act: Common Stock ($.001 par value)

Check whether the Issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act ¨

Check whether the Issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
 
Yes
x
No
¨

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B not contained in this form, and no disclosure will be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. ¨

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

State Issuer’s revenues for its most recent fiscal year:   $48,093.

As of April 5, 2006, the aggregate market value of the voting and non-voting common equity held by non-affiliates of the Issuer (8,584,459 shares) was approximately $15,366,000. The number of shares outstanding of the Common Stock ($.001 par value) of the Issuer as of the close of business on April 5, 2006 was 16,451,359.

Documents Incorporated by Reference: None

Transitional Small Business Disclosure Format: Yes   ¨   No x

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ENERTECK CORPORATION
 
     
 
TABLE OF CONTENTS
 
     
     
     
 
PART I
 
   
Page
     
Item 1.
Description of Business
3
     
Item 2.
Description of Property
15
     
Item 3.
Legal Proceedings
15
     
Item 4.
Submission of Matters to a Vote of Security Holders
15
     
 
PART II
 
     
Item 5.
Market for Common Equity, Related Stockholder Matters
 
 
and Small Business Issuer Purchases of Equity Securities
15
     
Item 6.
Management’s Discussion and Analysis or Plan of Operation
17
     
Item 7.
Financial Statements
21
     
Item 8.
Changes in and Disagreements with Accountants on Accounting
 
 
and Financial Disclosure
21
     
Item 8A.
Controls and Procedures
21
     
Item 8B.
Other Information
21
     
     
 
PART III
 
     
Item 9.
Directors, Executive Officers, Promoters and Control Persons;
 
 
Compliance with Section 16(a) of the Exchange Act
21
     
Item 10.
Executive Compensation
23
     
Item 11.
Security Ownership of Certain Beneficial Owners and Management
 
 
and Related Stockholder Matters
25
     
Item 12.
Certain Relationships and Related Transactions
26
     
Item 13.
Exhibits
27
     
Item 14.
Principal Accountant Fees and Services
28
     
 
Signatures
29

 

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Forward-Looking Statements

This report contains certain forward-looking statements and information relating to the Company that are based on the beliefs and assumptions made by the Company’s management as well as information currently available to the management. When used in this document, the words “anticipate”, “believe”, “estimate”, and “expect” and similar expressions, are intended to identify forward-looking statements. Such statements reflect the current views of the Company with respect to future events and are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated or expected. Certain of these risks and uncertainties are discussed in this report under the caption “Uncertainties and Risk Factors” in Part I, Item 1 “Description of Business”. The Company does not intend to update these forward-looking statements.

PART I

Item 1.
 
Description of Business.

Introduction

Enerteck Corporation (the “Company” or “EnerTeck Parent”) was incorporated under the laws of the State of Washington on July 30, 1935 under the name of Gold Bond Mining Company for the purpose of acquiring, exploring, and developing precious metal mines and, if warranted, the mining of precious metals. We subsequently changed our name to Gold Bond Resources, Inc. in July 2000. On January 9, 2003, we acquired EnerTeck Chemical Corp. (“EnerTeck Sub”) as our wholly owned operating subsidiary. For a number of years prior to our acquisition of EnerTeck Sub, we were an inactive, public “shell” corporation seeking to merge with or acquire an active, private company. As a result of the acquisition, we are now acting as a holding company, with EnerTeck Sub as our only operating business. Subsequent to this transaction, on November 24, 2003, we changed our domicile from the State of Washington to the State of Delaware, changed our name from Gold Bond Resources, Inc. to EnerTeck Corporation and effected a one from 10 reverse common stock split.

EnerTeck Sub, our wholly owned operating subsidiary, was incorporated in the State of Texas on November 29, 2000. It was formed for the purpose of commercializing a diesel fuel specific combustion catalyst known as EnerBurn (TM), as well as other combustion enhancement and emission reduction technologies. Nalco/Exxon Energy Chemicals, L.P. (“Nalco/Exxon L.P.”), a joint venture between Nalco Chemical Corporation and Exxon Corporation commercially introduced EnerBurn in 1998. When Nalco/Exxon L.P. went through an ownership change in 2000, our founder, Dwaine Reese, formed EnerTeck Sub. It acquired the EnerBurn trademark and related assets and took over the Nalco/Exxon L.P. relationship with the EnerBurn formulator and blender, and its supplier, Ruby Cat Technology, LLC (“Ruby Cat”). The decision to form EnerTeck Sub and acquire the EnerBurn business was motivated by Mr. Reese’s belief that:

·  
EnerBurn was clearly beginning to gain market acceptance;
·  
the gross margins associated with EnerBurn sales would support the business model, since existing customers would likely continue to buy the product due to the significant impact on diesel fuel savings and reduced emissions;
·  
EnerBurn had been professionally tested extensively in field applications as well as in the laboratory, clearly demonstrating its effectiveness in increasing fuel economy and reducing emissions and engine wear;
·  
use of the product in diesel applications has a profound impact on a cleaner environment.

Business of the Company

We, through our wholly owned subsidiary, specialize in the sales and marketing of a fuel borne catalytic engine treatment for diesel engines known as EnerBurn(TM). We utilize a sales process that includes detailed proprietary customer fleet monitoring protocols in on-road applications that quantify data and assists in managing certain internal combustion diesel engine operating results while utilizing EnerBurn. Test data prepared by Southwest Research Institute and actual customer usage has indicated that the use of EnerBurn in diesel engines improves fuel economy, lowers smoke, and decreases engine wear and the dangerous emissions of both Nitrogen Oxide (NOx) and microscopic airborne solid matter (particulates). Our principal target markets are the trucking, railroad and maritime shipping industries. Each of these industries share certain common financial characteristics, i.e. (i) diesel fuel represents a disproportionate share of operating costs; and (ii) relatively small operating margins are prevalent. Considering these factors, management believes that the use of EnerBurn and the corresponding derived savings in diesel fuel costs can positively effect the operating margins of its customers while contributing to

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a cleaner environment.

Since we are currently a sales and marketing organization, we have not spent any funds on research and development activities. We own the EnerBurn trademark and, pursuant to a memorandum of understanding which expired on December 31, 2003, were granted the exclusive, global marketing rights from our formulator, blender and supplier, Ruby Cat (which arrangement required the Company to meet certain annual minimum purchase levels to maintain such exclusivity), and an option to purchase the EnerBurn technology and associated assets by December 31, 2003 for $6.6 million which was not exercised and has also thus expired. Based upon sales volume to date, we did not achieved these required minimum levels. However, management is in continuing discussions with Ruby Cat to waive the requirements necessary for the Company to maintain this exclusivity, as well as keep open the possibility of the Company acquiring Ruby Cat and/or the EnerBurn technology and associated assets. In this regard, on October 14, 2005, we entered into a letter of intent (the “Ruby Cat LOI”) to acquire Ruby Cat. However, no definitive agreement has been agreed upon or signed to date. As a result, there can be no assurance that that a definitive agreement will be able to be agreed upon and signed with Ruby Cat or that the transaction will ever be consummated.

Current Operations and Recent Developments

To date, we have engaged in limited marketing of the EnerBurn technology and have generated minimal sales, principally to the trucking and maritime industries. We compete in an evolving market with a significant number of competitors that include both established businesses and new entries into the field.

Total revenue from sales for 2004 amounted to $179,000 and for 2005 amounted to $48,000, much of which came during the fourth quarter of 2005. Due to a lack of working capital, and a nearly complete turnover in upper management and sales staff dating back into 2004, senior management changed its method of marketing the operation during 2005. The majority of the marketing effort for 2005 was directed at targeting and gaining a foothold in one of our major target areas, the inland marine diesel market. Management focused virtually all of our resources at pinpointing and convincing one major customer within this market, Custom Fuel Services Inc. (“Custom”) to go full fleet with our diesel fuel additive product lines. A substantial portion of 2005 was spent testing our primary product, EnerBurn, on one large inland marine vessel belonging to this major potential customer.

As a result thereof, on July 28, 2005, EnerTeck Sub entered into an Exclusive Reseller and Market Development Agreement (the “Custom Agreement”) with Custom. Under the Custom Agreement, EnerTeck Sub has appointed Custom, which provides dockside and midstream fueling from nine service locations in Louisiana, Kentucky, Illinois, West Virginia, Missouri and Iowa, as its exclusive reseller of EnerBurn and the related technology on the Western Rivers of the United States, meaning the Mississippi River, its tributaries, South Pass, and Southwest Pass, excluding the Intra Coastal Waterway. The Agreement has an initial term of three years but can be terminated upon 60 days prior written notice by either party. Custom is not required to purchase a minimum volume of EnerBurn during the term of the Custom Agreement.

Subsequent to the signing of the Custom Agreement, Custom obtained the regulatory approvals and installed the blending equipment necessary to facilitate its distribution of EnerBurn. In February 2006, we delivered the first shipment of EnerBurn to Custom by delivering 4,840 gallons. This initial purchase order plus the second current oral order scheduled to be delivered in the second quarter of 2006, amount in size to more revenue and a higher margin than all the orders combined for 2005, 2004 and 2003. At present this one customer represents a majority of our sale revenues. With Custom’s assistance, however, negotiations are currently underway with several over large customers in the same industry to expand this market.   The loss of Custom as a customer would adversely affect our business and we cannot provide any assurances that we could adequately replace the loss of this customer.

In December 2005, we obtained a $3,000,000 investment from BATL Bioenergy LLC (“BATL”), then an unrelated third party, pursuant to which we issued and sold to BATL 2,450,000 shares of the common stock of the Company, and a warrant to purchase an additional 1,000,000 shares of common stock. See Part iii, Item 12 “Certain Relationships and Related Transactions”). In accordance with the terms on the investment, we agreed that the proceeds shall be used as follows: (i) $1,000,000 to complete the purchase of Ruby Cat; (ii) no more than $340,000 to repay certain outstanding debt of the Company and its subsidiary; and (iii) the balance for working capital purposes. We have granted BATL an irrevocable, unconditional right, exercisable on one occasion only for a period of 90 days following the earlier to occur of (i) the termination of any definitive agreement or letter of intent in respect of the Ruby Cat Transaction, and (ii) if the Ruby Cat Transaction shall not yet have been consummated, 90 days following the BATL Closing Date, to sell to the Company up to 816,667 shares of common stock at a per share purchase price of $1.2245 per share.

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The Industry

General Discussion of Diesel Fuel and Diesel Fuel Additives

As crude oil is heated, various components evaporate at increasingly higher temperatures. First to evaporate is butane, the lighter-than-air gas used in cigarette lighters, for instance. The last components of crude oil to evaporate, and the heaviest, include the road tars used to make asphalt paving. In between are gasoline, jet fuel, heating oil, lubricating oil, bunker fuel (used in ships), and of course diesel fuel. The fuel used in diesel engine applications such as trucks and locomotives is a mixture of different types of molecules of hydrogen and carbon and include aromatics and paraffin. Diesel fuel cannot burn in liquid form. It must vaporize into its gaseous state. This is accomplished by injecting the fuel through spray nozzles at high pressure. The smaller the nozzles and the higher the pressure, the finer the fuel spray and vaporization. When more fuel vaporizes, combustion is more complete, so less soot will form inside the cylinders and on the injector nozzles. Soot is the residue of carbon, partially burned and unburned fuel.

Sulfur is also found naturally in crude oil. Sulfur is a slippery substance and it helps lubricate fuel pumps and injectors. It also forms sulfuric acid when it burns and is a catalyst for the formation of particulate matter (one of the exhaust emissions being regulated). In an effort to reduce emissions, the sulfur content of diesel fuel is being reduced through the refinery process, however, the result is a loss of lubricity.

Diesel fuel has other properties that affect its performance and impact on the environment as well. The main problems associated with diesel fuel include:

·  
Difficulty getting it to start burning o Difficulty getting it to burn completely o Tendency to wax and gel
·  
With introduction of low sulfur fuel, reduced lubrication
·  
Soot clogging injector nozzles
·  
Particulate emissions
·  
Water in the fuel
·  
Bacterial growth

Diesel fuel additives have been developed to address the variety of problems associated with diesel fuel performance.

Diesel Fuel and the Environment

Diesel fuel is the most cost effective fuel/engine technology available for heavy-duty industrial and vehicle service. However, environmentally it needs dramatic improvement. Governments worldwide are legislating specifications regarding the fuel itself and diesel engine design.

Today’s advanced diesel engines are far cleaner than the smoke-belching diesels of recent decades. Unfortunately, even smokeless diesel engines are not clean enough to meet current stricter air pollution regulations.

While diesel engines are the only existing cost-effective technology making significant inroads in reducing “global warming” emissions from motor vehicles, it is not sufficient to satisfy regulators and legislators. Diesel engines will soon be required to adhere to stringent regulatory/legislative guidelines that meet near “zero” tailpipe emissions, especially on smog-forming nitrogen oxides (NOx), particulate matter (PM) and “toxins”; the organic compounds of diesel exhaust.

Diesel engines can become ultra-clean. Meeting the environmental challenges will require extensive research on clean-diesel technology. Research in this area is currently being sponsored by government agencies, major engine companies, truck manufacturers, automobile makers, catalyst producers and, for fuels, oil refining companies and their technology suppliers.

The search for ultra-clean diesel is far from over. Discoveries and breakthroughs will continue to prevail. Large Fortune 500 companies, as well as small, emerging technology companies are investing hundreds of millions of dollars in research and development worldwide on these and other clean-diesel technologies.

Today, there is no economic alternative to diesel engines for most industrial applications. This is true for ocean vessels, tug boats, commercial/recreational vessels, locomotive, trucking, bus transport, construction, mining,

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agriculture, logging, distributed power generation, and, in many parts of the world, personal transportation. In short, diesel fuel does the world’s heavy work.

Products And Services

The Diesel Fuel Additive Product Line
EnerBurn Combustion Catalyst for Diesel Fuel

EnerBurn is a liquid, chemical formulation, presently sold in bulk quantities to fleet and vessel operators, under three product codes differentiated by market application and product concentration, as indicated below:

Product
Application
-----------------------
---------------------
EnerBurn EC5805A
U.S. On-Road Market
EnerBurn EC5931A
U.S. Off-Road Market
EnerBurn EC5805C
International Market
 
     Although added to diesel fuel and generally referred to as a diesel fuel additive within the industry, EnerBurn functions as an engine treatment application by removing carbon deposits from the combustion surfaces of the engine and greatly reducing further carbon deposit buildup. It also provides for an increased rate of combustion. By adding EnerBurn to diesel fuel in accordance with proprietary methodology, it forms a non-hazardous catalytic surface in the diesel engine combustion chamber and on the surface of the piston heads. This surface is visible in the form of a monomolecular film that develops after initiation of treatment and remains active for a period of time after cessation of treatment.

The buildup of carbon within the combustion chamber of a diesel engine can generate greater exhaust opacity and increased engine wear. These carbon deposits can cause piston rings to stick and reduce compression resulting in decreased engine efficiency with extended use.

The unique chemical formulation of EnerBurn, when applied in accordance with proprietary methodology, has been shown to produce benefits in fuel economy, NOx formation, smoke, brake horespowere and engine wear (See “Product Testing”, below).  

EnerBurn Volumetric Proportioning Injector Equipment (VPI)

Volumetric proportioning injection equipment is used to deliver proper dosage ratios of EnerBurn to the diesel fuel, and are typically offered to our customers in support of an EnerBurn sale. Three equipment vendors supply additive injection equipment to us that is either installed at a bulk fueling depot or onboard the vehicle or vessel.

Product Testing

Southwest Research Institute

The Southwest Research Institute (“SWRI”) of San Antonio, Texas has extensively tested the EnerBurn technology. This institute is an independent, nonprofit, applied engineering and physical sciences research and development organization with 11 technical divisions using multidisciplinary approaches to problem solving. The Institute occupies 1,200 acres and provides nearly two million square feet of laboratories, test facilities, workshops, and offices for more the 2,700 employees who perform contract work for industry and government clients.

The extensive testing of EnerBurn conducted by SWRI confirmed product claims of lower highway smoke, reduced NOx emissions, a significant reduction in engine wear and an increase in horsepower. Actual customer usage data has also confirmed the claim that EnerBurn usage reduces fuel consumption.

EnerBurn Proof of Performance Demonstrations

An integral part of our sales process is to conduct proof of performance demonstrations for potential customers wherein we accumulate historical fleet data that documents the effects of the use of EnerBurn (i.e. advantages in terms of increased fuel economy, a decrease in engine wear and reductions in toxic emissions) on that customer’s specific vehicles or vessels. In connection with these proof of performance demonstrations, we provide

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fleet monitoring services and forecasts of fuel consumption for purposes of the prospective customer’s own analysis.

The results below are indicative of typical customer experiences using EnerBurn. In many instances, customers have directly informed us about their satisfaction with EnerBurn and the fuel savings that its use has provided them. In all cases, our own comparison of the customer provided historical fuel usage data with the EnerBurn usage (which we have monitored) data has proven to us and the customer that the use of EnerBurn has reduced their fuel consumption. In addition to fuel consumption reduction, the decrease in emissions resulting from EnerBurn use is measured with a device called the UEI Intelligent Solutions Meter. Similarly, the percentage reduction in opacity (smoke generated by diesel engines) is measured by the Wager 6500 Meter (manufactured by Robert H. Wager Co., Inc.).

·  
An EnerBurn proof of performance demonstration of a long haul truck fleet began in August of 1998. The number of trucks treated with EnerBurn exceeded 3,000-Century Class Freightliners, most of that were equipped with Caterpillar or similar type engines. This company’s measurable fuel savings averaged 10.4% over a 3 plus year period while using EnerBurn, resulting in annual fuel savings in excess of $6.5 million. In addition, the company’s maintenance department observed significant reductions in metal loss in crankcase wear-parts, although they did not attempt to quantify the value of this phenomenon.
·  
A fleet of 24 three-year-old 1400 horsepower Morrison Knudson MK1500 locomotives with Caterpillar 3512 diesel engines were used for a 12-month proof of performance demonstration of the effectiveness of EnerBurn. This demonstration started on July 1, 1999 and clearly documented a 10.8% reduction in fuel consumption and a 9.5% reduction in Brake Specific Fuel Consumption (“BSFC”). The demonstration also reflected a significant reduction in engine wear, confirmed by a 56% reduction in copper content of the lube oil.
·  
Three maritime vessels were selected from a large fleet, based on size and typical routes for accessibility of regular fueling at this company’s bulk fueling barge. A proof of performance protocol was developed under the guidance and supervision of this company’s management. The base line demonstration commenced on July 11, 2001 and the final demonstration was performed on February 28, 2002. One of the three demonstration vessels represented an untreated placebo; two were treated with EnerBurn. The two treated vessels exhibited a measured reduction in fuel consumption of 7% and 9.9%, while the untreated placebo experienced nearly a 10% increase in fuel consumption. Additionally five vessels with different diesel engines were selected for proof of performance under the same protocols yielding results in excess of 10% in fuel savings, significant reductions in opacity, from 33%-86%, reductions of NOx emissions between 11% and 20%.

The Target Market

Overview of Worldwide Diesel Fuel Consumption

The U.S. Department of Energy, Energy Information Administration (“EIA”) estimates that worldwide annual consumption of diesel fuel approximates 210 billion U.S. gallons. A breakdown of this estimate is summarized as follows:


 
Annual consumption of
 
Diesel Fuel - Billion USG/Year
 
------------------------------
   
United States
60
Europe
60
Pacific Rim
50
Rest of the World
40
 
---
Total Gallons Consumption
210

Domestic Diesel Fuel Consumption
 
Based on further EIA published data, the following table* depicts domestic distillate fuel oil consumption by energy use for 2001.
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ENERGY USE
2001 (THOUSAND GALLONS)
   
U.S. Total
58,971,486
   
Residential
6,263,440
   
Commercial
3,505,057
   
Industrial
2,323,797
   
Oil Company
820,321
   
Farm
3,427,343
   
Electric Power
1,510,273
   
Railroad
2,951,831
   
Vessel Bunkering
2,093,252
   
On-Highway Diesel
33,215,320
   
Military
346,060
   
Off-Highway Diesel
2,514,791
* Sources: Energy Information Administration’s Form EIA-821, “Annual Fuel Oil and Kerosene Sales Report,” for 1997-2001 and “Petroleum Supply Annual,” Volume 1, 1997-2001. Totals may not equal sum of components due to independent rounding.

The Company’s Target Markets

Our primary domestic target markets include the trucking industry, railroad industry, and the maritime shipping industry, all responsible for transporting freight. Combined, management believes these three industries consume approximately 38 billion gallons of diesel fuel, or over 50% of annual domestic consumption.

Furthermore, trucking, railroad, and maritime shipping companies, diesel fuel accounts for a disproportionate share of total operating costs. Furthermore, each of these industries typically experiences relatively small operating margins. Because of these financial factors, management believes that the ability to reduce fuel consumption, even by a small amount, could have a dramatic effect on its customers’ competitive viability.
 
To a lesser extent, we market EnerBurn to other domestic industries that are reliant upon diesel fuel. Those industries include electric power, oil and gas production (both onshore and offshore), mining, construction and agricultural. However, at the present time, we have limited its efforts in these industries to specific customer applications wherein it has a personal relationship.

Presently, EnerBurn is marketed by the Company in Western Europe, and certain countries in Asia, South Africa and Latin America though relationships with entities that have an established presence in these areas. To date, we have derived minimal revenues from these markets.

Sales and Marketing Strategy

The Company’s Sales Process

The fuel additive industry has historically been mired by a myriad of technically dubious products and potential customers are usually wary of promotional claims by product manufacturers or “snake oil” peddlers as they are sometimes labeled.

Prospective customers in all targeted market sectors and geographic locations are primarily concerned about the potential business risks associated with the adoption of any new fuel or engine treatment. Thus, the first resistant barrier to adoption of a fleet proof of performance demonstration is dispelling fear about impact on engine warranties and any potential business risk associated with a fleet shutdown caused by our product. The potential

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EnerBurn fuel and maintenance savings are strong motivators but are secondary to risk avoidance. The SWRI fitness for use testing and customer testimonials are paramount in assisting us in addressing these fears.

Potential customers have a strong predisposition to accept only demonstrable proof-of-benefit in their own fleet as justification for any new expenditure. After risk avoidance, the ability to demonstrate and prove results is the primary obstacle for market adoption of the EnerBurn product.

Our sales process begins with a proof of performance demonstration that is a thorough analysis of the potential customer, including fleet type, size, and opportunity. (See “Business -Product Testing- EnerBurn Proof of Performance Demonstrations”, above)). This is followed with sales presentations at both the executive level and maintenance level. Executive level sales presentations emphasize return on investment (“ROI”), while maintenance level sales presentations emphasize our technology and why it does not impact engine warranties and any potential business risk associated with a fleet shutdown.

Convincing a potential customer to undertake a proof of performance demonstration is a difficult task because there is a significant expense to be borne by the potential customer. Specifically, the potential customer must pay for both the EnerBurn that is used during the demonstration as well as purchase the additive injection equipment that is also needed. The cost will vary according to the potential customer and the industry in which it is in. For a proof of performance demonstration on a typical fleet of 100 diesel engine trucks, the cost of the EnerBurn would be approximately $30,000, while the average cost of the equipment used would be approximately $20,000 to $50,000. The personnel costs related to providing fleet monitoring services and forecasts of fuel consumption for the potential customer’s analysis are borne either by the Company, its supplier or the sales agent. For a demonstration involving a fleet of 100 hundred trucks, typically 50 to 100 man-hours are involved. The current sales cycle from inception to full customer implementation is typically six to 12-months from initial customer contact. This includes the two to six months it usually takes for the benefits of EnerBurn to begin to take effect in the subject engines during the proof of performance demonstration period.

Competition

The market for products and services that increase diesel fuel economy, reduce emissions and engine wear is rapidly evolving and intensely competitive and management expects it to increase due to the implementation of stricter environmental standards. Competition can come from other fuel additives, fuel and engine treatment products and from producers of engines that have been modified or adapted to achieve these results. In addition, the we believe that new technologies, including additives, will further increase competition.

Our primary current competitors include Lubrizol Corporation, Chevron Oronite Company (a subsidiary of Chevron Corporation), Octel Corp., Clean Diesel Technologies, Inc. and Ethyl Corporation.

Many of our competitors have been in business longer than it has, have significantly greater financial, technical, and other resources, or greater name recognition. Our competitors may be able to respond more quickly to new or emerging technologies and changes in customer requirements. Competition could negatively impact our business. Competitive pressures could cause us to lose market share or to reduce the price of its products, either of which could harm its business, financial condition and operating results.

Management believes that the principal competitive factors in the Company’s market include the:

·  
effectiveness of the product;
·  
cost;
·  
proprietary technology;
·  
ease of use; and
·  
quality of customer service and support.

Government Regulation - Fuel Additive Registration

We need to comply with registration requirements for each geographic jurisdiction in which it sells EnerBurn. On January 21, 2001, the US Environmental Protection Agency, pursuant to the Environmental Protection Act (the “Act”) (40 CFR 79.23) issued permit number EC 5805A in connection with the use of EnerBurn. This registration allows EnerBurn to be used anywhere in the United States for highway use in all over-the-road diesel applications. Additionally, on March 30, 2004, we received a second EPA permit, permit number EC 5931A in connection with the use of EnerBurn. This registration allows EC 5931A to be used anywhere in the United States

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for use in all diesel applications. Under these registrations, we have pass through rights from the formulator, blender and supplier to sell EnerBurn in on-road applications. However, there are provisions in the Act under which the EPA could require further testing. The EPA has not exercised these provisions yet for any additive. Internationally, we intend to seek registration in other countries as we develops market opportunities.

Our business is impacted by air quality regulations and other regulations governing vehicle emissions as well as emissions from stationary engines. If such regulations were abandoned or determined to be invalid, its prospects may be adversely effected. As an example, if crude oil and resulting diesel prices were to reach or approach historical lows, the emphasis for fuel efficiency would be diminished, potentially impacting sales velocity of the products, consequently adversely effecting our performance. Typically, there are registration and regulation requirements for fuel additives in each country in which they are sold. In the United States, fuel and fuel additives are registered and regulated pursuant to Section 211 of the Clean Air Act. 40 CFR Part 79 and 80 specifically relates to the registration of fuels and fuel additives

In accordance with the Clean Air Act regulations at 40 CFR 79, manufacturers (including importers) of gasoline, diesel fuel and additives for gasoline or diesel fuel, are required to have their products registered by the EPA prior to their introduction into commerce. Registration involves providing a chemical description of the fuel or additive, and certain technical, marketing, and health-effects information. The health-effects research is divided into three tiers of requirements for specific categories of fuels and additives. Tier 1 requires a health-effects literature search and emissions characterization. Tier 2 requires short-term inhalation exposures of laboratory animals to emissions and screened for adverse health effects, unless comparable data are already available. Alternative Tier 2 testing can be required in lieu of standard Tier 2 if EPA concludes that such testing would be more appropriate. Certain small businesses are exempt from some or all the Tier 1 and Tier 2 requirements. Tier 3 provides for follow-up research, if necessary.

Supply Arrangements

We presently obtains EnerBurn products and services on an exclusive basis from Ruby Cat. However, this arrangement is not governed by any formal written contract. Accordingly, either party can terminate the arrangement at any time, including the exclusivity aspect of the arrangement. If this supplier is not able to provide us with sufficient quantities of the product, or chooses not to provide the product at all (for any reason), or if exclusivity is lost, business and planned operations could be adversely effected. Although management has identified alternate suppliers of the products, no assurance can be given that the replacement products will be comparable in quality to the product presently supplied to us by Ruby Cat, or that, if comparable, that it can be acquired under acceptable terms and conditions.

In addition, we are dependent upon Ruby Cat for statistical analysis of fleet data gathered from customers and potential customers in on-road applications. This data is important in that it serves to demonstrate the products’ proof of performance to customers and potential customers. If we were not provided this service, our sales efforts and ability to maintain existing customers could be negatively effected. However, management believes that the Company can adequately analyze the data.

Management is in continuing discussions with Ruby Cat to waive the requirements necessary for us to maintain our exclusivity, as well as keep open the possibility of our acquiring Ruby Cat and/or the EnerBurn technology and associated assets. In this regard, on October 14, 2005, we entered into a letter of intent (the “Ruby Cat LOI”) to acquire Ruby Cat. A tentative agreement has been reached in principle and, although no assurance can be given, we are hopeful that a final agreement can be signed during the second quarter of 2006.

Employees

We currently employ five individuals on a full-time basis, and we also engage independent sales representatives. None of our employees are covered by a collective bargaining agreement. We believe that relations with our employees are good.

Uncertainties and Risk Factors

In addition to other information and financial data set forth elsewhere in this report, the following risk factors should be considered carefully in evaluating the Company.



- 10 -
 
Business and Financial Risks

 
WE HAVE A HISTORY OF LOSSES WHICH MAY CONTINUE AND WHICH MAY NEGATIVELY IMPACT OUR ABILITY TO ACHIEVE OUR BUSINESS OBJECTIVES AND OUR FINANCIAL RESULTS. For the years ended December 31, 2005 and 2004, we generated revenues of only $48,000 and $179,000, respectively, and incurred net losses of $12,960,000 and $1,863,000, respectively. Our failure to increase our revenues significantly or improve our gross margins will harm our business. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis in the future. If our revenues grow more slowly than we anticipate, our gross margins fail to improve, or our operating expenses exceed our expectations, our operating results will suffer. If we are unable to sell our products at acceptable prices relative to our costs, or if we fail to develop and introduce on a timely basis new products from which we can derive additional revenues, our financial results will suffer.

OUR CHANCES FOR SUCCESS ARE REDUCED BECAUSE WE ARE AN EARLY STAGE COMPANY WITH REGARD TO OUR NEW BUSINESS OPERATION. In recent years we were inactive and had not generated revenues until we acquired EnerTeck Sub on January 9, 2003. Furthermore, EnerTeck Sub was only formed in November 2000 and has a limited operating history. Accordingly, we are subject to all the risks and challenges associated with the operation of a new enterprise, including inexperience, lack of a track record, difficulty in entering the targeted market place, competition from more established businesses with greater financial resources and experience, an inability to attract and retain qualified personnel (including, most importantly, sales and marketing personnel) and a need for additional capital to finance our marketing efforts and intended growth. We cannot assure you that we will be successful in overcoming these and other risks and challenges that we face as a new business enterprise.

THE ENERBURN TECHNOLOGY HAS NOT GAINED MARKET ACCEPTANCE, NOR DO WE KNOW WHETHER A MARKET WILL DEVELOP FOR IT IN THE FORESEEABLE FUTURE TO GENERATE ANY MEANINGFUL REVENUES. The EnerBurn technology has received only limited market acceptance. This technology is a relatively new product to the market place and we have not generated any significant sales. Although ever growing concerns and regulation regarding the environment and pollution has increased interest in environmentally friendly products generally, the engine treatment and fuel additive market remains an evolving market. The EnerBurn technology competes with more established companies such as Lubrizol Corporation, Chevron Oronite Company (a subsidiary of Chevron Corporation), Octel Corp., Clean Diesel Technologies, Inc. and Ethyl Corporation, as well as other companies whose products or services alter, modify or adapt diesel engines to increase their fuel efficiency and reduce pollutants. Acceptance of EnerBurn as an alternative to such traditional products and/or services depend upon a number of factors including:

·  
favorable pricing vis a vis projected savings from increased fuel efficiency
·  
the ability to establish the reliability of EnerBurn products relative to available fleet data
·  
public perception of the product

For these reasons, we are uncertain whether our technology will gain acceptance in any commercial markets or that demand will be sufficient to create a market large enough to produce any meaningful revenue or earnings. Our future success depends upon customers’ demand for our products in sufficient amounts.

OUR TECHNOLOGY MAY BE ADVERSELY AFFECTED BY FUTURE TECHNOLOGICAL CHANGES AND ENVIRONMENTAL REGULATORY REQUIREMENTS. Although diesel engines are now being manufactured that have reduced dangerous emissions, this has not satisfied governmental regulators and legislators. We believe that diesel engines themselves may soon be required to adhere to stringent guidelines that produce nearly zero tailpipe emissions. Research in this area is currently being sponsored by governmental agencies, major engine companies, truck manufacturers, automobile makers, catalyst producers, oil refining companies and their technology suppliers. If such research is successful, it could eventually reduce the need for diesel fuel additives such as EnerBurn as they relate to pollution control.

SINCE WE MARKET A RANGE OF PRODUCTS WITHIN ONLY ONE PRODUCT LINE, WE ARE ENTIRELY DEPENDENT UPON THE ACCEPTANCE OF ENERBURN IN THE MARKET PLACE FOR OUR SUCCESS. Our business operations are not diversified. If we do not generate sufficient sales of the EnerBurn product, we will not be successful, and unlikely to be able to continue in business. We cannot assure you that we will be able to develop other product lines to hedge against our dependency on EnerBurn, or if our EnerBurn sales will be sufficient for us to generate revenue or be profitable.

- 11 -


WE HAVE NOT DEVELOPED ANY EFFECTIVE DISTRIBUTION CHANNELS FOR OUR PRODUCT WHICH ARE NECESSARY TO GENERATE REVENUE. We market our product through in-house sales personnel, independent sales consultants and through exclusive and non-exclusive arrangements known as agency agreements. In most instances, we utilize proof of performance demonstrations as part of our sales process. This process is the gathering of historical fleet data during a trial period when EnerBurn was not used and comparing it with data over a similar period when EnerBurn was used. In addition, our future marketing plans include:

·  
establishing of product brand recognition through customers with large trucking, railroad and maritime fleets
·  
active participation in industry trade shows
·  
public relations efforts directed at target market trade press

Our success will depend upon our marketing efforts effectively generating sales. While we have commenced this marketing effort, we have not developed any effective distribution channels and may not have the resources or ability to sustain these efforts or generate any meaningful sales.

OUR SALES PROCESS IS COSTLY AND TIME CONSUMING WHICH DECREASES OUR ABILITY TO EFFECT SALES. In order to effect EnerBurn sales, we must prove to a potential customer that the use of our product is specifically beneficial to and cost effective for that potential customer. We accomplish this by conducting proof of performance demonstrations. Our supplier, our sales agent and/or we bear the cost to provide the personnel to do the monitoring and analyzing of compiled data. However, the potential customer must bear the cost of the EnerBurn and equipment used during the trial period. We cannot assure you that we will be able to convince potential customers to undertake this expense and effect a significant number of sales. Furthermore, we cannot assure you that the results of a specific proof of performance demonstration will prove that the use of EnerBurn will be beneficial to that specific potential customer, or if beneficial, that the potential customer will purchase EnerBurn. If, after conducting the proof of performance demonstration, the potential customer does not purchase our product, we will have wasted the time and the cost of providing personnel to the proof of performance demonstration.

WE FACE INTENSE COMPETITION AND MAY NOT HAVE THE FINANCIAL AND HUMAN RESOURCES NECESSARY TO KEEP UP WITH RAPID TECHNOLOGICAL CHANGES WHICH MAY RESULT IN OUR TECHNOLOGY BECOMING OBSOLETE. The diesel fuel additive business and related anti-pollutant businesses are subject to rapid technological change, especially due to environmental protection regulations, and subject to intense competition. We compete with both established companies and a significant number of startup enterprises. We face competition from producers and/or distributors of other diesel fuel additives (such as Lubrizol Corporation, Chevron Oronite Company, Octel Corp., Clean Diesel Technologies, Inc. and Ethyl Corporation), from producers of alternative mechanical technologies (such as Algae-X International, Dieselcraft, Emission Controls Corp. and JAMS Turbo, Inc.) and from alternative fuels (such as bio-diesel fuel and liquefied natural gas) all targeting the same markets and claiming increased fuel economy, and/or a decrease in toxic emissions and/or a reduction in engine wear. Most of our competitors have substantially greater financial and marketing resources than we do and may independently develop superior technologies which may result in our technology becoming less competitive or obsolete. We may not be able to keep pace with this change. If we cannot keep up with these advances in a timely manner, we will be unable to compete in our chosen markets.

THE COMPANY NEEDS TO MAINTAIN ENERBURN’S EPA REGISTRATIONS. In accordance with the regulations promulgated under the US Clean Air Act, manufacturers (including importers) of gasoline, diesel fuel and additives for gasoline or diesel fuel, are required to have their products registered with the EPA prior to their introduction into the market place. Currently, EnerBurn products have two such registrations (EPA # 5805A and 5931A). However, unforeseen future changes to the registration requirements may be made, and these products, or either one of them, may not be able to qualify for registration under such new requirements. The loss of the EPA registrations or restrictions on the current registrations could have an adverse affect on our business and plan of operation.
 
The blender, formulator and supplier of EnerBurn, Ruby Cat, has registered these products with the US Environmental Protection Agency. The registrations permit us, pursuant to our sales arrangement with Ruby Cat, to sell EnerBurn for domestic on-road and off-road use. In addition, we currently sell our product outside of the United States and intend to further expand our sales efforts internationally. EnerBurn is registered in the United States only, and we are considering its registration in other countries. Further testing could be needed in these or other countries. We cannot assure you that EnerBurn will pass any future testing that may be required. The failure of EnerBurn to obtain registration in countries or areas where we would like to market it, could have a materially adverse effect on

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our business and plan of operation.

FAILURE TO PROPERLY MANAGE OUR POTENTIAL GROWTH POTENTIAL WOULD BE DETRIMENTAL TO HOLDERS OF OUR SECURITIES. Since we have limited operating history, any significant growth will place considerable strain on our financial resources and increase demands on our management and on our operational and administrative systems, controls and other resources. There can be no assurance that our existing personnel, systems, procedures or controls will be adequate to support our operations in the future or that we will be able to successfully implement appropriate measures consistent with our growth strategy. As part of this growth, we may have to implement new operational and financial systems, procedures and controls to expand, train and manage our employees and maintain close coordination among our technical, accounting, finance, marketing, sales and editorial staff. We cannot guarantee that we will be able to do so, or that if we are able to do so, we will be able to effectively integrate them into our existing staff and systems. We may fail to adequately manage our anticipated future growth. We will also need to continue to attract, retain and integrate personnel in all aspects of our operations. Failure to manage our growth effectively could hurt our business.

WE DEPEND ON OUR EXECUTIVE OFFICERS AND NEED ADDITIONAL MARKETING AND TECHNICAL PERSONNEL TO SUCCESSFULLY MARKET OUR PRODUCT. WE CAN NOT ASSURE YOU THAT WE WILL BE ABLE TO RETAIN OR ATTRACT SUCH PERSONS. Since we are a small company, a loss of one or both of our current officers would severely and negatively impact our operations. To implement our business plan, we will need additional marketing and technical personnel to successfully market our product. The market for such persons remains competitive and our limited financial resources may make it more difficult for us to recruit and retain qualified persons.

WE HAVE ONLY ONE SUPPLIER WITH WHOM WE HAVE NO WRITTEN AGREEMENTAND WE ARE DEPENDENT UPON IT TO PROVIDE US WITH THE ENERBURN PRODUCT THAT WE MARKET ON AN EXCLUSIVE BASIS. Presently, one supplier, Ruby Cat, provides us our entire EnerBurn product line. If it were not able to provide us with sufficient quantities of the product, or not provide us the product at all (for any reason), our business could be adversely effected. Although we have identified alternate suppliers of the product, we cannot assure you that the replacement products will be comparable in quality, or that we will be able to contract with these alternate suppliers on terms acceptable to us.

In addition, we are dependent upon Ruby Cat for statistical analysis of fleet data gathered from customers and potential customers in on-road use applications in the United States. This data is important in that it serves to demonstrate our products’ proof of performance to customers and potential customers. If this service were not supplied to us, our sales efforts and ability to maintain existing customers could be negatively effected. Although we believe that we can find a replacement provider of such services to adequately analyze the data, we cannot assure you that we can be successful in retaining such a provider on reasonably acceptable terms to us.

Our written sales agreement with Ruby Cat expired on December 31, 2003, and we currently only have an informal exclusive arrangement with this supplier. Although we have had discussions with Ruby Cat about entering a new written agreement, no assurance can be given that we can reach an agreement acceptable to both parties. If we were to lose this exclusivity, it may have a material adverse effect on our business and planned operations.

Risks Related To Our Common Stock

WE HAVE ISSUED A SUBSTANTIAL NUMBER OF WARRANTS TO PURCHASE OUR COMMON STOCK WHICH WILL RESULT IN SUBSTANTIAL DILUTION TO THE OWNERSHIP INTERESTS OF OUR EXISTING SHAREHOLDERS.   As of December 31, 2005, we had 16,451,359 shares of common stock outstanding. Up to an additional 4,306,650 shares are issuable upon the exercise of the warrants currently outstanding. The exercise of all of these warrants substantially dilute the ownership interests of our existing shareholders.

WE DO NOT INTEND TO PAY DIVIDENDS IN THE FORESEEABLE FUTURE. We have never declared or paid a dividend on our common stock. We intend to retain earnings, if any, for use in the operation and expansion of our business and, therefore, do not anticipate paying any dividends in the foreseeable future.

THE TRADING PRICE OF OUR COMMON STOCK MAY BE VOLATILE. The trading price of our shares has, from time to time, fluctuated widely and in the future may be subject to similar fluctuations. The trading price may be affected by a number of factors including the risk factors set forth in this report as well as our operating results, financial condition, announcements of innovations or new products by us or our competitors, general conditions in the market place, and other events or factors. Although we believe that approximately 19

- 13 -

registered broker dealers currently make a market in our common stock, we cannot assure you that any of these firms will continue to serve as market makers or have the financial capability to stabilize or support our common stock. A reduction in the number of market makers or the financial capability of any of these market makers could also result in a decrease in the trading volume of and price of our shares. In recent years, broad stock market indices, in general, and the securities of technology companies, in particular, have experienced substantial price fluctuations. Such broad market fluctuations may adversely affect the future trading price of our common stock.

OUR STOCK PRICE MAY EXPERIENCE VOLATILITY. The market price of the common stock, which currently is listed in the OTC Bulletin Board, has, in the past, fluctuated over time and may in the future be volatile. The Company believes that there are a small number of market makers that make a market in the Company’s common stock. The actions of any of these market makers could substantially impact the volatility of the Company’s common stock.

POTENTIAL FUTURE SALES PURSUANT TO RULE 144. Many of the shares of Common Stock presently held by management and others are “restricted securities” as that term is defined in Rule 144, promulgated under the Securities Act. Under Rule 144, a person (or persons whose shares are aggregated) who has satisfied a one-year holding period, may, under certain circumstances sell within any three-month period a number of shares which does not exceed the greater of 1% of the then outstanding shares of Common Stock, or the average weekly trading volume during the four calendar weeks prior to such sale. Rule 144 also permits, under certain circumstances, the sale of shares without any quantity limitation by a person who is not an affiliate of the Company and who has satisfied a two-year holding period. Such holding periods have already been satisfied in many instances. Therefore, actual sales or the prospect of sales of such shares under Rule 144 in the future may depress the prices of the Company’s securities.

OUR COMMON STOCK IS A PENNY STOCK. Our Common Stock is classified as a penny Stock, which is traded on the OTCBB. As a result, an investor may find it more difficult to dispose of or obtain accurate quotations as to the price of the shares of the Common Stock. In addition, the “penny stock” rules adopted by the Securities and Exchange Commission subject the sale of the shares of the Common Stock to certain regulations which impose sales practice requirements on broker-dealers. For example, broker-dealers selling such securities must, prior to effecting the transaction, provide their customers with a document that discloses the risks of investing in such securities. Furthermore, if the person purchasing the securities is someone other than an accredited investor or an established customer of the broker-dealer, the broker-dealer must also approve the potential customer’s account by obtaining information concerning the customer’s financial situation, investment experience and investment objectives. The broker-dealer must also make a determination whether the transaction is suitable for the customer and whether the customer has sufficient knowledge and experience in financial matters to be reasonably expected to be capable of evaluating the risk of transactions in such securities. Accordingly, the Commission’s rules may result in the limitation of the number of potential purchasers of the shares of the Common Stock. In addition, the additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in the Common Stock, which could severely limit the market of the Company’s Common Stock.

LIMITATIONS OF THE OTCBB CAN HINDER COMPLETION OF TRADES. Trades and quotations on the OTCBB involve a manual process that may delay order processing. Price fluctuations during a delay can result in the failure of a limit order to execute or cause execution of a market order at a price significantly different from the price prevailing when an order was entered. Consequently, one may be unable to trade in the Company’s Common Stock at optimum prices.

THE OTCBB IS VULNERABLE TO MARKET FRAUD. OTCBB securities are frequent targets of fraud or market manipulation, both because of their generally low prices and because OTCBB reporting requirements are less stringent than those of the stock exchanges or NASDAQ.

INCREASED DEALER COMPENSATION COULD ADVERSELY AFFECT STOCK PRICE. OTCBB dealers’ spreads (the difference between the bid and ask prices) may be large, causing higher purchase prices and less sale proceeds for investors.

Except as required by the Federal Securities Law, the Company does not undertake any obligation to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date of this Form 10-KSB or for any other reason.


- 14 -


Item 2.
 
Description of Property.  

The Company does not own any real estate. It conducts operations from leased premises in Stafford, Texas. The premises are approximately 2,692 square feet of space at 10701 Corporate Drive, Suite No. 150, and are under a three-year lease, which terminates on March 31, 2006. Rent expense for the years ended December 31, 2005 and December 31, 2004 totaled approximately $52,327 and $45,258, respectively. A one year extension is currently being negotiated and is expected to be signed at terms similar to those of past years. Management believes that the current facility is adequate for the foreseeable future.


Item 3.     Legal Proceedings.  

The Company is not a party to any pending material legal proceeding nor is it aware of any proceeding contemplated by any individual, company, entity or governmental authority involving the Company except as follows. A former employee of the Company’s subsidiary, has threatened legal action against EnerTeck Sub for breach of his employment contract. We feel there is no merit to this threatened action, and will defend this position and include counterclaims in the event a suit is initiated.


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

No matter was submitted during the fourth quarter of the fiscal year covered by this report to a vote of security holders.


PART II

Item 5.
 
Market for Common Equity, Related Stockholder Matters and
   
Small Business Issuer Purchases of Equity Securities.

Market Information  

The Company’s common stock currently trades on the OTC Bulletin Board under the symbol “ETCK”. The following table sets forth the range of high and low bid prices per share of the common stock for each of the calendar quarters identified below as reported by the OTC Bulletin Board. These quotations represent inter-dealer prices, without retail mark-up, markdown or commission, and may not represent actual transactions.

Period
 
Bid Prices
 
           
Year ended December 31, 2004:
 
High
 
Low
 
           
Jan. 1, 2004 to March 31, 2004
 
$
3.20
 
$
1.30
 
April l, 2004 to June 30, 2004
 
$
2.35
 
$
1.30
 
July 1, 2004 to Sept. 30, 2004
 
$
1.90
 
$
0.75
 
Oct. 1, 2004 to Dec. 31, 2004
 
$
1.02
 
$
0.31
 

Year ended December 31, 2005:
 
High
 
Low
 
           
Jan. 1, 2005 to March 31, 2005
 
$
0.39
 
$
0.15
 
April l, 2005 to June 30, 2005
 
$
0.83
 
$
0.18
 
July 1, 2005 to Sept. 30, 2005
 
$
2.32
 
$
0.83
 
Oct. 1, 2005 to Dec. 31, 2005
 
$
2.38
 
$
1.80
 

Holders

As of April 5, 2006, there were approximately 925 stockholders of record of the Company’s Common Stock. This does not reflect persons or entities that hold their stock in nominee or “street name”.



- 15 -


Dividends

The Company has not paid any cash dividends to date, and it has no intention of paying any cash dividends on its common stock in the foreseeable future. The declaration and payment of dividends is subject to the discretion of its Board of Directors and to certain limitations imposed under the Delaware Corporation law. The timing, amount and form of dividends, if any, will depend on, among other things, results of operations, financial condition, cash requirements and other factors deemed relevant by the Board of Directors.

Recent Sales of Unregistered Securities  

On January 9, 2003, the Company, then an inactive public corporation, issued 5,000,000 shares of common stock in exchange for 100% of the outstanding common stock of EnerTeck Chemical Corp., whereby it became a wholly-owned subsidiary of the Company.

On January 9, 2003, the Company issued 500,000 shares of its common stock to Parrish Brian & Co., Inc. for business, financial and marketing consulting services previously rendered to the Company's subsidiary before its acquisition.

On April 30, 2003 and May 28, 2003, the Company sold a total of 3,150,000 shares of its common stock at $.50 per share (1,000,000 shares to 22 investors and 2,150,000 shares to eight investors, respectively) for total gross proceeds of $1,575,000 in two separate private placement offerings to accredited investors only. These securities were sold both directly by the Company with regard to some sales and through a NASD registered broker-dealer (“Selling Agent”) with regard to others. The offerings were conducted without engaging in any advertising or general solicitation of any kind and without payment of underwriting discounts or commissions to any person except commissions to the Selling Agent on sales effected by it.

In addition, in 2003, the Company granted warrants to purchase up to 4,025,650 shares of common stock at varying exercise prices ranging from $.01 to $1.20 per share. During 2003, the Company issued 1,000,000 shares of common stock upon the exercise of warrants granted in 2003 at an aggregate exercise price of $10,000.

In 2004, the Company granted warrants to purchase up to 705,000 shares of common stock at varying exercise prices ranging from $.01 to $1.20 per share. During 2004, the Company issued 224,000 shares of common stock upon with the exercise of warrants at an aggregate exercise price of $224,800. Also, during 2004, the Company issued an additional 135,484 shares of common stock to Maxim Partners, LLC which exercised its rights under a cashless exercise provision to the warrant agreement whereby it exercised 200,000 warrants and received 135,484 common shares by forfeiting 64,516 warrants. The Company received no cash proceeds from this exercise.

In 2005, the Company received loans for working capital of an aggregate of $40,000 from three individuals. As an added inducement to the lenders and as additional consideration for making the loans, the Company issued an aggregate of 400,000 shares of common stock to such individuals.

In June 2005, the Company granted 200,000 shares of common stock to each of Gary B. Aman and Jack D. Cowles, each a director of the Company, for their services as Board members.

During the quarter ended September 30, 2005, the Company issued 250,000 shares of its common stock to certain accredited investors for aggregate proceeds of $250,000.

In November 2005, the Company issued 250,000 shares of common stock to Maxim Partners LLC in full settlement of $130,000 of fees owed to Maxim Group LLC for investment banking services previously rendered.

In December 2005, the Board of Directors of the Company authorized the return and immediate reissuance of an aggregate of 2,750,000 shares of common stock to the four founding shareholders. In March 2004, such shareholders had delivered 3,000,000 shares to the Company for cancellation as part of a corporate reorganization and restructuring.

In December 2005, the Company sold to BATL Bioenergy LLC (“BATL”) 2,450,000 shares of the common stock and a warrant to purchase an additional 1,000,000 shares of common stock at an exercise price of $2.00 per share.for the aggregate purchase price of $3,000,000.

In addition to the warrants granted to BATL, the Company also granted warrants to purchase up to an

- 16 -

aggregate of 600,000 shares of common stock at exercise prices ranging from $1.00 to $2.00 per share. During 2005, the Company issued 25,000 shares of common stock upon with the exercise of warrants at an aggregate exercise price of $25,000.

All of the foregoing securities were issued in reliance upon the exemption from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended, and/or Rule 506 thereunder.  

Equity Compensation Plan Information

           
 
 
   
 
     
 
 
   
 
 
 
 
 
 
   
 
 
 
 
 
 
   
 
 
 
 
 
 
Plan category
 
Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)
 
Weighted-average   exercise price of outstanding options, warrants and rights (b)
 
Number of securities   remaining available for future issuance under Equity compensation plans (excluding securities reflected in column (a)) (c)
 
               
Equity compensation
             
plans approved by
             
security holders
   
-0-
   
-0-
   
1,000,000 (1
)
                     
Equity compensation
                   
plans not approved
                   
by security holders
   
4,406,650 (2
)
$
1.34
   
N/A
 
                     
Total
   
4,406,650
 
$
1.34
   
-0-
 
 
(1)
Represents shares underlying the 2003 Employee Stock Option Plan. To date, no options have been issued pursuant to the Plan. The exercise prices will be determined at the time of issuance.

(2)
Represents shares underlying the individual grant of warrants.


Item 6.
 
Management’s Discussion and Analysis or Plan of Operation.

The following discussion should be read in conjunction with the audited consolidated financial statements and the notes thereto appearing elsewhere in this report and is qualified in its entirety by the foregoing.

Executive Overview

EnerTeck Corporation (the “Company” or “EnerTeck Parent”) was incorporated in the State of Washington on July 30, 1935 under the name of Gold Bond Mining Company for the purpose of acquiring, exploring, and developing and, if warranted, the mining of precious metals. We subsequently changed our name to Gold Bond Resources, Inc. in July 2000. We acquired EnerTeck Chemical Corp. (“EnerTeck Sub”) as a wholly owned subsidiary on January 9, 2003. For a number of years prior to our acquisition of EnerTeck Sub, we were an inactive, public “shell” corporation seeking to merge with or acquire an active, private company. As a result of this acquisition, we are now acting as a holding company, with EnerTeck Sub as our only operating business. Subsequent to this transaction, on November 24, 2003 we changed our domicile from the State of Washington to the State of Delaware, changed our name from Gold Bond Resources, Inc. to EnerTeck Corporation and effected a one for 10 reverse common stock split.

EnerTeck Sub, our wholly owned operating subsidiary, was incorporated in the State of Texas on November 29, 2000. It was formed for the purpose of commercializing a diesel fuel specific combustion catalyst known as EnerBurn (TM), as well as other combustion enhancement and emission reduction technologies. Nalco/Exxon Energy Chemicals, L.P. (“Nalco/Exxon L.P.”), a joint venture between Nalco Chemical Corporation and Exxon Corporation commercially introduced EnerBurn in 1998. When Nalco/Exxon L.P. went through an ownership change in 2000, our founder, Dwaine Reese, formed EnerTeck Sub. It acquired the EnerBurn trademark and related assets and took over the Nalco/Exxon L.P. relationship with the EnerBurn formulator and blender, and its supplier, Ruby Cat Technology, LLC (“Ruby Cat”). The decision to form EnerTeck Sub and acquire the EnerBurn business was motivated by Mr. Reese’s belief that:

·  
EnerBurn was clearly beginning to gain market acceptance;

- 17 -


·  
the gross margins associated with EnerBurn sales would support the business model, since existing customers would likely continue to buy the product due to the significant impact on diesel fuel savings and reduced emissions;
·  
EnerBurn had been professionally tested extensively in field applications as well as in the laboratory, clearly demonstrating its effectiveness in increasing fuel economy and reducing emissions and engine wear;
·  
use of the product in diesel applications has a profound impact on a cleaner environment.

We utilize a sales process that includes detailed proprietary customer fleet monitoring protocols in on-road applications that quantify data and assists in managing certain internal combustion diesel engine operating results while utilizing EnerBurn. Test data prepared by Southwest Research Institute and actual customer usage has indicated that the use of EnerBurn in diesel engines improves fuel economy, lowers smoke, and decreases engine wear and the dangerous emissions of both Nitrogen Oxide (NOx) and microscopic airborne solid matter (particulates). Our principal target markets are the trucking, railroad and maritime shipping industries. Each of these industries share certain common financial characteristics, i.e. (i) diesel fuel represents a disproportionate share of operating costs; and (ii) relatively small operating margins are prevalent. Considering these factors, management believes that the use of EnerBurn and the corresponding derived savings in diesel fuel costs can positively effect the operating margins of its customers while contributing to a cleaner environment.

Results of Operations

Revenues

We recognized revenues of $48,000 for the year ended December 31, 2005 compared to revenues of $179,000 for the year ended December 31, 2004, a decrease of $131,000 or 73.2%. Since the inception of EnerTeck Sub in 2000, we have has generated limited revenues from operations. The primary source of revenue for the years ended December 31, 2005 and 2004 is from the sale of EnerBurn to the trucking and maritime industries.

We expect future revenue trends to initially come from the trucking and maritime industries, and subsequently expect revenues to also be derived from the railroad, mining and offshore drilling industries. We expect this to occur as sales increase and the sales and marketing strategies are implemented into the targeted markets and we create an understanding and awareness of our technology through proof of performance demonstrations with potential customers.

Our future growth is significantly dependent upon our ability to generate sales from trucking companies with fleets of 500 trucks or more, and barge and tugboat companies with large maritime fleets, and railroad, mining and offshore drilling and genset applications. Our main priorities relating to revenue are: (1) increase market awareness of EnerBurn product through its strategic marketing plan, (2) growth in the number of customers and vehicles or vessels per customer, (3) accelerating the current sales cycle, and (4) providing extensive customer service and support.

On July 28, 2005, EnerTeck Sub entered into an Exclusive Reseller and Market Development Agreement (the “Custom Agreement”) with Custom Fuel Services Inc. (“Custom”). Under the Custom Agreement, EnerTeck Sub has appointed Custom, which provides dockside and midstream fueling from nine service locations in Louisiana, Kentucky, Illinois, West Virginia, Missouri and Iowa, as its exclusive reseller of EnerBurn and the related technology on the Western Rivers of the United States, meaning the Mississippi River, its tributaries, South Pass, and Southwest Pass, excluding the Intra Coastal Waterway. The Agreement has an initial term of three years but can be terminated upon 60 days prior written notice by either party. Custom is not required to purchase a minimum volume of EnerBurn during the term of the Custom Agreement. Therefore, we cannot guarantee that any meaningful revenues will be derived from the Custom Agreement. Subsequent to the signing of the Custom Agreement, Custom obtained the regulatory approvals and installed the blending equipment necessary to facilitate its distribution of EnerBurn. In February 2006, we delivered our first shipment of EnerBurn to Custom by delivering 4,840 gallons.

Gross Profit

Gross profit, defined as revenues less cost of goods sold, was $19,000 or 39.6% of sales for the year ended December 31, 2005, compared to $53,000 or 29.6% of sales for the year ended December 31, 2004. In terms of absolute dollars, gross profit decreased $34,000 although the gross profit percentage increased 10.0% for the 2005 calendar year compared to the 2004 calendar year due primarily to an increase in price to reflect marker conditions.

- 18 -

 
Cost of good sold was $29,000 for the 2005 calendar year which represented 60.4% of revenues compared to $126,000 for the 2004 calendar year which represented 70.5% of revenues. The decrease in cost of goods sold as a percentage of revenues primarily reflects fluctuations in product cost due to the manufacturing of our products by outside vendors.

Cost and Expenses

Costs and expenses increased to $12,244,000 for the year ended December 31, 2005 from $1,913,000 for the year ended December 31, 2004, an increase of $10,331,000. Such increase was primarily due to a significant increase in the amounts recognized for non-cash charges due to the issuance of warrants during 2005, the reissuance of shares to certain founding shareholders and an increase in staff during 2005. Costs and expenses in all periods primarily consisted of professional fees, rent expense, amortization expense and general and administrative expenses.

Net Loss

During the year ended December 31, 2005, we reported a net loss of $12,960,000 as compared to a net loss of $1,863,000 for the year ended December 31, 2004. This change was primarily due to the increases in costs and expenses primarily to the increase in amounts recognized for non-cash charges due to the issuance of shares and warrants.

Net income in the future will be dependent upon our ability to increase revenues faster than we increase our selling, general and administrative expenses, research and development expense and other expenses.

Operations Outlook

Beginning in 2005, we began a period of reassessing our direction. Due to a lack of working capital, and a nearly complete turnover in upper management and sales staff dating back into 2004, senior management changed its method of marketing the operation during 2005. The majority of the marketing effort for 2005 was directed at targeting and gaining a foothold in one of our major target areas, the inland marine diesel market. Management focused virtually all of our resources at pinpointing and convincing one major customer within this market, Custom, to go full fleet with our diesel fuel additive product lines. A substantial portion of 2005 was spent testing our primary product, EnerBurn, on one large inland marine vessel belonging to this major potential customer. This resulted in the signing of the Custom Agreement discussed above.

As a result thereof, on July 28, 2005, EnerTeck Sub entered into an Exclusive Reseller and Market Development Agreement (the “Custom Agreement”) with Custom. Subsequent to the signing of the Custom Agreement, Custom obtained the regulatory approvals and installed the blending equipment necessary to facilitate its distribution of EnerBurn. In February 2006, we delivered the first shipment of EnerBurn to Custom by delivering 4,840 gallons. This initial purchase order plus the second current oral order scheduled to be delivered in the second quarter of 2006, amount in size to more revenue and a higher margin than all the orders combined for 2005, 2004 and 2003. At present this one customer represents a majority of our sale revenues. With Custom’s assistance, however, negotiations are currently underway with several over large customers in the same industry to expand this market.   The loss of Custom as a customer would adversely affect our business and we cannot provide any assurances that we could adequately replace the loss of this customer.

Liquidity and Capital Resources

On December 31, 2005, we had working capital of $2,333,000 and stockholders’ equity of $2,438,000 compared to a working capital deficit of $501,000 and stockholders’ deficit of $375,000 on December 31, 2004. On December 31, 2005, the Company had $2,522,000 in cash, total assets of $2,690,000 and total liabilities of $251,000, compared to less than $1,000 in cash, total assets of $145,000 and total liabilities of $520,000 on December 31, 2004.

Increases in cash were primarily due to an increase in net cash provided by financing activities for the year ended December 31, 2005 compared to the prior year. During the quarter ended September 30, 2005, we issued 250,000 shares of its common stock to certain accredited investors for aggregate proceeds of $250,000. In addition, in December 2005, we sold to BATL Bioenergy LLC 2,450,000 shares of the common stock and a warrant to purchase an additional 1,000,000 shares of common stock at an exercise price of $2.00 per share for the aggregate purchase price of $3,000,000. Also, in 2005, we received loans for working capital of an aggregate of $115,000 from various parties. All loans were repaid in December 2005.

- 19 -


Cash used in operating activities was $648,000 for the year ended December 31, 2005 which was primarily the result of a loss of $12,960,000 partially offset by non-cash charges for depreciation of $41,000 and common stock and warrants issued for services of $11,650,000.

Cash used in operating activities was $559,000 for the year ended December 31, 2004 which was primarily the result of a loss of $1,863,000 partially offset by non-cash charges for depreciation of $37,000 and common stock and warrants issued for services of $968,000, decrease in accounts receivable of $348,000 and increase in accounts payable of $226,000.

For the year ended December 31, 2005, we obtained $3,190,000 from financing activities primarily from the sale of equity securities to certain investors compared to $285,000 obtained from financing activities for the year ended December 31, 2004 from the exercise of warrants and issuance of a note payable.

We anticipate, based on currently proposed plans and assumptions relating to our operations, that our current cash and cash equivalents together with projected cash flows from operations and projected revenues will be sufficient to satisfy our contemplated cash requirements for the next 12 months. Our contemplated cash requirements for 2006 and beyond will depend primarily upon level of sales of our products, inventory levels, product development, sales and marketing expenditures and capital expenditures.

We currently have no material commitments for capital requirements.

Inflation has not significantly impacted the Company’s operations.

Off-Balance Sheet Arrangements

We do not have any off balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, results of operations, liquidity or capital expenditures.

Significant Accounting Policies

Our discussion and analysis of the Company’s financial condition and results of operations are based upon our consolidated financial statements which have been prepared in conformity with U.S. generally accepted accounting principles. Our significant accounting policies are described in Note 1 to the consolidated financial statements included elsewhere herein. The application of our critical accounting policies is particularly important to the portrayal of our financial position and results of operations. These critical accounting policies require us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We believe the following critical accounting policies reflect the more significant judgments and estimates used in the preparation of the consolidated financial statements.

Inventory - Our inventory consists of EnerBurn.which we value at the lower of cost or market using the average cost method.

Property and Equipment - Our property and equipment are stated at cost. We compute provisions for depreciation on the straight-line methods, based upon the estimated useful lives of the various assets. Maintenance and repairs are charged to operations as incurred.

Revenue Recognition - We recognize revenue for products sold when the customer received the product.

Income taxes   - We compute income taxes using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.
 
Stock Options and Warrants - We account for our stock-based compensation plans under Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees. Statement of Financial Accounting Standard (“FAS”) No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure, issued in December 2002 requires pro forma net loss and pro forma net loss per share to be disclosed in interim financial statements.

- 20 -


Accounting Developments

In December 2004, the Financial Accounting Standards Board issued SFAS No. 123R, “Share-Based Payment” to revise SFAS No. 123. SFAS No. 123R establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. This Statement focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. SFAS No. 123R requires that the fair value of such equity instruments be recognized as expense in the historical financial statements as services are performed. Prior to SFAS No. 123R, only certain pro forma disclosures of fair value were required. SFAS No. 123R shall be effective for small business issuers as of the beginning of the first interim or annual reporting period that begins after December 15, 2005. The impact of the adoption of this new accounting pronouncement would be similar to our calculation of the pro forma impact on net income of SFAS 123 included in the notes to the consolidated financial statements.

We do not expect the adoption of other recently issued accounting pronouncements to have a significant impact on our results of operations, financial position or cash flow.


Item 7.
Financial Statements.
.

See the Financial Statements annexed to this report.


Item 8.
Changes in and Disagreements with Accountants
 
on Accounting and Financial Disclosure.
 
Not applicable.


Item 8A.
Controls and Procedures.

The Company’s Chief Executive Officer and Principal Financial Officer have reviewed the Company’s disclosure controls and procedures as of the end of the period covered by this report.  Based upon this review, such officers believe that the Company’s disclosure controls and procedures are not effective in timely alerting them to material information required to be included in this report. There were several material adjustments proposed by the Company’s outside auditors. The Company hired a full-time Chief Financial Officer in December 2005 in an effort to improve the disclosure controls and procedures.

There have been no significant changes in internal control over financial reporting that occurred during the fiscal year covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.


Item 8B.
Other Information.


Not applicable.

PART III

Item 9.
Directors, Executive Officers, Promoters and Control Persons;
 
Compliance with Section 16(a) of the Exchange Act.


Set forth below are our present directors and executive officers. Note that there are no other persons who have been nominated or chosen to become directors nor are there any other persons who have been chosen to become executive officers. There are no arrangements or understandings between any of the directors, officers and other persons pursuant to which such person was selected as a director or an officer. Directors are elected to serve until the next annual meeting of stockholders and until their successors have been elected and have qualified. Officers serve at the discretion of the Board of Directors.
 
- 21 -
 
   
Present Position
Has Served as
Name
Age
and Offices
Director Since
       
Dwaine Reese
63
Chairman of the
January 2003
   
Board, Chief Executive
 
 
 
Officer and Director
 
       
Gary B. Aman
58
Director
March 2005
       
Jack D. Cowles
45
Director
March 2005
       
Thomas F. Donino
44
Director
December 2005
       
Stan Crow
57
President
-
       
Richard B. Dicks
58
Chief Financial Officer
-

Set forth below are brief accounts of the business experience during the past five years of each director and executive officer of the Company and each significant employee of the Company.

DWAINE REESE has been the Chairman of the Board and the Company’s Chief Executive Officer of EnerTeck Sub since 2000 and of EnerTeck Parent since 2003. From approximately 1975 to 2000, Mr. Reese held various executive, management, sales and marketing positions in the refining and specialty chemical business with Nalco Chemical Corporation and later Nalco/Exxon Energy Chemicals, LP. In 2000, he founded EnerTeck Chemical Corp., and has been its President and Chief Executive Officer since that time. Mr. Reese has been and will continue to devote his full-time to the Company’s business. Mr. Reese has B.S. degree in Biology and Chemistry from Lamar University and a M.S. degree in Chemistry from Highland New Mexico University.

GARY B. AMAN has been a director of the Company since March 2005. He has been employed with Nalco Company since 1994, most recently serving as General Manager of ADOMITE Subsurface Chemicals, a Nalco division, since 1999. ADOMITE is recognized as a technology leader in energy exploration additives including drilling fluids, cementing, fracturing and well stimulation additives. Mr. Aman received a Bachelor of Science degree in Mathematics from the University of South Dakota in 1970.

JACK D. COWLES has been a director of the Company since March 2005. He has been a Managing Director of JDC Consulting, a management consulting firm, since 1997. JDC, headquartered in New York City, provides a broad range of senior level management consulting services including strategy, business process improvement and implementation, change management, financial management, due diligence and merger integration. Mr. Cowles received a Bachelor of Arts, Economics degree; Phi Beta Kappa, from the University of Michigan in 1983 and a Masters of Business Administration degree for the University of Pennsylvania, Wharton School of Business in 1994.

THOMAS F. DONINO has been a director of the Company since December 2005. Since August 1997, he has been a partner at First New York Securities (FNY) in New York, New York. FNY is an investment management company with assets over $250 million dollars. Mr. Donino is also the General Partner of BATL Management LP, a family Limited Partnership, and President of BATL Bioenergy LLC.

STAN CROW has been President of the Company since September 2005. Since 1986, Mr. Crow has been President and Chief Executive Officer of Stanmar Manufacturing Inc. (“Stanmar”) located in Livingston, Texas, a company founded by Mr. Crow, which is engaged in the manufacturing and sales of chemical injection equipment for the refining industry as well as the transportation industry. Mr. Crow has also owned and operated several other companies in his career.

RICHARD B. DICKS has been Chief Financial Officer of the Company since December 2005. Mr. Dicks is a certified public accountant and since January 1985 has had his own accounting practice focusing on tax, financial, cash management and MAS services. In addition, from July 1993 to December 2001, Mr. Dicks was President and Chief Executive Officer of Combustion Process Manufacturing Corporation, located in Houston, Texas. Mr. Dicks received a Bachelor’s Degree from Oklahoma State University in 1969.

None of the directors and officers is related to any other director or officer of the Company.

- 22 -


To the knowledge of the Company, none of the officers or directors has been personally involved in any bankruptcy or insolvency proceedings. To the knowledge of the Company, none of the directors or officers have been convicted in any criminal proceedings (excluding traffic violations and other minor offenses) or are the subject of a criminal proceeding which is presently pending, nor have such persons been the subject of any order, judgment, or decree of any court of competent jurisdiction, permanently or temporarily enjoining them from acting as an investment advisor, underwriter, broker or dealer in securities, or as an affiliated person, director or insurance company, or from engaging in or continuing in any conduct or practice in connection with any such activity or in connection with the purchase or sale of any security, nor were any of such persons the subject of a federal or state authority barring or suspending, for more than 60 days, the right of such person to be engaged in any such activity, which order has not been reversed or suspended.

Audit Committee Financial Expert

We do not have an audit committee financial expert, as such term is defined in Item 401(e) of Regulation S-B, serving on our audit committee because we have no audit committee and are not required to have an audit committee because we are not a listed security.

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s directors and executive officers, and persons who own more than ten percent of the Company’s Common Stock, to file with the Securities and Exchange Commission initial reports of ownership and reports of changes of ownership of Common Stock of the Company. Officers, directors and greater than ten percent stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file.

Based solely on the Company’s review of such forms received by it, or written representations from certain of such persons, the Company believes that, with respect to the year ended December 31, 2005, all Section 16(a) filing requirements applicable to its officers, directors and greater than 10% beneficial owners were complied with except Dwaine Reese filed five reports late relating to a total of five transactions, Gary B. Aman filed two reports late relating to a total of two transactions, Jack D. Cowles filed two reports late relating to a total of three transactions, Stan Crow filed two reports late relating to a total of three transactions and Richard B. Dicks filed one report late relating to one transaction.

Code of Ethics

The Board of Directors has adopted a Code of Ethics applicable to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, which is designed to promote honest and ethical conduct; full, fair, accurate, timely and understandable disclosure; and compliance with applicable laws, rules and regulations. A copy of the Code of Ethics will be provided to any person without charge upon written request to the Company at its executive offices, 10701 Corporate Drive, Suite 150, Stafford, Texas 77477.

Item 10.     Executive Compensation.

The following summary compensation tables set forth information concerning the annual and long-term compensation for services in all capacities to the Company for the years ended December 31, 2005, December 31, 2004 and December 31, 2003, of those persons who were, at December 31, 2005 (i) the chief executive officer and (ii) the other most highly compensated executive officers of the Company, whose annual base salary and bonus compensation was in excess of $100,000 (the named executive officers):


 



- 23 -


Summary Compensation Table

       
Annual
Compensation
 
Long-Term
Compensation
 
       
                       
               
Restricted
 
Shares
 
Name and Principal
 
Fiscal
         
Stock
 
Underlying
 
Position
 
Year
 
Salary
 
Bonus
 
Awards
 
Options
 
                       
Dwaine Reese (1)
   
2005
 
$
170,000
 
$
0
   
0 (2
)
 
0
 
Chairman of the
   
2004
 
$
26,600
 
$
0
   
0
   
0
 
Board and Chief
   
2003
 
$
150,000
 
$
0
   
0
   
1,000,000
 
Executive Officer  
_______________________
(1)
Mr. Reese has served in these positions with both companies since shortly after EnerTeck Sub was acquired on January 9, 2003. Prior thereto, from EnerTeck Sub’s inception on November 29, 2000, Mr. Reese served as the President and Chief Executive Officer of EnerTeck Sub. The compensation that is indicated here is his compensation from EnerTeck Sub for the periods indicated as its officer and director.

(2)
Does not include 2,325,000 shares which the Board of Directors authorized be returned and reissued to Mr. Reese in December 2005. In March 2004, Mr. Reese had delivered 2,325,000 shares to the Company for cancellation as part of a corporate reorganization   and restructuring.

2003 Stock Option Plan

In September 2003, our shareholders approved an employee stock option plan authorizing the issuance of options to purchase up to 1,000,000 shares of our common stock. This plan is intended to give us greater ability to attract, retain, and motivate officers, key employees, directors and consultants; and is intended to provide us with the ability to provide incentives more directly linked to the success of our business and increases in shareholder value. To date no options have been issued under the plan.

2005 Stock Compensation Plan

In June 2005, the Board of Directors adopted the 2005 Stock Compensation Plan (the “2005 Stock Plan”) authorizing the issuance of up to 2,500,000 shares of common stock. Pursuant to the 2005 Stock Plan, employees, directors, officers or individuals who are consultants or advisors of the Company or any subsidiary may be awarded shares under the 2005 Stock Plan. The 2005 Stock Plan is intended to offer those employees, directors, officers, or consultants or advisors of the Company or any subsidiary who assist in the development and success of the business of the Company or any subsidiary, the opportunity to participate in a compensation plan designed to reward them for their services and to encourage them to continue to provide services to the Company or any subsidiary. To date, 2,000,000 shares have been awarded under the 2005 Stock Plan, of which 1,000,000 were granted to Parrish B. Ketchmark. At the time of the grant, Mr. Ketchmark was an officer and director of the Company but has since resigned. In December 2005, Mr. Ketchmark agreed to return 500,000 shares granted to him under the 2005 Stock Plan. See Part III, Item 12 “Certain Transactions”. No other officers or directors of the Company have been granted shares under the 2005 Stock Plan.  

Other Options, Warrants or Rights

We have no outstanding options or rights to purchase any of its securities. However, as of December 31, 2005, we do have outstanding warrants to purchase up to 4,306,650 shares of its common stock.

  Employment Agreements - Executive Officers and Certain Significant Employees

None of our officers and key employees are presently bound by employment agreements. However, in connection with the Securities Purchase Agreement entered into with BATL in December 2005 (see Part III, Item 12 “Certain Relationships and Related Transactions”) and as a further inducement to BATL for making an investment in the Company, Dwaine Reese has agreed not to unilaterally resign as our Chief Executive Officer for a period of two years from December 7, 2005.

- 24 -


We do not have any termination or change in control arrangements with any of our named executive officers.

Compensation of Directors

At the present time, directors receive no cash compensation for serving on the Board of Directors, other than reimbursement of reasonable expenses incurred in attending meetings. In June 2005, we issued 200,000 shares of common stock to each of Gary B. Aman and Jack D. Cowles, each a director of the Company, for their services as Board members. See Part III, Item 12 “Certain Relationships and Related Transactions”.

Indebtedness of Management

No member of management was indebted to the Company during its last fiscal year.


Item 11.     Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters.

The following table sets forth, as of April 5, 2006, certain information with regard to the record and beneficial ownership of the Company’s Common Stock by (i) each stockholder owning of record or beneficially 5% or more of the Company’s Common Stock, (ii) each director of the Company, (iii) the Company’s Chief Executive Officer and other executive officers, if any, of the Company whose annual base salary and bonus compensation was in excess of $100,000 (the “named executive officers”), and (iv) all executive officers and directors of the Company as a group:

 
Amount and Nature
Percent
Name of Beneficial Owner
of Beneficial Ownership
of Class
     
Dwaine Reese
3,550,000 (1)
21.6%
BATL Bioenergy LLC
3,450,000 (2)
19.8%
Thomas F. Donino
3,712,850 (3)
21.3%
Gary B. Aman
650,000 (4)
4.0%
Jack D. Cowles
388,550 (5)
2.4%
Stan Crow
650,500 (6)
3.9%
Parrish B. Ketchmark
1,137,500 (7)
6.6%
Richard B. Dicks
100,000 (8)
*
     
All Executive Officers and
   
Directors as a Group (6 persons)
9,051,900
51.3%


*
Less than 1%.

(1)
The address for Mr. Reese is 10701 Corporate Drive, Suite 150, Stafford, Texas.

(2)
Consists of 2,450,000 shares held by BATL Bioenergy LLC (“BATL”) and 1,000,000 shares underlying warrants held by BATL. This information is based solely upon information reported in filings made to the SEC on behalf of BATL. The address for BATL is 7 Lakeside Drive, Rye, New York.

(3)
Consists of 50,000 shares held by Mr. Donino, 2,450,000 shares held by BATL, 212,850 shares held by BATL Management LP (“BATL Management”) and 1,000,000 shares underlying warrants held by BATL. As the president and managing member of BATL and the sole officer, director and shareholder of BATL Management’s general partner, Mr. Donino may be deemed to be the beneficial owner of shares owned by BATL and BATL Management. BATL Management is a family limited partnership whose members are certain relatives and trusts for the benefit of certain relatives of Mr. Donino. This information is based solely upon information reported in filings made to the SEC on behalf of Thomas Donino, BATL and BATL Management. The address for Mr. Donino is 7 Lakeside Drive, Rye, New York.

(4)
The address for Mr. Aman is 6119 Apple Valley Lane, Houston, Texas.

(5)
The address for Mr. Cowles is 30 Lansdowne Drive, Larchmont, New York.

- 25 -


(6)
Consists of 565,500 shares held by Mr. Crow and 85,000 shares underlying warrants held by him. The address for Mr. Crow 1410 Andover Street, Livingston, Texas.

(7)
Consists of 367,500 shares held by Mr. Ketchmark and 770,000 shares underlying warrants held by Parrish Brian Partners, Inc., an entity owned and/or controlled by Mr. Ketchmark. Mr. Ketchmark is a former officer and director of the Company. The address for Mr. Ketchmark is P.O. Box 256, Norwood, New Jersey.

(8)
Consists of 100,000 shares underlying warrants held by Mr. Dicks. The address for Mr. Dicks is 10701 Corporate Drive, Suite 150, Stafford, Texas.


Item 12.     Certain Relationships and Related Transactions.

In 2005, we received loans for working capital of an aggregate of $40,000 from three individuals, one of whom was Jack D. Cowles, a director of the Company who loaned us $10,000. As an added inducement to the lenders and as additional consideration for making the loans, the Board of Directors granted an aggregate of 400,000 shares of common stock to such individuals of which Mr. Cowles received 100,000 shares.

In June 2005, the Board of Directors granted 200,000 shares of common stock to each of Gary B. Aman and Jack D. Cowles, each a director of the Company, for their services as Board members.

In June 2005, the Board of Directors granted to Parrish B. Ketchmark, then an officer and director of the Company, 1,000,000 shares of common stock under the 2005 Stock Plan for services rendered and to be rendered to the Company. Mr. Ketchmark resigned as an officer and director of the Company in September 2005.

In November 2005, we granted Richard Dicks, who was appointed Chief Financial Officer of the Company in December 2005, warrants to acquire 100,000 shares of the Company’s common stock. Such warrants are exercisable at $2.00 per share, which was the market price of the Company’s common stock on the date of grant, and expire five years from the date of grant.

On December 6, 2005, we entered into a Redemption Agreement (the “Redemption Agreement”) with Parrish B. Ketchmark (“Ketchmark”), and Parrish Brian Partners, Inc., a company owned and/or controlled by Ketchmark (“Partners”), pursuant to which (i) Ketchmark agreed to and on that date returned to the Company 500,000 shares of common stock previously issued to him, and (ii) Partners agreed to and on that date returned to the Company 500,000 warrants to acquire 500,000 shares of common stock previously issued to it by the Company. Pursuant to the Redemption Agreement, we agreed that upon the raising of equity financing of at $1 million, we will cause certain loans made by certain third parties (which included Ketchmark and Partners) in the aggregate principal of approximately $71,000 to be repaid in full. Other than the agreement to repay the foregoing loans, no cash consideration was or will be paid by us to Ketchmark and Partners in connection with the redemption of the aforesaid shares and warrants.

On December 6, 2005, the Board of Directors of the Company authorized the return and immediate reissuance of an aggregate of 2,750,000 shares of common stock to the following founding shareholders of EnerTeck Chemical Corp., the Company’s wholly-owned subsidiary: Dwaine Reese - 2,325,000 shares; Tom Himsel - 100,000 shares; Gary Aman - 225,000 shares; and Ken Jackson - 100,000 shares. Mr. Reese is the Company’s Chief Executive Officer and a director of the Company and Mr. Aman is a director of the Company. In March 2004, such shareholders had delivered 3,000,000 shares to the Company for cancellation as part of a corporate reorganization and restructuring.

On December 8, 2005, we entered into a Securities Purchase Agreement (the “BATL Agreement”) with BATL Bioenergy LLC (“BATL”), then an unrelated third party, pursuant to which we agreed to issue and sell to BATL, for the aggregate purchase price of $3,000,000 (the “BATL Purchase Price”), (i) 2,450,000 shares (the “BATL Shares”) of the common stock of the Company, and (ii) a warrant (the “BATL Warrant”) expiring in five years to purchase an additional 1,000,000 shares of common stock at an exercise price of $2.00 per share. In accordance with the terms of the BATL Agreement, BATL shall be entitled to nominate one director to the Board of Directors of the Company. On December 9, 2005 (the “BATL Closing Date”), the transactions contemplated by the BATL Agreement were completed with the Purchase Price being paid and the BATL Shares and BATL Warrant being issued. In addition, on the BATL Closing Date, Thomas Donino, President of BATL, was appointed by the Board of Directors of the Company to serve on the Board. The BATL Agreement provides that for so long as

- 26 -

BATL shall beneficially own in excess of 10% of the outstanding shares of the common stock of the Company, BATL shall be entitled to nominate one director to the Board of Directors of the Company.

In accordance with the terms on the BATL Agreement, we have agreed that the proceeds of the Purchase Price shall be used as follows: (i) $1,000,000 to complete the purchase of Ruby Cat Technology, LLC (the proposed acquisition of which was previously reported in the Company’s Form 8-K filed with the Commission on October 24, 2005) (the “Ruby Cat Transaction”); (ii) no more than $340,000 to repay certain outstanding debt of the Company and its subsidiary; and (iii) the balance for working capital purposes. We have granted BATL an irrevocable, unconditional right, exercisable on one occasion only for a period of 90 days following the earlier to occur of (i) the termination of any definitive agreement or letter of intent in respect of the Ruby Cat Transaction, and (ii) if the Ruby Cat Transaction shall not yet have been consummated, 90 days following the BATL Closing Date, to sell to the Company up to 816,667 shares of common stock at a per share purchase price of $1.2245 per share.

In connection with the BATL Agreement, the Company and BATL entered into a Registration Rights Agreement dated as of December 8, 2005, whereby we have agreed to prepare and file with the Commission not later than the 60th day (the “Filing Date”) after the BATL Closing Date a Registration Statement covering the resale of all of the BATL Shares and the shares of common stock underlying the BATL Warrant. We have agreed to use our best efforts to cause the Registration Statement to be declared effective as promptly as possible after the filing thereof, but in any event prior to the 240 th day after the Filing Date (such day referred to as the “Effective Date”); provided that, if the Registration Statement is not filed by the Filing Date or declared effective by the Effective Date (each a “Penalty Event”) then we shall issue a five-year warrant (“Penalty Warrant”) to BATL to acquire another 49,000 shares of common stock, at an exercise price equal to the exercise price of the BATL Warrant, per each 30-day period following the Penalty Event that the Registration Statement has not been filed and/or that the Effective Date has not occurred.


Item 13.
  Exhibits.
 
     
2.1
Share Exchange Agreement
Exhibit 2.1 (1)
2.2
Plan of Merger
Exhibit 2.2 (2)
2.3
Article of Merger (Delaware)
Exhibit 2.3 (2)
2.4
Articles of Merger (Washington)
Exhibit 2.4 (2)
3.1
Articles of Incorporation (July 8, 2003 filing date)
Exhibit 3.1 (2)
3.2
Bylaws
Exhibit 3.2 (2)
4.1
Specimen of Common Stock Certificate
Exhibit 4.1 (2)
4.2
Registrant’s 2003 Stock Option Plan
Exhibit 4.1 (3)
4.3
Registrant’s 2005 Stock Compensation Plan
Exhibit 99.1 (4)
4.4
Form of Common Stock Purchase Warrant granted to various persons  at various times from August 2003 to date
   
*
4.5
Registration Rights Agreement dated December 8, 2005 between
 
 
the Company and BATL Bioenergy LLC
Exhibit 4.1 (5)
4.6
Warrant to purchase 1,000,000 shares issued to BATL Bioenergy LLC
Exhibit 4.2 (5)
10.1
Memorandum of Understanding by and between the Registrant’s Subsidiary and RubyCat Technology dated February 1, 2003
 
Exhibit 10.22 (2)
10.2
Office Lease dated February 1, 2001
Exhibit 10.23 (2)
10.3
Office Lease Amendment dated March 31, 2003
Exhibit 10.24 (2)
10.4
Redemption Agreement dated December 6, 2005 between the
 
 
Company and Parrish B. Ketchmark and Parrish Brian Partners, Inc.
  Exhibit 10.1 (5)
10.5
Securities Purchase Agreement dated December 8, 2005 between the
 
 
Company and BATL Bioenergy LLC
Exhibit 10.2 (5)
21.1
     *
23.1
     *
31.1
 
 
of the Sarbanes-Oxley Act of 2002 (Rules 13a-14 and 15d-14 of  the
 
 
Exchange Act)
     *
31.2
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rules 13a-14 and 15d-14 of the
 
 
Exchange Act)
     *
32.1
Certification pursuant to Section 906 of the Sarbanes-Oxley Act
 
 
of 2002 (18 U.S.C. 1350)
   *


- 27 -



*
Filed herewith.

(1)
Filed as an exhibit to the Company’s Current Report on Form 8-K filed on January 23, 2003, and incorporated by reference herein.

(2)
Filed as an exhibit to the Company’s Registration Statement on Form SB-2, File No. 333-108872, and incorporated by reference herein.

(3)
Filed as an exhibit to the Company’s Schedule 14A filed on August 12, 2003, and incorporated by reference herein.

(4)
Filed as an exhibit to the Company’s Registration Statement on Form S-8, File No. 333-1258814, and incorporated by reference herein.

(5)
Filed as an exhibit to the Company’s Current Report on Form 8-K filed on December 12, 2005, and incorporated by reference herein.


Item 14.     Principal Accountant Fees and Services.

The following is a summary of the fees billed to us by the principal accountants to the Company for professional services rendered for the fiscal years ended February 28, 2005 and February 29, 2004:

Fee Category
 
2005 Fees
 
2004 Fees
 
           
Audit Fees
 
$
16,500
 
$
19,000
 
Audit Related Fees
 
$
0
 
$
0
 
Tax Fees
 
$
0
 
$
0
 
All Other Fees
 
$
0
 
$
0
 
               
Total Fees
 
$
16,500
 
$
19,000
 

Audit Fees. Consists of fees billed for professional services rendered for the audit of our financial statements and review of interim consolidated financial statements included in quarterly reports and services that are normally provided by the principal accountants in connection with statutory and regulatory filings or engagements.
 
Audit Related Fees. Consists of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our consolidated financial statements and are not reported under “Audit Fees”.

Tax Fees. Consists of fees billed for professional services for tax compliance, tax advice and tax planning. These services include preparation of federal and state income tax returns.

All Other Fees. Consists of fees for product and services other than the services reported above.

Pre-Approval Policies and Procedures

Prior to engaging its accountants to perform a particular service, the Company’s Board of Directors obtains an estimate for the service to be performed. All of the services described above were approved by the Board of Directors in accordance with its procedures.

- 28 -

SIGNATURES

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

ENERTECK CORPORATION
(Registrant)

 
 
By:   /s/ Dwaine Reese                        
                            Dwaine Reese,
                                                     Chief Executive Officer


Dated:   April 10, 2006


Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant, and in the capacities and on the dates indicated:

Signature
Title
Date
     
     
/s/ Dwaine Reese
Chief Executive Officer,
04/10/2006
Dwaine Reese
Chairman of the Board
 
 
and Director
 
 
(Principal Executive Officer)
 
     
     
/s/ Richard Dicks
Chief Financial Officer
04/10/2006
Richard B. Dicks
(Principal Financial Officer)
 
     
     
/s/ Gary B. Aman
Director
04/06/2006
Gary B. Aman
   
     
     
/s/ Jack D. Cowles
Director
04/07/2006
Jack D. Cowles
   
     
     
/s/ Thomas F. Donino
Director
04/07/2006
Thomas F. Donino
   
 
 
 
- 29 -
 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of
EnerTeck Corporation
Houston, Texas

We have audited the accompanying consolidated balance sheet of EnerTeck Corporation as of December 31, 2005, and the related consolidated statements of operations, stockholders' equity (deficit), and cash flows for each of the two years then ended. These financial statements are the responsibility of EnerTeck's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of EnerTeck Corporation as of December 31, 2005, and the results of its operations and cash flows for each of the two years then ended, in conformity with accounting principles generally accepted in the United States of America.




Malone & Bailey, PC
www.malone-bailey.com
Houston, Texas

March 8, 2006
 
F-1
 

ENERTECK CORPORATION
CONSOLIDATED BALANCE SHEET
December 31, 2005

ASSETS
     
Current assets:
     
     Cash
 
$
2,522,269
 
     Inventory
   
17,190
 
    Accounts receivable
   
24,993
 
    Other current assets
   
19,900
 
       
Total current assets
 
$
2,584,352
 
       
         
Property and equipment, net of accumulated
       
depreciation of $79,408
   
105,231
 
       
Total asset
 
$
2,689,583
 
       
         
         
LIABILITIES AND STOCKHOLDERS' EQUITY
       
Current liabilities:
       
    Accounts payable
 
$
52,287
 
    Accrued liabilities
   
199,115
 
       
Total current liabilities
   
251,402
 
       
         
         
STOCKHOLDERS' EQUITY:
       
         
Preferred stock, $.001 par value, 100,000,000 shares
       
authorized, none issued
   
-
 
Common stock, $.001 par value, 100,000,000 shares
       
authorized, 16,451,359 shares issued and outstanding
   
16,451
 
Additional paid-in capital
   
20,366,944
 
Accumulated deficit
   
(17,945,214
)
       
Total stockholders' equity
   
2,438,181
 
       
         
                                   Total liabilities and stockholders' equity
 
$
2,689,583
 
       


See accompanying summary of accounting policies and notes to financial statements.
 
F-2
 
 

ENERTECK CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 2005 and 2004

   
2005
 
2004
 
           
Revenues
 
$
48,093
 
$
179,393
 
Cost of goods sold
   
29,198
   
126,489
 
               
Gross profit
   
18,895
   
52,904
 
               
Costs and expenses:
             
    Salaries
   
337,490
   
380,464
 
    Non-cash compensation
   
11,649,700
   
968,002
 
    Depreciation
   
40,669
   
36,507
 
    Other selling, general and administrative
   
216,350
   
528,477
 
               
Total expenses
   
12,244,209
   
1,913,450
 
               
Loss from operations
   
(12,225,314
)
 
(1,860,546
)
               
Other income (expense)
             
    Other income
   
30,115
   
343
 
    Interest expense
   
(46,850
)
 
(2,684
)
    Loss on settlement of debt
   
(718,313
)
 
-
 
               
Total other income (expense)
   
(735,048
)
 
(2,341
)
               
Net loss
 
$
(12,960,362
)
$
(1,862,887
)
               
Net loss per share:
             
    Basic and diluted
 
$
(1.14
)
$
(0.21
)
               
Weighted average shares outstanding:
             
    Basic and diluted
   
11,393,897
   
8,668,750
 


See accompanying summary of accounting policies and notes to financial statements.
 
 
F-3
ENERTECK CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
Years Ended December 31, 2005 and 2004

           
Additional
         
   
Common Stock
 
Paid-in
 
Accumulated
     
   
Shares
 
Amount
 
Capital
 
Deficit
 
Total
 
                       
Balances, December 31, 2003
   
10,792,025
 
$
10,792
 
$
3,406,101
 
$
(3,121,965
)
$
294,928
 
                                 
    Exercise of warrants
   
224,000
   
224
   
224,576
   
--
   
224,800
 
                                 
                                 
    Exercise of cashless warrant
   
135,484
   
135
   
(135
)
 
--
   
--
 
                                 
                                 
    Common stock for services
   
400,000
   
400
   
639,600
   
--
   
640,000
 
                                 
    Warrants issued for services
   
--
   
--
   
328,002
   
--
   
328,002
 
                                 
    Common stock cancelled
   
(3,000,000
)
 
(3,000
)
 
3,000
   
--
   
--
 
Net loss
   
--
   
--
         
(1,862,887
)
 
(1,862,887
)
                                 
Balances, December 31, 2004
   
8,551,509
   
8,551
   
4,601,144
   
(4,984,852
)
 
(375,157
)
                                 
    Common stock for services
   
5,310,000
   
5,310
   
8,148,590
   
--
   
8,153,900
 
    Sale of common stock
   
2,700,000
   
2,700
   
3,247,300
   
--
   
3,250,000
 
    Settlement of debt
   
650,000
   
650
   
873,350
   
--
   
874,000
 
    Redemptions of common stock
   
(760,150
)
 
(760
)
 
760
   
--
   
--
 
    Warrant expense
   
--
   
--
   
3,495,800
   
--
   
3,495,800
 
    Net loss
   
--
   
--
   
--
   
(12,960,362
)
 
(12,960,362
)
                                 
Balances, December 31, 2005
   
16,451,359
 
$
16,451
 
$
20,366,944
 
$
(17,945,214
)
$
2,438,181
 


See accompanying summary of accounting policies and notes to financial statements.
 
 
F-4

ENERTECK CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2005 and 2004

   
2005
 
2004
 
           
CASH FLOWS FROM OPERATING ACTIVITIES:
         
Net loss
 
$
( 12,960,362
)
$
(1,862,887
)
Adjustments to reconcile net loss to cash used in operating activities:
             
    Depreciation
   
40,389
   
36,507
 
    Common stock and warrants issued for services
   
11,649,700
   
968,002
 
    Loss on settlement of debt
   
718,313
   
--
 
Changes in operating assets and liabilities:
             
    Accounts receivable
   
(24,993
)
 
347,686
 
    Inventory
   
1,052
   
(4,856
)
    Prepaid expenses
   
--
   
7,655
 
    Other current assets
   
(19,900
)
 
--
 
    Accounts payable
   
(221,406
)
 
225,643
 
    Accrued expenses and deferred revenue
   
168,752
   
(276,436
)
               
NET CASH USED IN OPERATING ACTIVITIES
   
(648,455
)
 
(558,686
)
               
CASH FLOWS FROM INVESTING ACTIVITIES:
             
    Capital expenditures
   
(20,074
)
 
(1,166
)
               
CASH FLOWS FROM FINANCING ACTIVITIES:
             
    Proceeds from sale of common stock
   
3,250,000
   
--
 
    Proceeds from exercise of options and warrants
   
--
   
224,800
 
    Proceeds from issuance of notes payable
   
115,057
   
60,000
 
    Repayments of notes payable
   
(175,057
)
 
--
 
               
NET CASH PROVIDED BY FINANCING ACTIVITIES
   
3,190,000
   
284,800
 
               
NET INCREASE (DECREASE) IN CASH
   
2,521,471
   
(275,052
)
Cash, beginning of period
   
798
   
275,850
 
               
Cash, end of period
 
$
2,522,269
 
$
798
 
               
SUPPLEMENTAL DISCLOSURES:
             
Cash paid for interest
 
$
49,335
 
$
--
 
Cash paid for income taxes
   
--
   
--
 
               
               
NON-CASH TRANSACTIONS:
             
    Stock issued for debt
 
$
874,000
 
$
--
 


See accompanying summary of accounting policies and notes to financial statements.
 
F-5

ENERTECK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business and Basis of Presentation

EnerTeck Corporation, formerly Gold Bond Resources, Inc. was incorporated under the laws of the State of Washington on July 30, 1935. On January 9, 2003, the Company acquired EnerTeck Chemical Corp. ("EnerTeck Sub") as its wholly owned operating subsidiary. As a result of the acquisition, the Company is now acting as a holding company, with EnerTeck Sub as its only operating business. Subsequent to this transaction, on November 24, 2003, the Company changed its domicile from the State of Washington to the State of Delaware, changed its name from Gold Bond Resources, Inc. to EnerTeck Corporation.

EnerTeck Sub, the Company's wholly owned operating subsidiary is a Houston-based corporation. It was incorporated in the State of Texas on November 29, 2000 and was formed for the purpose of commercializing a diesel fuel specific combustion catalyst known as EnerBurn (TM), as well as other combustion enhancement and emission reduction technologies for diesel fuel. EnerTeck's primary product is EnerBurn, and is registered for highway use in all USA diesel applications. The products are used primarily in on-road vehicles, locomotives and diesel marine engines throughout the United States and select foreign markets.

Principles of Consolidation

The consolidated financial statements include the accounts of EnerTeck Corporation and its wholly-owned subsidiary, EnerTeck Chemcial Corp. All significant inter-company accounts and transactions are eliminated in consolidation.

Inventory

Inventory consists of market ready EnerBurn. Inventory is valued at the lower of cost or market using the average cost method.

Accounts Receivable

EnerTeck provides for the possible inability to collect accounts receivable by recording an allowance for doubtful accounts. As of December 31, 2005, there were no uncollectible accounts.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is computed over the estimated useful lives of the assets using the straight-line method for financial reporting purposes. Maintenance and repairs are charged to operations as incurred.

Revenue Recognition

EnerTeck recognizes revenue for products sold when the customer receives the product.

F-6

Income Taxes

EnerTeck will compute income taxes using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on evidence from prior years, may not be realized over the next calendar year or for some years thereafter.

Income (Loss) Per Common Share

The basic net income (loss) per common share is computed by dividing the net income (loss) applicable to common stockholders by the weighted average number of common shares outstanding.

Diluted net income (loss) per common share is computed by dividing the net income applicable to common stockholders, adjusted on an "as if converted" basis, by the weighted average number of common shares outstanding plus potential dilutive securities. For 2004 and 2003, potential dilutive securities had an anti-dilutive effect and were not included in the calculation of diluted net loss per common share


Management Estimates and Assumptions

The accompanying financial statements are prepared in conformity with accounting principles generally accepted in the United States of America which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Stock Options and Warrants

EnerTeck accounts for its stock-based compensation plans under Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees. Statement of Financial Accounting Standard ("FAS") No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure, issued in December 2002 requires pro forma net loss and pro forma net loss per share to be disclosed in interim financial statements (See note 7 for additional information on warrants).

During the year ended December 31, 2005, EnerTeck's board of directors approved the issuance of warrants to acquire 100,000 shares of common stock to one newly hired employee. The warrants vested immediately and have a five-year life. These warrants had an exercise price of $2.00 per share resulting in $24,000 of compensation expense during 2005. Compensation expense was calculated under the intrinsic value method.

Also, in December 2005, Antheneum Capital LLC for past and future consulting services, were issued warrants to acquire 500,000 shares of common stock at $1.00 per share.

The following table illustrates the effect on net income and earnings per share if EnerTeck had applied the fair value recognition provisions of FASB

F-7

Statement No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation.


 
Year Ended
December 31,
 
 
                                   2005
2004
     
Net loss, as reported
                                   $(12,960,362)
$(1,862,887)
Add: Expense recorded
                                   24,000
328,002
     
Deduct: expense determined under the fair value based
method for all awards
   
                                   (223,723)
(510,797)
     
Pro forma net loss
                                   $(13,160,085)
$(2,045,682)
     
Loss per share:
   
Basic and diluted - as reported
                                   $(1.14)
$(0.21)
     
Basic and diluted - pro forma
                                   $(1.16)
$(0.24)

The fair value of each warrant granted is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions: dividend yield 0.0%, expected volatility of 86% to 100%, risk-free interest rate of 3.5%, and expected life of 5 years.

Recently Issued Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board issued SFAS No. 123R, "Share-Based Payment" to revise SFAS No. 123. SFAS No. 123R establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. This Statement focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. SFAS No. 123R requires that the fair value of such equity instruments be recognized as expense in the historical financial statements as services are performed. Prior to SFAS No. 123R, only certain pro forma disclosures of fair value were required. SFAS No. 123R shall be effective for small business issuers as of the beginning of the first interim or annual reporting period that begins after December 15, 2005. The impact of the adoption of this new accounting pronouncement would be similar to the Company's calculation of the pro forma impact on net income of SFAS 123 included above.

EnerTeck does not expect the adoption of other recently issued accounting pronouncements to have a significant impact on EnerTeck's results of operations, financial position or cash flow.

F-8


NOTE 2 - PROPERTY AND EQUIPMENT

At December 31, 2005, property and equipment consisted of the following:

   
Useful
Lives
     
 
 
 
  Amount
           
Furniture and fixtures
   
5-7
 
$
60,575
 
Equipment
   
5-7
   
164,453
 
               
           
225,028
 
Less: accumulated depreciation
         
119,797
 
         
$
105,231
 

NOTE 3 - INCOME TAXES

EnerTeck has incurred net losses since the merger with Gold Bond and, therefore, has no tax liability. The net deferred tax asset generated by the loss carry-forward has been fully reserved. The cumulative operating loss carry-forward is approximately $4,300,000 at December 31, 2005, and will expire beginning in 2023.

Deferred income taxes consist of the following at December 31, 2005:

Deferred tax assets
 
$
1,466,000
 
Valuation allowance
   
(1,466,000
)
$-
    $ -   

NOTE 4 - STOCKHOLDERS' EQUITY

On March 20, 2004 four of the founders of EnerTeck's wholly owned operating subsidiary, EnerTeck Chemical Corp., returned for cancellation 3,000,000 of the 5,000,000 shares of their common stock that they were issued in connection with the acquisition of EnerTeck Chemical Corp. (See Note 3).

Also during 2004, two consultants were issued a total of 400,000 shares of common stock for services to be rendered to EnerTeck Corporation valued at $640,000.

During 2004, EnerTeck received $224,800 from the exercise of 220,000 warrants at an exercise price of $1.00 per share and 4,000 warrants at an exercise price of $1.20 per share, resulting in the issuance of 224,000 common shares. Additionally, 135,484 common shares were issued to our investment banker, Maxim Partners, LLC. under a cashless exercise provision to a warrant agreement. We received no proceeds from this exercise (See Note 7).

During August 2004, EnerTeck authorized ten million shares of preferred stock with $0.001 par value. None of the preferred stock is issued and outstanding.

During 2005, EnerTeck issued 250,000 shares of its common stock for aggregate proceeds of $250,000.

In July 2005, EnerTeck issued 1,000,000 shares of common stock to its President and acting Chief Financial Officer, Mr. Parrish B. Ketchmark , as compensation for his continued services. These shares were recorded at their fair value of $985,000.

F-9


 
On September 6, 2005, Mr. Ketchmark submitted his resignation as both an officer and director of EnerTeck to pursue other outside interests. In December 2005, he agreed to allow the company to redeem 500,000 shares of previously issued common stock, along with 500,000 warrants held by him.

On December 9, 2005, EnerTeck sold 2,450,000 shares of common stock and 1,000,000 warrants to BATL Bioenergy LLC for $3,000,000. The warrants have an exercise price of $2.00 per share.

NOTE 5 - STOCK WARRANTS

During 2004 and 2005, EnerTeck issued warrants to consultants and employees as follows:

During 2004, Maxim Partners, LLC. Exercised its rights under a cashless exercise provision to the warrant agreement whereby it exercised 200,000 warrants and received 135,484 common shares by forfeiting 64,516 warrants. EnerTeck received no cash proceeds from this exercise.

During 2005, EnerTeck's board of directors approved the issuance of warrants to acquire 1,000,000 shares of common stock at $2.00 per share to BATL Bioenergy LLC as part of BATL’s equity investment transaction. These stock warrants were valued using Black-Scholes with the resulting fair value of $350,000 charged to compensation expense.

In December 2005, warrants to acquire 100,000 shares of common stock at a price of $2.00 per share were issued to an employee as an incentive to join to company. These warrants were valued using Black-Scholes with the resulting fair value of $24,000 charged to compensation expense.

Also, in December 2005, Antheneum Capital LLC was issued warrants to acquire 500,000 shares of common stock at $1.00 per share for past and future consulting services. These warrants were valued using Black-Scholes with the resulting fair value of $690,000 charged to compensation expense.

Summary information regarding warrants is as follows:

       
Weighted
 
 
 
 
 
average
 
 
 
Warrants
 
Share Price
 
           
Outstanding at December 31, 2003
   
3,025,650
 
$
1.06
 
               
Year ended December 31, 2004:
             
Granted
   
705,000
   
1.16
 
Exercised
   
(424,000
)
 
0.77
 
Expired
   
-
   
-
 
               
Outstanding at December 31, 2004
   
3,306,650
   
1.12
 
               
Year ended December 31, 2005:
             
Granted
   
1,100,000
   
2.00
 
Exercised
   
-
   
-
 
Expired
   
-
   
-
 
               
Outstanding at December 31, 2005
   
4,406,650
 
$
1.34
 

F-10


Warrants outstanding and exercisable as of December 31, 2005:

 
Number of
Warrants
Weighted
Average
Remaining Life
Exercisable
Number of
Warrants
 
Exercise Price
       
$1.00
1,430,000
2.6
1,430,000
$1.20
1,874,150
2.8
1,874,150
$2.00
1,100,000
4.9
1,100,000
$3.40
2,500
2.5
2,500
 
4,406,650
 
4,406,650

NOTE 6 - COMMITMENTS AND CONTINGENCIES

RubyCat Technology Agreement-

Effective September 7, 2001, EnerTeck entered into an Exclusive Market Segment Development Agreement with RubyCat Technology, Inc. (“RubyCat”). The agreement provided EnerTeck exclusive rights to market RubyCat products, which includes EnerBurn, to on-highway diesel large fleet truck market, small engine marine (<7,000 horsepower) market, railroad diesel and the international diesel fuel market. In addition, EnerTeck was able to obtain approval from the Environmental Protection Agency to sell the product through its agreement with RubyCat.

The Company has a letter of intent for the purchase of RubyCat and is presently in negotiations with the owners of RubyCat to formalize the purchase of all rights for the diesel fuel markets.

Office Lease -

EnerTeck leases office space under a non-cancelable operating lease. Future minimum rentals due under non-cancelable operating leases with an original maturity of at least one-year are approximately as follow:

December 31,
 
Amount
 
2006
 
$
48,060
 
2007
   
12,012
 

Rent expense for the years ended December 31, 2005 and December 31, 2004 totaled approximately $52,327 and $45,258, respectively. The current lease expires March 31, 2006. A one year lease is currently being negotiated and will be signed at terms similar to those of past years.

F-11


NOTE 7 - CONCENTRATION OF CREDIT RISK

For the years ended December 31, 2005 and 2004, EnerTeck purchased 100% of its products from RubyCat (see note 8). It is expected that EnerTeck will complete the purchase of RubyCat in the near future, which will with potentially larger volume sales should greatly lower its short and long-term cost of product and enhance its profit potential.

Financial instruments that potentially subject EnerTeck to concentration of credit risk are accounts receivable. Currently all Accounts Receivable are collected. EnerTeck performs ongoing credit evaluations as to the financial condition of its customers. Generally, no collateral is required.

EnerTeck at times has cash in bank in excess of Federal Deposit Insurance Corporation (“FDIC”) insurance limits. At December 31, 2005, EnerTeck had $2,420,849 in cash in excess of FDIC insurance limits.

NOTE 8 - REVENUE FROM MAJOR CUSTOMERS

During 2005, one customer represented a majority of the company’s sale revenues.
 
F-12
 
Exhibit 4.4

THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS IN RELIANCE ON EXEMPTIONS FROM REGISTRATION REQUIREMENTS UNDER SAID LAWS, AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS.

THE TRANSFER OF THIS WARRANT IS RESTRICTED AS DESCRIBED HEREIN.


ENERTECK CORPORATION

____________ Warrants for the Purchase of ___________ Shares of
Common Stock, par value $0.001 per share


No. W-___                   ________ Shares

THIS CERTIFIES that, for value received, ____________ (including any transferee, the “Holder”), is entitled to subscribe for and purchase from ENERTECK CORPORATION , a Delaware corporation (the “Company”), the amount of shares set forth above (the “Shares”) upon the terms and conditions set forth herein. Each Warrant (collectively, the “Warrants”) grants the Holder the right to purchase from the Company one share of its common stock at the exercise price of $______ per share (“Exercise Price”), during the period commencing as of the date hereof and expiring at 11:59 p.m., Eastern Time, on ______________   (“Exercise Period”). As used herein, the term “this Warrant” shall mean and include this Warrant and any Warrant or Warrants hereafter issued as a consequence of the exercise or transfer of this Warrant in whole or in part.

1 .   This Warrant may be exercised during the Exercise Period as to all of the Shares by the surrender of this Warrant (with the Exercise Form attached hereto as Exhibit A, duly executed) to the Company at its office at 10701 Corporate Drive, Suite 150, Stafford, Texas 77477 , Attention: President, or at such other place as is designated in writing by the Company, together with a certified or bank cashier’s check payable to the order of the Company in an amount equal to the Exercise Price of $____ multiplied by the number of Shares for which this Warrant is being exercised.

2.   Upon each exercise of the Holder’s rights to purchase Shares, the Holder shall be deemed to be the holder of record of the Shares issuable upon such exercise, notwithstanding that the transfer books of the Company shall then be closed or certificates representing such Shares shall not then have been actually delivered to the Holder. As soon as practicable after each such

 
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exercise of this Warrant, the Company shall issue and deliver to the Holder a certificate or certificates for the Shares issuable upon such exercise, registered in the name of the Holder or its designee. If this Warrant should be exercised in part only, the Company shall, upon surrender of this Warrant for cancellation, execute and deliver a new Warrant evidencing the right of the Holder to purchase the balance of the Shares (or portions thereof) subject to purchase hereunder.

3.   ( a )   Any Warrants issued upon the transfer or exercise in part of this Warrant shall be numbered and shall be registered in a Warrant Register as they are issued. The Company shall be entitled to treat the registered holder of any Warrant on the Warrant Register as the owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in such Warrant on the part of any other person, and shall not be liable for any registration or transfer of Warrants which are registered or to be registered in the name of a fiduciary or the nominee of a fiduciary unless made with the actual knowledge that a fiduciary or nominee is committing a breach of trust in requesting such registration or transfer, or with the knowledge of such facts that its participation therein amounts to bad faith. This Warrant shall be transferable only on the books of the Company upon delivery thereof duly endorsed by the Holder or by his duly authorized attorney or representative the Form of Assignment, a copy of which is attached hereto as Exhibit B, or accompanied by proper evidence of succession, assignment, or authority to transfer. In all cases of transfer by an attorney, executor, administrator, guardian, or other legal representative, duly authority shall be produced. Upon any registration of transfer, the Company shall deliver a new Warrant or Warrants to the person entitled thereto. This Warrant may be exchanged, at the option of the Holder thereof, for another Warrant, or other Warrants of different denominations, of like tenor and representing in the aggregate the right to purchase a like number of Shares (or portions thereof), upon surrender to the Company or its duly authorized agent. Notwithstanding the foregoing, the Company may require prior to registering any transfer of a Warrant an opinion of counsel reasonably satisfactory to the Company that such transfer complies with the provisions of the Securities Act of 1933, as amended (the “Act”), and the rules and regulations thereunder.

( b )   The Holder acknowledges that he/she has been advised by the Company that neither this Warrant nor the Shares have been registered under the Act, that this Warrant is being or has been issued and the Shares may be issued on the basis of the statutory exemption provided by Section 4(2) of the Act, relating to transactions by an issuer not involving any public offering, and that the Company’s reliance thereon is based in part upon the representations made herein by the Holder. The Holder acknowledges that he has been informed by the Company of, or is otherwise familiar with, the nature of the limitations imposed by the Act and the rules and regulations thereunder on the transfer of securities. In particular, the Holder agrees that no sale, assignment or transfer of this Warrant or the Shares issuable upon exercise hereof shall be valid or effective, and the Company shall not be required to give any effect to any such sale, assignment or transfer, unless (i) the sale, assignment or transfer of this Warrant or such Shares is registered under the Act, it being understood that neither this Warrant nor such Shares are currently registered for sale and that the Company has no obligation or intention to so register this Warrant or such Shares except as otherwise provided for herein, or (ii) this Warrant or such Shares are sold, assigned or transferred in accordance with all the requirements and limitations of Rule 144 under the Act, or (iii) such sale, assignment, or transfer is otherwise exempt from registration under the Act in the opinion of counsel reasonably acceptable to the Company.

4.   The Company shall at all times reserve and keep available out its authorized and unissued Common Stock, solely for the purpose of providing for the exercise of the rights to purchase all Shares granted pursuant to the Warrants, such number of shares of Common Stock as shall, from time to time, be sufficient therefor. The Company covenants that all shares of Common Stock issuable upon exercise of this Warrant, upon receipt by the Company of the full Exercise Price therefor, shall be validly issued, fully paid, nonassessable, and free of preemptive rights.

 
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5.   ( a )   In case the Company shall at any time after the date the Warrants were first issued (i) declare a dividend on the outstanding Common Stock payable in shares of its capital stock, (ii) subdivide the outstanding Common Stock, (iii) combine the outstanding Common Stock into a smaller number of shares, or (iv) issue any shares of its capital stock by reclassification of the Common Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing corporation), then, in each case, the Exercise Price, and the number of Shares issuable upon exercise of this Warrant, in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination, or reclassification, shall be proportionately adjusted so that the Holder after such time shall be entitled to receive the aggregate number and kind of shares which, if such Warrant had been exercised immediately prior to such time, he/she would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination, or reclassification. Such adjustment shall be made successively whenever any event listed above shall occur.

( b )   In case the Company shall issue or fix a record date for the issuance to all holders of Common Stock of rights, options, or warrants to subscribe for or purchase Common Stock (or securities convertible into or exchangeable for Common Stock) at a price per share (or having a conversion or exchange price per share, if a security convertible into or exchangeable for Common Stock) less than the then applicable Exercise Price per share on such record date, then, in each case, the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding on such record date plus the number of shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock so to be offered (or the aggregate initial conversion or exchange price of the convertible or exchangeable securities so to be offered) would purchase at such Exercise Price and the denominator of which shall be the number of shares of Common Stock outstanding on such record date plus the number of additional shares of Common Stock to be offered for subscription or purchase (or into which the convertible or exchangeable securities so to be offered are initially convertible or exchangeable). Such adjustment shall become effective at the close of business on such record date; provided, however, that, to the extent the shares of Common Stock (or securities convertible into or exchangeable for shares of Common Stock) are not delivered, the Exercise Price shall be readjusted after the expiration of such rights, options, or warrants (but only with respect to warrants exercised after such expiration), to the Exercise Price which would then be in effect had the adjustments made upon the issuance of such rights, options, or warrants been made upon the basis of delivery of only the number of shares of Common Stock (or securities convertible into or exchangeable for shares of Common Stock) actually issued. In case any subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined in good faith by the board of directors of the Company, whose determination shall be conclusive.

( c )   In case the Company shall distribute to all holders of Common Stock (including any such distribution made to the stockholders of the Company in connection with a consolidation or merger in which the Company is the continuing corporation) evidences of its indebtedness, cash (other than any cash dividend which, together with any cash dividends paid within the 12 months prior to the record date for such distribution, does not exceed 5% of the then applicable Exercise Price at the record date for such distribution) or assets (other than distributions and dividends payable in shares of Common Stock), or rights, options, or warrants to subscribe for or purchase Common Stock, or securities convertible into or exchangeable for shares of Common Stock (excluding those with respect to the issuance of which an adjustment of the Exercise Price is provided pursuant to Section 5(b) hereof), then, in each case, the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to the record date for the determination of stockholders entitled to receive such distribution by a fraction, the numerator of which shall be the then applicable Exercise Price per share of Common Stock on such record date, less the fair market value (as determined in good faith by the board of directors of the Company, whose determination shall be conclusive absent manifest error) of the portion of the evidences of indebtedness or assets so to be distributed, or of such rights, options, or warrants or convertible or exchangeable securities, or the amount of such cash, applicable to one share, and the denominator of which shall be such Exercise Price per share of Common Stock. Such adjustment shall become effective at the close of business on such record date.

 
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( d )   No adjustment in the Exercise Price shall be required if such adjustment is less than $.01; provided, however, that any adjustments which by reason of this Section 5 are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 5 shall be made to the nearest cent or to the nearest one-thousandth of a share, as the case may be.

( e )   In any case in which this Section 5 shall require that an adjustment in the Exercise Price be made effective as of a record date for a specified event, the Company may elect to defer, until the occurrence of such event, issuing to the Holder, if the Holder exercised this Warrant after such record date, the shares of Common Stock, if any, issuable upon such exercise over and above the shares of Common Stock, if any, issuable upon such exercise on the basis of the Exercise Price in effect prior to such adjustment; provided, however, that the Company shall deliver to the Holder a due bill or other appropriate instrument evidencing the Holder’s right to receive such additional shares upon the occurrence of the event requiring such adjustment.

( f )   Upon each adjustment of the Exercise Price as a result of the calculations made in Sections 5(b) or 5(c) hereof, this Warrant shall thereafter evidence the right to purchase, at the adjusted Exercise Price, that number of shares (calculated to the nearest thousandth) obtained by dividing (i) the product obtained by multiplying the number of shares purchasable upon exercise of this Warrant prior to adjustment of the number of shares by the Exercise Price in effect prior to adjustment of the Exercise Price by (ii) the Exercise Price in effect after such adjustment of the Exercise Price.

( g )   Whenever there shall be an adjustment as provided in this Section 5, the Company shall promptly cause written notice thereof to be sent by registered mail, postage prepaid, to the Holder, at its address as it shall appear in the Warrant Register, which notice shall be accompanied by an officer’s certificate setting forth the number of Shares purchasable upon the exercise of this Warrant and the Exercise Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment and the computation thereof, which officer’s certificate shall be conclusive evidence of the correctness of any such adjustment absent manifest error.

( h )   The Company shall not be required to issue fractions of shares of Common Stock or other capital stock of the Company upon the exercise of this Warrant. If any fraction of a share would be issuable on the exercise of this Warrant (or specified portions thereof), the Company shall purchase such fraction for an amount in cash equal to the same fraction of the Exercise Price of such share of Common Stock on the date of exercise of this Warrant.

6.   ( a )   In case of any consolidation with or merger of the Company with or into another corporation (other than a merger or consolidation in which the Company is the surviving or continuing corporation), or in case of any sale, lease, or conveyance to another corporation of the property and assets of any nature of the Company as an entirety or substantially as an entirety (collectively an “Extraordinary Event”), such successor, leasing, or purchasing corporation, as the case may be, shall, as a condition precedent to the consummation of such consolidation or merger, (i) execute with the Holder an agreement providing that the Holder shall have the right thereafter to receive upon exercise of this Warrant solely the kind and amount of shares of stock and other securities, property, cash, or any combination thereof (collectively “Extraordinary Event Consideration”) receivable upon such consolidation, merger, sale, lease, or conveyance by a holder of the number of shares of Common Stock for which this Warrant might have been exercised immediately prior to such consolidation, merger, sale, lease, or conveyance, and (ii) make effective provision in its certificate of incorporation or otherwise, if necessary, to effect such agreement. Such agreement shall provide for adjustments that shall be as nearly equivalent as practicable to the adjustments in Section 5.

 
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( b )   In case of any reclassification or change of the shares of Common Stock issuable upon exercise of this Warrant (other than a change in par value or from no par value to a specified par value, or as a result of a subdivision or combination, but including any change in the shares into two or more classes or series of shares), or in case of any consolidation or merger of another corporation into the Company in which the Company is the continuing corporation and in which there is a reclassification or change (including a change to the right to receive cash or other property) of the shares of Common Stock (other than a change in par value, or from no par value to a specified par value, or as a result of a subdivision or combination, but including any change in the shares into two or more classes or series of shares), the Holder shall have the right thereafter to receive upon exercise of this Warrant solely the kind and amount of shares of stock and other securities, property, cash, or any combination thereof receivable upon such reclassification, change, consolidation, or merger by a holder of the number of shares of Common Stock for which this Warrant might have been exercised immediately prior to such reclassification, change, consolidation, or merger. Thereafter, appropriate provision shall be made for adjustments that shall be as nearly equivalent as practicable to the adjustments in Section 5.

( c )   The above provisions of this Section 6 shall similarly apply to successive reclassifications and changes of shares of Common Stock and to successive consolidations, mergers, sales, leases, or conveyances.

7.   In case at any time the Company shall propose to:

( a )   pay any dividend or make any distribution on shares of Common Stock in shares of Common Stock or make any other distribution (other than regularly scheduled cash dividends which are not in a greater amount per share than the most recent such cash dividend) to all holders of Common Stock; or

( b )   issue any rights, warrants, or other securities to all holders of Common Stock entitling them to purchase any additional shares of Common Stock or any other rights, warrants, or other securities; or

( c )   effect any reclassification or change of outstanding shares of Common Stock, or any consolidation, merger, sale, lease, or conveyance of property; or

( d )   effect any liquidation, dissolution, or winding-up of the Company; or

( e )   take any other action that would cause an adjustment to the Exercise Price;

then, and in any one or more of such cases, the Company shall give written notice thereof, by registered mail, postage prepaid, to the Holder at the Holder’s address as it shall appear in the Warrant Register, mailed at least 15 days prior to (i) the date as of which the holders of record of shares of Common Stock to be entitled to receive any such dividend, distribution, rights, warrants, or other securities are to be determined, (ii) the date on which any such reclassification, change of outstanding shares of Common Stock, consolidation, merger, sale, lease, conveyance of property, liquidation, dissolution, or winding-up is expected to become effective, and the date as of which it is expected that holders of record of shares of Common Stock shall be entitled to exchange their shares for securities or other property, if any, deliverable upon such reclassification, change of outstanding shares, consolidation, merger, sale, lease, conveyance of property, liquidation, dissolution, or winding-up, or (iii) the date of such action which would require an adjustment to the Exercise Price.

 
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8.   The issuance of any shares or other securities upon the exercise of this Warrant, and the delivery of certificates or other instruments representing such shares or other securities, shall be made without charge to the Holder for any tax or other charge in respect of such issuance. The Company shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of any certificate in a name other than that of the Holder and the Company shall not be required to issue or deliver any such certificate unless and until the person or persons requesting the issue thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.

9.   ( a )   Subject to the provisions of this Section 9, if at any time the Company proposes to file a registration statement under the Act covering its shares of Common Stock (other than a registration statement filed under Form S-4 or Form S-8 or any successor forms of the Securities and Exchange Commission (the “Commission”)), it shall give to each holder of Warrants and/or Shares, notice of such proposed registration (and a description of the form and manner and other relevant facts involved in such proposed registration) at least 60 days prior to the filing of the registration statement and shall afford each such holder who gives the Company written notice not less than 15 days prior to such filing that such holder then proposes to sell or distribute publicly all or any portion of the Shares then held, or to be held upon exercise of such Warrants, the opportunity to have such shares included in the securities registered under the registration statement; provided, however, that following the giving of notice of its intention to register its securities and prior to the effective date of the registration statement filed in connection with such registration, the Company may determine, at its election, not to register any securities pursuant to such registration, and immediately thereon give written notice of such determination to each such holder who requested the registration of its securities and, thereupon, shall be relieved of its obligations to register any securities in connection with such registration; and, provided further, that prior to the effective date of the registration statement, any holder who has given the Company written notice of its desire to have its shares included in the securities to be registered under the registration statement (an “Electing Holder”) may determine not to include all or some of such shares in such registration by providing written notice of such determination to the Company. All expenses, disbursements and fees (including, without limitation, fees and expenses of counsel, auditing fees, printing expenses, registration and filing fees and blue sky fees and expenses, but excluding any underwriting fees, discounts or commissions) incurred in connection with the registration by the Company of any shares for any such holder under this Section 9(a) shall be borne by the Company.

( b )   If a registration pursuant to Section 9(a) involves an underwritten offering and the managing or lead underwriter advises the Company in writing (with a copy to each holder of Warrants and/or Shares that has requested registration) that, in its good faith opinion, the number of shares proposed to be included in such offering exceeds the number of shares that can reasonably be sold in (or during the time of) such offering or otherwise would materially and adversely affect its ability to effect such offering upon the terms proposed, then the Company will include in such registration the maximum number of securities that the Company is so advised should be included in such offering, and the Company, all Electing Holders and all other holders of securities proposing to register shares in such offering shall share pro rata in the number of shares of securities to be so excluded from such offering, with such sharing to be based upon the respective number of shares of securities as to which registration has been requested by each such party.

 
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( c )   In connection with any registration under the Act and state securities laws pursuant to this Section 9, the Company shall furnish each holder whose shares are registered thereunder with copies of the registration statement and all amendments thereto and will supply each such holder with copies of any preliminary and final prospectus included therein in such quantities as may be necessary for the purposes of such proposed sale or distribution that the holder or holders may reasonably request.

( d )   In connection with any registration of shares pursuant to this Section 9, the Electing Holders whose shares are being registered shall furnish the Company with such information concerning such Electing Holders and the proposed sale or distribution as shall be required for use in the preparation of such registration statement and applications.    

( e )   ( i )   The Company shall indemnify and hold harmless each holder of Common Stock registered pursuant to this Agreement with the Commission, or under any state securities law or regulation, and each such holder’s officers, directors, employees and agents and each person, if any, who controls such holder within the meaning of either Section 15 of the Act or Section 20 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), against any losses, claims, damages or liabilities, joint or several to which such holder or such other person may become subject under the Act or otherwise, but only to the extent that such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus, registration statement, prospectus or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each such holder for any legal or other expenses reasonably incurred by such holder in connection with investigating or defending any such action or claim; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission (x) made in any such document in reliance upon and in conformity with written information with respect to such holder furnished to the Company by such holder expressly for use therein or (y) made in any preliminary prospectus if (A) such holder failed to send or deliver a current copy of the prospectus to the person asserting any such loss, claim, damage, or liability with or prior to the delivery of written confirmation of the sale of the securities concerned to such person, (B) it is determined that it was the responsibility of such holder to provide such person with a current copy of the prospectus, and (C) such current copy of the prospectus would have completely corrected such untrue statement or omission.

( ii )   Each holder of Common Stock registered pursuant to this Agreement will indemnify and hold harmless the Company and the Company’s officers, directors, employees and agents and each person, if any, who controls the Company within the meaning of either Section 15 of the Act or Section 20 of the Exchange Act, against any and all losses, claims, damages or liabilities, joint or several, to which the Company or such other person may become subject under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus, registration statement or prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company and such other persons for any legal or other expenses reasonably incurred by any of them in connection with investigating or defending any such action or claim, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in any such document, in reliance upon and in conformity with written information with respect to such holder furnished to the Company by such holder expressly for use therein.

 
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( iii )   Promptly after receipt by an indemnified party under Sections 9(e)(i) or (ii) of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under either such section, notify the indemnifying party in writing of the commencement thereof; provided, however, that the failure or delay of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under this Section 9(e), except to the extent that the indemnifying party is materially prejudiced by such failure or delay to give notice. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to assume the defense thereof with counsel reasonably satisfactory to the indemnified party by notice in writing to the indemnified party. After receipt of written notice from the indemnifying party to such indemnified party of its election to assume the defense thereof, the indemnifying party shall not, except as set forth in the following sentence, be liable to such indemnified party under either of such sections for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation incurred prior to the assumption by the indemnifying party. The preceding sentence notwithstanding, the indemnified party shall have the right to employ its own counsel and direct its defense, with the fees and expenses of such counsel and such other expenses related thereto to be borne by the indemnifying party, if the indemnified party shall have reasonably concluded that there may be defenses available to it which are different from or additional to those available to the indemnifying party. The indemnifying party shall not be liable for any settlement of any claim or action effected without its written consent, which consent shall not be unreasonably withheld.

( iv )   If the indemnification provided for in this Section 9(e) is unavailable or insufficient to hold harmless an indemnified party under Sections 9(e)(i) or (ii) above (other than by reason of exceptions provided in such sections) in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party, as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Company and the holder or holders from this Agreement and from the offering of the shares of Common Stock. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law, then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company and the holders in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the holder and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the holders agree that it would not be just and equitable if contribution pursuant to this Section 9(e)(iv) were determined by pro rata allocation (even if the holders were treated as one entity for such purpose) or by any other method of allocation which does not take into account the equitable considerations referred to above in this Section 9(e)(iv). Except as provided in Section 9(e)(iii), the amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this Section 9(e)(iv) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. Notwithstanding any provision in this Section 9(e) to the contrary, no Holder shall be liable for any amount, in the aggregate, in excess of the net proceeds to such Holder from the sale of such holder’s Shares giving rise to such losses, claims, damages or liabilities.

 
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( v )   The obligations of the Company under this Section 9(e) shall be in addition to any liability which the Company may otherwise have at law or in equity.

10.   Unless registered pursuant to the provisions of Section 9 hereof, the Shares issued upon exercise of this Warrant shall be subject to a stop transfer order and the certificate or certificates evidencing such Shares shall bear the following legend, or one substantially similar thereto:

“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS, AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS.”

11.   Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction, or mutilation of any Warrant (and upon surrender of any Warrant if mutilated), the Company shall execute and deliver to the Holder thereof a new Warrant of like date, tenor, and denomination.

12.   The Holder of any Warrant shall not have solely on account of such status, any rights of a stockholder of the Company, either at law or in equity, or to any notice of meetings of stockholders or of any other proceedings of the Company, except as provided in this Warrant.

13.   The Company may by notice to the holders of the Warrants make any changes or corrections in the Warrants (i) that it shall deem in good faith appropriate to cure any ambiguity or to correct any defective or inconsistent provision or manifest mistake or error contained in the Warrants; or (ii) that it may deem necessary or desirable and which shall not adversely affect the interests of the holders of Warrants; provided, however , that the Warrants shall not otherwise be modified, supplemented or altered in any respect except with the prior written consent of the Holder.

14.   This Warrant has been negotiated and consummated in the State of Texas and shall be construed in accordance with the laws of the State of Texas applicable to contracts made and performed within such State, without regard to principles governing conflicts of law.


Dated: __________________

ENERTECK CORPORATION


By:
Name:  
Title:  


 
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EXHIBIT A
 


ENERTECK CORPORATION

EXERCISE FORM

(To be completed and signed only upon exercise of the Warrants)

To:   EnerTeck Corporation
10701 Corporate Drive, Suite 150
Stafford, Texas 77477

Attention: Secretary



The undersigned hereby exercises his or its rights to purchase ___________ Shares covered by the within Warrant and tenders payment herewith in the amount of $_________ in accordance with the terms thereof, and requests that certificates for such securities be issued in the name of, and delivered to:



(Print Name, Address and Social Security
or Tax Identification Number)

and, if such number of Shares shall not be all the Shares covered by the within Warrant, that a new Warrant for the balance of the Shares covered by the within Warrant be registered in the name of, and delivered to, the undersigned at the address stated below.


Dated: ____________, ________     Name:  
(Please Print)
Address:    


(Signature)
 

 

 
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EXHIBIT B
 


ENERTECK CORPORATION

FORM OF ASSIGNMENT

(To be executed by the registered holder if such holder desires to transfer the attached Warrant.)

To:   EnerTeck Corporation
10701 Corporate Drive, Suite 150
Stafford, Texas 77477

Attention: Secretary

FOR VALUE RECEIVED, _______________ hereby sells, assigns, and transfers unto _______________ that certain Warrant (Number W-______) to purchase __________ shares of Common Stock, par value $0.001 per share, of EnerTeck Corporation (the “Company”), together with all right, title, and interest therein, and does hereby irrevocably constitute and appoint ________________________ attorney to transfer such Warrant on the books of the Company, with full power of substitution.

Dated:      

Signature:


Notice:

The signature on the foregoing Assignment must correspond to the name as written upon the face of this Warrant in every particular, without alteration or enlargement or any change whatsoever.


 
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Exhibit 21.1

Subsidiaries of the Registrant


EnerTeck Chemical Corp. - Incorporated in the State of Texas

Exhibit 23.1




CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of
EnerTeck Corporation
Houston, Texas

We consent to the incorporation by reference in the Registration Statement No. 333-125814 on Form S-8 of EnerTeck Corporation, of our report dated March 8, 2006 with respect to the financial statements of EnerTeck Corporation included in this Annual Report on Form 10-KSB for the year ended December 31, 2005.

Malone & Bailey, PC
Houston, Texas

April 10, 2006


Exhibit 31.1
CERTIFICATION

I, Dwaine Reese, certify that:

1.   I have reviewed this annual report on Form 10-KSB of EnerTeck Corporation;

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

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

4.   The small business issuer’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have:

(a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)   Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c)   Disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonable likely to materially affect, the small business issuer’s internal control over financial reporting; and

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

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

(b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.



Dated: April 10, 2006                             By:   /s/ Dwaine Reese
Dwaine Reese,
Chief Executive Officer and Chairman of
                        the Board (Principal Executive Officer)




 
Exhibit 31.2
CERTIFICATION

I, Richard Dicks, certify that:

1.   I have reviewed this annual report on Form 10-KSB of EnerTeck Corporation;

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

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

4.   The small business issuer’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have:

(a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)   Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c)   Disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonable likely to materially affect, the small business issuer’s internal control over financial reporting; and

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

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

(b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.



Dated: April 10, 2006                       By:   /s/ Richard Dicks
                          Richard Dicks, Chief Financial Officer
                                   (Principal Financial Officer)




Exhibit 32.1


CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002


In connection with the Annual Report of EnerTeck Corporation (the “Company”) on Form 10-KSB for the period ended December 31, 2005, as filed with the Securities and Exchange Commission (the “Report”), the undersigned certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of the undersigned’s knowledge, that:

(1)   The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Dated: April 10, 2006                             By:   /s/ Dwaine Reese
Dwaine Reese,
Chief Executive Officer and Chairman of
                        the Board (Principal Executive Officer)


Dated: April 10, 2006                             By:   /s/ Richard Dicks
                                Richard Dicks, Chief Financial Officer
                                        (Principal Financial Officer)