**** ****


**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, 2007**





o
      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.
                  Employerof
                  incorporation or
              Identificationorganization)
              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. o





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
o





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. o





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


Yes
o  No
x





State
      Issuer’s revenues for its most recent fiscal year:   $396,141





As
      of
      March 6, 2008, the aggregate market value of the voting and non-voting common
      equity held by non-affiliates of the Issuer (8,552,726 shares) was approximately
      $8,400,000. The number of shares outstanding of the Common Stock ($.001 par
      value) of the Issuer as of the close of business on March 6, 2008 **** was
      17,761,359.





Documents
      Incorporated by Reference: None





Transitional
      Small Business Disclosure Format: Yes o  No
x














**ENERTECK
      CORPORATION**





**TABLE
      OF CONTENTS**




PagePART
                  IItem
                  1.
              
              Description
                  of Business
              
              3Item
                  2.
              
              Description
                  of Property
              
              16Item
                  3.
              
              Legal
                  Proceedings
              
              16Item
                  4.
              
              Submission
                  of Matters to a Vote of Security Holders
              
              16PART
                  IIItem
                  5.
              
              Market
                  for Common Equity, Related Stockholder Matters and Small Business
                  Issuer
                  Purchases of Equity Securities
              
              17Item
                  6.
              
              Management’s
                  Discussion and Analysis or Plan of Operation
              
              19Item
                  7.
              
              Financial
                  Statements
              
              28Item
                  8.
              
              Changes
                  in and Disagreements with Accountants on Accounting and Financial
                  Disclosure
              
              29Item
                  8A(T).
              
              Controls
                  and Procedures
              
              29Item
                  8B.
              
              Other
                  Information
              
              29PART
                  IIIItem
                  9.
              
              Directors,
                  Executive Officers, Promoters, Control Persons and Corporate Governance;
                  Compliance with Section 16(a) of the Exchange Act
              
              30Item
                  10.
              
              Executive
                  Compensation
              
              32Item
                  11.
              
              Security
                  Ownership of Certain Beneficial Owners and Management and Related
                  Stockholder Matters
              
              33Item
                  12.
              
              Certain
                  Relationships and Related Transactions, and Director Independence
              
              34Item
                  13.
              
              Exhibits
              
              34Item
                  14.
              
              Principal
                  Accountant Fees and Services
              
              35Signatures
              
              37









**Forward-Looking
      Statements**





When
      used
      in this document, the words “may,” “will,” “expect,” “anticipate,” “continue,”
“estimate,” “intend,” “plans”, and similar expressions are intended to identify
      forward-looking statements regarding events, conditions and financial trends
      which may affect our future plans of operations, business strategy, operating
      results and financial position. Forward looking statements in this prospectus
      include without limitation statements relating to trends affecting our financial
      condition or results of operations, our business and growth strategies and
      our
      financing plans.




Such
      statements are not guarantees of future performance and are subject to risks
      and
      uncertainties and actual results may differ materially from those included
      within the forward-looking statements as a result of various factors. Such
      factors include, among other things, general economic conditions; cyclical
      factors affecting our industry; lack of growth in our industry; our ability
      to
      comply with government regulations; a failure to manage our business
      effectively; our ability to sell products at profitable yet competitive prices;
      and other risks and factors set forth from time to time in our filings with
      the
      Securities and Exchange Commission (the “SEC”).




Readers
      are cautioned not to place undue reliance on these forward-looking statements,
      which speak only as of the date made. We undertake no obligation to publicly
      release the result of any revision of these forward-looking statements to
      reflect events or circumstances after the date they are made or to reflect
      the
      occurrence of unanticipated events.




**PART
      I**





**Item
                1.**
            
            **Description
                of Business.**





**Introduction**





Enerteck
      Corporation (the “Company” or “EnerTeck Parent”) was originally incorporated,
      under the name of Gold Bond Mining Company, under the laws of the State of
      Washington on July 30, 1935. Gold Bond Mining Company, was initially formed
      for
      the purpose of acquiring, exploring, and developing precious metal mines and,
      if
      warranted, the mining of precious metals. Our name was subsequently changed
      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 affected a one from 10 reverse common stock
      split. Unless the context otherwise requires, the terms “we,” “us” or “our”
refer to EnerTeck Corporation and its consolidated subsidiary.





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®, 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 then 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.




3




**Business
      of the Company and Current Operations**





We,
      through our wholly owned subsidiary, specialize in the sales and marketing,
      and
      since August 2006, in the manufacturing of a fuel borne catalytic engine
      treatment for diesel engines known as EnerBurn®. 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 presently the railroad, trucking, heavy construction and maritime shipping industries. We also expect
      that revenues will be derived in the future from the mining and offshore
      drilling 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.





We
      own
      the EnerBurn trademark and, since July 2006, the EnerBurn formulas and
      technology. Prior to July 13, 2006, we obtained EnerBurn products and services
      from Ruby Cat and its affiliates pursuant to arrangement made with Ruby Cat.
      Pursuant to a memorandum of understanding with Ruby Cat which expired on
      December 31, 2003, the Company was granted the exclusive, global marketing
      rights from Ruby Cat and an option to purchase the EnerBurn technology and
      associated assets by December 31, 2003 for $6.6 million which was not exercised.
      Following expiration of the memorandum of understanding, Ruby Cat and its
      affiliates continued to supply EnerBurn products to the Company but not pursuant
      to a formal written contract. On July 13, 2006, we completed the acquisition
      of
      the EnerBurn formulas, technology and associated assets pursuant to an Asset
      Purchase Agreement executed as of the same date between the Company and the
      owner of Ruby Cat (see “Our Purchase of the EnerBurn Technology” below). Since
      we were primarily a sales and marketing organization prior our acquisition
      of
      the EnerBurn formulas and technology, we have not spent any funds on research
      and development activities through 200 7 .
      We
      expect this to change however in the future.





Since
      inception and through 2005, we engaged in limited marketing of the EnerBurn
      technology and generated minimal sales, principally to the trucking and maritime
      industries. 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 our first shipment of EnerBurn to Custom by
      delivering 4,840 gallons. During the first quarter and most of the second
      quarter on 2006, Custom concentrated on completing the required infrastructural
      work to allow Custom to begin servicing the Ingram and other fleets. This work
      was completed late in the second quarter of 2006 and treatment of the Ingram
      fleet was commenced. Late in the second quarter of 2006, Custom placed a second
      order of 4,840 gallons and began treatment on the Mississippi River.





Primarily
      as a result of our relationship with Custom, we had product sales of $641,000
      in
      2006 and $396,000 in 2007, with a $105,000 **** additional
      order made but not yet shipped at year end December 31, 2007. 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.




4




Sales
      revenues for 2007 were considerably less than earlier anticipated primarily
      due
      to three unforeseen events occurring during 2007: (1) an equipment malfunction
      on the Mississippi River that apparently occurred early in the Spring of 2007,
      which went undetected by the vendor for a period of time, causing a severe
      reduction of fuel dosage during the year, (2) a delay of nearly seven months
      in
      the completion of one of the principal Marine fueling facilities for EnerBurn
      on
      the Mississippi River from the original date projected until February, 2008
      which also delayed the shipment and required the reclassification of a material
      sale from 2007 to 2008, and (3) a delay of nearly a year by a major vendor
      in
      the completion of final development, testing and availability of the on-truck
      dosing unit required for use by most trucks operating in the trucking industry,
      until early 2008. We believe that if not for the occurrence of these three
      events, we may have been able to achieve sufficient sales to have likely made
      it
      a profitable 2007. With our assistance, each of these problems has been
      addressed and is either corrected or close to being corrected. It is expected
      that sales should show significant increases throughout 2008.





**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
      utilized 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.




5




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, 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
              
              ApplicationEnerBurn
                  EC5805A
              
              U.S.
                  On-Road MarketEnerBurn
                  EC5931A
              
              U.S.
                  Off-Road MarketEnerBurn
                  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 horsepower 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.




6




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 proofs of performance demonstrations, we provide 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%.





**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/YearUnited
                  States
              
              
              60Europe
              
              
              60Pacific
                  Rim
              
              
              50Rest
                  of the World
              
              
              40Total
                  Gallons Consumption
              
              
              210




7




*Domestic
      Diesel Fuel Consumption*





Based
      on
      further EIA published data, the following table* depicts domestic distillate
      fuel oil consumption by energy use for 2001.




*Energy
                  Use*
              
              *2001
                  (Thousand Gallons)*U.S.
                  Total
              
              
              58,971,486Residential
              
              
              6,263,440Commercial
              
              
              3,505,057Industrial
              
              
              2,323,797Oil
                  Company
              
              
              820,321Farm
              
              
              3,427,343Electric
                  Power
              
              
              1,510,273Railroad
              
              
              2,951,831Vessel
                  Bunkering
              
              
              2,093,252On-Highway
                  Diesel
              
              
              33,215,320Military
              
              
              346,060Off-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.





**Our
      Target Markets**





Our
      primary domestic target markets presently include the trucking, rail, heavy
      construction and maritime shipping industries. We also expect that revenues
      will
      be derived in the future from the mining and offshore drilling industries.
      Combined, management believes these industries consume billions of gallons
      of
      diesel fuel. 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.





**Sales
      and Marketing Strategy**





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 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.




8




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.





**The
      BATL Agreement and Our Purchase of the EnerBurn Technology**





As
      mentioned above, prior to July 2006, we obtained EnerBurn products and services
      from Ruby Cat and its affiliates pursuant to arrangement made with Ruby Cat.
      Pursuant to a memorandum of understanding with Ruby Cat which expired on
      December 31, 2003, the Company was granted the exclusive, global marketing
      rights from Ruby Cat and an option to purchase the EnerBurn technology and
      associated assets by December 31, 2003 for $6.6 million which was not exercised.
      Following expiration of the memorandum of understanding, Ruby Cat and its
      affiliates continued to supply EnerBurn products to the Company but not pursuant
      to a formal written contract.





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 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 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 “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 (the “Registration
      Rights Agreement”), 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. In April 2006, we entered into a letter agreement with BATL amending
      and clarifying certain provisions of the Registration Rights Agreement. Pursuant
      to the April 2006 letter agreement, it was agreed (i) that the number of Penalty
      Warrants issuable for all periods prior to April 30, 2006 in respect of delays
      in filing the Registration Statement shall be 30,000, and (ii) 28,500 of such
      warrants shall be issued to Thomas F. Donino and 1,500 of such warrants shall
      be
      issued to Jay Goldstein. In October 2007, we entered into another letter
      agreement with BATL pursuant to which it was agreed that in the event the
      Effective Date occurs during the period from and including April 30, 2006
      through April 30, 2008 (the “Fixed Period”), the number of shares of Common
      Stock underlying any Penalty Warrant issuable due to the fact that the
      Registration Statement was not declared effective by the Effective Date shall
      be
      510,000 (the “Fixed Penalty Warrant”), regardless of at which point during the
      Fixed Period the Effective Date occurs. In October 2007, the Fixed Penalty
      Warrant was delivered to BATL. The October 2007 letter agreement further
      provides that if the Effective Date shall have not occurred on or prior to
      April
      30, 2008, then we shall once again be obligated to issue a Penalty Warrant
      to
      BATL per 30-day period following the Fixed Period that the Effective Date has
      not occurred, in accordance with the terms of the Registration Rights Agreement.
      As of the date of this report, we do not believe that it is probable that we
      will be required to issue any additional Penalty Warrants to BATL under this
      arrangement. However, no assurance can be given that such will be the case.




9




On
      July
      13, 2006, we completed the acquisition of the EnerBurn formulas, technology
      and
      associated assets pursuant to an Asset Purchase Agreement executed as of the
      same date (the “EnerBurn Acquisition Agreement”) between the Company and the
      owner of Ruby Cat (the “Seller”). Pursuant thereto, the Company acquired from
      the Seller all of its rights with respect to the liquid diesel motor vehicle
      fuel additives known as EC5805A and EC5931A products (the “Products”) as well as
      its rights to certain intellectual property and technology associated with
      the
      Products (collectively, the “Purchased Assets”). The purchase price for the
      Purchased Assets was $3.0 million, payable as follows: (i) $1.0 million paid
      on
      July 13, 2006 in cash, and (ii) the remaining $2.0 million evidenced by a
      promissory note (the “Note”) bearing interest each month at a rate of 4.0% per
      annum, compounded monthly, and which is to be paid in four annual payments
      of
      $500,000 plus accumulated interest to that date on each anniversary of the
      closing until the entire purchase price is paid in full. In order to secure
      the
      debt represented by the Note, the Company executed and delivered to the Seller
      a
      Security Agreement in which the Company granted the Seller a first priority
      lien
      on the Purchased Assets. In May 2007, the initial payment of $500,000 plus
      interest was made in advance of the due date to take advantage of a significant
      saving in interest.





The
      EnerBurn Acquisition Agreement provides that for five years after closing the
      Seller will not, within the United States or anywhere abroad, be engaged in
      the
      business of researching,
      developing, manufacturing, marketing or selling products intended to improve
      the
      fuel efficiency of heavy duty diesel engines.





In
      addition, so long as any amounts payable to the Seller under the Note remain
      unpaid, the Company shall provide observation rights to one representative
      designated by the Seller to attend meeting of the Company’s Board of Directors.
      Such observer shall have the right to observe and participate in such meetings
      but shall not have the right to vote.





Contemporaneously
      with the closing, the Company granted the Seller a non-exclusive, fully paid,
      perpetual, non-revocable, royalty-free, assignable license, to manufacture,
      market and sell a certain product known as “Thermoboost II”, which has the same
      chemical formulation as one of the Products and which is used exclusively in
      home heating oil. During the fourth quarter of 2007, we negotiated a
      manufacturing agreement with the Seller and have begun production of its
      Thermoboost II product line at our ICP manufacturing facility at Cut and Shoot,
      Texas. We will wholesale this product exclusively to the Seller for its resale
      and distribution in the home heating oil market.





**Manufacturing**





The
      acquisition of the EnerBurn formulas, technology and associated assets has
      provided us the ability to transform our business from a sales organization
      to a
      fully integrated manufacturer and distributor of EnerBurn. The manufacturing
      of
      our EnerBurn product is now undertaken pursuant to a Manufacturing and Supply
      Agreement entered into on August 18, 2006 with Independent Contract Packaging,
      Inc., a Texas corporation located in Cut and Shoot, Texas (“ICP”). Pursuant to
      the agreement, ICP has been appointed as our non-exclusive manufacturer, blender
      and packager of our EnerBurn product for a term of three years. As provided
      in
      the agreement, we have agreed to purchase and supply certain tanks and related
      equipment and raw materials to be used by ICP to manufacture, blend and package
      the EnerBurn product, and ICP has agreed to provide its manufacturing, blending
      and packaging services on a commercially reasonably prompt basis according
      to
      the specifications received from and required by us. For such services, we
      have
      agreed to pay ICP its fees pursuant to an agreed upon fee schedule.





**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.




10




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 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 affected. 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 affecting 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.





**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.




11




**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.





**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, 2007 and 2006, we generated revenues of $396,000 and
      $641,000, respectively, and incurred net losses of $ 1,004,000 and
      $639,000, respectively. Continued failure to increase our revenues significantly
      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 maintain its current improvement, 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 depends upon a number of factors
      including:





·
            favorable
                pricing visa vie 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.




12




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 affect 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.




Ruby
      Cat
      registered these products with the US Environmental Protection Agency which
      registrations we acquired in connection with the EnerBurn Acquisition Agreement.
      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 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.




13




LOSS
      OF
      OUR LARGEST CUSTOMER COULD RESULT IN SUBSTANTIAL DECREASE IN REVENUES. Primarily
      as a result of our relationship with Custom Fuel Services Inc. (“Custom”), we
      recognized product sales in 2006 of $641,000 and $396,000 in 2007. At present
      this one customer represents a majority of our sale revenues. With Custom’s
      assistance, negotiations are currently underway with several over large
      customers in the same industry to expand this market. However, there is no
      assurance that we will be able 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.





RELIANCE
      UPON THIRD-PARTY MANUFACTURER FOR OUR PRODUCTS. The manufacturing of our
      EnerBurn products are undertaken pursuant to a Manufacturing and Supply
      Agreement entered into on August 18, 2006 with Independent Contract Packaging,
      Inc., a Texas corporation located in Cut and Shoot, Texas (“ICP”). Pursuant to
      the agreement, ICP has been appointed as our non-exclusive manufacturer, blender
      and packager of our EnerBurn product for a term of three years. ICP is presently
      our sole manufacturer. Although we believe we can secure other manufacturers,
      we
      expect that the deterioration or cessation of our relationship with ICP would
      have a material adverse effect, at least temporarily, until new relationships
      are satisfactorily in place. In addition, any manufacturers that we rely upon
      may possibly become unreliable in meeting delivery schedules, experience their
      own financial difficulties or provide products of inadequate quality. Any
      problems with our third-party manufacturers can be expected to have a material
      adverse effect on our financial condition, business, results of operations
      and
      continued growth prospects.





THE
      PAYMENTS DUE TO THE SELLER OF THE ENERBURN TECHNOLOGY WILL DRAW SIGNIFICANTLY
      ON
      FUTURE CASH RESERVES. On July 13, 2006, we completed the acquisition of the
      EnerBurn formulas, technology and associated assets pursuant to an Asset
      Purchase Agreement executed as of the same date (the “EnerBurn Acquisition
      Agreement”) between the Company and the owner of Ruby Cat (the “Seller”).
      Pursuant thereto, the Company acquired from the Seller all of its rights with
      respect to the liquid diesel motor vehicle fuel additives known as EC5805A
      and
      EC5931A products (the “Products”) as well as its rights to certain intellectual
      property and technology associated with the Products (collectively, the
“Purchased Assets”). The purchase price for the Purchased Assets was $3.0
      million, payable as follows: (i) $1.0 million paid on July 13, 2006 in cash,
      and
      (ii) the remaining $2.0 million evidenced by a promissory note (the “Note”)
      bearing interest each month at a rate of 4.0% per annum, compounded monthly,
      and
      which shall be paid in four annual payments of $500,000 plus accumulated
      interest to that date on each anniversary of the closing until the entire
      purchase price is paid in full. In order to secure the debt represented by
      the
      Note, the Company executed and delivered to the Seller a Security Agreement
      in
      which the Company granted the Seller a first priority lien on the Purchased
      Assets. The foregoing payments will draw significantly on future cash reserves.
      In addition, if we are unable to make such payment obligations, the Seller
      could
      foreclose on its lien on the Purchase Assets or take other action, all of which
      would likely have a material adverse effect on our business. The first payment
      of $500,000 plus related interest was paid to the Seller on May 10, 2007, two
      months in advance of the due date to take advantage of the savings in interest
      expense.




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.





**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, 2007, we had 17,761,359 shares of common stock outstanding. Up
      to
      an additional 4,936,650 shares are issuable upon the exercise of the warrants
      currently outstanding. The exercise of all of these warrants substantially
      dilutes 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.




14




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 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 certain
      holding period, may, under certain circumstances sell such shares or a portion
      of such shares. Effective as of February 15, 2008, the holding
      period for the resale of restricted securities of reporting companies was
      shortened from one year to six months. Additionally, the SEC substantially
      simplified Rule 144 compliance for non-affiliates by allowing non-affiliates
      of
      reporting companies to freely resell restricted securities after satisfying
      a
      six-month holding period (subject only to the Rule 144(c) public information
      requirement until the securities have been held for one year) and by allowing
      non-affiliates of non-reporting companies to freely resell restricted securities
      after satisfying a 12-month 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.




15




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.




**Item
                2.**
            
            **Description
                of Property.**





We
      do not
      own any real estate. We lease approximately 2,722 square feet of space for
      our
      executive offices at 10701 Corporate Drive, Suite No. 150, Stafford, Texas.
      Such
      lease, which commenced on February 1, 2001, had an original term of three years
      and has been extended to April 30, 2010. Rent expense for the years ended
      December 31, 2007 and December 31, 2006 totaled approximately $ 43,553 and
      $43,140, respectively. 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.




**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.




16




**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, 2006:**
              
              **High**
              
              **Low**Jan.
                  1, 2006 to March 31, 2006
              
              $
              2.39
              
              $
              1.65April
                  l, 2006 to June 30, 2006
              
              $
              2.11
              
              $
              1.40July
                  1, 2006 to Sept. 30, 2006
              
              $
              1.90
              
              $
              1.10Oct.
                  1, 2006 to Dec. 31, 2006
              
              $
              1.25
              
              $
              0.53
  **Year
                    ended December 31, 2007:**
                
                **High**
                
                **Low**Jan.
                    1, 2007 to March 31, 2007
                
                $
                0.95
                
                $
                0.53April
                    l, 2007 to June 30, 2007
                
                $
                1.51
                
                $
                0.60July
                    1, 2007 to Sept. 30, 2007
                
                $
                1.30
                
                $
                0.71Oct.
                    1, 2007 to Dec. 31, 2007
                
                $
                1.35
                
                $
                0.75


**Holders**





As
      of
      March 6, 2008 there were approximately 916 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”.





**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.




17




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 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 (the “Returned 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 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.





During
      the first quarter of 2006, the Company issued 10,000 shares of common stock
      upon
      the exercise of warrants previously granted at an aggregate exercise price
      of
      $12,000.  During
      the second quarter of 2006, the Company granted warrants to purchase up to
      an
      aggregate of 30,000 shares of common stock at an exercise price of $2.00 per
      share. In December 2006, the Board of Directors of the Company authorized the
      return and immediate reissuance of an aggregate of 250,000 shares of common
      stock to two of the four founding shareholders, representing the balance of
      the
      Returned Shares which had not then yet been reissued.





Between
      May 1, 2007 and May 16, 2007, the Company sold a total of 1,000,000 shares
      of
      common stock at $0.75 per share to seven investors for total gross proceeds
      of
      $750,000 in a private placement offering to accredited investors only. These
      securities were sold directly by the Company, without engaging in any
      advertising or general solicitation of any kind and without payment of
      underwriting discounts or commissions to any person. In October 2007, the
      Company granted warrants to BATL to purchase up to an aggregate of 510,000
      shares of common stock at an exercise price of $2.00 per share **** and
      expire in 5 years. These warrants were valued using the Black-Scholes Model
      and
      the fair value of $374,667 was charged to operating expense during
      2007. ****





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. ****




18




**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
              
              
              4,936,650
              (2)
              $
              1.41
              
              
              N/ATotal
              
              
              4,936,650
              
              $
              1.41
              
              
              -0-







(1)
            Represents
                shares underlying the 2003 Employee Stock Option Plan. As of December
                31,
                2007, 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 affected 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;


·
            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;


·
            The
                use of the product in diesel applications has a profound impact on
                a
                cleaner environment.




19




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 presently include the trucking,
      heavy construction and maritime shipping industries. We also expect that
      revenues will be derived in the future from the railroad, mining and offshore
      drilling industries. Each of these industries shares 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 $396,000 for the year ended December 31, 2007 compared
      to
      revenues of $641,000 for the year ended December 31, 2006, a decrease of
      $245,000 or 38.0%. The primary source of revenue for the years ended December
      31, 2007 and 2006 is from the sale of EnerBurn to the railroad, heavy
      construction and maritime industries. During 2007, we sold 4,840 fewer gallons
      of EnerBurn than sold in 2006. The price levels of product sold in 2007 was
      relatively comparable to pricing in 2006. This decrease
      in revenues can be traced primarily to (i)
      a
      customer owned equipment malfunction on the Mississippi River that went
      undetected for several months, (ii) a seven month delay in the completion of
      one
      of the principal Marine fueling facilities for EnerBurn from the original date
      projected, which also delayed the shipment and required the reclassification
      of
      a major sale from 2007 into 2008, and (iii) a delay of nearly a year in the
      final development, testing and availability of the on-truck dosing unit required
      for use by most trucks operating in the trucking industry, until early 2008.
      We
      believe that if not for the occurrence of these three events, we may have been
      able to achieve sufficient sales to have likely made it a profitable 2007.
      With
      our assistance, each of these problems has been addressed and is either
      corrected or close to being corrected, and therefore should not reoccur in
      the
      future. It is expected that sales should show significant increases throughout
      2008.





On
      July
      28, 2005, EnerTeck Sub entered into an Exclusive Reseller and Market Development
      Agreement (the “Custom Agreement”) with Custom Fuel Services, Inc. (“Custom”), a
      subsidiary of Ingram Barge. 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. During most
      of
      2006, Custom concentrated on completing the required infrastructural work to
      allow Custom to begin servicing the Ingram and other fleets. This work was
      completed late in the second quarter of 2006 and treatment of the Ingram fleet
      was commenced. Late in the second quarter, Custom placed a second order of
      4,840
      gallons. However, Custom was unable to take delivery until late in the fourth
      quarter of 2006. Sales to Custom, currently the Company’s largest customer have
      been slower than initially anticipated principally due to the equipment
      malfunction and delay in the completion of a principal Marine fueling facility
      as described above. Each of these problems has been addressed and is either
      corrected or close to being corrected.




We
      expect
      future revenue trends to initially come from the trucking, rail, heavy
      construction and maritime industries, and subsequently expect revenues to also
      be derived from the 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
      heavy construction companies such as those currently coming on line, 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.




20








In
      early
      September 2006, we made our initial sale to a member of the heavy construction
      industry working in the South Central Texas area. After successful testing
      this
      initial customer has led to introductions and initial testing with a large
      concrete company in West Texas, one of the largest highway contracts in the
      state of Texas and most recently one to largest highway and heavy construction
      contractor in the United States. We feel as this market matures it can become
      a
      major source of business for the Company.





Also,
      negotiations have been completed to begin demonstration and testing with a
      major
      American railroad company in April 2008. This follows several years of
      successful usage of EnerBurn, our principal product for several years with
      a
      small railroad company, work ing principally in the Houston area. Successful completion of this test, which
      is
      projected to take several months, should lead to the Company’s entry into a
      significantly larger market.





*Gross
      Profit*





Gross
      profit, defined as revenues less cost of goods sold, was $322,000 or 81.3%
      of
      sales for the year ended December 31, 2007, compared to $401,000 or 62.6% of
      sales for the year ended December 31, 2006. In terms of absolute dollars, gross
      profit decreased $79,000 primarily due to the reduced sales achieved in 2007
      compared to 2006 . The
      gross
      profit percentage increased 18.7% for the 2007 calendar year compared to the
      2006 calendar year due primarily to the fact that we are now the manufacturer
      of
      our core products, instead of a purchaser and relabeler. As our overall volume
      increases, we feel confident that this improvement in the gross profit
      percentage should continue as our manufacturing proficiency improves for our
      core products.





Cost
      of
      good sold was $74,000 for the 2007 calendar year which represented 18.7% of
      revenues compared to $241,000 for the 2006 calendar year which represented
      37.6%
      of revenues. The decrease in cost of goods sold as a percentage of revenues
      primarily reflects the decrease in overall product cost from our initiation
      of
      manufacturing of our products. We
      have
      owned the EnerBurn technology and associated assets since its purchase in July
      2006. Although our actual manufacturing function is performed for us by an
      unrelated third party under contract to us, we should continue to realize better
      gross margins through the manufacturing of our product lines, compared to those
      we achieved in the past when we purchased all of our products from an outside
      vendor.





*Cost
      and Expenses*





Costs
      and
      expenses decreased to $928,000 for the year ended December 31, 2007 from 1,068,000 for the
      year ended December 31, 2006, a decrease of $ 140,000. Costs
      and expenses in all periods primarily consisted of payroll, professional fees,
      rent expense, depreciation expense and other general and administrative
      expenses. While
      there has been some decrease, costs and expenses for 2007 are reasonably
      consistent with those of the prior year overall .





*Net
      Loss*





Our
      net
      operating loss amounted to $605,000 for the year ended December 31, 2007 as
      compared to $667,000 for the year ended December 31, 2006, a decrease in net
      operating loss of $62,000, despite a decrease in sales revenues of $245,000
      from
      the prior year. As stated earlier, our gross profit percentage increased 18.7%
      in 2007 compared to 2006. We believe that such increase should better position
      the Company for profitability as sales volumes increase.





Total
      net
      loss for the year ended December 31, 2007, was $1,004,000 as compared to a
      total
      net loss of $639,000 for the year ended December 31, 2006. This amounts to
      an
      increase in net loss for the year ended December 31, 2007 of $365,000 as
      compared with the year ended December 31, 2006. Such increase was primarily
      due
      to a $310,000 increase in a non-cash expense for stock-based delay awards in
      2007 compared to the prior year. In 2007, we were required to issue stock
      warrants to BATL in compliance with our December 2005 agreement, as amended.
      We
      do not expect that this should reoccur in the future. An additional $66,000
      of
      the net loss in 2007 consisted of interest expenses paid or payable on the
      remaining principal of the Note for the purchase of the technology, which will
      decrease each year until the Note is paid in full. We also had interest income
      of $24,000 in 2007 compared to $75,000 in 2006, primarily due to a greater
      amount of cash on hand during 2006 compared to 2007 which was not needed for
      day-to-day operations and could therefore be deposited in interest earning
      accounts. We also had other income of $18,000 in 2007 compared to $58,000 in
      2006. Such other income primarily consisted of certain non-repeating entries
      such as previously accrued expenses which were determined not to be a liability
      and other entries which we deemed not to be material. We do not expect that
      such
      will reoccur in the future.




21





Net
      income in the future will be dependent upon our ability to successfully complete
      testing in our projected new markets and to increase revenues faster than we
      increase our selling, general and administrative expenses, research and
      development expense and other expenses. Our improved gross margin resulting
      from
      our manufacturing of our products should help us in our ability to hopefully
      become profitable in the future.





*Operations
      Outlook*





Beginning
      in 2005, management began a period of reassessing the Company’s 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
      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 and delivery of the first
      shipment of Enerburn to Custom as discussed above. This initial purchase order
      plus the second order received 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. In addition to our efforts in the marine sales, the sales effort resulted
      in initial sales to customers in the heavy construction industry market
      beginning in the third quarter of 2006 in which we have used the same strategies
      that had successfully started with the marine market. To date, we have signed
      on
      three new customers with testing to begin with another major heavy equipment
      contractor in the very near future.





At
      present, one customer, Custom, **** represents
      a majority of our sale revenues. With Custom’s assistance, however, negotiations
      are currently underway with several other 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. Sales revenues to Custom and its clients
      have
      been less to date than had originally been projected. This has been due
      primarily to the equipment malfunction and delay in the completion of a
      principal Marine fueling facility as described above. With our assistance,
      each
      of these problems has been addressed and is either corrected or close to being
      corrected. It is expected that sales should show significant increases
      throughout 2008. It is also anticipated that other new customers coming on
      board
      during 2007 and 2008 will lessen the impact of a loss of Custom, should that
      happen. In this regard, in June 2007, we entered into an Exclusive Reseller
      and
      Market Development Agreement with Tanner Fuel Services, LLC appointing Tanner
      the exclusive reseller of EnerBurn on the Inter Coastal Waterway from Houma,
      Louisiana to the Port of Houston, Texas.





A
      major
      change in the way EnerTeck does business commenced in the third quarter of
      2006
      with the completion of the purchase of the EnerBurn technology and the
      commencement of manufacturing operation. This gave us permanent, exclusive
      rights to the EnerBurn formulas and protocols and allows for a much better
      gross
      margin than in the past. The purchase of the EnerBurn technology and associated
      assets had been completed on July 13, 2006 and both the formulation equipment
      and raw materials were in place to manufacture both our on and off road product
      lines. The opening of the on road market to our products offers great potential
      to the Company in coming years. Our marketing efforts from that point broadened
      from principally marine applications to a wide range of new industries. It
      remains to be seen how, when or if this effort will become successful, however
      the potential for success is much broader with our increased ability to service
      these markets.





**Liquidity
      and Capital Resources**





On
      December 31, 2007, we had negative working capital of $31,000 and stockholders’
equity of $2,088,000 compared to a working capital of $301,000 and stockholders’
equity of $1,968,000 on December 31, 2006. On December 31, 2007, the Company
      had
      $319,000 in cash, total assets of $3,660,000 and total liabilities of $1,572,000
      compared to $429,000 in cash, total assets of $4,072,000 and total liabilities
      of $2,105,000 on December 31, 2006.




22





The
      decrease in cash and working capital for the year ended December 31, 2007
      compared to the prior year was primarily due to lower than anticipated sales
      revenues. As stated above, the principal cause for these lower revenues can
      be
      traced to technical difficulties suffered by principal customer and the delay
      in
      availability of the on-road truck dosing equipment, both of which were
      unanticipated and beyond our control. We have assisted in the correction of
      both
      of these issues during the later part of 2007 and feel both are now under
      control.




Cash
      used
      in operating activities was $382,000 for the year ended December 31, 2007,
      which
      was primarily the result of a loss of $1,004,000 partially offset by non-cash
      charges for depreciation of $46,000 and warrants issued of $375,000. Cash used
      in operating activities was $985,000 for the year ended December 31, 2006,
      which
      was primarily the result of a loss of $639,000 partially offset by non-cash
      charges for depreciation of $48,000 and common stock and warrants issued for
      services of $157,000.





Cash
      provided by investing activities was $22,000 for the year ended December 31,
      2007 which was primarily the result of employee advances and capital
      expenditures. Cash used by investing activities was $1,119,000 for the year
      ended December 31, 2006 which was primarily the result of the acquisition of
      the
      intellectual property. The $3,000,000 purchase of the Intellectual Property
      related to the manufacture of EnerBurn was paid for by an initial down payment
      of $1,000,000 and the issuance of a note payable for $2,000,000, $500,000 of
      which was paid during 2007.





On
      July
      13, 2006, we completed the acquisition of the EnerBurn formulas, technology
      and
      associated assets pursuant to an Asset Purchase Agreement executed as of the
      same date (the “EnerBurn Acquisition Agreement”) between the Company and the
      owner of Ruby Cat (the “Seller”). Pursuant thereto, the Company acquired from
      the Seller all of its rights with respect to the liquid diesel motor vehicle
      fuel additives known as EC5805A and EC5931A products (the “Products”) as well as
      its rights to certain intellectual property and technology associated with
      the
      Products (collectively, the “Purchased Assets”). The purchase price for the
      Purchased Assets was $3.0 million, payable as follows: (i) $1.0 million paid
      on
      July 13, 2006 in cash, and (ii) the remaining $2.0 million evidenced by a
      promissory note (the “Note”) bearing interest each month at a rate of 4.0% per
      annum, compounded monthly, and which shall be paid in four annual payments
      of
      $500,000 plus accumulated interest to that date on each anniversary of the
      closing until the entire purchase price is paid in full. In order to secure
      the
      debt represented by the Note, the Company executed and delivered to the Seller
      a
      Security Agreement in which the Company granted the Seller a first priority
      lien
      on the Purchased Assets. The foregoing payments will draw significantly on
      future cash reserves. This acquisition, however, allows us to manufacture our
      own on and off road versions of the EnerBurn product line and will allow for
      significant savings in the cost requirements of product sales from
      manufacturing. The first payment of $500,000 was made in July 2007. An
      additional $500,000 will become payable during 2008.





In
      the
      past, we have been able to finance our operations primarily from capital which
      has been raised. To date, sales have not been adequate to finance our operations
      without investment capital. In addition to the $750,000 financing affected
      in
      2007, during the quarter ended September 30, 2005, we issued 250,000 shares
      of
      our 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.





Cash
      provided by financing activities was $250,000 for the year ended December 31,
      2007 primarily from the sale of a private placement of common stock in the
      amount of $750,000 used primarily to fund the scheduled 2007 $500,000 payment
      due on the purchase of the intellectual property. This is compared to $12,000
      obtained from financing activities during the year ended December 31, 2006
      from
      the exercise of warrants.





Other
      than the Note Payable for the purchase of the intellectual property, we
      currently have no material commitments for capital requirements. We anticipate,
      based on currently proposed plans and assumptions relating to our operations,
      that in addition to our current cash and cash equivalents together with
      projected cash flows from operations and projected revenues, we may require
      additional investment to satisfy our contemplated cash requirements for the
      next
      12 months. We anticipate that our costs and expenses over the next 12 months
      will be approximately $1.1 million which includes the amount we will have to
      pay
      in 2008 on the Note. Our continuation as a going concern is contingent upon
      our
      ability to obtain additional financing and to generate revenues and cash flow
      to
      meet our obligations on a timely basis. As mentioned above, management believes
      that sales revenues for 2007 were considerably less than earlier anticipated
      primarily due to circumstances which have been corrected or are in the process
      of being corrected and therefore should not reoccur in the future. Management
      expects that sales should show significant increases in 2008.




23





Currently
      there are 4,936,650 warrants outstanding with a total exercised value of
      $6,955,480. Of these, there are 2,426,650 stock warrants with an exercised
      value
      of $2,731,480 which will expire during 2008. If a substantial number of these
      warrants are exercised on or before the expiration date, this will provide
      sufficient capital for the next 12 months. In addition, we have been able to
      generate working capital in the past through private placements and believe
      that
      these avenues will remain available to us if additional financing is necessary.
      No assurances can be made that the warrants will be exercised or that we will
      be
      able to obtain such other investment on terms acceptable to us or at all. Our
      contemplated cash requirements beyond 2008 will depend primarily upon level
      of
      sales of our products, inventory levels, product development, sales and
      marketing expenditures and capital expenditures.





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, and results
      of
      operations, liquidity or capital expenditures.





**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 Chemical Corp. All significant
      inter-company accounts and transactions are eliminated in
      consolidation.





**Cash
      and Cash Equivalents**





The
      Company considers all highly liquid investments purchased with an original
      maturity of three (3) months or less to be cash and cash
      equivalents.





**Inventory**





Inventory
      consists of market ready EnerBurn plus raw materials required to manufacture
      the
      products. Inventory is valued at the lower of cost or market, using the average
      cost method. Also included in inventory are three large Hammonds EnerBurn doser
      systems amounting to $57,000, which will be transferred to marine or railroad
      customers during 2008. The Company’s remaining inventory was split on
      approximately a 60/40 basis between raw materials and finished goods at December
      31, 2007.





**Accounts
      Receivable**





Accounts
      receivable represent uncollateralized obligations due from customers of the
      Company and are recorded at net realizable value. This value includes an
      appropriate allowance for estimated uncollectible accounts to reflect any loss
      anticipated on the accounts receivable balances and charged to the provision
      for
      doubtful accounts. The Company calculates this allowance based on historical
      write-offs, level of past due accounts and relationships with and economic
      status of the customers. As of December 31, 2007 and 2006, there were no
      uncollectible accounts and no allowance has been provided.




24





**Property
      and Equipment**





Property
      and equipment are stated at cost, net of accumulated depreciation. Depreciation
      is provided for on the straight-line or accelerated method over the estimated
      useful lives of the assets. The average lives range from five (5) to ten (10)
      years. Maintenance and repairs that neither materially add to the value of
      the
      property nor appreciably prolong its life are charged to expense as incurred.
      Betterments or renewals are capitalized when incurred.





**Intangible
      Assets**





Intellectual
      property and other intangibles are recorded at cost. The Company has determined
      that its intellectual property has an indefinite life because there is no legal,
      regulatory, contractual, competitive, economic or other factor to limits its
      useful life, and therefore will not be amortized. For other intangibles,
      amortization would be computed on the straight-line method over the identifiable
      lives of the assets. The Company has adopted the provisions of Statement of
      Financial Accounting Standards (SFAS) No. 142, *Goodwill and Other Intangible Assets,* effective
      for periods beginning January 1, 2002, and thereafter. SFAS 142 addresses
      financial accounting and reporting for acquired goodwill and other intangible
      assets and supersedes APB Opinion No. 17, *Intangible
      Assets* .
      Specifically, the statement addresses how intangible assets that are acquired
      should be accounted for in financial statements upon their acquisition, as
      well
      as how goodwill and other intangible assets should be accounted for after they
      have been initially recognized in the financial statements. The statement
      requires the Company to evaluate its intellectual property each reporting period
      to determine whether events and circumstances continue to support an indefinite
      life. In addition, the Company will test its intellectual property for
      impairment on an annual basis, or more frequently if events or changes in
      circumstances indicate that the asset might be impaired. The statement requires
      intangible assets with finite lives to be reviewed for impairment whenever
      events or changes in circumstances indicate that their carrying amounts may
      not
      be recoverable and that a loss shall be recognized if the carrying amount of
      an
      intangible exceeds its fair value. The Company tested its intangible assets
      for
      impairment as of December 31, 2007. It was determined at that time that no
      impairment existed based primarily on projected sales and the resulting
      discounted projected cash flow analyses.





**Revenue
      Recognition**





The
      Company follows the provisions of SEC Staff Accounting Bulletin (SAB) No. 104, *“Revenue
      Recognition”* which
      was issued in December 2003, and recognizes revenues when evidence of a
      completed transaction and customer acceptance exists, and when title passes,
      if
      applicable. SAB No. 104 codified, revised and rescinded certain sections of
      Staff Accounting Bulletin (SAB) No. 101, *“Revenue
      Recognition in Financial Statements”,* in order
      to make this interpretive guidance consistent with current authoritative
      accounting guidance and SEC rules and regulations.





Revenues
      from sales are recognized at the point when a customer order has been shipped
      and invoiced.





**Income
      Taxes**





The
      Company 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 2007 and 2006, potential dilutive securities had an
      anti-dilutive effect and were not included in the calculation of diluted net
      loss per common share.




25





**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.





**Financial
      Instruments**





The
      Company’s financial instruments recorded on the balance sheet include cash and
      cash equivalents, accounts receivable, accounts payable and note payable. The
      carrying amounts approximate fair value because of the short-term nature of
      these items.





**Stock
      Options and Warrants**





Effective
      January 1, 2006, the Company began recording compensation expense associated
      with stock options and other forms of equity compensation in accordance with
      Statement of Financial Accounting Standards No. 123R, *Share-Based Payment,* as
      interpreted by SEC Staff Accounting Bulletin No. 107. Prior to
      January 1, 2006, EnerTeck had accounted for stock options according to
      the provisions of Accounting Principles Board Opinion No. 25, *Accounting for Stock Issued to Employees,* and
      related interpretations, and therefore no related compensation expense was
      recorded for awards granted with no intrinsic value. The Company adopted the
      modified prospective transition method provided for under SFAS No. 123R, and,
      consequently, has not retroactively adjusted results from prior periods. Under
      this transition method, compensation cost associated with stock options
      recognized in the first quarter of fiscal 2006 includes the quarterly
      amortization related to the remaining unvested portion of all stock option
      awards granted prior to January 1, 2006, based on the grant date fair value
      estimated in accordance with the original provisions of SFAS No. 123. There
      was
      no unvested portion of stock options or warrants as of January 1,
      2006.





**Recently
      Issued Accounting Pronouncements**





In
      May
      2003, the Financial Accounting Standards Board issued SFAS No. 150, *Accounting
      for Certain Financial Instruments with Characteristics of both Liabilities
      and
      Equity* .
      SFAS
      No. 150 established standards for how a company classifies and measures certain
      financial instruments with characteristics of both liabilities and equity.
      The
      statement requires that a company classify a financial instrument that is within
      its scope as a liability (or an asset in some circumstances) if certain criteria
      are met. Freestanding financial instruments that obligate the issuer to redeem
      the holder’s shares, or are indexed to such an obligation, and are settled in
      cash or settled with shares meeting certain conditions would be treated as
      liabilities. Many of those instruments were previously classified as equity.





In
      June 2005, the FASB issued FSP FAS 150-5, Issuers Accounting under FASB
      Statement No. 150 for Freestanding Warrants and Other Similar Instruments on
      Shares that are Redeemable (“FAS 150-5”). FAS 150-5 clarifies that freestanding
      warrants and similar instruments on shares that are redeemable should be
      accounted for as liabilities under FAS 150 regardless of the timing of the
      redemption feature or price, even though the underlying shares may be classified
      as equity. FAS 150-5 is effective for the first reporting period beginning
      after
      June 30, 2005. Although the Company had outstanding warrants as of December
      31, 2006, the shares issued upon exercise of the warrants are not redeemable;
      consequently, management does not expect the adoption of FAS 150-5 to have
      a
      material impact on the Company’s financial position, results of operations or
      cash flows.





In
      May 2005, the FASB issued FAS No. 154, *Accounting
      Changes and Error Corrections—A replacement of APB Opinion No. 20 and FASB
      Statement No. 3* (“FAS
      154”). FAS 154 replaces APB Opinion No. 20, *Accounting
      Changes* (“APB
      20”) *,* and FAS
      No. 3, *Reporting
      Accounting Changes in Interim Financial Statements* (“FAS
      3”) and changes the requirements for the accounting for, and reporting of, a
      change in accounting principles. FAS 154 applies to all voluntary changes in
      accounting principles and changes required by an accounting pronouncement in
      the
      unusual instance that the pronouncement does not include specific transition
      provisions. Under previous guidance, changes in accounting principle were
      recognized as a cumulative effect in the net income of the period of the change.
      FAS 154 requires retrospective application of changes in accounting
      principle, limited to the direct effects of the change, to prior periods’
financial statements, unless it is impracticable to determine either the
      period-specific effects or the cumulative effect of the change in accounting
      principle. Additionally, FAS 154 requires that a change in depreciation,
      amortization or depletion method for long-lived, non-financial assets be
      accounted for as a change in accounting estimate affected by a change in
      accounting principle and that correction of errors in previously issued
      financial statements should be termed a “restatement.” The provisions in
      FAS 154 are effective for accounting changes and correction of errors made
      in fiscal years beginning after December 15, 2005.




26





In
      March
      2006, the EITF reached a tentative consensus on Issue No. 06-03, *How
      Sales Taxes Collected from Customers and Remitted to Governmental Authorities
      Should Be Presented in the Income Statement (That Is, Gross Versus Net
      Presentation)* (“EITF
      06-03”). EITF 06-03 addresses income statement classification and disclosure
      requirements of externally-imposed taxes on revenue-producing transactions.
      EITF
      06-03 is effective for periods beginning after December 15, 2006. Management
      is
      currently evaluating the effect implementation of EITF 06-03 will have on the
      Company’s financial position, results of operations and cash flows.





In
      September 2006, the Securities and Exchange Commission issued Staff Accounting
      Bulletin No. 108, Considering the Effects of Prior Year Misstatements when
      Quantifying Misstatements in Current Year Financial Statements.
      SAB No. 108 was issued to address diversity in practice in quantifying
      financial statement misstatements. Current practice allows for the evaluation
      of
      materiality on the basis of either (1) the error quantified as the amount
      by which the current year income statement was misstated (“rollover method”) or
      (2) the cumulative error quantified as the cumulative amount by which the
      current year balance sheet was misstated (“iron curtain method”). The guidance
      provided in SAB No. 108 requires both methods to be used in evaluating
      materiality (“dual approach”). SAB No. 108 permits companies to
      initially apply its provisions either by (1) restating prior financial
      statements as if the dual approach had always been used or (2) recording
      the cumulative effect of initially applying the “dual approach” as adjustments
      to the carrying values of assets and liabilities as of January 1, 2006 with
      an offsetting adjustment recorded to the opening balance of retained earnings.





During
      June 2006, The FASB has issued FIN 48 which prescribes rules for the financial
      statements accounting for uncertainty in income tax positions. FIN 48 requires
      all material tax positions to undergo a new two-step recognition and measurement
      process. All material tax positions in all jurisdictions in all tax years in
      which the statute of limitations remains open upon the initial date of adoption
      are required to be assessed. The criteria for asset recognition is that it
      is
      more likely than not that a tax position will be sustained upon examination
      based solely on its technical merits. If the recognition standard is not
      satisfied, then no tax benefit otherwise arising from the tax position can
      be
      recorded for financial statement purposes. If the recognition standard is
      satisfied, the amount of tax benefit recorded for financial statement purposes
      is the largest amount of tax benefit with a greater than 50% likelihood of
      being
      realized upon ultimate settlement with a taxing authority. FIN 48 became
      effective for the Company’s fiscal 2007 year. The adoption of FIN 48 has not had
      a material impact on the Company’s financial position, results of the
      operations, or cash flows.





In
      September 2006, the FASB issued SFAS No. 157; "Fair Value Measurements". This
      statement defines fair value, establishes a framework for measuring fair value
      in generally accepted accounting principles (GAAP), and expands disclosures
      about fair value measurements. This statement applies under other accounting
      pronouncements that require or permit fair value measurements, the FASB having
      previously concluded in those accounting pronouncements that fair value is
      a
      relevant measurement attribute. Accordingly, this statement does not require
      any
      new fair value measurements. However, for some entities, the application of
      this
      Statement will change current practices. This Statement is effective for
      financial statements for fiscal years beginning after November 15, 2007. Earlier
      application is permitted provided that the reporting entity has not yet issued
      financial statements for that fiscal year. In
      November 2007, FASB agreed to a one-year deferral of the effective date for
      nonfinancial assets and liabilities that are recognized or disclosed at fair
      value on a recurring basis. We are
      currently evaluating the provisions of FASB 157 to determine the future impact
      on the Company’s consolidated financial statements.





In
      December 2006, the FASB issued FASB Staff Position EITF Issue No. 00-19-2,
“Accounting for Registration Payment Arrangements,” or FSP 00-19-2, which
      addresses an issuer’s accounting for registration payment arrangements.
      FSP 00-19-2 specifies that the contingent obligation to make future
      payments or otherwise transfer consideration under a registration payment
      arrangement, whether issued as a separate agreement or included as a provision
      of a financial instrument or other agreement, should be separately recognized
      and measured in accordance with SFAS No. 5, “Accounting for
      Contingencies.” FSP EITF 00-19-2
      also requires additional disclosure regarding the nature of any registration
      payment arrangements, alternative settlement methods, the maximum potential
      amount of consideration and the current carrying amount of the liability, if
      any. FSP 00-19-2
      was issued in December 2006 and was effective immediately for registration
      payment arrangements and the financial instruments subject to those arrangements
      that were entered into or modified subsequent to the issuance of
      FSP 00-19-2. For registration payment arrangements and financial
      instruments subject to those arrangements entered into prior to the issuance
      of
      FSP 00-19-2, it is effective for financial statements issued for fiscal
      years beginning after December 15, 2006. We have adopted the provisions of
      FSP 00-19-2 effective January 1, 2007 and have determined that the
      adoption had no material impact on our consolidated financial
      statements.




27





On
      February 15, 2007, the FASB issued Statement of Financial Accounting
      Standards No. 159, *“The
      Fair Value Option for Financial Assets and Financial Liabilities — Including an
      Amendment of FASB Statement No. 115”* (“SFAS
      159”). This standard permits an entity to measure financial instruments and
      certain other items at estimated fair value. Most of the provisions of SFAS
      No. 159 are elective; however, the amendment to FASB
      No. 115, *“Accounting
      for Certain Investments in Debt and Equity Securities,”* applies
      to all entities that own trading and available-for-sale securities. The fair
      value option created by SFAS 159 permits an entity to measure eligible items
      at
      fair value as of specified election dates. The fair value option (a) may
      generally be applied instrument by instrument, (b) is irrevocable
      unless a new election date occurs, and (c) must be applied to the entire
      instrument and not to only a portion of the instrument. SFAS 159 is effective
      as
      of the beginning of the first fiscal year that begins after November 15,
      2007. Early adoption is permitted as of the beginning of the previous fiscal
      year provided that the entity (i) makes that choice in the first
      120 days of that year, (ii) has not yet issued financial statements
      for any interim period of such year, and (iii) elects to apply the
      provisions of FASB 157.
      Management is currently evaluating the impact of SFAS 159, if any, on the
      Company’s financial statements. The adoption of SFAS No. 159 is not expected to
      have a material effect on its financial position, results of operations or
      cash
      flows.





In
      December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
      Consolidated Financial Statements, an amendment of Accounting Research Bulletin
      No 51” (SFAS 160). SFAS 160 establishes accounting and reporting standards for
      ownership interests in subsidiaries held by parties other than the parent,
      changes in a parent’s ownership of a noncontrolling interest, calculation and
      disclosure of the consolidated net income attributable to the parent and the
      noncontrolling interest, changes in a parent’s ownership interest while the
      parent retains its controlling financial interest and fair value measurement
      of
      any retained noncontrolling equity investment. SFAS 160 is effective for
      financial statements issued for fiscal years beginning after December 15, 2008,
      and interim periods within those fiscal years. Early adoption is prohibited.
      The
      adoption of SFAS No. 160 is not expected to have a material effect on its
      financial position, results of operations or cash flows.





In
      December 2007, the FASB issued SFAS 141R, *Business Combinations* (“SFAS
      141R”), which replaces FASB SFAS 141, *Business Combinations.* This
      Statement retains the fundamental requirements in SFAS 141 that the acquisition
      method of accounting be used for all business combinations and for an acquirer
      to be identified for each business combination. SFAS 141R defines the acquirer
      as the entity that obtains control of one or more businesses in the business
      combination and establishes the acquisition date as the date that the acquirer
      achieves control.  SFAS 141R will require an entity to record
      separately from the business combination the direct costs, where previously
      these costs were included in the total allocated cost of the
      acquisition.  SFAS 141R will require an entity to recognize the assets
      acquired, liabilities assumed, and any non-controlling interest in the acquired
      at the acquisition date, at their fair values as of that date.  This
      compares to the cost allocation method previously required by SFAS No.
      141.  SFAS 141R will require an entity to recognize as an asset or
      liability at fair value for certain contingencies, either contractual or
      non-contractual, if certain criteria are met.  Finally, SFAS 141R will
      require an entity to recognize contingent consideration at the date of
      acquisition, based on the fair value at that date.  This Statement
      will be effective for business combinations completed on or after the first
      annual reporting period beginning on or after December 15,
      2008.  Early adoption of this standard is not permitted and the
      standards are to be applied prospectively only.  Upon adoption of this
      standard, there would be no impact to the Company’s results of operations and
      financial condition for acquisitions previously completed.  The
      adoption of SFAS No. 141R is not expected to have a material effect on its
      financial position, results of operations or cash flows.





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





**Item
                7.**
            
            **Financial
                Statements.**





See
      the
      Financial Statements annexed to this report.




28




**Item
              8.**
            **Changes
                in and Disagreements with Accountants****on
                Accounting and Financial Disclosure.**




None.





**Item
              8A(T).**
            **Controls
                and Procedures.**





Under
      the
      supervision and with the participation of our management, including the Chief
      Executive Officer and Chief Financial Officer, we have evaluated the
      effectiveness of our disclosure controls and procedures (as defined in Rule
      13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period
      covered by this report. Based on that evaluation, the Chief Executive Officer
      and Chief Financial Officer have concluded that, as of December 31, 2007, these
      disclosure controls and procedures were effective to ensure that all information
      required to be disclosed by us in the reports that we file or submit under
      the
      Exchange Act is: (i) recorded, processed, summarized and reported, within the
      time periods specified in the Commission’s rule and forms; and (ii) accumulated
      and communicated to our management, including our Chief Executive Officer and
      Chief Financial Officer, as appropriate to allow timely decisions regarding
      required disclosure.





There
      have been no material changes in internal control over financial reporting
      that
      occurred during the fourth fiscal quarter that have materially affected, or
      are
      reasonably likely to materially affect the Company’s internal control over
      financial reporting.





**Management’s
      Annual Report on Internal Control over Financial Reporting**





Our
      management is responsible for establishing and maintaining adequate internal
      control over financial reporting. Internal control over financial reporting
      is a
      process designed by, or under the supervision of, the Chief Executive Officer
      and Chief Financial Officer and effected by our Board of Directors, management
      and other personnel, to provide reasonable assurance regarding the reliability
      of financial reporting and the preparation of financial statements for external
      purposes in accordance with generally accepted accounting
      principles.





Our
      evaluation of internal control over financial reporting includes using the
      COSO
      framework, an integrated framework for the evaluation of internal controls
      issued by the Committee of Sponsoring Organizations of the Treadway Commission,
      to identify the risks and control objectives related to the evaluation of our
      control environment.





Based
      on
      our evaluation under the frameworks described above, our management has
      concluded that our internal control over financial reporting was effective
      as of
      December 31, 2007.





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




**Item8B.**
            **Other
                Information.**





Not
      applicable.





29




**PART
      III**





**Item
                9.**
            
            **Directors,
                Executive Officers, Promoters, Control Persons and Corporate Governance;
                **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.




**Present
                  Position**
              
              **Has
                  Served as****Name**
              
              **Age**
              
              **and
                  Offices**
              
              **Director
                  Since**Dwaine
                  Reese
              
              65
              
              Chairman
                  of the
              
              January
                  2003Board,
                  Chief ExecutiveOfficer
                  and DirectorGary
                  B. Aman
              
              60
              
              Director
              
              March
                  2005Jack
                  D. Cowles
              
              47
              
              Director
              
              March
                  2005Thomas
                  F. Donino
              
              46
              
              Director
              
              December
                  2005Stan
                  Crow
              
              59
              
              President
              
              -Richard
                  B. Dicks
              
              60
              
              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.




30





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.





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, 2007, all Section 16(a) filing
      requirements applicable to its officers, directors and greater than 10%
      beneficial owners were complied with except Dwaine Reese filed one report late
      relating to a total of one transaction, and Thomas F. Donino filed three reports
      late relating to a total of three transactions.





**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.




31


**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, 2007 and December 31, 2006, of those persons
      who were, at December 31, 2007 (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):




**Summary
      Compensation Table**





**Name
                and Principal Position**
            
            **Year**
            
            **Salary**
              **($)**
            
            **Bonus**
              **($)**
            
            **Stock
                Awards**
              **($)**
            
            **Option
                Awards**
              **($)**
            
            **Non-Equity
                Incentive Plan Compensation**
              **($)**
            
            **Nonqualified**
              **Deferred
                Compensation**
              **Earnings
                ($)**
            
            **All
                Other Compensation**
              **($)**
            
            **Total**Dwaine
                Reese,
            
            
            2007
            
            $
            178,500
            
            $
            0
            
            $
            0
            
            $
            0
            
            $
            0
            
            $
            0
            
            $
            7,807
            (2)
            $
            186,307Chairman
              of the
              Board and Chief Executive Officer
            
            
            2006
            
            $
            269,520
            (1)
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            $
            7,531
            (2)
            $
            277,051







(1)
            Includes
                $104,500 of accrued salary for 2004 which was paid to Mr. Reese in
                2006.





(2)
            Mr.
                Reese was reimbursed $7,807 and $7,531 in 2007 and 2006, respectively,
                for
                health insurance costs.





**2003
      Stock Option Plan**





In
      September 2003, our shareholders approved an employee stock option plan (the
      “2003 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. As of December 31, 2007, no options have been issued under
      the 2003 Option Plan. On January 15, 2008, options to acquire 64,200 shares
      were
      issued under the 2003 Option Plan to five employees which options are
      immediately exercisable. These
      options have an exercise price of $0.80 per share and expire in five years
      from
      their issue date.





**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, 2,050,000 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. 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 other outstanding options or rights to purchase any of our securities.
      However, as of December 31, 2007, we do have outstanding warrants to purchase
      up
      to 4,936,650 shares of our 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 and as a further inducement to BATL for making an
      investment in the Company, Dwaine Reese had agreed not to unilaterally resign
      as
      our Chief Executive Officer for a period of two years from December 7, 2005.
      This period has now elapsed.





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




32




**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.





**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 March 6, 2008, 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****Name
                  of Beneficial Owner**
              
              **of
                  Beneficial Ownership**
              
              **Percent**
                    **of
                      Class**Dwaine
                  Reese
              
              
              3,590,000
              (1)
              
              20.2
              %BATL
                  Bioenergy LLC
              
              
              3,960,000
              (2)
              
              20.5
              %Thomas
                  F. Donino
              
              
              5,558,083
              (3)
              
              28.8
              %Gary
                  B. Aman
              
              
              660,000
              (4)
              
              3.7
              %Jack
                  D. Cowles
              
              
              398,550
              (5)
              
              2.2
              %Stan
                  Crow
              
              
              700,500
              (6)
              
              3.9
              %Richard
                  B. Dicks
              
              
              114,200
              (7)
              
              *All
                  Executive Officers andDirectors
                  as a Group (6 persons)
              
              
              11,021,133
              
              
              56.6
              %







*
            Less
                than 1%.





(1)
            Consists
                of 3,565,000 shares held by Mr. Reese and 25,000 shares underlying
                an
                option granted to him. 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 1,510,000
                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 1,184,883 shares held by Mr. Donino, 2,450,000 shares held by
                BATL,
                384,700 shares held by BATL Management LP (“BATL Management”), 1,510,000
                shares underlying warrants held by BATL and 28,500 shares underlying
                warrants held by Mr. Donino. 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.




33




(6)
            Consists
                of 565,500 shares held by Mr. Crow and 135,000 shares underlying
                warrants
                held by him. The address for Mr. Crow 1410 Andover Street, Livingston,
                Texas.





(7)
            Consists
                of 100,000 shares underlying warrants held by Mr. Dicks and 14,200
                shares
                underlying an option granted to him. The address for Mr. Dicks is
                10701
                Corporate Drive, Suite 150, Stafford, Texas.




**Item
              12.**
            **Certain
                Relationships and Related Transactions, and Director
                Independence.**





Since
      January 1, 2007, there has not been, nor is there currently proposed, any
      transaction or series of similar transactions to which we were or will be a
      party: (i) in which the amount involved exceeds the lesser of $120,000 or one
      percent of the average of our total assets at year-end for the last three
      completed fiscal years; and (ii) in which any director, executive officer,
      shareholder who beneficially owns 5% or more of our common stock or any member
      of their immediate family had or will have a direct or indirect material
      interest.




**Director
      Independence**




Our
      board
      of directors currently consists of four members. They are Dwaine Reese, Gary
      B.
      Aman, Jack D. Cowles and Thomas F. Donino. Mr. Reese is the Company’s Chairman
      of the Board and Chief Executive Officer. Messrs. Aman, Cowles and Donino are
      independent directors. We have determined their independence using the
      definition of independence set forth in NASD Rule 4200.





**Item
              13.**
            **Exhibits.**




**Incorporated
                  by****Reference
                  to**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
              
              Exhibit
                  4.4 (5)4.5
              
              Registration
                  Rights Agreement dated December 8, 2005 between the Company and
                  BATL
                  Bioenergy LLC
              
              Exhibit
                  4.1 (6)4.6
              
              Warrant
                  to purchase 1,000,000 shares issued to BATL Bioenergy LLC
              
              Exhibit
                  4.2 (6)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
              
              Second
                  Amendment to Lease Agreement
              
              Exhibit
                  10.4 (7)10.5
              
              Third
                  Amendment to Lease Agreement
              
              Exhibit
                  10.5 (7)10.6
              
              Redemption
                  Agreement dated December 6, 2005 between the Company and Parrish
                  B.
                  Ketchmark and Parrish Brian Partners, Inc.
              
              Exhibit
                  10.1 (6)10.7
              
              Securities
                  Purchase Agreement dated December 8, 2005 between the Company and
                  BATL
                  Bioenergy LLC
              
              Exhibit
                  10.2 (6)10.8
              
              Asset
                  Purchase Agreement dated as of July 13, 2006
              
              Exhibit
                  2.1 (8)10.9
              
              Manufacturing
                  and Supply Agreement dated August 18, 2006
              
              Exhibit
                  10.9 (7)21.1
              
              Subsidiaries
                  of the Registrant
              
              Exhibit
                  21.1 (7)23.1
              
              Consent
                  of Philip Vogel & Co. PC
              
              *31.1
              
              Certification
                  of Chief Executive Officer pursuant to Section 302 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)
              
              *







*
            Filed
                herewith.




34




(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 Annual Report on Form 10-KSB for the year
                ended December 31, 2005, and incorporated by reference
                herein.





(6)
            Filed
                as an exhibit to the Company’s Current Report on Form 8-K filed on
                December 12, 2005, and incorporated by reference
                herein.





(7)
            Filed
                as an exhibit to the Company’s Annual Report on Form 10-KSB for the year
                ended December 31, 2006, and incorporated by reference
                herein.





(8)
            Filed
                as an exhibit to the Company’s Current Report on Form 8-K filed on July
                19, 2006, 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
      December 31, 2007 and December 31, 2006:


Fee
                  Category
              
              2007
                  Fees
              
              2006
                  FeesAudit
                  Fees
              
              $
              38,816
              
              $
              30,710Audit
                  Related Fees
              
              $
              0
              
              $
              0Tax
                  Fees
              
              $
              0
              
              $
              0All
                  Other Fees
              
              $
              0
              
              $
              0Total
                  Fees
              
              $
              38,816
              
              $
              30,710





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.




35





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.




36




**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 ReeseDwaine
              Reese,Chief
              Executive OfficerDated:March
              17, 2008




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,
              
              3/17/2008Dwaine
                  Reese
              
              Chairman
                  of the Boardand
                  Director(Principal
                  Executive Officer)/s/
                  Richard B. Dicks
              
              Chief
                  Financial Officer
              
              3/17/2008Richard
                  B. Dicks
              
              (Principal
                  Financial Officer)/s/
                  Gary B. Aman
              
              Director
              
              3/17/2008Gary
                  B. Aman/s/
                  Jack D. Cowles
              
              Director
              
              3/17/2008Jack
                  D. Cowles/s/
                  Thomas F. Donino
              
              Director
              
              3/17/2008Thomas
                  F. Donino





37




REPORT
      OF
      INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




To
      the
      Board of Directors


EnerTeck
      Corporation


Houston,
      Texas





We
      have
      audited the accompanying consolidated balance sheet **s** of
      EnerTeck Corporation and subsidiary as of December 31, 2007 **** and
      2006,
      and the related consolidated statements of operations, of changes in
      stockholders' equity and of cash flows for each of the years in the two-year
      period ended December 31, 2007. These financial statements are the
      responsibility of the Company’s management. Our responsibility is to express an
      opinion on these financial statements based on our audit **s** .





We
      conducted our audit **s** in
      accordance with the standards of the Public Company Accounting Oversight Board
      (United States). Those standards require that we plan and perform the
      audit **s** to
      obtain reasonable assurance about whether the financial statements are free
      of
      material misstatement. The company is not required to have, nor were we engaged
      to perform, an audit of its internal control over financial reporting. Our
      audit
      included consideration of internal control over financial reporting as a basis
      for designing audit procedures that are appropriate in the circumstances, but
      not for the purpose of expressing an opinion on the effectiveness of the
      company’s internal control over financial reporting. Accordingly, we express no
      such opinion. 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 audit **s** provide
      a reasonable basis for our opinion.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the consolidated financial position of EnerTeck
      Corporation and subsidiary as of December 31, 2007 and 2006, and the
      consolidated results of their operations and their cash flows for each of the
      years in the two-year period ended December 31, 2007, in conformity with
      accounting principles generally accepted in the United States of
      America.





/s/
              Philip Vogel & Co. PCPHILIP VOGEL & CO. PCCertified
                Public Accountants




Dallas,
      Texas





March
      7,
      2008




F-1


. **ENERTECK
      CORPORATION AND SUBSIDIARY**


**CONSOLIDATED
      BALANCE SHEET**


December
      31, 2007 and 2006


2007
                
                2006ASSETSCurrent
                    assetsCash
                
                $
                319,126
                
                $
                429,483Inventory
                
                
                146,654
                
                
                137,485Receivables
                    - trade
                
                
                50,920
                
                
                290,072Receivables
                    - employee
                
                
                4,483
                
                
                29,145Prepaid
                    Expenses
                
                
                19,639
                
                
                19,625Total
                    current assets
                
                
                540,822
                
                
                905,810Intellectual
                    Property
                
                
                3,000,000
                
                
                3,000,000Property
                    and equipment, net of accumulateddepreciation
                    of $202,271 and $168,011 respectively
                
                
                119,894
                
                
                166,832Total
                    assets
                
                $
                3,660,715
                
                $
                4,072,642LIABILITIES
                    AND STOCKHOLDERS’ EQUITYCurrent
                    liabilitiesNote
                    payable - current maturity
                
                $
                500,000
                
                $
                500,000Accounts
                    payable
                
                
                10,649
                
                
                64,510Accrued
                    liabilities
                
                
                61,666
                
                
                40,000Total
                    current liabilities
                
                
                572,315
                
                
                604,510Long
                    Term LiabilitiesNotesPayable - long term portion
                
                
                1,000,000
                
                
                1,500,000Total
                    Long Term Liabilities
                
                
                1,000,000
                
                
                1,500,000Stockholders’
                    EquityPreferred
                    stock, $.001 par value, 100,000,000 sharesauthorized,
                    none issuedCommon
                    stock, $.001 par value, 100,000,000shares
                    authorized, 17,761,359 and 16,761,359 shares issued and outstanding,
                    respectively
                
                
                17,761
                
                
                16,761Additional
                    paid-in capital
                
                
                19,947,381
                
                
                18,823,714Accumulated
                    deficit
                
                
                (17,876,742
                )
                
                (16,872,343
                )Total
                    stockholders’ equity
                
                
                2,088,400
                
                
                1,968,132Total
                    liabilities and stockholders’ equity
                
                $
                3,660,715
                
                $
                4,072,642




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




F-2




**ENERTECK
      CORPORATION AND SUBSIDIARY**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**Years
      Ended December 31, 2007 and 2006**


2007
              
              2006Product
                  Sales
              
              $
              396,141
              
              $
              641,419Cost
                  of goods sold
              
              
              73,756
              
              
              240,770Gross
                  profit
              
              $
              322,385
              
              
              400,649Costs
                  and expenses:General
                  and Administrative Expenses:Wages
              
              $
              429,541
              
              $
              421,676Non-cash
                  compensation
              
              
              0
              
              
              92,500Depreciation
              
              
              46,332
              
              
              48,214Other
                  Selling, General and Administrative Expenses
              
              
              451,965
              
              
              505,458Total
                  Expenses
              
              $
              927,838
              
              $
              1,067,848Operating
                  loss
              
              
              ($605,453
              )
              
              ($667,199
              )Other
                  income (expense)Interest
                  Income
              
              
              23,765
              
              
              74,845Other
                  Income
              
              
              17,990
              
              
              57,805Stock-based
                  delay awards
              
              
              (374,667
              )
              
              (64,500
              )Interest
                  expense
              
              
              (66,033
              )
              
              (40,000
              )Net
                  Income (loss)
              
              
              ($1,004,399
              )
              $
              (639,049
              )Net
                  loss per share:Basic
                  and diluted
              
              
              ($0.06
              )
              
              ($0.04
              )Weighted
                average
                shares outstanding:Basic
                  and diluted
              
              
              17,413,414
              
              
              16,540,181




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




F-3


**ENERTECK
      CORPORATION AND SUBSIDIARY**


**CONSOLIDATED
      STATEMENT OF STOCKHOLDERS' EQUITY**


**Years
      Ended December 31, 2007 and 2006**


AdditionalCommon
                    Stock
                
                Paid-in
                
                AccumulatedShares
                
                Amount
                
                Capital
                
                Deficit
                
                TotalBalances,
                    December 31, 2005
                
                
                16,451,359
                
                **$**
                16,451
                
                **$**
                18,067,524
                
                **$**
                (16,233,294
                )
                **$**
                1,850,681Return
                    of Founders' Stock
                
                
                250,000
                
                
                250
                
                
                587,250
                
                
                
                
                
                587,500Common
                    stock for services
                
                
                50,000
                
                
                50
                
                
                92,450
                
                
                
                
                
                92,500Warrants
                    Exercised
                
                
                10,000
                
                
                10
                
                
                11,990
                
                
                
                
                
                12,000Warrants
                    Issued
                
                
                
                
                
                
                
                
                64,500
                
                
                
                
                
                64,500Net
                    Loss
                
                
                
                
                
                
                
                
                
                
                
                (639,049
                )
                
                (639,049
                )Balances,
                    December 31, 2006
                
                
                16,761,359
                
                
                16,761
                
                
                18,823,714
                
                
                (16,872,343
                )
                
                1,968,132Private
                    Offering
                
                
                1,000,000
                
                
                1,000
                
                
                749,000
                
                
                
                
                
                750,000Warrants
                    Issued
                
                
                
                
                
                
                
                
                374,667
                
                
                
                
                
                374,667Net
                    Loss
                
                
                
                
                
                
                
                
                
                
                
                (1,004,399
                )
                
                (1,004,399
                )Balances,
                    December 31, 2007
                
                
                17,761,359
                
                **$**
                17,761
                
                $
                19,947,381
                
                $
                (17,876,742
                )
                $
                2,088,400




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




F-4


**ENERTECK
      CORPORATION AND SUBSIDIARY**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**Years
      Ended December 31, 2007 and 2006**


2007
              
              2006Net
                  (loss)
              
              
              ($1,004,399
              )
              
              ($639,049
              )Adjustments
                  to reconcile net loss to cash used inoperating
                  activities:Depreciation
              
              
              46,332
              
              
              48,214Common
                  stock issued for services
              
              
              0
              
              
              92,500Warrants
                  issued to Investor
              
              
              374,667
              
              
              64,500Non-cash
                  income items
              
              
              3,392
              
              
              (57,805
              )Changes
                  in operating assets and liabilities:Accounts
                  receivable
              
              
              239,152
              
              
              (265,079
              )Inventory
              
              
              (9,169
              )
              
              (120,295
              )Prepaid
                  expenses and other
              
              
              (14
              )
              
              (19,225
              )Accounts
                  payable
              
              
              (53,861
              )
              
              12,223Accrued
                  Interest payable
              
              
              (933
              )
              
              40,000Accrued
                  Liabilities
              
              
              22,598
              
              
              (141,310
              )NET
                  CASH USED IN OPERATING ACTIVITIES
              
              
              ($382,235
              )
              
              (985,326
              )CASH
                  FLOWS FROM INVESTING ACTIVITIESProceeds
                  from sales of assets
              
              
              4,800
              
              
              0Capital
                  expenditures
              
              
              (7,584
              )
              
              (109,815
              )Acquisition
                  of intellectual property
              
              
              0
              
              
              (1,000,000
              )Employee
                  advances
              
              
              24,662
              
              
              (9,645
              )CASH
                  PROVIDED BY (USED IN) INVESTING ACTIVITIES
              
              $
              21,878
              
              
              (1,119,460
              )CASH
                  FLOWS FROM FINANCING ACTIVITIESExercise
                  of warrants
              
              
              0
              
              
              12,000Proceeds
                  from sale of common stock
              
              
              750,000
              
              
              0Repayments
                  of note payable
              
              
              (500,000
              )
              
              0CASH
                  PROVIDED BY FINANCING ACTIVITIES
              
              $
              250,000
              
              
              12,000NET
                  INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
              
              
              ($110,357
              )
              
              (2,092,786
              )Cash
                  and cash equivalents, beginning of year
              
              
              429,483
              
              
              2,522,269Cash
                  and cash equivalents, end of year
              
              $
              319,126
              
              $
              429,483Cash
                  paid for:Income
                  tax
              
              $
              0
              
              $
              0Interest
              
              $
              66,965
              
              $
              0Non-cash
                  investing and financing activities:Note
                  payable originated for the purchase of intellectualproperty
              
              
              
              
              $
              2,000,000




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




F-5




**ENERTECK
      CORPORATION and SUBSIDIARY**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**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.





Certain
      reclassifications have been made to the 2006 financial statements in order
      to
      conform to the current presentation. The primary reclassification relates to
      the
      presentation of stock-based delay awards which management believes are more
      appropriately reflected as a non-operating expense. Net loss as previously
      reported has not changed.





**Principles
      of Consolidation**





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





**Cash
      and Cash Equivalents**





The
      Company considers all highly liquid investments purchased with an original
      maturity of three (3) months or less to be cash and cash
      equivalents.





**Inventory**





Inventory
      consists of market ready EnerBurn plus raw materials required to manufacture
      the
      products. Inventory is valued at the lower of cost or market using the average
      cost method. Also included in inventory are three large Hammonds EnerBurn doser
      systems amounting to $57,000 which are projected to be transferred to marine
      customers during 2008. Finished product amounted to approximately $42,000 at
      December 31, 2007; the remainder being comprised of raw materials. **** Included
      in inventories at December 31, 2006, were four doser systems amounting to
      $76,000; with substantially all the remaining inventory being comprised of
      raw
      materials. ****





**Accounts
      Receivable**





Accounts
      receivable represent uncollateralized obligations due from customers of the
      Company and are recorded at net realizable value. This value includes an
      appropriate allowance for estimated uncollectible accounts to reflect any loss
      anticipated on the accounts receivable balances and charged to the provision
      for
      doubtful accounts. The Company calculates this allowance based on historical
      write-offs, level of past due accounts and relationships with and economic
      status of the customers. As of December 31, 2006 and 2005, there were no
      uncollectible accounts and no allowance has been provided.





F-6




**Property
      and Equipment**





Property
      and equipment are stated at cost, net of accumulated depreciation. Depreciation
      is provided for on the straight-line or accelerated method over the estimated
      useful lives of the assets. The average lives range from five (5) to ten (10)
      years. Maintenance and repairs that neither materially add to the value of
      the
      property nor appreciably prolong its life are charged to expense as incurred.
      Betterments or renewals are capitalized when incurred.





**Intangible
      Assets**





Intellectual
      property and other intangibles are recorded at cost. The Company has determined
      that its intellectual property has an indefinite life because there is no legal,
      regulatory, contractual, competitive, economic or other factor to limit its
      useful life, and therefore will not be amortized. For other intangibles,
      amortization would be computed on the straight-line method over the identifiable
      lives of the assets. The Company has adopted the provisions of Statement of
      Financial Accounting Standards (SFAS) No. 142, *Goodwill and Other Intangible Assets,* effective
      for periods beginning January 1, 2002, and thereafter. SFAS 142 addresses
      financial accounting and reporting for acquired goodwill and other intangible
      assets and supersedes APB Opinion No. 17, *Intangible
      Assets* .
      Specifically, the statement addresses how intangible assets that are acquired
      should be accounted for in financial statements upon their acquisition, as
      well
      as how goodwill and other intangible assets should be accounted for after they
      have been initially recognized in the financial statements. The statement
      requires the Company to evaluate its intellectual property each reporting period
      to determine whether events and circumstances continue to support an indefinite
      life. In addition, the Company will test its intellectual property for
      impairment on an annual basis, or more frequently if events or changes in
      circumstances indicate that the asset might be impaired. The statement requires
      intangible assets with finite lives to be reviewed for impairment whenever
      events or changes in circumstances indicate that their carrying amounts may
      not
      be recoverable and that a loss shall be recognized if the carrying amount of
      an
      intangible exceeds its fair value. The Company tested its intangible assets
      for
      impairment as of December 31, 2007. It was determined at that time that no
      impairment existed based primarily on projected sales and the resulting
      discounted projected cash flow analyses.





**Revenue
      Recognition**





The
      Company follows the provisions of SEC Staff Accounting Bulletin (SAB) No.
      104, *"Revenue Recognition"* which
      was issued in December 2003, and recognizes revenues when evidence of a
      completed transaction and customer acceptance exists, and when title passes,
      if
      applicable. SAB No. 104 codified, revised and rescinded certain sections of
      Staff Accounting Bulletin (SAB) No. 101, *"Revenue Recognition in Financial Statements",* in order
      to make this interpretive guidance consistent with current authoritative
      accounting guidance and SEC rules and regulations.





Revenues
      from sales of product and equipment **** are
      recognized at the point when a customer order has been shipped and
      invoiced.





**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 2007 and 2006, potential dilutive securities had an
      anti-dilutive effect and were not included in the calculation of diluted net
      loss per common share.




F-7




**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.





**Financial
      Instruments**





The
      Company’s financial instruments recorded on the balance sheet include cash and
      cash equivalents, accounts receivable, accounts payable and note payable. The
      carrying amounts approximate fair value because of the short-term nature of
      these items.





**Stock
      Options and Warrants**





Effective
      January 1, 2006, EnerTeck began recording compensation expense associated with
      stock options and other forms of equity compensation in accordance with
      Statement of Financial Accounting Standards No. 123R, *Share-Based Payment,* as
      interpreted by SEC Staff Accounting Bulletin No. 107. Prior to
      January 1, 2006, EnerTeck had accounted for stock options according to
      the provisions of Accounting Principles Board Opinion No. 25, *Accounting for Stock Issued to Employees,* and
      related interpretations, and therefore no related compensation expense was
      recorded for awards granted with no intrinsic value. EnerTeck adopted the
      modified prospective transition method provided for under SFAS No. 123R, and,
      consequently, has not retroactively adjusted results from prior periods. Under
      this transition method, compensation cost associated with stock options
      recognized in the first quarter of fiscal 2006 includes the quarterly
      amortization related to the remaining unvested portion of all stock option
      awards granted prior to January 1, 2006, based on the grant date fair value
      estimated in accordance with the original provisions of SFAS No. 123. There
      was
      no unvested portion of stock options or warrants as of January 1,
      2006.





**Recently
      Issued Accounting Pronouncements**





In
      May
      2003, the Financial Accounting Standards Board issued SFAS No. 150, *Accounting
      for Certain Financial Instruments with Characteristics of both Liabilities
      and
      Equity* .
      SFAS
      No. 150 established standards for how a company classifies and measures certain
      financial instruments with characteristics of both liabilities and equity.
      The
      statement requires that a company classify a financial instrument that is within
      its scope as a liability (or an asset in some circumstances) if certain criteria
      are met. Freestanding financial instruments that obligate the issuer to redeem
      the holder’s shares, or are indexed to such an obligation, and are settled in
      cash or settled with shares meeting certain conditions would be treated as
      liabilities. Many of those instruments were previously classified as equity.





In
      June 2005, the FASB issued FSP FAS 150-5, Issuers Accounting under FASB
      Statement No. 150 for Freestanding Warrants and Other Similar Instruments on
      Shares that are Redeemable (“FAS 150-5”). FAS 150-5 clarifies that freestanding
      warrants and similar instruments on shares that are redeemable should be
      accounted for as liabilities under FAS 150 regardless of the timing of the
      redemption feature or price, even though the underlying shares may be classified
      as equity. FAS 150-5 is effective for the first reporting period beginning
      after
      June 30, 2005. Although the Company had outstanding warrants as of December
      31, 2006, the shares issued upon exercise of the warrants are not redeemable;
      consequently, the adoption of FAS 150-5 did not have a material impact on the
      Company’s financial position, results of operations or cash flows.





In
      May 2005, the FASB issued FAS No. 154, *Accounting
      Changes and Error Corrections—A replacement of APB Opinion No. 20 and FASB
      Statement No. 3* (“FAS
      154”). FAS 154 replaces APB Opinion No. 20, *Accounting
      Changes* (“APB
      20”) *,* and FAS
      No. 3, *Reporting
      Accounting Changes in Interim Financial Statements* (“FAS
      3”) and changes the requirements for the accounting for, and reporting of, a
      change in accounting principles. FAS 154 applies to all voluntary changes in
      accounting principles and changes required by an accounting pronouncement in
      the
      unusual instance that the pronouncement does not include specific transition
      provisions. Under previous guidance, changes in accounting principle were
      recognized as a cumulative effect in the net income of the period of the change.
      FAS 154 requires retrospective application of changes in accounting
      principle, limited to the direct effects of the change, to prior periods’
financial statements, unless it is impracticable to determine either the
      period-specific effects or the cumulative effect of the change in accounting
      principle. Additionally, FAS 154 requires that a change in depreciation,
      amortization or depletion method for long-lived, non-financial assets be
      accounted for as a change in accounting estimate affected by a change in
      accounting principle and that correction of errors in previously issued
      financial statements should be termed a “restatement.” The provisions in
      FAS 154 are effective for accounting changes and correction of errors made
      in fiscal years beginning after December 15, 2005.




F-8





In
      March
      2006, the EITF reached a tentative consensus on Issue No. 06-03, *How
      Sales Taxes Collected from Customers and Remitted to Governmental Authorities
      Should Be Presented in the Income Statement (That Is, Gross Versus Net
      Presentation)* (“EITF
      06-03”). EITF 06-03 addresses income statement classification and disclosure
      requirements of externally-imposed taxes on revenue-producing transactions.
      EITF
      06-03 is effective for periods beginning after December 15, 2006. Management
      has
      determined that adoption of EITF 06-03 has not had a material effect on the
      Company’s financial position, results of operations and cash flows.





In
      September 2006, the Securities and Exchange Commission issued Staff Accounting
      Bulletin No. 108, Considering the Effects of Prior Year Misstatements when
      Quantifying Misstatements in Current Year Financial Statements.
      SAB No. 108 was issued to address diversity in practice in quantifying
      financial statement misstatements. Current practice allows for the evaluation
      of
      materiality on the basis of either (1) the error quantified as the amount
      by which the current year income statement was misstated (“rollover method”) or
      (2) the cumulative error quantified as the cumulative amount by which the
      current year balance sheet was misstated (“iron curtain method”). The guidance
      provided in SAB No. 108 requires both methods to be used in evaluating
      materiality (“dual approach”). SAB No. 108 permits companies to
      initially apply its provisions either by (1) restating prior financial
      statements as if the dual approach had always been used or (2) recording
      the cumulative effect of initially applying the “dual approach” as adjustments
      to the carrying values of assets and liabilities as of January 1, 2006 with
      an offsetting adjustment recorded to the opening balance of retained earnings.




During
      June 2006, The FASB has issued FIN 48 which prescribes rules for the financial
      statements accounting for uncertainty in income tax positions. FIN 48 requires
      all material tax positions to undergo a new two-step recognition and measurement
      process. All material tax positions in all jurisdictions in all tax years in
      which the statute of limitations remains open upon the initial date of adoption
      are required to be assessed. The criteria for asset recognition is that it
      is
      more likely than not that a tax position will be sustained upon examination
      based solely on its technical merits. If the recognition standard is not
      satisfied, then no tax benefit otherwise arising from the tax position can
      be
      recorded for financial statement purposes. If the recognition standard is
      satisfied, the amount of tax benefit recorded for financial statement purposes
      is the largest amount of tax benefit with a greater than 50% likelihood of
      being
      realized upon ultimate settlement with a taxing authority. FIN 48 became
      effective for the Company’s fiscal 2007 year. The adoption of FIN 48 has not had
      a material impact on the Company’s financial position, results of the
      operations, or cash flows.





In
      September 2006, the FASB issued SFAS No. 157; "Fair Value Measurements". This
      statement defines fair value, establishes a framework for measuring fair value
      in generally accepted accounting principles (GAAP), and expands disclosures
      about fair value measurements. This statement applies under other accounting
      pronouncements that require or permit fair value measurements, the FASB having
      previously concluded in those accounting pronouncements that fair value is
      a
      relevant measurement attribute. Accordingly, this statement does not require
      any
      new fair value measurements. However, for some entities, the application of
      this
      Statement will change current practices. This Statement is effective for
      financial statements for fiscal years beginning after November 15, 2007. Earlier
      application is permitted provided that the reporting entity has not yet issued
      financial statements for that fiscal year. In November 2007, FASB agreed to
      a
      one-year deferral of the effective date for nonfinancial assets and liabilities
      that are recognized or disclosed at fair value on a recurring basis. We are
      currently evaluating the provisions of FASB 157 to determine the future impact
      on the Company’s consolidated financial statements.





In
      December 2006, the FASB issued FASB Staff Position EITF Issue No. 00-19-2,
“Accounting for Registration Payment Arrangements,” or FSP 00-19-2, which
      addresses an issuer’s accounting for registration payment arrangements.
      FSP 00-19-2 specifies that the contingent obligation to make future
      payments or otherwise transfer consideration under a registration payment
      arrangement, whether issued as a separate agreement or included as a provision
      of a financial instrument or other agreement, should be separately recognized
      and measured in accordance with SFAS No. 5, “Accounting for
      Contingencies.” FSP EITF 00-19-2 also requires additional disclosure
      regarding the nature of any registration payment arrangements, alternative
      settlement methods, the maximum potential amount of consideration and the
      current carrying amount of the liability, if any. FSP 00-19-2 was issued in
      December 2006 and was effective immediately for registration payment
      arrangements and the financial instruments subject to those arrangements that
      were entered into or modified subsequent to the issuance of FSP 00-19-2.
      For registration payment arrangements and financial instruments subject to
      those
      arrangements entered into prior to the issuance of FSP 00-19-2, it is
      effective for financial statements issued for fiscal years beginning after
      December 15, 2006. We have adopted the provisions of FSP 00-19-2
      effective January 1, 2007 and have determined that the adoption had no
      material impact on our consolidated financial statements.




F-9




On
      February 15, 2007, the FASB issued Statement of Financial Accounting
      Standards No. 159, *“The
      Fair Value Option for Financial Assets and Financial Liabilities — Including an
      Amendment of FASB Statement No. 115”* (“SFAS
      159”). This standard permits an entity to measure financial instruments and
      certain other items at estimated fair value. Most of the provisions of SFAS
      No. 159 are elective; however, the amendment to FASB
      No. 115, *“Accounting
      for Certain Investments in Debt and Equity Securities,”* applies
      to all entities that own trading and available-for-sale securities. The fair
      value option created by SFAS 159 permits an entity to measure eligible items
      at
      fair value as of specified election dates. The fair value option (a) may
      generally be applied instrument by instrument, (b) is irrevocable
      unless a new election date occurs, and (c) must be applied to the entire
      instrument and not to only a portion of the instrument. SFAS 159 is effective
      as
      of the beginning of the first fiscal year that begins after November 15,
      2007. Early adoption is permitted as of the beginning of the previous fiscal
      year provided that the entity (i) makes that choice in the first
      120 days of that year, (ii) has not yet issued financial statements
      for any interim period of such year, and (iii) elects to apply the
      provisions of FASB 157.
      Management is currently evaluating the impact of SFAS 159, if any, on the
      Company’s financial statements. The adoption of SFAS No. 159 is not expected to
      have a material effect on its financial position, results of operations or
      cash
      flows.





In
      December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
      Consolidated Financial Statements, an amendment of Accounting Research Bulletin
      No 51” (SFAS 160). SFAS 160 establishes accounting and reporting standards for
      ownership interests in subsidiaries held by parties other than the parent,
      changes in a parent’s ownership of a noncontrolling interest, calculation and
      disclosure of the consolidated net income attributable to the parent and the
      noncontrolling interest, changes in a parent’s ownership interest while the
      parent retains its controlling financial interest and fair value measurement
      of
      any retained noncontrolling equity investment. SFAS 160 is effective for
      financial statements issued for fiscal years beginning after December 15, 2008,
      and interim periods within those fiscal years. Early adoption is prohibited.
      The
      adoption of SFAS No. 160 is not expected to have a material effect on its
      financial position, results of operations or cash flows.





In
      December 2007, the FASB issued SFAS 141R, *Business Combinations* (“SFAS
      141R”), which replaces FASB SFAS 141, *Business Combinations.* This
      Statement retains the fundamental requirements in SFAS 141 that the acquisition
      method of accounting be used for all business combinations and for an acquirer
      to be identified for each business combination. SFAS 141R defines the acquirer
      as the entity that obtains control of one or more businesses in the business
      combination and establishes the acquisition date as the date that the acquirer
      achieves control.  SFAS 141R will require an entity to record
      separately from the business combination the direct costs, where previously
      these costs were included in the total allocated cost of the
      acquisition.  SFAS 141R will require an entity to recognize the assets
      acquired, liabilities assumed, and any non-controlling interest in the acquired
      at the acquisition date, at their fair values as of that date.  This
      compares to the cost allocation method previously required by SFAS No.
      141.  SFAS 141R will require an entity to recognize as an asset or
      liability at fair value for certain contingencies, either contractual or
      non-contractual, if certain criteria are met.  Finally, SFAS 141R will
      require an entity to recognize contingent consideration at the date of
      acquisition, based on the fair value at that date.  This Statement
      will be effective for business combinations completed on or after the first
      annual reporting period beginning on or after December 15,
      2008.  Early adoption of this standard is not permitted and the
      standards are to be applied prospectively only.  Upon adoption of this
      standard, there would be no impact to the Company’s results of operations and
      financial condition for acquisitions previously completed.  The
      adoption of SFAS No. 141R is not expected to have a material effect on its
      financial position, results of operations or cash flows.





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





**NOTE
      2 - PROPERTY AND EQUIPMENT**





At
      December 31, 2007 and 2006 property and equipment consisted of the following:


Useful
              
              2007
              
              2006Lives
              
              Amount
              
              AmountFurniture
                  and fixtures
              
              
              5-7
              
              $
              55,797
              
              $
              67,025Equipment
              
              
              5-7
              
              
              266,368
              
              
              267,818322,165
              
              
              334,843Less:
                  accumulated depreciation
              
              
              
              
              
              202,271
              
              
              168,011$
              119,894
              
              $
              166,832




F-10


**NOTE
        3 - INTELLECTUAL PROPERTY**


In
      July
      2006, EnerTeck acquired the EnerBurn technology. The purchase price for the
      EnerBurn technology is as follows: (i) $1.0 million cash paid on July 13, 2006,
      and (ii) a promissory note for $2.0 million. In May of 2007, we made the initial
      payment of $500,000 plus interest against the loan. EnerTeck has determined
      that
      the life of the intellectual property is indefinite; therefore, the asset is
      not
      amortized. The Company has tested the asset for impairment and has determined
      that no impairment exists at December 31, 2007.





**NOTE
      4 - 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 $9,600,000 at December 31, 2007, and will expire beginning in
      2024.





Deferred
      income taxes consist of the following at December 31, 2007 and
      2006:





**2007**
            
            **2006**Assets:Net
                operating loss carryforwards
            
            $
            3,271,000
            
            $
            2,850,000Valuation
                allowance
            
            
            (3,119,000
            )
            
            (2,850,000
            )$
            152,000
            
            $
            -Liabilities:Amortization
                differences
            
            $
            (108,000
            )
            $
            -Depreciation
                differences
            
            
            (44,000
            )
            
            -$
            (152,000
            )
            $
            -




The
      change in the valuation allowance for the years ended December 31, 2007 and
      2006, was $269,000 and $185,000, respectively





**NOTE
      5 - 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.





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





During
      the year ended December 31, 2004, EnerTeck received $224,800 from the exercise
      of 220,000 warrants at an exercise price of $1.00 per share and 4000 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.




F-11





The
      holders of a majority of the issued and outstanding shares of common stock
      of
      the Company authorized an amendment to the Company's Articles of Incorporation
      to change the par value of the Company's common stock from $.001 to $.0001
      to
      enable it to affect a four to one forward stock split. An Information Statement
      was circulated to all shareholders of the Company in October 2004. However,
      the
      Board of Directors, as was its right, chose to indefinitely postpone these
      actions because of market conditions and the public trading price of the
      Company's common stock.





During
      August of 2004, EnerTeck authorized ten million shares of Preferred Stock with
      $0.001 par value. None of the Preferred Stock is issued and outstanding for
      the
      period ended December 31, 2004.





During
      the quarter ended September 30, 2005, EnerTeck issued 250,000 shares of its
      common stock to certain accredited investors for aggregate proceeds of $250,000.
      All of such securities were issued in reliance upon the exemption from
      registration pursuant to Section 4(2) of the Securities Act of 1933, as amended,
      and Rule 506, hereunder. ****





During
      2005, EnerTeck issued a total of 1,560,000 shares of common stock to various
      individuals for services valued at $706,400.





In
      April
      2005, EnerTeck cancelled 260,150 shares of common stock.





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 to the company. These shares were recorded at their
      fair
      value of $985,000.





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





During
      2005, EnerTeck issued 650,000 shares of common stock to settle debt of $155,687.
      The shares had a value of $874,000 on the settlement date. EnerTeck recorded
      a
      loss of $718,313 on the settlement of the debt.





In
      December 2005, EnerTeck reissued 2,750,000 shares of the 3,000,000 shares of
      common stock cancelled in 2004 (see above) to four of its founding shareholders.
      The 250,000 remaining shares were not reissued until December 2006. The
      3,000,000 shares were valued at $7,050,000, which was recorded as compensation
      expense for 2005. $587,500 of the compensation expense, represented by the
      shares not yet reissued as of December 31, 2005, has been reported as a current
      accrued liability at that date.





On
      December 9, 2005, EnerTeck sold 2,450,000 shares of common stock to BATL
      Bioenergy LLC for $3,000,000. BATL Bioenergy LLC was granted 1,000,000 warrants
      for future common stock purchases at an exercise price of $2.00 per
      share.





Between
      May 1, 2007 and May 16, 2007, the Company sold a total of 1,000,000 shares
      of
      common stock at $0.75 per share to seven investors for total gross proceeds
      of
      $750,000 in a private placement offering to accredited investors only.




**NOTE
      6 - STOCK WARRANTS** **AND
      OPTIONS**





**Stock
      Warrants**





During
      2005 and 2006, EnerTeck issued warrants to consultants and employees as follows:





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.





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 the company.
      These warrants were valued using Black-Scholes with the resulting fair value
      of
      $24,000 charged to compensation expense.




F-12





Also,
      in
      December 2005, Atheneum Capital LLC was issued warrants to acquire 500,000
      shares of common stock at $1.00 per share for past consulting services. These
      warrants were valued using Black-Scholes with the resulting fair value of
      $1,172,380 charged to compensation expense.





Variables
      used in the Black-Scholes option-pricing model to determine the value of the
      warrants issued during 2005 include (1) risk-free interest rate of 5.0%, (2)
      expected life is the actual remaining life of the warrants, (3) expected
      volatility is 198.48%, and (4) zero expected dividends.





In
      April,
      2006, an additional 30,000 warrants were granted to Mr. Thomas Donino of BATL
      Bioenergy LLC and his designee pursuant to the terms of an agreement made as
      part of the BATL stock purchase in December, 2005. These warrants have an
      exercise price of $2.00 per share and expire in five years. These warrants
      were
      valued using the Black-Scholes Model and the fair value of $64,500 was charged
      to operating expense during 2006.





In
      October, 2007, an additional 510,000 warrants were granted to Mr. Thomas Donino
      of BATL Bioenergy LLC and his designee pursuant to the terms of an agreement
      made as part of the BATL stock purchase in December, 2005. These warrants have
      an exercise price of $2.00 per share and expire in five years from their issue
      date. These warrants were valued using the Black-Scholes Model and the fair
      value of $374,667 was charged to operating expense during 2007.





Summary
      information regarding warrants is as follows:


WeightedaverageWarrants
              
              
              Share
                  PriceOutstanding
                  at December 31, 2004
              
              
              3,306,650
              
              
              1.12Year
                  ended December 31, 2005:Granted
              
              
              1,100,000
              
              
              2.00Exercised
              
              
              -
              
              
              -Expired
              
              
              -
              
              
              -Outstanding
                  at December 31, 2005
              
              
              4,406,650
              
              $
              1.34Year
                  ended December 31, 2006:Granted
              
              
              30,000
              
              
              2.00Exercised
              
              
              10,000
              
              
              1.20Expired
              
              
              -
              
              
              -Outstanding
                  at December 31, 2006
              
              
              4,426,650
              
              $
              1.34Year
                  ended December 31, 2007:Granted
              
              
              510,000
              
              
              2.00Exercised
              
              
              -
              
              
              **-**Expired
              
              
              -
              
              
              -Outstanding
                  at December 31, 2007
              
              
              4,936,650
              
              $
              1.41






F-13




Warrants
      outstanding and exercisable as of December 31, 2007:




WeightedAverage
              
              ExercisableNumber
                  of
              
              Remaining
              
              Number
                  ofExercise
                  Price
              
              Warrants
              
              Life
              
              Warrants$1.00
              
              
              1,430,000
              
              
              1.4
              
              
              1,430,000$1.20
              
              
              1,864,150
              
              
              .8
              
              
              1,864,150$2.00
              
              
              1,640,000
              
              
              3.5
              
              
              1,640,000$3.40
              
              
              2,500
              
              
              .3
              
              
              2,5004,936,650
              
              
              
              
              
              4,936,650
  **Stock
        Options**





In
      September 2003, shareholders of the Company approved an employee stock option
      plan (the “2003 Option Plan”) authorizing the issuance of options to purchase up
      to 1,000,000 shares of common stock. The 2003 Option Plan is intended to give
      the Company greater ability to attract, retain, and motivate officers, key
      employees, directors and consultants; and is intended to provide the Company
      with the ability to provide incentives more directly linked to the success
      of
      the Company’s business and increases in shareholder value. As of December 31,
      2007, no options have been issued under the 2003 Option Plan. On January 15,
      2008, options to acquire 64,200 shares were issued under the 2003 Option Plan
      to
      five employees which options are immediately exercisable. These
      options have an exercise price of $0.80 per share and expire in five years
      from
      their issue date. These
      options were valued using the Black-Scholes Model and the fair value of $47,000
      will be charged to operating expense during the first quarter of
      2008.





**NOTE
      7 - NOTE PAYABLE**





The
      Company has a note payable in connection with its acquisition of intellectual
      property. The note requires four annual payments of $500,000 plus interest
      at 4%
      compounded on a monthly basis, starting July 2007. The note is secured by the
      intellectual property. The initial payment of $500,000 plus related interest
      was
      made in advance of the due date in May, 2007, leaving a remaining balance of
      $1,500,000.





**NOTE
      8 - 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.





In
      October 2005, we entered into a letter of intent to acquire Ruby Cat, the
      formulator of our products (the “Ruby Cat LOI”). Despite the Ruby Cat LOI to
      acquire Ruby Cat, we subsequently changed negotiations to simply acquire the
      EnerBurn technology and associated assets. These negotiations were successfully
      completed during the third quarter of 2006, with the completion of the
      acquisition of the EnerBurn technology and associated assets on July 13, 2006
      for a total purchase price of $3,000,000. As a result of the acquisition, we
      were required to make an immediate payment of $1,000,000 at closing and we
      were
      to make additional annual payments of $500,000 per year, plus interest at a
      rate
      of 4% for four years, all of which will draw significantly on future cash
      reserves. During the second quarter of 2007, we made the first of these $500,000
      note payments in advance of the due date to allow us to take advantage of a
      significant savings in interest by doing so. This acquisition allows us to
      manufacture our own on and off road versions of the EnerBurn product line and
      has allowed for significant savings in the cost requirements of product sales
      from manufacturing.




F-14





**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,
              
              Amount2008
              
              $
              47,6352009
              
              
              47,6352010
              
              
              15,878Total
              
              $
              111,148




Rent
      expense for the years ended December 31, 2007 and December 31, 2006 totaled
      $43,553 and $43,140, respectively. The current lease expires April 30, 2010.
      A
      three year lease was negotiated in 2007 and contained terms similar to those
      of
      past years.





**Registration
      Rights Agreement**





In
      connection with the BATL Agreement, the Company and BATL entered into a
      Registration Rights Agreement dated as of December 8, 2005 (the “Registration
      Rights Agreement”), whereby the Company has 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. The Company
      has agreed to use its 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 240th 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 the Company 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. In April 2006, the Company
      entered into a letter agreement with BATL amending and clarifying certain
      provisions of the Registration Rights Agreement. Pursuant to the April 2006
      letter agreement, it was agreed (i) that the number of Penalty Warrants issuable
      for all periods prior to April 30, 2006 in respect of delays in filing the
      Registration Statement shall be 30,000, and (ii) 28,500 of such warrants shall
      be issued to Thomas F. Donino and 1,500 of such warrants shall be issued to
      Jay
      Goldstein. In October 2007, the Company entered into another letter agreement
      with BATL pursuant to which it was agreed that in the event the Effective Date
      occurs during the period from and including April 30, 2006 through April 30,
      2008 (the “Fixed Period”), the number of shares of Common Stock underlying any
      Penalty Warrant issuable due to the fact that the Registration Statement was
      not
      declared effective by the Effective Date shall be 510,000 (the “Fixed Penalty
      Warrant”), regardless of at which point during the Fixed Period the Effective
      Date occurs. In October 2007, the Fixed Penalty Warrant was delivered to BATL.
      The October 2007 letter agreement further provides that if the Effective Date
      shall have not occurred on or prior to April 30, 2008, then the Company shall
      once again be obligated to issue a Penalty Warrant to BATL per 30-day period
      following the Fixed Period that the Effective Date has not occurred, in
      accordance with the terms of the Registration Rights Agreement. As of the date
      of this statement, the Company does not believe that it is probable that it
      will
      be required to issue any additional Penalty Warrants to BATL under this
      arrangement. However, no assurance can be given that such will be the
      case.





**Ability
      to Continue as a Going Concern**





The
      accompanying financial statements have been prepared assuming that the Company
      will continue as a going concern which contemplates the realization of assets
      and satisfaction of liabilities in the normal course of business. During the
      years ended December 31, 2007 and 2006, the Company incurred recurring net
      losses of $1,004,000 and $639,000, respectively. In addition, at December 31,
      2007, the Company has an accumulated deficit of $17,876,742. These conditions
      raise substantial doubt about the Company’s ability to continue as a going
      concern. The financial statements do not include any adjustments that might
      be
      necessary if the Company is unable to continue as a going concern.





The
      Company’s continuation as a going concern is contingent upon its ability to
      obtain additional financing and to generate revenues and cash flow to meet
      its
      obligations on a timely basis. Management believes that sales revenues for
      2007
      were considerably less than earlier anticipated primarily due to circumstances
      which have been corrected or are in the process of being corrected and therefore
      should not reoccur in the future. Management expects that both marine and
      trucking sales should show significant increases in 2008. In addition,
      management is also currently putting sales strategies in place to other
      industries in an effort to increase revenues and cash flow. No assurance can
      be
      made that any of these efforts will be successful.




F-15





Currently
      there are 4,936,550 warrants outstanding with a total exercised value of
      $6,955,000. Of these, there are 2,426,650 warrants with an exercised value
      of
      $2,731,000 which will expire during 2008. If a substantial number of these
      warrants are exercised on or before the expiration date, this will provide
      sufficient capital for the next twelve months. In addition, the Company has
      been
      able to generate working capital in the past through private placements and
      believes that these avenues will remain available to the Company if additional
      financing is necessary. No assurances can be made, however, that the warrants
      will be exercised or that the Company will be able to obtain such other
      additional financing on terms acceptable to the Company or at all.





**NOTE
      9 - CONCENTRATION OF CREDIT RISK**





For
      the
      year ended December 31, 2005 EnerTeck purchased 100% of its products from
      RubyCat. In July, 2006 EnerTeck completed the purchase of the RubyCat technology
      rights.





Financial
      instruments that potentially subject EnerTeck to concentration of credit risk
      are accounts receivable. Currently all Accounts Receivable are considered
      collectible. 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, 2007, EnerTeck had $256,046 in cash
      in excess of FDIC insurance limits.





**NOTE
      10 - REVENUE FROM MAJOR CUSTOMERS**





O ne
      customer represented 59.7% of the company’s sale revenues for the year ended
      December 31, 2007 as compared to 80.8% of the company’s sales revenues for the
      year ended December 31, 2006. The company had a pending sale prepared for
      shipment, but had no receivables outstanding for this major customer at year
      end
      December 31, 2007 as compared to $264,000 in receivables from this customer
      at
      year end December 31, 2006..




F-16