UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
DC  20549
 
 FORM
10-K
 
 x ANNUAL REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
 SECURITIES
EXCHANGE ACT OF 1934
 
 For the
fiscal year ended DECEMBER 31,
2008
 
 o TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
 SECURITIES
EXCHANGE ACT OF 1934
 
 Commission
file number 0-31981
 
 ENERTECK
CORPORATION
 (Exact
Name of Registrant as Specified in Its Charter)
 
 Delaware
                (State
      or other jurisdiction
                of
      incorporation or organization)
              47-0929885
                (I.R.S.
      Employer
                Identification
      Number)
 
 10701
      Corporate Drive, Suite 150
                Stafford,
      Texas
                (Address
      of principal executive offices)
              77477
                (Zip
      Code)
 
 Registrant’s
telephone number, including area code:(281)
240-1787
 
 Securities
registered pursuant to Section 12(b) of the Exchange Act:None
 
 Securities
registered pursuant to Section 12(g) of the Exchange Act: Common Stock ($.001 par
value)
 
 Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.
 Yes oNo x
 
 Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Act.
 Yes oNo x
 
 Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
 Yes xNo
o
 
 Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. o
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definition of “large accelerated filer”,
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):
 
 Large
      accelerated filer
              o
              Accelerated
      filer
              oNon-accelerated
      filer
              o
              Smaller
      reporting company
              x
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act).
 Yes oNo
x
 
 The
aggregate market value of the voting and non-voting common equity held by
non-affiliates of the registrant (9,955,134 shares) as of June 30, 2008, the
last business day of the registrant’s most recently completed second fiscal
quarter, was approximately $7,964,000.  The number of shares
outstanding of the Common Stock ($.001 par value) of the registrant as of the
close of business on March 1, 2009was
19,087,788.
 
 Documents
Incorporated by Reference:  None
  
 
  ENERTECK
CORPORATION
 
 TABLE
OF CONTENTS
 
 
 PART
      IPageItem
      1.
              Description
      of Business
              3Item
      1A.
              Risk
      Factors
              11Item
      1B.
              Unresolved
      Staff Comments
              16Item
      2.
              Properties
              16Item
      3.
              Legal
      Proceedings
              16Item
      4.
              Submission
      of Matters to a Vote of Security Holders
              16PART
      IIItem
      5.
              Market
      for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
              16Item
      6.
              Selected
      Financial Data
              18Item
      7.
              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
              18Item
      7A.
              Quantitative
      and Qualitative Disclosures About Market Risk
              26Item
      8.
              Financial
      Statements and Supplementary Data
              26Item
      9.
              Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
              26Item
      9A(T).
              Controls
      and Procedures
              26Item
      9B.
              Other
      Information
              27PART
      IIIItem
      10.
              Directors,
      Executive Officers and Corporate Governance
              27Item
      11.
              Executive
      Compensation
              29Item
      12.
              Security
      Ownership of Certain Beneficial Owners and Management and RelatedStockholder
      Matters
              31Item
      13.
              Certain
      Relationships and Related Transactions, and Director
      Independence
              31Item
      14.
              Principal
      Accountant Fees and Services
              32PART
      IVItem
      15.
              Exhibits
      and Financial Statement Schedules
              32Signatures
              34
  2
  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.
                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 2007.  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 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.
  4
 Primarily
as a result of our relationship with Custom, we had product sales of $396,000 in
2007 and $282,000 in 2008.  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
marine industry to expand this market and in other larger markets to expand the
overall sales of the Company, something that must be accomplished to make the
Company successful.  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 for 2008 were considerably less than earlier anticipated primarily due
to three unforeseen events first occurring during 2007 and were still being
addressed for much of 2008: (i) an equipment malfunction on the Mississippi
River that apparently started early in the Spring of 2007, which went undetected
by the vendor for an extended period of time, causing a severe reduction of fuel
dosage of its fleet, (ii) a delay of over a year 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
(iii) a delay of more than a year by  major vendors in the completion
of final development, testing and availability of on-truck dosing units required
for use by most trucks operating in the trucking industry, until late
2008.  As a result, the Company has located and is working with a
second firm to supply another design which can also handle the function for the
trucking industry.  We now believe that if not for the occurrence of
these events, we may have been able to achieve significant sales in
2008.  With our assistance, each of these problems has been addressed
and has been either corrected or close to being corrected.   It
is expected that sales should show significant increases throughout 2009,
despite the problems with the economy.
 
 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.
  5
  While diesel engines are the only
existing cost-effective technology making significant inroads in reducing
“global warming” emissions from motor vehicles, it is not sufficient to satisfy
regulators and legislators. Diesel engines will soon be required to adhere to
stringent regulatory/legislative guidelines that meet near “zero” tailpipe
emissions, especially on smog-forming nitrogen oxides (NOx), particulate matter
(PM) and “toxins”; the organic compounds of diesel exhaust.
 
 Diesel engines can become ultra-clean.
Meeting the environmental challenges will require extensive research on
clean-diesel technology. Research in this area is currently being sponsored by
government agencies, major engine companies, truck manufacturers, automobile
makers, catalyst producers and, for fuels, oil refining companies and their
technology suppliers.
 
 The search for ultra-clean diesel is
far from over. Discoveries and breakthroughs will continue to prevail. Large
Fortune 500 companies, as well as small, emerging technology companies are
investing hundreds of millions of dollars in research and development worldwide
on these and other clean-diesel technologies.
 
 Today, there is no economic alternative
to diesel engines for most industrial applications. This is true for ocean
vessels, tug boats, commercial/recreational vessels, locomotive, trucking, bus
transport, construction, mining, 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.
 
 6
 
 Product Testing
 
 Southwest Research
Institute
 
 The Southwest Research Institute
(“SWRI”) of San Antonio, Texas has extensively tested the EnerBurn technology.
This institute is an independent, nonprofit, applied engineering and physical
sciences research and development organization with 11 technical divisions using
multidisciplinary approaches to problem solving. The Institute occupies 1,200
acres and provides nearly two million square feet of laboratories, test
facilities, workshops, and offices for more the 2,700 employees who perform
contract work for industry and government clients.
 
 The extensive testing of EnerBurn
conducted by SWRI confirmed product claims of lower highway smoke, reduced NOx
emissions, a significant reduction in engine wear and an increase in horsepower.
Actual customer usage data has also confirmed the claim that EnerBurn usage
reduces fuel consumption.
 
 EnerBurn Proof of Performance
Demonstrations
 
 An integral part of our sales process
is to conduct proof of performance demonstrations for potential customers
wherein we accumulate historical fleet data that documents the effects of the
use of EnerBurn (i.e. advantages in terms of increased fuel economy, a decrease
in engine wear and reductions in toxic emissions) on that customer’s specific
vehicles or vessels. In connection with these 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.
  8
  Our sales process begins with a proof
of performance demonstration that is a thorough analysis of the potential
customer, including fleet type, size, and opportunity. (See “Business - Product
Testing - EnerBurn Proof of Performance Demonstrations”, above). This is
followed with sales presentations at both the executive level and maintenance
level. Executive level sales presentations emphasize return on investment
(“ROI”), while maintenance level sales presentations emphasize our technology
and why it does not impact engine warranties and any potential business risk
associated with a fleet shutdown.
 
 Convincing a potential customer to
undertake a proof of performance demonstration is a difficult task because there
is a significant expense to be borne by the potential customer. Specifically,
the potential customer must pay for both the EnerBurn that is used during the
demonstration as well as purchase the additive injection equipment that is also
needed. The cost will vary according to the potential customer and the industry
in which it is in. For a proof of performance demonstration on a typical fleet
of 100 diesel engine trucks, the cost of the EnerBurn would be approximately
$30,000, while the average cost of the equipment used would be approximately
$20,000 to $50,000. The personnel costs related to providing fleet monitoring
services and forecasts of fuel consumption for the potential customer’s analysis
are borne either by the Company, its supplier or the sales agent. For a
demonstration involving a fleet of 100 hundred trucks, typically 50 to 100
man-hours are involved. The current sales cycle from inception to full customer
implementation is typically six to 12-months from initial customer contact. This
includes the two to six months it usually takes for the benefits of EnerBurn to
begin to take effect in the subject engines during the proof of performance
demonstration period.
 
 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.
 
 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.  The first payment of $500,000 was made in
July 2007.  An additional $500,000 due July 13, 2008 was also made in
advance of the due date, on July 3, 2008.  The remaining payments to
complete the purchase are due on July 13, 2009 and 2010,
respectively.
  9
  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, which will end in
2009.  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.   We anticipate that any
additional manufacturing arrangements with other contract manufacturing
companies will be structured on similar terms to the ICP
arrangement.
 
 Competition
 
 The
market for products and services that increase diesel fuel economy, reduce
emissions and engine wear is rapidly evolving and intensely competitive and
management expects it to increase due to the implementation of stricter
environmental standards. Competition can come from other fuel additives, fuel
and engine treatment products and from producers of engines that have been
modified or adapted to achieve these results. In addition, the
we  believe that new technologies, including additives, will further
increase competition.
 
 Our primary current competitors include
Lubrizol Corporation, Chevron Oronite Company (a subsidiary of Chevron
Corporation), Octel Corp., Clean Diesel Technologies, Inc. and Ethyl
Corporation.
 
 Many of
our competitors have been in business longer than it has, have significantly
greater financial, technical, and other resources, or greater name recognition.
Our competitors may be able to respond more quickly to new or emerging
technologies and changes in customer requirements. Competition could negatively
impact our business. Competitive pressures could cause us to lose market share
or to reduce the price of its products, either of which could harm its business,
financial condition and operating results.
 
 Management believes that the principal
competitive factors in the Company’s market include the:
 
 ·
              effectiveness
      of the product;
 ·
              cost;
 ·
              proprietary
      technology;
 ·
              ease
      of use; and
 ·
              Quality
      of customer service and support.
  10
 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 seven 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.
 
 
 Item
      1A.
              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
 
 THE
CURRENT FINANCIAL CRISES AND DETERIORATING ECONOMIC CONDITIONS MAY HAVE A
MATERIAL ADVERSE IMPACT ON OUR BUSINESS AND FINANCIAL CONDITION THAT WE
CURRENTLY CANNOT PREDICT.The
economic conditions in the United States and throughout the world have been
deteriorating.  Global financial markets have been experiencing a
period of unprecedented turmoil and upheaval characterized by extreme volatility
and declines in prices of securities, diminished liquidity and credit
availability, inability to access capital markets, the bankruptcy, failure,
collapse or sale of financial institutions and an unprecedented level of
intervention from the United States federal government and other governments.
Unemployment has risen while businesses and consumer confidence have declined
and there are fears of a prolonged recession.  Although we cannot
predict the impacts on us of the deteriorating economic conditions, they could
materially adversely affect our business and financial condition. For example,
the consequences of such deteriorating economic conditions could include
interruptions or delays in our suppliers’ or customers’ performance of any
contracts, reductions and delays in customer purchases, delays in or the
inability of customers to obtain financing to purchase our products, and
bankruptcy of customers.  We may also find it more costly or difficult to
obtain financing to fund operations, or to refinance our debt in the
future.  There can be no assurance that we will be able to raise
additional capital or debt when necessary or desirable.  Any of these
events may materially adversely affect our business.
  11
  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, 2008 and 2007, we
generated revenues of $268,000 and $396,000, respectively, and incurred net
losses of $1,524,000 and $1,004,000, 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 affect 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.
 
 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 of $396,000 in 2007 and
$282,000 in 2008.  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.
  13
  RELIANCE
UPON THIRD-PARTY MANUFACTURER FOR OUR PRODUCTS COULD CAUSE DELIVERY OF PRODUCT
ISSUES THAT COULD DECREASE REVENUES.  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 which term expires in 2009.  ICP is presently our
sole manufacturer.  We believe we will be able to secure other
manufacturers if necessary in 2009.  We understand that a
deterioration or cessation of our relationship with ICP could have an adverse
effect, at least temporarily, until new relationships are satisfactorily in
place.  No assurance can be made that we will be able to secure other
manufacturing arrangements on terms acceptable to the Company.  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.   The second $500,000 payment plus accrued
interest was also made in advance of the due date in July 2008.
 
 WE ARE
DEPENDENT ON KEY PERSONNEL INCLUDING OUR EXECUTIVE OFFICERS.  Due to
the specialized nature of our business, our success depends in part upon
attracting and retaining the services of qualified managerial and technical
personnel.  The market for such persons remains competitive and the
relative small size of the Company may make it more difficult for us to recruit
and retain qualified persons.  In addition, and since we are a small
company, a loss of one or more of our current officers could severely and
negatively impact our operations.
 
 Risks
Related To Our Common Stock
 
 WE HAVE
ISSUED A SUBSTANTIAL NUMBER OF WARRANTS TO PURCHASE OUR COMMON STOCK WHICH WILL
RESULT IN SUBSTANTIAL DILUTION TO THE OWNERSHIP INTERESTS OF OUR EXISTING
SHAREHOLDERS.As of December 31, 2008, we had 19,087,788 shares of common stock
outstanding. Up to an additional 2,910,047.5 shares are issuable upon the
exercise of the warrants currently outstanding and up to 64,200 shares are
issuable upon exercise of options currently outstanding.  The exercise
of all of these warrants and options will substantially dilute the ownership
interests of our existing shareholders.
 
 WE DO NOT
INTEND TO PAY DIVIDENDS IN THE FORESEEABLE FUTURE.  We have never
declared or paid a dividend on our common stock. We intend to retain earnings,
if any, for use in the operation and expansion of our business and, therefore,
do not anticipate paying any dividends in the foreseeable future.
  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.
 
 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.
  15
  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
      1B.
              Unresolved
      Staff Comments.
 
 We are a
smaller reporting company as defined by Rule 12b-2 of the Securities Exchange
Act of 1934 and are not required to provide the information under this item.
 
 
 Item 2.
              Properties.
 
 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, 2008 and December
31, 2007 totaled approximately $48,075 and $43,553,
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 except as described
below.
 
 Based
upon information which has recently come to management’s attention, the Company
is investigating and if necessary intends to take appropriate legal action to
enforce its rights under the EnerBurn Acquisition Agreement as it relates to
protected confidential and proprietary information under such agreement. Based
upon its initial investigation, management believes certain confidential and
proprietary information has been disclosed to third parties in violation of the
EnerBurn Acquisition Agreement and the Company has demanded that such parties
cease and desist from disclosing and/or using such information in violation of
the EnerBurn Acquisition Agreement.   While no lawsuit has to
date been filed, it is the intention of management to further investigate these
allegations and protect its contractual rights to its technology to the fullest
extent and to take all legal action which may be necessary.
 
 Item
      4.
              Submission
      of Matters to a Vote of Security
Holders.
 
 No matter was submitted during the
fourth quarter of the fiscal year covered by this report to a vote of security
holders.
 
 PART
II
 
 Item
      5.
              Market
      for Registrant’s Common Equity, Related Stockholder Matters and 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 sales
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.
 
 16
  Year
      ended December 31, 2007:
                
                High
                
                
                LowJan.
      1, 2007 to March 31, 2007
                
                $
                0.99
                
                
                $
                0.55April
      l, 2007 to June 30, 2007
                
                $
                1.51
                
                
                $
                0.70July
      1, 2007 to Sept. 30, 2007
                
                $
                1.35
                
                
                $
                0.75Oct.
      1, 2007 to Dec. 31, 2007
                
                $
                1.35
                
                
                $
                0.75
 
 Year
      ended December 31, 2008:
                  
                  High
                  
                  
                  LowJan.
      1, 2008 to March 31, 2008
                  
                  $
                  1.10
                  
                  
                  $
                  0.75April
      l, 2008 to June 30, 2008
                  
                  $
                  1.05
                  
                  
                  $
                  0.55July
      1, 2008 to Sept. 30, 2008
                  
                  $
                  0.94
                  
                  
                  $
                  0.38Oct.
      1, 2008 to Dec. 31, 2008
                  
                  $
                  0.99
                  
                  
                  $
                  0.13
 Holders
 
 As of
March 1, 2009, there were approximately 920 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
 
 We sold
the following equity securities during the fiscal year ended December 31, 2008
that were not registered under the Securities Act of 1933, as
amended:
 
 During
the second quarter of 2008, we issued 526,334 shares of common stock upon the
exercise of warrants at an aggregate exercise price of $333,800.  The
foregoing shares were issued in reliance upon the exemption from registration
pursuant to Section 4(2) of the Securities Act of 1933, as amended.
 
 During
the third quarter of 2008, we sold 800,095 shares of its common stock at $0.70
per share to 15 investors for total gross proceeds of $560,066.50 in a private
placement offering to accredited investors only.  In connection
therewith, the investors were also issued a total of 400,047.5 warrants
exercisable into shares of common stock at $1.20 per share.  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.  The 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 there
under.
 
 Recent
Stock Option Grants
 
 During
the first quarter of 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.
 
 17
  Equity
Compensation Plan Information
  Plan
      category
                
                Number
      of securities
                  to
      be issued upon
                  exercise
      of
                  outstanding
      options,
                  warrants
      and rights (a)
                
                
                Weighted-average
                  exercise
      price of
                  outstanding
      options,
                  warrants
      and rights (b)
                
                
                Number
      of securities
                  remaining
      available for
                  future
      issuance under
                  equity
      compensation plans
                  (excluding
      securities reflected
                  in
      column (a)) (c)Equity
      compensation plans approved by security holders
                
                
                64,200
                (1)
                
                $
                0.80
                
                
                
                935,800
                (1)Equity
      compensation plans not approved by security holders
                
                
                2,910,047.5
                (2)
                
                $
                1.62
                
                
                
                N/ATotal
                
                
                2,974,247.5
                
                
                $
                1.61
                
                
                
                935,800
 _________________________
 (1)
              Represents
      shares underlying the 2003 Employee Stock Option
  Plan.
 
 (2)
              Represents
      shares underlying the individual grant of
  warrants.
 
 Item
      6.
              Selected Financial
      Data.
 
 We are a
smaller reporting company as defined by Rule 12b-2 of the Securities Exchange
Act of 1934 and are not required to provide the information under this
item.
 
 Item
      7.
                Management’s Discussion and
      Analysis of Financial Condition and Results of
      Operations.
 
 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”).
  18
  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 $282,000 for the year ended December 31, 2008, compared
to revenues of $396,000 for the year ended December 31, 2007, with $0 returned
products, a decrease of $114,000 or 28.8%.  We also recorded a Return
of Sales during 2008, which is an extraordinary item.   While it
is the policy of the Company that, due to potential environmental
issues,  no returns are to be accepted once the product has left the
Company facility, we made a one time exception to take the materials
back.  The primary source of revenue for the years ended December 31,
2008 and 2007 is from the sale of EnerBurn to the railroad, heavy construction
and maritime industries.  The price levels of product sold in 2008 was
relatively comparable to pricing in 2007.  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 several
month delay in the completion of one of the principal Marine fueling facilities
for EnerBurn from the original date projected, and (iii) a delay of nearly two
years in the competition of development, testing and availability of the
on-truck dosing unit required for use by most trucks operating in the trucking
industry, until early 2009.   We believe that if not for the
occurrence of these events, we may have been able to achieve sufficient sales to
have likely made it a profitable in 2008 and 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 2009.
 
 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.
  19
  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 continue for the demonstration and testing with a major American
railroad company.  This follows several years of successful usage of
EnerBurn, our principal product for several years with a small railroad company,
working 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 and the results of the one
time sales return discussed above, was $220,000 or 82.2% of sales for the year
ended December 31, 2008, compared to $322,000 or 81.3% of sales for the year
ended December 31, 2007.  In terms of absolute dollars, gross profit
decreased $102,000 primarily due to the reduced sales achieved in 2008 compared
to 2007.   The gross profit percentage increased 1.2% for the
2008 calendar year compared to the 2007 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 $48,000 for the 2008 calendar year which represented 17.9% of
revenues compared to $74,000 for the 2007 calendar year which represented 18.7%
of revenues.  The decrease in cost of goods sold as a percentage of
revenues primarily reflect 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 for operations decreased to $883,000 for the year ended December 31,
2008 from $928,000 for the year ended December 31, 2007, a decrease of
$45,000.  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 2008 are reasonably consistent with those of the
prior year overall.
 
 Net
Loss
 
 Our net
operating loss amounted to $663,000 for the year ended December 31, 2008 as
compared to $605,000 for the year ended December 31, 2007, an increase in net
operating loss of $72,000 from the prior year.
 
 Total net
loss for the year ended December 31, 2008, was $1,524,000 as compared to a total
net loss of $1,004,000 for the year ended December 31,
2007.   This amounts to an increase in net loss for the year
ended December 31, 2008 of $520,000 as compared with the year ended December 31,
2007.   Such increase was primarily due to a required $825,000
non-cash expense for the estimated impairment of the value of our technology
asset as compared to zero in 2007.   While we feel that the
requirement was due more to issues with our own marketing plan and feel that the
asset is as valuable as ever, we understand that until our marketing effort
becomes successful there is no other way to measure the value of the
asset.    There was a $374,000 non-cash expense in 2007 for
stock-based delay awards compared to zero in 2008.  In 2007, we were
required to issue stock warrants to BATL in compliance with our December 2005
agreement, as amended.  This did not reoccur in 2008 insofar that such
condition has been satisfied..  An additional $53,000 of the net loss
in 2008 consisted of interest expenses paid or payable on the remaining
principal of the Note for the purchase of the technology as compared to $66,000
in 2007, which will decrease each year until the Note is paid in full in
2010.  We also had interest income of $12,000 in 2008 compared to
$24,000 in 2007, primarily due to a greater amount of cash on hand during 2007
compared to 2008, which was not needed for day-to-day operations and could
therefore be deposited in interest earning accounts.   We also
had other income of $4,000 in 2008 compared to $18,000 in
2007.   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.
  20
  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 in
2009.   It is also anticipated that other new customers coming on
board during 2009 will lessen the impact of a loss of Custom, should that
happen.
 
 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.  Effective January 1, 2009, the
marketing effort for the Company has changed with the addition of a new
executive officer (who has been and remains a director), a change in marketing
personnel and a new focus on marketing strategy.    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, 2008, we had negative working capital of $268,000 and stockholders’
equity of $1,505,000 compared to negative working capital of $31,000 and
stockholders’ equity of $2,088,000 on December 31, 2007.   The
majority of the decrease in equity stems directly from the write down in the
current value on our principal asset, caused by poor sales during the past two
periods.    On December 31, 2008, the Company had $106,000
in cash, total assets of $2,562,000 and total liabilities of $1,057,000 compared
to $319,000 in cash, total assets of $3,660,000 and total liabilities of
$1,572,000 on December 31, 2007.
 
 The
decrease in cash and working capital for the year ended December 31, 2008
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.
  21
  Cash used
in operating activities was $595,000 for the year ended December 31, 2008, which
was primarily the result of a loss of $1,524,000 partially offset by non-cash
charges for depreciation of $38,000, 825,000 for impairment and options issued
of $47,000.   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
provided by investing activities was a negative $12,000 for the year ended
December 31, 2008 which was primarily the result of the purchase of equipment,
combined with employee advances and capital expenditures.   Cash
used by investing activities was $22,000 for the year ended December 31, 2007
which was primarily the result repayment of employee advances.  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, two payments of $500,000 of which were paid
during 2008 and 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 due July 13,
2008 was also made in advance of the due date, on July 3, 2008.  The
remaining payments to complete the purchase are due on July 13, 2009 and 2010,
respectively.
 
 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.  Cash provided by financing
activities was $894,000 for the year ended December 31, 2008 primarily from the
sale of a private placement of common stock in the amount of $560,000 and
$334,000 from the exercise of warrants.   These funds were used
primarily to fund the scheduled 2008 payment of $500,000 due on the purchase of
the intellectual property.   This is compared to $750,000
obtained from financing activities during the year ended December 31, 2007 from
the sale of stock, which was used for the 2007 payment of $500,000 on the
purchase of the intellectual property.
 
 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 will
require additional investment to satisfy our contemplated cash requirements for
the next 12 months.  No assurance can be made that we will be able to
obtain such investment on terms acceptable to us or at all. We anticipate that
our costs and expenses over the next 12 months will be approximately $2.6
million, which includes the amount we will have to pay in 2009 on the Note and
for the anticipated cost of inventory for late 2009 business.  Other
than the Note Payable for the purchase of the intellectual property, we
currently have no material commitments for capital requirements.  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
acknowledges that sales revenues for 2007 and 2008 were considerably less than
earlier anticipated.  This was primarily due to a combination of
circumstances which have been corrected or are in the process of being corrected
and therefore should not reoccur in the future and the general state of the
economy.   Management expects that sales should show significant
increases in the later parts of 2009.  No assurances can be made that
we will be able to obtain required financial on terms acceptable to us or at
all.  Our contemplated cash requirements beyond 2009 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.
 
 22
 
 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 2009.   The Company’s remaining inventory was
split on approximately a 60/40 basis between raw materials and finished goods at
December 31, 2008.
 
 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, 2008, there were no
uncollectible accounts and no allowance has been provided.
 
 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.
 
 23
 
 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 tests 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, 2008.  As a result of an
independent examination based on sales for the years ended December 31, 2008 and
2007, an impairment of the asset in the amount of $825,000 was required to be
recorded  which management believes is a reflection of problems with
the marketing plan.   As such, significant changes were made to
the plan and personnel effective January 1, 2009 that will hopefully remedy the
situation in the future.
 
 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 2008 and 2007, potential dilutive securities had an
anti-dilutive effect and were not included in the calculation of diluted net
loss per common share.
 
 Management
Estimates and Assumptions
 
 The
accompanying financial statements are prepared in conformity with accounting
principles generally accepted in the United States of America which require
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.
  24
  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
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 SFAS 157 to determine whether
there will be any future impact on the Company’s consolidated financial
statements.
 
 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 FASB157. We are currently evaluating the provisions of SFAS
159 to determine the Company’s position on adoption and whether there will be
any future impact on the Company’s consolidated financial
statements.
 
 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.
  25
  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.
  Item 7A.
              Quantitative and Qualitative
      Disclosures About Market
Risk.
 
 We are a
smaller reporting company as defined by Rule 12b-2 of the Securities Exchange
Act of 1934 and are not required to provide the information under this
item.
 
 
 Item
      8.
                Financial
      Statements and Supplementary
Data.
 
 See the Financial Statements annexed to
this report.
 
 
 Item
      9.
              Changes
      in and Disagreements with Accountantson
      Accounting and Financial
Disclosure.
 
 None.
  Item
      9A(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,
2008, 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.
 
 26
  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, 2008.
  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.
 
 
 Item
      9B.
              Other
      Information.
 
 Not
applicable.
 
 PART
III
 
 Item
      10.
              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 asName
                Age
                and
      Offices
                Director
      SinceDwaine
      Reese
                66
                Chairman
      of the
                January
      2003Board,
      Chief ExecutiveOfficer
      and DirectorGary
      B. Aman
                61
                President
      and Director
                March
      2005Jack
      D. Cowles
                48
                Director
                March
      2005Thomas
      F. Donino
                47
                Director
                December
      2005Richard
      B. Dicks
                61
                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.
  27
  GARY B.
AMAN has been a director of the Company since March 2005 and President since
March 2009.  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.
 
 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
407(d)(5) of Regulation S-K, 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, 2008, 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, Gary B. Aman filed two reports late
relating to a total of two transactions, Richard B. Dicks 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.
  28
  Code
of Ethics
 
 The Board
of Directors has adopted a Code of Ethics applicable to its principal executive
officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions, which is designed to
promote honest and ethical conduct; full, fair, accurate, timely and
understandable disclosure; and compliance with applicable laws, rules and
regulations.   A copy of the Code of Ethics will be provided to
any person without charge upon written request to the Company at its executive
offices, 10701 Corporate Drive, Suite 150, Stafford, Texas 77477.
 
 
 Item
      11.
              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, 2008 and December 31, 2007, of those persons
who were, at December 31, 2008 (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
                  ($)
                
                
                TotalDwaine
      Reese,
                
                2008
                
                $
                178,153
                
                
                $
                0
                
                
                $
                0
                
                
                $
                18,331
                (1)
                
                $
                0
                
                
                $
                0
                
                
                $
                8,628
                (2)
                
                $
                205,112Chairman
      of the
                  Board
      and Chief
                  Executive
      Officer
                
                2007
                
                $
                178,500
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                $
                7,807
                (2)
                
                $
                186,307
 _______________________
 
 (1)
              Represents
      the dollar amount recognized for financial statement reporting purposes
      with respect to the fiscal year in accordance with SFAS
    123R.
 
 (2)
              Mr.
      Reese was reimbursed $8,628 and $7,807 in 2008 and 2007, respectively, for
      health insurance costs.
 
 Equity
Awards
 
 The following table provides certain
information concerning equity awards held by the named executive officers as of
December 31, 2008.
 
 OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
  Option
      Awards
                
                
                
                
                
                
                Stock
      AwardsName
                
                No.
      of
                  Securities
                  Underlying
                  Unexercised
                  Options
      (#)
                  Exercisable
                
                
                Number
      of
                  Securities
                  Underlying
                  Unexercised
                  Options
      (#)
                  Unexercisable
                
                
                Option
                  Exercise
                  Price
      ($)
                
                Option
                  Expiration
                  Date
                
                Number
      of
                  Shares
      or
                  Units
      of Stock
                  That
      Have Not
                  Vested
      (#)
                
                
                Equity
      Incentive Plan
                  Awards:
      Number of
                  Unearned
      Shares, Units
                  Or
      Other Rights That
                  Have
      Not Vested(#)Dwaine
      Reese
                
                
                25,000
                
                
                
                -0-
                
                
                $
                0.80
                
                1/15/2013
                
                
                -0-
                
                
                
                -0-
  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.  During the first quarter of 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.
  29
 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, 2008, we do have outstanding
warrants to purchase up to 2,910,047.5 shares of our common stock.
 
 Employment Agreements - Executive
Officers and Certain Significant Employees
 
 As of
December 31, 2008, none of our officers and key employees are 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.
 
 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.
 
 The
following table provides certain summary information concerning the compensation
paid to the Company’s non-employee directors during fiscal 2008 for their
services as such.  All compensation paid to Mr. Reese is set forth in
the Summary Compensation table above.
  Director
Compensation
 
 Name
              
              Fees
                Earned
      or
                Paid
      in
                Cash
      ($)
              
              
              Stock
                Awards
      (S)
              
              
              Option
                Awards
      ($)
              
              
              All
      Other
                Compensation
                ($)
              
              
              Total
      ($)Gary
      B. Aman
              
              $
              0
              
              
              
              -0-
              
              
              $
              0
              
              
              
              -0-
              
              
              $
              0Jack
      D. Cowles
              
              $
              0
              
              
              
              -0-
              
              
              $
              0
              
              
              
              -0-
              
              
              $
              0Thomas
      F. Donino
              
              $
              0
              
              
              
              -0-
              
              
              $
              0
              
              
              
              -0-
              
              
              $
              0
 
 Indebtedness
of Management
 
 No member of management was indebted to
the Company during its last fiscal year.
 
 30
 
 Item
      12.
              Security
      Ownership of Certain Beneficial Owners and Managementand
      Related Stockholder Matters.
 
 The
following table sets forth, as of March 1, 2009, 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:
  Name
      of Beneficial Owner
                
                Amount
      and Nature of Beneficial Ownership
                
                
                Percent
      of ClassDwaine
      Reese
                
                
                3,590,000
                (1)
                
                
                17.9
                %BATL
      Bioenergy LLC
                
                
                3,960,000
                (2)
                
                
                19.2
                %Thomas
      F. Donino
                
                
                6,251,889
                (3)
                
                
                30.0
                %Gary
      B. Aman
                
                
                670,000
                (4)
                
                
                3.5
                %Jack
      D. Cowles
                
                
                398,550
                (5)
                
                
                2.1
                %Richard
      B. Dicks
                
                
                114,200
                (6)
                
                
                *All
      Executive Officers and Directors as a Group (5 persons)
                
                
                11,024,639
                
                
                
                52.5
                %
 
 *
              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 1,613,404 shares held by Mr. Donino, 2,450,000 shares held by BATL,
      435,700 shares held by BATL Management LP (“BATL Management”), 1,510,000
      shares underlying warrants held by BATL and 242,785 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 Manage    ment.  The
      address for Mr. Donino is 7 Lakeside Drive, Rye, New
  York.
 
 (4)
              The
      address for Mr. Aman is 10701 Corporate Drive, Suite 150, Stafford,
      Texas.
 
 (5)
              The
      address for Mr. Cowles is 30 Lansdowne Drive, Larchmont, New
      York.
 
 (6)
              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
      13.
              Certain
      Relationships and Related Transactions, and Director
      Independence.
 
 Since
January 1, 2008, 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.
 
 31
 
 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, and Mr. Aman
is the Company’s President.  Messrs. Cowles and Donino are independent
directors.  We have determined their independence using the definition
of independence set forth in Nasdaq Marketplace Rule 4200(a)(15).
 
 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, 2008 and December 31, 2007:
  Fee
      Category
                
                2008
      Fees
                
                
                2007
      FeesAudit
      Fees
                
                $
                33,022
                
                
                $
                38,816Audit
      Related Fees
                
                $
                0
                
                
                $
                0Tax
      Fees
                
                $
                0
                
                
                $
                0All
      Other Fees
                
                $
                0
                
                
                $
                0Total
      Fees
                
                $
                33,022
                
                
                $
                38,816
  Audit
Fees.  Consists of fees billed for professional  services
rendered for the
audit  of  our   financial   statements  and  review  of  interim
consolidated  financial  statements  included in
quarterly  reports and services
that  are  normally  provided  by the
principal accountants
in  connection  with  statutory  and
regulatory filings or engagements.
 
 Audit
Related Fees. Consists of fees billed for assurance and related services that
are reasonably related to the performance of the audit or review of our
consolidated financial statements and are not reported under “Audit
Fees”.
 
 Tax
Fees.  Consists of fees billed for professional services for tax
compliance, tax advice and tax planning.  These services include
preparation of federal and state income tax returns.
 
 All
Other  Fees.  Consists of fees for product and services
other than the services reported above.
 
 Pre-Approval
Policies and Procedures
 
 Prior to
engaging its accountants to perform a particular service, the Company’s Board of
Directors obtains an estimate for the service to be performed. All of the
services described above were approved by the Board of Directors in accordance
with its procedures.
 
 
 PART
IV
 
 Item
      15.
              Exhibits
      and Financial Statement Schedules.
 
 The
following documents are filed as part of this report:
 
 (1)
              Financial
      Statements
 
 Financial Statements are annexed to
this report.
 
 (2)
              Financial
      Statement Schedules
 
 No
financial statement schedules are included because such schedules are not
applicable, are not required, or because required information is included in the
financial statements or notes thereto.
  32
  (3)
              Exhibits
  Incorporated
      by
                  Reference
      to2.1
                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 betweenthe
      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
                Office
      Lease dated February 1, 2001
                Exhibit
      10.23 (2)10.2
                Office
      Lease Amendment dated March 31, 2003
                Exhibit
      10.24 (2)10.3
                Second
      Amendment to Lease Agreement
                Exhibit
      10.4 (7)10.4
                Third
      Amendment to Lease Agreement
                Exhibit
      10.5 (7)10.5
                Securities
      Purchase Agreement dated December 8, 2005 between the Company and BATL
      Bioenergy LLC
                Exhibit
      10.2 (6)10.6
                Asset
      Purchase Agreement dated as of July 13, 2006
                Exhibit
      2.1 (8)10.7
                Manufacturing
      and Supply Agreement dated August 18, 2006
                Exhibit
      10.9 (7)10.8
                Exclusive
      Reseller and Market Development AllianceWith
      Custom Fuel Services, Inc.
                Exhibit
      10.10 (9)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.
 
 (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.
 
 (9)
              Filed 
      as an exhibit to Amendment No. 3 to the Company’s Registration Statement
      on Form SB-2 filed as Form S-1/A on March 25, 2008, File No. 333-133651,
      and incorporated by reference
herein.
  33
  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 30,
      2009
 
 
 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,
                03/30/2009Dwaine
      Reese
                Chairman
      of the Boardand
      Director(Principal
      Executive Officer)/s/ Richard B.
      Dicks
                Chief
      Financial Officer
                03/30/2009Richard
      B. Dicks
                (Principal
      Financial Officer)/s/ Gary B.
      Aman
                President
      and Director
                03/30/2009Gary
      B. Aman/s/ Jack D.
      Cowles
                Director
                03/30/2009Jack
      D. Cowles/s/ Thomas F.
      Donino
                Director
                03/30/2009Thomas
      F. Donino
  34
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 To the Board of Directors
 EnerTeck
Corporation
 Houston,
Texas
 
 
 We have
audited the accompanying consolidated balance sheets of EnerTeck Corporation and
subsidiary as of December 31, 2008and 2007, 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, 2008.  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 audits.
 
 We
conducted our audits in
accordance with the standards of the Public Company Accounting Oversight Board
(United States).  Those standards require that we plan and perform the
audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  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 audits 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, 2008 and 2007, and the
consolidated results of their operations and their cash flows for each of the
years in the two-year period ended December 31, 2008, 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  25,
2009
  F-1
  ENERTECK CORPORATION AND
SUBSIDIARY
 CONSOLIDATED
BALANCE SHEET
 December
31, 2008 and 2007
 
 ASSETS
                  
                  2008
                  
                  
                  2007Current
      assetsCash
                  
                  $
                  106,240
                  
                  
                  $
                  319,126Inventory
                  
                  
                  161,019
                  
                  
                  
                  146,654Receivables
      - trade
                  
                  
                  10,036
                  
                  
                  
                  50,920Receivables
      - employee
                  
                  
                  100
                  
                  
                  
                  4,483Prepaid
      Expenses
                  
                  
                  11,584
                  
                  
                  
                  19,639Total
      current assets
                  
                  
                  288,979
                  
                  
                  
                  540,822Intellectual
      Property
                  
                  
                  2,175,302
                  
                  
                  
                  3,000,000Property
      and equipment, net of accumulateddepreciation
      of $240,614 and $202,271 respectively
                  
                  
                  98,091
                  
                  
                  
                  119,894Total
      assets
                  
                  $
                  2,562,372
                  
                  
                  $
                  3,660,715LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilitiesNote
      payable - current maturity
                  
                  $
                  500,000
                  
                  
                  $
                  500,000Accounts
      payable
                  
                  
                  8,204
                  
                  
                  
                  10,649Accrued
      liabilities
                  
                  
                  48,796
                  
                  
                  
                  61,666Total
      current liabilities
                  
                  
                  557,001
                  
                  
                  
                  572,315Long
      Term LiabilitiesNotes Payable -
      long term portion
                  
                  
                  500,000
                  
                  
                  
                  1,000,000Total
      Long Term Liabilities
                  
                  
                  500,000
                  
                  
                  
                  1,000,000Stockholders’
      EquityPreferred
      stock, $.001 par value, 100,000,000 sharesauthorized,
      none issuedCommon
      stock, $.001 par value, 100,000,000shares
      authorized, 19,087,788 and 17,761,359 shares issued and outstanding,
      respectively
                  
                  
                  19,088
                  
                  
                  
                  17,761Additional
      paid-in capital
                  
                  
                  20,886,996
                  
                  
                  
                  19,947,381Accumulated
      deficit
                  
                  
                  (19,400,712
                  )
                  
                  
                  (17,876,742
                  )Total
      stockholders’ equity
                  
                  
                  1,505,373
                  
                  
                  
                  2,088,400Total
      liabilities and stockholders’ equity
                  
                  $
                  2,562,372
                  
                  
                  $
                  3,660,715
 
 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, 2008 and 2007
 
 2008
                  
                  
                  2007Product
      Sales
                  
                  $
                  282,195
                  
                  
                  $
                  396,141Sales
      Returns
                  
                  
                  13,760
                  
                  
                  
                  0Cost
      of goods sold
                  
                  
                  48,057
                  
                  
                  
                  73,756Gross
      profit
                  
                  $
                  220,378
                  
                  
                  $
                  322,385Costs
      and expenses:General
      and Administrative Expenses:Wages
                  
                  $
                  425,879
                  
                  
                  $
                  429,541Non-cash
      compensation
                  
                  
                  47,074
                  
                  
                  
                  0Depreciation
                  
                  
                  38,343
                  
                  
                  
                  46,332Other
      Selling, General and Administrative Expenses
                  
                  
                  371,417
                  
                  
                  
                  451,965Total
      Expenses
                  
                  $
                  882,713
                  
                  
                  $
                  927,838Operating
      loss
                  
                  $
                  (662,335
                  )
                  
                  $
                  (605,453
                  )Other
      income (expense)Interest
      Income
                  
                  
                  12,074
                  
                  
                  
                  23,765Other
      Income
                  
                  
                  3,531
                  
                  
                  
                  17,990Stock-based
      delay awards
                  
                  
                  (0
                  )
                  
                  
                  (374,667
                  )Non-cash
      Impairment
                  
                  
                  (824,698
                  )
                  
                  
                  0Interest
      expense
                  
                  
                  (52,541
                  )
                  
                  
                  (66,033
                  )Net
      Income (loss)
                  
                  $
                  (1,523,970
                  )
                  
                  $
                  (1,004,399
                  )Net
      loss per share:Basic
      and diluted
                  
                  $
                  (0.08
                  )
                  
                  $
                  (0.06
                  )Weighted
      average shares outstanding:Basic
      and diluted
                  
                  
                  18,273,536
                  
                  
                  
                  17,413,414
 
 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, 2008 and 2007
 
 AdditionalCommon
      Stock
                
                
                Paid-in
                
                
                AccumulatedShares
                
                
                Amount
                
                
                Capital
                
                
                Deficit
                
                
                TotalBalances,
      December 31, 2006
                
                
                16,761,359
                
                
                $
                16,762
                
                
                $
                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
                
                
                $
                17,762
                
                
                $
                19,947,381
                
                
                $
                (17,876,742
                )
                
                $
                2,088,400Options
      Granted
                
                
                
                
                
                
                
                
                
                $
                47,074
                
                
                
                
                
                
                $
                47,074Warrants
      Exercised
                
                
                526,334
                
                
                $
                526
                
                
                
                333,272
                
                
                
                
                
                
                
                333,798Private
      Offering
                
                
                800,095
                
                
                
                800
                
                
                
                559,270
                
                
                
                
                
                
                
                560,070Current
      Loss 1/01 – 12/31/2008
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (1,523,970
                )
                
                
                (1,523,970
                )19,087,788
                
                
                $
                19,088
                
                
                $
                20,886,996
                
                
                $
                (19,400,712
                )
                
                $
                1,505,372
 
 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, 2008 and 2007
 
 2008
                    
                    
                    2007Net
      (loss)
                    
                    $
                    (1,523,970
                    )
                    
                    $
                    (1,004,399
                    )Adjustments
      to reconcile net loss to cash used in operating
activities:Depreciation
                    
                    
                    38,343
                    
                    
                    
                    46,332Common
      stock options issued for services
                    
                    
                    47,074
                    
                    
                    
                    0Impairment
      of Assets
                    
                    
                    824,698
                    
                    
                    
                    0Warrants
      /Options Expense
                    
                    
                    0
                    
                    
                    
                    374,667Non-cash
      income items
                    
                    
                    0
                    
                    
                    
                    3,391Changes
      in operating assets and liabilities:Accounts
      receivable
                    
                    
                    40,884
                    
                    
                    
                    239,152Inventory
                    
                    
                    (14,365
                    )
                    
                    
                    (9,169
                    )Prepaid
      expenses and other
                    
                    
                    8,055
                    
                    
                    
                    (13
                    )Accounts
      payable
                    
                    
                    (2,446
                    )
                    
                    
                    (53,861
                    )Accrued
      Interest payable
                    
                    
                    (19067
                    )
                    
                    
                    (933
                    )Accrued
      Liabilities
                    
                    
                    6,198
                    
                    
                    
                    22,599NET
      CASH USED IN OPERATING ACTIVITIES
                    
                    $
                    (594,598
                    )
                    
                    $
                    (382,234
                    )CASH
      FLOWS FROM INVESTING ACTIVITIESProceeds
      from sales of assets
                    
                    
                    
                    
                    
                    
                    4,800Capital
      Expenditures
                    
                    $
                    (16541
                    )
                    
                    
                    (7,584
                    )Employee
      advances
                    
                    
                    4,384
                    
                    
                    
                    24,661CASH
      PROVIDED BY (USED IN) INVESTING ACTIVITIES
                    
                    $
                    (12,157
                    )
                    
                    $
                    21,878CASH
      FLOWS FROM FINANCING ACTIVITIESExercise
      of warrants
                    
                    $
                    333,799
                    
                    
                    
                    0Proceeds
      from sale of common stock
                    
                    
                    560,070
                    
                    
                    
                    750,000Repayments
      of note payable
                    
                    
                    (500,000
                    )
                    
                    
                    (500,000
                    )CASH
      PROVIDED BY FINANCING ACTIVITIES
                    
                    $
                    393,869
                    
                    
                    $
                    250,000NET
      INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
                    
                    $
                    (212,886
                    )
                    
                    $
                    (110,357
                    )Cash
      and cash equivalents, beginning of year
                    
                    
                    319,126
                    
                    
                    
                    429,483Cash
      and cash equivalents, end of year
                    
                    $
                    106,240
                    
                    
                    $
                    319,126Cash
      paid for:Income
      tax
                    
                    $
                    0
                    
                    
                    $
                    0Interest
                    
                    $
                    70,365
                    
                    
                    $
                    66,965Non-cash
      investing and financing activities:
 
 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.
 
 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 2009. Finished product amounted to approximately $56,000 at
December 31, 2008; the remainder being comprised of raw
materials.  Finished product
amounted to approximately $56,000 and $42,000 at December 31, 2008 and 2007,
respectively:  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, 2008, there were no remaining 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
tests 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, 2008.  As a result of an independent examination based on
sales for the years ended December 31, 2008 and 2007, an impairment of the asset
in the amount of $825,000 was required to be recorded.   It is
management’s belief that this impairment is reflective of the Company’s past
inability to generate significant sales over the past two
years.   As such, significant changes were made to the business
plan and staffing, effective January 1, 2009, which will hopefully remedy this
situation in the future.
 
 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 equipmentare 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 2008 and 2007, 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.
 
 Recently
Issued Accounting Pronouncements
 
 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 whether there will be any future impact on the Company’s consolidated
financial statements.
 
 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 FASB157. We are currently evaluating the provisions of FASB
159 to determine the Company’s position on adoption and whether there will be
any future impact on the Company’s consolidated financial
statements.
 
 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.
  F-8
  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.
 
 NOTE
2 - PROPERTY AND EQUIPMENT
 
 At
December 31, 2008 and 2007 property and equipment consisted of the
following:
  Useful
                  
                  
                  2008
                  
                  
                  2007Lives
                  
                  
                  Amount
                  
                  
                  AmountFurniture
      and fixtures
                  
                  
                  5-7
                  
                  
                  $
                  57,395
                  
                  
                  $
                  55,797Equipment
                  
                  
                  5-7
                  
                  
                  
                  281,310
                  
                  
                  
                  266,368323,763
                  
                  
                  
                  322,165Less:
      accumulated depreciation
                  
                  
                  
                  
                  
                  
                  240,614
                  
                  
                  
                  202,271$
                  98,091
                  
                  
                  $
                  119,894
  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 tested its intangible assets for impairment as of December 31,
2008.  As a result of an independent examination based on sales for
the years ended December 31, 2008 and 2007 that an impairment of the asset in
the amount of $825,000 was required to be recorded.   That is a
reflection of problems with the marketing plan.   As such,
significant changes were made to the plan and personnel effective January 1,
2009 that will hopefully remedy the situation in the future
 
 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 $10,849,000 at December 31, 2008, and will expire beginning in
2025.
  F-9
  Deferred
income taxes consist of the following at December 31, 2008 and
2007:
 
 
 2008
                
                
                2007Assets:Net
      operating loss carryforwards
                
                $
                3,689,000
                
                
                $
                3,271,000Valuation
      allowance
                
                
                (3,505,000
                )
                
                
                (3,119,000
                )$
                184,000
                
                
                $
                152,000Liabilities:Amortization
      differences
                
                $
                (157,000
                )
                
                $
                (108,000
                )Depreciation
      differences
                
                
                (27,000
                )
                
                
                (44,000
                )$
                (184,000
                )
                
                $
                (152,000
                )
 
 The
change in the valuation allowance for the years ended December 31, 2008 and
2007, was $386,000 and $269,000, respectively
 
 NOTE
5 - STOCKHOLDERS' EQUITY
 
 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.
 
 During
the second quarter of 2008, the Company issued 526,334 shares of common stock
upon the exercise of warrants at an aggregate exercise price of
$333,800.
 
 During
the third quarter of 2008, the Company sold 800,095 shares of its common stock
at $0.70 per share to 15 investors for total gross proceeds of $560,066.50 in a
private placement offering to accredited investors only.  In
connection therewith, the investors were also issued a total of 400,047.5
warrants exercisable into shares of common stock at $1.20 per
share.
  NOTE
6 - STOCK WARRANTS AND OPTIONS
 
 Stock
Warrants
 
 In
October, 2007, 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.
 
 During
second quarter of 2008, a total of 526,334 warrants were exercised by the
warrant holders prior to their expiration date.    During
the third and fourth quarters of 2008, 1,900,316 reached their expiration date
and were not extended.     As part of a private
placement  during the same period an additional 400,047.5 five year
warrants with a strike price of $1.20 per share and an expiration date of
September 30, 2013 were issued.   As these warrants were issued
as part of a purchase, no additional expense was charged for this transaction
during 2008.
 
 F-10
 
 Summary
information regarding warrants is as follows:
  Year
      ended December 31, 2007:Granted
                  
                  
                  510,000
                  
                  
                  
                  2.00Exercised
                  
                  
                  -
                  
                  
                  
                  -Expired
                  
                  
                  -
                  
                  
                  
                  -Outstanding
      at December 31, 2007
                  
                  
                  4,936,650
                  
                  
                  $
                  1.41Granted
                  
                  
                  405,047.5
                  
                  
                  
                  1.20Exercised
                  
                  
                  (376,334
                  )
                  
                  
                  1.00Exercised
                  
                  
                  (150,000
                  )
                  
                  
                  1.20Expired
                  
                  
                  (1,900,316
                  )
                  
                  
                  -Outstanding
      at December 31, 2008
                  
                  
                  2,910,047.5
                  
                  
                  $
                  1.62
 
 Warrants
outstanding and exercisable as of December 31, 2008:
  Weighted
                  
                  
                  ExercisableNumber
      of
                  
                  
                  Average
                  
                  
                  Number
      ofExercise
      Price
                  
                  
                  Warrants
                  
                  
                  Remaining
      Life
                  
                  
                  Warrants$
                  1.00
                  
                  
                  
                  500,000
                  
                  
                  
                  1.7
                  
                  
                  
                  500,000$
                  1.20
                  
                  
                  
                  770,047.5
                  
                  
                  
                  2.8
                  
                  
                  
                  770,047.5$
                  2.00
                  
                  
                  
                  1,640,000
                  
                  
                  
                  2.6
                  
                  
                  
                  1,640,0002,910,047.5
                  
                  
                  
                  
                  
                  
                  
                  2,910,047.5
 
 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
was 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. A payment of $500,000 plus related
interest was made in July, 2008, leaving a remaining balance of
$1,000,000.
 
 F-11
 
 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. The first payment of $500,000 was made in
July 2007.  An additional $500,000 due July 13, 2008 was also made in
advance of the due date, on July 3, 2008.  The remaining payments to
complete the purchase are due on July 13, 2009 and 2010,
respectively.      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.
 
 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,
                  
                  Amount2009
                  
                  
                  47,6352010
                  
                  
                  15,878Total
                  
                  $
                  63,513
  Rent
expense for the years ended December 31, 2008 and December 31, 2007 totaled
$48,075 and $43,553, 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.  The Effective Date occurred on April
15, 2008.  As a result, no additional Penalty Warrants were required
to be issued.
 
 F-12
 
 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, 2008 and 2007, the
Company incurred recurring net losses of $1,524,000 and $1,004,000,
respectively.  In addition, at December 31, 2008, the Company has an
accumulated deficit of $19,401,000.  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 2008 and 2007 were considerably less than earlier anticipated
primarily due to circumstances which have been corrected or are in the process
of being corrected.   Management expects that marine, railroad
and trucking sales should show significant increases in 2009 over what has been
generated in the past, as a result of the expected outcome of long term client
demonstrations from several extremely large new clients generated during the
second half of 2008, which will take place over the second, third and fourth
quarters of 2009.  In addition, marketing management has been changed
effective January 1, 2009 and this new management team is currently putting
sales strategies in place in an effort to increase revenues and cash
flow.  No assurance can be made that any of these efforts will be
successful.
 
 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 assurance can be made
that any of these efforts will be successful.
 
 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, 2008, EnerTeck had
$106,240 in cash which is within FDIC insurance limits.
 
 
 NOTE
10 - REVENUE FROM MAJOR CUSTOMERS
 
 One
customer represented 83.3% of the company’s sale revenues for the year ended
December 31, 2008 as compared to 59.7% of the company’s sales revenues for the
year ended December 31, 2007.    The company has no
receivables outstanding for this major customer at year end December 31, 2008 or
2007.
 
 F-13