**UNITED
STATES**


**SECURITIES
AND EXCHANGE COMMISSION**


**Washington,
D.C. 20549**





**FORM
10-QSB**





(Mark
One)





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





For the
quarterly period ended **March
31, 2005**





o  TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period
from ___________ to ___________





Commission
file number 0-32129





**Energy
      & Engine Technology Corporation**(Exact
      name of small business issuer as specified in its
  charter)





**Nevada**
    **88-0471842**(State
      or other jurisdiction of incorporation or organization)
    (IRS
      Employer Identification No.





**5308
      West Plano Parkway, Plano, Texas 75093**(Address
      of principal executive offices)





**(972)
      732-6360**(Issuer's
      telephone number)





(Former
      name, former address and former fiscal year, if changed since last
      report)





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





APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY


PROCEEDINGS
DURING THE PRECEDING FIVE YEARS





Check
whether the registrant filed all documents and reports required to be filed by
Section l2, 13 or 15(d) of the Exchange Act after the distribution of securities
under a plan confirmed by a court. Yes o No o





APPLICABLE
ONLY TO CORPORATE ISSUERS





State the
number of shares outstanding of each of the issuer's classes of common equity,
as of the latest practicable date: 127,001,244 (as of May 13,
2005).





Transitional
Small Business Disclosure Format (Check one): Yes o No x





***Table
of Contents***








PART I -
FINANCIAL INFORMATION


PageItem 1. Financial Statements
    1CONDENSED
      CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)Condensed Consolidated Balance Sheet
    1Condensed Consolidated Statements of
      Operations
    2Condensed Consolidated Statements of Cash
    Flows
    3NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (UNAUDITED)
    5Item 2. Management's Discussion and Analysis or Plan of
      Operation
    12Item 3. Controls and Procedures
    16





PART II -
OTHER INFORMATION


Item 1. Legal Proceedings
    18Item 2. Changes in Securities
    18Item 3. Defaults upon Senior
    Securities
    18Item 4. Submission of Matters to a Vote of Security
      Holders
    18Item 5. Other Information
    18Item 6. Exhibits and Reports on Form 8-K and
      8-K/A
    18Signatures
    19
















ENERGY& ENGINE TECHNOLOGY CORPORATION AND
      SUBSIDIARIESCONDENSED
      CONSOLIDATED BALANCE SHEET(UNAUDITED)March
      31, 2005





ASSETS





CURRENT
      ASSETSCash
      and cash equivalents
    
    $
    12,898Accounts
      receivable
    
    
    35,393Inventories
    
    
    555,774Prepaid
      expenses and other current assets
    
    
    142,306Total
      Current Assets
    
    
    746,371PROPERTY
      AND EQUIPMENT, Net
    
    
    252,924OTHER
      ASSETSIntangible
      assets, net
    
    
    716,790Goodwill
    
    
    146,518Total
      Other Assets
    
    
    863,308TOTAL
      ASSETS
    
    $
    1,862,603





LIABILITIES
AND STOCKHOLDERS' EQUITY





CURRENT
      LIABILITIESAccounts
      payable and accrued expenses
    
    $
    718,774Accrued
      expenses, officers
    
    
    321,788Convertible
      debentures payable, net of discount of $161,414
    
    
    287,586Notes
      payable, stockholders, net of discount of $35,625
    
    
    327,375TOTAL
      LIABILITIES
    
    
    1,655,523COMMITMENTS
      AND CONTINGENCIESSTOCKHOLDERS'
      EQUITYCommon
      stock, $.001 par value, 280,000,000 shares authorized 121,390,874 shares
      issued and outstanding
    
    
    121,390Additional
      paid-in capital
    
    
    13,700,107Accumulated
      Deficit
    
    
    (13,536,417
    )Treasury
      Stock (600,000 shares at cost)
    
    
    (78,000
    )TOTAL
      STOCKHOLDERS’ EQUITY
    
    
    207,080TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
    
    $
    1,862,603





See
accompanying Notes to the Condensed Consolidated Financial
Statements.


1




ENERGY& ENGINE TECHNOLOGY CORPORATION AND
      SUBSIDIARIESCONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS(UNAUDITED)For
      the Three Months Ended March 31, 2005 and
2004





THREE
      MONTHS ENDEDMARCH
      31, 2005
    
    MARCH
      31, 2004NET
      SALES
    
    $
    162,145
    
    $
    24,513COST
      OF SALES
    
    
    129,311
    
    
    26,823GROSS
      PROFIT (LOSS)
    
    
    32,834
    
    
    (2,310
    )OPERATING
      EXPENSESSelling,
      general and administrative expenses
    
    
    675,078
    
    
    267,002Stock
      based compensation for selling, general and administrative
      expenses
    
    
    30,500
    
    
    1,672,815TOTAL
      OPERATING EXPENSES
    
    
    705,578
    
    
    1,939,817OPERATING
      LOSS
    
    
    (672,744
    )
    
    (1,942,127
    )OTHER
      (INCOME) EXPENSEInterest
      income
    
    
    --
    
    
    (1,323
    )Interest
      expense
    
    
    181,968
    
    
    29,609TOTAL
      OTHER EXPENSE
    
    
    181,968
    
    
    28,286Loss
      from continuing operations
    
    
    (854,712
    )
    
    (1,970,413
    )Income
      (Loss) from discontinued operations
    
    
    148,967
    
    
    (64,547
    )NET
      LOSS
    
    $
    (705,745
    )
    $
    (2,034,960
    )BASIC
      AND DILUTED NET LOSS PER COMMON SHARENet
      loss per common share from continuing operations
    
    $
    (0.01
    )
    $
    (0.02
    )Net
      income (loss) per common share from discontinued
operations
    
    $
    0.00
    
    $
    (0.00
    )NET
      LOSS PER COMMON SHARE:
    
    $
    (0.01
    )
    $
    (0.02
    )WEIGHTED
      AVERAGE COMMON SHARES OUTSTANDING
    
    
    120,699,228
    
    
    88,659,469





See
accompanying Notes to the Condensed Consolidated Financial
Statements.





2





ENERGY& ENGINE TECHNOLOGY CORPORATION AND
      SUBSIDIARIESCONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS(UNAUDITED)For
      the Three Months Ended March 31, 2005 and
2004





2005
    
    2004CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss from continuing operations
    
    $
    (854,712
    )
    $
    (1,970,413
    )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation
      and amortization
    
    
    74,388
    
    
    1,344Stock-based
      compensation
    
    
    30,500
    
    
    1,697,515Amortization
      of debt discount
    
    
    124,839
    
    
    15,628Changes
      in operating assets and liabilities:Accounts
      receivable
    
    
    (8,439
    )
    
    (235
    )Inventory
    
    
    1,915
    
    
    (43,541
    )Prepaid
      expenses and other current assets
    
    
    31,594
    
    
    (96,812
    )Accounts
      payables and accrued expenses
    
    
    232,204
    
    
    (132,031
    )Accrued
      expenses, officers
    
    
    (37,128
    )
    
    (47,083
    )TOTAL
      ADJUSTMENTS
    
    
    449,873
    
    
    1,394,785NET
      CASH USED IN OPERATING ACTIVITIES
    
    
    (404,839
    )
    
    (575,628
    )CASH
      FLOW FROM DISCONTINUED OPERATIONSNet
      income (loss) from discontinued operations
    
    
    148,967
    
    
    (64,547
    )Proceeds
      from sale of assets
    
    
    387,500Gain
      on sale of assets
    
    
    (176,403
    )Changes
      in:Discontinued
      assets
    
    
    --
    
    
    (6,012
    )Discontinued
      liabilities
    
    
    --
    
    
    (23,372
    )NET
      CASH PROVIDED BY (USED IN) DISCONTINUED OPERATIONS
    
    
    360,064
    
    
    (93,931
    )CASH
      FLOWS USED IN INVESTING ACTIVITIESPurchases
      of property and equipment
    
    
    (6,761
    )
    
    (26,120
    )NET
      CASH USED IN INVESTING ACTIVITIES
    
    
    (6,761
    )
    
    (26,120
    )CASH
      FLOWS FROM FINANCING ACTIVITIESRepayment
      of notes payable, stockholders
    
    
    (5,904
    )
    
    (5,000
    )Proceeds
      from the issuance of common stock, net of offering costs
    
    
    24,000
    
    
    1,745,498NET
      CASH PROVIDED BY FINANCING ACTIVITIES
    
    
    18,096
    
    
    1,740,498NET
      (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    (33,440
    )
    
    1,044,819CASH
      AND CASH EQUIVALENTS-Beginning
    
    
    46,338
    
    
    7,024CASH
      AND CASH EQUIVALENTS-Ending
    
    
    12,898
    
    
    1,051,843SUPPLEMENTAL
      DISCLOSURES OF CASH FLOW INFORMATIONCash
      paid during the period for:Interest
    
    
    7,858
    
    
    1,703


See
accompanying Notes to the Condensed Consolidated Financial
Statements.


3





ENERGY
      & ENGINE TECHNOLOGY CORPORATION AND SUBSIDIARIESCONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS(UNAUDITED)For
      the Three Months Ended March 31, 2005 and
2004





Non-cash
investing and financing activities:





During
the three months ended March 31. 2005, the Company resold Supplemental Type
Certificates and related inventories purchased in September 2003 for a return of
600,000 shares of the Company’s common stock valued at $78,000.





See
accompanying Notes to the Condensed Consolidated Financial
Statements.


4





ENERGY& ENGINE TECHNOLOGY CORPORATION AND
      SUBSIDIARIESNOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  (UNAUDITED)





NOTE 1 - Description
of Business, Going Concern, Management Plans and Basis of
Presentation





Financial
Statements





The
condensed consolidated balance sheet of Energy & Engine Technology
Corporation ("EENT" or the "Company") as of March 31, 2005, the related
condensed consolidated statements of operations and cash flows for the three
months ended March 31, 2005 and 2004 included in Item 1 have been prepared by
the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission ("SEC" or "Commission"). Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States of
America have been condensed or omitted pursuant to such rules and regulations.
In the opinion of management, the accompanying condensed consolidated financial
statements include all adjustments (consisting of normal, recurring adjustments)
necessary in order to make the financial statements not misleading. The results
of operations for the three months ended March 31, 2005 are not necessarily
indicative of the results of operations for the full year or any other interim
period. These condensed consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 2004 and filed with the Commission.





Going
Concern and Management Plans





As shown
in the accompanying consolidated financial statements, the Company incurred a
net loss of $705,745 during the three months ended March 31, 2005, resulting in
an accumulated deficit of $13,536,417. As of March 31, 2005, the Company also
had a working capital deficit of $ 909,152. These matters raise substantial
doubt about the Company's ability to continue as a going concern. Management's
plans include the raising of cash through the issuance of debt or equity and
increasing revenues. On April 27, 2005 and on May 10 and 12, 2005, the Company
closed on the initial $1,366,667 of $2,000,000 of financing with several
investors. Proceeds were used to purchase Anchor Manufacturing and for working
capital purposes (See Note 9). The accompanying condensed consolidated financial
statements have been prepared on a going concern basis, which contemplates the
realization of assets and satisfaction of liabilities in the normal course of
business. These condensed consolidated financial statements do not include any
adjustments relating to the recovery of the recorded assets or the
classification of the liabilities that might be necessary should the Company be
unable to continue as a going concern





Organization
and Principal Business Activity





EENT was
incorporated under the name Bidder Communications, Inc. in Nevada on November
16, 1999. It changed its name from Bidder Communications, Inc. ("Bidder") to
Energy & Engine Technology Corporation on December 5, 2001.





The
consolidated financial statements include the accounts of EENT and its wholly
owned subsidiaries, Gas Gathering Enterprises, LLC (“Gas Gathering”)
(previously, Southern States Gas Gathering, LLC), Wind Dancer Aviation Services,
Inc. (“Wind Dancer”) and BMZ Generators Technology, Inc. (“BMZ”) collectively
referred to as the “Company.” During the year ended December 2004, both Gas
Gathering and Wind Dancer were deemed to be discontinued operations and both
were sold during the three months ended March 31, 2005 (see Note
8).


5





ENERGY
      & ENGINE TECHNOLOGY CORPORATION AND SUBSIDIARIESNOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  (UNAUDITED)





NOTE 1 - Description
of Business, Going Concern, Management Plans and Basis of
Presentation ,
continued








EENT is
the developer and marketer of the AXP 1000 auxiliary power generator for long
haul trucks. It also assembles and sells power generators for marine, standby
and other commercial/residential applications.





Consolidation





The
consolidated financial statements include the accounts of EENT and its wholly
owned subsidiaries. All significant intercompany balances and transactions have
been eliminated in consolidation.





NOTE 2 - Summary
of Significant Accounting Policies





Revenue
Recognition





BMZ
Generators Technology, Inc./AXP 1000 Power Generators





Revenue
is recognized at the time the generator is delivered to the dealer or
customer.





Cash
and Cash Equivalents





The
Company considers all highly liquid debt instruments purchased with a maturity
of three months or less and money market accounts to be cash
equivalents.





Inventories





Inventories
consist of parts and materials and engines/generators and are valued at the
lower of cost or market, cost is being determined using the first in/first out
basis.





Impairment
of Long-Lived Assets





The
Company evaluates its property and equipment and intangible assets subject to
amortization for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by comparison of the carrying amount of
an asset to future undiscounted net cash flows expected to be generated by the
asset. If such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of the assets
exceeds the fair value of the assets.





Research
and Development





Research
and development costs are expensed as incurred. Research and development costs
for the three months ended March 31, 2005 and 2004 were $53,179 and $2,253
respectively, and are included in selling, general and administrative
expenses.





6





ENERGY
      & ENGINE TECHNOLOGY CORPORATION AND SUBSIDIARIESNOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  (UNAUDITED)





NOTE 2 - Summary
of Significant Accounting Policies ,
continued





Income
Taxes





The
Company accounts for income taxes using the liability method, which requires the
determination of deferred tax assets and liabilities based on the differences
between the financial and tax bases of assets and liabilities using enacted tax
rates in effect for the year in which differences are expected to reverse.
Deferred tax assets are adjusted by a valuation allowance, if, based on the
weight of available evidence, it is more likely than not that some portion or
all of the deferred tax assets will not be realized.





Depreciation
and Amortization





Depreciation
and amortization of furniture, fixtures and equipment is computed on the
straight-line method at rates adequate to allocate the cost of applicable assets
over their expected useful lives.





Net
Loss per Share





Basic
earnings per share (“EPS”) is computed by dividing income (loss) available to
common stockholders by the weighted-average number of common shares outstanding
for the period. Diluted EPS is based on the weighted-average number of shares of
common stock and common stock equivalents outstanding for the period. Common
stock equivalents have been excluded from the weighted average shares for the
three months ended March 31, 2005 and 2004, as inclusion is anti-dilutive.
Potentially dilutive securities (warrants) of 17,873,974 and 2,235,000 are
outstanding at March 31, 2005 and 2004, respectively.





Use of
Estimates in the Financial Statements





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.





NOTE 3 - Note
Payable Stockholders





As of
March 31, 2005, the Company is in default of the terms on an outstanding note
payable with one of its stockholders. The note was due on January 7, 2004 with
principal balance due of $20,000 and accrued interest of $7,217.





NOTE 4 - Common
Stock





During
the three months ended March 31, 2005, the Company issued an aggregate of
390,000 shares of common stock valued at $24,000 to four investors in connection
with a private placement.





During
the three months ended March 31, 2005, the Company issued an aggregate of 25,000
shares of common stock valued at $3,000 to an employee for services
provided.


7





ENERGY
      & ENGINE TECHNOLOGY CORPORATION AND SUBSIDIARIESNOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  (UNAUDITED)





NOTE 4 - Common
Stock ,
continued





On
February 10, 2005, the Company entered into a Consulting Agreement with an
independent contractor. The terms of the agreement is for one year with the
Company making monthly payments of $5,500. Based on the agreement, the Company
is also required to issue 275,000 shares of common stock quarterly during the
terms of the agreement. On March 23, 2005, in connection with this agreement,
the Company issued 275,000 shares of common stock valued at
$27,500.





On March
16, 2005, the Company issued 172,500 shares of common stock to an investor
pursuant to an anti-dilution agreement.





NOTE 5 - Warrants





Transactions
involving warrants are summarized as follows:





Number
      of Warrants
    Weighted
      AverageExercise
      PriceBalance
      - January 1, 2005
    18,398,974
    $0.27Warrants
      issued during the period
    --Warrants
      expired during the period
    525,000
    $0.20Warrants
      exercised during the period
    --Balance
      - March 31, 2005 (all exercisable)
    17,873,974
    $0.27





NOTE 6 - Stock-Based
Compensation





In
October 1995, Statement of Financial Accounting Standards No. 123, “Accounting
for Stock-Based Compensation” (“SFAS 123”) was issued. SFAS 123 prescribes
accounting and reporting standards for all stock-based compensation plans,
including employee stock options, restricted stock, employee stock purchase
plans and stock appreciation rights. SFAS 123 requires compensation expense to
be recorded (i) using the new fair value method or (ii) using the existing
accounting rules prescribed by Accounting Principles Board Opinion No. 25,
“Accounting for Stock Issued to Employees” (“APB 25”) and related
interpretations with pro forma disclosure of what net income and earnings per
share would have been had the Company adopted the new fair value method. The
Company intends to continue to account for its stock based compensation plans in
accordance with the provisions of APB 25.





The
Company adopted SFAS No. 148 “Accounting for Stock-Based Compensation -
Transition and Disclosure” (“SFAS 148”). This statement amended SFAS No. 123,
“Accounting for Stock-Based Compensation.” As permitted under SFAS No. 123, the
Company continues to apply the Accounting Principles Board Opinion No.25,
“Accounting for Stock Issued to Employees.” As required under SFAS No. 148, the
fair value-based method had been applied to all awards. There were no stock
options or warrants issued to employees during the three months ended March 31,
2005 and 2004.





8





ENERGY
      & ENGINE TECHNOLOGY CORPORATIONAND
      SUBSIDIARIESNOTES
      TO CONDENSED CONSOLIDATED FINANCIAL
  STATEMENTS(UNAUDITED)





NOTE 7 - Other
Items





Related
Party Transactions





The
Company leases its Pompano Beach, Florida manufacturing facility from Freddy
Pereira, an officer of its subsidiary, BMZ Generators Technology, Inc. Rent
expense relating to this lease for the three months ended March 31, 2005 and
2004 was $22,542 and $0 respectively.





Authorized
Shares





On March
31, 2005, the Company filed a Certificate of Amendment to its Articles of
Incorporation to increase their authorized shares of common stock to
280,000,000.





Other
Events





Pursuant
to a letter agreement effective as of February 21, 2005, EENT has sold the
Supplemental Type Certificates and related inventory purchased in September 2003
to Mr. RPM, LLC and RPM Management, LLC for a return of 600,000 shares of EENT
stock previously issued to Mr. RPM, LLC and RPM Management, LLC. The value of
the 600,000 shares was $78,000 (thus the repurchase price) as of February 11,
2005. These assets were recorded as held for sale at December 31, 2004 and as a
result an impairment loss of approximately $43,000 was recorded during the year
ended. The 600,000 shares were recorded as treasury stock as of March 31,
2005.





Legal
Proceedings





On
October 28, 2003, the Company was served with a complaint by 600 Racing, Inc.
The complaint alleges that EENT is liable on a $150,000 judgment issued against
Millennium Fuels USA, LLC (“MFUSA”), an unrelated entity, of which Will McAndrew
and Roger Wurtele, the Company's CEO and CFO, respectively, were the Managers.
The complaint alleges that the Company engaged in a joint enterprise with MFUSA
and integrated resources with MFUSA and is thus liable on an “alter ego” theory.
In October 2004, the case was removed to the U.S. Bankruptcy Court for the
Northern District of Texas, as part of the pending bankruptcy of MFUSA. The
debtor has proposed a Plan of Reorganization supported by the U.S. Trustee, for
settlement by EENT of the litigation for $15,000, which is accrued for and
included in accrued expenses as of March 31, 2005.





NOTE 8 - Discontinued
Operations





On
February 22, 2005, EENT completed the sale of substantially all of the assets of
the Wind Dancer Aviation Services, Inc, division for $262,500 in
cash.





During
December 2004, the Company classified the Wind Dancer Aviation Services, Inc.
assets as held for sale. The operations of Wind Dancer Aviation Services, Inc.
are reported as discontinued operations for all periods presented in the
consolidated financial statements.





9





ENERGY
      & ENGINE TECHNOLOGY CORPORATION AND SUBSIDIARIESNOTES
      TO CONDENSED CONSOLIDATED FINANCIAL
  STATEMENTS(UNAUDITED)





NOTE 8 - Discontinued
Operations ,
continued





The
results of discontinued operations for the three months ended March 31, 2005 and
2004 are:





**3/31/05**
    **3/31/04**Net
      revenue
    22,397
    84,392Costs
      of revenues
    (10,964)
    (31,926)Operating
      expense
    (38,869)
    (103,296)Gain
      on Sale of Assets
    176,403
    --Net
      Gain (Loss)
    148,967
    (50,830)





On March
14, 2005, EENT completed the sale of all of the assets of the Gas Gathering
Enterprises, Inc., division for $150,000 in cash of which $25,000 was advanced
to the Company during the year ended December 31, 2004.





During
December 2004, the Company classified the Gas Gathering Enterprises, Inc. assets
as held for sale. The operations of Gas Gathering Enterprises, Inc. are reported
as discontinued operations for all periods presented in the consolidated
financial statements.





The
results of discontinued operations for the three months ended March 31, 2005 and
2004 are:





**3/31/05**
    **3/31/04**Net
      revenue
    -
    -Costs
      of revenues
    -
    -Operating
      expense
    -
    (13,717)Net
      Loss
    -
    (13,717)





NOTE 9 - Subsequent
Events





Issuance
of Common Stock





From
April 1, 2005 through May 4, 2005, the Company issued an aggregate of 2,000,000
shares of common stock valued at $100,000 to an investor in connection with a
private placement.





From
April 1, 2005 through May 4, 2005, the Company issued an aggregate of 50,000
shares of common stock valued at $4,000 to employees for services
provided.





From
April 1, 2005 through May 4, 2005, the Company issued an aggregate of 276,000
shares of common stock valued at $21,955 to consultants for services
provided.





On April
22, 2005, the Company issued 581,500 shares of common stock to an investor
pursuant to an anti-dilution agreement.





10





ENERGY
      & ENGINE TECHNOLOGY CORPORATION AND SUBSIDIARIESNOTES
      TO CONDENSED CONSOLIDATED FINANCIAL
  STATEMENTS(UNAUDITED)





NOTE 9 - Subsequent
Events ,
continued





Acquisition





On
February 8, 2005, EENT entered into a binding letter of intent with Anchor
Tampa, Inc. to purchase assets of its marine air conditioning business for
$950,000. The letter of intent called for a $37,500 non-refundable deposit paid
by EENT as of March 31, 2005, with closing set to occur on or before April 30,
2005. The closing occurred on May 3, 2005, effective as of April 29, 2005. The
$912,500 balance of the purchase price was paid as follows: $200,000 in Common
Stock (2,702,703 shares), $550,000 in cash, $25,000 in price reduction for
assumption of warranty claims and $137,500 in a purchase money note due on the
earlier of (i) 5 business days after the receipt of proceeds from the second
tranche of cash to be received from Longview Equity Fund after effectiveness of
a registration statement to be filed in conjunction with the Company’s April 27,
2005 financing (see note 9, convertible note financing), and (ii) July 3,
2006.





Employment
Agreements





As of
April 8, 2005, the Company entered into five year employment contracts with each
of the CEO, CFO, and General Counsel with salaries of $260,000, $230,000 and
$200,000, with each entitled to receive 25,000 warrants per month, with
conversion prices at market price on the date of issuance. Each is entitled to
certain benefits, such as severance pay, upon a “not for cause
termination”.





Convertible
Note Financing





On April
27, 2005, the Company entered into Convertible Note Financing with Longview
Fund, L.P., Longview Equity Fund, L.P. and Longview International Equity Fund,
L.P. pursuant to which the investors are to invest a total of $1,500,000 in the
Company: $1,000,000 at closing (April 27. 2005, received gross of commissions)
and $500,000 within 5 days after effectiveness of the registration statement to
be filed by the Company in connection therewith.  The security is a
convertible note (as of date of closing) bearing interest at the higher of 8% or
Prime plus 4%.  The notes have a two year term and are convertible at a 30%
discount to the average of the five lowest closing bid prices for the 20
trading days preceding the conversion date, with a $0.05 per share minimum
conversion price. The Company will also issue to the investors 18,201,229
warrants exercisable at $0.12 per share with a five year term plus 5,000,000
warrants exercisable at $0.20 per share with a five year term. The notes are
secured by a first lien on the assets of the Company and its subsidiaries. On
May 10, 2005 and May 12, 2005, the Company raised an additional $500,000 from
third parties on identical terms. Of the $500,000 investment, the Company
received $335,000 (less commissions), and will issue 6,067,076 warrants
exercisable at $0.12 per share with a five year term plus 1,666,667 warrants
exercisable at $0.20 per share with a five year term.


11


Item 2. Management's Discussion and Analysis or Plan of
Operation.





Background
and Overview





The
Company operates businesses which provide products to various aspects of the
transportation industry (long haul trucking) which supply innovative products to
promote efficiency of operation of motor vehicles, reduce fuel consumption and
assist in reducing pollutive emissions from operation of motor vehicles.





EENT’s
gas gathering operation and fixed base operator businesses were considered
discontinued operations in 2004 and subsequently sold in the first three months
of 2005 for $150,000 and $262,500 respectively.





Long Haul
Trucking Industry and the AXP 1000 (according to statistics gleaned from
Truckinfo.net in late March 2004):





«
    The
      overall U.S. trucking industry employs over 9 million individuals, with an
      estimated 15.5 million trucks overall, of these.1.9 million are tractor
      trailers.





«
    There
      are an estimated 3.3 million truck drivers, with 10% being independent
      truckers mostly owner operators).





«
    There
      are also over 360,000 trucking companies with 96% operating 28 or fewer
      trucks.





«
    Total
      revenue estimates are $255 billion per
year.





«
    However,
      profit margins are very small ($.048 per dollar of revenue), and the
      average trucker earns under $40,000 per year, with 12.8% of all fuel
      purchased belonging to truckers.





«
    The
      U.S. Department of Labor estimates that the demand for employment of truck
      drivers may triple by 2020 from current
levels.





Given
these small profit margins and the January 2004 federal mandates requiring 10
hours of rest for every 11 hours driven (combined with the state and local anti
idling laws), there is a need for solutions which can achieve the combined goals
of: utilizing all means possible to take measures to increase profit margin and
compliance with the increased and more enforced federal and state legislation
affecting long haul trucks. Solutions to be used must combine these two goals.
Hence, the increasing popularity of auxiliary power units (“APUs”) other
alternatives, such as truck stop electrification, exist, but require large
capital expenditures and are thus less likely to become prevalent.





The
Company's experience is that although APUs have been around for several years,
the recent increase in diesel prices, combined with stricter enforcement, has
placed a spotlight on this cottage industry (with industry estimates that it
could become a $2.5 billion dollar per year industry), which heretofore had been
filled with small niche players with minimal followings. Such newfound industry
is evident from the formation of a trade association for APU manufacturers (Idle
Eliminators Manufacturing Association) and various conferences (such as the May
2004 Anti Idling Conference in Albany, New York and the December 2004 conference
in Austin, Texas). Additionally, EENT has participated in several trucking
industry trade shows over the past 13 months, with increased interest in the AXP
1000 at each show.


12


Given the
size of the market, EENT believes that there is ample room for itself and its
competitors. With estimates significantly upwards of 500,000 or more long haul
trucks on the road today, even if EENT were to only capture a 1% market share,
with an average sales price of $5,000 per unit, this represents gross revenues
of $25,000,000.





The AXP
1000 has also been successful in distinguishing itself from its competitors in
several areas, including:





«
    Lower
      cost.





«
    Lighter
      weight.





«
    Only
      unit to sit between the rails.





«
    Low
      maintenance burden.





The
biggest overall challenge is coordinating production/supply chain and sales.
EENT has purchased BMZ Generators, its contract assembly facility, which in its
current space can assemble 30 - 50 generators per month. BMZ's owner, Freddy
Pereira (a related party), has purchased a large facility in Pompano Beach,
Florida, which has been built out and the Certificate of Occupancy issued as of
the first week of August 2004. EENT moved into its space and was able to receive
power and communications during the fourth quarter of 2004. EENT is leasing
space from Pereira and expects initial assembly volume to be close to 100 units
per month at some point during the fourth quarter of 2005. By purchasing BMZ,
EENT will also have direct access to its generator manufacturer, thus
controlling supply.





The BMZ
purchase gives EENT the opportunity to expand into other stand alone and
portable generator markets in the future, such as the marine, aviation and
military industries, thus giving it flexibility in expansion of revenue base
should the APU market become saturated. Also, the facility will become, under
the aegis of Freddy Pereira, ISO 9001 certified, allowing it to be an industry
accepted testing facility for its products.





On the
supply chain issue, in March 2004, Registrant's CEO and CFO traveled with BMZ
owner, Freddy Pereira, to meet with the manufacturer of the custom made
generator used in the AXP 1000. The meetings proved successful in allowing
Registrant to conduct sufficient due diligence to be comfortable that the
manufacturer will be able to meet Registrant's increasing product need. Also,
EENT looked to replace its unreliable third party air conditioners which had a
30% - 40% failure rate and in mid-2004 put out bids to three companies to supply
a replacement specified to EENT’s design. Anchor Manufacturing’s design won. For
similar rationale to the acquisition of BMZ on supply chain concerns, EENT
purchased Anchor effective as of May 2, 2005. See Note 8 to the attached
financial statements for further information





Registrant
is exploring opportunities in the private sector to take advantage of quieter
technologies; however, sound reduction is proving to be a more difficult task
than originally anticipated. It is significant to note that, although noise
reduction is an ongoing process, the sound level from the AXP 1000 is still
significantly lower than from a truck's main engine or the generator used for
cooling by reefers (refrigerated truck trailers).





13


Additional
2005 Goals:





Management
has, in addition to product specific goals, undertaken to use its reasonable
best efforts to accomplish the following in 2005:





«
    Preparation
      for listing on a U.S. regulated exchange and effectuating that listing,
      depending on ability to meet listing criteria, in late 2005 or early
      2006.





«
    Implementation
      of further internal controls and policies and procedures to continue to
      self manage the growth of Registrant's business and personnel as the
      business expands.





«
    Shift
      from reliance of use of outside consultants for support services (such as
      investor relations) to self-reliance for such services through the use of
      internal resources and personnel.





«
    Further
      development of new products such as the AXP InfiniGen, still in prototype
      stage.





«
    Identification
      of new markets for products and long range business planning for all
      business units.





FORWARD
LOOKING STATEMENT





The
Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for
forward-looking statements. Certain information included in this document (as
well as information included in oral statements or other written statements made
or to be made by Energy & Engine Technology Corporation) contains statements
that are forward-looking, such as statements relating to the future anticipated
direction of the high technology and energy industries, plans for future
expansion, various business development activities, planned capital
expenditures, future funding sources, anticipated sales growth and potential
contracts. Such forward-looking information involves important risks and
uncertainties that could significantly affect anticipated results in the future
and, accordingly, such results may differ from those expressed in any
forward-looking statements made by or on behalf of Energy & Engine
Technology Corporation. These risks and uncertainties include, but are not
limited to, those relating to development and expansion activities, dependence
on existing management, financial activities, domestic and global economic
conditions, changes in federal or state tax laws, and market competition
factors.





RESULTS
OF OPERATIONS





For the
three months ended March 31, 2005, the Company had net sales of $162,145. The
delays in production of the AXP 1000 product continued as EENT moved into the
new facility being leased from Fernando A. Pereira in Pompano Beach, Florida.
Production continued to be sluggish until the new facility was complete and EENT
was able to move assembly operations there, which occurred late in the fourth
quarter of 2004, with most BMZ sales deriving from non AXP business. AXP
production commenced in early 2005 with consistent production to commence in the
second quarter of 2005. Revenue of $22,397 from operations of its Wind Dancer
Aviation Services, Inc. subsidiary has been excluded from net sales and recorded
as discontinued operations for the quarter ended March 31, 2005.





The
Company had a net loss from continuing operations of $1,970,413 for the quarter
ended March 31, 2004 and of $854,712 for the quarter ended March 31, 2005. The
Company had a net loss of $64,547 for discontinued operations for the quarter
ended March 31, 2004 and a profit of $148,967 for the quarter ended March 31,
2005. The marked decrease in net loss is based primarily on a reduction in
stock-based compensation during the first quarter of 2005. The profit for the
three months ended March 31, 2005 from discontinued operations include a gain of
approximately $176,000 from the sale of discontinued assets.





14


Selling,
general and administrative expenses at March 31, 2004 and March 31, 2005 were
$267,002 and $675,078 respectively. The
increase in selling, general and administrative expenses is based primarily upon
increases in overhead costs due to increases in staff and equipment as the
Company commences production of its products.





LIQUIDITY
AND CAPITAL RESOURCES





As of
March 31, 2005, Registrant's primary sources of liquidity included cash and cash
equivalents in the amount of $12,868, which was the balance of proceeds raised
in several private Section 4(2) stock sales and sales of product.





Registrant
believes that its existing cash balance and future operating cash flows may not
be sufficient for near term operating needs unless it is able to quickly and
consistently expand its operations, and it is exploring various opportunities to
raise additional capital. On April 27, 2005, the Company entered into
Convertible Note Financing with Longview Fund, L.P., Longview Equity Fund, L.P.
and Longview International Equity Fund, L.P. pursuant to which the investors are
to invest a total of $1,500,000 in the Company: $1,000,000 at closing (April 27.
2005, received gross of commissions) and $500,000 within 5 days after
effectiveness of the registration statement to be filed by the Company in
connection therewith.  The security is a convertible note (as of date of
closing) bearing interest at the higher of 8% or Prime plus 4%.  The notes
have a two year term and are convertible at a 30% discount to the average
of the five lowest closing bid prices for the 20 trading days preceding the
conversion date, with a $0.05 per share minimum conversion price. The Company
will also issue to the investors 18,201,229 warrants exercisable at $0.12 per
share with a five year term plus 5,000,000 warrants exercisable at $0.20 per
share with a five year term. The notes are secured by a first lien on the assets
of the Company and its subsidiaries. On May 10, 2005 and May 12, 2005, the
Company raised an additional $500,000 from third parties on identical terms. Of
the $500,000 investment, the Company received $335,000 (less commissions), and
will issue 6,067,076 warrants exercisable at $0.12 per share with a five year
term plus 1,666,667 warrants exercisable at $0.20 per share with a five year
term.





The
extent to which such sources will be sufficient to meet Registrant's anticipated
cash requirements is subject to a number of uncertainties, the most important of
which is Registrant's ability to generate sufficient cash flow to support its
business operations.





Our
independent auditors have noted in their report on our 2004 financial statements
that there are existing uncertain conditions including the net loss the Company
incurred in the amount of $5,849,366 during the year ended December 31, 2004 and
the working capital deficiency of $247,533 that existed at the balance sheet
date. These conditions raise substantial doubt as to our ability to continue as
a going concern. During the first quarter of 2005, the Company incurred a net
loss of $705,745. As of March 31, 2005, the Company had a working capital
deficit of $909,152. Theses conditions raise substantial doubt as to our ability
to continue as a going concern.





With
regard to known trends and events reasonably expected to have a material impact
on net sales and revenues, Registrant strongly believes that the heightened
interest in idling alternatives should provide a stronger demand for the AXP
1000 device. Uncertainties include whether there can be sufficient noise
reduction in the AXP 1000 to overcome objections from some long haul truckers
(the AXP 1000 is air cooled rather than water cooled, so it has a somewhat
elevated noise level when compared with liquid cooled devices). EENT is
currently working on alternatives to lower the noise level and is making steady
progress. Also, Registrant does not believe it will be faced with the same
delays it experienced in 2004, which were largely caused by the BMZ acquisition
and moving into its new Pompano Beach, Florida facility.


15


The other
major uncertainty is the extent to whether new technology will appear that will
make the small generator/engine genset used by EENT obsolete. Given the
potential development of other power generator technologies, there may be a
limited window of 5 - 10 years for EENT's technology as currently configured.
Therefore, EENT, in addition to gearing up for current production, is looking
into commencing a research and development project for its next generation
products, which is envisioned to be a part of the AXP 1000 business unit, with
project specific funding, to be determined in the future as the details of such
research and development products come to fruition. Registrant is also in the
process of developing its next generation engine driven genset, to replace the
currently used engine, the AXP InfiniGen. This is an intermediate step to be
taken before putting an alternative fuel generation source into commercial
production.





Another
guard against obsolescence is looking for new markets for BMZ generators.
Therefore, Registrant will commence exploration of marketing and sales for the
generator products in other likely industries, most notably marine, aviation and
military.





Of
course, EENT's business is subject to customary and usual business risks, not
necessarily subject to its control, including, but not limited, to:





«
    Ordinary
      operating risks (product, labor and capital cost
    increases).





«
    General
      economic conditions.





«
    Changes
      in laws and regulations.





«
    Competition.





«
    Stock
      and product market volatility.





«
    “Acts
      of God”.





Item 3. Controls and Procedures.





Disclosure
Controls and Procedures





The
Company maintains controls and procedures designed to ensure that it is able to
collect the information that is required to be disclosed in the reports it files
with the SEC, and to process, summarize and disclose this information within the
time period specified in the rules of the SEC. The Company's Chief Executive and
Chief Financial Officers are responsible for establishing, maintaining and
enhancing these procedures. They are also responsible, as required by the rules
established by the SEC, for the evaluation of the effectiveness of these
procedures.





Based on
their evaluation of the Company's disclosure controls and procedures which took
place as of the filing of this report, the Chief Executive Officer and the Chief
Financial Officer believe that these procedures are ineffective to ensure that
the Company is able to collect, process and disclose the information it is
required to disclose in the reports it files with the SEC within the required
time period.





Internal
Controls





The
Company maintains a system of internal controls designed to provide reasonable
assurance that transactions are executed in accordance with management's general
or specific authorization; transactions are recorded as necessary to (1) permit
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America, and (2) maintain
accountability for assets. Access to assets is permitted only in accordance with
management's general or specific authorization.


16


Since the
date of the most recent evaluation of the Company's internal controls by the
Chief Executive and Chief Financial Officers, there have been no significant
changes in such controls or in other factors that could have significantly
affected those controls, including any corrective actions with regard to
significant deficiencies and material weaknesses.





It is the
responsibility of the Company’s management to establish and maintain adequate
internal control over financial reporting. However, due to its small size and
limited financial resources the Company’s chief financial officer, a member of
management, has been the only employee with part time assistance from two staff
people, principally involved in accounting and financial reporting. The Board of
Directors has recognized that as a result, there is no segregation of duties
within the accounting function, leaving all aspects of financial reporting and
physical control of cash and equivalents in the hands of the CFO. Based on the
integrity and trustworthiness of the Company's chief financial officer, the
Board of Directors has had confidence that there have been no irregularities in
the Company’s financial reporting or in the protection of its
assets.





Our
independent auditors have reported to our Board of Directors certain matters
involving internal controls that our independent auditors considered to be a
reportable conditions and a material weakness, under standards established by
the American Institute of Certified Public Accountants. The reportable
conditions and material weaknesses relates to the December 31, 2004 financial
close process and absence of appropriate reviews and approvals of transactions
and accounting entries. Certain adjustments were identified in the annual audit
process, related to the recording of stock-based compensation, exercise of
warrants, asset acquisition, inventory, deferred debt and beneficial conversion
feature on convertible debentures, amortization of deferred debt and beneficial
conversion features, conversion of convertible debentures and discontinued
operations. The adjustments related to these matters were made by the Company in
connection with the preparation of the audited financial statements for the year
ended December 31, 2004. It was subsequently determined that these reported
conditions and material weaknesses also existed as of March 31,
2005.





Given
these reportable conditions and material weaknesses, management devoted
additional resources to resolving questions that arose during our year-end audit
and this Form 10-QSB for the three months ended March 31, 2005. As a result, we
are confident that our financial statements for the year ended December 31, 2004
and this Form 10-QSB for the three months ended March 31., 2005 fairly present,
in all material respects, our financial condition and results of
operations.





17


**PART
II - OTHER INFORMATION**





Item 1. Legal Proceedings.





600
Racing, Inc. v. EENT et. al.





On
October 28, 2003, the Company was served with a complaint by 600 Racing, Inc.
The complaint alleges that EENT is liable on a $150,000 judgment issued against
Millennium Fuels USA, LLC (“MFUSA”), an unrelated entity, of which Will McAndrew
and Roger Wurtele, the Company's CEO and CFO, respectively, were the Managers.
The complaint alleges that the Company engaged in a joint enterprise with MFUSA
and integrated resources with MFUSA and is thus liable on an “alter ego” theory.
In October 2004, the case was removed to the U.S. Bankruptcy Court for the
Northern District of Texas, as part of the pending bankruptcy of MFUSA. The
debtor has proposed a Plan of Reorganization supported by the U.S. Trustee, for
settlement by EENT of the litigation for $15,000.





Item 2. Changes in Securities.





During
the three months ended March 31, 2005, the Company issued an aggregate of
390,000 shares of common stock valued at $24,000 to four investors in connection
with a private placement.





During
the three months ended March 31, 2005, the Company issued an aggregate of 25,000
shares of common stock valued at $3,000 to an employee for services
provided.





On March
16, 2005, the Company issued 172,500 shares of common stock to an investor
pursuant to an anti-dilution agreement.





On March
23, 2005, the Company issued 275,000 shares of common stock valued at $27,500 to
a consultant for services provided.





Item 3. Defaults Upon Senior Securities.





Not
Applicable.





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





Not
Applicable.





Item 5. Other Information.





Not
Applicable.





Item 6. Exhibits and Reports on Form 8-K and 8-K/A.





(a)
    **Exhibit
      Number**
    **Description**31.1
    Certification
      by Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002.31.2
    Certification
      by Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002.32.1
    Certification
      by Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
      Act of 2002.32.2
    Certification
      by Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
      Act of 2002.


18





(b)
    **Reports
      Item #**
    **Description**1.01
    Entry
      into a Material Definitive Agreement filed February 10,
    20058.01
    Other
      Events filed February 10, 20059.01
    Financial
      Statements and Exhibits filed February 10, 20058.01
    Other
      Events filed February 22, 20059.01
    Financial
      Statements and Exhibits filed February 22, 20051.01
    Entry
      into a Material Definitive Agreement filed February 24,
    20058.01
    Other
      Events filed February 24, 20058.01
    Other
      Events filed March 9, 20059.01
    Financial
      Statements and Exhibits filed March 9, 20057.01
    Regulation
      FD Disclosure filed March 10, 20051.01
    Entry
      into a Material Definitive Agreement filed March 22,
  20058.01
    Other
      Events filed March 22, 20059.01
    Financial
      Statements and Exhibits filed March 22, 20051.01
    Entry
      into a Material Definitive Agreement filed May 3, 20051.01
    Entry
      into a Material Definitive Agreement filed May 9, 20058.01
    Other
      Events filed May 9, 2005








SIGNATURES





In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.








Date:
    May
      16, 2005
    /s/
      Willard G. McAndrew, IIIEnergy
      & Engine Technology CorporationDate:
    May
      16, 2005
    /s/
      Willard G. McAndrew, IIIWillard
      G. McAndrew, IIIDate:
    May
      16, 2005
    /s/
      Roger N. WurteleRoger
      N. Wurtele





*Print
the name and title of each signing officer under his signature.







19