ENERTECK CORP - Quarter Report: 2008 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2008

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission file number 0-31981

ENERTECK CORPORATION

(Exact name of Registrant as Specified in its Charter)

Delaware	47-0929885
(State or other jurisdiction	(I.R.S. Employer
of incorporation or	Identification No.)
organization)

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

(281) 240-1787

(Registrant’s Telephone Number, Including Area Code)

Not applicable

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

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 x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. 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	o
Non-accelerated filer	o	Smaller reporting company	x

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

Yes o No x

State the number of shares outstanding of each of the Issuer’s classes of common stock, as of the latest practicable date: Common, $.001 par value per share; 19,087,788 outstanding as of October 31, 2008.

PART I - FINANCIAL INFORMATION

ENERTECK CORPORATION

Index to Financial Information

Period Ended September 30, 2008

Item		Page

Item 1 – Consolidated Financial Statements (Unaudited):

Consolidated Balance Sheets		3

Consolidated Statements of Operations		4

Consolidated Statements of Cash Flows		5

Notes to Consolidated Financial Statements		6

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations		8

Item 3 – Quantitative and Qualitative Disclosures About Market Risk		15

Item 4T – Controls and Procedures		15

ENERTECK CORPORATION and SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	Unaudited			Audited
	September 30, 2008			Dec. 31, 2007
ASSETS

Current assets
Cash	$	427,683		$	319,126
Inventory		150,606			146,654
Receivables – Trade		8,098			50,920
Receivables - Employee		0			4,483
Prepaid Expenses		32,452			19,639
Total current assets		618,839			540,821

Intellectual Property		3,000,000			3,000,000

Property and equipment, net of accumulated depreciation of $230,968 and 202,271, respectively		91,196			119,893
Total assets	$	3,710,035		$	3,660,715

LIAB. AND STOCKHOLDERS’ EQUITY (DEFICIT)

Current liabilities
Notes Payable - Current Portion	$	500,000		$	500,000
Accounts payable		12,198			10,649
Accrued liabilities		30,613			61,666
Line of Credit		99,795			0
Total current liabilities		642,606		$	572,315

Long Term Liabilities
Notes Payable	$	500,000		$	1,000,000
Total Long Term Liabilities	$	500,000		$	1,000,000


Stockholders’ Equity (Deficit)
Common stock, $.001 par value, 100,000,000 shares authorized, 19,087,788 and 17,761,359 shares issued and outstanding, respectively		19,088			17,761
Additional paid-in capital		20,886,996			19,947,381
Accumulated deficit		(18,338,655	)		(17,876,742	)
Total stockholders’ equity		2,567,429			2,088,400

Total liabilities and stockholders’ equity (deficit)	$	3,710,035		$	3,660,715

ENERTECK CORPORATION and SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

Three and Nine Months Ended September 30, 2008 and 2007

(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2008			2007			2008			2007

Revenues	$	0		$	245,616		$	274,998		$	301,732
Cost of goods sold		0			32,097			41,125			50,735
Gross profit	$	0		$	213,519		$	233,873		$	250,997

General and Administrative Expenses:
Wages	$	102,500		$	108,429		$	314,748		$	322,108
Stock based compensation		0			0			47,074			0
Depreciation		9.565			13,917			28,697			37,993
Other Selling, Gen. & Admin. Exp.		83,019			83,183			277,644			309,194
Total Expenses	$	195,083		$	205,529		$	668,163		$	669,295

Operating Income (loss)	$	(195,084	)	$	7,990		$	(434,290	)	$	(418,298	)

Interest Income		2,385			5,027			11,049			18,791
Other Income		0			300			3,388			18,928
Stock based delay awards		0			(422,884	)		0			(422,884	)
Interest expense		(10,934	)		(15,259	)		(42,060	)		(50,620	)

Net Income (loss)	$	(203,633	)	$	(424,826	)	$	(461,913	)	$	(854,083	)

Weighted average shares outstanding:		(0.01	)	$	(0.02	)	$	(0.03	)	$	(0.05	)
Basic and diluted		18,296,390			17,761,359			18,003,109			17,321,799

ENERTECK CORPORATION and SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30, 2008 and 2007

(Unaudited)

	2008			2007
Net (loss)	$	(461,913	)	$	(854,083	)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation		28,697			37,993
Common Stock issued for services		0			0
Warrants/Options Expenses		47,074			422,884
Gain on sale of assets		0			(964	)
Changes in operating assets and liabilities:
Accounts receivable		42,822			45,920
Inventory		(3,952	)		(8,395	)
Prepaid expenses		(12,813	)		17,175
Accounts payable		1,549			(44,359	)
Accrued Interest payable		(28,305	)		(16,346	)
Accrued Other expenses		(1,771	)		23,430
NET CASH USED IN OPERATING ACTIVITIES	$	(388,612	)	$	(376,745	)

CASH FLOWS FROM INVESTING ACTIVITIES		0		$	4,800
Proceeds from Sale of Asset		0		$	(3,025	)
Repayment of Employee Advances		4,483			16,685
CASH PROVIDED BY INVESTING ACTIVITIES	$	4,483		$	18,460

CASH FLOWS FROM FINANCING ACTIVITIES
Exercise of warrants	$	333,800		$	0
Sale of Common Stock		560,068			750,000
Proceeds under line of credit		98,818
Payment on Intellectual Property		(500,000	)		(500,000	)
CASH PROVIDED BY FINANCING ACTIVITIES	$	492,686		$	250,000

NET INCREASE (DECREASE) IN CASH	$	108,557		$	(108,285	)
Cash, beginning of period		319,126		$	429,483

Cash, end of period	$	427,683		$	321,198

Cash paid for:
Income tax	$	-		$	-
Interest expense		70,365			66,966
,

ENERTECK CORPORATION and SUBSIDIARY,

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – BASIS OF PRESENTATION

The accompanying Unaudited interim consolidated financial statements of EnerTeck Corporation have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited consolidated financial statements and notes thereto contained in EnerTeck’s Annual Report filed with the SEC on Form 10-KSB. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the consolidated financial statements which would substantially duplicate the disclosure contained in the audited consolidated financial statements for fiscal 2007 as reported in the Form 10-KSB have been omitted.

NOTE 2 - 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.

NOTE 3 – INTELLECTUAL PROPERTY

In July 2006, EnerTeck acquired the EnerBurn technology. The purchase price for the EnerBurn technology is to be paid as follows: (i) $1.0 million cash paid on July 13, 2006, and (ii) promissory note for $2.0 million 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. The second installment payment on this note of $500,000 plus compounded interest was made in advance of the due date on July 3, 2008. EnerTeck has determined that the life of the intellectual property is indefinite. Therefore, the asset is not amortized and will be tested for impairment at least annually.

NOTE 4 - STOCK-BASED COMPENSATION

Effective January 1, 2006, EnerTeck began recording compensation expense associated with stock options and other forms of equity compensation in accordance with Statement of Financial Accounting Standards No. 123R, Share-Based Payment, as interpreted by SEC Staff Accounting Bulletin No. 107. Prior to January 1, 2006, EnerTeck had accounted for stock options according to the provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations, and therefore no related compensation expense was recorded for awards granted with no intrinsic value. EnerTeck adopted the modified prospective transition method provided for under SFAS No. 123R, and, consequently, have 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.

EnerTeck granted 64,200 non-statutory stock options to company employees during the three months ended March 31, 2008 under the Enerteck Corporation 2003 Stock Option Plan. These options were divided based upon current compensation levels to all current salaried employees. No further stock option compensation is planned at the present time.

NOTE 5 - EXERCISE OF WARRANTS

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. Such warrants were exercised following the temporary reduction in the warrant exercise prices of all of the Company’s then outstanding warrants by 40.0% effective immediately through and including June 2, 2008, which was extended until June 30, 2008.

NOTE 6 – PRIVATE OFFERING

During June 2008, the Board of Directors of the Company authorized a private offering of stock and warrants. Pursuant thereto and during the third quarter of 2008, the Company issued 800,095 shares of its common stock at $0.70 per share to 15 investors for total gross proceeds of $560,066.50. The investors were also issued a total of 400,047.5 warrants exercisable into shares of common stock at $1.20 per share.

NOTE 7 - LINE OF CREDIT

During March 2008, the Company entered into a revolving line-of-credit agreement with Merrill Lynch Bank USA. The line of credit provides for short-term borrowings up to $100,000, with interest at LIBOR plus .5%. The line is collateralized by cash and cash equivalents totaling $215,291 at September 30, 2008.

Item 2. Management’s Discussion and Analysis of Plan of Operation

The following should be read in conjunction with the consolidated financial statements of the Company included elsewhere herein.

FORWARD-LOOKING STATEMENTS

When used in this report, 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 report 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. Certain of these risks and uncertainties are discussed in the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2007 under the caption “Uncertainties and Risk Factors” in Part I, Item 1 “Description of Business”.

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.

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. 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 supplier, Ruby Cat Technology, LLC (“Ruby Cat”).

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 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 affect the operating margins of its customers while contributing to a cleaner environment.

RESULTS OF OPERATIONS

Revenues

We recorded no sales revenues for the three months and $275,000 for the nine months ended September 30, 2008, versus sales revenues of $246,000 and $302,000, respectively, in the same periods of 2007. The lack of revenues for the three month period and decrease for the nine month periods over that of the prior year can primarily be traced to the determination that the equipment problems with the chemical delivery infrastructure on the Mississippi River had to be investigated and remedied to allow for an increase in sales in the future. We believe that this has now been accomplished. It is anticipated that another large order from Custom will be shipped during the fourth quarter of 2008 and that this business should increase now that the fueling facility for EnerBurn on the Mississippi River located at Memphis, Tennessee is operational. We also determined that for the future growth of the EnerBurn market it was necessary to restructure our marketing force and make a concerted effort to expand into larger U.S. and international markets. We believe we have been successful in this effort as well with the opening of new markets both within the U.S. and in Europe which should generate considerable sales starting in the fourth quarter and into 2009.

On July 28, 2005, EnerTeck Sub had entered into an Exclusive Reseller and Market Development Agreement (the “Custom Agreement”) with 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. 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 an equipment problems and delay in the completion of a principal Marine fueling facility for EnerBurn on the Mississippi River. We believe that each of these problems has been addressed. We anticipate sales in this market will increase significantly during 2009.

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.

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

While their were no sales to report and zero gross profits during the third quarter of 2008, the gross profit, defined as revenues less cost of goods sold, was $234,000 or 85.0% of sales for the nine month period ended September 30, 2008, compared to $214,000 or 86.9% of sales and $251,000 or 83.1% for the three and nine month periods ended September 30, 2007. In terms of absolute dollars, the decrease for the nine month period is a direct reflection of the difference in sales volume for the two periods.

Cost of goods sold was $0 and $41,000 for the three and nine month periods ended September 30, 2008, which represented 0% and 15.0% of revenues respectively, as compared to $32,000 and $51,000 for the three month and nine month periods ended September 30, 2007 which represented 13.1% and 16.9% of revenues respectively. Starting in July 2006, we have owned the EnerBurn technology and associated assets. Although our manufacturing is done for our company by an unrelated third party, we should continue to realize excellent gross margins due to our manufacturing our own product lines, compared to those we achieved in the past when we purchased all of our products from an outside vendor.

Costs and Expenses

Operating expenses were $195,000 for the three months and $668,000 for the nine months ended September 30, 2008 as compared to $206,000 for the three months and $669,000 for the nine months ended September 30, 2007. A significant portion of such decrease for the three month period of 2008 was due to decreases in sales commissions from the decrease in sales for the third quarters of 2008 compared to the prior year period. While total operating expenses were primarily equal for the nine months ended September 30, 2008 compared to September 30, 2007, other selling, general and administrative expenses decreased to $277,000 for the nine months ended September 30, 2008 from $309,000 for the prior year period, wages decreased to $315,000 from $322,000, depreciation decreased to $29,000 from $38,000, which decreases were offset by a non-cash stock based compensation expense of $47,000 for the nine months ended September 30, 2008 for which there was not a comparable item for the prior year period. Costs and expenses in all periods primarily consisted of wages, professional fees, rent expense, amortization expense and other selling, general and administrative expenses.

Net Loss

We reported a net loss of $204,000 during the three months and $462,000 during the nine months ended September 30, 2008, as compared to net losses of $425,000 for the three months and $854,000 for the nine months ended September 30, 2007, respectively. This change was primarily due to a non cash-stock-based penalty award accrued in the third quarter of 2007 in the amount of $423,000 related to the issuance of 510,000 additional stock warrants, which were the result of our required compliance with the terms of the December 2005 agreement with BATL Bioenergy LLC for its December 2005 stock purchase related to delays caused by our prior auditors over unrelated issues. There was not a comparable non-cash stock-based penalty award in the nine months ended September 30, 2008. Without such non cash-stock-based penalty award in 2007, our net loss for the three months and nine months ended September 30, 2007 would have been $2,000 and $431,000, respectively, which would have been substantially less than the net loss suffered in the three months ended September 30, 2008 and less than the net loss suffered in the nine months ended September 30, 2008, primarily due to the reduced sales achieved in the three and nine months of 2008 compared to the prior year periods.

We realized early in the third quarter of 2008 that a change in our marketing effort had to be made to allow us to grow. Our ability to produce net income in the future will be dependent upon our ability to increase revenues faster than we increase our selling, general and administrative expenses, research and development expense and other expenses. The success of our large new client demonstrations negotiated during the third quarter is critical to the future success of our business and there are no guarantees that these demonstrations will generate sales with these potential new clients.

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 early in the third quarter of 2006, with the completion of the purchase of the EnerBurn technology and the commencement of manufacturing operation. This gives 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 was completed on July 13, 2006 and both the formulation equipment and raw materials are presently in place to manufacture for both on and off road product lines.

In this regard, we continue to believe that the on road trucking industry is another potentially large market for our products. The purchase of the rights to the EnerBurn technology and the subsequent issuance to Enerteck of its manufacturing permit for “On Road” versions of EnerBurn, allows us to now pursue this market and it is our intention to do that during 2008. We are currently working closely with two engineering firms on the development of a reliable and economically priced truck mounted dosing unit which will better allow for the efficient utilization of EnerBurn for the trucking markets. This appears to be nearing completion and it is anticipated that this market should begin opening up for us later in 2008.

Our management has also determined that it is important to expand the market for the Company’s products to other industries and other countries. During the third quarter of 2008, we have focused our marketing effort on the heavy construction, offshore marine and rail industries. We believed that it was vital to the long term viability of the Company to expand the market for EnerBurn to newer, larger markets. Negotiations are currently underway for the demonstration of EnerBurn in each of these markets and we are scheduled to commence demonstrations for major potential clients in each of these industries in the fourth quarter of 2008 and first and second quarters of 2009.

LIQUIDITY AND CAPITAL RESOURCES

On September 30, 2008, we had working capital deficit of ($24,000) and stockholders’ equity of $2,567,000 compared to working capital of $159,000 and stockholders equity of $2,287,000 on September 30, 2007.

On September 30, 2008, we had $428,000 in cash, total assets of $3,710,000 and total liabilities of $1,143,000, compared to $321,000 in cash, total assets of $3,854,000 and total liabilities of $1,567,000 on September 30, 2007.

The increase in cash on hand on September 30, 2008, as compared to that of September 30, 2007, was primarily due to cash from the exercise of common stock purchase warrants and from a sale of common stock and warrants through a private placement.

Cash available increased by $109,000 during the first nine months of 2008 to a balance of $428,000 on September 30, 2008 as compared to $319,000 at year end December 31, 2007. Net cash used in operating activities was $390,000 for the nine months ended September 30, 2008 compared to net cash used in operating activities of $377,000 for the nine months ended September 30, 2007. Such changes from period to period were primarily the result of a net loss of $462,000 for the nine months ended September 30, 2008 compared to a net loss of $854,000 for the nine months ended September 30, 2007, as well as changes from period to period in accounts receivable, inventory, prepaid expenses, accounts payable, accrued interest payable and accrued other expenses.

For the nine months ended September 30, 2008, we had investing activities of $4,000 from the repayment of employee debt compared to investing activities of $18,000 for the nine months ended September 30, 2007 primarily from the repayment of employee debt of $16,000. Cash provided by financing activities was $493,000 for the nine months ended September 30, 2008 primarily from $334,000 received from the exercise of warrants, and $560,000 received from private stock placement, offset by $500,000 paid on the intellectual property in 2008, compared to $250,000 from financing activities for the nine months ended September 30, 2007 from the sale of a private placement of common stock in the amount of $750,000, offset by $500,000 paid on the intellectual property in 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 advance in May 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. 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. Such warrants were exercised following the temporary reduction in the warrant exercise prices of all of the Company’s then outstanding warrants by 40.0% effective immediately through and including June 2, 2008, which was extended until June 30, 2008. As of July 1, 2008, the warrant exercise prices of the outstanding warrants returned to their original warrant exercise prices.

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 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. In addition, $750,000 in financing was affected in 2007, and during the quarter ended September 30, 2005, we issued 250,000 shares of our common stock to certain accredited investors for aggregate proceeds of $250,000. In addition, in December 2005, we sold to BATL Bioenergy LLC 2,450,000 shares of the common stock and a warrant to purchase an additional 1,000,000 shares of common stock at an exercise price of $2.00 per share for the aggregate purchase price of $3,000,000. Also, in 2005, we received loans for working capital of an aggregate of $115,000 from various parties. All loans were repaid in December 2005.

Since the end of the second quarter, 1,740,316 warrants with a total exercised value of $1,998,146 have expired. As of September 30, 2008, there were 2,670,000 warrants outstanding with a total exercised value of $4,401,000. Such warrants have exercise prices ranging from $1.00 to $2.00. There can be no assurance that any of the warrants (160,000 of which expired on October 1, 2008) will be exercised especially in view of the current market price of our common stock which is less than the exercise prices of the warrants. The foregoing does not include 400,054 warrants exercisable into shares of common stock at $1.20 per share issued in connection with the private offering effected during the third quarter of 2008.

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. Our contemplated cash requirements for the balance of 2008 and beyond will depend primarily upon level of sales of our products, inventory levels, product development, sales and marketing expenditures and capital expenditures.

Other than the remaining $1,000,000 balance of the Note Payable from the $3,000,000 for the purchase of the intellectual property and a small line of credit collateralized with short term interest generating cash investments, we have no material commitments for capital requirements. Our continuation as a going concern is contingent upon our ability to obtain this additional financing and to generate revenues and cash flow to meet our obligations on a timely basis. As mentioned above, management believes that sales revenues for 2007 and the first nine months of 2008 were considerably less than earlier anticipated, primarily due to circumstances which have been addressed and therefore should not reoccur in the future. Management anticipates that sales should show significant increases during 2009.

Inflation has not significantly impacted our operations.

Off-Balance Sheet Arrangements

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

Significant Accounting Policies

Business and Basis of Presentation

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

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

Principles of Consolidation

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

Cash and Cash Equivalents

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

Inventory

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

Accounts Receivable

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

Property and Equipment

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

Intangible Assets

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

Revenue Recognition

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

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

Income Taxes

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

Income (Loss) Per Common Share

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

Diluted net income (loss) per common share is computed by dividing the net income applicable to common stockholders, adjusted on an "as if converted" basis, by the weighted average number of common shares outstanding plus potential dilutive securities. For 2007 and 2006, potential dilutive securities had an anti-dilutive effect and were not included in the calculation of diluted net loss per common share.

Management Estimates and Assumptions

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

Financial Instruments

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

Stock Options and Warrants

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

Item 3. 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 4T. 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 September 30, 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 changes in internal control over financial reporting that occurred during the fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

There are no material pending legal proceedings to which the Company is a party or to which any of its property is subject.

Item 1A. Risk Factors.

Not required.

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

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.

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. 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, 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. 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 thereunder.

Item 3. Defaults Upon Senior Securities.

None.

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

None.

Item 5. Other Information.

None.

Item 6. Exhibits.

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)

SIGNATURES

Pursuant to the requirements 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)

Dated: November 12, 2008	By:	/s/ Dwaine Reese
		Dwaine Reese,
		Chief Executive Officer
		(Principal Executive Officer)

Dated: November 12, 2008	By:	/s/ Richard B. Dicks
		Richard B. Dicks,
		Chief Financial Officer
		(Principal Financial Officer)