ENERTECK CORP - Quarter Report: 2010 March (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 March 31, 2010

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 ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ¨ No ¨

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	¨	Accelerated filer	¨
	Non-accelerated filer	¨	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 ¨ 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; 21,982,616 outstanding as of May 1, 2010.

PART I - FINANCIAL INFORMATION

ENERTECK CORPORATION

Index to Financial Information

Period Ended March 31, 2010

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	9

Item 3 – Quantitative and Qualitative Disclosures About Market Risk	16

Item 4T – Controls and Procedures	16

ENERTECK CORPORATION and SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	Unaudited			Audited
	March 31, 2010			Dec. 31, 2009
ASSETS

Current assets
Cash	$	37,830		$	52,129
Inventory		156,565			168,380
Receivables – Trade		235,225			243,855
Receivables - Employee		500			500
Prepaid Expenses		47,539			20,129
Total current assets	$	477,660			484,992

Intellectual Property	$	1,451,980			1,596,644

Property and equipment, net of accumulated depreciation of $290,635 and $280,264, respectively		120,827			130,365
Total assets	$	2,050,466		$	2,212,002

LIAB. AND STOCKHOLDERS’ EQUITY (DEFICIT)

Current liabilities
Notes Payable - Current Portion	$	550,000		$	500,000
Accounts payable		171,847			155,447
Shareholder Loans and Advances		280,000			230,000
Accrued Interest		24,237			19,187
Other Accrued liabilities		465,005			293,619
Total current liabilities	$	1,470,257		$	1,198,254

Long Term Liabilities
Notes Payable	$	50,000		$	50,000
Total Long Term Liabilities	$	50,000		$	50,000

Stockholders’ Equity (Deficit)
Preferred stock, $.001 par value, 10,000,000 shares authorized, none issued
Common stock, $.001 par value, 100,000,000 shares authorized, 21,637,788 and 21,637,788 shares issued and outstanding, respectively		21,638			21,638
Additional paid-in capital		22,396,617			22,396,617
Accumulated deficit		(21,888,046	)		(21,454,506	)
Total stockholders’ equity		530,209			963,749

Total liabilities and stockholders’ equity (deficit)	$	2,050,466		$	2,212,002

ENERTECK CORPORATION and SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended March 31, 2010 and 2009

(Unaudited)

	Three Months Ended March 31,
	2010			2009

Revenues	$	99,526		$	21,152
Cost of goods sold		20,059			6,054
Gross profit	$	79,467		$	15,254

General and Administrative Expenses:
Wages	$	211,239		$	184,320
Stock-based Compensation		0			25,469
Depreciation		10,371			8,414
Amortization		144,664			0
Other Selling, Gen. & Admin. Exp.		137,905			84,033
Total Expenses	$	504,179		$	302,236

Operating loss	$	(424,712	)	$	(287,138	)

Interest Income		6			34
Interest expense		(8,832	)		(10,103	)
Net Income (loss)	$	(433,538	)	$	(297,207	)

Weighted average shares outstanding:	$	(0.02	)	$	(0.02	)
Basic and diluted		21,637,788			19,087,788

ENERTECK CORPORATION and SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended March 31, 2010 (Unaudited)

	March 31,			March 31,
	2010			2009
Net (loss)	$	(433,538	)	$	(297,208	)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization		155,035			8,414
Warrants /Options Expense		0			25,469
Changes in operating assets and liabilities:
Accounts receivable		8,629			(9,612	)
Inventory		11,815			(37,171	)
Prepaid expenses and other		(27,409	)		(11,584	)
Accounts payable		16,400			(7,649	)
Accrued Interest payable		5,050			10,094
Accrued Liabilities		150,551			26,202
NET CASH USED IN OPERATING ACTIVITIES	$	(113,467	)	$	(269,875	)

CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	$	(832	)	$	0
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES	$	(832	)	$	0

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds of Stockholder Notes Payable and Advances		100,000			250,000
CASH PROVIDED BY FINANCING ACTIVITIES	$	100,000		$	250,000

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	$	(14,299	)	$	(19,875	)
Cash and cash equivalents, beginning of Quarter		52,129			106,240
Cash and cash equivalents, end of Quarter	$	37,830		$	86,365
Cash paid for:
Income tax	$	0		$	0
Interest	$	0		$	0

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-K. 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 2008 as reported in the Form 10-K 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 2010 and 2009, 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 as follows: (i) $1.0 million cash paid on July 13, 2006, and (ii) a promissory note for $2.0 million. In May of 2007, we made the initial payment of $500,000 plus interest against the loan. Prior to 2009 EnerTeck had determined that the life of the intellectual property was indefinite; therefore, the asset was not amortized. The Company tested its intangible assets for impairment as of December 31, 2008. As a result of an independent examination based on sales for the years ended December 31, 2008, the Company determined that an impairment of the asset in the amount of $825,000 was required to be recorded.

Management made the decision during 2009 to change the characterization of its intellectual property to a finite-lived asset and to amortize the remaining balance of its intangible assets to the nominal value of $150,000 by the end of 2012, due to its determination that this now represents the scheduled end of its exclusive registration during period. As a result, amortization expense of approximately $579,000 was recorded for the year ended December 31, 2009. Amortization expense for the years ending December 31, 2010, 2011 and 2012 is expected to be $569,000, $569,000 and $289,000, respectively.

NOTE 4 - STOCK-BASED COMPENSATION

EnerTeck follows the provisions of FASB Accounting Standards Codification (“FASB ASC”), FASB ASC 718, Compensation – Stock Compensation, to account for expense associated with stock options and other forms of equity compensation.

Pursuant to the employment agreement entered into with Gary B. Aman during the first quarter of 2009, the Company granted Mr. Aman an option to purchase 200,000 shares of Common Stock of the Company at an exercise price of $1.00 per share, all of which became 100% vested on January 1, 2010 and shall expire March 27, 2014.

In May 2009, the Company issued 250,000 shares of common stock to Wakabayashi Fund, LLC (“Wakabayashi”) for consulting services to be rendered pursuant to a consulting agreement entered into in May 2009 between the Company and Wakabayashi. Such shares were valued at the closing price of Company stock at the date of issuance and an expense of $225,000 was recorded.

During the third quarter of 2009, options to acquire 64,200 shares were issued under our 2003 Stock Option Plan to five employees which options are immediately exercisable. These options have an exercise price of $0.55 per share and expire in five years from their issue date. These options were valued using the Black-Scholes Model and the fair value of $35,295 was charged to operations in the third quarter of 2009. We applied the following assumptions:

Expected Term: The expected term represents the period over which the share-based awards are expected to be outstanding based on the historical experience of our employees. We used an expected term of 5 years.

Expected Volatility: The volatility factor used in the assumptions is based on the historical price of our stock over the most recent period commensurate with the expected term of the stock option award. We used an expected volatility of 312.51%.

Expected Dividend Yield: We do not intend to pay dividends on common stock for the foreseeable future. Accordingly, we used a dividend yield of zero in the assumptions

NOTE 5 - EXERCISE OF WARRANTS

No warrants have been exercised during 2010 or 2009.

NOTE 6 – PRIVATE OFFERING

During the second quarter of 2009, we issued 1,600,000 shares of our common stock at $0.50 per share to five investors for total gross proceeds of $800,000 in a private placement offering to accredited investors only. An additional 700,000 shares, at $0.50 per share, were issued in the third quarter of 2009 to three other investors in connection with additional proceeds of $350,000 which had been advanced by such investors during the second quarter of 2009. An additional $30,000 has been advanced towards this offering from one other investor who advanced funds for this offering during the second quarter of 2009.

NOTE 7 – RELATED PARTY NOTES AND ADVANCES

On July 7, 2009, the Company entered into a $100,000 unsecured promissory note with an officer, due on demand. Interest is payable at 12% per annum. Also, on December 11, 2009, the Company entered into a $50,000 note with a shareholder/director. Interest is 5% per annum. The principal balance of the note is due on the earlier of December 11, 2012, or upon completion by the Company of equity financing in excess of $1.0 million in gross proceeds. Interest on the loan is payable on the maturity date at the rate of 5% per annum. Such shareholder/director advanced the Company $50,000 during the first quarter of 2010. This advance is due on demand and does not bear interest.

NOTE 8 – CONVERTIBLE NOTE PAYABLE

On February 10, 2010, the Company entered into a $50,000 convertible promissory note with Wayside Ventures, LLC due on October 10, 2010. Interest is payable at 8% per annum. At anytime Wayside Ventures, LLC shall have the right to convert any unpaid portion of the note into capital stock prior to the maturity date. (See Note 11)

NOTE 9 – ABILITY TO CONTINUE AS A GOING CONCERN

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. During the quarter ending March 31, 2010 and the year ended December 31, 2009, the Company incurred net losses of $434,000 and $2,054,000 respectively . In addition, at the quarter ending March 31, 2010 and year ending December 31, 2009, the Company has an accumulated deficit of $21,888,000 and $21,455,000 respectively. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

The Company’s continuation as a going concern is contingent upon its ability to obtain additional financing and to generate revenues and cash flow to meet its obligations on a timely basis. Management believes that sales revenues for 2009 and 2008 were considerably less than earlier anticipated primarily due to circumstances which have been corrected or are in the process of being corrected. Management expects that marine, railroad and trucking sales should show significant increases in 2010 over what has been generated in the past, as a result of the expected outcome of long term client demonstrations from several extremely large new clients, which took place over the fourth quarter of 2009 and will take place over the first three quarters of 2010.

The Company has been able to generate working capital in the past through private placements and believes that these avenues will remain available to the Company if additional financing is necessary. No assurance can be made that any of these efforts will be successful.

NOTE 10 — RECENTLY ISSUED AUTHORITATIVE ACCOUNTING GUIDANCE

In June 2009, the Financial Accounting Standards Board (FASB) established the FASB Accounting Standards Codification (“Codification” or “ASC”) as the source of authoritative U. S. generally accepted accounting principles recognized by the FASB to be applied by nongovernmental entities. Rules and interpretative releases of the SEC under authority of federal securities laws are also sources of authoritative guidance for SEC registrants. All non-grandfathered, non-SEC accounting literature not included in the Codification became nonauthoritative. The Codification became effective for the period ended September 30, 2009 and did not have a significant impact on the Company’s financial statements.

In May 2009, the FASB issued new accounting guidance on subsequent events that establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. FASB ASC 855, Subsequent Events, sets forth (1) The period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, (2) The circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements and (3) The disclosures that an entity should make about events or transactions that occurred after the balance sheet date. The pronouncement was effective for interim or annual financial periods ending after June 15, 2009. The adoption of this statement did not have a material effect on the Company’s financial statements.

In February 2010, the FASB amended its guidance on subsequent events to remove the requirement for SEC filers to disclose the date through which an entity has evaluated subsequent events, for both issued and revised financial statements. This amendment alleviates potential conflicts between the FASB’s guidance and the reporting rules of the SEC. Our adoption of this amended guidance, which was effective upon issuance, had no effect on our financial condition, results of operations, or cash flows. There were no subsequent events that would require adjustment to or disclosure in the financial statements.

NOTE 11 — SUBSEQUENT EVENTS

Subsequent to the quarter ended March 31, 2010, the Company issued 344,828 shares of common stock to a third party in connection with the conversion of a $50,000 loan made to the Company in February 2010.

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. Such factors include, among other things, general economic conditions; cyclical factors affecting our industry; lack of growth in our industry; our ability to comply with government regulations; a failure to manage our business effectively; our ability to sell products at profitable yet competitive prices; and other risks and factors set forth from time to time in our filings with the Securities and Exchange Commission.

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 $99,526 sales revenues for the three months ended March 31, 2010, compared to sales revenues of $21,152, in the same period of 2009. The increase in revenues for the first three months of 2010 compared to the prior year period was primarily due to a sale to our largest customer and the increase of sales activity with new customers. As the economy hopefully improves, this business should increase back to or greater than prior levels during the later part of 2010 and into 2011.

We also determined that for the future growth of the EnerBurn market it is necessary to restructure our marketing force and make a concerted effort to expand into larger U.S. and international markets. We believe our initial efforts in this area have been successful. Effective January 1, 2009, the marketing effort for the Company changed with the addition of a new executive officer (who has been and remains a director), a change in marketing personnel and a new focus on marketing strategy. A significant piece of new business, larger than any we have previously sold was closed subsequent to the close of the first quarter of 2010. The Company has completed nearly a year of testing for one of the largest trucking companies in the U.S. which is expected to lead to initial shipments as soon as infrastructure equipment can be installed and put into operation. We are also working on the opening of other new markets both within the U.S. and in Europe and anticipate the generation of new sales during 2010 and 2011.

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 and renews automatically for successive one year terms 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 and have been corrected and are in the process of being corrected. We cannot guarantee that meaningful revenues will be derived in the future from the Custom Agreement. During 2009, Custom represented 0.0% of the Company’s sales as compared to 83.3% of the Company’s sales revenues for the year ended December 31, 2008. We believe Custom suffered from the weakened economy although it is currently testing the Company’s principal product line on additional segments of its business. Custom has again ordered in early 2010, and we still believe will be a significant part of our business. However, we are hopeful that as other customer testing in completed in other industries, Custom’s impact on our business will lessen. Nevertheless, at the present time, the business generated by Custom materially impacts our operating results.

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

Gross profit, defined as revenues less cost of goods sold, was $79,000 or 79.8% of sales for the three month period ended March 31, 2010, compared to $15,000 or 71.4% of sales for the three period ended March 31, 2009. In terms of absolute dollars, the increase for the three month periods is a direct reflection of the difference in sales volume for the two periods. It is expected that sales should increase during the balance of 2010 and thereafter primarily due to the completion of testing and the closing of sales with one of the major U.S. trucking companies.

Cost of goods sold was $20,000 for the three period ended March 31, 2010, which represented 20.2% of revenues, as compared to $6,000 for the three months ended March 31, 2009 which represented 28.6% of revenues. Since its purchase in July 2006, we have owned the EnerBurn technology and associated assets. Although our manufacturing is performed for us by an unrelated third party, we should continue to realize better gross margins due to the manufacturing our own product lines, compared to those we had achieved in the past when we purchased all of our products from an outside vendor.

Costs and Expenses

Operating expenses were $504,000 for the three months ended March 31, 2010 as compared to $300,000 for the three months ended March 31, 2009. Costs and expenses in all periods primarily consisted of payroll, professional fees, rent expense, depreciation expense, amortization expense and other general and administrative expenses. While there has been an increase in costs and expenses for the three month period ended March 31, 2010 compared to the prior year period, it is felt that these increases will lead to a considerable increase in earnings potential in 2010 and future years. Such increases were primarily due to Wages which increase to $211,000 for the three months ended March 31, 2010 as compared to $184,000 for the same period in 2009 and to other selling, general and administrative expenses which increased to $138,000 for the three months ended March 31, 2010 from $84,000 for the prior year period,. Depreciation also increased to $10,000 for the three months ended March 31, 2010 from $8,000 for the three months ended March 31, 2009. Of the total $211,000 in wages for the first three months of 2010, $121,000 was not paid in cash during the period and was accrued to a later date when funds become available.

Other Income and Expenses for the three months ended March 31, 2010 were a negative $9,000 as compared to a negative $10,000 for the three months ended March 31, 2009. Of this amount for 2010, $9,000 was accrued interest expense for the notes payable as compared to $10,000 in accrued interest expense for the same period in 2009.

Net Loss

We reported a net loss of $434,000 during the three months ended March 31, 2010, as compared to net losses of $297,000 for the three months ended March 31, 2009. The additional loss was primarily due to additional costs and expenses of $57,000 for the three months ended March 31, 2010 compared to the prior year period and the write down of the technology of $145,000 in the first quarter of 2010, offset by a small increase in gross profit achieved in the first quarter of 2010 compared to the first quarter of 2009.

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

Operations Outlook

Beginning in 2005, management began a period of reassessing the Company’s direction. Due to a lack of working capital, and a nearly complete turnover in upper management and sales staff dating back into 2004, senior management changed its method of marketing the operation during 2005. The majority of the marketing effort for 2005 was directed at targeting and gaining a foothold in one of our major target areas, the inland marine diesel market. Management focused virtually all resources at pinpointing and convincing one major customer within this market, Custom, to go full fleet with our diesel fuel additive product lines. A substantial portion of 2005 was spent testing our primary product, EnerBurn, on one large inland marine vessel belonging to this major potential customer. This resulted in the signing of the Custom Agreement and delivery of the first shipment of EnerBurn to Custom as discussed above. This initial purchase order plus the second order received in the second quarter of 2006, amount in size to more revenue and a higher margin than all the orders combined for 2005, 2004 and 2003. In addition to our efforts in the marine sales, the sales effort resulted in initial sales to customers in the heavy construction industry market beginning in the third quarter of 2006 in which we have used the same strategies that had successfully started with the marine market. To date, we have signed on three new customers with testing to begin with another major heavy equipment contractor in the very near future.

At present, one customer, Custom, has represented a majority of our sale revenues to date, although during 2009, Custom represented 0.0% of the Company’s sales. As stated above, Custom has again ordered in early 2010, and we still believe will be a significant part of our business. In addition, with Custom’s assistance, negotiations have been 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 have been corrected and are in the process of being tested. It is expected that sales should continue to show significant increases in 2010. It is also anticipated that other new customers coming on board during 2010 will lessen the impact of a loss of Custom, should that happen.

A major change in the way EnerTeck does business commenced in the third quarter of 2006 with the completion of the purchase of the EnerBurn technology and the commencement of manufacturing operation. This gave us permanent, exclusive rights to the EnerBurn formulas and protocols and allows for a much better gross margin than in the past. The purchase of the EnerBurn technology and associated assets had been completed on July 13, 2006 and both the formulation equipment and raw materials were in place to manufacture both our on and off road product lines. The opening of the on-road market to our products offers great potential to the Company in coming years. Our marketing efforts from that point broadened from principally marine applications to a wide range of new industries. Effective January 1, 2009, the marketing effort for the Company has changed with the addition of a new executive officer (who has been and remains a director) and a new focus on marketing strategy. It remains to be seen how, when or if this effort will become successful, however the potential for success is much broader with our increased ability to service these markets.

LIQUIDITY AND CAPITAL RESOURCES

On March 31, 2010, we had working capital deficit of ($993,000) and stockholders’ equity of $530,000 compared to a working capital deficit of ($713,000) and stockholders equity of $964,000 on December 31, 2009.

On March 31, 2010, we had $43,000 in cash, total assets of $2,050,000 and total liabilities of $1,520,000, compared to $52,000 in cash, total assets of $2,212,000 and total liabilities of $1,248,000 on December 31, 2009.

For the three months ended March 31, 2010, we had investing activities of a negative $832 compared to investing activities of $0 for the three months ended March 31, 2009. Cash provided by financing activities was $100,000 for the three months ended March 31, 2010 as compared to $250,000 for the three months ended March 31, 2009.

Net cash provided by operating activities was negative $113,000 for the three months ended March 31, 2010 caused primarily by a non cash income items of $155,000, accrued liabilities of $151,000, accounts payable of $16,000 and inventory of $12,000, offset by the net loss of ($434,000) and prepaid expenses and other of ($27,000). Net cash used in operating activities was $270,000 for the three months ended March 31, 2009 which was primarily due to a net loss of ($297,000), inventory of ($37,000), accrued liabilities of $26,000, stock options of $25,000and accrued interest payable of $10,000.

For the three months ended March 31, 2010, we had investing activities of a negative $832 due to purchase of capital assets compared to investing activities of $0 for the three months ended March 31, 2009. Cash provided by financing activities was $100,000 for the three months ended March 31, 2010 due to a shareholder advance compared to $250,000 in cash provided by financing activities for the period ended March 31, 2009 due to shareholder notes payable and advances.

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. Due to recent litigation commenced between the Company and the Seller, the Company has requested the court to grant it leave to pay the remaining installments under the EnerBurn Acquisition Agreement. The court granted the request and the Company paid $500,000 plus accrued interest into the registry on July 13, 2009. The next and final payment to complete the purchase will be due on July 13, 2010.

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. As described above, cash provided by financing activities was $100,000 for the three months ended March 31, 2010 due to a shareholder advance. For the year ended December 31, 2009, cash provided by financing activities was $930,000 primarily from the sale of common stock of $1,150,000, shareholder advances of $30,000 and proceeds from a shareholder note payable of $250,000, offset by the $500,000 payment on the intellectual property. This compares to $394,000 from financing activities for the year ended December 31, 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.

We anticipate, based on currently proposed plans and assumptions relating to our operations, that in addition to our current cash and cash equivalents together with projected cash flows from operations and projected revenues we will require additional investment to satisfy our contemplated cash requirements for the next 12 months. No assurance can be made that we will be able to obtain such investment on terms acceptable to us or at all. We anticipate that our costs and expenses over the next 12 months will be approximately $2.6 million, which includes the amount we will have to pay in 2010 on the Note and for the anticipated cost of inventory for 2010 business. Other than the Note Payable for the purchase of the intellectual property, we currently have no material commitments for capital requirements. Our continuation as a going concern is contingent upon our ability to obtain additional financing and to generate revenues and cash flow to meet our obligations on a timely basis. As mentioned above, management acknowledges that sales revenues for 2007, 2008 and 2009 have been considerably less than earlier anticipated. This was primarily due to a combination of circumstances which have been corrected or are in the process of being corrected and therefore should not reoccur in the future and the general state of the economy. Management expects that sales should show significant increases in the later parts of 2010. No assurances can be made that we will be able to obtain required financial on terms acceptable to us or at all. Our contemplated cash requirements beyond 2010 will depend primarily upon level of sales of our products, inventory levels, product development, sales and marketing expenditures and capital expenditures.

Inflation has not significantly impacted the Company’s operations.

Off-Balance Sheet Arrangements

We do not have any off balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, 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 2010. The Company’s remaining inventory was split on approximately a 60/40 basis between raw materials and finished goods at December 31, 2009.

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 March 31, 2010, there are 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

The Company follows the provisions of FASB ASC 350, Goodwill and Other Intangible Assets. FASB ASC 350 addresses financial accounting and reporting for acquired goodwill and other intangible assets. Specifically, FASB ASC 350 addresses how intangible assets that are acquired should be accounted for in financial statements upon their acquisition, as well as how goodwill and other intangible assets should be accounted for after they have been initially recognized in the financial statements. The statement requires the Company to evaluate its intellectual property each reporting period to determine whether events and circumstances continue to support an indefinite life. In addition, the Company tests its intellectual property for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The statement requires intangible assets with finite lives to be reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable and that a loss shall be recognized if the carrying amount of an intangible exceeds its fair value.

Intellectual property and other intangibles are recorded at cost. Prior to 2009, the Company determined that its intellectual property had an indefinite life because it believed there was no legal, regulatory, contractual, competitive, economic or other factor to limit its useful life, and therefore would not be amortized. For other intangibles, amortization would be computed on the straight-line method over the identifiable lives of the assets.

Revenue Recognition

The Company follows the provisions of FASB ASC 605, Revenue Recognition, and recognizes revenues when evidence of a completed transaction and customer acceptance exists, and when title passes, if applicable.

Revenues from sales of product and equipment 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.

The current and deferred tax provisions in the financial statements include consideration of uncertain tax positions in accordance with FASB ASC 740, Income Taxes. Management believes there are no significant uncertain tax positions, so no adjustments have been reported from adoption of FASB ASC 740. The Company files income tax returns in the U.S. federal jurisdiction, and various state jurisdictions.

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.

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 FASB ASC 718, Stock Compensation.

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 March 31, 2010, these disclosure controls and procedures were effective to ensure that all information required to be disclosed by us in the reports that we file or submit under the Exchange Act is: (i) recorded, processed, summarized and reported, within the time periods specified in the Commission’s rule and forms; and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

There have been no material changes in internal control over financial reporting that occurred during the 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.

The Company is not currently a party to any pending material legal proceeding nor is it aware of any proceeding contemplated by any individual, company, entity or governmental authority involving the Company except as described below.

Based on information which has recently come to management’s attention that certain confidential and proprietary information has been disclosed to third parties in violation of the EnerBurn Acquisition Agreement, the Company filed a petition in April 2009 in Harris County, Texas, requesting that the court order Econalytic Systems, Inc. (“Econalytic”) and others to appear for pre-suit depositions. Although such petition was opposed by Econalytic and others, the court granted the Company the right to conduct three depositions which have now been taken.

Econalytic filed suit in late April 2009 against the Company in the District Court, Boulder County, Colorado in which Econalytic is seeking a declaratory judgment which would permit it to sell certain technology which Econalytic claims it retained and is permitted to sell under the EnerBurn Acquisition Agreement. In July 2009, the Company filed an answer and counterclaims against Econalytic in such action claiming breach of contract and misappropriation of trade secrets and seeking a declaratory judgment specifically interpreting and clarifying the Company’s rights under the EnerBurn Acquisition Agreement. On August 14, 2009, the Company removed the state court lawsuit pending in District Court in Boulder, Colorado to the United States District Court in Denver, Colorado. In addition, the Company filed a motion requesting the court grant the Company leave to pay the remaining installments under the EnerBurn Acquisition Agreement into the registry of the court pending adjudication of such matter; which leave was granted. Discovery in this action is ongoing and is not scheduled to be completed until the end of May 2010. The Company intends to take all legal action which may be necessary to protect its rights under the EnerBurn Acquisition Agreement, including prosecuting and defending this matter vigorously.

Item 1A. Risk Factors.

Not required.

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

None.

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: May 13, 2010	By:	/s/ Dwaine Reese
		Dwaine Reese,
		Chief Executive Officer
		(Principal Executive Officer)

Dated: May 13, 2010	By:	/s/ Richard B. Dicks
		Richard B. Dicks,
		Chief Financial Officer
		(Principal Financial Officer)