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Enerteck Corp. – ‘10-Q’ for 6/30/22

On:  Friday, 8/12/22, at 9:01am ET   ·   For:  6/30/22   ·   Accession #:  1477932-22-5880   ·   File #:  0-31981

Previous ‘10-Q’:  ‘10-Q’ on 5/23/22 for 3/31/22   ·   Next:  ‘10-Q’ on 11/14/22 for 9/30/22   ·   Latest:  ‘10-Q’ on 11/17/23 for 9/30/23

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  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 8/12/22  Enerteck Corp.                    10-Q        6/30/22   47:2.8M                                   Discount Edgar/FA

Quarterly Report   —   Form 10-Q

Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                    HTML    606K 
 2: EX-31.1     Certification -- §302 - SOA'02                      HTML     18K 
 3: EX-31.2     Certification -- §302 - SOA'02                      HTML     18K 
 4: EX-32.1     Certification -- §906 - SOA'02                      HTML     15K 
10: R1          Cover                                               HTML     63K 
11: R2          Condensed Consolidated Balance Sheets               HTML     98K 
12: R3          Condensed Consolidated Balance Sheets               HTML     37K 
                (Parenthetical)                                                  
13: R4          Condensed Consolidated Statements of Operations     HTML     75K 
14: R5          Condensed Consolidated Statements of Changes in     HTML     41K 
                Stockholders Deficit                                             
15: R6          Condensed Consolidated Statements of Cash Flows     HTML     79K 
16: R7          Basis of Presentation                               HTML     47K 
17: R8          Property and Equipment                              HTML     27K 
18: R9          Loss Per Common Share                               HTML     36K 
19: R10         Stockholders' Deficit                               HTML     20K 
20: R11         Stock Warrants and Options                          HTML     70K 
21: R12         Income Taxes                                        HTML     19K 
22: R13         Related Party Notes and Advances                    HTML     26K 
23: R14         Commitments and Contingencies                       HTML     18K 
24: R15         Recently Issued Accounting Pronouncements           HTML     27K 
25: R16         Subsequent Events                                   HTML     16K 
26: R17         Basis of Presentation (Policies)                    HTML     62K 
27: R18         Basis of Presentation (Tables)                      HTML     29K 
28: R19         Property and Equipment (Tables)                     HTML     26K 
29: R20         Loss Per Common Share (Tables)                      HTML     34K 
30: R21         Stock Warrants and Options (Tables)                 HTML     69K 
31: R22         Basis of Presentation (Details)                     HTML     25K 
32: R23         Basis of Presentation (Details Narrative)           HTML     34K 
33: R24         Property and Equipment (Details)                    HTML     25K 
34: R25         Property and Equipment (Details Narrative)          HTML     16K 
35: R26         Loss Per Common Share (Details)                     HTML     24K 
36: R27         Loss Per Common Share (Details Narrative)           HTML     19K 
37: R28         Stock Warrants and Options (Details)                HTML     28K 
38: R29         Stock Warrants and Options (Details 1)              HTML     50K 
39: R30         Stock Warrants and Options (Details Narrative)      HTML     66K 
40: R31         Related Party Notes and Advances (Details           HTML     54K 
                Narrative)                                                       
41: R32         Commitments and Contingencies (Details Narrative)   HTML     16K 
42: R33         Subsequent Events (Details Narrative)               HTML     16K 
45: XML         IDEA XML File -- Filing Summary                      XML     77K 
43: XML         XBRL Instance -- etck_10q_htm                        XML    660K 
44: EXCEL       IDEA Workbook of Financial Reports                  XLSX     67K 
 7: EX-101.CAL  XBRL Calculations -- etck-20220630_cal               XML     97K 
 9: EX-101.DEF  XBRL Definitions -- etck-20220630_def                XML    165K 
 6: EX-101.LAB  XBRL Labels -- etck-20220630_lab                     XML    466K 
 8: EX-101.PRE  XBRL Presentations -- etck-20220630_pre              XML    359K 
 5: EX-101.SCH  XBRL Schema -- etck-20220630                         XSD     89K 
46: JSON        XBRL Instance as JSON Data -- MetaLinks              200±   275K 
47: ZIP         XBRL Zipped Folder -- 0001477932-22-005880-xbrl      Zip    112K 


‘10-Q’   —   Quarterly Report

Document Table of Contents

Page (sequential)   (alphabetic) Top
 
11st Page  –  Filing Submission
"Table of Contents
"Part I -- Financial Information
"Item 1
"Financial Statements
"Item 2
"Management's Discussion and Analysis of Financial Condition and Results of Operations
"Item 3
"Quantitative and Qualitative Disclosures About Market Risk
"Item 4
"Controls and Procedures
"Part Ii -- Other Information
"Legal Proceedings
"Item 1A
"Risk Factors
"Unregistered Sales of Equity Securities and Use of Proceeds
"Default upon Senior Securities
"Mine Safety Disclosures
"Item 5
"Item 6
"Exhibits
"Signatures

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM  i 10-Q

 

 i 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended  i June 30, 2022

 

 i 

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  i 0-31981

 

 i ENERTECK CORPORATION

(Exact name of Registrant as Specified in its Charter)

 

 i Delaware

 i 47-0929885

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 i 10701 Corporate Drive,  i Suite 150  i Stafford,  i Texas

 i 77477

(Address of principal executive offices)

(Zip Code)

 

( i 281)  i 240-1787

(Registrant’s Telephone Number, Including Area Code)

 

Not applicable

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

 

Securities registered pursuant to Section 12(b) of the Act: None.

 

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.  i Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).  i Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 i Non-accelerated Filer

Smaller reporting company

 i 

Emerging growth company

 i 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes  i  No ☒

 

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;  i 36,380,690 outstanding as of August 12, 2022.

 

 

 

 

ENERTECK CORPORATION

 

TABLE OF CONTENTS

 

 

 

Page

 

PART I ‑ FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements.

3

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

15

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

19

 

Item 4.

Controls and Procedures.

19

 

 

 

 

PART II - OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings.

20

 

Item 1A.

Risk Factors.

20

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

20

 

Item 3.

Default upon Senior Securities.

 

20

 

Item 4.

Mine Safety Disclosures.

20

 

Item 5.

Other Information.

20

 

Item 6.

Exhibits.

21

 

 

 

 

SIGNATURES

 

22

 

 

2

Table of Contents

 

PART I ‑ FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

ENERTECK CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

 

June 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

 

 

(unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$ i 37,737

 

 

$ i 23,625

 

Inventory

 

 

 i 186,715

 

 

 

 i 79,697

 

Accounts receivable

 

 

 i 7,539

 

 

 

 i -

 

Prepaid expenses

 

 

 i 50,279

 

 

 

 i 14,721

 

Total current assets

 

 

 i 282,270

 

 

 

 i 118,043

 

 

 

 

 

 

 

 

 

 

Inventory, net of current portion

 

 

 i 37,524

 

 

 

 i 37,524

 

 

 

 

 

 

 

 

 

 

Intangible assets, net of accumulated amortization of $ i 43,750 and $ i 37,500, respectively

 

 

 i 106,250

 

 

 

 i 112,500

 

 

 

 

 

 

 

 

 

 

Property and equipment, net of accumulated depreciation of $ i 269,242 and $ i 269,210, respectively

 

 

 i 1,081

 

 

 

 i 1,113

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$ i 427,125

 

 

$ i 269,180

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$ i 258,932

 

 

$ i 209,452

 

Customer advances

 

 

 i 50,900

 

 

 

 i 50,900

 

Related party notes and advances

 

 

 i 3,892,500

 

 

 

 i 3,492,500

 

Accrued compensation

 

 

 i 4,856,337

 

 

 

 i 4,748,687

 

Accrued interest

 

 

 i 2,244,338

 

 

 

 i 2,099,926

 

Accrued liabilities

 

 

 i 275,766

 

 

 

 i 253,007

 

Deferred revenue

 

 

 i -

 

 

 

 i 695

 

Total liabilities

 

 

 i 11,578,773

 

 

 

 i 10,855,167

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 8)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' deficit

 

 

 

 

 

 

 

 

Preferred stock, $ i 0.001 par value, authorized  i 10,000,000 shares, none issued and outstanding at June 30, 2022 and December 31, 2021

 

 

 i -

 

 

 

 i -

 

Common stock, $ i 0.001 par value, authorized  i 100,000,000 shares,  i 36,380,690 issued and outstanding at June 30, 2022 and December 31, 2021

 

 

 i 36,381

 

 

 

 i 36,381

 

Additional paid-in capital

 

 

 i 29,495,837

 

 

 

 i 29,495,837

 

Accumulated deficit

 

 

( i 40,683,866)

 

 

( i 40,118,205)

Total stockholders' deficit

 

 

( i 11,151,648)

 

 

( i 10,585,987)

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

 

$ i 427,125

 

 

$ i 269,180

 

 

The accompanying notes are integral part of these condensed consolidated financial statements.

 

3

Table of Contents

 

ENERTECK CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

(unaudited)

 

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$ i 44,889

 

 

$ i 13,083

 

 

$ i 76,060

 

 

$ i 18,664

 

Cost of goods sold

 

 

 i 11,161

 

 

 

 i 1,735

 

 

 

 i 21,278

 

 

 

 i 2,464

 

Gross profit

 

 

 i 33,728

 

 

 

 i 11,348

 

 

 

 i 54,782

 

 

 

 i 16,200

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wages

 

 

 i 133,968

 

 

 

 i 126,087

 

 

 

 i 268,008

 

 

 

 i 260,116

 

Depreciation and amortization

 

 

 i 3,141

 

 

 

 i 3,229

 

 

 

 i 6,282

 

 

 

 i 6,354

 

Stock-based compensation

 

 

 i -

 

 

 

 i 141,373

 

 

 

 i -

 

 

 

 i 141,373

 

Other selling, general and administrative

 

 

 i 91,142

 

 

 

 i 116,608

 

 

 

 i 203,262

 

 

 

 i 223,068

 

Total expenses

 

 

 i 228,251

 

 

 

 i 387,297

 

 

 

 i 477,552

 

 

 

 i 630,911

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating loss

 

 

( i 194,523)

 

 

( i 375,949)

 

 

( i 422,770)

 

 

( i 614,711)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

 i 1

 

 

 

 i 1

 

 

 

 i 2

 

 

 

 i 2

 

Other income

 

 

 i -

 

 

 

 i -

 

 

 

 i 2,372

 

 

 

 i 389

 

Interest expense

 

 

( i 73,899)

 

 

( i 67,342)

 

 

( i 145,265)

 

 

( i 132,179)

Gain on forgiveness of debt

 

 

 i -

 

 

 

 i 146,200

 

 

 

 i -

 

 

 

 i 146,200

 

Net loss

 

$( i 268,421)

 

$( i 297,090)

 

$( i 565,661)

 

$( i 600,299)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$( i 0.01)

 

$( i 0.01)

 

$( i 0.02)

 

$( i 0.02)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

 i 36,380,690

 

 

 

 i 36,380,690

 

 

 

 i 36,380,690

 

 

 

 i 36,380,690

 

 

The accompanying notes are integral part of these condensed consolidated financial statements.

 

4

Table of Contents

 

ENERTECK CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

(Unaudited)

  

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Stockholders'

 

Six Months Ended June 30, 2021

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Deficit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2020

 

 

36,380,690

 

 

$ i 36,381

 

 

$ i 29,293,021

 

 

$( i 38,914,627)

 

$( i 9,585,225)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

-

 

 

 

 i -

 

 

 

 i 141,373

 

 

 

 i -

 

 

 

 i 141,373

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

-

 

 

 

 i -

 

 

 

 i -

 

 

 

( i 600,299)

 

 

( i 600,299)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at June 30, 2021

 

 

 i 36,380,690

 

 

$ i 36,381

 

 

$ i 29,434,394

 

 

$( i 39,514,926)

 

$( i 10,044,151)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

Stockholders'

 

Six Months Ended June 30, 2022

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Deficit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2021

 

 

 i 36,380,690

 

 

$ i 36,381

 

 

$ i 29,495,837

 

 

$( i 40,118,205)

 

$( i 10,585,987)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

-

 

 

 

 i -

 

 

 

 i -

 

 

 

( i 565,661)

 

 

( i 565,661)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at June 30, 2022

 

 

 i 36,380,690

 

 

$ i 36,381

 

 

$ i 29,495,837

 

 

$( i 40,683,866)

 

$( i 11,151,648)

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Stockholders'

 

Three Months Ended June 30, 2021

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Deficit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at March 31, 2021

 

 

 i 36,380,690

 

 

$ i 36,381

 

 

$ i 29,293,021

 

 

$( i 39,217,836)

 

$( i 9,888,434)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

-

 

 

 

 i -

 

 

 

 i 141,373

 

 

 

 i -

 

 

 

 i 141,373

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

-

 

 

 

 i -

 

 

 

 i -

 

 

 

( i 297,090)

 

 

( i 297,090)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at June 30, 2021

 

 

 i 36,380,690

 

 

$ i 36,381

 

 

$ i 29,434,394

 

 

$( i 39,514,926)

 

$( i 10,044,151)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated 

 

 Stockholders'

 

Three Months Ended June 30, 2022

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Deficit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at March 31, 2022

 

 

 i 36,380,690

 

 

$ i 36,381

 

 

$ i 29,495,837

 

 

$( i 40,415,445)

 

$( i 10,883,227)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

-

 

 

 

 i -

 

 

 

 i -

 

 

 

( i 268,421)

 

 

( i 268,421)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at June 30, 2022

 

 

 i 36,380,690

 

 

$ i 36,381

 

 

$ i 29,495,837

 

 

$( i 40,683,866)

 

$( i 11,151,648)

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

5

Table of Contents

 

ENERTECK CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2022

 

 

2021

 

 

 

(unaudited)

 

 

 

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Net loss

 

$( i 565,661)

 

$( i 600,299)

Adjustments to reconcile net loss to net cash used in

 

 

 

 

 

 

 

 

 operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

 i 6,282

 

 

 

 i 6,354

 

Stock-based compensation

 

 

 i -

 

 

 

 i 141,373

 

Gain on forgiveness of debt

 

 

 i -

 

 

 

( i 146,200)

Effects of changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

( i 7,539)

 

 

 i 19,515

 

Inventory

 

 

( i 107,018)

 

 

 i 2,079

 

Prepaid expenses

 

 

( i 35,558)

 

 

( i 44,257)

Accounts payable

 

 

 i 67,475

 

 

 

 i 70,606

 

Accrued interest

 

 

 i 144,412

 

 

 

 i 132,129

 

Accrued compensation

 

 

 i 107,650

 

 

 

 i 107,650

 

Accrued liabilities

 

 

 i 22,759

 

 

 

 i 24,734

 

Deferred revenue

 

 

( i 695)

 

 

( i 4,167)

NET CASH USED IN OPERATING ACTIVITIES

 

 

( i 367,893)

 

 

( i 290,483)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Payments on prepaid insurance financing

 

 

( i 17,995)

 

 

( i 28,867)

Proceeds from notes payable

 

 

 i -

 

 

 

 i 73,100

 

Proceeds from related party notes and advances

 

 

 i 400,000

 

 

 

 i 225,000

 

NET CASH PROVIDED BY FINANCING ACTIVITIES

 

 

 i 382,005

 

 

 

 i 269,233

 

 

 

 

 

 

 

 

 

 

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS

 

 

 i 14,112

 

 

 

( i 21,250)

 

 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS, beginning of period

 

 

 i 23,625

 

 

 

 i 86,820

 

 

 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS, end of period

 

$ i 37,737

 

 

$ i 65,570

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL CASH FLOW INFORMATION

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash paid for:

 

 

 

 

 

 

 

 

Income tax

 

$ i -

 

 

$ i -

 

Interest

 

$ i 576

 

 

$ i 50

 

 

 

 

 

 

 

 

 

 

Non-cash financing activities

 

 

 

 

 

 

 

 

Financed portion of prepaid insurance

 

$ i 46,293

 

 

$ i 62,850

 

 

The accompanying notes are integral part of these condensed consolidated financial statements.

 

6

Table of Contents

 

ENERTECK CORPORATION and SUBSIDIARY,

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 i 

NOTE 1 – BASIS OF PRESENTATION

 

Nature of Operations:

 

 i 

EnerTeck Corporation, a Delaware corporation, and its wholly owned subsidiary, EnerTeck Chemical Corp. (“EnerTeck Sub”) (collectively referred to as the “Company”) are headquartered in Houston, Texas. The Company specializes in the sales, marketing and manufacture of a fuel borne catalytic engine treatment for diesel engines known as EnerBurn®. 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). Principal target markets have included the trucking, heavy construction, maritime shipping, railroad and mining industries, as well as federal, state and international government applications. Key uncertainties and risks to the Company include, but are not limited to, if and how quickly the EnerBurn technology is accepted by the market and the effects future technological changes and environmental regulatory requirements may have on the need for diesel fuel additives.

 

Basis of Presentation

 

 i 

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company’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 2021 as reported in the Form 10-K have been omitted.

 

Use of Estimates

 

 i 

In preparing the accompanying condensed unaudited interim consolidated financial statements, management has made certain estimates and assumptions that affect reported amounts in the condensed unaudited interim consolidated financial statements and disclosures of contingencies. Actual results may differ from those estimates.

 

Inventory

 

 i 

Inventory primarily consists of market ready EnerBurn plus raw materials required to manufacture the products. With the adoption of ASU 2015-11, inventory is valued at the lower of cost or net realizable value, using the average cost method.

 

Finished product costs amounted to approximately $ i 81,000 and $ i 89,000 at June 30, 2022 and December 31, 2021, respectively, and includes required blending costs to bring the Company’s products to their finished state.

 / 

 

Accounts Receivable

 

 i 

Account receivables 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. Accounts are written off as bad debts when all collection efforts have failed, and the account is deemed uncollectible. Management has provided allowances for doubtful accounts of $ i 6,722 as of June 30, 2022 and December 31, 2021.

 / 
 / 

 

7

Table of Contents

 

Intangible Assets

 

 i 

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 consolidated 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 consolidated financial statements. The statement requires the Company to evaluate its intellectual property each reporting period to determine whether events and circumstances continue to support an indefinite life. In addition, the Company tests its intellectual property for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The statement requires intangible assets with finite lives to be reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable and that a loss shall be recognized if the carrying amount of an intangible exceeds its fair value.

 

The Company has determined its intangible assets to have a finite life of  i 12 years. Amortization expense for the three months ended June 30, 2022 and 2021 was $ i 3,125 and $ i 3,125, respectively, and $ i 6,250 and $ i 6,250 for the six months ended June 30, 2022 and 2021, respectively.

 / 

 

Revenue Recognition

 

 i 

The Company follows Accounting Standards Update (ASU) 2014-09, Revenues from Contracts with Customers and all subsequent amendments to the ASU (collectively Topic 606) which creates a single framework for recognizing revenue from contracts with customers that fall within its scope. The core principle of Topic 606 is that a reporting entity should recognize revenue to depict the transfer of promised goods and services to customers in an amount that reflects the consideration to which the reporting entity expects to be entitled in exchange for the goods and services.

 

While the Company has had some direct customers over the years, the principal method of selling the Company’s product EnerBurn is through the use of independent distributors, for both domestic and international markets. The transaction price for each sale is explicitly stated within the contract with a customer. The Company does not accept returns nor does it provide warranty on its product’s performance, as control of performance is based on the proper utilization by the final user. Normal payment terms for domestic sales to both customers and distributors shipping within the United States are net 30 days. All foreign shipments are cash in advance of shipment from the Company’s location. The Company’s sole performance obligation to customers and distributors is the manufacturing and shipment of EnerBurn. Revenues from sales of the Company’s product are recognized at the point when a customer order has been completed and shipped. Sales of all product are f.o.b. shipping point, with the distributors responsible for the freight and delivery. Revenue from shipments to related party distributors is recognized when the product is sold to unrelated third-party customers. All negotiation on sales contracts between the individual distributor and end customer and are the responsibility of the individual distributor and the amount of mark up above the distributors’ wholesale price per unit is the purview of the distributor.

 

The Company may from time to time enter into contracts to sell exclusive distributorship rights to certain markets for a fee. The contracts typically contain a term of market exclusivity as well as other performance obligations. The Company has determined the performance obligations on these types of contracts are satisfied evenly over the term of the contract and recognizes revenue evenly over the term of the contract. For such contracts that were classified as deferred revenue at the beginning of 2022 and 2021, the Company recognized revenue of $ i 0 and $ i 2,083 for the three months ended June 30, 2022 and 2021, respectively, and $ i 695 and $ i 4,167 for the six months ended June 30, 2022 and 2021, respectively. The remaining performance obligations on these contracts as of June 30, 2022 is $ i 0.

 / 

 

8

Table of Contents

 

In the following table, revenues have been disaggregated for the periods indicated:

 

 i 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

(unaudited)

 

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues - domestic

 

$ i 44,889

 

 

$ i 13,083

 

 

$ i 76,060

 

 

$ i 18,664

 

Revenues - foreign

 

 

 i -

 

 

 

 i -

 

 

 

 i -

 

 

 

 i -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$ i 44,889

 

 

$ i 13,083

 

 

$ i 76,060

 

 

$ i 18,664

 

 / 

  

As stated above, the Company does not accept returns nor does it provide warranty on its product’s performance, as control of performance is based on the proper utilization by the final user. The Company periodically tests the product manufactured prior to shipment for its proprietary quality standards and guarantees to the distributors that the product will always maintain the level of strict quality standard that is integral to the performance of its product for the end customer. The Company will provide a Certificate of Analysis, (“C of A”) on each shipment of its product, if requested for the customer. The C of A provides proof that the product is manufactured to meet chemical specifications that insure performance standards.

 

Going Concern

 

 i 

In accordance with ASC Subtopic 205-40, Going Concern, management evaluates whether relevant conditions and events that, when considered in the aggregate, indicate that it is probable the Company will be unable to meet its obligations as they become due within one year after the date that the consolidated financial statements are issued. When relevant conditions or events, considered in the aggregate, initially indicate that it is probable that the Company will be unable to meet its obligations as they become due within one year after the date that the consolidated financial statements are issued (and therefore they raise substantial doubt about the Company’s ability to continue as a going concern), management evaluates whether its plans that are intended to mitigate those conditions and events, when implemented, will alleviate substantial doubt about the Company’s ability to continue as a going concern. Management’s plans are considered only to the extent that 1) it is probable that the plans will be effectively implemented and 2) it is probable that the plans will mitigate the conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern.

 

The accompanying condensed consolidated 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 six months ended June 30, 2022 and 2021, the Company incurred recurring net losses of $ i 565,661 and $ i 600,299, respectively. Further, most of the Company’s notes payable are overdue and payment may be demanded at any time. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The condensed consolidated 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. The Company has been able to obtain cash in the past through private placements and issuing promissory notes and believes that these avenues will remain available to the Company. These financings are intended to mitigate the substantial doubt raised by the Company’s historical operating results and satisfying estimated liquidity needs  i 12 months from the issuance of the consolidated financial statements. However, there is no certainty that additional financing can be obtained in the future at terms acceptable to the Company.

 / 

 

Reclassifications

 

 i 

Certain amounts in the June 30, 2021 condensed consolidated statement of cash flow have been reclassified to conform to the classifications in the June 30, 2022 condensed consolidated statement of cash flow.

 

9

Table of Contents

 

 i 

NOTE 2 – PROPERTY AND EQUIPMENT

 

Property and equipment consisted of the following:

 

 i 

 

 

June 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

 

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

Furniture and fixtures

 

$ i 30,909

 

 

$ i 30,909

 

Equipment

 

 

 i 239,414

 

 

 

 i 239,414

 

 

 

 

 i 270,323

 

 

 

 i 270,323

 

Less: accumulated depreciation

 

 

 i 269,242

 

 

 

 i 269,210

 

 

 

 

 

 

 

 

 

 

Total property and equipment, net

 

$ i 1,081

 

 

$ i 1,113

 

 / 

  

Depreciation expense for the three months ended June 30, 2022 and 2021 was $ i 16 and $ i 104, respectively, and $ i 32 and $ i 104 for the six months ended June 30, 2022 and 2021, respectively.

 / 

 

 i 

NOTE 3 – LOSS PER COMMON SHARE

 

The Company follows ASC 260, Earnings Per Share, for share-based payments that are considered to be participating securities within the definition provided by the standard. All share-based payment awards that contained non-forfeitable rights to dividends, whether paid or unpaid, were designated as participating securities and included in the computation of earnings per share (“EPS”).

 

The following table sets forth the computation of basic and diluted loss per share:

 

 i 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

(unaudited)

 

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$( i 268,421)

 

$( i 297,090)

 

$( i 565,661)

 

$( i 600,299)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

 i 36,380,690

 

 

 

 i 36,380,690

 

 

 

 i 36,380,690

 

 

 

 i 36,380,690

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted loss per share

 

$( i 0.01)

 

$( i 0.01)

 

$( i 0.02)

 

$( i 0.02)
 / 

  

For the six months ended June 30, 2022 and 2021,  i 4,940,000 and  i 4,440,000 stock warrants, respectively, were excluded from diluted earnings per share because they are considered anti-dilutive.

 

For the six months ended June 30, 2022 and 2021,  i 1,235,070 and  i 1,133,388 stock options were excluded from diluted earnings per share because they are considered anti-dilutive.

 

Further, the calculation of diluted weighted-average shares outstanding for the six months ended June 30, 2022 and 2021 exclude potential shares related to the outstanding convertible notes payable, which if converted, would be anti-dilutive and would have a significant impact on the total number of shares outstanding, once exercised.

 / 

 

10

Table of Contents

 

 i 

NOTE 4 – STOCKHOLDERS’ DEFICIT

 

During the three and six months ended June 30, 2022 and 2021, no equity activity occurred.

 

 i 

NOTE 5 – STOCK WARRANTS AND OPTIONS

 

Stock Warrants

 

No warrants were issued or exercised, nor were there any warrants that expired, during the three and six months ended June 30, 2022.

 

During the three and six months ended June 30, 2021, no warrants were issued or exercised, and  i 2,050,000 warrants with an exercise price of $ i 0.60 per share expired.  i On July 3, 2021, and effective retroactively to May 17, 2021 (the expiration date of such 2,050,000 warrants), the Board of Directors authorized and approved the extension of the expiration dates of such warrants to December 31, 2026. In addition, on July 3, 2021, the Board of Directors authorized and approved the extension of the expiration dates of (i)  i 1,290,000 warrants due to expire on  i August 9, 2021 with an exercise price of $ i 0.60 per share, (ii)  i 100,000 warrants due to expire on  i September 9, 2021 with an exercise price of $ i 0.75 per share, and (iii)  i 750,000 warrants due to expire on  i November 8, 2021 with an exercise price of $ i 0.30 per share. The expiration dates of all such warrants were extended to December 31, 2026. On July 3, 2021, the Board of Directors also granted  i 250,000 warrants to each of the three directors which warrants have an exercise price of $ i 0.30 per share and expire on  i December 31, 2026.

 

An unaudited summary of warrants outstanding and exercisable as of June 30, 2022 were:

 

 i 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

 

 

 

Average

 

 

Exercisable

 

Exercise

 

 

Number of

 

 

Remaining

 

 

Number of

 

Price

 

 

Warrants

 

 

Life in Years

 

 

Warrants

 

 

 

 

 

 

 

 

 

 

 

 

$

0.60

 

 

 

 i 3,340,000

 

 

 

 i 4.5

 

 

 

 i 3,340,000

 

$

0.75

 

 

 

 i 100,000

 

 

 

 i 4.5

 

 

 

 i 100,000

 

$

0.30

 

 

 

 i 1,500,000

 

 

 

 i 4.5

 

 

 

 i 1,500,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 i 4,940,000

 

 

 

 

 

 

 

 i 4,940,000

 

 / 

  

No stock-based compensation was recognized during the three and six months ended June 30, 2022. During the three and six months ended June 30, 2021, $ i 141,373 was recognized as stock-based compensation associated with the expiration extension of the  i 2,050,000 warrants.

 

Stock Options

 

In September 2003, shareholders of the Company approved an employee stock option plan (the “2003 Option Plan”) authorizing the issuance of options to purchase up to  i 1,000,000 shares of common stock. The 2003 Option Plan is intended to give the Company greater ability to attract, retain, and motivate officers, key employees, directors and consultants; and is intended to provide the Company with the ability to provide incentives more directly linked to the success of the Company’s business and increases in shareholder value.  i During the third quarter of 2013, the board of directors increased the number of shares reserved for issuance under the 2003 Option Plan from 1,000,000 to 1,250,000 which was increased by the board to 1,750,000 during the third quarter of 2018. 

 

On July 3, 2021, the Board of Directors authorized and approved the extension of the expiration dates of  i 141,667 options exercisable at $ i 0.60 per share due to expire on  i August 9, 2021 for an additional term of five years, and authorized and approved the extension of  i 165,010 options exercisable at $ i 0.30 per share due to expire on  i August 2, 2021 for an additional term of five years. In addition, on July 3, 2021, the Board also granted a total of  i 247,516 options to employees which options have an exercise price of $ i 0.20 per share and expire five years thereafter, On July 21, 2021, the Board of Directors also authorized and approved the extension of  i 150,000 options exercisable at $ i 0.30 per share due to expire on  i September 21, 2021 for an additional term of five years.

 / 

 

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An unaudited summary of the activity of the Company’s stock options for the six months ended June 30, 2022 is presented below:

 

 i 

 

 

 

 

 

 

 

 

Weighted

 

 

Weighted

 

 

 

 

 

 

Weighted

 

 

 

 

 

Average

 

 

Average

 

 

 

 

 

 

Average

 

 

Number of

 

 

Remaining

 

 

Optioned

 

 

Aggregate

 

 

 

Exercise

 

 

Optioned

 

 

Contractual

 

 

Grant Date

 

 

Intrinsic

 

 

 

Price

 

 

Shares

 

 

Term in Years

 

 

Fair Value

 

 

Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2021

 

$ i 0.32

 

 

 

 i 1,235,070

 

 

 

 

 

$-

 

 

$-

 

Expired

 

 

-

 

 

 

-

 

 

 

 

 

 

-

 

 

 

 

 

Granted

 

 

-

 

 

 

-

 

 

 

 

 

 

-

 

 

 

 

 

Exercised

 

 

-

 

 

 

 

 

 

 

 

 

 

-

 

 

 

 

 

Forfeited

 

 

-

 

 

 

-

 

 

 

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of June 30, 2022

 

$0.32

 

 

 

1,235,070

 

 

 

 i 2.81

 

 

$ i 0.09

 

 

$-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vested and exercisable as of June 30, 2022

 

$0.32

 

 

 

 i 1,235,070

 

 

 

 i 2.81

 

 

$ i 0.09

 

 

$-

 

 / 

    

 i 

NOTE 6 – INCOME TAXES

 

The Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. At June 30, 2022, the Company’s net deferred tax asset had a full valuation allowance against it.

 

 i 

NOTE 7 – RELATED PARTY NOTES AND ADVANCES

 

On July 7, 2009, the Company entered into a $ i 100,000 unsecured promissory note with an officer, due on demand. Interest is payable at  i 12% per annum. Also, on December 11, 2009, the Company entered into a $ i 50,000 note with a shareholder/director. Interest is  i 5% per annum. The principal balance of the note was due on the earlier of December 11, 2013, or upon completion by the Company of equity financing in excess of $ i 1.0 million in gross proceeds. Interest on the loan is payable on the maturity date at the rate of  i 5% per annum. These notes are now overdue for payment.

 

On June 1, 2010, the Company entered into a $ i 50,000 convertible promissory note with a shareholder/director which was due on  i June 1, 2013 and accrues interest at  i 8.0% per annum payable at maturity and which may be converted at any time into shares of common stock. The assignment of the conversion feature of the note resulted in a loan discount being recorded. The discount amount of $ i 36,207 was fully amortized over the original thirty-six-month term of the debt as additional interest expense. This note is now overdue for payment.

 

On June 1, 2010, the Company entered into $ i 300,000 of convertible promissory notes with a shareholder/director which was due on  i June 1, 2013 and accrues interest at  i 8.0% per annum payable at maturity and which may be converted at any time into shares of common stock the number of which is to be determined at that time. This note is now overdue for payment.

 

On July 20, 2010, the Company entered into $ i 400,000 convertible promissory notes with a shareholder/director which was due on  i July 20, 2013 and accrues interest at  i 8.0% per annum payable at maturity and which may be converted at any time into shares of common stock. This note is now overdue for payment.

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On July 20, 2010, the Company entered into a $ i 100,000 convertible promissory note with a shareholder which was due on  i July 20, 2013 and accrues interest at  i 8.0% per annum payable at maturity and which may be converted at any time into shares of common stock. This note is now overdue for payment.

 

On December 10, 2010, the Company entered into $ i 150,000 of convertible promissory notes with a shareholder/director which was due on December 10, 2013 and accrues interest at  i 8.0% per annum payable at maturity and which may be converted at any time into shares of common stock. This note is now overdue for payment.

 

On June 20, 2011, the Company entered into a $ i 150,000 convertible promissory note with a shareholder/director which shall be due and payable on  i June 20, 2014 and accrues interest at  i 8.0% per annum payable at maturity and which may be converted at any time into shares of common stock. This note is now overdue for payment.

 

On October 20, 2011, the Company entered into a $ i 70,000 convertible promissory note with a shareholder/director which was due on  i October 20, 2014 and accrues interest at  i 8.0% per annum payable at maturity and which may be converted at any time into shares of common stock. This note is now overdue for payment.

 

During the year ended December 31, 2018, a shareholder/director advanced $ i 445,000 to the Company for working capital requirements. In addition, the Company reclassified a previous customer deposit of $ i 37,500 originally received from a shareholder/director, made on behalf of a now deceased distributor, from customer deposits to shareholder deposits, as the original projected sale in question is no longer viable. The Company expects amounts advanced will be either (i) applied against a stock subscription to be issued at a future date or (ii) repaid at a future date as the parties shall determine. Until otherwise agreed, such amounts advanced have been recorded as an additional payable bearing no interest.

 

During the year ended December 31, 2019, a shareholder/director advanced $ i 570,000 to the Company for working capital requirements. The Company expects amounts advanced will be either (i) applied against a stock subscription to be issued at a future date or (ii) repaid at a future date as the parties shall determine. Until otherwise agreed, such amounts advanced have been recorded as an additional payable bearing no interest.

 

During the year ended December 31, 2020, a shareholder/director advanced $ i 625,000 to the Company for working capital requirements. The Company expects amounts advanced will be either (i) applied against a stock subscription to be issued at a future date or (ii) repaid at a future date as the parties shall determine. Until otherwise agreed, such amounts advanced have been recorded as an additional payable bearing no interest.

 

During the year ended December 31, 2021, a shareholder/director advanced $ i 435,000 to the Company for working capital requirements. The Company expects amounts advanced will be either (i) applied against a stock subscription to be issued at a future date or (ii) repaid at a future date as the parties shall determine. Until otherwise agreed, such amounts advanced have been recorded as an additional payable bearing no interest.

 

During the six months ended June 30, 2022, a shareholder/director advanced $ i 400,000 to the Company for working capital requirements. The Company expects amounts advanced will be either (i) applied against a stock subscription to be issued at a future date or (ii) repaid at a future date as the parties shall determine. Until otherwise agreed, such amounts advanced have been recorded as an additional payable bearing no interest.

 

The Company determined it is not practicable to estimate the fair value of outstanding debt as of June 30, 2022 and December 31, 2021, as the outstanding debt is private, there is no clarity as to when interest payments or principal payments will ultimately be made (or be called by the debt holders), and the Company lacks the internal expertise to calculate fair value of these debt instruments and would incur excessive costs to obtain a third-party valuation.

 

Other related party transactions

 

As of June 30, 2022, and December 31, 2021, the Company owed approximately $ i 4.9 and $ i 4.7 million, respectively, to its chief executive officer and other employees of the Company. The CEO and employees agreed to salary deferrals pending available resources to make such payments.

 

One of the Company’s shareholders owns  i 100% of BATL Trading, Inc., which is a distributor of EnerBurn. There were no transactions with them during the three and six months ended June 30, 2022 and 2021.

 

13

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 i 

NOTE 8 -- COMMITMENTS AND CONTINGENCIES

 

In June 2020, the Company executed an additional six-month amendment to the lease for office space for the period September 1, 2020 through February 28, 2021. As permitted by ASC 842-20-25-2 the Company elected to not record the short-term lease on the consolidated balance sheets.

 

In January 2021, the Company executed an additional one-year amendment to the lease for office space for the period March 1, 2021 through February 28, 2022. As permitted by ASC 842-20-25-2 the Company has elected to not record the short-term lease on the consolidated balance sheets.

 

In November 2021, the Company executed an additional one-year amendment to the lease for office space for the period March 1, 2022 through February 28, 2023. As permitted by ASC 842-20-25-2 the Company has elected to not record the short-term lease on the consolidated balance sheets.

 

Rent expense for the three months ended June 30, 2022 and 2021 totaled $ i 14,283 and $ i 14,812, respectively, and $ i 28,567 and $ i 28,904 for the six months ended June 30, 2022 and 2021, respectively.

 / 

 

 i 

NOTE 9 -- RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

 

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. In addition, the ASU requires credit losses relating to available-for-sale debt securities to be recorded through an allowance for credit losses. The amendments in this ASU broaden the information that an entity must consider in developing its expected credit loss estimate for assets measured either collectively or individually. For smaller reporting companies, the new standard is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2022. The Company does not currently believe the impact of this guidance will be material on its consolidated financial statements.

 

Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying consolidated financial statements.

 

 i 

NOTE 10 – SUBSEQUENT EVENTS

 

In July 2022 the Company received an advance from a shareholder/director in the amount of $ i 50,000.

 / 

 

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

 

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 a guarantee 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”), formerly named Gold Bond Mining Company and then Gold Bond Resources, Inc., was incorporated in the State of Washington on July 30, 1935. We acquired EnerTeck Chemical Corp. (“EnerTeck Sub”) as a wholly owned subsidiary on January 9, 2003. As a result of this acquisition, we are now acting as a holding company, with EnerTeck Sub as our primary operating business. Subsequent to this transaction, on November 24, 2003 we changed our domicile from the State of Washington to the State of Delaware and changed our name from Gold Bond Resources, Inc. to EnerTeck Corporation. 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 (TM), as well as other combustion enhancement and emission reduction technologies. Nalco/Exxon Energy Chemicals, L.P. (“Nalco/Exxon L.P.”), a joint venture between Nalco Chemical Corporation and Exxon Corporation commercially introduced EnerBurn in 1998. When Nalco/Exxon L.P. went through an ownership change in 2000, our founder, Dwaine Reese, formed EnerTeck Sub. It acquired the EnerBurn trademark and related assets and took over the Nalco/Exxon L.P. relationship with the EnerBurn formulator and blender, and its supplier, Ruby Cat Technology, LLC (“Ruby Cat”).

 

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 have included the trucking, heavy construction, maritime shipping, railroad and mining industries, as well as federal, state and international government applications. Each of these industries shares certain common financial characteristics, i.e. (i) diesel fuel represents a disproportionate share of operating costs; and (ii) relatively small operating margins are prevalent. Considering these factors, management believes that the use of EnerBurn and the corresponding derived savings in diesel fuel costs can positively affect the operating margins of its customers while contributing to a cleaner environment. 

 

15

Table of Contents

 

During 2011, we acquired a 40% membership interest in an entity called EnerTeck Environmental, LLC, which was formed for the purpose of marketing and selling a diesel fuel emission reduction technology with the creators of such specific technology. Indian Nations Technology, the co-owner of EnerTeck Environmental, LLC is currently working on a testing protocol which could revive this entity.

 

Results of Operations

 

Three Months Ended June 30, 2022, Compared to Three Months Ended June 30, 2021

 

Revenues

 

We recognized revenues of $44,889 for the three months ended June 30, 2022, compared to revenues of $13,083 for the three months ended June 30, 2021, an increase of $31,806. Several trials and evaluations are currently underway in the U.S. and various other countries and it is expected revenue should show increases for the remainder of 2022.

 

During the three months ended June 30, 2022, the primary source of revenue was from the sale of EnerBurn to oilfield service, heavy construction and mining industries. Sales delays have occurred due to delays in the completion of important product testing projects, a lack of new customers and the COVID-19 shutdown and restrictions. As businesses fully reopen following the COVID-19 shutdown, we expect to see progress in ongoing trials and evaluations that are currently underway in the U.S. and various other countries.

 

Gross Profit

 

Gross profit, defined as revenues less cost of goods sold, was $33,728, or 75.1% of revenue, for the three months ended June 30, 2022, compared to $11,348, or 86.7% of revenue, for the three months ended June 30, 2021. Although raw material costs have increased substantially, we feel confident that there will be an increase in gross profits for the remainder of 2022, as several trials and evaluations are currently underway in the U.S. and various other countries.

 

Cost of goods sold was $11,161 for the three months ended June 30, 2022 which represented 24.9% of revenue compared to $1,735 for the three months ended June 30, 2021, which represented 13.3% of revenue.

 

Costs and Expenses

 

Operating expenses were $228,251 for the three months ended June 30, 2022 as compared to $387,297 for the three months ended June 30, 2021, a decrease of $159,046. Costs and expenses in all periods primarily consisted of payroll, professional fees, rent expense, amortization expense and other general and administrative expenses. During the three months ended June 30, 2021, we recognized $141,373 of stock-based compensation for the extension of expiration dates for 2,050,000 stock warrants.

 

Net Loss

 

We reported a net loss of $268,421 for the three months ended June 30, 2022 as compared to a net loss of $297,090 for the three months ended June 30, 2021, a decrease of $28,669. The expectation is that sales will increase for the remainder of 2022 as several trials and evaluations are currently underway in the U.S. and various other countries.

 

16

Table of Contents

 

Six Months Ended June 30, 2022, Compared to Six Months Ended June 30, 2021

 

Revenues

 

We recognized revenues of $76,060 for the six months ended June 30, 2022, compared to revenues of $18,664 for the six months ended June 30, 2021, an increase of $57,396. Several trials and evaluations are currently underway in the U.S. and various other countries and it is expected revenue should show increases for the remainder of 2022.

 

During the six months ended June 30, 2022, the primary source of revenue was from the sale of EnerBurn to oilfield service, heavy construction and mining industries. Sales delays have occurred due to delays in the completion of important product testing projects, a lack of new customers and the COVID-19 shutdown and restrictions. As businesses fully reopen following the COVID-19 shutdown, we expect to see progress in ongoing trials and evaluations that are currently underway in the U.S. and various other countries.

 

Gross Profit

 

Gross profit, defined as revenues less cost of goods sold, was $54,782, or 72.0% of revenue, for the six months ended June 30, 2022, compared to $16,200, or 86.8% of revenue, for the six months ended June 30, 2021. Although raw material costs have increased substantially, we feel confident that there will be an increase in gross profits for the remainder of 2022, as several trials and evaluations are currently underway in the U.S. and various other countries.

 

Cost of goods sold was $21,278 for the six months ended June 30, 2022 which represented 28.0% of revenue compared to $2,464 for the six months ended June 30, 2021, which represented 13.2% of revenue.

 

Costs and Expenses

 

Operating expenses were $477,552 for the six months ended June 30, 2022 as compared to $630,911 for the six months ended June 30, 2021, a decrease of $153,359. Costs and expenses in all periods primarily consisted of payroll, professional fees, rent expense, amortization expense and other general and administrative expenses. During the six months ended June 30, 2021, we recognized $141,373 of stock-based compensation for the extension of expiration dates for 2,050,000 stock warrants.

 

Net Loss

 

We reported a net loss of $565,661 for the six months ended June 30, 2022 as compared to a net loss of $600,299 for the six months ended June 30, 2021, a decrease of $34,638. The expectation is that sales will increase for the remainder of 2022 as several trials and evaluations are currently underway in the U.S. and various other countries.

 

Operations Outlook

 

The fuel additive industry has historically been mired by a myriad of technically dubious products. Prospective customers in all targeted market sectors and geographic locations are primarily concerned about the potential business risks associated with the adoption of any new fuel or engine treatment. Our sales process begins with a proof of performance demonstration that is a thorough analysis of the potential customer, including fleet type, size, and opportunity. This is followed with sales presentations at both the executive level and maintenance level.

 

The majority of our marketing effort since 2005 has been directed at targeting and gaining a foothold in one of several major target areas, including the inland marine diesel market, trucking, heavy construction and mining. Management concedes that sales revenues for 2021 and prior years, and the first six months of 2022, have been considerably less than earlier anticipated. One of the issues we have faced in recent years has been the very long timeline from initial contact to contract signing subsequent to completion of an evaluation. Although we believe that many times in the past, we have proven the benefits of EnerBurn, various evaluating companies have opted not to move forward for a variety of reasons which we believe were beyond our control.

 

Nevertheless, at both the Company and distributor level, we have recently completed or are proceeding with evaluations of EnerBurn in many field trials. As we continue to string together a series of positive evaluations in more industries, we should begin to see more business generated from such results. New trials are either in progress or should be commencing shortly.

 

17

Table of Contents

 

A substantial portion of the last few years was spent re-directing our marketing emphasis for our primary product, EnerBurn. Our current sales process now requires a signed commitment letter from the prospective customer for a minimum of a 3-year supply agreement, prior to the commencement of an evaluation of any of our products. Should the evaluation meet or exceed the established benchmarks as outlined in the evaluation protocol document, the supply agreement would become binding. We have adopted this strategy as we had numerous successful evaluations in the past that did not result in the customer moving forward and adopting the technology, with most of those evaluations being at the Company’s expense.

 

Additionally, we have contracted with outside sales representatives, both in the United States and in other parts of the world to act as distributors of our products. We currently have distribution agreements with Diesel-E Pty Ltd in Australia and with Green Group in South America. Diesel-E Pty Ltd completed its first EnerBurn evaluation with Robson Civil Projects Pty Limited of Australia and is currently working on multiple other opportunities leveraging on that successful trial. Green Group is currently running two evaluations in Peru, one for a mining railroad and another for a large mining conglomerate. We also have a representative working on mining evaluations in Mexico and expect that once the COVID-19 pandemic subsides, we will commence an evaluation at a large mine in Mexico. In the U.S. we have a representative working on a number of currently ongoing EnerBurn evaluations in the Midwest, two of which have been completed successfully and we have recently started to supply one of them with chemical. Two other evaluations recently started but were terminated due to the pandemic. We believe such will resume when it is safe to do so.

 

It should be noted that the ongoing coronavirus outbreak which began at the beginning of 2020 has impacted various businesses throughout the world, including travel restrictions and the extended shutdown of certain businesses in impacted geographic regions. A pandemic typically results in social distancing, travel bans and quarantine, and the effects of, and response to, the COVID-19 pandemic has so far limited access to our corporate office, personnel and professional advisors, and has also hampered, and may continue to hamper, our efforts to comply with our filing obligations with the Securities and Exchange Commission. If the coronavirus outbreak situation should worsen, we may experience additional disruptions to our business. The extent to which the coronavirus impacts our operations or those of our third-party partners will depend on future developments, which are highly uncertain and cannot be predicted, including the duration of the outbreak, new information that may emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among others.

 

Liquidity and Capital Resources

 

On June 30, 2022 we had a working capital deficit of $11,296,503 and a stockholders’ deficit of $11,151,648 compared to a working capital deficit of $10,737,124 and a stockholders’ deficit of $10,585,987 on December 31, 2021. Our continuing deficit levels are primarily due to poor sales. On June 30, 2022, we had $37,737 in cash, total assets of $427,125 and total liabilities of $11,578,773, compared to $23,625 in cash, total assets of $269,180 and total liabilities of $10,855,167 on December 31, 2021.

 

Net cash used in operating activities was $367,893 for the six months ended June 30, 2022 compared to net cash used in operating activities of $290,483 for the six months ended June 30, 2021, an increase of $77,410. The increase was primarily due to an increase of inventory during the six months ended June 30, 2022.

 

Cash used in investing activities was $0 for the six months ended June 30, 2022 and 2021.

 

In the past, we have been able to finance our operations primarily from capital which has been raised. To date, sales have not been adequate to finance our operations without investment capital. Cash provided by financing activities was $382,005 for the six months ended June 30, 2022, a result of funds received from related party notes and advances. This is compared to cash provided by financing activities of $269,233 during the six months ended June 30, 2021, primarily resulting from a PPP Small Business loan in the amount of $73,100 and $225,000 from related party notes and advances.

 

18

Table of Contents

 

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 $3.0 million. 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 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 expect that sales should show increases during the remainder of 2022. No assurances can be made that we will be able to obtain required financing on terms acceptable to us or at all. Our contemplated cash requirements in 2022 and beyond will depend primarily upon level of sales of our products, inventory levels, product development, sales and marketing expenditures and capital expenditures.

 

Due to our lack of meaningful revenues, we have been forced to finance our operations primarily from capital which has been raised from third parties and promissory notes and advances from related parties. Such loans and advances from related parties total $3,892,500 and $3,492,500 on June 30, 2022 and December 31, 2021, respectively. Many of these remaining loans are past due and certain others are due on demand. The Company does not expect any of such related parties to demand payment until the Company has adequate resources to pay back such loans and advances, there can be no assurance that such will be the case. This debt presents a significant risk to the Company in that in the event any of such related parties demand payment, the Company may not have the necessary cash to meet such payment obligations, or if it does, such payments may draw significantly on the Company’s cash position. Any of such events will likely have a materially detrimental effect on the Company.

 

Inflation has not significantly impacted the Company’s operations.

 

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 4. 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 June 30, 2022, these disclosure controls and procedures were ineffective 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, as a result of material weaknesses in our disclosure controls and internal control over financial reporting. The ineffectiveness was due to the following material weaknesses which are indicative of many small companies: (i) all accounting functions are performed by limited accounting personnel; (ii) lack of formalized controls in the financial close process; and (iii) review of monthly, quarterly and yearly consolidated financial statements was not performed at a sufficient level of precision and specificity in order to detect material errors in the financial statements.

 

Despite the existence of the material weaknesses, we believe that our consolidated financial statements contained in this Form 10-Q fairly present our financial position, results of operations and cash flows as of and for the periods presented in all material respects.

 

Changes in Internal Control over Financial Reporting

 

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. However, we intend to actively plan for and implement control procedures to improve our overall control environment including but not limited to documenting necessary internal control policies and developing and delivering appropriate internal control training to our personnel. Due to the nature of the remediation process and the need to allow adequate time after implementation to evaluate and test the effectiveness of the controls, as well as our limited cash resources, no assurance can be given as to the timing of achievement of remediation.

 

19

Table of Contents

 

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.

 

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. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

None.

 

20

Table of Contents

 

Item 6. Exhibits.

 

31.1

 

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 002 (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)

101.INS

 

Inline XBRL Instance Document

101.SCH

 

Inline XBRL Taxonomy Extension Schema Document

101.CAL

 

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

 

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

 

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

 

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

 

Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

 

21

Table of Contents

 

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: August 12, 2022

By:

/s/ Gary B. Aman

 

Gary B. Aman,

 

President and Acting Chief Executive Officer

 

(Principal Executive Officer)

 

Dated: August 12, 2022

By:

/s/ Richard B. Dicks

 

Richard B. Dicks,

 

Chief Financial Officer

 

(Principal Financial Officer)

 

 
22

 

 

 


Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘10-Q’ Filing    Date    Other Filings
12/31/26
2/28/23
12/31/22
12/15/22
Filed on:8/12/22
For Period end:6/30/22
3/31/2210-K,  10-Q,  NT 10-Q
3/1/22
2/28/22
12/31/2110-K
11/8/21
9/21/21
9/9/21
8/9/21
8/2/21
7/21/21
7/3/214
6/30/2110-Q
5/17/21NT 10-Q
3/31/2110-K,  10-Q,  NT 10-Q
3/1/21
2/28/21
12/31/2010-K
9/1/20
12/31/1910-K
12/31/1810-K
10/20/14
6/20/14
12/11/13
12/10/13
7/20/13
6/1/13
10/20/11
6/20/11
12/10/10
7/20/10
6/1/10
12/11/09
7/7/09
11/24/038-K
1/9/03
11/29/00
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