COMPANY OVERVIEW

We were initially incorporated in 1998 in Florida as Cyber Public Relations, Inc. for the purpose of providing Internet electronic commerce consulting services to small and medium size businesses. Cyber Public Relations never had any material operations or revenues. On January 21, 2004, pursuant to a Capital Stock Exchange Agreement between the stockholders of Environmental Technologies, Inc., a Nevada corporation, the Environmental Technologies stockholders transferred all of their shares of the Environmental Technologies stock to Cyber Public Relations in exchange for 9,550,000 shares of the common stock of Cyber Public Relations.

We changed our name to Entech Environmental Technologies, Inc. on March 22, 2004 to more accurately reflect the change of our business. We provide a variety of services to customers ranging from large corporations to retail consumers, through H.B. Covey, Inc., a 57 year old construction and maintenance company that specializes in the installation and maintenance of fueling systems. We have recently expanded our scope of services to include installation of major household appliances for major retailers. We are based in southern California and provide service primarily in California.

As a result of the stock exchange discussed above, Environmental Technologies, Inc. became a wholly-owned subsidiary of Cyber Public Relations, and the Environmental Technologies stockholders acquired 96.81 percent of the issued and outstanding shares of the common stock of Cyber Public Relations. Immediately following the exchange, Barron Partners LP acquired 2,000,000 shares of our common stock and warrants for the purchase of 7,150,000 shares of our common stock. However, on September 30, 2004, Barron Partners agreed to the cancellation of the warrants for the purchase of 7,150,000 shares of our common stock.

Our wholly-owned subsidiary, Environmental Technologies, Inc. a Nevada corporation located in Chino Hills, California, was formerly known as Parr Development, Inc. which was incorporated in 2001. Before the mergers of its subsidiaries described in this section, Parr Development had not engaged in any operations. Parr Development changed its name to Environmental Technologies, Inc. in 2003. We are the result of the combination of several companies:

o H.B. Covey, Inc., a California corporation incorporated in 1971 but which has been in business since 1948, (herein sometimes referred to as "H.B. Covey"), a fueling station diagnostic and maintenance company with petroleum construction experience in building and maintaining service stations, through which we conduct all of our current operations;

o Christie-Peterson Development, a California corporation incorporated in 1995 (herein sometimes referred to as "Christie-Peterson"), a provider of construction, repair, and maintenance services for petroleum service stations in California, Nevada, and Arizona, which was placed into Chapter 7 bankruptcy on September 30, 2004, and is no longer actively engaged in business; and

o Advanced Fuel Filtration Services, Inc., a California corporation incorporated in 1995 (herein sometimes referred to as "AFFS"), a provider of comprehensive environmental management solutions for the petroleum industry, with operations including fuel and chemical transportation, hazardous and non-hazardous waste disposal, emergency HAZMAT response, and underground storage tank cleaning and filtration services, which was placed into Chapter 7 bankruptcy on September 30, 2004, and is no longer actively engaged in business.

We also acquired from the stockholders of AFFS all of the issued and outstanding shares of Advanced Petroleum Transport, Inc., a California corporation, with no business activities. As of the date of this report, Advanced Petroleum Transport, Inc. has conducted no operations.

The mechanics of the combination of the component companies of Entech initially occurred with the reverse triangular mergers between each of Christie-Peterson, H.B. Covey and AFFS with three subsidiaries of Environmental Technologies. In each case, the stockholders of Christie-Peterson, H.B. Covey and AFFS existing before the mergers received shares of the common stock of Environmental Technologies in exchange for all of their shares in the merged companies. Following the reverse triangular mergers, Environmental Technologies had four wholly-owned subsidiaries, Christie-Peterson, H.B. Covey, AFFS, and Advanced Petroleum Transport, Inc.

On December 9, 2005, we acquired all the assets and the right to use the name of Pacific Coast Testing, a California corporation, at a price of $125,000, $75,000 payable at closing, the remainder payable over a twelve month period, subject to certain offsets.

GENERAL

H.B. COVEY, INC.

Our H.B. Covey subsidiary is a 58 year old construction and maintenance company that specializes in construction and maintenance services to the retail petroleum industry, to commercial and industrial users, to municipal organizations, and in support of major equipment manufacturers. H.B. Covey expanded its scope of services beginning in October 2004 to include installation of major household appliances for major retailers.

H.B. Covey is western states oriented with the heaviest concentration of infrastructure located in California. On occasion, we provide services in other states to give core customers a "one stop" support capacity or to take advantage of a target opportunity. The industry is subject to constant, increasingly restrictive environmental regulation. Traditionally, H.B. Covey targets select opportunities within these sectors that support the core competencies of its work force. Examples of these skill sets include:

o Complete fuel system installations and upgrades;

o Installation of monitoring and point of sale equipment;

o Alternative fueling systems including CNG and LNG;

o Installation and removal of hoists, clarifiers, and underground storage tanks;

o Installation of soil and groundwater remediation equipment;

o Complete maintenance and support of all major equipment and electronics supported by a 24 hour per day maintenance dispatch center; and

CLIENT BASE. H.B. Covey has categorized its customer base into six categories in order to efficiently develop, maintain and maximize our opportunities. A focused approach and determination of viability is made for each potential customer. Our ideal client spends in excess of $5 million in capital and maintenance each year. It should have centralized decision-making structure and its payment terms must be timely. It is our goal to retain our "relationship based" clients and maximize the amount of opportunities and activities with those clients. Each category has differences in target services and expectation of potential revenue. The categories are guidelines and should not be considered exclusive of any opportunity not listed.

CATEGORY I; MAJOR OIL AND RETAIL COMPANIES. These companies sell fuel as their primary retail strategy; have budgeted capital expenditures on a yearly basis; have in excess of 250 locations and complementary geographic coverage; engage in yearly maintenance contracts; and rely heavily on contracted services. These companies include BP, Exxon Mobil Corporation, Chevron, Shell, Valero, and Wal-Mart (Sam's Club).

CATEGORY II; LARGE INDEPENDENT AND REGIONAL OPERATORS. Generally these companies are similar to the Category I list, however, they are smaller (less than 250 stations) and more regionally located. They have centralized decision-making structure and have a significant requirement for our services. These companies include USA Petroleum, Pilot Corporation, Giant Industries, Travel Centers of America, Tower Energy, United Oil, Quick Stop Markets Inc., Nella Oil, and Jayco.

CATEGORY III; INDUSTRIAL/COMMERCIAL. The industrial/commercial clients view their fueling operations as "a necessary evil." They do not sell fuel but rather install and maintain fueling systems to facilitate their primary revenue generating functions. They typically lack knowledgeable personnel to manage their fuel dispensing activities and rely heavily on relationships with consultants and contractors. This group represents a significant opportunity for relationship building and complete package sales. This group includes Ryder Corporation, Hertz Corporation, UPS, Overnight Transport, Yellow Freight, Roadway, Penske Leasing, Sempra Energy, and Consolidated Freight.

CATEGORY IV; MUNICIPAL ORGANIZATIONS. These potential clients operate large fleets of vehicles that utilize both traditional and alternate fuel power. Although bidding opportunities are commonly open to the public, we have been able to foster longstanding relationships and extended contracts. These opportunities typically require bid and performance bonds. The size and complexity of the bid offerings coupled with the documentation and capitalization requirements create a barrier of entrance that is often daunting to our competition. Along with upgrades to traditional fueling systems mandated by legislation these customers are aggressively converting fleets to alternative fuel sources and taking advantage of substantial incentives and grant programs. This group includes the City of Los Angeles, the United States Postal Service, and the California Highway Patrol.

CATEGORY V; ORIGINAL EQUIPMENT MANUFACTURERS AND DISTRIBUTORS. H.B. Covey is an authorized service company for the majority of the fueling equipment in use today. We derive value from our ability to provide maintenance services during the start up of the original equipment, in the performance of preventative and warranty services, and engaging in time and material contracts with our customers, the OEM's, and the distributors. The fueling equipment that H.B. Covey is authorized to service includes, but is not limited to, equipment manufactured by Tokheim Corporation, Gilbarco, Dresser Wayne, Gas Boy, Veeder Root, API Ronan, Allied, EBW, FE Petro, EMCO, Hasstek, Healy, Incon, Red Jacket, Ruby Verifone, SSI Blue Line, and CNG.

CATEGORY VI; TARGETS OF OPPORTUNITY. These clients are small independent operators. They offer one-time opportunities and on-going maintenance contracts. They are typically high maintenance requiring frequent communication with senior management. There is limited opportunity for repeat business and we are constantly wary of under-capitalization issues that often lead to disputes. We are very selective in our analysis of these opportunities and typically quote work with higher contingency percentages to offset our exposure to the aforementioned risks.

FUTURE AND ON-GOING OPPORTUNITIES. The industry as a whole has undergone an intense period of change. Retail petroleum divisions of oil companies are redefining themselves as "retailers" as opposed to operators. More emphasis is being placed on profitability facilitated by reductions in operating costs. The market is in a period of contraction with mergers and acquisitions occurring in hopes of creating higher margins through enhanced efficiencies and reduced competition. Non-traditional fuel retailers (Costco, Sam's Club, K-Mart, Wal-Mart, etc.) are focusing on customer retention by offering expanded services including fueling operations at their existing and new facilities.

Independent of the ongoing corporate shuffling, various oversight agencies have imposed restrictive compliance deadlines and created effective methods to monitor compliance. Legislation continues to provide substantial incentives and judicial mandates for operators to convert fleets to clean burning fuel sources. These directives have provided H.B. Covey numerous opportunities to service customers in all categories.

H.B. Covey is currently involved in major oil capital rollout programs designed to meet deadlines set by the California Air Recourse Board, South Coast Air Quality Management District, and Regional Water Quality Control Boards. The most urgent programs have various compliance deadlines ranging from December 31, 2002 through December 31, 2008. Levels of compliance vary through the various categories. However, we estimate that the industry as a whole is 50 percent to 60 percent compliant. All fuel system operators will be forced to allocate larger portions of their capital budgets to regulatory compliance. Additional funds will be allocated to programs focused on image improvement, new technology implementation, and installation of alternative fueling systems.

We anticipate that retail companies will have an increased expectation of service to develop sophisticated metrics to measure performance. It is hoped that these metrics and our commitment to service and operational excellence will differentiate us from our competitors and allow us continued growth. The technology utilized in today's fueling systems has become relatively high-tech. H.B. Covey continues to train its employees and study regulations to provide a value added approach in its sales effort.

H.B. Covey anticipates a robust, sellers market, for the foreseeable future (one to three years). Sales in all categories will be fueled primarily by opportunities mandated by regulatory compliance. We will align ourselves with select partners (i.e., testing companies and environmental consultants) to maximize referral business. Although opportunities are expected to be plentiful, the group will be limited by our ability to employ a well-trained, highly competent, work force. Additional challenges will come in the form of capitalization and financial stability. Competition to retain qualified management and skilled craftsmen will be intense. The most successful companies will be those that are diverse enough to endure unpredictable capital cycles and provide robust employment packages to its employees.

CORPORATE OFFICES

The mailing address of our principal executive office is 3233 Grand Avenue, Suite N-353, Chino Hills, California 91709. Our telephone number is (909) 623-2502 and our fax number is (909) 865-1244. Our e-mail address is entech@onebox.com. Our operational offices are located in Chino, California.

EMPLOYEES

We currently employ 16 petroleum service technicians and support personnel, 11 consumer services technicians and support personnel, 10 construction and support personnel, and 5 management and administrative employees. As we grow, we will need to attract an unknown number of additional qualified employees. Although we have experienced no work stoppages and believe our relationships with our

employees are good, we could be unsuccessful in attracting and retaining the persons needed. None of our employees are currently represented by a labor union. Considered one of the fastest growing areas in the United States, the Inland Empire area of southern California, where we are located, is expected to provide a ready source of available labor to support our growth.

RISK FACTORS

THIS ANNUAL REPORT ON FORM 10-KSB INCLUDES FORWARD-LOOKING STATEMENTS ABOUT OUR BUSINESS AND RESULTS OF OPERATIONS THAT ARE SUBJECT TO RISKS AND UNCERTAINTIES. SEE "FORWARD-LOOKING STATEMENTS" ABOVE. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE THOSE DISCUSSED BELOW. IN ADDITION TO THE RISK FACTORS DISCUSSED BELOW, WE ARE ALSO SUBJECT TO ADDITIONAL RISKS AND UNCERTAINTIES NOT PRESENTLY KNOWN TO US OR THAT WE CURRENTLY DEEM IMMATERIAL. IF ANY OF THESE KNOWN OR UNKNOWN RISKS OR UNCERTAINTIES ACTUALLY OCCUR, OUR BUSINESS COULD BE HARMED SUBSTANTIALLY.

WE ARE NOT LIKELY TO SUCCEED UNLESS WE CAN OVERCOME THE MANY OBSTACLES WE FACE.

As an investor, you should be aware of the difficulties, delays and expenses we encounter, many of which are beyond our control, including unanticipated market trends, employment costs, and administrative expenses. We cannot assure our investors that our proposed business plans as described in this report will materialize or prove successful, or that we will ever be able to finalize development of our products or services or operate profitably. If we cannot operate profitably, you could lose your entire investment in our securities. As a result of the nature of our business, initially we expect to sustain substantial operating expenses without generating significant revenues.

OUR AUDITORS HAVE STATED WE MAY NOT BE ABLE TO STAY IN BUSINESS.

Our auditors have issued a going concern opinion, which means that there is doubt that we can continue as an ongoing business for the next 12 months. Unless we can raise additional capital, we may not be able to achieve our objectives and may have to suspend or cease operations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations."

WE HAVE NOT ACHIEVED PROFITABLE OPERATIONS, WE HAVE A HISTORY OF LOSSES AND A LARGE ACCUMULATED DEFICIT AND WE EXPECT FUTURE LOSSES THAT MAY CAUSE OUR STOCK PRICE TO DECLINE.

We incurred net losses of approximately $1.47 million in fiscal year 2006, $1.23 million in fiscal year 2005, $28.9 million in fiscal year 2004, $457,000 in fiscal year 2003. Our expenses are currently greater than our revenues. Our ability to operate profitably depends on generating sales and achieving sufficient gross profit margins. We cannot assure you that we will achieve or maintain profitable operations in the future.

We may continue to incur losses as we spend additional capital to develop and market our services and establish our infrastructure and organization to support anticipated operations. We cannot be certain whether we will ever earn a significant amount of revenues or profit, or, if we do, that we will be able to continue earning such revenues or profit. Also, the current economic weakness may limit our ability to develop and ultimately market our products and services. Any of these factors could cause our stock price to decline and result in you losing a portion or all of your investment in our securities.

INTENSE COMPETITION IN THE CONSTRUCTION AND MAINTENANCE INDUSTRY COULD REDUCE OUR MARKET SHARE AND PROFITS.

We serve markets that are highly competitive and in which a large number of local and regional companies compete. In particular, the engineering and construction markets are highly competitive and require substantial resources and capital investment in equipment, technology, and skilled personnel.

Competition also places downward pressure on our contract prices and profit margins. Intense competition is expected to continue in these markets, presenting us with significant challenges to our ability to achieve strong growth rates and acceptable profit margins. If we are unable to meet these competitive challenges, we could lose market share to our competitors and experience an overall reduction in our profits.

OUR ACQUISITION STRATEGY INVOLVES A NUMBER OF RISKS.

We intend to pursue growth through the opportunistic acquisition of companies or assets that will enable us to expand our service lines to provide more cost-effective customer solutions. We routinely review potential acquisitions. This strategy involves certain risks, including difficulties in the integration of operations and systems, the diversion of our management's attention from other business concerns, and the potential loss of key employees of acquired companies. We may not be able to successfully acquire, and/or integrate acquired businesses into our operations.

OUR PROJECTS EXPOSE US TO POTENTIAL PROFESSIONAL LIABILITY, PRODUCT LIABILITY, OR WARRANTY OR OTHER CLAIMS.

We construct and maintain large fueling station and storage facilities in which system failure could be disastrous. Notwithstanding the fact that we generally will not accept liability for consequential damages in our contracts, any catastrophic occurrence in excess of insurance limits at projects where our services are performed could result in significant warranty or other claims against us. Such liabilities could potentially exceed our current insurance coverage and the fees we derive from those services. A partially or completely uninsured claim, if successful and of a significant magnitude, could potentially result in substantial losses.

WE ARE EXPOSED TO POTENTIAL ENVIRONMENTAL LIABILITIES.

We are subject to environmental laws and regulations, including those concerning:

o Emissions into the atmosphere;

o Discharge into soil and ground water;

o Handling and disposal of waste materials; and

o Health and safety.

Our business often involves working around and with volatile, toxic and hazardous substances and other highly regulated materials, the improper characterization, handling or disposal of which could constitute violations of federal, state or local statutes and laws, and result in criminal and civil liabilities. Environmental laws and regulations generally impose limitations and standards for certain pollutants or waste materials and require us to obtain a permit and comply with various other requirements. Governmental authorities may seek to impose fines and penalties on us, or revoke or deny issuance or renewal of operating permits, for failure to comply with applicable laws and regulations.

The environmental health and safety laws and regulations to which we are subject are constantly changing, and it is impossible to predict the effect of such laws and regulations on us in the future. We cannot ensure that future laws and regulations will not significantly adversely affect us.

LACK OF INDEPENDENT DIRECTORS.

We cannot guarantee that our board of directors will have a majority of independent directors in the future. In the absence of a majority of independent directors, our executive officers could establish policies and enter into transactions without independent review and approval thereof. This could present the potential for a conflict of interest between us and our stockholders, generally, and the controlling officers, stockholders or directors.

LIMITATION OF LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS.

Our officers and directors are required to exercise good faith and high integrity in our management affairs. Our articles of incorporation provide, however, that our officers and directors shall have no liability to our stockholders for losses sustained or liabilities incurred which arise from any transaction in their respective managerial capacities unless they violated their duty of loyalty, did not act in good faith, engaged in intentional misconduct or knowingly violated the law, approved an improper dividend or stock repurchase, or derived an improper benefit from the transaction. Our articles and bylaws also provide for the indemnification by us of the officers and directors against any losses or liabilities they may incur as a result of the manner in which they operate our business or conduct the internal affairs, provided that in connection with these activities they act in good faith and in a manner that they reasonably believe to be in, or not opposed to, our best interests, and their conduct does not constitute gross negligence, misconduct or breach of fiduciary obligations.

MANAGEMENT OF POTENTIAL GROWTH.

We may experience rapid growth which will place a significant strain on our managerial, operational, and financial systems resources. To accommodate our current size and manage growth, we must continue to implement and improve our financial strength and our operational systems, and expand, train and manage our sales and distribution base. There is no guarantee that we will be able to effectively manage the expansion of our operations, or that our facilities, systems, procedures or controls will be adequate to support our expanded operations. Our inability to effectively manage our future growth would have a material adverse effect on us.

SECURITIES AND EXCHANGE COMMISSION RULES CONCERNING SALES OF LOW-PRICED SECURITIES MAY HINDER RE-SALES OF OUR COMMON STOCK.

Because our common stock has a market price that is less than five dollars per share, our common stock is not listed on an exchange or quoted on Nasdaq and is traded on the OTC Bulletin Board, our shares are referred to as "penny stocks" within the definition of that term contained in Rules 15g-1 through 15g-9 promulgated under the Securities Exchange Act of 1934, as amended. These rules impose sales practices and disclosure requirements on certain broker-dealers who engage in certain transactions involving penny stocks. These additional sales practices and disclosure requirements could impede the sale of our securities, including securities purchased herein, in the secondary market. In general, penny stocks are low priced securities that do not have a very high trading volume. Consequently, the price of the stock is volatile and you may not be able to buy or sell the stock when you want. Accordingly, the liquidity for our securities may be adversely affected, with related adverse effects on the price of our securities.

Under the penny stock regulations, a broker-dealer selling penny stocks to anyone other than an established customer or "accredited investor" (generally, an individual with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 together with his or her spouse) must make a special suitability determination for the purchaser and must receive the purchaser's written consent to the transaction prior to the sale, unless the broker-dealer is otherwise exempt. In addition, unless the broker-dealer or the transaction is otherwise exempt, the penny stock regulations require the broker-dealer to deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the Securities and Exchange Commission relating to the penny stock. A broker-dealer is also required to disclose commissions payable to the broker-dealer and the Registered Representative and current quotations for the securities. A broker-dealer is additionally required to send monthly statements disclosing recent price information with respect to the penny stock held in a customer's account and information with respect to the limited market in penny stocks.

THERE MAY BE LIMITED LIQUIDITY IN OUR COMMON STOCK AND ITS PRICE MAY BE SUBJECT TO FLUCTUATION.

There is only a limited market for our common stock, which is currently traded on the OTC Bulletin Board. We can provide no assurances that we will be able to have our common stock listed on an exchange or quoted on Nasdaq or that it will continue to be quoted on the OTC Bulletin Board. If there is no trading market for our common stock, the market price of our common stock will be materially and adversely affected.

TO DATE, WE HAVE NOT PAID ANY CASH DIVIDENDS AND NO CASH DIVIDENDS WILL BE PAID IN THE FORESEEABLE FUTURE.

We do not anticipate paying cash dividends on our common shares in the foreseeable future, and we cannot assure an investor that funds will be legally available to pay dividends or that even if the funds are legally available, that the dividends will be paid.

VOLATILITY IN OUR COMMON SHARE PRICE MAY SUBJECT US TO SECURITIES LITIGATION, THEREBY DIVERTING OUR RESOURCES WHICH MAY HAVE A MATERIAL ADVERSE EFFECT ON OUR RESULTS OF OPERATIONS.

The market for our common shares is characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. In the past, plaintiffs have often initiated securities class action litigation against a company following periods of volatility in the market price of its securities. We may in the future be the target of similar litigation. Securities litigation could result in substantial costs and liabilities and could divert management's attention and resources.

THE TRADING PRICE OF OUR COMMON STOCK MAY DECREASE DUE TO FACTORS BEYOND OUR CONTROL.

The stock market from time to time has experienced extreme price and volume fluctuations, which have particularly affected the market prices for emerging growth companies and which often have been unrelated to the operating performance of the companies. These broad market fluctuations may adversely affect the market price of our common stock. If our shareholders sell substantial amounts of their common stock in the public market, the price of our common stock could fall. These sales also might make it more difficult for us to sell equity or equity related securities in the future at a price we deem appropriate.