The discussion contained herein contains "forward-looking statements" that involve risk and uncertainties. These statements may be identified by the use of terminology such as "believes," "expects," "may," "should" or anticipates" or expressing this terminology negatively or similar expressions or by discussions of strategy. The cautionary statements made in our Annual Report on Form 10-K, filed March 31, 2009, should be read as being applicable to all related forward-looking statements wherever they appear in this Form 10-Q. Our actual results could differ materially from those discussed in this report. The following discussion should be read in conjunction with the financial statements and the related notes included herein as Item 1.

Accounting Policies and Estimates

The methods, estimates and judgments that we use in applying our critical accounting policies have a significant impact on the results that we report in our financial statements. Some of our accounting policies require us to make difficult and subjective judgments, often as a result of the need to make estimates regarding matters that are inherently uncertain. We also have other policies that we consider key accounting policies, such as those for revenue recognition; however, these policies typically do not require us to make estimates or judgments that are difficult or subjective.

We have identified accounting policies that we consider critical in Note 2 "Nature of Business and Significant Accounting Policies" of the notes to our financial statements included in this report. The accounting policies and estimates described in this report should be read in conjunction with Note 1 "Nature of Business and Significant Accounting Policies" of the notes to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2008, which includes a discussion of the policies identified in this report and other significant accounting policies.

Overview

Energy Composites Corporation (formerly Las Palmas Mobile Estates) ("we," "us," "our," or the "Company") is a manufacturer of composite structures and vessels for a range of clean technology industries. Based on our research of companies in this sector, we believe we have the Midwest's largest and most automated manufacturing capabilities with our world-class, automated 73,000 square foot climate-controlled manufacturing facility in Wisconsin Rapids, Wisconsin.

Our Company was incorporated on October 29, 1992 under the laws of the State of Nevada. At first, we were defined as a "shell" company whose sole purpose was to locate and consummate a merger or acquisition with a private entity. As of October 14, 2008, we completed a reverse acquisition of Advanced Fiberglass Technologies, Inc., a Wisconsin corporation ("AFT"). Pursuant to the reverse acquisition we issued 28,750,000 shares of our common stock to AFT's shareholders (approximately 72% of the then issued and outstanding common stock) and AFT's shareholders gained voting control of our Company. As a result of the reverse acquisition, we are no longer considered a "shell" company. AFT is now our wholly-owned subsidiary.

Advanced Fiberglass Technologies. AFT was incorporated in the state of Wisconsin on January 1, 2005, following nearly ten years operating as M&W Fiberglass, LLC ("M&W"). Founded in 1995 by Jamie Lee Mancl, M&W was the operating entity that developed and operated AFT's business. In January 2005, M&W transferred all operating assets and liabilities into a newly formed S-Corporation: AFT. M&W, solely owned by Jamie Lee Mancl, retained ownership of AFT's former manufacturing facility. In February 2007, M&W sold AFT's former manufacturing facility to the city of Wisconsin Rapids. M&W and AFT then purchased and developed our current manufacturing facility by obtaining $4,000,000 of financing in the form of industrial revenue bonds. On December 31, 2008, we purchased the manufacturing facility from M&W by assuming the industrial revenue bonds, paying M&W $500,000 in cash and delivering a promissory note to M&W for $1,045,328.

Fiberglass Piping & Fitting Company. In September 2006, our largest shareholder, Jamie Lee Mancl, formed Fiberglass Piping & Fitting Company ("FPF") and began operating FPF out of the same manufacturing facility used by AFT. FPF is a wholesale distributor of imported fiberglass piping and fitting products. We purchase products from FPF from time to time for use in the manufacture of our products pursuant to a long-term supply agreement at a price equal to FPF's net direct costs for such products.

Results of Operations

The tables below separate the results of our operating subsidiary, AFT, from the
revenues and expenses attributable to M&W and FPF so that appropriate
comparisons can be made. Unless otherwise noted, the discussion refers only to
our results (AFT) on a non-consolidated basis.

Revenue                                      Three months ended March 31,        Increase /       % increase /
                                                2009                2008         (decrease)        (decrease)
AFT                                        $     2,412,669       $ 1,623,014     $   789,655               48.7 %
M&W/FPF, net of eliminations                             -           186,103        (186,103 )               NA
Total consolidated revenue                 $     2,412,669       $ 1,809,117     $   603,552               33.4 %

Our revenue growth during the first quarter of 2009 was primarily attributable to our successful completion and delivery of an eighteen tank contract with a major chlor-alkali producer. During the first quarter of 2009, we recorded $878,249 of increased revenue from product sales, $38,076 of increased revenue associated with field services tank work, and decreased revenue of ($126,670) associated with field pipefitting contracts due to the timing of field pipefitting outages, some of which are sensitive to weather conditions.

Cost of goods sold                           Three months ended March 31,        Increase /       % increase /
                                                2009                2008         (decrease)        (decrease)
AFT                                        $     1,968,202       $ 1,284,666     $   683,536               53.2 %
M&W/FPF, net of eliminations                             -           155,551        (155,551 )               NA
Total cost of goods sold                   $     1,968,202       $ 1,440,217     $   527,985               36.7 %

The major components of cost of goods sold are raw materials used in manufacturing, manufacturing labor, and manufacturing overhead. The primary raw materials used in our manufacturing processes are isophathalic, polyester, and vinyl-ester resins and fiberglass. Manufacturing labor includes wages, employment taxes, employee benefits, and union expenses. The major components of manufacturing overhead are utilities and depreciation associated with our manufacturing facility and equipment, travel and lodging expense associated with field service activities and manufacturing supplies. For the three months ended March 31, 2009, our cost of materials increased to 29% of revenue from 28% of revenue for the comparable period in 2008. The increase in material cost as a percentage of revenue is primarily due to a sales mix with slightly lower service and installation revenue. Our cost of labor remained stable at 31% of revenue for the three months ended March 31, 2009 and 2008. Manufacturing overhead increased from 20% of revenue during the first quarter of 2008 to 21% in 2009 primarily as a result of increased depreciation expense from added equipment. These factors resulted in a 2% decline in gross profit for the first quarter of 2009 compared to 2008.

Gross profit                                  Three months ended March 31,          % of revenue       % of revenue
                                                2009                 2008               2009               2008
AFT                                        $      444,467       $      338,348               18.4 %             20.8 %
M&W/FPF, net of eliminations                            -               30,552                 NA               16.4 %
Total gross profit                         $      444,467       $      368,900               18.4 %             20.4 %

Selling, general & administrative expenses      Three months ended March 31,          % of revenue      % of revenue
                                                  2009                 2008               2009              2008
AFT                                          $      892,316       $      528,360               37.0 %            32.6 %
M&W/FPF, net of eliminations                              -              (75,771 )               NA             (40.7 )%
Total SG&A expenses                          $      892,316       $      452,589               37.0 %            25.0 %

The increase in our selling, general and administrative expenses is driven by our growth strategy, including costs associated with being a public company, continuing investment in certain in-house capabilities, such as expanded sales, engineering and design staff, more robust human resource management, augmented financial and legal staff, and a more aggressive, and thus more costly, marketing program. Taken together, these additional expenses represent a platform for managing and driving our growth. Accordingly, we expect our sales to increase robustly in 2009 as a result of our investment in this management platform. We have also invested time and effort into the development of our WindFiber™ strategy, including planning the construction of a 350,000 square foot wind blade production plant in Wisconsin Rapids within the next 12 months. Selling, general and administrative expenses for both M&W and FPF for the three months ended March 31, 2008 were $33,729 net of eliminations of rental activity for M&W of $109,500.

Income (loss) from operations                Three months ended March 31,        % of revenue       % of revenue
                                                2009                2008             2009               2008
AFT                                        $      (447,849 )     $  (190,012 )           (18.6 )%           (11.7 )%
M&W/FPF, net of eliminations                             -           106,323                NA              (57.1 )%
Total income (loss) from operations        $      (447,849 )     $   (83,689 )           (18.6 )%            (4.6 )%

The $257,837 increase in our net loss in 2009 is primarily due to increased cost of goods sold, costs associated with public company reporting, and the increase in selling, general and administrative expenses observed in 2009, as described above.

Interest expense                             Three months ended March 31,        % of revenue       % of revenue
                                                 2009                2008            2009               2008
AFT                                        $      (1,174,538 )     $ (28,470 )           (48.7 )%            (1.8 )%
M&W/FPF                                                    -         (53,368 )              NA              (28.7 )%
Total interest expense                     $      (1,174,538 )     $ (81,838 )           (48.7 )%            (4.5 )%

Non-cash amortization of debt discounts for warrants and beneficial conversion feature related to the convertible debt was $1,049,213 for the three months ended March 31, 2009. The remaining increase is due to increased short and long-term debt borrowings in 2009 relating to the new manufacturing facility acquired at the end of 2008 and equipment and working capital notes to fund our growing operations. For the three months ended March 31, 2009, interest expense was partially offset by bank interest income of $7,745.

Net loss                                     Three months ended March 31,        % of revenue       % of revenue
                                                 2009                2008            2009               2008
Loss before income taxes                   $     (1,614,642 )     $ (165,527 )           (66.9 )%           (10.2 )%
Income tax provision (benefit)                     (624,000 )         28,000             (25.9 )%            15.0 %
Net loss                                   $       (990,642 )     $ (193,527 )           (41.1 )%           (10.7 )%

Effective January 1, 2008, we terminated our S-Corporation election and began operating as a C-Corporation. As a result of the change in tax status, an initial $110,000 of net deferred tax liability was recorded as income tax expense which was offset by a net income tax benefit of $82,000 associated with net operating losses and temporary book and tax timing differences for the three months ended March 31, 2008. We believe the full amount of the benefit is realizable due to our previous history of operating profits prior to 2008 and, therefore, have not recorded a valuation allowance against the deferred tax benefits. Significant components of the income tax benefit include the net operating loss for the year, fair value of warrants and temporary timing differences of fixed assets, accruals, and reserves.

Our consolidated net loss for the three months ended March 31, 2009 was $(990,642) compared to a net loss of $(246,482) for the three months ended March 31, 2008, as a result of the factors described above.

Liquidity and Capital Resources

Our liquidity and capital resources have been driven by our growth strategy. Beginning in 2007 and continuing into 2009, we significantly expanded our operations and our manufacturing capabilities. We have invested in our plant and equipment to become a large manufacturing concern with a diverse manufacturing capability, both in-house and on-client-site. As a result of our expansion efforts, we believe we are well positioned to take advantage of market opportunities and to introduce our products and services into emerging markets like wind energy.

To capitalize on our expanding manufacturing capabilities, we have made significant investments in our sales personnel and marketing program and in our new WindFiber™ strategy. With these expenditures, we have increased our visibility in our existing markets and have captured early attention from major targeted customers within the wind energy market and in our core markets. Furthermore, we anticipate field service revenues will increase sharply from the first quarter 2009 results, consistent with historical seasonal trends. Major manufacturers typically plan maintenance, repair and overhaul activities ("outages") for the spring, summer and fall months. Historically, we experience sharp increases in field service backlog and revenue in the second and third quarter of the year, and we expect this trend to continue in 2009. As we realize increased revenue during the "outage" season, we believe our liquidity outlook will improve.

Our primary sources of liquidity to fund our growth strategy are cash generated from operations and short and long-term term financing arrangements. As of March 31, 2009, cash and cash equivalents totaled $2,884,096. Our working capital was $2,644,268 and $3,138,951 at March 31, 2009 and December 31, 2008, respectively. We believe we have sufficient resources available to meet our liquidity requirements, including debt service, for the remainder of 2009. We will require additional financing to pursue our WindFiber™ strategy over the next 12 months, including the construction of a new 350,000 square foot wind blade production plant.

Operating Cash Flows

Operating activities used $120,868 and $91,019 of cash for the three months ended March 31, 2009 and 2008, respectively. The increase in cash used by operating activities for 2009, was due primarily to the significant decreases in accounts payable and customer deposits associated with the large tank contract we completed and the increase in the overall net loss for the three months ended March 31, 2009. These increases in operating cash uses were partially offset by decreases in accounts receivable and inventories primarily associated with the same contract.

Investing Cash Flows

Investing activities used $74,980 and $112,055 of cash for the three months ended March 31, 2009 and 2008, respectively. The primary use of cash in investing activities for both periods was the purchase of additional manufacturing equipment supporting plant and field service activities, as well as purchase of office equipment for added office staff positions.

Financing Cash Flows

Financing activities provided $94,655 and $229,643 for the three months ended March 31, 2009 and 2008, respectively. Proceeds from financing activities for the three months ended March 31, 2009 were $200,000 raised from additional short-term notes which was partially offset by financing costs and payments on long-term debt of $105,345. For the three months ended March 31, 2008, proceeds from financing activities included proceeds from short-term notes of $506,063. Cash used in financing activities for the three months ended March 31, 2008 included a reduction in bank overdrafts of $168,087, payments on the bank line of credit of $27,691, payments on long-term debt of $70,642, and distributions to a stockholder of $10,000 primarily for income taxes due by the shareholders relating to the pass through income from M&W and FPF.

Debenture Financing

We executed the first part of our financing strategy starting in August to December 2008, when we raised $6,370,000 by selling units, each unit consisting of (i) a 3-year, 6% convertible debenture (the "Debentures") with a conversion price of $2.50 per share (subject to adjustment for stock splits and stock dividends), and (ii) a number of warrants equal to the number of shares issuable upon conversion of the principal amount of the Debenture (the "Warrants"). Each Warrant is exercisable into shares of common stock for a term of 3 years at $5.00 per share. The Warrant also provides anti-dilution protection for the following events: reorganization, reclassification, consolidation, merger or sale; subdivision, combination or dividend of our common stock.

The Debentures sold included the issuance of 2,548,000 Warrants. The issued Warrants were deemed to have a relative fair market value of $4,068,422 which was recorded as a discount to the face value of the Debentures and as a credit to additional paid-in capital and will be accreted to interest expense over the 3-year term using the effective interest method. We used the Black-Scholes-Merton pricing model as a method for determining the estimated fair value of the Warrants.

At March 31, 2009, Debentures totaling $1,470,000 remain outstanding and will become due during the last part of 2011. $4,900,000 of Debentures has been converted to common stock as of March 31, 2009. Many Debenture holders have elected to receive interest in the form of stock, lowering our cash outlays for debt service on the Debentures. We believe that the growth of our business and revenue will improve the value of our stock and motivate the remaining Debenture holders to convert their debt into stock which will further reduce our cash requirements to settle the debt in 2011. We also anticipate that the Debenture holders will exercise their Warrants when and if the value of our stock increases above $5.00 per share. The money we raise from the exercise of Warrants, if any, will be used to continue our growth strategy.

As we roll out the sequential elements of our WindFiber™ strategy, it may be appropriate to pursue an additional tranche of equity financing to support the construction of a new 350,000 square foot manufacturing plant, the equipping of the production lines, training of employee-associates, and working capital. While we anticipate a substantial portion of our WindFiber™ financing requirements will be met with subsidized or otherwise advantaged debt financing, it may be prudent to supplement such financing with a modest tranche of supplemental equity.

Purchase of Manufacturing Plant and Related Debts

On December 31, 2008, we exercised our option to purchase the manufacturing facility we were leasing from M&W for a purchase price of $4,500,000. We elected to exercise this option in order to lower the monthly cash requirement associated with our manufacturing facility and to remove conflicting interests between our business and Jamie and Jennifer Mancls' other business interest:
M&W. The favorable interest rate we negotiated with the Mancls (described below) will improve our cash flows by approximately $72,000 annually because the associated annual debt service is less than the annual lease payments we were paying. We believe removing the Mancls' control over our business (as exercised through the facility lease) will, in the long run, improve our balance sheet and our ability to borrow money from large institutional investors.

The purchase price for the facility was paid in the form of: (i) an assumption of the industrial revenue bonds and note related to the building and land; (ii) cash at closing in the amount of $500,000; and (iii) the balance ($1,045,328) in the form of a promissory note bearing interest at an annual fixed rate of 4.775% which was determined using the twelve-month LIBOR as of December 31, 2008 (2.025%) plus 2.75%, payable in quarterly installments of principal and interest amortized over not more than 15 years with the unpaid principal balance due not later than December 15, 2015. The assumed debt consisted of all obligations of M&W under the bond agreement and all obligations of M&W under that certain Promissory Note dated February 28, 2007 in the principal amount of $75,000 issued to the City of Wisconsin Rapids. As of December 31, 2008, the amount of the assumed debt of the industrial revenue bonds was $2,879,672.

The assumed building-related industrial revenue bonds mature in 2027 with an annual interest rate of 5.5%. Monthly principal and interest payments on the assumed bonds are $20,766. Our manufacturing equipment was financed with two $500,000 industrial revenue bonds expiring July 2014 with interest at 5.75% and a $500,000 note from the City of Wisconsin Rapids expiring April 2012 with interest at 2%. Monthly principal and interest payments for each of these bonds and the Wisconsin Rapids note are $7,266 and $4,499. The long maturities and

low interest rates associated with the building and equipment loans allow us enough time to successfully execute our growth strategy at a low cost of capital. As we begin to generate positive cash from operations, we anticipate that we will be able to service these building- and equipment-related debts without the need of raising additional capital.

The 4.775% interest rate on the $1,045,328 note held by M&W is also low relative to historical market rates. Going forward, we believe that we will be able to service the M&W note with cash from operations. We may settle the M&W note prior to its 2015 due date with the proceeds of a future debt or equity financing.

On March 13, 2009, we executed an amendment to the credit agreement for the three building- and equipment-related industrial revenue bonds. The amended financial covenants require us to maintain (a) a Debt Service Coverage Ratio of not less than 1.25 to 1, (b) a Debt to Equity Ratio of not more than 3.5 to 1, and (c) an Equity level of not less than $600,000. The next measurement date of these covenants will be December 31, 2009.

Other Debt Activity

As of May 5, 2009, we have decreased our total short-term borrowings for working capital purposes by settling a $500,000 note that was due May 4, 2009 and borrowing an additional $300,000 under a new short-term note which carries a three-month term, 6.75% interest per annum, and is secured by our business assets and receivables and certain customer purchase orders.

Leases

We have entered into various operating leases to support operations. We lease several vehicles supporting our Field Services Division, forklifts for the plant, office equipment, and lodging space in Biron, Wisconsin. Total monthly lease payments for this equipment and office space are $3,587. The lease we previously held for the office space in Hastings, Michigan expired March 1, 2009 and was not renewed. The monthly payment for the Hastings office was $925 per month.

Going Forward

While we have sufficient capital to complete the first step of our four-part growth strategy in 2009, we need additional capital to grow our business, especially our WindFiber™ strategy. If our cash flow from operations is insufficient to fund debt service and other obligations, we may be required to increase our borrowings, reduce or delay capital expenditures, and seek additional capital or refinance our indebtedness. There can be no assurance, however, that we will continue to generate cash flows at or above current levels or that we will be able to maintain our ability to borrow under revolving credit facilities.

Off-Balance Sheet Arrangements

As of March 31, 2009, we did not have any off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not applicable to smaller reporting companies.

Item 4. Controls and Procedures

Under the supervision and with the participation of our principal executive . . .