Forward Looking Statements

This quarterly report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions.

While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested in this report. Except as required by applicable law, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Our unaudited financial statements are stated in Canadian Dollars (Cdn$) and are prepared in accordance with generally accepted accounting principles in the United States. The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report.

In this quarterly report, unless otherwise specified, all dollar amounts are expressed in Canadian dollars. All references to "US$" refer to United States dollars and all references to "common shares" refer to the common shares in our capital stock.

As used in this quarterly report, the terms "we", "us", "our", "our company" and "EVCC" mean Environmental Control Corp., unless otherwise indicated.

Business Overview

We are a development stage company engaged in the production, research and development of catalytic muffler technology for small displacement engines. Our catalytic muffler technology is registered for two patents in the United States under the titles of "Combined Catalytic Muffler" and "Reverse Flow Catalytic Muffler". We also hold two patents in Canada under the titles "Combined Catalytic Muffler" and "Reverse Flow Catalytic Muffler" and one patent in Europe under the title of "Reverse Flow Catalytic Muffler". The filing numbers are located below:

                               Area      Filing Number
                           United States   6,622,482
                                           7,108,590
                              Canada       2,448,742
                                           2,448,648
                              Europe      02742591.7

We currently target small spark-ignition engines, including personal transportation devices, off-road recreational vehicles, personal watercrafts, water pumps and in particular the lawn and garden industry. Included under the lawn and garden segment are: walk behind rotary mowers, rear engine riding mowers, front engine lawn tractors, riding garden tractors, walk-behind rotary tillers, snow throwers, commercial turf intermediate walk-behind rotary mowers, commercial turf riding rotary mowers, gasoline powered chainsaws, gasoline powered hand-held blowers, gasoline powered backpack blowers, gasoline powered trimmers/brushcutters and gasoline powered hedge trimmers. We are currently focused on the North American market and we are targeting Original Engine Manufacturers (OEMs). The aftermarket parts segment represents a secondary market.

Results of Operations

Our results of operations are presented below:

                                     Three           Three                                       Period from
                                    Months          Months        Six Months     Six Months     March 6, 1999
                                     Ended           Ended          Ended          Ended          (Date of
                                   June 30,        June 30,        June 30,       June 30,      Inception) to
                                     2009            2008            2009           2008        June 30, 2009
                                      ($)             ($)            ($)            ($)              ($)
Revenue                                     -               -              -              -                 -
Operating Expenses                     81,776         109,032        175,718        215,024         1,413,714
Net Loss                               90,907         156,454        188,228        309,868         1,791,806

Results of Operations for the Three Month Period Ended June 30, 2009 and for the period from March 6, 1999 (inception) to June 30, 2009.

For the three month period ended June 30, 2009 we incurred a net loss of $90,907, compared to a net loss of $156,454 during the same period in 2008. The main reason for the decrease in net loss was a gain on foreign exchange and lower general and administrative expenses during the period ended June 30, 2009. Our net loss from inception to June 30, 2009 was $1,791,806. We have not experienced a net loss per share during any of these periods except for the six month period ended June 30, 2008 during which our net loss per share was $0.01.

Our total operating expenses for the three month period ended June 30, 2009 were $81,776, compared to total operating expenses of $109,032 for the same period in fiscal 2008. The decrease in operating expenses was largely due to a gain on foreign exchange and lower general and administrative expenses. Our total operating expenses from our inception on March 6, 1999 to June 30, 2009 were $1,413,714.

Our total operating expenses for the three month period ended June 30, 2009 consisted of $916 in depreciation, $15,933 in foreign exchange gains, $82,290 in general and administrative expenses and $14,503 in research and development expenses. In comparison, our total operating expenses for the three month period ended June 30, 2008 consisted of $1,356 in depreciation, $219 in foreign exchange losses, $103,702 in general and administrative expenses and $3,755 in research and development expenses. We did not incur any other operating expenses during these periods.

Our total operating expenses from our inception on March 6, 1999 to June 30, 2009 consisted of $13,344 in depreciation, $5,771 in foreign exchange losses, $1,317,241 in general and administrative expenses and $77,358 in research and development expenses.

The decrease in operating expenses for the three month period ended June 30, 2009 was primarily due to a decrease in our general and administrative expenses and gains on foreign exchange. Our general and administrative expenses consist of professional fees, transfer agent fees, investor relations expenses and general office expenses. Our professional fees include legal, accounting and auditing fees.

Results of Operations for the Six Month Period Ended June 30, 2009.

For the six month period ended June 30, 2009 we incurred a net loss of $188,228, compared to a net loss of $309,868 during the same period in 2008. The main reason for the decrease in net loss was a gain on foreign exchange, lower general and administrative expenses and a decrease in other non-operating expenses during the period ended June 30, 2009.

Our total operating expenses for the six month period ended June 30, 2009 were $175,718 compared to total operating expenses of $215,024 for the same period in 2008. The decrease in operating expenses was largely due to a gain on foreign exchange and lower general and administrative expenses.

Our total operating expenses for the six month period ended June 30, 2009 consisted of $1,899 in depreciation, $11,735 in foreign exchange gains, $169,118 in general and administrative expenses and $16,436 in research and development expenses. In comparison, our total operating expenses for the six month period ended June 30, 2008 consisted of $2,711 in depreciation, $449 in foreign exchange gains, $209,007 in general and administrative expenses and $3,755 in research and development expenses. We did not incur any other operating expenses during these periods.

The decrease in operating expenses for the six month period ended June 30, 2009 was primarily due to a decrease in our general and administrative expenses and gains on foreign exchange. Our general and administrative expenses consist of professional fees, transfer agent fees, investor relations expenses and general office expenses. Our professional fees include legal, accounting and auditing fees.

Liquidity and Capital Resources

As of June 30, 2009 we had cash of $173,637 in our bank accounts. As of June 30, 2009 we also had property and equipment in the amount of $13,024, for total assets of $186,661.

As of June 30, 2009 we had working capital of $101,727. Our accumulated deficit from our inception on March 6, 1999 to June 30, 2009 was $1,791,806 and was funded primarily through equity financing.

For the six month period ended June 30, 2009 we spent net cash of $201,614 on operating activities, compared to net cash spending of $150,494 during the same period in 2008. The increase in expenditures on operating activities for the six months ended June 30, 2009 was primarily due to an increase in our accounts payable and a decrease in our accretion of discounts on convertible debentures.

For the six month period ended June 30, 2009 we received $250,000 from financing activities as a convertible debt, compared to net cash received of $165,000 during the same period in fiscal 2008 from the issuance of shares. The $250,000 debenture was entered into on April 9, 2009 with a company controlled by our directors. The debenture bears interest at 10% per annum and is due five years from the advancement date. No interest shall be accrued for the first year from the advancement date but shall begin to accrue on the second anniversary of the advancement date and all accrued interest shall be payable annually, on the subsequent anniversaries of the advancement date. Proceeds from the debenture are to be used to further advance the current business development and marketing initiatives, and to complete testing of our catalytic mufflers. The loan amount is secured against our North American patents relating to our catalytic muffler technology. The loan and any unpaid interest are convertible into shares of common stock at a conversion price of US$0.06 per share.

We estimate our planned expenses for the next 12 months (beginning September 2009) to be approximately $385,000, including $165,000 for research and development costs and $220,000 for other operational costs. Our other operational costs include sales and marketing expenses, manufacturing and engineering expenses and general and administrative expenses

Our general and administrative expenses for the year will consist primarily of professional fees, transfer agent fees, investor relations expenses and general office expenses. Our professional fees include legal, accounting and auditing fees, and are related to our regulatory filings throughout the year.

Based on our planned expenditures, we require additional funds of approximately $385,000 to proceed with our business plan over the next 12 months. If we secure less than the full amount of financing that we require, we will not be able to carry out our complete business plan and we will be forced to proceed with a scaled back business plan based on our available financial resources.

Future Financings

We have not generated any revenues, have achieved losses since our inception, and rely upon the sale of our securities to fund our operations. We anticipate that we will incur substantial losses for the foreseeable future, and we are dependent upon obtaining outside financing to carry out our operations. Our financial statements for the six months ended June 30, 2009 have been prepared on a going concern basis and do not include any adjustments that might result from the outcome of this uncertainty.

We will require approximately $385,000 over the next 12 months in order to enable us to proceed with our plan of operations, including paying our ongoing expenses. These expenses include sales and marketing, research and development, manufacturing and engineering, and general and administrative expenses. These cash requirements are in excess of our current cash and working capital resources. Accordingly, we intend to raise the balance of our cash requirements for the next 12 months from private placements, shareholder loans or possibly a registered public offering (either self-underwritten or through a broker-dealer). If we are unsuccessful in raising enough money through such efforts, we may review other financing possibilities such as bank loans. At this time we do not have a commitment from any broker-dealer to provide us with financing, and there is no guarantee that any financing will be available to us or if available, on terms that will be acceptable to us.

If we are unable to obtain the necessary additional financing, then we plan to reduce the amounts that we spend on our operations and our general and administrative expenses so as not to exceed the amount of capital resources that are available to us. If we do not secure additional financing our current cash reserves and working capital will be not be sufficient to enable us to sustain our operations and for the next 12 months, even if we do decide to scale back our operations.

Off-Balance Sheet Arrangements

As of June 30, 2009 we had no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.

Critical Accounting Policies

Use of Estimates

The preparation of financial statements in accordance with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses in the reporting period. We regularly evaluate estimates and assumptions related to useful life and recoverability of long-lived assets, stock-based compensation and deferred income tax asset valuation allowances. We base our estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by us may differ materially and adversely from our estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

Earnings (Loss) Per Share
We compute earnings (loss) per share in accordance with SFAS No. 128, "Earnings per Share". SFAS No. 128 requires presentation of both basic and diluted earnings per share ("EPS") on the face of the income statement. Basic EPS is computed by dividing net earnings (loss) available to common shareholders
(numerator) by the weighted average number of shares outstanding (denominator)
during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible securities using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS and the weighted average number of common shares exclude all dilutive potential shares since their effect is anti-dilutive. As at June 30, 2009, we had 8,934,538 potentially dilutive securities outstanding.

Financial Instruments and Fair Value Measures SFAS No. 157 "Fair Value Measurements" requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. SFAS No. 157 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. SFAS No. 157 prioritizes the inputs into three levels that may be used to measure fair value:

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

Our financial instruments consist principally of cash, accounts payable, accrued convertible interest payable, advances from related parties and convertible debentures issued to related parties. Pursuant to SFAS No. 157, the fair value of our cash equivalents, when applicable, is determined based on "Level 1" inputs, which consist of quoted prices in active markets for identical assets. We estimate that the recorded values of all of its other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations. Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash in excess of federally insured amounts. To date, we have not incurred a loss relating to this concentration of credit risk.
Our operations are in Canada, which results in exposure to market risks from changes in foreign currency rates. The financial risk is the risk to our operations that arise from fluctuations in foreign exchange rates and the degree of volatility of these rates. Currently, we do not use derivative instruments to reduce our exposure to foreign currency risk.

Inflation

The amounts presented in the financial statements do not provide for the effect of inflation on our operations or financial position. The net operating losses shown would be greater than reported if the effects of inflation were reflected either by charging operations with amounts that represent replacement costs or by using other inflation adjustments.