----

----

| Nevada                                                         | 88-0409170                        |
|----------------------------------------------------------------|-----------------------------------|
| (State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |

| Large accelerated filer  o | Accelerated filer  o              |
|--------------------------------------|---------------------------------------------|
| Non-accelerated filer  o   | Smaller reporting company  ý |

----

|                                     |                                                                                        | Page   |
|------------------------------------------|---------------------------------------------------------------------------------------------|--------|
| PART I.  FINANCIAL INFORMATION |
|                                     |                                                                                        |   |
| Item 1.                                  | Financial Statements:                                                                       |   |
|                                     |                                                                                        |   |
|                                     | Consolidated Balance Sheets (Unaudited)                                                     | 2      |
|                                     |                                                                                        |   |
|                                     | Consolidated Statements of Operations (Unaudited)                                           | 3      |
|                                     |                                                                                        |   |
|                                     | Consolidated Statements of Cash Flows (Unaudited)                                           | 4      |
|                                     |                                                                                        |   |
|                                     | Notes to Consolidated Financial Statements (Unaudited)                                      | 5      |
|                                     |                                                                                        |   |
| Item 2.                                  | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 18     |
|                                     |                                                                                        |   |
| Item 3.                                  | Quantitative and Qualitative Disclosures about Market Risk                                  | 24     |
|                                     |                                                                                        |   |
| Item 4.                                  | Controls and Procedures                                                                     | 24     |
|                                     |                                                                                        |   |
|                                     |                                                                                        |   |
| PART II.  OTHER INFORMATION    |
|                                     |                                                                                        |   |
| Item 1.                                  | Legal Proceedings                                                                           | 25     |
|                                     |                                                                                        |   |
| Item 1A.                                 | Risk Factors                                                                                | 25     |
|                                     |                                                                                        |   |
| Item 2.                                  | Unregistered Sales of Equity Securities and Use of Proceeds                                 | 25     |
|                                     |                                                                                        |   |
| Item 3.                                  | Defaults Upon Senior Securities                                                             | 25     |
|                                     |                                                                                        |   |
| Item 5.                                  | Other Information                                                                           | 25     |
|                                     |                                                                                        |   |
| Item 6.                                  | Exhibits                                                                                    | 26     |
|                                     |                                                                                        |   |
| SIGNATURES                               | 27                                                                                          |

----

| ENERGY COMPOSITES CORPORATION                        |   |        |        |   |         |   |
|------------------------------------------------------|--------|-------------|-------------|--------|--------------|--------|
|                                                 |   |        |        |   |         |   |
| CONSOLIDATED BALANCE SHEETS                          |   |        |        |   |         |   |
|                                                 |   | (Unaudited) |        |   | (Audited)    |   |
|                                                 |   | June 30,    |        |   | December 31, |   |
|                                                 |   | 2010        |        |   | 2009         |   |
| ASSETS                                               |   |        |        |   |         |   |
|                                                 |   |        |        |   |         |   |
| Current assets:                                      |   |        |        |   |         |   |
| Cash                                                 |   | $           | 55,091      |   |         | $      | 281,809 |   |
| Accounts receivable, net of allowance for doubtful   |   |        |        |   |         |   |   |   |
| accounts of $154,000 in 2010 and $191,000 in 2009    |   |        | 1,461,322   |   |         |   | 2,512,934 |   |
| Accounts receivable - related party                  |   |        | 2,669       |   |         |   | 1,860 |   |
| Inventories, net                                     |   |        | 836,384     |   |         |   | 592,987 |   |
| Other current assets                                 |   |        | 57,156      |   |         |   | 120,123 |   |
|                                                 |   |        |        |   |         |   |   |   |
| Total current assets                                 |   |        | 2,412,622   |   |         |   | 3,509,713 |   |
|                                                 |   |        |        |   |         |   |   |   |
| Property and equipment, net                          |   |        | 6,329,739   |   |         |   | 5,914,803 |   |
|                                                 |   |        |        |   |         |   |   |   |
| Intangible assets, net                               |   |        | 53,861      |   |         |   | 58,218 |   |
|                                                 |   |        |        |   |         |   |   |   |
| Total assets                                         |   | $           | 8,796,222   |   |         | $      | 9,482,734 |   |
|                                                 |   |        |        |   |         |   |   |   |
| LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)       |   |        |        |   |         |   |   |   |
|                                                 |   |        |        |   |         |   |   |   |
| Current liabilities:                                 |   |        |        |   |         |   |   |   |
| Current portion of long-term debt obligations        |   | $           | 533,699     |   |         | $      | 533,545 |   |
| Line of credit - bank                                |   |        | 98,315      |   |         |   | 117,512 |   |
| Short-term notes payable                             |   |        | 1,500,000   |   |         |   | 1,720,000 |   |
| Accounts payable                                     |   |        | 737,977     |   |         |   | 468,374 |   |
| Accounts payable - related party                     |   |        | 123,551     |   |         |   | 188,356 |   |
| Accrued expenses                                     |   |        | 216,758     |   |         |   | 259,549 |   |
| Accrued payroll and payroll taxes                    |   |        | 314,320     |   |         |   | 288,782 |   |
| Customer deposits                                    |   |        | 159,294     |   |         |   | 84,399 |   |
|                                                 |   |        |        |   |         |   |   |   |
| Total current liabilities                            |   |        | 3,683,914   |   |         |   | 3,660,517 |   |
|                                                 |   |        |        |   |         |   |   |   |
| Long-term debt obligations, net of current portion   |   |        | 5,342,798   |   |         |   | 5,363,986 |   |
| Deferred income - land purchase                      |   |        | 429,494     |   |         |   | - |   |
|                                                 |   |        |        |   |         |   |   |   |
| Total liabilities                                    |   |        | 9,456,206   |   |         |   | 9,024,503 |   |
|                                                 |   |        |        |   |         |   |   |   |
| Stockholders' equity (deficit):                      |   |        |        |   |         |   |   |   |
| Common stock - $.001 par value; 100,000,000 shares   |   |        |        |   |         |   |   |   |
| authorized, 42,447,862 and 42,115,205 shares issued  |   |        |        |   |         |   |   |   |
| and outstanding, respectively                        |   |        | 42,448      |   |         |   | 42,115 |   |
| Additional paid-in capital                           |   |        | 11,478,575  |   |         |   | 10,365,292 |   |
| Accumulated deficit                                  |   |        | (12,181,007 | )      |         |   | (9,949,176 | ) |
|                                                 |   |        |        |   |         |   |   |   |
| Total stockholders' equity (deficit)                 |   |        | (659,984    | )      |         |   | 458,231 |   |
|                                                 |   |        |        |   |         |   |   |   |
| Total liabilities and stockholders' equity (deficit) |   | $           | 8,796,222   |   |         | $      | 9,482,734 |   |

----

| ENERGY COMPOSITES CORPORATION                                                        |   |                       |       |   |                     |   |       |   |   |   |
|--------------------------------------------------------------------------------------|--------|----------------------------|------------|--------|--------------------------|--------|------------|--------|--------|--------|
|                                                                                 |   |                       |       |   |                     |   |       |   |   |   |   |   |
| CONSOLIDATED STATEMENTS OF OPERATIONS                                                |   |                       |       |   |                     |   |       |   |   |   |
|                                                                                 |   |                       |       |   |                     |   |       |   |   |   |   |   |
|                                                                                 |   | (Unaudited)                |       |   | (Unaudited)              |   |
|                                                                                 |   | For the Three Months Ended |       |   | For the Six Months Ended |   |
|                                                                                 |   | June 30,                   |       |   | June 30,                 |   |
|                                                                                 |   | 2010                       |       |   | 2009                     |   |       | 2010   |   |   | 2009 |   |
|                                                                                 |   |                       |       |   |                     |   |       |   |   |   |   |   |
|  Revenue                                                                        |   | $                          | 2,064,991  |   |                     | $      | 1,936,656  |   |   | $      | 2,824,596 |   |   | $ | 4,349,325 |   |
|                                                                                 |   |                       |       |   |                     |   |       |   |   |   |   |   |   |   |   |   |
|  Cost of goods sold                                                             |   |                       | 1,395,354  |   |                     |   | 1,765,262  |   |   |   | 2,127,265 |   |   |   | 3,733,464 |   |
|                                                                                 |   |                       |       |   |                     |   |       |   |   |   |   |   |   |   |   |   |
|             Gross profit |   |                       | 669,637    |   |                     |   | 171,394    |   |   |   | 697,331 |   |   |   | 615,861 |   |
|                                                                                 |   |                       |       |   |                     |   |       |   |   |   |   |   |   |   |   |   |
| Selling, general and administrative expenses                                         |   |                       | 1,215,577  |   |                     |   | 881,846    |   |   |   | 2,398,014 |   |   |   | 1,774,162 |   |
|                                                                                 |   |                       |       |   |                     |   |       |   |   |   |   |   |   |   |   |   |
|  Loss from operations                                                           |   |                       | (545,940   | )      |                     |   | (710,452   | )      |   |   | (1,700,683 | ) |   |   | (1,158,301 | ) |
|                                                                                 |   |                       |       |   |                     |   |       |   |   |   |   |   |   |   |   |   |
| Other income (expense):                                                              |   |                       |       |   |                     |   |       |   |   |   |   |   |   |   |   |   |
| Interest expense                                                                     |   |                       | (289,317   | )      |                     |   | (277,378   | )      |   |   | (531,357 | ) |   |   | (1,451,916 | ) |
| Interest income                                                                      |   |                       | 33         |   |                     |   | 4,049      |   |   |   | 209 |   |   |   | 11,794 |   |
|                                                                                 |   |                       |       |   |                     |   |       |   |   |   |   |   |   |   |   |   |
|  Total other income (expense)                                                   |   |                       | (289,284   | )      |                     |   | (273,329   | )      |   |   | (531,148 | ) |   |   | (1,440,122 | ) |
|                                                                                 |   |                       |       |   |                     |   |       |   |   |   |   |   |   |   |   |   |
| Loss before provision (benefit) for income taxes                                     |   |                       | (835,224   | )      |                     |   | (983,781   | )      |   |   | (2,231,831 | ) |   |   | (2,598,423 | ) |
|                                                                                 |   |                       |       |   |                     |   |       |   |   |   |   |   |   |   |   |   |
| Income tax benefit                                                                   |   |                       | -          |   |                     |   | (404,000   | )      |   |   | - |   |   |   | (1,028,000 | ) |
|                                                                                 |   |                       |       |   |                     |   |       |   |   |   |   |   |   |   |   |   |
| Net loss                                                                             |   | $                          | (835,224   | )      |                     | $      | (579,781   | )      |   | $      | (2,231,831 | ) |   | $ | (1,570,423 | ) |
|                                                                                 |   |                       |       |   |                     |   |       |   |   |   |   |   |   |   |   |   |
| Net loss per common share - basic and diluted                                        |   | $                          | (0.02      | )      |                     | $      | (0.01      | )      |   | $      | (0.05 | ) |   | $ | (0.04 | ) |
|                                                                                 |   |                       |       |   |                     |   |       |   |   |   |   |   |   |   |   |   |
|                                                                                 |   |                       |       |   |                     |   |       |   |   |   |   |   |   |   |   |   |
| Weighted average shares outstanding - basic and diluted                              |   |                       | 42,328,662 |   |                     |   | 42,061,142 |   |   |   | 42,229,912 |   |   |   | 41,996,541 |   |

----

| ENERGY COMPOSITES CORPORATION                                   |   |                     |       |   |   |   |
|-----------------------------------------------------------------|--------|--------------------------|------------|--------|--------|--------|
|                                                            |   |                     |       |   |   |   |
| CONSOLIDATED STATEMENTS OF CASH FLOWS                           |   |                     |       |   |   |   |
|                                                            |   | (Unaudited)              |       |
|                                                            |   | For the Six Months Ended |       |
|                                                            |   | June 30,                 |       |
|                                                            |   | 2010                     |       |   | 2009   |   |
| Cash flows from operating activities:                           |   |                     |       |   |   |   |
| Net loss                                                        |   | $                        | (2,231,831 | )      |   | $      | (1,570,423 | ) |
| Adjustments to reconcile net loss to net cash                   |   |                     |       |   |   |   |   |   |
| provided by (used in) operating activities:                     |   |                     |       |   |   |   |   |   |
| Depreciation and amortization                                   |   |                     | 233,725    |   |   |   | 204,329 |   |
| (Gain) loss on asset disposal                                   |   |                     | 3,205      |   |   |   | (650 | ) |
| Amortization of debt discount for imputed interest              |   |                     | 2,085      |   |   |   | 1,926 |   |
| Amortization of discount for warrants and beneficial conversion |   |                     |       |   |   |   |   |   |
|    feature on convertible debt                   |   |                     | 300,335    |   |   |   | 1,208,958 |   |
| Stock issued for interest payments                              |   |                     | 35,597     |   |   |   | 55,541 |   |
| Stock issued for compensation                                   |   |                     | 188,125    |   |   |   | 156,250 |   |
| Stock option compensation expense                               |   |                     | 224,071    |   |   |   | - |   |
| Deferred income taxes                                           |   |                     | -          |   |   |   | (1,028,000 | ) |
| Changes in operating assets and liabilities:                    |   |                     |       |   |   |   |   |   |
| Accounts receivable, net                                        |   |                     | 1,051,612  |   |   |   | 1,173,175 |   |
| Accounts receivable - related party                             |   |                     | (809       | )      |   |   | - |   |
| Inventories, net                                                |   |                     | (243,397   | )      |   |   | 205,270 |   |
| Other current assets                                            |   |                     | 62,967     |   |   |   | (33,382 | ) |
| Accounts payable                                                |   |                     | 269,603    |   |   |   | (972,653 | ) |
| Accounts payable - related party                                |   |                     | (64,805    | )      |   |   | 122,065 |   |
| Accrued expenses                                                |   |                     | (42,791    | )      |   |   | 624 |   |
| Accrued payroll and payroll taxes                               |   |                     | 25,538     |   |   |   | 104,256 |   |
| Customer deposits                                               |   |                     | 74,895     |   |   |   | (197,122 | ) |
|                                                            |   |                     |       |   |   |   |   |   |
| Net cash used in operating activities                           |   |                     | (111,875   | )      |   |   | (569,836 | ) |
|                                                            |   |                     |       |   |   |   |   |   |
| Cash flows from investing activities:                           |   |                     |       |   |   |   |   |   |
| Purchase of property and equipment                              |   |                     | (218,015   | )      |   |   | (384,981 | ) |
| Proceeds from sale of property and equipment                    |   |                     | -          |   |   |   | 650 |   |
|                                                            |   |                     |       |   |   |   |   |   |
| Net cash used in investing activities                           |   |                     | (218,015   | )      |   |   | (384,331 | ) |
|                                                            |   |                     |       |   |   |   |   |   |
| Cash flows from financing activities:                           |   |                     |       |   |   |   |   |   |
| Net borrowings (repayments) from lines of credit - bank         |   |                     | (19,197    | )      |   |   | 163,074 |   |
| Financing costs paid for long-term debt                         |   |                     | -          |   |   |   | (3,320 | ) |
| Net borrowings (repayments) from short-term notes payable       |   |                     | (220,000   | )      |   |   | 350,000 |   |
| Payments on long-term debt                                      |   |                     | (248,454   | )      |   |   | (228,202 | ) |
| Proceeds from exercise of warrants                              |   |                     | 590,823    |   |   |   | - |   |
|                                                            |   |                     |       |   |   |   |   |   |
| Net cash provided by financing activities                       |   |                     | 103,172    |   |   |   | 281,552 |   |
|                                                            |   |                     |       |   |   |   |   |   |
| Net decrease in cash and cash equivalents                       |   |                     | (226,718   | )      |   |   | (672,615 | ) |
|                                                            |   |                     |       |   |   |   |   |   |
| Cash and cash equivalents:                                      |   |                     |       |   |   |   |   |   |
| Beginning of period                                             |   |                     | 281,809    |   |   |   | 2,985,289 |   |
|                                                            |   |                     |       |   |   |   |   |   |
| End of period                                                   |   | $                        | 55,091     |   |   | $      | 2,312,674 |   |

----

| ENERGY COMPOSITES CORPORATION              |
|--------------------------------------------|
|                                       |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |

|     |   |          |   |           |   | Percentage of |
|----------|--------|---------------|--------|----------------|--------|---------------|
|     |   | Percentage of |   | Trade Accounts |
|     |   | Total Sales   |   | Receivable     |
| Customer |   | 2010          |   | 2009           |   | 2010          |   | 2009 |
| 1        |   | 24.4%         |   | 7.4%           |   | 39.8%         |   | 20.0% |
| 2        |   | 13.9          |   | 0.9            |   | 14.2          |   | - |
| 3        |   | 1.0           |   | 12.9           |   | 6.8           |   | 15.0 |
| 4        |   | 1.1           |   | 58.7           |   | 0.1           |   | 32.1 |
| 5        |   | -             |   | -              |   | 7.8           |   | 10.1 |
|     |   | 40.4%         |   | 79.9%          |   | 68.7%         |   | 77.2% |

----

| ENERGY COMPOSITES CORPORATION              |
|--------------------------------------------|
|                                       |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |

----

| ENERGY COMPOSITES CORPORATION              |
|--------------------------------------------|
|                                       |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |

|                 |   | June 30, 2010 |    |   | December 31, 2009 |   |
|----------------------|--------|---------------|---------|--------|-------------------|--------|
| Raw materials        |   | $             | 421,679 |   |              | $      | 312,710 |   |
| Work in progress     |   |          | 414,705 |   |              |   | 289,731 |   |
| Finished goods       |   |          | -       |   |              |   | - |   |
| Obsolescence reserve |   |          | -       |   |              |   | (9,454 | ) |
| Total                |   | $             | 836,384 |   |              | $      | 592,987 |   |

|                           |   | June 30, 2010 |       |   | December 31, 2009 |   |
|--------------------------------|--------|---------------|------------|--------|-------------------|--------|
| Land and improvements          |   | $             | 568,242    |   |              | $      | 82,572 |   |
| Buildings and improvements     |   |          | 3,868,980  |   |              |   | 3,787,784 |   |
| Machinery and equipment        |   |          | 2,507,896  |   |              |   | 2,496,015 |   |
| Vehicles and trailers          |   |          | 373,015    |   |              |   | 369,717 |   |
| Computer equipment             |   |          | 249,284    |   |              |   | 224,166 |   |
| Furniture and office equipment |   |          | 138,128    |   |              |   | 108,206 |   |
|                           |   |          | 7,705,545  |   |              |   | 7,068,460 |   |
| Less accumulated depreciation  |   |          | (1,375,806 | )      |              |   | (1,153,657 | ) |
| Net property and equipment     |   | $             | 6,329,739  |   |              | $      | 5,914,803 |   |

----

| ENERGY COMPOSITES CORPORATION              |
|--------------------------------------------|
|                                       |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |

|                          |   | June 30, 2010 |    |   | December 31, 2009 |   |
|-------------------------------|--------|---------------|---------|--------|-------------------|--------|
| Non-compete agreement         |   | $             | 5,000   |   |              | $      | 5,000 |   |
| Customer list                 |   |          | 74,434  |   |              |   | 74,434 |   |
| Deferred financing costs      |   |          | 69,338  |   |              |   | 69,338 |   |
|                          |   |          | 148,772 |   |              |   | 148,772 |   |
| Less accumulated amortization |   |          | (94,911 | )      |              |   | (90,554 | ) |
| Net intangible assets         |   | $             | 53,861  |   |              | $      | 58,218 |   |

| 2010 - remaining |   | $      | 4,155  |   |
|------------------|--------|--------|--------|--------|
| 2011             |   |   | 6,825  |   |
| 2012             |   |   | 5,396  |   |
| 2013             |   |   | 4,872  |   |
| 2014             |   |   | 3,172  |   |
| Thereafter       |   |   | 29,441 |   |
|             |   |   |   |   |
| Total            |   | $      | 53,861 |   |

----

| ENERGY COMPOSITES CORPORATION              |
|--------------------------------------------|
|                                       |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |

|                                                                                                                                                                                                                              |   |      June 30, 2010                                                                                                                                                                                |   |   December 31, 2009                                                                                                                                                                                                   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| NPESB - a term loan secured by 15 ton deck crane, interest rate of 7.25%, due October 2010, monthly payments of $948                                                                                                              |   | $                                     1,310 |   | $                                     6,827 |
|                                                                                                                                                                                                                              |   |                                                                                                                                                                                                                            |   |                                                                                                                                                                                                                            |
| NPESB – a term loan secured by all general business assets of AFT and unlimited continuing guarantee of ECC; interest rate of 6.75%, due on demand, monthly payments of $898                                                |   | 40,350                                                                                                                                                                                                                          |   | 44,355                                                                                                                                                                                                                          |
|                                                                                                                                                                                                                              |   |                                                                                                                                                                                                                            |   |                                                                                                                                                                                                                            |
| NPESB - an industrial revenue bond term loan, secured by equipment and unlimited continuing guarantee of ECC; contains restrictive financial covenants, interest rate of 5.75%, due July 2014, monthly payment of $7,266          |   | 313,625                                                                                                                                                                                                                         |   | 347,525                                                                                                                                                                                                                         |
|                                                                                                                                                                                                                              |   |                                                                                                                                                                                                                            |   |                                                                                                                                                                                                                            |
| NPESB - an industrial revenue bond term loan, secured by equipment and unlimited continuing guarantee of ECC; contains restrictive financial covenants, interest rate of 5.75%, due July 2014, monthly payment of $7,266          |   | 307,482                                                                                                                                                                                                                         |   | 341,559                                                                                                                                                                                                                         |
|                                                                                                                                                                                                                              |   |                                                                                                                                                                                                                            |   |                                                                                                                                                                                                                            |
| City of Wisconsin Rapids, a term loan, secured by all assets and unlimited continuing guarantee of ECC; contains various operating covenants, interest rate 2%, due April 2012, monthly payment of $4,499                         |   | 370,776                                                                                                                                                                                                                         |   | 393,935                                                                                                                                                                                                                         |
|                                                                                                                                                                                                                              |   |                                                                                                                                                                                                                            |   |                                                                                                                                                                                                                            |
| Yale Financial Services, a capital lease term loan, secured by two Yale forklifts, interest rate 7.7%, due October 2010, monthly payment of $657                                                                                  |   | 2,589                                                                                                                                                                                                                           |   | 6,350                                                                                                                                                                                                                           |
|                                                                                                                                                                                                                              |   |                                                                                                                                                                                                                            |   |                                                                                                                                                                                                                            |
| City of Wisconsin Rapids, a $75,000 term loan, secured by ECC and AFT guarantees; imputed interest at 8% resulting in an original issue discount with an unamortized balance of $21,190 at June 30, 2010, balloons in August 2014 |   | 53,810                                                                                                                                                                                                                          |   | 51,724                                                                                                                                                                                                                          |
|                                                                                                                                                                                                                              |   |                                                                                                                                                                                                                            |   |                                                                                                                                                                                                                            |
| NPESB – an industrial revenue bond term loan, secured by real estate, ECC and AFT guarantees; contains restrictive financial covenants, interest rate of 5.50%, due July 2027, monthly payment of $20,776                   |   | 2,740,963                                                                                                                                                                                                                       |   | 2,788,630                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                              |   |                                                                                                                                                                                                                            |   |                                                                                                                                                                                                                            |
| M&W LLC (related party) – an unsecured term loan, interest rate of 4.775%, due December 2015, quarterly payment of $24,493                                                                                              |   | 970,770                                                                                                                                                                                                                         |   |  996,340                                                                                                                                                                                                                   |
|                                                                                                                                                                                                                              |   |                                                                                                                                                                                                                            |   |                                                                                                                                                                                                                            |
| NPESB – a term loan secured by all general business assets of AFT and an unlimited continuing guarantee of ECC; due January 2012, interest rate of 6.75%, monthly payments of $13,405                                       |   | 240,715                                                                                                                                                                                                                         |   | 311,514                                                                                                                                                                                                                         |
|                                                                                                                                                                                                                              |   |                                                                                                                                                                                                                            |   |                                                                                                                                                                                                                            |
| Convertible notes payable ($1,320,000 face value) – see Note 7                                                                                                                                                              |   | 834,107                                                                                                                                                                                                                         |   | 608,772                                                                                                                                                                                                                         |
|                                                                                                                                                                                                                              |   | 5,876,497                                                                                                                                                                                                                       |   | 5,897,531                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                              |   |                                                                                                                                                                                                                            |   |                                                                                                                                                                                                                            |
| Less current portion of long-term obligations                                                                                                                                                                                     |   | (533,699)                                                                                                                                                                                                                       |   | (533,545)                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                              |   |                                                                                                                                                                                                                            |   |                                                                                                                                                                                                                            |
| Total long-term debt obligations, net of current portion                                                                                                                                                                          |   | $                                5,342,798                      |   | $                            5,363,986                                                   |

----

| ENERGY COMPOSITES CORPORATION              |
|--------------------------------------------|
|                                       |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |

| 2010 - remaining |   | $      | 285,090   |   |
|------------------|--------|--------|-----------|--------|
| 2011             |   |   | 1,823,380 |   |
| 2012             |   |   | 631,588   |   |
| 2013             |   |   | 337,056   |   |
| 2014             |   |   | 268,492   |   |
| Thereafter       |   |   | 3,016,784 |   |
|             |   |   |      |   |
| Total            |   | $      | 6,362,390 |   |

----

| ENERGY COMPOSITES CORPORATION              |
|--------------------------------------------|
|                                       |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |

| Balance at January 1, 2008                                                                 |   | $      | -          |   |
|--------------------------------------------------------------------------------------------|--------|--------|------------|--------|
|                                                                                       |   |   |       |   |
| Plus: gross proceeds received in 2008                                                      |   |   | 6,370,000  |   |
|                                                                                       |   |   |       |   |
| Less: value assigned to:                                                                   |   |   |       |   |
| Warrants                                                                                   |   |   | (4,068,422 | )      |
| Beneficial conversion feature allotted to:                                                 |   |   |       |   |
| Additional paid-in capital                                                                 |   |   | (1,412,578 | )      |
| Deferred income tax liability                                                              |   |   | (889,000   | )      |
| Sub-total of assigned values                                                               |   |   | (6,370,000 | )      |
|                                                                                       |   |   |       |   |
| Plus: accretion of original issue discount from warrants and beneficial conversion feature |   |   | 5,583,772  |   |
|                                                                                       |   |   |       |   |
| Less: conversion of debt to common stock                                                   |   |   | (4,975,000 | )      |
|                                                                                       |   |   |       |   |
| Balance at December 31, 2009                                                               |   |   | 608,772    |   |
|                                                                                       |   |   |       |   |
| Plus: accretion of original issue discount from warrants and beneficial conversion feature |   |   | 300,335    |   |
|                                                                                       |   |   |       |   |
| Less: conversion of debt to common stock                                                   |   |   | (75,000    | )      |
|                                                                                       |   |   |       |   |
| Balance at June 30, 2010 (face value $1,320,000)                                           |   | $      | 834,107    |   |

----

| ENERGY COMPOSITES CORPORATION              |
|--------------------------------------------|
|                                       |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |

----

| ENERGY COMPOSITES CORPORATION              |
|--------------------------------------------|
|                                       |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |

|                           |   | June 30, |     |
|--------------------------------|--------|----------|----------|
|                           |   | 2010     |     |   | 2009 |   |
| Currently payable (refundable) |   | $        | -        |   |   | $ | - |   |
| Deferred tax benefit           |   |     | (290,000 | ) |   |   | (404,000 | ) |
| Valuation allowance            |   |     | 290,000  |   |   |   | - |   |
| Total income tax benefit       |   | $        | -        |   |   | $ | (404,000 | ) |

|                           |   | June 30, |     |
|--------------------------------|--------|----------|----------|
|                           |   | 2010     |     |   | 2009 |   |
| Currently payable (refundable) |   | $        | -        |   |   | $ | - |   |
| Deferred tax benefit           |   |     | (837,000 | ) |   |   | (1,028,000 | ) |
| Valuation allowance            |   |     | 837,000  |   |   |   | - |   |
| Total income tax benefit       |   | $        | -        |   |   | $ | (1,028,000 | ) |

|                                           |   | June 30, 2010 |       |   | December 31, 2009 |   |
|------------------------------------------------|--------|---------------|------------|--------|-------------------|--------|
| Current deferred tax assets                    |   | $             | 110,000    |   |              | $      | 143,000 |   |
| Long-term deferred tax assets                  |   |          | 4,189,000  |   |              |   | 3,319,000 |   |
| Valuation allowance on net deferred tax assets |   |          | (4,299,000 | )      |              |   | (3,462,000 | ) |
| Net deferred tax assets                        |   | $             | -          |   |              | $      | - |   |

----

| ENERGY COMPOSITES CORPORATION              |
|--------------------------------------------|
|                                       |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |

| 2010 - remaining |   | $      | 29,422  |   |
|------------------|--------|--------|---------|--------|
| 2011             |   |   | 46,376  |   |
| 2012             |   |   | 28,517  |   |
| 2013             |   |   | 4,597   |   |
| 2014             |   |   | -       |   |
|             |   | $      | 108,912 |   |

|                |   | Three Months Ended June 30, 2010 |      |
|---------------------|--------|----------------------------------|-----------|
|                |   | Products &                   |      |   | Service & |   |   |   |   |
|                |   | Components                       |      |   | Installation |   |   | Total |   |
| Net sales           |   | $                                | 817,275   |   |   | $ | 1,247,716 |   |   | $ | 2,064,991 |   |
| Cost of sales       |   |                             | 861,663   |   |   |   | 533,691 |   |   |   | 1,395,354 |   |
| Gross profit (loss) |   | $                                | (44,388   | ) |   | $ | 714,025 |   |   | $ | 669,637 |   |
|                |   |                             |      |   |   |   |   |   |   |   |   |   |
|                |   | Three Months Ended June 30, 2009 |      |
|                |   | Products &                   |      |   | Service & |   |   |   |   |   |
|                |   | Components                       |      |   | Installation |   |   | Total |   |
| Net sales           |   | $                                | 1,392,398 |   |   | $ | 544,258 |   |   | $ | 1,936,656 |   |
| Cost of sales       |   |                             | 1,542,279 |   |   |   | 222,983 |   |   |   | 1,765,262 |   |
| Gross profit (loss) |   | $                                | (149,881  | ) |   | $ | 321,275 |   |   | $ | 171,394 |   |

----

| ENERGY COMPOSITES CORPORATION              |
|--------------------------------------------|
|                                       |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |

|                |   | Six Months Ended June 30, 2010 |      |
|---------------------|--------|--------------------------------|-----------|
|                |   | Products &                 |      |   | Service & |   |   |   |   |
|                |   | Components                     |      |   | Installation |   |   | Total |   |
| Net sales           |   | $                              | 1,443,487 |   |   | $ | 1,381,109 |   |   | $ | 2,824,596 |   |
| Cost of sales       |   |                           | 1,444,125 |   |   |   | 683,140 |   |   |   | 2,127,265 |   |
| Gross profit (loss) |   | $                              | (638      | ) |   | $ | 697,969 |   |   | $ | 697,331 |   |
|                |   |                           |      |   |   |   |   |   |   |   |   |   |
|                |   | Six Months Ended June 30, 2009 |      |
|                |   | Products &                 |      |   | Service & |   |   |   |   |   |
|                |   | Components                     |      |   | Installation |   |   | Total |   |
| Net sales           |   | $                              | 3,623,015 |   |   | $ | 726,310 |   |   | $ | 4,349,325 |   |
| Cost of sales       |   |                           | 3,318,101 |   |   |   | 415,363 |   |   |   | 3,733,464 |   |
| Gross profit        |   | $                              | 304,914   |   |   | $ | 310,947 |   |   | $ | 615,861 |   |

|                                               |   | 2010   |       |   | 2009   |   |
|----------------------------------------------------|--------|--------|------------|--------|--------|--------|
| Basic earnings (loss) per share calculation:       |   |   |       |   |   |   |
| Net income (loss) to common shareholders           |   | $      | (835,224   | )      |   | $      | (579,781 | ) |
| Weighted average of common shares outstanding      |   |   | 42,328,662 |   |   |   | 42,061,142 |   |
| Basic net earnings (loss) per share                |   | $      | (0.02      | )      |   | $      | (0.01 | ) |
|                                               |   |   |       |   |   |   |   |   |
| Diluted earnings (loss) per share calculation:     |   |   |       |   |   |   |   |   |
| Net income (loss) to common shareholders           |   | $      | (835,224   | )      |   | $      | (579,781 | ) |
| Weighted average of common shares outstanding      |   |   | 42,328,662 |   |   |   | 42,061,142 |   |
| Convertible debentures (1)                         |   |   | -          |   |   |   | - |   |
| Warrants (2)                                       |   |   | -          |   |   |   | - |   |
| Options (3)                                        |   |   | -          |   |   |   | - |   |
| Diluted weighted average common shares outstanding |   |   | 42,328,662 |   |   |   | 42,061,142 |   |
|                                               |   |   |       |   |   |   |   |   |
| Diluted net income (loss) per share                |   | $      | (0.02      | )      |   | $      | (0.01 | ) |

----

| ENERGY COMPOSITES CORPORATION              |
|--------------------------------------------|
|                                       |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |

|                                               |   | 2010   |       |   | 2009   |   |
|----------------------------------------------------|--------|--------|------------|--------|--------|--------|
| Basic earnings (loss) per share calculation:       |   |   |       |   |   |   |
| Net income (loss) to common shareholders           |   | $      | (2,231,831 | )      |   | $      | (1,570,423 | ) |
| Weighted average of common shares outstanding      |   |   | 42,229,912 |   |   |   | 41,996,541 |   |
| Basic net earnings (loss) per share                |   | $      | (0.05      | )      |   | $      | (0.04 | ) |
|                                               |   |   |       |   |   |   |   |   |
| Diluted earnings (loss) per share calculation:     |   |   |       |   |   |   |   |   |
| Net income (loss) to common shareholders           |   | $      | (2,231,831 | )      |   | $      | (1,570,423 | ) |
| Weighted average of common shares outstanding      |   |   | 42,229,912 |   |   |   | 41,996,541 |   |
| Convertible debentures (1)                         |   |   | -          |   |   |   | - |   |
| Warrants (2)                                       |   |   | -          |   |   |   | - |   |
| Options (3)                                        |   |   | -          |   |   |   | - |   |
| Diluted weighted average common shares outstanding |   |   | 42,229,912 |   |   |   | 41,996,541 |   |
|                                               |   |   |       |   |   |   |   |   |
| Diluted net income (loss) per share                |   | $      | (0.05      | )      |   | $      | (0.04 | ) |

| (1)     | At June 30, 2010 and 2009, there were outstanding convertible debentures equivalent to 528,000 and 568,000 common shares, respectively.  The convertible debentures are anti-dilutive at June 30, 2010 and 2009 and therefore, have been excluded from diluted earnings per share. |
|------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)     | At June 30, 2010 and 2009, there were outstanding warrants equivalent to 2,311,671 and 2,548,000 common shares.  The warrants are anti-dilutive at June 30, 2010 and 2009 and therefore, have been excluded from diluted earnings per share. |
|------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3)     | At June 30, 2010 and 2009, there were outstanding options equivalent to 430,000 and 0 common shares, respectively.  The options are anti-dilutive at June 30, 2010 and therefore, have been excluded from diluted earnings per share. |
|------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ENERGY COMPOSITES CORPORATION              |
|--------------------------------------------|
|                                       |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |

|                                                                                                    |   | Six months ended June 30, |    |
|---------------------------------------------------------------------------------------------------------|--------|---------------------------|---------|
|                                                                                                    |   | 2010                      |    |   | 2009 |   |
| Supplemental disclosure of cash flow information:                                                       |   |                      |    |   |   |   |
| Cash paid for interest                                                                                  |   | $                         | 184,176 |   |   | $ | 197,167 |   |
|                                                                                                    |   |                      |    |   |   |   |   |   |
| Non-cash investing and financing activities:                                                            |   |                      |    |   |   |   |   |   |
| Purchase of property and equipment with long-term debt                                                  |   | $                         | -       |   |   | $ | 9,412 |   |
| Increase in land and deferred income due to discounted land purchased from the City of Wisconsin Rapids |   | $                         | 429,494 |   |   | $ | - |   |
| Debt converted to common stock                                                                          |   | $                         | 75,000  |   |   | $ | 1,075,000 |   |

----

----

|                |   | Three Months Ended June 30, 2010 |      |
|---------------------|--------|----------------------------------|-----------|
|                |   | Products &                   |      |   | Service & |   |   |   |   |
|                |   | Components                       |      |   | Installation |   |   | Total |   |
| Net sales           |   | $                                | 817,275   |   |   | $ | 1,247,716 |   |   | $ | 2,064,991 |   |
| Cost of sales       |   |                             | 861,663   |   |   |   | 533,691 |   |   |   | 1,395,354 |   |
| Gross profit (loss) |   | $                                | (44,388   | ) |   | $ | 714,025 |   |   | $ | 669,637 |   |
|                |   |                             |      |   |   |   |   |   |   |   |   |   |
|                |   | Three Months Ended June 30, 2009 |      |
|                |   | Products &                   |      |   | Service & |   |   |   |   |   |
|                |   | Components                       |      |   | Installation |   |   | Total |   |
| Net sales           |   | $                                | 1,392,398 |   |   | $ | 544,258 |   |   | $ | 1,936,656 |   |
| Cost of sales       |   |                             | 1,542,279 |   |   |   | 222,983 |   |   |   | 1,765,262 |   |
| Gross profit (loss) |   | $                                | (149,881  | ) |   | $ | 321,275 |   |   | $ | 171,394 |   |

|                |   | Six Months Ended June 30, 2010 |      |
|---------------------|--------|--------------------------------|-----------|
|                |   | Products &                 |      |   | Service & |   |   |   |   |
|                |   | Components                     |      |   | Installation |   |   | Total |   |
| Net sales           |   | $                              | 1,443,487 |   |   | $ | 1,381,109 |   |   | $ | 2,824,596 |   |
| Cost of sales       |   |                           | 1,444,125 |   |   |   | 683,140 |   |   |   | 2,127,265 |   |
| Gross profit (loss) |   | $                              | (638      | ) |   | $ | 697,969 |   |   | $ | 697,331 |   |
|                |   |                           |      |   |   |   |   |   |   |   |   |   |
|                |   | Six Months Ended June 30, 2009 |      |
|                |   | Products &                 |      |   | Service & |   |   |   |   |   |
|                |   | Components                     |      |   | Installation |   |   | Total |   |
| Net sales           |   | $                              | 3,623,015 |   |   | $ | 726,310 |   |   | $ | 4,349,325 |   |
| Cost of sales       |   |                           | 3,318,101 |   |   |   | 415,363 |   |   |   | 3,733,464 |   |
| Gross profit        |   | $                              | 304,914   |   |   | $ | 310,947 |   |   | $ | 615,861 |   |

----

----

----

----

----

----

| Date               | Persons or Class of Persons | Securities                     | Consideration                                                             |
|--------------------|-----------------------------|--------------------------------|---------------------------------------------------------------------------|
| April 1, 2010      | 28 accredited investors     | 6,779 shares of common stock   | $16,940 of accrued interest paid to debenture holders                     |
| May 14, 2010       | Executive officer           | 18,337 shares of common stock  | Compensation for services                                                 |
| June 22, 2010      | 4 directors                 | 33,730 shares of common stock  | Compensation for services                                                 |
| April through May  | 19 accredited investors     | 236,329 shares of common stock | Exercise of $590,823 of Common Stock Purchase Warrants at $2.50 per share |
| April through June | 2 accredited investors      | 20,201 shares of common stock  | Conversion of $50,000 of Debenture principal and $501 of accrued interest |

----

| RegulationS-K Number | Document                                                                                                                                      |
|----------------------|-----------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1                  | Articles of Merger effective October 14, 2008 (1)                                                                                             |
| 3.2                  | Amended and Restated Articles of Incorporation effective October 14, 2008 (1)                                                                 |
| 3.3                  | Amended and Restated Bylaws adopted October 14, 2008 (1)                                                                                      |
| 4.1                  | Form of Debenture (2)                                                                                                                         |
| 4.2                  | Form of Warrant (2)                                                                                                                           |
| 10.1                 | Share Exchange Agreement dated June 26, 2008 (3)                                                                                              |
| 10.2                 | First Amendment to Share Exchange Agreement dated August 8, 2008 (4)                                                                          |
| 10.3                 | 2008 Stock Incentive Plan (1)                                                                                                                 |
| 10.4                 | Industrial Development Revenue Bonds, Bond Agreement dated February 28, 2007 (1)                                                              |
| 10.5                 | Industrial Development Revenue Bonds, Promissory Note 2007A dated February 28, 2007 (1)                                                       |
| 10.6                 | Industrial Development Revenue Bonds, Promissory Note 2007B dated February 28, 2007 (1)                                                       |
| 10.7                 | Industrial Development Revenue Bonds, Promissory Note 2007C dated February 28, 2007 (1)                                                       |
| 10.8                 | Industrial Development Revenue Bonds, Credit Agreement dated February 28, 2007 (1)                                                            |
| 10.9                 | Industrial Development Revenue Bonds, Construction Mortgage, Assignment Of Leases And Rents and Fixture Filing dated February 28, 2007 (1)    |
| 10.10                | Industrial Development Revenue Bonds, Security Agreement dated February 28, 2007 (1)                                                          |
| 10.11                | Option Agreement dated June 18, 2008 (1)                                                                                                      |
| 10.12                | Purchase and Supply Agreement dated October 13, 2008 (1)                                                                                      |
| 10.13                | Unsecured Promissory Note dated December 31, 2008 (5)                                                                                         |
| 10.14                | Assignment and Assumption Agreement dated December 31, 2008 (6)                                                                               |
| 10.15                | Amendment to the Credit Agreement dated March 13, 2009 (7)                                                                                    |
| 10.16                | Employee Stock Purchase Plan (8)                                                                                                              |
| 31.1                 | Rule 13a-14(a) Certification of Jamie L. Mancl                                                                                                |
| 31.2                 | Rule 13a-14(a) Certification of Jeffrey S. Keuntjes                                                                                           |
| 32.1                 | Certification of Jamie L. Mancl Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002      |
| 32.2                 | Certification of Jeffrey S. Keuntjes Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |

| (1)     | Filed as an exhibit to the Current Report on Form 8-K dated October 14, 2008, filed October 17, 2008. |
|------------------------|-------------------------------------------------------------------------------------------------------|

| (2)     | Filed as an exhibit to the Current Report on Form 8-K dated December 15, 2008, filed December 19, 2008. |
|------------------------|---------------------------------------------------------------------------------------------------------|

| (3)     | Filed as an exhibit to the Current Report on Form 8-K dated June 26, 2008, filed June 27, 2008. |
|------------------------|-------------------------------------------------------------------------------------------------|

| (4)     | Filed as an exhibit to the Definitive Information Statement on Schedule 14C, filed September 24, 2008. |
|------------------------|--------------------------------------------------------------------------------------------------------|

| (5)     | Filed as an exhibit to the Current Report on Form 8-K/A dated December 31, 2008, filed January 26, 2009. |
|------------------------|----------------------------------------------------------------------------------------------------------|

| (6)     | Filed as an exhibit to the Current Report on Form 8-K dated December 31, 2008, filed January 6, 2009. |
|------------------------|-------------------------------------------------------------------------------------------------------|

| (7)     | Filed as an exhibit to the Annual Report for the year ended December 31, 2008 on Form 10-K filed March 31, 2009. |
|------------------------|------------------------------------------------------------------------------------------------------------------|

| (8)     | Filed as an exhibit to the Current Report on Form 8-K dated June 2, 2009, filed June 5, 2009. |
|------------------------|-----------------------------------------------------------------------------------------------|

----

|                              | ENERGY COMPOSITES CORPORATION |
|-----------------------------------|-------------------------------|
|                              |                          |   |
| Dated:  August 16, 2010 | By:                           | /s/ Jamie L. Mancl |
|                              |                          | Jamie L. Mancl, President |
|                              |                          |   |
| Dated:  August 16, 2010 | By:                           | /s/ Jeffrey S. Keuntjes |
|                              |                          | Jeffrey S. Keuntjes, Vice President – Finance |

----

----