UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q


(Mark
One)





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





For
the quarterly period ended September 30, 2008





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





For the
transition period from ________________ to _______________





000-52397


(Commission
file number)





ENERGY
COMPOSITES CORPORATION


(Exact
name of registrant as specified in its charter)





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





4400
Commerce Drive, Wisconsin Rapids, WI  54494


(Address
of principal executive offices) (Zip Code)





(715)
421-2060


(Registrant’s
telephone number, including area code)





Las
Palmas Mobile Estates, 6767 Tropicana Avenue, Suite 207, Las Vegas,
Nevada  89103


(Former
name, former address and former fiscal year, if changed since last
report)





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.  Yes ý   No
o





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





Large
      accelerated filer  o
            Accelerated
      filer  oNon-accelerated
      filer  o
            Smaller
      reporting company  ý





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





Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date:  40,000,000 shares as of November 5,
2008








ENERGY
COMPOSITES CORPORATION


(formerly
Las Palmas Mobile Estates)


(A
Development Stage Enterprise)


Consolidated
Balance Sheets





September
      30,
            
            
            December
      31,2008
            
            
            2007(Unaudited)ASSETSCURRENT
      ASSETSCash
            
            $
            2,911,682
            
            
            $
            -Accounts
      receivable
            
            
            531,849
            
            
            
            -Note
      receivable – acquisition target
            
            
            1,814,838
            
            
            
            -Interest
      receivable
            
            
            11,540
            
            
            
            -Total
      current assets
            
            
            5,269,909
            
            
            
            -Total
      assets
            
            $
            5,269,909
            
            
            $
            -LIABILITIES
      AND STOCKHOLDERS’ EQUITYCURRENT
      LIABILITIESAccounts
      payable
            
            $
            540,659
            
            
            $
            -Accrued
      interest
            
            
            36,299
            
            
            
            -Officer
      advances
            
            
            13,383
            
            
            
            11,283Total
      current liabilities
            
            
            590,341
            
            
            
            11,283Convertible
      notes payable, net of discounts
            
            
            202,960
            
            
            
            -STOCKHOLDERS’
      EQUITYCommon
      stock: $.001 par value; 100,000,000 sharesauthorized;
      33,000,000 shares issued and outstandingat
      September 30, 2008 and December 31, 2007
            
            
            33,000
            
            
            
            33,000Additional
      paid in capital
            
            
            4,720,000
            
            
            
            -Deficit
      accumulated during development stage
            
            
            (276,392
            )
            
            
            (44,283
            )Total
      stockholders’ equity
            
            
            4,476,608
            
            
            
            (11,283
            )Total
      liabilities and stockholders’ equity
            
            $
            5,269,909
            
            
            $
            -

















See
Accompanying Notes to the Consolidated Financial Statements.


2


ENERGY
COMPOSITES CORPORATION


(formerly
Las Palmas Mobile Estates)


(A
Development Stage Enterprise)


Consolidated
Statements of Operations


(Unaudited)





October
      29, 1992Three
      months ended
            
            
            Nine
      months ended
            
            
            (inception)
      toSeptember
      30,
            
            
            September
      30,
            
            
            September
      30,2008
            
            
            2007
            
            
            2008
            
            
            2007
            
            
            2008Revenues
            
            $
            962,087
            
            
            $
            -
            
            
            $
            962,087
            
            
            $
            -
            
            
            $
            962,087Cost
      of revenue
            
            
            962,087
            
            
            
            -
            
            
            
            962,087
            
            
            
            -
            
            
            
            962,087Gross
      profit
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Selling,
      general, and administrative expenses
            
            
            1,800
            
            
            
            919
            
            
            
            4,390
            
            
            
            4,541
            
            
            
            48,673Loss
      from operations
            
            
            (1,800
            )
            
            
            (919
            )
            
            
            (4,390
            )
            
            
            (4,541
            )
            
            
            (48,673
            )Other
      income (expense):Interest
      income
            
            
            11,540
            
            
            
            -
            
            
            
            11,540
            
            
            
            -
            
            
            
            11,540Interest
      expense
            
            
            (239,259
            )
            
            
            -
            
            
            
            (239,259
            )
            
            
            -
            
            
            
            (239,259
            )Total
      other income (expense)
            
            
            (227,719
            )
            
            
            -
            
            
            
            (227,719
            )
            
            
            -
            
            
            
            (227,719
            )Income
      tax expense
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Net
      loss
            
            $
            (229,519
            )
            
            $
            (919
            )
            
            $
            (232,109
            )
            
            $
            (4,541
            )
            
            $
            (276,392
            )Net
      loss per share, basic and diluted
            
            $
            (0.01
            )
            
            $
            -
            
            
            $
            (0.01
            )
            
            $
            -Average
      number of shares of common stock outstanding, basic and
      diluted
            
            
            33,000,000
            
            
            
            33,000,000
            
            
            
            33,000,000
            
            
            
            33,000,000














See
Accompanying Notes to the Consolidated Financial Statements.


3


ENERGY
COMPOSITES CORPORATION


(formerly
Las Palmas Mobile Estates)


(A
Development Stage Enterprise)


Consolidated
Statements of Stockholders’ Equity


(Unaudited)





AccumulatedDeficitAdditional
            
            
            DuringCommon
      Stock
            
            
            Paid-In
            
            
            DevelopmentShares
            
            
            Amount
            
            
            Capital
            
            
            Stage
            
            
            TotalNovember
      8, 1992, issue common stock
            
            
            33,000,000
            
            
            $
            33,000
            
            
            $
            -
            
            
            $
            (11,000
            )
            
            $
            22,000Net
      loss, December 31, 1992
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (340
            )
            
            
            (340
            )Balance,
      December 31, 1992
            
            
            33,000,000
            
            
            $
            33,000
            
            
            $
            -
            
            
            $
            (11,340
            )
            
            $
            21,660Net
      loss, December 31, 1993
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (21,660
            )
            
            
            (21,660
            )Balance,
      December 31, 1993
            
            
            33,000,000
            
            
            $
            33,000
            
            
            $
            -
            
            
            $
            (33,000
            )
            
            $
            -Net
      loss, December 31, 1994
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (85
            )
            
            
            (85
            )Balance,
      December 31, 1994
            
            
            33,000,000
            
            
            $
            33,000
            
            
            $
            -
            
            
            $
            (33,085
            )
            
            $
            (85
            )Net
      loss, December 31, 1995
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (85
            )
            
            
            (85
            )Balance,
      December 31, 1995
            
            
            33,000,000
            
            
            $
            33,000
            
            
            $
            -
            
            
            $
            (33,170
            )
            
            $
            (170
            )Net
      loss, December 31, 1996
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (85
            )
            
            
            (85
            )Balance,
      December 31, 1996
            
            
            33,000,000
            
            
            $
            33,000
            
            
            $
            -
            
            
            $
            (33,255
            )
            
            $
            (255
            )Net
      loss, December 31, 1997
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (380
            )
            
            
            (380
            )Balance,
      December 31, 1997
            
            
            33,000,000
            
            
            $
            33,000
            
            
            $
            -
            
            
            $
            (33,635
            )
            
            $
            (635
            )Net
      loss, December 31, 1998
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (85
            )
            
            
            (85
            )Balance,
      December 31, 1998
            
            
            33,000,000
            
            
            $
            33,000
            
            
            $
            -
            
            
            $
            (33,720
            )
            
            $
            (720
            )Net
      loss, December 31, 1999
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (85
            )
            
            
            (85
            )Balance,
      December 31, 1999
            
            
            33,000,000
            
            
            $
            33,000
            
            
            $
            -
            
            
            $
            (33,805
            )
            
            $
            (805
            )July
      29, 2000, forward stock split 1000:1, changed from no par value to
      $0.001Net
      loss, December 31, 2000
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (340
            )
            
            
            (340
            )Balance,
      December 31, 2000
            
            
            33,000,000
            
            
            $
            33,000
            
            
            $
            -
            
            
            $
            (34,145
            )
            
            $
            (1,145
            )Net
      loss, December 31, 2001
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (85
            )
            
            
            (85
            )Balance,
      December 31, 2001
            
            
            33,000,000
            
            
            $
            33,000
            
            
            $
            -
            
            
            $
            (34,230
            )
            
            $
            (1,230
            )Net
      loss, December 31, 2002
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (85
            )
            
            
            (85
            )Balance,
      December 31, 2002
            
            
            33,000,000
            
            
            $
            33,000
            
            
            $
            -
            
            
            $
            (34,315
            )
            
            $
            (1,315
            )Net
      loss, December 31, 2003
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (85
            )
            
            
            (85
            )Balance,
      December 31, 2003
            
            
            33,000,000
            
            
            $
            33,000
            
            
            $
            -
            
            
            $
            (34,400
            )
            
            $
            (1,400
            )Net
      loss, December 31, 2004
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (545
            )
            
            
            (545
            )Balance,
      December 31, 2004
            
            
            33,000,000
            
            
            $
            33,000
            
            
            $
            -
            
            
            $
            (34,945
            )
            
            $
            (1,945
            )Net
      loss, December 31, 2005
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (200
            )
            
            
            (200
            )Balance,
      December 31, 2005
            
            
            33,000,000
            
            
            $
            33,000
            
            
            $
            -
            
            
            $
            (35,145
            )
            
            $
            (2,145
            )Net
      loss, December 31, 2006
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (4,165
            )
            
            
            (4,165
            )Balance,
      December 31, 2006
            
            
            33,000,000
            
            
            $
            33,000
            
            
            $
            -
            
            
            $
            (39,310
            )
            
            $
            (6,310
            )November
      14, 2007, 14 for 1 stock dividendNet
      loss, December 31, 2007
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (4,973
            )
            
            
            (4,973
            )Balance,
      December 31, 2007
            
            
            33,000,000
            
            
            $
            33,000
            
            
            $
            -
            
            
            $
            (44,283
            )
            
            $
            (11,283
            )Issuance
      of 1,888,000 warrants and recording beneficial conversion charge related
      to convertible debt issuance
            
            
            
            
            
            
            
            
            
            
            4,720,000
            
            
            
            
            
            
            
            4,720,000Net
      loss, September 30, 2008
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (232,109
            )
            
            
            (232,109
            )Balance,
      September 30, 2008
            
            
            33,000,000
            
            
            $
            33,000
            
            
            $
            4,720,000
            
            
            $
            (276,392
            )
            
            $
            4,476,608




See
Accompanying Notes to the Consolidated Financial Statements.


4


ENERGY
COMPOSITES CORPORATION


(formerly
Las Palmas Mobile Estates)


(A
Development Stage Enterprise)


Consolidated
Statements of Cash Flows


(Unaudited)





October
      29, 1992Nine
      Months Ended
            
            
            (inception)
      toSeptember
      30,
            
            
            September
      30,2008
            
            
            2007
            
            
            2008Cash
      Flows From Operating Activities:Net
      loss
            
            $
            (232,109
            )
            
            $
            (4,541
            )
            
            $
            (276,392
            )Adjustments
      to reconcile net loss to cash provided by (used in) operating
      activities:Amortization
      of beneficial conversion feature on convertible debt
            
            
            78,331
            
            
            
            -
            
            
            
            78,331Amortization
      of warrant discount
            
            
            124,629
            
            
            
            -
            
            
            
            124,629Changes
      in assets and liabilities:Accounts
      receivable
            
            
            (531,849
            )
            
            
            -
            
            
            
            (531,849
            )Interest
      receivable
            
            
            (11,540
            )
            
            
            -
            
            
            
            (11,540
            )Increase
      (decrease) in accounts payable
            
            
            540,659
            
            
            
            (25
            )
            
            
            540,659Accrued
      interest
            
            
            36,299
            
            
            
            -
            
            
            
            36,299Net
      cash provided by (used in) operating activities
            
            
            4,420
            
            
            
            (4,566
            )
            
            
            (39,863
            )Cash
      Flows From Investing Activities:Note
      receivable – acquisition target
            
            
            (1,814,838
            )
            
            
            -
            
            
            
            (1,814,838
            )Net
      cash (used in) investing activities
            
            
            (1,814,838
            )
            
            
            -
            
            
            
            (1,814,838
            )Cash
      Flows From Financing Activities:Issuance
      of convertible debt
            
            
            4,720,000
            
            
            
            -
            
            
            
            4,720,000Issuance
      of common stock
            
            
            -
            
            
            
            -
            
            
            
            33,000Increase
      in officer advances
            
            
            2,100
            
            
            
            4,566
            
            
            
            13,383Net
      cash provided by financing activities
            
            
            4,722,100
            
            
            
            4,566
            
            
            
            4,766,383Net
      increase in cash
            
            
            2,911,682
            
            
            
            -
            
            
            
            2,911,682Cash,
      beginning of period
            
            
            -
            
            
            
            -
            
            
            
            -Cash,
      end of period
            
            $
            2,911,682
            
            
            $
            -
            
            
            $
            2,911,682Supplemental
      Information and Non-monetary Transactions:Interest
      paid
            
            $
            -
            
            
            $
            -
            
            
            $
            -Taxes
      paid
            
            $
            -
            
            
            $
            -
            
            
            $
            -











See
Accompanying Notes to the Consolidated Financial Statements.


5


ENERGY
COMPOSITES CORPORATION


(formerly
Las Palmas Mobile Estates)


(A
Development Stage Enterprise)


Notes
to Consolidated Financial Statements


(Unaudited)





Note
1.       Nature of Business and Significant
Accounting Policies





Nature of
Business:





Energy
Composites Corporation (formerly Las Palmas Mobile Estates) (“Company”) was
organized October 29, 1992 under the laws of the State of Nevada.  The
Company had not started its planned principal operations until October 14, 2008,
and, in accordance with Statement of Financial Accounting Standard (SFAS) No. 7,
“Accounting and Reporting by
Development Stage Enterprises,” was considered a Development Stage
Enterprise.  As of October 14, 2008, the Company completed a reverse
acquisition of Advanced Fiberglass Technologies, Inc., a Wisconsin corporation
(“AFT”).  Although the Company raised capital through a private
placement of debt and warrants and recorded revenue of $962,087 during the
quarter ended September 30, 2008, the Company was still considered a
“development stage company” and a “shell” company as of September 30,
2008.  All third quarter activity was undertaken in anticipation of
completing the acquisition of AFT.  As of result of the reverse
acquisition, the Company is no longer considered a “development stage company”
or a “shell” company.  Effective October 14, 2008, the Company changed
its name to Energy Composites Corporation.  For additional details on
the acquisition of AFT, see Note 7 Subsequent Events.





Significant Accounting
Policies:





Basis of
Presentation: The accompanying consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiary, after elimination
of all intercompany accounts, transactions, and profits.





Estimates: The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting
period.  Actual results could differ from those
estimates.  The presentation of this Form 10-Q filing of Energy
Composites Corporation is still only Energy Composites Corporation, formerly Las
Palmas Mobile Estates.  Note 7 includes the pro forma financial
statements as of September 31, 2008 that include the financial statements of
AFT.





Cash: For the
Statements of Cash Flows, all highly liquid investments with maturity of three
months or less are considered to be cash equivalents.





Revenue Recognition:
From inception through June 30, 2008, the Company had no
activity.  During the quarter ended September 30, 2008, the Company
undertook two service contracts which were subcontracted to AFT to complete the
work on behalf of Energy Composites Corporation.  In accordance with
SEC Staff Accounting Bulletin No. 104, “Revenue Recognition” (“SAB
104”), revenue is recognized when persuasive evidence of an arrangement exists,
the price is fixed and determinable, and transfer of title has occurred,
services have been rendered or delivery has occurred per contract terms and
collection of the related receivable is reasonably assured.





Income Taxes: Income
taxes are provided for using the liability method of accounting in accordance
with SFAS No. 109 “Accounting
for Income Taxes,” and clarified by FIN 48, “Accounting for Uncertainty in Income
Taxes—an interpretation of FASB Statement No. 109.”  A deferred
tax asset or liability is recorded for all temporary differences between
financial and tax reporting.  Temporary differences are the
differences between the reported amounts of assets and liabilities and their tax
basis.  Deferred tax assets are reduced by a valuation allowance when,
in the opinion of management, it is more likely than not that some portion or
all of the deferred tax assets will not be realized.  Deferred tax
assets and liabilities are adjusted for the effect of changes in tax laws and
rates on the date of enactment.





6


ENERGY
COMPOSITES CORPORATION


(formerly
Las Palmas Mobile Estates)


(A
Development Stage Enterprise)


Notes
to Consolidated Financial Statements


(Unaudited)





Note
1.       Nature of Business and Significant
Accounting Policies (continued)





Share-based Expenses:
In December 2004, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards (“SFAS”) No. 123R “Share Based
Payment.”  This statement is a revision to SFAS 123 and
supersedes Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to
Employees,” and amends FASB Statement No. 95, “Statement of Cash
Flows.”  This statement requires a public entity to expense the
cost of employee services received in exchange for an award of equity
instruments.  This statement also provides guidance on valuing and
expensing these awards, as well as disclosure requirements of these equity
arrangements.  The Company adopted SFAS 123R and expenses share-based
costs in the period incurred.





Going Concern: The
Company’s financial statements are prepared in accordance with generally
accepted accounting principles applicable to a going concern.  This
contemplates the realization of assets and the liquidation of liabilities in the
normal course of business.  As of September 30, 2008, the Company did
not have sufficient assets, operations or a source of revenue sufficient to
cover its ongoing costs and allow it to continue as a going
concern.  The Company’s going concern status has changed with the
completion of the reverse acquisition on October 14, 2008.  The
Company will be dependent upon the raising of additional capital through the
sale debt or equity securities in order to implement its business plan now that
the reverse acquisition is complete.  There can be no assurance that
the Company will be successful in either situation in order to continue as a
going concern.





Recent Accounting
Pronouncements:





In
December 2007, the FASB issued SFAS No. 141(R), “Business Combinations— a replacement
of FASB Statement No. 141” (“SFAS 141R”).  SFAS 141R replaces
SFAS 141, “Business
Combinations,” and requires an acquirer to recognize the assets acquired,
the liabilities assumed, including those arising from contractual contingencies,
any contingent consideration, and any non-controlling interest in the acquiree
at the acquisition date, measured at their fair values as of that date, with
limited exceptions specified in the statement.  SFAS 141R also
requires the acquirer in a business combination achieved in stages (sometimes
referred to as a step acquisition) to recognize the identifiable assets and
liabilities, as well as the non-controlling interest in the acquiree, at the
full amounts of their fair values (or other amounts determined in accordance
with SFAS 141R).  In addition, SFAS 141R’s requirement to measure the
non-controlling interest in the acquiree at fair value will result in
recognizing the goodwill attributable to the non-controlling interest in
addition to that attributable to the acquirer.  SFAS 141R amends SFAS
109, “Accounting for Income
Taxes,” to require the acquirer to recognize changes in the amount of its
deferred tax benefits that are recognizable because of a business combination
either in income from continuing operations in the period of the combination or
directly in contributed capital, depending on the circumstances.  It
also amends SFAS 142, “Goodwill and Other Intangible
Assets,” to, among other things, provide guidance on the impairment
testing of acquired research and development intangible assets and assets that
the acquirer intends not to use.  SFAS 141R applies prospectively to
business combinations for which the acquisition date is on or after January 1,
2009.  The Company will apply SFAS 141R to business combinations
consummated on or after January 1, 2009.





7


ENERGY
COMPOSITES CORPORATION


(formerly
Las Palmas Mobile Estates)


(A
Development Stage Enterprise)


Notes
to Consolidated Financial Statements


(Unaudited)





Note
1.       Nature of Business and Significant
Accounting Policies (continued)





In
December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in
Consolidated Financial Statements” (“SFAS 160”).  SFAS 160
amends Accounting Research Bulletin 51, “Consolidated Financial
Statements,” to establish accounting and reporting standards for the
non-controlling interest in a subsidiary and for the deconsolidation of a
subsidiary.  It also clarifies that a non-controlling interest in a
subsidiary is an ownership interest in the consolidated entity that should be
reported as equity in the consolidated financial statements.  SFAS 160
also changes the way the consolidated income statement is presented by requiring
consolidated net income to be reported at amounts that include the amounts
attributable to both the parent and the non-controlling interest.  It
also requires disclosure, on the face of the consolidated statement of income,
of the amounts of consolidated net income attributable to the parent and to the
non-controlling interest.  SFAS 160 requires that a parent recognize a
gain or loss in net income when a subsidiary is deconsolidated and requires
expanded disclosures in the consolidated financial statements that clearly
identify and distinguish between the interests of the parent owners and the
interests of the non-controlling owners of a subsidiary.  SFAS 160 is
effective for fiscal periods, and interim periods within those fiscal years,
beginning on or after December 15, 2008.  The Company is currently
assessing the potential impact that the adoption of SFAS 160 could have on the
financial statements.





Note
2.       Stockholders’ Equity





Common stock: The
authorized common stock of the Company initially consisted of 2,500 shares of
common stock, no par value.  On June 29, 2000, the Company’s
stockholders approved (1) a forward split of its outstanding common stock at
1,000 shares for one share of the existing shares, and (2) restated Articles of
Incorporation, which increased its capitalization from 2,500 common shares to
25,000,000 common shares and changed the par value from no par value to $0.001
per share.  Prior period information has been restated to reflect the
stock splits and changes in par value.





On
October 29, 2007, the Company’s stockholders approved a stock dividend of its
common stock.  The dividend was 14 shares for each outstanding share
at November 14, 2007.  No fractional shares were
issued.  The number of common shares outstanding increased from
2,200,000 to 33,000,000.  The par value of the new shares exceeded the
original consideration received.  An adjustment to retained earnings
was made for $11,000 to account for this dividend.  Prior period
information has been restated to reflect the stock dividend.  In
addition, the stockholders approved an amendment to Article Four of the Articles
of Incorporation which increased its capitalization from 25,000,000 common
shares to 100,000,000 common shares.  The par value remained at $0.001
per share.





As of
September 30, 2008, the Company had not authorized any preferred
stock.





Net loss per common
share:  Net loss per share is calculated in accordance with
SFAS No. 128, “Earnings Per
Share.”  The weighted-average number of common shares
outstanding during each period is used to compute basic loss per
share.  Diluted loss per share is computed using the weighted average
number of shares and dilutive potential common shares
outstanding.  Dilutive potential common shares are additional common
shares assumed to be exercised.





Basic net
loss per common share is based on the weighted average number of shares of
common stock outstanding of 33,000,000 during 2008, 2007 and since
inception.  As of September 30, 2008, the Company excluded the
anti-dilutive warrants and convertible debentures from the
calculation.





8


ENERGY
COMPOSITES CORPORATION


(formerly
Las Palmas Mobile Estates)


(A
Development Stage Enterprise)


Notes
to Consolidated Financial Statements


(Unaudited)





Note
3.       Income Taxes





The
Company did not provide any current or deferred U.S. federal income tax
provision or benefit for any of the periods presented because it has experienced
operating losses since inception.  Per SFAS 109 – Accounting for Income Tax and
FASB Interpretation No. 48 – Accounting for Uncertainty in Income
Taxes an interpretation of FASB Statement No.109, when it is more likely
than not that a tax asset cannot be realized through future income the Company
must allow for this future tax benefit.  The Company provided a full
valuation allowance on the net deferred tax asset, consisting of net operating
loss carryforwards, because management had determined that it is more likely
than not that it will not earn income sufficient to realize the deferred tax
assets during the carryforward period.  The net federal operating loss
carry forward will expire between 2016 and 2027.  This carry forward
may be limited upon the consummation of a business combination under IRC Section
381.





Note
4.       Note Receivable – Acquisition
Target





Prior to
the completion of the reverse acquisition with AFT on October 14, 2008, the
Company advanced AFT working capital and expansion funds totaling
$1,814,838.  The note is due on demand and bears interest at
6%.  Interest receivable of $11,540 was accrued as of September 30,
2008.





Note
5.       Related Party
Transactions





The
Company neither owns nor leases any real or personal property.  An
officer of the Company provided office services without charge.  Such
costs are immaterial to the financial statements and accordingly, have not been
reflected therein.  The officers and directors for the Company are
involved in other business activities and may, in the future, become involved in
other business opportunities.  If a specific business opportunity,
such as the reverse acquisition of AFT, becomes available, such persons may face
a conflict in selecting between the Company and their other business
interest.  The Company has not formulated a policy for the resolution
of such conflicts.  As of September 30, 2008 and December 31, 2007,
the Company owed officers $13,383 and $11,283 respectively.





Note
6.       Convertible Note
Payable





In August
2008, the Company began a $10 million private placement offering of Units, each
Unit consisting of (i) a 3-year, 6% convertible debenture with a conversion
price of $2.50 (the “Conversion Price”) per share (subject to adjustment for
stock splits and stock dividends) (the “Debentures”), and (ii) a number of
warrants equal to the number of shares issuable upon conversion of the principal
amount of the Convertible Debenture (the “Warrants”).  This placement
offering was in anticipation of the AFT reverse acquisition taking place which
became effective on October 14, 2008.





Interest
on the Debentures is payable in cash or in shares of the Company’s common stock
at $2.50 per share, in twelve quarterly installments on April 1, July 1, October
1, and January 1 until the principal amount and all accrued and unpaid interest
shall have been paid in full on the maturity date.  The Maturity Date
for each Debenture is three years after the issue date.





The
Debentures are subject to prepayment at the option of the Company in whole or in
part after the one year anniversary of the date of each Debenture but prior to
the Maturity Date at any time and from time to time without penalty or premium
so long as all of the following conditions have been met: (i) the Company’s
Common Stock has traded above the Conversion Price for at least twenty
consecutive trading days immediately preceding the Prepayment Notice; (ii) the
average trading volume shall be at least one hundred thousand shares per day
during such twenty consecutive day trading period; and (iii) the shares of
Common Stock issuable upon conversion of the Debentures shall be eligible for
resale pursuant to Rule 144 under the Securities Act of 1933.  The
Debentures are also convertible at the option of the Company provided that all
of the conditions required for prepayment of the Debentures have been
met.


9


ENERGY
COMPOSITES CORPORATION


(formerly
Las Palmas Mobile Estates)


(A
Development Stage Enterprise)


Notes
to Consolidated Financial Statements


(Unaudited)





Note
6.       Convertible Note Payable
(continued)





Each
Warrant is exercisable into shares of common stock for a term of 3 years at
$5.00 per share.  The Warrants also provide anti-dilution protection
for the following events: reorganization, reclassification, consolidation,
merger or sale; subdivision, combination or other issuance of the Company’s
Common Stock, or new warrants.





As of
September 30, 2008, Debentures in the aggregate principal amount of $4,720,000
have been sold which included the issuance of 1,888,000 Warrants.  The
Debentures are considered to be conventional convertible debt under the
accounting guidance of Emerging Issues Task Force (“EITF”) 05-2 “The Meaning of ‘Conventional
Convertible Debt’ in Issue No. 00-19.”





The
issued Warrants were deemed to have a fair market value of $2,898,340 which was
recorded as a discount to the face value of the Debentures and as a credit to
Additional Paid-In Capital and will be accreted to interest expense over the
3-year term using the effective interest method.  The Company used the
Black-Scholes-Merton pricing model as a method for determining the estimated
fair value of the Warrants.  The following assumptions were used to
estimate the fair market value of the Warrants: risk free interest rate of
2.83%; expected life of 3 years; no expected dividends; and volatility of
171%.  The expected life of the Warrants was determined to be the
full-term of the Warrants.  The risk-free interest rate is based on
the Federal Reserve Board’s constant maturities of U.S. Treasury bond
obligations with terms comparable to the expected life of the
Warrants.  The Company’s volatility is based on the historical
volatility of the Company’s stock blended with the historical stock volatility
of a peer group.





The
application of the provisions of EITF 98-5, “Accounting for Convertible
Securities with Beneficial Conversion Features or Contingently Adjustable
Conversion Ratios,” and EITF 00-27, “Application of Issue 98-5 to Certain
Convertible Instruments” resulted in the proceeds of the Debentures being
allocated based on the relative fair value of the Debentures and Warrants as of
the commitment date.  The Company then calculated the intrinsic value
of the beneficial conversion feature embedded in the Debentures and because the
amount of the beneficial conversion feature exceeded the fair value allocated to
the Debentures, the amount of the beneficial conversion feature to be recorded
was limited to the proceeds allocated to the Debentures.  Accordingly,
the beneficial conversion feature was calculated to be $1,821,660 and was
recorded as an additional discount on the Debentures and a credit to Additional
Paid-In Capital.  Following the guidance of Issue 6 in EITF 00-27, the
Company is accreting the beneficial conversion feature to interest expense over
the 3-year term of the debt using the effective interest method.





The
following table summarizes the convertible note balance as of September 30,
2008:





Gross
      proceeds received August & September 2008
            
            $
            4,720,000Less:
      original issue discount at time of issuance of debentures
            
            
            -Net
      proceeds prior to paying transaction costs
            
            
            4,720,000Less:
      value assigned to beneficial conversion feature and
    warrants
            
            
            (4,720,000
            )Add:
      accretion of original issue discount, beneficial conversion feature and
      warrants
            
            
            202,960Less:
      principal payments
            
            
            -Balance
      at September 30, 2008
            
            $
            202,960





The
following table summarizes the current maturities of the Debentures as of
September 30, 2008:





2009
            
            $
            -2010
            
            $
            -2011
            
            $
            4,720,000





10


ENERGY
COMPOSITES CORPORATION


(formerly
Las Palmas Mobile Estates)


(A
Development Stage Enterprise)


Notes
to Consolidated Financial Statements


(Unaudited)





Note
7.       Subsequent events





As of
November 12, 2008, the Company has sold additional Units under its private
placement offering for a total $665,000 of gross proceeds.





Effective
October 14, 2008, the Company merged its wholly-owned Nevada subsidiary into the
Company.  The Company amended and restated its Articles of
Incorporation, changing its name to “Energy Composites
Corporation.”  The Amended and Restated Articles of Incorporation
authorize 100,000,000 shares of common stock and created 10,000,000 shares of
undesignated preferred stock.





Also,
effective October 14, 2008, the Company adopted the 2008 Stock Incentive
Plan.  The Company has not issued any awards pursuant to the Plan as
of November 14, 2008.





Reverse
acquisition





On
October 14, 2008, the Company consummated a share exchange (the “Share
Exchange”) with AFT, Jamie Lee Mancl, Jennifer Lynn Mancl and Integritas, Inc.
(the “AFT Shareholders”) pursuant to a share exchange agreement, as amended,
between the parties dated as of June 26, 2008.  The Company acquired
100% of the issued and outstanding shares of AFT’s common stock in exchange for
28,750,000 shares of the Company’s common stock.





The
combined Company incurred $691,503 in non-recurring, reverse acquisition-related
expenses which will be expensed as of the date of the reverse
acquisition.  Of these costs, $420,000 was related to the issuance of
AFT shares to Integritas, Inc. for consulting services related to the reverse
acquisition.  The remainder was legal and accounting fees related to
the reverse acquisition.





As a
result of the Share Exchange, AFT is a wholly-owned subsidiary and the results
of its composites and fiberglass manufacturing business will be consolidated on
the Company’s consolidated financial statements.  For financial
reporting purposes, the transaction is to be accounted for as an additional
capitalization of AFT with AFT as the accounting acquirer (reverse
acquirer).  The operations of AFT will be the continuing operations of
the Company.





The
accompanying pro forma combined balance sheet as of September 30, 2008 has been
prepared to give effect to the acquisition of AFT as if the reverse acquisition
occurred on September 30, 2008.  The combined balance sheet presents
the historical financial information of Energy Composites Corporation as of
September 30, 2008, as adjusted for the acquisition of AFT, accounted for as a
reverse acquisition.  The accompanying pro forma combined statements
of operations for the nine months ended September 30, 2008 and the year ended
December 31, 2007, combines the historical financial information of AFT for the
nine months ended September 30, 2008, and the year ended December 31, 2007 with
the historical information of the Company for the nine months ended September
30, 2008, and the year ended December 31, 2007, respectively, as if the reverse
acquisition had occurred on January 1, 2007.





11


ENERGY
COMPOSITES CORPORATION


(formerly
Las Palmas Mobile Estates)


(A
Development Stage Enterprise)


Notes
to Consolidated Financial Statements


(Unaudited)





Unaudited Pro Forma Combined
Balance Sheets as of September 30, 2008:





Energy
      Composites
            
            
            Advanced
      Fiberglass
            
            
            Pro
      Forma Adjustments
            
            
            Notes
            
            Pro
      Forma Combined(unaudited)
            
            
            (unaudited)
            
            
            (unaudited)
            
            
            
            
            (unaudited)ASSETSCurrent
      Assets:Cash
            
            $
            2,911,682
            
            
            $
            736,757
            
            
            $
            -
            
            
            
            
            $
            3,648,439Accounts
      receivable
            
            
            531,849
            
            
            
            1,684,477
            
            
            
            (538,369
            )
            
            (5)
            
            
            1,677,957Inventories
            
            
            -
            
            
            
            1,357,594
            
            
            
            -
            
            
            
            
            
            1,357,594Deferred
      income taxes
            
            
            -
            
            
            
            41,000
            
            
            
            -
            
            
            
            
            
            41,000Prepaid
      merger costs
            
            
            -
            
            
            
            420,000
            
            
            
            (420,000
            )
            
            (6)
            
            
            -Note
      receivable – acquisition target
            
            
            1,814,838
            
            
            
            91,939
            
            
            
            (1,814,838
            )
            
            (5)
            
            
            91,939Interest
      receivable
            
            
            11,540
            
            
            
            -
            
            
            
            (11,540
            )
            
            (5)
            
            
            -Total
      current assets
            
            
            5,269,909
            
            
            
            4,331,767
            
            
            
            (2,784,747
            )
            
            
            
            
            6,816,929Property
      and equipment, net
            
            
            -
            
            
            
            5,360,619
            
            
            
            -
            
            
            
            
            
            5,360,619Intangible
      assets:Deferred
      income taxes
            
            
            -
            
            
            
            372,000
            
            
            
            -
            
            
            
            
            
            372,000Customer
      list, net
            
            
            -
            
            
            
            18,158
            
            
            
            -
            
            
            
            
            
            18,158Deferred
      financing costs, net
            
            
            -
            
            
            
            50,260
            
            
            
            -
            
            
            
            
            
            50,260Total
      intangible assets, net
            
            
            -
            
            
            
            440,418
            
            
            
            -
            
            
            
            
            
            440,418Total
      assets
            
            $
            5,269,909
            
            
            $
            10,132,804
            
            
            $
            (2,784,747
            )
            
            
            
            $
            12,617,966LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      Liabilities:Current
      portion of long-term debt obligations
            
            $
            -
            
            
            $
            333,995
            
            
            $
            -
            
            
            
            
            $
            333,995Lines
      of credit – bank
            
            
            -
            
            
            
            430,000
            
            
            
            -
            
            
            
            
            
            430,000Short-term
      notes payable
            
            
            -
            
            
            
            3,374,774
            
            
            
            (1,814,838
            )
            
            (5)
            
            
            1,559,936Accounts
      payable
            
            
            540,659
            
            
            
            958,215
            
            
            
            (538,369
            )
            
            (5)
            
            
            960,505Accrued
      expenses
            
            
            36,299
            
            
            
            130,723
            
            
            
            (11,540
            )
            
            (5)
            
            
            155,482Accrued
      payroll and payroll taxes
            
            
            -
            
            
            
            405,379
            
            
            
            -
            
            
            
            
            
            405,379Customer
      deposits
            
            
            -
            
            
            
            263,316
            
            
            
            -
            
            
            
            
            
            263,316Due
      to officer/stockholder
            
            
            13,383
            
            
            
            22,851
            
            
            
            (13,383
            )
            
            (3)
            
            
            22,851Total
      current liabilities
            
            
            590,341
            
            
            
            5,919,253
            
            
            
            (2,378,130
            )
            
            
            
            
            4,131,464Long-term
      debt net of discounts, less current maturities
            
            
            202,960
            
            
            
            4,022,362
            
            
            
            -
            
            
            
            
            
            4,225,322Deferred
      income taxes
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            
            
            -Total
      liabilities
            
            
            793,301
            
            
            
            9,941,615
            
            
            
            (2,378,130
            )
            
            
            
            
            8,356,786Non-controlling
      interest in variable interest entities
            
            
            -
            
            
            
            186,261
            
            
            
            -
            
            
            
            
            
            186,261STOCKHOLDERS’
      EQUITY:Common
      stock
            
            
            33,000
            
            
            
            1
            
            
            
            28,750
            
            
            (1)(21,751
            )
            
            (1)
            
            
            40,000Additional
      Paid In Capital
            
            
            4,720,000
            
            
            
            635,269
            
            
            
            (6,999
            )
            
            (1)(276,392
            )
            
            (2)13,383
            
            
            (3)
            
            
            5,085,261Retained
      earnings (Accumulated deficit)
            
            
            (276,392
            )
            
            
            (630,342
            )
            
            
            276,392
            
            
            (2)(420,000
            )
            
            (6)
            
            
            (1,050,342
            )Total
      stockholders’ equity
            
            
            4,476,608
            
            
            
            4,928
            
            
            
            (406,617
            )
            
            
            
            
            4,074,919Total
      liabilities and stockholders’ equity
            
            $
            5,269,909
            
            
            $
            10,132,804
            
            
            $
            (2,784,747
            )
            
            
            
            $
            12,617,966





See notes
to the pro forma combined financial statements.


12


ENERGY
COMPOSITES CORPORATION


(formerly
Las Palmas Mobile Estates)


(A
Development Stage Enterprise)


Notes
to Consolidated Financial Statements


(Unaudited)





Unaudited Pro Forma Combined
Statement of Operations for the Nine Months Ended September 30,
2008:





Energy
      Composites
            
            
            Advanced
      Fiberglass
            
            
            Pro
      Forma Adjustments
            
            
            Notes
            
            Pro
      Forma Combined(unaudited)
            
            
            (unaudited)
            
            
            (unaudited)
            
            
            
            
            (unaudited)Revenues
            
            $
            962,087
            
            
            $
            5,729,234
            
            
            $
            (962,087
            )
            
            (5)
            
            $
            5,729,234Cost
      of goods sold
            
            
            962,087
            
            
            
            5,025,511
            
            
            
            (962,087
            )
            
            (5)
            
            
            5,025,511Gross
      profit
            
            
            -
            
            
            
            703,723
            
            
            
            -
            
            
            
            
            
            703,723Selling,
      general and administrative expenses
            
            
            4,390
            
            
            
            1,588,806
            
            
            
            -
            
            
            
            
            
            1,593,196Loss
      from operations
            
            
            (4,390
            )
            
            
            (885,083
            )
            
            
            -
            
            
            
            
            
            (889,473
            )Other
      income (expense)Interest
      income
            
            
            11,540
            
            
            
            -
            
            
            
            (11,540
            )
            
            (5)
            
            
            -Interest
      expense
            
            
            (239,259
            )
            
            
            (282,855
            )
            
            
            11,540
            
            
            (5)
            
            
            (510,574
            )Loss
      before non-controlling interest in variable interest
    entities
            
            
            (232,109
            )
            
            
            (1,167,938
            )
            
            
            -
            
            
            
            
            
            (1,400,047
            )Non-controlling
      interest in variable interest entities
            
            
            -
            
            
            
            (138,144
            )
            
            
            -
            
            
            
            
            
            (138,144
            )Loss
      before provision for income taxes
            
            
            (232,109
            )
            
            
            (1,306,082
            )
            
            
            (11,540
            )
            
            
            
            
            (1,538,191
            )Income
      tax benefit
            
            
            -
            
            
            
            413,000
            
            
            
            -
            
            
            
            
            
            413,000Net
      loss
            
            $
            (232,109
            )
            
            $
            (893,082
            )
            
            $
            (11,540
            )
            
            
            
            $
            (1,125,191
            )Loss
      per share
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            (0.03
            )Weighted
      average shares outstanding:Basic
      and diluted
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            40,000,000





Unaudited Pro Forma Combined
Statement of Operations for the Year Ended December 31,
2007:





Energy
      Composites
            
            
            Advanced
      Fiberglass
            
            
            Pro
      Forma Adjustments
            
            
            Notes
            
            Pro
      Forma Combined(unaudited)
            
            
            (unaudited)
            
            
            (unaudited)
            
            
            
            
            (unaudited)Revenues
            
            $
            -
            
            
            $
            6,541,256
            
            
            $
            -
            
            
            
            
            $
            6,541,256Cost
      of goods sold
            
            
            -
            
            
            
            5,215,245
            
            
            
            -
            
            
            
            
            
            5,215,245Gross
      profit
            
            
            -
            
            
            
            1,326,011
            
            
            
            -
            
            
            
            
            
            1,326,011Selling,
      general and administrative expenses
            
            
            4,973
            
            
            
            1,085,521
            
            
            
            -
            
            
            
            
            
            1,090,494Gain
      on sale of land and building - Variable interest entity
            
            
            -
            
            
            
            (100,220
            )
            
            
            -
            
            
            
            
            
            (100,220
            )Income/(loss)
      from operations
            
            
            (4,973
            )
            
            
            340,710
            
            
            
            -
            
            
            
            
            
            (335,737
            )Other
      income (expense):Interest
      expense
            
            
            -
            
            
            
            (132,274
            )
            
            
            -
            
            
            
            
            
            (132,274
            )Interest
      income
            
            
            -
            
            
            
            2,783
            
            
            
            -
            
            
            
            
            
            2,783Loss
      before non-controlling interest in variable interest
    entities
            
            
            (4,973
            )
            
            
            211,219
            
            
            
            -
            
            
            
            
            
            206,246Non-controlling
      interest in variable interest entities
            
            
            -
            
            
            
            (168,195
            )
            
            
            -
            
            
            
            
            
            (168,195
            )Net
      income/(loss) before provision for income taxes
            
            
            (4,973
            )
            
            
            43,024
            
            
            
            -
            
            
            
            
            
            38,051Income
      tax expense
            
            
            -
            
            
            
            -
            
            
            
            (15,000
            )
            
            (4)
            
            
            (15,000
            )Net
      income/(loss)
            
            $
            (4,973
            )
            
            $
            43,024
            
            
            $
            (15,000
            )
            
            
            
            $
            23,051Earnings
      per share
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            0.00Weighted
      average shares outstanding:Basic
      and diluted
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            40,000,000





See notes
to the pro forma combined financial statements.


13


ENERGY
COMPOSITES CORPORATION


(formerly
Las Palmas Mobile Estates)


(A
Development Stage Enterprise)


Notes
to Consolidated Financial Statements


(Unaudited)





Notes to the Unaudited Pro
Forma Combined Financial Statements:





Note
1 – Basis of Presentation





The
accompanying pro forma combined balance sheet as of September 30, 2008 has been
prepared to give effect to the reverse acquisition of AFT as if the reverse
acquisition occurred on September 30, 2008.  The historical financial
statements prior to September 30, 2008, are those of AFT.  The
accompanying pro forma combined statement of operations combines the historical
operations of AFT for the nine months ended September 30, 2008, and the year
ended December 31, 2007, as if the reverse acquisition had occurred on January
1, 2007.





Note
2 – Pro Forma Adjustments





The
unaudited pro forma combined financial statements reflect the following pro
forma adjustments:





(1)
            As
      a part of the reverse acquisition, AFT Shareholders received 28,750,000
      shares of the Company’s common stock and an officer retired 21,750,000
      shares of common stock so that 40,000,000 shares ($.001 par value) are
      outstanding post reverse acquisition.  All of the common shares
      ($0.01 par value) of AFT are owned by the Company and eliminated for
      purposes of consolidation.





(2)
            As
      a result of the reverse acquisition, the Company’s deficit accumulated in
      the development stage will be eliminated and be offset against additional
      paid-in capital.





(3)
            Integritas,
      Inc. received 19.79 shares (pre-acquisition) of AFT in return for its
      continuing consulting services provided to AFT for the reverse acquisition
      transaction.  Part of these services include paying off the
      advances made by the Company’s
officers.





(4)
            AFT
      operated as an S-corporation in 2007.  For the year ended
      December 31, 2007, pro forma financial statements, assuming a 40% income
      tax rate on combined Energy Composites Corporation and AFT operations, a
      tax provision of $15,000 has been recorded.(5)
            Elimination
      of intercompany transactions.





(6)
            Because
      this transaction is considered a reverse acquisition and Energy Composites
      had no net tangible cash, prepaid acquisition costs are expensed as part
      of the acquisition transaction.  Since acquisition costs are not
      a recurring expense, they are not reflected in the pro forma combined
      statement of operations and are shown as an offset to retained
      earnings.





14


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





The
discussion contained herein contains “forward-looking statements” that involve
risk and uncertainties. These statements may be identified by the use of
terminology such as “believes,” “expects,”  “may,” “should” or
anticipates” or expressing this terminology negatively or similar expressions or
by discussions of strategy.  The cautionary statements made in this
Form 10-Q should be read as being applicable to all related forward-looking
statements wherever they appear in this Form 10-Q.  Our actual results
could differ materially from those discussed in this report.





Generally





Energy
Composites Corporation (formerly Las Palmas Mobile Estates) (“we,” “us,” “our,”
or the “Company”) was incorporated on October 29, 1992 under the laws of the
State of Nevada.  Since formation, we were defined as a “shell”
company whose sole purpose was to locate and consummate a merger or acquisition
with a private entity.





As of
October 14, 2008, we completed a reverse acquisition of Advanced Fiberglass
Technologies, Inc., a Wisconsin corporation (“AFT”).  As of result of
the reverse acquisition, we are no longer considered a “shell”
company.  Although we raised capital through a private placement of
debt and warrants and recorded revenue of $962,087 during the quarter ended
September 30, 2008, we considered ourselves a “shell” company until we completed
the reverse acquisition of AFT.  All third quarter activity was
undertaken in anticipation of completing the reverse acquisition of
AFT.





Financial
Condition





Our
auditor’s going concern opinion for prior years ended and the notation in the
financial statements indicate that we did not have significant cash or other
material assets and that we are relying on advances from stockholders, officers
and directors to meet limited operating expenses.  As of September 30,
2008, we had $2,911,682 in cash with only $590,341 of current liabilities
outstanding.  Subsequent to September 30, 2008, we have sold
additional debt with warrants pursuant to a private placement for gross proceeds
of $655,000.  We believe that we have sufficient cash to operate as a
going concern after the completion of the AFT acquisition on October 14, 2008
for the next twelve months.





Prior to
the commencement of the private placement offering, we were dependent upon our
officers to meet any de minimis costs that we incurred.  Diana L.
Hassan, a former officer and director of the Company, provided the necessary
funds, without interest, for the Company to comply with the reporting
requirements of the Securities Exchange Act of 1934, as amended; provided that
she was an officer and director of the Company when the obligation was
incurred.  All advances were interest-free.





Liquidity





In August
2008, the Company began a $10 million private placement offering of Units, each
Unit consisting of (i) a 3-year, 6% convertible debenture with a conversion
price of $2.50 per share (subject to adjustment for stock splits and stock
dividends) (the “Debentures”), and (ii) a number of warrants equal to the number
of shares issuable upon conversion of the principal amount of the Convertible
Debenture (the “Warrants”).  This placement offering was in
anticipation of the AFT merger.  As of September 30, 2008, Debentures
in the aggregate principal amount of $4,720,000 had been sold which included the
issuance of 1,888,000 Warrants.





As of
September 30, 2008, we had assets totaling $5,269,909.  This consisted
of $2,911,682 in cash, accounts receivable totaling $531,849, a note receivable
with AFT for advances made in anticipation of the reverse acquisition totaling
$1,814,838, and interest receivable on the note totaling
$11,540.  These advances were primarily used to launch AFT’s new field
services division and most of these launch costs have been expensed by AFT
during the quarter ended September 30, 2008.





As of
September 30, 2008, we had total liabilities of $793,301 which included accounts
payable to AFT for sub-contracting work of $540,659, officer advances of
$13,383, and convertible notes payable, net of a discount, of
$202,960.  Total principal on the convertible notes as of September
30, 2008 was $4,720,000.  As of September 30,






15
 
 2008, we
had net worth of $4,476,608.  As of December 31, 2007, we had no
assets and total liabilities of $11,283 and a negative net worth of $11,283 from
officer advances.





Results
of Operations





During
the three and nine months ended September 30, 2008, we recorded revenues of
$962,087 for contracts that we bid in anticipation of completing the acquisition
of AFT.  We subcontracted all work on the project to
AFT.  Pursuant to the subcontracting arrangement, our cost of revenue
was 100% of the contract value, or $962,087.





We
incurred selling, general, and administrative expenses of $1,800 and $4,390
during the three and nine months ended September 30, 2008,
respectively.  This compares to $919 and $4,541 incurred during the
three and


nine
months ended September 30, 2007, respectively.  These amounts related
to the legal and accounting fees associated with filing periodic reports with
the Securities and Exchange Commission.





Additionally,
during the three and nine months ended September 30, 2008, we recorded interest
income on working capital loans to AFT in the amount of $11,540.  We
also recognized interest expense of $239,259 related to the Debentures and
Warrants we sold in the private placement.  The interest expense
consisted of interest accrued on the convertible debentures of $36,299,
accretion of the discount on the Debentures associated with the fair value of
the warrants of $124,629, and accretion of the beneficial conversion feature
associated with the Debentures of $78,331.





We
incurred net losses of $229,519 and $232,109 for the three and nine months ended
September 30, 2008.  This compares to our net losses of $919 and
$4,541 for the three and nine months ended September 30, 2007.  The
increase in our losses relates to the non-cash expenses we recorded in
connection with our sale of convertible debentures and warrants during the three
months ended September 30, 2008.  Our cumulative net loss is $276,392
for the period from inception through September 30, 2008.





Plan
of Operation





Our plan
of operation now relates to our newly acquired subsidiary AFT.  For a
complete discussion of our plan of operation, see the Form 8-K filing announcing
the acquisition filed October 17, 2008.





Accounting
for a Business Combination





As a
result of the closing of the share exchange agreement with AFT, the transaction
will be accounted for as a reverse acquisition with us being the surviving
registrant.  As a result of any reverse acquisition, if the acquired
entity’s stockholders will exercise control over us, the transaction will be
deemed to be a capital transaction where we are treated as a non-business
entity.  Therefore, the accounting for the transaction is identical to
that resulting from a reverse merger, except no goodwill or other intangible
assets will be recorded.  For accounting purposes, the acquired entity
will be treated as the accounting acquirer and, accordingly, will be presented
as the continuing entity.





Off-Balance
Sheet Arrangements





As of
September 30, 2008, we did not have any off-balance sheet
arrangements.





Item
3.      Quantitative and Qualitative Disclosures
about Market Risk





Not
applicable.





Item
4.      Controls and Procedures





Under the
supervision and with the participation of our principal executive officer and
principal financial officer, we conducted an evaluation of the effectiveness of
our disclosure controls and procedures as defined in Rule 13a-15(e) promulgated
under the Securities Exchange Act of 1934 (the “Exchange Act”) as of the end of
the period covered by this report.  Based on this evaluation, the
officers concluded that our disclosure controls and procedures are effective to
ensure that information required to be disclosed by us in reports that we file
or submit under the






16
 
 Exchange
Act is recorded, processed, summarized and reported within the time periods
specified in the SEC’s rules and forms, and is accumulated and communicated to
our management including our principal executive officer and principal financial
officer, to allow timely decisions regarding required
disclosure.





There
were no changes in our internal control over financial reporting during the
period covered by this report that have materially affected, or are reasonably
likely to materially affect our internal control over financial
reporting.





On
October 14, 2008, we acquired AFT, which has increased the controls and
procedures that we employ to process, record and report our financial
results.  Our internal control over financial reporting will remain
effective because the acquisition of AFT has increased the number and
sophistication of our accounting personnel and the sophistication of our
accounting systems.  We will continue to evaluate and strengthen our
controls and procedures to improve the accuracy and timeliness of our financial
disclosure.





PART
II.  OTHER INFORMATION





Item
1.      Legal Proceedings





None.





Item 1A.   Risk
Factors





Not
Applicable.





Item
2.      Unregistered Sales of Equity Securities
and Use of Proceeds





During
the quarter ended September 30, 2008, we issued and sold the unregistered
securities set forth in the table below.


Date
            Persons
      or Class of Persons
            Securities
            ConsiderationAugust
      and September 2008
            59
      accredited investors
            Convertible
      Debentures and Warrants to purchase 1,888,000 shares of common
      stock
            $4,720,000





No
underwriters were used in the above transactions.  We relied upon the
exemption from registration contained in Section 4(2) and/or Rule 506 as to all
of the transactions, as the investors were deemed to be sophisticated with
respect to the investment in the securities due to their financial condition and
involvement in our business or were accredited investors.  Restrictive
legends were placed on the certificates evidencing the securities issued in all
of the above transactions.





Item
3.      Defaults Upon Senior
Securities





None.





Item
4.      Submission of Matters to a Vote of
Security Holders





During
the quarter ended September 30, 2008, a majority of our stockholders authorized
the acquisition of AFT, the amendment and restatement of our Articles of
Incorporation, and the 2008 Stock Incentive Plan.  The authorization
was given in a written consent of the majority of our stockholders dated August
29, 2008, in lieu of a special meeting of the stockholders.  We filed
and mailed a Definitive Information Statement on Schedule 14C to our
stockholders on or about September 24, 2008 containing all the details of the
actions taken by majority written consent.  Please see the Definitive
Information Statement on Schedule 14C filed September 24, 2008 for further
information relating to the vote taken by our stockholders.





Item
5.      Other Information





None.





17


Item
6.      Exhibits





Regulation
              S-K
      Number
            Document3.1
            Articles
      of Merger effective October 14, 2008 (3)3.2
            Amended
      and Restated Articles of Incorporation effective October 14, 2008
      (3)3.3
            Amended
      and Restated Bylaws adopted October 14, 2008 (3)10.1
            Share
      Exchange Agreement dated June 26, 2008 (1)10.2
            First
      Amendment to Share Exchange Agreement dated August 8, 2008
    (2)10.3
            2008
      Stock Incentive Plan (3)10.4
            Industrial
      Development Revenue Bonds, Bond Agreement dated February 28, 2007
      (3)10.5
            Industrial
      Development Revenue Bonds, Promissory Note 2007A dated February 28, 2007
      (3)10.6
            Industrial
      Development Revenue Bonds, Promissory Note 2007B dated February 28, 2007
      (3)10.7
            Industrial
      Development Revenue Bonds, Promissory Note 2007C dated February 28, 2007
      (3)10.8
            Industrial
      Development Revenue Bonds, Credit Agreement dated February 28, 2007
      (3)10.9
            Industrial
      Development Revenue Bonds, Construction Mortgage, Assignment Of Leases And
      Rents and Fixture Filing dated February 28, 2007 (3)10.10
            Industrial
      Development Revenue Bonds, Security Agreement dated February 28, 2007
      (3)10.11
            Option
      Agreement dated June 18, 2008 (3)10.12
            Purchase
      and Supply Agreement dated October 13, 2008 (3)31.1
            Rule
      13a-14(a) Certification of Samuel W. Fairchild31.2
            Rule
      13a-14(a) Certification of Jeffrey S. Keuntjes32.1
            Certification
      of Samuel W. Fairchild Pursuant to 18 U.S.C. Section 1350, as Adopted
      Pursuant to Section 906 of the Sarbanes-Oxley Act of
  200232.2
            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 June 26, 2008, filed
      June 27, 2008.


(2)
            Filed
      as an exhibit to the Definitive Information Statement on Schedule 14C
      filed September 24, 2008.


(3)
            Filed
      as an exhibit to the Current Report on Form 8-K dated October 14, 2008,
      filed October 17, 2008.





SIGNATURES





In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.





ENERGY
      COMPOSITES CORPORATIONDated:  November
      13, 2008
            By:
            /s/ Samuel W. FairchildSamuel
      W. Fairchild, Chief Executive
Officer