**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**


______________





**FORM
      10-Q**


**(Mark
      One)**


**X**  **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)**


**OF
      THE SECURITIES EXCHANGE ACT OF 1934**





**For
      the quarterly period ended June 30, 2006**


**or**





___ ****  **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE**


**SECURITIES
      EXCHANGE ACT OF 1934**





**For
      the transition period from _______________ to
      _______________**





**Commission
      file number 000-51596**





**ECHO
      HEALTHCARE**


**ACQUISITION
      CORP.**


**(Exact
      name of Registrant as specified in its charter)**





**Delaware**
            **56-2517815****(State
                of Incorporation)**
            **(I.R.S.
                Employer Identification
                No.)**





**8000
      Towers Crescent Drive, Suite 1300, Vienna, VA 22182**


**(Address
      of principal executive offices)**





**(703)
      448-7688**


**(Telephone
      number, including area code)**





**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 the filing requirements for
      the past 90 days.**


**Yes
                X**
            **No
                __**





**Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
      one):**





**Large
      accelerated filer [   ]** **Accelerated
      filer [   ]** **Non-accelerated
      filer [X]**





**Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).**


**Yes
                X**
            **No
                __**





**Indicate
      the number of shares outstanding of each of the issuer's classes of common
      stock
      as of August 18, 2006.**





**Common
                Stock, $.0001 par value**
            **8,750,000****(Class)**
            **(Number
                of shares)**















**Part
      I - Financial Information**






**Item
      1. Condensed Financial Statements**




**Echo
      Healthcare Acquisition Corp.**


**(a
      development stage company)**





**Condensed
      Balance Sheets**




**June
                30,**
              **2006**
              **(Unaudited)**
            
            **December
                31,**
              **2005****ASSETS**Current
                Assets:Cash
            
            $
            25,922
            
            $
            14,807Prepaid
                expenses
            
            
            69,438
            
            
            -Total
                current assets
            
            
            95,360
            
            
            14,807Investments
                held in Trust Fund
            
            
            55,650,806
            
            
            -Deferred
                offering costs - Non-current
            
            
            -
            
            
            601,413Total
                assets
            
            $
            55,746,166
            
            $
            616,220**LIABILITIES
                AND STOCKHOLDERS’ EQUITY**Current
                liabilities:Accrued
                expenses
            
            $
            79,600
            
            $
            136,052Derivative
                Liabilities
            
            
            5,582,849Notes
                Payable to Founding Stockholders
            
            
            -
            
            
            150,000Line
                of Credit from Founding Stockholders
            
            
            105,700
            
            
            -Accrued
                offering costs
            
            
            152,713
            
            
            443,288Deferred
                underwriting and other offering costs
            
            
            2,018,233
            
            
            -Accrued
                Income Taxes
            
            
            139,948
            
            
            -Total
                current liabilities
            
            
            8,079,043
            
            
            729,340**COMMITMENTS
                AND CONTINGENCIES**Common
                stock subject to possible conversion,1,436,781shares
                at a conversion value of approximately$7.70
                per share, including accretion of allocated income of $92,856 (net
                of
                $47,835 income taxes)
            
            
            11,076,761
            
            
            -**STOCKHOLDERS’
                EQUITY**Preferred
                stock—$.0001 par value; 1,000,000 shares authorized; 0 issued and
                outstandingCommon
                stock—$.0001 par value, 25,000,000 shares authorized; 8,750,000 and
                1,562,500 issued and outstanding (which includes1,436,781shares
                subject to possible conversion)
            
            
            875
            
            
            156Additional
                paid-in capital
            
            
            36,195,054
            
            
            24,844Retained
                Earnings (Deficit) accumulated during the development
                stage
            
            
            394,433
            
            
            (138,120
            )Total
                stockholders’ equity
            
            
            36,590,362
            
            
            (113,120
            )Total
                liabilities and stockholders’ equity
            
            $
            55,746,166
            
            $
            616,220





See
      Notes
      to Condensed Financial Statements.





1





**Echo
      Healthcare Acquisition Corp.**


**(a
      development stage company)**





**Condensed
      Statements of Operations**


**(Unaudited)**








**Six
                months**
              **ended
                June 30,**
              **2006**
            
            **Three
                months**
              **ended
                June 30,**
              **2006**
            
            **June
                10, 2005**
              **(Date
                of**
              **Inception)
                to**
              **June
                30, 2005**
            
            **June
                10, 2005**
              **(Date
                of**
              **Inception)**
              **through
                June**
              **30,
                2006**Revenue
            
            $
            0
            
            $
            0
            
            
            
            
            $
            0Operating
                expenses
            
            
            (154,075
            )
            
            (127,604
            )
            
            (1,000
            )
            
            (291,195
            )Organization
                costs
            
            
            0
            
            
            0
            
            
            0
            
            
            (1,000
            )Operating
                loss
            
            
            (154,075
            )
            
            (127,604
            )
            
            (1,000
            )
            
            (292,195
            )Gain/(loss)
                on derivative liabilities
            
            
            215,625
            
            
            399,862
            
            
            
            
            
            215,625Interest
                income
            
            
            703,806
            
            
            642,108
            
            
            -
            
            
            703,807Income/(loss)
                before provision for income taxes
            
            
            765,356
            
            
            914,366
            
            
            (1,000
            )
            
            627,237Provision
                for income taxes
            
            
            (139,948
            )
            
            (139,948
            )
            
            0
            
            
            (139,948
            )Net
                income/(loss)
            
            $
            625,408
            
            $
            774,418
            
            
            (1,000
            )
            $
            487,289Weighted
                average number of shares outstanding—basic
            
            
            5,111,360
            
            
            7,968,750
            
            
            1,562,500Net
                income per share—basic
            
            $
            0.12
            
            $
            0.10
            
            
            0.00Net
                income
            
            $
            625,408
            
            $
            774,418Gain
                on derivative liabilities attributed to warrants
            
            
            (215,625
            )
            
            (399,862
            )Adjusted
                net income - for diluted earnings
            
            $
            409,783
            
            $
            374,556Weighted
                average shares outstanding
            
            
            5,111,360
            
            
            7,968,750
            
            
            1,562,500Shares
                from assumed conversion of warrants
            
            
            692,232
            
            
            1,275,232
            
            
            0Weighted
                average number of shares outstanding - diluted
            
            
            5,803,592
            
            
            9,243,982
            
            
            1,562,500Net
                income per share - diluted
            
            $
            0.07
            
            $
            0.04
            
            $
            0.00




See
      Notes
      to Condensed Financial Statements.





2




**Echo
      Healthcare Acquisition Corp.**


**(a
      development stage company)**


**Condensed
        Statements of Stockholders’ Equity (Capital Deficit)**
 
 
 **Common
                  Stock****Shares**
              
              **Amount**
              
              **Additional
                  Paid-In Capital**
              
              **Deficit
                  Accumulated During the Development**
                **Stage**
              
              **Total
                  Stockholders’ Equity**
                **(Capital
                  Deficit)****Balance
                  - June 10, 2005 (date of inception)**
              
              -0-
              
              -0-
              
              -0-
              
              -0-
              
              -0-Contributions
                  fromFounding
                  Stockholders
              
              
              1,562,500
              
              $
              156
              
              $
              24,844
              
              
              
              
              $
              25,000Net
                  loss for the period ended December 31, 2005
              
              
              
              
              
              
              
              
              
              
              
              (138,120
              )
              
              (138,120
              )**Balance
                  - December 31, 2005**
              
              
              1,562,500
              
              $
              156
              
              $
              24,844
              
              $
              (138,120
              )
              $
              (113,120
              )Sale
                  of 7,187,500 Units, net of underwriter’s discount and offering expenses
                  (includes1,436,781
                  shares subject to possible conversion) less derivative
                  liabilities
              
              
              7,187,500
              
              
              719
              
              
              52,495,345
              
              
              
              
              
              52,496,064Proceeds
                  subject to possible conversion of 1,436,781 shares
              
              
              
              
              
              
              
              
              (11,076,761
              )
              
              
              
              
              (11,076,761
              )Reclassification
                of proceeds allocated to warrants - derivatives liabilty
              
              
              
              
              
              
              
              
              (5,798,474
              )
              
              
              
              
              (5,798,474
              )Proceeds
                  from issuance of underwriter’s purchase option
              
              
              
              
              
              
              
              
              100
              
              
              
              
              
              100Proceeds
                  from sale of warrants to founding stockholders
              
              
              
              
              
              
              
              
              550,000
              
              
              
              
              
              550,000Net
                  income for the period
              
              
              
              
              
              
              
              
              
              
              
              532,553
              
              
              532,553**Balance
                    - **June
                    30, 2006 (unaudited)****
              
              
              8,750,000
              
              $
              875
              
              $
              36,195,054
              
              $
              394,433
              
              $
              36,683,217


See
      Notes
      to Condensed Financial Statements.




3




**Echo
        Healthcare Acquisition Corp.**
 **(a
        development stage company)**
 
 **Condensed
        Statements of Cash Flows**
 **(Unaudited)**
  
 **January
                  1, 2006 through June 30, 2006**
              
              **June
                  10, 2005**
                **(Date
                  of**
                **Inception)**
                **through
                  June 30,**
                **2006****Cash
                  flows from operating activities:**Net
                  income (loss)
              
              $
              625,408
              
              $
              487,289Adjustments
                  to reconcile net income (loss) to net cash used by operating
                  activities:Gain
                  on derivative liabilities
              
              
              (215,625
              )
              
              (215,625
              )Changes
                  in:Prepaid
                  expenses
              
              
              (69,438
              )
              
              (69,438
              )Accrued
                  expenses
              
              
              83,497
              
              
              219,548Net
                  cash generated by operating activities
              
              
              423,842
              
              
              421,774**Cash
                  flows from investing activities:******Increase
                  in cash equivalents held in Trust Fund
              
              
              (55,650,806
              )
              
              (55,650,806
              )****Net
                  cash used in investing activities
              
              
              (55,650,806
              )
              
              (55,650,806
              )**Cash
                  flows from financing activities:**Proceeds
                  from notes payable to Founding Stockholders
                Proceeds
                  from Line of Credit from Founding Stockholders
              
              
              50,000
                105,700
              
              
              200,000
                105,700Payments
                  on notes payable to Founding Stockholders
              
              
              (200,000
              )
              
              (200,000
              )Proceeds
                  from sale of common stock to Founding Stockholders
              
              
              --
              
              
              25,000Gross
                  proceeds from public offering
              
              
              57,500,000
              
              
              57,500,000Proceeds
                  from issuance of underwriter’s purchase option
              
              
              100
              
              
              100Proceeds
                  from sale of warrants to Founding Stockholders
              
              
              550,000
              
              
              550,000Costs
                  of offering
              
              
              (2,767,721
              )
              
              (2,925,846
              )Net
                  cash provided by financing activities
              
              
              55,238,079
              
              
              55,254,954**Net
                  increase in cash**
              
              
              11,115
              
              
              25,922Cash—beginning
                  of period
              
              
              14,807
              
              
              0**Cash—end
                  of period**
              
              **$**
              25,922
              
              **$**
              25,922Supplemental
                  schedule of non-cash financing activities(Payment
                  of accrued) Accrual of deferred offering costs
              
              $
              (290,575
              )
              $
              152,713Accrual
                  of deferred underwriting and other offering costs
              
              $
              2,018,233
              
              $
              2,018,233Warrant
                  obligation in connection with sale of units in offering
              
              $
              5,582,849
              
              $
              5,582,849
 
 
 See
        Notes
        to Condensed Financial Statements.
 
  4





**Echo
      Healthcare Acquisition Corp.**


**(a
      development stage company)**


**Notes
      to Condensed Financial Statements**


**(Unaudited)**







**NOTE
      A—BASIS OF PRESENTATION**




The
      condensed financial statements of Echo Healthcare Acquisition Corp. (the
“Company”) at June 30, 2006 and for the periods ended June 30, 2006 are
      unaudited. In the opinion of management, all adjustments (constituting normal
      accruals) have been made that are necessary to present fairly the financial
      position of the Company as of June 30, 2006 and the results of its operations
      and its cash flow for the three and six-month periods ended June 30, 2006 and
      for the periods from June 10, 2005 (inception) to June 30, 2005 and 2006.
      Operating results for the interim period presented are not necessarily
      indicative of the results expected for a full year. These unaudited condensed
      Financial Statements should be read in conjunction with the Financial Statements
      and related notes included in the Company’s Registration Statement on Form S-1/A
      filed on March 8, 2006 and the Company’s current report on Form 8-K filed on
      March 24, 2006.




The
      statements and related notes have been prepared pursuant to the rules and
      regulations of the U.S. Securities and Exchange Commission. Accordingly, certain
      information and footnote disclosures normally included in the financial
      statements prepared in accordance with accounting principles generally accepted
      in the United States of America have been omitted pursuant to such rules and
      regulations.




**NOTE
      B—ORGANIZATION AND BUSINESS OPERATIONS**




The
      Company was incorporated in Delaware on June 10, 2005. The Company was formed
      for the purpose of acquiring, through a merger, capital stock exchange, asset
      acquisition, other similar acquisition one or more domestic or international
      operating businesses in the healthcare industry (“Acquisition”). The Company has
      not generated revenue to date. The Company is considered to be in the
      development stage and is subject to the risks associated with activities of
      development stage companies. The Company has selected December 31 as its fiscal
      year end.




On
      March
      16, 2006, the Company amended and restated its Certificate of Incorporation
      to
      reduce the number of authorized shares of common stock from 100,000,000 shares
      to 25,000,000 shares.




The
      registration statement for the Company’s initial public offering of Units (as
      described in Note D) (“Offering”) was declared effective on March 17, 2006. The
      Company consummated the Offering on March 22, 2006 and received net cash
      proceeds of approximately $45,446,690, not inclusive of deferred underwriting
      and other accrued offering costs (see Notes D and H). On March 27, 2006, the
      underwriters for the Company’s Offering exercised their over-allotment option
      and purchased 937,500 additional units. The net proceeds from the exercise
      of
      the over-allotment option were approximately $6,975,000, after deducting
      underwriting discounts of $525,000, not including deferred amounts totaling
      $225,000.




The
      Company’s management has broad discretion with respect to the specific
      application of the net proceeds of the Offering, although substantially all
      of
      the net proceeds of the Offering are intended to be generally applied toward
      acquiring an operating company (“Acquisition”). Furthermore, there is no
      assurance that the Company will be able to successfully effect an Acquisition.
      An amount of $54,947,000, from the net proceeds of the Offering (including
      the
      exercise of the over-allotment option) together with the proceeds from the
      sale
      of 458,333 warrants at $1.20 per warrant to the founding directors for $550,000
      is being held in a trust account (“Trust Fund”) and invested in government
      securities (currently the Northern
      Institutional Government Select Portfolio) until the
      earlier of (i) the consummation of its first Acquisition or (ii) the
      distribution of the Trust Fund as described below. The remaining net proceeds
      (not held in the Trust Fund) together with borrowings under the Company’s
      Working Capital Line of Credit (see Note E) may be used to pay for business,
      legal and accounting due diligence on prospective acquisitions and continuing
      general and administrative expenses.




The
      Company, after signing a definitive agreement for the Acquisition, will submit
      such transaction for stockholders’ approval. In the event that holders of 20% or
      more of the shares issued in the Offering vote against the Acquisition and
      exercise their conversion rights, the Acquisition will not be
      consummated.




5




**Echo
        Healthcare Acquisition Corp.**
 **(a
        development stage company)**
 **Notes
        to Condensed Financial Statements—(Continued)**
 **(Unaudited)**
 
 The
        Company’s initial stockholders (the “Founding Stockholders”) have agreed to vote
        their 1,562,500 shares
        of
        common stock in accordance with the vote of the majority in interest of all
        other stockholders of the Company (“Public Stockholders”) with respect to an
        Acquisition. After consummation of an Acquisition, these voting safeguards
        will
        no longer be applicable.




With
      respect to an Acquisition which is approved and consummated, any Public
      Stockholder who voted against such Acquisition may demand that the Company
      convert its shares into a pro rata share of the Trust Fund. The per share
      conversion price will equal the amount in the Trust Fund, calculated as of
      two
      business days prior to the consummation of the proposed Acquisition, divided
      by
      the number of shares of common stock held by Public Stockholders at the
      consummation of the Offering. Accordingly, Public Stockholders holding up to
      19.99% of the aggregate number of shares owned by all Public Stockholders may
      seek conversion of their shares in the event of an Acquisition. Such Public
      Stockholders are entitled to receive their per share interest in the Trust
      Fund
      computed without regard to the shares held by the Founding Stockholders.
      Accordingly, a portion of the net proceeds from the Offering and the interest
      earned thereon (19.99% of the amount held in the Trust Fund) has been classified
      as common stock subject to possible conversion in the accompanying June 30,
      2006
      balance sheet. The Company is permitted to seek disbursements of amounts held
      in
      the Trust for related tax obligations.




In
      the
      event that the Company does not consummate an Acquisition within 18 months
      from
      the date of the consummation of the Offering, or 24 months from the consummation
      of the Offering if certain extension criteria have been satisfied (the
“Acquisition Period”), the proceeds held in the Trust Fund will be distributed
      to the Company’s Public Stockholders. In the event of such distribution, it is
      likely that the per share value of the residual assets remaining available
      for
      distribution (including Trust Fund assets) will be less than the initial public
      offering price per share in the Offering (assuming no value is attributed to
      the
      Warrants contained in the Units to be offered in the Offering discussed in
      Note
      D).




**NOTE
      C—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**




**[1]**  **Use
      of estimates:**




The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America 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 revenue and expenses during
      the reporting period. Actual results could differ from those
      estimates.




**[2]**  **Cash
      and cash equivalents:**




The
      Company considers all highly liquid investments with original maturities of
      three months or less to be cash equivalents.




**[3]**  **Deferred
      offering costs:**




Deferred
      offering costs at December 31, 2005 consist principally of legal and
      underwriting fees incurred through the balance sheet date that are related
      to
      the Offering.




**[4]
      Accrued offering costs:**




Accrued
      offering costs consist of legal, accounting and miscellaneous fees incurred
      through June 30, 2006 and December 31, 2005 that were related to the
      Offering and were charged to stockholder’s equity upon completion of the
      Offering.




**[5]**  **Income
      taxes:**




Deferred
      income taxes are provided for the differences between the bases of assets and
      liabilities for financial reporting and income tax purposes. A valuation
      allowance is established when necessary to reduce deferred tax assets to the
      amount expected to be realized.




6


**Echo
          Healthcare Acquisition Corp.**
 **(a
          development stage company)**
 **Notes
          to Condensed Financial Statements—(Continued)**
 **(Unaudited)**


The
      Company recorded a deferred income tax asset for the tax effect of start-up
      costs and temporary differences, aggregating approximately $37,000 at December
      31, 2005. In
      recognition of the uncertainty regarding the ultimate amount of income tax
      benefits to be derived, the Company recorded a full valuation allowance at
      December 31, 2005.




In
      late
      March 2006, the net proceeds from the initial public offering were invested
      in a
      taxable U.S. government portfolio. Since the interest generated from the
      portfolio is fully taxable at the federal level, the Company determined that
      no
      valuation allowance is necessary as of June 30, 2006.




**[6]
      Deferred underwriting and other offering costs:**




Deferred
      underwriting and other offering costs consist of deferred underwriting fees
      (see
      Note D), legal and printing fees (see Note H) incurred through June 30, 2006
      that were related to the Offering and were charged to stockholder’s equity upon
      completion of the Offering.




**[7]**  **Income/(Loss)
      per common share:**




Income/(loss)
      per share is computed by dividing net income (loss) applicable to common
      stockholders by the weighted average number of common shares outstanding for
      the
      period. The per share effects of potential common shares such as warrants,
      aggregating 692,232 shares,
      have been included in the periods from January 1, 2006 through June 30, 2006
      and 1,275,232 for the three months ended June 30, 2006. These potential
      shares have not been included in the other reporting periods because the effects
      would be antidilutive. Potential common shares in connection with the
      underwriters’ purchase option (see Note D) aggregating 625,000 have not been
      included because the effect would be antidilutive. Shares held in escrow that
      are subject to performance conditions are not considered outstanding for
      purposes of per share calculations (see Note D).




The
      following table presents pro forma income per share attributable to common
      stockholders subject to possible conversion and not subject to possible
      conversion:




**Six
                months**
              **ended******
              **June
                30, 2006**
            
            **Three
                months**
              **ended******
              **June
                30, 2006**Net
                income
            
            $
            625,408
            
            $
            774,418Interest
                income attributable to common stock subject to possible
                conversion
            
            $
            (92,856
            )
            $
            (80,522
            )Pro
                forma net income attributable to common stockholders not subject
                to
                possible conversion
            
            $
            532,552
            
            $
            693,896Pro
                forma weighted average number of shares outstanding, excluding shares
                subject to possible conversion - basic
            
            
            4,314,798
            
            
            6,531,969Pro
                forma net income per share, excluding shares subject to possible
                conversion - basic
            
            $
            0.12
            
            $
            0.11Net
                income
            
            $
            625,408
            
            $
            774,418Interest
                income attributable to common stock subject to possible
                conversion
            
            
            (92,856
            )
            
            (80,522
            )Gain
                on derivative liabilities attributed to warrants
            
            
            (215,625
            )
            
            (399,862
            )




7


**Echo
          Healthcare Acquisition Corp.**
 **(a
          development stage company)**
 **Notes
          to Condensed Financial Statements—(Continued)**
 **(Unaudited)**


Pro
                forma net income attributable to common stockholders not subject
                to
                possible conversion less gain on derivative liabilities attributed
                to
                warrants
            
            $
            316,927
            
            $
            294,034Pro
                forma weighted average number of shares outstanding excluding shares
                subject to possible conversion - basic
            
            
            4,314,798
            
            
            6,531,969Shares
                from assumed conversion on warrants
            
            
            562,200
            
            
            1,035,594Pro
                forma weighted average number of shares outstanding, excluding shares
                subject to possible conversion - diluted
            
            
            4,876,998
            
            
            7,567,563Pro
                forma net income per share, excluding shares subject to possible
                conversion - diluted
            
            $
            0.06
            
            $
            0.04







**[8]
      New Accounting Pronouncements:**




In
      June
      2006, the Financial Accounting Standards Board (“FASB”) issued FASB
      Interpretation No. 48, “Accounting for Uncertainty in Income Taxes - an
      interpretation of FASB Statement No. 109” (“FIN 48”), which prescribes a
      recognition threshold and measurement attribute for the financial statement
      recognition and measurement of a tax position taken or expected to be taken
      in a
      tax return. FIN 48 also provides guidance on derecognition, classification,
      interest and penalties, accounting in interim periods, disclosure and
      transition. FIN 48 is effective for fiscal years beginning after December 15,
      2006. We do not expect the adoption of FIN 48 to have a material impact on
      our
      financial reporting, and we are currently evaluating the impact, if any, the
      adoption of FIN 48 will have on our disclosure requirements.




The
      Company does not believe that any recently issued, but not yet effective,
      accounting standards if currently adopted would have a material effect on the
      accompanying financial statements.




**[9]** **Accounting
      for Warrants and Derivative Instruments**




On
      March
      22, 2006, the Company sold 6,250,000 Units in the Offering. On March 27, 2006,
      the underwriters for the initial public offering exercised their over-allotment
      option and purchased an additional 937,500 Units. Each Unit consists of one
      share of the Company’s common stock and one warrant (“Warrant”). Each Warrant
      entitles the holder to purchase from the Company one share of common stock
      at an
      exercise price of $6.00 commencing on the later of (a) March 17, 2007 or (b)
      the
      completion of an Acquisition. The Warrants will expire March 17, 2010. The
      Warrants will be redeemable, at the Company’s option at a price of $.01 per
      Warrant upon 30 days notice after the Warrants become exercisable, only in
      the
      event that the last sale price of the common stock is at least $11.50 per share
      for any 20 trading days within a 30 trading day period ending on the third
      day
      prior to the date on which notice of redemption is given.




The
      Company sold to Morgan Joseph & Co. Inc. and Roth Capital Partners, LLC, the
      underwriters, an option, for $100, to purchase up to a total of 312,500 Units
      at
      $10.00 per Unit.




In
      September 2000, the Emerging Issues Task Force issued EITF 00-19, “Accounting
      for Derivative Financial Instruments Indexed to, and Potentially Settled in,
      a
      Company's Own Stock” (“EITF 00-19”), which requires freestanding contracts that
      are settled in a company's own stock, including common stock warrants, to be
      designated as an equity instrument, asset or a liability. Under the provisions
      of EITF 00-19, a contract designated as an asset or a liability must be carried
      at fair value on a company’s balance sheet, with any changes in fair value
      recorded in the company’s results of operations. A contract designated as an
      equity instrument must be included within equity, and no fair value adjustments
      are required from period to period. In accordance with EITF 00-19, the 7,187,500
      Warrants issued as part of the Units issued in the Offering are separately
      accounted for as liabilities. The fair value of these Warrants is shown on
      the
      Company’s balance sheet and the unrealized changes in the values of these
      derivatives are shown on the Company’s statement of operations as “Gain (loss)
      on derivative liabilities.” The Warrants started trading on the over-the-counter
      bulletin board on June 6, 2006. The fair value of the Warrants prior to June
      6,
      2006 was estimated based on the market price of the Units. To the extent that
      the market price increases or decreases, the Company’s derivative liabilities
      will also increase or decrease, including the effect on the Company’s statement
      of operations.




8


**Echo
          Healthcare Acquisition Corp.**
 **(a
          development stage company)**
 **Notes
          to Condensed Financial Statements—(Continued)**
 **(Unaudited)**


Fair
      values for exchange traded securities and derivatives are based on quoted market
      prices. Where market prices are not readily available, fair values are
      determined using market based pricing models incorporating readily observable
      market data and requiring judgment and estimates. The
      underwriter’s purchase option to purchase 312,500 Units is considered an equity
      instrument, as all criteria to be accounted for as an equity instrument have
      been fulfilled. The
      embedded derivatives, the Warrants to purchase 312,500 shares for $6.00 each,
      follow the same accounting guidelines as the Warrants issued in the initial
      public offering and are considered a liability. In addition, the founding
      director warrants to purchase 458,333 shares of common stock are considered
      equity instruments, as all criteria to be accounted for as an equity instrument
      have been fulfilled.




Statement
      of Financial Accounting Standard (‘‘SFAS”) No. 133, “Accounting for Derivative
      Instruments and Hedging Activities,’’ as amended, requires all derivatives to be
      recorded on the balance sheet at fair value. Furthermore, paragraph 11(a) of
      SFAS No. 133 precludes contracts issued or held by a reporting entity that
      are
      both (1) indexed to its own stock and (2) classified as stockholders' equity
      in
      its statement of financial position from being treated as derivative
      instruments. The Company has determined that the option to purchase 312,500
      units, each unit consisting of one warrant and one share of common stock, is
      a
      derivative that also contains an embedded derivative. The option to purchase
      312,500 Units and the Warrants to purchase an additional 312,500 shares, the
      latter being the embedded derivative, are separately valued and accounted for
      on
      the Company’s balance sheet. While the Warrants to purchase the additional
      312,500 shares are indexed to the Company's common stock, the
      fact
      that the shares underlying the Warrants are registered, **** requires
      the Company to classify these instruments as a liability in accordance with
      EITF
      00-19, paragraph 14.  The
      embedded derivatives, which are the Warrants to purchase 312,500 shares for
      $6.00 each, follow the same accounting guidelines as the Warrants issued in
      the
      initial public offering and are considered a liability. These derivative
      liabilities will continue to be adjusted to fair value at each reporting
      date.




The
      Company performed a valuation of the option to purchase 312,500 units, and
      then
      allocated its fair value to its two components, the underlying 312,500 shares
      and the embedded Warrants to purchase additional 312,500 shares. The fair value
      at inception was calculated to be $484,742, or $1.55 per unit, of which $436,268
      was allocated to the 312,500 shares included in the Units and $48,474 was
      allocated to the Warrants to purchase an additional 312,500 shares, according
      to
      their respective fair values.




The
      pricing model the Company uses for determining fair values of the purchase
      option is the Black-Scholes Pricing Model. Valuations derived from this model
      are subject to ongoing internal and external verification and review. The model
      uses market-sourced inputs such as interest rates, market prices and
      volatilities. Selection of these inputs involves management’s judgment and may
      impact net income.




In
      particular, the Company uses volatility rates based upon a sample of comparable
      companies in its industry, special purpose acquisition corporations. At the
      time
      a company to be acquired has been identified and agreements to acquire are
      in
      place, the volatility rates will be based on comparable companies to the
      acquired company. The Company uses a risk-free interest rate, which is the
      rate
      on U. S. Treasury instruments, for a security with a maturity that approximates
      the estimated remaining contractual life of the derivative. The volatility
      factor used in the Black-Scholes Pricing Model has a significant effect on
      the
      resulting valuation of the derivative liabilities on the Company’s balance
      sheet. The volatility for the calculation of the embedded derivatives was
      approximated at 0.27, this volatility-rate will likely change in the future.
      The
      Company uses the closing market price of the Company’s common stock at the end
      of a quarter when a derivative is valued at fair value. The Company’s stock
      price will also change in the future. To the extent that the Company’s stock
      price increases or decreases, the Company’s derivative liabilities will also
      increase or decrease, absent any change in volatility rates and risk-free
      interest rates.




**NOTE
      D — INITIAL PUBLIC OFFERING** ****




On
      March
      22, 2006, the Company sold 6,250,000 Units in the Offering. On March 27, 2006,
      the underwriters for the initial public offering exercised their over-allotment
      option and purchased an additional 937,500 Units. Each Unit consists of one
      share of the Company’s common stock and one Warrant. Each Warrant entitles the
      holder to purchase from the Company one share of common stock at an exercise
      price of $6.00 commencing on the later of (a) March 17, 2007 or (b) the
      completion of an Acquisition. The Warrants will expire March 17, 2010. The
      Warrants will be redeemable, at the Company’s option at a price of $.01 per
      Warrant upon 30 days notice after the Warrants become exercisable, only in
      the
      event that the last sale price of the common stock is at least $11.50 per share
      for any 20 trading days within a 30 trading day period ending on the third
      day
      prior to the date on which notice of redemption is given.




9




**Echo
          Healthcare Acquisition Corp.**
 **(a
          development stage company)**
 **Notes
          to Condensed Financial Statements—(Continued)**
 **(Unaudited)**


The
      Company sold to Morgan Joseph & Co. Inc. and Roth Capital Partners, LLC, the
      underwriters, an option for $100 to purchase up to a total of 312,500 Units
      at
      $10.00 per Unit. The option has been valued at the date of issuance at
      approximately $485,000, based upon a Black-Scholes model, using an expected
      life
      of four years, volatility of 27% and a risk-free interest rate of 4.35%.
      The volatility calculation of 27% is based on the four-year volatility of a
      subgroup of the Russell 2000 Healthcare Index, which consisted of the
      twenty-five smallest constituent companies measured by overall market
      capitalization. Because the Company does not have a trading history, the Company
      needed to estimate the potential volatility of its units, which will depend
      on a
      number of factors which cannot be ascertained at this time. The Company referred
      to this subgroup of the four-year volatility of the Russell 2000 Healthcare
      Index because its management believes that the volatility of these constituent
      companies is a reasonable benchmark to use in estimating the expected volatility
      for the Company’s units. Although an expected life of four years was taken into
      account for purposes of assigning a fair value to the option, if the Company
      does not consummate an Acquisition within the prescribed time period and
      liquidates, the option would become worthless.




The
      units
      issuable upon exercise of this option are identical to the Units in the
      Offering. The option is exercisable commencing on the later of the consummation
      of a business combination or one year from March 17, 2006, and expires five
      years from the date of issuance. The option and the 312,500 units, the 312,500
      shares of common stock and the 312,500 warrants underlying such units, and
      the
      312,500 shares of common stock underlying such warrants, are subject to a
      180-day lock-up. The underwriters will not sell, transfer, assign, pledge,
      or
      hypothecate this option or the securities underlying this option, nor will
      they
      engage in any hedging, short sale, derivative, put, or call transaction that
      would result in the effective economic disposition of this option or the
      underlying securities for a period of 180 days from the date of the Offering.
      However, the option may be transferred to any underwriter and selected dealer
      participating in the Offering and their bona fide officers or partners. Although
      the option and its underlying securities have been registered, the option grants
      holders demand and “piggy back” registration rights for periods of five and
      seven years, respectively, from March 17, 2006. These rights apply to all of
      the
      securities directly and indirectly issuable upon exercise of the option. The
      exercise price and number of units issuable upon exercise of the option may
      be
      adjusted in certain circumstances including in the event of a stock dividend,
      or
      our recapitalization, reorganization, merger or consolidation. However, the
      option exercise price or underlying units will not be adjusted for issuances
      of
      common stock at a price below the option exercise price. The option may be
      exercised for cash, or on a “cashless” basis, at the holder’s option, such that
      the holder may receive a net amount of shares equal to the appreciated value
      of
      the option (the difference between the exercise prices of the option and the
      underlying warrants, and the market price of the underlying securities).




Certain
      Founding Stockholders purchased an aggregate of 458,333 warrants concurrently
      with the closing of the Offering at a price of $1.20 per warrant directly from
      the Company. They have agreed that these warrants purchased by them will not
      be
      sold or transferred until completion of an Acquisition. In exchange for agreeing
      to purchase such warrants, these Founding Stockholders were sold an aggregate
      of
      171,662 shares of previously issued common stock from other Founding
      Stockholders in a private transaction for a purchase price equal to the initial
      price paid by selling Founding Stockholders. The transaction is accounted for
      as
      an equity transaction and had no effect on the financial position or operations
      of the Company.




The
      Company agreed to pay the Underwriters of the Offering fees equal to 7.0% of
      the
      gross proceeds, of which the Underwriters have agreed to defer 3.0% of their
      fees (totaling $1,725,000) until consummation of an Acquisition. The Company
      will pay the deferred fees upon an Acquisition out of the proceeds of the
      Offering held in trust. If there is no Acquisition, these Fees will not be
      paid.




Upon
      consummation of the Offering, all shares of common stock owned by the Founding
      Stockholders were placed into an escrow account maintained by Corporate Stock
      Transfer, Inc., acting as escrow agent. These shares will be released from
      escrow in two equal increments:




·
            781,250
                shares on the expiration of three years from March 17, 2006;
                and




·
            781,250
                shares on upon the completion of an Acquisition and the last sale
                price of
                the Company’s common stock thereafter equals or exceeds $11.50 per share
                for any 20 trading days within any 30 trading day period beginning
                after
                the Company completes its initial
                Acquisition.




10


**Echo
          Healthcare Acquisition Corp.**
 **(a
          development stage company)**
 **Notes
          to Condensed Financial Statements—(Continued)**
 **(Unaudited)**


The
      foregoing restrictions are subject to certain limited exceptions such as
      transfers to family members and trusts for estate planning purposes, upon death
      of an escrow depositor, transfers to an estate or beneficiaries, or other
      specified transfers. Even if transferred under these circumstances, the shares
      will remain in the escrow account. The shares are releasable from escrow prior
      to the above dates only if following the initial Acquisition, the Company
      consummates a transaction in which all of the stockholders of the combined
      entity have the right to exchange their shares of common stock for cash,
      securities or other property. If the price of the Company’s common stock fails
      to reach the trigger price for the required number of trading days described
      above, the 781,250 shares subject to this condition will remain in escrow until
      a transaction is consummated in which all stockholders of the combined entity
      have the right to exchange their common stock for cash, securities or other
      property, or until the Company ceases operations.




The
      shares placed in escrow subject to performance and market conditions as defined
      in the agreement, the attainment of which can not be assured, are considered
      contingent shares. As a result, these shares are not included in the income
      (loss) per common share calculations. The agreement provides that the shares
      are
      to be released to the initial stockholders (all of whom are officers and/or
      directors or are a related party to an officer and director) upon meeting
      certain performance and market conditions. Accordingly, the Company may be
      required to recognize a charge based on the fair value of the shares at the
      time
      the shares are released from the escrow. (The amount of such charge could be
      equal to the number of shares times the market value at such date. Based on
      the
      target price of $11.50, such charge would be approximately $8,984,000.)




**NOTE
      E—NOTES PAYABLE TO** **AND
      LINE OF CREDIT FROM FOUNDING STOCKHOLDERS**




The
      Company had issued notes totaling $200,000 to certain of its Founding
      Stockholders. The notes were satisfied on March 22, 2006.




Certain
      of the Company’s Founding Stockholders have entered into a limited recourse
      revolving line of credit agreement, (the “Working Capital Line of Credit”),
      pursuant to which the Company may have up to $750,000 of borrowings outstanding
      at any time. Amounts outstanding under the Working Capital Line of Credit will
      bear interest at a rate equal to the rate of interest earned on the net proceeds
      of the offering held in the Trust Fund. No interest shall be payable until
      the
      principal of the loan becomes payable. The loans under the limited recourse
      revolving line of credit agreement shall be payable only upon the consummation
      of the initial Acquisition or upon certain events of default. If the Company
      does not consummate the initial Acquisition within two years following the
      completion of the offering, the loans under the limited recourse revolving
      line
      of credit agreement shall terminate and the payees shall have no right to
      repayment thereunder. At June 30, 2006
      $105,700 had been
      advanced under this line of credit. The Company has incurred interest of $1,135
      through June 30, 2006, which is included in accrued expenses.




**NOTE
      F —RELATED PARTY TRANSACTION**




The
      Company has agreed to pay a Founding Stockholder an administrative fee of $7,500
      per month, $5,500 of which shall be deferred until the completion of the initial
      Acquisition, for office space and general and administrative services from
      March
      22, 2006 through the effective date of the initial Acquisition. If there is
      no
      Acquisition, the deferred fees will not be paid. During the period ended June
      30, 2006, $24,435 **** had
      been
      recorded as expense. At June 30, 2006, the Company had a liability of $17,919,
      which is included in accrued expenses.




11


**Echo
          Healthcare Acquisition Corp.**
 **(a
          development stage company)**
 **Notes
          to Condensed Financial Statements—(Continued)**
 **(Unaudited)**


**NOTE
      G — OFFICERS AND DIRECTORS**




The
      Company’s officers and directors have agreed with Morgan Joseph & Co. Inc.
      and Roth Capital Partners, LLC, that during the first 40 trading day period
      beginning the later of the date the separate trading of the common stock and
      the
      Warrants has commenced or 60 days after the end of the “restricted period,” they
      or certain of their affiliates or designees collectively will purchase up to
      $300,000 of Warrants in the public marketplace at prices not to exceed $1.20
      per
      Warrant. They have further agreed that any Warrants purchased by them or their
      affiliates or designees will not be sold or transferred until the completion
      of
      an Acquisition. As of June 30, 2006, they had purchased $235,720 of
      Warrants.




**NOTE
      H —COMMITMENTS AND OTHER MATTERS**




On
      January 29, 2006, Powell Goldstein LLP agreed to defer its legal fees related
      to
      the Offering totaling $200,000 until the completion of the initial Acquisition
      or the liquidation of the Company, in which case the deferred fees would not
      be
      payable out of the net proceeds of the offering held in trust. These fees
      constitute a cost of the offering and an obligation of the Company. If there
      is
      no Acquisition, this obligation will not be paid.




On
      January 29, 2006, Tri-State Financial, which provided financial printing
      services in connection with the Offering, agreed to defer payment of 20% of
      its
      printing fees until the completion of the initial Acquisition (in which case
      the
      deferred fees would be payable out of the net proceeds of the offering held
      in
      trust) or the liquidation of the Company (in which case the deferred fees would
      not be payable out of the net proceeds of the offering held in trust). These
      fees, totaling $93,233, constitute a cost of the offering and an obligation
      of
      the Company. If there is no Acquisition, this obligation will not be
      paid.




12





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




The
      following Management’s Discussion and Analysis of Financial Condition and
      Results of Operations should be read in conjunction with our financial
      statements and the related notes and schedules thereto.




**Overview**




We
      were
      formed on June 10, 2005 as a blank check company for the purpose of acquiring,
      through a merger, capital stock exchange, asset acquisition or other similar
      business combination, one or more domestic or international operating businesses
      in the healthcare industry. We intend to use cash derived from the net proceeds
      of our initial public offering, which closed on March 22, 2006, and the exercise
      by the underwriters of their over-allotment option, which closed on March 27,
      2006, together with our subordinated revolving line of credit for up to
      $750,000, or our Line of Credit, and any additional financing arrangements
      that
      we undertake, to effect a business combination.




Through
      June 30, 2006, our efforts have been limited to organizational activities,
      activities relating to our initial public offering, and activities related
      to
      pursuing potential target businesses; we have not generated any revenues. As
      of
      June 30, 2006, we had accrued expenses and accrued offering costs of approximately
      $79,600 and $152,713 respectively. In addition, we had cash of approximately
      $25,922, which was principally funded pursuant to a $105,700 draw on
      our Line of
      Credit.




On
      March
      22, 2006, we consummated our initial public offering. The net proceeds from
      our
      initial public offering were approximately $45,446,690, after deducting offering
      expenses of approximately $1,053,300 and underwriting discounts of $3,500,000,
      including deferred amounts totaling approximately $1,793,200.




On
      March
      27, 2006, the underwriters for our initial public offering exercised their
      over-allotment option and purchased 937,500 additional units. The net proceeds
      from the exercise of the over-allotment option were approximately $6,975,000,
      after deducting underwriting discounts of $525,000, including deferred amounts
      totaling $225,000. Except for the cost of the underwriting, we have not yet
      determined the amount of any expenses attributable to the sale of units pursuant
      to the exercise of the over-allotment option.




As
      of
      March 27, 2006, after giving effect to the sale of units pursuant to our initial
      public offering and the exercise of the over-allotment option and proceeds
      from
      the sale of warrants to founding directors totaling $550,000, approximately
      $54,947,000 was held in trust, and we had approximately $233,000 of our offering
      proceeds not held in trust available to us for our activities in connection
      with
      identifying and conducting due diligence of a suitable business combination,
      and
      for general corporate matters. Through June 30, 2006, the funds held in trust
      had earned $703,806 in interest income.




**Critical
      Accounting Policies** **and
      Accounting Estimates**




The
      preparation of financial statements and related disclosures in conformity with
      accounting principles generally accepted in the United States requires
      management to make estimates and assumptions that affect the reported amounts
      of
      assets and liabilities, disclosure of contingent assets and liabilities at
      the
      date of the financial statements, and revenues and expenses during the periods
      reported. Actual results could materially differ from those estimates. We have
      determined that we currently are not subject to any critical accounting
      policies.




**Results
      of Operations and Known Trends or Future Events**




We
      have
      neither engaged in any operations nor generated revenues to date.  Since
      our inception, our only activities have been organizational activities and
      those
      necessary to prepare for our Offering, and thereafter, certain activities
      related to pursuing a target business.  We will not generate any operating
      revenues until the completion of a business combination, if any.  We have
      generated non-operating income in the form of interest income on cash and cash
      equivalents and our other short term investments.




For
      the
      three months ended June 30, 2006, we had net income of approximately
      $774,418, derived primarily from a gain on a change in our derivative
      liabilities and income related to the cash held in our trust account. For the
      six months ended June 30, 2006, we had net income of approximately
      $625,408, derived primarily from a gain on a change in our derivative
      liabilities and income related to the cash held in our trust account. For the
      period from June 10, 2005 (date of inception) through June 30, 2006, we had
      net income of approximately $487,289, derived primarily from a gain on a change
      in our derivative liabilities and income related to the cash held in our trust
      account.




13




**Liquidity
      and Capital Resources**




We
      will
      use substantially all of the net proceeds discussed above to acquire one or
      more
      operating businesses, including identifying and evaluating prospective
      acquisition candidates, selecting one or more operating businesses, and
      structuring, negotiating and consummating the business combination, including
      the making of a down payment or the payment of exclusivity or similar fees
      and
      expenses, if any. However, we may not use all of the proceeds held in the trust
      account in connection with a business combination, either because the
      consideration for the business combination is less than the proceeds in trust
      or
      because we finance a portion of the consideration with capital stock or debt
      securities that we can issue. In that event, the proceeds held in the trust
      account as well as any other net proceeds not expended will be used to finance
      the operations of the target business or businesses.




We
      may
      issue additional capital stock or debt securities to finance a business
      combination. The issuance of additional capital stock, including upon conversion
      of any convertible debt securities we may issue, or the incurrence of debt,
      could have material consequences on our business and financial condition. The
      issuance of additional shares of our capital stock (including upon conversion
      of
      convertible debt securities):




·
            may
                significantly reduce the equity interest of our
                stockholders;




·
            will
                likely cause a change in control if a substantial number of our shares
                of
                common stock or voting preferred stock are issued, which may affect,
                among
                other things, our ability to use our net operating loss carry forwards,
                if
                any, and may also result in the resignation or removal of one or
                more of
                our present officers and directors;
                and




·
            may
                adversely affect prevailing market prices for our common
                stock.




Similarly,
      if we issue debt securities, it could result in:




·
            default
                and foreclosure on our assets if our operating revenues after a business
                combination are insufficient to pay our debt
                obligations;




·
            acceleration
                of our obligations to repay the indebtedness even if we make all
                principal
                and interest payments when due if we breach the covenants contained
                in any
                debt securities, such as covenants that require the satisfaction
                or
                maintenance of certain financial ratios or reserves, without a waiver
                or
                renegotiation of such covenants;




·
            an
                obligation to immediately repay all principal and accrued interest,
                if
                any, upon demand to the extent any debt securities are payable on
                demand;
                and




·
            our
                inability to obtain additional financing, if necessary, to the extent
                any
                debt securities contain covenants restricting our ability to obtain
                additional financing while such security is outstanding, or to the
                extent
                our existing leverage discourages other potential
                investors.




We
      believe that we have sufficient funds available under our Line of Credit to
      allow us to operate for at least the next 18 months, assuming that a business
      combination is not consummated during that time. Over this time period, we
      anticipate making the following expenditures:




·
            approximately
                $250,000 of expenses for legal and accounting fees attendant to the
                due
                diligence investigations, structuring and negotiating of a business
                combination;




·
            approximately
                $50,000 for reimbursement of out-of-pocket expenses for the due diligence
                and investigation of a target
                business;




14




·
            approximately
                $50,000 of expenses in legal and accounting fees relating to our
                reporting
                obligations to the Securities and Exchange Commission;




·
            approximately
                $352,000 for general working capital that will be used for miscellaneous
                expenses and reserves, including expenses of structuring and negotiating
                a
                business combination, including the making of a down payment or the
                payment of exclusivity or similar fees and expenses;
                and




·
            approximately
                $42,000for administrative fees relating to office space fortwenty-one
                (21)months. However, an additional $115,500in
                the administrative fees will be deferred and shall be payable upon
                the
                consummation of a business combination. In the event we must liquidate
                our
                company prior to such a business combination,these
                fees will not be paid with proceeds of our public offering held in
                trust.




At
      June
      30, 2006, we had total assets of $55,746,166, stockholders’ equity of
      $36,590,362 (not including $11,076,761 that may be converted to cash by
      shareholders voting against a business combination) and a Line of Credit
      obligation of $105,700.




The
      following table shows the amounts due in connection with the contractual
      obligations described below as of June 30, 2006.




**Payments
                due by period****Total**
            
            **Less
                than**
              **1
                year**
            
            **1-3
                years**
            
            **3-5
                years**
            
            **More
                than**
              **5
                years****(In
                thousands)**Long-term
                debt (1)
            
            $
            105,700
            
            $
            -
            
            $
            105,700
            
            $
            -
            
            $
            -Administrative
                Fees Obligations (2)
            
            
            157,500
            
            
            90,000
            
            
            67,500
            
            
            -
            
            
            -Total
            
            $
            263,200
            
            $
            90,000
            
            $
            173.200
            
            $
            -
            
            $
            -





(1) As
      of
      June 30, 2006, we had drawn $105,700 on our Line of Credit which will become
      due
      at the consummation of a business combination, which could occur in less than
      one year but may occur as late as March 22, 2008.




(2) The
      administrative fees obligations represent the full amount of rent payable to
      Windy City, Inc. for office space, utilities and personnel, $5,500 per month
      of
      which is deferred until the consummation of a business combination.




During
      the second quarter ended June 30, 2006, there were payments to directors and
      officers of $125,000 representing reimbursement of road show expenses.




Since
      our
      initial public offering, we have been actively engaged in sourcing a suitable
      business combination candidate. We have met with target companies, service
      professionals and other intermediaries to discuss our
      company, the background of our management and our combination preferences. In the course
      of
      these discussions, we have also spent time explaining the capital structure
      of
      the initial public offering, the combination approval process and the timeline
      under which we are operating before the proceeds of the offering are returned
      to
      investors.




Consistent
      with the disclosures in our prospectus dated March 17, 2006, we have focused
      our
      search on companies that span a broad spectrum of the healthcare industry.
      Overall, we would gauge the environment for target companies to be competitive,
      and we believe that private equity firms, other blank check companies and
      strategic buyers represent our biggest competition. Our management believes
      that
      many of the fundamental drivers of alternative investment vehicles like our
      company are becoming more accepted by investors and potential business
      combination targets; these include a difficult environment for initial public
      offerings, a cash-rich investment community looking for differentiated
      opportunities for incremental yield and business owners seeking new ways to
      maximize their shareholder value while remaining invested in the business.
      However, there can be no assurance that we will find a suitable business
      combination in the allotted time.  Furthermore, it is possible that we
      could use a portion of the funds not in the trust account to make a deposit,
      down payment or fund a *“no-shop”* provision with respect to a particular proposed business combination. In the
      event we were ultimately required to forfeit such funds (whether as a result
      of
      our breach of the agreement relating to such payment or otherwise), we may
      not
      have a sufficient amount of working capital available outside of the trust
      account to pay expenses related to finding a suitable business combination
      without securing additional financing. If we were unable to secure additional
      financing, we would most likely fail to consummate a business combination in
      the
      allotted time and would be forced to liquidate.




15




**Risk
      Factors that May Affect Future Results**




This
      Quarterly Report on Form 10-Q includes forward-looking statements within the
      meaning of Section 27A of the Securities Act of 1933, as amended, and
      Section 21E of the Securities Exchange Act of 1934, as amended. We have
      based these forward-looking statements on our current expectations and
      projections about future events. These forward-looking statements are subject
      to
      known and unknown risks, uncertainties and assumptions about us that may cause
      our actual results, levels of activity, performance or achievements to be
      materially different from any future results, levels of activity, performance
      or
      achievements expressed or implied by such forward-looking statements. In some
      cases, you can identify forward-looking statements by terminology such as “may,”
“should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,”
“estimate,” “continue,” or the negative of such terms or other similar
      expressions. Factors that might cause or contribute to such a discrepancy
      include, but are not limited to, those described in our other filings with
      the
      Securities and Exchange Commission, including our registration statement on
      Form
      S-1/A as filed on March 8, 2006.




**Item
      3. Quantitative and Qualitative Disclosures about Market
      Risk**




Market
      risk is the sensitivity of income to changes in interest rates, foreign currency
      exchange rates, commodity prices, equity prices, and other market-driven rates
      or prices. We are not presently engaged in and, if a suitable business target
      is
      not identified by us prior to the prescribed liquidation date of the trust
      fund,
      we may not engage in, any substantive commercial business. Accordingly, we
      are
      not and, until such time as we consummate a business combination, we will not
      be, exposed to risks associated with foreign exchange rates, commodity prices,
      equity prices or other market-driven rates or prices. The net proceeds of our
      initial public offering held in the trust fund have been invested only in
      securities meeting certain conditions under Rule 2a-7 promulgated under the
      Investment Company Act of 1940. Given our limited risk exposure related to
      these
      short-term securities, we do not view the interest rate risk to be
      significant.




**Item
      4. Controls and Procedures**




*Evaluation
      of Disclosure Controls and Procedures*




Our
      principal executive officer and principal financial officer are responsible
      for
      establishing and maintaining disclosure controls and procedures as defined
      in
      the rules promulgated under the Securities Exchange Act of 1934, as amended
      (the
“Exchange Act”). We evaluated the effectiveness of the design and operation of
      our disclosure controls and procedures as of June 30, 2006 and, based on that
      evaluation, our principal executive officer and principal financial officer
      have
      concluded that these controls and procedures were effective as of June 30,
      2006.




Disclosure
      controls and procedures are the controls and other procedures designed to ensure
      that information that we are required to disclose in our reports under the
      Exchange Act is recorded, processed, summarized and reported within the time
      periods required. Disclosure controls and procedures include, without
      limitation, controls and procedures designed to ensure that information we
      are
      required to disclose in the reports that we file **** under
      the
      Exchange Act is accumulated and communicated to our management, including our
      principal executive officer and principal financial officer, as appropriate,
      to
      allow timely decisions regarding required disclosure.




**PART
      II** **-** **OTHER INFORMATION**




**Item
      1.    Legal Proceedings**




There
      are
      no material legal proceedings pending against us.




**Item
      1A. Risk Factors**




We
      filed
      a registration statement on Form S-1/A with the Securities and Exchange
      Commission on March 8, 2006, which describes our risk factors. We have not
      experienced any material changes from the risk factors previously disclosed
      on
      our Form S-1/A.




16




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




Our
      units
      are traded on the over-the-counter bulletin board under the symbol “EHHAU.OB.”
On June 6, 2006, the stock and warrants underlying our units were permitted
      to
      trade separately. Our common stock is traded on the over-the-counter bulletin
      board under the symbol “EHHA.OB.” Our warrants are traded on the
      over-the-counter bulletin board under the symbol “EHHAW.OB.” Our units continue
      to trade on the over-the-counter bulletin board under the symbol
“EHHAU.OB.”




On
      March
      22, 2006, we consummated our initial public offering of 6,250,000 units. The
      securities sold in the initial public offering were registered under the
      Securities Act of 1933, as amended, on a registration statement on Form S-1/A
      (File No. 333-126650). The Securities and Exchange Commission declared our
      registration statement effective on March 17, 2006. We also sold Morgan Joseph
      and Co. Inc. and Roth Capital Partners, LLC, for $100, as additional
      compensation, an option to purchase up to 312,500 units at $10.00 per unit.
      Concurrently with the initial public offering, we sold 458,333 warrants to
      certain of our founding stockholders for a total of $550,000 in a private
      placement, or Private Placement. The net proceeds from our initial public
      offering and Private Placement were approximately $45,446,690, after deducting
      offering expenses of approximately $827,500 and underwriting discounts of
      $3,500,000, including deferred amounts totaling approximately $1,793,200. As
      of
      March 22, 2006, $47,780,000 of this amount had been placed in trust for purposes
      of consummating a business combination, with approximately $200,000 remaining
      for operating purposes.




On
      March
      27, 2006, the underwriters for our initial public offering exercised their
      over-allotment option and purchased 937,500 additional units. The net proceeds
      from the exercise of the over-allotment option were approximately $6,975,000,
      after deducting underwriting discounts of $525,000, including deferred amounts
      of $225,000. Approximately $7,167,000 of the net proceeds from the exercise
      of
      the over-allotment option were placed in trust. We have not yet determined
      the
      amount of any expenses attributable to the sale of units pursuant to the
      exercise of the over-allotment option.




On
      March
      22, 2006, we used $200,000 of our general working capital to repay notes payable
      to certain of our initial stockholders. The loans were repaid in full, without
      interest, and cancelled.




On
      March
      22, 2006, we used $85,000 of our general working capital to pay premiums
      associated with our directors and officers liability insurance.




As
      of
      March 27, 2006, after giving effect to the sale of units pursuant to the
      exercise of the over-allotment option, approximately $54,947,000 was held in
      trust and we had approximately $33,000 of our offering proceeds not held in
      trust from the exercise of the over-allotment option remaining and available
      to
      us for our activities in connection with identifying and conducting due
      diligence of a suitable business combination, and for general corporate matters.




During
      the second quarter ended June 30, 2006, there were payments to directors and
      officers of $125,000 representing reimbursement of road show expenses.




**Item
      3.   Defaults Upon Senior Securities**




Not
      applicable.




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




None.




**I** **tem
      5.   Other Information**




None.




17





**Item
      6. Exhibits**




Exhibit
                No.
            
            Description31.1
            
            Rule
                13a-14(a)/15d-14(a) Certification of the Chief Executive
                Officer.31.2
            
            Rule
                13a-14(a)/15d-14(a) Certification of the Chief Financial
                Officer.32.1
            
            Section
                1350 Certification of the Chief Executive Officer.32.2
            
            Section
                1350 Certification of the Chief Financial Officer.





18




SIGNATURES







Pursuant
      to the requirements of the Securities Exchange Act of 1934, the registrant
      has
      duly caused this report to be signed on its behalf by the undersigned thereunto
      duly authorized.





ECHO
      HEALTHCARE ACQUISITION CORP.


Registrant




Date:     August
                21, 2006
            By:/S/
                GENE E. BURLESONGene
                E. BurlesonChief
                Executive OfficerDate:     August
                21, 2006
            By:/S/
                KEVIN PENDERGESTKevin
                PendergestChief
                Financial Officer




19