**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 September 30, 2006**


**or**





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


**Yes x** ****    **No o**





**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 o** **** **Accelerated
      filer o** **** **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 o**


**Indicate
      the number of shares outstanding of each of the issuer’s classes of common stock
      as of November 10, 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**





**September
                30,**
              **2006**
              **(Unaudited)**
            
            **December
                31,**
              **2005****ASSETS**Current
                Assets:Cash
            
            $
            13,387
            
            $
            14,807Prepaid
                expenses
            
            
            55,270
            
            
            —Total
                current assets
            
            
            68,657
            
            
            14,807Investments
                held in Trust Fund
            
            
            56,352,357
            
            
            —Deferred
                offering costs
            
            
            —
            
            
            601,413Deferred
                acquisition costs
            
            
            244,728Total
                assets
            
            $
            56,665,742
            
            $
            616,220**LIABILITIES
                AND STOCKHOLDERS’ EQUITY**Current
                liabilities:Accrued
                expenses
            
            $
            777,266
            
            $
            136,052Derivative
                liabilities
            
            
            5,226,204Notes
                Payable to Founding Stockholders
            
            
            —
            
            
            150,000Line
                of Credit from Founding Stockholders
            
            
            153,600
            
            
            —Accrued
                offering costs
            
            
            152,713
            
            
            443,288Deferred
                underwriting and other offering costs
            
            
            2,018,233
            
            
            —Total
                current liabilities
            
            
            8,328,016
            
            
            729,340**COMMITMENTS
                AND CONTINGENCIES**Common
                stock subject to possible conversion,1,436,781shares
                at a conversion value of approximately$7.77****per
                share, including accretion of allocated income of $185,414 (net of
                $95,516
                income taxes)
            
            
            11,169,319
            
            
            —**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
            
            
            972,478
            
            
            (138,120
            )Total
                stockholders’ equity (capital deficit)
            
            
            37,168,407
            
            
            (113,120
            )Total
                liabilities and stockholders’ equity
            
            $
            56,665,742
            
            $
            616,220





See
      Notes
      to Condensed Financial Statements.


1


**Echo
      Healthcare Acquisition Corp.**


**(a
      development stage company)**


**Condensed
      Statements of Operations**


**(Unaudited)**





**Nine
                Months**
              **ended**
              **September
                30,**
              **2006**
            
            **Three
                Months**
              **ended**
              **September
                30,**
              **2006**
            
            **Three
                Months**
              **ended**
              **September
                30,**
              **2005**
            
            **June
                10, 2005**
              **(Date
                of**
              **Inception)**
              **through**
              **September
                30,**
              **2005**
            
            **June
                10, 2005**
              **(Date
                of**
              **Inception)**
              **through**
              **September
                30,**
              **2006**Revenue
            
            $
            0
            
            $
            0
            
            $
            0
            
            $
            0
            
            $
            0Operating
                expenses
            
            
            (379,220
            )
            
            (225,145
            )
            
            (1,552
            )
            
            
            
            
            (516,340
            )Organization
                costs
            
            
            0
            
            
            0
            
            
            (1,000
            )
            
            (1,000
            )
            
            (1,000
            )Operating
                loss
            
            
            (379,220
            )
            
            (225,145
            )
            
            (2,552
            )
            
            (1,000
            )
            
            (517,340
            )Gain
                on derivative liabilities
            
            
            572,270
            
            
            356,645
            
            
            
            
            
            
            
            
            572,270Interest
                income
            
            
            1,405,357
            
            
            701,550
            
            
            
            
            
            
            
            
            1,405,357Income/(loss)
                before provision for income taxes
            
            
            1,598,407
            
            
            833,050
            
            
            (2,552
            )
            
            (1,000
            )
            
            1,460,287Provision
                for income taxes
            
            
            (302,395
            )
            
            (162,447
            )
            
            0
            
            
            0
            
            
            (302,395
            )Net
                Income/(loss)
            
            
            1,296,012
            
            
            670,603
            
            
            (2,552
            )
            
            (1,000
            )
            
            1,157,892Weighted
                average number of shares outstanding—basic
            
            
            6,074,290
            
            
            7,968,750
            
            
            1,562,500
            
            
            1,562,500Net
                income per share—basic
            
            $
            0.21
            
            $
            0.08
            
            $
            0.00
            
            $
            0.00Net
                Income
            
            $
            1,296,012
            
            $
            670,604Gain
                on derivative liabilities attributed to warrants
            
            
            (572,270
            )
            
            (356,645
            )Adjusted
                net income –diluted
                earnings
            
            $
            723,742
            
            $
            313,959Weighted
                average shares outstanding
            
            
            6,074,290
            
            
            7,968,750Shares
                from assumed conversion of warrants
            
            
            924,663
            
            
            1,383,569Weighted
                average number of shares outstanding – diluted
            
            
            6,998,953
            
            
            9,352,319Net
                income per share – diluted
            
            $
            0.10
            
            $
            0.03





See
      Notes
      to Condensed Financial Statements.


2


**Echo
      Healthcare Acquisition Corp.**


**(a
      development stage company)**


**Condensed
      Statements of Stockholders’ Equity**





**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
                from Founding 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, excludes Derivative
                Liabilities)
            
            
            7,187,500
            
            
            719
            
            
            52,402,489
            
            
            
            
            
            52,403,208Proceeds
                subject to possible conversion of1,436,781shares
            
            
            
            
            
            
            
            
            (10,983,905
            )
            
            
            
            
            (10,983,905
            )Proceeds
                from issuance of underwriter’s purchase option
            
            
            
            
            
            
            
            
            100
            
            
            
            
            
            100Reclassification
                of proceeds allocated to warrants - derivatives liability
            
            
            
            
            
            
            
            
            (5,798,474
            )
            
            
            
            
            (5,798,474
            )Proceeds
                from sale of warrants to Founding Stockholders
            
            
            
            
            
            
            
            
            550,000
            
            
            
            
            
            550,000Accretion
                of trust fund income for the period relating to common stock subject
                to
                redemption, net of tax
            
            
            
            
            
            
            
            
            
            
            
            (185,414
            )
            
            (185,414
            )Net
                Income for the period
            
            
            
            
            
            
            
            
            
            
            
            1,296,012
            
            
            1,296,012**Balance**–**September 30, 2006 (unaudited)**
            
            
            8,750,000
            
            $
            875
            
            $
            36,195,054
            
            $
            972,478
            
            $
            37,168,407





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
                September**
              **30,
                2006**
            
            **June
                10, 2005 (Date**
              **of
                Inception)**
              **through
                September**
              **30,
                2006****Cash
                flows from operating activities:**Net
                income (loss)
            
            $
            1,296,012
            
            $
            1,157,892Adjustments
                to reconcile net income (loss) to net cash used by operating
                activities:Gain
                on derivative liabilities
            
            
            (572,270
            )
            
            (572,270
            )Changes
                in:Prepaid
                Expenses
            
            
            (55,270
            )
            
            (55,270
            )Accrued
                expenses
            
            
            396,486
            
            
            532,538Net
                cash used by operating activities
            
            
            1,064,958
            
            
            1,062,890**Cash
                flows from investing activities:**Increase
                in Investments held in Trust Fund
            
            
            (56,352,357
            )
            
            (56,352,357
            )Net
                cash used in investing activities
            
            
            (56,352,357
            )
            
            (56,352,357
            )**Cash
                flows from financing activities:**Proceeds
                from notes payable to Founding Stockholders
            
            
            50,000
            
            
            200,000Proceeds
                from Line of Credit from Founding Stockholders
            
            
            153,600
            
            
            153,600Payments
                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
            
            
            55,285,979
            
            
            55,302,854**Net
                increase (decrease) in cash**
            
            
            (1,420
            )
            
            13,387Cash—beginning
                of period
            
            
            14,807
            
            
            0**Cash—end
                of period**
            
            **$**
            13,387
            
            **$**
            13,387Supplemental
                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
            
            $
            5,226,204
            
            $
            5,226,204Accrual
                of deferred acquisition costs
            
            $
            244,728
            
            $
            244,728








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
      financial statements of Echo Healthcare Acquisition Corp. (the “Company”) at
      September 30, 2006 and for the periods ended September 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 September 30, 2006 and the results of its operations and
      its
      cash flow for the periods ended September 30, 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 filed on March 8, 2006, as amended
      and in the Company’s current report on Form 8-K filed on March 24, 2006 and Form
      8-K/A filed on August 22, 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, or other similar acquisition one or more domestic or international
      operating businesses in the healthcare industry (“Acquisition”). The Company has
      neither engaged in any operations nor 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 September 5, 2006, the Company
      incorporated a wholly-owned subsidiary, PetDRx Acquisition Corp. (“PetDRx
      Acquisition Corp.”) for the sole purpose of acquiring XLNT Veterinary Care,
      Inc., as described in Note H below. As of September 30, 2006, there were no
      assets and liabilities and no activity for PetDRx Acquisition Corp.




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 $45,447,000, 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 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**


**(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 that 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 September
      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 September 30, 2006 and December 31, 2005 that were related to the
      Offering and were charged to stockholders’ 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**


**(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 no
      valuation allowance was necessary as of September 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 I) incurred through September 30,
      2006 that were related to the Offering and were charged to stockholders’ 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 and
      options, aggregating 6,998,954 shares and 7,968,750, have been included in
      the
      period from March 22, 2006 through September 30, 2006 and July 1, 2006 through
      September 30,2006 respectively. 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:




**Nine
                months**
              **ended**
              **September
                30,2006**
            
            **Three
                months**
              **ended**
              **September
                30,**
              **2006**Net
                income
            
            $
            1,296,012
            
            $
            670,603Interest
                income attributable to common stock subject to possible
                conversion
            
            $
            (185,414
            )
            $
            (92,558
            )Pro
                forma net income attributable to common stockholders not subject
                to
                possible conversion
            
            $
            1,110,598
            
            $
            578,045Pro
                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
            
            $
            0.25
            
            $
            0.08Net
                income
            
            $
            1,296,012
            
            $
            670,603Interest
                income attributable to common stock subject to possible
                conversion
            
            
            (185,414
            )
            
            (92,558
            )Gain
                on derivative liabilities attributed to warrants
            
            
            (572,270
            )
            
            (356,645
            )Pro
                forma net income attributable to common stockholders not subject
                to
                possible conversion less gain on derivative liabilities attributed
                to
                warrants
            
            $
            538,328
            
            $
            221,400Pro
                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
            
            
            924,663
            
            
            1,383,569Pro
                forma weighted average number of shares outstanding, excluding shares
                subject to possible conversion – diluted
            
            
            5,239,461
            
            
            7,915,538Pro
                forma net income per share, excluding shares subject to possible
                conversion - diluted
            
            $
            0.10
            
            $
            0.02




7




**[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 fair value of the Warrants, which amounted to
      $5,750,000 at the issue date 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**


**(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 and the Company must maintain
      an
      effective registration statement, **** 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 (“Units”) in the Offering. On March
      27, 2006, the underwriters for our 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
      (“Warrants”). Accordingly, 7,187,500 Warrants are outstanding at September 30,
      2006. 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**


**(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 sale of the option has been accounted for as a cost
      attributable to the offering. Accordingly, there is no net impact on the
      Company’s financial position or results of operations, except for recording of
      the $100 proceeds from the sale. The option has been valued at the date of
      issuance at $484,742, 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 purchase 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). The Company must maintain the effectiveness of the
      registration of the shares underlying the underwriters’ purchase option. The
      agreement does not provide for specific liquidated damages.




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.


10


**Echo
      Healthcare Acquisition Corp.**


**(a
      development stage company)**


**Notes
      to Condensed Financial Statements**


**(Unaudited)**







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 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.




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 Working Capital
      Line
      of Credit 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
      September 30, 2006, $153,600 had been advanced under this Working Capital Line
      of Credit. The Company has incurred interest of $2,803 through September 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 nine months ended
      September 30, 2006, $46,935 had been recorded as expense. At September 30,
      2006,
      the Company had a liability of $34,419, which is included in accrued
      expenses.


11


**Echo
      Healthcare Acquisition Corp.**


**(a
      development stage company)**


**Notes
      to Condensed Financial Statements**


**(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. The Company’s officers and directors, in accordance with their
      agreement with Morgan Joseph & Co. Inc., have purchased the warrants during
      the aforementioned 40 trading day period during the months of June and July
      2006
      and collectively hold 339,000 warrants as a result of such
      purchases.




**NOTE
      H – PROPOSED ACQUISITION**




On
      September 11, 2006, the Company entered into an Agreement and Plan of Merger
      (the “Merger Agreement”) by and among the Company, Pet DRx Acquisition Company
      (“Merger Sub”), a newly formed, wholly-owned subsidiary of the Company, and XLNT
      Veterinary Care, Inc. (“XLNT”), pursuant to which Merger Sub will merge with and
      into XLNT (the “Merger”), with XLNT continuing as the surviving entity. Because
      the Company will have no other operating business following the Merger, XLNT
      will effectively become a public company at the conclusion of the Merger. XLNT
      is headquartered in San Jose, California and operates as of September 30, 2006,
      11 veterinary care clinics and hospitals in the State of
      California.




Pursuant
      to the Merger Agreement, (i) each share of XLNT’s common stock, par value $.0001
      per share (“XLNT Common Stock”) issued and outstanding immediately prior to the
      effective time (“Effective Time”) of the Merger (including XLNT Common Stock
      issued upon conversion of XLNT Series A preferred stock, par value $.0001 per
      share (“XLNT Preferred Stock”), as contemplated by clause (ii) below) shall be
      converted into and represent the right to receive such number of shares of
      the
      Company’s common stock as is determined by multiplying such share by the
      Exchange Ratio (as defined below) (the “Merger Consideration”) and (ii) each
      share of XLNT Preferred Stock issued and outstanding immediately prior to the
      Effective Time will be converted into shares of XLNT Common Stock pursuant
      to
      and in accordance with the terms of the XLNT Preferred Stock and shall
      thereafter represent the right to receive the Merger Consideration. Each share
      of capital stock of XLNT held in treasury of XLNT or held by the Company or
      any
      of its subsidiaries will be cancelled and retired, and no payment will be made
      with respect thereto.




The
      aggregate Merger Consideration payable by the Company in connection with the
      Merger (the “Aggregate Merger Consideration”) shall be the number of shares of
      the Company’s common stock equal to the quotient obtained by dividing (A) the
      product of (i) the lesser of (x) the consolidated gross revenues for XLNT for
      the year ending December 31, 2006, including those attributable to hospitals
      or
      clinics that are subject to definitive acquisition agreements on or before
      December 31, 2006 and are subsequently acquired by XLNT on or before March
      31,
      2007 (the “Acquisition Candidates”) and (y) $60.0 million but in no event less
      than $48.0 million, multiplied by 2.00 plus $1.0 million by (B) the product
      of
      (a) the amount of cash in the Company’s trust fund at the closing of the merger
      (without deduction for amounts paid in connection with obtaining a fairness
      opinion from a nationally recognized financial advisor and the conversion by
      public stockholders of the Company voting against the Merger of up to 19.9%
      of
      the shares of common stock issued in the Company’s initial public offering into
      a pro rata share of the funds held in the Company’s trust fund established in
      connection with the initial public offering) divided by the number of shares
      of
      the Company’s common stock issued and outstanding (excluding therefrom any
      shares of common stock issuable upon exercise or exchange of other Company
      securities which by their terms are convertible into or exercisable or
      exchangeable for the Company’s common stock) multiplied by (b) 1.25, provided,
      however, that in no event will the product determined in accordance with this
      clause (B) exceed $7.20 (as may be adjusted to reflect stock splits, stock
      dividends, new issuances and similar transactions). The Exchange Ratio shall
      be
      equal to the quotient of (x) the Aggregate Merger Consideration, divided by
      (y)
      the fully diluted number of outstanding shares of XLNT Common Stock (assuming
      for purposes of the foregoing calculation that all securities convertible into
      or exercisable or exchangeable for XLNT Common Stock have been so converted,
      exercised or exchanged unless otherwise adjusted pursuant to the provisions
      of
      the Merger Agreement to reflect the consummation of the Merger) immediately
      prior to the Effective Time. If at the closing of the Merger the indebtedness
      of
      XLNT exceeds $16,500,000 (excluding accounts payable incurred in the ordinary
      course of business and any XLNT convertible notes that are converted into XLNT
      Common Stock on or prior to the Closing Date), the Aggregate Merger
      Consideration shall be reduced on a pro rata basis by an amount equal to the
      excess indebtedness divided by the price per share of the Company’s common
      stock. To the extent XLNT has third party expenses that will not be paid prior
      to closing, such expenses will reduce the Aggregate Merger Consideration in
      an
      amount equal to the quotient obtained by dividing such expenses by the per
      share
      issue price of the Merger Consideration. XLNT has agreed that ten percent of
      the
      shares of the Company’s common stock received as Merger Consideration shall be
      held in an escrow account for purposes of funding XLNT’s indemnification
      obligations under the Merger Agreement (the “Escrow Fund”).


12




**Echo
      Healthcare Acquisition Corp.**


**(a
      development stage company)**


**Notes
      to Condensed Financial Statements**


**(Unaudited)**




The
        vesting of all outstanding options granted or issued under XLNT’s stock option
        plans (each, an “XLNT Option”) will be accelerated. Each unexercised and
        outstanding warrant to acquire XLNT Common Stock (each an “XLNT Warrant”) and
        each XLNT Option shall be automatically converted at the Effective Time into
        an
        option or warrant, as appropriate, to purchase that number of shares of the
        Company’s common stock equal to the number of shares of XLNT Common Stock
        subject to the XLNT Option or XLNT Warrant, as appropriate, immediately prior
        to
        the Effective Time multiplied by the Exchange Ratio, with an exercise price
        per
        share equal to the exercise price per share that existed under the corresponding
        XLNT Option or XLNT Warrant, as appropriate, divided by the Exchange Ratio,
        and
        with other terms and conditions that are the same as the terms and conditions
        of
        such XLNT Option or XLNT Warrant, as appropriate, immediately before the
        Effective Time.
  Echo
        has
        agreed to register the shares of the Company’s common stock representing the
        Aggregate Merger Consideration on a registration statement on Form
        S-4.
  **NOTE
        I – 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%
        its
        printing fees 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, 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.
  **NOTE
        J – DEFERRED ACQUISTION COSTS**
 
 As
        of September 30, 2006, the Company has accumulated $244,728 in deferred
        costs related to the proposed acquisition of XLNT. These costs will be
        capitalized contingent upon the completion of the Merger following the required
        approval by the Company’s stockholders and the fulfillment of certain other
        conditions. If the Acquisition is not completed, these costs will be recorded
        as
        expense. Deferred acquisition costs are comprised of legal services provided
        by
        Powell Goldstein.
  **NOTE
        K –
        SUBSEQUENT EVENT**
  As
        of
        November 3, 2006, the Company had drawn an additional $28,200 on its Working
        Capital Line of Credit for a total of $181,800.
  13
 **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 limited recourse 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
        September 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
        September 30, 2006, we had accrued expenses and accrued offering costs of approximately
        $777,266 and $152,713 respectively. In addition, we had cash of approximately
        $13,387 which was principally funded pursuant to a $153,600 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 September 30, 2006, the funds held
        in
        trust had earned $1,405,357 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
        nine months ended September 30, 2006, we had net income of approximately
        $1,296,012, derived primarily from income related to the cash held in our
        trust
        account and a gain on a change in our derivative liabilities, compared to
        a net
        loss of $2,552 for the period from June 10, 2005 (date of inception) through
        September 30, 2005. For the period from June 10, 2005 (date of inception)
        through September 30, 2006, we had net income of approximately $1,157,892,
        derived primarily from income related to the cash held in our trust account
        and
        a gain on a change in our derivative liabilities.
  14
  **Developments
        in Finding a Suitable Business Target**
  On
        September 11, 2006, we entered into an Agreement and Plan of Merger (the
“Merger
        Agreement”) by and among us, Pet DRx Acquisition Company (“Merger Sub”), our
        newly formed, wholly-owned subsidiary, and XLNT Veterinary Care, Inc. (“XLNT”),
        pursuant to which Merger Sub will merge with and into XLNT (the “Merger”), with
        XLNT continuing as the surviving entity. Following the Merger, we anticipate
        changing our name to Pet DRx Corporation. Because we will
        have
        no other operating business following the merger, XLNT will effectively become
        a
        public company at the conclusion of the merger. XLNT is headquartered in
        San
        Jose, California. XLNT as of September 30, 2006 has 11 veterinary hospitals
        and
        clinics operating in California.
  Pursuant
        to the Merger Agreement, (i) each share of XLNT’s common stock, par value $.0001
        per share (“XLNT Common Stock”) issued and outstanding immediately prior to the
        effective time (“Effective Time”) of the Merger (including XLNT Common Stock
        issued upon conversion of XLNT Series A preferred stock, par value $.0001
        per
        share (“XLNT Preferred Stock”), as contemplated by clause (ii) below) shall be
        converted into and represent the right to receive such number of shares of
        our
        common stock as is determined by multiplying such share by the Exchange Ratio
        (as defined below) (the “Merger Consideration”) and (ii) each share of XLNT
        Preferred Stock issued and outstanding immediately prior to the Effective
        Time
        will be converted into shares of XLNT Common Stock pursuant to and in accordance
        with the terms of the XLNT Preferred Stock and shall thereafter represent
        the
        right to receive the Merger Consideration. Each share of capital stock of
        XLNT
        held in treasury of XLNT or held by us or any of our subsidiaries will be
        cancelled and retired, and no payment will be made with respect
        thereto.
  The
        aggregate Merger Consideration payable by us in connection with the Merger
        (the
“Aggregate Merger Consideration”) shall be the number of shares of our common
        stock equal to the quotient obtained by dividing (A) the product of (i) the
        lesser of (x) the consolidated gross revenues for XLNT for the year ending
        December 31, 2006, including those attributable to hospitals or clinics that
        are
        subject to definitive acquisition agreements on or before December 31, 2006
        and
        are subsequently acquired by XLNT on or before March 31, 2007 (the “Acquisition
        Candidates”) and (y) $60.0 million but in no event less than $48.0 million,
        multiplied by 2.00 plus $1.0 million by (B) the product of (a) the amount
        of
        cash in our trust fund at the closing of the Merger (without deduction for
        amounts paid in connection with obtaining a fairness opinion from a nationally
        recognized financial advisor and the conversion by our public stockholders
        voting against the Merger of up to 19.9% of the shares of common stock issued
        in
        our initial public offering into a pro rata share of the funds held in our
        trust
        fund established in connection with the initial public offering) divided
        by the
        number of shares our common stock issued and outstanding (excluding therefrom
        any shares of common stock issuable upon exercise or exchange of our other
        securities which by their terms are convertible into or exercisable or
        exchangeable for our common stock) multiplied by (b) 1.25, provided, however,
        that in no event will the product determined in accordance with this clause
        (B)
        exceed $7.20 (as may be adjusted to reflect stock splits, stock dividends,
        new
        issuances and similar transactions). The Exchange Ratio shall be equal to
        the
        quotient of (x) the Aggregate Merger Consideration, divided by (y) the fully
        diluted number of outstanding shares of XLNT Common Stock (assuming for purposes
        of the foregoing calculation that all securities convertible into or exercisable
        or exchangeable for XLNT Common Stock have been so converted, exercised or
        exchanged unless otherwise adjusted pursuant to the provisions of the Merger
        Agreement to reflect the consummation of the Merger) immediately prior to
        the
        Effective Time. If at the closing of the Merger the indebtedness of XLNT
        exceeds
        $16,500,000 (excluding accounts payable incurred in the ordinary course of
        business and any XLNT convertible notes that are converted into XLNT Common
        Stock on or prior to the closing date of the Merger), the Aggregate Merger
        Consideration shall be reduced on a pro rata basis by an amount equal to
        the
        excess indebtedness divided by the price per share of our common stock. To
        the
        extent XLNT has third party expenses that will not be paid prior to closing,
        such expenses will reduce the Aggregate Merger Consideration in an amount
        equal
        to the quotient obtained by dividing such expenses by the per share issue
        price
        of the Merger Consideration. XLNT has agreed that ten percent of the shares
        of
        our common stock received as Merger Consideration shall be held in an escrow
        account for purposes of funding XLNT’s indemnification obligations under the
        Merger Agreement (the “Escrow Fund”).
  We
        have
        agreed to register the shares of our common stock representing the Aggregate
        Merger Consideration on a registration statement on Form S-4.
  15
  In
        connection with the evaluation of the Merger, our Board of Directors appointed
        a
        special committee (“Special Committee”) consisting of independent directors
        Eugene A. Bauer, Gary A. Brukardt, Alastair J. Clemow, and Dr. Richard O.
        Martin. The Merger Agreement and the transactions contemplated thereby were
        approved unanimously by our Board of Directors upon the unanimous recommendation
        of the Special Committee of our Board of Directors.
  The
        vesting of all outstanding options granted or issued under XLNT’s stock option
        plans (each, an “XLNT Option”) will be accelerated. Each unexercised and
        outstanding warrant to acquire XLNT Common Stock (each an “XLNT Warrant”) and
        each XLNT Option shall be automatically converted at the Effective Time into
        an
        option or warrant, as appropriate, to purchase that number of shares of our
        common stock equal to the number of shares of XLNT Common Stock subject to
        the
        XLNT Option or XLNT Warrant, as appropriate, immediately prior to the Effective
        Time multiplied by the Exchange Ratio, with an exercise price per share equal
        to
        the exercise price per share that existed under the corresponding XLNT Option
        or
        XLNT Warrant, as appropriate, divided by the Exchange Ratio, and with other
        terms and conditions that are the same as the terms and conditions of such
        XLNT
        Option or XLNT Warrant, as appropriate, immediately before the Effective
        Time.
  The
        Merger is subject to customary closing conditions, including approval of
        the
        transaction by our stockholders and the stockholders of XLNT, the expiration
        or
        termination of any applicable antitrust waiting periods, receipt of any other
        regulatory approvals, and other customary closing conditions. In addition
        to the
        standard closing conditions, the Merger Agreement contains the following
        conditions to our obligations, some of which were specifically negotiated
        by us:
  ●
                  XLNT’s
                      representations and warranties must be true and correct, disregarding
                      any
                      materiality qualifiers contained therein, except where such
                      failure to be
                      true and correct, individually or in the aggregate, has not
                      had, and would
                      not reasonably be likely to result in a Material Adverse Effect
                      (as
                      defined in the Merger
                      Agreement).
  ●
                  Certain
                      stockholders of XLNT and of us shall have executed a Lock-up
                      Agreement, a
                      Co-Sale Agreement and a Board Voting Agreement, as
                      applicable.
  ●
                  Nothing
                      shall have occurred that results in a material adverse effect
                      as defined
                      by the Merger Agreement.
  ●
                  Holders
                      of 20% or more of our common stock cannot have exercised conversion
                      rights
                      under our Certificate of
                      Incorporation.
  ●
                  Holders
                      of 5% or more of XLNT Common Stock cannot have exercised dissenters’
                      rights under Delaware
                      law.
  ●
                  Immediately
                      prior to the closing of the merger, XLNT shall not have outstanding,
                      on a
                      fully-diluted basis, more than 19,500,000 shares of XLNT Common
                      Stock (the
                      “Cap”); provided, however, XLNT may issue securities (including
                      securities
                      exercisable or exchangeable for, or convertible into, XLNT
                      Common Stock)
                      that would not exceed the Cap determined as of the closing
                      of the merger,
                      provided that (i) any equity security convertible into XLNT
                      Common Stock
                      shall have a conversion price of at least $4.75 and (ii) any
                      debt security
                      convertible into XLNT Common Stock shall have a conversion
                      price of at
                      least $5.50, except for warrants issued as a yield enhancement
                      or
                      mezzanine debt.
  ●
                  XLNT
                      must have a positive working capital as of the end of the month
                      immediately preceding the month in which the closing of the
                      merger
                      occurs.
  XLNT’s
        obligations are conditioned upon the accuracy of our representations and
        warranties and each of our founding stockholders executing a lock-up agreement.
        The parties presently expect to close the Merger in the second quarter of
        2007.
  We
        and
        XLNT have made customary representations, warranties and covenants in the
        Merger
        Agreement, including, among others, XLNT’s covenant not to directly or
        indirectly, solicit or encourage competing offers or engage in discussions
        regarding an acquisition proposal, but XLNT may, prior to the adoption of
        the
        Merger Agreement by its stockholders, respond to unsolicited written competing
        offers if its special committee or board of directors determines that a failure
        to respond would likely be a breach of its fiduciary responsibilities. If
        an
        unsolicited acquisition proposal is received that XLNT’s board determines is a
        better opportunity for XLNT and its stockholders (a “Superior Proposal”), XLNT
        must provide us with prior written notice of the receipt of the Superior
        Proposal. Generally speaking, a “Superior Proposal” must be for the acquisition
        of at least 90% of XLNT’s stock or all or substantially all of its assets and
        have terms determined to be superior to our offer. Subject to certain limited
        exceptions to permit XLNT’s board of directors to comply with its fiduciary
        duties, XLNT agrees not to revoke or alter in any way adverse to us the
        recommendation of XLNT’s board of directors that its stockholders adopt the
        Merger Agreement and thereby approve the Merger.
  16
  XLNT
        has
        also agreed that between the date of the signing of the Merger Agreement
        and
        December 31, 2006, XLNT shall continue to present for the approval of its
        Board
        of Directors, in a manner consistent with its current practice, new letters
        of
        intent or definitive agreements for any hospital or clinic acquisitions or
        group
        of hospital or clinic acquisitions. If any such hospital or clinic acquisition,
        or group of hospital or clinic acquisitions, presented to XLNT’s Board of
        Directors at a particular time, have a purchase price (aggregated in the
        case of
        a group of acquisitions) that exceeds either (i) six times such target’s (or
        targets’) trailing twelve month earnings before interest, taxes, depreciation
        and amortization (“EBITDA”) as of the end of the most recent fiscal quarter of
        such target or (ii) 1.1 times the aggregate of such target’s (or targets’)
        trailing twelve month revenue as of the end of the most recent fiscal quarter
        of
        such target (or targets), any such acquisition or group of acquisitions shall
        be
        subject to the approval of an acquisition committee (“Acquisition Committee”) of
        our Board of Directors consisting of one person that we expect to designate
        as
        our post-closing Board of Directors nominee, one member of our Special Committee
        and an additional person who is a member of our Board of Directors. If the
        Acquisition Committee does not respond within seven days, it will be deemed
        to
        have approved the acquisition.
  XLNT’s
        stockholders will indemnify us and our representatives, assigns, and successors
        for any breach of any representation or warranty by XLNT, the failure to
        fulfill
        a covenant by XLNT, or the settlement of any claim for dissenter rights to
        the
        extent such claim exceeds $7.20 per share. We will indemnify XLNT’s stockholders
        and their representatives, assigns and successors for any breach of any
        representation or warranty by us or the failure to fulfill a covenant by
        us. The
        indemnifications of XLNT’s stockholders are subject to a first-dollar basket and
        are limited to the Escrow Fund. Our indemnification obligations are also
        subject
        to a first-dollar basket and will not exceed an aggregate of an amount equal
        to
        ten percent of the Aggregate Merger Consideration.
  The
        Merger Agreement contains certain termination rights for both us, on the
        one
        hand, and XLNT, on the other, and provides that, upon the termination of
        the
        Merger Agreement under specified circumstances, XLNT will be required to
        pay a
        fee of $5 million to us plus documented, reasonable out-of-pocket expenses
        incurred by us in pursuing the transactions contemplated by the Merger
        Agreement.
  The
        Merger Agreement may be terminated by either party upon the occurrence of
        any of
        the following:
   ●
                  if
                      the Merger has not occurred by October 31, 2007 (provided that
                      this
                      termination date shall be reduced by each day XLNT delivers
                      certain
                      required historical audited financial statements in advance
                      of December
                      15, 2006);
  ●
                  if
                      a governmental entity has issued a non-appealable final decree,
                      order or
                      ruling or other final action permanently restraining or otherwise
                      prohibiting the Merger;
  ●
                  Our
                      stockholders reject the proposed transaction (provided that
                      such right to
                      terminate shall be predicated on our Board’s continued support of
                      transaction); or
  ●
                  Holders
                      of 20% or more of our common stock exercise their conversion
                      rights.
  XLNT
        can
        terminate the Merger Agreement upon the occurrence of any of the
        following:
  ●
                  we
                      have breached any of our representations, warranties or covenants
                      and any
                      curable breach has not been cured by thirty days after XLNT
                      notifies us of
                      such breach;
  ●
                  XLNT
                      decides to accept a “Superior
                      Proposal”;
  ●
                  If
                      XLNT’s stockholders fail to approve (provided that such right to
                      terminate
                      shall be predicated on the XLNT Board’s continued support of
                      transaction).
  17
  We
        can
        terminate the Merger Agreement upon the occurrence of any of the
        following:
  ●
                  XLNT
                      has breached any of its representations, warranties or covenants
                      and any
                      curable breach has not been cured by thirty days after we notify
                      XLNT of
                      such breach;
  ●
                  XLNT
                      fails to deliver certain required historical audited financial
                      statements
                      by December 15, 2006; provided such termination must occur
                      by December 31,
                      2006; and
  ●
                  XLNT’s
                      annualized trailing twelve months revenue as of December 31,
                      2006
                      (together with any Acquisition Candidates) is less than $48,000,000
                      or the
                      annualized consolidated hospital EBITDA for XLNT (together
                      with any
                      Acquisition Candidates) based on the trailing twelve month
                      period ending
                      December 31, 2006 is less than $8,150,000, which termination
                      right shall
                      be exercisable within five (5) business days after: (a) XLNT
                      notifies us
                      that XLNT does not reasonably believe that it will meet one
                      of the
                      foregoing targets; or (b) March 31, 2007 if either or both
                      of the targets
                      are not met due to the failure by XLNT to complete the acquisition
                      of
                      certain acquisition candidates.
  In
        connection with the Merger Agreement, certain stockholders of XLNT that
        beneficially own shares of XLNT Common Stock or XLNT Preferred Stock (the
“XLNT
        Affiliates”) have entered into a Voting Agreement with us and Merger Sub
        pursuant to which the XLNT Affiliates granted us an irrevocable proxy to
        vote
        the shares of XLNT common stock or XLNT preferred stock that they collectively
        own and any subsequently acquired shares in favor of adoption the Merger
        Agreement and approval of the Merger.  The
        Voting Agreement, with certain exceptions, also restricts the parties to
        the
        agreement from transferring any shares subject to the agreement.
  The
        XLNT
        Affiliates have also agreed to vote against (i) any action, transaction,
        proposal, agreement or amendment to XLNT’s charter or bylaws that would be
        reasonably expected to materially prevent, impede, or adversely affect the
        Merger or any related transactions, and (ii) any competing proposal to acquire
        XLNT. The XLNT Affiliates will grant to us an irrevocable proxy with respect
        to
        the foregoing matters. The XLNT Affiliates also agree to a “no-shop” provision
        and to not deposit their shares in a voting trust.
  **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.
  18
  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;
  ●
                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
        September 30, 2006, we had total assets of $56,421,014, stockholders’ equity of
        $37,059,197 (not including $11,169,319 that may be converted to cash by
        stockholders voting against a business combination) and a Line of Credit
        obligation of $153,600.
  The
        following table shows the amounts due in connection with the contractual
        obligations described below as of September 30, 2006.
  **Payments
                  due by period****Total**
              
              **Less
                  than**
                **1
                  year**
              
              **1-3
                  years**
              
              **3-5
                  years**
              
              **More
                  than**
                **5
                  years**Long-term
                  debt (1)
              
              $
              153,600
              
              $
              —
              
              $
              153,600
              
              $
              —
              
              $
              —Administrative
                  Fees Obligations (2)
              
              
              135,000
              
              
              90,000
              
              
              45,000
              
              
              —
              
              
              —Total
              
              $
              288,600
              
              $
              90,000
              
              $
              198,600
              
              $
              —
              
              $
              —
 
 (1) As
        of
        September 30, 2006, we had drawn $153,600 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.
  19
  During
        the third quarter ended September 30, 2006, there were payments to directors
        and
        officers of $35,407 representing reimbursement of road show and board meeting
        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 stockholder 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 borrowings under our Working Capital Line of Credit
        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.
  **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.
  20
  **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 September 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 September
        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.
  **Item
        2. Unregistered Sales of Equity Securities and Use of
        Proceeds**
  Not
        applicable.
  **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.
  21
 **Item
            6. Exhibits**
  1010.1
                  
                  Agreement
                      and Plan of Merger by and among Echo Healthcare Acquisition
                      Corp., Pet DRx
                      Acquisition Company, and XLNT Veterinary Care, Inc. dated September
                      11,
                      2006 (incorporated by reference to the Company’s Current Report on Form
                      8-K filed on September 11, 2006).31.1
                  
                  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.




22




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.
                RegistrantDate: November
                14, 2006
              By:
              /s/
                GENE
                E. BURLESONGene
                  E. Burleson
                Chief
                  Executive Officer
  Date: November
                14, 2006
              By:
              /s/
                KEVIN PENDERGESTKevin
                  Pendergest
                Chief
                  Financial Officer














23