10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ended December 31, 2009

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:  000-31026

ELECTRONIC CONTROL SECURITY INC.

(Exact name of small business issuer as specified in its charter)

NEW JERSEY	22-2138196
(State or other jurisdiction	(IRS Employer Identification No.)
of incorporation or organization

790 BLOOMFIELD AVENUE, CLIFTON, NEW JERSEY 07012

(Address of principal executive offices)

(973) 574-8555

(Issuer's telephone number)

Indicate by checkmark whether the registrant has (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  o  No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	x

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

As of February 4, 2010, Electronic Control Security Inc. had outstanding 10,149,259 shares of common stock, par value $.001 per share.

INDEX PAGE

PART I — FINANCIAL INFORMATION
Forward Looking Statements	6
Item 1 - Financial Statements*
Consolidated Balance Sheets December 31, 2009 (Unaudited) and June 30, 2009	F-2
Unaudited Consolidated Statements of Operations for the  six and three months ended December 31, 2009 and 2008	F-3
Unaudited Consolidated Statements of Cash Flows for the six months ended December 31, 2009 and 2008	F-4
Notes to Consolidated Financial Statements	4
Item 2 - Management's Discussion and Analysis of  Financial Condition or Results of Operations	6
Item 4A(T) - Controls and Procedures	10
PART II — OTHER INFORMATION
Item 3 - Defaults upon Senior Securities	10
Item 4 - Submission of Matters to a Vote of Security Holders	10
Item 6 – Exhibits	11
Signatures	12

2

Electronic Control Security Inc.

Consolidated Balance Sheets

	December 31,			June 30,
	2009			2009
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	185,080		$	15,735
Accounts receivable, current portion, net of allowanceof $100,000		1,414,990			1,252,255
Inventories		2,155,817			2,145,133
Other current assets		117,719			121,579
Total current assets		3,873,606			3,534,702
Property, equipment and software development costs - net		179,312			212,115
Intangible assets - net		1,073,500			1,115,123
Goodwill		196,962			196,962
Deferred income taxes		442,450			442,450
Other assets		8,786			8,786
	$	5,774,616		$	5,510,138
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses	$	1,910,539		$	1,900,297
Current maturities of long-term debt		61,151			65,017
8% Convertible debentures		365,000			452,500
Customer deposits		150,000			-
Total current liabilities		2,486,690			2,417,814
Noncurrent liabilities
Due to officers and shareholders		408,115			405,760
Deferred income taxes		48,650			48,650
Total liabilities		2,943,455			2,872,224
Shareholders' equity
$2.00 liquidation preference; 5,000,000 shares authorized,300,000 and 300,000 shares issued and outstanding, respectively		3,000			3,000
Series B 10% Convertible Preferred stock, cumulative, $.001 par value; $1,723 and $1,639 per share liquidation preference; 2,000 shares authorized, 791 shares issued and outstanding, respectively		1			1
Common Stock, $.001 par value; 30,000,000 shares authorized;10,249,259 and 10,249,259 shares issued; 10,149,259 and 10,149,259 shares outstanding		10,249			10,249
Additional paid-in capital		12,999,709			12,921,154
Accumulated deficit		(10,176,588	)		(10,291,280	)
Accumulated other comprehensive income		4,790			4,790
Treasury stock, at cost, 100,000 shares		(10,000	)		(10,000	)
Total shareholders' equity		2,831,161			2,637,914
	$	5,774,616		$	5,510,138

See Notes to Consolidated Financial Statements.

F-2

Electronic Control Security Inc.

Consolidated Statements of Operations

	Six Months					Three Months
	Ended					Ended
	December 31,					December 31,
	2009		2008			2009		2008
	(Unaudited)		(Unaudited)			(Unaudited)		(Unaudited)
Revenues	$	1,635,704	$	2,438,190		$	1,245,047	$	1,612,674
Cost of revenues		562,332		1,819,127			456,418		1,112,074
Gross profit		1,073,372		619,063			788,629		500,600
Research and development		80,668		80,668			40,334		40,334
Selling, general  and administrative expenses		745,753		543,355			518,437		324,745
Stock based compensation		12,374		53,798			7,721		10,504
Income (loss) from operations		234,577		(58,758	)		222,137		125,017
Other expenses
Interest expense		53,704		87,889			26,493		40,467
Legal settlement		-		55,304			-		55,304
Amortization of beneficial conversion feature on convertible debt		-		9,224			-		4,612
Total other expenses		53,704		152,417			26,493		100,383
Income (loss) before income taxes		180,873		(211,175	)		195,644		24,634
Income taxes		-		-			-		-
Income (loss) before dividends		180,873		(211,175	)		195,644		24,634
Dividends related to convertible preferred stock		66,181		59,956			33,502		30,351
Net income (loss) attributable to common shareholders	$	114,692	$	(271,131	)	$	162,142	$	(5,717	)
Net income per share:
Basic	$	0.01	$	(0.03	)	$	0.02	$	(0.00	)
Diluted	$		$	(0.03	)	$		$	(0.00	)
Weighted average number of
common shares and equivalents:
Basic		10,149,259		10,149,259			10,149,259		10,149,259
Diluted				10,149,259					10,149,259

See Notes to Consolidated Financial Statements.

F-3

Electronic Control Security Inc.

Consolidated Statements of Cash Flows

	Six Months
	Ended
	December 31,
	2009			2008
	(Unaudited)			(Unaudited)
INCREASE IN CASH AND CASH EQUIVALENTS
Cash flows from operating activities:
Net income (loss) before deemed dividends	$	180,873		$	(211,175	)
Adjustments to reconcile loss to net cash provided by operating activities:
Depreciation and amortization		87,312			128,963
Stock based compensation		12,374			53,798
Amortization of beneficial conversion feature on convertible debt		-			9,224
Increase (decrease) in cash attributable to changes in
Accounts receivable		(162,735	)		(328,708	)
Inventories		(10,684	)		(38,185	)
Other current assets		3,860			11,652
Other assets		-			(498	)
Accounts payable and accrued expenses		10,242			488,374
Customer deposits		150,000			-
Net cash provided by operating activities		271,242			113,445
Cash flows from investing activities:
Acquisition of property plant and equipment		(12,886	)		-
Net cash used in investing activities		(12,886	)		-
Cash flows from financing activities:
Principal payments on 8% convertible debentures		(87,500	)		-
Payments on long-term debt		(3,866	)		(32,309	)
Loans to/(from) officers and shareholders - net		2,355			(3,804	)
Net cash used in financing activities		(89,011	)		(36,113	)
Net increase in cash and cash equivalents		169,345			77,332
Cash and cash equivalents at beginning of period		15,735			72,592
Cash and cash equivalents at end of period	$	185,080		$	149,924
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest	$	45,183		$	53,940
Taxes	$	-		$	-

See Notes to Consolidated Financial Statements.

F-4

ELECTRONIC CONTROL SECURITY INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Basis of Presentation

The accompanying unaudited consolidated financial statements of Electronic Control Security Inc. and its subsidiaries (collectively "the Company") have been prepared in accordance with generally accepted accounting principles for interim financial information and Article 8.03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.  In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.  Operating results for the six months ended December 31, 2009 are not necessarily indicative of the results that may be expected for the year ending June 30, 2010.  These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and footnotes thereto  included in the Company's Form 10-K for the year ended June 30, 2009, as filed with the Securities and Exchange Commission.

Note 2 - Earnings Per Share

In determining basic or diluted earnings per share (EPS), the effects of dividends related to the Company's Series A convertible preferred stock is added to the net loss.  Basic EPS is computed by dividing net income or net loss by the weighted average number of common shares outstanding for the period.  Diluted EPS reflects the potential dilution from the exercise or conversion of other securities into common stock, but only if dilutive.  The following securities have been excluded from the dilutive per-share computation, as they are anti-dilutive.

	2009		2008
Stock options		1,732,000		1,584,500
Warrants		-		556,552
Convertible debentures		486,667		653,333
Convertible preferred stock		1,816,897		1,646,019

Note 3 - Inventories

Inventories consist of the following:

	December		June
	2009		2009
Raw materials	$	349,042	$	335,418
Work-in-process		274,734		232,426
Finished goods		1,532,041		1,577,289
	$	2,155,817	$	2,145,133

Note 4 - Convertible Debentures

In January 2006, the Company raised net proceeds of $831,000 from the proceeds of the private placement of $1 million in principal amount of Senior Secured Convertible Debentures ("the Debentures").  The obligations with respect to the Debentures are secured by a lien on all of the Company’s assets, including its intellectual property.  The Debentures had a term of three years and are convertible at the option of the holder at any time into shares of the Company's Common Stock at a conversion price of $.75 per share, subject to certain adjustments. Interest is payable at a rate equal to the greater of 8% per annum or the prime rate for the applicable interest period plus 2.5%.  The principal owing on the debentures became due as of January 11, 2009 but was not repaid. The Company has been making payments to the debenture holders pursuant to a monthly payment program based on free cash flow plus 8% interest.  The Company has continued principal payments to the debenture holders proportional to the amount outstanding for each which amounted to $87,500 in aggregate for the six months ended December 31, 2009 leaving a balance due of $365,000 as of such date.  No assurance can, however, be provided that the debenture holders will not resort to legal process and/or attempt to foreclose on their lien.

4

Note 5 — New Authoritative Pronouncements

In June 2009, the Financial Accounting Standards Board ("FASB") approved its Accounting Standards Codification ("Codification") as the single source of authoritative United States accounting and reporting standards applicable for all non-governmental entities, with the exception of the SEC and its staff.  The Codification, which changes the referencing of financial standards, is effective for interim or annual financial periods ending after September 15, 2009.  Therefore, in the first quarter of the fiscal year 2010 and going forward, all references made to US GAAP use the new Codification numbering system prescribed by the FASB.  The change in references to the new Codification did not have an impact on our consolidated financial position or results of operations.

5

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR RESULTS OF OPERATIONS.

The following discussion should be read in conjunction with our financial statements and the notes related to those statements.  Some of our discussion is forward-looking and involves risks and uncertainties.  For information regarding risk factors that could have a material adverse effect on our business, refer to the risk factors section of the annual report for the year ended June 30, 2009 on Form 10-K.

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

Our Company and its representatives may from time to time make written or verbal forward-looking statements, including statements contained in this report and other Company filings with the Securities and Exchange Commission and in our reports to shareholders.  Statements that relate to other than strictly historical facts, such as statements about our plans and strategies, expectations for future financial performance, new and existing products and technologies, and markets for our products are forward-looking statements.  Generally, the words "believe," "expect," "intend," "estimate," "anticipate," "will" and other similar expressions identify forward-looking statements. The forward-looking statements are and will be based on our management's then-current views and assumptions regarding future events and operating performance, and speak only as of their dates.  Investors are cautioned that such statements involve risks and uncertainties that could cause actual results to differ materially from historical or anticipated results due to many factors including, but not limited to, our Company's current and future capital needs, uncertainty of capital funding, our clients' ability to cancel contracts with little or no penalty, government initiatives to implement Homeland Security measures, the likelihood of completing transactions for which we have entered into letters of intent, the state of the worldwide economy, competition, our customer's ability to pay our invoices within our standard credit terms, and other risks detailed in our Company's most recent Annual Report on Form 10-K and other Securities and Exchange Commission filings.  We undertake no obligation to publicly update or revise any forward-looking statements.

OVERVIEW

We design, develop, manufacture and market technology-based integrated security systems.  We also provide support services to system integrators consisting of risk assessment and vulnerability studies to ascertain a client's security requirements to develop a comprehensive risk management and mitigation program.

We market our products domestically and internationally to:

· security system integrators;

· national and local government entities;

· large industrial facilities and major office complexes;

· energy facilities, including nuclear plants, power utilities and pipelines; and commercial transportation centers, such as airports and seaports.

We believe we are one of the few true comprehensive security solution providers in the industry.  We are able to analyze a security risk and develop security solutions specifically tailored to mitigate that risk, including design, engineering and manufacturing individual components of a system as may be necessary to deliver a fully integrated security system customized to a client's requirements. We are frequently engaged by security system integrators, security system dealers/installers, and commercial architects and engineers because we are able to deliver the integrated platform of design, engineering services and fully integrated security solutions that support their requirements for the completion of a given project.

We believe that we have developed a superior reputation as a provider of integrated security systems since our inception in 1976 because we:

· offer the complete range of solutions-driven responses to accommodate our customers' needs;

· offer technologically superior products;

6

· are able to design, engineer and manufacture systems customized to our clients' specific requirements;

· deliver systems that are easy to operate and maintain while providing superior life cycle cost performance compared to systems offered by competitors;

· have established solid credentials in protecting high value targets; and

· offer customers perhaps the best warranty in the industry.

During the quarter ended December 31, 2009, the Company submitted proposals on major projects for the Department of Defense facilities and numerous nuclear power stations in the United States and South Korea valued at approximately $2,250,000.  These proposals are pending and awaiting approval, funding and award.  We anticipate decisions relating to these proposals within the third quarter of fiscal 2010.

In November 2009, the Company announced the award of purchase orders valued at $1.5 million for security upgrades at nuclear power stations in key states to meet updated NRC requirements.  We anticipate shipping these purchase orders in full by June 30, 2010.

In January 2010, the Company entered into marketing agreements with Balinor International, LLC and Operational Security, Ltd. (UK) to market the Company's products and its anti-piracy technology in India, Africa and Middle Eastern Territories.  Norman Barta, who is a director of the Company, is also the President of Balinor International, LLC.

CRITICAL ACCOUNTING POLICIES

Our consolidated financial statements and accompanying notes have been prepared in accordance with U.S. generally accepted accounting principles.  The preparation of these financial statements requires that we make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses.  Management continually evaluates the accounting policies and estimates it uses to prepare the consolidated financial statements.  We base our estimates on historical experience and assumptions believed to be reasonable under current facts and circumstances.  Actual amounts and results could differ from these estimates made by management.

We do not participate in, nor has there been created, any off-balance sheet special purpose entities or other off-balance sheet financing.  In addition, we do not enter into any derivative financial instruments for speculative purposes.

We have identified the following critical accounting policies that affect the more significant judgments and estimates used in the preparation of our condensed consolidated financial statements.

INVENTORY VALUATION

Inventories are valued at the lower of cost or market.  We routinely evaluate the composition of our inventory to identify obsolete or otherwise impaired inventories.  Inventories identified as impaired are evaluated to determine if reserves are required. We do not currently have any reserves against inventory.

ALLOWANCE FOR DOUBTFUL ACCOUNTS

The allowance for doubtful accounts is comprised of two parts, a specific account analysis and a general reserve. Accounts where specific information indicates a potential loss may exist are reviewed and a specific reserve against amounts due is recorded.  As additional information becomes available, such specific account reserves are updated. Additionally, a general reserve is applied to the aging categories based on historical collection and write-off experience.

7

ACCOUNTING FOR INCOME TAXES

We record a valuation allowance to our deferred tax assets for the amount that is more likely than not to be realized. While we consider historical levels of income, expectations and risks associated with estimates of future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance, in the event that we determine that we would be able to realize deferred tax assets in the future in excess of the net amount recorded, an adjustment to the deferred tax asset would increase income in the period such determination has been made. Likewise, should we determine that we would not be able to realize all or part of the net deferred tax asset in the future, an adjustment to the deferred tax asset would be charged against income in the period such determination was made.

FAIR VALUE OF EQUITY INSTRUMENTS

The valuation of certain items, including valuation of warrants or stock options that may be offered as compensation for goods or services, involve significant estimations with underlying assumptions judgmentally determined.  Warrants are valued using the most reliable measure of fair value, such as the value of the goods or services rendered, if obtainable.  If such value is not readily  obtainable, the valuation of warrants and stock options are then based upon the Black-Scholes valuation model, which involves estimates of stock volatility, expected life of the instruments and other assumptions.

RESULTS OF OPERATIONS

SIX MONTHS ENDED DECEMBER 31, 2009 ("2009 PERIOD") COMPARED TO SIX MONTHS ENDED DECEMBER 31, 2008 ("2008 PERIOD") AND THREE MONTHS ENDED DECEMBER 31, 2009 COMPARED TO THREE MONTHS ENDED DECEMBER 31, 2008

REVENUES.  We had net revenues of $1,635,704 for the 2009 Period compared to $2,438,190 for the 2008 Period, representing a decrease of approximately 32.9%.  Net revenues for the three months ended December 31, 2009 were $1,245,047 as compared to $1,612,674 for the corresponding three month period in 2008. The decrease in net revenues during the 2009 periods compared to the 2008 periods is primarily attributable to a reduction in task orders released on contracts in-house for the U.S. Air Force IBDSS program and nuclear power station orders received during the periods.  Based on our current backlog and incoming orders, we believe that this trend will reverse itself in the coming months, although no assurance can be provided that this will in fact occur.

GROSS MARGINS. Gross margins for the 2009 Period were 66% compared to 25% of revenue for the 2008 Period.  Gross margins were 63% of revenue for the three months ended December 31, 2009 compared to 31% for the corresponding three-month period in 2008.  The increase in gross margins for the six and three  months ended December 31, 2009 compared to the corresponding periods in 2008 is primarily attributable to a change in the order mix of equipment sales and support services.  A decrease in material costs as a percentage of sales is directly related to the improving gross margin on product sales.  Further, the increase in higher margin design and engineering support service billings resulted in the increase in gross margins for the period.

RESEARCH AND DEVELOPMENT.  Research and development expenses consist primarily of expenses incurred in designing and developing upgrades to existing products and systems.  Research and development expenses for the 2009 Period and for the three months ended December 31, 2009 were $80,668 and $40,334 as well as for the corresponding periods in 2008.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.  Selling, general and administrative expenses for the 2009 Period and for the three months ended December 31, 2009 were $745,753 and $518,437, respectively, compared to $543,355 and $324,745 for each of the corresponding periods in 2008. The increase in selling, general and administrative expenses is primarily attributable to a one-time write-off of a debt amounting to $259,316.  Without this one-time write-off, SG&A would have decreased for both the 2009 Period and the quarter ended December 31, 2009.

STOCK BASED COMPENSATION. We issued stock options to our directors and various employees and consultants. The value of these options is being amortized over their respective vesting periods. Stock-based compensation is non-cash and, therefore, has no impact on cash flow or liquidity.

INCOME (LOSS) FROM OPERATIONS.  The net profit from operations increased from a net loss of $(58,758) in the 2008 period to net income of $234,577 in the 2009 period.  For the three months ended December 31, 2009, there was net income from operations of $222,137 compared to net income of $125,017 for the corresponding period in 2008.  The increase in income from operations during the 2009 periods compared to the 2008 periods is attributable to receipt of higher gross margin purchase orders and controlled selling, general and administrative expenses.

8

INTEREST EXPENSE.  Interest expense in the 2009 Period was $53,704 compared to $87,889 incurred during the 2008 Period.  The decrease is due to lower amounts pf principal outstanding during the respective periods. Also included in interest expense in the 2008 period is $32,346 of amortization of deferred finance costs relating to the offering costs and the value of the warrants issued on the private placement of the convertible debentures.

AMORTIZATION OF BENEFICIAL CONVERSION FEATURE. In accordance with EITF No. 00-27, we recorded an additional discount in the amount of $118,748 upon the issuance of our convertible debentures in January 2006 to reflect the beneficial conversion feature of the debt and amortize this amount to the date of maturity which was January 2009.  Amortization for  the 2008 period was $9,224 ..

NET INCOME (LOSS).  Net income (loss) before deemed dividends related to preferred stock for the 2009 Period was $180,873 and $(211,175) in 2008.  For the three months ended December 31, 2009, there was net income of $195,644 compared to net income of $24,634 in the corresponding period in 2008.  The increase in net income is directly related to the deliverables of design and engineering support services in the November-December period.

DIVIDENDS RELATED TO PREFERRED STOCK.

We recorded dividends totaling $66,181 on our Series B Convertible Preferred Stock in the 2009 Period and $59,956 in the 2008 Period. In lieu of a cash payment, we have elected, under the terms of these securities, to add this amount to the stated value of the Series B Convertible Preferred Stock.

These dividends are non-cash and, therefore, have no impact on our net worth, cash flow or liquidity.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2009, we had working capital of approximately $1.4 million compared to approximately $1.1 million at June 30, 2009.  Net cash provided by operating activities for the 2009 period was $271,242 as compared to $113,445 for the 2008 period.

Inventory has increased by $10,684 during the six months ended December 31, 2009 which has still remained relatively high due to an increase of the Company’s work in process in preparation for shipments on our committed projects.

Accounts receivable have increased by $162,735 to $1,414,990 for the six months ended December 31, 2009.  This is directly related to substantial deliverables in December 2009.

Accounts payable and accrued expenses have increased by $10,242 to $1,910,539 for the six months ended December 31, 2009.  The increase from June 30, 2009, is directly related to an increase in material purchases and an increase in accrued salaries to officers and other key employees in the amount of $793,455.

The Company purchased equipment in the aggregate of $12,886 during the six months ended December 31, 2009.  We do not have any material commitments for capital expenditures going forward.

In January 2006, we raised net proceeds of $831,000 from the proceeds of the private placement of $1 million in principal amount of our Senior Secured Convertible Debentures ("the Debentures").  Our obligations with respect to the Debentures are secured by a lien on all of our assets, including our intellectual property.  The Debentures had a term of three years and are convertible at the option of the holder at any time into shares of the Company's Common Stock at a conversion price of $.75 per share, subject to certain adjustments. Interest is payable at a rate equal to the greater of 8% per annum or the prime rate for the applicable interest period plus 2.5%.  As of December 31, 2009, approximately $365,000 in principal amount of the debentures remains outstanding.

The principal and interest owing on the debentures became due as of January 11, 2009 but were not repaid.  The Company has been making payments to the debenture holders pursuant to a monthly payment program based on free cash flow plus 8% interest.  The Company has continued  principal payments which amounted  to $87,500 for the six months ended December 31, 2009 and, as of such date, there remains outstanding a balance of $365,000.

We expect that cash on hand together with anticipated collection of accounts receivable during the short term will be sufficient to provide for our working capital needs for the next 12 months.

9

ITEM 4(T). CONTROLS AND PROCEDURES.

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. As of the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer (and Principal Financial Officer and Accounting Officer), of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, management and our Chief Executive Officer (and Principal Financial Officer and Accounting Officer) concluded that our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the  Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.

There was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) identified in connection with the foregoing evaluation that occurred during the period covered by this Quarterly  Report on Form 10-Q that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

In January 2006, we raised net proceeds of $831,000 from the proceeds of the private placement of $1 million in principal amount of our Senior Secured Convertible Debentures ("the Debentures").  Our obligations with respect to the Debentures are secured by a lien on all of our assets, including our intellectual property.  The Debentures have a term of three years and are convertible at the option of the holder at any time into shares of the Company's Common Stock at a conversion price of $.75 per share, subject to certain adjustments. Interest is payable at a rate equal to the greater of 8% per annum or the prime rate for the applicable interest period plus 2.5%.  As of December 31, 2009, approximately $365,000 in principal amount of the debentures remains outstanding.

The principal and interest owing on the debentures became due as of January 11, 2009 but were not repaid. The Company has been making payments to the debenture holders pursuant to a monthly payment program based on free cash flow plus 8% interest. The Company has continued principal payments, which amounted to $87,500 for the six months ended December 31, 2009 and, as of such date, approximately $365,000 remains outstanding..

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

On December 8, 2009, we held our 2009 annual meeting of shareholders at our principal offices in Clifton, New Jersey.  The following matters were voted on:  (1) election of directors to our board of directors; and  (2) ratification of the appointment of independent registered public accounting firm and auditors.  The vote tally was as follows:

(1) Each of the following individuals was elected to the board of directors to hold office until the next annual meeting of stockholders or until a successor is duly elected and qualified or the director’s earlier death, resignation or removal.

10

	For		Withheld
Arthur Barchenko		6,123,507		31,198
Natalie Barchenko		6,123,507		31,198
Norman Barta		6,123,507		31,198
Gordon Fornell		6,123,507		31,198
Stephen Rossetti		6,123,507		31,198
Edward Snow		6,123,507		31,198
Ronald Thomas		6,123,507		31,198

(2) Ratification of appointment of Demetrius & Company, LLC, Certified Public Accountants as our independent accounting firm and auditors for the fiscal year ended June 30, 2010.

For	Against		Abstain
6,139,017		13,588		2,100

All proposals received the requisite number of votes and were approved.

ITEM 6. EXHIBITS -

Exhibit No.	Title
31.1	Certification of Chief Executive Officer (and Principal Financial and Accounting Officer) pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer (and Principal Financial and Accounting Officer) pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350

11

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.

	ELECTRONIC CONTROL SECURITY INC.
Date: February 5, 2010	By: /s/ Arthur Barchenko
	Arthur Barchenko
	President, Chief Executive Officer
	(duly authorized officer; principal executive officer, and principal financial and accounting officer)

12

EX-31.1

CERTIFICATION

I, Arthur Barchenko, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended December 31, 2009 of Electronic Control Security Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5 I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant's board of directors (or persons performing equivalent functions):

a All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:   February 5, 2010	By:	/s/ Arthur Barchenko
		Arthur Barchenko President, Chief Executive Officer
		(duly authorized officer; principal executive officer, and   principal financial and accounting officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Electronic Control Security Inc. (the "Company") on Form 10-Q for the quarter ended December 31, 2009 as filed with the Securities and Exchange on the date hereof (the "Report"), I, Arthur Barchenko, President and Chief Executive Officer (Principal Executive Officer and Principal Financial and Accounting Officer) hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1. The Report complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

Date:   February 5, 2010	By:	/s/ Arthur Barchenko
		Arthur Barchenko President, Chief Executive Officer
		(duly authorized officer; principal executive officer, and  principal financial and accounting officer)

This certification accompanies this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under that section. This certification shall not be deemed incorporated by reference in any filing under the Securities Act or Exchange Act, except to the extent that the Company specifically incorporates it by reference.

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form with the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.