S-1/A

UNITED STATES

Securities and Exchange Commission

Washington, D.C. 20549

Amendment No. 3 to

Form S-1

Registration Statement Under The Securities Act of 1933

Commission file number: 333-91436

ECOLOGY COATINGS, INC.

(Exact name of registrant as specified in its charter)

Nevada

(State or other jurisdiction of incorporation or organization)

3479

(Primary Standard Industrial Classification Code Number)

26-0014658

(I.R.S. Employer Identification Number)

2701 Cambridge Court, Suite 100, Auburn Hills, MI  48326

248-370-9900

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Daniel V. Iannotti, Vice President, General Counsel & Secretary

Ecology Coatings, Inc.

2701 Cambridge Court, Suite 100

Auburn Hills, MI  48326

248-370-9900

(Name, address and telephone number of agent for service)

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:

From time to time after this Registration Statement becomes effective.

If any securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box:

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  x

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

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If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

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

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

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CALCULATION OF REGISTRATION FEE

Title of Each Class of Security To be Registered	Amount to be Registered (1)	Proposed Maximum Offering Price per Share (2)	Proposed Maximum Aggregate Offering Price (3)	Amount of Registration Fee
Common Stock, $.001 par value per share	4,340,000	$1.05	$4,557,000	$254.28(4)

(1)   Represents only shares offered by the selling shareholder.  Includes 4,340,000 shares of common stock issuable upon conversion of certain of the 5% convertible preferred shares held by the selling shareholder and does not include shares held by any other shareholder.

(2)   Represents the closing price of our common stock on the OTC Bulletin Board association on August 27, 2009.

(3)   Estimated solely for purposes of calculating the registration fee in accordance with Rule 457(e) under the Securities Act of 1933.

(4)   Amount was previously paid.

____________________________

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the registration statement shall become effective on such date as the SEC, acting pursuant to said Section 8(a), may determine.

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Subject to Completion

Preliminary Prospectus Dated November 20, 2009

4,340,000 Common Shares

Ecology Coatings, Inc.

_______________________________

This prospectus relates to the offer and sale of up to 4,340,000 shares of our common stock held by Equity 11, Ltd. (the “selling shareholder” identified in this prospectus). The selling shareholder intends to sell the shares of our common stock held by it from time to time at a time that is determined based on its assessment of market conditions.  JB Smith, a member of our Board of Directors, is the managing partner of Equity 11.  This prospectus only relates to shares held by the selling shareholder.  We will not receive any of the proceeds from the sale of these shares by the selling shareholder. Subject to any agreement that we may in the future reach in connection with the offer and sale of shares pursuant to this prospectus, we will bear all expenses of this offering, except that the selling shareholder will pay all transfer taxes and any brokerage discounts or commissions or similar expenses applicable to the sale of its shares.

We are registering the offer and sale of these shares pursuant to an agreement with the selling shareholder. The shares offered under this prospectus are being registered to permit the selling shareholder to sell the shares in the public market at a time that it determines based on its assessment of market conditions. The selling shareholder may sell the shares through any means described in the section titled "Plan of Distribution."

Our common stock is not presently traded on any national securities exchange but is quoted and traded on the Over-The-Counter Bulletin Board.  The last reported sale price of our common stock on November 16, 2009, was $0.25 per share.

Investing in our common stock involves risks. See "Risk Factors" below.

__________________________

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

The date of this prospectus is November 20, 2009

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

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TABLE OF CONTENTS

	Page
Item 1:  Forepart of the Registration Statement and Outside Front Cover Page of Prospectus	1
Item 2:  Inside Front and Outside Back Cover Pages of Prospectus	4
Item 3:  Summary Information, Risk Factors and Ratio of Earnings to Fixed Charges	6
Item 4:  Use of Proceeds	16
Item 5:  Determination of Offering Price	16
Item 6:  Dilution	18
Item 7:  Selling Shareholder	18
Item 8:  Plan of Distribution	27
Item 9:  Description of Stock to be Registered	29
Item 10:  Interests of Named Experts and Counsel	35
Item 11:  Information With Respect to the Registrant and Financial Information Schedules	35
Item 11A:  Material Changes	110
Item 12:  Incorporation of Certain Information by Reference	110
Item 12A:  Disclosure of Commission Position On Indemnification For Securities Act Liabilities	110
Item 13:  Other Expenses of Issuance and Distribution	111
Item 14:  Indemnification of Directors and Officers	111
Item 15:  Recent Sales of Unregistered Securities	111
Item 16:  Exhibits	115
Item 17:  Undertakings	119

ABOUT THIS PROSPECTUS

You should rely only on the information contained in this prospectus. We and the selling shareholder have not authorized anyone to provide you with information different from that contained in this prospectus. This prospectus may only be used where it is legal to sell these securities. You should assume that the information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of common stock. Our business, financial condition, results of operations and prospects may have changed since that date.

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ITEM 3:  SUMMARY INFORMATION, RISK FACTORS AND RATIO OF EARNINGS TO FIXED CHARGES

This summary highlights information contained elsewhere in this prospectus. This summary sets forth the material terms of the offering, but does not contain all of the information that you should consider before investing in our common stock. You should read the entire prospectus carefully before making an investment decision, especially the risks of investing in our common stock described under "Risk Factors." Unless the context otherwise requires, the terms "we," "us," "our," and "Ecology" refer to Ecology Coatings, Inc. and its predecessors, direct and indirect subsidiaries and affiliates.

ECOLOGY COATINGS, INC.

Our Company

Ecology Coatings, Inc. (“Ecology-CA”) was originally incorporated in California on March 12, 1990.  OCIS Corp. (“OCIS”) was incorporated in Nevada on February 6, 2002.  OCIS completed a merger with Ecology-CA on July 27, 2007 (the “Merger”).  In the Merger, OCIS issued approximately 30,530,684 shares of common stock to the Ecology-CA stockholders.  In this transaction, OCIS changed its name from OCIS Corporation to Ecology Coatings, Inc. and our ticker symbol on the OTC Bulletin Board association changed to “ECOC.”  As a result of the merger, we became a Nevada corporation and Ecology-CA became a wholly owned subsidiary.

We develop “cleantech”, nanotechnology-enabled, ultraviolet (“UV”) curable coatings that are designed to drive efficiencies, reduce energy consumption and virtually eliminate pollutants in the manufacturing sector.  We create proprietary coatings with unique performance and environmental attributes by leveraging our platform of integrated clean technology products that reduce overall energy consumption and offer a marked decrease in drying time.

Our patent and intellectual property activities to date include:

· seven patents covering elements of our technology from the United States Patent and Trademark Office(“USPTO”)

· two European patents allowed and nine pending patent applications in foreign countries

· one ICT international patent application

· three trademarks issued by the USPTO – “EZ Recoat™”, “Ecology Coatings™”, “EcoQuik™” and “Liquid Nanotechnology™”.

We continue to work independently on developing our clean technology products further.  In addition, we are developing proprietary coatings for a variety of metal, paper and plastic-based applications.  Our target markets include the electronics, steel, construction, automotive and trucking, paper products and original equipment manufacturers (“OEMs”). Our business model contemplates both licensing and direct sales strategies.  We intend to license our technology to industry leaders in our target markets, through which products will be sold to end users.  We plan to use direct sales teams and third party agents in certain target markets, such as OEMs, and third party distributors in broad product markets, such as paper products, to develop our product sales.

Our website address is www.ecologycoatings.com.  Our website and the information contained on our website are not incorporated into this prospectus or the registration statement of which it forms a part.  Our principal executive offices are located at 350 Fifth Avenue, Suite 100, Auburn Hills, MI  49326.  Our telephone number is 248-370-9900.

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The Offering

Common Stock Offered by the Selling Shareholder hereby	4,340,000 shares issuable upon the conversion of outstanding shares of preferred stock – such 4,340,000 shares will be converted from 2,170 preferred shares acquired under the August 28, 2008 Securities Purchase Agreement at an aggregate purchase price of $2,170,000 and at a conversion price of $.50 per share.  No shares of any other shareholder are included in this registration.
Common Stock Outstanding Before and After this Offering	32,835,684 common shares issued and outstanding as of September 30, 2009 and 37,175,684 common shares issued and outstanding after this offering which includes 4,340,000 common shares converted from convertible preferred stock by the selling shareholder. (1)
Use of Proceeds	We will not receive any proceeds from the shares sold by the selling shareholder.
Plan of Distribution	The selling shareholder plans to sell up to all of the shares being offered in this offering from time to time at a time determined by its assessment of market conditions. See “Plan of Distribution” for additional information.
Risk Factors	You should carefully read and consider the information set forth under the heading titled “Risk Factors” and all other information set forth in this prospectus before deciding to invest in shares of our common stock.
Over-The-Counter Bulletin Symbol	“ECOC”

(1)   Based on shares outstanding on November 16, 2009.  This figure does not include shares which may be issued upon exercise or conversion of stock options, warrants or shares which may be issuable under outstanding promissory notes.  Although four of our outstanding promissory notes were initially convertible into our common stock, the right to convert was extinguished because we did not complete an underwritten public or private stock offering in which we netted $1,000,000 or more by the maturity dates of the notes.  However, we are in negotiations with these note holders and we may allow some or all of these notes to convert into our common stock as a method to conserve our cash.  If these notes are converted into common stock, our number of shares outstanding will increase.  See Item 9 for further information regarding the conversion of such notes.  As of September 30, 2009, we had 51,984,241shares of common stock beneficially outstanding, including 32,835,684 common shares issued and outstanding, 2,436 shares of convertible preferred stock which can be converted into 4,872,000 common shares, 616 shares of convertible preferred stock, Series B which can be converted into 6,513,538 common shares, warrants to acquire 4,532,900 common shares and stock options vested or that will vest within sixty days of November 16, 2009 to acquire 3,230,119 common shares.  Of the 51,984,241common shares beneficially outstanding as of November 16, 2009, 34,199,384 were held by affiliates and 17,784,857were held by non-affiliates.  For purposes of the foregoing, we have treated all shares held by executive officers, directors and Equity 11 as “affiliate” shares.

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Unless otherwise noted, all information in this prospectus assumes the conversion of 2,170 5% convertible preferred shares with an aggregate purchase price of $2,170,000 into 4,340,000 shares of common stock.

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Risk Factors

Prospective and existing investors should carefully consider the following risk factors in evaluating our business.  The factors listed below represent the known material risks that we believe could cause our business results to differ from the statements contained herein.

RISKS RELATED TO OUR COMPANY AND OUR BUSINESS

We have generated minimal revenue and have a history of significant operating losses

We are a company that has failed to generate significant revenue as yet and had an accumulated deficit of $21,043,440 as of June 30, 2009.  We have a limited operating history upon which investors may rely to evaluate our prospects.  Such prospects must be considered in light of the problems, expenses, delays and complications associated with a business that seeks to generate more significant revenue.  We have generated nominal revenue to date and have incurred significant operating losses.  Our operating losses have resulted principally from costs incurred in connection with our capital raising efforts and becoming a public company through a merger, promotion of our products, and from salaries and general and administrative costs.  We have maintained minimal cash reserves since October 2008 and have relied solely on additional investment from Equity 11.  Equity 11 is not committed to make any additional investments.  We will need to raise additional capital from Equity 11 or other investors in fiscal year 2010 in order to continue to fund our operations.

We have entered the emerging business of nanotechnology, which carries significant developmental and commercial risk

We have expended in excess of $1,000,000 to develop our nanotechnology-enabled and other products.  We expect to continue expending significant sums in pursuit of further development of our technology. Such research and development involves a high degree of risk as to whether a commercially viable product will result.

We expect to continue to generate operating losses and experience negative cash flow and it is uncertain whether we will achieve future profitability

We expect to continue to incur operating losses.  Our ability to commence revenue generating operations and achieve profitability will depend on our products functioning as intended, the market acceptance of our liquid nano-technology™ products and our capacity to develop, introduce and bring additional products to market.  We cannot be certain that we will ever generate significant sales or achieve profitability.  The extent of future losses and the time required to achieve profitability, if ever, cannot be predicted at this point.

Our auditors have expressed a going concern opinion

We have incurred losses, primarily as a result of our inception stage, general and administrative, and pre-production expenses and our limited amount of revenue.  Accordingly, we have received a report from our independent auditors that includes an explanatory paragraph describing their substantial doubt about our ability to continue as a going concern.

We will need additional financing in November 2009 and for fiscal year 2010

Our cash requirements may vary materially from those now planned depending on numerous factors, including the status of our marketing efforts, our business development activities, and the results of future research and development and competition.  Our past capital raising activities have not been sufficient to fund our working and other capital requirements and we will need to raise additional funds through private or public financings in November 2009 and for fiscal year 2010. Such financing could include equity financing, which may be dilutive to stockholders, or debt financing, which would likely restrict our ability to make acquisitions and borrow from other sources.  In addition, such securities may contain rights, preferences or privileges senior to those of the rights of our current shareholder.  During our last fiscal year ended September 30, 2008, we relied on short term debt financing, most of which carried a 25% interest rate, to fund our operations.  As of September 30, 2009, we were in default on approximately $739,483.61 in short term debt, including accrued interest, and raised only $763,716 from the issuance of notes and the sale of convertible preferred shares during the twelve months ended September 30, 2009.  On May 15, 2009, we entered into a Convertible Preferred Securities Agreement with Equity 11 under which Equity 11 may purchase additional shares of our preferred stock, it does not have any commitments for additional financing from Equity 11.  On September 30, 2009, we entered into a Securities Purchase Agreement with Stromback Acquisition Corporation but it does not commit Stromback Acquisition Corporation to provide any additional financing beyond the initial investment which netted us $120,000.  We have maintained minimal cash reserves since October 2008 and have relied solely on additional investment from Equity 11.  Equity 11 is not committed to make any additional investments.  We will need to raise additional capital from Equity 11, Stromback Acquisition Corporation or other investors in fiscal year 2010 in order to continue to fund our operations.  We cannot be certain that additional funds will be available on terms attractive to us or at all.  If adequate funds are not available, we may be required to curtail our pre-production, sales and research and development activities and/or otherwise materially reduce our operations.  Our inability to raise adequate funds will have a material adverse effect on our business, results of operations and financial condition and may force us to seek protection under the bankruptcy laws.

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We are dependent on key personnel

Our success will be largely dependent upon the efforts of our executive officers.  The loss of the services of our executive officers could have a material adverse effect on our business and prospects.  We cannot be certain that we will be able to retain the services of such individuals in the future.  Our research and development efforts are dependent upon a single executive, Sally Ramsey, with whom we have entered into an employment agreement which expires on December 31, 2012.  Our success will be dependent upon our ability to hire and retain qualified technical, research, management, sales, marketing, operations, and financial personnel.  We will compete with other companies with greater financial and other resources for such personnel.  Although we have not to date experienced difficulty in attracting qualified personnel, we cannot be certain that we will be able to retain our present personnel or acquire additional qualified personnel as and when needed.  On September 21, 2009, we entered into new employment agreements with our Chief Executive Officer, Chief Operating Officer, and General Counsel and entered into an amendment to Ms. Ramsey’s employment agreement.  We do not have an employment agreement with our Chief Financial Officer.

We Rely on Computer Systems for Financial Reporting and other Operations and any Disruptions in Our Systems Would Adversely Affect Us

We rely on computer systems to support our financial reporting capabilities and other operations. As with any computer systems, unforeseen issues may arise that could affect our ability to receive adequate, accurate and timely financial information, which in turn could inhibit effective and timely decisions. Furthermore, it is possible that our information systems could experience a complete or partial shutdown. If such a shutdown occurred, it could impact our ability to report our financial results in a timely manner or to otherwise operate our business.  In this regard, our financial data in our accounting software (QuickBooks) became corrupted and unusable in late June 2009 and the backup system for our computer systems failed to backup the data. This resulted in a delay in our ability to complete our financial statements for the June 30, 2009 quarter and to file our Form 10-Q with the SEC for such period. 

Risks Related to our Business

We are operating in both mature and developing markets, and there is a risk that we may not achieve acceptance of our technology and products in these markets

We researched the markets for our products using our own personnel rather than third parties.  We have conducted limited test marketing and, thus, have relatively little information on which to estimate our levels of sales, the amount of revenue our planned operations will generate and our operating and other expenses.  We cannot be certain that we will be successful in our efforts to market our products or to develop our markets in the manner we contemplate.

Certain markets, such as electronics and specialty packaging, are developing and rapidly evolving and are characterized by an increasing number of market entrants who have developed or are developing a wide variety of products and technologies, a number of which offer certain of the features that our products offer.  Because of these factors, demand and market acceptance for new products may be difficult.  In mature markets, such as automotive or general industrial, we may encounter resistance by our potential customers in changing to our technology because of the capital investments they have made in their present production or manufacturing facilities.  Thus, we cannot be certain that our technology and products will become widely accepted. We do not know our future growth rate, if any, and size of these markets. If a substantial market fails to develop, develops more slowly than expected, becomes saturated with competitors or if our products do not achieve market acceptance, our business, operating results and financial condition will be materially adversely affected.

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Our technology is also intended to be marketed and licensed to component or device manufacturers for inclusion in the products they market and sell as an embedded solution.  As with other new products and technologies designed to enhance or replace existing products or technologies or change product designs, these potential partners may be reluctant to adopt our coating solution into their production or manufacturing facilities unless our technology and products are proven to be both reliable and available at a competitive price and the cost-benefit analysis is favorable to the particular industry.  Even assuming acceptance of our technology, our potential customers may be required to redesign their production or manufacturing facilities to effectively use our Liquid Nanotechnology™ coatings.  The time and costs necessary for such redesign could delay or prevent market acceptance of our technology and products.  A lack of, or delay in, market acceptance of our Liquid Nanotechnology™ products would adversely affect our operations.  We do not know if we will be able to market our technology and products successfully or that any of our technology or products will be accepted in the marketplace.

We expect that our products will have a long sales cycle

One of our target markets is the original equipment manufacturer (OEM) market. OEMs traditionally have substantial capital investments in their plant and equipment, including the coating portion of the production process.  In this market, the sale of our coating technology will be subject to budget constraints and resistance to change with respect to long-established production techniques and processes, which could result in a significant reduction or delay in our anticipated revenues.  We cannot assure investors that such customers will have the necessary funds to purchase our technology and products even though they may want to do so.  Further, even if such customers have the necessary funds, we may experience delays and relatively long sales cycles due to their internal-decision making policies and procedures and reticence to change.

Our target markets are characterized by new products and rapid technological change

The target markets for our products are characterized by rapidly changing technology and frequent new product introductions.  Our success will depend on our ability to enhance our planned technologies and products and to introduce new products and technologies to meet changing customer requirements.  We intend to devote significant resources toward the development of our Liquid Nanotechnology™ solutions.  We are not certain that we will successfully complete the development of these technologies and related products in a timely fashion or that our current or future products will satisfy the needs of the coatings market.   We do not know if technologies developed by others will adversely affect our competitive position or render our products or technologies non-competitive or obsolete.

There is a significant amount of competition in our market

The industrial coatings market is extremely competitive.  Competitive factors our products face include ease of use, quality, portability, versatility, reliability, accuracy, cost, switching costs and other factors.  Our primary competitors include companies with substantially greater financial, technological, marketing, personnel and research and development resources than we currently have.  There are direct competitors who have competitive technology and products for many of our products.  New companies will likely enter our markets in the future.  Although we believe that our products are distinguishable from those of our competitors on the basis of their technological features and functionality at an attractive value proposition, we may not be able to penetrate any of our anticipated competitors’ portions of the market.  Many of our anticipated competitors have existing relationships with manufacturers that may impede our ability to market our technology to potential customers and build market share.  We do not know that we will be able to compete successfully against currently anticipated or future competitors or that competitive pressures will not have a material adverse effect on our business, operating results and financial condition.

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We have limited marketing capability

We have limited marketing capabilities and resources.  In order to achieve market penetration, we will have to undertake significant efforts and expenditures to create awareness of, and demand for, our technology and products.  Our ability to penetrate the market and build our customer base will be substantially dependent on our marketing efforts, including our ability to establish strategic marketing arrangements with OEMs and suppliers.  We cannot be certain that we will be able to enter into any such arrangements or if entered into that they will be successful.  Our failure to successfully develop our marketing capabilities, both internally and through third-party alliances, would have a material adverse effect on our business, operating results and financial condition.  Even if developed, such marketing capabilities may not lead to sales of our technologies and products.

We have limited manufacturing capacity

We have limited manufacturing capacity for our products.  In order to execute our contemplated direct sales strategy, we will need to either: (i) acquire existing manufacturing capacity; (ii) develop a manufacturing capacity “in-house”; or (iii) identify suitable third parties with whom we can contract for the manufacture of our products.  To either acquire existing manufacturing capacity or to develop such capacity, significant capital or outsourcing will be required.   We may not be able to  raise the necessary capital to acquire existing manufacturing capacity or to develop such capacity.  Moreover, we have not identified potential third parties with whom we could contract for the manufacture of our coatings.  We cannot be certain that such arrangements, if consummated, would be suitable to meet our needs.

We are dependent on manufacturers and suppliers

We purchase, and intend to continue to purchase, all of the raw materials for our products from a limited number of manufacturers and suppliers.

We do not intend to directly manufacture any of the chemicals or other raw materials used in our products.  Our reliance on outside manufacturers and suppliers is expected to continue and involves several risks, including limited control over the availability of raw materials, delivery schedules, pricing and product quality.  We may experience delays, additional expenses and lost sales if we are required to locate and qualify alternative manufacturers and suppliers.

A few of the raw materials for our products are produced by a very small number of specialized manufacturers.  While we believe that there are alternative sources of supply, if, for any reason, we are precluded from obtaining such materials from such manufacturers, we may experience long delays in product delivery due to the difficulty and complexity involved in producing the required materials and we may also be required to pay higher costs for our materials.

We are uncertain of our ability to protect our technology through patents

Our ability to compete effectively will depend on our success in protecting our proprietary Liquid Nanotechnology™, both in the United States and abroad.  We have filed for patent protection in the United States and certain other countries to cover a number of aspects of our Liquid Nanotechnology™.  The U.S. Patent Office (“USPTO”) has issued seven patents to us.  We have four applications still pending before the USPTO and nine patent applications pending in other countries, plus one pending ICT international patent application.

We do not know if  any additional patents relating to our existing technology will be issued from the United States or any foreign patent offices, that we will receive any additional patents in the future based on our continued development of our technology, or that our patent protection within and/or outside of the United States will be sufficient to deter others, legally or otherwise, from developing or marketing competitive products utilizing our technologies.

We do not know if any of our current or future patents will be enforceable to prevent others from developing and marketing competitive products or methods.  If we bring an infringement action relating to any of our patents, it may require the diversion of substantial funds from our operations and may require management to expend efforts that might otherwise be devoted to our operations.  Furthermore, we may not be successful in enforcing our patent rights.

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Further, patent infringement claims in the United States or in other countries will likely be asserted against us by competitors or others, and if asserted, we may not be successful in defending against such claims.  If one of our products is adjudged to infringe patents of others with the likely consequence of a damage award, we may be enjoined from using and selling such product or be required to obtain a royalty-bearing license, if available on acceptable terms.  Alternatively, in the event a license is not offered, we might be required, if possible, to redesign those aspects of the product held to infringe so as to avoid infringement liability.  Any redesign efforts undertaken by us might be expensive, could delay the introduction or the re-introduction of our products into certain markets, or may be so significant as to be impractical.

We are uncertain of our ability to protect our proprietary technology and information

In addition to seeking patent protection, we rely on trade secrets, know-how and continuing technological advancement in special formulations to achieve and thereafter maintain a competitive advantage.  Although we have entered into confidentiality and employment agreements with some of our employees, consultants, certain potential customers and advisors, we cannot be certain that such agreements will be honored or that we will be able to effectively protect our rights to our unpatented trade secrets and know-how.  Moreover, others may independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets and know-how.

Risks related to our license arrangements

We have licensing agreements with DuPont and Red Spot Paint & Varnish regarding their use of our technology for specific formulations for designated applications.  The DuPont license provides multiple formulas for use on metal parts in the North American automotive market.  To date, this license has not generated any ongoing royalty payments.  We also have a licensing agreement with Red Spot that provides formulations for specific tank coatings. Such licenses are renewable provided the parties are in compliance with the agreements.  Although these licenses provide for royalties based upon net sales of our UV-cured coating formulations, it is unlikely that Red Spot or DuPont will aggressively market products with our coatings and thus entitle us to receive royalties at any level.

We have not completed our trademark registrations

We have received approval of “EZ Recoat™”, “Liquid Nanotechnology™”, “Ecology Coatings™” as trademarks in connection with our proposed business and marketing activities.  Although we intend to pursue the registration of our marks in the United States and other countries, prior registrations and/or uses of one or more of such marks, or a confusingly similar mark, may exist in one or more of such countries, in which case we might be precluded from registering and/or using such mark in certain countries.

There are economic and general risks relating to our business

The success of our activities is subject to risks inherent in business generally, including demand for products and services; general economic conditions; changes in taxes and tax laws; and changes in governmental regulations and policies.  For example, difficulties in obtaining credit and financing and the recent slowdown in the U.S. automotive industry have made it more difficult to market our technology to that industry.

Risks Related to our Common Stock

Our stock price has been volatile and the future market price for our common stock is likely to continue to be volatile. Further, the limited market for our shares may make it difficult for our investors to sell our common stock for a positive return on investment

The public market for our common stock has historically been very volatile. During fiscal year 2009, our low and high market prices of our stock were $0.25 per share (March 24, 2009) and $2.00 per share (August 17, 2009).  Any future market prices for our shares are likely to continue to be very volatile. This price volatility may make it more difficult for our shareholder to sell our shares when desired.  We do not know of any one particular factor that has caused volatility in our stock price.  However, the stock market in general has experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of listed companies.  Broad market factors and the investing public’s negative perception of our business may reduce our stock price, regardless of our operating performance. Further, the volume of our traded shares and the market for our common stock is very limited.  During the past fiscal year, there have been several days where no shares of our stock have traded.  A larger market for our shares may never develop or be maintained. Market fluctuations and volatility, as well as general economic, market and political conditions, could reduce our market price.  As a result, this may make it very difficult for our shareholder to sell our common stock.

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Control by key stockholders

As of September 30, 2009, Richard D. Stromback, Douglas Stromback, Deanna Stromback, who are the brother and sister of Richard D. Stromback, respectively, Sally J.W. Ramsey, and Equity 11 held shares representing approximately 75.4% of the voting power of our outstanding capital stock prior to any sales of any common stock by Equity 11 in this offering and 67% of the voting power assuming the sale of all of the 4,340,000 shares which may be sold in this offering .  In addition, pursuant to the Securities Purchase Agreement we entered into with Equity 11 in August 2008, Equity 11 has the right to effectively control our Board of Directors with the right to appoint three of the five members of our Board of Directors.  Additionally, Equity 11 has the right to appoint our Chief Executive Officer.  The stock ownership and governance rights of such parties constitute effective voting control over all matters requiring stockholder approval.  These voting and other control rights mean that our other stockholders will have only limited rights to participate in our management.  The rights of our controlling stockholders may also have the effect of delaying or preventing a change in our control and may otherwise decrease the value of the shares and voting securities owned by other stockholders.

Our common stock is considered a “penny stock,” any investment in our shares is considered to be a high-risk investment and is subject to restrictions on marketability

Our common stock is considered a “penny stock” because it is traded on the OTC Bulletin Board and it trades for less than $5.00 per share. The OTC Bulletin Board is generally regarded as a less efficient trading market than the NASDAQ Capital or Global Markets or the New York Stock Exchange.

The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in “penny stocks.”  The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document prepared by the SEC, which specifies information about penny stocks and the nature and significance of risks of the penny stock market.  The broker-dealer also must provide the customer with bid and offer quotations for the penny stock, the compensation of the broker-dealer and any salesperson in the transaction, and monthly account statements indicating the market value of each penny stock held in the customer’s account.  In addition, the penny stock rules require that, prior to effecting a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction.  These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our common stock.

Since our common stock will be subject to the regulations applicable to penny stocks, the market liquidity for our common stock could be adversely affected because the regulations on penny stocks could limit the ability of broker-dealers to sell our common stock and thus the ability of our shareholder to sell our common stock in the secondary market in the future.

We have never paid dividends and have no plans to do so in the future

To date, we have paid no cash dividends on our shares of common stock and we do not expect to pay cash dividends on our common stock in the foreseeable future.  We intend to retain future earnings, if any, to provide funds for the operation of our business.  Our Securities Purchase Agreement with Equity 11 prevents the payment of any dividends to our common stockholders without the prior approval of Equity 11.  Dividends for the preferred shares held by Equity 11 have not been paid in cash.  Thus far, the dividends have been paid through the issuance of additional preferred shares.

14

The issuance and exercise of additional options, warrants, and convertible securities may dilute the ownership interest of our stockholders

As of November 16, 2009, we had granted options to purchase 5,131,119 shares of our common stock under our 2007 Stock Option and Restricted Stock Plan (the “2007 Plan).  Under the Securities Purchase Agreement, Equity 11 purchased $2,357,000 in convertible preferred shares, potentially convertible into 4,714,000 shares of our common stock.  On December 1, 2008, we issued a dividend in lieu of cash to Equity 11 of 24 convertible preferred shares which are convertible into 48,000 shares of common stock.  On June 1, 2009, we issued additional shares of preferred stock as a dividend in lieu of cash to Equity 11 of 55 convertible preferred shares which are convertible into 110,000 shares of our common stock.  The total potential number of common shares to be issued under the Securities Purchase Agreement assuming issuance and conversion of all of the convertible preferred shares issued under the Securities Purchase Agreement is 4,872,000.  The Securities Purchase Agreement provides for the issuance of 500 warrants for each convertible preferred share issued and entitles Equity 11 to purchase one share of our common stock at $.75 per common share for each warrant.  As of Nobember 16, 2009, we had issued warrants to purchase 4,532,900 shares of our common stock which includes 1,178,500 warrants issued to Equity 11.  On May 15, 2009, we entered into a new Convertible Preferred Securities Agreement with Equity 11.  Shares purchased under this Agreement are convertible into our common shares at a price equal to twenty percent (20%) of the average closing price of our common stock for the five trading days immediately prior to purchase.  As of November 16, 2009, 616 of these preferred shares had been sold under this Agreement which are convertible into 6,513,538 of our common shares.  As of September 30, 2009, there was $739,483.61 outstanding in principal and accrued interest on notes held by Investment Hunter, LLC, George Resta and Mitchell Shaheen.  These notes are no longer convertible but we may grant conversion rights to these holders to reduce our need for cash.  To the extent that our outstanding stock options and warrants are exercised, Convertible Preferred Shares are converted to common stock and/or promissory notes are converted into common stock, dilution to the ownership interests of our stockholders will occur.

We have additional securities available for issuance, which, if issued, could adversely affect the rights of the holders of our common stock

Our Articles of Incorporation authorize the issuance of 90,000,000 shares of common stock and 10,000,000 shares of preferred stock.  The common stock and preferred stock can be issued by our Board of Directors without stockholder approval.  Any future issuances of our common stock or preferred stock could further dilute the percentage ownership of our existing stockholders.

Indemnification of officers and directors

Our Articles of Incorporation and Bylaws contain broad indemnification and liability limiting provisions regarding our officers, directors and employees, including the limitation of liability for certain violations of fiduciary duties.  In addition, we maintain Directors and Officers liability insurance.  Our shareholder will have only limited recourse against such directors and officers.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of our company under Nevada law or otherwise, we have been advised that the opinion of the Securities and Exchange Commission is that such indemnification is against public policy as expressed in the Securities Act and may, therefore, be unenforceable.

Sales of our stock by the Selling Stockholder may drive the price of our stock down

Our common stock is “thinly” traded as it has very low daily trading volume.  On some trading days, no shares of our stock are sold.  In addition, we may file additional registration statements for shares held by Equity 11 as the SEC rules may permit.  Once registered, these shares may be sold on the OTC Bulletin Board.  Future sales of a substantial number of shares by the Selling Stockholder will likely put a downward pressure on the price of our stock.

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Short Selling may drive the price of our stock down

Short selling is the practice of selling securities that have been borrowed from a third party with the intention of buying identical securities back at a later date to return to the lender. The short seller hopes to profit from a decline in the value of the securities between the sale and the repurchase, as he will pay less to buy the securities than he received on selling them. Conversely, the short seller will make a loss if the price of the security rises.  The ability of the Selling Shareholder to sell a substantial number of shares and the downward pressure on the price of our common stock that may result may encourage short selling of our common stock by third parties.  Such short selling will cause additional downward pressure on the price of our stock.

 FORWARD LOOKING STATEMENTS

Except for statements of historical fact, the information presented herein constitutes forward-looking statements. These forward-looking statements generally can be identified by phrases such as “anticipates,” “believes,” “estimates,” “expects,” “forecasts,” “foresees,” “intends,” “plans,” or other words of similar import.  Similarly, statements herein that describe our business strategy, outlook, objectives, plans, intentions or goals also are forward-looking statements.  Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.  Such factors include, but are not limited to, our ability to: successfully commercialize our technology; generate revenues and achieve profitability in an intensely competitive industry; compete in products and prices with substantially larger  and better capitalized competitors; secure, maintain and enforce a strong intellectual property portfolio; attract immediate additional capital sufficient to finance our working capital requirements, as well as any investment of plant, property and equipment; develop a sales and marketing infrastructure; identify and maintain relationships with third party suppliers who can provide us a reliable source of raw materials; acquire, develop, or identify for our own use, a manufacturing capability; attract and retain talented individuals; continue operations during periods of adverse changes in general economic or market conditions, and; other events, factors and risks previously and from time to time disclosed in our filings with the Securities and Exchange Commission, including, specifically, the “Risk Factors” enumerated herein.

Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements may differ from the past.  You should not place undue reliance on these forward-looking statements, which speak only as of the date of this report.  Except as required by law, we do not undertake to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

In this prospectus, “Ecology”, “we”, “us”, or “our” refer to Ecology Coatings, Inc. and its wholly-owned subsidiary, Ecology Coatings, Inc., a California corporation.

ITEMS 4 and 5:  USE OF PROCEEDS, DETERMINATION OF OFFERING PRICE

We will not receive any of the proceeds resulting from the sale of the shares held by Equity 11, the selling shareholder.

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Our common stock, par value $.001 per share (the “Common Stock”), is currently quoted on the OTC Bulletin Board under the symbol “ECOC”.  The high/low market prices of our common stock were as follows for the periods below, as reported on http://finance.google.com.  The quotations below reflect prices without retail markup, markdown, or commission and may not represent actual transactions.  Additionally, our Merger with OCIS was consummated on July 27, 2007.  Therefore, the quotations below for the fiscal year ended September 30, 2007 reflect quotations prior to the completion of the reverse merger.

	High Close		Low Close
Fiscal Year 2010
1st Quarter (through November 16, 2009)	$	.55	$	.25
Fiscal Year 2009
1st Quarter	$	1.04	$	.65
2nd Quarter	$	.95	$	.25
3rd Quarter	$	.89	$	.31
4th Quarter	$	2.00	$	.40
Fiscal Year Ended September 30, 2008
1st Quarter	$	3.15	$	1.01
2nd Quarter	$	3.65	$	1.01
3rd Quarter	$	2.05	$	.52
4th Quarter	$	2.50	$	.51
Fiscal Year Ended September 30, 2007
1st Quarter	$	3.18	$	.76
2nd Quarter	$	2.22	$	1.46
3rd Quarter	$	4.85	$	1.59
4th Quarter	$	4.90	$	2.95

On November 16, 2009 the last reported sale price of our common stock on the Over-The-Counter Bulletin Board was $0.25 per share.

Holders of Record

As of November 16, 2009, there were approximately 242 holders of record of our common stock.  Equity 11 will hold 18,895,038 shares of our common stock if it converts all of its preferred shares into common shares.  We have agreed to register certain of Equity 11’s converted common shares under the registration statement of which this prospectus is a part,  pursuant to our Securities Purchase Agreement and Convertible Preferred Securities Agreement with Equity 11.  The sale of the 4,340,000 shares held by Equity 11 could have a material negative effect on the price of our common stock.

Dividends

To date, we have paid no cash dividends on our shares of common stock and we do not expect to pay cash dividends on our common stock in the foreseeable future.  We intend to retain future earnings, if any, to provide funds for the operation of our business.  Our Securities Purchase Agreement with Equity 11 prevents the payment of any dividends to our common stockholders without the prior approval of Equity 11.  We have paid dividends due Equity 11 for its preferred shares by issuing additional preferred shares in lieu of cash.

SEC Reports

We are an SEC reporting company and are current in filing our quarterly, annual and other reports with the SEC.  On January 30, 2009, we voluntarily sent all shareholders our FY 2008 10-KSB filed with the SEC on December 23, 2008 as our FY 2008 annual report.  A cover letter from our CEO accompanied the 10-KSB and was filed with the SEC on January 30, 2009.  The public may read and copy materials we have filed with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington, DC 20549.  The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.  The SEC maintains an Internet site that contains reports, proxy and information statements, and other information we have filed electronically with the SEC and these may be accessed at http://www.sec.gov.  These filings may also be accessed at our website:  www.EcologyCoatings.com.

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Equity Compensation Plans

The following table sets forth certain information as of September 30, 2009, concerning outstanding options and rights to purchase common stock granted to participants in all of our equity compensation plans and the number of shares of common stock remaining available for issuance under such equity compensation plans.

			Number of Securities
			Remaining Available for
	Number of Securities to be		Future Issuance Under Equity
	Issued Upon Exercise of	Weighted-Average Exercise	Compensation Plans
	Outstanding Options, Warrants	Price of Outstanding Options,	(Excluding Securities
	and Rights	Warrants and Rights	Reflected in Column (a))
Plan Category	(a)	(b)	(c)
Equity compensation plans approved by security holders	5,131,119	$1.13	1,217,881
Equity compensation plans not approved by security holders	-	-	-
Total	5,131,119	$1.13	1,217,881

ITEM 6:  DILUTION

Not applicable.

ITEM 7:  SELLING SECURITY HOLDER

The table below sets forth information concerning beneficial ownership of our common stock as of September 30, 2009, and as adjusted to reflect the shares of common stock to be issued and sold in this offering by:

·   each person known by us to be the beneficial owner of more than 5% of our common stock;

·   each of our directors;

·   each of our named executive officers; and

·   all of executive officers and directors as a group.

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The selling stockholder acquired our securities pursuant to private placements of our shares.

As of November 16, 2009, we had 51,984,241shares of common stock beneficially outstanding, including 32,835,684 common shares issued and outstanding, 2,436 shares of convertible preferred stock which can be converted into 4,872,000 common shares, 616 shares of convertible preferred stock, Series B which can be converted into 6,513,538 common shares, warrants to acquire 4,532,900 common shares and stock options vested or that will vest within sixty days of November 16, 2009 to acquire 3,230,119 common shares.  The percentage of beneficial ownership is based on 51,984,241shares of common stock beneficially outstanding as of November 16, 2009 and 51,984,241shares of common stock outstanding after completion of this offering. 

  Of the 32,835,684 common shares issued and outstanding on November 16, 2009, 18,907,300 were held by affiliates and 13,928,384 were held by non-affiliates as shown in the table below.  For purposes of the foregoing, we have treated all shares held by executive officers, directors and Equity 11 as “affiliate” shares.

	Issued and Outstanding Shares Held Prior To Offering		Issued and Outstanding Shares Held After The Offering
Affiliate	Shares	Percentage	Shares	Percentage
Equity 11/JB Smith	5,200,000	15.8%	5,200,000	15.8%
Richard Stromback	10,697,300	32.6%	10,697,300	32.6%
Sally Ramsey	3,000,000	9.1%	3,000,000	9.1%
Rocco DelMonaco	-	-	-	-
Joe Nirta	-	-	-	-
Robert Crockett	-	-	-	-
Daniel Iannotti	-	-	-	-
Tom Krotine	10,000	*	10,000	*
Kevin Stolz	-	-	-	-
Affiliate Total:	18,907,300	57.6%	18,907,300	57.6%
Non-Affiliates:	13,928,384	32.4%	13,928,384	32.4%

* Less than 1%.

Of the 51,984,241 common shares beneficially outstanding as of November 16, 2009, 34,179,384 were held by affiliates and 17,784,857 were held by non-affiliates as shown in the table below.  For purposes of the foregoing, we have treated all shares held by executive officers, directors and Equity 11 as “affiliate” shares.  Beneficial ownership in this table is determined in accordance with the rules of the SEC and does necessarily indicate beneficial ownership for any other purpose.  Under these rules, the number of shares of common stock deemed outstanding includes shares issuable upon exercise of options, warrants or convertible securities held by the respective person or group that may be exercised within 60 days after September 30, 2009.

	Beneficially Held Shares Outstanding Prior To Offering		Beneficially Held Shares Outstanding After The Offering
Affiliate	Shares	Percentage	Shares	Percentage
Equity 11/JB Smith	18,895,038	36.4%	14,555,038	28%
Richard Stromback	11,293,129	21.7%	11,293,129	21.7%
Sally Ramsey	3,150,000	6%	3,150,000	6%
Rocco DelMonaco	100,000	*	100,000	*
Joe Nirta	100,000	*	100,000	*
Robert Crockett	110,000	*	110,000	*
Daniel Iannotti	110,000	*	110,000	*
Tom Krotine	341,217	*	341,217	*
Kevin Stolz	100,000	*	100,000	*
Affiliate Total:	34,199,384	65.7%	29,859,384	57.4%
Non-Affiliates:	17,784,857	34.3%	22,124,857	42.6%

* Less than 1%.

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Unless otherwise indicated and subject to applicable community property laws, to our knowledge, each stockholder named in the following table possesses sole voting and investment power over the shares listed, except for those jointly owned with that person’s spouse.  Unless otherwise noted below, the address of each person listed on the table is c/o Ecology Coatings, Inc., 2701 Cambridge Court , Suite 100, Auburn Hills, MI  48326.  Beneficial ownership representing less than 1% is denoted with an asterisk (*).

Equity 11 and our Directors and Officers currently hold the following number of our common shares and warrants:

Name and Address of Beneficial Owner	Shares Beneficially Owned Prior to the Offering		Number of Shares Offered	Shares Beneficially Owned After the Offering
	Shares	Percentage		Shares	Percentage
10 % Stockholders:
Equity 11, Ltd. (1)	18,895,038	36.4%	4,340,000	14,555,038	28%
Richard Stromback (4)	11,293,129	22.7%	—	11,293,129	22.7%
Named Executive Officers and Directors:
Richard Stromback (4)	11,293,129	22.7%	—	11,293,129	22.7%
Sally Ramsey	3,150,000	6%	—	3,150,000	6%
Rocco DelMonaco (5)	100,000	*	—	100,000	*
Joseph Nirta (6)	100,000	*	—	100,000	*
Robert Crockett	110,000	*	—	110,000	*
Thomas Krotine (7)	341,217	*	—	341,217	*
Daniel Iannotti	110,000	*	—	110,000	*
Kevin Stolz (10)	100,000	*	*	100,000	*
J.B. Smith (8)	18,895,038	36.4%	4,340,000	14,555,038	28%
Others:
Trimax, LLC (9)	3,050,000	5.8%	—	3,050,000	5.8%
All executive officers and directors as a group (nine people)	34,199,384	65.8%	4,340,000	29,859,384	57.4%

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(1)Includes warrants to acquire 1,178,500 shares, 945,000 shares issuable upon the exercise of options exercisable within 60 days of September 30, 2009, and 9,299,778 shares issuable upon conversion of 5% preferred stock convertible within 60 days of September 30, 2009.  These amounts include stock options to purchase 531,000 shares held by Sales Attack LC and stock options to purchase 100,000 shares held by JB Smith.  Mr. J.B. Smith is the Managing Partner of Equity 11, Ltd. and may be deemed to share voting and dispositive power over the shares held by Equity 11, Ltd and options held by Sales Attack LC.  Mr. Smith disclaims beneficial ownership of shares held by Equity 11, Ltd., except to the extent of any pecuniary interest therein.  Mr. Smith is the managing partner of Sales Attack LC.  Sales Attack LC provides marketing services to us pursuant to a Consulting Agreement entered into on September 17, 2008.  The selling shareholder and Mr. Smith are not broker-dealers nor affiliates of broker-dealers.

(2)Douglas Stromback is the brother of Richard D. Stromback.

(3)Deanna Stromback is the sister of Richard D. Stromback.

(4)Includes 62,500 shares owned beneficially and of record by his wife, Jill Stromback, but does not include 4,340,000 shares held by Mr. Stromback’s brother and sister, Doug and Deanna Stromback.  Includes 10,000 shares issuable upon the exercise of options exercisable within 60 days of September 30, 2009 and also includes 571,428 common shares convertible from 240 convertible preferred shares purchased by Stromback Acquisition Corporation and warrants to purchase 14,400 common shares issued in connection with that purchase.

(5) Mr. DelMonaco’s address is: 737 3rd Street Northeast, Washington, D.C. 20002.

(6)Mr. Nirta’s address is: 5600 Orion Road, Rochester, MI 48306.

(7)Includes 331,217 shares issuable upon the exercise of options exercisable within 60 days of September 30, 2009.

(8)Includes 100,000 shares issuable upon the exercise of options exercisable within 60 days of September 30, 2009.  Mr. Smith is the Managing Partner of Equity 11, Ltd. and may be deemed to share voting and dispositive power over the shares held by Equity 11, Ltd. and options held by Sales Attack LC.  Mr. Smith disclaims beneficial ownership of shares held by Equity 11, Ltd., except to the extent of any pecuniary interest therein.

(9)Represents shares issuable upon the exercise of stock options and warrants.  Although our records from September 2008 indicate that Trimax, LLC directly owned 762,939 common shares, we have been unable to confirm that Trimax continues to own such shares.  If Trimax continues to own such common shares, the beneficial ownership number shown in this table could be as high as 3,812,939.  Daryl Repokis holds voting and dispositive control over the shares, stock options and warrants held by Trimax, LLC.  Mr. Repokis’s address is:  220 Cranbrook, Bloomfield Hills, MI  48304.

(10)Includes 50,000 shares issuable upon the exercise of options exercisable within 60 days of September 30, 2009.

INFORMATION REGARDING SHARES ISSUED TO EQUITY 11

The following table identifies the investment amounts, number of preferred shares purchased , number of common shares to be issued if the preferred shares are converted and the weighted average cost per share of the shares held by the selling shareholder, and purchased under the August 28, 2008 Securities Purchase Agreement and the May 15, 2009 Convertible Preferred Securities Purchase Agreement:

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Sales Under Securities Purchase Agreement Date August 28, 2008:
Preferred Shares Selling Date	Amount Sold	No. of Preferred Shares	Conversion Price - Cost Per Share	No. of Common Shares When Converted	Market Price Per Share on Date of Sale
August 28, 2008	$1,260,000	1,260	$.50	2,520,000	$.62
September 26, 2008	$750,000	750	$.50	1,500,000	$1.10
December 1, 2008 Dividend		24	$.50	48,000
January 23, 2009	$94,000	94	$.50	188,000 (1)	$.901
February 11, 2009	$30,000	30	$.50	60,000	$.65
February 18, 2009	$25,000	25	$.50	50,000	$.48
February 26, 2009	$40,000	40	$.50	80,000 (2)	$.552
March 10, 2009	$23,000	23	$.50	46,000	$.88
March 26, 2009	$80,000	80	$.50	160,000	$.603
April 14, 2009	$21,000	21	$.50	42,000	$.65
April 29, 2009	$34,000	34	$.50	68,000	$.35
June 1, 2009 Dividend		55		110,000	$.45
Sales Under Securities Purchase Agreement Date May 15, 2009:
May 15, 2009	$276,000	276	$.08	3,450,000	$.40
May 27, 2009	$40,000	40	$.09	444,444	$.50
June 10, 2009	$20,000	20	$.09	222,222	$.45
June 26, 2009	$28,000	28	$.09	311,111	$.55
July 24, 2009	$75,000	75	$.10	750,000	$.64
August 12, 2009	$52,000	52	$.16	325,000	$.70
August 19, 2009	$25,000	25	$.24	104,167	$1.30
August 31, 2009	$50,000	50	$.26	192,308	$.96
November 9, 2009	$50,000	50	$.07	714,286	$.32
TOTAL:	$2,973,000	3,052		11,385,538

(1)   No shares were traded on January 23, 2009.  The closest previous day that the shares were traded was on January 15, 2009 and the closing price on that date was $.90 per share.

(2)   No shares were traded on February 26, 2009.  The closest previous day that the shares were traded was on February 19, 2009 and the closing price on that date was $.55 per share.

(3)   No shares were traded on March 26, 2009.  The closest previous day that the shares were traded was on March 25, 2009 and the closing price on that date was $.60 per share.

The following table identifies the dollar value of the selling shareholder’s investment in the shares of preferred stock to be converted into common shares which are being registered under this registration statement and the market value of those shares of common stock on the date of each investment:

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Preferred Shares Selling Date	Selling Shareholder’s Investment	No. of Preferred Shares	Conversion Price Per Share	No. of Common Shares When Converted	Market Price Per Share on Date of Investment	Market Value of Investment
August 28, 2008	$1,260,000	1,260	$.50	2,520,000	$.62	$1,562,400
September 26, 2008	$750,000	750	$.50	1,500,000	$1.10	$1,650,000
December 1, 2008 Dividend		24	$.50	48,000	$.75	$36,000
January 23, 2009	$94,000	94	$.50	188,000	$.90(1)	$169,200
February 11, 2009	$30,000	30	$.50	60,000	$.65	$39,000
February 18, 2009	$12,000	12	$.50	24,000	$.48	$11,520
TOTAL:	$2,146,000	2,170	$.50.	4,340,000		$3,468,120

(1)   No shares were traded on January 23, 2009.  The closest previous day that shares were traded was January 15, 2009 and the closing price on that date was $.90 per share.

(2)   No shares were traded on February 26, 2009.  The closest previous day that shares were traded was February 19, 2009 and the closing price on that date was $.55 per share.

(3)   No shares were traded on March 26, 2009.  The closest previous day that shares were traded was January 15, 2009 and the closing price on that date was $.60 per share.

We will not receive any of the proceeds from sales by selling shareholder of the common shares under this registration statement.  The only payments we anticipate making to the selling shareholder within one year of the sales of such stock by the selling shareholder are noted on pages 60-62  in Item 11.  However, if Equity 11 and its affiliates exercise all of its outstanding warrants and stock options, we will receive $1,546,425.

The total possible profit the selling shareholder could realize as a result of the conversion discount for the common shares that are included under this registration statement is shown below:

Preferred Shares Selling Date	Selling Shareholder’s Investment	No. of Preferred Shares	Conversion Price Per Share	Total Additional Cost to Convert to Common Shares	No. of Common Shares When Converted	Market Price Per Share on Date of Sale	Market Price of Investment	Potential Profit/Discount to Market Price
August 28, 2008	$1,260,000	1,260	$.50	$0	2,520,000	$.62	$1,562,400	$302,400
September 26, 2008	$750,000	750	$.50	$0	1,500,000	$1.10	$1,650,000	$900,000
December 1, 2008 Dividend		24	$.50	$0	48,000	$.75	$36,000	$36,000
January 23, 2009	$94,000	94	$.50	$0	188,000	$.90 (1)	$169,200	$75,200
February 11, 2009	$30,000	30	$.50	$0	60,000	$.65	$39,000	$9,000
February 18, 2009	$12,000	12	$.50	$0	24,000	$.48	$11,520	($480)
TOTAL:	$2,146,000	2,170	$.50	$0	4,340,000		$3,468,120	$1,322,120

(1)   No shares were traded on January 23, 2009.  The closest previous day that shares were traded was January 15, 2009 and the closing price on that date was $.90 per share.

(2)   No shares were traded on February 26, 2009.  The closest previous day that shares were traded was February 19, 2009 and the closing price on that date was $.55 per share.

(3)   No shares were traded on March 26, 2009.  The closest previous day that shares were traded was January 15, 2009 and the closing price on that date was $.60 per share.

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The total possible profit the selling shareholder could realize as a result of the warrants issued to the selling shareholder under the August 28, 2008 Securities Purchase Agreement is shown below:

Warrant Issue Date	Selling Shareholder’s Investment	No. of Shares	Purchase Price Per Share	Total Purchase Price of Warrant	Market Price Per Share on Warrant Issue Date	Market Value of Warrant	Potential Profit/Discount to Market Price
August 28, 2008	$0 (1)	630,000	$.75	$472,500	$.62	$390,600	($81,900)
September 26, 2008	$0 (1)	375,000	$.75	$281,250	$1.10	$412,500	$131,250
January 23, 2009	$0 (1)	47,000	$.75	$35,250	$.90 (2)	$42,300	$7,050
February 11, 2009	$0 (1)	15,000	$.75	$11,250	$.65	$9,750	($1,500)
February 18, 2009	$0 (1)	12,500	$.75	$9,375	$.48	$6,000	($3,375)
February 26, 2009	$0 (1)	20,000	$.75	$15,000	$.55 (3)	$11,000	($4,000)
March 10, 2009	$0 (1)	11,500	$.75	$8,625	$.88	$10,120	$1,495
March 26, 2009	$0 (1)	40,000	$.75	$30,000	$.60 (4)	$24,000	($6,000)
April 14, 2009	$0 (1)	10,750	$.75	$8,062	$.65	$6,987	($1,075)
April 29, 2009	$0 (1)	16,750	$.75	$12,563	$.35	$5,863	($6,700)
TOTAL:		1,178,500		$883,875		$919,120	$35,245

(1)   These warrants were issued with each investment by Equity 11 in shares of preferred stock under the Securities Purchase Agreement dated August 28, 2008.

(2)   No shares were traded on January 23, 2009.  The closest previous day that the shares were traded was on January 15, 2009 and the closing price on that date was $.90 per share.

(3)   No shares were traded on February 26, 2009.  The closest previous day that the shares were traded was on February 19, 2009 and the closing price on that date was $.55 per share.

(4)   No shares were traded on March 26, 2009.  The closest previous day that the shares were traded was on March 25, 2009 and the closing price on that date was $.60 per share.

The following table identifies the total payments to the selling shareholder and the total discount to the market price of the common shares and warrants to be issued to the selling shareholder as a percentage of the net proceeds to us:

Gross Proceeds from Sale of Preferred Stock	Payments Previously Made to Selling Shareholder(1)	Remaining Required Payments to be made to Selling Shareholder (1)	Net Proceeds to Issuer	Total Discount to Market By Selling Shareholder for common stock and warrants	Total Payments to Selling Shareholder as a Percentage of Gross Proceeds	Total Discount to Market Price as a Percentage of Gross Proceeds
$2,146,000	$299,603.72	$426,752.70	$1,419,643.60	$1,357,365	34%	63%

(1)   See pages 63-65 in Item 11 for the calculation of these figures.

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The following table identifies the total combined possible profit to be realized by the selling shareholder as a result of any conversion discounts regarding the common shares underlying the preferred stock and any other warrants, options, notes, or other securities held by selling shareholder and its affiliates:

Total Combined Profit Common Shares	Total Combined Profit Warrants	Total Combined Profit Options	Total Combined Profit Notes	Total Combined Profit
$1,322,120	$35,245	$0 (1)	$1,093 (2)	$1,358,458

(1)   531,000 stock options were issued to Sales Attack, LLC, an affiliate of the selling shareholder,  on September 17, 2008 to purchase our common stock at $1.05 per share.  The closing price of our common stock on the OTC Bulletin Board on that date was $1.05 per share.  The selling shareholder acquired stock options to purchase 500,000 shares of our common stock at $.90 per share on January 23, 2009.  No shares of our stock traded on January 23, 2009 and next closest trading date was January 15, 2009 on which the closing price of our common stock was $.90 per share.

(2)   This amount reflects interest paid or accrued for promissory notes held by affiliates of the selling shareholder (Seven Industries, JB Smith LC, and Sky Blue Ventures).

The following table identifies the total of all possible payments by us to the selling shareholder, the total possible discount to the market price of the shares underlying the preferred stock and the total possible discount to the market price of the warrants issued to the selling shareholder as a percentage of the net proceeds to use from the sale of preferred stock to selling shareholder:

Total of Possible Payments to Selling Shareholder	Total Possible Payments As a % of Net Proceeds	Total Possible Discount Common Shares	Total Possible Discount Common Shares As a % of Net Proceeds	Total Possible Discount Warrants	Total Possible Discount Warrants As a % of Net Proceeds	Total of Payments & Discounts	Total As a % of Net Proceeds
$726,366.42 (1)	60%	$1,322,120	95%	$35,245	2.5%	$2,083,373.40	147%

(1)   Represents $299,603.72 in payments previously made and $426,752.70 in payments remaining to be paid.  See pages 63-65 in Item 11 for the calculation of these figures.  This includes prior payments to the selling shareholder or its affiliates and all future payments to be made to the selling shareholder.

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The following identifies the number of shares outstanding prior to the selling shareholder’s initial investment in us and information regarding the registration of such shares:

# of shares outstanding prior to Selling Shareholder’s initial investment	# of shares registered for resale by selling shareholder in prior registration statements	# of shares registered for resale by selling shareholder that continue to held by Selling Shareholder	# of shares sold in registered resale transactions by Selling Shareholder	# of shares registered for resale on behalf of Selling Shareholder
32,810,684	0	4,340,000	0	4,340,000

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ITEM 8:  PLAN OF DISTRIBUTION

Equity 11, as the selling shareholder of the common stock hereunder and any of its pledgees, assignees and successors-in-interest may, from time to time, sell any or all of the shares of common stock subject to the prospectus on the Over-The-Counter Bulletin Board, market or trading facility on which the shares are traded or in private transactions.  These sales may be at fixed or negotiated prices.  The selling shareholder may use one or more of the following methods when selling shares:

· ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

· block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;

· purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

· privately negotiated transactions;

· broker-dealers may agree with the selling shareholder to sell a specified number of such shares at a stipulated price per share; or

· any other method permitted pursuant to applicable law.

The selling shareholder may also sell shares under Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”), if available, rather than under this prospectus.  So long as the selling shareholder is an affiliate of Ecology Coatings, as defined under applicable SEC rules, under Rule 144, the selling shareholder may not sell in any three month period a number of shares which exceeds the greater of:  i) one percent of the outstanding shares shown in our most recent SEC report or statement, or ii) the average weekly reported volume of trading in our common stock as reported by the Over-The-Counter Bulletin Board association during the four calendar weeks preceding prior to the notice of the Rule 144 sale.  The selling shareholder is currently an affiliate of Ecology Coatings, Inc. within the meaning of federal securities laws.  In the event that the selling shareholder is not deemed to have been an "affiliate" at any time during the 90 days preceding a sale and has beneficially owned the shares proposed to be sold for at least six months, the selling shareholder would be entitled to sell those shares under Rule 144 subject to compliance with the current public information requirements of Rule 144.  If such selling shareholder has beneficially owned the shares proposed to be sold for at least one year, then the selling shareholder is entitled to sell those shares without complying with any of the requirements of Rule 144 so long as we are current in our public information requirements under Rule 144 (c).

Broker-dealers engaged by the selling shareholder may arrange for other broker-dealers to participate in sales.  Broker-dealers may receive commissions or discounts from the selling shareholder (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this Prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with applicable FINRA rules.

Although there are no contractual or other arrangements that prohibit the selling shareholder from engaging in short selling, the selling shareholder has informed us that it has not held a short position in our common stock, does not currently hold a short position in our common stock and that does not intend to engage in any short selling in our shares.  Short selling is the practice of selling securities that have been borrowed from a third party with the intention of buying identical securities back at a later date to return to the lender. The short seller hopes to profit from a decline in the value of the securities between the sale and the repurchase, as he will pay less to buy the securities than he received on selling them. Conversely, the short seller will make a loss if the price of the security rises.  The ability of the Selling Shareholder to sell a substantial number of shares and the downward pressure on the price of our common stock that may result may encourage short selling of our common stock by third parties.  Such short selling will cause additional downward pressure on the price of our stock.

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We agreed to keep this prospectus effective until the earlier of (i) the date on which the shares may be resold by the selling shareholder without registration and without regard to any volume limitations by reason of Rule 144 under the Securities Act or any other rule of similar effect or (ii) all of the shares have been sold pursuant to this prospectus or Rule 144 under the Securities Act or any other rule of similar effect.  The resale shares will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states, the resale shares may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.

Under applicable rules and regulations under the Securities Exchange Act of 1934, any person engaged in the distribution of the resale shares may not simultaneously engage in market making activities with respect to the common stock for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution.  In addition, the selling shareholder will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of shares of the common stock by the selling shareholder or any other person.  We will make copies of this prospectus available to the selling shareholder and have informed them of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule 172 under the Securities Act).

Important Information on Penny Stocks

Our stock is a “penny stock”.  The SEC requires your broker to give the following statement to you, and to obtain your signature to show that you have received it, before your first trade in a penny stock. This statement contains important information — and you should read it carefully before you sign it, and before you decide to purchase or sell a penny stock.

In addition to obtaining your signature, the SEC requires your broker to wait at least two business days after sending you this statement before executing your first trade to give you time to carefully consider your trade.

Penny stocks can be very risky.

Penny stocks are low-priced shares of small companies. Penny stocks may trade infrequently – which means that it may be difficult to sell penny stock shares once you have them. Because it may also be difficult to find quotations for penny stocks, they may be impossible to accurately price. Investors in penny stock should be prepared for the possibility that they may lose their whole investment.

While penny stocks generally trade over-the-counter, they may also trade on U.S. securities exchanges, facilities of U.S. exchanges, or foreign exchanges. You should learn about the market in which the penny stock trades to determine how much demand there is for this stock and how difficult it will be to sell. Be especially careful if your broker is offering to sell you newly issued penny stock that has no established trading market.

The securities you are considering have not been approved or disapproved by the SEC. Moreover, the SEC has not passed upon the fairness or the merits of this transaction nor upon the accuracy or adequacy of the information contained in any prospectus or any other information provided by an issuer or a broker or dealer.

Information you should get.

In addition to this statement, your broker is required to give you a statement of your financial situation and investment goals explaining why his or her firm has determined that penny stocks are a suitable investment for you. In addition, your broker is required to obtain your agreement to the proposed penny stock transaction.

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Before you buy penny stock, federal law requires your salesperson to tell you the “offer” and the “bid” on the stock, and the “compensation” the salesperson and the firm receive for the trade. The firm also must send a confirmation of these prices to you after the trade. You will need this price information to determine what profit or loss, if any, you will have when you sell your stock.

The offer price is the wholesale price at which the dealer is willing to sell stock to other dealers. The bid price is the wholesale price at which the dealer is willing to buy the stock from other dealers. In its trade with you, the dealer may add a retail charge to these wholesale prices as compensation (called a “markup” or “markdown”).

The difference between the bid and the offer price is the dealer’s “spread.” A spread that is large compared with the purchase price can make a resale of a stock very costly. To be profitable when you sell, the bid price of your stock must rise above the amount of this spread and the compensation charged by both your selling and purchasing dealers. Remember that if the dealer has no bid price, you may not be able to sell the stock after you buy it, and may lose your whole investment.

After you buy penny stock, your brokerage firm must send you a monthly account statement that gives an estimate of the value of each penny stock in your account, if there is enough information to make an estimate. If the firm has not bought or sold any penny stocks for your account for six months, it can provide these statements every three months.

Additional information about low-priced securities – including penny stocks – is available on the SEC’s Web site at http://www.sec.gov/investor/pubs/microcapstock.htm. In addition, your broker will send you a copy of this information upon request. The SEC encourages you to learn all you can before making this investment.

Brokers’ duties and customer’s rights and remedies.

Remember that your salesperson is not an impartial advisor – he or she is being paid to sell you stock. Do not rely only on the salesperson, but seek outside advice before you buy any stock. You can get the disciplinary history of a salesperson or firm from FINRA at 1-800-289-9999 or contact FINRA via the Internet at www.finra.org. You can also get additional information from your state securities official. The North American Securities Administrators Association, Inc. can give you contact information for your state. You can reach NASAA at (202) 737-0900 or via the Internet at www.nasaa.org.

If you have problems with a salesperson, contact the firm’s compliance officer. You can also contact the securities regulators listed above. Finally, if you are a victim of fraud, you may have rights and remedies under state and federal law. In addition to the regulators listed above, you also may contact the SEC with complaints at (800) SEC-0330 or via the Internet at help@sec.gov.

ITEM 9:  DESCRIPTION OF SECURITIES TO BE REGISTERED

Our authorized capital stock consists of 90,000,000 shares of common stock, par value $0.001 per share, and 10,000,000 shares of preferred stock, par value $0.001 per share.

Number of Shares of Common Outstanding After This Offering

Holders of our common stock are entitled to one vote for each share of common stock held of record for the election of directors and on all matters submitted to a vote of stockholders. Holders of our common stock are entitled to receive ratably any dividends that are declared by our board of directors out of legally available funds, subject to any preferential dividend rights of any preferred stock then outstanding. Upon our dissolution, liquidation or winding up, holders of our common stock are entitled to share ratably in our net assets legally available after the payment of all our debts and other liabilities, subject to the preferential rights of any preferred stock then outstanding. Holders of our common stock have no preemptive, subscription, redemption or conversion rights. The rights, preferences and privileges of holders of common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock that we may designate and issue in the future.

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As of November 16, 2009, we had 51,984,241 shares of common stock beneficially outstanding, including 32,835,684 common shares issued and outstanding, 2,436 shares of convertible preferred stock which can be converted into 4,872,000 common shares, 616 shares of convertible preferred stock, Series B which can be converted into 6,513,538 common shares, warrants to acquire 4,532,900 common shares and stock options vested or that will vest within sixty days of September 30, 2009 to acquire 3,230,119 common shares.  Of the 51,984,241shares beneficially outstanding, 34,199,384 were held by affiliates and 17,784,857were held by non-affiliates.  For purposes of the foregoing, we have treated all shares held by executive officers, directors and Equity 11 as “affiliate” shares.

As of November 16, 2009, 32,835,684 shares of our common stock were issued and outstanding.  The number of shares of common stock outstanding after this offering will be 37,175,684, including common shares that are converted from certain preferred shares held by the selling shareholder.  The number of issuable shares of common stock issuable upon the exercise of options and warrants that are not vested and will not vest by January 17,, 2010 is 1,901,000.

We have four notes which are currently due identified in the table below which initially had the potential to convert to common stock.  Because we did not engage in a publicly underwritten new offering of our common stock that raised $1,000,000 or more by the maturity dates of these notes, these notes no longer have the ability to convert to our common stock:

Note Holder	Amounts Owing on September 30, 2009
Investment Hunter, LLC	$358,207
Mitch Shaheen I	$198,787.06
Mitch Shaheen II	$134,513.33
George Resta	$47,976.22
Total:	$739,483.61

In addition, we have the following outstanding promissory notes which are not currently due:

Note Holder	Amounts Owing on September 30, 2009
Richard Stromback	$2,584 (1)
Doug Stromback	$148,936.45
Deanna Stromback	$123,735.38
JB Smith LC	$7,812.59
Sky Blue Ventures	$6,518

(1)   This note is no longer outstanding.  This amount represents interest previously due but that has not yet been paid.

We are in negotiations with these note holders for the notes that are currently due concerning repayment.  It is possible that we may grant such note holders the right to convert the notes into our common stock since the conversion would reduce our need for cash.  If we grant these holders the right to convert, additional common shares will be issued in exchange for such notes.

For information regarding the dividend rights and dividend payment history of our common stock, see Item 7 of this prospectus.

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Preferred Stock

On August 28, 2008, we entered into a Securities Purchase Agreement (“Securities Purchase Agreement”) with Equity 11, Ltd. (“Equity 11”) to issue up to $5,000,000 in convertible preferred securities.  The securities accrue cumulative dividends at 5% per annum and the entire amount then outstanding is convertible at the option of the investor into shares of our common stock at fixed price of $.50 per share.  The preferred securities carry “as converted” voting rights. As of September 30, 2009, we had issued 2,436 of these convertible preferred shares and warrants to acquire 1,178,500 common shares at $.75 per share.  When we sold additional convertible preferred securities under the Securities Purchase Agreement, we issued attached warrants (500 warrants for each $1,000 convertible preferred share sold).  The warrants are immediately exercisable, expire in five years, and entitle the investor to purchase one share of our common stock at $.75 per share for each warrant issued. Equity 11 will convert all of its 2,436 shares of convertible preferred securities into an aggregate of 4,872,000 shares of our common stock in connection with this offering.  If all of the convertible preferred shares are converted into common stock and all warrants are exercised under the Securities Purchase Agreement, Equity 11 will have acquired a total of 6,050,500 common shares pursuant to this Agreement.  Under Section 5.8 of the Securities Purchase Agreement with Equity 11, we have agreed to file a registration statement with the SEC (of which the prospectus is a part) with respect to our shares of common stock held by Equity 11.  Until August 28, 2011, the Securities Purchase Agreement allows Equity 11 to elect three of the five members of our Board of Directors for a period of three years.  In addition, so long as Equity 11 retains at least 1,260 convertible preferred shares issued under the Securities Purchase Agreement, Equity 11 will have the right to appoint our Chief Executive Officer.   We were unable to pay the cash dividends due on December 1, 2008 and June 1, 2009 for preferred shares purchased under the Securities Purchase Agreement and, as is permitted under the Agreement, we issued additional preferred shares in lieu of cash.  Our ability to pay future dividends on preferred shares held by Equity 11 is dependent on our ability to generate revenue and/or raise additional capital from Equity 11 or others.

On May 15, 2009, we entered into a Convertible Preferred Securities Agreement (the “Preferred Securities Agreement”) with Equity 11 for the issuance and sale of 5.0% Cumulative Convertible Preferred Shares, Series B of the Company at a purchase price of $1,000 per share.   Equity 11 may convert the Convertible Preferred Shares into shares of our common stock at a fixed conversion price that is twenty percent (20%) of the average of the closing price of our common stock on the Over-The-Counter Bulletin Board  for the five trading days prior to each investment.  Under Section 5.8 of the Preferred Securities Agreement, we have agreed to file a registration statement with the SEC (of which the prospectus is a part) with respect to the shares of our common stock held by Equity 11.  Until May 15, 2012, the Preferred Securities Agreement allows Equity 11 to elect three of the five members of our Board of Directors.  In addition, so long as Equity 11 retains at least 1,501 convertible preferred shares issued under the Preferred Securities Agreement, Equity 11 will have the right to appoint our Chief Executive Officer.  We were unable to pay the cash dividend due on June 1, 2009 for preferred shares purchased under the Preferred Securities Agreement and  issued additional preferred shares in lieu of cash.  Our ability to pay future dividends is dependent on our ability to generate revenue and/or raise additional capital.

The Preferred Securities Agreement did not replace or terminate the terms of the Securities Purchase Agreement.  That is, the terms of the Securities Purchase Agreement will continue to apply to preferred stock and warrants issued under the Securities Purchase Agreement.  Similarly, the terms of the Preferred Securities Agreement will apply to preferred stock issued under the Preferred Securities Agreement.

On September 30, 2009, we and Stromback Acquisition Corporation, an Illinois corporation (the “Purchaser”), entered into a Securities Purchase Agreement (the “Preferred Securities Agreement”) for the issuance and sale of our 5.0% Cumulative Convertible Preferred Shares, Series B (the “Convertible Preferred Shares”) at a purchase price of $1,000 per share.  Stromback Acquisition Corporation is owned by Richard Stromback a former member of our Board of Directors.  Until April 1, 2010, Purchaser has the right to purchase up to 3,000 Convertible Preferred Shares.  The Convertible Preferred Shares have a liquidation preference of $1,000 per share.  Purchaser may convert the Convertible Preferred Shares into shares of our common stock at a conversion price that is seventy seven percent (77%) of the average closing price of our common stock on the Over-The-Counter Bulletin Board for the five trading days prior to each investment.  The Convertible Preferred Shares will pay cumulative cash dividends at a rate of 5% per annum, subject to declaration by our Board of Directors, on December 1 and June 1 of each year.  We have agreed to provide piggyback registration rights for common stock converted by Purchaser under a Registration Rights Agreement.  Fifty percent (50%) of each investment, up to a maximum of $500,000, will be placed in a fund and disbursed as directed by Purchaser to satisfy our outstanding debts, accounts payable and/or investor relations programs (“Discretionary Fund”).  On October 1, 2009, Stromback Acquisition Corporation acquired 240 shares of our Convertible Preferred Shares, Series B with a purchase price per share of $1,000.  We received $240,000 of gross proceeds and net proceeds of $120,000 after payments were made from the Discretionary Fund for outstanding obligations owed to Mr. Stromback.

Our board of directors is authorized, without further vote or action by the stockholders, to issue from time to time up to an aggregate of 10,000,000 shares of preferred stock in one or more series and to fix or alter the designations, rights, preferences and powers and any qualifications, limitations or restrictions of the shares of each such series of preferred stock, including the dividend rights, dividend rates, conversion rights, voting rights, terms of redemption including sinking fund provisions, redemption price or prices, liquidation preferences and the number of shares constituting any series or designations of that series, any or all of which may be greater than the rights of common stock.  The issuance of preferred stock could adversely affect the voting power of holders of our common stock and the likelihood that holders of our common stock will receive dividend payments and payments upon liquidation and could have the effect of delaying, deferring or preventing a change in control.  Other than pursuant to the Preferred Securities Agreement, we have no present plans to issue any shares of preferred stock.

Warrants

On August 28, 2008, we entered into the Agreement with Equity 11 to issue up to $5,000,000 in convertible preferred securities.  For each share of convertible preferred securities sold under this agreement, we will issue attached warrants (500 warrants for each $1,000 convertible preferred share sold).  The warrants are immediately exercisable, expire in five years, and entitle Equity 11 to purchase one share of our common stock at $.75 per share for each warrant issued.  As of November 16, 2009, Equity 11 held warrants to acquire our common stock as follows:

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	Exercise	Date	Expiration
Number of Warrants	Price	Issued	Date
100,000	$0.75	July 28, 2008	July 28, 2013
5,000	$0.75	August 20, 2008	August 20, 2013
25,000	$0.75	August 27, 2008	August 27, 2013
500,000	$0.75	August 29, 2008	August 29, 2013
375,000	$0.75	September 26, 2008	September 26, 2013
47,000	$0.75	January 23, 2009	January 23, 2014
15,000	$0.75	February 12, 2009	February 12, 2014
12,500	$0.75	February 18, 2009	February 18, 2014
20,000	$0.75	February 26, 2009	February 26, 2014
11,500	$0.75	March 10, 2009	March 10, 2014
40,000	$0.75	March 26, 2009	March 26, 2014
10,750	$0.75	April 14, 2009	April 14, 2014
16,750	$.075	April 29, 2009	April 29, 2014
Total:   1,178,500

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As of November 16, 2009, we had the following additional warrants outstanding:

Number of Warrants	Issue Date	Expiration Date	Acquisition Price per Share	Held By
500,000	December 18, 2006	December 18, 2016	$.90	Trimax, LLC
2,000,000	November 11, 2008	November 11, 2018	$.50	Trimax LLC
12,500	March 1, 2008	March 1, 2018	$1.75	George Resta
262,500	February 5, 2008	February 5, 2018	$2.00	Hayden Capital USA, LLC
125,000	March 1, 2008	March 1, 2018	$1.75	Investment Hunter. LLC
210,000	June 9, 2008	June 9, 2018	$2.00	Hayden Capital USA, LLC
100,000	June 21, 2008	June 21, 2018	$.75	Mitchell Shaheen
100,000	July 14, 2008	July 14, 2018	$.50	Mitchell Shaheen
15,000	July 14, 2008	July 14, 2018	$1.75	George Resta
15,000	July 14, 2008	July 14, 2018	$1.75	Investment Hunter, LLC
14,400	October 1, 2009	October 1, 2019	$.42	Stromback Acquisition Corporation
Total:  3,354,400

Stock Options

Stock Option Plan.  On May 9, 2007, we adopted a stock option plan and reserved 4,500,000 shares for issuance thereunder.  On December 2, 2008, our Board of Directors authorized the addition of 1,000,000 shares of our common stock to the 2007 Plan.  All prior grants of options were included under this plan.  The plan provides for incentive stock options, nonqualified stock options, rights to restricted stock and stock appreciation rights.  Eligible recipients are employees, directors, and consultants. Only employees are eligible for incentive stock options.  The vesting terms are set by the Board of Directors.  All options expire 10 years after issuance.

The Company granted non-statutory options as follows during the twelve months ended September 30, 2009:

	Weighted Average Exercise Price Per Share	Number of Options	Weighted Average (Remaining) Contractual Term	Aggregate Fair Value
Outstanding as of September 30, 2008	$1.83	4,642,119	9.2	$5,011,500
Granted	$.61	439,000	9.8	$634,491
Exercised	.50	50,000	---	$76,447
Forfeited	$2.13	850,000	7.8	$1,000,479
Outstanding as of November 16, 2009	$1.13	5,131,119	8.5	$4,569,005
Exercisable	$1.06	2,925,119	6.7	$3,249,831

2,925,119 of the options were exercisable as of November 16, 2009.  The options are subject to various vesting periods between June 26, 2007 and January 1, 2012.   The options expire on various dates between June 1, 2016 and January 1, 2022. Additionally, the options had no intrinsic value as of June 30, 2009, as our stock price as of such date was greater than the exercise price of such options.

Our stock option plans are subject to the provisions of Statement of Financial Accounting Standards (“SFAS”) Number 123(R), Accounting for Stock-Based Compensation.  Under the provisions of SFAS Number 123(R), employee and director stock-based compensation expense is measured utilizing the fair-value method.

We account for stock options granted to non-employees under SFAS Number 123(R) using EITF 96-18 requiring the measurement and recognition of stock-based compensation to consultants under the fair-value method with stock-based compensation expense being charged to earnings on the earlier of the date services are performed or a performance commitment exists.

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In calculating the compensation related to employee/consultants and directors stock option grants, the fair value of each option is estimated on the date of grant using the Black-Scholes option-pricing model.  See Note 7 of our Financial Statements included herein for additional information regarding our stock option plan.

Registration Rights

As of November 16, 2009, we have issued stock options to purchase 5,131,119 shares.  We have filed a Form S-8 registration with the SEC to register the shares issuable upon exercise of the stock options held by employees and individual consultants.  The Form S-8 was filed with the SEC on April 9, 2009.

On July 21, 2007, we completed a private placement of 2,000,000 common shares and granted “piggyback” registration rights for those shares.  As of December 27, 2007, the non-affiliated holders of those shares were able to resell those shares pursuant to SEC Rule 144.

Piggyback Registration Rights

In connection with our reverse merger with OCIS, we granted piggyback registration rights to certain OCIS shareholders in a Registration Rights Agreement dated April 30, 2007.  The piggyback registration rights are in effect for two years from the close of the reverse merger (July 21, 2007).  The parties to this Agreement – Kirk Blosch, Jeff Holmes and Brent Schlesinger – have notified us that they do not want their shares to be included in this registration.  This registration statement does not include shares issued to these shareholders – only shares held by the selling shareholder are included in this registration.

Shareholders who purchased shares of our common stock pursuant to our 2007 Private Placement had certain registration rights.  Those rights have lapsed as of the date such stockholders were able to remove their restrictive stock legends from their shares pursuant to Rule 144.

The holders of certain promissory notes issued by us have piggyback registration rights if we complete an underwritten “new offering” which would result in proceeds of $1,000,000 or more.  We did not undertake such an offering by any of the maturity dates of these notes.  If we had undertaken such an offering, we would have paid all registration expenses, other than underwriting discounts and commissions and any transfer taxes related to any such piggyback registration. With respect to demand registrations, these expenses include all reasonable expenses that any stockholder incurs in connection with the registration of its securities, subject to certain limitations.

Our Certificate of Incorporation and Bylaws

Our amended and restated certificate of incorporation and our amended and restated bylaws do not contain certain provisions that could have the effect of delaying, deferring or discouraging another party from acquiring control of us.

Undesignated Preferred Stock

As discussed above, our board of directors has the ability to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change control of us. These and other provisions may have the effect of deterring hostile takeovers or delaying changes in control or management of our company.

Limits on Ability of Stockholders to Act by Written Consent

Our amended and restated certificate of incorporation and bylaws do not prevent our stockholders from acting by written consent.

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Requirements for Advance Notification of Stockholder Nominations and Proposals

Our amended and restated bylaws establish advance notice procedures with respect to stockholder proposals and the nomination of candidates for election as directors, other than nominations made by or at the direction of our board of directors or a committee of our board of directors. These provisions may have the effect of precluding the conduct of certain business at a meeting if the proper procedures are not followed. These provisions may also discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our company.

Election and Removal of Directors

Our amended and restated certificate of incorporation and amended and bylaws contain provisions that establish specific procedures for appointing and removing members of our board of directors.

Cumulative Voting

Our amended and restated certificate of incorporation and bylaws permit cumulative voting in the election of directors. Cumulative voting allows a stockholder to vote a portion or all of its shares for one or more candidates for seats on our board of directors.

Transfer Agent and Registrar

Our transfer agent and registrar for our common stock is Colonial Stock Transfer Co, Inc.. Its address is 66 Exchange Place, Suite 100, Salt Lake City, UT 84111, and its telephone number is (801) 355-5740.

Listing

Our common stock has been authorized for listing on the Over-The-Counter Bulletin Board under the symbol “ECOC.”

ITEM 10:  INTERESTS OF NAMED EXPERTS AND COUNSEL

Legal Matters

The validity of our common stock offered hereby will be passed upon by our General Counsel, Daniel Iannotti, Auburn Hills, Michigan.

Experts

Our consolidated financial statements as of and for the years ended September 30, 2008 and 2007, appearing in this prospectus have been so included in reliance on the report of  UHY LLP an independent registered public accounting firm, given on the authority of the firm as experts in auditing and accounting.

ITEM 11:  INFORMATION WITH RESPECT TO THE REGISTRANT

DESCRIPTION OF BUSINESS

Ecology Coatings, Inc. (“Ecology-CA”) was originally incorporated in California on March 12, 1990.  OCIS Corp. (“OCIS”) was incorporated in Nevada on February 6, 2002.  OCIS completed a merger with Ecology-CA on July 27, 2007 (the “Merger”).  In the Merger, OCIS issued approximately 30,530,684 shares of common stock to the Ecology-CA stockholders.  In this transaction, OCIS changed its name from OCIS Corporation to Ecology Coatings, Inc. and our ticker symbol on the OTC Bulletin Board association changed to “ECOC.”  As a result of the merger, we became a Nevada corporation and Ecology-CA became a wholly owned subsidiary.

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Company Overview

We develop “clean tech”, nanotechnology-enabled, ultra-violet (“UV”) curable coatings that are designed to drive efficiencies, reduce energy consumption and virtually eliminate pollutants in the manufacturing sector.  We create proprietary coatings with unique performance and environmental attributes by leveraging our platform of integrated clean technology products that reduce overall energy consumption and offer a marked decrease in drying time.

Our patent and intellectual property activities to date include:

· seven patents covering elements of our technology from the United States Patent and Trademark Office(“USPTO”)

· two European patents allowed and nine pending patent applications in foreign countries

· one ICT international patent application

· three trademarks issued by the USPTO – “EZ Recoat™”, “Ecology Coatings™” and “Liquid Nanotechnology™”.

We continue to work independently on developing our clean technology products further. Our target markets include the electronics, steel, construction, automotive and trucking, paper products and original equipment manufacturers (“OEMs”).  Our business model contemplates both licensing and direct sales strategies.  We intend to license our technology to industry leaders in our target markets, through which products will be sold to end users.  We plan to use direct sales teams and third party agents in certain target markets, such as OEMs, and third party distributors in broad product markets, such as paper products, to develop our product sales.

Business in General

We have focused on developing products that support inexpensive mass production utilization of protective coatings that leverage nano-particle clean technology and are cured under ultra-violet (“UV”) light.  We believe that the use of our “Liquid Nanotechnology™” coatings represent a paradigm shift in coatings technology.  While our competitors have focused their efforts on improving the industry-standard, thermal-cured powder-coat, water-borne and solvent-based coatings, we have strived for technological breakthroughs.  We have developed over 200 individual coating formulations that address the limitations of traditional coatings.  The USPTO has issued six patents and have allowed a seventh covering many of these formulations as well as their application.  Additionally, the formulations that are not currently patent protected are protected as trade secrets.

Nearly every manufactured product has a protective coating on it, whether metal, plastic, glass or an electronic product.  These coatings are important for providing protection, such as scratch and abrasion resistance, as well as for enabling added durability and maintenance of the overall aesthetic appearance of the product.  Coatings that use water or organic carriers remain the standard in the large OEM coatings market.  However, the use of traditional, carrier-based coatings continues to burden manufacturers with cost, performance, and environmental health and safety disadvantages.

Our Liquid Nanotechnology™ coatings are 100% solids and UV curable.  They contain almost no volatile carriers and are generally comprised of polymers that react to UV light, all of which becomes part of the final coating bound to the substrate.  Traditional coatings, such as paint, are composed of a solid resin and a carrier, such as an organic solvent or water, that are used to adjust the viscosity to allow application.  Thus, during the curing process the carrier evaporates either by application of heat or air-drying, both of which require time to complete the process.  Moreover, the evaporation of the carrier can generate environmentally harmful airborne emissions.

Our Liquid Nanotechnology™ coatings offer a number of performance and user benefits over traditional coatings.  We believe that our 100% solids, UV-cured industrial products represent the coatings industry’s cutting edge in overall performance, offering bottom line value and environmental advantages to users because they:

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• Cure faster, usually in seconds, not minutes;

• Use less floor space, thereby improving operating efficiency;

• Use dramatically less energy;

• Reduce production compliance burdens with the Environmental Protection Agency because they contain fewer toxic chemicals;

• Provide improved coating performance; and

• Boost manufacturing productivity by increasing process throughput.

Conventional Low-Tech Coatings

Many conventional, low-tech coatings used today require 20 or more minutes of drying time (either air dried or forced thermal drying).  In the case of air drying, a process bottleneck can occur, causing reduced production rates. In the case of thermally induced drying, protective coats can only be applied to materials able to withstand certain levels of heat.  This requires the disassembly of many manufactured parts before they can be coated and further increases the time needed for the coating process to be completed. In either case, the manufacturing process is characterized by inefficiency, slower production rates, higher energy costs, increased product costs, and greater floor space requirements.

There are other disadvantages with conventional coatings.  In some cases, much of the applied coating evaporates into the air (solvent based carrier), while only a fraction of the coating actually remains as a dry coating film.  In addition, overspray coatings are difficult to reuse or reclaim, and water-borne systems tend to promote corrosion and flash-rusting.  Not only is this an inefficient use of the coating, it is also responsible for the emission of many harmful airborne toxins.

Our Solution - Clean Technology

Liquid Nanotechnology™, our 100% solids UV-cured industrial coatings clean technology, addresses all of the issues noted above and provides unique performance combinations.  We have developed over 200 specific individual coating formulations that address the limitations of traditional carrier-based coatings.  Many of these patent and/or trade-secret protected. Our coatings cure in less than a minute after application without the use of heat.  This changes the manufacturing dynamic in four ways.  First, UV curing eliminates the bottleneck effect and makes product disassembly unnecessary, increasing the speed with which coated products are produced.  Second, the use of UV curing eliminates the need for thermal heating equipment and/or drying space, allowing manufacturers to use less floor space.  Third, the elimination of thermal heating from the manufacturing process produces dramatic energy cost savings.  Finally, the use of 100% solids results in fewer harmful airborne emissions being released during production or application.

Our clean technology coatings have other advantages.  Indeed, a crucial advantage of our products is that they are more cost effective than conventional coatings.  Our 100% solid coatings offer increased efficiency and result in minimal wasted product: if a manufacturer needs one mil of dry film thickness, it need only apply and cure one mil of our coating.

Cleantech Offerings

Plastics -  Our Liquid Nanotechnology™ coatings have improved hardness and abrasion resistance over conventional carrier-based coatings.  The coatings are also noteworthy for their ability to achieve either optical clarity or accept pigments.  Based on laboratory tests, we believe our formulations offer excellent adhesion to many common plastics, such as polycarbonate.

Metals -  Our coatings adhere well to most metal surfaces. Moreover, our coatings are able to accept pigmentation with a UV curable solution.  Applications include automotive parts and products that incorporate metal along with seals or other rubber parts.  Because our coatings are UV curable, metals paired with rubber parts will not require disassembly prior to finishing.

Glass -  Our UV curable glass coatings product has achieved solid optical clarity in both high and low viscosity formulations that have significant thermal conductivity.  The product also offers adhesion between separate glass products that is less breakable than a single layer product.  Potential applications for this technology include electronics and visible light consumer products.

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Paper - -  Our paper product coating provides a water barrier rather than a repellant to water, allowing the paper to be waterproof while still being writable and printable.  It does not deform under heat. Potential applications of this coating include packaging, labels and cigarettes.  Our coatings do not contain either water or organic solvents that may damage delicate electronic components.  Moreover, these coatings are also UV curable and may be applied and cured without thermal shock to the substrate. We believe this technology also offers potential for various electronics applications.

Medical -  We have successfully developed a flexible, urethane based coating used to bond metal and plastic parts for use on a cardiovascular device.

License Arrangements

We have not yet been successful in generating substantial licensing revenue and our coatings have yet to be incorporated into manufacturers’ products.  Many of our potential customers require extensive performance tests of our technology which can take several years to complete.  In addition, some potential customers are concerned about our long-term financial viability.  We are unable to make predictions regarding the timing and size of any future royalty payments.  With respect to these licenses, we believe that any royalties depend on the licensee’s ability to market, produce and sell products incorporating our proprietary technology.  We cannot predict when we will receive any royalty revenue from these licenses, if ever.

DuPont.  On November 8, 2004, we licensed our platform automotive technology to DuPont.  This non-exclusive license covers all of DuPont’s automotive metal coating activities in North America.  The license is for a term of fifteen (15) years, terminating on November 8, 2019.  The license provides for royalty payments at a stated percentage of net sales.  To date, we have not received any royalty payments pursuant to this license as our coatings have yet to be incorporated into products by DuPont and we cannot predict when we will, if ever.  Royalty payments are entirely dependent on DuPont’s marketing efforts which are beyond our control.  DuPont is not required under the agreement to incorporate our coatings into DuPont products.  The license agreement does not require DuPont to ensure any minimum level of sales using our coatings.

Red Spot Paint & Varnish.  On May 6, 2005, we granted Red Spot Paint & Varnish an exclusive license to manufacture and sell one of our proprietary products for use on 22 gallon metal propane tanks.  The duration of this license is fifteen years, terminating on May 6, 2020.  Upon consummation of the license, Red Spot made a one-time payment of $125,000 to us.  All of our revenue in 2007 and 2008 was from this one customer.  The license also provides for royalty payments at a stated percentage of net sales.  To date, we have not received any royalty payments pursuant to this license as our coatings have yet to be incorporated into Red Spot’s products and we cannot predict when we will, if ever.  Royalty payments are entirely dependent on Red Spot’s marketing efforts which are beyond our control.  Red Spot is not required under the agreement to incorporate our coatings into Red Spot products.  The license agreement does not require Red Spot to ensure any minimum level of sales using our coatings.

Medical Device Company.  On February 3, 2001, we granted a medical device company a license to use one of our proprietary products on a cardiovascular application.  All terms of this license are subject to a confidentiality agreement.  The duration of this agreement is unlimited except upon breach of the agreement by either party.  The medical device company paid us a one time licensing fee of $70,000 and thereafter we will not receive future revenues under this agreement.

Prior to reaching a license agreement with a potential customer, we typically work with the potential customer on a development phase to better understand its needs and desired performance levels.  A good example of our development phase is our recently executed (August 21, 2009) Collaboration Agreement with Reynolds Innovations Inc. for the development of a fire standards compliant (“FSC”) cigarette.  Although we have previously developed a unique coating to meet this customer’s needs and have already passed some initial testing, this Agreement provides for a series of additional tests that must be satisfactorily passed before our coating is used in the production of cigarettes.  This development process with Reynolds could take up to two years to complete.  The Agreement has a framework of successive testing milestones and payments totaling $700,000 if we successfully pass every milestone as shown below:

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Milestone	Anticipated Date	Success Criteria	Reynolds Payment
Formula Release	August 2009	Collaboration Agreement Executed	$0
Product Integrity & Legal Approval	August 2009	Pass toxicology & legal tests	$25,000
FSC, Chemistry & Sensory Tests	September 2009	Meets ASTM E2187-04 Passes “Mainstream Smoke Target Compound List” Passes smoking panel sensory test	$25,000
Passes Business Case Tests	December 1, 2009	Passes ROI hurdles, engineering feasibility and footprint standards Royalty Agreement executed	$50,000
Prototype System	December 1, 2010	Prototype system installed & passes performance tests	$250,000
Production Approval	December 1, 2011		$350,000

On November 13, 2009, Reynolds terminated the Collaboration Agreement before we completed any milestone.  No payments or penalties were paid in connection with the termination.

Reynolds had limited exclusivity for use of our technology for tobacco products until the later to occur of December 1, 2011 or the entry into a royalty agreement.  Reynolds was not bound to exclusively deal with us; Reynolds may enter into agreements with other parties for the development of FSC cigarettes.  As a result of the termination of the Collaboration Agreement, the exclusivity provision no longer exists.

Marketing Strategy

Our target markets include the electronics, automotive and trucking, paper and packaging products and original equipment manufacturers.  Our business model contemplates both a licensing strategy and direct sales strategy.  We intend to license our technology to industry leaders in the electronics, steel, construction, automotive and medical applications markets, through which our product will be sold to end users.  We plan to use direct sales teams in certain target markets, such as OEMs, and third party distributors in broad product markets, such as paper products, to develop our product sales. Thus, our key promotional activities may include:

• Attendance and technical presentations at industry trade shows and conventions;

• Direct sales, with a force of industry-specific sales people who will identify, call upon and build ongoing relationships with key purchasers and targeted industries;

• Fostering joint development agreements and other research arrangements with industry leaders and third party consortiums;

• Print advertising in journals with specialized industry focus;

• Web advertising, including supportive search engines and Web site registration with appropriate sourcing entities;

• Public relations, industry-specific venues, as well as general media, to create awareness of us and our products. This will include membership in appropriate trade organizations; and

• Brand identification through trade names associated with us and our products.

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Sales Strategy

To date, we have conducted all of our business development and sales efforts through our senior management team who are active in other roles.  We intend to build dedicated sales, marketing, and business development teams to sell our products.  Our initial focus will be either the direct sales of our products to end users and/or the formation of joint venture arrangements with established market participants through which our products will be sold.  We also intend to engage in strategic licensing activities targeted at key markets.

Our sales cycle is often longer than one year and we did not generate sales revenues in fiscal year 2009.  The sales process begins with the identification of potential customers in selected markets. If the customer is interested, the customer will generally send application samples to us for initial analysis and testing.  We then coat the application samples using our product. Provided we are able to demonstrate the efficacy of our product on the application sample to the customer, the customer will then perform extended durability tests.  In most cases, we are unable to exert any control or influence over the durability test. Upon conclusion of the durability test, we plan to work with the customer while it decides whether to purchase our product.

In many cases, the potential customer will have to modify its coating production line to add UV curing to replace its thermal curing equipment.  We plan to work with the customer to assist in the transition of its traditional coating operations to our technology.  We expect that the customer’s resistance to change, costs, access to capital, and payback on investment will be factors in its decision to adopt our technology.

FY 2010 Goals

     Our FY2010 goals, given sufficient capital, are to:

• Secure a suitable facility and build an enhanced research laboratory and prototype coatings line;

• Expand current research initiatives and intellectual property protection;

• Expand our in-house sales and sales channel business development team;

• Pursue independent, third party review of our technology through independent testing and evaluation;

• Secure new sources of revenue.

Competition

The industrial coatings industry is extremely competitive.  There are several hundred sources in the United States of conventional paints and coatings for general metal use, including major sources such as Akzo Nobel, PPG, Sherwin-Williams and Valspar, who also offer UV coatings primarily for flooring, graphics, paper and container lithography applications.  Direct competition comes from a variety of UV-cure producers such as Allied Photochemical, Rad-Cure (Altana Chemie), Red Spot (Fujikura), R&D Coatings, Northwest (Ashland), DSM Desotech, Prime and other small sources.  Although certain of these competitors offer 100% solids products, our product technology is unique as demonstrated by our patents.

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Competitive factors in this industry include ease of use, quality, versatility, reliability, and cost.  Our primary competitors include companies with substantially greater financial, technological, marketing, personnel and research and development resources than we currently have.  We  might not be able to compete successfully in this market.  Further, existing and new companies may enter the industrial coatings markets in the future.

Intellectual Property

Our ability to compete effectively will depend on our success in protecting our proprietary technology, both in the United States and abroad.  Our patent and intellectual property activities to date include:

· seven patents covering elements of our technology from the United States Patent and Trademark Office(“USPTO”)

· nine pending patent applications in foreign countries. One patent has been allowed in China.

· one ICT international patent application

· three trademarks issued by the USPTO – “EZ Recoat™”, “Ecology Coatings™” and “Liquid Nanotechnology™”.

The USPTO has issued all patents to Sally J.W. Ramsey, our founder and Vice President for New Product Development, which she irrevocably assigned to us.

In addition, we have developed over 200 individual coating formulations.  We have taken actions to protect these formulations under trade secret laws.

It is possible that no additional patents relating to our existing technology will be issued from the United States or any foreign patent offices, or that we will not receive any patents in the future based on our continued development of our technology, or that our patent protection within and/or outside of the United States will be sufficient to deter others, legally or otherwise, from developing or marketing competitive products utilizing our technologies.  With the exception of the patent allowed in China, action with respect to our foreign patents has been limited to translation of the patent applications.  In addition to seeking patent protection, we will rely on trade secrets, know-how and continuing technological advancement to seek to achieve and thereafter maintain a competitive advantage.  Although we have entered into or intend to enter into confidentiality agreements with our employees, consultants, advisors, and other third parties that we are engaged with, we cannot be certain that such agreements will be honored or that we will be able to effectively protect our rights to our unpatented trade secrets and know-how.  Others may independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets and know-how.

Research and Development

Until 2007, most of our efforts focused on inventive research to discover new ways to coat substrates using UV curing.  Those efforts resulted in a variety of new UV cured coatings and patents and patent applications to protect those inventions.  Since 2007, most of our research and development efforts are related to the application of our prior inventions to develop coatings for specific substrates and for specific customer applications.  By working closely with potential customers, we believe we position ourselves to better understand their needs which increases the likelihood they will use our technology and speed the adoption of our technology in the marketplace.  During this process, our initial customers and we are each responsible for costs incurred in the development process.  A good example of how we have shifted our focus and the length of time needed to reach production agreements is our recently executed (August 21, 2009) Collaboration Agreement with Reynolds Innovations Inc. for the development of fire standards compliant cigarettes.  Although we have previously developed a unique coating to meet this customer’s needs and have already passed some initial testing, this Agreement provides for a series of additional tests that must be satisfactorily passed before our coating is used in the production of cigarettes.  This development process with Reynolds could have taken up to two years to complete but the Collaboration Agreement was terminated on November 13, 2009.

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For fiscal years 2007, 2008, 2009, we spent approximately $200,000, $275,000 and $175,000 on research and development, respectively.  This includes contracted research, salary expenses of Sally Ramsey, our Vice President of New Product Development, laboratory expenses and raw materials.  During these three fiscal years, we did not undertake any customer-sponsored research and development.

Manufacturing

We presently have a limited manufacturing capacity. We currently have no contracts in place for the manufacturing of our products.   The raw materials used in our coatings are solids and we do not believe such materials have any negative environmental impact.  Our business is subject to  many different federal, state, local and foreign governmental regulations related to the use, storage, discharge and disposal of hazardous substances.  We must conduct our business in compliance with these regulations.  Any changes in such regulations or any change in our business that requires us to use hazardous materials, could force us to acquire costly equipment or to incur other significant expenses to comply with environmental regulations.  Increasing public attention has been focused on the environmental impact of manufacturing operations.  While we have not experienced any adverse effects on our operations from environmental regulations, and our products are designed to have no adverse impact on the environment, our business and results of operations could suffer if for any reason we are unable to comply with present or future environmental regulations.

The table below identifies our principal raw materials suppliers:

Supplier	Raw Material
Nanoresins AG	Nano dispersion material
Cytec Industries, Inc.	Monomers & Oligomers
Sartomer Company, Inc.	Monomers & Oligomers
Rahn USA Corp.	Photoinitiators
Rockwood Specialties Group, Inc.	Pigments

Employees

As of November 16, 2009, we had five full-time employees.  As of that date, we had employment agreements with four of our employees.

DESCRIPTION OF PROPERTY

Our executive office consists of approximately 1,600 square feet and is located at 2701 Cambridge Court, Suite 100, Auburn Hills, MI  48326.  The lease commenced on September 1, 2008 and continues through September 30, 2010 at an average rate of $2,997 per month.  The lessor, Seven Industries, Inc., is wholly owned by J.B. Smith, a Director of the Company and the managing partner of Equity 11, Ltd.

We also lease approximately 3,600 square feet of laboratory space at 1238 Brittain Road, Akron, Ohio 44310.  We use this facility for manufacturing, storing and testing of our products.  We are currently leasing this property on a month-to-month basis and the monthly rent is $1,800.

Management believes that our existing facilities are adequate for our current needs and that suitable additional space will be available on reasonable terms if required.  Management also believes that our facilities are adequately insured.

LEGAL PROCEEDINGS

None.

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DIVIDENDS AND OWNERSHIP INFORMATION

For information regarding the market price of and dividends on our common stock and related stockholder matters, see Items 4 and 5 of this prospectus.

For information regarding the effect of this offering on the amount and percentage of holdings of our common stock beneficially owned by certain persons, see the table  in Item 7 of this prospectus.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

Except for statements of historical fact, the information presented herein constitutes forward-looking statements. These forward-looking statements generally can be identified by phrases such as “anticipates,” “believes,” “estimates,” “expects,” “forecasts,” “foresees,” “intends,” “plans,” or other words of similar import.  Similarly, statements herein that describe our business strategy, outlook, objectives, plans, intentions or goals also are forward-looking statements.  Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.  Such factors include, but are not limited to, our ability to: successfully commercialize our technology; generate revenues and achieve profitability in an intensely competitive industry; compete in products and prices with substantially larger  and better capitalized competitors; secure, maintain and enforce a strong intellectual property portfolio; attract immediate additional capital sufficient to finance our working capital requirements, as well as any investment of plant, property and equipment; develop a sales and marketing infrastructure; identify and maintain relationships with third party suppliers who can provide us a reliable source of raw materials; acquire, develop, or identify for our own use, a manufacturing capability; attract and retain talented individuals; continue operations during periods of adverse changes in general economic or market conditions, and; other events, factors and risks previously and from time to time disclosed in our filings with the Securities and Exchange Commission, including, specifically, the “Risk Factors” enumerated herein.

Overview

We develop nano-enabled, ultra-violet curable coatings that are designed to drive efficiencies and clean processes in manufacturing.  We create proprietary coatings with unique performance attributes by leveraging our platform of integrated nano-material technologies.  We develop high-value, high-performance coatings for applications in the specialty paper, automotive, general industrial, electronic and medical areas.  Our target markets include the electronics, steel, construction, automotive and trucking, paper products and OEMs.  We plan to use direct sales teams in certain target markets, such as OEMs, and third party distributors in broad product markets, such as paper products, to develop our product sales.

Operating Results

Years Ended September 30, 2008 and 2007

Results From Operations

Revenues for the years ended September 30, 2008 and 2007, were $25,092 and $41,668, respectively. Substantially all of our revenues for the year ended September 30, 2008 and all of our revenues for the year ended September 30, 2007 derived from our licensing agreement with Red Spot. These revenues stem from the amortization of the initial payment of $125,000 by Red Spot to the Company in May 2005 and not from any subsequent transactions.

Salaries and Fringe Benefits for the years ended September 30, 2008 and 2007 were $2,006,776 and $1,409,840, respectively. The increase in such expenses for the year ended September 30, 2008 is the result of higher headcount as we had seven employees for most of 2008, five of which were hired at various times throughout 2007 and were therefore not being paid for all of 2007.  As a result, salaries increased by approximately $280,000 in 2008. Additionally, all of the employees were awarded initial or additional option grants in late 2007 or early in 2008. The value of these option grants is amortized over the vesting period associated with the options. The amortized amount in 2008 was approximately $228,000 higher than in 2007. Finally, benefit costs increased by approximately $44,000 over 2007 as a result of the increase in the number of employees and the start of benefit programs for all of the additional employees.

Professional Fees for the years ended September 30, 2008 and 2007 were $2,735,360 and $2,583,927, respectively. An increase our options expense associated with a full year of amortization of option grants made to consultants of approximately $330,000, an increase in investor relations services of approximately $120,000, an increase in lobbying expense of approximately $92,000, and a $35,000 fee for a patent valuation were offset by reductions in legal, accounting, and public relations expenses totaling approximately $425,000. The reduction in legal, accounting, and public relations expenses is a result of our  relatively heavy use of these services in 2007 while we were preparing for a private placement of our stock and a reverse merger.

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Other General and Administrative Expenses for the years ended September 30, 2008 and 2007 were $637,668 and $463,199, respectively. The increase in such expenses for the year ended September 30, 2008 is due to increases in liability and medical insurance costs, as well as increases in depreciation and amortization expense.

Operating Losses for the years ended September 30, 2008 and 2007 were ($5,354,712) and ($4,415,298), respectively. The increased loss between the periods is explained by the increases in the expense categories discussed above.

Interest Income for the years ended September 30, 2008 and 2007 was $5,784 and $20,940, respectively. The decrease resulted from a reduction in our average investable cash balances between and 2007 and 2008.

Interest Expense for the years ended September 30, 2008 and 2007 was $1,421,394 and $256,512, respectively. These amounts reflect interest accrued on notes payable to third parties as well as notes payable to related parties. We borrowed $1,300,000 on notes payable in varying increments between February 1, 2008 and July 11, 2008. These notes bear interest at 25% per annum and had warrants attached. The value of the warrants of approximately $1,200,000 was amortized over the life of the notes into interest expense.

Income Tax Provision.  No provision for income tax benefit from net operating losses has been made for the years ended September 30, 2008 and 2007 as we have fully reserved the asset until realization is more reasonably assured.

Net Loss for the years ended September 30, 2008 and 2007 was ($6,770,322) and ($4,650,870), respectively. The increase in the loss results primarily from the increase in Salaries and Fringe Benefits, Professional Fees, General and Administrative Expenses and Interest Expense discussed above.

Basic and Diluted Loss per Share for the years ended September 30, 2008 and 2007 was ($.21) and ($.16), respectively. This change reflects the increased Net Loss discussed above partially offset by the increase in weighted average shares outstanding during the year ended September 30, 2008.

Nine months ended June 30, 2009 and 2008

Revenues.  Our revenues for the nine months ended June 30, 2008 were $24,884 and derived from our licensing agreement with Red Spot.  These revenues stem from the amortization of the initial payment of $125,000 by Red Spot to us in May 2005 and not from any subsequent transactions.  We generated no revenues for the nine months ended June 30, 2009.

Salaries and Fringe Benefits.  The decrease of approximately $414,000 in such expenses for the nine months ended June 30, 2009 compared to the nine months ended June 30, 2008 is the result of the elimination of two salaried employees prior to October 1, 2008, the elimination of a third employee in March 2009, the reduction of the salary of one employee effective October 1, 2008, and the reduction of  the salaries of three employees in December 2008.  These reductions were partially offset by the expense associated with options issued to two employees in September 2008 and December 2008 as well as the addition of a new employee in September 2008.

Professional Fees.  Theincrease of approximately $560,000 in these expenses for the nine months ended June 30, 2009 compared to the nine months ended June 30, 2008 is the result of the issuance of 2,000,000 options to Trimax in November 2008.  These options vested upon issuance, so the entire charge of $1,368,000 was recognized in that month. This expense was offset by a reduction of approximately $808,000 in fees and options paid or awarded to consultants for a variety of services. Three such consultants are no longer under agreement with us and two others have reduced their ongoing fees to us.

Other General and Administrative.  The decrease of approximately $317,000 in these expenses for the nine months ended June 30, 2009 compared to the nine months ended June 30, 2008 reflects reductions in legal fees relating to SEC filings, in-sourcing the work of preparing SEC filings, the elimination of debt extension fees, and the reduction of travel and travel-related expenses.

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Operating Losses.  The increased loss between the reporting periods is explained by the increases in the expense categories discussed above and the decrease in revenue over the periods.

Interest Expense. The decrease of approximately $1,039,000 for the nine months ended June 30, 2009 compared to the nine months ended June 30, 2008 is the result of the expensing of the value of detachable warrants issued with bridge notes in the earlier period partially offset by the revaluing of previously issued detachable warrants and an increase of approximately $700,000 in average outstanding debt for the 2008 period.

Income Tax Provision.  No provision for income tax benefit from net operating losses has been made for the nine months ended June 30, 2009 and 2008 as we have fully reserved the asset until realization is more reasonably assured.

Net Loss.  The decrease in the Net Loss of approximately $1,179,000 for the nine months ended June 30, 2009 compared to the nine months ended June 30, 2008, while more fully explained in the foregoing discussions of the various expense categories, is due primarily to reductions of approximately $1,039,000 in Interest Expense, $808,000 in certain professional fees, $317,000 in Other General and Administrative expenses, and $414,000 in Salaries and Fringe Benefits, partially offset by the expensing of a grant of 2,000,000 options awarded to a consultant in November 2008 and the fact that we recognized no revenue in the 2009 period.

Basic and Diluted Loss per Share. The change in basic and diluted net loss per share for the nine months ended June 30, 2009 compared with the nine months ended June 30, 2008 reflects the decreased Net Loss discussed above.

Liquidity and Capital Resources

Current and Expected Liquidity

Cash and cash equivalents as of June 30, 2009 and September 30, 2008 totaled $4,257 and $974,276, respectively. The decrease reflects cash used in operations of $1,321,329, cash used to purchase fixed and intangible assets of $47,889, and cash used to pay down debt of $372,801.  This decrease was partially offset by borrowings of $61,000 and the issuance of $711,000 in convertible preferred stock.

We are a company that has failed to generate significant revenues as yet and have incurred an accumulated deficit of ($21,043,440).  We have incurred losses primarily as a result of general and administrative expenses, salaries and benefits, professional fees, and interest expense.  Since our inception, we have generated very little revenue.  We have received a report from our independent auditors that includes an explanatory paragraph describing their substantial doubt about our ability to continue as a going concern.

We expect to continue using substantial amounts of cash to: (i) develop and protect our intellectual property; (ii) further develop and commercialize our products; (iii) fund ongoing salaries, professional fees, and general administrative expenses.  Our cash requirements may vary materially from those now planned depending on numerous factors, including the status of our marketing efforts, our business development activities, the results of future research and development, competition and our ability to generate revenue.

Historically, we have financed operations primarily through the issuance of debt and the sale of equity securities.  In the near future, as additional capital is needed, we expect to rely primarily on the sale of convertible preferred securities.

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As of June 30, 2009, we had notes payable to three separate parties on which we owed approximately $695,648 in principal and accrued interest.  These notes do not contain any restrictive covenants with respect to the issuance of additional debt or equity securities by the Company.  Notes and the accrued interest totaling $695,648 owing to three note holders were due prior to September 30, 2008 and their holders demanded payment.  We have paid $320,000 in principal and accrued interest against the remaining principal and interest balance on two of these notes.  We have not made any payment to the third note holder to whom we owed approximately $313,000 in principal and accrued interest as of June 30, 2009.  Additionally, we have notes owing to shareholders totaling approximately $289,586.42 including accrued interest as of September 30, 2009.  These notes are due and payable on December 31, 2009. None of the debt is subject to restrictive covenants.  All of the debt is unsecured.

As of September 30, 2009, the selling shareholder had purchased 3,002 convertible preferred shares.  In addition, we entered into a Securities Purchase Agreement with Stromback Acquisition Corporation on September 30, 2009.  On October 1, 2009, Stromback Acquisition Corporation acquired 240 shares of our Convertible Preferred Shares, Series B with a purchase price of $1,000 per share.  We received $240,000 of gross proceeds and net proceeds of $120,000 after payments were made from the Discretionary Fund for outstanding obligations owed to Mr. Stromback.  We will need to raise immediate additional funds in fiscal year 20010 to continue our operations. At present, we do not have any binding commitments for additional financing.  If we are unable to obtain additional financing, we would seek to negotiate with other parties for debt or equity financing, pursue additional bridge financing, and negotiate with creditors for a reduction and/or extension of debt and other obligations through the issuance of stock.  At this point, we cannot assess the likelihood of achieving these objectives.  If we are unable to achieve these objectives, we would be forced to cease our business, sell all or part of our assets, and/or seek protection under applicable bankruptcy laws.

On June 30, 2009, we had 32, 835,684 common shares issued and outstanding and 3,242 in convertible preferred shares issued and outstanding.  These preferred shares and accumulated and unpaid dividends can be converted into a total of 11,242,680 shares of our common stock.  As of September 30, 2009, options and warrants to purchase up to 9,649,919 shares of common stock had been granted.  Additionally, some of our outstanding notes and accrued interest may be converted into shares of common stock.           

Our financing agreements with the selling shareholder allow the selling shareholder the opportunity to match any other offers of financing that we receive.  To date, this provision has not inhibited our ability to seek alternative financing arrangements.  The selling shareholder chose not to match the financing offer that we recently received from Stromback Acquisition Corporation that resulted in a Securities Purchase Agreement dated September 30, 2009.

Our financing agreements with the selling shareholder also require that the selling shareholder approve any capital expenditure greater than $10,000.  To date, the selling shareholder has not prevented us from making any capital expenditure that we believe are critical to our business.

Capital Commitments

Contractual
Obligations	Total		Less Than 1 Year		1-3 Years		4-5 Years		After 5 Years
Notes Payable	$	1,137,604	$	1,137,604	$	—	$	—	$	—
Interest on notes payable		133,332		133,332		—		—		—
Contractual Service Agreements		1,675,139		1,162,389		512,750		—		—
Office Leases		71,933		34,699		37,234
Equipment Leases		21,332		7,890		13,442		—		—
Total Contractual Obligations	$	3,039,340	$	2,475,914	$	563,426	$	—	$	—

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Off-Balance Sheet Arrangements

Our off-balance sheet arrangements include contractual service agreements, office leases and equipment leases.  A summary of our off-balance sheet arrangements is below:

	Less Than 1 Year	1-3 Years	4-5 Years	After 5 Years	Total
Contractual Service Agreements	$715,835	$969,750	---	---	$1,685,585
Office Leases	$28,024	---			$28,024
Equipment Leases	$7,044	$5,260	---	---	$12,304
Total Off-Balance Sheet Obligations	$750,903	$975,010	---	---	$1,725,913

Our off-balance sheet contractual service agreements include services provided by vendors and services by our employees under employment agreements.  Vendor services include IP/PR services, legal services and business and revenue generation consulting services.  The following table summarizes of our off-balance contractual service agreements:

Contract Service Provider	Purpose	Monthly Amount	Expiration		Less Than 1 Year		1-3 Years	4-5 Years	After 5 Years	Total
McCloud Communications	IR/PR Services	$5,000	12/31/2009	$30,000						$30,000
Wilson, Sonsini, Goodrich & Rosati	SEC Legal Services	$1,667	12/31/2009	$10,002						$10,002
RJS Consulting LLC	Business Consulting	$16,000	9/17/2011	$192,000		$176,000				$368,000
Robert Crockett	CEO	$16,667	9/21/2012	$200,000		$400,000				$600,000
Daniel Iannotti	General Counsel & Secretary	$12,500	9/21/2012	$137,500		$300,000				$437,500
F. Thomas Krotine	COO & President	$5,417	9/21/2012	$59,583						$59,583
Sally Ramsey	Chief Chemist	$6,250	1/1/2012	$68,750		$93,750				$162,500
Total Contractual Service  Obligations		$63,501		$697,835		$969,750				$1,667,585

We have a lease for our headquarters in Auburn Hills, MI.  The space for our laboratory in Akron, OH is not currently subject to a written lease – we use that space on a month to month basis.  A summary of our Auburn Hills, MI office lease is summarized in the table below:

Contract Service Provider	Purpose	Monthly Amount	Expiration		Less Than 1 Year	1-3 Years	4-5 Years	After 5 Years	Total
Seven Industries, Ltd.	Auburn Hills, MI Headquarters	$2,952	11/30/2009	$5,904					$5,904
		$3,110	5/31/2010	$18,966					$18,966
		$3,154	9/30/2010	$12,617					$12,617

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We lease computer equipment and our office printer/copier for our Auburn Hills, MI headquarters.  A summary of our off-balance sheet leases for computer equipment and the printer/copier is shown in the table below:

Contract Service Provider	Purpose	Monthly Amount	Expiration		Less Than 1 Year	1-3 Years	4-5 Years	After 5 Years	Total
Dell Financial Services	Computer Equipment	$42	6/17/2010	$336					$336
Dell Financial Services	Computer Equipment	$44	7/17/2010	$396					$396
Ricoh America	Printer/Copier	$526	9/22/2011	$6,312		$5,260			$11,572

See also Notes to the Consolidated Financial Statements in this prospectus. The details of such arrangements are found in Note 5 – Commitments and Contingencies and Note 9 – Subsequent Events.

Critical Accounting Policies and Estimates

Our financial statements are prepared in accordance with U.S. Generally Accepted Accounting Principles. Preparation of the statements in accordance with these principles requires that we make estimates, using available data and our judgment, for such things as valuing assets, accruing liabilities and estimating expenses. The following is a discussion of what we feel are the most critical estimates that we must make when preparing our financial statements.

Revenue Recognition.  Revenues from licensing contracts are recorded ratably over the life of the contract. Contingency earnings such as royalty fees are recorded when the amount can reasonably be determined and collection is likely.

Income Taxes and Deferred Income Taxes.  We use the asset and liability approach for financial accounting and reporting for income taxes. Deferred income taxes are provided for temporary differences in the bases of assets and liabilities as reported for financial statement purposes and income tax purposes and for the future use of net operating losses. We have recorded a valuation allowance against our net deferred income tax asset. The valuation allowance reduces deferred income tax assets to an amount that represents management’s best estimate of the amount of such deferred income tax assets that more likely than not will be realized.

Property and Equipment.  Property and equipment is stated at cost, less accumulated depreciation. Depreciation is recorded using the straight-line method over the following useful lives:

Computer equipment	3-10 years
Furniture and fixtures	3-7 years
Test equipment	5-7 years
Software	3 years

Repairs and maintenance costs are charged to operations as incurred. Betterments or renewals are capitalized as incurred.

We review long lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset with future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.

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Patents.  It is our policy to capitalize costs associated with securing a patent. Costs consist of legal and filing fees. Once a patent is issued, it is amortized on a straight-line basis over its estimated useful life. For purposes of the preparation of the audited, consolidated financial statements found elsewhere in this prospectus, we have recorded amortization expense associated with the patents based on an eight year useful life.

Stock-Based Compensation.  We have a stock incentive plan that provides for the issuance of stock options, restricted stock and other awards to employees and service providers. We calculate compensation expense under SFAS 123(R) using a Black-Scholes option pricing model. In so doing, we estimate certain key assumptions used in the model. We believe the estimates we use, which are presented in Note 7 of Notes to the Consolidated Financial Statements, are appropriate and reasonable.

Recent Accounting Pronouncements

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133”. This statement changes the disclosure requirements for derivative instruments and hedging activities. SFAS 161 will become effective for us beginning in the three months ending March 31, 2009. The adoption of this pronouncement would have had no impact on our results or financial position as of September 30, 2008.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles”. SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (GAAP) in the United States (the GAAP hierarchy). SFAS 162 will not have an impact on our financial statements.

In May 2008, the FASB issued SFAS No. 163, “Accounting for Financial Guarantee Insurance Contracts, an interpretation of FASB Statement No. 60.” The scope of SFAS 163 is limited to financial guarantee insurance (and reinsurance) contracts, as described in this Statement, issued by enterprises included within the scope of Statement 60. Accordingly, SFAS 163 does not apply to financial guarantee contracts issued by enterprises excluded from the scope of Statement 60 or to some insurance contracts that seem similar to financial guarantee insurance contracts issued by insurance enterprises (such as mortgage guaranty insurance or credit insurance on trade receivables). SFAS 163 also does not apply to financial guarantee insurance contracts that are derivative instruments included within the scope of FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities.” SFAS 163 will not have an impact on our financial statements.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE .

None.

DIRECTORS, EXECUTIVE OFFICERS, PROMOTER, AND CONTROL PERSONS

The following table sets forth as of March 31, 2009, the name, age, and position of each Executive Officer and Director and the term of office of each Director and significant employees.

Name	Age	Position
J.B. Smith	36	Director
Rocco DelMonaco, Jr.	55	Director
Joseph Nirta	45	Director
Robert G. Crockett	51	Chief Executive Officer
F. Thomas Krotine	68	President and Chief Operating Officer
Daniel V. Iannotti	54	Vice President, General Counsel & Secretary
Kevin Stolz	46	Chief Financial Officer, Controller and Chief Accounting Officer
Sally J.W. Ramsey	56	Vice President – New Product Development

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Under Section 5.1 of the Securities Purchase Agreement and Section 5.1 of the Preferred Securities Agreement, Equity 11 has the right to elect three of the five directors to our Board of Directors.  Mr. Smith is one of the Directors appointed by Equity 11 and Joseph Nirta is other Equity 11 elected Director.  Equity 11 has the ability to appoint a third director at any time but has not done so as of the date of this prospectus.  Each other Director serves for a term of one year and until his successor is duly elected and qualified. Each officer serves at the pleasure of the Board of Directors subject to any applicable employment agreements.

Set forth below is certain biographical information regarding each of our current executive officers, directors and significant employees as of September 30, 2009.

J.B. Smith.  Mr. Smith currently is the Managing Partner for Equity 11, Ltd. Equity 11’s portfolio companies employ the largest collection of former federal law enforcement agents in the private sector.  Smith is also currently serving as Chairman of Isekurity, the nation’s leader in identity theft solutions and holds a bachelor’s degree in Administration of Justice from The Pennsylvania State University.  Smith has served as a member of Stealth Investigations LLC since 2003, and has been a partner in Sky Blue Ventures since 2004.  Also known as the creator of the “Philanthropic InvestmentSM,” Smith is a partner in WM Reign, Ltd., an investment model solely dedicated to helping finance churches and Christian causes by utilizing Smith’s “Philanthropic InvestmentSM” concept.

Rocco DelMonaco, Jr.  Mr. DelMonaco became a Director on September 15, 2008, and is our only independent Director.  Mr. DelMonaco has been the Vice President of Security for Georgetown University since 2007.  From 2005 to 2007, Mr. DelMonaco was an Assistant Executive Director of ManTech Security and Mission Assurance Corporation.  From 2004 to 2005, Mr. DelMonaco was the Acting Director with the Department of Homeland Security, Incident Management Division.  From 2002 to 2004, Mr. DelMonaco was a Special Agent in Charge- Liaison Division with the Department of Homeland Security, Federal Air Marshall Service.  From 1980 to 2002, Mr. DelMonaco was a Supervisory Special Agent with the United States Secret Service.  Mr. DelMonaco received his BA from the University of Miami and his Masters of Public Administration from Pepperdine University.

Joseph Nirta.  On October 20, 2008, Joseph Nirta was elected as a Director.  Mr. Nirta was the co-founder of BondExchange LLC and BondDesk Group LLC. The electronic bond trading platform created by Mr. Nirta revolutionized the online bond trading market. Nirta served as Bond Desk Group’s chief information officer and a board member since 1999. He has a Bachelor of Mathematics in Computer Science from the University of Waterloo, Waterloo, Ontario, and is a Certified Oracle DBA.

Robert G. Crockett.  Mr. Crockett joined us as our Chief Executive Officer on September 15, 2008.  From 2007 to September, 2008, Mr. Crockett served in Advanced Sales Development for JCIM L.L.C., a an automotive plastics supplier and joint venture between Johnson Controls Inc. and private equity.  In 2007, Mr. Crockett served as President – Exterior Painted Products for Plastech, a privately held plastic component supplier.  From 2004 to 2006 he also served as Vice President of Plastech as part of the executive team acquired from LDM Technologies Inc.  From 1997 through 2004, Mr. Crockett served as Director for LDM Technologies Inc., a privately held automotive exterior and interior supplier.  From 1996 to 1997, he was a Vice President at the Becker Group, a privately held automotive interior supplier.  Mr. Crockett holds a B.S. in Business from Central Michigan University.

F. Thomas Krotine.  Since October 30, 2006, Mr. Krotine has served as our President and from October 30, 2006 until August 15, 2007, he served as our Chief Executive Officer.  From August 15, 2007 to the present, he has also served as the Chief Operating Officer.  Mr. Krotine is an industry veteran with extensive coatings industry and materials-based experience.  From 2001 to 2006, Mr. Krotine was a Principal of TBD Associates, a technology and business development consulting company.   From 1996 to 2001, he served as Chairman of CV Materials, a privately-held a supplier of porcelain enamel materials and coatings.  Prior to his role at CV Materials, from 1992 to 1996 he was the Manager of TK Holdings, a private company which he formed to acquire equity holdings in small-to-medium-sized manufacturing companies.  From 1990 to 1992, he served as a Vice President at Valspar, a publicly-held coatings company, where he managed Valspar’s North American powder coating business.  From 1980 to 1990, he served as Senior Vice President at Sherwin-Williams Company, a publicly-held paint and coatings concern, where he was responsible for technology management and corporate environmental and health compliance.  Mr. Krotine holds a B.A., an M.S. and a Ph.D. in Metallurgy and Materials Science from Case Western Reserve University in Cleveland, Ohio.

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Daniel V. Iannotti.  Mr. Iannotti became our General Counsel and Secretary on August 11, 2008.  From 2004 to 2008, Mr. Iannotti served as a Principal of TheGeneralCounsel.com.  From 2003 to 2004, he served as the General Counsel and Secretary of Origen Financial, LLC.  During his career, Mr. Iannotti previously served as general counsel for three publically held companies including Prodigy Communications, Hoover’s, and Origen Financial.  He also spent several years as a staff attorney for Ameritech, now AT&T.  Mr. Iannotti holds a BA and MBA from Michigan State University. He received his Juris Doctor degree, cum laude, from the Wayne State University Law School, where he was an editor of the Wayne Law Review.  Iannotti is licensed to practice law in Michigan and Illinois.

Kevin Stolz.  Mr. Stolz became our Controller and Chief Accounting Officer on February 1, 2007 and our Chief Financial Officer on March 26, 2008.  From 1999 until 2007, Mr. Stolz was the principal of Kevin Stolz and Associates, Ltd., a Troy, Michigan-based management consulting firm specializing in providing financial and operations consulting services.  From 1985 to 1987, Mr. Stolz worked as an auditor at Coopers & Lybrand, a public accounting firm, and from 1988 to 1992 he worked in commercial lending at JP Morgan/Chase.  From 1997 to 1999, he was the Vice President of Manufacturing of Unique Fabricating, Inc. a privately held Detroit automotive supplier; from 1996 to 1997, a Controller at Broner Glove and Safety, Inc. a privately held wholesale distributor, and; from 1992 to 1995 the Director of Operations for Virtual Services, Inc., a privately held computer services firm.  Mr. Stolz has an M.B.A. from the University of Notre Dame and a B.B.A. in Accounting from the University of Portland.

Sally Judith Weine Ramsey.  Ms. Ramsey is our founder. From 1990 to the present, Ms. Ramsey served as Vice President of Ecology-CA and from 1990 to November 2006 served as Secretary.  From 1990 to November 2003, she served as a director of Ecology-CA. As of July 27, 2007, Ms. Ramsey was elected our Vice President of New Product Development.  Ms. Ramsey is a graduate of the Bronx School of Science and holds a B.S. in Chemistry with honors from Hiram College.

Committees of the Board of Directors

Audit Committee

Our Audit Committee appoints our independent auditors, reviews audit reports and plans, accounting policies, financial statements, internal controls, audit fees, and certain other expenses and oversees our accounting and financial reporting process.  Specific responsibilities include selecting, hiring and terminating our independent auditors; evaluating the qualifications, independence and performance of our independent auditors; approving the audit and non-audit services to be performed by our auditors; reviewing the design, implementation, adequacy and effectiveness of our internal controls and critical accounting policies; overseeing and monitoring the integrity of our financial statements and our compliance with legal and regulatory requirements as they relate to financial statements or accounting matters; reviewing any earnings announcements and other public announcements regarding our results of operations, in conjunction with management and our public auditors; and preparing the report that the Securities and Exchange Commission will require in our annual proxy statement.  On October 18, 2007, the Audit Committee adopted a written charter.

Until July 13, 2008, the Audit Committee was comprised of two Directors, Mr. Campion and Mr. Liebig, each of whom was independent, as defined by the rules and regulations of NASDAQ.  Mr. Campion was the Chairman of the Committee and the Board of Directors determined that Mr. Campion qualified as an “audit committee financial expert,” as defined under the rules and regulations of the Securities and Exchange Commission, and is independent as noted above.

From July 13, 2008 until July 24, 2008, the Audit Committee was comprised solely of Mr. Liebig. Since July 24, 2008, we have not had an elected Audit Committee.  Since that date, the entire Board has acted on any matter requiring Audit Committee approval.

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Director Independence

Mr. DelMonaco is our only independent Director.  Both our Audit Committee and Compensation Committee Charters set forth the following to determine whether a Director is independent:  (1) the independence requirements of the NASDAQ Stock Market,  (2)  a “non-employee director” within the meaning of Rule 16b-3 of the Securities Exchange Act of 1934, as amended (the “1934 Act”), and (3) be an “outside director” under the regulations promulgated under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”).  Mr. Smith and Nirta not considered to be independent Directors.

Compensation Committee

Our Compensation Committee assists our Board of Directors in determining the development plans and compensation of our officers, directors and employees.  Specific responsibilities include approving the compensation and benefits of our executive officers; reviewing the performance objectives and actual performance of our officers; administering our stock option and other equity compensation plans; and reviewing and discussing with management the compensation discussion and analysis that the Securities and Exchange Commission regulations will require in our future Form 10-Ks and proxy statements.  On October 18, 2007 the Board of Directors adopted a written charter.

Until July 13, 2008, our Compensation Committee was comprised of two Directors, Mr. Campion and Mr. Liebig, whom the Board considered to be independent under the rules of NASDAQ.  Mr. Liebig was the Chairman of the Committee.  From July 13, 2008 until July 24, 2008, Mr. Liebig was the sole member of the Compensation Committee.  Since that date, our sole independent Board member, Rocco DelMonaco, Jr., has approved all compensation matters involving our executives.

Compensation Committee Interlocks and Insider Participation

Mr. DelMonaco is the sole member of our Compensation Committee since his appointment on September 15, 2008.  Mr. DelMonaco has not at any time been an officer or employee of the company.  We have not entered into any contracts or other transactions with Mr. DelMonaco.  None of our executive officers serves, or in the past year has served, as a member of the board of directors or compensation committee of any entity that has one or more executive officers who serve on our board of directors or compensation committee.

Advisory Board

On May 1, 2007, we formed an Advisory Board of experts in the industries we serve.  The Advisory Board is currently made up of one person, Dr. William F. Coyro, Jr.

Dr. William F. Coyro, Jr . Dr. Coyro serves as chairman of Ecology Coatings’ Business Advisory Board.  He is a 1969 graduate of the University of Detroit with a Doctorate degree in Dental Surgery (DDS).  He attended the University of Michigan where he earned a B.S. in Chemistry.  After graduation, he was a Lieutenant and dentist in the U.S. Navy from 1970 until 1972.  After leaving the Navy in 1972, he was a dentist in private practice, an investor, and a financier.  Dr. Coyro founded TechTeam Global, Inc., in 1979.  Dr. Coyro was the President and CEO of TechTeam Global until 2006, and also served as Chairman of the Board of Directors until 1997.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Act of 1934, as amended, requires our Directors and Executive Officers, and persons who own more than ten percent (10%) of a registered class of our equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Officers, Directors and greater than ten percent (10%) shareholder are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.

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To our knowledge, based solely on a review of such materials as are required by the SEC, no officer, director or beneficial holder of more than ten percent of our issued and outstanding shares of Common Stock failed to file in a timely manner with the SEC any form or report required to be so filed pursuant to Section 16(a) of the Securities Exchange Act of 1934, as amended, during the fiscal year ended September 30, 2008.

Code of Ethics

We have adopted a Code of Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of our Code of Ethics may be obtained without charge by sending a written request to us at 2701 Cambridge Court, Suite 100, Auburn Hills, MI 48326, Attn: Investor Relations.

Executive Compensation

The table below sets forth all cash compensation paid or proposed to be paid by us to our chief executive officer and the most highly compensated executive officers, and key employees for services rendered in all capacities to us during fiscal years ended September 30, 2008 and 2007.

The table below sets forth all cash compensation paid or proposed to be paid by us to our chief executive officer and the most highly compensated executive officers, and key employees for services rendered in all capacities to us during fiscal years ended September 30, 2008 and 2007.

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Summary Compensation Table

															Change in
															Pension
															Value and
												Non-Equity			Nonqualified
												Incentive			Deferred
							Stock		Option			Plan			Compensation		All Other
	Year		Salary		Bonus		Awards		Awards			Compensation			Earnings		Compensation			Total
Name (a)	(b)		($) (c)		($) (d)		($) (e)		($) (f)  (1)			($) (g)			($) (h)		($) (i)			($) (j)
Richard D. Stromback,		2008	$	305,789	$	-0-	$	-0-	$	-0-		$	-0-		$	-0-	$	-0-		$	305,789
Chairman & CEO (2)		2007	$	348,333	$	-0-	$	-0-	$	15,399		$	-0-		$	-0-	$	-0-		$	363,732
Robert G. Crockett, CEO (3)		2008	$	8,333	$	-0-	$	-0-	$	254,701		$	-0-		$	-0-	$	1,297	(5)	$	263,034
		2007	$	-0-	$	-0-	$	-0-	$	-0-		$	-0-		$	-0-	$	-0-		$	-0-
9 Months Ending		6/30/09	$	150,000													$	15,946	(5)
Sally J.W. Ramsey,		2008	$	195,833	$	-0-	$	-0-	$	-0-		$	-0-		$	-0-	$	12,564	(5)	$	208,397
Vice President – New		2007	$	157,146	$	6,667	$	-0-	$	335,442		$	-0-		$	-0-	$	10,081	(5)	$	509,336
Product Development (4)
9 Months Ending		6/30/09	$	74,167													$	12,949	(5)
F. Thomas Krotine		2008	$	160,000	$	-0-	$	-0-	$	-0-		$	-0-	$	-0-		$	7,342	(5)	$	167,342
President and COO, Director		2007	$	155,248	$	-0-	$	-0-	$	16,545		$	-0-	$	-0-		$	-10,341	(5)(7)	$	182,134
9 Months Ending		6/30/09	$	40,667													$	5,008	(5)
David W. Morgan		2008	$	210,000	$	-0-	$	-0-	$	180,367	(6)	$	-0-		$	-0-	$	27,687	(5)(7)	$	418,054
Vice President, CFO and Treasurer  (6)		2007	$	60,000	$	-0-	$	-0-	$	469,786		$	-0-		$	-0-	$	6,189	(5)(7)	$	535,975
9 Months Ending		6/30/09	$	54,375													$	15,946	(5)
Kevin Stolz		2008	$	133,333						160,561							$	16,349	(5) (6)	$	310,243
CFO (6)		2007	$	80,000					$	16,814							$	3,649	(5)	$	100,463
9 Months Ending		6/30/09	$	52,500													$	15,946	(5)

55

(1)	See Note 7 in the Consolidated Financial Statements included in our Form 10-KSB for our fiscal year ending September 31, 2008 for a discussion of the assumptions underlying the value of the compensation disclosed in this column.
(2)	Mr. Stromback resigned as our CEO on September 15, 2008. Effective October 1, 2008, he was engaged by us as a consultant through an entity named RJS Consulting, LLC.
(3)	Mr. Crockett began employment with us as CEO on September 17, 2008. His annual salary is $200,000.  He was awarded 330,000 options on that date, the value of which is disclosed in Option Awards in this table.
(4)	Ms. Ramsey entered into an employment agreement with us on January 1, 2007.  Pursuant to such employment contract, she will receive a salary of $180,000 for the calendar year 2007, a salary of $200,000 for the calendar years 2008 through 2011, and a salary of $220,000 for calendar year 2012.  Pursuant to amendments of her employment agreement, Ms. Ramsey’s current salary is $75,000 per year.  Ms. Ramsey was awarded options to purchase 450,000 shares of common stock that vest over five years.
(5)	These amounts reflect health insurance for all persons shown.
(6)	Mr. Morgan resigned as Chief Financial Officer on March 26, 2009. Mr. Stolz was appointed the Company’s Chief Financial Officer on March 26, 2009.
(7)	Reflects automobile allowances paid to Mr. Krotine and Mr. Morgan.

56

Compensation Components

With the Company still in its inception stage, the main elements of our compensation package consist of base salary, stock options, and bonus.

Base Salary . The base salary for each executive officer is reviewed and compared to the prior year, with considerations given for increase.  Base salary adjustments will be based on both individual and Company performance and will include both objective and subjective criteria specific to each executive’s role and responsibility with the Company.  No increases were given to executives from 2007 to 2008.

Stock Options.  Stock option awards are determined by the Board of Directors based on several factors, some of which include responsibilities incumbent with the role of each executive to the Company, tenure with the Company, as well as Company performance, such as shipment of product at certain thresholds.  The vesting period of said options is also tied, in some instances, to Company performance directly related to certain executive’s responsibilities with the Company.

Bonuses.  To date, bonuses have been granted on a limited basis, with these bonuses related to meeting certain performance criteria that are directly related to areas within the executive’s responsibilities with the Company, such as production of product and sales of product to customers.  As the Company continues to evolve, more defined bonus programs are expected to be created to attract and retain our employees at all levels.  No bonuses were granted in 2008.

Other.  At this time, the Company has no profit sharing plan in place for employees.  However, this is another area of consideration to add such a plan to provide yet another level of compensation to our compensation plan.  The Company reimburses all or a portion of health insurance costs for its employees.

Mr. Stromback earned a base salary of $305,789 during 2008.  He received no other compensation for 2008.  He was employed under an employment agreement effective January 1, 2008. He resigned his position as CEO on September 15, 2008.  Effective October 1, 2008, Mr. Stromback signed a consulting contract with the Company that expires on September 11, 2011.  The contract calls for monthly payments of $16,000, a monthly office expense reimbursement of $1,000, and payment for Mr. Stromback’s attendance at certain events.  During 2007, Mr. Stromback earned a base salary of $348,333.  These earnings, coupled with $15,399 in stock options awarded to him as a director, brought his total compensation to $363,732.  The options grant him the right to purchase 10,000 shares of the Company’s common stock at $2 per share.  They vested on April 1, 2008, and expire on February 1, 2017.  Mr. Stromback resigned from our Board of Directors on October 1, 2009.

Mr. Crockett was named the Company’s CEO on September 15, 2008.  He receives a base salary of $200,000 and health care benefits.  Additionally, he was awarded 330,000 options to purchase shares of the Company’s common stock at $1.05 per share.  The options vest in 110,000 option increments over a thirty month period, with the first tranche becoming exercisable on March 15, 2010, the middle tranche becoming exercisable on September 15, 2010, and the final tranche becoming exercisable on March 15, 2011.  The options expire on September 11, 2018.  He earned $8,333 in base salary in 2008 and the aforementioned options were valued at $254,701.  Additionally, the Company paid $1,297 in medical insurance premiums on his behalf, bringing his total 2008 compensation to $263,034.  On September 21, 2009, we entered into a three year employment agreement with Mr. Crockett with a annual salary of $200,000, accelerating the vesting of existing options held by him and granting him an additional 670,000 stock options with an exercise price of $0.51 per share with a term of ten years.

57

Ms. Ramsey has a base salary of $60,000.  Additionally, the Company paid health insurance premiums of $12,564 on her behalf.  Her total compensation for 2008 was $208,397.  She is employed under an agreement dated January 1, 2007.  The employment agreement is for a term of five years from January 1, 2007 through January 1, 2012.  Her salary for the first year is $180,000, then $200,000 for years two through four, and finally $220,000 for year five.  Ms. Ramsey earned a base salary of $157,146 during 2007 along with a bonus of $6,667 for performance criteria she met during the year.  These earnings, coupled with the $335,442 of stock options and $10,081 in company-paid health insurance premiums, brought her total compensation to $509,336 for 2007.  On January 1, 2007, Ms. Ramsey was granted options to purchase 450,000 shares of the Company’s common stock at $2 per share.  The options vest in tranches of 150,000 each on January 1st of 2010, 2011, and 2012 and expire on January 1, 2017.  On September 21, 2009, we signed the Second Amendment to Ms. Ramsey’s employment agreement increasing Mr. Ramsey’s salary to $75,000 per year.

Mr. Krotine earned a base salary of $160,000 during 2008 until December 3, 2008 when it was reduced to $24,000 annually.  In addition, the Company paid $7,342 in medical insurance premiums on his behalf, bringing his total compensation for 2008 to $167,342.  He earned a base salary of $155,248 during 2007.  These earnings, coupled with the $16,545 of stock options and $5,277 in company-paid health insurance premiums and $5,064 of auto allowance, brought his total compensation to $182,134 for 2007.  On November 1, 2006, he was awarded options to purchase 321,217 shares of the Company’s common stock at $2 per share.  80,237 of these options vested on November 1, 2007 and the remaining 240,980 vested on November 1, 2008.  These options expire on November 1, 2016.  He was also awarded 10,000 options on February 1, 2007 for service as a director.  These options have an exercise price of $2 per share, vested on April 1, 2008, and expire on February 1, 2017.  He was employed under an employment agreement that expired on November 1, 2008.  On September 21, 2009, we entered into a new employment agreement with Mr. Krotine increasing his salary to $65,000 per year and awarding him 169,000 stock options to purchase our common stock at $0.51 per share with a term of ten years.

Outstanding Equity Awards at Fiscal Year 2009 End

Option Awards

Stock Awards

Equity

Equity

Incentive

Incentive

Equity

Number

Plan

Plan

Incentive

of

Market

Awards:

Awards:

Plan

Shares

Value of

Number of

Market or

Number of

Number of

Awards:

or Units

Shares or

Unearned

Payout Value

Securities

Securities

Number of

of

Units of

Shares,

of Unearned

Underlying

Underlying

Securities

Stock

Stock

Units or

Shares, Units

Unexercised

Unexercised

Underlying

That

That

Other

or Other

Options

Options

Unexercised

Option

Option

Have

Have

Rights That

Rights That

(#)

(#)

Unearned

Exercise

Expiration

Not

Not

Have Not

Have Not

Exercisable

Unexercisable

Options (#)

Price

Date

Vested

Vested

Vested

Vested

Name (a)

(b)

(c)

(d)

($) (e)

(f)

(#) (g)

($) (h)

(#) (i)

($) (j)

Richard D. Stromback

10,000

0

2.00

3/01/2017

Sally J.W. Ramsey

0

450,000

2.00

1/01/2017

F. Thomas Krotine

80,237

321,237

.85

11/01/2016

10,000

10,000

1.00

3/01/2017

169,000

.51

9/21/2019

Robert G. Crockett

110,000

1.05

9/15/2018

890,000

.60

9/21/2019

J.B. Smith

0

100,000

1.05

9/17/2018

Rocco DelMonaco

0

100,000

1.05

9/17/2018

58

Mr. Stromback was granted 10,000 options under the 2007 Stock Option Plan for serving as a director.  All options are priced at $2.00 per share and expire in ten (10) years.  None of the options vested at time of issuance and all 10,000 options vested on April 1, 2008.

Ms. Ramsey was granted 450,000 options under the 2007 Stock Option Plan.  All options are priced at $2.00 per share and expire in ten (10) years.  None of the options vested at the time of issuance. On January 1, 2010, 150,000 options will vest, 150,000 options will vest on January 1, 2011, and 150,000 options will vest on January 1, 2012.

Mr. Krotine was granted 331,217 options under the 2007 Stock Option Plan.  All options are priced at $2.00 per share and expire in ten (10) years.  None of the options vested at the time of issuance.  On November 1, 2007, 80,237 options vested and 240,980 options vested on November 1, 2008.  Mr. Krotine received 10,000 options as part of the 2007 Stock Option Plan for service as a director, which vested on April 1, 2008.  These options have an exercise price of $2.00 per share and expire ten (10) years from the date of issuance.  On September 21, 2009, Mr. Krotine was granted 169,000 additional options priced at $.51 per share with a term of ten (10) years.  These newly issued options will expire in ten (10) years (September 15, 2019).

Mr. Crockett was awarded 330,000 options to purchase shares of the Company’s common stock at $1.05 per share.  None of the options were exercisable at issuance.  The options vest in 110,000 option increments over a thirty month period, with the first tranche becoming exercisable on March 15, 2010, the middle tranche becoming exercisable on September 15, 2010, and the final tranche becoming exercisable on March 15, 2011.  The options expire on September 17, 2018.  On September 21, 2009, Mr. Crockett was granted 670,000 additional options priced at $.51 per share with 167,500 options exercisable on March 2011, 167,500 options exercisable on September 15, 2011, 167,500 options exercisable on March 15, 2012 and 167,500 options exercisable on September 15, 2012.  These newly issued options will expire in ten (10) years (September 15, 2019).

Mr. Smith was awarded 100,000 options to purchase shares of the Company’s common stock at $1.05 per share.  None of the options were exercisable at issuance.  The options vest on September 15, 2009 and expire on September 15, 2018.  These options are personal to Mr. Smith and do not include convertible preferred shares and warrants issued to Equity 11.  Mr. Smith is the managing partner of Equity 11.

Mr. DelMonaco was awarded 100,000 options to purchase shares of the Company’s common stock at $1.05 per share.  None of the options were exercisable at issuance.  The options vest on September 15, 2009 and expire on September 15, 2018.

At the end of 2008, all of the 4,500,000 options available under the 2007 Plan had been granted.  On December 2, 2008, the Board of Directors authorized the addition of another 1,000,000 shares to the 2007 Plan.  The table above indicates options granted under the Plan to certain executives in fiscal 2007.  The balance of the options under the 2007 Plan was granted to consultants, other employees of the Company, and past and current directors.  In 2008, 1,456,000 options were granted under the 2007 Plan.

Stock Option Plans

Our Board of Directors adopted the 2007 Stock Option and Restricted Stock Plan (the “2007 Plan”) on May 9, 2007 and the shareholders approved the Plan on June 4, 2007.  The 2007 Plan authorized us to issue up to 4,500,000 shares of our common stock upon exercise of options and grant of restricted stock awards.  On December 2, 2008, the Board of Directors authorized the addition of another 1,000,000 shares to the 2007 Plan.  We issued 590,000 options under the Plan to our directors, officers and employees, all of which are subject to vesting provisions.  The balance of the options issued under the plan during the fiscal year ended September 30, 2008 was issued to consultants.

59

The Plan authorizes us to grant (i) to key employees incentive stock options and non-qualified stock options and restricted stock awards and (ii) to non-employee directors and consultants non-qualified stock options and restricted stock.  Our Compensation Committee will administer the Plans by making recommendations to the board or determinations regarding the persons to whom options or restricted stock should be granted and the amount, terms, conditions and restrictions of the awards.     

The Plan allows for the grant of incentive stock options, non-qualified stock options and restricted stock awards.  Incentive stock options granted under the Plan must have an exercise price at least equal to one hundred percent (100%) of the fair market value of the common stock as of the date of grant.  Incentive stock options granted to any person who owns, immediately after the grant, stock possessing more than ten percent (10%) of the combined voting power of all classes of our stock, or of any parent or subsidiary corporation, must have an exercise price at least equal to one hundred ten percent (110%) of the fair market value of the common stock on the date of grant.  Non-statutory stock options may have exercise prices as determined by our Compensation Committee.  To date, no incentive stock options have been granted under the Plan.

The Compensation Committee is also authorized to grant restricted stock awards under the Plan. A restricted stock award is a grant of shares of the common stock that is subject to restrictions on transferability, risk of forfeiture and other restrictions and that may be forfeited in the event of certain terminations of employment or service prior to the end of a restricted period specified by the Compensation Committee.

Compensation of Directors

J.B. Smith and Rocco DelMonaco were appointed to the Company’s Board of Directors on September 17, 2008.  Each received options to purchase 100,000 shares of the Company’s common stock for $1.05 per share. The options become exercisable on September 17, 2009 and expire on September 17, 2018.

During 2008, three officers, Mr. Stromback, CEO, Mr. Krotine, COO, and Mr. Morgan, CFO, served on the Board of Directors.  They did not receive any compensation for this service.  Mr. Krotine and Mr. Morgan resigned as directors on September 15, 2008.  Mr. Stromback resigned as a director on October 1, 2009.

In 2008, neither Mr. Liebig nor Mr. Campion received any compensation as directors.  Mr. Campion resigned on July 13, 2008.  Mr. Liebig resigned on July 24, 2008.  In 2007, Mr. Liebig, a non-employee director, was granted 25,000 options for agreeing to serve on the Board of Directors in 2007, including on the Audit and Compensation Committees, and 75,000 options for agreeing to serve on the Board of Directors prior to the Company purchasing director and officer liability insurance.  Mr. Campion was paid $20,000 in cash and was granted 100,000 options for agreeing to serve as a member of the board in 2007.  The non-employee directors are reimbursed for their out-of-pocket costs in attending the meetings of the Board of Directors.

60

Director Compensation for fiscal year 2009

										Change in
										Pension Value
										and
	Fees									Nonqualified
	Earned							Non-Equity		Deferred
	Or Paid		Stock		Option			Incentive Plan		Compensation		All Other
	in Cash		Awards		Awards			Compensation		Earnings		Compensation			Total
Name (a)	($)		($)		($)			($)		($)		($)			($)
Richard D. Stromback (1)	$	-0-	$	-0-	$	-0-	(1)	$	-0-	$	-0-	$	-0-		$	-0-
J.B. Smith (2)	$	-0-	$	-0-	$	76,971	(2)	$	-0-	$	-0-	$	453,259	(8)	$	530,230
Rocco DelMonaco (3)	$	-0-	$	-0-	$	76,971	(3)	$	-0-	$	-0-	$	-0-		$	76,971
F. Thomas Krotine (4)	$	-0-	$	-0-	$	-0-	(5)	$	-0-	$	-0-	$	-0-		$	-0-
Robert W. Liebig (5)	$	-0-	$	-0-	$	-0-	(6)	$	-0-	$	-0-	$	-0-		$	-0-
Donald Campion (6)	$	-0-	$	-0-	$	-0-	(7)	$	-0-	$	-0-	$	-0-		$	-0-

(1)		Mr. Stromback had 10,000 outstanding vested option awards at an exercise price of $2.00 per share at fiscal year end 2009.  These options expire on March 1, 2017.
(2)	Reflects compensation paid to Sales Attack, LLC, a company wholly-owned by Equity 11. Mr. Smith is a principal in Equity 11. Of this amount, $29,333 was paid in cash while the remainder, $423,926 reflects the value of options awarded to Sales Attack.  Mr. Smith had 100,000 outstanding vested option awards at an exercise price of $1.05 per share at fiscal year end 2009.  These options expire on September 17, 2018.
(3)		Mr. DelMonaco had 100,000 outstanding vested option awards at an exercise price of $1.05 per share at fiscal year end 2009.  These options expire on September 17, 2018.
(4)		Mr. Krotine had the following options outstanding at fiscal year end 2009: ·80,237 outstanding vested options at an exercise price of $.85 per share which expire on November 1, 2016 ·10,000 outstanding vested option awards at an exercise price of $1.00 per share which expire on March 1, 2017 ·321,237 outstanding unvested option awards at an exercise price of $.85 per share which expire on November 1, 2016 ·10,000 outstanding unvested options at an exercise price of $1.00 per share which expire on March 1, 2017 ·169,000 outstanding unvested options at an exercise price of $.51 per share which expire on September 21, 2019. .
(5)		Mr. Liebig had 100,000 outstanding option awards at fiscal year end 2008. He resigned on July 24, 2008.
(6)		Mr. Campion had 100,000 outstanding option awards at fiscal year end 2008. He resigned on July 13, 2008.

61

Mr. Stromback did not receive any compensation in 2008 for serving as Chairman.  Mr. Stromback resigned as a director on October 1, 2009.

Mr. Smith, a non-employee director, received 100,000 options in 2008 for serving as a director.  All of his compensation is disclosed in the Director Compensation Table.

Mr. DelMonaco, a non-employee director, received 100,000 options in 2008 for serving as a director.  All of his compensation is disclosed in the Director Compensation Table.

Mr. Krotine did not receive any compensation in 2008 for serving on the Board of Directors.

Mr. Morgan resigned as a director on September 15, 2008 and from the Company on March 26, 2009.  He did not receive any compensation in 2008 for serving on the Board of Directors.

Mr. Liebig, a non-employee director, did not receive any compensation in 2008 for serving as a director. He resigned on July 24, 2008.

Mr. Campion, a non-employee director, did not receive any compensation in 2008 for serving as a director.

62

Employment Contracts; Termination of Employment and Change-in-Control Arrangements

Effective September 21, 2009, we entered into an employment agreement with Robert G. Crockett, under which he serves as the Chief Executive Officer of the Company.  Mr. Crockett  reports to the Chairman of the Board of Directors.  Mr. Crockett will receive an annual base salary of $200,000. The Compensation Committee of the Board of Directors may review Mr. Crockett’s salary to determine what, if any, increases shall be made thereto.  The Crockett Agreement may be terminated prior to the end of the term by us for cause. If Mr. Crockett’s employment is terminated without cause or for “good reason,” as defined in the Crockett Agreement, he is entitled to 50% of salary that would have been paid over the balance of the term of the Crockett Agreement. Further, a termination within one year after a change in control shall be deemed to be a termination without cause.

On September 21, 2009, we entered into an employment agreement with F. Thomas Krotine (the “Krotine Agreement”), our COO. The Krotine Agreement is deemed effective September 21, 2009 (the “Effective Date”) and shall expire on September 21, 2010. Effective November 1, 2009, Mr. Krotine will receive an annual base salary of $65,000. The Compensation Committee of the Board of Directors may review Mr. Krotine’s salary to determine what, if any, increases shall be made thereto. The Krotine Agreement may be terminated prior to the end of the term by us for cause. If Mr. Krotine’s employment is terminated without cause or for “good reason,” as defined in the Krotine Agreement, he is entitled to 50% of salary that would have been paid over the balance of the term of the Krotine Agreement. Further, a termination within one year of a change in control shall be deemed to be a termination without cause.  On September 21, 2009, we entered into an employment agreement with Daniel V. Iannotti (the “Iannotti Agreement”), our Vice President, General Counsel & Secretary. Mr. Iannotti  has served as our Vice President, General Counsel since August 11, 2008. The Iannotti Agreement is deemed effective September 21, 2009 (the “Effective Date”) and shall expire on September 21, 2012. Effective November 1, 2009, Mr. Iannotti will receive an annual base salary of $150,000. The Compensation Committee of the Board of Directors may review Mr. Iannotti’s salary to determine what, if any, increases shall be made thereto. The Iannotti Agreement may be terminated prior to the end of the term by us for cause. If Mr. Iannotti’s employment is terminated without cause or for “good reason,” as defined in the Iannotti Agreement, he is entitled to 50% of salary that would have been paid over the balance of the term of the Iannotti Agreement. Further, a termination within one year after a change in control shall be deemed to be a termination without cause.

Kevin Stolz serves as Chief Financial Officer, Controller and Chief Accounting Officer under an agreement with the Company effective February 1, 2007.  The agreement was executed on February 1, 2008 and was terminated on July 28, 2009 and Mr. Stolz continues to serve on an at-will basis. He reports to the Chief Executive Officer.

Sally J.W. Ramsey serves as the Director of Research and Development and New Product Development.  Her employment agreement is for a term of five years from January 1, 2007 through January 1, 2012.  Her salary for the first year is $180,000, then $200,000 for years two through four, and finally $220,000 for year five but it was reduced to $60,000 effective December 1, 2008.  She reports to the Chief Executive Officer.  On September 21, 2009, we entered into a Second Amendment To Employment Agreement with Sally J.W. Ramsey which amends Section 4.1 of her Employment Agreement with us to provide for an annual salary of $75,000 effective November 1, 2009. 

Ms. Ramsey’s agreement is renewable for one year at the Company’s option unless either party gives written notice to the other party that it does not wish to extend the agreement.  The agreement may be terminated prior to the end of the term by the Company for cause, good reason, or upon thirty days written notice given to the other party.  If the executive’s employment is terminated without cause or for “good reason,” as defined in their employment agreements, the executive is entitled to the amount of salary that would have been paid over the balance of the term of the agreement and will receive it over such period.  Further, upon a change in control other than with selling shareholder, the Company must pay the executive’s annual salary that would be payable for a twenty-four month period and any declared and accrued, but as of then unpaid, bonus or stock options grant, shall be deemed to be vested.

On August 27, 2008, the terms of the employment agreements of Messrs. Stromback, Krotine, Morgan, Stolz were amended so the Equity 11 transaction was not a “change in control” under the terms of those then existing employment agreements.

63

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The following table identifies the payments and obligations made by us to the selling shareholder, an affiliate of the selling shareholder or any person with whom the selling shareholder has a contractual relationship regarding the selling shareholder’s investment in Ecology Coatings or the sale of common shares under this registration statement for the past three years up to and including the year following the sale of preferred stock:

64

Payment Entity	Purpose	Payment Amount	Frequency	Termination Date	Total Payments Made	Total Payments Remaining
Seven Industries, Ltd. (4)	Office Rent	$2,951.76	Monthly	September 20, 2010	$25,591.60(2)	$25,072.11
Sales Attack LC (5)	Marketing & Sales Consulting Services	1) $20,000 per month 2) Stock options to purchase 531,000 shares at $1.05 per share 3) Sales commission of 15% of royalties and 3% of product sales	$20,000 Monthly	May 15, 2009	$169,333(1)	$0
Jim Juliano (6)	Financial	$7,500	Monthly	May 15, 2009	$37,500 (2)	$0
Seven Industries, Ltd. (7)	Promissory Notes	$54,000	One-Time	May 15, 2009	$54,337 (3)	$0
JB Smith LC (8)	Promissory Note	$7,000	One-Time	Terminated	$7,010 (3)	$0
Equity 11	Purchase of office furniture	$5,832.12	One-Time	November 14, 2008	$5,832.12	$0
JB Smith LC (9)	Promissory Note	$7,716.40	One-Time	15 days after demand for payment	$0	$7,812.59
Equity 11 (Selling Shareholder)	Convertible Preferred Shares Dividends	December 1, 2009	One-Time	If not converted prior to dividend date		$121,800 (11)
Equity 11 (Selling Shareholder)	Convertible Preferred Shares Dividends	June 1, 2010	One-Time	If not  converted prior to dividend date		$121,800 (11)
Equity 11 (10) (Selling Shareholder)	Convertible Preferred Shares Dividends	December 1, 2010	One-Time	If not converted prior to dividend date		$121,800 (11)
Equity 11 (Selling Shareholder)	Convertible Preferred Shares, Series B Dividends	December 1, 2009	One-Time	If not  converted prior to dividend date		$10,975(11)
Equity 11 (Selling Shareholder)	Convertible Preferred Shares, Series B Dividends	June 1, 2010	One-Time	If not  converted prior to dividend date		$10,975(11)
Equity 11 (10) (Selling Shareholder)	Convertible Preferred Shares, Series B Dividends	December 1, 2010	One-Time	If not  converted prior to dividend date		$10,975(11)
JB Smith LC	$6500 Promissory Note	September 10, 2009	One-Time	15 days after demand for payment	$0	$6,518
				SELLING SHAREHOLDER TOTAL:	$299,603.72	$426,752.70

(1)   Includes cash payments of $69,333 and issuance of $100,000 in Convertible Preferred Securities, Series B.  The May 15, 2009 Convertible Preferred Securities Agreement is attached as an exhibit to this registration statement.

(2)   Paid through the issuance of Convertible Preferred  Securities, Series B.

(3)   Includes accrued interest; paid through the issuance of Convertible Preferred Securities, Series B.

(4)   The Office Sublease is filed as an exhibit to this registration statement.

(5)   The September 17, 2008 Consulting Agreement with Sales Attack LLC is filed as an exhibit to this registration statement..

(6)   Mr. Juliano’s Consulting Agreement is filed as an exhibit to this registration statement.

(7)   These promissory notes are filed as exhibits to this registration statement.

(8)   This promissory note is filed as an exhibit to the registration statement..

(9)   This promissory note is filed as an exhibit to this registration statement.

(10)   We have assumed that the selling shareholder will convert these preferred shares to common stock prior to the next scheduled dividend date.

(11)   We have shown dividend payments for preferred shares until December 1, 2010 but these dividends payments will continue after this date unless the selling shareholder converts the preferred shares to common stock.  We have shown dividend payments for Series B preferred shares based on the number of Series B preferred owned by the selling shareholder as of August 1, 2009.  Dividend payments for Series B preferred shares will continue after December 1, 2010 unless the selling shareholder converts the preferred shares to common stock.  See also the discussion about our ability to pay dividends in Item 9.

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The selling shareholder, its affiliates and all persons who have a contractual relationship with the selling shareholder have not had any prior transactions with us other than the transactions described in the table above and the August 28, 2008 Securities Purchase Agreement and the May 15, 2009 Convertible Preferred Securities Agreement.

On August 12, 2008, one of our outside law firms, Butzel Long PC entered into an Investigation Services Agreement with Stealth Investigations, LLC for investigative services on behalf of the Company associated with the departure of the Company’s prior general counsel, Adam Tracy.  Stealth Investigations, LLC is owned by J.B. Smith, the managing partner of Equity 11 and one of the Company’s Directors.  At September 30, 2008, we owed $6,711 to Butzel Long for these services.  This amount is included in the accounts payable balance shown on the consolidated balance sheets included in this Form 10-KSB.

On September 17, 2008, we entered into a Consulting Agreement with RJS Consulting LLC (“RJS”).  RJS is wholly owned by our former Chairman, Richard D. Stromback.  Under the Agreement, RJS will provide

directorship services and services relating to generating new revenue.  RJS will be paid $16,000/month. In addition, RJS will be paid based on new revenue generated from RJS’s efforts — 15% of collected new gross licensing and royalty revenue and 3% of new collected gross revenue from product sales.  To date, we have not paid any commissions under this Agreement.  The Company will also reimburse RJS for various event, legal, office and IT costs.  This agreement is attached as an exhibit to this registration statement.  We paid $2,700 under this agreement in fiscal year 2008 and $107,884.35 in fiscal year 2009.  Additionally, we paid $45,269.51 under this agreement on October 1, 2009 in connection with Stromback Acquisition Corporation’s $240,000 investment in us on that date.

On September 17, 2008, we entered into a Consulting Agreement with DAS Ventures LLC (“DAS”).  DAS is wholly owned by the brother of our Chairman (Richard D. Stromback), Douglas Stromback, who is also a shareholder.  Under the Agreement, DAS will provide services relating to generating new revenue.  DAS will be paid based on new revenue generated from DAS’s efforts — 15% of collected gross licensing and royalty revenue and 3% of collected gross revenue from product sales.  To date, we have not paid any commissions under this Agreement.

On September 17, 2008, we entered into a Consulting Agreement with Sales Attack LC (“Sales Attack”).  Sales Attack is wholly owned by J.B. Smith, a member of our Board of Directors and owner of Equity 11, Ltd., the holder of our 5% convertible preferred shares.  Under the Agreement, Sales Attack will receive 15% of  collected gross licensing and royalty revenue generated from Sales Attack’s efforts  and 3% of collected gross revenue from product sales.  The agreement also included a monthly payment of $20,000 but that provision was terminated effective May 15, 2009.  To date, we have not paid any commissions under this Agreement.

On September 30, 2008, the Company entered into a lease for office space for its headquarters in Auburn Hills, MI with Seven Industries, Ltd..  The lease specifies average monthly rent of $2,997.  Seven Industries, Ltd. is wholly owned by J.B. Smith.  Mr. Smith is the managing partner of Equity 11.  The Company has entered into a Securities Purchase Agreement with Equity 11and Equity 11 has the right to designate three of the five members of the Company’s Directors.

We had unsecured notes payable to Seven Industries, a company that is wholly owned by J.B. Smith, a member of our Board of Directors and managing partner of Equity 11, Ltd. (“Equity 11”) who is our largest shareholder.  The notes bear interest at 5% per annum with principal and interest due at June 30, 2009.  The notes and accrued interest can be converted into shares of our common stock at $.66 per share at the sole discretion of the note holder.  As of March 31, 2009 and September 30, 2009, the notes had an outstanding balance of $54,000 and $0, respectively.  The accrued interest on this note was $266 and $0 as of March 31, 2009 and September 30, 2009, respectively.  These notes were converted into our common stock on May 15, 2009 at a conversion price of $.08 per share.

From November of 2003 through September 30, 2006, Richard D. Stromback incurred expenses on behalf of the Company for which he was not reimbursed.  The balance at September 30, 2008 was $49,190.  The highest aggregate amount owed to him during the fiscal year ended September 30, 2008 was $49,190.  The Company made no payments on this balance during the fiscal year ended September 30, 2008.  On February 16, 2009, this maturity date for this note was extended until December 31, 2009.

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On December 15, 2003, the Company entered into a promissory note with Deanna Stromback, the sister of Richard D. Stromback and a former director of the Company, under which it borrowed a total of $173,030.  The note bears interest at the rate of 4% per annum and is due and payable on December 31, 2009.  She converted $27,500 of the principal amount of the note into 3,000,000 shares of common stock on March 1, 2005.  At September 30, 2008, the outstanding principal balance of this note was $110,500 plus accrued interest of $8,407.  No payments of principal and/or interest were made on this note during the fiscal year ended September 30, 2008.  During the fiscal year ended September 30, 2008, the highest principal amount owed on this note was $110,500.  On February 25, 2009, this maturity date for this note was extended until December 31, 2009.

On August 10, 2004, the Company entered into a promissory note with Douglas Stromback, the brother of Richard D. Stromback and Deanna Stromback and a former director of the Company, under which it borrowed a total of $200,000.  He converted $27,500 of the principal amount into 3,000,000 shares of common stock on March 1, 2005.  The note bears interest at the rate of 4% per annum and is due and payable on December 31, 2009.  At September 30, 2008 the outstanding principal balance of this note was $133,000 plus accrued interest of $10,125.  No payments of principal and/or interest were made on this note during the fiscal year ended September 30, 2008.  During the fiscal year ended September 30, 2008, the highest principal amount owed on this note was $133,000.  On February 24, 2009, this maturity date for this note was extended until December 31, 2009.

On November 11, 2008, we settled our lawsuit against Trimax Gaming, LLC and Daryl Repokis pending in Oakland County Circuit Court, Pontiac, Michigan.  We entered into a new, one year Consulting Services Agreement with Trimax, LLC (“Trimax”).  According to our records, Trimax beneficially owns at least 5% of our common stock.  Under the agreement, Trimax will provide services to generate new revenue for us. Trimax will be paid $7,500/month.  In addition, Trimax will be paid based on new revenue generated from Trimax’s efforts — 15% of collected new gross licensing and royalty revenue and 3% of new collected gross revenue from product sales.  This agreement was terminated in March 2009.

On September 10, 2009, we entered into a promissory note with JB Smith LC, which is an affiliate of the selling shareholder and controlled by JB Smith, a director on our Board of Directors, under which we borrowed a total of $6,500.  The note bears interest at the rate of 5% per annum and is due and payable on fifteen (15) days written notice from JB Smith LC.  At September 30, 2009, the outstanding principal balance of this note was $6,518.  No payments of principal and/or interest were made on this note during the fiscal year ended September 30, 2009.

On May 5, 2009, we entered into a promissory note with JB Smith LC, which is an affiliate of the selling shareholder and controlled by JB Smith, a director on our Board of Directors, under which we borrowed a total of $7,000.  The note bears interest at the rate of 5% per annum and is due and payable on fifteen (15) days written notice from JB Smith LC.  At September 30, 2009, the outstanding principal balance of this note was $0.  This note were converted into our common stock on May 15, 2009 at a conversion price of $.08 per share.

On July 1, 2009, we entered into a promissory note with JB Smith LC, which is an affiliate of the selling shareholder and controlled by JB Smith, a director on our Board of Directors, under which we borrowed a total of $7,716.40.  The note bears interest at the rate of 5% per annum and is due and payable on fifteen (15) days written notice from JB Smith LC.  At September 30, 2009, the outstanding principal balance of this note was $7,812.59.  No payments of principal and/or interest were made on this note during the fiscal year ended September 30, 2009.

On July 28, 2009, we and Kevin P. Stolz, our Chief Financial and Accounting Officer, agreed to terminate Mr. Stolz’s Employment Agreement dated February 1, 2008.  Mr. Stolz continues to remain employed by us in his current capacity.  Effective September 1, 2009, Mr. Stolz’s salary was reduced to $42,000 per year and he receives $1,000 per month for medical insurance in lieu of participating in our medical plan.   Mr. Stolz also received an additional stock option award to purchase 40,000 shares of our common stock at $1 per share.

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On August 11, 2009, we executed a promissory note in favor JB Smith LC dated July 1, 2009 in the principal amount of Seven Thousand Seven Hundred Sixteen Dollars and Forty Cents ($7,716.40) bearing interest at five percent (5%) per annum.  The note is payable in full within 15 days written demand from JB Smith LC.  JB Smith LC is wholly owned by J.B. Smith, one of our directors and the managing partner of Equity 11, Ltd. which holds shares of our 5% Convertible Preferred Shares and 5% Convertible Preferred Shares, Series B.  JB Smith LC, at its option, may demand payment of all amounts owed under the note within fifteen (15) days following our completion of either (i) an underwritten public offering of its securities or (ii) a private offering exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, which results in proceeds, net of underwriting discounts and commissions, in excess of One Million Dollars ($1,000,000) (“New Offering”). The amounts due under the note may also be accelerated upon an event of default or converted into common shares upon our completing a New Offering.

On September 10, 2009, we executed a promissory note in favor of Sky Blue Ventures, LLC (“Sky Blue”) in the principal amount of Six Thousand Five Hundred Dollars ($6,500) bearing interest at five percent (5%) per annum.  The note is payable in full within 15 days written demand from Sky Blue.  Sky Blue is 65% owned by J.B. Smith, one of our directors and the managing partner of Equity 11, Ltd. which holds shares of our 5% Convertible Preferred Shares and 5% Convertible Preferred Shares, Series B.  Sky Blue, at its option, may demand payment of all amounts owed under the note within fifteen (15) days following our completion of either (i) an underwritten public offering of its securities or (ii) a private offering exempt from registration under Section 4(2) of the Securities Act of 1933, as amended which results in proceeds, net of underwriting discounts and commissions, in excess of One Million Dollars ($1,000,000) (“New Offering”). The amounts due under the note may also be accelerated upon an event of default or converted into common shares upon our completing a New Offering.

On September 21, 2009, we entered into an employment agreement with Robert G. Crockett (the “Crockett Agreement”), our CEO. Mr. Crockett has served as our CEO since September 15, 2008. The Crockett Agreement is deemed effective September 21, 2009 (the “Effective Date”) and will expire on September 21, 2012. Mr. Crockett will receive an annual base salary of $200,000. The Compensation Committee of the Board of Directors may review Mr. Crockett’s salary to determine what, if any, increases shall be made thereto. In addition, the vesting for Mr. Crockett’s previously awarded stock options was adjusted so that 110,000 stock options will vest on each of 12 months, 18 months and 24 months from Mr. Crockett’s initial date of employment (September 15, 2008).  Mr. Crockett was also granted stock options to purchase 670,000 shares of our common stock, one-quarter of which shall vest at each of 30, 36, 42 and 48 months from Mr. Crockett’s initial date of employment with us (September 15, 2008) with an exercise price of $.51 per share. The Crockett Agreement may be terminated prior to the end of the term by us for cause.  If Mr. Crockett’s employment is terminated without cause or for “good reason,” as defined in the Crockett Agreement, he is entitled to 50% of salary that would have been paid over the balance of the term of the Crockett Agreement. Further, a termination within one year after a change in control shall be deemed to be a termination without cause.

On September 21, 2009, we entered into an employment agreement with Daniel V. Iannotti (the “Iannotti Agreement”), our Vice President, General Counsel & Secretary. Mr. Iannotti has served as our Vice President, General Counsel since August 11, 2008. The Iannotti Agreement is deemed effective September 21, 2009 (the “Effective Date”) and shall expire on September 21, 2012. Effective November 1, 2009, Mr. Iannotti will receive an annual base salary of $150,000. The Compensation Committee of the Board of Directors may review Mr. Iannotti’s salary to determine what, if any, increases shall be made thereto. In addition, the vesting for Mr. Iannotti’s previously awarded stock options was adjusted so that 110,000 stock options will vest on each of 12 months, 18 months and 24 months from Mr. Iannotti’s initial date of employment (August 11, 2008).  Mr. Iannotti was also granted stock options to purchase 70,000 shares of our common stock, one-quarter of which shall vest at each of 30, 36, 42 and 48 months from Mr. Iannotti’s’s initial date of employment with us (August 11, 2008) with an exercise price of $.51 per share. The Iannotti Agreement may be terminated prior to the end of the term by us for cause. If Mr. Iannotti’s employment is terminated without cause or for “good reason,” as defined in the Iannotti Agreement, he is entitled to 50% of salary that would have been paid over the balance of the term of the Iannotti Agreement. Further, a termination within one year after a change in control shall be deemed to be a termination without cause.

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On September 21, 2009, we entered into an employment agreement with F. Thomas Krotine (the “Krotine Agreement”), our COO. The Krotine Agreement is deemed effective September 21, 2009 (the “Effective Date”) and shall expire on September 21, 2010. Effective November 1, 2009, Mr. Krotine will receive an annual base salary of $65,000. The Compensation Committee of the Board of Directors may review Mr. Krotine’s salary to determine what, if any, increases shall be made thereto. Mr. Krotine was also granted stock options to purchase 169,000 shares of our common stock, one-quarter of which shall vest at each of 6, 12, 18 and 24 months from September 21, 2009 with an exercise price of $.51 per share. The Krotine Agreement may be terminated prior to the end of the term by us for cause. If Mr. Krotine’s employment is terminated without cause or for “good reason,” as defined in the Krotine Agreement, he is entitled to 50% of salary that would have been paid over the balance of the term of the Krotine Agreement. Further, a termination within one year of a change in control shall be deemed to be a termination without cause.

On September 21, 2009, we entered into a Second Amendment To Employment Agreement with Sally J.W. Ramsey which amends Section 4.1 of her Employment Agreement with us dated January 1, 2007 to provide for an annual salary of $75,000 effective November 1, 2009.  From December 15, 2008 until September 21, 2009, Ms. Ramsey's annual salary was $60,000.

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ECOLOGY COATINGS, INC. AND SUBSIDIARY
Consolidated Balance Sheets
ASSETS
	June 30, 2009	September 30, 2008
	(Unaudited)
Current Assets
Cash and cash equivalents	$4,257	$974,276
Prepaid expenses	1,400	25,206
Total Current Assets	5,657	999,482
Property and Equipment
Computer equipment	30,111	22,933
Furniture and fixtures	21,027	18,833
Test equipment	9,696	7,313
Signs	213	213
Software	6,057	1,332
Video	48,177	48,177
Total property and equipment	115,281	98,801
Less: Accumulated depreciation	(42,034)	(22,634)
Property and Equipment, net	73,247	76,167
Other Assets
Patents-net	437,554	421,214
Trademarks-net	5,771	5,029
Total Other Assets	443,325	426,243
Total Assets	$522,229	$1,501,892

See the accompanying notes to the unaudited consolidated financial statements.

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ECOLOGY COATINGS, INC. AND SUBSIDIARY
Consolidated Balance Sheets
LIABILITIES AND STOCKHOLDERS' DEFICIT
	June 30, 2009	September 30, 2008
	(Unaudited)
Current Liabilities
Accounts payable	$1,398,823	$1,359,328
Credit card payable	114,621	92,305
Accrued Liabilities	4,202	12,033
Franchise tax payable	-	800
Interest payable	142,380	133,332
Notes payable	582,301	894,104
Notes payable - related party	243,500	243,500
Preferred Dividends Payable	12,258	6,300
Total Current Liabilities	2,498,085	2,741,702
Total Liabilities	2,498,085	2,741,702
Commitments and Contingencies (Note 5)	-	-
Stockholders' Deficit
Preferred Stock - 10,000,000 $.001 par value and 10,000,000	2	2
no par value authorized; 2,800 and 2,010 shares issued and outstanding
as of June 30, 2009 and September 30, 2008, respectively
Common Stock - 90,000,000 $.001 par value and 50,000,000
no par value authorized; 32,233,600
outstanding as of June 30, 2009 and
September 30, 2008	32,234	32,234
Additional paid in capital	19,035,348	13,637,160
Accumulated Deficit	(21,043,440)	(14,909,206)
Total Stockholders' Deficit	(1,975,856)	(1,239,810)
Total Liabilities and Stockholders' Deficit	$522,229	$1,501,892

See the accompanying notes to the unaudited consolidated financial statements.

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ECOLOGY COATINGS, INC. AND SUBSIDIARY
Consolidated Statements of Operations (Unaudited)
	For the three months ended	For the three months ended	For the nine months ended	For the nine months ended
	June 30, 2009	June 30, 2008	June 30, 2009	June 30, 2008
Revenues	$-	$4,050	$-	$24,884
Salaries and Fringe Benefits	301,700	444,920	1,105,546	1,519,705
Professional Fees	322,032	758,691	2,806,104	2,245,674
Other general and administrative costs	63,967	111,533	239,953	556,493
Total General and Administrative Expenses	687,699	1,315,144	4,151,603	4,321,872
Operating Loss	(687,699)	(1,311,094)	(4,151,603)	(4,296,988)
Other Income (Expense)
Interest Income	-	11	142	5,671
Interest Expense	(49,435)	(966,248)	(222,115)	(1,261,115)
Total Other Expenses - net	(49,435)	(966,237)	(221,973)	(1,255,444)
Net Loss	$(737,134)	$(2,227,331)	$(4,373,576)	$(5,552,432)
Basic and diluted net loss per share	$(0.02)	$(0.07)	$(0.14)	$(0.17)
Basic and diluted weighted average
common shares outstanding	32,233,600	32,210,684	32,233,600	32,182,874

See the accompanying notes to the unaudited consolidated financial statements.

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ECOLOGY COATINGS, INC. AND SUBSIDIARY

Consolidated Statements of Cash Flows

(Unaudited)

	For the	For the
	nine months ended	nine months ended
	June 30, 2009	June 30, 2008
OPERATING ACTIVITIES
Net  loss	$(4,373,576)	$(5,552,432)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization	33,725	25,971
Option expense	2,866,914	1,610,456
Warrant expense	63,512	841,887
Beneficial conversion expense	2,062	301,517
Issuance of stock for extension fee	-	162,000
Changes in Asset and Liabilities
Miscellaneous receivable	-	1,118
Prepaid expenses	23,806	41,688
Accounts payable	39,495	684,429
Accrued payroll taxes and wages	-	(13,960)
Accrued liabilities	(7,832)	-
Credit card payable	22,317	81,998
Franchise tax payable	(800)	-
Interest payable	9,048	93,107
Deferred revenue	-	(24,884)
Net Cash Used In Operating Activities	(1,321,329)	(1,747,105)
INVESTING ACTIVITIES
Purchase of fixed assets	(16,480)	(49,345)
Purchase of intangibles	(31,409)	(92,546)
Net Cash Used in Investing Activities	(47,889)	(141,891)
FINANCING ACTIVITIES
Repayment of debt	(372,801)	(91,998)
Proceeds from debt	61,000	-
Proceeds from convertible preferred shares	711,000	1,200,000
Net Cash Provided By Financing Activities	399,199	1,108,002
Net Change in Cash and Cash Equivalents	(970,019)	(780,994)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD	974,276	808,163
CASH AND CASH EQUIVALENTS AT END
OF PERIOD	$4,257	$27,169

See the accompanying notes to the unaudited consolidated financial statements.

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ECOLOGY COATINGS, INC. AND SUBSIDIARY

Consolidated Statements of Cash Flows

(Unaudited)

	For the	For the
	nine months ended	nine months ended
	June 30, 2009	June 30, 2008
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Interest paid	$132,000	$24,614
SUPPLEMENTAL DISCLOSURE OF NON-CASH
FINANCING ACTIVITIES
Common stock for extension fee	$-		$162,000

See the accompanying notes to the unaudited consolidated financial statements.

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ECOLOGY COATINGS, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 — Summary of Significant Accounting Policies, Nature of Operations and Use of Estimates

           Interim Reporting. While the information presented in the accompanying interim consolidated financial statements is unaudited, it includes all normal recurring adjustments, which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented in accordance with accounting principles generally accepted in the United States of America. These interim consolidated financial statements follow the same accounting policies and methods of their application as the September 30, 2008 audited annual consolidated financial statements of Ecology Coatings, Inc. (“we”, “us”, the “Company” or “Ecology”). It is suggested that these interim consolidated financial statements be read in conjunction with our September 30, 2008 annual consolidated financial statements included in the Form 10-KSB we filed with the Securities and Exchange Commission on December 23, 2008 which are attached as an exhibit to this registration statement.

Our operating results for the three and nine months ended June 30, 2009 are not necessarily indicative of the results that can be expected for the year ending September 30, 2009 or for any other period.

      Going Concern. In connection with their audit report on our consolidated financial statements as of September 30, 2008, the Company’s independent registered public accounting firm expressed substantial doubt about our ability to continue as a going concern.  Continuance of our operations is dependent upon our ability to raise sufficient capital. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.

Description of the Company.We were originally incorporated on March 12, 1990 in California (“Ecology-CA”). Our current entity was incorporated in Nevada on February 6, 2002 as OCIS Corp. (“OCIS”). OCIS completed a merger with Ecology-CA on July 26, 2007 (the “Merger”). In the Merger, OCIS changed its name from OCIS Corporation to Ecology Coatings, Inc. We develop nanotechnology-enabled, ultra-violet curable coatings that are designed to drive efficiencies and clean processes in manufacturing. We create proprietary coatings with unique performance and environmental attributes by leveraging our platform of integrated nano-material technologies that reduce overall energy consumption and offer a marked decrease in drying time. Ecology’s markets consist of electronics, automotive and trucking, paper products and original equipment manufacturers (“OEMs”).

Principles of Consolidation.The consolidated financial statements include all of our accounts and the accounts of our wholly owned subsidiary Ecology-CA. All significant intercompany transactions have been eliminated in consolidation.

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 amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents.We consider all highly liquid investments with original maturities of three months or less to be cash and cash equivalents.

Revenue Recognition.Revenues from licensing contracts are recorded ratably over the life of the contract. Contingency earnings such as royalty fees are recorded when the amount can reasonably be determined and collection is likely.

Loss Per Share.Basic loss per share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding during the period. Diluted loss per share is computed by dividing the net loss by the weighted average number of shares of common stock and potentially dilutive securities outstanding during the period. Potentially dilutive shares consist of the incremental common shares issuable upon the exercise of stock options and warrants and the conversion of convertible debt and convertible preferred stock. Potentially dilutive shares are excluded from the weighted average number of shares if their effect is anti-dilutive. We had a net loss for all periods presented herein; therefore, none of the stock options and/or warrants outstanding or stock associated with the convertible preferred shares during each of the periods presented were included in the computation of diluted loss per share as they were anti-dilutive. As of June 30, 2009 and 2008, there were 19,109,588 and 5,333,441 potentially dilutive shares outstanding.

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Income Taxes and Deferred Income Taxes.We use the asset and liability approach for financial accounting and reporting for income taxes. Deferred income taxes are provided for temporary differences in the bases of assets and liabilities as reported for financial statement purposes and income tax purposes and for the future use of net operating losses. We have recorded a valuation allowance against the net deferred income tax asset. The valuation allowance reduces deferred income tax assets to an amount that represents management’s best estimate of the amount of such deferred income tax assets that more likely than not will be realized. We cannot be assured of future income to realize the net deferred income tax asset; therefore, no deferred income tax asset has been recorded in the accompanying consolidated financial statements.

Effective January 1, 2007, we adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 was issued to clarify the requirements of SFAS109 relating to the recognition of income tax benefits. As of June 30, 3009, we had no unrecognized tax benefits due to uncertain tax positions.

Property and Equipment.Property and equipment is stated at cost less accumulated depreciation. Depreciation is recorded using the straight-line method over the following useful lives:

Computer equipment	3-10 years
Furniture and fixtures	3-7 years
Test equipment	5-7 years
Software Computer	3 years
Marketing and Promotional Video	3 years

Repairs and maintenance costs are charged to operations as incurred. Betterments or renewals are capitalized as incurred.

We review long lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.

Patents.It is our policy to capitalize costs associated with securing a patent. Costs consist of legal and filing fees. Once a patent is issued, it will be amortized on a straight-line basis over its estimated useful life. Seven patents were issued as of June 30, 2009 and are being amortized over 8 years.

Stock-Based Compensation.Our stock option plans are subject to the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123(R), Share-Based Payment. Under the provisions of SFAS No. 123(R), employee and director stock-based compensation expense is measured utilizing the fair-value method.

We account for stock options granted to non-employees under SFAS No. 123(R) using EITF 96-18, requiring the measurement and recognition of stock-based compensation to consultants under the fair-value method with stock-based compensation expense being charged to earnings on the earlier of the date services are performed or a performance commitment exists.

Expense Categories.Salaries and Fringe Benefits of $301,700 and $444,920 for the three months ended June 30, 2009 and 2008, respectively, and $1,105,546 and $1,519,705 for the nine months ended June 30, 2009 and 2008, respectively, include wages paid to and insurance benefits for our officers and employees as well as stock based compensation expense for those individuals. Professional fees of $322,032 and $758,691 for the three months ended June 30, 2009 and 2008, and $2,806,104 and $2,245,674 for the nine months ended June 30, 2009 and 2008, respectively, include amounts paid to attorneys, accountants, and consultants, as well as the stock based compensation expense for those services.

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Recent Accounting Pronouncements

In June 2009, the FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets, as amendment to SFAS No. 140 (SFAS166). SFAS 166 eliminates the concept of a “qualifying special-purpose entity,” changes the requirements for derecognizing financial assets, and requires additional disclosures in order to enhance information reported to users of financial statements by providing greater transparency about transfers of financial assets, including securitization transactions, and an entity’s continuing involvement in and exposure to the risks related to transferred financial assets. SFAS 166 is effective for fiscal years beginning after November 15, 2009. We will adopt SFAS 166 in fiscal 2010 as applicable. It would not have had any impact on any of the financial statements that we’ve issued to date.

In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R),” (SFAS 167). SFAS 167 amends FASB Interpretation No. 46 (Revised December 2003), “Consolidation of Variable Interest Entities—an interpretation of ARB No. 51,” (FIN 46(R)) to require an enterprise to perform an analysis to determine whether the enterprise’s variable interest or interests give it a controlling financial interest in a variable interest entity; to require ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity; to eliminate the quantitative approach previously required for determining the primary beneficiary of a variable interest entity; to add an additional reconsideration event for determining whether an entity is a variable interest entity when any changes in facts and circumstances occur such that holders of the equity investment at risk, as a group, lose the power from voting rights or similar rights of those investments to direct the activities of the entity that most significantly impact the entity’s economic performance; and to require enhanced disclosures that will provide users of financial statements with more transparent information about an enterprise’s involvement in a variable interest entity. SFAS 167 becomes effective on January 1, 2010. We do not anticipate SFAS 167 will have a material impact on our consolidated financial statements upon adoption.

FASB Statement No. 168, The FASB Accounting Standards Codification TM and the Hierarchy of Generally Accepted Accounting Principles—a replacement of FASB Statement No. 162 (“SFAS 168”).  The FASB Accounting Standards CodificationTM (“Codification”) will become the source of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. On the effective date of SFAS 168, the Codification will supersede all then-existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the Codification will become non-authoritative.  SFAS 168 becomes effective for us for the period ending after September 15, 2009.  We have determined that the adoption of SFAS 168 will not have an impact on our financial statements.

Note 2 — Concentrations

For the three months and nine months ended June 30, 2009, we had no revenues. For the three months and nine months ended June 30, 2008, we had one customer representing 100% of revenues. As of June 30, 2009 and 2008, there were no amounts due from this customer.

We occasionally maintain bank account balances in excess of the federally insurable amount of $250,000. The Company had cash deposits in excess of this limit on June 30, 2009 and September 30, 2008 of $0 and $724,276, respectively.

Note 3 — Related Party Transactions

We have borrowed funds for our operations from certain major stockholders, directors and officers as disclosed below:

We have an unsecured note payable due to Deanna Stromback, a principal shareholder and former director and sister of our Chairman, Rich Stromback, that bears interest at 4% per annum with principal and interest due on December 31, 2009.  As of June 30, 2009 and September 30, 2008, the note had an outstanding balance of $110,500.  The accrued interest on the note was $12,000 and $8,407 as of June 30, 2009 and September 30, 2008, respectively.  The note carries certain conversion rights that allow the holder to convert all or part of the outstanding balance into shares of our common stock upon mutually agreeable terms and conversion price.

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We have an unsecured note payable due to Doug Stromback, a principal shareholder and former director and brother of our Chairman, Rich Stromback, that bears interest at 4% per annum with principal and interest due on December 31, 2009.  As of June 30, 2009 and September 30, 2008, the note had an outstanding balance of $133,000.  The accrued interest on the note was $14,450 and $10,125 as of June 30, 2009 and September 30, 2008, respectively.  The note carries certain conversion rights that allow the holder to convert all or part of the outstanding balance into shares of our common stock upon mutually agreeable terms and conversion price.

We had an unsecured note payable due to Rich Stromback, our Chairman and a principal  shareholder,  that bore interest at 4% per annum with principal and interest due on June 30, 2009.  As of both June 30, 2009 and September 30, 2008, the note had an outstanding balance of $0. The unpaid accrued interest on the note was $2,584 as of June 30, 2009 and September 30, 2008.  The note carries certain conversion rights which allow the holder to convert all or part of the outstanding balance into shares of our common stock upon mutually agreeable terms and conversion price.

Future maturities of related party long-term debt as of June 30, 2009 are as follows:

12 Months Ending June 30,
2010	$	243,500

We have a payable to a related party totaling $49,191 and $63,775 as of June 30, 2009 and September 30, 2008, respectively, included in accounts payable on the consolidated balance sheets.

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Note 4 — Notes Payable

We have the following notes:

		June 30, 2009	September 30, 2008
Chris Marquez Note:  note payable, 15% per annum interest rate, principal and interest payment was due May 31, 2008; unsecured, convertible at holder’s option into common shares of the Company at $1.60 per share. Accrued interest of $15,367 was outstanding at September 30, 2008.		---	$	94,104
George Resta Note: subordinated note payable, 25% per annum, unsecured, principal and interest was due June 30, 2008; the Company extended the maturity for 30 days, to July 30, 2008 in exchange for warrants to purchase 15,000 shares of the Company’s common stock at $1.75 per share. Additionally, the Company granted the note holder warrants to purchase 12,500 shares of the Company’s common stock at $1.75 per share. Demand for repayment was made on September 8, 2008. On November 14, 2008, we agreed to pay the note holder $10,000 per month until the principal and accrued interest is paid off. We made such payments in October and November of 2008, but did not make payments thereafter. Accrued interest of $6,388 and $7,329 was outstanding as of June 30, 2009 and September 30, 2008, respectively.	$	38,744		50,000
Investment Hunter, LLC Note:  subordinated note payable, 25% per annum, unsecured, principal and interest was due June 30, 2008; the Company extended the maturity for 30 days, to July 30, 2008 in exchange for warrants to purchase 15,000 shares of the Company’s common stock at $1.75 per share. Additionally, the Company granted the note holder warrants to purchase 125,000 shares of the Company’s common stock at $1.75 per share. Demand for repayment was made on September 5, 2008. On November 13, 2008, we agreed to pay the note holder $100,000 per month until the principal and accrued interest is paid off. The payments for October, November, and December were made, but none have been made since. Accrued interest of $43,416 and $73,288 was outstanding as of June 30, 2009 and September 30, 2008, respectively.	$	293,557		500,000
Mitchell Shaheen Note:  subordinated note payable, 25% per annum, unsecured, principal and interest was due July 18, 2008. Additionally, the Company issued a warrant to purchase 100,000 shares of the Company’s common stock at a price equal to $.75 per share (the “Warrant”). The Warrant is exercisable immediately and carries a ten (10) year term.  If applicable, the Company has agreed to include the Conversion Shares in its first registration statement filed with the Securities and Exchange Commission. Demand for repayment was made on August 27, 2008. Accrued interest of $37,003 and $10,685 was outstanding as of June 30, 2009 and September 30, 2008, respectively.		150,000		150,000
Mitchell Shaheen Note:  subordinated note payable, 25% per annum, unsecured, principal and interest was due August 10, 2008. Additionally, the Company issued a warrant to purchase 100,000 shares of the Company’s common stock at a price equal to $.50 per share (the “Warrant”). The Warrant is exercisable immediately and carries a ten (10) year term.  If applicable, the Company has agreed to include the Conversion Shares in its first registration statement filed with the Securities and Exchange Commission. Demand for repayment was made on August 27, 2008. Accrued interest of $26,540 and $5,548 was outstanding as of June 30, 2009 and September 30, 2008, respectively.		100,000		100,000
		$582,301		$894,104

All of the notes shown in the table above are in default and are currently due and payable.

Future maturities of the notes payable as of June 30, 2009 are as follows:

12 Months Ending June 30,
2010	$	582,301

The above notes payable have conversion rights and detachable warrants. These Notes may be converted for the principal balance and any unpaid accrued interest to Common Stock. In accordance with guidance issued by the FASB and the Emerging Issue Task Force (“EITF”) regarding the Accounting for Convertible Securities with a Beneficial Conversion Feature (EITF No. 98-5), the Company recognized an embedded beneficial conversion feature present in these Notes. The Company allocated the proceeds based on the fair value of $340,043 to the warrants. The warrants are exercisable through March 31, 2018 and the fair value was amortized to interest expense over the term of the Notes.

 Note 5 — Commitments and Contingencies

Consulting Agreements.

On June 1, 2007, we entered into a consulting agreement with The Rationale Group, LLC (“Rationale Group”). The managing member of Rationale Group is Dr. William Coyro, Jr., who serves as the chairman of Ecology’s business advisory board.  The agreement expired June 1, 2009. Ecology pays Rationale Group $11,000 per month under the Agreement. Additionally, Ecology granted Rationale Group 200,000 options to purchase shares of our common stock for $2.00 per share. Of these options, 50,000 options vested on December 1, 2007, 50,000 options vested on June 1, 2008, 50,000 options vested on December 1, 2008, and the remaining 50,000 options vested on June 1, 2009. Additionally, we agreed to reimburse Rationale Group for all reasonable expenses incurred by Rationale Group in the conduct of our business. On February 11, 2009, we amended the agreement upon the following terms:

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·   Six monthly payments to Rationale Group of $5,000, with payments ending on July 1, 2009.

·   Re-pricing of the 50,000 options that vested on December 1, 2007 by our Board to an exercise price of $.50 per share

·   Rationale Group forgave $121,000 owed by us to them.

·   Rationale Group transferred options to purchase 50,000 shares of common stock that vest on June 1, 2009 to Equity 11, our largest shareholder.  J.B. Smith, a director of our Board, is the managing partner and majority owner of Equity 11.

On July 26, 2007, we entered into a consulting agreement with DMG Advisors, LLC, owned by two former officers and directors of OCIS Corporation. The terms of the agreement call for the transfer of the $100,000 standstill deposit paid to OCIS as a part of a total payment of $200,000. The balance will be paid in equal installments on the first day of each succeeding calendar month until paid in full. The agreement calls for the principals to provide services for 18 months in the area of investor relations programs and initiatives; facilitate conferences between Ecology and members of the business and financial community; review and analyze the public securities market for our securities; and introduce Ecology to broker-dealers and institutions, as appropriate. The agreement expired on February 28, 2009.  We have reached a settlement with DMG Advisors for amounts owed under the consulting agreement.  See also Note 9- Subsequent Events.

On April 2, 2008, we entered into a letter agreement with Dr. Robert Matheson to become chairman of our Scientific Advisory Board. The letter agreement provides that we will grant Dr. Matheson options to purchase 100,000 shares of our common stock. Each option is exercisable at a price of $2.05 per share. The options vest as follows: 25,000 immediately upon grant; 25,000 on October 3, 2008; 25,000 on April 3, 2009, and the remaining 25,000 on October 3, 2009. The options will all expire on April 3, 2018.

On September 17, 2008, we entered into an agreement with Sales Attack LLC, an entity owned by J.B. Smith, a director of the Company and managing partner of Equity 11 who is our largest shareholder. This agreement is for business and marketing consulting services. This agreement expires on September 17, 2010 and calls for monthly payments of $20,000, commissions on licensing revenues equal to 15% of the revenues due to Sales Attack’s efforts, commissions on product sales equal to 3% of the revenue due to Sales Attack’s efforts, and a grant of options to purchase 531,000 shares of our common stock for $1.05 per share. 177,000 of the options became exercisable on March 17, 2009, 177,000 of the options become exercisable on September 17, 2009, and 177,000 of the options become exercisable on March 17, 2010. The options expire on December 31, 2020.  We paid $60,000 to Sales Attack LLC during the nine months ending June 30, 2009. On May 15, 2009, we issued 100 Series B Convertible Preferred Securities in full settlement of all amounts then outstanding and terminated the agreement.

On September 17, 2008, we entered into an agreement with RJS Consulting LLC (“RJS”), an entity owned by our chairman of the board of directors, Richard Stromback, under which RJS will provide advice and consultation to us regarding strategic planning, business and financial matters, and revenue generation. The agreement expires on September 17, 2011 and calls for monthly payments of $16,000, commissions on licensing revenues equal to 15% of the revenues due to RJS’s efforts, commissions on product sales equal to 3% of the revenue due to RJS’s efforts, $1,000 per month to pay for office rent reimbursement, expenses associated with RJS’s participation in certain conferences, information technology expenses incurred by the consultant in the performance of duties relating to the Company, and certain legal fees incurred by Richard Stromback during his tenure as our Chief Executive Officer.

On September 17, 2008, we entered into an agreement with DAS Ventures LLC (“DAS”) under which DAS will act as a consultant to us. DAS Ventures, LLC is wholly owned by Doug Stromback, a principal shareholder and former director and brother of our Chairman, Rich Stromback,  Under this agreement, DAS will provide business development services for which he will receive commissions on licensing revenues equal to 15% of the revenues due to DAS’s efforts and commissions on product sales equal to 3% of the revenue due to DAS’s efforts and reimbursement for information technology expenses incurred by the consultant in the performance of duties relating to the Company. This agreement expires on September 17, 2011.

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On November 11, 2008, we settled the lawsuit we filed against Trimax, LLC (“Trimax”) on September 11, 2008 for breach of contract.  Under the terms of the settlement, we will pay Trimax $7,500 per month for twelve months under a new consulting agreement and will pay $15,000 in 12 equal monthly payments of $1,250 to Trimax’s attorney.   Additionally, we will pay Trimax a commission of 15% for licensing revenues and 3% for product sales that Trimax generates for the Company.   On June 12, 2009, we terminated the agreement and replaced it with a new one in which the sole compensation paid to Trimax will be a commission of 15% for licensing revenues and 3% for product sales to Daewoo. This new agreement expires June 12, 2010 and can be terminated on 90 days written notice by either party.

On January 1, 2009, we entered into a new agreement with McCloud Communication to provide investor relations services to us.  The new agreement calls for monthly payments of $5,500 for 12 months.  In addition, the consultant forgave $51,603 in past due amounts owed by the Company in exchange for a reset of the exercise price on options to purchase 25,000 shares of our common stock that we issued to the consultant on April 8, 2008. The exercise price at the time of issuance was $4.75 per share.  This price was re-set by our Board to $.88 per share on February 6, 2009.

On January 5, 2009, we entered into an agreement with James Juliano to provide debt consulting services to us. Mr. Juliano is a principal in Equity 11. The agreement calls for twelve monthly payments of $7,500 and expires on December 31, 2009.  No monthly payments were made to Mr. Juliano for the nine months ending on June 30, 2009.  On May 15, 2009, we issued 37.5 Convertible Preferred Securities in full settlement of all amounts then outstanding and terminated the agreement.

Employment Agreements.

On January 1, 2007, we entered into an employment agreement with Sally J.W. Ramsey, Vice President New Product Development, that expires on January 1, 2012.  Upon expiration, the agreement calls for automatic one-year renewals until terminated by either party with thirty days written notice.  Pursuant to the agreement, the officer will be paid an annual base salary of $180,000 in 2007; an annual base salary of $200,000 for the years 2008 through 2011; and an annual base salary of $220,000 for 2012.  On December 15, 2008, we amended the agreement to reduce Ms. Ramsey’s annual base salary to $60,000.  In addition, 450,000 options were granted to the officer to acquire our common stock at $2.00 per share. 150,000 options will vest on January 1, 2010, 150,000 options will vest on January 1, 2011 and the remaining 150,000 options will vest January 1, 2012.  The options expire on January 1, 2022.

On February 1, 2007, we entered into an employment agreement with Kevin Stolz, Chief Financial Officer, Controller and Chief Accounting Officer, that expired on February 1, 2008. Pursuant to the agreement, the officer was paid an annual base salary of $120,000 and was granted 25,000 options to acquire our common stock at $2.00 per share. These options were re-priced to $1.05 per share on September 15, 2008. All of the options vested on February 1, 2008. The options expire on February 1, 2017. On February 1, 2008, we entered into a new agreement with this officer. This new agreement expires on February 1, 2010 and calls for an annual salary of $140,000. Further, Mr. Stolz was granted 50,000 options to purchase shares of our common stock at $3.00 per share. These options were re-priced to $1.05 per share on September 15, 2008. 25,000 options vest on February 1, 2009 and the remaining 25,000 options vest on February 1, 2010. This agreement was modified effective October 1, 2008. Under the modified agreement, Mr. Stolz receives an annual base salary of $70,000, subject to increase to $140,000 upon the achievement by the Company of revenues of at least $100,000. Additionally, we granted Mr. Stolz options to purchase 10,000 shares of our common stock at $1.05 per share. The options become exercisable on September 17, 2009 and expire on September 17, 2018. Mr. Stolz assumed the additional title of Chief Financial Officer on March 26, 2009.  Mr. Stolz’s employment agreement has been terminated.  See Note 9 - Subsequent Events.

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On May 21, 2007, we entered into an employment agreement with David W. Morgan, Chief Financial Officer, that will expire on May 21, 2009.  Pursuant to the agreement, Mr. Morgan will be paid an annual base salary of $160,000 and was granted 300,000 options to acquire our common stock at $2.00 per share.  These options were re-priced to $1.05 per share on September 15, 2008. 75,000 of the options vested on May 21, 2008, and 225,000 of the options vested on May 21, 2009.  The options expire on May 21, 2017. On October 1, 2007, the Company modified the employment agreement to increase the salary from $160,000 to $210,000.  This agreement was terminated on December 3, 2008 and Mr. Morgan continued to serve as our Chief Financial Officer and was being paid $60,000 per annum. Mr. Morgan resigned on March 26, 2009 and his employment agreement was terminated. We will pay medical insurance premiums of $1,128 per month through September of 2009 for him.

On December 28, 2007, we entered into an employment agreement with Richard Stromback, our Chairman of the Board of Directors and Chief Executive Officer.  Under this agreement, Mr. Stromback was to be paid at a rate of $320,000 per year through August 8, 2010.  This agreement was terminated by consent of both parties on September 17, 2008.  See also the discussion of Mr. Stomback’s consulting agreement above.

Contingencies.On September 11, 2008, we filed a lawsuit against a consultant in the Circuit Court of Oakland County, Michigan for breach of the consulting agreement.

A lawsuit was filed against us on September 16, 2008 in the Circuit Court of Oakland County, Michigan for breach of contract by a consultant previously contracted by the Company to provide information technology services.  On November 6, 2008, we settled the lawsuit.  We paid $26,500 in full settlement of all claims. This amount was included in Accounts Payable at September 30, 2008.

Lease Commitments.

a.

On August 1, 2005, we leased our office facilities in Akron, Ohio for a rent of $1,800 per month. The lease expired July 1, 2006 and was renewed under the same terms through August 31, 2007. The Company now leases that property on a month-to-month basis for the same rent. Rent expense for the nine months ended June 30, 2009 and 2008 was $16,200 and $16,200, respectively. Rent expense for the three months ended June 30, 2009 and 2008 was $5,400 and $5,400, respectively

b.

On September 1, 2008, we executed a lease for our office space in Auburn Hills, Michigan. The lease calls for average monthly rent of $2,997 and expires on September 30, 2010. The landlord is a company owned by a shareholder and director of Ecology. Rent expense for the nine months ended June 30, 2009 was $25,843. Rent expense for the three months ended June 30, 2009 was $8,855.

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Note 6 — Equity

Reverse Merger.  A reverse merger with OCIS Corporation was consummated on July 26, 2007.  The shareholders of Ecology-CA acquired 95% of the voting stock of OCIS. OCIS had no significant operating history.  The purpose of the acquisition was to provide Ecology with access to the public equity markets in order to more rapidly expand its business operations.  The consideration to the shareholders of OCIS was approximately 5% of the stock, at closing, of the successor company.  The final purchase price was agreed to as it reflects the value to Ecology of a more rapid access to the public equity markets than a more traditional initial public offering.

Warrants.On December 16, 2006, we issued warrants to Trimax, LLC to purchase 500,000 shares of our stock at $2.00 per share. On November 11, 2008, the exercise price of the warrants was reset to $.90 per share. The warrants vested on December 17, 2007. The weighted average remaining life of the warrants is 7.6 years.

On February 6, 2008, we issued warrants to Hayden Capital to purchase 262,500 shares of our common stock at the lower of $2.00 per share or at the average price per share at which the Company sells its debt or and/or equity in its next private or public offering. The warrants vested upon issuance. The weighted average remaining life of the warrants is 8.6 years.

On March 1, 2008, we issued warrants to George Resta to purchase 12,500 shares of our common stock at the lower of $2.00 per share or at the average price per share at which the Company sells its debt or and/or equity in its next private or public offering. The warrants vested upon issuance. The weighted average remaining life of the warrants is 8.6 years.

On March 1, 2008, we issued warrants to Investment Hunter, LLC to purchase 125,000 shares of our common stock at the lower of $2.00 per share or at the average price per share at which the Company sells its debt or and/or equity in its next private or public offering. The warrants vested upon issuance. The weighted average remaining life of the warrants is 8.6 years.

On June 9, 2008, we issued warrants to Hayden Capital to purchase 210,000 shares of our common stock at the lower of $2.00 per share or at the average price per share at which the Company sells its debt or and/or equity in its next private or public offering. The warrants vested upon issuance. The weighted average remaining life of the warrants is 8.9 years.

On June 21, 2008, we issued warrants to Mitchell Shaheen to purchase 100,000 shares of our common stock at $.75 per share. The warrants vested upon issuance. The weighted average remaining life of the warrants is 8.9 years.

On July 14, 2008, we issued warrants to Mitchell Shaheen to purchase 100,000 shares of our common stock at $.50 per share. The warrants vested upon issuance. The weighted average remaining life of the warrants is 8.9 years.

On July 14, 2008, we issued warrants to George Resta to purchase 15,000 shares of our common stock at $1.75 per share. The warrants vested upon issuance. The weighted average remaining life of the warrants is 8.9 years.

On July 14, 2008, we issued warrants to Investment Hunter, LLC to purchase 15,000 shares of our common stock at $1.75 per share. The warrants vested upon issuance. The weighted average remaining life of the warrants is 8.9 years.

We issued the following immediately vested warrants to Equity 11 in conjunction with Equity 11’s purchases of our 5% convertible preferred stock:

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	Strike	Date	Expiration
Number	Price	Issued	Date
100,000	$0.75	July 28, 2008	July 28, 2018
5,000	$0.75	August 20, 2008	August 20, 2018
25,000	$0.75	August 27, 2008	August 27, 2018
500,000	$0.75	August 29, 2008	August 29, 2018
375,000	$0.75	September 26, 2008	September 26, 2018
47,000	$ 0.75	January 23, 2009	January 23, 2014
15,000	$ 0.75	February 10, 2009	February 10, 2014
12,500	$ 0.75	February 18, 2009	February 18, 2014
20,000	$ 0.75	February 26, 2009	February 26, 2014
11,500	$ 0.75	March 10, 2009	March 10, 2014
40,000	$ 0.75	March 26, 2009	March 26, 2014
10,750	$0.75	April 14, 2009	April 14, 2014
16,750	$0.75	April 29, 2009	April 29, 2014

On November 11, 2008, we issued warrants to purchase 2,000,000 shares of our common stock at $.50 per share to Trimax. The warrants vested upon issuance.  The weighted average remaining life of the warrants is 9.3 years.

Shares.On February 6, 2008, we entered into an allonge to the promissory note made to Christopher Marquez on February 28, 2006. The amount owed, including principal and accrued interest, totaled $142,415 and the note matured on December 31, 2007 (See Note 4). The maturity date of the note was extended to May 31, 2008, with interest continuing at 15% per annum. In consideration of this extension, we issued 60,000 shares of our common stock to the note holder and granted the holder certain priority payment rights.  This note has been paid in full.

On August 28, 2008, we entered into an agreement with Equity 11 to issue up to $5,000,000 in convertible preferred securities.  The securities accrue cumulative dividends at 5% per annum and the entire amount then outstanding is convertible at the option of the investor into shares of our common stock at $.50 per share.  The preferred securities carry “as converted” voting rights.  As of June 30, 2009, we had issued 2,436 of these convertible preferred shares.  As we sell additional convertible preferred securities under this agreement, we will issue attached warrants (500 warrants for each $1,000 convertible preferred share sold).  The warrants will be immediately exercisable, expire in five years, and entitle the investor to purchase one share of our common stock at $.75 per share for each warrant issued.  The table above identifies warrants issued in conjunction with Equity 11’s additional purchases of our 5% convertible preferred stock through June 30, 2009.

On May 15, 2009, we entered into an agreement with Equity 11 to issue convertible preferred securities at $1,000 per share. The securities accrue cumulative dividends at 5% per annum and the entire amount then outstanding is convertible at the option of the investor into shares of our common stock at a price equal to 20% of the average closing price of our common shares for the five trading days immediately preceding the date of issuance. The preferred securities carry “as converted” voting rights.  As of June 30, 2009, we have issued 364 of these convertible preferred securities. These shares are convertible into 4,427,778 of our common shares at the sole discretion of Equity 11.

In the event of a voluntary or involuntary dissolution, liquidation or winding up, Equity 11 will be entitled to be paid a liquidation preference equal to the stated value of the convertible preferred shares, plus accrued and unpaid dividends and any other payments that may be due on such shares, before any distribution of assets may be made to holders of capital stock ranking junior to the preferred shares.

Note 7 — Stock Options

Stock Option Plan.On May 9, 2007, we adopted a stock option plan and reserved 4,500,000 shares for the issuance of stock options or for awards of restricted stock. On December 2, 2008, our Board of Directors authorized the addition of 1,000,000 shares of our common stock to the 2007 Plan.  All prior grants of options were included under this plan.  The plan provides for incentive stock options, nonqualified stock options, rights to restricted stock and stock appreciation rights.  Eligible recipients are employees, directors, and consultants.  Only employees are eligible for incentive stock options.

The vesting terms are set by the Board of Directors. All options expire 10 years after issuance.

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The Company granted non-statutory options as follows during the nine months ended June 30, 2009:

	Weighted Average Exercise Price Per Share	Number of Options	Weighted Average (Remaining) Contractual Term	Aggregate Fair Value
Outstanding as of September 30, 2008	$1.83	4,642,119	9.2	$5,011,500
Granted	$.77	490,000	9.4	$311,035
Exercised	---	---	---	---
Forfeited	$2.14	850,000	7.8	$928,806
Outstanding as of June 30, 2009	$1.26	4,282,119	8.4	$4,393,729
Exercisable	$1.26	2,408,119	7.8	$2,875,310

2,408,119 of the options were exercisable as of June 30, 2009.  The options are subject to various vesting periods between June 26, 2007 and January 1, 2012.   The options expire on various dates between June 1, 2016 and January 1, 2022. Additionally, the options had no intrinsic value as of June 30, 2009.  Intrinsic value arises when the exercise price is lower than the trading price on the date of grant.

Our stock option plans are subject to the provisions of Statement of Financial Accounting Standards (“SFAS”) Number 123(R), Accounting for Stock-Based Compensation.Under the provisions of SFAS Number 123(R), employee and director stock-based compensation expense is measured utilizing the fair-value method.

We account for stock options granted to non-employees under SFAS Number 123(R) using EITF 96-18 requiring the measurement and recognition of stock-based compensation to consultants under the fair-value method with stock-based compensation expense being charged to earnings on the earlier of the date services are performed or a performance commitment exists.

In calculating the compensation related to employee/consultants and directors stock option grants, the fair value of each option is estimated on the date of grant using the Black-Scholes option-pricing model and the following weighted average assumptions:

Dividend	None
Expected volatility	86.04%-101.73%
Risk free interest rate	.10%-5.11%
Expected life	5 years

The expected volatility was derived utilizing the price history of another publicly traded nanotechnology company. This company was selected due to the fact that it is widely traded and is in the same equity sector as our Company.

The risk free interest rate figures shown above contain the range of such figures used in the Black-Scholes calculation. The specific rate used was dependent upon the date of the option grant.

Based upon the above assumptions and the weighted average $1.26 exercise price, the options outstanding at June 30, 2009 had a total unrecognized compensation cost of $579,542 which will be recognized over the remaining weighted average vesting period of .5 years. Options cost of $2,866,915 was recorded as an expense for the nine months ended June 30, 2009 of which $561,555 was recorded as compensation expense and $2,305,360 was recorded as consulting expense.

Note 8 — Going Concern

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. For the nine months ended June 30, 2009 and 2008, we incurred net losses of ($4,373,576) and ($5,552,432), respectively. As of June 30, 2009 and September 30, 2008, we had stockholders’ deficits of ($1,975,856) and ($1,239,810), respectively.

85

Our continuation as a going concern is dependent upon our ability to generate sufficient cash flow to meet our obligations on a timely basis, to obtain additional financing or refinancing as may be required, to develop commercially viable products and processes, and ultimately to establish profitable operations. We have financed operations primarily through the issuance of equity securities and debt and through some limited operating revenues. Until we are able to generate positive operating cash flows, additional funds will be required to support our operations. We will need to acquire additional immediate funding in September 2009 to continue our operations.  The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.

Note 9 — Subsequent Events

The Company evaluated subsequent events for potential recognition and/or disclosure through August 19, 2009, the date we filed our most recent Form 10-Q periodic report and consolidated financial statements.  No subsequent events have occurred to cause us to change the financial statements as filed in our most recent Form 10-Q or Form 10-KSB periodic reports.

On July 1, 2009, we issued a note to JB Smith LC, an entity controlled by J.B. Smith, a director of the company. This note is in the amount of $7,716, bears interest at 5% and is convertible under certain conditions.

On July 21, 2009, we entered into a Settlement and Release Agreement with DMG Advisors, LLC, Kirk Blosch and Jeff Holmes which terminated the parties’ July 26, 2007 Consulting Agreement (“Former Consulting Agreement”).  We agreed to issue 500,000 shares of our common stock as payment for services owed under the Former Consulting Agreement.

Only July 21, 2009, we entered into a new Consulting Agreement with DMG Advisors.  DMG Advisors will provide investor, business and financial services to us under the New Consulting Agreement and will be paid $5,000 per month for services by the issuance of 25,000 shares of the our common stock per month.  The Agreement has a term of six months and terminates on January 15, 2010.

On July 24, 2009, Equity 11 purchased an additional 75 shares of 5% Convertible Preferred Shares, Series B at a purchase price of $1,000 per share pursuant to Convertible Preferred Securities Purchase Agreement entered into between  the Company and Equity 11on May 15, 2009.  The Convertible Preferred Shares will pay cumulative cash distributions initially at a rate of 5% per annum, subject to declaration by the Board.

On July 24, 2009, we terminated our agreement with Kevin Stolz, Chief Financial Officer, Controller and Chief Accounting Officer. In consideration, we issued 40,000 options exercisable at $1.00 share and vesting according to the following schedule:

10,000 shares on:	September 1, 2009
10,000 shares on:	October 15, 2009
10,000 shares on:	December 1, 2009
10,000 shares on:	January 15, 2010

Mr. Stolz will serve on an at-will basis and will be paid a salary of $5,917 through August 2009 and will be paid a salary of $3,500 per month thereafter.

86

On August 12, 2009, Equity 11 purchased an additional  of 5% Convertible Preferred Shares, Series B at a purchase price of $1,000 per share pursuant to Convertible Preferred Securities Purchase Agreement entered into between  the Company and Equity 11 on May 15, 2009.  The Convertible Preferred Shares will pay cumulative cash distributions initially at a rate of 5% per annum, subject to declaration by the Board.

87

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors

Ecology Coatings, Inc.

We have audited the accompanying consolidated balance sheets of Ecology Coatings, Inc. and Subsidiary (the “Company”) as of September 30, 2008 and 2007, and the related consolidated statements of operations, stockholders’ equity (deficit) and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Ecology Coatings, Inc. and Subsidiary as of September 30, 2008 and 2007, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern.  As discussed in Note 9 to the consolidated financial statements, the Company’s recurring losses, negative cash flows from operations and net capital deficiency raise substantial doubt about its ability to continue as a going concern.  Management’s plans as to these matters are also discussed in Note 9.  The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ UHY LLP

Southfield, Michigan

December 19, 2008

88

ECOLOGY COATINGS, INC. AND SUBSIDIARY
Consolidated Balance Sheets
ASSETS
	September 30, 2008			September 30, 2007
Current Assets
Cash and cash equivalents	$	974,276		$	808,163
Miscellaneous receivable		-			1,118
Prepaid expenses		25,206			70,888
Total Current Assets		999,482			880,169
Property and Equipment
Computer equipment		22,933			11,285
Furniture and fixtures		18,833			1,565
Test equipment		7,313			7,313
Signs		213			213
Software		1,332			1,332
Video		48,177			-
Total fixed assets		98,801			21,708
Less: Accumulated depreciation		(22,634	)		(3,794	)
Property and Equipment, net		76,167			17,914
Other
Patents-net		421,214			302,575
Trademarks-net		5,029			3,465
Total Other Assets		426,243			306,040
Total Assets	$	1,501,892		$	1,204,123

See the accompanying notes to the audited consolidated financial statements.

89

ECOLOGY COATINGS, INC. AND SUBSIDIARY
Consolidated Balance Sheets
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
	September 30, 2008			September 30, 2007
Current Liabilities
Accounts payable	$	1,359,328		$	429,790
Credit card payable		92,305			14,772
Deferred revenue		-			24,884
Accrued liabilities		12,033			-
Payroll taxes payable		-			1,459
Accrued wages		-			12,500
Franchise tax payable		800			800
Interest payable		133,332			15,851
Notes payable		894,104			170,280
Notes payable - related party		243,500			243,500
Preferred dividends payable		6,300			-
Total Current Liabilities		2,741,702			913,836
Total Liabilities		2,741,702			913,836
Commitments and Contingencies (Note 5)
Stockholders' Equity (Deficit)
Preferred Stock - 10,000,000 $.001 par value shares
authorized; 2,010 and 0 shares issued and outstanding
as of September 30, 2008 and September 30, 2007, respectively		2			-
Common Stock - 90,000,000 $.001 par value shares
authorized; 32,210,684 and 32,150,684
outstanding as of September 30, 2008 and
September 30, 2007, respectively		32,234			32,174
Additional paid in capital		13,637,160			6,165,282
Accumulated Deficit		(14,909,206	)		(5,907,169	)
Total Stockholders' Equity (Deficit)		(1,239,810	)		290,287
Total Liabilities and Stockholders'
Equity (Deficit)	$	1,501,892		$	1,204,123

See the accompanying notes to the audited consolidated financial statements.

90

ECOLOGY COATINGS, INC. AND SUBSIDIARY
Consolidated Statements of Operations
	For the Year Ended			For the Year Ended
	September 30, 2008			September 30, 2007
Revenues	$	25,092		$	41,668
Salaries and fringe benefits		2,006,776			1,409,840
Professional fees		2,735,360			2,583,927
Other general and administrative costs		637,668			463,199
Operating Loss		(5,354,712	)		(4,415,298	)
Other Income (Expenses)
Interest income		5,784			20,940
Interest expense		(1,421,394	)		(256,512	)
Total Other (Expenses), net		(1,415,610	)		(235,572	)
Net Loss	$	(6,770,322	)	$	(4,650,870	)
Basic and diluted net loss per share	$	(0.21	)	$	(0.16	)
Basic and diluted weighted average of
common shares outstanding		32,189,864			29,178,144

See the accompanying notes to the audited consolidated financial statements.

91

ECOLOGY COATINGS, INC. AND SUBSIDIARY
Statement of Changes in Shareholders’ Equity (Deficit) for the Years Ended September 30, 2008 and 2007
										Additional					Total
										Paid In		Accumulated			Stockholders'
	Common Stock					Preferred Stock				Capital		Deficit			Equity
	Shares		Amount			Shares		Amount							(Deficit)
Balance at September 30, 2006		28,200,000	$	142,000			-	$	-	$	-	$	(1,256,299	)	$	(1,114,299)
Beneficial conversion feature on convertible debt		-		-			-		-		116,819		-			116,819
Stock option expense		-		-			-		-		1,288,670		-			1,288,670
Warrants issued with debt		-		-			-		-		4,497		-			4,497
Issuance of stock, net of issuance costs of $10,789		3,950,684		4,645,470			-		-		-		-			4,645,470
Creation of par value stock		-		(4,755,296	)		-		-		4,755,296		-			-
Net loss		-		-			-		-		-		(4,650,870	)		(4,650,870)
Balance at September 30, 2007		32,150,684	$	32,174			-	$	-	$	6,165,282	$	(5,907,169	)	$	290,287
Issuance of stock for debt extension		60,000		60			-		-		161,940		-			162,000
Issuance of warrants for debt extension		-		-			-		-		26,343		-			26,343
Issuance of preferred stock		-					2,010		2		1,500,585		-			1,500,585
Beneficial conversion feature on preferred stock		-		-			-		-		2,225,415		(2,225,415	)		-
Warrants issued with preferred stock		-		-			-		-		509,415		-			509,415
Beneficial conversion feature on debt		-		-			-		-		358,654		-			358,654
Stock option expense		-		-			-		-		1,847,639		-			1,847,639
Warrants issued with debt		-		-			-		-		841,887		-			841,887
Preferred dividends		-		-			-		-		-		(6,300	)		(6,300)
Net Loss		-		-			-		-		-		(6,770,322	)		(6,770,322)
Balance at September 30, 2008		32,210,684	$	32,234			2,010	$	2	$	13,637,160	$	(14,909,206	)	$	(1,239,810)

See the accompanying notes to the audited consolidated financial statements.

92

ECOLOGY COATINGS, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
	For the Year			For the Year
	Ended			Ended
	September 30, 2008			September 30, 2007
CASH FLOWS FROM OPERATING ACTIVITIES
Net  loss	$	(6,770,322	)	$	(4,650,870	)
Adjustments to reconcile net loss
to net cash  (used in) operating activities:
Depreciation and amortization		37,486			12,757
Option expense		1,847,639			1,288,670
Interest paid through conversion to stock		-			137,391
Beneficial conversion expense		374,476			116,819
Issuance of stock for debt extension		162,000			412,500
Warrants		868,231			4,497
Changes in Asset and Liabilities
Miscellaneous receivable		1,118			(1,118	)
Prepaid expenses		45,683			(39,531	)
Accounts payable		929,539			144,122
Accrued payroll taxes and wages		(13,960	)		(28,428	)
Accrued liabilities		12,033			-
Credit card payable		77,533			14,772
Interest payable		117,481			(62,893	)
Deferred revenue		(24,884	)		(41,668	)
Net Cash Used in Operating Activities		(2,335,947	)		(2,692,980	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets		(77,094	)		(12,050	)
Purchase of intangibles		(138,848	)		(85,514	)
Net Cash Used in Investing Activities		(215,942	)		(97,564	)
Repayment of notes payable - related parties		-			(53,530	)
Repayment of notes payable		(591,998	)		(67,642	)
Proceeds from notes payable and warrants		1,300,000			500,000
Issuance of preferred stock		2,010,000			-
Issuance of common stock		-			2,483,500
Net Cash Provided by Financing Activities		2,718,002			2,862,328
Net Increase in Cash and Cash Equivalents		166,113			71,784
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD		808,163			736,379
CASH AND CASH EQUIVALENTS AT END
OF PERIOD	$	974,276		$	808,163

See the accompanying notes to the audited consolidated financial statements.

93

ECOLOGY COATINGS, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
	For the Year		For the Year
	Ended		Ended
	September 30, 2008		September 30, 2007
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Interest paid	$	79,284	$	114,253
Income taxes paid		-		-
SUPPLEMENTAL DISCLOSURE OF NON-CASH
FINANCING ACTIVITIES
Conversion of notes and interest for common stock	$	-	$	1,749,470
Issuance of common stock for services	$	-	$	412,500
Issuance of common stock for debt extension	$	162,000	$	-

See the accompanying notes to the audited consolidated financial statements.

94

ECOLOGY COATINGS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 — Summary of Significant Accounting Policies, Nature of Operations and Use of Estimates

Description of the Company.  The terms “we”, “us”, “Ecology”, and “the Company” refer to Ecology Coatings, Inc. We were originally incorporated in Nevada on February 6, 2002 as OCIS Corp. (“OCIS”). OCIS completed a merger with Ecology Coatings, Inc. a California corporation (“Ecology-CA”) on July 26, 2007 (the “Merger”). In the Merger, OCIS changed its name from OCIS Corporation to Ecology Coatings, Inc. We develop nanotechnology-enabled, ultra-violet curable coatings that are designed to drive efficiencies and clean processes in manufacturing. We create proprietary coatings with unique performance and environmental attributes by leveraging our platform of integrated nano-material technologies that reduce overall energy consumption and offer a marked decrease in drying time. Ecology’s market consists electronics, automotive and trucking, paper products and original equipment manufacturers (“OEMs”).

Principles of Consolidation.  The consolidated financial statements include all of our accounts and the accounts of our wholly owned subsidiary Ecology-CA. All significant intercompany transactions have been eliminated in consolidation.

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 amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents.  We consider all highly liquid investments with original maturities of three months or less to be cash and cash equivalents.

Revenue Recognition.  Revenues from licensing contracts are recorded ratably over the life of the contract. Contingency earnings such as royalty fees are recorded when the amount can reasonably be determined and collection is likely.

Loss Per Share.  Basic loss per share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding during the period. Diluted loss per share is computed by dividing the net loss by the weighted average number of shares of common stock and potentially dilutive securities outstanding during the period. Potentially dilutive shares consist of the incremental common shares issuable upon the exercise of stock options and warrants and the conversion of convertible preferred stock. Potentially dilutive shares are excluded from the weighted average number of shares if their effect is anti-dilutive. We had a net loss for all periods presented herein; therefore, none of the stock options and/or warrants outstanding or stock associated with the convertible preferred shares during each of the periods presented were included in the computation of diluted loss per share as they were anti-dilutive. As of September 30, 2008 and 2007, there were 11,007,119 and 3,792,080 potentially dilutive securities outstanding.

Income Taxes and Deferred Income Taxes.  We use the asset and liability approach for financial accounting and reporting for income taxes. Deferred income taxes are provided for temporary differences in the bases of assets and liabilities as reported for financial statement purposes and income tax purposes and for the future use of net operating losses. We have recorded a valuation allowance against the net deferred income tax asset. The valuation allowance reduces deferred income tax assets to an amount that represents management’s best estimate of the amount of such deferred income tax assets that more likely than not will be realized. We cannot be assured of future income to realize the net deferred income tax asset; therefore, no deferred income tax asset has been recorded in the accompanying consolidated financial statements.

95

Property and Equipment.  Property and equipment is stated at cost less accumulated depreciation. Depreciation is recorded using the straight-line method over the following useful lives:

Computer equipment	3-10 years
Furniture and fixtures	3-7 years
Test equipment	5-7 years
Software Computer	3 years
Marketing and Promotional Video	3 years

Repairs and maintenance costs are charged to operations as incurred. Betterments or renewals are capitalized as incurred.

We review long lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.

Patents.  It is our policy to capitalize costs associated with securing a patent. Costs consist of legal and filing fees. Once a patent is issued, it will be amortized on a straight-line basis over its estimated useful life. Six patents were issued as of September 30, 2008 and are being amortized over 8 years.

Stock-Based Compensation.  Our stock option plans are subject to the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123(R), Share-Based Payment. Under the provisions of SFAS No. 123(R), employee and director stock-based compensation expense is measured utilizing the fair-value method.

We account for stock options granted to non-employees under SFAS No. 123(R) using EITF 96-18, requiring the measurement and recognition of stock-based compensation to consultants under the fair-value method with stock-based compensation expense being charged to earnings on the earlier of the date services are performed or a performance commitment exists.

Expense Categories.  Salaries and Fringe Benefits of $2,006,776 and $1,409,840 for the years ended September 30, 2008 and 2007, respectively, include wages paid to and insurance benefits for our officers and employees as well as stock based compensation expense for those individuals. Professional fees of $2,735,360 and $2,583,927 for the years ended September 30, 2008 and 2007, respectively, include amounts paid to attorneys, accountants, and consultants, as well as the stock based compensation expense for those services.

Recent Accounting Pronouncements

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (SFAS 141(R)) and No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51” (SFAS 160). SFAS 141(R) will significantly change how business acquisitions are accounted for and will impact financial statements both on the acquisition date and in subsequent periods. SFAS 160 will change the accounting and reporting for minority interests, which will be re-characterized as non-controlling interests and classified as a component of equity. SFAS 141(R) and SFAS 160 are effective for both public and private companies for fiscal years beginning on or after December 15, 2008 (October 1, 2009 for Ecology). Early adoption is prohibited for both standards. SFAS 141(R) will be applied prospectively. SFAS 160 requires retroactive adoption of the presentation and disclosure requirements for existing minority interests. All other requirements of SFAS 160 shall be applied prospectively. The adoption of SFAS 160 would have no impact on our financial position or results of operations for the year ended September 30, 2008

96

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133”. This statement changes the disclosure requirements for derivative instruments and hedging activities. SFAS 161 will become effective for us beginning in the three months ending March 31, 2009. The adoption of this pronouncement would have had no impact on our results or financial position as of September 30, 2008.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles”. SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (GAAP) in the United States (the GAAP hierarchy). SFAS 162 will not have an impact on our financial statements.

In May 2008, the FASB issued SFAS No. 163, “Accounting for Financial Guarantee Insurance Contracts, an interpretation of FASB Statement No. 60.” The scope of SFAS 163 is limited to financial guarantee insurance (and reinsurance) contracts, as described in this Statement, issued by enterprises included within the scope of Statement 60. Accordingly, SFAS 163 does not apply to financial guarantee contracts issued by enterprises excluded from the scope of Statement 60 or to some insurance contracts that seem similar to financial guarantee insurance contracts issued by insurance enterprises (such as mortgage guaranty insurance or credit insurance on trade receivables). SFAS 163 also does not apply to financial guarantee insurance contracts that are derivative instruments included within the scope of FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities.” SFAS 163 will not have an impact on our financial statements.

Note 2 — Concentrations

For the years ended September 30, 2008 and 2007, we had one customer representing 100% of revenues. As of September 30, 2008 and 2007, there were no amounts due from this customer.

We occasionally maintain bank account balances in excess of the federally insurable amount of $100,000. The Company had cash deposits in excess of this limit on September 30, 2008 and 2007 of $874,276 and $708,163, respectively.

Note 3 — Related Party Transactions

We have borrowed funds for our operations from certain major stockholders, directors and officers as disclosed below:

We have an unsecured note payable due to a principal shareholder and former director that bears interest at 4% per annum with principal and interest due on December 31, 2008. As of September 30, 2008 and September 30, 2007, the note had an outstanding balance of $110,500. The accrued interest on the note was $8,407 and $3,836 as of September 30, 2008 and September 30, 2007, respectively. The note carries certain conversion rights that allow the holder to convert all or part of the outstanding balance into shares of our common stock.

We have an unsecured note payable due to a principal shareholder and former director that bears interest at 4% per annum with principal and interest due on December 31, 2008. As of September 30, 2008 and September 30, 2007, the note had an outstanding balance of $133,000. The accrued interest on the note was $10,125 and $4,617 as of September 30, 2008 and September 30, 2007, respectively. The note carries certain conversion rights that allow the holder to convert all or part of the outstanding balance into shares of our common stock.

97

We had an unsecured note payable due to a majority shareholder, officer and director that bore interest at 4% per annum with principal and interest due on December 31, 2008. As of September 30, 2008 and September 30, 2007, the note had an outstanding balance of $0. The unpaid accrued interest on the note was $2,584 as of September 30, 2008 and September 30, 2007. The note carries certain conversion rights which allow the holder to convert all or part of the outstanding balance into shares of the our common stock.

Future maturities of related party long-term debt as of September 30, 2008 are as follows:

Year Ending September 30,
2009	$243,500

We have a payable to a related party totaling $63,775 and $49,191 as of September 30, 2008 and September 30, 2007, respectively, included in accounts payable on the consolidated balance sheets.

We also paid consulting fees for contracted administrative support to a related party company totaling $8,244 for the year ended September 30, 2007.

Note 4 — Notes Payable

We have the following notes:

		September 30, 2008	September 30, 2007
Note payable, 20% per annum interest rate, principal and interest payment due December 31, 2007.  This note is stated net of an unamortized discount of $2,400 at September 30, 2007.	$	-		708
Subordinated note payable, 7.5% per annum interest rate. Principal and interest payment due December 31, 2007 and the note is unsecured.  Accrued interest of $415 is outstanding as of September 30, 2007.		-		26,461
Note payable, 15% per annum interest rate, principal and interest payment was due May 31, 2008; the note is unsecured.  Accrued interest of $15,367 and $4,268 was outstanding as of September 30, 2008 and September 30, 2007, respectively. This note is stated net of unamortized discount of $0 and $13,422 as of September 30, 2008 and September 30, 2007, respectively.  The holder made demand upon the Company for repayment of this note on August 18, 2008. See Note 10-Subsequent Evens for further discussion.		94,104		145,873
Subordinated note payable, 25% per annum, unsecured, principal and interest was due June 30, 2008; the Company extended the maturity for 30 days, to July 30, 2008 in exchange for warrants to purchase 15,000 shares of the Company’s common stock at $1.75 per share. Additionally, the Company granted the note holder warrants to purchase 12,500 shares of the Company’s common stock at $1.75 per share. Demand for repayment was made on September 8, 2008. See Note 10-Subsequent Events for further discussion. Accrued interest of $7,329 was outstanding as of September 30, 2008. This note is stated net of unamortized discount of $0 as of September 30, 2008.	$	50,000	$	—
Subordinated note payable, 25% per annum, unsecured, principal and interest was due June 30, 2008; the Company extended the maturity for 30 days, to July 30, 2008 in exchange for warrants to purchase 15,000 shares of the Company’s common stock at $1.75 per share. Additionally, the Company granted the note holder warrants to purchase 125,000 shares of the Company’s common stock at $1.75 per share.  Demand for repayment was made on September 5, 2008. See Note 10-Subsequent Events for further discussion. Accrued interest of $73,288 was outstanding as of September 30, 2008. This note is stated net of unamortized discount of $0 as of September 30, 2008.	$	500,000	$	-
Subordinated note payable, 25% per annum, unsecured, principal and interest was due July 18, 2008. Additionally, the Company issued a warrant to purchase 100,000 shares of the Company’s common stock at a price equal to $.75 per share (the “Warrant”). The Warrant is exercisable immediately and carries a ten (10) year term.  Demand for repayment was made on August 27, 2008. Accrued interest of $10,685 was outstanding as of September 30, 2008. This note is stated net of unamortized discount of $0 as of September 30, 2008.		150,000	$	-
Subordinated note payable, 25% per annum, unsecured, principal and interest was due August 10, 2008. Additionally, the Company issued a warrant to purchase 100,000 shares of the Company’s common stock at a price equal to $.50 per share (the “Warrant”). The Warrant is exercisable immediately and carries a ten (10) year term.. Demand for repayment was made on August 27, 2008. Accrued interest of $5,548 was outstanding as of September 30, 2008. This note is stated net of unamortized discount of $0 as of September 30, 2008.		100,000	$	-
	$	894,104	$	173,042

98

Future maturities of the notes payable as of September 30, 2008 are as follows:

Year Ending September 30,
2009	$894,104

The above notes payable have conversion rights and detachable warrants. These Notes may be converted under limited circumstances for the principal balance and any unpaid accrued interest to Common Stock. In accordance with guidance issued by the FASB and the Emerging Issue Task Force (“EITF”) regarding the Accounting for Convertible Securities with a Beneficial Conversion Feature (EITF No. 98-5), the Company recognized an embedded beneficial conversion feature present in these Notes. The Company allocated the proceeds based on the fair value of $1,767,881to the warrants. The warrants are exercisable through March 31, 2018 and the fair value was amortized to interest expense over the term of the Notes.

Note 5 — Commitments and Contingencies

Consulting Agreements.  On July 15, 2006, we entered into an agreement that provides for six months of international business development consulting services. We agreed to pay the consultant $15,000 per month payable in cash and an additional $15,000 per month payable in shares of our common stock at a share price of $2.00. We further agreed to pay the consultant a fee of 2% of any royalties that we receive pursuant to royalty agreements that are a direct result of the consultant’s material efforts under the consulting agreement. In addition, we agreed to pay the consultant a fee of 2% of any net sales that we receive pursuant to joint venture agreements that are a direct result of the consultant’s material efforts under the consulting agreement. We will pay the fees to the consultant for the term of any royalty or joint venture agreements for a period of time not to exceed a period of 48 months. The agreement was extended for six month increments in January 2007, July 2007, and January 2008.

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On February 1, 2007, we amended an agreement with a consultant. The consultant provides various business and financial consulting services, including but not limited to assistance with raising capital. The original agreement was dated June 1, 2006 and called for $12,500 to be paid to the consultant in 18 monthly payments commencing February 1, 2007. The amendment called for additional monthly payments of $9,250 on February 1, 2007, $9,375 on March 1, 2007, and $9,000 per month from April 1, 2007 and continuing through September 1, 2007. This agreement was further amended on December 28, 2007 to extend the agreement until November 1, 2010. The effective date of the agreement was November 1, 2007. Additionally, the agreement calls for monthly payments of $16,000. Finally, the agreement calls for an option grant of 100,000 shares at an exercise price of $3.05 per share. 25,000 options will vest on June 28, 2008, 25,000 options will vest on December 28, 2008, 25,000 options will vest on June 28, 2009, and 25,000 options will vest on December 28, 2009. All of the options expire on December 27, 2017. This agreement was terminated on July 31, 2008. See the caption Contingencies under this Note for further discussion.

On May 1, 2007, we entered into an agreement with a consultant to provide information system consulting services. The agreement calls for six monthly payments of $5,000 plus reimbursement for any out of pocket costs. Additionally, options to purchase 1,000 shares of common stock at $2.00 per share were issued to the consultant, with additional options to purchase 500 shares upon the achievement of certain performance measures. The options are restricted for 12 months and expire 10 years from date of issuance. On October 8, 2007, we extended the contract with the consultant for six months, and, on May 8, 2008, extended the contract for an additional six months. The expiration date is now November 8, 2008 and provides for monthly payments of $5,000. This agreement was terminated on July 31, 2008. See the caption Contingencies under this Note for further discussion.

On June 1, 2007, we entered into a consulting agreement with Dr. William Coyro who serves as the chairman of Ecology’s Business Advisory Board. The agreement expires June 1, 2009. Ecology will pay the consultant $11,000 per month. Additionally, Ecology granted Dr. Coyro 200,000 options to purchase shares of our common stock for $2.00 per share. Of these options, 50,000 options vest on December 1, 2007, 50,000 options vest on June 1, 2008, 50,000 options vest on December 1, 2008, and the remaining 50,000 options vest on June 1, 2009. Additionally, we will reimburse Dr. Coyro for all reasonable expenses incurred by the consultant in the conduct of Ecology business.

On July 26, 2007, we entered into a consulting agreement with a company owned by two former officers and directors of OCIS Corporation. The terms of the agreement call for the transfer of the $100,000 standstill deposit paid to OCIS as a part of a total payment of $200,000. The balance will be paid in equal installments on the first day of each succeeding calendar month until paid in full. The agreement calls for the principals to provide services for 18 months in the area of investor relations programs and initiatives; facilitate conferences between Ecology and members of the business and financial community; review and analyze the public securities market for our securities; and introduce Ecology to broker-dealers and institutions, as appropriate.

On December 13, 2007, we entered into an agreement with a consultant to provide investor relations services. The agreement expires on December 13, 2008. The consultant will bill against a non-refundable monthly retainer of $5,000. The consultant charges on an hourly basis ranging from $35 to $225 per hour. The term of the contract is 12 months.

On April 2, 2008, we entered into a letter agreement with an individual to become chairman our Scientific Advisory Board. The letter agreement provides that we will grant the individual options to purchase 100,000 shares of our common stock. Each option is exercisable at a price equal to the final closing price as quoted on the Over The Counter Bulletin Board on April 3, 2008. The options vest as follows: 25,000 immediately upon grant; 25,000 on October 3, 2008; 25,000 on April 3, 2009, and the remaining 25,000 on October 3, 2009. The options will all expire on April 3, 2018.

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On April 10, 2008, we entered into an agreement with a consultant to assist us in securing equity and/or debt financing. The agreement called for payment of $5,000 at inception and an additional payment of $5,000 on May 1, 2008. The agreement was terminable upon notice of either party and was terminated on May 31, 2008.

On September 17, 2008, we entered into an agreement with an entity controlled by an investor in and a director of Ecology Coatings, Inc. This agreement is for business and marketing consulting services. This agreement expires on September 17, 2010 and calls for monthly payments of $20,000, commissions on licensing revenues equal to 15% of said revenues, commissions on product sales equal to 3% of said sales, and a grant of options to purchase 531,000 shares of our common stock for $1.05 per share. 177,000 of the options become exercisable on March 17, 2009, 177,000 of the options become exercisable on September 17, 2009, and 177,000 of the options become exercisable on March 17, 2010. The options expire on December 31, 2020.

On September 17, 2008, we entered into an agreement with our Chairman of the Board of Directors under which the Chairman will provide advice and consultation to us regarding strategic planning, business and financial matters, and revenue generation. The agreement expires on September 17, 2011 and calls for monthly payments of $16,000, commissions on licensing revenues equal to 15% of said revenues, commissions on product sales equal to 3% of said sales, $1,000 per month to pay for office rent reimbursement, expenses associated with the consultant’s participation in certain conferences, information technology expenses incurred by the consultant in the performance of duties relating to the Company, and certain legal fees incurred by the consultant during his tenure as our  Chief Executive Officer.

On September 17, 2008 we entered into an agreement with a shareholder under which that shareholder will act as a consultant to us. Under this agreement, the shareholder will provide business development services for which he will receive commissions on licensing revenues equal to 15% of said revenues and commissions on product sales equal to 3% of said sales and reimbursement for information technology expenses incurred by the consultant in the performance of duties relating to the Company. This agreement expires on September 17, 2011.

Employment Agreements.  On October 30, 2006, we entered into an employment agreement with an officer that expires on October 30, 2008. Pursuant to the agreement, the officer is paid an annual base salary of $160,000. We also granted the officer 321,217 options to purchase its common stock at $2.00 per share. Twenty-five percent (25%) of the options vested on November 1, 2007 and the remaining seventy-five percent (75%) will vest on November 1, 2008. The options expire on November 1, 2016.

On November 1, 2006, we entered into an employment agreement with an officer that expires on November 1, 2008. Pursuant to the agreement, the officer was paid an annual base salary of $100,000. We also granted the officer 150,000 options to acquire its common stock at $2.00 per share. The options will all vest on November 1, 2008. The options expire on November 1, 2016. On July 1, 2007, we amended this employment agreement. The amended agreement will expire on November 1, 2009, and calls for an annual salary $140,000, a one time bonus of $12,500 and the grant of 87,500 options to purchase our common stock at $2.00 per share. Upon grant, 25,000 of the options vested, 37,500 options will vest on July 1, 2008, and 25,000 options will vest on July 1, 2009. All of the options expire on July 1, 2017. This employee resigned effective July 31, 2008.

On January 1, 2007, we entered into an employment agreement with an officer that expires on January 1, 2012. Upon expiration, the agreement calls for automatic one-year renewals until terminated by either party with thirty days written notice. Pursuant to the agreement, the officer will be paid an annual base salary of $180,000 in 2007; an annual base salary of $200,000 for the years 2008 through 2011; and an annual base salary of $220,000 for 2012. In addition, 450,000 options were granted to the officer to acquire our common stock at $2.00 per share. 150,000 options will vest on January 1, 2010, 150,000 options will vest on January 1, 2011 and the remaining 150,000 options will vest January 1, 2012. The options expire on January 1, 2022.

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On February 1, 2007, we entered into an employment agreement with an officer that expired on February 1, 2008. Pursuant to the agreement, the officer was paid an annual base salary of $120,000 and was granted 25,000 options to acquire our common stock at $2.00 per share. All of the options vested on February 1, 2008. The options expire on February 1, 2017. On February 1, 2008, we entered into a new agreement with this officer. This new agreement expires on February 1, 2010 and calls for an annual salary of $140,000. Further, the officer was granted 50,000 options to purchase shares of our common stock at $3.00 per share. 25,000 options vest on February 1, 2009 and the remaining 25,000 options vest on February 1, 2010. This agreement was modified effective October 1, 2008. Under the modified agreement, the employee receives an annual base salary of $70,000, subject to increase to $140,000 upon the achievement by the Company of revenues of at least $100,000. Additionally, we granted the employee options to purchase 10,000 shares of our common stock at $1.05 per share. The options become exercisable on September 17, 2009 and expire on September 17, 2018.

On May 21, 2007, we entered into an employment agreement with an officer that expires on May 21, 2009. Pursuant to the agreement, the officer will be paid an annual base salary of $160,000 and was granted 300,000 options to acquire our common stock at $2.00 per share. 75,000 of the options vested on May 21, 2008, and 225,000 of the options will vest on May 21, 2009. The options expire on May 21, 2017. On October 1, 2007, the Company modified the employment agreement to increase the salary from $160,000 to $210,000.

On December 28, 2007, we entered into an employment agreement with our Chairman of the Board of Directors and Chief Executive Officer. Under this agreement, he will continue to be paid at a rate of $320,000 per year through August 8, 2010. This agreement was terminated by consent of both parties on September 17, 2008. See also Consulting Agreements under this Note 5.

On August 11, 2008, we employed, on an at-will basis, an individual to serve as Vice President and General Counsel. The letter documenting the employment calls for a probationary period of 90 days and stipulates a salary of $150,000 per year.

On September 15, 2008, we employed, on an at-will basis, an individual to serve as Chief Executive Officer. The letter documenting the employment calls for a probationary period of 90 days and stipulates a salary of $200,000 per year. Additionally, we issued options to the individual to purchase 330,000 shares of our common stock at $1.05 per share. 110.000 of the options become exercisable on March 15, 2010, 110,000 of the options become exercisable on September 15, 2010, and 110,000 of the options become exercisable on March 15, 2011. The options expire on September 15, 2018.

Contingencies.  On September 11, 2008, we filed a lawsuit against a consultant in the Circuit Court of Oakland County, Michigan for violation of fiduciary duties. See Note 10 – Subsequent Events for further discussion.

A lawsuit was filed against us on September 16, 2008 in the Circuit Court of Oakland County, Michigan for breach of contract by a consultant previously contracted by the Company to provide information technology services. The suit seeks damages in excess of $42,335 plus court costs and attorney fees. See Note 10 – Subsequent Events for further discussion.  Our financial statements reflect an accrual for the amount of the damages.

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Lease Commitments.

a.	On August 1, 2005, we leased our office facilities in Akron, Ohio for a rent of $1,800 per month. The lease expired July 1, 2006 and was renewed under the same terms through August 31, 2007. The Company now leases that property on a month-to-month basis for the same rent. Rent expense for the years ended September 30, 2008 and 2007 was $21,600 and $21,600, respectively.
b.	On September 1, 2006, we leased our office space in Bloomfield Hills, Michigan for monthly rent of $1,800. A new lease was executed on April 1, 2007 with monthly payments of $3,200. The lease is on a month-to-month basis until terminated by tenant or landlord upon 60 days notice. The monthly lease amount was reduced to $2,400 on September 1, 2007. We vacated this space on August 31, 2008 and have no further obligation under the lease. Rent expense for the years ended September 30, 2008 and 2007 was $26,400 and $28,850, respectively
c.	On September 1, 2008, we executed a lease for our office space in Auburn Hills, Michigan. The lease calls for average monthly rent of $2,997 and expires on September 30, 2010. The landlord is a company owned by a shareholder and director of Ecology.
d.	On January 9, 2006, we leased computer equipment with 24 monthly payments of $147. We recognized expense of $588 and $1,764 for the years ended September 30, 2008 and 2007, respectively, related to this lease.
e.	On April 17, 2006, we leased computer equipment with 36 monthly payments of $75. We recognized expense of $901 for each of  the years ended September 30, 2008 and September 30, 2007 related to this lease.
f.	On June 17, 2007, we leased computer equipment with 36 monthly payments of $42. We recognized expense of $504 and $126 for the years ended September 30, 2008  and 2007, respectively, related to this lease.
g.	On July 17, 2007, we leased computer equipment with 36 monthly payments of $44. We recognized expense of $528 and  $88 for the years ended September 30, 2008 and 2007, respectively, related to this lease.
h.	On September 22, 2008, we leased a multi-purpose copier with 36 monthly payments of $526. The first payment was due November 3, 2008.

Minimum future rental payments under the above operating leases as of September 30, 2008 are as follows:

Year Ending September 30,
2009	$	42,589
2010		44,364
2011		6,312
	$	93,265

Note 6 — Equity

Reverse Merger.  A reverse merger with OCIS Corporation was consummated on July 26, 2007. The shareholders of Ecology acquired 95% of the voting stock of OCIS. OCIS had no significant operating history. The purpose of the acquisition was to provide Ecology with access to the public equity markets in order to more rapidly expand its business operations. The consideration to the shareholders of OCIS was approximately 5% of the stock, at closing, of the successor company. The final purchase price was agreed to as it reflects the value to Ecology of a more rapid access to the public equity markets than a more traditional initial public offering.

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Warrants.  On December 16, 2006, we issued warrants to purchase 500,000 shares of our stock at $2.00 per share. The warrants were issued to the holder of the $1,500,000 note. The warrants vested on December 17, 2007. The weighted average remaining life of the warrants is 8.5 years.

On February 6, 2008, we issued warrants to purchase 262,500 shares of our common stock at the lower of $2.00 per share or at the average price per share at which the Company sells its debt or and/or equity in its next private or public offering. The warrants vested upon issuance. The weighted average remaining life of the warrants is 9.5 years.

On March 1, 2008, we issued warrants to purchase 137,500 shares of our common stock at the lower of $2.00 per share or at the average price per share at which the Company sells its debt or and/or equity in its next private or public offering. The warrants vested upon issuance. The weighted average remaining life of the warrants is 9.5 years.

On June 9, 2008, we issued warrants to purchase 210,000 shares of our common stock at the lower of $2.00 per share or at the average price per share at which the Company sells its debt or and/or equity in its next private or public offering. The warrants vested upon issuance. The weighted average remaining life of the warrants is 9.8 years.

On June 21, 2008, we issued warrants to purchase 100,000 shares of our common stock at the $.75 per share. The warrants vested upon issuance. The weighted average remaining life of the warrants is 9.8 years.

On July 14, 2008, we issued warrants to purchase 100,000 shares of our common stock at $.50 per share. The warrants vested upon issuance. The weighted average remaining life of the warrants is 9.8 years.

On July 14, 2008, we issued warrants to purchase 30,000 shares of our common stock at $1.75 per share. The warrants vested upon issuance. The weighted average remaining life of the warrants is 9.8 years.

We issued warrants as shown below to the holder of our convertible preferred stock.

		Strike		Date	Expiration
Number		Price		Issued	Date
	100,000	$	0.75	July 28, 2008	July 28, 2018
	5,000	$	0.75	August 20, 2008	August 20, 2018
	25,000	$	0.75	August 27, 2008	August 27, 2018
	500,000	$	0.75	August 29, 2008	August 29, 2018
	375,000	$	0.75	September 26, 2008	September 26, 2018

Shares.  On February 5, 2008, we entered into an agreement with a note holder. The amount owed the note holder, including principal and accrued interest, totaled $142,415 and the note matured on December 31, 2007 (See Note 4). The maturity date of the note was extended to May 31, 2008, with interest continuing at 15% per annum. In consideration of this extension, we issued 60,000 shares of our common stock to the note holder and granted the holder certain priority payment rights.

On August 28, 2008, we entered into an agreement with an investor to issue up to $5,000,000 in convertible preferred securities. The securities accrue cumulative dividends at 5% per annum and the entire amount then outstanding is convertible at the option of the investor into shares of our common stock at $.50 per share. The preferred securities carry “as converted” voting rights. As of September 30, 2008, we had issued 2,010 of these convertible preferred shares. In the event that we sell additional convertible preferred securities under this agreement, we will issue attached warrants (500 warrants for each $1,000 convertible preferred share sold). The warrants will be immediately exercisable, expire in five years, and entitle the investor to purchase one share of our common stock at $.75 per share for each warrant issued.

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Note 7 — Stock Options

Stock Option Plan.  On May 9, 2007, we adopted a stock option plan and reserved 4,500,000 shares for the issuance of stock options or for awards of restricted stock. All prior grants of options were included under this plan. The plan provides for incentive stock options, nonqualified stock options, rights to restricted stock and stock appreciation rights. Eligible recipients are employees, directors, and consultants. Only employees are eligible for incentive stock options. The vesting terms are set by the Board of Directors. All options expire 10 years after issuance.

The Company granted non-statutory options as follows during the year ended September 30, 2008:

					Weighted
	Weighted				Average
	Average				(Remaining)
	Exercise Price		Number of		Contractual		Aggregate
	per Share		Options		Term		Fair Value
Outstanding as of September 30, 2006	$	2.00		150,000		8.7	$	184
Granted	$	2.04		3,036,119		9.5	$	3,681,425
Exercised		---		---		---		---
Forfeited		---		---		---		---
Exercisable	$	2.00		375,800		9.8	$	552,540
Outstanding as of September 30, 2007	$	2.03		3,186,119		9.5	$	3,681,609
Granted	$	1.49		1,456,000		10.3	$	1,329,891
Exercised		—		—		—		—
Forfeited		—		—		—		—
Outstanding as of September 30, 2008	$	1.83		4,642,119		9.2	$	5,011,500
Exercisable	$	2.09		1,605,228		8.4	$	1,966,657

1,605,228 of the options were exercisable as of September 30, 2008. The options are subject to various vesting periods between June 26, 2007 and January 1, 2012. The options expire on various dates between June 1, 2016 and January 1, 2022. Additionally, the options had no intrinsic value as of September 30, 2008. Intrinsic value arises when the exercise price is lower than the trading price on the date of grant.

Our stock option plans are subject to the provisions of Statement of Financial Accounting Standards (“SFAS”) Number 123(R), Accounting for Stock-Based Compensation. Under the provisions of SFAS Number 123(R), employee and director stock-based compensation expense is measured utilizing the fair-value method.

We account for stock options granted to non-employees under SFAS Number 123(R) using EITF 96-18 requiring the measurement and recognition of stock-based compensation to consultants under the fair-value method with stock-based compensation expense being charged to earnings on the earlier of the date services are performed or a performance commitment exists.

On September 15, 2008, the Board of Directors approved a change in exercise price on option grants previously made to two officers. This change was effective for options to purchase 375,000 shares of our common stock. The new exercise price is $1.05 per share. The weighted average of the price of the options at original issuance was $2.13. This change resulted in a total incremental compensation increase of  $240,641, combined, for the two officers.

In calculating the compensation related to employee/consultants and directors stock option grants, the fair value of each option is estimated on the date of grant using the Black-Scholes option-pricing model and the following weighted average assumptions:

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Dividend	None
Expected volatility		91.69%-101.73%
Risk free interest rate		1.50%-5.11%
Expected life	5.5 years

The expected volatility was derived utilizing the price history of another publicly traded nanotechnology company. This company was selected due to the fact that it is widely traded and is in the same equity sector as our Company.

The risk free interest rate figures shown above contain the range of such figures used in the Black-Scholes calculation. The specific rate used was dependent upon the date of option grant.

Based upon the above assumptions and the weighted average $1.83 exercise price, the options outstanding at September 30, 2008 had a total unrecognized compensation cost of $1,582,378 which will be recognized over the remaining weighted average vesting period of .7 years. Options cost of $1,847,639 was recorded as an expense for the year ended September 30, 2008 of which $623,518 was recorded as compensation expense and $1,224,121 was recorded as consulting expense.

Note 8 — Income Taxes

The Company has incurred losses since operations commenced in 1990.  The Company has a net operating loss carry forward for income tax purposes of approximately $7,464,662. The total loss carry forward expiring on September 30, 2028 is $3,109,937, expiring on September 30, 2027 is $3,488,598, expiring on September 30, 2026 is $427,056, expiring on September 30, 2025 is $203,978, expiring on September 30, 2024 is $189,988, expiring on September 30, 2023 is $ 25,364 and expiring on September 30, 2022 is $19,741.  The Company changed its year-end to September 30th from February 28th effective in fiscal 2006.

Deferred income taxes arise from timing differences resulting from income and expense items reported for financial accounting and tax purposes in different periods.

The principal sources of timing differences are different accrual versus cash accounting methods used for financial accounting and tax purposes; the timing of the utilization of the net operating losses, and different book versus tax depreciation methods.

As of September 30, 2008 and 2007, the deferred tax asset based on a 34% tax bracket consists of the following:

	2008			2007
Assets:
Federal loss carry forwards	$	2,537,985		$	1,481,936
Cash basis accounting differences		451,603			89,925
Depreciation timing differences					939
Liability:
Depreciation timing differences		(804	)		-
Net Deferred tax asset		2,988,784			1,572,800
Valuation  allowance		(2,988,784	)		(1,572,800	)
Net deferred tax asset	$	-		$	-

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The tax benefit from net operating losses and differences in timing differ from the federal statutory rate primarily due to the $1,415,984 change in the deferred tax asset valuation allowance from September 30, 2007.

Note 9 — Going Concern

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. For the years ended September 30, 2008 and  2007, we incurred net losses of ($6,770,322) and ($4,560,870), respectively. As of September 30, 2008 and September 30, 2007, we had stockholders’ deficit and equity of ($1,239,810) and $290,287, respectively.

Our continuation as a going concern is dependent upon our ability to generate sufficient cash flow to meet our obligations on a timely basis, to obtain additional financing or refinancing as may be required, to develop commercially viable products and processes, and ultimately to establish profitable operations. We have financed operations through operating revenues and, primarily, through the issuance of equity securities and debt. Until we are able to generate positive operating cash flows, additional funds will be required to support operations. We believe that cash investments subject to a securities purchase agreement with a investor will be sufficient to enable us to continue as a going concern through the fiscal year ending September 30, 2009. This securities purchase agreement does not legally bind the investor to make the investments and we cannot be certain that the investments will continue. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern. Please see also Note 10 — Subsequent Events.

Note 10 — Subsequent Events

On November 6, 2008, we settled the lawsuit filed against us on September 16, 2008 by a consultant for breach of contract. We paid $26,500 in full settlement of all claims. This amount was included in Accounts Payable at September 30, 2008.

On November 11, 2008, we settled the lawsuit we filed against one of two consultants on September 11, 2008 for breach of contract. Under the terms of the settlement, we will pay the consultant $7,500 per month for twelve months under a new consulting agreement and will pay $15,000 in 12 equal monthly payments of $1,250 to the consultant’s attorney.  Additionally, we will pay the consultant a commission of 15% for licensing revenues and 3% for product sales that the consultant generates for the Company.

On November 11, 2008, we paid in full the principal and accrued interest on the note payable shown in Note 4 with a September 30, 2008 principal balance of $94,104. In addition, we issued warrants to the note holder for the purchase of 2,000,000 shares of our common stock at $.50 per share and reset the strike price of warrants and options previously issued to the note holder to purchase 1,500,000 shares of our common stock at $2 per share. The new price is $.80 per share.

On November 13, 2008, we reached agreement with a note holder. The note holder made demand for payment on September 5, 2008. We made a payment of $100,000 on October 6, 2008 on the outstanding principal and interest on that date. On November 13, we made another payment of $100,000 against the outstanding principal and interest on that date. Further, we agreed to make additional payments on the remaining principal and interest. These payments will be $100,000 for each month beginning in December of 2008 and continuing until all principal and interest has been paid. This note payable is shown in Note 4 with a September 30, 3008 principal balance of $500,000.

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On November 14, 2008, we reached agreement with a note holder. The note holder made demand for payment on September 8, 2008. We made a payment of $10,000 on October 8, 2008 on the outstanding principal and interest on that date. On November 14, we made another payment of $10,000 against the outstanding principal and interest on that date. Further, we agreed to make additional payments on the remaining principal and interest. These payments will be $10,000 for each month beginning in December of 2008 and continuing until all principal and interest has been paid. This note payable is shown in Note 4 with a September 30, 3008 principal balance of $50,000.

On December 2, 2008, our Board of Directors authorized the addition of 1,000,000 shares of our common stock to the 2007 Plan.

On December 3, 2008, we terminated the employment agreement with our Chief Financial Officer. The Chief Financial Officer continues to be employed by the Company in that capacity as an at-will employee.

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CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To The Board of Directors and Shareholders of

Ecology Coatings, Inc.

We hereby consent to the inclusion in this Registration Statement on Form S-1 (Amendment No. 3) of our report dated December 19, 2008, relating to the consolidated financial statements of Ecology Coatings, Inc. and Subsidiary as of September 30, 2008 and 2007, and for the two years in the period ended September 30, 2008, appearing in the Annual Report on Form 10-KSB of Ecology Coatings, Inc. and Subsidiary for the year ended September 30, 2008.

We also consent to the reference to us under the heading "Experts" in such Registration Statement on Form S-1 (Amendment No. 3).

/s/ UHY LLP

Southfield, Michigan

November 20, 2009

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ITEM 11A:  MATERIAL CHANGES

Not applicable.

ITEM 12:  INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

Not applicable.

ITEM 12A:  DISCLOSURE OF COMMISION POSITION ON INDEMNFICATION FOR SECURITIES ACT LIABILITIES

Under our Articles of Incorporation, our directors will not be personally liable to us or to our shareholders for monetary damages for any breach of their fiduciary duty as a director, except liability for the following:

· Any breach of their duty of loyalty to us or to our shareholders.

· Acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law.

· Unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 78.7502 of the Nevada Revised Statutes.

· Any transaction from which the director derived an improper personal benefit.

We believe that these limitation of liability provisions are necessary to attract and retain qualified persons as directors and officers.

The limitation of liability provisions in our Articles of Incorporation may discourage shareholder from bringing a lawsuit against our directors for breach of their fiduciary duty. They may also reduce the likelihood of derivative litigation against our directors and officers, even though an action, if successful, might benefit us and other stockholders.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC, such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.

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PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13:  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

Estimated expenses, other than transfer taxes and any brokerage discounts or commissions or similar expenses, payable by us in connection with the sale of the common stock being registered under this registration statement are as follows:

SEC registration fee	$285
Legal fees and expenses	$20,000
Accounting fees and expenses	$10,000
Blue Sky fees and expenses (including legal fees)	$10,000
Transfer Agent fees and expenses	$5,000
Miscellaneous	$10,000
Total:	$55,285

ITEM 14:  INDEMNIFICATION OF DIRECTORS AND OFFICERS

Our Articles of Incorporation and Bylaws contain broad indemnification and liability limiting provisions regarding our officers, directors and employees, including the limitation of liability for certain violations of fiduciary duties.  In addition, we maintain Directors and Officers liability insurance.  Our shareholders will have only limited recourse against directors and officers.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of our company under Nevada law or otherwise, we have been advised the opinion of the SEC is that such indemnification is against public policy as expressed in the Securities Act and may, therefore, be unenforceable.

ITEM 15:  RECENT SALES OF UNREGISTERED SECURITIES

Set forth below is a description of all of our sales of unregistered securities during the last three years.  All sales were made to “accredited investors” as such term is defined in Regulation D promulgated under the Securities Act of 1933, as amended (the “Act”).  All such sales were exempt from registration under Section 4(2) of the Act, as transactions not involving a public offering. Unless indicated, we did not pay any commissions to third parties in connection with the sales.

On August 28, 2008, we entered into a Securities Purchase Agreement with Equity 11 for the issuance of 5% convertible preferred shares at a price of $1,000 per share.  Under the Securities Purchase Agreement, Equity 11 may purchase up to $5,000,000 of 5% convertible preferred shares.  In addition, for each acquisition of convertible preferred shares, Equity 11 will be issued warrants to purchase up to 2,500,000 shares of our common stock at $.75 per share.  As of September 30, 2009, under this Agreement, Equity 11 had been issued 2,436 shares of 5% Convertible Preferred Shares and had been issued warrants to purchase 1,178,500 shares.

On May 15, 2009, we entered into a Convertible Preferred Securities Agreement (the “Preferred Securities Agreement”) with Equity 11 for the issuance and sale of 5.0% Cumulative Convertible Preferred Shares, Series B of the Company at a purchase price of $1,000 per share.  The Preferred Securities Agreement did not replace or terminate the terms of the Securities Purchase Agreement.  That is, the terms of the Securities Purchase Agreement will continue to apply to preferred stock and warrants issued under the Securities Purchase Agreement.  Similarly, the terms of the Preferred Securities Agreement will apply to preferred stock issued under the Preferred Securities Agreement.

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Equity 11 may convert the Convertible Preferred Shares into common stock of the Company at a conversion price that is twenty percent (20%) of the average of the closing price of Company’s common stock on the Over-The-Counter Bulletin Board for the five trading days prior to each investment.  As of September 30, 2009, we had  issued 364 Convertible Preferred Shares to Equity 11 under this Agreement.

On September 30, 2009, we and Stromback Acquisition Corporation, an Illinois corporation (the “Purchaser”), entered into a Securities Purchase Agreement (the “Preferred Securities Agreement”) for the issuance and sale of our 5.0% Cumulative Convertible Preferred Shares, Series B (the “Convertible Preferred Shares”) at a purchase price of $1,000 per share.  Stromback Acquisition Corporation is owned by Richard Stromback a former member of our Board of Directors.  Until April 1, 2010, Purchaser has the right to purchase up to 3,000 Convertible Preferred Shares.  The Convertible Preferred Shares have a liquidation preference of $1,000 per share.  Purchaser may convert the Convertible Preferred Shares into shares of our common stock at a conversion price that is seventy seven percent (77%) of the average closing price of our common stock on the Over-The-Counter Bulletin Board for the five trading days prior to each investment.  The Convertible Preferred Shares will pay cumulative cash dividends at a rate of 5% per annum, subject to declaration by our Board of Directors, on December 1 and June 1 of each year.  We have agreed to provide piggyback registration rights for common stock converted by Purchaser under a Registration Rights Agreement.  Fifty percent (50%) of each investment, up to a maximum of $500,000, will be placed in a fund and disbursed as directed by Purchaser to satisfy our outstanding debts, accounts payable and/or investor relations programs (“Discretionary Fund”).  On October 1, 2009, Stromback Acquisition Corporation acquired 240 of our Convertible Preferred Shares, Series B with a purchase price per share of $1,000.  We received $240,000 of gross proceeds and net proceeds of $120,000 after payments were made from the Discretionary Fund for outstanding obligations owed to Mr. Stromback.

We issued the following promissory notes during 2008:

Note Holder	Issue Date(s)	Amount Owing on September 22, 2009
Investment Hunter, LLC	March 1, 2008	$336,973
Mitchell Shaheen I	September 21, 2008	$187,003
Mitchell Shaheen II	July 14, 2008	$126,540
George Resta	March 1, 2008	$45,132

During the prior three years, we issued the following warrants:

Number of Warrants	Issue Date	Expiration Date	Acquisition Price per Share	Held By
500,000	December 18, 2006	December 18, 2016	$.90	Trimax, LLC
2,000,000	November 11, 2008	November 11, 2018	$.50	Trimax LLC
12,500	March 1, 2008	March 1, 2018	$1.75	George Resta
262,500	February 5, 2008	February 5, 2018	$2.00	Hayden Capital USA, LLC
125,000	March 1, 2008	March 1, 2018	$1.75	Investment Hunter. LLC
210,000	June 9, 2008	June 9, 2018	$2.00	Hayden Capital USA, LLC
100,000	June 21, 2008	June 21, 2018	$.75	Mitchell Shaheen
100,000	July 14, 2008	July 14, 2018	$.50	Mitchell Shaheen
15,000	July 14, 2008	July 14, 2018	$1.75	George Resta
15,000	July 14, 2008	July 14, 2018	$1.75	Investment Hunter, LLC
14,400	October 1, 2009	October 1, 2019	$.42	Stromback Acquisition Corporation
Total:  3,354,400

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The notes had limited conversion rights until their dates of maturity.  They no longer have the ability to convert to our common stock.

On July 21, 2007, we completed a Private Placement and raised $4,232,970 from the sale of our common stock to private investors.

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The following summarizes the above recent sales of unregistered securities:

Title	Date	Underwriters Or Purchasers	Consideration	Exemption	Ability To Convert	Terms of Conversion	Use of Proceeds
Private Placement Memorandum	July 21, 2007	(1)	$2 per share	4(2) of ’33 Securities Act		-	Working Capital
Investment Hunter, LLC	March 1, 2008	-	$500,000	4(2) of ’33 Securities Act	Prior to June 30, 2008	Lower of $1.75 or price of “New Offering”	Working Capital
Mitchell Shaheen I	September 21, 2008	-	$150,000	4(2) of ’33 Securities Act	Prior to July 18, 2008	Lower of $.50 or price of “New Offering”	Working Capital
Mitchell Shaheen II	July 14, 2008		$100,000	4(2) of ’33 Securities Act	Prior to August 10, 2008	“New Offering” price	Working Capital
George Resta	March 1, 2008		$50,000	4(2) of ’33 Securities Act	Prior to June 30, 2008	Lower of $1.75 or price of “New Offering	Working Capital

(1)   The list of PPM purchasers include:  Daniel Ahlsrtrom, Edward F Andrews, Alan Andrews, Donald Bailey Trust, Eugene Baratta, Marty Bartnick, Michael Battaglia, Deanna Berman, John R Bourbeau, John Bourbeau, Jr., Kastytis Buitkus, Bruce C Bullard, James C Carson, Thomas Commes, William F Coyro, Jr., Jon Crouse, Shawn Van Drehle, Paul Dudgeon, Gary Dudgeon, Dudgeon Ferguson Financial Group, Albert Hodgson, James Hoen, Guy T Humeniuk, Rae Ann Hoffman Jones, Andrew & Danielle Kapoor, Jeffrey Knudson, F. Thomas Krotine, John Lindeman, Henry & Michelle Lindeman III, Michele & Maria Longordo, Chris Marquez, Simone Mastantuono, Neil Master, Steven & Antonia Mellos, John Morgan, James Padilla, Timothy Perkins, Sasha Prakash, Paul & Susan Prentis, Trimax, LLC, Grace Rosman, Joseph Savel, Scott Schaffer, Robert Sims, Stephen & Darlene Stephens, David T Sterrett, Jr., David Susko, Patrick Sweeney, Kristin Wikol, and Michael Wisniekski.

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ITEM 16:  EXHIBITS AND FINANCIAL INFORMATION SCHEDULES

Exhibit Number	Description
2.1	Agreement and Plan of Merger entered into effective as of April 30, 2007, by and among OCIS Corp., a Nevada corporation, OCIS-EC, INC., a Nevada corporation and a wholly-owned subsidiary of OCIS, Jeff W. Holmes, R. Kirk Blosch and Brent W. Schlesinger and ECOLOGY COATINGS, INC., a California corporation, and Richard D. Stromback, Deanna Stromback and Douglas Stromback. (2)
3.2	Amended and Restated Articles of Incorporation of Ecology Coatings, Inc., a Nevada corporation.(2)
3.3	By-laws. (1)
3.4	Certificate of Designation of 5% Convertible Preferred Shares dated August 29, 2008. (9)
3.5	Certificate of Designation of 5% Convertible Preferred Shares dated September 26, 2008. (14)
4.1	Form of Common Stock Certificate of the Company. (2)
5.1	Opinion of Daniel Iannotti, VP, General Counsel & Secretary. (26)
10.1	Promissory Note between Ecology Coatings, Inc., a California corporation, and Richard D. Stromback, dated November 13, 2003. (2)
10.2	Promissory Note between Ecology Coatings, Inc., a California corporation, and Deanna Stromback, dated December 15, 2003. (2)
10.3	Promissory Note between Ecology Coatings, Inc., a California corporation, and Douglas Stromback, dated August 10, 2004. (2)
10.4	Registration Rights Agreement by and between Ecology Coatings, Inc., a Nevada corporation, and the shareholder of OCIS, Corp., a Nevada corporation, dated as of April 30, 2007. (2)
10.5	Consulting Agreement among Ecology Coatings, Inc., a Nevada corporation, and DMG Advisors, LLC, a Nevada limited liability company dated July 27, 2007. (2)
10.6	Employment Agreement between Ecology Coatings, Inc., a California corporation and Kevin Stolz dated February 1, 2007. (2)
10.7	Employment Agreement between Ecology Coatings, Inc., a California corporation and Sally J.W. Ramsey dated January 1, 2007. (2)
10.8	License Agreement with E.I. Du Pont De Nemours and Ecology Coatings, Inc., a California corporation, dated November 8, 2004. (2)
10.9	License Agreement between Ecology Coatings, Inc., a California corporation and Red Spot Paint & Varnish Co., Inc., dated May 6, 2005. (2)
10.10	Lease for office space located at 35980 Woodward Avenue, Suite 200, Bloomfield Hills, Michigan 48304. (2)
10.11	Lease for laboratory space located at 1238 Brittain Road, Akron, Ohio  44310. (2)
10.12	2007 Stock Option and Restricted Stock Plan. (2)
10.13	Form of Stock Option Agreement.  (2)
10.14	Form of Subscription Agreement between Ecology Coatings, Inc., a California corporation and the Investor to identified therein.  (2)
10.15	Consulting Agreement by and between Ecology Coatings, Inc., a California corporation, and MDL Consulting Group, LLC, a Michigan limited liability company dated April 10, 2006.  (2)
10.16	Consulting Agreement by and between Ecology Coatings, Inc., a California corporation, and MDL Consulting Group, LLC, a Michigan limited liability company dated July 1, 2006.  (2)
10.17	Antenna Group Client Services Agreement by and between Ecology Coatings, Inc., a California corporation and Antenna Group, Inc. dated March 1, 2004, as amended effective as of July 6, 2007.  (2)
10.18	Consulting Agreement by and between Ecology Coatings, Inc., a California corporation and Kissinger McLarty Associates, date July 15, 2006, as amended.  (2)
10.19	Business Advisory Board Agreement by and between Ecology Coatings, Inc., a California corporation, and The Rationale Group, LLC, a Michigan limited liability corporation, dated September 1, 2007.  (2)
10.20	Allonge to Promissory Note dated November 13, 2003 made in favor of Richard D. Stromback dated February 6, 2008. (3)
10.21	Allonge to Promissory Note dated December 15, 2003 made in favor of Deanna. Stromback dated February 6, 2008. (3)
10.22	Allonge to Promissory Note dated August 10, 2003 made in favor of Douglas Stromback dated February 6, 2008. (3)
10.23	Third Allonge to Promissory Note dated February 28, 2006 made in favor of Chris Marquez dated February 6, 2008. (3)
10.24	Employment Agreement with Kevin Stolz dated February 1, 2008. (4)
10.25	Promissory Note made in favor of George Resta dated March 1, 2008. (5)
10.26	Promissory Note made in favor of Investment Hunter, LLC dated March 1, 2008. (5)
10.27	Scientific Advisory Board Agreement with Dr. Robert Matheson dated February 18, 2008. (6)
10.28	Promissory Note made in favor of Mitch Shaheen dated September 18, 2008. (7)
10.29	Promissory Note made in favor of Mitch Shaheen dated July 10, 2008. (8)
10.30	Extension of Promissory Note made in favor of Richard D. Stromback dated July 10, 2009. (8)
10.31	Extension of Promissory Note made in favor of George Resta dated July 14, 2008. (8)
10.32	Extension of Promissory Note made in favor of Investment Hunter, LLC dated July 14, 2008. (8)
10.33	Securities Purchase Agreement with Equity 11, Ltd. dated August 28, 2008. (9)
10.34	First Amendment to Employment Agreement of Richard D. Stromback dated August 27, 2008. (9)
10.35	First Amendment to Employment Agreement of Kevin Stolz dated August 29, 2008. (9)
10.36	Consulting Services Agreement with RJS Consulting LLC dated September 17, 2008. (10)
10.37	Consulting Services Agreement with DAS Ventures LLC dated September 17, 2008. (10)
10.38	Consulting Services Agreement with Sales Attack LLC dated September 17, 2008. (10)
10.39	First Amendment to Securities Purchase Agreement with Equity 11, Ltd. dated October 27, 2008. (11)
10.40	Consulting Services Agreement with Trimax, LLC dated November 11, 2008. (12)
10.41	Promissory Note made in favor of Seven Industries date December 24, 2008. (13)
10.42	Promissory Note dated January 8, 2009 in favor of Seven Industries. (15)
10.43	Amendment of December 24, 2008 Promissory Note. (15)
10.44	Second Amendment To Securities Purchase Agreement. (16)
10.45*	Convertible Preferred Securities Agreement dated May 15, 2009.
10.46	Warrant W-6. (17)
10.47	Warrant W-7. (27)
10.48	Warrant W-8. (18)
10.49	Warrant W-9. (19)
10.50	Warrant W-10. (20)
10.51	Warrant W-11. (21)
10.52	Warrant W-12. (22)
10.53	Promissory Note in favor of JB Smith LC dated May 5, 2009. (23)
10.54*	DMG Advisors Consulting and Settlement Agreements.
10.55	Termination of Kevin P. Stolz’s Employment Agreement. (24)
10.56*	Promissory Note in favor of Chris Marquez dated February 28, 2006.
10.57*	First Allonge to Promissory Note in favor of Chris Marquez dated December 1, 2006.
10.58*	Second Allonge to Promissory Note in favor of Chris Marquez dated July 26,2007.
10.59*	Consulting Services Agreement with Jim Juliano dated January 5, 2009.
10.60*	First Amendment to Employment Agreement of Sally J.W. Ramsey dated December 15, 2008.
10.61	Employment Agreement of Richard Stromback dated December 28, 2007. (25)
10.62*	Office Sublease dated September 30, 2008.
10.63*	Collaboration Agreement with Reynolds Innovations dated August 21, 2009.
10.64*	Securities Purchase Agreement with Stromback Acquisition Corporation dated September 30, 2009.
10.65*	Employment Agreement with Robert G. Crockett dated September 21, 2009.
10.66*	Employment Agreement with Daniel V. Iannotti dated September 21, 2009.
10.67*	Employment Agreement with F. Thomas Krotine dated September 21, 2009.
10.68*	Second Amendment of Employment Agreement with Sally J.W. Ramsey dated September 21, 2009.
10.69*	Promissory Note in favor of Sky Blue Ventures in the amount of $6,500 dated September 10, 2009.
10.70*	Promissory Note in favor of JB Smith LC in the amount of $7,716.40 dated August 11, 2009.
21.1	List of subsidiaries. (2)
23.1*	Consent of UHY LLP, an independent registered public accounting firm.
23.2*	Consent of counsel, Daniel Iannotti (included in Exhibit 5.1).
24.1*	Power of Attorney.- See Signatures page.
99.1*	Financial statements from Form 10-KSB for the fiscal year ended September 30, 2008 filed with the SEC on December 23, 2008.

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*           Filed herewith.

(1) Incorporated by reference from OCIS’ registration statement on Form SB-2 originally filed with the SEC on September 28, 2002 and amended on September 20, 2002, November 7, 2002 and March 27, 2003.

(2) Incorporated by reference from our Form 8-K filed with the SEC on July 30, 2007.

(3) Incorporated by reference from our From 8-K filed with the SEC on February 12, 2008.

(4) Incorporated by reference from our Form 8-K filed with the SEC on February 22, 2008.

(5) Incorporated by reference from our Form 8-K filed with the SEC on March 20, 2008.

(6) Incorporated by reference from our Form 8-K filed with the SEC on April 3, 2008.

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(7) Incorporated by reference from our Form 8-K filed with the SEC on September 24, 2008.

(8) Incorporated by reference from our Form 8-K filed with the SEC on July 17, 2008.

(9) Incorporated by reference from our Form 8-K/A filed with the SEC on August 29, 2008.

(10) Incorporated by reference from our Form 8-K filed with the SEC on September 19, 2008.

(11) Incorporated by reference from our Form 8-K filed with the SEC on October 28, 2008.

(12) Incorporated by reference from our Form 8-K filed with the SEC on November 13, 2008.

(13) Incorporated by reference from our Form 10-KSB filed with the SEC on December 24, 2008.

(15) Incorporated by reference from our Form 8-K filed with the SEC on September 30, 2008.

(16) Incorporated by reference from our Form 8-K filed with the SEC on January 9, 2009.

(17) Incorporated by reference from our Form 8-K filed with the SEC on January 23, 2009.

(18) Incorporated by reference from our Form 8-K filed with the SEC on February 12, 2009.

(19) Incorporated by reference from our Form 8-K filed with the SEC on February 27, 2009.

(21) Incorporated by reference from our Form 8-K filed with the SEC on March 10, 2009.

(22) Incorporated by reference from our Form 8-K filed with the SEC on March 27, 2009.

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(23) Incorporated by reference from our Form 8-K filed with the SEC on August 5, 2009.

(24) Incorporation by reference from our Form 8-K filed with the SEC on July 29, 2009.

(25) Incorporation by reference from our Form 8-K filed with the SEC on January 3, 2008.

(26) Incorporation by reference from our Amendment No. 1 to S-1 registration statement filed with the SEC on September 10, 2009.

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ITEM 17:  UNDERTAKINGS

The undersigned registrant hereby undertakes to file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

(i)To include any prospectus required by section 10(a)(3) of the Securities Act of 1933;

(ii)To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; and

(iii)To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.

The undersigned registrant hereby undertakes that, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

The undersigned registrant hereby undertakes to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions described in Item 14 above, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser: if the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

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SIGNATURES

The registrant has duly caused this amendment No. 3 to registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, this 20th day of November, 2009 in the City of Auburn Hills, Michigan.

ECOLOGY COATINGS, INC., a Nevada corporation
By:	/s/ Robert G. Crockett
	Robert G. Crockett
	CEO

     Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signatures	Title	Date
/s/ Robert G. Crockett Robert G. Crockett	Chief Executive Officer (Principal Executive Officer)	November 20 , 2009
/s/Kevin P. Stolz	Chief Financial Officer (Principal Financial and Accounting Officer)	November 18 , 2009
/s/ J.B. Smith* J.B. Smith	Director	November 18 , 2009
/s/ Rocco DelMonaco* Rocco DelMonaco	Director	November 20 , 2009
/s/ Joseph Nirta*	Director	November 20 , 2009
Joseph Nirta

*By:  /s/ Robert G. Crockett

Robert G. Crockett, Attorney-In-Fact

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EX-10.45

CONVERTIBLE PREFERRED SECURITIES AGREEMENT

DATED AS OF MAY 15, 2009

between

ECOLOGY COATINGS, INC.

and

EQUITY 11, Ltd.

CONVERTIBLE PREFERRED SECURITIES AGREEMENT (this “Agreement”), dated as of May 15, 2009, between Ecology Coatings, Inc., a corporation organized  under the laws of the state of Nevada (the “Company”), and Equity 11, Ltd., a corporation organized under the laws of the state of Michigan (the “Purchaser”).

RECITALS

WHEREAS, the Company desires to sell to the Purchaser, and the Purchaser desires to purchase from the Company, 5.0% Cumulative Convertible Preferred Shares, Series B of the Company at a price per share of $1000 (the “Convertible Preferred Shares, Series B”) containing the terms set forth in the Certificate of Designation attached as Exhibit A hereto (the “Certificate of Designation”).

NOW, THEREFORE, in consideration of the mutual promises herein made, and in consideration of the representations, warranties, and covenants herein contained, the Company and the Purchaser agree as follows:

All capitalized terms used and not otherwise defined in this Agreement shall have the definitions set forth on Annex I.

ARTICLE I

Sale of the Convertible Preferred Shares, Series B

Section 1.1Authorization of Issuance and Sale and Delivery of the Convertible Preferred Shares, Series B.

Subject to the terms and conditions hereof, until December 15, 2009, the Purchaser agrees to purchase and the Company agrees to sell and issue to the Purchaser at the Closings, 5% Convertible Preferred Shares, Series B, at a price per share of $1,000, convertible into common shares at the Conversion Price.

Section 1.2 The Closing of the Sale of the Convertible Preferred Shares, Series B.

The closings (the “Closings”) shall take place at the offices of Purchaser, at 8:00 p.m.,New York time, on the date hereof, or such other time and date as the parties may agree upon (the date that the Closing occurs, the “Closing Date”).  At the Closing, on the terms and subject to the conditions contained herein, the Company shall issue and deliver the Convertible Preferred Shares, Series B against receipt by the Company of the Aggregate Purchase Price by wire transfer of immediately available funds to an account, which the Company shall designate to the Purchaser prior to the Closing in writing.  The Convertible Preferred Shares, Series B shall be evidenced by certificates.

Section 1.3 Termination of Certain Agreements.

(1)The parties agree that Purchaser will not acquire any further securities under the SPA and the SPA will continue to define the terms and conditions with respect to convertible preferred securities purchased under the SPA.  Sections 5.2, 5.3, 5.4, 5.5, 5.6, 5.7, and 5.9 of the SPA shall remain in full force and effect with respect to the purchase of securities under the SPA.  In all other respects, the SPA shall be considered terminated.

(2)The parties agree to terminate the Consulting Agreement between Company and James Juliano dated January 5, 2009.

(3)The parties agree to eliminate the monthly compensation in Exhibit A of the Consulting Services Agreement between Company and Sales Attack LC dated September 17, 2008.  In all other respects, the terms of the Consulting Services Agreement shall remain in full force and effect.

(4)Upon the issuance of the Convertible Preferred Shares, Series B described in Section 2.1, the parties acknowledge that the promissory notes dated December 24, 2008, January 8, 2009 and May 5, 2009 in favor of Seven Industries Ltd. and JB Smith LC will be considered paid in full and shall be cancelled.

(5)Upon the issuance of the Convertible Preferred Shares, Series B described in Section 2.1, the parties acknowledge payment of the monthly rent under the Office Sublease between Company and Seven Industries Ltd. shall be considered paid in full through the month of May 2009.

ARTICLE II

The Initial Closing

Section 2.1 Closing Requirements.

(1)   Within two (2) business days, the Company shall deliver to the Purchaser:

(a)a duly executed share certificate registered in the name of the Purchaser, representing 225 Convertible Preferred Shares, Series B, being issued to Purchaser pursuant to this Agreement for outstanding amounts due to Purchaser and Purchaser’s affiliates for office rent, marketing services, consultant services and promissory notes;

(b)a Secretary’s Certificate, duly executed by the Secretary of the Company, appending certified copies of the Company’s Fundamental Documents and minutes/resolutions of the Board of Directors of the Company (the “Board”) (and, if applicable, any committee) approving the Documents and the transactions contemplated thereby (including, without limitation, the Certificate of Designation );

(c) an Incumbency Certificate, duly executed by an authorized officer of the Company, certifying with respect to the incumbency of the officers listed thereon and the genuineness of such officers’ respective signatures.

(3) At the Initial Closing, the Purchaser shall deliver to the Company a duly executed counterpart signature page to the Cross-Receipt.

Section 2.2 Purchases of Additional Preferred Shares.

(1)Purchaser, in Purchaser’s sole and absolute discretion, may purchase additional Convertible Preferred Shares, Series B until December 15, 2009 convertible to common shares at the Conversion Price.

(2)   For each such additional purchase, Company shall deliver to Purchaser:

(a)a duly executed share certificate registered in the name of the Purchaser, representing the number of additional Convertible Preferred Shares, Series B being purchased by the Purchaser pursuant to this Agreement;

(b)a duly executed counterpart signature page to a cross-receipt (the “Cross-Receipt”) with respect to the Company’s receipt of the Aggregate Purchase Price and the Purchaser’s receipt of the additional Convertible Preferred Shares, Series B.

(3)For each purchase of additional Convertible Preferred Shares, Series B, the Purchaser shall deliver to the Company:

(a)the Aggregate Purchase Price for the additional Convertible Preferred Shares, Series B being purchased by the Purchaser pursuant to this Agreement; and

(b)   a duly executed counterpart signature page to the Cross-Receipt.

Section 2.3 Restrictive Legend.

The certificate representing each of the Convertible Preferred Shares, Series B shall be stamped or otherwise imprinted with a legend substantially in the following form (in addition to any legend required by applicable state securities Laws), upon issuance thereof, and until such time as the same is no longer required under the applicable requirements of the Securities Act:

THE 5% CUMULATIVE CONVERTIBLE PREFERRED SHARES, SERIES B REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAWS, AND ECOLOGY COATINGS, INC. (THE “COMPANY”) HAS NOT BEEN REGISTERED UNDER THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED (THE “INVESTMENT COMPANY ACT”).  NEITHER SUCH 5% CUMULATIVE CONVERTIBLE PREFERRED SHARES, SERIES B NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, RESOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.

THE HOLDER, BY ITS ACCEPTANCE HEREOF, AGREES TO OFFER, RESELL OR OTHERWISE TRANSFER THE 5% CUMULATIVE CONVERTIBLE PREFERRED SHARES, SERIES B REPRESENTED HEREBY, UNLESS SUCH 5% CUMULATIVE CONVERTIBLE PREFERRED SHARES, SERIES B NO LONGER CONSTITUTE “RESTRICTED SECURITIES” WITHIN THE MEANING OF RULE 144 UNDER THE SECURITIES ACT, ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) TO ONE OR MORE PERSONS, EACH OF WHICH IS AN “ACCREDITED INVESTOR” (AS DEFINED IN RULE 501 UNDER THE SECURITIES ACT) THAT IS ACQUIRING SUCH 5% CUMULATIVE CONVERTIBLE PREFERRED SHARES, SERIES B FOR ITS OWN ACCOUNT FOR INVESTMENT AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR OTHER APPLICABLE SECURITIES LAWS OR (D) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, IN EACH CASE SUBJECT TO ANY REQUIREMENT OF LAW THAT THE DISPOSITION OF ITS PROPERTY OR THE PROPERTY OF SUCH ACCREDITED INVESTOR BE AT ALL TIMES WITHIN ITS OR THEIR CONTROL.

TO THE FULLEST EXTENT PERMITTED BY LAW, ANY TRANSFER IN VIOLATION OF THE FOREGOING WILL BE OF NO FORCE AND EFFECT, WILL BE VOID AB INITIO, AND WILL NOT OPERATE TO TRANSFER ANY RIGHTS TO THE TRANSFEREE, NOTWITHSTANDING ANY INSTRUCTION TO THE CONTRARY TO THE COMPANY, THE TRANSFER AGENT OR ANY INTERMEDIARY.

Furthermore, the Convertible Preferred Share certificate will contain a legend substantially to the following effect:

THE COMPANY WILL FURNISH TO ANY SHAREHOLDER ON REQUEST AND WITHOUT CHARGE A FULL STATEMENT OF (1) ANY RESTRICTIONS, LIMITATIONS, PREFERENCES OR REDEMPTION PROVISIONS CONCERNING THE 5% CUMULATIVE CONVERTIBLE PREFERRED SHARES, SERIES B AND (2) THE DESIGNATIONS AND ANY PREFERENCES, CONVERSION AND OTHER RIGHTS, VOTING POWERS, RESTRICTIONS, LIMITATIONS AS TO DISTRIBUTIONS, AND OTHER QUALIFICATIONS AND TERMS AND CONDITIONS OF REDEMPTION OF THE 5% CUMULATIVE CONVERTIBLE PREFERRED SHARES, SERIES B, THE DIFFERENCES IN THE RELATIVE RIGHTS AND PREFERENCES BETWEEN THE SHARES OF EACH SERIES OF SUCH CLASS TO THE EXTENT THEY HAVE BEEN SET, AND THE AUTHORITY OF THE BOARD OF DIRECTORS OF THE COMPANY TO SET THE RELATIVE RIGHTS AND PREFERENCES OF SUBSEQUENT SERIES OF 5% CUMULATIVE CONVERTIBLE PREFERRED SHARES, SERIES B.  5% CUMULATIVE CONVERTIBLE PREFERRED SHARES, SERIES B WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN WHOLE SHARES.

ARTICLE III

Representations and Warranties of the Company

As a material inducement to the Purchaser to enter into and perform its obligations under this Agreement, the Company hereby represents and warrants to the Purchaser as follows:

Section 3.1Due Creation, Good Standing and Due Qualification.  The Company has been duly created and is validly existing corporation in good standing under the laws of the state of Nevada, and pursuant to the resolutions of the Board (or a duly authorized committee thereof)  has full power and authority to own, lease and operate its properties and conduct its business as presently being conducted and to enter into and perform its obligations under, or as contemplated under, this Agreement; and the Company is duly qualified to transact business as a foreign entity and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not result in a material adverse change in the business, Assets, liabilities, operations, condition (financial or otherwise) or operating results of the Company and its Subsidiaries (as defined herein), taken as a whole (a “Material Adverse Effect”). 

Section 3.2 Authorization; Enforceability; Corporate and Other Proceedings.

(1)The Company has all requisite power and authority to execute and deliver each Document to which it is a party and to perform its obligations under each such Document. Each Document to which the Company is a party has been duly authorized by all necessary action on the part of the Company, and each Document to which the Company is a party has been duly executed and delivered by the Company, and, assuming the due authorization, execution and delivery by the other parties thereto, constitutes the valid and legally binding obligation of the Company, enforceable in accordance with its terms and conditions, except that the enforcement thereof may be subject to (i) bankruptcy, insolvency, reorganization, receivership, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to creditors’ rights generally and (ii) general principles of equity (whether applied by a court of law or equity) and the discretion of the court before which any proceeding therefor may be brought.

(2)The authorization, issuance, sale and delivery of the Convertible Preferred Shares, Series B have been duly authorized by all requisite action of the Board. Notwithstanding anything contained on the schedules attached hereto, the Convertible Preferred Shares, Series B being issued as of the Closing Date, if and when issued, will be duly andvalidly issued and outstanding, fully paid and nonassessableinterests in the Company, with no personal liabilityattaching to the ownership thereof, free and clear of any Liensand will not be subject to preemptive rights or other similar rights of any security holder of the Company.The underlying Common Shares issuable upon conversion of the Convertible Preferred Shares, Series B have been duly authorized by all requisite action of the Boardand, when issued upon such conversion and delivered against surrender of the Convertible Preferred Shares, Series B, will be duly andvalidly issued, fully paid and nonassessableinterests in the Company and will not be subject to any preemptive right, resale right, right of first refusal or other similar rights of any security holder of the Company.

Section 3. Non Contravention.  Notwithstanding anything contained on the schedules attached hereto, the execution, delivery and performance by the Company of the Documents, the consummation of the transactions contemplated hereby andthereby and compliance with the provisions hereof andthereof, including the issuance, sale and delivery of the Convertible Preferred Shares, Series B have not, do not and shall not(whether with or without the giving of notice or passage of time or both), (a) violate any Law to which the Company or any of its Subsidiaries is subject, (b) violate any provision of the Fundamental Documents of the Company or the Fundamental Documents of the Company’s Subsidiaries, (c) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, require the repurchase, redemption or repayment of, terminate, modify or cancel, or require any notice under any material contract to which the Company or any of its Subsidiaries is a party, or (d) result in the imposition of any Lien upon any of the Assets of the Company or any of its Subsidiaries.

Section 3.4 Absence of Defaults.  Except as disclosed in SEC filings, the Company is not in violation of its respective Fundamental Documents and neither the Company nor any of its Subsidiaries are in default in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other agreement or instrument to which the Company or any of its Subsidiaries is a party or by which any of them may be bound or to which any of the property or assets of the Company or any of its Subsidiaries is subject, except for such violations or defaults that would not result in a Material Adverse Effect.

Section 3.5 Capitalization of the Company.

(1)All of the issued and outstanding beneficial interests in the Company have been duly and validly authorized and issued and are fully paid and nonassessable interests in the Company, have been issued in compliance with all federal and state securities laws and were not issued in violation of any preemptive right, resale right, right of first refusal or other similar right.

(2)Except as contemplated by the Documents, the Certificate of Designation or as otherwise disclosed in the SEC Reports, there are, and immediately after consummation of any Closing , there will be, no (i) outstanding warrants, options, agreements, convertible securities or other commitments or instruments pursuant to which the Company is or may become obligated to issue or sell any shares of the Company’s capital stock or other securities(or securities convertible into securities of the Company) except for the First Closing, securities purchased under the SPA and  stock options and warrants issued and outstanding prior to the Effective Date, (ii) preemptive rights, resale rights, rights of first refusalor similar rights to purchase or otherwise acquire shares of the capital stock or other securities of the Company pursuant to any provision of Law, the Company’s Fundamental Documents or any contract, “shareholders’ rights plan”, “poison pill” or similar plan, arrangement or scheme to which the Company is a party or (iii) right, contractual or otherwise, to cause the Company to register pursuant to the Securities Act, any beneficial interests in the Company upon the issue and sale of the Convertible Preferred Shares, Series B, in each case, other than those rights that have been expressly waived, fully and unconditionally, prior to the date hereof; immediately following the Closing hereunder.

Section 3.6Offering Exemption.  Based upon and assuming the accuracy of the representations of the Purchaser in Article VI, the offering, sale and issuance of the Convertible Preferred Shares, Series B do not require registration under the Securities Act or applicable state securities and “blue sky” Laws.  The Company has made or shall make all requisite filings and has taken or will take all action necessary to be taken to comply with such federal and state securities or “blue sky” Laws.

Section 3.7SEC Reports. The Company’s Annual Report on Form 10-KSB most recently filed with the SEC (the “Annual Report”) and (ii) each subsequent report filed with the SEC pursuant to the Exchange Act (together with the Annual Report, the “SEC Reports”), as of their respective dates, did not include any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.  Such documents, when they were filed with the SEC, conformed in all material respects to the requirements of the Exchange Act and the rules and regulations of the SEC thereunder.  Since the date of the filing of the Annual Report with the SEC, the Company has made all filings with the SEC required to be made by the Company under the Exchange Act.

Section 3.8 Financial Statements.  The consolidated financial statements of the Company contained in the SEC Reports (the “Financial Statements”) complied as to form in all material respects with the published rules and regulations of the SEC with respect thereto, were prepared in accordance with GAAP applied on a consistent basis during the periods involved and fairly present, in all material respects, in conformity with GAAP, the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and their consolidated results of operations and changes in financial position for the periods then ended (except, in each case, as may be indicated in the notes thereto and subject, in each case, to normal year-end adjustments in the case of any unaudited interim financial statements).

Section 3.9 No Material Adverse Change.  Since March 31, 2009 (the date of the most recent financial statements of the Company filed with the SEC), except as otherwise stated therein or in the SEC Reports, there has not been (i) any change resulting in a Material Adverse Effect, (ii) any transaction which is material to the Company or its Subsidiaries, except transactions in the ordinary course of business, (iii) any obligation, direct or contingent, which is material to the Company and its Subsidiaries taken as a whole, incurred by the Company or its Subsidiaries, except obligations incurred in the, ordinary course of business, (iv) any change in the beneficial interests in or outstanding indebtedness of the Company or its Subsidiaries, except changes in the ordinary course of business or (v) except for regular quarterly dividends on the beneficial interests in the Company or its Subsidiaries, in amounts per share that are consistent with past practice, there has been no dividend or distribution of any kind declared, paid or made on the beneficial interests in the Company  or its Subsidiaries.  Neither the Company or its Subsidiaries has any material contingent obligation which is not disclosed in this Agreement or the SEC Reports.

Section 3.10 No Consent or Approval Required.  No consent, approval or authorization of, or declaration to or filing with, any Person, including pursuant to the Hart Scott Rodino Antitrust Improvements Act of 1976, as amended, is required by the Company for the valid authorization, execution and delivery by the Company of any Document or for its consummation of the transactions contemplated thereby or for the valid authorization, issuance and delivery of the Convertible Preferred Shares, Series B, other than those consents, approvals, authorizations, declarations or filings which have been obtained or made, as the case may be, and such as may be required under state securities or “blue sky” laws in connection with the purchase and resale of the Convertible Preferred Shares, Series B.

Section 3.11 Absence of Proceedings.  Except as disclosed in the SEC Reports, there is no Proceedingnow pending, or, to the knowledge of the Company, threatened, against or affecting the Company or any of its Subsidiaries which, singly or in the aggregate, would result in a Material Adverse Effect, or which might reasonably be expected to materially and adversely affect the consummation of the transactions contemplated herein or the performance by the Company of its obligations hereunder.

Section 3.12 Possession of Licenses and Permits.  The Company and its Subsidiaries possess such permits, licenses, approvals, consents and other authorizations (collectively, “Governmental Licenses”) issued by the appropriate federal, state, local or foreign, regulatory agencies or bodies necessary to conduct the businesses now operated by them; the Company and its Subsidiaries are in compliance with the terms and conditions of all such Governmental Licenses, except where the failure so to comply would not, singly or in the aggregate, result in a Material Adverse Effect; all of the Governmental Licenses are valid and in full force and effect, except where the invalidity of Governmental Licenses or the failure of such Governmental Licenses to be in full force and effect would not, singly or in the aggregate, result in a Material Adverse Effect; and neither the Company nor any of its Subsidiaries has received any notice of proceedings relating to the revocation or modification of any Governmental Licenses which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would result in a Material Adverse Effect.

Section 3.13 Title to Property.  The Company and its Subsidiaries do not own any real property nor do they have any leases or subleases with respect to any real property; the Company and its Subsidiaries have good and marketable title to the investments described in the SEC Reports, in each case, free and clear of all Liens of any kind except such as (i) are described in the SEC Reports or (ii) do not, singly or in the aggregate, materially affect the value of any such investments; and neither the Company nor any of its Subsidiaries has any notice of any material claim of any sort that has been asserted by anyone adverse to the rights of the Company or any of its Subsidiaries under any of such investments, or affecting or questioning the rights of the Company or any Subsidiary thereof to the continued possession of the investments.

Section 3.14Investment Company Act.  The Company is not, and upon the issuance and sale of the Convertible Preferred Shares, Series B as herein contemplated and the application of the net proceeds therefrom will not be, an “investment company” or an entity “controlled” by an “investment company”, as such terms are defined in the Investment Company Act of 1940, as amended.

Section 3.15 Limitation of Personal Liability.  The holders of the Convertible Preferred Shares, Series B will be entitled to the same limitation of personal liability as that extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Nevada; provided, however, that pursuant to the terms of this Agreement, the Purchaser will indemnify the Company against any liability resulting from any inaccuracy in or breach of any such investor’s representations and warranties in accordance with the terms hereof; and provided.

Section 3.16 Similar Offerings.  None of the Company, its Affiliates, or any Person acting on its or any of their behalf (in each case other than the Purchaser, as to which the Company makes no representation), has, directly or indirectly, solicited any offer to buy, sold or offered to sell or otherwise negotiated in respect of, or will solicit any offer to buy, sell or offer to sell or otherwise negotiate in respect of, in the United States or to any United States citizen or resident, any security which is or would be integrated with the sale of the Convertible Preferred Shares, Series B in a manner that would require the Convertible Preferred Shares, Series B to be registered under the Securities Act.

Section 3.17 No General Solicitation.  None of the Company, its Affiliates or any person acting on its or any of their behalf (in each case other than the Purchaser, as to whom the Company makes no representation) has engaged or will engage, in connection with the offering of the Convertible Preferred Shares, Series B, in any form of general solicitation or general advertising within the meaning of Rule 502(c) under the Securities Act.

Section 3.18 Maintenance of Controls and Procedures.  The Company has established and maintains “disclosure controls and procedures” (as such term is defined in Rules 13a-15 and 15d-15 under the Exchange Act) that (A) are designed to ensure that material information relating to the Company , including its Subsidiaries, is made known to the Company ’s Chief Executive Officer and its Chief Financial Officer by others within those entities, particularly during the periods in which the filings made by the Company with the SEC which it may make under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act are being prepared and (B) have been evaluated for effectiveness as of the end of the Company ’s most recent quarterly report on Form 10-Q filed with the SEC.  The Company’s accountants and the audit committee of the Board have been advised of (x) any significant deficiencies in the design or operation of internal controls that could adversely affect the Company’s ability to record, process, summarize, and report financial data and (y) any fraud, whether or not material, that involves management or other employees who have a role in the Company’s internal controls.

Section 3.19 Brokers or Finders.  The Company has not retained any investment banker, broker or finder in connection with this Agreement or the transactions contemplated hereby (including the sale of the Convertible Preferred Shares, Series B) or incurred any liability for any brokerage or finders’ fees, agent commissions or any similar charges in connection with this Agreement or the transactions contemplated hereby.

ARTICLE IV

Representations and Warranties of the Purchaser

As a material inducement to the Company to enter into and perform its obligations under this Agreement, the Purchaser represents, warrants and covenants to the Company as follows:

Section 4.1Experience. The Purchaser is an “accredited investor” within the meaning of Regulation D promulgated under the Securities Act and, by virtue of its experience in evaluating and investing in private placement transactions of securities in companies similar to the Company, the Purchaser is capable of evaluating the merits and risks of its investment in the Company and has the capacity to protect its own interests.  The Purchaser has had access to the Company’s senior management and has had the opportunity to conduct such due diligence review as it has deemed appropriate.

Section 4.2Investment.  The Purchaser has not been formed solely for the purpose of making this investment and is not making this investment with the view to, or for resale in connection with, any distribution of any part thereof in violation of, or in a manner that would require registration of the Convertible Preferred Shares, Series B being purchased hereby under, the Securities Act.  The Purchaser understands that the Convertible Preferred Shares, Series B have not been registered under the Securities Act or applicable state securities or “blue sky” Laws by reason of a specific exemption from the registration provisions of the Securities Act and applicable state securities or “blue sky” Laws, the availability of which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Purchaser’s representations as expressed herein and the Purchaser will not take any actions that would have caused the Convertible Preferred Shares, Series B being purchased hereby to be registered under the Securities Act.  Notwithstanding the foregoing, the use of the proceeds thereof shall not be deemed to be a violation of this representation, warranty and covenant.

Section 4.3Transfer Restrictions.  The Purchaser acknowledges and understands that it must bear the economic risk of this investment for an indefinite period of time because the Convertible Preferred Shares, Series B must be held indefinitely unless subsequently registered under the Securities Act and applicable state securities or “blue sky” Laws or unless an exemption from such registration is available.  The Purchaser understands that any transfer agent of the Company will be issued stop transfer instructions with respect to the Convertible Preferred Shares, Series B unless any transfer thereof is subsequently registered under the Securities Act and applicable state securities or “blue sky” Laws or unless an exemption from such registration is available.

Section 4.4Brokers or Finders.  The Purchaser has not retained any investment banker, broker or finder in connection with this Agreement or the transactions contemplated hereby (including the sale of the Convertible Preferred Shares, Series B) or incurred any liability for any brokerage or finders’ fees, agent commissions or any similar charges in connection with this Agreement or the transactions contemplated hereby.

Section 4.5Organization; Good Standing; Qualification and Power.  The Purchaser is duly organized, validly existing and in good standing under the Laws of its jurisdiction of formation, has all requisite power to carry on its business as presently being conducted and is qualified to do business and in good standing in every jurisdiction in which the failure so to qualify or be in good standing could reasonably be expected to have a material adverse effect on the business, Assets, liabilities, operations, condition (financial or otherwise) or operating results of the Purchaser and its subsidiaries, taken as a whole (a “Purchaser Material Adverse Effect”).

Section 4.6Authorization; Enforceability; Corporate and Other Proceedings.  The Purchaser has all requisite power and authority to execute and deliver each Document to which it is a party and to perform its obligations under each such Document.  Each Document to which the Purchaser is a party has been duly authorized by all necessary action on the part of the Purchaser, and each Document to which the Purchaser is a party has been duly executed and delivered by the Purchaser, and assuming the due authorization, execution and delivery by the other parties thereto constitutes the valid and legally binding obligation of the Purchaser, enforceable in accordance with its terms and conditions, except that the enforcement thereof may be subject to (i) bankruptcy, insolvency, reorganization, receivership, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to creditors’ rights generally and (ii) general principles of equity (whether applied by a court of law or equity) and the discretion of the court before which any proceeding therefor may be brought.

Section 4.7Non Contravention.  The execution, delivery and performance by the Purchaser of the Documents, the consummation of the transactions contemplated thereby and compliance with the provisions thereof, including the purchase of the Convertible Preferred Shares, Series B have not, do not and shall not, (a) violate any Law to which the Purchaser or any of its subsidiaries is subject, (b) violate any provision of the Fundamental Documents of the Purchaser or any of its subsidiaries, (c) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, require the repurchase of, terminate, modify or cancel, or require any notice under any material contract to which the Purchaser or any of its subsidiaries is a party or (d) result in the imposition of any Lien upon any of the Assets of the Purchaser or any of its subsidiaries, except in the case of (a), (c) and (d), as would not have a Purchaser Material Adverse Effect.

Section 4.8No Consent or Approval Required.  No consent, approval or authorization of, or declaration to or filing with, any Person is required by the Purchaser for the valid authorization, execution and delivery by the Purchaser of any Document or for its consummation of the transactions contemplated thereby or for the purchase of the Convertible Preferred Shares, Series B, other than those consents, approvals, authorizations, declarations or filings which have been obtained or made, as the case may be, and such as may be required under state securities or “blue sky” laws in connection with the purchase and resale of the Convertible Preferred Shares, Series B.

Section 4.9Similar Offerings.  None of the Purchaser, its Affiliates or any Person acting on its or any of their behalf (in each case other than the Company( as to which the Purchaser makes no representation), has, directly or indirectly, solicited any offer to buy, sold or offered to sell or otherwise negotiated in respect of, or will solicit any offer to buy, sell or offer to sell or otherwise negotiate in respect of, in the United States or to any United States citizen or resident, any security which is or would be integrated with the sale of the Convertible Preferred Shares, Series B in a manner that would require the Convertible Preferred Shares, Series B to be registered under the Securities Act.

Section 4.10No General Solicitation.  None of the Purchaser, its Affiliates or any person acting on its or any of their behalf (in each case other than the Company, as to whom the Purchaser makes no representation) has engaged or will engage, in connection with the offering of the Convertible Preferred Shares, Series B, in any form of general solicitation or general advertising within the meaning of Rule 502(c) under the Securities Act.

ARTICLE V

Covenants

Section 5.1 Governance  Rights.

(1)For a period of three years, the Company shall, acting through the Board, consistent with and subject to its duties under Nevada law, take all actions necessary allow the Purchaser to elect three (3) of the five (5) Board members.  If there is an amendment to the Articles of Incorporation or Bylaws of Company to increase the number of board seats greater than 5, the Company will increase the number of Board members to be elected by Purchaser sufficient that the number of directors appointed by Purchaser shall be a majority of Board seats.  Of the three members designated by Purchaser for election to the Board of Directors, at least one shall qualify as “independent” in accordance with the applicable listing standards of the NYSE or any other national or regional securities exchange or system of automated dissemination of securities prices in the United States on which the common shares are then traded or quoted, each as amended from time to time  at least one of the three directors and will also qualify as a “financial expert” under Section 407 of Sarbanes-Oxley and SEC Rules (17 CFR § 229.401).   Notwithstanding the foregoing, if after three (3) years after the Effective Date of this Agreement, Purchaser does not hold Convertible Preferred Shares, Series B (or, if converted into common shares common shares from such conversion) as shown below, Purchaser shall obtain the required number of resignations from members of the Board of Directors that Purchaser has elected in accordance with the following:

# of Convertible/Common Shares Held	Number of Directors To Be Appointed by Purchaser
0 - 1,500 Convertible Preferred Shares, Series B or 10,000,000 Common Shares	0
1,501 - 3,500 Convertible Preferred Shares, Series B or 15,000,001 - 20,000,000 Common Shares	1
3,501 – 6,250 Convertible Preferred Shares, Series B or 20,000,001 – 25,000,000 Common Shares	2
6,251+ Convertible Preferred Shares, Series B or 25,000,001+ Common Shares	3

(2) The Purchaser shall provide written notice (the “Designation Notice”) to the Board identifying each Designee.  Upon receiving a Designation Notice, the Board shall take such actions as may reasonably be within their power, consistent with and subject to their duties under Nevada law, to cause the Board to nominate for appointment to the Board, the Designee(s), to include the Designee(s) in the Company’s next election for directors to its Board and to recommend that the shareholders of the Company vote for the Designee(s) for election to the Board.

(3) To the extent that a Designee is unable to stand for election for any reason, the Purchaser shall promptly provide to the Board a written notice of the name of the person to be designated by them in substitution of such prior Designee.

(4) In the event that a Designee ceases to serve as a Board member of the Company due to death, resignation or removal of said director, the Purchaser may submit written notice to the Board designating an individual to replace said Designee.  The Board shall, consistent with and subject to their duties under Nevada law, promptly recommend that the Board appoint such replacement designee as a Board member of the Company to fill any vacancy resulting from the death, resignation or removal of the Designee and to include the Designee in the Company’s next election to its Board and recommend that the shareholders of the Company vote for the Designee for election to the Board.  If any such Designee is elected at an Annual Meeting of Shareholders of the Company, the Designee will be nominated to the Board as a member of the class of directors whose office have expired in that year.

(5) So long as Purchaser retains at least 1,501 of the Convertible Preferred Shares, Series B, the Company shall, acting through the Board, consistent with and subject to their duties under Nevada law, take all actions necessary to cause the nomination and election by the Board of a Chief Executive Officer designated by Purchaser.

Section 5.2 Dividends.  Dividends will be cumulative and will accrue daily from the date of each Closing of this offering at the annual rate of 5% of the stated value of the Convertible Preferred Shares, Series B, payable semi-annually on each June 1 and December 1, commencing June 1, 2009.  The initial stated value of the preferred stock is $1,000 per share.  Any dividends must be declared by the Company’s Board of Directors and must come from funds that are legally available for dividend payments.  In the event that funds are not legally available to pay any dividend on the convertible preferred stock, or if the Company chooses to not pay the dividend in cash, the amount of the stated value of the stock shall be increased by the amount of such unpaid dividend.  Dividends on the Convertible Preferred Shares, Series B will accrue regardless of whether or not earned or declared and regardless of whether or not the Company has profits, surplus or other funds legally available for the payment of dividends.  Except as stated in this Agreement, Company shall not issue or declare any dividends with respect to any class of its respective capital stock or purchase, acquire, or redeem any such stock, without the prior written consent of Purchaser.

Section 5.3                      Conversion.  The Convertible Preferred Shares, Series B can be converted at the Purchaser’s option at any time into shares of the Company’s common stock at the Conversion Price.  The number of common shares will be determined by dividing the stated value of the Convertible Preferred Shares, Series B to be converted by the Conversion Price. On or after May 15, 2010, the Company may require the Purchaser to convert up to 100% of its shares of convertible preferred stock if the volume weighted average price of the Company’s common stock price exceeds $3.00 per share for a continuous 30-day period.

Section 5.4                      Liquidation Preference.  In the event of a voluntary or involuntary dissolution, liquidation or winding up of the Company, the Purchaser will be entitled to be paid a liquidation preference equal to the stated value of the Convertible Preferred Shares, Series B, plus accrued and unpaid dividends and any other payments that may be due on such shares, before any distribution of assets may be made to holders of capital stock ranking junior to the Convertible Preferred Shares, Series B.

Section 5.5                      Optional Redemption.  On or after May 15, 2014 the Company may redeem the Convertible Preferred Shares, Series B, in whole or in part, at its option for the stated value at the time of such redemption, together with accrued but unpaid dividends and other payments that may be due on such shares.  On or after May 15, 2016 the Purchaser may redeem the Convertible Preferred Shares, Series B, in whole or in part, at its option for the stated value at the time of such redemption, together with accrued but unpaid dividends and other payments that may be due on such shares.

Section 5.6                      Voting Rights.  The Convertible Preferred Shares, Series B will vote on an as-converted basis with the common stock.  However, the Company cannot alter or adversely change the rights of the convertible preferred stock, authorize or create any class of senior or parity preferred stock, amend its articles of incorporation or other charter documents in such a way that it would adversely affect the rights of the convertible preferred stock, or increase the number of authorized shares of the convertible preferred stock without the approval of holders of a majority of the convertible preferred stock.

Section 5.7 Distributions Upon Redemption.  Upon redemption of the Purchaser’s Convertible Preferred Shares, Series B, the Company hereby confirms that the Purchaser shall be entitled to accrued and unpaid distributions at an annual rate of 5% (computed on the basis of a 360-day year consisting of twelve 30-day months as provided in the Certificate of Designation) from the issue date thereof to, but excluding, the redemption date, whether or not declared by the Board, as set forth in the Certificate of Designation.

Section 5.8  Registration Rights.

(1) If Purchaser has converted its Convertible Preferred Shares, Series B to common stock of the Company and such shares have not been otherwise registered within the first six (6) months of this Agreement and at any time the Company proposes to file a registration statement with the SEC, whether or not for sale for the Company’s own account, on a form and in a manner that would also permit registration of shares (other than in connection with a registration statement on Forms S-4 or S-8 or any similar or successor form), Company shall give to Purchaser, written notice of such proposed filing promptly, but in any case at least twenty (20) days before the anticipated filing. The notice referred to in the preceding sentence shall offer the holder(s) holding the Conversion Shares the opportunity to register such amount of the Conversion Shares as he may request (a “Piggyback Registration”). Subject to this Section, Company will include in each such Piggyback Registration (and any related qualification under state blue sky laws and other compliance filings, and in any underwriting involved therein) that portion of the Conversion Shares with respect to which Company has received written requests for inclusion therein within twenty (20) days after the written notice from Company is given. The holders holding any portion of the Conversion Shares will be permitted to withdraw all or part of the Conversion Shares from a Piggyback Registration at any time prior to the effective date of such Piggyback Registration.

(2) The Company will file for a registration of its common stock with the SEC on or before January 15, 2010.  To the extent Purchaser converts its Convertible Preferred Shares, Series B into common stock of the Company and/or exercise warrants to purchase common stock of the Company, such common shares will be included in the shares for which the Company will seek registration.  Company shall bear all costs, fees and expenses associated with the registration filing.

Section 5.9  Exclusivity Period.  During the time that Purchaser retains ownership of at least 1,501 Convertible Preferred Shares, Series B (the “Exclusivity Period”), the Company may not accept a financing proposal offered by any other party, unless approved by Purchaser after Purchaser is offered to fund on the same terms, and Company and Purchaser agree to work diligently, in good faith, to negotiate, complete and enter into definitive agreements and related closing documents, reflecting the terms and conditions hereof.

Section 5.10  Capital Expenditures and Transfers.  For 240 days after the Effective Date of this Agreement, Company shall not make any capital acquisitions or expenditures over ten thousand ($10,000.00) dollars without the prior written consent of Purchaser.  This period may be extended for an additional 240 days by a vote of  he entire Board , including the Board members designated by Purchaser.  Company shall not make any payments or transfers of property to any shareholder, officer, director, or key employee other than (A) salaries, bonuses, and compensation for actual services rendered, as approved by Purchaser; and (B) reasonable and customary directors’ fees for directors, without the prior written consent of Purchaser.

Section 5.11 Non-Disclosure.  Purchaser agrees to treat all material, non-public information received from Company as confidential information and not disclose such information to any third party.  Purchaser agrees that it will not trade in Company’s stock based on any material, non-public information.

ARTICLE VI

Indemnification

Section 6.1Indemnification Generally. The Company shall indemnify the Purchaser and its Affiliates, and their respective directors, officers, shareholders and other equity holders, partners, members, attorneys, accountants, agents, advisors, representatives and employees and, as applicable, their respective heirs, successors and permitted assigns (each of the foregoing, in such capacity (as applicable), a “Purchaser Indemnified Party”) from and against any and all losses, damages, liabilities, fines, costs, claims, charges, actions, proceedings, demands, judgments, settlement costs and expenses of any nature whatsoever (including, without limitation, reasonable attorneys’ fees and out-of-pocket expenses), whether joint or several (any of the foregoing, a “Loss”) resulting from any breach of a representation, warranty or covenant by the Company. The Purchaser shall indemnify the Company and its Affiliates, and their respective directors, trustees, officers, shareholders and other equity holders, partners, members, attorneys, accountants, agents, advisors, representatives and employees and, as applicable, their respective heirs, successors and permitted assigns (each of the foregoing, in such capacity (as applicable), a “Company Indemnified Party”; each Company Indemnified Party and Purchaser Indemnified Party, (an “Indemnified Party”) from and against any and all Losses resulting from any breach of a representation, warranty or covenant by the Purchaser.

Section 6.2Indemnification Procedures For Third-Party Claims.  If a claim by a third party (including claims for breaches of fiduciary duties) is made against an Indemnified Party and such Indemnified Party intends to seek indemnity with respect thereto from the Company (in the case of a Purchaser Indemnified Party seeking such indemnity) or the Purchaser (in the case of a Company Indemnified Party seeking indemnity) (each of the Company or the Purchaser, as the case may be, in such capacity, an “Indemnifying Party”), such Indemnified Party shall give notice in writing as promptly as reasonably practicable to such Indemnifying Party of any Proceeding commenced against or by it in respect of which indemnity may be sought hereunder, but failure to so notify such Indemnifying Party shall not relieve such Indemnifying Party from any liability that it may have on account of this Article VI, so long as such failure shall not have materially prejudiced the position of such Indemnifying Party.  Upon such notification, the Indemnifying Party shall assume the defense of such Proceeding brought by a third party, and, after such assumption, the Indemnified Party shall not be entitled to reimbursement of any expenses thereafterincurred by it in connection with such Proceeding, except as described below.  In any such Proceeding, any Indemnified Party shall have the right to retain its own counsel (including local counsel), but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (i) the Indemnifying Party shall have failed to promptly assume and thereafter conduct such defense, (ii) the Indemnifying Party and the Indemnified Party shall have mutually agreed to the contrary, (iii) in the reasonable determination of counsel for the Indemnified Party, representation of such Indemnified Party by counsel obtained by the Indemnifying Party would be inappropriate due to actual or potential conflicting interests between such Indemnified Party and any other party represented by such counsel in such proceeding. No Indemnifying Party, in the defense of a third-party claim, shall, except with the consent of the Indemnified Party, consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect of such claim.  The Indemnifying Party shall not be liable for any settlement of any Proceeding effected without its written consent (which shall not be unreasonably withheld, delayedorconditioned by such Indemnifying Party), but if settled with such consent or if there be final judgment for the plaintiff, the Indemnifying Party shall indemnify the Indemnified Party from and against any Loss by reason of such settlement or judgment. The Indemnifying Party will advance expenses to an Indemnified Party as reasonably incurred so long as such indemnified party shall have provided the indemnifying party with a written undertaking to reimburse the indemnifying party for all amounts so advanced if it is ultimately determined that the indemnified party is not entitled to indemnification hereunder (which shall include breaches of fiduciary duty if permitted above).

Section 6.3 Survival of Representations, Warranties and Covenants.  All representations and warranties and covenants contained in this Agreement or made in writing by or on behalf of the Company or the Purchaser in connection with the transactions contemplated by this Agreement shall survive, for the duration of any statutes of limitation applicable thereto, the execution and delivery of this Agreement, any investigation at any time made by the Company, the Purchaser or on such party’s behalf, the purchase of the Convertible Preferred Shares, Series B by the Purchaser under this Agreement and any disposition of or payment on the Convertible Preferred Shares, Series B.  All statements contained in any certificate or other instrument delivered to the Purchaser or the Company by or on behalf of the Company or the Purchaser pursuant to this Agreement shall be deemed representations and warranties of the Company or the Purchaser, respectively, under this Agreement.

ARTICLE VII

Miscellaneous

Section 7.1 Expenses and Taxes.

(1)Each party to this Agreement shall bear its own respective costs and expenses incurred in connection with the preparation, execution and delivery of this Agreement and the agreements and transactions contemplated hereby, except that the Company shall reimburse the Purchaser for its reasonable legal fees and disbursements incurred in connection with the negotiation and documentation of the purchase of the Convertible Preferred Shares, Series B.

(2)All transfer, stamp (including documentary stamp taxes, if any), and other similar taxes (including, in each case, any penalties, interest or additions thereto)with respect to the initial purchase and sale of the Convertible Preferred Shares, Series B, shall be borne by the Company.

Section 7.2Further Assurances. Purchaser and the Company shall duly execute and deliver, or cause to be duly executed and delivered, at its own cost and expense, such further instruments and documents and to take all such action, in each case as may be necessary or proper in the reasonable judgment of each Company or thePurchaser, respectively, upon the reasonable advice of counsel, to carry out the provisions and purposes of this Agreement and the other Documents.

Section 7.3Securities Law Disclosure; Public Announcement. The Company shall issue a current report on Form 8-K within the time periods required thereby disclosing the material terms of the transactions contemplated hereby and attaching this Agreement as an exhibit thereto.  Except as set forth below, no public release or announcement concerning the transactions contemplated hereby shall be issued by the Company or any of its Subsidiaries without the prior consent of the Purchasers (which consents shall not be unreasonably withheld), except as such release or announcement may be required by law or the applicable rules or regulations of any securities exchange or securities market, in which case the Company shall allow the Purchaser to the extent reasonably practicable under the circumstances, reasonable time to comment on such release or announcement in advance of such issuance.

Section 7.4No Third-Party Beneficiaries. Except as expressly provided herein, this Agreement shall not confer any rights or remedies upon any Person other than the parties hereto and their respective successors and permitted assigns.

Section 7.5 Entire Agreement.This Agreement and the other Documents constitute the entire agreement among the parties hereto and supersede any prior understandings, agreements or representations by or among such parties, written or oral, that may have related in any way to the subject matter of any Document.

Section 7.6Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.  The Company may not assign either this Agreement or any of its rights, interests, or obligations hereunder without the prior written approval of the Purchaser.  The rights and obligations of the Purchaser hereunder shall be binding upon and inure to the benefit of any and all Persons to whom the Purchaser transfers any Convertible Preferred Shares, Series B  in each case with the same force and effect as if the foregoing Persons were named herein as Purchaser parties hereto; provided, that any such transferee of the Convertible Preferred Shares, Series B has executed and delivered to the Company an Instrument of Accession in the form of Exhibit E. References herein to Convertible Preferred Shares, Series B sold by the Company and purchased by the Purchaser shall be deemed to include Convertible Preferred Shares, Series B held or owned by any transferees of the Purchaser, and references to the Purchaser herein (including, without limitation, such references contained in Article VI) shall be deemed to include such transferees.  Notwithstanding the foregoing, the Purchaser may not transfer or assign any of its rights or obligations hereunder or the Convertible Preferred Shares, Series B in violation of the provisions of the Certificate of Designation (including the restrictive legends contained therein) or in violation of the Securities Act or any other manner that would have resulted in a requirement to register the Convertible Preferred Shares, Series B purchased on the date hereof.  Purchaser may assign, transfer or delegate its obligations and rights under this Agreement to any affiliate.

Section 7.7Counterparts. This Agreement may be executed in one or more counterparts(including via facsimile or similar instantaneous electronic transmission devices pursuant to which the signature of or on behalf of such party can be seen), each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

Section 7.8Notices. All notices, requests, demands, claims and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered personally, telecopied, sent by internationally-recognized overnight courier or mailed by registered or certified mail (return receipt requested), postage prepaid, to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):

If to the Company, to:

Ecology Coatings, Inc.

2701 Cambridge Court

Suite 100

Auburn Hills, MI 48326

Telephone:  (248) 736-6200

Telecopy:  (866)750-2489

Attention:  General Counsel

If to the Purchaser, to:

Equity 11, Ltd.

2701 Cambridge Court

#420

Auburn Hills, MI  48326

Telephone:  (248) 377-8012

Telecopy:  (248) 377-6302

Attention:  JB Smith

All such notices and other communications shall be deemed to have been given and received (i) in the case of personal delivery, on the date of such delivery, (ii) in the case of delivery by telecopy, on the date of such delivery, (iii) in the case of delivery by internationally-recognized overnight courier, on the third Business Day following dispatch and (iv) in the case of mailing, on the seventh Business Day following such mailing.

Section 7.9Governing Law. This agreement shall be governed by and construed in accordance with the internal laws of the state of Michigan, without regard to the principles of conflicts of laws thereof.

Section 7.10Submission to Jurisdiction. Except as otherwiseset forth in this Section 7.10, no claim under this Agreement by a party against the other partymay be commenced, prosecuted or continued in any court other than the courts of the State of Michigan located in Pontiac, Michigan in Oakland County or in the United States District Court for the Southern District of Michiganlocated in the City of Detroit, Michigan, which courts shall have exclusivejurisdiction over the adjudication of such matters, and the parties hereto consent to personal jurisdiction, service and venue in any court in which any claim arising out of or in any way relating to this Agreement is brought by any third party against the Company or any Indemnified Party.  The parties hereto agree that a final judgment in any such action, proceeding or counterclaim brought in any such court shall be conclusive and binding upon the parties and may be enforced in any other courts in the jurisdiction of which the parties is or may be subject, by suit upon such judgment.

Section 7.11Specific Performance.  The parties hereto acknowledge that there would be no adequate remedy at law if any party fails to perform any of its obligations hereunder, and accordingly agree that each party, in addition to any other remedy to which it may be entitled at law or in equity, shall be entitled to compel specific performance of the obligations of any other party under this Agreement in accordance with the terms and conditions of this Agreementand immediate injunctive relief, without the necessity of proving the inadequacy of money damages as a remedy, in any court of the United States or any State thereof having jurisdiction.

Section 7.12 Amendments and Waivers.  No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by both partieshereto.  No waiver by any party of any default, misrepresentation, or breach ofrepresentation, warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of representation, warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence.  No such waiver shall be effective unless signed by the party against which the waiver is to be effective.

Section 7.13 Incorporation of Schedules and Exhibits.  The Annex,Schedules and Exhibits identified in this Agreement are incorporated herein by reference and made a part hereof.

Section 7.14 Construction.  Where specific language is used to clarify by example a general statement contained herein, such specific language shall not be deemed to modify, limit or restrict in any manner the construction of the general statement to which it relates.  The use in this Agreement of the term “including” means “including, without limitation.”  The language used in this Agreement shall be deemed to be the language chosen by the parties to express their mutual intent, and no rule of strict construction shall be applied against any party.

Section 7.15 Interpretation.  Unless otherwise indicated, references to “$” are references to the U.S. dollar.  Accounting terms used but not otherwise defined herein shall have the meanings given to them under GAAP.  As used in this Agreement (including allAnnexes,Schedules, Exhibits and amendments hereto), the masculine, feminine and neuter gender and the singular or plural number shall be deemed to include the others whenever the context so requires.  References to Articles and Sections refer to articles and sections of this Agreement.  Similarly, references to Annexes,Schedules and Exhibits refer to schedules and exhibits, respectively, attached to this Agreement.  Unless the content requires otherwise, words such as “hereby,” “herein,” “hereinafter,” “hereof,” “hereto,” “hereunder” and words of like import refer to this Agreement.  The article and section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement.

Section 7.16Severability.  It is the desire and intent of the parties that the provisions of this Agreement be enforced to the fullest extent permissible under the Laws and public policies applied in each jurisdiction in which enforcement is sought.  Accordingly, if any particular provision of this Agreement shall be adjudicated by a court of competent jurisdiction to be invalid, prohibited or unenforceable for any reason, such provision, as to such jurisdiction, shall be ineffective, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction.  Notwithstanding the foregoing, if such provision could be more narrowly written so as not to be invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such jurisdiction, be deemed to be so narrowly written, to the minimum extent necessary to prevent the rendering of such provision from being invalid or unenforceable, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction.

Section 7.17 Waiver of Jury Trial.

EACH OF THE PARTIES HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER DOCUMENT.

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written.

	ECOLOGY COATINGS, INC.
By:	/s/ Robert G. Crockett
	Robert G. Crockett
Its:	CEO

	EQUITY 11, LTD.
By:	/s/ JB Smith
	JB Smith
Its:	Managing Partner

Annex I

CERTAIN DEFINITIONS

“Assets” means, with respect to any Person, all of the assets, rights, interests and other properties, real, personal and mixed, tangible and intangible, owned by such Person.

“Business Day” means any day that is not a Saturday, Sunday, legal holiday or other day on which banks are required to be closed in New York, New York.

“Conversion Price” for each acquisition of 5% Convertible Preferred Shares, Series B, shall mean twenty percent (20%) of the average of the closing price of the Company’s common stock on the Over-The-Counter Bulletin Board exchange for the five prior trading days prior to Purchaser’s investment.  The computation shall be rounded up to the nearest cent (e.g. $.432 = $.44).

 “Documents” means this Agreement and the Certificate of Designation, collectively.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“Fundamental Documents” means, with respect to a corporation, the charter and bylaws (each as amended) or, with respect to any other Person, the documents by which such Person (other than an individual) establishes its legal existence or which govern its internal affairs.

“GAAP” means, at any time, generally accepted accounting principles in the jurisdiction in which the Person to which such principles are applied is organized at such time.

“Governmental Entity” means any court, administrative agency or commission or other governmental authority or instrumentality, domestic or foreign, federal, state or local.

“Law” means any constitution, law, statute, treaty, rule, directive, requirement or regulation or Order, domestic or foreign, of any Governmental Entity or any rules or regulations of any self-regulatory organization.

“Lien” means any security interest, pledge, bailment (in the nature of a pledge or for purposes of security), mortgage, deed of trust, the grant of a power to confess judgment, conditional sale, trust receipt or other title retention agreement (including any lease in the nature thereof), lien, charge, encumbrance, claim,equity, easement, reservation, restriction, cloud, right of first refusal or first offer, option, equity or adverse claim or other similar arrangement or interest in real or personal property.

 “Order” means any order, writ, judgment, injunction, decree, determination or award issued by a Governmental Entity.

 “Person” means any individual, corporation, partnership, limited liability company, trust, estate, or unincorporated organization, or other entity or Governmental Entity or other juridical entity.

 “Proceeding” means any action, suit, claim, inquiry, investigation or proceeding by or before any Governmental Entity.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“SPA” means the Securities Purchase Agreement between Company and Purchaser dated August 28, 2008.

“Subsidiary” means any entity in which the Company  directly or indirectly, through one or more intermediaries, (a) holds beneficially or of record securities that would entitle the Company  to exercise 50% or more of the votes that could be cast in the election of members to the board of directors, board of managers or other governing body of such entity, or (b) possesses, directly or indirectly, power (whether through the ownership of voting securities or, through membership on the board of directors, managers or other governing body, by contract (including, without limitation, a limited partnership agreement or general partnership agreement) or otherwise) to direct or cause the direction of the management and policies of such entity.

EXHIBIT A

CERTIFICATE OF DESIGNATION

of

5% CUMULATIVE CONVERTIBLE PREFERRED SHARES, SERIES B

of

ECOLOGY COATINGS, INC.

ECOLOGY COATINGS, INC. is a Nevada corporation created and existing under the laws of the state of Nevada (the “Company”), and

DOES HEREBY CERTIFY:

Section 1. Designation; Number.

This series of Convertible Preferred Stock is designated as the “Convertible Preferred Shares, Series B” (“Convertible Preferred Shares, Series B”). The par value $0.001 per share.

Section 2. Conversion.

(a)   Each share of the Convertible Preferred Shares, Series B can be converted at the Purchaser’s option at any time into shares of the Company’s common stock at the Conversion Price.  The number of common shares will be determined by dividing the stated value of the Convertible Preferred Shares, Series B to be converted by the Conversion Price.

(b)   If requested by the Company, each holder of record of a share of Convertible Preferred Stock must convert any whole number or all of such holder’s shares of Convertible Preferred Stock into fully paid and nonassessable shares of Common Stock at the Conversion Price if, on or after May 15, 2010, the Company’s common stock price exceeds $3.00 per share for a continuous 30-day period

(c)    Any such conversion may be effected by the holder of Convertible Preferred Shares, Series B by surrendering such holder’s certificate or certificates for the shares of Convertible Preferred Shares, Series B to be converted, duly endorsed, at the office of the Corporation or the office of any transfer agent for the Common Stock, together with a written notice to the Corporation at such office that such holder elects to convert all or a specified number of such shares of Convertible Preferred Stock. Promptly thereafter, the Corporation shall issue and deliver to such holder a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled as aforesaid. Such conversion shall be made at the close of business on the date of such surrender and the person entitled to receive the shares of Common Stock issuable on such conversion shall be treated for all purposes as the record holder of such shares of Common Stock on such date.

Section 3. Voting Rights.

Each holder thereof shall be entitled to vote, together with the holders of the shares of Common Stock (and any other class or series that may similarly be entitled to vote with the shares of Common Stock) as a single class, upon all matters upon which holders of Common Stock are entitled to vote, with each share of Convertible Preferred Shares, Series B entitled to one vote on such matters.  The Company cannot alter or adversely change the rights of the Convertible Preferred Shares, Series B, authorize or create any class of senior or parity preferred stock, amend its articles of incorporation or other charter documents in such a way that it would adversely affect the rights of the Convertible Preferred Shares, Series B or increase the number of authorized share of convertible preferred stock without the approval of holders of a majority of the Convertible Preferred Shares, Series B.

Section 4. Dividends.

The holders of shares of Series A Convertible Preferred Stock shall receive cumulative dividends of 5% payable semi-annually on June 1 and December 1 commencing June 1, 2009.

Section 5. Redemption.

In the event of any liquidation, dissolution, winding up or insolvency of the Corporation, whether voluntary or involuntary, before any distribution or payment is made to any holders of shares of Common Shares or any other class or series of capital stock of the Company designated to be junior to the Convertible Preferred Shares, Series B, and subject to the liquidation rights and preferences of any class or series of preferred stock designated in the future to be senior to, or on a parity with, the Convertible Preferred Shares, Series B with respect to liquidation preferences, the holders of Convertible Preferred Stock shall be entitled to be paid first out of the assets of the Corporation available for distribution to holders of capital stock of all classes whether such assets are capital, surplus or earnings together with the amount of any accrued or capitalized dividends in respect thereof (the “Liquidation Preference”). After payment in full to the holders of Convertible Preferred Stock of the Liquidation Preference, holders of the Convertible Preferred Stock shall, as such, have no right or claim to any of the remaining Available Assets.

Section 6.  Optional Redemption.

On or after May 15, 2014 the Company may redeem the convertible preferred stock, in whole or in part, at its option for the stated value at the time of such redemption, together with accrued but unpaid dividends and other payments that may be due on such shares.  On or after May 15, 2016 the Purchaser may redeem the convertible preferred stock, in whole or in part, at its option for the stated value at the time of such redemption, together with accrued but unpaid dividends and other payments that may be due on such shares.

Section 7. Additional Definitions. For purposes of these resolutions, the following terms shall have the following meanings:

Common Stock” refers to the common stock of the Corporation, par value $0.001 per share.

IN WITNESS WHEREOF, the Corporation has caused this Certificate of Designations to be executed by a duly authorized officer of the Corporation as of this day of May, 2009.

ECOLOGY COATINGS, INC.
By:	/s/
	Name:
	Title:

ANNEX TO

CERTIFICATE OF DESIGNATION

NOTICE OF CONVERSION

To:          Ecology Coatings, Inc.

Reference is made to that certain Certificate of Designation of 5% Cumulative Convertible Preferred Shares, Series B (the “5% Designation”).  Capitalized terms used but not defined herein have the meanings set forth in the 5% Designation.  Pursuant to the 5% Designation, the undersigned, being a holder of 5% Cumulative Convertible Preferred Shares, Series B (an “Exercising Holder”), hereby elects to exercise its conversion rights as to a portion or portions of its 5% Cumulative Convertible Preferred Shares, Series B, all as specified opposite its signature below:

Dated:

EXERCISING HOLDER		NUMBER OF 5% CUMULATIVE CONVERTIBLE PREFERRED SHARES, SERIES B TO BE CONVERTED TO COMMON SHARES
Name	Signature

EXHIBIT E

Instrument of Accession

Reference is made to the Securities Purchase Agreement (the “Purchase Agreement”), dated as of May 15, 2009, between Ecology Coatings, Inc., a statutory corporation created under the laws of the state of Nevada, and Equity 11, Ltd., a Michigan corporation.  Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to them in the Purchase Agreement.

The undersigned,_______________________, as a condition precedent to becoming the owner or holder of record of _____________(_________) Convertible Preferred Shares, Series B hereby agrees to become a Purchaser party to and to be bound by all of the obligations of the Purchaser under the Convertible Preferred Securities Agreement (other than with respect to Section 2.1 thereof), and shall be the recipient of all the rights of the Purchaser under the Purchase Agreement (other than with respect to Sections 7.1, 9.1 and 9.3 thereof).  The undersigned hereby makes to the Company (as of the date written below) the representations and warranties of the Purchaser contained in Article VI of the Purchase Agreement.  The Company hereby makes (as of the date of the Convertible Preferred Securities Agreement) the representations and warranties of the Company contained in Article V of the Purchase Agreement, and the Company hereby agrees that the undersigned shall have all of the rights of the Purchaser under the Purchase Agreement (other than any rights provided to the Purchaser under Sections 2.1, 7.1, 9.1 and 9.3 thereof).  This Instrument of Accession shall take effect and shall become an integral part of the Purchase Agreement immediately upon execution and delivery to the Company of this Instrument of Accession.

The address for notification to the undersigned for purposes of Section 7.8 of the Purchase Agreement is as follows:

 _______________

Telephone:  _______________

Telecopy:  _______________

Attention:  _______________

IN WITNESS WHEREOF, the undersigned has caused this Instrument of Accession to be signed as of the date below written.

____________________

By:__________________

Name:

Title:

Agreed to and Accepted

ECOLOGY COATINGS, INC.

By:______________________________

Name:

Its:

EX-10.54

CONSULTING AGREEMENT

This CONSULTING AGREEMENT (the "Agreement") is made and entered into as of July 15, 2009 by and between ECOLOGY COATINGS, INC., a Nevada corporation (the "Company"), and DMG ADVISORS, LLC, a Nevada limited liability company (the "Consultant").

1. RETENTION OF CONSULTANT. The Company hereby engages and retains Consultant and Consultant hereby agrees to use Consultant's best efforts to render to the Company the consulting services for a period commencing on the date of this Agreement and terminating on January 15, 2009 (six months),or such additional periods as agreed upon in writing by the parties. This Agreement may not be terminated by either the Company or Consultant during its term.

2. CONSULTANT'S SERVICES. Consultant's services under this Agreement shall consist of the following:

2.1 Advise the Company regarding its investor relations program and initiatives;

2.2 Facilitate conferences between the Company and members of the business and financial community;

2.3 Review and analyze the public securities market for the Company's securities; and

2.4 Introduce the Company to broker-dealers and institutions, as appropriate.

In rendering its services, Consultant will deal with the CEO or Directors of the Company.

3. PAYMENT FOR SERVICES.

3.1 The Company shall pay Consultant Five Thousand Dollars ($5,000) per month.  For purposes of this Agreement, the $5,000 shall be deemed to be equivalent to Twenty Five Thousand (25,000) shares of Company’s common stock.  Company shall issue Twenty Five Thousand (25,000) shares of Company’s common stock to Consultant upon execution of this Agreement and Twenty Five Thousand (25,000) shares on the fifteenth day of each calendar month following the date of this Agreement until termination through December 15, 2009.

3.2 The Company's payments under Paragraph 3.1 above shall be deemed full and complete consideration for the services to be rendered by Consultant under this Agreement.

4. CONSULTANT'S TIME COMMITMENT. Consultant shall devote such time as reasonably requested by the Company for consultation, advice and assistance on matters described in this Agreement and provides the same in such form as the Company requests. The Company agrees that Consultant shall not be prevented or barred from rendering services similar or dissimilar in nature for and on behalf of any person, firm or corporation other than the Company.

5. NATURE OF SERVICES AND INDEPENDENT CONTRACTOR. The relationship created

under this Agreement is that of Consultant acting as an independent contractor.  The parties acknowledge and agree that Consultant shall have no authority to, and shall not, bind the Company to any agreement or obligation with any third party. The parties also acknowledge that Consultant's services will consist in part of introducing and facilitating the introduction of parties to the Company.  Consultant will not assist in any negotiations between the Company and such parties. Consultant is not a licensed broker-dealer and will not provide services as a broker-dealer. Consultant will also not provide legal or accounting services.

6. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Consultant shall maintain as secret and confidential all valuable information heretofore or hereafter acquired, developed or used by the Company relating to its business, operations, employees and customers that may give the Company a competitive advantage in its industry (all such information is hereinafter referred to as "Confidential Information"). The parties recognize that, by reason of Consultant's duties under this Agreement, Consultant may acquire Confidential Information. Consultant recognizes that all such Confidential Information is the property of the Company. During the term of Consultant's engagement by the Company, Consultant shall exercise all due and diligent precautions to protect the integrity of any or all of the Company's documents containing Confidential Information. In consideration of the Company entering into this Agreement,

Consultant shall not, directly or indirectly, use, publish, disseminate or otherwise disclose any Confidential Information obtained during Consultant's engagement by the Company without the prior written consent of the Company. The parties agree that this Paragraph 6 shall survive the termination of this Agreement.

7. COMMUNICATIONS WITH CONSULTANT. Consultant will not independently conduct a due diligence review of the Company and will, to a great extent, be relying upon information provided by the Company in rendering services under this Agreement.

8. EXCULPATION OF LIABILITY AND INDEMNIFICATION. All decisions with respect to consultations or services rendered by Consultant for transactions negotiated for and presented to the Company by Consultant shall be those of the Company, and Consultant shall have no liability with respect to such decisions. In connection with the services Consultant renders under this Agreement, the Company indemnifies and holds Consultant harmless against any and all losses,

claims, damages and liabilities and the expense, joint and several, to which Consultant may become subject and will reimburse Consultant for any legal and other expenses, including attorney's fees and disbursements incurred by Consultant in connection with investigating, preparing or defending any actions commenced or threatened or claim whatsoever, whether or not resulting in the liability, insofar as such are based upon the information the Company has supplied to Consultant under this Agreement. In connection with the services Consultant renders under this Agreement, Consultant indemnifies and holds the Company harmless against any and all losses, claims, damages and liabilities and the expense, joint and several, to which Company may become subject and will reimburse Company for any legal and other expenses, including attorney's fees and disbursements incurred by the Company in connection with investigating, preparing or defending any actions commenced or threatened or claim whatsoever, whether or not resulting in the liability, insofar as such are based upon or in connection with the services Consultant has rendered under this Agreement.

9. ENTIRE AGREEMENT. Except for Settlement Agreement, this Agreement sets forth the entire agreement and understanding of the parties relating to the subject matter hereof, and supersedes all prior agreements, arrangements and understandings, written or oral, relating to the subject matter hereof. No representation, promise, or inducement has been made by any party that is not embodied in this Agreement, and no party shall be bound by or liable for any alleged representation, promise or inducement not so set forth. If any provision of this Agreement shall be declared void or against public policy, such provision shall be deemed severed from this Agreement and the remaining provisions shall remain in full force and effect and unmodified.

10. ASSIGNMENT. The Consultant may not assign or transfer any or all rights under this Agreement without written authorization from the Company. The Company may assign its rights, together with its obligations, hereunder in connection with any sale, transfer or other disposition of all or substantially all of its business or assets. In such event, the rights and obligations of the Company shall be binding on its successors or assigns, whether by merger, consolidation or acquisition of all or substantially all of the business or assets.

11. AMENDMENT. This Agreement may be amended, modified, superseded, canceled, renewed or extended and the terms or covenants hereof may be waived only by a written instrument executed by all of the parties hereto who are thereby affected, or in the case of a waiver, by the party waiving compliance. No waiver by either party of the breach of any term or covenant contained in this Agreement, whether by conduct or otherwise, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such breach, or a waiver of the breach of any other term or covenant contained in this Agreement.

12. NOTICES. All notices, consents, requests, demands and offers required or permitted to be given under this Agreement will be in writing and will be considered properly given or made when personally delivered to the party entitled thereto, or when mailed by certified United States mail, postage prepaid, return receipt requested, addressed to the addresses appearing in this Agreement. A party may change his address by giving notice to the other party to this Agreement.

13. COUNTERPARTS. This Agreement may be signed in any number of counterparts, each of which shall be an original, but all of which, taken together, shall constitute one agreement. It shall not be required that any single counterpart hereof be signed by the parties, so long as each party signs any counterpart of this Agreement.

14. GOVERNING LAW. This Agreement shall be governed in all respects and for

all purposes by the laws of the State of Michigan and the Courts of Wayne County, Michigan shall have exclusive jurisdiction to enforce any order or award.

15. ATTORNEYS' FEES. In case of any action or proceeding to compel compliance with, or for a breach of, any of the terms and conditions of this Agreement, the prevailing party shall be entitled to recover from the losing party all costs of such action or proceeding, including, but not limited to, reasonable attorneys' fees.

IN WITNESS WHEREOF, the undersigned have executed this Agreement to be effective as of the day and year first above written.

ECOLOGY COATINGS, INC.

By:  /s/ Robert G. Crockett

Robert G. Crockett

Its:  CEO

2701 Cambridge Court, Suite 100

Auburn Hills, MI  48326

DMG ADVISORS, LLC

By:  /s/ Jeff Holmes

Jeff Holmes

Its:  Manager

SETTLEMENT AND RELEASE AGREEMENT

This Settlement and Release Agreement, by and between Ecology Coatings, Inc. (“ECOC”) and DMG Advisors, LLC, Kirk Blosch and Jeff Holmes (DMG Advisors, LLC, Kirk Blosch and Jeff Holmes collectively referred to as “Undersigned”), is effective July 15, 2009.

1.   In exchange for the following:

·   The parties agree to terminate their Consulting Agreement dated July 26, 2007 (“Initial Consulting Agreement”).

·   ECOC currently owes Undersigned $200,000 for services in connection with the Initial Consulting Agreement.  The parties agree to reduce the obligation to $100,000 which will be satisfied in full by ECOC’s issuance of 500,000 shares to Undersigned.

·   The parties will enter into a new consulting agreement which will have a term of 6 months and payment by ECOC of 25,000 restricted shares of ECOC stock per month to Undersigned.

·   The Undersigned shall not use any of their shares of ECOC stock for short selling purposes.

Undersigned and Ecology Coatings, Inc., its directors, officers, employees,  agents and affiliates, including Equity 11, Ltd. (“ECOC”) each mutually forever release, discharge and indemnify each other from any and all claims, demands,  actions,  causes  of  action  and  any  other  rights which either may have against the other, based upon or arising out of the Initial Consulting Agreement entered into by and between the Undersigned and ECOC.  Undersigned understands and agrees that the consideration as specified herein represents the total amount of money required under this Agreement to be paid on behalf of ECOC and that no further payments are necessary or required.

2. Undersigned acknowledges and agrees this agreement constitutes the entire agreement between Undersigned and ECOC with regard to the matter set forth herein and shall be binding upon and inure to the benefit of the executors, administrators, personal representatives, heirs, successors and assigns of each.

	DMG ADVISORS, LLC, UNDERSIGNED		ECOLOGY COATINGS, INC.
By:	/s/ Jeff Holmes	By:	/s/ Robert G. Crockett
	Jeff Holmes		Robert G. Crockett
Its:	Manager	Its:	CEO
	/s/ Kirk Blosch
	Kirk Blosch, Individually, UNDERSINGED
	/s/ Jeff Holmes
	Jeff Holmes, Individually, UNDERSINGED

EX-10.56

ECOLOGY COATINGS, INC.

CONVERTIBLE PROMISSORY NOTE

$300,000                                                                                                Note Number:

February 26, 2006

FOR VALUE RECEIVED, ECOLOGY COATINGS, INC., a California corporation (“Company”), promises to pay to Chris L. Marquez (“Holder”), or its registered assigns, in lawful money of the United States of America the principal sum of THREE HUNDRED THOUSAND DOLLARS ($300,000), or such lesser amount as shall equal the outstanding principal amount hereof, together with interest from the date of this Convertible Promissory Note (the “Note”) on the unpaid principal balance at a rate equal to fifteen percent (15%) per annum, computed on the basis of the actual number of days elapsed and a year of 365 days.  All unpaid principal, together with any then unpaid and accrued interest and other amounts payable hereunder, shall be due and payable on the earlier of (i) August 26, 2007 (the “Maturity Date”), or (ii) when, upon or after the occurrence of an Event of Default (as defined below), such amounts are declared due and payable by Holder or made automatically due and payable in accordance with the terms hereof.  This Note is one of a duly authorized series of Convertible Promissory Notes of the Company that may be issued by the Company from time to time of like tenor and effect (except for such variations as may be necessary to express the name of the payee, the number, the date, and the principal amount of each note) each dated on or after February 28, 2006 (the “Bridge Notes”).

The following is a statement of the rights of Holder and the conditions to which this Note is subject, and to which Holder, by the acceptance of this Note, agrees:

1.   Definitions.  As used in this Note, the following capitalized terms have the following meanings:

(a)   “Business Day” means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in the State of Ohio are authorized or obligated by law or executive order to close.

(b)   “Company” includes the corporation initially executing this Note and any Person which shall succeed to or assume the Obligations of Company under this Note.

(c)   “Event of Default” has the meaning given in Section 4 hereof.

(d)   “Holder” means the Person specified in the introductory paragraph of this Note or any Person who shall at the time be the registered Holder of this Note, and “Bridge Holders” shall refer to all such Persons holding then-outstanding Bridge Notes.

(e)   “Lien” means with respect to any property, any security interest, mortgage, pledge, lien, claim, charge or other encumbrance in, of, or on such property or the income therefrom, including, without limitation, the interest of a vendor or lessor under a conditional sale agreement, capital lease or other title retention agreement, or any agreement to provide any of the foregoing, and filing of any financing statement or similar instrument under the Uniform Commercial Code or comparable law of any jurisdiction.

(f)   “Majority-in-Interest of the Bridge Holders” means Bridge Holders holding more than fifty percent (50%) of the aggregate outstanding principal amount of the then-outstanding Bridge Notes.

(g)   “Material Adverse Effect” shall mean a material adverse effect on (a) the business, assets, operations, prospects or financial or other condition of the Company; (b) the ability of the Company to pay or perform the Obligation in accordance with the terms of this Note and each of the other Bridge Notes and to avoid an Event of Default, or an event which, with the giving of notice or the passage of time or both, would constitute an Event of Default, under any Bridge Notes; or (c) the rights and remedies of Holder under this Note or any related documents, instrument or agreement.

(h)   “Obligations” means and includes all loans, advances, debts, liabilities and obligation howsoever arising, owned by Company to the Bridge Holders of every kind and description (whether or not evidenced by any note or instrument and whether or not for the payment of money), now existing or hereafter arising under or pursuant to the terms of the Bridge Notes, including all interest, fees, charges, expenses, attorneys’ fees and costs and accountants’ fees and costs chargeable to and payable by Company hereunder and thereunder, in each case, whether direct or indirect, absolute or contingent, due or to become due, and whether or not arising after the commencement of a proceeding under Title 11 of the United State Code 17 USC Section 101 et. Seq.) as amended from time to time (including post-petition interest) and whether or not allowed or allowable as a claim in any such proceeding.

(i)   “Person” means and includes an individual, a partnership, a corporation (including a business trust), a joint stock company, a limited liability company, an unincorporated association, a joint venture or other entity or a governmental authority.

(j)   “Securities Act” means the Securities Act of 1933, as amended.

2.Interest.  Subject to Section 3 and 8 of this Note, accrued interest on this Note shall be first payable on the Maturity Date.

3.Prepayment.  Company may prepay this Note in whole or in part only upon the prior written consent of the Bridge Holder.

4.Events of Default.  The occurrence of any of the following shall constitute an “Event of Default under this Note:

(a)   Failure to Pay.  The Company shall fail to pay when due any principal or interest payment on the date hereunder;

(b)   Voluntary Bankruptcy or Insolvency Proceedings.  The Company shall (i) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian of itself of all or a substantial part of its property, (ii) be unable, or admit in writing its inability, to pay its debts general as they mature, (iii) make a general assignment for the benefit of its or any of its creditors, (iv) be dissolved or liquidated, (v) become insolvent (as such term may be defined or interpreted under any applicable statute), (vi) commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or consent to any such relief or to the appointment of or taking possession of its property by any official in an involuntary case or other proceeding commenced against it, or (vii) take any action for the purpose of effecting any of the foregoing; or

(c)   Involuntary Bankruptcy or Insolvency Proceedings.  Proceedings for the appointment of a receiver, trustee, liquidator or custodian of the Company or of all or a substantial part of the property thereof, or an involuntary case or other proceedings seeking liquidation, reorganization or other relief with respect to the Company or the debts thereof under any bankruptcy, insolvency or other similar law now or hereafter in effect shall be commenced and an order for relief entered or such proceeding shall not be dismissed or discharged within thirty (30) days of commencement.

5.Rights of Holder Upon Default.  Upon the occurrence or existence of any Event of Default (other than an Event of Default described in Sections 4(b) or 4(c)) and at any time thereafter during the continuance of such Event of Default, Holder may, with the consent of a Majority-in-Interest of the Bridge Holders, by written notice to the Company, declare all outstanding Obligation payable by Company hereunder to be immediately due and payable without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived.  Upon the occurrence or existence of any Event of Default described in Sections 4(b) and 4(c), immediately and without notice, all outstanding Obligations payable by the Company hereunder shall automatically become immediately due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived.

6.   Representations and Warranties of the Company.  The Company represents and warrants to Holder that:

(a)   Due Incorporation, Qualification, etc.  The Company (i) is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation; (ii) has the power and authority to own, lease and operate its properties and carry on its business as now conducted; and (iii) is duly qualified, licensed to do business and in good standing as a foreign corporation in each jurisdiction where the failure to be so qualified or licensed could reasonably be expected to have a Material Adverse Effect.

(b)   Authority.  The execution, delivery and performance by the Company of this Note (i) are within the power of the Company and (ii) have been duly authorized by all necessary actions on the part of the Company.

(c)   Enforceability.  This Note has been or will be, duly executed and delivered by the Company and constitutes, or will constitute, a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as limited by bankruptcy, insolvency or other laws of general application relating to or affecting the enforcement of creditors’ rights generally and general principles of equity.

(d)   Non-Contravention.  The execution and delivery by the Company of this Note and the performance and consummation of the transactions contemplated thereby do no and will not (i) violate the Company’s Articles of Incorporation or Bylaws (“Charter Documents”) or any material judgment, order, writ, decree, statute, rule or regulation applicable to the Company; (ii) violated any provision of, or result in the breach of the acceleration of, or entitle any other Person to accelerate (whether after the giving of notice or lapse of time or both), any material mortgage, indenture, agreement, instrument or contract to which the Company is a party or by which it is bound; or (iii) result in the creation or imposition of any Lien upon any property, asset or revenue of the Company or the suspension, revocation, impairment, forfeiture, or nonrenewal of any material permit, license, authorization or approval applicable to the Company, its business or operations, or any of its assets or properties.

(e)   Approvals.  No consent, approval, order or authorization of, or registration, declaration or filing with, any governmental authority or other Person (including, without limitation, the shareholders of any person) is required in connection with the execution and delivery of this Note and the performance and consummation of the transactions contemplated thereby.

(f)   No Violation of Default.  The Company is not in violation of or in default with respect to (i) its Charter Documents or any material judgment, order, writ, decree, statute, rule or regulation applicable to such Person; or (ii) any material mortgage, indenture, agreement, instrument or contract to which such Person is a party or by which it is bound (no is there any waiver in effect which, if not in effect, would result in such a violation or default), where, in each case, such violation or default, individually, or together with all such violations or defaults, could reasonably be expected to have a Material Adverse Effect.

7.Representations and Warranties of Holder.  Holder represents and warrants to the Company upon the acquisition of this Note as follows:

(a)   Binding Obligation.  Holder has full legal capacity, power and authority to execute and deliver this Note and to perform its obligations hereunder.  This Note is a valid and binding obligation of Holder, enforceable in accordance with its terms, except as limited by bankruptcy, insolvency or other laws of general application relating to or affecting the enforcement of creditors’ rights generally and general principles of equity.

(b)   Securities Law Compliance.  Holder has been advised that this Note and the underlying securities have not been registered under the Securities Act, or any state securities laws and, therefore, cannot be resold unless they are registered under the Securities Act, and applicable state securities laws or unless an exemption from such registration requirements is available.  Holder is aware that the Company is under no obligation to effect any such registration with respect to this Note or the underlying securities or to file for or comply with any exemption from registration.  Holder has not been formed solely for the purpose of making this investment and is purchasing this Note for its own account for investment, not as a nominee or agent, and not with a view to, or for resale in connection with, the distribution thereof.  Holder has such knowledge and experience in financial and business matters that Holder is capable of evaluating the merits and risks of such investment, is able to incur a complete loss of such investment and is able to bear the economic risk of such investment for an indefinite period of time.  Holder is an accredited investor as such term is defined in Rule 501 of Regulation D under the Securities Act.

(c)   Tax Advisors.  Holder acknowledges that it has had the opportunity to review with its own tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contemplated by this Note.  Holder further acknowledges and agrees that Holder (and not the Company) shall be responsible for its own tax liability that may arise as a result of this investment or the transactions contemplated by this Note.

8.   Acceleration of Payment/Optional Conversion.

(a)   Automatic Conversion.  In the event the Company consummates, prior to the Maturity Date an equity financing pursuant to which it sells shares of its Stock (the “Stock”) with the principal purpose of raising capital and with aggregate gross proceeds to the Company of at least $5,000,000 (including the principal amount of any Bridge Notes that convert into Stock in such financing)(the “Qualified Equity Financing”), the Holder may, at its sole option, (i) elect to have the Company pay to Holder the entire outstanding principal amount of and all accrued interest under this Note upon the consummation of the Qualified Equity Financing or (ii) elect to have the outstanding principal amount of and all accrued interest under this Note convert into shares of Stock on the same terms and conditions (except for price) as the other investors that purchase the Stock in the Qualified Equity Financing at a conversion price per share equal to eighty percent (80%) of the price per share paid by the other investors that purchase the Stock in the Qualified Equity Financing (the “Discount Price”).

(b)   Conversion Procedure.  In the event Holder elects to convert this Note pursuant to Section 8(a), Holder agrees to deliver the original of this Note (or a notice to the effect that the original Note has been lost, stolen or destroyed and an agreement acceptable to the Company whereby Holder agrees to indemnify the Company from any loss incurred by it in connection with this Note) at the closing of the Qualified Equity Financing for cancellation.  In addition, upon conversion of this Note in connection with a Qualified Equity Financing, Holder hereby further agrees to execute and deliver to the Company all transaction documents related to the Qualified Equity Financing, including a purchase agreement and other ancillary agreements, with customary representations and warranties and transfer restrictions (including a 180-day, or such shorter period established by the lead underwriter, lock-up agreement in connection with an initial public offering), and having the same terms as those agreements entered into by the other investors that purchase the Stock.

(c)   Delivery of Stock Certificate; No Fractional Shares.  In the event of the conversion of this Note pursuant to Section 8(a), Company shall deliver to Holder not more than ten (10) Business Days after delivery by Holder of this Note to Company a certificate representing the shares of Stock issued upon conversion of this Note and cash in lieu of any fractional shares pursuant to the next sentence.  No fractions of shares or scrip representing fractions of shares will be issued upon conversion, but instead of any fractional interest, Company shall pay a cash adjustment, computed on the basis of the Discount Price.

9.Successors and Assigns.  Subject to the restrictions on transfer described in Section 11 and 12 below, the rights and Obligation of Company and Holder of this Note shall be binding upon and benefit the successors, assigns, heirs, administrators and transferees of the parties.

10.Waiver and Amendment.  Any provision of this Note may be amended, waived or modified upon the written consent of Company and a Majority-in-Interest of the Bridge Holders.

11.Transfer of this Note or Securities Issuable on Conversion Hereof.  Holder agrees that this Note and the securities issuable upon conversion of this Note may not be offered, sold, transferred or disposed of in any other way without the prior written consent of the Company.  With respect to any offer, sale or other disposition of this Note or securities into which such Note may be converted, Holder will give written notice to Company prior thereto, describing briefly the manner thereof, together, if requested, with a written opinion of Holder’s counsel, or other evidence if reasonably satisfactory to the Company, to the effect that such offer, sale or other distribution may be effected without registration or qualification (under any federal or state law then in effect).  Upon receiving such written notice and reasonably satisfactory opinion, if so requested, or other evidence, Company, as promptly as practicable, shall notify Holder whether or not Holder may sell or otherwise dispose of this Note or such securities, all in accordance with the terms of the notice delivered to Company.  If a determination has been made pursuant to this Section 11 that the opinion of counsel for Holder, or other evidence, is not reasonably satisfactory to Company, Company shall so notify Holder promptly after such determination has been made.  After Holder ahs been notified in writing that the Company consents to the offer, sale, or other disposition of this Note or such securities, Holder may sell or otherwise dispose of this Note or such securities in accordance with the terms of the notice delivered to Company.  Each Note thus transferred and each certificate representing the securities thus transferred shall bear a legend as to the applicable restrictions on transferability in order to ensure compliance with the Securities Act, unless in the opinion of counsel for Company such legend is not required in order to ensure compliance with the Securities Act.  Company may issue stop transfer instructions to its transfer agent in connection with such restrictions.  Subject to the foregoing, transfers of this Note shall be registered upon registration books maintained for such purpose by or on behalf of Company.  Prior to presentation of this Note for registration of transfer, Company shall treat the registered Holder hereof as the owner and Holder of this Note for the purpose of receiving all payments of principal and interest hereon and for all other purposes whatsoever, whether or not this Note shall be overdue and Company shall not be affected by notice to the contrary.

12.Assignment by Company.  Neither this Note nor any of the rights, interests or Obligations hereunder may be assigned, by operation of law or otherwise, in whole or in part, by Company without the prior written consent of a Majority-in-Interest of the Bridge Holders.

(a)   Notices.  All notices, request, demands, consent, instructions or other communications required or permitted hereunder shall be in writing and faxed, mailed or delivered to each party as follows:  (i) if to Holder, at Holder’s address of facsimile number set forth on the signature page hereto, or at such other address as Holder shall have furnish the Company in writing, or (ii) if to the Company, at the following address of facsimile number (or at such other address or facsimile number as the Company shall have furnished to the Investors in writing):

Company:                      Ecology Coatings, Inc.

1238 Brittain Road

Akron, Ohio  44310

Telephone:  (33) 633-3500

Facsimile:   (330) 633-3464

Attn:  Chief Financial Officer

All such notices and communications shall be effective (a) when sent by Federal Express or other overnight service of recognized standing, on the business day following the deposit with such service; (b) when mailed, by registered or certified mail, first class postage prepaid and addressed as aforesaid through the United States Postal Service, four days after being deposited in the mail; (c) when delivered by hand, upon delivery; and (d) when faced, upon confirmation of receipt.

13.Withholding Rights.  The Company shall be entitled to deduct and withhold from any payments made pursuant to this Note such amounts as the Company is required to deduct and withhold with respect to the making of such payment under the Internal Revenue Code of 1986, as amended, or any provision of state or local tax law.  To the extent that amounts are so withheld by the Company, such withheld amounts shall be treated for all purposes of this Note as having been paid to Holder in respect of which such deduction and withholding was made by Company.

14.Pari Passu Notes.  Holder acknowledges and agrees that the payment of all or any portion of the outstanding principal amount of this Note and all interest hereon shall be pari passu in right of payment and in all other respects to the other Bridge Notes.  In the event Holder receives payments in excess of its pro rata share of Company’s payments to the Bridge Holder holding the other Bridge Notes, then Holder shall hold in trust and such excess payments for the benefit of the Bridge Holders holding the other Bridge Notes and shall pay such amounts held in trust to such other Bridge Holders upon demand by such Investors.

15.Usury.  In the event any interest is paid on this Note which is deemed to be in excess of the then legal maximum rate, then that portion of the interest payment representing an amount in excess of the then legal maximum rate shall be deemed a payment of principal and applied against the principal of this Note.

16.Waivers.  Company hereby waives notice of default, presentment or demand for payment, protest or notice of nonpayment or dishonor and all other notices or demands relative to this instrument.

17.Partial Invalidity.  If at any time any provision of this Note is or becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions of this Note nor the legality, validity or enforceability of such provision under the law of any other jurisdiction shall in any way be affected or impaired thereby.

18.Governing Law.  This Note and all actions arising out of or in connection with this Note shall be governed by and construed in accordance with the laws of the State of California, without regard to the conflicts of law provisions of the State of California, or of any other state.

IN WITNESS WHEREOF, the Company and Holder have caused this Second Allonge to be executed and delivered as of the date and year first above written.

ECOLOGY COATINGS, INC.

By:  /s/ Richard Stromback

Richard Stromback

Its:           CEO

Accepted and agreed to:

/s/ Chris L Marquez

CHRIS L. MARQUEZ

EX-10.57

ALLONGE TO CONVERTIBLE PROMISSORY NOTE

DATED FEBRUARY 28, 2006

This Allonge (the “Allonge”), dated as of December 1, 2006, attached to and forming a part of a Convertible Promissory Note,, dated February 28, 2006 (collectively, the “Note”), made by ECOLOGY COATINGS, INC., a California corporation (the “Company”), payable to the order of CHRIS L. MARQUEZ (the “Holder”), in the original principal amount of $300,000.

1.   The first paragraph of the Note is hereby amended and restated in its entirety as follows:

FOR VALUE RECEIVED, ECOLOGY COATINGS, INC., a California corporation (“Company”),

Promises to pay Chris L. Marquez (“Holder”) or his registered assigns,, in lawful money

of the United States of American the principal sum of THREE HUNDRED THOUSAND

Dollars ($300,000), or such lesser amount as shall equal the outstanding principal amount

Hereof, together with interest from the date of this Convertible Promissory Note (the “Note”)

on the unpaid principal balance at a rate equal to fifteen percent (15%) per annum, computed on the basis of the actual number of days elapsed and a year of 365 days.  All unpaid principal,

together with any then unpaid and accrued interest and other amounts payable hereunder, shall be due and payable on the earlier of (i) December 31, 2007 (the “Maturity Date”), or (ii) when, upon or after the occurrence of an Event of Default (as defined below), such amounts are declared due and payable by Holder or made automatically due and payable in accordance

with the terms hereof.  This Note is one of a duly authorized series of Convertible Promissory

Notes of the Company that may be issued by the Company from time to time of like tenor

And effect (except for such variations as may be necessary to express the name of the payee, the number, the date, and the principal amount of each note) each dated on or after February 28, 2006 (the “Bridge Notes”).

In all other respects, the Note is confirmed, ratified and approved and, as amended by this

Allonge, shall continue in full force and effect.

IN WITNESS WHEREOF, the Company and Holder have caused this Second Allonge to be executed and delivered as of the date and year first above written.

ECOLOGY COATINGS, INC.

By:  /s/ Adam S. Tracy

Adam S. Tracy, Esq.

Its:           Vice President

Accepted and agreed to:

/s/ Chris L Marquez

CHRIS L. MARQUEZ

EX-10.58

SECOND ALLONGE TO
CONVERTIBLE
PROMISSORY NOTE
DATED FEBRUARY 28, 2006

This Second Allonge (the Second Allonge) dated as of July 26, 2007, attached to and forming a part of the Convertible Promissory Note, dated 

February 28, 2006 (collectively, the Note), made by ECOLOGY COATINGS, INC., a California corporation (the Company), payable to the order of 

CHRIS L. MARQUEZ (the Holder), in the original principal amount of $300,000.

1.           The first paragraph of the Note is hereby amended and restated in its entirety as follows:

FOR VALUE RECEIVED, ECOLOGY COATINGS, INC., a California corporation (Company), promises to pay to Chris L. Marquez (Holder) or his registered 

assigns, in lawful money of the United States of America the principal sum of ONE HUNDRED FIFTY THOUSAND Dollars ($150,000), or such lesser amount 

as shall be equal to the outstanding principal amount hereof, together with interest from the date of this Convertible Promissory Note (the Note) 

on the unpaid principal balance at a rate equal to fifteen percent (15%) per annum, computed on the basis of the actual number of days elapsed and 

a year of 365 days. All unpaid principal, together with any then unpaid and accrued interest and other amounts payable hereunder, shall be due and 

payable on the earlier of (i) December 31, 2007 (the Maturity Date), or (ii) when, upon or after the occurrence of an Event of Default (as defined 

below), such amounts are declared due and payable by Holder or made automatically due and payable in accordance with the terms hereof. This Note is 

one of a duly authorized series of Convertible Promissory Notes of the Company that may be issued by the Company from time to time of like tenor and 

effect (except for such variation as may be necessary to express the name of the payee, the number, the date, and the principal amount of each note) 

each dated on or after February 28, 2006 (the Bridge Notes).

2.           In all other respects, the Note is confirmed, ratified, and approved and, as amended by this Second Allonge, shall continue in full force 

and effect.


[This space intentionally left blank]






IN WITNESS WHEREOF, the Company and Holder have caused this Second Allonge to be executed and delivered as of the date and year first above written.

ECOLOGY COATINGS, INC.



By:  /s/ Adam S. Tracy
Adam S. Tracy, Esq.
Its:           Vice President


Accepted and agreed to:


/s/ Chris L Marquez
CHRIS L. MARQUEZ

EX-10.59

CONSULTING SERVICES AGREEMENT

This Debt Consulting Services Agreement (hereinafter the "Agreement") is entered this 5th. day of January, 2009 by and between JAMES M. JULIANO (hereinafter "Consultant") and ECOLOGY COATINGS, INC. (hereinafter "Client"), a Nevada corporation, with reference to the following:

RE CIT A L S:

WHEREAS, Client desires to be assured of the association and services of Consultant in order to avail itself of Consultant's experience, skills, abilities, knowledge, and background to facilitate long range strategic planning, and to advise Client in business and/or financial matters and is therefore willing to engage Consultant upon the terms and conditions set forth herein.

WHEREAS, Consultant desires to be assured, and Client desires to assure Consultant, that, if Consultant associates with Client and allocates his resources necessary to provide Client with his services as Client requires and expects, the Consultant will be paid the consideration described herein and said consideration will be nonrefundable, regardless of the circumstances.

WHEREAS, the Consultant agrees to be engaged and retained by the Client and Client agrees to engage and retain Consultant upon the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the foregoing, of the mutual promises hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1.             Engagement. Client hereby engages Consultant on a non-exclusive basis,

and Consultant hereby accepts the engagement to become debt Consultant to Client and to render such advice, consultation, information, and services to the Directors and/or Officers of Client regarding debt management and financial counseling.

2.              Term. The term ("Term") of this Agreement shall commence on the date

hereof and continue for one (1) year. The Agreement may be extended upon agreement by both parties, unless or until the Agreement is terminated. Either party may cancel this Agreement upon five days written notice in the event either party violates any material provision of this Agreement and fails to cure such violation within five (5) days of written notification of such violation from the other party. Such cancellation shall not excuse the breach or non-performance by the other party or relieve the breaching party of their obligation incurred prior to the date of cancellation.

3.              Due Diligence. Client shall supply and deliver to Consultant all

information relating to the Client's debt as may be reasonably requested by the Consultant to enable Consultant to provide the consulting services described in paragraph 1 hereof.

4.              Compensation and Fees. As consideration for Consultant entering into

this Agreement, the Client shall pay the Consultant $7,500.00 at the end of each month during the term of this agreement, regardless of the amount of services the Consultant renders during the month. The Consultant will also be reimbursed for all reasonable business expenses the Consultant incurs in the performance of your consulting services for the Client. The Consultant will not participate in any employee benefit programs offered by the Client to its employees. The Client shall not be obligated to pay the Consultant compensation during any period in which the Consultant is unable to render the services requested because of sickness, injury, or other disability.

5.              Exclusivity; Performance; Confidentiality. The services of Consultant

hereunder shall not be exclusive, and Consultant and his agents may perform similar or different services for other persons or entities whether or not they are competitors of Client. Consultant agrees that he will, at all times, faithfully and in a professional manner perform all of the duties that may be reasonably required of Consultant pursuant to the terms of this Agreement. Consultant shall be required to expend only such time as is necessary to service Client in a commercially reasonable manner. Consultant does not guarantee that his efforts will have any impact upon the Client's business or that there will be any specific result or improvement from Consultant's efforts. Consultant acknowledges and agrees that confidential and valuable information proprietary to Client and obtained during his engagement with Client, shall not be, directly or indirectly, disclosed without the prior express written consent of Client, unless and until such information is otherwise known to the public generally or is not otherwise secret and confidential.

6.              Exculpation of Liability and Indemnification. All decisions with respect

to consultations or services rendered by Consultant for transactions negotiated for and presented to the Client by Consultant shall be those of the Client, and Consultant shall have no liability with respect to such decisions. In connection with the services Consultant renders under this Agreement, the Client indemnifies and holds Consultant harmless against any and all losses, claims, damages and liabilities and the expense, joint and several, to which Consultant may become subject and will reimburse Consultant for any legal and other expenses, including attorney's fees and disbursements incurred by Consultant in connection with investigating, preparing or defending any actions commenced or threatened or claim whatsoever, whether or not resulting in the liability, insofar as such are based upon the information the Client has supplied to Consultant under this Agreement.

7.              Independent Contractor. In his performance hereunder, Consultant shall

be an independent contractor. Consultant shall complete the services required hereunder according to his own means and methods of work, shall be in the exclusive charge and control of Consultant and which shall not be subject to the control or supervision of Client, except as to the results of the work. Client acknowledges that nothing in this Agreement shall be construed to require Consultant to provide services to Client at any specific time, or in any specific place or manner. Payments to Consultant hereunder shall not be subject to withholding taxes or other employment taxes as required with respect to compensation paid to an employee.

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8.             Arbitration and Fees. Any controversy or claim arising out of or relating

to this Agreement, or breach thereof, may be resolved by mutual agreement; or if not, shall be settled in accordance with the Arbitration rules of the American Arbitration Association in Irvine, California. Any decision or award rendered by the arbitrators shall be binding upon the parties and shall be enforceable as a judgment in any court of competent jurisdiction. The prevailing party in such arbitration or other proceeding shall be entitled, in addition to such other relief as many be granted, to a reasonable sum as and for attorney's fees in such arbitration or other proceeding which may be determined by the arbitrator or other officer in such proceeding. If collection is required for any payment not made when due, the creditor shall collect statutory interest and the cost of collection, including attorney's fees whether or not court action is required for enforcement. The prevailing party in any such proceeding shall also be entitled to reasonable attorneys' fees and costs in connection all appeals of any judgment.

9.              Notices. Any notice or other communication required or permitted

hereunder must be in writing and sent by either (i) certified mail, postage prepaid, return receipt requested and First Class mail; or (ii) overnight delivery with confirmation of delivery; or (iii) facsimile transmission with an original mailed by first class mail, postage prepaid, addressed as follows:

If to the Client:

Ecology Coatings

Address:

2701 Cambridge Court, Suite 100 Auburn Hills, Michigan 48326 Attn: General Counsel & Secretary

Facsimile No.:

866-750-2489

If to Consultant:

James M. Juliano

Address:

2701 Cambridge Court Suite 425

Auburn Hills, MI 48326

Facsimile No:

248-377-6302

or in each case to such other address and facsimile number as shall have last been furnished by like notice. If mailing is impossible due to an absence of postal service, and other methods of sending notice are not otherwise available, notice shall be hand-delivered to the aforesaid addresses. Each notice or communication shall be deemed to have been given as of the date so mailed or delivered, as the case may be; provided, however, that any notice sent by facsimile shall be deemed to have been given as of the date sent by facsimile if a copy of such notice is also mailed by first class mail on the date sent by facsimile; if the date of mailing is not the same as the date of sending by facsimile, then the date of mailing by first class mail shall be deemed to be the date upon which notice given.

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10.             Additional Provisions. No waiver of any of the provisions of this

Agreement shall be deemed or shall constitute a waiver of any other provision and no waiver shall constitute a continuing waiver. No waiver shall be binding unless executed in writing by the party making the waiver. No supplement, modification, or amendment of this Agreement shall be binding unless executed in writing by all parties. This Agreement constitutes the entire agreement between the parties and supersedes any prior agreements or negotiations. There are no third party beneficiaries of this Agreement. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Michigan, regardless of laws of conflicts.

11.             Recitals. The Recitals are incorporated herein by this reference and made

a material part of this Agreement.

The parties hereto have entered into this Agreement on the date first written above.

"Client"

Ecology Coatings, Inc.

a Nevada corporation

/s/ Robert G. Crockett

By: Bob Crockett

Title: CEO

" Consultant"

/s/ James M. Juliano

James M. Juliano

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EX-10.60

FIRST AMENDEMENT TO EMPLOYMENT AGREEMENT

This First Amendment to Employment Agreement is made as December 15, 2008 (“Amendment”), by and between Ecology Coatings, Inc., a Nevada corporation (“Company”) and Sally J.W. Ramsey (“Executive”) and amends the Employment Agreement between Company and Executive dated January 1, 2007 (“Agreement”).

1.The parties agree to amend Section 4.1 of the Agreement to add the following language at the end of Section 4.1:

Notwithstanding the foregoing, Executive agrees to an annual salary of $60,000 until the Company obtains/closes on additional equity financing that supports a sustainable Company.

2.   In all other respects, the terms of the Agreement shall remain in full force and effect.

ECOLOGY COATINGS, INC.

By:  /s/ Robert G. Crockett                                                                                                                     By:  /s/ Sally J.W. Ramsey

         Robert G. Crockett                                                                                                                          Sally J.W. Ramsey

Its:  CEO

EX-10.62

OFFICE SUBLEASE

This Office Sublease (“Sublease”) is made effective as of September 30, 2008, by and between SEVEN INDUSTRIES, LTD., a Michigan Corporation d/b/a Seven Capital (“Sub-Landlord”), and Ecology Coatings, Inc., a Nevada corporation (“Sub-Tenant”), upon the following terms and conditions.

1. Description of the Premises. Sub-Landlord entered into a lease for office space (“Master Lease”) located on land and improvements known as the Champion Building, 2701 Cambridge Court, Auburn Hills, Michigan 48326(the “Building”).  Sub-Landlord has full right and authority to enter into a sublease regarding the Building. Sub-Landlord subleases to Sub-Tenant and Sub-Tenant hires from Sub-Landlord Suite 100 of said property for its operations (the “Premises”).  There shall be no leasehold improvements made to the property without the prior written consent of the Sub-Landlord.  Any leasehold improvements made by Sub-Tenant shall be paid by the Sub-Tenant.

2. Common Areas. Sub-Landlord shall also ensure that areas and facilities of common benefit are made available to the tenants and occupants of the Premises, including parking areas, driveways, sidewalks and ramps, service areas, hallways, lighting facilities, and landscaped areas (the “Common Areas”).  Sub-Landlord shall ensure that the Common Areas are operational, managed, equipped, well-lit, insured, repaired, and maintained. All Common Areas shall be under the exclusive control and management of the Sub-Landlord and any party required under the Master Lease.

3. Term. This Sublease shall be for the term of two (2) years commencing on September 30, 2008, (the “Commencement Date”) and ending on September 30, 2010.

4. Rental.  Sub-Tenant shall pay to Sub-Landlord a monthly rent shown in the below schedule, payable in advance, on the first day of each month during the term of this Sublease. All rent shall be paid to Sub-Landlord at the address 2701 Cambridge Court, Suite 420, Auburn Hills, Michigan 48326, or at any other address that Sub-Landlord designates in writing, without any prior demand by Sub-Landlord and without any deduction or offset.

Monthly Rent Schedule

RENTAL PERIOD	MONTHLY RENT
Commencement Date – 11/30/08	$2,590.52
12/1/08 – 11/30/2009	$2,951.76
12/1/2009 –5/31/2010	$3,119.03
6/1/2010 - 9/30/2010	$3,154.17

If Sub-Tenant fails to pay any amount it owes to Sub-Landlord under this Sublease when that amount is due, the amount shall be assessed a one-time late charge of $200.00 and shall be subject to a service charge until it is paid at the lesser of the rate of 2 percent per month or the highest rate permitted by law.

5. Operating Expenses. All operating expenses have been included in the rent.

6. Use. Sub-Tenant shall use and occupy the Premises as a general office and for no other purpose without the prior written consent of Sub-Landlord. Sub-Tenant shall not intentionally and knowingly use the Premises for any purpose or in any manner in violation of any law, ordinance, rule, or regulation adopted or imposed by any federal, state, county, or municipal body or other governmental agency. Sub-Tenant shall not deface or injure the Premises or the Building, permit anything to be done on the Premises tending to create a nuisance or to disturb other tenants in the Building, or permit any activity in the Premises that will result in an increase of any insurance premium on the Premises or the Building.

7. Taxes. Sub-Landlord shall remain responsible, as determined under the Master Lease, for all taxes and special assessments levied against the land and improvements on and in which the Premises are situated. Sub-Tenant shall pay all personal property taxes assessed against any personal property owned by Sub-Tenant on the Premises.

8. Maintenance and Repair. Sub-Landlord shall ensure that the Premises and the Common Areas are maintained and kept in good condition and repair, including the exterior windows, the heating and air-conditioning equipment, and the electrical and plumbing systems. Sub-Landlord shall be obligated to ensure repairs are made only after Sub-Tenant has given Sub-Landlord written notice of the need for the repair, and only if the repair was not caused by the negligence or willful act of Sub-Tenant or its agents, employees, invitees, or licensees.

Sub-Landlord shall ensure that a regular janitorial service is provided and paid for to maintain the Premises in a neat and clean condition. Sub-Tenant shall be responsible for all repairs or replacements occasioned by the negligence or willful act of Sub-Tenant or its agents, employees, invitees, or licensees.

9. Assignment and Subletting. Sub-Tenant agrees not to sell, assign, mortgage, pledge, or in any manner transfer this Sublease or sublet the Premises or any portion of the Premises without Sub-Landlord’s prior written consent, which shall not be unreasonably withheld. In the event of any assignment or sublease, Sub-Tenant shall remain fully liable on this Sublease. Sub-Landlord’s right to assign this Sublease is unqualified. Upon any sale of the Premises in which the purchaser assumes all obligations under this Sublease, Sub-Landlord shall be entirely free of all obligations of the landlord under this Sublease and shall not be subject to any liability resulting from any act, omission, or event occurring after the conveyance. Sub-Tenant agrees to recognize and attorn to any such transferee, and Sub-Tenant further agrees, at Sub-Landlord’s request, to sign and deliver a recordable document setting forth the provisions of this paragraph.

10. Utilities. All utility expenses have been included in the rent. Sub-Landlord shall provide all utilities, including electricity, heat, air-conditioning, ventilation, water, and sewer services.  Except for Sub-Landlord’s negligence, Sub-Landlord shall not be liable for damages should the furnishing of any utilities be interrupted by fire or other casualty, accident, strike, labor dispute or disagreement, the making of any necessary repairs or improvements, or any other causes beyond the reasonable control of Sub-Landlord.

11. Insurance. Sub-Landlord shall ensure that the proper party under the Master Lease insures the Building, including the Premises and the Common Areas, against loss or damage under a policy of fire or extended coverage insurance in amounts that Sub-Landlord and owner deem appropriate.

Except for Sub-Landlord’s negligence, Sub-Tenant shall indemnify Sub-Landlord and keep Sub-Landlord harmless from any liability or claim for damages that may be asserted against Sub-Landlord because of any accident or casualty occurring on or about the Premises.  Any insurance maintained by either party pursuant to this paragraph shall contain a clause or endorsement under which the insurer waives all rights of subrogation against the other party or its agents or employees with respect to losses payable under the policy.

Any personal property kept on the Premises by Sub-Tenant shall be kept there at Sub-Tenant’s sole risk.

12. Acceptance of Premises. The opening by Sub-Tenant of its business in the Premises shall constitute an acknowledgment by Sub-Tenant that the Premises are then in acceptable condition.

13. Damage or Destruction. If, during the term of this Sublease, the Premises are partially or totally destroyed by fire or other casualty covered by insurance so as to become partially or totally untenantable, the Premises shall be repaired as quickly as possible as determined under the Master Lease unless this Sublease is terminated as provided below. In the event of such damage or destruction, and if this Sublease is not terminated, there shall be no abatement or reduction in the rent payments due under this Sublease.

If, during the term of this Sublease, the Premises or the Building is partially or totally destroyed by fire or other casualty, and the Master Lease is terminated, Sub-Landlord shall have the right to terminate this Sublease. Upon the giving of the notice, this Sublease shall terminate as of the date on which the damage occurred, and the rent shall be adjusted to that date. If the notice by Sub-Landlord is not given, this Sublease shall continue and Sub-Landlord shall cause the Premises or the Building to be repaired or restored with due diligence.

14. Condemnation. If the whole or any part of the Premises is taken by any public authority under the power of eminent domain, including any conveyances or grants made in anticipation of, or in lieu of, such a taking, then the term of this Sublease shall cease on that part of the Premises to be taken from the day the possession of that part shall be acquired by public authority, and the rent shall be paid up to that date. If the taking of a portion of the Premises substantially impairs the usefulness of the Premises for the purpose for which the Premises were leased, Sub-Tenant shall have the right either to terminate this Sublease or to continue in the possession of the remainder of the Premises under the terms and conditions of this Sublease, except that the rent shall be reduced in proportion to the amount of the Premises taken and, in the latter event, Sub-Landlord shall promptly restore the remainder to a reasonably tenantable condition. All damages awarded for the taking shall belong to and be the property of Sub-Landlord as determined under the Master Lease, whether the damages are awarded as compensation for diminution of value of the leasehold or to the fee of the Premises. However, Sub-Landlord shall not be entitled to any award made to Sub-Tenant for the costs of removing fixtures or for business interruption.

15. Alterations. No improvements, alterations, additions, or physical changes shall be made on the Premises by Sub-Tenant without the Sub-Landlord’s prior written consent. Sub-Tenant shall not paint or decorate any part of the interior or exterior of the Premises or attach or hang any curtains, blinds, shades, screens, awnings, or other projections to the interior or exterior of any window of the Premises or on the outside wall of the Building. Also, Sub-Tenant shall not attach or exhibit any sign, display, lettering, or advertising matter of any kind on the exterior walls or corridors of the Building or on any window or door of the Premises without Sub-Landlord’s prior written consent. All alterations and improvements, but not moveable equipment and trade fixtures, put in at the expense of Sub-Tenant shall be the property of Sub-Tenant and shall remain on and be surrendered with the Premises at the termination of the Sublease. However, Sub-Landlord may require that Sub-Tenant remove the alterations and improvements and repair any damages to the Premises caused by the removal.

16. Signs. Sub-Landlord shall ensure that appropriate signs are provided on the exterior of the Building and in the Common Areas. Sub-Tenant shall, at its own expense, be responsible for any of its signs on the exterior of the Premises. Sub-Landlord reserves the right to require uniform signs for all tenants, and no sign or other advertising or lettering shall be placed on the exterior walls or corridors of the Building or on any windows or doors of the Premises without Sub-Landlord’s prior consent.

17. Remedies and Default. If Sub-Tenant does any of the following:

a. defaults in paying any sums to Sub-Landlord when due, including rent and additional rent, and does not cure the default within 10 days;

b. defaults in performing any other covenant or condition of the Sublease and does not cure the other default within 30 days after written notice from Sub-Landlord specifying the default; or

c. is adjudicated to be bankrupt or makes any assignment for the benefit of creditors;

Then Sub-Landlord may:

a.   accelerate the full balance of the rent payable for the remainder of the term and sue for the sums due;

b.   terminate this Sublease; or

c.   without terminating this Sublease, reenter the Premises and dispossess Sub-Tenant or any other occupant of the Premises, remove Sub-Tenant’s effects, and relet the Premises for the account of Sub-Tenant for rent and upon terms that are satisfactory to Sub-Landlord, crediting the proceeds, after deducting the costs and expense of reentry, alterations, additions, and reletting, to the unpaid rent and the other amounts due under this Sublease during the remainder of the term, and Sub-Tenant shall remain liable to Sub-Landlord for the balance owed.

If suit is brought to recover possession of the Premises, to recover any rent or any other amount due under the provisions of this Sublease, or because of the breach of any other covenant to be performed by Sub-Tenant, and a breach is established, then Sub-Tenant shall pay to Sub-Landlord all expenses incurred in the action, including reasonable attorney fees, which shall be deemed to have been incurred on the commencement of the action and shall be enforceable whether or not the action is prosecuted to judgment.

18. Access to Premises. Sub-Landlord and any party required under the Master Lease shall have the right to enter the Premises at all reasonable hours, provided that the entry does not interfere with the operation and conduct of Sub-Tenant’s business. Sub-Landlord and any party required under the Master Lease shall have the right to use all or any part of the Premises to install, maintain, use, repair, and replace pipes, ducts, lights, conduits, plants, wires, floor coverings, and all other mechanical equipment serving the Premises in locations within the Premises that will not materially interfere with Sub-Tenant’s use of the Premises.

19. Rules and Regulations. Sub-Landlord reserves the right to adopt from time to time rules and regulations for the operation of the Building that are customary for buildings of this character and are not inconsistent with the provisions of this Sublease. Sub-Tenant and its agents, employees, invitees, and licensees shall comply with all rules and regulations.

20. Waiver. Sub-Landlord’s failure to insist on a strict performance of any of the terms, covenants, or conditions of this Sublease shall not be deemed a waiver of any subsequent breach or default in the terms, covenants, and conditions in this Sublease. This Sublease may not be changed, modified, or discharged orally.

21. Notices. All notices required under this Sublease shall be in writing and shall be deemed to be given if either delivered personally or mailed by certified or registered mail to Sub-Landlord or to Sub-Tenant at their respective addresses set forth in this Sublease or to any other address that either party furnishes in writing during the term of this Sublease.

22. Quiet Enjoyment. Sub-Landlord covenants and agrees with Sub-Tenant and its successors and assigns that, upon Sub-Tenant’s paying the rent and observing and performing all the terms, covenants, and conditions on Sub-Tenant’s part to be performed and observed, Sub-Tenant may peaceably and quietly hold, occupy, possess, and enjoy the Premises for the full term of this Sublease.

23. Subordination to Mortgage. Any mortgage now or later placed upon any property of which the Premises are a part shall be deemed to be prior in time and senior to the rights of Sub-Tenant under this Sublease. Sub-Tenant subordinates all of its interest in the leasehold estate created by this Sublease to the lien of any mortgage of Sub-Landlord. Sub-Tenant shall, at Sub-Landlord’s request, sign any additional documents necessary to indicate this subordination.

Notwithstanding the foregoing, Sub-Tenant’s possession of the Premises under this Sublease shall not be disturbed by any mortgagee, trustee under a trust deed, owner, or holder of a note secured by a mortgage or trust deed now existing or later placed on the Premises, unless Sub-Tenant breaches any of the provisions of this Sublease and the lease term of Sub-Tenant’s right to possession is lawfully terminated in accordance with the provisions of this Sublease.

24. Security Deposit. Sub-Tenant has not deposited a security deposit with Sub-Landlord.

25. Changes by Sub-Landlord. Sub-Landlord and any proper party under the Master Lease reserve the absolute right at any time and from time to time to make changes or revisions in the Building, parking lot, driveways, signs, landscaping, and sidewalks, including additions to, subtractions from, or rearrangements of the improvements, provided that the changes do not materially alter the use of the Premises.

26. Holding Over. If Sub-Tenant remains in possession of the Premises after the expiration or termination of the Sublease and without signing a new lease, it shall be deemed to be occupying the Premises as a tenant from month to month at twice the minimum rent (as adjusted in this Sublease), subject to all the conditions, provisions, and obligations of this Sublease insofar as it can be applicable to a month-to-month tenancy, cancelable by either party upon seven days’ written notice to the other.

27. Recording. Sub-Tenant shall not record this Sublease without the written consent of Sub-Landlord.

28. Captions and Headings. The captions and headings used in this Sublease are intended only for convenience and are not to be used in construing this Sublease.

29. Applicable Law. This Sublease shall be construed under the laws of the State of Michigan. If any provision of this Sublease or portions of this Sublease or their application to any person or circumstances shall, to any extent, be invalid or unenforceable, the remainder of this Sublease shall not be affected and each provision of this Sublease shall be valid and enforceable to the fullest extent permitted by law.

30. Successors. This Sublease and its covenants and conditions shall inure to the benefit of and be binding on Sub-Landlord and its successors and assigns and shall be binding on Sub-Tenant and permitted assigns of Sub-Tenant.

31. No Partnership. Any intention to create a joint venture or partnership between the parties is expressly disclaimed.

32. Recovery by Sub-Tenant. Sub-Tenant agrees to look solely to the interest of Sub-Landlord in the land and improvements on which the Premises are situated to satisfy any judgment against Sub-Landlord as a result of any breach by Sub-Landlord of its obligations under this Sublease. No other property of Sub-Landlord or any partners shall be subject to levy or execution as a result of any claim by Sub-Tenant against Sub-Landlord arising out of the relationship created by this Sublease.

33. Estoppel Agreement. At the request of Sub-Landlord, Sub-Tenant shall, within 10 days, deliver to Sub-Landlord, or anyone designated by Sub-Landlord, a certificate stating the Commencement Date and the term and certifying, as of that date, the date to which rent, additional rent, and other charges under this Sublease are paid, that this Sublease is unmodified and in full force, and that Sub-Landlord is not in default under any provision of this Sublease or, if the Sublease is modified or if Sub-Landlord is in default, stating the modification or the nature of the default and the amount of any claims.

34. Effective Date. Sub-Landlord and Sub-Tenant have signed this Sublease and it shall be effective on the date listed at the beginning of this agreement.

SUB-LANDLORD                                                                                      SUB-TENANT

SEVEN INDUSTRIES, LTD.,                                                                                                Ecology Coatings, Inc.,

a Michigan Corporation                                                                                                a Nevada corporation

By:  /s/ JB Smith________                                                                                                 By:  /s/ Robert G. Crockett

JB SMITH                                                                                                    Robert G. Crockett

Its:  Managing Partner Its:   CEO

EX-10.63

COLLABORATION AGREEMENT

The Agreement is by and between Reynolds Innovations Inc. (hereinafter “RII”) and Ecology Coatings Inc. (hereinafter “Supplier”).  The effective date of this Agreement is April 1st, 2009.

Whereas RII is a manufacturer and seller of tobacco products, including cigarettes, snus, and other smokeless tobacco products;

Whereas Supplier has expertise and capabilities regarding coatings, including UV curable products;

Whereas RII and Supplier desire to discuss with one another projects, products, needs and ideas of RII relating to coatings having application as components of tobacco products;

Whereas RII and Supplier deem it desirable to collaborate on a project directed toward Supplier’s development for RII of coatings and associated technologies for RII’s use in tobacco products;

Now therefore, RII and Supplier deem it mutually beneficial to engage in collaborative activities with one another, to become parties to this Agreement, and to agree as follows:

SECTION 1.                           DEFINITIONS

1.1           Defined Terms.  The following terms have the following meanings:

"Affiliate" means, as to a party to this Agreement, any corporation, company, partnership, joint venture or other entity which controls, is controlled by, or is under common control with, such party.  For purposes of this definition, the term “control” shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person or entity, whether through ownership of voting securities, by contract, or otherwise.

"Confidential Information" means (i) any proprietary information of either party or of a third party with whom either party has an obligation of confidence, (ii) any other information or data relating to any aspect of the collaboration or any research project, work in progress, tests, scientific information, technical information, engineering information, manufacturing information, marketing plan, business plan, proposal, financial or personnel matter relating to either party or to a third party with whom either party has an obligation of confidence, or (iii) the present or future products, sales, suppliers, customers, employees, investors or business of either party or a third party with whom either party has an obligation of confidence; whether any of the foregoing is observed or in oral, written, graphic or electronic form.

“Coatings” means materials capable of being applied to components of tobacco products, and including materials and formulations.

“Intellectual Property” means information, concepts, ideas, discoveries, inventions (whether conceived or reduced to practice, and whether or not patentable), specifications, requirements, prototypical products, prototypical product components, data, codes, programs, designs, blueprints, sketches, graphics, drawings, photographs, developments, processes, methods, know-how, trade secrets, patent applications, patents, and other intellectual property of any type, and enhancements and improvements of the foregoing.

“Receiving Party” has the meaning set forth in Section 5.2.

SECTION 2.                           COLLABORATION

2.1           Collaboration.  RII and Supplier will cooperate towards engaging in research and development efforts for the purpose of developing Coatings and evaluating tobacco product components having Coatings applied thereto.  Details of the types and specifications of Coatings intended to be produced by Supplier pursuant to the collaboration, are set forth in Attachment A, (Collaboration Activities including Descriptions of Coatings), which is attached hereto and becomes part of this Agreement.  The content of Attachment A may be amended in writing, by mutual consent of the Parties.

2.2           RII’s Responsibilities.  RII shall have primary responsibility for identifying the overall goals of the collaboration, and for evaluating Coatings provided to it by Supplier.  RII shall disclose to Supplier information, concepts, ideas, specifications, and requirements (to the extent available and at RII’s sole discretion) regarding RII’s needs relating to the Coatings.

2.3           Supplier’s Responsibilities.  Supplier shall have primary responsibility for designing, manufacturing and supplying to RII Coatings that meet specifications and requirements set by RII and are acceptable to RII.  Supplier shall have the responsibility of providing adequate non-commercial quantities of Coatings to RII solely for the purpose of allowing RII to conduct evaluation of the Coatings for research and development purposes.  Supplier shall have the responsibility of providing to RII information regarding: (i) Coatings and the components of those Coatings, (ii) all process conditions regarding preparation of those Coatings.

2.4           Periodic Meetings.  Supplier and RII shall arrange periodic meetings, to be held periodically at mutually agreeable times and locations to discuss with one another the status of the project, project timing, design review, changes relating to the Coatings, and other relevant topics relating to the collaboration and the Coatings.

2.5           Visit of Facilities.  Representatives of either party may, upon reasonable notice and at times reasonably acceptable to the other party, (i) visit the facilities where the activities relating to the collaboration are being conducted; and (ii) consult informally, during such visits and by telephone, with personnel of the other party performing such activities.  Each party shall bear its own expenses with regard to any such visits, unless otherwise agreed upon in writing by the parties.  If requested by the other party, the parties each shall cause appropriate individuals working on the activities relating to the collaboration to be available for meetings at the location of the facilities where such individuals are employed at times reasonably convenient to each party.

2.6           Supplier’s Limited Exclusivity of Efforts.  Supplier represents and warrants that, as of the effective date of this Agreement, it is not in any way conducting any activities with any third party relating to the development, manufacture, supply, or sale of any Coatings for use in connection with tobacco products or for use within the tobacco industry.  Until the later of December 1st, 2011 or future date that the parties enter into a Commercial Agreement of the type set forth in Attachment B (Detailed Project Stages, Compensation, and Success Criteria), which is attached hereto and becomes part of this Agreement, Supplier shall not, without RII’s prior written approval, solicit orders, initiate any orders, cooperate in the fulfillment of orders, or conduct any activities with any third party relating to the development, manufacture, supply, or sale of any Coatings for use in connection with tobacco products or for use within the tobacco industry.

2.7           RII’s Non-Exclusivity of Efforts.  RII makes no representation or warranty that, it has not entered into any agreement with any third party (or that it will not enter into any agreement with any third party) that obligates RII to (i) collaborate with any third party towards the development, manufacture, supply or sale of Coatings (or coatings of any type) to RII, or (ii) purchase Coatings (or coatings of any type) from any third party.  During the collaboration period, RII shall remain entitled to place orders or conduct any activities with any third party relating to the development, manufacture, supply, or sale of any type of coatings (including Coatings).  Nothing contained in this Agreement shall be construed as requiring RII to (i) use any Coatings or associated technology resulting from this Agreement or from the efforts of Company, or (ii) stop obtaining any types of coatings from other sources, including RII’s current source of coatings or coated papers for use associated with tobacco product manufacture.

SECTION 3.                           COMMERCIAL ASPECTS OF COLLABORATION

3.1           Acceptance.  Provided that the Coatings perform in accordance with the specifications, meets those qualifications, and performs in accordance with the general criteria set forth in Attachments A, which is attached hereto and becomes part of this Agreement, RII shall notify Supplier of its acceptance of the Coatings.

3.2           Delivery.  Supplier shall supply RII with Coatings for evaluation pursuant to Suppliers’ consent, which is attached hereto as Attachment B and becomes part of this Agreement.  The party may mutually agree in writing to amend each element of Attachment B during the term of this Agreement.

3.3           Payment Terms.  Payment terms shall be those set forth in Attachment B.  In no event shall RII be responsible for payment of more that those amounts set forth in Attachment B, without its prior written consent.

3.4           Costs of Collaboration.  Direct costs associated with the collaboration during the development and application of Coatings shall be but limited to the extent set forth in Attachment B.

3.5           Further Commercial Relationship.  In the event that RII, in its sole discretion, determines that any Coatings provided by Supplier are satisfactory for use in applications in conjunction with any tobacco product component, the parties each shall negotiate in good faith towards arriving at terms and conditions of a separate Commercial Agreement to exclusively license Supplier’s Coatings.  This Commercial Agreement would provide for RII’s or its Affiliates ability to employ for commercial purposes any and all formulations and technologies associates with Coatings provided by Supplier and for Supplier's ability to be reasonably compensated for RII's commercial use of such formulations, technologies and materials.  The ranges of Commercial costs have been estimated by the parties in accordance set forth in, Attachment C. (Proposed Commercial Terms of Collaboration).  Nothing contained in this Agreement shall be construed as obligating RII to employ Coatings in commercial applications or to enter into any type of commercial agreement with Supplier; and any commercial relationship with Supplier shall be at RII’s sole discretion.

SECTION 4.                           INTELLECTUAL PROPERTY RIGHTS

4.1           Ownership.

(a)  All Intellectual Property resulting solely from RII or its representatives shall be solely owned by RII.  All Intellectual Property resulting from activities of RII unrelated to the Coatings, this Agreement or the collaboration contemplated thereby, whether or not those activities involved a third party, shall be owned (as between RII and Supplier) by RII.  Disclosure of Intellectual Property of RII to Supplier by RII shall not in any way affect RII’s ownership rights with respect to RII’s Intellectual Property, absent a written agreement to the contrary.

(b)                           All Intellectual Property relating to the Coatings resulting solely from Supplier or its representatives, whether or not those activities involved a third party, shall be owned (as between RII and Supplier) by Supplier. provided that, all such Intellectual Property results from activities of Supplier related to the Coatings, this Agreement or the collaboration contemplated thereby.

(c) With regards to 4.1 (b) Supplier agrees to license to RII and its Affiliates such Intellectual Property on both a non-exclusive and exclusive basis, subject to mutually acceptable commercial terms.

4.2           Intellectual Property from Joint Activities.

(a) Intellectual Property that results from the joint activities of the parties by their respective employees or representatives shall be owned by (i) Supplier if the Intellectual Property relates to the Coatings, and (ii) RII if the Intellectual Property relates to any product resulting from the use of the Coatings and processes associated with the use of the Coatings for production of any such product containing tobacco components.  (iii) both parties if the Intellectual Property relates to any product resulting from the use of the Coatings and processes associated with the application of the Coatings for production of any such product other than those containing tobacco components.

(b) For inventions (whether or not patentable), inventorship shall be determined in accordance with the rules of inventorship under the laws of the United States of America), and inventions that are jointly invented by the parties shall be owned by (i) Supplier if the inventions relate to the Coatings and processes associated with the manufacture of the Coatings, and (ii) RII if the inventions relate to any product resulting from the use of the Coatings and processes associated with the use of the Coatings for production of any such product containing tobacco components. (iii) both parties if the inventions relate to any product resulting from the use of the Coatings and processes associated with the application of the Coatings for production of any such product other than those containing tobacco components.  The parties each shall enter into (or shall have entered into) agreements with their respective employees and representatives providing that, to the extent permitted by applicable law, such employees and representatives shall assign (or be obligated to assign) to the party hereto which acts as their employer or applicable contracting party, the ownership and control of all inventions conceived or reduced to practice by such employees and representatives in the course of their employment for, or within the scope of the relevant relationship with, each party hereto.

           (c) From the effective date of this Agreement and for a period of 3 years thereafter, Supplier shall grant to RII an exclusive license under the Intellectual Property that arises from Joint Activities owned by the Supplier in accordance with Section 4.2 (a).and a non-exclusive license under the Intellectual Property that arises from Joint Activities owned by the Supplier in accordance with Section 4.2 (a), thereafter subject to mutually acceptable commercial terms.

4.3           Prosecution of Patents.  Supplier shall be solely responsible for preparing, filing, prosecuting and maintaining (at its discretion) patents and or patent applications for inventions for which it has ownership rights pursuant to Sub-Section 4.1(b).  RII shall be solely responsible for preparing, filing, prosecuting and maintaining (at its discretion) patents and patent applications for inventions for which it has ownership rights pursuant to Sub-Sections 4.1(a) and 4.2 (b).  Each party shall cooperate with the other with regard to the preparation, filing, and prosecution of patent applications directed toward inventions that name at least one inventor of Supplier and/or that otherwise result from activities of Supplier pursuant to this Agreement.  The parties shall ensure that their respective employees and representative who are named as on patent applications as inventors on jointly owned patent applications have executed assignments to the appropriate party.

4.4           Infringement Actions.  If a party receives any notice, suit or claim alleging that the conduct or activities of either or both of the parties in accordance with this Agreement infringes Intellectual Property rights of a third party, the party receiving such notice shall promptly inform the other, and the parties shall promptly discuss and decide on an appropriate action and response to such notice, suit or claim.

4.5           Documents.  RII shall have sole ownership rights of all documents that originate by or through it, its employees, or its representatives.  Supplier shall have sole ownership rights of all documents that originate by or through it, its employees, or its representatives.

4.6           No Other Licenses.  Except as expressly set forth in this Agreement or as required by law, nothing in this Agreement shall be construed to grant any right or license under any Intellectual Property of either party to the other, including any patent, trademark or trade secret.

SECTION 5.                                      CONFIDENTIALITY

5.1           Confidentiality Obligation.  For a period that extends for seven years beyond termination, each party shall maintain in confidence all Confidential Information disclosed to it by the other party.  Neither party will use, disclose or grant the use of such Confidential Information except as expressly authorized by this Agreement.  To the extent that disclosure is authorized by this Agreement, the party receiving the Confidential Information (the "Receiving Party") shall obtain prior agreement from its employees, representatives and contracting parties to whom disclosure is to be made to hold in confidence and not make use of such information for any purpose other than those permitted by this Agreement.  Each party will use at least the same standard of care as it uses to protect its own proprietary and trade secret information to ensure that such employees, representatives and contracting parties do not disclose or make any unauthorized use of such Confidential Information.  Each party will promptly notify the other upon discovery of any unauthorized use or disclosure of the Confidential Information.  The Receiving Party shall be responsible to the other party for any loss of Confidential Information of the other party or breach of the provisions of this Section 5 by any employee, representative or contracting party of the Receiving Party that received such Confidential Information from the Receiving Party.

           5.2           Exceptions.  The obligations of confidentiality contained in Sub-Section 5.1 will not apply to the extent that it can be established by the Receiving Party by competent proof that such Confidential Information:

(i) was already known to the Receiving Party, other than under an obligation of confidentiality, at the time of receipt from the other party;

(ii) was generally available to the public or otherwise part of the public domain at the time of its receipt from the other party;

(iii) becomes generally available to the public or otherwise part of the public domain after its disclosure and other than through any act or omission of the Receiving Party in breach of this Agreement; or

(iv) was received by the Receiving Party, other than under an obligation of confidentiality, by a third party lawfully in possession of the information.

5.3           Authorized Disclosure.  Each party (and third parties as applicable) may disclose the Confidential Information to the extent such disclosure is reasonably necessary in filing or prosecuting patent applications, prosecuting or defending litigation, complying with court orders, or complying with applicable governmental regulations, provided that if such party is required to make any such disclosure of the Confidential Information it will to the extent practicable give reasonable advance notice to the other party of such disclosure requirement and, except to the extent inappropriate in the case of patent applications, will use its best efforts to secure confidential treatment of such information required to be disclosed.

5.4                           Further Authorized Disclosure.  In no event shall RII be restricted in its ability to use any information provided to it by Supplier pursuant to Sub-Section 2.3.

SECTION 6.                                      TERM AND TERMINATION

6.1           Term of Collaboration.  Unless earlier terminated as provided herein, the period over which the collaboration set forth in Section 2 extends shall commence on the effective date of this Agreement and shall continue for a term that ends on or before December 31, 2011.  The term of the collaboration may end prior to December 31, 2011 in the event that the parties agree in writing that collaborative activities are complete.  That term may be extended by mutual agreement of the parties following written notice by one party to the other of its desire to extend that term; provided such notice is received by the other party at least 90 days prior to the date of expiration of that term.  Upon expiration of such term, this Agreement shall terminate.

6.2                 Termination.

(a) The parties may mutually agree in writing at any time to terminate the collaboration or terminate this Agreement.

(b) Each party will have the right to terminate this Agreement (i) in the event of insolvency or bankruptcy of the other party, or (ii) after appropriate written notice to the other that the other is in breach of any material term of this Agreement, unless the other party cures the breach before the expiration of 60 days from the date of receipt of such notice.

(c) Either party may elect to terminate the collaboration or this Agreement prior to expiration of this Agreement by providing to the other 90 days’ written notice to the other.  Such termination of this Agreement shall not relieve the parties of any obligation accruing prior to such termination, even if such obligation extends beyond such termination.

(d) In the event that this Agreement is terminated for any reason, the parties shall cooperate toward arriving at a final accounting for amounts due by one party to the other; including amounts due to Supplier for direct costs incurred and non-cancelable commitments made in the performance of this Agreement for which RII has agreed to be responsible (not to exceed the amount for which RII has agree to be responsible), and amounts due to RII for pre-paid amounts to Supplier for activities and expenses not yet performed or incurred by Supplier.

6.3                 Other Agreements.  Termination of this Agreement for any reason shall not have any effect upon projects, activities, collaborations, commercial arrangements, or service arrangements that the parties may have with one another and that do not relate to the Equipment or this Agreement.

6.4                 Survival.  Section 4, Section 5, Sub-Section 6.2(d), Sub-Section 7.7, and Sub-Section 7.11 shall survive termination of this Agreement for any reason.

SECTION 7.                           MISCELLANEOUS PROVISIONS

7.1                 Representation of Authority.  Each party hereby represents and warrants to the other party that it is lawfully constituted in accordance with the laws of its state or country of incorporation and that its signatory to this Agreement has full power and authority to enter into this Agreement.

7.2                 Notices.

(a)           All notices sent under this Agreement are to be sent by overnight courier or facsimile addressed to such party at the address or facsimile number set forth below or to such other address or facsimile number as either party has designated by notice given to the other party.

(b)  All notices are effective when received.  The parties agree that service of any process, summons, notice, or documents by registered mail in compliance with this Sub-Section 7.2 shall be effective service of process for any action, suit, or proceeding brought against a party in any court.  Absent a notice designating another address or facsimile number, the addresses and facsimile numbers shall be as follows:

If to RII, to:

Reynolds Innovations Inc.

401 North Main Street

Winston-Salem, NC 27102

Attention:  Dennis Potter 

If to Supplier, to:                                Ecology Coatings Inc.

2701 Cambridge Court, Suite 100

Auburn Hills, MI  48326

Attention:  CEO & General Counsel

7.3                 Force Majeure.  Neither party shall be held liable or responsible to the other party nor be deemed to have defaulted under or breached this Agreement for failure or delay in fulfilling or performing any term of this Agreement (other than payment of monies due) when such failure or delay is caused by or results from causes beyond reasonable control of the affected party, including but not limited to acts of God, fire, flood, storm, earthquake, explosion, epidemic, embargo, war, acts of war (whether war be declared or not), insurrection, riot, civil commotion, strike, lockout or other labor disturbances, shortage of labor, shortage of materials, or acts, omissions or delays in acting by any governmental authority.

7.4                 Assignment.  This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective legal successors and assigns.

This Agreement may not be assigned or otherwise transferred, nor, except as expressly provided hereunder, may any right or obligations hereunder be assigned or transferred by either party without the written consent of the other party; provided, however, that either party may, without such consent, assign this Agreement and its rights and obligations hereunder (i) in connection with the transfer or sale of all or substantially all of its business, if such assets include substantially all of the assets relating to its performance of its respective obligations hereunder, (ii) to a wholly owned subsidiary or, (iii) in the event of its merger or consolidation with another company at any time during the term of this Agreement.  Any permitted assignee shall assume all obligations of its assignor under this Agreement.

7.5                 Publicity.  Except for a press release announcing this Agreement, Exhibit 3, (Approved Press Release Announcing Collaboration Agreement) that shall require the written approval of the other party, neither party shall originate any news release or other public announcement, written or oral, or otherwise make any disclosure relating to the existence or terms of or performance under this Agreement without the prior written approval of the other party, except as may otherwise be required by law.

7.6                 Export Laws.  No technology or information licensed from the other, and no product thereof, will be made available or re-exported, directly or indirectly, except in compliance with all applicable export laws and regulations.

7.7                 Applicable Law.  This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia, without regard to its choice of law provisions, and any applicable laws of the United States.  The parties also agree that any suit concerning the subject matter of this Agreement shall be filed in the Commonwealth of Virginia.

7.8                 Compliance with Laws.  RII and Supplier shall comply with, and shall ensure that their respective employees and Affiliates shall comply with, all laws, regulations, agreements, licenses and consents applicable to or otherwise relating to the subject matter of this Agreement.

7.9                 Waiver.  No waiver by either party of any of the provisions of this Agreement will be effective unless explicitly set forth in writing and executed by that party.  Any waiver by either party of a breach of this Agreement will not operate or be construed as a waiver of any subsequent breach.

7.10                 Severability.  If any provision of this Agreement shall be held to be unlawful, the same shall be deemed to be deleted from this Agreement, but this Agreement shall remain in full force and effect as if the deleted provision had never been contained in it.  The parties shall negotiate in good faith as to the terms of a mutually acceptable and satisfactory provision in place of any deleted provision, and if such terms shall be agreed, this Agreement shall be amended accordingly.

7.11Entire Agreement; Amendment.  This Agreement contains the entire understanding of the parties with respect to the subject matter hereof.  All express or implied agreements and understandings, either oral or written, heretofore made are expressly merged in and made a part of this Agreement.  The parties shall remain bound by their previous Confidentiality Agreement # 5212, dated May 5, 2008 and Ingredient and Formula Confidentiality Agreement # 08-33740-074, dated September 5, 2008, which incorporated herein by reference in its entirety, and except as expressly amended by this Agreement all the terms and conditions thereof remain in full force and effect.  This Agreement may be amended, or any term hereof modified, only by a written instrument duly executed by both parties hereto.

7.12                 Independent Contractors.  RII and Supplier are independent contractors, and that the relationship between them shall not constitute a partnership, franchise, joint venture or agency of any kind.  Neither party shall have the authority to make any statements, representations nor commitments of any kind (whether express or implied), or to take any action, which shall be binding on the other or create any liability or obligation on behalf of the other, without the prior written authorization of the other party to do so.

7.13                 Warranties.  Each party warrants that it has the right and capacity to enter into this Agreement and that it has no obligation to any third party that affects its ability to enter into or to perform its obligations of this Agreement.

7.14                 Further Assurances.  Each of the parties agrees to enter into or execute, or procure the entering into or execution of such agreements, assignments or further assurances, or do such other acts as the other party may reasonably request to carry out the terms and conditions of this Agreement.

7.15                 Counterparts.  This Agreement and any amendment thereto may be executed in multiple counterparts, each of which is an original and all which constitute one agreement or amendment, as the case may be, notwithstanding that all of the parties are not signatories to the original or the same counterpart, or that signature pages from different counterparts are combined, and the signature of any party to any counterpart in a signature to and may be appended to any other counterpart.

In Witness Whereof, the parties hereto have duly executed this Agreement.

Reynolds Innovations Inc.                                                                                     Ecology Coatings

By:  /s/ Dennis Potter                                                                            By:  /s/ Robert G. Crockett

Title:  VP                                                                Title:  CEO

Date:  8/18/2009                                                                           Date: 8/21/2009

Attachments:  Attachment A, Attachment B, and Attachment C

Attachment A

Collaboration Activities including Descriptions of Coatings

Project Name:	Ecology Coatings FSC Cigarette Development
Project Manager:	Matt Reddick
Project Objective:	Develop a process whereby Ecology Coatings proprietary Coatings can be applied in an online method for use in the commercial manufacture of FSC cigarettes.
Descriptions of types and specifications of coatings intended to be provided by Supplier:	Coating criteria includes but is not limited to: ·Passes SRA stewardship requirements ·Does not impart off tastes or odors ·Successfully passes FSC requirements ·Has capability to be applied on-line and at full machine speed without excessive loss in productivity ·Is cost effective ·Meets operational health and safety requirements ·Exceeds benefits of alternative solutions

Attachment B

Detailed Project Stages, Compensation, and Success Criteria

Stage 1) Formula Release to RJRT Product Integrity & Legal Review	August 2009		No Cost
	Success: Collaboration Agreement negotiated and signed
Stage 2) Product Integrity & Legal Approval  to Make & Test Cigarettes	August 2009		$25,000
	Success: S&RA reviews the formulations and gives the approval to make cigarettes in the pilot plant to be tested for chemical, sensory, and FSC analysis
Stage 3) Cigarettes Made & Tested (FSC, Chemistry, Sensory)	Late September  2009		$25,000
	Success: Cigarettes are made, tested, and have passed the following minimum testing requirements: ·Testing of cigarettes that have been manufactured with Coatings shall be conducted pursuant to the American Society of Testing and Materials Standard ASTM E2187-04, "Standard Test Method for Measuring the Ignition Strength of Cigarettes " and fully meet the performance requirements of the standard. ·Chemistry – Using RJRT’s internal document, “Mainstream Smoke Target Compound List”, cigarettes that have been manufactured with Coatings will have specific cigarette deliveries reviewed to determine if they are within one standard deviation of permissible limits to be acceptable relative to control* (does not include full stewardship testing requirements) Exhibit 1 ·Sensory – Using RJRT’s internal scorecard, “Unstructured Time Ballot with Revised Breaks”, cigarettes that have been manufactured with Coatings will be scored to determine if they remain at parity or better by internal expert smoking panels relative to control* Exhibit 2 Step 3 may include iterative testing before final testing is complete
Stage 4) Approval to Proceed To Prototype Online Machine	Earliest Start Date: October 2009	Latest Completion Date: December 1, 2009		$50,000
	Success:  Business case analysis determines that the proposal to use Coatings for the manufacture of FSC compliant cigarettes meets preliminary ROI hurdle(s) with respect to CapEx, machine de-rate, engineering feasibility assessment, footprint impact, etc. Success:  Commercial Agreement for the use of Coatings is Signed
Stage 5) Prototype System Operational & Online Testing Begins	Earliest Start Date: August 2010	Latest Completion Date: December 1, 2010		$250,000
	Success:Prototype system has been installed on a production cigarette complex and performance testing proves that the use of Coatings in an online band application meets the success criteria as outlined in the business case proposal (Step 4) Success: Quality Control’s evaluation of cigarette performance through statistical sampling (product quip) begins and cigarettes manufactured with Coatings to produce FSC compliant cigarettes are approved by Product Integrity as acceptable for sale.
Stage 6) Production Approval	Earliest Start Date: August 2011	Latest Completion Date: December 1, 2011		$350,000
	Success: Quality Control’s evaluation of cigarette performance through statistical sampling is complete; Stewardship requirements are fully met; and FSC compliant cigarettes manufactured with Coatings have been sold to a cigarette wholesaler.
*Control – cigarettes that reflect current market product format (i.e. Camel Lights) that meet internal guidelines and/or specifications for all areas of testing.
Payment Terms:	Net 30 Days post-Stage Success
Payment Release Date:	Completion of success criteria as identified in each Stage or the inception of work on a subsequent Stage begins and the parties have mutual agreement that progress towards completion of current Stage has been effectively achieved.

Attachment C

Proposed Commercial Licensing Agreement Terms

Assumptions for arriving at a fixed Price per Unit of Coatings:	RJRT has made some assumptions when formulating our initial valuation but feel confident the royalty fee we are offering remains competitive to the existing FSC paper alternatives. ·RJRT possesses an intimate working knowledge of the FSC paper market.  We routinely demonstrate mastery in negotiating with our existing supply chain base of FSC paper providers. ·RJRT analyzed the Ecology Coatings standard Royalties fee structure which is based on a 30/70 net total benefit (NTB) formula where 30% of NTB paid to Ecology Coatings, and 70% NTB retained by customer and concluded that by using our market intelligence and the projections listed below.
RJRT FSC Projections:	2010	2011	2012	2013	2014	2015
	72.3 bil/yr	67.2 bil/yr	63.9 bil/yr	60.9 bil/yr	58.5 bil/yr	56.5 bil/yr
FSC Paper $ Projections:	$60/100K	$45/100K	$40/100K	$35/100K	$30/100K	$??/100K
RJRT Initial Valuation of Royalty Fee:	Actual results from project phases 1-3 will form the basis for the RJRT Business Case to justify the project which will include a detailed value analysis and plan for conversion to the new process.  The conversion plan will entail a phased machine conversion and implementation of the process which may span over several quarters. Based on the business, as we know it today RJRT has arrived at the valuation of the royalty fee to be $0.02/TH cigarettes. Finally, RJRT will recapture all success dollars paid out to Ecology Coatings through the write down of the first few years’ royalty fees.
EC Initial Valuation of Royalty Fee:	Ecology’s coatings are disruptive, game changing technologies exclusively available to RJRT.  Ecology Coatings has analyzed industry cost information associated with currently available FSC solutions and has determined that RJRT has an opportunity to achieve significant NTB cost savings over traditional off-line FSC processes.  Ecology believes the total savings to be as much as $0.01/cigarette or $60 million annual NTB based on projected 2011 cigarette sales.  EC’s benefit sharing model is consistent with other industries where disruptive patented inventions succeed in changing the manufacturing process resulting in significant cost savings.  A successful collaboration will ensure very large savings is enjoyed by RJRT (70%) with the remainder (30%) paid to EC in licensing royalties.  In this application, EC analysis estimates the royalties to be as much as $0.003/cigarette, approximately $18.0 million annually.
Finalization of Further Commercial Agreement – Royalties	A full commercial license agreement is to be approved as part of Stage 4, attachment B.  Success at this stage includes RJR management approval of the initial business case and preliminary ROI with both parties approval of royalty fees.

Exhibit 1

Mainstream Smoke Target Compound List

Chemical	Short Term Exposure	Long Term Exposure
Aromatic Amines
2-Aminonaphthalene		X
4-Aminobiphenyl		X
Volatile Carbonyls
Formaldehyde	X	X
Acetaldehyde	X	X
Acrolein	X	X
Trace metals
Cadmium		X
Arsenic		X
N-Nitrosamines
N-Nitrosonornicotine (NNN)		X
4-(N-Nitrosomethylamino)-1-(3-pyridinyl)-1-butanone (NNK)		X
N-Nitrosoanatabine (NAT)		X
Semi-Volatiles
Quinoline		X
Phenols
Hydroquinone	X	X
Catechol	X	X
Phenol	X	X
m+p-Cresol	X	X
o-Cresol	X	X
Volatiles
1,3-butadiene		X
Isoprene		X
Acrylonitrile		X
Benzene		X
Polyaromatic Hydrocarbons (PAHs)
Benzo[a]pyrene		X
Benzo[a]anthracene		X
Benzo[b]fluoranthene		X
Benzo[j]fluoranthene		X
Benzo[k]fluoranthene		X
Dibenz[a,h]anthracene		X
Indeno[1,2,3-cd]pyrene		X
Fluorene		X
Acenaphthylene		X
Fluoranthene		X
Acenaphthene		X
Naphthalene		X
Others
Tar	X	X
Nicotine	X	X
CO	X	X
HCN	X	X
NOx	X	X

Exhibit 2

Unstructured Time Ballot with Revised Breaks

 

Exhibit 3

Approved Press Release Announcing Collaboration Agreement

Investor and Media Relations

McCloud Communications, LLC

Marty Tullio, Managing Member 

949.553.9748

Marty@McCloudCommunications.com

Ecology Coatings Signs Development Agreement with Major U.S. Tobacco Company

        Market Size (2007):  Five Trillion Cigarettes Produced Worldwide;

                                            330 Billion Cigarettes Produced Within the U.S. (1)

Auburn Hills, MI – August 24, 2009 – Ecology Coatings, Inc. (OTCBB:ECOC), a leader in the discovery and development of nanotechnology-enabled, ultraviolet-curable advanced coatings, today announced that it has signed a collaboration agreement with a major tobacco company for the application of its technology for producing “fire standard compliant” (FSC) cigarettes. FSC cigarettes are designed to meet government reduced ignition propensity testing standards. Ecoloiogy has filed a patent application with the U.S. Patent and Trademark Office for its technology.

The agreement establishes the framework under which the two companies plan to test and commercialize FSC cigarettes using Ecology Coatings’ unique paper coating technology. Milestone payments will be made to Ecology Coatings as predefined development and testing milestones are met. If those payments are met, royalty payments will commence with market introduction and product sales.

“The goal of our collaboration with this tobacco company is to meet government requirements for FSC cigarettes while at the same time allowing the manufacturer to produce at full production speeds,” said Ecology Coatings CEO Bob Crockett. “Our solution has the potential to allow manufacturers to be self-reliant and eliminate the need for specialty paper. Our uniqueness resides in our ability to cure UV coatings at high speeds at substantial cost savings.”

Crockett continued, “This application is an outgrowth of our patented disruptive paper barrier coating technologies. By designing the solution as part of the manufacturing process, manufacturers can reduce their costs. We believe this is an exciting opportunity that could be very rewarding to our company and its shareholders.”

The Coalition for Fire-Safe Cigarettes reports that approximately 40 states in the U.S. and Washington, D.C., have passed legislation calling for the production of FSC cigarettes (http://firesafecigarettes.org/). The Coalition’s goal is to save lives and prevent injuries due to cigarette-induced fires. The Coalition reports that 99.8 percent of the U.S. population is now or soon will be governed by state fire-safe cigarette legislation.

(1)  The source of this information is the U.S. Department of Agriculture

About Ecology Coatings, Inc.

Ecology Coatings, Inc. (OTCBB:ECOC) is a world leader in the development and licensing of cleantech ultra-

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Ecology Coatings Signs Development Agreement with Major U.S. Tobacco Company

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violet (UV) curable coatings — coatings that improve the products we use daily. Ecology’s technology platform allows manufacturers to enhance the durability and performance of their products, while significantly reducing energy costs and increasing manufacturing throughput. The company produces solid coatings which eliminate the escape of harmful solvents into the atmosphere during application. Headquartered in Auburn Hills, Michigan, Ecology Coatings has a development and prototype lab in Akron, Ohio. For additional information, visit the company's website at http://www.ecologycoatings.com.

Forward-looking Statements

Except for the historical information contained herein, the matters discussed are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended. These statements involve risks and uncertainties which are specified in Ecology's filings with the Securities and Exchange Commission. These risks and uncertainties could cause actual results to differ materially from any forward-looking statements made herein.

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EX-10.64

SECURITIES PURCHASE AGREEMENT

This SECURITIES PURCHASE AGREEMENT, dated as of September 29, 2009 (this "Agreement") is entered  into  by  and  among  Ecology Coatings, Inc.,  a  Nevada corporation (the "Company"), Stromback Acquisition Corporation, an Illinois corporation (the "Purchaser") and Richard Stromback.  The parties, intending to be legally bound, hereby agree as follows:

WHEREAS, the Company desires to sell to Purchaser, and the Purchaser desires to purchase from the Company up to three thousand (3,000) five (5.0%) percent Cumulative Convertible Preferred Shares of the Company at a price per share of One Thousand and 00/100 dollars ($1,000/00) (the “Convertible Preferred Stock”) containing the terms set forth in the Certificate of Designation attached as Exhibit “A” hereto (the “Certificate of Designation”). The amounts in excess of $240,000.00 invested by Stromback Acquisition Corporation to Company under this agreement is not guaranteed and will be subject to Stromback Acquisition Corporation’s sole and absolute discretion.

NOW, THEREFORE, in consideration of the mutual promises herein made, and in consideration of the representations, warranties and covenants herein contained, the Company and Purchaser agree as follows:

1.Sale of Convertible Preferred Stock.  Subject to the terms and conditions of this Agreement, Company hereby agrees to sell to Purchaser and Purchaser hereby agrees to purchase from Company up to three thousand (3,000) shares of the Convertible Preferred Stock at a price of One Thousand and 00/100 dollars ($1,000/00) per share. Upon the execution of this Agreement (the "First Closing"):

a.   The Company shall deliver or cause to be delivered to Purchaser the  following:  (i) this Agreement duly executed by the Company; (ii) a certificate evidencing that number of shares of Convertible Preferred Stock being  purchased by Purchaser,  registered in the name of Purchaser; (iii) the  Registration  Rights  Agreement  [attached] duly executed by the Company and (iv) and Warrant (the "Warrant") [attached], registered in the name of Purchaser and giving Purchaser the right to acquire the number of shares of the Company’s common stock (the “Common Stock”) upon the  exercise  of the  Warrant; and

b.   Purchaser shall deliver or cause to be delivered to the Company the following: (i) this Agreement duly executed by Purchaser;  (ii) the  purchase  price for the Shares  being  purchased  by Purchaser,  by check,  wire transfer,  or any  combination  thereof,  payable to Company,  and (iii) the  Registration  Rights  Agreement  duly  executed by Purchaser.

2.Additional Closings. After investment of the initial $240,000.00 Purchaser, in Purchaser’s sole and absolute discretion, may purchase up to 2760 additional Convertible Preferred Shares on or before six (6) months  after the First Closing (the  "Additional  Closing(s)"),  subject  to the  same  procedures  as provided  in  Section  1.

3.Conversion. The Convertible Preferred Stock can be converted at Purchaser’s option at any time into shares of the Company’s Common Stock at a conversion price equal to seventy-seven (77%) percent of the average closing price of the Company’s common stock as quoted on the Over the Counter Bulletin Board, or, where applicable, other national exchange, for the five (5) business days preceding the First Closing or, as applicable, any Additional Closing (the “Conversion Price”).

4.Warrants. Upon the First Closing, and each Additional Closing(s) thereafter, the Company shall issue Purchaser a warrant to purchase that number of shares of the Company’s Common Stock which is equal to six (6%) percent of the total dollar amount invested by Purchaser at the respective Closing (the “Warrant”). Thus, for the avoidance of doubt, should Purchaser invest One Million and 00/100 dollars ($1,000,000/00) (e.g., purchases 1,000 shares of the Convertible Preferred Stock), the Company shall issue Purchase a warrant to purchase sixty thousand (60,000/00) shares of the Company’s Common Stock. The exercise price of a Warrant shall be equal to the Conversion Price.

5.Budgetary Authority. Purchaser shall have approval authority over fifty (50%) percent of the proceeds of the First Closing, or, as applicable, any Additional Closing up to a maximum of Five hundred thousand dollars ($500,000.00) in total (the "Discretionary Investment").  Purchaser will advise and make recommendations to the Company as to the use of such Discretionary Investment, which shall include recommendations as to the Company’s investor relations and shareholder communications programs as well as other company debts and payables per its existing agreements.  The Company shall not employ nor withhold the Discretionary Investment without the prior approval of the Purchaser.  Upon approval or recommendation of the Discretionary Investment from the Purchaser, the Company shall make the approved payments within three (3) business days of the request of the Purchaser.      The Company's failure to abide by the terms and conditions of this paragraph five (5) or paragraph nine (9) shall constitute a material breach of this Securities Purchase Agreement and result in liquidated damages for Purchaser equal to four times the amount of Discretionary Investment funds.   In the event the Company fails to abide by the terms and conditions of this paragraph five (5) or paragraph nine (9) it is understood and agreed that Purchaser has the unequivocal right to obtain timely injunctive relief to protect the rights of Purchaser.    Notwithstanding the foregoing, Purchaser shall not have authority pursuant to this paragraph five (5) to bind or obligate the Company with respect to any material agreement.

6.Representations and Warranties of Company. Company hereby represents and  warrants  to Purchaser  in the  First  Closing  that  the  statements contained in the following paragraphs of this Section 6 are all true and correct as of the date of this  Agreement and the Closing Date, and to Purchaser in an Additional Closing that the statements  contained in the following paragraphs of this  Section  6 are all true and  correct  as of the date of the  Additional Closing:

a.   Organization and Standing: Articles and Bylaws. Company is a corporation  duly organized,  validly  existing and in good standing under the laws of the  State  of  Nevada  and  has all  requisite  corporate  power  and authority to carry on its business as now conducted.

b.   Corporate  Power.  Company  has all  requisite  legal and corporate power to enter into,  execute,  deliver and perform this Agreement and the Registration Rights Agreement (the "Registration  Rights Agreement") of even date herewith between Company and Purchaser. This Agreement and the Registration Rights  Agreement (the  "Transaction  Documents") have been duly executed by the Company and  constitute  the legal,  valid and binding  obligations  of Company, enforceable in accordance with their terms, except as the same may be limited by (i) bankruptcy,  insolvency,  moratorium,  and other laws of general application affecting the  enforcement  of  creditors'  rights and (ii)  limitations  on the enforceability  of the  indemnification  provisions of the  Registration  Rights Agreement as limited by applicable securities laws.

c.   Authorization.

i.   Corporate Action.  All corporate and legal action on the part of Company, its officers, directors and shareholders necessary for the execution and delivery of this Agreement, the Registration Rights Agreement, the sale and issuance of the Convertible Preferred Stock and Common Stock,  and the performance of Company's obligations hereunder have been taken.

ii.   Valid Issuance.  The Convertible Preferred Stock and Common Stock, when issued in compliance with the provisions of this Agreement and the Warrant, will be duly and validly issued, fully paid and nonassessable, free and clear of all liens and encumbrances; provided, however, that the Convertible Preferred Stock, the Common Stock and Warrants may be subject to restrictions on transfer under state and/or federal  securities  laws as set forth herein,  and as may be required by future changes in such laws.

d.   Government Consent, Etc. No consent,  approval,  order or authorization of, or designation,  registration, declaration or filing with, any federal,  state, local or other governmental authority on the part of Company is required in connection  with the valid execution and delivery of this Agreement, the Registration Rights Agreement or the offer, sale or issuance of the Convertible Preferred Stock, the  Common Stock and the Warrant  other  than,  if  required,  filings or qualifications under the Nevada Securities Act, as amended (the "Nevada  Law"), or other  applicable  blue sky laws,  which filings or qualifications,  if required,  will be timely filed or obtained by Company.  The execution,  delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions  contemplated thereby do not and will not conflict  with,  or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination,  amendment,  acceleration  or  cancellation  (with or without notice,  lapse of time or both) of, any agreement filed (or incorporated by reference) as an exhibit to the SEC Reports (as defined below).

e.   SEC Reports; Financial Statements.  The Company has filed all reports  required  to be filed by it under the  Securities  Exchange  Act of 1934,  as amended  ("1934  Act"),  including  pursuant to Section 13(a) or 15(d) thereof,  for the  twelve  months  preceding  the  date  hereof  (the  foregoing materials  being  collectively  referred  to herein as the "SEC  Reports")  on a timely  basis or has  received a valid  extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension.  As of their respective  dates, the SEC Reports complied in all material  respects with the  requirements of the Securities Act of 1933, as amended (the "1933 Act") and the 1934 Act and the rules and  regulations  of the  Securities and Exchange Commission ("Commission")  promulgated thereunder,  and none of the SEC Reports, when filed,  contained  any untrue  statement  of a material  fact or omitted to state a material  fact  required to be stated  therein or  necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.  The financial  statements of the Company  included in the SEC  Reports  comply  in  all  material  respects  with  applicable   accounting requirements  and the rules  and  regulations  of the  Commission  with  respect thereto as in effect at the time of filing. Such financial  statements have been prepared in accordance with generally accepted accounting  principles applied on a  consistent  basis  during the periods  involved,  except as may be  otherwise specified in such financial  statements or the notes thereto, and fairly present in all  material  respects  the  financial  position  of  the  Company  and  its consolidated  subsidiaries  as of and for the dates  thereof  and the results of operations  and cash flows for the periods then ended,  subject,  in the case of unaudited statements, to normal, year-end audit adjustments.

f.   Private Placement. Assuming the accuracy of the Purchaser’s representations and warranties set forth in Section 7, no registration under the 1933 Act is required for the offer, issuance and sale of the Convertible Preferred Stock, the Common Stock and the Warrants by the Company to Purchaser as contemplated hereby.

g.   Investment  Company.  The  Company is not,  and is not an Affiliate  of, an  "investment  company"  within the  meaning of the  Investment Company Act of 1940, as amended.

7.Representations  and  Warranties  by  Purchaser.   Purchaser represents and warrants to Company as of the Closing Date (or Additional Closing Date, as applicable) as follows:

a.   Investment Intent:  Authority. This Agreement is made with Purchaser in reliance upon Purchaser's  representation to Company,  evidenced by Purchaser's execution of this Agreement, that Purchaser is acquiring the Convertible Preferred Stock, the Warrants and the Common Stock for investment for  Purchaser's own account, not as nominee or agent, for investment and not with a view to, or for resale in connection  with, any distribution or public offering thereof within the meaning of the 1933 Act; provided,  however, that by making the representations  herein, Purchaser does not agree to hold any of the Convertible Preferred Stock, the Warrants and the Common Stock for any minimum or other  specific term and reserves the right to dispose of the Convertible Preferred Stock,  the  Warrants and the Warrant.  Shares at any time in accordance with or pursuant to a registration statement or an exemption under the 1933 Act. Purchaser has the requisite right,  power,  authority and capacity to enter into and perform this Agreement and the Agreement will constitute a valid and binding obligation  upon  Purchaser,  except as the same may be limited  by  bankruptcy, insolvency,  moratorium,  and other laws of general  application  affecting  the enforcement of creditors' rights.

b.   Knowledge and Experience. Purchaser (i) has such knowledge and experience in financial and business  matters as to be capable of evaluating the merits and risks of Purchaser's  prospective  investment in the Convertible Preferred Stock,  the Warrants and the Common Stock; (ii) has the ability to bear the economic risks of Purchaser's  prospective  investment;  (iii) has had all questions which have been asked by  Purchaser  satisfactorily  answered by Company;  and (iv) has not been  offered the Convertible Preferred Stock,  the  Warrants  and the Common Stock by any form of advertisement,   article,   notice  or  other  communication  published  in  any newspaper,  magazine, or similar media or broadcast over television or radio, or any  seminar or meeting  whose  attendees  have been  invited by any such media. Purchaser represents and warrants that it is an "accredited investor" within the meaning of Rule 501 of Regulation D of the Securities Act.

c.   Transfer  Restrictions.  Purchaser  covenants  that in no event will it sell,  transfer or  otherwise  dispose of any of the  Convertible Preferred Stock,  the Warrants  and the Common Stock  other than in  conjunction  with an effective registration statement for the same under the Securities Act or pursuant to an exemption  there from,  or in  compliance  with  Rule 144  promulgated  under the Securities  Act or to a person  related  to or an  entity  affiliated  with said Purchaser and other than in compliance with the applicable securities regulation laws of any state.

8.Registration of the Shares to be Purchased.  The Purchaser will have such rights to have the Common Stock registered under the Securities Act as is provided initially under the Registration Rights Agreement.

9.Stromback Family.  Company will continue to use the services of RJS Consulting.  Company will upon the maturity date of the promissory note Company made to Richard Stromback offer the option to either extend the terms of the note for an additional one year period on identical terms or convert the outstanding principal and interest owed under the note into the Company’s common stock at a conversion price equal to the close of the Company’s common stock on the OTC Bulletin Board on the maturity date.  Company agrees to extend an offer to Doug Stromback and Deanna Stromback that will allow them upon the maturity dates of the Company’s promissory notes held by them to either extend the terms of the notes for an additional one year period on identical terms or convert the outstanding principal and interest owed under the notes into the Company’s common stock at a conversion price equal to the close of the Company’s common stock on the OTC Bulletin Board on the maturity dates.  Upon completion of the first closing and immediately after dispersments are made per the Discretionary Investment of the initial $240,000.00 of investment, Richard Stromback agrees to resign as a member of the Company’s Board of Directors by executing a resignation letter substantially in the form of Exhibit B.  Subsequently, as long as there are no material breaches of this agreement Richard Stromback also agrees not to seek directly or indirectly to become a Company director, be nominated to become a Company director and/or accept the appointment as a Company director for a period of five years after the effective date of this Agreement.

10.Legends.   Company  will  place  the  following   legends  on  each certificate representing Shares and Common Stock:

THE SECURITIES REPRESENTED  HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED  ("ACT"),  OR ANY  APPLICABLE  STATE SECURITIES LAWS ("BLUE SKY LAWS"). ANY TRANSFER OF SUCH SECURITIES WILL BE INVALID UNLESS A REGISTRATION STATEMENT UNDER THE ACT OR AS REQUIRED BY BLUE SKY LAWS IS IN EFFECT AS TO SUCH  TRANSFER OR IN THE OPINION  OF  COUNSEL  REASONABLY   SATISFACTORY  TO  THE  COMPANY  SUCH REGISTRATION  IS  UNNECESSARY IN ORDER FOR SUCH TRANSFER TO COMPLY WITH THE ACT OR BLUE SKY LAWS.

The legend  set forth  above  shall be removed  and the  Company  shall  issue a certificate  without such legend to the holder of the Shares and Warrant  Shares upon which it is stamped,  if,  unless  otherwise  required by state  securities laws,  (i) such Shares and Warrant  Shares are  registered  for resale under the 1933 Act, (ii) in connection with a sale  transaction,  such holder provides the Company  with an opinion of counsel,  in a  generally  acceptable  form,  to the effect  that a public  sale,  assignment  or  transfer of the Shares and Common Stock may be made without registration under the 1933 Act, or (iii) such holder provides  the Company  with  reasonable  assurances  that the Shares and Common Stock can be sold pursuant to Rule 144 without any restriction as to the number of  securities  acquired as of a  particular  date that can then be  immediately sold.  The Purchaser acknowledges,  covenants  and  agrees to sell  Shares and Warrant  Shares  represented  by a  certificate  from  which the legend has been removed only pursuant to (i) a registration  statement  effective under the 1933 Act or (ii)  advice of counsel  that such sale is exempt  from the  registration requirements  of Section 5 of the 1993 Act,  including,  without  limitation,  a transaction pursuant to Rule 144.

11.Indemnification of Purchasers.  The Company will indemnify and hold Purchaser and its directors, officers, shareholders,  partners, employees and  agents  (each,  a  "Purchaser  Party")  harmless  from any and all  losses, liabilities,  obligations,  claims, contingencies,  damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys'  fees and costs of  investigation  (collectively,  "Losses") that a Purchaser Party may  suffer or incur as a result  of or  relating  to the failure of the  representations  and  warranties  of the  Company to be true and correct.

12.Miscellaneous.

a.   Waivers and Amendments.  The provisions of this Agreement may only be amended or modified in a writing executed  by each of Company and Purchaser.  A waiver shall not be effective  unless in a writing  by the party against whom such waiver is to be enforced.

b.   Governing Law. This Agreement and all actions  arising out of or in connection  with this  Agreement  shall be governed by and construed in accordance  with  the laws of the  State  of  Michigan,  without  regard  to the conflicts of law provisions  thereof.  EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY  DISPUTE  HEREUNDER  OR IN  CONNECTION  HEREWITH  OR ARISING  OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

c.   Entire Agreement.  This Agreement, the Registration Rights Agreement  and the Warrants  constitute  the full and entire  understanding  and agreement between the parties with regard to the subjects hereof and thereof.

d.   Survival. The representations,  warranties,  covenants and agreements  made  herein  shall  survive  the  execution  and  delivery  of this Agreement.

e.   Notices, etc. Any notice,  request or other communication required or permitted  hereunder shall be in writing and shall be deemed to have been duly given (i) upon receipt if  personally  delivered,  (ii) three (3) days after being mailed by registered or certified mail,  postage  prepaid,  or (iii) one day after being sent by recognized overnight courier or by facsimile,  if to Purchaser,  1050 Northover Drive, Bloomfield Hills, Michigan, or at such other address or number as Purchaser shall have furnished to Company in writing, or if to Company, at 2701 Cambridge Court, Suite 100, Auburn Hills, Michigan, or at such other address or number as the Company shall have furnished to Purchaser in writing.

f.   Validity.  If any  provision of this  Agreement  shall be judicially  determined to be invalid,  illegal or  unenforceable,  the validity, legality and enforceability of the remaining  provisions shall not in any way be affected or impaired thereby.

g.   Counterparts. This Agreement may be executed in any number of counterparts,  each of which shall be an original,  but all of which together shall be deemed to constitute one instrument.

h.   Assignment.  The terms and  conditions of this  Agreement shall inure to the benefit of and be binding upon the respective  successors and assigns of the  parties.  Nothing in this  Agreement,  express  or  implied,  is intended  to  confer  upon any  party  other  than the  parties  hereto or their respective  successors  and  assigns  any  rights,  remedies,   obligations,  or liabilities under or by reason of this Agreement,  except as expressly  provided in this Agreement.

i.   Remedies.  The Purchaser shall have all rights and remedies set forth in the  Transaction  Documents  and all rights and  remedies  which such holders have been granted at any time under any other  agreement  or contract  and all of the rights which such holders have under  any law.  Any  person  having  any  rights  under any  provision  of this Agreement shall be entitled to enforce such rights specifically (without posting a bond or other  security),  to  recover  damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law.

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the date and year first written above.

ECOLOGY COATINGS, INC.

/s/ Robert G. Crockett

By:  Robert G. Crockett

Its:  CEO

STROMBACK ACQUISITION CORPORATION

/s/ Richard D. Stromback

By: Richard D. Stromback

Its: President

/s/ Richard Stromback

RICHARD STROMBACK, Individually

EX-10.65

EMPLOYMENT AGREEMENT

THE AGREEMENT is made as of the 21st day of September, 2009 (the “Effective Date”) by and between Ecology Coatings, Inc., a Nevada corporation (the "Company"), and Robert G. Crockett (the "Executive").

1.Employment:  The Company hereby agrees to employ the Executive as its Chief Executive Officer and the Executive hereby accepts such employment upon the terms and conditions set forth in the Agreement.

2.Duties.

2.1During the term of the Agreement, the Executive shall diligently perform all services consistent with his position as may be assigned to his by or under the direction of the Board of Directors of the Company and such other members of senior management designated by the Board.  The Executive's duties shall include overall responsibility for the affairs of the Company, attainment of new revenue sources and compliance with SEC and other requirements of a public company.  In the performance of his duties, the Executive shall report to the Board of Directors.

2.2The Executive shall devote his full working time and attention to the business and affairs of the Company, render such services in a competent and efficient manner, and use his reasonable and appropriate best efforts to faithfully promote the interests of the Company.

3.Term of Employment.

3.1Term.  The term of employment shall begin upon execution of the Agreement and extend for a period of three (3) years (the "Initial Term").

3.2Termination Without Cause.  The Company shall have the right to terminate the Executive's employment under the Agreement by written notice to the Executive at any time; provided, however, that, upon such termination without Cause or termination by Executive for Good Reason, the Company shall pay to Executive 50% of unpaid compensation and benefits based on the remaining term of Executive’s employment.  The Company shall be deemed to have terminated the Executive's employment if such employment is terminated:  (i) by the Company without Cause; or (ii) by the Executive voluntarily for "Good Reason."  For purposes of the Agreement, "Good Reason" means any breach by the Company of any of the terms or provisions of the Agreement which is not cured within thirty (30) business days of written notice by the Executive.  Any termination which occurs within one year of a change in control shall be presumed to be a termination without Cause.

3.3 Termination for Cause.  The Company may terminate the Agreement and the Executive's employment hereunder immediately upon written notice to the Executive for "Cause" (as hereinafter defined).  For purposes of the Agreement, the term "Cause" shall mean (i) the repeated failure or refusal of the Executive to perform the duties or render the services reasonably assigned to his from time to time by the Board of Directors (except during reasonable vacation periods or sick leave); (ii) the charging or indictment of the Executive in connection with a felony or willful misfeasance or nonfeasance; (iii) the association, directly or indirectly, of the Executive, for his profit or financial benefit, with any person, firm, partnership, association, entity or corporation that competes, in any material way, with the Company; (iv) the disclosing or using of any material "Confidential Information", "Trade Secrets"  or “Material, Non-Public Information” (as those terms are defined in Section 9) of the Company at any time by the Executive, except as required in connection with his duties to the Company, (v) the breach by the Executive of his fiduciary duty or duty of trust to the Company, including the commission by the Executive of an act of fraud or embezzlement against the Company, (vi) trading, directly or indirectly, in the Company’s securities while in possession of material, non-public information (vii) any other material breach by the Executive of any of the terms or provisions of the Agreement or any other agreement between the Company and the Executive, which other material breach is not cured within thirty (30) business days of notice by the Company; or (vii) any other action by the Executive, which, in the good faith and reasonable determination of all of the members of the Company's Board of Directors, has the effect of materially injuring the reputation or business of the Company.  If the Executive is terminated for Cause, the Executive shall have no further rights or entitlements under the Agreement, the Company shall have no further obligations to the Executive, and the Agreement shall be null and void, provided, however, that the Executive shall be entitled to be receive all unpaid, earned salary, wages and benefits, including accrued vacation pay and reimbursement for reasonable business expenses incurred prior to the date of termination, to the date of termination.  It shall be the Company's burden to show that good "Cause" existed for termination under the Section by clear and convincing evidence, and any failure by the Company to carry the burden shall convert the termination into a termination without "Cause."  Any termination which occurs within one year of a change in control shall be presumed to be a termination without Cause.

4.Compensation.

4.1Base Salary.  The Company shall pay the Executive an annual salary for his services under the Agreement shall be $200,000 for calendar year 2009.  Such salary shall be payable semi-monthly, subject to applicable withholding and other taxes.  For calendar year 2010 and beyond, the Executive’s salary shall be annually reviewed by the Compensation Committee or the Board of Directors for possible increase.

4.2Bonus and Other Compensation.  Executive shall be entitled to participate on the same terms as other officers in any applicable bonus, stock option, restricted stock, pension or profit sharing plan, or any other type of plan adopted by the Company for the benefit of its officers, directors and employees.

5.Grant of Stock Options:  The Company will alter stock options previously granted to Executive to purchase Company’s common stock at a price per share equal to the closing price of the Company’s stock on the date the Company’s Board of Directors approves this Agreement in the amounts and with vesting from Executive’s initial date of employment (September 15, 2008) as follows:  (i) 110,000 stock options vest at 12 months, (ii) 110,000 stock options vest at 18 months, and (iii) 110,000 vest at 24 months.  In addition, the Company will grant Executive 670,000 additional stock options to purchase the Company’s common stock at a price per share equal to the closing price of the Company’s stock on the date the Company’s Board of Directors approves this Agreement, one-quarter of which shall vest on 30 months, 36 months, 42 months and 48 months from the date of Executive’s initial date of employment (September 15, 2008) respectively.  The Company shall provide in its stock option plan and/or stock option agreements with Executive that all of Executive’s stock options shall vest upon a “Change in Control” of the ownership or composition of the Board of Directors.

6.Place of Employment:  The Executive's regular place of work shall be 2701 Cambridge Ct., Auburn Hills, MI 48326, or such other place in the Detroit metropolitan area that it may designate from time to time.  However, if the Company desires to move its office out of such area, or any other area it thereafter designates, the Company shall provide Executive with no less than one (1) year’s time to complete his relocation.  The Company shall pay the Executive's reasonable moving expenses.

7.Executive Benefits.

7.1Holidays.  The Executive shall be entitled to seven (7) paid holidays annually.  The Company will notify the Executive as much in advance as practical with respect to the holiday schedule to be observed by the Company.

7.2Vacations.  During the term of the Agreement, the Executive shall be entitled to three (3) weeks of paid vacation annually.  The Executive agrees not to utilize vacation and/or compensatory time at a time when to do so could adversely affect the Company's business.

7.3Personal Insurance Benefits.  The Executive shall be entitled to participate in all medical, dental and hospitalization, group life insurance, and any and all other such plans as are presently and hereafter provided by the Company to its executives.

8.Expenses:  During the term of the Executive's employment hereunder, the Company, upon the submission of proper substantiation by the Executive, shall reimburse the Executive for all reasonable expenses actually and necessarily paid or incurred by the Executive in the course of and pursuant to the business of the Company.  The payments will be made within fifteen (15) days after the Executive provides the Company with an itemized statement of all charges.

9.Confidentiality.

9.1The Executive shall not divulge, communicate, use to the detriment of the Company or for the benefit of any other person or persons, or misuse in any way, any "Confidential Information" pertaining to the Company or its affiliates.  Any confidential information or data now known or hereafter acquired by the Executive with respect to the Company or its affiliates shall be deemed a valuable, special and unique asset of the Company that is received by the Executive in confidence and as a fiduciary, and the Executive shall remain a fiduciary to the Company with respect to all of such information.  For purposes of the Agreement, the following terms when used in the Agreement have the meanings set forth below:

9.1.1                      "Confidential Information" means confidential data and confidential information relating to business of the Company or its affiliates, including the nano-engineered, ultraviolet curable coatings and technology owned or developed by the Company, (which does not rise to the status of a Trade Secret under applicable law) which is or has been disclosed to the Executive or of which the Executive became aware as a consequence of or through his employment with the Company and which the Executive knows or has reason to know has value to the Company or its affiliates and is not generally known to the competitors of the Company.  Confidential Information shall not include any data or information that (i) has been voluntarily disclosed to the general public by the Company or its affiliates, (ii) has been independently developed and disclosed to the general public by others, or (iii) otherwise enters the public domain through lawful means.

9.1.2                      "Trade Secrets" means information of the Company or its affiliates including, but not limited to, technical or non-technical data, formulas, patterns, compilations, programs, financial data, financial plans, product or service plans or lists of actual or potential customers or suppliers which (i) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

9.1.3  “Material, Non-Public Information” means financial, business or strategic information that may have a material effect on the Company and which has not been previously publicly disclosed by the Company.  “Material Non-Public Information” includes “Confidential Information” and “Trade Secrets”.

9.2In addition, during the Initial Term and during the periods described in the last sentence of this Section 9.2, the Executive (i) will receive and hold all Confidential Information and Trade Secrets (collectively, the "Company Information") in trust and in strictest confidence, (ii) will take reasonable steps to protect the Company Information from disclosure and will in no event knowingly or wrongfully take any action causing, or fail to take any action reasonably necessary to prevent, any Company Information to lose its character as Company Information, and (iii) except as required by the Executive's duties in the course of his employment by the Company, will not, directly or indirectly, use, disseminate or otherwise disclose any Company Information to any third party without the prior written consent of the Company, which may be withheld in the Company's absolute discretion.  The provisions of this Section 9 shall survive the termination of the Executive's employment for a period of two (2) years with respect to Confidential Information, and, with respect to Trade Secrets, for so long as any such information qualifies as a Trade Secret under applicable law.

10.Restrictive Covenants.

10.1Non-competition.  The Executive agrees that, at all times during the term of the Agreement, any subsequent one-year extension term and for a period of one (1) year after termination of his employment under the Agreement, howsoever brought about, he will not, directly or indirectly, (whether as owner, principal, agent, shareholder, employee, partner, lender, venture with or consultant to any person, firm, partnership, corporation, limited liability company or other entity), whether or not compensation is received:  (i) engage or participate in the development, design and production of nano-engineered, ultraviolet curable coatings which compete with the products of the Company; or (ii) engage or participate in any activity for any business or entity which is or plans to engage in the marketing and sale of any products or services which are under active development or are marketed or sold by the Company, or other business in which the Company is engaged, during the term of the Agreement anywhere in the United States.  In the event that the provisions of the Section 10 ever be deemed to exceed the time, geographic or occupational limitations permitted by the applicable laws, then such provisions shall be reformed to the maximum time, geographic or occupational limitations by the applicable laws.

10.2Non-solicitation of Clients.  The Executive agrees that, during the term of the Agreement, any subsequent one-year extension term, and for a period of one (1) year after termination of his employment under the Agreement, howsoever brought about, he will not directly or indirectly, for himself or for any other person, firm, corporation partnership, association or other entity:  (i) induce any person who is an actual client or a known targeted prospective client of the Company to patronize any competing firm; (ii) canvass, solicit or accept any business relationship from any person who is an actual client or a known targeted prospective client of the Company; (iii) directly or indirectly request or advise any person who is an actual client or a known targeted prospective client of the Company to withdraw, curtail or cancel such business with the Company; or (iv) directly or indirectly disclose to any other person, firm or corporation the names or addresses of any of the actual clients or known targeted prospective clients of the Company.

10.3Non-solicitation of Employees.  The Executive agrees that, during the term of the Agreement, any subsequent one-year extension term, and for a period of two (2) years after termination of his employment under the Agreement, howsoever brought about, he will not, directly or indirectly, for himself or for any other person, firm, corporation, partnership, association or other entity, attempt to employ or enter into any contractual arrangement with any person known by the Executive to be an employee or former employee of the Company, unless such employee or former employee has not been employed by the Company for a period in excess of six months.

10.4Books and Records.  All books, records, reports, writings, notes, notebooks, computer programs, sketches, drawings, blueprints, prototypes, formulas, photographs, negatives, models, equipment, chemicals, reproductions, proposals, flow sheets, supply contracts, customer lists and other documents and/or things relating in any manner to the business of the Company (including but not limited to any of the same embodying or relating to any Confidential Information or Trade Secrets), whether prepared by the Executive or otherwise coming into the Executive's possession, shall be the exclusive property of the Company and shall not be copied, duplicated, replicated, transformed, modified or removed from the premises of the Company except pursuant to the business of the Company and shall be returned immediately to the Company on termination of the Executive's employment hereunder or on the Company's request at any time.

10.5No Conflict.  The Executive represents to the Company that his execution and performance of the Agreement does not violate the provisions of any employment, non-competition, confidentiality or other material agreement to which he is a party or by which he is bound.  The Executive also agrees to indemnify and hold harmless the Company from any and all damages and other obligations or liabilities incurred by the Company in connection with any breach of the foregoing representation.

11.Remedies for Breach of Agreement:  In the event of the breach or threatened breach of any provision of the Agreement by either party, the other party shall be entitled to injunctive relief, both preliminary and final, enjoining and restraining such breach or threatened breach.  Such remedies shall be in addition to all other remedies available at law or in equity, including the Company's right to recover from the Executive any and all damages that may be sustained as a result of Executive's breach of the Agreement.

12.Intellectual Property.

12.1Inventions.  Executive hereby assigns and agrees to assign to Company, its subsidiaries, successors and assigns, all intellectual property rights, in all countries of the world, in and to any invention, patent, trademark, copyright, trade secret, confidential information and technology developed, authored, conceived, or reduced to practice solely by the Executive or jointed with others during the term of the Agreement, which is related to Company's present or prospective business interests.  The Executive will, without charge to Company, but at its expense, sign all papers, take all rightful oaths, and do all acts which may be necessary, desirable, or convenient for securing and maintaining intellectual property rights in any and all countries and for vesting title thereto with Company, his successors, assigns, and legal representatives or nominees.

12.2Prior Inventions.  Executive shall disclose to Company in writing any of his inventions, discoveries and technology that occurred prior to the execution of the Agreement but during his employment with the Company, which inventions, discoveries and technology Executive also hereby assigns to the Company.  The disclosure shall contain sufficient detail to permit Company to evaluate and quantify the scope of Executive's work prior to the date of this Agreement.

13.Miscellaneous.

13.1Severability.  If any of the provisions of the Agreement shall be invalid or unenforceable, such invalidity shall not invalidate or render unenforceable the entire Agreement, but rather the entire Agreement shall be construed as if not containing the particular invalid or unenforceable provisions, and the rights and obligations the Company and the Executive shall be construed and enforced accordingly.

13.2Notices.  All communications and notices required by or relating to the Agreement shall be deemed to have been duly given upon receipt in writing by the addressee addressed as indicated below:

Ecology Coatings, Inc.                                                                Robert G. Crockett

Attn: Chairman                                                                Ecology Coatings, Inc.

2701 Cambridge Ct., Suite 100                                                                2701 Cambridge Ct., Suite 100

Auburn Hills, MI 48326                                                                Auburn Hills, MI 48326

The address to which notices or communications may be given by either party may be changed by written notice given by such party to the other pursuant to the Article.  The mailing or transmittance of any notice shall be deemed complete upon the mailing or transmission of the notice to the address stated above or any subsequent amended address.

13.3Law.  The Agreement shall be governed by and construed in accordance with the laws of the State of Michigan in all respects, including matters of construction, validity, and performance.  The parties irrevocably agree that, all actions of proceedings in any way, manner or respect arising out of or from or related to the Agreement shall be litigated only in courts located  in the State of Michigan and hereby consent and submit to the jurisdiction of any local, State, or Federal court located in the State of Michigan.

13.4Non-Waiver.  No course of dealing or failure of either party to strictly enforce any term, right or condition of the Agreement shall be construed as a waiver of such terms, right or condition.

13.5Entire Agreement.  The Agreement constitutes the entire Agreement between the parties and may not be modified or amended other than by a written instrument executed by both parties.  All agreements, oral or written, entered into by or on behalf of the parties prior to the Agreement are revoked and superseded hereby.  No representations, warranties, inducements or oral agreements have been made by any of the parties except as expressly set forth herein.

13.6Assignment.  Any assignment of the Agreement by either party must be approved in writing by the other party and the assignee must agree in writing to be bound by the terms of the Agreement.

IN WITNESS WHEREOF, the foregoing Agreement has been executed by the parties hereto to be effective as of the day and year first above written.

Ecology Coatings, Inc.                                                                                                           Executive

/s/ JB Smith                                                      /s/ Robert G. Crockett

JB Smith                                                                                     Robert G. Crockett

Its: Board Member

EX-10.66

EMPLOYMENT AGREEMENT

THE AGREEMENT is made as of the 21st day of September, 2009 (the “Effective Date”) by and between Ecology Coatings, Inc., a Nevada corporation (the "Company"), and Daniel V. Iannotti (the "Executive").

1.Employment:  The Company hereby agrees to employ the Executive as its Vice President, General Counsel & Secretary and the Executive hereby accepts such employment upon the terms and conditions set forth in the Agreement.

2.Duties.

2.1During the term of the Agreement, the Executive shall diligently perform all services consistent with his position as may be assigned to his by or under the direction of the Board of Directors of the Company and such other members of senior management designated by the Board.  The Executive's duties shall include overall responsibility for the affairs of the Company, legal and SEC compliance and other requirements of a public company.  In the performance of his duties, the Executive shall report to the Board of Directors and the Chief Executive Officer.

2.2(b)           The Executive shall devote his full working time and attention to the business and affairs of the Company, render such services in a competent and efficient manner, and use his reasonable and appropriate best efforts to faithfully promote the interests of the Company.

3.Term of Employment.

3.1Term.  The term of employment shall begin upon execution of the Agreement and extend for a period of three (3) years (the "Initial Term").

Termination Without Cause.  The Company shall have the right to terminate the Executive's employment under the Agreement by written notice to the Executive at any time; provided, however, that, upon such termination without Cause, the Company shall pay to Executive 50% of the unpaid compensation and benefits based on the remaining term in Executive’s employment.  The Company shall be deemed to have terminated the Executive's employment pursuant to this Section 3.2 if such employment is terminated:  (i) by the Company without Cause; or (ii) by the Executive voluntarily for "Good Reason."  For purposes of the Agreement, "Good Reason" means any breach by the Company of any of the terms or provisions of the Agreement which is not cured within thirty (30) business days of written notice by the Executive.   Any termination which occurs within one year of a change in control shall be presumed to be a termination without Cause.

3.3 Termination for Cause:  The Company may terminate the Agreement and the Executive's employment hereunder immediately upon written notice to the Executive for "Cause" (as hereinafter defined).  For purposes of the Agreement, the term "Cause" shall mean (i) the repeated failure or refusal of the Executive to perform the duties or render the services reasonably assigned to his from time to time by the Board of Directors (except during reasonable vacation periods or sick leave); (ii) the charging or indictment of the Executive in connection with a felony or willful misfeasance or nonfeasance; (iii) the association, directly or indirectly, of the Executive, for his profit or financial benefit, with any person, firm, partnership, association, entity or corporation that competes, in any material way, with the Company; (iv) the disclosing or using of any material "Confidential Information", "Trade Secrets"  or “Material, Non-Public Information” (as those terms are defined in Section 9) of the Company at any time by the Executive, except as required in connection with his duties to the Company, (v) the breach by the Executive of his fiduciary duty or duty of trust to the Company, including the commission by the Executive of an act of fraud or embezzlement against the Company, (vi) trading, directly or indirectly, in the Company’s securities while in possession of material, non-public information (vii) any other material breach by the Executive of any of the terms or provisions of the Agreement or any other agreement between the Company and the Executive, which other material breach is not cured within thirty (30) business days of notice by the Company; or (vii) any other action by the Executive, which, in the good faith and reasonable determination of all of the members of the Company's Board of Directors, has the effect of materially injuring the reputation or business of the Company.  In which event, notwithstanding any other provision in the Agreement to the contrary, the Executive shall have no further rights or entitlements under the Agreement, the Company shall have no further obligations to the Executive, and the Agreement shall be null and void, provided, however, that the Executive shall be entitled to be receive all unpaid, earned salary, wages and benefits, including accrued vacation pay and reimbursement for reasonable business expenses incurred prior to the date of termination, to the date of termination.  It shall be the Company's burden to show that good "Cause" existed for termination under the Section by clear and convincing evidence, and any failure by the Company to carry the burden shall convert the termination into a termination without "Cause."  Any termination which occurs within one year of a change in control shall be presumed to be a termination without Cause.

4.Compensation.

4.1Base Salary.  The Company shall initially pay the Executive an annual salary of $150,000 for his services under the Agreement starting November 1, 2009.  Such salary shall be payable semi-monthly, subject to applicable withholding and other taxes and subject to annual adjustment by the Company’s Compensation Committee or its Board of Directors.  For calendar year 2010 and beyond, the Executive’s salary shall be reviewed by the Compensation Committee or the Board of Directors for possible increase.

4.2Bonus and Other Compensation.  Executive shall be entitled to participate on the same terms as other officers in any applicable bonus, stock option, restricted stock, pension or profit sharing plan, or any other type of plan adopted by the Company for the benefit of its officers, directors and employees.

5.Grant of Stock Options:  The Company will alter the vesting for Executive’s previously issued 330,000 options to vest one-third of outstanding options 12 months, 18 months and 24 months respectively from the date of Executive’s initial date of employment (August 11, 2008).  In addition, the Company will grant Executive 70,000 additional stock options to purchase the Company’s common stock at a price per share equal to the closing price of the Company’s stock on the date the Company’s Board of Directors approves this Agreement, one-quarter of which shall vest on 30 months, 36 months, 42 months and 48 months from the date of Executive’s initial date of employment (August 11, 2008) respectively.  The Company shall provide in its stock option plan and/or stock option agreements with Executive that all of Executive’s stock options shall vest upon a “Change in Control” of the ownership or composition of Company’s Board of Directors.

6.Place of Employment:  The Executive's regular place of work shall be 2701 Cambridge Ct., Auburn Hills, MI 48326, or such other place in the Detroit metropolitan area that it may designate from time to time.  However, if the Company desires to move its office out of such area, or any other area it thereafter designates, the Company shall provide Executive with no less than one (1) year’s time to complete his relocation.  The Company shall pay the Executive's reasonable moving expenses.

7.Executive Benefits.

7.1Holidays.  The Executive shall be entitled to seven (7) paid holidays annually.  The Company will notify the Executive as much in advance as practical with respect to the holiday schedule to be observed by the Company.

7.2Vacations.  During the term of the Agreement, the Executive shall be entitled to three (3) weeks of paid vacation annually.  The Executive agrees not to utilize vacation and/or compensatory time at a time when to do so could adversely affect the Company's business.

7.3Personal Insurance Benefits.  The Executive shall be entitled to participate in all medical, dental and hospitalization, group life insurance, and any and all other such plans as are presently and hereafter provided by the Company to its executives.

8.Expenses:  During the term of the Executive's employment hereunder, the Company, upon the submission of proper substantiation by the Executive, shall reimburse the Executive for all reasonable expenses actually and necessarily paid or incurred by the Executive in the course of and pursuant to the business of the Company.  The payments will be made within fifteen (15) days after the Executive provides the Company with an itemized statement of all charges.

9.Confidentiality.

9.1The Executive shall not divulge, communicate, use to the detriment of the Company or for the benefit of any other person or persons, or misuse in any way, any "Confidential Information" pertaining to the Company or its affiliates.  Any confidential information or data now known or hereafter acquired by the Executive with respect to the Company or its affiliates shall be deemed a valuable, special and unique asset of the Company that is received by the Executive in confidence and as a fiduciary, and the Executive shall remain a fiduciary to the Company with respect to all of such information.  For purposes of the Agreement, the following terms when used in the Agreement have the meanings set forth below:

9.1.1                      "Confidential Information" means confidential data and confidential information relating to business of the Company or its affiliates, including the nano-engineered, ultraviolet curable coatings and technology owned or developed by the Company, (which does not rise to the status of a Trade Secret under applicable law) which is or has been disclosed to the Executive or of which the Executive became aware as a consequence of or through his employment with the Company and which the Executive knows or has reason to know has value to the Company or its affiliates and is not generally known to the competitors of the Company.  Confidential Information shall not include any data or information that (i) has been voluntarily disclosed to the general public by the Company or its affiliates, (ii) has been independently developed and disclosed to the general public by others, or (iii) otherwise enters the public domain through lawful means.

9.1.2                      "Trade Secrets" means information of the Company or its affiliates including, but not limited to, technical or non-technical data, formulas, patterns, compilations, programs, financial data, financial plans, product or service plans or lists of actual or potential customers or suppliers which (i) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

9.1.3  “Material, Non-Public Information” means financial, business or strategic information that may have a material effect on the Company and which has not been previously publicly disclosed by the Company.  “Material Non-Public Information” includes “Confidential Information” and “Trade Secrets”.

9.2In addition, during the Initial Term and during the periods described in the last sentence of this Section 9.2, the Executive (i) will receive and hold all Confidential Information and Trade Secrets (collectively, the "Company Information") in trust and in strictest confidence, (ii) will take reasonable steps to protect the Company Information from disclosure and will in no event knowingly or wrongfully take any action causing, or fail to take any action reasonably necessary to prevent, any Company Information to lose its character as Company Information, and (iii) except as required by the Executive's duties in the course of his employment by the Company, will not, directly or indirectly, use, disseminate or otherwise disclose any Company Information to any third party without the prior written consent of the Company, which may be withheld in the Company's absolute discretion.  The provisions of this Section 9 shall survive the termination of the Executive's employment for a period of two (2) years with respect to Confidential Information, and, with respect to Trade Secrets, for so long as any such information qualifies as a Trade Secret under applicable law.

10.Restrictive Covenants.

10.1Non-competition.  The Executive agrees that, at all times during the term of the Agreement, any subsequent one-year extension term and for a period of one (1) year after termination of his employment under the Agreement, howsoever brought about, he will not, directly or indirectly, (whether as owner, principal, agent, shareholder, employee, partner, lender, venture with or consultant to any person, firm, partnership, corporation, limited liability company or other entity), whether or not compensation is received:  (i) engage or participate in the development, design and production of nano-engineered, ultraviolet curable coatings which compete with the products of the Company; or (ii) engage or participate in any activity for any business or entity which is or plans to engage in the marketing and sale of any products or services which are under active development or are marketed or sold by the Company, or other business in which the Company is engaged, during the term of the Agreement anywhere in the United States.  In the event that the provisions of the Section 10 ever be deemed to exceed the time, geographic or occupational limitations permitted by the applicable laws, then such provisions shall be reformed to the maximum time, geographic or occupational limitations by the applicable laws.

10.2Non-solicitation of Clients.  The Executive agrees that, during the term of the Agreement, any subsequent one-year extension term, and for a period of one (1) year after termination of his employment under the Agreement, howsoever brought about, he will not directly or indirectly, for himself or for any other person, firm, corporation partnership, association or other entity:  (i) induce any person who is an actual client or a known targeted prospective client of the Company to patronize any competing firm; (ii) canvass, solicit or accept any business relationship from any person who is an actual client or a known targeted prospective client of the Company; (iii) directly or indirectly request or advise any person who is an actual client or a known targeted prospective client of the Company to withdraw, curtail or cancel such business with the Company; or (iv) directly or indirectly disclose to any other person, firm or corporation the names or addresses of any of the actual clients or known targeted prospective clients of the Company.

10.3Non-solicitation of Employees.  The Executive agrees that, during the term of the Agreement, any subsequent one-year extension term, and for a period of two (2) years after termination of his employment under the Agreement, howsoever brought about, he will not, directly or indirectly, for himself or for any other person, firm, corporation, partnership, association or other entity, attempt to employ or enter into any contractual arrangement with any person known by the Executive to be an employee or former employee of the Company, unless such employee or former employee has not been employed by the Company for a period in excess of six months.

10.4Books and Records.  All books, records, reports, writings, notes, notebooks, computer programs, sketches, drawings, blueprints, prototypes, formulas, photographs, negatives, models, equipment, chemicals, reproductions, proposals, flow sheets, supply contracts, customer lists and other documents and/or things relating in any manner to the business of the Company (including but not limited to any of the same embodying or relating to any Confidential Information or Trade Secrets), whether prepared by the Executive or otherwise coming into the Executive's possession, shall be the exclusive property of the Company and shall not be copied, duplicated, replicated, transformed, modified or removed from the premises of the Company except pursuant to the business of the Company and shall be returned immediately to the Company on termination of the Executive's employment hereunder or on the Company's request at any time.

10.5No Conflict.  The Executive represents to the Company that his execution and performance of the Agreement does not violate the provisions of any employment, non-competition, confidentiality or other material agreement to which he is a party or by which he is bound.  The Executive also agrees to indemnify and hold harmless the Company from any and all damages and other obligations or liabilities incurred by the Company in connection with any breach of the foregoing representation.

11.Remedies for Breach of Agreement:  In the event of the breach or threatened breach of any provision of the Agreement by either party, the other party shall be entitled to injunctive relief, both preliminary and final, enjoining and restraining such breach or threatened breach.  Such remedies shall be in addition to all other remedies available at law or in equity, including the Company's right to recover from the Executive any and all damages that may be sustained as a result of Executive's breach of the Agreement.

12.Intellectual Property.

12.1Inventions.  Executive hereby assigns and agrees to assign to Company, its subsidiaries, successors and assigns, all intellectual property rights, in all countries of the world, in and to any invention, patent, trademark, copyright, trade secret, confidential information and technology developed, authored, conceived, or reduced to practice solely by the Executive or jointed with others during the term of the Agreement, which is related to Company's present or prospective business interests.  The Executive will, without charge to Company, but at its expense, sign all papers, take all rightful oaths, and do all acts which may be necessary, desirable, or convenient for securing and maintaining intellectual property rights in any and all countries and for vesting title thereto with Company, his successors, assigns, and legal representatives or nominees.

12.2Prior Inventions.  Executive shall disclose to Company in writing any of his inventions, discoveries and technology that occurred prior to the execution of the Agreement but during his employment with the Company, which inventions, discoveries and technology Executive also hereby assigns to the Company.  The disclosure shall contain sufficient detail to permit Company to evaluate and quantify the scope of Executive's work prior to the date of this Agreement.

13.Miscellaneous.

13.1Severability.  If any of the provisions of the Agreement shall be invalid or unenforceable, such invalidity shall not invalidate or render unenforceable the entire Agreement, but rather the entire Agreement shall be construed as if not containing the particular invalid or unenforceable provisions, and the rights and obligations the Company and the Executive shall be construed and enforced accordingly.

13.2Notices.  All communications and notices required by or relating to the Agreement shall be deemed to have been duly given upon receipt in writing by the addressee addressed as indicated below:

Ecology Coatings, Inc.                                                                Daniel V. Iannotti

Attn: Chairman                                                                Ecology Coatings, Inc.

2701 Cambridge Ct., Suite 100                                                                2701 Cambridge Ct., Suite 100

Auburn Hills, MI 48326                                                                Auburn Hills, MI 48326

The address to which notices or communications may be given by either party may be changed by written notice given by such party to the other pursuant to the Article.  The mailing or transmittance of any notice shall be deemed complete upon the mailing or transmission of the notice to the address stated above or any subsequent amended address.

13.3Law.  The Agreement shall be governed by and construed in accordance with the laws of the State of Michigan in all respects, including matters of construction, validity, and performance.  The parties irrevocably agree that, all actions of proceedings in any way, manner or respect arising out of or from or related to the Agreement shall be litigated only in courts located  in the State of Michigan and hereby consent and submit to the jurisdiction of any local, State, or Federal court located in the State of Michigan.

13.4Non-Waiver.  No course of dealing or failure of either party to strictly enforce any term, right or condition of the Agreement shall be construed as a waiver of such terms, right or condition.

13.5Entire Agreement.  The Agreement constitutes the entire Agreement between the parties and may not be modified or amended other than by a written instrument executed by both parties.  All agreements, oral or written, entered into by or on behalf of the parties prior to the Agreement are revoked and superseded hereby.  No representations, warranties, inducements or oral agreements have been made by any of the parties except as expressly set forth herein.

13.6Assignment.  Any assignment of the Agreement by either party must be approved in writing by the other party and the assignee must agree in writing to be bound by the terms of the Agreement.

IN WITNESS WHEREOF, the foregoing Agreement has been executed by the parties hereto to be effective as of the day and year first above written.

Ecology Coatings, Inc.                                                                                                           Executive

/s/ JB Smith                                                      /s/ Daniel V. Iannotti

           Daniel V. Iannotti

Its: Board Member

EX-10.67

EMPLOYMENT AGREEMENT

THE AGREEMENT is made as of the 21st day of September, 2009 (the “Effective Date”) by and between Ecology Coatings, Inc., a Nevada corporation (the "Company"), and F. Thomas  Krotine (the "Executive").

WITNESSETH

WHEREAS, the Company is engaged in the business of the developing, producing and selling nanotechnology coatings;

WHEREAS, the Company desires to employ the Executive as its President and Chief Operations Officer;

WHEREAS, the parties desire to memorialize the employment of the Executive in the Agreement.

NOW THISEFORE, in consideration of the premises and the mutual covenants and agreements contained herein, the parties mutually covenant and agree as follows:

1.Employment.

The Company hereby agrees to employ the Executive as its Chief Operating Officer and the Executive hereby accepts such employment upon the terms and conditions set forth in the Agreement.

2.Duties.

2.1During the term of the Agreement, the Executive shall diligently perform all services consistent with his position as may be assigned to his by or under the direction of the Board of Directors of the Company and such other members of senior management designated by the Board.  The Executive's duties shall include overall responsibility for the affairs of the Company, legal and SEC compliance and other requirements of a public company.  In the performance of his duties, the Executive shall report to the Board of Directors and the Chief Executive Officer.

2.2(b)           The Executive shall devote his full working time and attention to the business and affairs of the Company, render such services in a competent and efficient manner, and use his reasonable and appropriate best efforts to faithfully promote the interests of the Company.

3.Term of Employment.

3.1Term.  The term of employment shall begin upon execution of the Agreement and extend for a period of one (1) year (the "Initial Term").  It shall thereafter be automatically renewed for successive periods of one (1) year, each upon the terms and conditions set forth in the Agreement, unless, at least thirty (30) days prior to such renewal date, either party shall have delivered to the other party written notice of termination of the Agreement.

3.2Termination Without Cause.  The Company shall have the right to terminate the Executive's employment under the Agreement by written notice to the Executive at any time; provided, however, that, upon such termination without Cause, as such term is defined below, the Company shall pay to Executive the full value of the remaining unpaid compensation owed to the Executive for the balance of the Initial Term, including medical and dental insurance coverage that the Company provides to its other executives.  If the Agreement is terminated without Cause by the Company during the final year of the Initial Term or during any subsequent one-year extension term, a full year's compensation, including medical and dental insurance coverage, shall be due and payable.  The Company shall have no further liability under the Agreement, other than for reimbursement for reasonable business expenses incurred prior to the date of termination.  The Company shall be deemed to have terminated the Executive's employment pursuant to this Section 3.2 if such employment is terminated:  (i) by the Company without Cause; or (ii) by the Executive voluntarily for "Good Reason."  For purposes of the Agreement, "Good Reason" means any breach by the Company of any of the terms or provisions of the Agreement which is not cured within thirty (30) business days of written notice by the Executive.

3.3Termination for Cause.  The Company may terminate the Agreement and the Executive's employment hereunder immediately upon written notice to the Executive for "Cause" (as hereinafter defined).  For purposes of the Agreement, the term "Cause" shall mean (i) the repeated failure or refusal of the Executive to perform the duties or render the services reasonably assigned to his from time to time by the Board of Directors (except during reasonable vacation periods or sick leave); (ii) the charging or indictment of the Executive in connection with a felony or willful misfeasance or nonfeasance; (iii) the association, directly or indirectly, of the Executive, for his profit or financial benefit, with any person, firm, partnership, association, entity or corporation that competes, in any material way, with the Company; (iv) the disclosing or using of any material "Confidential Information", "Trade Secrets"  or “Material, Non-Public Information” (as those terms are defined in Section 9) of the Company at any time by the Executive, except as required in connection with his duties to the Company, (v) the breach by the Executive of his fiduciary duty or duty of trust to the Company, including the commission by the Executive of an act of fraud or embezzlement against the Company, (vi) trading, directly or indirectly, in the Company’s securities while in possession of material, non-public information (vii) any other material breach by the Executive of any of the terms or provisions of the Agreement or any other agreement between the Company and the Executive, which other material breach is not cured within thirty (30) business days of notice by the Company; or (vii) any other action by the Executive, which, in the good faith and reasonable determination of all of the members of the Company's Board of Directors, has the effect of materially injuring the reputation or business of the Company.  In which event, notwithstanding any other provision in the Agreement to the contrary, the Executive shall have no further rights or entitlements under the Agreement, the Company shall have no further obligations to the Executive, and the Agreement shall be null and void, provided, however, that the Executive shall be entitled to be receive all unpaid, earned salary, wages and benefits, including accrued vacation pay and reimbursement for reasonable business expenses incurred prior to the date of termination, to the date of termination.  It shall be the Company's burden to show that good "Cause" existed for termination under the Section by clear and convincing evidence, and any failure by the Company to carry the burden shall convert the termination into a termination without "Cause."

4.Compensation.

4.1Base Salary.  The Company shall initially pay the Executive an annual salary of $65,000 for his services under the Agreement starting November 1, 2009.  Such salary shall be payable semi-monthly, subject to applicable withholding and other taxes and subject to annual adjustment by the Company’s Compensation Committee or its Board of Directors.  For calendar year 2010 and beyond, the Executive’s salary shall be reviewed by the Compensation Committee or the Board of Directors for possible increase.

4.2Bonus and Other Compensation.  Executive shall be entitled to participate on the same terms as other directors and officers in any applicable bonus, stock option, restricted stock, pension or profit sharing plan, or any other type of plan adopted by the Company for the benefit of its officers, directors and employees.

5.Grant of Stock Options.  The Company will grant an additional 169,000 options to purchase shares of the Company’s common stock at a price per share equal to the closing price of the Company’s stock on the date the Company’s Board of Directors approves this Agreement with vesting as follows:  one-quarter of which shall vest on 6 months, 12 months, 18 months and 24 months from the date of this Agreement.  The Company shall provide in its stock option plan and/or stock option agreements with Executive that all of Executive’s stock options shall vest upon a “Change in Control” of the ownership or composition of the Company’s Board of Directors.

6.Place of Employment.

The Executive's regular place of work shall be 1238 Brittain Rd., Akron, OH  44310, or such other place that it may designate from time to time.  However, if the Company desires to move its office out of such area, or any other area it thereafter designates, the Company shall provide Executive with no less than one (1) year’s time to complete his relocation.  The Company shall pay the Executive's reasonable moving expenses.

7.Executive Benefits.

7.1Holidays.  The Executive shall be entitled to fifteen (15) paid holidays annually.  The Company will notify the Executive as much in advance as practical with respect to the holiday schedule to be observed by the Company.

7.2Vacations.  During the term of the Agreement, the Executive shall be entitled to four (4) weeks of paid vacation annually.  The Executive agrees not to utilize vacation and/or compensatory time at a time when to do so could adversely affect the Company's business.

7.3Personal Insurance Benefits.  The Executive shall be entitled to participate in all medical, dental and hospitalization, group life insurance, and any and all other such plans as are presently and hereafter provided by the Company to its executives.

8.Expenses.

During the term of the Executive's employment hereunder, the Company, upon the submission of proper substantiation by the Executive, shall reimburse the Executive for all reasonable expenses actually and necessarily paid or incurred by the Executive in the course of and pursuant to the business of the Company.  The payments will be made within ten (10) days after the Executive provides the Company with an itemized statement of all charges.

9.Confidentiality.

9.1The Executive shall not divulge, communicate, use to the detriment of the Company or for the benefit of any other person or persons, or misuse in any way, any "Confidential Information" pertaining to the Company or its affiliates.  Any confidential information or data now known or hereafter acquired by the Executive with respect to the Company or its affiliates shall be deemed a valuable, special and unique asset of the Company that is received by the Executive in confidence and as a fiduciary, and the Executive shall remain a fiduciary to the Company with respect to all of such information.  For purposes of the Agreement, the following terms when used in the Agreement have the meanings set forth below:

9.1.1                      "Confidential Information" means confidential data and confidential information relating to business of the Company or its affiliates, including the nano-engineered, ultraviolet curable coatings and technology owned or developed by the Company, (which does not rise to the status of a Trade Secret under applicable law) which is or has been disclosed to the Executive or of which the Executive became aware as a consequence of or through his employment with the Company and which the Executive knows or has reason to know has value to the Company or its affiliates and is not generally known to the competitors of the Company.  Confidential Information shall not include any data or information that (i) has been voluntarily disclosed to the general public by the Company or its affiliates, (ii) has been independently developed and disclosed to the general public by others, or (iii) otherwise enters the public domain through lawful means.

9.1.2                      "Trade Secrets" means information of the Company or its affiliates including, but not limited to, technical or non-technical data, formulas, patterns, compilations, programs, financial data, financial plans, product or service plans or lists of actual or potential customers or suppliers which (i) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

9.1.3  “Material, Non-Public Information” means financial, business or strategic information that may have a material effect on the Company and which has not been previously publicly disclosed by the Company.  “Material Non-Public Information” includes “Confidential Information” and “Trade Secrets”.

9.2In addition, during the Initial Term and during the periods described in the last sentence of this Section 9.2, the Executive (i) will receive and hold all Confidential Information and Trade Secrets (collectively, the "Company Information") in trust and in strictest confidence, (ii) will take reasonable steps to protect the Company Information from disclosure and will in no event knowingly or wrongfully take any action causing, or fail to take any action reasonably necessary to prevent, any Company Information to lose its character as Company Information, and (iii) except as required by the Executive's duties in the course of his employment by the Company, will not, directly or indirectly, use, disseminate or otherwise disclose any Company Information to any third party without the prior written consent of the Company, which may be withheld in the Company's absolute discretion.  The provisions of this Section 9 shall survive the termination of the Executive's employment for a period of two (2) years with respect to Confidential Information, and, with respect to Trade Secrets, for so long as any such information qualifies as a Trade Secret under applicable law.

10.Restrictive Covenants.

10.1Non-competition.  The Executive agrees that, at all times during the term of the Agreement, any subsequent one-year extension term and for a period of one (1) year after termination of his employment under the Agreement, howsoever brought about, he will not, directly or indirectly, (whether as owner, principal, agent, shareholder, employee, partner, lender, venture with or consultant to any person, firm, partnership, corporation, limited liability company or other entity), whether or not compensation is received:  (i) engage or participate in the development, design and production of nano-engineered, ultraviolet curable coatings which compete with the products of the Company; or (ii) engage or participate in any activity for any business or entity which is or plans to engage in the marketing and sale of any products or services which are under active development or are marketed or sold by the Company, or other business in which the Company is engaged, during the term of the Agreement anywhere in the United States.  In the event that the provisions of the Section 10 ever be deemed to exceed the time, geographic or occupational limitations permitted by the applicable laws, then such provisions shall be reformed to the maximum time, geographic or occupational limitations by the applicable laws.

10.2Non-solicitation of Clients.  The Executive agrees that, during the term of the Agreement, any subsequent one-year extension term, and for a period of one (1) year after termination of his employment under the Agreement, howsoever brought about, he will not directly or indirectly, for himself or for any other person, firm, corporation partnership, association or other entity:  (i) induce any person who is an actual client or a known targeted prospective client of the Company to patronize any competing firm; (ii) canvass, solicit or accept any business relationship from any person who is an actual client or a known targeted prospective client of the Company; (iii) directly or indirectly request or advise any person who is an actual client or a known targeted prospective client of the Company to withdraw, curtail or cancel such business with the Company; or (iv) directly or indirectly disclose to any other person, firm or corporation the names or addresses of any of the actual clients or known targeted prospective clients of the Company.

10.3Non-solicitation of Employees.  The Executive agrees that, during the term of the Agreement, any subsequent one-year extension term, and for a period of two (2) years after termination of his employment under the Agreement, howsoever brought about, he will not, directly or indirectly, for himself or for any other person, firm, corporation, partnership, association or other entity, attempt to employ or enter into any contractual arrangement with any person known by the Executive to be an employee or former employee of the Company, unless such employee or former employee has not been employed by the Company for a period in excess of six months.

10.4Books and Records.  All books, records, reports, writings, notes, notebooks, computer programs, sketches, drawings, blueprints, prototypes, formulas, photographs, negatives, models, equipment, chemicals, reproductions, proposals, flow sheets, supply contracts, customer lists and other documents and/or things relating in any manner to the business of the Company (including but not limited to any of the same embodying or relating to any Confidential Information or Trade Secrets), whether prepared by the Executive or otherwise coming into the Executive's possession, shall be the exclusive property of the Company and shall not be copied, duplicated, replicated, transformed, modified or removed from the premises of the Company except pursuant to the business of the Company and shall be returned immediately to the Company on termination of the Executive's employment hereunder or on the Company's request at any time.

10.5No Conflict.  The Executive represents to the Company that his execution and performance of the Agreement does not violate the provisions of any employment, non-competition, confidentiality or other material agreement to which he is a party or by which he is bound.  The Executive also agrees to indemnify and hold harmless the Company from any and all damages and other obligations or liabilities incurred by the Company in connection with any breach of the foregoing representation.

11.Remedies for Breach of Agreement.

In the event of the breach or threatened breach of any provision of the Agreement by either party, the other party shall be entitled to injunctive relief, both preliminary and final, enjoining and restraining such breach or threatened breach.  Such remedies shall be in addition to all other remedies available at law or in equity, including the Company's right to recover from the Executive any and all damages that may be sustained as a result of Executive's breach of the Agreement.

12.Intellectual Property.

12.1Inventions.  Executive hereby assigns and agrees to assign to Company, its subsidiaries, successors and assigns, all intellectual property rights, in all countries of the world, in and to any invention, patent, trademark, copyright, trade secret, confidential information and technology developed, authored, conceived, or reduced to practice solely by the Executive or jointed with others during the term of the Agreement, which is related to Company's present or prospective business interests.  The Executive will, without charge to Company, but at its expense, sign all papers, take all rightful oaths, and do all acts which may be necessary, desirable, or convenient for securing and maintaining intellectual property rights in any and all countries and for vesting title thereto with Company, his successors, assigns, and legal representatives or nominees.

12.2Prior Inventions.  Executive shall disclose to Company in writing any of his inventions, discoveries and technology that occurred prior to the execution of the Agreement but during his employment with the Company, which inventions, discoveries and technology Executive also hereby assigns to the Company.  The disclosure shall contain sufficient detail to permit Company to evaluate and quantify the scope of Executive's work prior to the date of this Agreement.

13.Miscellaneous.

13.1Severability.  If any of the provisions of the Agreement shall be invalid or unenforceable, such invalidity shall not invalidate or render unenforceable the entire Agreement, but rather the entire Agreement shall be construed as if not containing the particular invalid or unenforceable provisions, and the rights and obligations the Company and the Executive shall be construed and enforced accordingly.

13.2Notices.  All communications and notices required by or relating to the Agreement shall be deemed to have been duly given upon receipt in writing by the addressee addressed as indicated below:

Ecology Coatings, Inc.                                                                F. Thomas Krotine

Attn: Chairman                                                                Ecology Coatings, Inc.

2701 Cambridge Ct., Suite 100                                                                1238 Brittain Rd.

Auburn Hills, MI 48326                                                                Akron, OH  44310

The address to which notices or communications may be given by either party may be changed by written notice given by such party to the other pursuant to the Article.  The mailing or transmittance of any notice shall be deemed complete upon the mailing or transmission of the notice to the address stated above or any subsequent amended address.

13.3Law.  The Agreement shall be governed by and construed in accordance with the laws of the State of Michigan in all respects, including matters of construction, validity, and performance.  The parties irrevocably agree that, all actions of proceedings in any way, manner or respect arising out of or from or related to the Agreement shall be litigated only in courts located  in the State of Michigan and hereby consent and submit to the jurisdiction of any local, State, or Federal court located in the State of Michigan.

13.4Non-Waiver.  No course of dealing or failure of either party to strictly enforce any term, right or condition of the Agreement shall be construed as a waiver of such terms, right or condition.

13.5Entire Agreement.  The Agreement constitutes the entire Agreement between the parties and may not be modified or amended other than by a written instrument executed by both parties.  All agreements, oral or written, entered into by or on behalf of the parties prior to the Agreement are revoked and superseded hereby.  No representations, warranties, inducements or oral agreements have been made by any of the parties except as expressly set forth herein.

13.6Assignment.  Any assignment of the Agreement by either party must be approved in writing by the other party and the assignee must agree in writing to be bound by the terms of the Agreement.

IN WITNESS WHEREOF, the foregoing Agreement has been executed by the parties hereto to be effective as of the day and year first above written.

Ecology Coatings, Inc.                                                                                                           Executive

/s/ JB Smith                                                      /s/ F. Thomas Krotine

JB Smith                                                                                                                             F. Thomas Krotine

Its: Board Member

EX-10.68

SECOND AMENDEMENT TO EMPLOYMENT AGREEMENT

This Second Amendment to Employment Agreement is made as September 15, 2009 (“Amendment”), by and between Ecology Coatings, Inc., a Nevada corporation (“Company”) and Sally J.W. Ramsey (“Executive”) and amends the Employment Agreement between Company and Executive dated January 1, 2007 (“Agreement”).

1.The parties agree to amend Section 4.1 of the Agreement as follows:

The Company shall pay the Executive an annual salary for her services under the Agreement of $75,000 (“Base Salary”).  The Base Salary shall be reviewed by the Compensation Committee of the Company’s Board of Directors for possible adjustment annually.  Such salary shall be payable semi-monthly, subject to applicable withholding and other taxes.

2.   In all other respects, the terms of the Agreement shall remain in full force and effect.

ECOLOGY COATINGS, INC.

By:  /s/ JB Smith                                                      By:  /s/ Sally J.W. Ramsey

                                                                                                                                           ;                            Sally J.W. Ramsey

Its:  Board Member

EX-10.69

US $6,500 September 10, 2009

PROMISSORY NOTE

FOR VALUE RECEIVED, the undersigned, Ecology Coatings, Inc., a Nevada corporation (the “The Maker”), promises to pay to the order of Sky Blue Ventures (the “Holder”), the principal amount of Six Thousand Five Hundred dollars ($6,500), together with interest thereon as provided below.

ARTICLE I

TERMS OF REPAYMENT

1. Interest. The Note shall bear interest (“Interest”) equal to five (5%) percent per annum on the unpaid principal balance, computed on a three hundred and sixty-five (365) day year, during the term of the Note. The Maker shall pay all Interest. In no event shall the rate of Interest payable on this Note exceed the maximum rate of interest permitted to be charged under applicable law.

2. Payments. All payments by the Maker under this Note shall first be credited against costs and expenses provided for hereunder, second to the payment of any penalties, third to the payment of accrued and unpaid interest, if any, and the remainder shall be credited against principal. All payments due hereunder shall be payable in legal tender of the United States of America, and in same day funds delivered to the Holder by cashier’s check, certified check, or any other means of guaranteed funds to the mailing address provided below, or at such other place as the Holder or any holder hereof shall designate in writing for such purpose from time to time. If a payment hereunder otherwise would become due and payable on a Saturday, Sunday or legal holiday, the due date thereof shall be extended to the next succeeding business day, and Interest, if any, shall be payable thereon during such extension.

3. Maturity Date. All of the outstanding principal and interest shall be payable within fifteen (15) days following receipt of a written payment demand from the Holder.

4. Pre-Payment Demand. If the Maker completes an underwritten public offering of its common stock or other form of security convertible into common stock pursuant to an effective registration statement under the Securities Act of 1933 (the “Act”), as amended, or a managed private offering exempt from registration under Section 4(2) of the Act and Regulation D promulgated thereunder (collectively, a “New Offering”) which results in proceeds received by the Maker net of underwriting discounts and commissions, of at least One Million and 00/100 dollars ($1,000,000.00) (a “Pre-Payment Event”), then at the sole and absolute discretion of the Holder, and upon written demand to the Maker (the “Pre-Payment Notice”), all amounts owed under this Note shall become due and payable within fifteen (15) days following Maker’s receipt of the Pre-Payment Notice.

5. Exemption from Restrictions. It is the intent of the Maker and the Holder in the execution of this Note that the indebtedness hereunder be exempt from the restrictions of the usury laws of any applicable jurisdiction. The Maker and the Holder agree that none of the terms and provisions contained herein shall be construed to create a contract for the use, forbearance or detention of money requiring payment of interest at a rate in excess of the maximum interest rate permitted to be charged by the laws of any applicable jurisdiction. In such event, if any holder of this Note shall collect monies which are deemed to constitute interest which would otherwise increase the effective interest rate on this Note to a rate in excess of the maximum rate permitted to be charged by the laws of any applicable jurisdiction, all such sums deemed to constitute interest in excess of such maximum rate shall, at the option of such holder, be credited to the payment of this principal amount due hereunder or returned to the Maker.

ARTICLE II

COVENANTS

6. Conversion into Common Stock. If the Maker completes a New Offering, the Maker shall give the Holder the option to convert this Note, in whole or in part, into Common Stock of the Maker based on a conversion price equal to the lower of: (a) the closing bid price per share of the Common Stock on the date first above written as reported on the Over-The-Counter Bulletin Board, or if there is not such price on the Effective Date, then the last bid price on the date nearest preceding the date first above written, or; (b) the average price at which the Maker sells its Common Stock in the New Offering (the “Conversion Price”)(the “Conversion Shares”).

7. Piggyback Registration. If the Conversion Shares and the Underlying Shares (collectively, the “Shares”) have not been otherwise registered and at any time the Maker proposes to file a registration statement, whether or not for sale for the Maker’s own account, on a form and in a manner that would also permit registration of shares (other than in connection with a registration statement on Forms S-4 or S-8 or any similar or successor form) the Maker shall give to Holder, written notice of such proposed filing promptly, but in any case at least twenty (20) days before the anticipated filing. The notice referred to in the preceding sentence shall offer the holder(s) holding the Shares the opportunity to register such amount of the Shares as he may request (a “Piggyback Registration”). Subject to this Section, the Maker will include in each such Piggyback Registration (and any related qualification under state blue sky laws and other compliance filings, and in any underwriting involved therein) that portion of the Shares with respect to which the Maker has received written requests for inclusion therein within twenty (20) days after the written notice from the Maker is given. The holders holding any portion of the Shares will be permitted to withdraw all or part of the Shares from a Piggyback Registration at any time prior to the effective date of such Piggyback Registration. Notwithstanding the foregoing, the Maker will not be obligated to effect any registration of shares under this Paragraph 7 as a result of the registration of any of its securities solely in connection with mergers effected pursuant to a Form S-4 Filing.

8. Covenants Regarding Registration

a.	The Maker shall use its best efforts to have any registration statement declared effective at the earliest possible time, and shall furnish such number of prospectuses as shall be reasonably required.
b.	The Maker shall bear all costs, fees and expenses in connection with a Piggyback Registration,
c.	The Maker will take all necessary action which may be required in qualifying qualifying or registering the Shares included in any Piggyback Registration for offering and sale under the securities or blue sky laws of such states as are requested by the holders of such Shares, provided that the Maker shall not be obligated to execute or file any general consent to service or process or to qualify as a foreign corporation to do business under the laws of any such jurisdiction.

9. Indemnification. The Maker shall, at The Maker’s expense, protect, defend, indemnify, save and hold Holder harmless against any and all claims, demands, losses, expenses, damages, causes of action (whether legal or equitable in nature) asserted by any person or entity arising out of, caused by or relating to the Note, including without limitation the construction of the Note and the use or application of the proceeds of the Note, and The Maker shall pay Holder upon demand all claims, judgments, damages, losses and expenses (including court costs and reasonable attorneys’ fees and expenses) incurred by Holder as a result of any legal or other action arising out of the Note as aforesaid.

10. Attorneys Fees. The Maker shall reimburse Holder for all reasonable costs, attorney’s fees, and all other expenses in connection with this Note.

11. Notice of Default. So long as any amount under this Note shall remain unpaid, the Holder will, unless the Maker otherwise consents in writing, promptly give written notice to the Maker in reasonable detail of the occurrence of any Event of Default, or any condition, event or act which with the giving of notice or the passage of time or both would constitute an Event of Default.

ARTICLE III

DEFAULT

12. Events of Default. Any of the following events shall constitute an “Event of Default” hereunder:

a.	Failure by the Maker to pay the principal or Interest, if any, of this Note when due and payable.
b.	The entry of an order for relief under Federal Bankruptcy Code as to the Maker or approving a petition in reorganization or other similar relief under bankruptcy or similar laws in the United States of America or any other competent jurisdiction, and if such order, if involuntary, is not satisfied or withdrawn within sixty (60) days after entry thereof; or the filing of a petition by the Maker seeking any of the foregoing, or
	consenting thereto; or the filing of a petition to take advantage of any debtor’s act; or making a general assignment for the benefit of creditors; or admitting in writing inability to pay debts as they mature; or
c.	Failure by the Maker to pay the principal and Interest, if any, of this Note concurrent with a Pre-Payment Event; or
d.	The breach of any covenant made by the Maker in this Note.

13. Acceleration. Upon any Event of Default (in addition to any other rights or remedies provided for under this Note), at the option of the Holder or any holder hereof, all sums evidenced hereby, including all principal, accrued but unpaid Interest, fees and all other amounts due hereunder, shall become immediately due and payable. If an Event of Default relating to certain events of bankruptcy or insolvency of the Maker occurs and is continuing, the principal of and interest, if any, on this Note will become and be immediately due and payable without any declaration or other act on the part of the Holder or any holder hereof. This Note shall bear interest at the rate of ten (10%) percent per annum upon the occurrence of an Event of Default (“Default Interest”). Payments of the Default Interest shall be due every thirty (30) days following the occurrence Event of Default.

14. No Waiver. Failure of the Holder or any holder hereof to exercise any option hereunder shall not constitute a waiver of the right to exercise the same in the event of any subsequent Event of Default, or in the event of continuance of any existing Event of Default after demand or performance thereof.

15. Pursuit of any Remedy. The Holder or holder hereof may pursue any remedy under this Note without notice or presentment. The Holder or any holder hereof has the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Holder or any such holder hereof under this Note.

ARTICLE IV

MISCELLANEOUS

16. Amendments. No amendment or waiver of any provision of this Note, nor consent to any departure by the Maker herefrom, shall in any event be effective unless the same shall be in writing and signed by the Holder, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

17. Notices. All notices and other communications provided for hereunder shall be in writing (including telecopier communication) and mailed, telecopied, or delivered, to the Maker or the Holder, as applicable, at their respective addresses specified on the signature pages hereof, or, as to each party, at such other address as shall be designated by such party in a written notice to the other party. All such notices and communications shall, when mailed or telecopied, be effective when deposited in the mails or telecopied with receipt confirmed, respectively.

18. No Waiver; Remedies. No failure on the part of the Holder to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. All rights, powers and remedies of the Holder in connection with this Note are cumulative and not exclusive, and shall be in addition to any other rights, powers or remedies provided by law or equity.

19. Severability; Headings. If any one or more provisions of this Note shall be held to be illegal, invalid or otherwise unenforceable, the same shall not affect any other provisions of this Note and the remaining provisions of this Note shall remain in full force and effect. Article and paragraph headings in this Note are included herein for convenience of reference only and shall not constitute a part of this Note for any other purpose or be given any substantive effect.

20. Binding Effect; Transfer. This Note shall be binding upon and inure to the benefit of the Maker and the Holder and their respective successors and assigns. The Holder may not assign or otherwise transfer, or grant participations in, this Note or all or any portion of its rights hereunder or its interest herein to any person or entity, without the prior written consent of the Maker which consent shall not be unreasonably withheld. The Maker may not assign or otherwise transfer its rights or obligations hereunder or any interest herein without the prior written consent of the Holder. Any attempted assignment by the Maker or the Holder in contravention of this paragraph shall be null and void and of no force or effect.

21. Enforcement. It is agreed that time is of the essence of this Note and in the event of default of the terms of this Note, the Maker agrees to pay all costs of collection or enforcement, including reasonable attorneys’ fees and if there is a default in payment of any sum due hereunder.

22. Governing Law. This Note shall be governed by, and shall be construed and enforced in accordance with, the internal laws of the State of Michigan without regard to conflicts of laws principles. The venue of any legal proceeding taken in connection with this Note will be in Pontiac, Michigan.

23. Independence of Covenants. All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or be otherwise within the limitations of, another covenant shall not avoid the occurrence of an Event of Default or event which with notice or lapse of time or both would become an Event of Default if such action is taken or condition exists.

24. Interpretation. The Holder and the Maker hereby waive the benefit of any statute or rule of law or judicial decision which would otherwise require that the provisions of this Note be construed or interpreted more strongly against the party responsible for the drafting thereof.

IN WITNESS WHEREOF, this Note has been issued as of date first written above.

MAKER:

Ecology Coatings, Inc.

/s/ Robert G. Crockett

Robert G. Crockett

Chief Executive Officer

Mailing Address of Holder:

Sky Blue Ventures

2701 Cambridge Court

Suite 425, Auburn Hills, MI 48326

Mailing Address of Maker:

Ecology Coatings, Inc.

2701 Cambridge Court

Suite 100

Auburn Hills, MI 48326

EX-10.70

US $7,716.40 July 1, 2009

PROMISSORY NOTE

FOR VALUE RECEIVED, the undersigned, Ecology Coatings, Inc., a Nevada corporation (the “The Maker”), promises to pay to the order of JB Smith LC. (the “Holder”), the principal amount of Seven Thousand Seven Hundred Sixteen and 40/100 dollars ($7,716.40.00), together with interest thereon as provided below.

ARTICLE I

TERMS OF REPAYMENT

1. Interest. The Note shall bear interest (“Interest”) equal to five (5%) percent per annum on the unpaid principal balance, computed on a three hundred and sixty-five (365) day year, during the term of the Note. The Maker shall pay all Interest. In no event shall the rate of Interest payable on this Note exceed the maximum rate of interest permitted to be charged under applicable law.

2. Payments. All payments by the Maker under this Note shall first be credited against costs and expenses provided for hereunder, second to the payment of any penalties, third to the payment of accrued and unpaid interest, if any, and the remainder shall be credited against principal. All payments due hereunder shall be payable in legal tender of the United States of America, and in same day funds delivered to the Holder by cashier’s check, certified check, or any other means of guaranteed funds to the mailing address provided below, or at such other place as the Holder or any holder hereof shall designate in writing for such purpose from time to time. If a payment hereunder otherwise would become due and payable on a Saturday, Sunday or legal holiday, the due date thereof shall be extended to the next succeeding business day, and Interest, if any, shall be payable thereon during such extension.

3. Maturity Date. All of the outstanding principal and interest shall be payable within fifteen (15) days following receipt of a written payment demand from the Holder.

4. Pre-Payment Demand. If the Maker completes an underwritten public offering of its common stock or other form of security convertible into common stock pursuant to an effective registration statement under the Securities Act of 1933 (the “Act”), as amended, or a managed private offering exempt from registration under Section 4(2) of the Act and Regulation D promulgated thereunder (collectively, a “New Offering”) which results in proceeds received by the Maker net of underwriting discounts and commissions, of at least One Million and 00/100 dollars ($1,000,000.00) (a “Pre-Payment Event”), then at the sole and absolute discretion of the Holder, and upon written demand to the Maker (the “Pre-Payment Notice”), all amounts owed under this Note shall become due and payable within fifteen (15) days following Maker’s receipt of the Pre-Payment Notice.

5. Exemption from Restrictions. It is the intent of the Maker and the Holder in the execution of this Note that the indebtedness hereunder be exempt from the restrictions of the usury laws of any applicable jurisdiction. The Maker and the Holder agree that none of the terms and provisions contained herein shall be construed to create a contract for the use, forbearance or detention of money requiring payment of interest at a rate in excess of the maximum interest rate permitted to be charged by the laws of any applicable jurisdiction. In such event, if any holder of this Note shall collect monies which are deemed to constitute interest which would otherwise increase the effective interest rate on this Note to a rate in excess of the maximum rate permitted to be charged by the laws of any applicable jurisdiction, all such sums deemed to constitute interest in excess of such maximum rate shall, at the option of such holder, be credited to the payment of this principal amount due hereunder or returned to the Maker.

ARTICLE II

COVENANTS

6. Conversion into Common Stock. If the Maker completes a New Offering, the Maker shall give the Holder the option to convert this Note, in whole or in part, into Common Stock of the Maker based on a conversion price equal to the lower of: (a) the closing bid price per share of the Common Stock on the date first above written as reported on the Over-The-Counter Bulletin Board, or if there is not such price on the Effective Date, then the last bid price on the date nearest preceding the date first above written, or; (b) the average price at which the Maker sells its Common Stock in the New Offering (the “Conversion Price”)(the “Conversion Shares”).

7. Piggyback Registration. If the Conversion Shares and the Underlying Shares (collectively, the “Shares”) have not been otherwise registered and at any time the Maker proposes to file a registration statement, whether or not for sale for the Maker’s own account, on a form and in a manner that would also permit registration of shares (other than in connection with a registration statement on Forms S-4 or S-8 or any similar or successor form) the Maker shall give to Holder, written notice of such proposed filing promptly, but in any case at least twenty (20) days before the anticipated filing. The notice referred to in the preceding sentence shall offer the holder(s) holding the Shares the opportunity to register such amount of the Shares as he may request (a “Piggyback Registration”). Subject to this Section, the Maker will include in each such Piggyback Registration (and any related qualification under state blue sky laws and other compliance filings, and in any underwriting involved therein) that portion of the Shares with respect to which the Maker has received written requests for inclusion therein within twenty (20) days after the written notice from the Maker is given. The holders holding any portion of the Shares will be permitted to withdraw all or part of the Shares from a Piggyback Registration at any time prior to the effective date of such Piggyback Registration. Notwithstanding the foregoing, the Maker will not be obligated to effect any registration of shares under this Paragraph 7 as a result of the registration of any of its securities solely in connection with mergers effected pursuant to a Form S-4 Filing.

8. Covenants Regarding Registration

a.	The Maker shall use its best efforts to have any registration statement declared effective at the earliest possible time, and shall furnish such number of prospectuses as shall be reasonably required.
b.	The Maker shall bear all costs, fees and expenses in connection with a Piggyback Registration,
c.	The Maker will take all necessary action which may be required in qualifying qualifying or registering the Shares included in any Piggyback Registration for offering and sale under the securities or blue sky laws of such states as are requested by the holders of such Shares, provided that the Maker shall not be obligated to execute or file any general consent to service or process or to qualify as a foreign corporation to do business under the laws of any such jurisdiction.

9. Indemnification. The Maker shall, at The Maker’s expense, protect, defend, indemnify, save and hold Holder harmless against any and all claims, demands, losses, expenses, damages, causes of action (whether legal or equitable in nature) asserted by any person or entity arising out of, caused by or relating to the Note, including without limitation the construction of the Note and the use or application of the proceeds of the Note, and The Maker shall pay Holder upon demand all claims, judgments, damages, losses and expenses (including court costs and reasonable attorneys’ fees and expenses) incurred by Holder as a result of any legal or other action arising out of the Note as aforesaid.

10. Attorneys Fees. The Maker shall reimburse Holder for all reasonable costs, attorney’s fees, and all other expenses in connection with this Note.

11. Notice of Default. So long as any amount under this Note shall remain unpaid, the Holder will, unless the Maker otherwise consents in writing, promptly give written notice to the Maker in reasonable detail of the occurrence of any Event of Default, or any condition, event or act which with the giving of notice or the passage of time or both would constitute an Event of Default.

ARTICLE III

DEFAULT

12. Events of Default. Any of the following events shall constitute an “Event of Default” hereunder:

a.	Failure by the Maker to pay the principal or Interest, if any, of this Note when due and payable.
b.	The entry of an order for relief under Federal Bankruptcy Code as to the Maker or approving a petition in reorganization or other similar relief under bankruptcy or similar laws in the United States of America or any other competent jurisdiction, and if such order, if involuntary, is not satisfied or withdrawn within sixty (60) days after entry thereof; or the filing of a petition by the Maker seeking any of the foregoing, or
	consenting thereto; or the filing of a petition to take advantage of any debtor’s act; or making a general assignment for the benefit of creditors; or admitting in writing inability to pay debts as they mature; or
c.	Failure by the Maker to pay the principal and Interest, if any, of this Note concurrent with a Pre-Payment Event; or
d.	The breach of any covenant made by the Maker in this Note.

13. Acceleration. Upon any Event of Default (in addition to any other rights or remedies provided for under this Note), at the option of the Holder or any holder hereof, all sums evidenced hereby, including all principal, accrued but unpaid Interest, fees and all other amounts due hereunder, shall become immediately due and payable. If an Event of Default relating to certain events of bankruptcy or insolvency of the Maker occurs and is continuing, the principal of and interest, if any, on this Note will become and be immediately due and payable without any declaration or other act on the part of the Holder or any holder hereof. This Note shall bear interest at the rate of ten (10%) percent per annum upon the occurrence of an Event of Default (“Default Interest”). Payments of the Default Interest shall be due every thirty (30) days following the occurrence Event of Default.

14. No Waiver. Failure of the Holder or any holder hereof to exercise any option hereunder shall not constitute a waiver of the right to exercise the same in the event of any subsequent Event of Default, or in the event of continuance of any existing Event of Default after demand or performance thereof.

15. Pursuit of any Remedy. The Holder or holder hereof may pursue any remedy under this Note without notice or presentment. The Holder or any holder hereof has the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Holder or any such holder hereof under this Note.

ARTICLE IV

MISCELLANEOUS

16. Amendments. No amendment or waiver of any provision of this Note, nor consent to any departure by the Maker herefrom, shall in any event be effective unless the same shall be in writing and signed by the Holder, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

17. Notices. All notices and other communications provided for hereunder shall be in writing (including telecopier communication) and mailed, telecopied, or delivered, to the Maker or the Holder, as applicable, at their respective addresses specified on the signature pages hereof, or, as to each party, at such other address as shall be designated by such party in a written notice to the other party. All such notices and communications shall, when mailed or telecopied, be effective when deposited in the mails or telecopied with receipt confirmed, respectively.

18. No Waiver; Remedies. No failure on the part of the Holder to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. All rights, powers and remedies of the Holder in connection with this Note are cumulative and not exclusive, and shall be in addition to any other rights, powers or remedies provided by law or equity.

19. Severability; Headings. If any one or more provisions of this Note shall be held to be illegal, invalid or otherwise unenforceable, the same shall not affect any other provisions of this Note and the remaining provisions of this Note shall remain in full force and effect. Article and paragraph headings in this Note are included herein for convenience of reference only and shall not constitute a part of this Note for any other purpose or be given any substantive effect.

20. Binding Effect; Transfer. This Note shall be binding upon and inure to the benefit of the Maker and the Holder and their respective successors and assigns. The Holder may not assign or otherwise transfer, or grant participations in, this Note or all or any portion of its rights hereunder or its interest herein to any person or entity, without the prior written consent of the Maker which consent shall not be unreasonably withheld. The Maker may not assign or otherwise transfer its rights or obligations hereunder or any interest herein without the prior written consent of the Holder. Any attempted assignment by the Maker or the Holder in contravention of this paragraph shall be null and void and of no force or effect.

21. Enforcement. It is agreed that time is of the essence of this Note and in the event of default of the terms of this Note, the Maker agrees to pay all costs of collection or enforcement, including reasonable attorneys’ fees and if there is a default in payment of any sum due hereunder.

22. Governing Law. This Note shall be governed by, and shall be construed and enforced in accordance with, the internal laws of the State of Michigan without regard to conflicts of laws principles. The venue of any legal proceeding taken in connection with this Note will be in Pontiac, Michigan.

23. Independence of Covenants. All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or be otherwise within the limitations of, another covenant shall not avoid the occurrence of an Event of Default or event which with notice or lapse of time or both would become an Event of Default if such action is taken or condition exists.

24. Interpretation. The Holder and the Maker hereby waive the benefit of any statute or rule of law or judicial decision which would otherwise require that the provisions of this Note be construed or interpreted more strongly against the party responsible for the drafting thereof.

IN WITNESS WHEREOF, this Note has been issued as of date first written above.

MAKER:

Ecology Coatings, Inc.

/s/ Robert G. Crockett

Robert G. Crockett

Chief Executive Officer

Mailing Address of Holder:

JB Smith LC

2701 Cambridge Court

Suite 425, Auburn Hills, MI 48326

Mailing Address of Maker:

Ecology Coatings, Inc.

2701 Cambridge Court

Suite 100

Auburn Hills, MI 48326

EX-99.1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors

Ecology Coatings, Inc.

We have audited the accompanying consolidated balance sheets of Ecology Coatings, Inc. and Subsidiary (the “Company”) as of September 30, 2008 and 2007, and the related consolidated statements of operations, stockholders’ equity (deficit) and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Ecology Coatings, Inc. and Subsidiary as of September 30, 2008 and 2007, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern.  As discussed in Note 9 to the consolidated financial statements, the Company’s recurring losses, negative cash flows from operations and net capital deficiency raise substantial doubt about its ability to continue as a going concern.  Management’s plans as to these matters are also discussed in Note 9.  The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ UHY LLP

Southfield, Michigan

December 19, 2008

ECOLOGY COATINGS, INC. AND SUBSIDIARY
Consolidated Balance Sheets
ASSETS
	September 30, 2008	September 30, 2007
Current Assets
Cash and cash equivalents	$974,276	$808,163
Miscellaneous receivable	-	1,118
Prepaid expenses	25,206	70,888
Total Current Assets	999,482	880,169
Property and Equipment
Computer equipment	22,933	11,285
Furniture and fixtures	18,833	1,565
Test equipment	7,313	7,313
Signs	213	213
Software	1,332	1,332
Video	48,177	-
Total fixed assets	98,801	21,708
Less: Accumulated depreciation	(22,634)	(3,794)
Property and Equipment, net	76,167	17,914
Other
Patents-net	421,214	302,575
Trademarks-net	5,029	3,465
Total Other Assets	426,243	306,040
Total Assets	$1,501,892	$1,204,123

See the accompanying notes to the audited consolidated financial statements.

ECOLOGY COATINGS, INC. AND SUBSIDIARY
Consolidated Balance Sheets
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
	September 30, 2008	September 30, 2007
Current Liabilities
Accounts payable	$1,359,328	$429,790
Credit card payable	92,305	14,772
Deferred revenue	-	24,884
Accrued liabilities	12,033	-
Payroll taxes payable	-	1,459
Accrued wages	-	12,500
Franchise tax payable	800	800
Interest payable	133,332	15,851
Convertible notes payable	894,104	170,280
Notes payable - related party	243,500	243,500
Preferred dividends payable	6,300	-
Total Current Liabilities	2,741,702	913,836
Total Liabilities	2,741,702	913,836
Commitments and Contingencies (Note 5)
Stockholders' Equity (Deficit)
Preferred Stock - 10,000,000 $.001 par value shares
authorized; 2,010 and 0 shares issued and outstanding
as of September 30, 2008 and September 30, 2007, respectively	2	-
Common Stock - 90,000,000 $.001 par value shares
authorized; 32,210,684 and 32,150,684
outstanding as of September 30, 2008 and
September 30, 2007, respectively	32,234	32,174
Additional paid in capital	13,637,160	6,165,282
Accumulated Deficit	(14,909,206)	(5,907,169)
Total Stockholders' Equity (Deficit)	(1,239,810)	290,287
Total Liabilities and Stockholders'
Equity (Deficit)	$1,501,892	$1,204,123

See the accompanying notes to the audited consolidated financial statements.

ECOLOGY COATINGS, INC. AND SUBSIDIARY
Consolidated Statements of Operations
	For the Year  Ended	For the Year  Ended
	September 30, 2008	September 30, 2007
Revenues	$25,092	$41,668
Salaries and fringe benefits	2,006,776	1,409,840
Professional fees	2,735,360	2,583,927
Other general and administrative costs	637,668	463,199
Operating Loss	(5,354,712)	(4,415,298)
Other Income (Expenses)
Interest income	5,784	20,940
Interest expense	(1,421,394)	(256,512)
Total Other (Expenses), net	(1,415,610)	(235,572)
Net Loss	$(6,770,322)	$(4,650,870)
Basic and diluted net loss per share	$(0.21)	$(0.16)
Basic and diluted weighted average of
common shares outstanding	32,189,864	29,178,144

See the accompanying notes to the audited consolidated financial statements.

ECOLOGY COATINGS, INC. AND SUBSIDIARY
Statement of Changes in Shareholders’ Equity (Deficit) for the Years Ended September 30, 2008 and 2007
					Additional		Total
					Paid In	Accumulated	Stockholders'
	Common Stock		Preferred Stock		Capital	Deficit	Equity
	Shares	Amount	Shares	Amount			(Deficit)
Balance at September 30, 2006	28,200,000	$142,000	-	$-	$ -	$(1,256,299)	$(1,114,299)
Beneficial conversion feature on convertible debt	-	-	-	-	116,819	-	116,819
Stock option expense	-	-	-	-	1,288,670	-	1,288,670
Warrants issued with debt	-	-	-	-	4,497	-	4,497
Issuance of stock, net of issuance costs of $10,789	3,950,684	4,645,470	-	-	-	-	4,645,470
Creation of par value stock	-	(4,755,296)	-	-	4,755,296	-	-
Net loss	-	-	-	-	-	(4,650,870)	(4,650,870)
Balance at September 30, 2007	32,150,684	$32,174	-	$-	$6,165,282	$(5,907,169)	$290,287
Issuance of stock for debt extension	60,000	60	-	-	161,940	-	162,000
Issuance of warrants for debt extension	-	-	-	-	26,343	-	26,343
Issuance of preferred stock	-		2,010	2	1,500,585	-	1,500,585
Beneficial conversion feature on preferred stock	-	-	-	-	2,225,415	(2,225,415)	-
Warrants issued with preferred stock	-	-	-	-	509,415	-	509,415
Beneficial conversion feature on convertible debt	-	-	-	-	358,654	-	358,654
Stock option expense	-	-	-	-	1,847,639	-	1,847,639
Warrants issued with convertible debt	-	-	-	-	841,887	-	841,887
Preferred dividends	-	-	-	-	-	(6,300)	(6,300)
Net Loss	-	-	-	-	-	(6,770,322)	(6,770,322)
Balance at September 30, 2008	32,210,684	$32,234	2,010	$2	$13,637,160	$(14,909,206)	$(1,239,810)

See the accompanying notes to the audited consolidated financial statements.

ECOLOGY COATINGS, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
	For the Year	For the Year
	Ended	Ended
	September 30, 2008	September 30, 2007
CASH FLOWS FROM OPERATING ACTIVITIES
Net  loss	$(6,770,322)	$(4,650,870)
Adjustments to reconcile net loss
to net cash  (used in) operating activities:
Depreciation and amortization	37,486	12,757
Option expense	1,847,639	1,288,670
Interest paid through conversion to stock	-	137,391
Beneficial conversion expense	374,476	116,819
Issuance of stock for debt extension	162,000	412,500
Warrants	868,231	4,497
Changes in Asset and Liabilities
Miscellaneous receivable	1,118	(1,118)
Prepaid expenses	45,683	(39,531)
Accounts payable	929,539	144,122
Accrued payroll taxes and wages	(13,960)	(28,428)
Accrued liabilities	12,033	-
Credit card payable	77,533	14,772
Interest payable	117,481	(62,893)
Deferred revenue	(24,884)	(41,668)
Net Cash Used in Operating Activities	(2,335,947)	(2,692,980)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets	(77,094)	(12,050)
Purchase of intangibles	(138,848)	(85,514)
Net Cash Used in Investing Activities	(215,942)	(97,564)
Repayment of notes payable - related parties	-	(53,530)
Repayment of notes payable	(591,998)	(67,642)
Proceeds from notes payable and warrants	1,300,000	500,000
Issuance of preferred stock	2,010,000	-
Issuance of common stock	-	2,483,500
Net Cash Provided by Financing Activities	2,718,002	2,862,328
Net Increase in Cash and Cash Equivalents	166,113	71,784
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD	808,163	736,379
CASH AND CASH EQUIVALENTS AT END
OF PERIOD	$974,276	$808,163

See the accompanying notes to the audited consolidated financial statements.

ECOLOGY COATINGS, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
	For the Year	For the Year
	Ended	Ended
	September 30, 2008	September 30, 2007
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Interest paid	$79,284	$114,253
Income taxes paid	-	-
SUPPLEMENTAL DISCLOSURE OF NON-CASH
FINANCING ACTIVITIES
Conversion of notes and interest for common stock	$-	$1,749,470
Issuance of common stock for services	$-	$412,500
Issuance of common stock for debt extension	$162,000	$-

See the accompanying notes to the audited consolidated financial statements.

ECOLOGY COATINGS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 — Summary of Significant Accounting Policies, Nature of Operations and Use of Estimates

Description of the Company.  The terms “we”, “us”, “Ecology”, and “the Company” refer to Ecology Coatings, Inc. We were originally incorporated in Nevada on February 6, 2002 as OCIS Corp. (“OCIS”). OCIS completed a merger with Ecology Coatings, Inc. a California corporation (“Ecology-CA”) on July 26, 2007 (the “Merger”). In the Merger, OCIS changed its name from OCIS Corporation to Ecology Coatings, Inc. We develop nanotechnology-enabled, ultra-violet curable coatings that are designed to drive efficiencies and clean processes in manufacturing. We create proprietary coatings with unique performance and environmental attributes by leveraging our platform of integrated nano-material technologies that reduce overall energy consumption and offer a marked decrease in drying time. Ecology’s market consists electronics, automotive and trucking, paper products and original equipment manufacturers (“OEMs”).

Principles of Consolidation.  The consolidated financial statements include all of our accounts and the accounts of our wholly owned subsidiary Ecology-CA. All significant intercompany transactions have been eliminated in consolidation.

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 amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents.  We consider all highly liquid investments with original maturities of three months or less to be cash and cash equivalents.

Revenue Recognition.  Revenues from licensing contracts are recorded ratably over the life of the contract. Contingency earnings such as royalty fees are recorded when the amount can reasonably be determined and collection is likely.

Loss Per Share.  Basic loss per share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding during the period. Diluted loss per share is computed by dividing the net loss by the weighted average number of shares of common stock and potentially dilutive securities outstanding during the period. Potentially dilutive shares consist of the incremental common shares issuable upon the exercise of stock options and warrants and the conversion of convertible debt and convertible preferred stock. Potentially dilutive shares are excluded from the weighted average number of shares if their effect is anti-dilutive. We had a net loss for all periods presented herein; therefore, none of the stock options and/or warrants outstanding or stock associated with the convertible debt or with the convertible preferred shares during each of the periods presented were included in the computation of diluted loss per share as they were anti-dilutive. As of September 30, 2008 and 2007, there were 12,031,220 and 3,792,080 potentially dilutive securities outstanding.

Income Taxes and Deferred Income Taxes.  We use the asset and liability approach for financial accounting and reporting for income taxes. Deferred income taxes are provided for temporary differences in the bases of assets and liabilities as reported for financial statement purposes and income tax purposes and for the future use of net operating losses. We have recorded a valuation allowance against the net deferred income tax asset. The valuation allowance reduces deferred income tax assets to an amount that represents management’s best estimate of the amount of such deferred income tax assets that more likely than not will be realized. We cannot be assured of future income to realize the net deferred income tax asset; therefore, no deferred income tax asset has been recorded in the accompanying consolidated financial statements.

Property and Equipment.  Property and equipment is stated at cost less accumulated depreciation. Depreciation is recorded using the straight-line method over the following useful lives:

Computer equipment	3-10 years
Furniture and fixtures	3-7 years
Test equipment	5-7 years
Software Computer	3 years
Marketing and Promotional Video	3 years

Repairs and maintenance costs are charged to operations as incurred. Betterments or renewals are capitalized as incurred.

We review long lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.

Patents.  It is our policy to capitalize costs associated with securing a patent. Costs consist of legal and filing fees. Once a patent is issued, it will be amortized on a straight-line basis over its estimated useful life. Six patents were issued as of September 30, 2008 and are being amortized over 8 years.

Stock-Based Compensation.  Our stock option plans are subject to the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123(R), Share-Based Payment. Under the provisions of SFAS No. 123(R), employee and director stock-based compensation expense is measured utilizing the fair-value method.

We account for stock options granted to non-employees under SFAS No. 123(R) using EITF 96-18, requiring the measurement and recognition of stock-based compensation to consultants under the fair-value method with stock-based compensation expense being charged to earnings on the earlier of the date services are performed or a performance commitment exists.

Expense Categories.  Salaries and Fringe Benefits of $2,006,776 and $1,409,840 for the years ended September 30, 2008 and 2007, respectively, include wages paid to and insurance benefits for our officers and employees as well as stock based compensation expense for those individuals. Professional fees of $2,735,360 and $2,583,927 for the years ended September 30, 2008 and 2007, respectively, include amounts paid to attorneys, accountants, and consultants, as well as the stock based compensation expense for those services.

Recent Accounting Pronouncements

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (SFAS 141(R)) and No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51” (SFAS 160). SFAS 141(R) will significantly change how business acquisitions are accounted for and will impact financial statements both on the acquisition date and in subsequent periods. SFAS 160 will change the accounting and reporting for minority interests, which will be re-characterized as non-controlling interests and classified as a component of equity. SFAS 141(R) and SFAS 160 are effective for both public and private companies for fiscal years beginning on or after December 15, 2008 (October 1, 2009 for Ecology). Early adoption is prohibited for both standards. SFAS 141(R) will be applied prospectively. SFAS 160 requires retroactive adoption of the presentation and disclosure requirements for existing minority interests. All other requirements of SFAS 160 shall be applied prospectively. The adoption of SFAS 160 would have no impact on our financial position or results of operations for the year ended September 30, 2008

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133”. This statement changes the disclosure requirements for derivative instruments and hedging activities. SFAS 161 will become effective for us beginning in the three months ending March 31, 2009. The adoption of this pronouncement would have had no impact on our results or financial position as of September 30, 2008.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles”. SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are

presented in conformity with generally accepted accounting principles (GAAP) in the United States (the GAAP hierarchy). SFAS 162 will not have an impact on our financial statements.

In May 2008, the FASB issued SFAS No. 163, “Accounting for Financial Guarantee Insurance Contracts, an interpretation of FASB Statement No. 60.” The scope of SFAS 163 is limited to financial guarantee insurance (and reinsurance) contracts, as described in this Statement, issued by enterprises included within the scope of Statement 60. Accordingly, SFAS 163 does not apply to financial guarantee contracts issued by enterprises excluded from the scope of Statement 60 or to some insurance contracts that seem similar to financial guarantee insurance contracts issued by insurance enterprises (such as mortgage guaranty insurance or credit insurance on trade receivables). SFAS 163 also does not apply to financial guarantee insurance contracts that are derivative instruments included within the scope of FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities.” SFAS 163 will not have an impact on our financial statements.

Note 2 — Concentrations

For the years ended September 30, 2008 and 2007, we had one customer representing 100% of revenues. As of September 30, 2008 and 2007, there were no amounts due from this customer.

We occasionally maintain bank account balances in excess of the federally insurable amount of $100,000. The Company had cash deposits in excess of this limit on September 30, 2008 and 2007 of $874,276 and $708,163, respectively.

Note 3 — Related Party Transactions

We have borrowed funds for our operations from certain major stockholders, directors and officers as disclosed below:

We have an unsecured note payable due to a principal shareholder and former director that bears interest at 4% per annum with principal and interest due on December 31, 2008. As of September 30, 2008 and September 30, 2007, the note had an outstanding balance of $110,500. The accrued interest on the note was $8,407 and $3,836 as of September 30, 2008 and September 30, 2007, respectively. The note carries certain conversion rights that allow the holder to convert all or part of the outstanding balance into shares of our common stock.

We have an unsecured note payable due to a principal shareholder and former director that bears interest at 4% per annum with principal and interest due on December 31, 2008. As of September 30, 2008 and September 30, 2007, the note had an outstanding balance of $133,000. The accrued interest on the note was $10,125 and $4,617 as of September 30, 2008 and September 30, 2007, respectively. The note carries certain conversion rights that allow the holder to convert all or part of the outstanding balance into shares of our common stock.

We had an unsecured note payable due to a majority shareholder, officer and director that bore interest at 4% per annum with principal and interest due on December 31, 2008. As of September 30, 2008 and September 30, 2007, the note had an outstanding balance of $0. The unpaid accrued interest on the note was $2,584 as of September 30, 2008 and September 30, 2007. The note carries certain conversion rights which allow the holder to convert all or part of the outstanding balance into shares of the our common stock..

Future maturities of related party long-term debt as of September 30, 2008 are as follows:

Year Ending September 30,
2009	$	243,500

We have a payable to a related party totaling $63,775 and $49,191 as of September 30, 2008 and September 39, 2007, respectively, included in accounts payable on the consolidated balance sheets.

We also paid consulting fees for contracted administrative support to a related party company totaling $8,244 for the year ended September 30, 2007.

Note 4 — Notes Payable

We have the following convertible notes:

		September 30, 2008	September 30, 2007
Convertible note payable, 20% per annum interest rate, principal and interest payment due December 31, 2007; unsecured, accrued interest of $130 outstanding at September 30, 2007, convertible at holder’s option into common shares of the Company. Conversion price is $1.60 per share. This note is stated net of an unamortized discount of $2,400 at September 30, 2007.		$-		708
Convertible subordinated note payable, 7.5% per annum interest rate. Principal and interest payment due December 31, 2007; unsecured, convertible at holder’s option into common shares of the Company at a price per share of $2.00. Accrued interest of $415 is outstanding as of September 30, 2007.		-		26,461
Convertible note payable, 15% per annum interest rate, principal and interest payment was due May 31, 2008; unsecured, convertible at holder’s option into common shares of the Company at $1.60 per share. Accrued interest of $15,367 and $4,268 was outstanding as of September 30, 2008 and September 30, 2007, respectively. This note is stated net of unamortized discount of $0 and $13,422 as of September 30, 2008 and September 30, 2007, respectively.  The holder made demand upon the Company for repayment of this note on August 18, 2008. See Note 10-Subsequent Evens for further discussion.		94,104		145,873
Convertible subordinated note payable, 25% per annum, unsecured, principal and interest was due June 30, 2008; the Company extended the maturity for 30 days, to July 30, 2008 in exchange for warrants to purchase 15,000 shares of the Company’s common stock at $1.75 per share. Additionally, the Company granted the note holder warrants to purchase 12,500 shares of the Company’s common stock at $1.75 per share. All outstanding principal and interest is convertible, at the note holder’s option, into the Company’s common shares at the lower of the closing price of the shares on the last trading date prior to conversion or at the average share price at which the Company sells its debt or equity securities in its next public offering or other private offering made pursuant to Section 4(2) of the Securities Act of 1933, as amended. Demand for repayment was made on September 8, 2008. See Note 10-Subsequent Events for further discussion. Accrued interest of $7,329 was outstanding as of September 30, 2008. This note is stated net of unamortized discount of $0 as of September 30, 2008.	$	50,000	$	—
Convertible subordinated note payable, 25% per annum, unsecured, principal and interest was due June 30, 2008; the Company extended the maturity for 30 days, to July 30, 2008 in exchange for warrants to purchase 15,000 shares of the Company’s common stock at $1.75 per share. Additionally, the Company granted the note holder warrants to purchase 125,000 shares of the Company’s common stock at $1.75 per share. All outstanding principal and interest is convertible, at the note holder’s option, into the Company’s common shares at the lower of the closing price of the shares on the last trading date prior to conversion or at the average share price at which the Company sells its debt or equity securities in its next public offering or other private offering made pursuant to Section 4(2) of the Securities Act of 1933, as amended. Demand for repayment was made on September 5, 2008. See Note 10-Subsequent Events for further discussion. Accrued interest of $73,288 was outstanding as of September 30, 2008. This note is stated net of unamortized discount of $0 as of September 30, 2008.	$	500,000	$	-
Convertible subordinated note payable, 25% per annum, unsecured, principal and interest was due July 18, 2008. Additionally, the Company issued a warrant to purchase 100,000 shares of the Company’s common stock at a price equal to $.75 per share (the “Warrant”). The Warrant is exercisable immediately and carries a ten (10) year term. The Holder may convert all or part of the then-outstanding Note balance into shares at $.50 per share. If applicable, the Company has agreed to include the Conversion Shares in its first registration statement filed with the Securities and Exchange Commission. Demand for repayment was made on August 27, 2008. Accrued interest of $10,685 was outstanding as of September 30, 2008. This note is stated net of unamortized discount of $0 as of September 30, 2008.		150,000	$	-
Convertible subordinated note payable, 25% per annum, unsecured, principal and interest was due August 10, 2008. Additionally, the Company issued a warrant to purchase 100,000 shares of the Company’s common stock at a price equal to $.50 per share (the “Warrant”). The Warrant is exercisable immediately and carries a ten (10) year term. The Holder may convert all or part of the then-outstanding Note balance into shares at $.50 per share. If applicable, the Company has agreed to include the Conversion Shares in its first registration statement filed with the Securities and Exchange Commission. Demand for repayment was made on August 27, 2008. Accrued interest of $5,548 was outstanding as of September 30, 2008. This note is stated net of unamortized discount of $0 as of September 30, 2008.		100,000	$	173,042
		$894,104		$173,042

Future maturities of the notes payable as of September 30, 2008 are as follows:

Year Ending
2009	$	894,104

The above notes payable have conversion rights and detachable warrants. These Notes may be converted for the principal balance and any unpaid accrued interest to Common Stock. In accordance with guidance issued by the FASB and the Emerging Issue Task Force (“EITF”) regarding the Accounting for Convertible Securities with a Beneficial Conversion Feature (EITF No. 98-5), the Company recognized an embedded beneficial conversion feature present in these Notes. The Company allocated the proceeds based on the fair value of $1,767,881to the warrants. The warrants are exercisable through March 31, 2018 and the fair value was amortized to interest expense over the term of the Notes.

 Note 5 — Commitments and Contingencies

Consulting Agreements.  On July 15, 2006, we entered into an agreement that provides for six months of international business development consulting services. We agreed to pay the consultant $15,000 per month payable in cash and an additional $15,000 per month payable in shares of our common stock at a

share price of $2.00. We further agreed to pay the consultant a fee of 2% of any royalties that we receive pursuant to royalty agreements that are a direct result of the consultant’s material efforts under the consulting agreement. In addition, we agreed to pay the consultant a fee of 2% of any net sales that we receive pursuant to joint venture agreements that are a direct result of the consultant’s material efforts under the consulting agreement. We will pay the fees to the consultant for the term of any royalty or joint venture agreements for a period of time not to exceed a period of 48 months. The agreement was extended for six month increments in January 2007, July 2007, and January 2008.

On February 1, 2007, we amended an agreement with a consultant. The consultant provides various business and financial consulting services, including but not limited to assistance with raising capital. The original agreement was dated June 1, 2006 and called for $12,500 to be paid to the consultant in 18 monthly payments commencing February 1, 2007. The amendment called for additional monthly payments of $9,250 on February 1, 2007, $9,375 on March 1, 2007, and $9,000 per month from April 1, 2007 and continuing through September 1, 2007. This agreement was further amended on December 28, 2007 to extend the agreement until November 1, 2010. The effective date of the agreement was November 1, 2007. Additionally, the agreement calls for monthly payments of $16,000. Finally, the agreement calls for an option grant of 100,000 shares at an exercise price of $3.05 per share. 25,000 options will vest on June 28, 2008, 25,000 options will vest on December 28, 2008, 25,000 options will vest on June 28, 2009, and 25,000 options will vest on December 28, 2009. All of the options expire on December 27, 2017. This agreement was terminated on July 31, 2008. See the caption Contingencies under this Note for further discussion.

On May 1, 2007, we entered into an agreement with a consultant to provide information system consulting services. The agreement calls for six monthly payments of $5,000 plus reimbursement for any out of pocket costs. Additionally, options to purchase 1,000 shares of common stock at $2.00 per share were issued to the consultant, with additional options to purchase 500 shares upon the achievement of certain performance measures. The options are restricted for 12 months and expire 10 years from date of issuance. On October 8, 2007, we extended the contract with the consultant for six months, and, on May 8, 2008, extended the contract for an additional six months. The expiration date is now November 8, 2008 and provides for monthly payments of $5,000. This agreement was terminated on July 31, 2008. See the caption Contingencies under this Note for further discussion.

On June 1, 2007, we entered into a consulting agreement with an individual who serves as the chairman of Ecology’s business advisory board. The agreement expires June 1, 2009. Ecology will pay the consultant $11,000 per month. Additionally, Ecology granted the consultant 200,000 options to purchase shares of our common stock for $2.00 per share. Of these options, 50,000 options vest on December 1, 2007, 50,000 options vest on June 1, 2008, 50,000 options vest on December 1, 2008, and the remaining 50,000 options vest on June 1, 2009. Additionally, we will reimburse the consultant for all reasonable expenses incurred by the consultant in the conduct of Ecology business.

On July 26, 2007, we entered into a consulting agreement with a company owned by two former officers and directors of OCIS Corporation. The terms of the agreement call for the transfer of the $100,000 standstill deposit paid to OCIS as a part of a total payment of $200,000. The balance will be paid in equal installments on the first day of each succeeding calendar month until paid in full. The agreement calls for the principals to provide services for 18 months in the area of investor relations programs and initiatives; facilitate conferences between Ecology and members of the business and financial community; review and analyze the public securities market for our securities; and introduce Ecology to broker-dealers and institutions, as appropriate.

On December 13, 2007, we entered into an agreement with a consultant to provide investor relations services. The agreement expires on December 13, 2008. The consultant will bill against a non-refundable monthly retainer of $5,000. The consultant charges on an hourly basis ranging from $35 to $225 per hour. The term of the contract is 12 months.

On April 2, 2008, we entered into a letter agreement with an individual to become chairman our Scientific Advisory Board. The letter agreement provides that we will grant the individual options to purchase 100,000 shares of our common stock. Each option is exercisable at a price equal to the final

closing price as quoted on the Over The Counter Bulletin Board on April 3, 2008. The options vest as follows: 25,000 immediately upon grant; 25,000 on October 3, 2008; 25,000 on April 3, 2009, and the remaining 25,000 on October 3, 2009. The options will all expire on April 3, 2018.

On April 10, 2008, we entered into an agreement with a consultant to assist us in securing equity and/or debt financing. The agreement called for payment of $5,000 at inception and an additional payment of $5,000 on May 1, 2008. The agreement was terminable upon notice of either party and was terminated on May 31, 2008.

On September 17, 2008, we entered into an agreement with an entity controlled by an investor in and a director of Ecology Coatings, Inc. This agreement is for business and marketing consulting services. This agreement expires on September 17, 2010 and calls for monthly payments of $20,000, commissions on licensing revenues equal to 15% of said revenues, commissions on product sales equal to 3% of said sales, and a grant of options to purchase 531,000 shares of our common stock for $1.05 per share. 177,000 of the options become exercisable on March 17, 2009, 177,000 of the options become exercisable on September 17, 2009, and 177,000 of the options become exercisable on March 17, 2010. The options expire on December 31, 2020.

On September 17, 2008, we entered into an agreement with our Chairman of the Board of Directors under which the Chairman will provide advice and consultation to us regarding strategic planning, business and financial matters, and revenue generation. The agreement expires on September 17, 2011 and calls for monthly payments of $16,000, commissions on licensing revenues equal to 15% of said revenues, commissions on product sales equal to 3% of said sales, $1,000 per month to pay for office rent reimbursement, expenses associated with the consultant’s participation in certain conferences, information technology expenses incurred by the consultant in the performance of duties relating to the Company, and certain legal fees incurred by the consultant during his tenure as our  Chief Executive Officer.

On September 17, 2008 we entered into an agreement with a shareholder under which that shareholder will act as a consultant to us. Under this agreement, the shareholder will provide business development services for which he will receive commissions on licensing revenues equal to 15% of said revenues and commissions on product sales equal to 3% of said sales and reimbursement for information technology expenses incurred by the consultant in the performance of duties relating to the Company. This agreement expires on September 17, 2011.

Employment Agreements.  On October 30, 2006, we entered into an employment agreement with an officer that expires on October 30, 2008. Pursuant to the agreement, the officer is paid an annual base salary of $160,000. We also granted the officer 321,217 options to purchase its common stock at $2.00 per share. Twenty-five percent (25%) of the options vested on November 1, 2007 and the remaining seventy-five percent (75%) will vest on November 1, 2008. The options expire on November 1, 2016.

On November 1, 2006, we entered into an employment agreement with an officer that expires on November 1, 2008. Pursuant to the agreement, the officer was paid an annual base salary of $100,000. We also granted the officer 150,000 options to acquire its common stock at $2.00 per share. The options will all vest on November 1, 2008. The options expire on November 1, 2016. On July 1, 2007, we amended this employment agreement. The amended agreement will expire on November 1, 2009, and calls for an annual salary $140,000, a one time bonus of $12,500 and the grant of 87,500 options to purchase our common stock at $2.00 per share. Upon grant, 25,000 of the options vested, 37,500 options will vest on July 1, 2008, and 25,000 options will vest on July 1, 2009. All of the options expire on July 1, 2017. This employee resigned effective July 31, 2008.

On January 1, 2007, we entered into an employment agreement with an officer that expires on January 1, 2012. Upon expiration, the agreement calls for automatic one-year renewals until terminated by either party with thirty days written notice. Pursuant to the agreement, the officer will be paid an annual base salary of $180,000 in 2007; an annual base salary of $200,000 for the years 2008 through 2011; and an annual base salary of $220,000 for 2012. In addition, 450,000 options were granted to the officer to acquire our common stock at $2.00 per share. 150,000 options will vest on January 1, 2010, 150,000 options will vest on January 1, 2011 and the remaining 150,000 options will vest January 1, 2012. The options expire on January 1, 2022.

On February 1, 2007, we entered into an employment agreement with an officer that expired on February 1, 2008. Pursuant to the agreement, the officer was paid an annual base salary of $120,000 and was granted 25,000 options to acquire our common stock at $2.00 per share. All of the options vested on February 1, 2008. The options expire on February 1, 2017. On February 1, 2008, we entered into a new agreement with this officer. This new agreement expires on February 1, 2010 and calls for an annual salary of $140,000. Further, the officer was granted 50,000 options to purchase shares of our common stock at $3.00 per share. 25,000 options vest on February 1, 2009 and the remaining 25,000 options vest on February 1, 2010. This agreement was modified effective October 1, 2008. Under the modified agreement, the employee receives an annual base salary of $70,000, subject to increase to $140,000 upon the achievement by the Company of revenues of at least $100,000. Additionally, we granted the employee options to purchase 10,000 shares of our common stock at $1.05 per share. The options become exercisable on September 17, 2009 and expire on September 17, 2018.

On May 21, 2007, we entered into an employment agreement with an officer that expires on May 21, 2009. Pursuant to the agreement, the officer will be paid an annual base salary of $160,000 and was granted 300,000 options to acquire our common stock at $2.00 per share. 75,000 of the options vested on May 21, 2008, and 225,000 of the options will vest on May 21, 2009. The options expire on May 21, 2017. On October 1, 2007, the Company modified the employment agreement to increase the salary from $160,000 to $210,000.

On December 28, 2007, we entered into an employment agreement with our Chairman of the Board of Directors and Chief Executive Officer. Under this agreement, he will continue to be paid at a rate of $320,000 per year through August 8, 2010. This agreement was terminated by consent of both parties on September 17, 2008. See also Consulting Agreements under this Note 5.

On August 11, 2008, we employed, on an at-will basis, an individual to serve as Vice President and General Counsel. The letter documenting the employment calls for a probationary period of 90 days and stipulates a salary of $150,000 per year.

On September 15, 2008, we employed, on an at-will basis, an individual to serve as Chief Executive Officer. The letter documenting the employment calls for a probationary period of 90 days and stipulates a salary of $200,000 per year. Additionally, we issued options to the individual to purchase 330,000 shares of our common stock at $1.05 per share. 110.000 of the options become exercisable on March 15, 2010, 110,000 of the options become exercisable on September 15, 2010, and 110,000 of the options become exercisable on March 15, 2011. The options expire on September 15, 2018.

Contingencies.  On September 11, 2008, we filed a lawsuit against a consultant in the Circuit Court of Oakland County, Michigan for violation of fiduciary duties. See Note 10 – Subsequent Events for further discussion.

A lawsuit was filed against us on September 16, 2008 in the Circuit Court of Oakland County, Michigan for breach of contract by a consultant previously contracted by the Company to provide information technology services. The suit seeks damages in excess of $42,335 plus court costs and attorney fees. See Note 10 – Subsequent Events for further discussion.  Our financial statements reflect an accrual for the amount of the damages.

Lease Commitments.

a.	On August 1, 2005, we leased our office facilities in Akron, Ohio for a rent of $1,800 per month. The lease expired July 1, 2006 and was renewed under the same terms through August 31, 2007. The Company now leases that property on a month-to-month basis for the same rent. Rent expense for the years ended September 30, 2008 and 2007 was $21,600 and $21,600, respectively.
b.	On September 1, 2006, we leased our office space in Bloomfield Hills, Michigan for monthly rent of $1,800. A new lease was executed on April 1, 2007 with monthly payments of $3,200. The lease is on a month-to-month basis until terminated by tenant or landlord upon 60 days notice. The monthly lease amount was reduced to $2,400 on September 1, 2007. We vacated this space on August 31, 2008 and have no further obligation under the lease. Rent expense for the years ended September 30, 2008 and 2007 was $26,400 and $28,850, respectively
c.	On September 1, 2008, we executed a lease for our office space in Auburn Hills, Michigan. The lease calls for average monthly rent of $2,997 and expires on September 30, 2010. The landlord is a company owned by a shareholder and director of Ecology.
d.	On January 9, 2006, we leased computer equipment with 24 monthly payments of $147. We recognized expense of $588 and $1,764 for the years ended September 30, 2008 and 2007, respectively, related to this lease.
e.	On April 17, 2006, we leased computer equipment with 36 monthly payments of $75. We recognized expense of $901 for each of  the years ended September 30, 2008 and September 30, 2007 related to this lease.
f.	On June 17, 2007, we leased computer equipment with 36 monthly payments of $42. We recognized expense of $504 and $126 for the years ended September 30, 2008  and 2007, respectively, related to this lease.
g.	On July 17, 2007, we leased computer equipment with 36 monthly payments of $44. We recognized expense of $528 and  $88 for the years ended September 30, 2008 and 2007, respectively, related to this lease.
h.	On September 22, 2008, we leased a multi-purpose copier with 36 monthly payments of $526. The first payment was due November 3, 2008.

Minimum future rental payments under the above operating leases as of September 30, 2008 are as follows:

Year Ending September 30,
2009	$	42,589
2010		44,364
2011		6,312
	$	93,265

Note 6 — Equity

Reverse Merger.  A reverse merger with OCIS Corporation was consummated on July 26, 2007. The shareholders of Ecology acquired 95% of the voting stock of OCIS. OCIS had no significant operating history. The purpose of the acquisition was to provide Ecology with access to the public equity markets in order to more rapidly expand its business operations. The consideration to the shareholders of OCIS was approximately 5% of the stock, at closing, of the successor company. The final purchase price was agreed to as it reflects the value to Ecology of a more rapid access to the public equity markets than a more traditional initial public offering.

Warrants.  On December 16, 2006, we issued warrants to purchase 500,000 shares of our stock at $2.00 per share. The warrants were issued to the holder of the $1,500,000 convertible note. The warrants vested on December 17, 2007. The weighted average remaining life of the warrants is 8.5 years.

On February 6, 2008, we issued warrants to purchase 262,500 shares of our common stock at the lower of $2.00 per share or at the average price per share at which the Company sells its debt or and/or equity in its next private or public offering. The warrants vested upon issuance. The weighted average remaining life of the warrants is 9.5 years.

On March 1, 2008, we issued warrants to purchase 137,500 shares of our common stock at the lower of $2.00 per share or at the average price per share at which the Company sells its debt or and/or equity in its next private or public offering. The warrants vested upon issuance. The weighted average remaining life of the warrants is 9.5 years.

On June 9, 2008, we issued warrants to purchase 210,000 shares of our common stock at the lower of $2.00 per share or at the average price per share at which the Company sells its debt or and/or equity in its next private or public offering. The warrants vested upon issuance. The weighted average remaining life of the warrants is 9.8 years.

On June 21, 2008, we issued warrants to purchase 100,000 shares of our common stock at the $.75 per share. The warrants vested upon issuance. The weighted average remaining life of the warrants is 9.8 years.

On July 14, 2008, we issued warrants to purchase 100,000 shares of our common stock at $.50 per share. The warrants vested upon issuance. The weighted average remaining life of the warrants is 9.8 years.

On July 14, 2008, we issued warrants to purchase 30,000 shares of our common stock at $1.75 per share. The warrants vested upon issuance. The weighted average remaining life of the warrants is 9.8 years.

We issued warrants as shown below to the holder of our convertible preferred stock.

	Strike	Date	Expiration
Number	Price	Issued	Date
100,000	$        0.75	July 28, 2008	July 28, 2018
5,000	$        0.75	August 20, 2008	August 20, 2018
25,000	$        0.75	August 27, 2008	August 27, 2018
500,000	$        0.75	August 29, 2008	August 29, 2018
375,000	$        0.75	September 26, 2008	September 26, 2018

Shares.  On February 5, 2008, we entered into an agreement with a convertible note holder. The amount owed the note holder, including principal and accrued interest, totaled $142,415 and the note matured on December 31, 2007 (See Note 4). The maturity date of the note was extended to May 31, 2008, with interest continuing at 15% per annum. In consideration of this extension, we issued 60,000 shares of our common stock to the note holder and granted the holder certain priority payment rights.

On August 28, 2008, we entered into an agreement with an investor to issue up to $5,000,000 in convertible preferred securities. The securities accrue cumulative dividends at 5% per annum and the entire amount then outstanding is convertible at the option of the investor into shares of our common stock at $.50 per share. The preferred securities carry “as converted” voting rights. As of September 30, 2008, we had issued 2,010 of these convertible preferred shares. In the event that we sell additional convertible preferred securities under this agreement, we will issue attached warrants (500 warrants for each $1,000 convertible preferred share sold). The warrants will be immediately exercisable, expire in five years, and entitle the investor to purchase one share of our common stock at $.75 per share for each warrant issued.

Note 7 — Stock Options

Stock Option Plan.  On May 9, 2007, we adopted a stock option plan and reserved 4,500,000 shares for the issuance of stock options or for awards of restricted stock. All prior grants of options were included under this plan. The plan provides for incentive stock options, nonqualified stock options, rights to restricted stock and stock appreciation rights. Eligible recipients are employees, directors, and consultants. Only employees are eligible for incentive stock options. The vesting terms are set by the Board of Directors. All options expire 10 years after issuance.

The Company granted non-statutory options as follows during the year ended September 30, 2008:

					Weighted
	Weighted				Average
	Average				(Remaining)
	Exercise Price		Number of		Contractual		Aggregate
	per Share		Options		Term		Fair Value
Outstanding as of September 30, 2006	$	2.00		150,000		8.7	$	184
Granted	$	2.04		3,036,119		9.5	$	3,681,425
Exercised		---		---		---		---
Forfeited		---		---		---		---
Excersisable	$	2.00		375,800		9.8	$	552,540
Outstanding as of September 30, 2007	$	2.03		3,186,119		9.5	$	3,681,609
Granted	$	1.49		1,456,000		10.3	$	1,329,891
Exercised		—		—		—		—
Forfeited		—		—		—		—
Outstanding as of September 30, 2008	$	1.83		4,642,119		9.2	$	5,011,500
Exercisable	$	2.09		1,605,228		8.4	$	1,966,657

1,605,228 of the options were exercisable as of September 30, 2008. The options are subject to various vesting periods between June 26, 2007 and January 1, 2012. The options expire on various dates between June 1, 2016 and January 1, 2022. Additionally, the options had no intrinsic value as of June 30, 2008. Intrinsic value arises when the exercise price is lower than the trading price on the date of grant.

Our stock option plans are subject to the provisions of Statement of Financial Accounting Standards (“SFAS”) Number 123(R), Accounting for Stock-Based Compensation. Under the provisions of SFAS Number 123(R), employee and director stock-based compensation expense is measured utilizing the fair-value method.

We account for stock options granted to non-employees under SFAS Number 123(R) using EITF 96-18 requiring the measurement and recognition of stock-based compensation to consultants under the fair-value method with stock-based compensation expense being charged to earnings on the earlier of the date services are performed or a performance commitment exists.

On September 15, 2008, the Board of Directors approved a change in exercise price on option grants previously made to two officers. This change was effective for options to purchase 375,000 shares of our common stock. The new exercise price is $1.05 per share. The weighted average of the price of the options at original issuance was $2.13. This change resulted in a total incremental compensation increase of  $240,641, combined, for the two officers.

In calculating the compensation related to employee/consultants and directors stock option grants, the fair value of each option is estimated on the date of grant using the Black-Scholes option-pricing model and the following weighted average assumptions:

Dividend	None
Expected volatility		91.69%-101.73	%
Risk free interest rate		1.50%-5.11	%
Expected life	5.5 years

The expected volatility was derived utilizing the price history of another publicly traded nanotechnology company. This company was selected due to the fact that it is widely traded and is in the same equity sector as our Company.

The risk free interest rate figures shown above contain the range of such figures used in the Black-Scholes calculation. The specific rate used was dependent upon the date of option grant.

Based upon the above assumptions and the weighted average $1.83 exercise price, the options outstanding at September 30, 2008 had a total unrecognized compensation cost of $1,582,378 which will be recognized over the remaining weighted average vesting period of .7 years. Options cost of $1,847,639 was recorded as an expense for the year ended September 30, 2008 of which $623,518 was recorded as compensation expense and $1,224,121 was recorded as consulting expense.

The Company has incurred losses since operations commenced in 1990.  The Company has a net operating loss carry forward for income tax purposes of approximately $7,464,662. The total loss carry forward expiring on September 30, 2028 is $3,109,937, expiring on September 30, 2027 is $3,488,598, expiring on September 30, 2026 is $427,056, expiring on September 30, 2025 is $203,978, expiring on September 30, 2024 is $189,988, expiring on September 30, 2023 is $ 25,364 and expiring on September 30, 2022 is $19,741.  The Company changed its year-end to September 30th from February 28th effective in fiscal 2006.

Deferred income taxes arise from timing differences resulting from income and expense items reported for financial accounting and tax purposes in different periods.

The principal sources of timing differences are different accrual versus cash accounting methods used for financial accounting and tax purposes; the timing of the utilization of the net operating losses, and different book versus tax depreciation methods.

As of September 30, 2008 and 2007, the deferred tax asset based on a 34% tax bracket consists of the following:

	2008	2007
Assets:
Federal loss carry forwards	$2,537,985	$1,481,936
Cash basis accounting differences	451,603	89,925
Depreciation timing differences		939
Liability:
Depreciation timing differences	(804)	-
Deferred tax asset	2,988,784	1,572,800
Valuation  allowance	(2,988,784)	(1,572,800)
Net deferred tax asset	$-	$-

The tax benefit from net operating losses and differences in timing differ from the federal statutory rate primarily due to the $1,415,984 change in the deferred tax asset valuation allowance from September 30, 2007.

Note 9 — Going Concern

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. For the years ended September 30, 2008 and  2007, we incurred net losses of ($6,770,322) and ($4,560,870), respectively. As of September 30, 2008 and September 30, 2007, we had stockholders’ deficit and equity of ($1,239,810) and $290,287, respectively.

Our continuation as a going concern is dependent upon our ability to generate sufficient cash flow to meet our obligations on a timely basis, to obtain additional financing or refinancing as may be required, to develop commercially viable products and processes, and ultimately to establish profitable operations. We have financed operations through operating revenues and, primarily, through the issuance of equity securities and debt. Until we are able to generate positive operating cash flows, additional funds will be required to support operations. We believe that cash investments subject to a securities purchase agreement with a investor will be sufficient to enable us to continue as a going concern through the fiscal year ending September 30, 2009. This securities purchase agreement does not legally bind the investor to make the investments and there can be no assurances that the investments will continue. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern. Please see also Note 10 — Subsequent Events.

Note 10 — Subsequent Events

On November 6, 2008, we settled the lawsuit filed against us on September 16, 2008 by a consultant for breach of contract. We paid $26,500 in full settlement of all claims. This amount was included in Accounts Payable at September 30, 2008.

On November 11, 2008, we settled the lawsuit we filed against one of two consultants on September 11, 2008 for breach of contract. Under the terms of the settlement, we will pay the consultant $7,500 per month for twelve months under a new consulting agreement and will pay $15,000 in 12 equal monthly payments of $1,250 to the consultant’s attorney.  Additionally, we will pay the consultant a commission of 15% for licensing revenues and 3% for product sales that the consultant generates for the Company.

On November 11, 2008, we paid in full the principal and accrued interest on the note payable shown in Note 4 with a September 30, 2008 principal balance of $94,104. In addition, we issued warrants to the note holder for the purchase of 2,000,000 shares of our common stock at $.50 per share and reset the strike price of warrants and options previously issued to the note holder to purchase 1,500,000 shares of our common stock at $2 per share. The new price is $.80 per share.

On November 13, 2008, we reached agreement with a convertible note holder. The note holder made demand for payment on September 5, 2008. We made a payment of $100,000 on October 6, 2008 on the outstanding principal and interest on that date. On November 13, we made another payment of $100,000 against the outstanding principal and interest on that date. Further, we agreed to make additional payments on the remaining principal and interest. These payments will be $100,000 for each month beginning in December of 2008 and continuing until all principal and interest has been paid. This note payable is shown in Note 4 with a September 30, 3008 principal balance of $500,000.

On November 14, 2008, we reached agreement with a convertible note holder. The note holder made demand for payment on September 8, 2008. We made a payment of $10,000 on October 8, 2008 on the outstanding principal and interest on that date. On November 14, we made another payment of $10,000 against the outstanding principal and interest on that date. Further, we agreed to make additional payments on the remaining principal and interest. These payments will be $10,000 for each month beginning in December of 2008 and continuing until all principal and interest has been paid. This note payable is shown in Note 4 with a September 30, 3008 principal balance of $50,000.

On December 2, 2008, our Board of Directors authorized the addition of 1,000,000 shares of our common stock to the 2007 Plan.

On December 3, 2008, we terminated the employment agreement with our Chief Financial Officer. The Chief Financial Officer continues to be employed by the Company in that capacity as an at-will employee.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors

Ecology Coatings, Inc.

We have audited the accompanying consolidated balance sheets of Ecology Coatings, Inc. and Subsidiary (the “Company”) as of September 30, 2008 and 2007, and the related consolidated statements of operations, stockholders’ equity (deficit) and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Ecology Coatings, Inc. and Subsidiary as of September 30, 2008 and 2007, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern.  As discussed in Note 9 to the consolidated financial statements, the Company’s recurring losses, negative cash flows from operations and net capital deficiency raise substantial doubt about its ability to continue as a going concern.  Management’s plans as to these matters are also discussed in Note 9.  The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ UHY LLP

Southfield, Michigan

December 19, 2008

ECOLOGY COATINGS, INC. AND SUBSIDIARY
Consolidated Balance Sheets
ASSETS
	September 30, 2008	September 30, 2007
Current Assets
Cash and cash equivalents	$974,276	$808,163
Miscellaneous receivable	-	1,118
Prepaid expenses	25,206	70,888
Total Current Assets	999,482	880,169
Property and Equipment
Computer equipment	22,933	11,285
Furniture and fixtures	18,833	1,565
Test equipment	7,313	7,313
Signs	213	213
Software	1,332	1,332
Video	48,177	-
Total fixed assets	98,801	21,708
Less: Accumulated depreciation	(22,634)	(3,794)
Property and Equipment, net	76,167	17,914
Other
Patents-net	421,214	302,575
Trademarks-net	5,029	3,465
Total Other Assets	426,243	306,040
Total Assets	$1,501,892	$1,204,123

See the accompanying notes to the audited consolidated financial statements.

ECOLOGY COATINGS, INC. AND SUBSIDIARY
Consolidated Balance Sheets
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
	September 30, 2008	September 30, 2007
Current Liabilities
Accounts payable	$1,359,328	$429,790
Credit card payable	92,305	14,772
Deferred revenue	-	24,884
Accrued liabilities	12,033	-
Payroll taxes payable	-	1,459
Accrued wages	-	12,500
Franchise tax payable	800	800
Interest payable	133,332	15,851
Convertible notes payable	894,104	170,280
Notes payable - related party	243,500	243,500
Preferred dividends payable	6,300	-
Total Current Liabilities	2,741,702	913,836
Total Liabilities	2,741,702	913,836
Commitments and Contingencies (Note 5)
Stockholders' Equity (Deficit)
Preferred Stock - 10,000,000 $.001 par value shares
authorized; 2,010 and 0 shares issued and outstanding
as of September 30, 2008 and September 30, 2007, respectively	2	-
Common Stock - 90,000,000 $.001 par value shares
authorized; 32,210,684 and 32,150,684
outstanding as of September 30, 2008 and
September 30, 2007, respectively	32,234	32,174
Additional paid in capital	13,637,160	6,165,282
Accumulated Deficit	(14,909,206)	(5,907,169)
Total Stockholders' Equity (Deficit)	(1,239,810)	290,287
Total Liabilities and Stockholders'
Equity (Deficit)	$1,501,892	$1,204,123

See the accompanying notes to the audited consolidated financial statements.

ECOLOGY COATINGS, INC. AND SUBSIDIARY
Consolidated Statements of Operations
	For the Year  Ended	For the Year  Ended
	September 30, 2008	September 30, 2007
Revenues	$25,092	$41,668
Salaries and fringe benefits	2,006,776	1,409,840
Professional fees	2,735,360	2,583,927
Other general and administrative costs	637,668	463,199
Operating Loss	(5,354,712)	(4,415,298)
Other Income (Expenses)
Interest income	5,784	20,940
Interest expense	(1,421,394)	(256,512)
Total Other (Expenses), net	(1,415,610)	(235,572)
Net Loss	$(6,770,322)	$(4,650,870)
Basic and diluted net loss per share	$(0.21)	$(0.16)
Basic and diluted weighted average of
common shares outstanding	32,189,864	29,178,144

See the accompanying notes to the audited consolidated financial statements.

ECOLOGY COATINGS, INC. AND SUBSIDIARY
Statement of Changes in Shareholders’ Equity (Deficit) for the Years Ended September 30, 2008 and 2007
					Additional		Total
					Paid In	Accumulated	Stockholders'
	Common Stock		Preferred Stock		Capital	Deficit	Equity
	Shares	Amount	Shares	Amount			(Deficit)
Balance at September 30, 2006	28,200,000	$142,000	-	$-	$ -	$(1,256,299)	$(1,114,299)
Beneficial conversion feature on convertible debt	-	-	-	-	116,819	-	116,819
Stock option expense	-	-	-	-	1,288,670	-	1,288,670
Warrants issued with debt	-	-	-	-	4,497	-	4,497
Issuance of stock, net of issuance costs of $10,789	3,950,684	4,645,470	-	-	-	-	4,645,470
Creation of par value stock	-	(4,755,296)	-	-	4,755,296	-	-
Net loss	-	-	-	-	-	(4,650,870)	(4,650,870)
Balance at September 30, 2007	32,150,684	$32,174	-	$-	$6,165,282	$(5,907,169)	$290,287
Issuance of stock for debt extension	60,000	60	-	-	161,940	-	162,000
Issuance of warrants for debt extension	-	-	-	-	26,343	-	26,343
Issuance of preferred stock	-		2,010	2	1,500,585	-	1,500,585
Beneficial conversion feature on preferred stock	-	-	-	-	2,225,415	(2,225,415)	-
Warrants issued with preferred stock	-	-	-	-	509,415	-	509,415
Beneficial conversion feature on convertible debt	-	-	-	-	358,654	-	358,654
Stock option expense	-	-	-	-	1,847,639	-	1,847,639
Warrants issued with convertible debt	-	-	-	-	841,887	-	841,887
Preferred dividends	-	-	-	-	-	(6,300)	(6,300)
Net Loss	-	-	-	-	-	(6,770,322)	(6,770,322)
Balance at September 30, 2008	32,210,684	$32,234	2,010	$2	$13,637,160	$(14,909,206)	$(1,239,810)

See the accompanying notes to the audited consolidated financial statements.

ECOLOGY COATINGS, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
	For the Year	For the Year
	Ended	Ended
	September 30, 2008	September 30, 2007
CASH FLOWS FROM OPERATING ACTIVITIES
Net  loss	$(6,770,322)	$(4,650,870)
Adjustments to reconcile net loss
to net cash  (used in) operating activities:
Depreciation and amortization	37,486	12,757
Option expense	1,847,639	1,288,670
Interest paid through conversion to stock	-	137,391
Beneficial conversion expense	374,476	116,819
Issuance of stock for debt extension	162,000	412,500
Warrants	868,231	4,497
Changes in Asset and Liabilities
Miscellaneous receivable	1,118	(1,118)
Prepaid expenses	45,683	(39,531)
Accounts payable	929,539	144,122
Accrued payroll taxes and wages	(13,960)	(28,428)
Accrued liabilities	12,033	-
Credit card payable	77,533	14,772
Interest payable	117,481	(62,893)
Deferred revenue	(24,884)	(41,668)
Net Cash Used in Operating Activities	(2,335,947)	(2,692,980)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets	(77,094)	(12,050)
Purchase of intangibles	(138,848)	(85,514)
Net Cash Used in Investing Activities	(215,942)	(97,564)
Repayment of notes payable - related parties	-	(53,530)
Repayment of notes payable	(591,998)	(67,642)
Proceeds from notes payable and warrants	1,300,000	500,000
Issuance of preferred stock	2,010,000	-
Issuance of common stock	-	2,483,500
Net Cash Provided by Financing Activities	2,718,002	2,862,328
Net Increase in Cash and Cash Equivalents	166,113	71,784
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD	808,163	736,379
CASH AND CASH EQUIVALENTS AT END
OF PERIOD	$974,276	$808,163

See the accompanying notes to the audited consolidated financial statements.

ECOLOGY COATINGS, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
	For the Year	For the Year
	Ended	Ended
	September 30, 2008	September 30, 2007
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Interest paid	$79,284	$114,253
Income taxes paid	-	-
SUPPLEMENTAL DISCLOSURE OF NON-CASH
FINANCING ACTIVITIES
Conversion of notes and interest for common stock	$-	$1,749,470
Issuance of common stock for services	$-	$412,500
Issuance of common stock for debt extension	$162,000	$-

See the accompanying notes to the audited consolidated financial statements.

ECOLOGY COATINGS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 — Summary of Significant Accounting Policies, Nature of Operations and Use of Estimates

Description of the Company.  The terms “we”, “us”, “Ecology”, and “the Company” refer to Ecology Coatings, Inc. We were originally incorporated in Nevada on February 6, 2002 as OCIS Corp. (“OCIS”). OCIS completed a merger with Ecology Coatings, Inc. a California corporation (“Ecology-CA”) on July 26, 2007 (the “Merger”). In the Merger, OCIS changed its name from OCIS Corporation to Ecology Coatings, Inc. We develop nanotechnology-enabled, ultra-violet curable coatings that are designed to drive efficiencies and clean processes in manufacturing. We create proprietary coatings with unique performance and environmental attributes by leveraging our platform of integrated nano-material technologies that reduce overall energy consumption and offer a marked decrease in drying time. Ecology’s market consists electronics, automotive and trucking, paper products and original equipment manufacturers (“OEMs”).

Principles of Consolidation.  The consolidated financial statements include all of our accounts and the accounts of our wholly owned subsidiary Ecology-CA. All significant intercompany transactions have been eliminated in consolidation.

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 amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents.  We consider all highly liquid investments with original maturities of three months or less to be cash and cash equivalents.

Revenue Recognition.  Revenues from licensing contracts are recorded ratably over the life of the contract. Contingency earnings such as royalty fees are recorded when the amount can reasonably be determined and collection is likely.

Loss Per Share.  Basic loss per share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding during the period. Diluted loss per share is computed by dividing the net loss by the weighted average number of shares of common stock and potentially dilutive securities outstanding during the period. Potentially dilutive shares consist of the incremental common shares issuable upon the exercise of stock options and warrants and the conversion of convertible debt and convertible preferred stock. Potentially dilutive shares are excluded from the weighted average number of shares if their effect is anti-dilutive. We had a net loss for all periods presented herein; therefore, none of the stock options and/or warrants outstanding or stock associated with the convertible debt or with the convertible preferred shares during each of the periods presented were included in the computation of diluted loss per share as they were anti-dilutive. As of September 30, 2008 and 2007, there were 12,031,220 and 3,792,080 potentially dilutive securities outstanding.

Income Taxes and Deferred Income Taxes.  We use the asset and liability approach for financial accounting and reporting for income taxes. Deferred income taxes are provided for temporary differences in the bases of assets and liabilities as reported for financial statement purposes and income tax purposes and for the future use of net operating losses. We have recorded a valuation allowance against the net deferred income tax asset. The valuation allowance reduces deferred income tax assets to an amount that represents management’s best estimate of the amount of such deferred income tax assets that more likely than not will be realized. We cannot be assured of future income to realize the net deferred income tax asset; therefore, no deferred income tax asset has been recorded in the accompanying consolidated financial statements.

Property and Equipment.  Property and equipment is stated at cost less accumulated depreciation. Depreciation is recorded using the straight-line method over the following useful lives:

Computer equipment	3-10 years
Furniture and fixtures	3-7 years
Test equipment	5-7 years
Software Computer	3 years
Marketing and Promotional Video	3 years

Repairs and maintenance costs are charged to operations as incurred. Betterments or renewals are capitalized as incurred.

We review long lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.

Patents.  It is our policy to capitalize costs associated with securing a patent. Costs consist of legal and filing fees. Once a patent is issued, it will be amortized on a straight-line basis over its estimated useful life. Six patents were issued as of September 30, 2008 and are being amortized over 8 years.

Stock-Based Compensation.  Our stock option plans are subject to the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123(R), Share-Based Payment. Under the provisions of SFAS No. 123(R), employee and director stock-based compensation expense is measured utilizing the fair-value method.

We account for stock options granted to non-employees under SFAS No. 123(R) using EITF 96-18, requiring the measurement and recognition of stock-based compensation to consultants under the fair-value method with stock-based compensation expense being charged to earnings on the earlier of the date services are performed or a performance commitment exists.

Expense Categories.  Salaries and Fringe Benefits of $2,006,776 and $1,409,840 for the years ended September 30, 2008 and 2007, respectively, include wages paid to and insurance benefits for our officers and employees as well as stock based compensation expense for those individuals. Professional fees of $2,735,360 and $2,583,927 for the years ended September 30, 2008 and 2007, respectively, include amounts paid to attorneys, accountants, and consultants, as well as the stock based compensation expense for those services.

Recent Accounting Pronouncements

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (SFAS 141(R)) and No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51” (SFAS 160). SFAS 141(R) will significantly change how business acquisitions are accounted for and will impact financial statements both on the acquisition date and in subsequent periods. SFAS 160 will change the accounting and reporting for minority interests, which will be re-characterized as non-controlling interests and classified as a component of equity. SFAS 141(R) and SFAS 160 are effective for both public and private companies for fiscal years beginning on or after December 15, 2008 (October 1, 2009 for Ecology). Early adoption is prohibited for both standards. SFAS 141(R) will be applied prospectively. SFAS 160 requires retroactive adoption of the presentation and disclosure requirements for existing minority interests. All other requirements of SFAS 160 shall be applied prospectively. The adoption of SFAS 160 would have no impact on our financial position or results of operations for the year ended September 30, 2008

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133”. This statement changes the disclosure requirements for derivative instruments and hedging activities. SFAS 161 will become effective for us beginning in the three months ending March 31, 2009. The adoption of this pronouncement would have had no impact on our results or financial position as of September 30, 2008.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles”. SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are

presented in conformity with generally accepted accounting principles (GAAP) in the United States (the GAAP hierarchy). SFAS 162 will not have an impact on our financial statements.

In May 2008, the FASB issued SFAS No. 163, “Accounting for Financial Guarantee Insurance Contracts, an interpretation of FASB Statement No. 60.” The scope of SFAS 163 is limited to financial guarantee insurance (and reinsurance) contracts, as described in this Statement, issued by enterprises included within the scope of Statement 60. Accordingly, SFAS 163 does not apply to financial guarantee contracts issued by enterprises excluded from the scope of Statement 60 or to some insurance contracts that seem similar to financial guarantee insurance contracts issued by insurance enterprises (such as mortgage guaranty insurance or credit insurance on trade receivables). SFAS 163 also does not apply to financial guarantee insurance contracts that are derivative instruments included within the scope of FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities.” SFAS 163 will not have an impact on our financial statements.

Note 2 — Concentrations

For the years ended September 30, 2008 and 2007, we had one customer representing 100% of revenues. As of September 30, 2008 and 2007, there were no amounts due from this customer.

We occasionally maintain bank account balances in excess of the federally insurable amount of $100,000. The Company had cash deposits in excess of this limit on September 30, 2008 and 2007 of $874,276 and $708,163, respectively.

Note 3 — Related Party Transactions

We have borrowed funds for our operations from certain major stockholders, directors and officers as disclosed below:

We have an unsecured note payable due to a principal shareholder and former director that bears interest at 4% per annum with principal and interest due on December 31, 2008. As of September 30, 2008 and September 30, 2007, the note had an outstanding balance of $110,500. The accrued interest on the note was $8,407 and $3,836 as of September 30, 2008 and September 30, 2007, respectively. The note carries certain conversion rights that allow the holder to convert all or part of the outstanding balance into shares of our common stock.

We have an unsecured note payable due to a principal shareholder and former director that bears interest at 4% per annum with principal and interest due on December 31, 2008. As of September 30, 2008 and September 30, 2007, the note had an outstanding balance of $133,000. The accrued interest on the note was $10,125 and $4,617 as of September 30, 2008 and September 30, 2007, respectively. The note carries certain conversion rights that allow the holder to convert all or part of the outstanding balance into shares of our common stock.

We had an unsecured note payable due to a majority shareholder, officer and director that bore interest at 4% per annum with principal and interest due on December 31, 2008. As of September 30, 2008 and September 30, 2007, the note had an outstanding balance of $0. The unpaid accrued interest on the note was $2,584 as of September 30, 2008 and September 30, 2007. The note carries certain conversion rights which allow the holder to convert all or part of the outstanding balance into shares of the our common stock..

Future maturities of related party long-term debt as of September 30, 2008 are as follows:

Year Ending September 30,
2009	$	243,500

We have a payable to a related party totaling $63,775 and $49,191 as of September 30, 2008 and September 39, 2007, respectively, included in accounts payable on the consolidated balance sheets.

We also paid consulting fees for contracted administrative support to a related party company totaling $8,244 for the year ended September 30, 2007.

Note 4 — Notes Payable

We have the following convertible notes:

		September 30, 2008	September 30, 2007
Convertible note payable, 20% per annum interest rate, principal and interest payment due December 31, 2007; unsecured, accrued interest of $130 outstanding at September 30, 2007, convertible at holder’s option into common shares of the Company. Conversion price is $1.60 per share. This note is stated net of an unamortized discount of $2,400 at September 30, 2007.		$-		708
Convertible subordinated note payable, 7.5% per annum interest rate. Principal and interest payment due December 31, 2007; unsecured, convertible at holder’s option into common shares of the Company at a price per share of $2.00. Accrued interest of $415 is outstanding as of September 30, 2007.		-		26,461
Convertible note payable, 15% per annum interest rate, principal and interest payment was due May 31, 2008; unsecured, convertible at holder’s option into common shares of the Company at $1.60 per share. Accrued interest of $15,367 and $4,268 was outstanding as of September 30, 2008 and September 30, 2007, respectively. This note is stated net of unamortized discount of $0 and $13,422 as of September 30, 2008 and September 30, 2007, respectively.  The holder made demand upon the Company for repayment of this note on August 18, 2008. See Note 10-Subsequent Evens for further discussion.		94,104		145,873
Convertible subordinated note payable, 25% per annum, unsecured, principal and interest was due June 30, 2008; the Company extended the maturity for 30 days, to July 30, 2008 in exchange for warrants to purchase 15,000 shares of the Company’s common stock at $1.75 per share. Additionally, the Company granted the note holder warrants to purchase 12,500 shares of the Company’s common stock at $1.75 per share. All outstanding principal and interest is convertible, at the note holder’s option, into the Company’s common shares at the lower of the closing price of the shares on the last trading date prior to conversion or at the average share price at which the Company sells its debt or equity securities in its next public offering or other private offering made pursuant to Section 4(2) of the Securities Act of 1933, as amended. Demand for repayment was made on September 8, 2008. See Note 10-Subsequent Events for further discussion. Accrued interest of $7,329 was outstanding as of September 30, 2008. This note is stated net of unamortized discount of $0 as of September 30, 2008.	$	50,000	$	—
Convertible subordinated note payable, 25% per annum, unsecured, principal and interest was due June 30, 2008; the Company extended the maturity for 30 days, to July 30, 2008 in exchange for warrants to purchase 15,000 shares of the Company’s common stock at $1.75 per share. Additionally, the Company granted the note holder warrants to purchase 125,000 shares of the Company’s common stock at $1.75 per share. All outstanding principal and interest is convertible, at the note holder’s option, into the Company’s common shares at the lower of the closing price of the shares on the last trading date prior to conversion or at the average share price at which the Company sells its debt or equity securities in its next public offering or other private offering made pursuant to Section 4(2) of the Securities Act of 1933, as amended. Demand for repayment was made on September 5, 2008. See Note 10-Subsequent Events for further discussion. Accrued interest of $73,288 was outstanding as of September 30, 2008. This note is stated net of unamortized discount of $0 as of September 30, 2008.	$	500,000	$	-
Convertible subordinated note payable, 25% per annum, unsecured, principal and interest was due July 18, 2008. Additionally, the Company issued a warrant to purchase 100,000 shares of the Company’s common stock at a price equal to $.75 per share (the “Warrant”). The Warrant is exercisable immediately and carries a ten (10) year term. The Holder may convert all or part of the then-outstanding Note balance into shares at $.50 per share. If applicable, the Company has agreed to include the Conversion Shares in its first registration statement filed with the Securities and Exchange Commission. Demand for repayment was made on August 27, 2008. Accrued interest of $10,685 was outstanding as of September 30, 2008. This note is stated net of unamortized discount of $0 as of September 30, 2008.		150,000	$	-
Convertible subordinated note payable, 25% per annum, unsecured, principal and interest was due August 10, 2008. Additionally, the Company issued a warrant to purchase 100,000 shares of the Company’s common stock at a price equal to $.50 per share (the “Warrant”). The Warrant is exercisable immediately and carries a ten (10) year term. The Holder may convert all or part of the then-outstanding Note balance into shares at $.50 per share. If applicable, the Company has agreed to include the Conversion Shares in its first registration statement filed with the Securities and Exchange Commission. Demand for repayment was made on August 27, 2008. Accrued interest of $5,548 was outstanding as of September 30, 2008. This note is stated net of unamortized discount of $0 as of September 30, 2008.		100,000	$	173,042
		$894,104		$173,042

Future maturities of the notes payable as of September 30, 2008 are as follows:

Year Ending
2009	$	894,104

The above notes payable have conversion rights and detachable warrants. These Notes may be converted for the principal balance and any unpaid accrued interest to Common Stock. In accordance with guidance issued by the FASB and the Emerging Issue Task Force (“EITF”) regarding the Accounting for Convertible Securities with a Beneficial Conversion Feature (EITF No. 98-5), the Company recognized an embedded beneficial conversion feature present in these Notes. The Company allocated the proceeds based on the fair value of $1,767,881to the warrants. The warrants are exercisable through March 31, 2018 and the fair value was amortized to interest expense over the term of the Notes.

 Note 5 — Commitments and Contingencies

Consulting Agreements.  On July 15, 2006, we entered into an agreement that provides for six months of international business development consulting services. We agreed to pay the consultant $15,000 per month payable in cash and an additional $15,000 per month payable in shares of our common stock at a

share price of $2.00. We further agreed to pay the consultant a fee of 2% of any royalties that we receive pursuant to royalty agreements that are a direct result of the consultant’s material efforts under the consulting agreement. In addition, we agreed to pay the consultant a fee of 2% of any net sales that we receive pursuant to joint venture agreements that are a direct result of the consultant’s material efforts under the consulting agreement. We will pay the fees to the consultant for the term of any royalty or joint venture agreements for a period of time not to exceed a period of 48 months. The agreement was extended for six month increments in January 2007, July 2007, and January 2008.

On February 1, 2007, we amended an agreement with a consultant. The consultant provides various business and financial consulting services, including but not limited to assistance with raising capital. The original agreement was dated June 1, 2006 and called for $12,500 to be paid to the consultant in 18 monthly payments commencing February 1, 2007. The amendment called for additional monthly payments of $9,250 on February 1, 2007, $9,375 on March 1, 2007, and $9,000 per month from April 1, 2007 and continuing through September 1, 2007. This agreement was further amended on December 28, 2007 to extend the agreement until November 1, 2010. The effective date of the agreement was November 1, 2007. Additionally, the agreement calls for monthly payments of $16,000. Finally, the agreement calls for an option grant of 100,000 shares at an exercise price of $3.05 per share. 25,000 options will vest on June 28, 2008, 25,000 options will vest on December 28, 2008, 25,000 options will vest on June 28, 2009, and 25,000 options will vest on December 28, 2009. All of the options expire on December 27, 2017. This agreement was terminated on July 31, 2008. See the caption Contingencies under this Note for further discussion.

On May 1, 2007, we entered into an agreement with a consultant to provide information system consulting services. The agreement calls for six monthly payments of $5,000 plus reimbursement for any out of pocket costs. Additionally, options to purchase 1,000 shares of common stock at $2.00 per share were issued to the consultant, with additional options to purchase 500 shares upon the achievement of certain performance measures. The options are restricted for 12 months and expire 10 years from date of issuance. On October 8, 2007, we extended the contract with the consultant for six months, and, on May 8, 2008, extended the contract for an additional six months. The expiration date is now November 8, 2008 and provides for monthly payments of $5,000. This agreement was terminated on July 31, 2008. See the caption Contingencies under this Note for further discussion.

On June 1, 2007, we entered into a consulting agreement with an individual who serves as the chairman of Ecology’s business advisory board. The agreement expires June 1, 2009. Ecology will pay the consultant $11,000 per month. Additionally, Ecology granted the consultant 200,000 options to purchase shares of our common stock for $2.00 per share. Of these options, 50,000 options vest on December 1, 2007, 50,000 options vest on June 1, 2008, 50,000 options vest on December 1, 2008, and the remaining 50,000 options vest on June 1, 2009. Additionally, we will reimburse the consultant for all reasonable expenses incurred by the consultant in the conduct of Ecology business.

On July 26, 2007, we entered into a consulting agreement with a company owned by two former officers and directors of OCIS Corporation. The terms of the agreement call for the transfer of the $100,000 standstill deposit paid to OCIS as a part of a total payment of $200,000. The balance will be paid in equal installments on the first day of each succeeding calendar month until paid in full. The agreement calls for the principals to provide services for 18 months in the area of investor relations programs and initiatives; facilitate conferences between Ecology and members of the business and financial community; review and analyze the public securities market for our securities; and introduce Ecology to broker-dealers and institutions, as appropriate.

On December 13, 2007, we entered into an agreement with a consultant to provide investor relations services. The agreement expires on December 13, 2008. The consultant will bill against a non-refundable monthly retainer of $5,000. The consultant charges on an hourly basis ranging from $35 to $225 per hour. The term of the contract is 12 months.

On April 2, 2008, we entered into a letter agreement with an individual to become chairman our Scientific Advisory Board. The letter agreement provides that we will grant the individual options to purchase 100,000 shares of our common stock. Each option is exercisable at a price equal to the final

closing price as quoted on the Over The Counter Bulletin Board on April 3, 2008. The options vest as follows: 25,000 immediately upon grant; 25,000 on October 3, 2008; 25,000 on April 3, 2009, and the remaining 25,000 on October 3, 2009. The options will all expire on April 3, 2018.

On April 10, 2008, we entered into an agreement with a consultant to assist us in securing equity and/or debt financing. The agreement called for payment of $5,000 at inception and an additional payment of $5,000 on May 1, 2008. The agreement was terminable upon notice of either party and was terminated on May 31, 2008.

On September 17, 2008, we entered into an agreement with an entity controlled by an investor in and a director of Ecology Coatings, Inc. This agreement is for business and marketing consulting services. This agreement expires on September 17, 2010 and calls for monthly payments of $20,000, commissions on licensing revenues equal to 15% of said revenues, commissions on product sales equal to 3% of said sales, and a grant of options to purchase 531,000 shares of our common stock for $1.05 per share. 177,000 of the options become exercisable on March 17, 2009, 177,000 of the options become exercisable on September 17, 2009, and 177,000 of the options become exercisable on March 17, 2010. The options expire on December 31, 2020.

On September 17, 2008, we entered into an agreement with our Chairman of the Board of Directors under which the Chairman will provide advice and consultation to us regarding strategic planning, business and financial matters, and revenue generation. The agreement expires on September 17, 2011 and calls for monthly payments of $16,000, commissions on licensing revenues equal to 15% of said revenues, commissions on product sales equal to 3% of said sales, $1,000 per month to pay for office rent reimbursement, expenses associated with the consultant’s participation in certain conferences, information technology expenses incurred by the consultant in the performance of duties relating to the Company, and certain legal fees incurred by the consultant during his tenure as our  Chief Executive Officer.

On September 17, 2008 we entered into an agreement with a shareholder under which that shareholder will act as a consultant to us. Under this agreement, the shareholder will provide business development services for which he will receive commissions on licensing revenues equal to 15% of said revenues and commissions on product sales equal to 3% of said sales and reimbursement for information technology expenses incurred by the consultant in the performance of duties relating to the Company. This agreement expires on September 17, 2011.

Employment Agreements.  On October 30, 2006, we entered into an employment agreement with an officer that expires on October 30, 2008. Pursuant to the agreement, the officer is paid an annual base salary of $160,000. We also granted the officer 321,217 options to purchase its common stock at $2.00 per share. Twenty-five percent (25%) of the options vested on November 1, 2007 and the remaining seventy-five percent (75%) will vest on November 1, 2008. The options expire on November 1, 2016.

On November 1, 2006, we entered into an employment agreement with an officer that expires on November 1, 2008. Pursuant to the agreement, the officer was paid an annual base salary of $100,000. We also granted the officer 150,000 options to acquire its common stock at $2.00 per share. The options will all vest on November 1, 2008. The options expire on November 1, 2016. On July 1, 2007, we amended this employment agreement. The amended agreement will expire on November 1, 2009, and calls for an annual salary $140,000, a one time bonus of $12,500 and the grant of 87,500 options to purchase our common stock at $2.00 per share. Upon grant, 25,000 of the options vested, 37,500 options will vest on July 1, 2008, and 25,000 options will vest on July 1, 2009. All of the options expire on July 1, 2017. This employee resigned effective July 31, 2008.

On January 1, 2007, we entered into an employment agreement with an officer that expires on January 1, 2012. Upon expiration, the agreement calls for automatic one-year renewals until terminated by either party with thirty days written notice. Pursuant to the agreement, the officer will be paid an annual base salary of $180,000 in 2007; an annual base salary of $200,000 for the years 2008 through 2011; and an annual base salary of $220,000 for 2012. In addition, 450,000 options were granted to the officer to acquire our common stock at $2.00 per share. 150,000 options will vest on January 1, 2010, 150,000 options will vest on January 1, 2011 and the remaining 150,000 options will vest January 1, 2012. The options expire on January 1, 2022.

On February 1, 2007, we entered into an employment agreement with an officer that expired on February 1, 2008. Pursuant to the agreement, the officer was paid an annual base salary of $120,000 and was granted 25,000 options to acquire our common stock at $2.00 per share. All of the options vested on February 1, 2008. The options expire on February 1, 2017. On February 1, 2008, we entered into a new agreement with this officer. This new agreement expires on February 1, 2010 and calls for an annual salary of $140,000. Further, the officer was granted 50,000 options to purchase shares of our common stock at $3.00 per share. 25,000 options vest on February 1, 2009 and the remaining 25,000 options vest on February 1, 2010. This agreement was modified effective October 1, 2008. Under the modified agreement, the employee receives an annual base salary of $70,000, subject to increase to $140,000 upon the achievement by the Company of revenues of at least $100,000. Additionally, we granted the employee options to purchase 10,000 shares of our common stock at $1.05 per share. The options become exercisable on September 17, 2009 and expire on September 17, 2018.

On May 21, 2007, we entered into an employment agreement with an officer that expires on May 21, 2009. Pursuant to the agreement, the officer will be paid an annual base salary of $160,000 and was granted 300,000 options to acquire our common stock at $2.00 per share. 75,000 of the options vested on May 21, 2008, and 225,000 of the options will vest on May 21, 2009. The options expire on May 21, 2017. On October 1, 2007, the Company modified the employment agreement to increase the salary from $160,000 to $210,000.

On December 28, 2007, we entered into an employment agreement with our Chairman of the Board of Directors and Chief Executive Officer. Under this agreement, he will continue to be paid at a rate of $320,000 per year through August 8, 2010. This agreement was terminated by consent of both parties on September 17, 2008. See also Consulting Agreements under this Note 5.

On August 11, 2008, we employed, on an at-will basis, an individual to serve as Vice President and General Counsel. The letter documenting the employment calls for a probationary period of 90 days and stipulates a salary of $150,000 per year.

On September 15, 2008, we employed, on an at-will basis, an individual to serve as Chief Executive Officer. The letter documenting the employment calls for a probationary period of 90 days and stipulates a salary of $200,000 per year. Additionally, we issued options to the individual to purchase 330,000 shares of our common stock at $1.05 per share. 110.000 of the options become exercisable on March 15, 2010, 110,000 of the options become exercisable on September 15, 2010, and 110,000 of the options become exercisable on March 15, 2011. The options expire on September 15, 2018.

Contingencies.  On September 11, 2008, we filed a lawsuit against a consultant in the Circuit Court of Oakland County, Michigan for violation of fiduciary duties. See Note 10 – Subsequent Events for further discussion.

A lawsuit was filed against us on September 16, 2008 in the Circuit Court of Oakland County, Michigan for breach of contract by a consultant previously contracted by the Company to provide information technology services. The suit seeks damages in excess of $42,335 plus court costs and attorney fees. See Note 10 – Subsequent Events for further discussion.  Our financial statements reflect an accrual for the amount of the damages.

Lease Commitments.

a.	On August 1, 2005, we leased our office facilities in Akron, Ohio for a rent of $1,800 per month. The lease expired July 1, 2006 and was renewed under the same terms through August 31, 2007. The Company now leases that property on a month-to-month basis for the same rent. Rent expense for the years ended September 30, 2008 and 2007 was $21,600 and $21,600, respectively.
b.	On September 1, 2006, we leased our office space in Bloomfield Hills, Michigan for monthly rent of $1,800. A new lease was executed on April 1, 2007 with monthly payments of $3,200. The lease is on a month-to-month basis until terminated by tenant or landlord upon 60 days notice. The monthly lease amount was reduced to $2,400 on September 1, 2007. We vacated this space on August 31, 2008 and have no further obligation under the lease. Rent expense for the years ended September 30, 2008 and 2007 was $26,400 and $28,850, respectively
c.	On September 1, 2008, we executed a lease for our office space in Auburn Hills, Michigan. The lease calls for average monthly rent of $2,997 and expires on September 30, 2010. The landlord is a company owned by a shareholder and director of Ecology.
d.	On January 9, 2006, we leased computer equipment with 24 monthly payments of $147. We recognized expense of $588 and $1,764 for the years ended September 30, 2008 and 2007, respectively, related to this lease.
e.	On April 17, 2006, we leased computer equipment with 36 monthly payments of $75. We recognized expense of $901 for each of  the years ended September 30, 2008 and September 30, 2007 related to this lease.
f.	On June 17, 2007, we leased computer equipment with 36 monthly payments of $42. We recognized expense of $504 and $126 for the years ended September 30, 2008  and 2007, respectively, related to this lease.
g.	On July 17, 2007, we leased computer equipment with 36 monthly payments of $44. We recognized expense of $528 and  $88 for the years ended September 30, 2008 and 2007, respectively, related to this lease.
h.	On September 22, 2008, we leased a multi-purpose copier with 36 monthly payments of $526. The first payment was due November 3, 2008.

Minimum future rental payments under the above operating leases as of September 30, 2008 are as follows:

Year Ending September 30,
2009	$	42,589
2010		44,364
2011		6,312
	$	93,265

Note 6 — Equity

Reverse Merger.  A reverse merger with OCIS Corporation was consummated on July 26, 2007. The shareholders of Ecology acquired 95% of the voting stock of OCIS. OCIS had no significant operating history. The purpose of the acquisition was to provide Ecology with access to the public equity markets in order to more rapidly expand its business operations. The consideration to the shareholders of OCIS was approximately 5% of the stock, at closing, of the successor company. The final purchase price was agreed to as it reflects the value to Ecology of a more rapid access to the public equity markets than a more traditional initial public offering.

Warrants.  On December 16, 2006, we issued warrants to purchase 500,000 shares of our stock at $2.00 per share. The warrants were issued to the holder of the $1,500,000 convertible note. The warrants vested on December 17, 2007. The weighted average remaining life of the warrants is 8.5 years.

On February 6, 2008, we issued warrants to purchase 262,500 shares of our common stock at the lower of $2.00 per share or at the average price per share at which the Company sells its debt or and/or equity in its next private or public offering. The warrants vested upon issuance. The weighted average remaining life of the warrants is 9.5 years.

On March 1, 2008, we issued warrants to purchase 137,500 shares of our common stock at the lower of $2.00 per share or at the average price per share at which the Company sells its debt or and/or equity in its next private or public offering. The warrants vested upon issuance. The weighted average remaining life of the warrants is 9.5 years.

On June 9, 2008, we issued warrants to purchase 210,000 shares of our common stock at the lower of $2.00 per share or at the average price per share at which the Company sells its debt or and/or equity in its next private or public offering. The warrants vested upon issuance. The weighted average remaining life of the warrants is 9.8 years.

On June 21, 2008, we issued warrants to purchase 100,000 shares of our common stock at the $.75 per share. The warrants vested upon issuance. The weighted average remaining life of the warrants is 9.8 years.

On July 14, 2008, we issued warrants to purchase 100,000 shares of our common stock at $.50 per share. The warrants vested upon issuance. The weighted average remaining life of the warrants is 9.8 years.

On July 14, 2008, we issued warrants to purchase 30,000 shares of our common stock at $1.75 per share. The warrants vested upon issuance. The weighted average remaining life of the warrants is 9.8 years.

We issued warrants as shown below to the holder of our convertible preferred stock.

	Strike	Date	Expiration
Number	Price	Issued	Date
100,000	$        0.75	July 28, 2008	July 28, 2018
5,000	$        0.75	August 20, 2008	August 20, 2018
25,000	$        0.75	August 27, 2008	August 27, 2018
500,000	$        0.75	August 29, 2008	August 29, 2018
375,000	$        0.75	September 26, 2008	September 26, 2018

Shares.  On February 5, 2008, we entered into an agreement with a convertible note holder. The amount owed the note holder, including principal and accrued interest, totaled $142,415 and the note matured on December 31, 2007 (See Note 4). The maturity date of the note was extended to May 31, 2008, with interest continuing at 15% per annum. In consideration of this extension, we issued 60,000 shares of our common stock to the note holder and granted the holder certain priority payment rights.

On August 28, 2008, we entered into an agreement with an investor to issue up to $5,000,000 in convertible preferred securities. The securities accrue cumulative dividends at 5% per annum and the entire amount then outstanding is convertible at the option of the investor into shares of our common stock at $.50 per share. The preferred securities carry “as converted” voting rights. As of September 30, 2008, we had issued 2,010 of these convertible preferred shares. In the event that we sell additional convertible preferred securities under this agreement, we will issue attached warrants (500 warrants for each $1,000 convertible preferred share sold). The warrants will be immediately exercisable, expire in five years, and entitle the investor to purchase one share of our common stock at $.75 per share for each warrant issued.

Note 7 — Stock Options

Stock Option Plan.  On May 9, 2007, we adopted a stock option plan and reserved 4,500,000 shares for the issuance of stock options or for awards of restricted stock. All prior grants of options were included under this plan. The plan provides for incentive stock options, nonqualified stock options, rights to restricted stock and stock appreciation rights. Eligible recipients are employees, directors, and consultants. Only employees are eligible for incentive stock options. The vesting terms are set by the Board of Directors. All options expire 10 years after issuance.

The Company granted non-statutory options as follows during the year ended September 30, 2008:

					Weighted
	Weighted				Average
	Average				(Remaining)
	Exercise Price		Number of		Contractual		Aggregate
	per Share		Options		Term		Fair Value
Outstanding as of September 30, 2006	$	2.00		150,000		8.7	$	184
Granted	$	2.04		3,036,119		9.5	$	3,681,425
Exercised		---		---		---		---
Forfeited		---		---		---		---
Excersisable	$	2.00		375,800		9.8	$	552,540
Outstanding as of September 30, 2007	$	2.03		3,186,119		9.5	$	3,681,609
Granted	$	1.49		1,456,000		10.3	$	1,329,891
Exercised		—		—		—		—
Forfeited		—		—		—		—
Outstanding as of September 30, 2008	$	1.83		4,642,119		9.2	$	5,011,500
Exercisable	$	2.09		1,605,228		8.4	$	1,966,657

1,605,228 of the options were exercisable as of September 30, 2008. The options are subject to various vesting periods between June 26, 2007 and January 1, 2012. The options expire on various dates between June 1, 2016 and January 1, 2022. Additionally, the options had no intrinsic value as of June 30, 2008. Intrinsic value arises when the exercise price is lower than the trading price on the date of grant.

Our stock option plans are subject to the provisions of Statement of Financial Accounting Standards (“SFAS”) Number 123(R), Accounting for Stock-Based Compensation. Under the provisions of SFAS Number 123(R), employee and director stock-based compensation expense is measured utilizing the fair-value method.

We account for stock options granted to non-employees under SFAS Number 123(R) using EITF 96-18 requiring the measurement and recognition of stock-based compensation to consultants under the fair-value method with stock-based compensation expense being charged to earnings on the earlier of the date services are performed or a performance commitment exists.

On September 15, 2008, the Board of Directors approved a change in exercise price on option grants previously made to two officers. This change was effective for options to purchase 375,000 shares of our common stock. The new exercise price is $1.05 per share. The weighted average of the price of the options at original issuance was $2.13. This change resulted in a total incremental compensation increase of  $240,641, combined, for the two officers.

In calculating the compensation related to employee/consultants and directors stock option grants, the fair value of each option is estimated on the date of grant using the Black-Scholes option-pricing model and the following weighted average assumptions:

Dividend	None
Expected volatility		91.69%-101.73	%
Risk free interest rate		1.50%-5.11	%
Expected life	5.5 years

The expected volatility was derived utilizing the price history of another publicly traded nanotechnology company. This company was selected due to the fact that it is widely traded and is in the same equity sector as our Company.

The risk free interest rate figures shown above contain the range of such figures used in the Black-Scholes calculation. The specific rate used was dependent upon the date of option grant.

Based upon the above assumptions and the weighted average $1.83 exercise price, the options outstanding at September 30, 2008 had a total unrecognized compensation cost of $1,582,378 which will be recognized over the remaining weighted average vesting period of .7 years. Options cost of $1,847,639 was recorded as an expense for the year ended September 30, 2008 of which $623,518 was recorded as compensation expense and $1,224,121 was recorded as consulting expense.

The Company has incurred losses since operations commenced in 1990.  The Company has a net operating loss carry forward for income tax purposes of approximately $7,464,662. The total loss carry forward expiring on September 30, 2028 is $3,109,937, expiring on September 30, 2027 is $3,488,598, expiring on September 30, 2026 is $427,056, expiring on September 30, 2025 is $203,978, expiring on September 30, 2024 is $189,988, expiring on September 30, 2023 is $ 25,364 and expiring on September 30, 2022 is $19,741.  The Company changed its year-end to September 30th from February 28th effective in fiscal 2006.

Deferred income taxes arise from timing differences resulting from income and expense items reported for financial accounting and tax purposes in different periods.

The principal sources of timing differences are different accrual versus cash accounting methods used for financial accounting and tax purposes; the timing of the utilization of the net operating losses, and different book versus tax depreciation methods.

As of September 30, 2008 and 2007, the deferred tax asset based on a 34% tax bracket consists of the following:

	2008	2007
Assets:
Federal loss carry forwards	$2,537,985	$1,481,936
Cash basis accounting differences	451,603	89,925
Depreciation timing differences		939
Liability:
Depreciation timing differences	(804)	-
Deferred tax asset	2,988,784	1,572,800
Valuation  allowance	(2,988,784)	(1,572,800)
Net deferred tax asset	$-	$-

The tax benefit from net operating losses and differences in timing differ from the federal statutory rate primarily due to the $1,415,984 change in the deferred tax asset valuation allowance from September 30, 2007.

Note 9 — Going Concern

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. For the years ended September 30, 2008 and  2007, we incurred net losses of ($6,770,322) and ($4,560,870), respectively. As of September 30, 2008 and September 30, 2007, we had stockholders’ deficit and equity of ($1,239,810) and $290,287, respectively.

Our continuation as a going concern is dependent upon our ability to generate sufficient cash flow to meet our obligations on a timely basis, to obtain additional financing or refinancing as may be required, to develop commercially viable products and processes, and ultimately to establish profitable operations. We have financed operations through operating revenues and, primarily, through the issuance of equity securities and debt. Until we are able to generate positive operating cash flows, additional funds will be required to support operations. We believe that cash investments subject to a securities purchase agreement with a investor will be sufficient to enable us to continue as a going concern through the fiscal year ending September 30, 2009. This securities purchase agreement does not legally bind the investor to make the investments and there can be no assurances that the investments will continue. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern. Please see also Note 10 — Subsequent Events.

Note 10 — Subsequent Events

On November 6, 2008, we settled the lawsuit filed against us on September 16, 2008 by a consultant for breach of contract. We paid $26,500 in full settlement of all claims. This amount was included in Accounts Payable at September 30, 2008.

On November 11, 2008, we settled the lawsuit we filed against one of two consultants on September 11, 2008 for breach of contract. Under the terms of the settlement, we will pay the consultant $7,500 per month for twelve months under a new consulting agreement and will pay $15,000 in 12 equal monthly payments of $1,250 to the consultant’s attorney.  Additionally, we will pay the consultant a commission of 15% for licensing revenues and 3% for product sales that the consultant generates for the Company.

On November 11, 2008, we paid in full the principal and accrued interest on the note payable shown in Note 4 with a September 30, 2008 principal balance of $94,104. In addition, we issued warrants to the note holder for the purchase of 2,000,000 shares of our common stock at $.50 per share and reset the strike price of warrants and options previously issued to the note holder to purchase 1,500,000 shares of our common stock at $2 per share. The new price is $.80 per share.

On November 13, 2008, we reached agreement with a convertible note holder. The note holder made demand for payment on September 5, 2008. We made a payment of $100,000 on October 6, 2008 on the outstanding principal and interest on that date. On November 13, we made another payment of $100,000 against the outstanding principal and interest on that date. Further, we agreed to make additional payments on the remaining principal and interest. These payments will be $100,000 for each month beginning in December of 2008 and continuing until all principal and interest has been paid. This note payable is shown in Note 4 with a September 30, 3008 principal balance of $500,000.

On November 14, 2008, we reached agreement with a convertible note holder. The note holder made demand for payment on September 8, 2008. We made a payment of $10,000 on October 8, 2008 on the outstanding principal and interest on that date. On November 14, we made another payment of $10,000 against the outstanding principal and interest on that date. Further, we agreed to make additional payments on the remaining principal and interest. These payments will be $10,000 for each month beginning in December of 2008 and continuing until all principal and interest has been paid. This note payable is shown in Note 4 with a September 30, 3008 principal balance of $50,000.

On December 2, 2008, our Board of Directors authorized the addition of 1,000,000 shares of our common stock to the 2007 Plan.

On December 3, 2008, we terminated the employment agreement with our Chief Financial Officer. The Chief Financial Officer continues to be employed by the Company in that capacity as an at-will employee.