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 **U.S.
        SECURITIES AND EXCHANGE COMMISSION**
 Washington,
        D.C. 20549
 
 **FORM
        10-KSB**
 
   [X]  Annual
        Report Pursuant to Section 13 or 15(D) of the Securities Exchange Act of
        1934
 for
        the
        fiscal year ended June 30, 2006.
 
 [
        ]  Transition
        Report Under Section 13 or 15(D) of the Securities Exchange Act of 1934
 for
        the
        transition period from _____ to _____
 
 Commission
        file number: 000-26017
 
 **RECLAMATION
        CONSULTING AND APPLICATIONS, INC.**
 (Exact
        name of Small Business Issuer as specified in its charter)
 
 Colorado
              58-2222646(State
                  or other jurisdiction
              (IRS
                  Employer Identification No.)of
                  incorporation or organization)
  940
                  Calle Amanecer Suite ESan
                  Clemente, California
              92673(Address
                  of principal executive offices)
              (Zip
                  Code)
 
 Issuer's
        telephone number, including area code: 949-542-7440
 Securities
        registered under Section 12(b) of the Exchange Act: None
 
 Securities
        registered under Section 12(g) of the Exchange Act: Common Stock, par value
        $0.01 per share
 
 Check
        whether the issuer (1) filed all reports required to be filed by Section
        13 or
        15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
        (or
        for such shorter period that the registrant was required to file such reports),
        and (2) has been subject to such filing requirements for the past 90 days.
        [X]
        Yes [ ] No
 
 Check
        if
        there is no disclosure of delinquent filers in response to Item 405 of
        Regulation S-B contained in this form, and no disclosure will be contained,
        to
        the best of registrant's knowledge, in definitive proxy or information
        statements incorporated by reference in Part III of this Form 10-KSB or any
        amendment to this Form 10-KSB. [X ]
 
 State
        issuer's revenues for its most recent fiscal year ended June 30, 2006:
        $96,122.
  Based
        on
        the closing sale price of $0.23 on June 30, 2006, the aggregate market value
        of
        the voting and non-voting common equity held by non-affiliates of the registrant
        was $7,328,390.
  As
        of
        October 9, 2006, there were 49,066,358  shares
        of
        the registrant’s Common Stock issued and outstanding.
 
 Transitional
        Small Business Disclosure Format (check one): Yes [ ] No [X]
 
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   **RECLAMATION
        CONSULTING AND APPLICATIONS, INC.**
 **Form
        10-KSB**
 
 For
        the
        Fiscal Years Ended June 30, 2006 and 2005
 
 PART
                  I
              3ITEM
                  1: DESCRIPTION OF BUSINESS
              4ITEM
                  2. DESCRIPTION OF PROPERTY
              10ITEM
                  3. LEGAL PROCEEDINGS
              10ITEM
                  4. SUBMISSION OF MATTERS TO VOTE OF SECURITY
                  SHAREHOLDERS
              11PART
                  II
              12ITEM
                  5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
                  MATTERS
              12ITEM
                  6. MANAGEMENT’S DISCUSSION AND
                  ANALYSIS
              14ITEM
                  7. FINANCIAL STATEMENTS
              19ITEM
                  8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTS ON
                  ACCOUNTING AND FINANCIAL DISCLOSURE
              19ITEM
                  8A. CONTROLS AND PROCEDURES
              19ITEM
                  9. DIRECTORS AND OFFICERS OF THE
                  REGISTRANT
              20ITEM
                  10. EXECUTIVE COMPENSATION
              22ITEM
                  11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
                  AND MANAGEMENT
              24ITEM
                  12. CERTAIN RELATIONSHIPS AND RELATED
                  TRANSACTIONS
              26ITEM
                  13. EXHIBITS.
              27ITEM
                  14. PRINCIPAL ACCOUNTANT FEES AND
                  SERVICES
              28
 
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  **PART
        I**
 
 **FORWARD
        LOOKING STATEMENTS**
 
 This
        Form
        10-KSB, the other reports, statements, and information that we have previously
        filed or that we may subsequently file with the Securities and Exchange
        Commission and public announcements that we have previously made or may
        subsequently make include, may include, incorporate by reference or may
        incorporate by reference certain statements that may be deemed to be
“forward-looking statements” within the meaning of the Private Securities
        Litigation Reform Act of 1995. These forward-looking statements relate to
        such
        matters as, among other things, our anticipated financial performance, business
        prospects, technological developments, new products, future distribution
        or
        license rights, international expansion, possible strategic alternatives,
        new
        business concepts, capital expenditures, consumer trends and similar matters.
 
 Forward
        looking statements necessarily involve known and unknown risks, uncertainties
        and other factors that may cause our actual results, levels of activity,
        performance, or achievements to be materially different from any future results,
        levels of activity, performance, or achievement expressed or implied by such
        forward-looking statements. In some cases, you can identify forward-looking
        statements by terminology such as "may," "will," "should," "could," "intend,"
        “expect,” “anticipate,” “assume,” “hope,” “plan,” “believe,” “seek,” "estimate,"
        "predict," “approximate,” "potential," "continue," or the negative of such
        terms. Statements including these words and variations of such words, and
        other
        similar expressions, are forward-looking statements. Although we believe
        that
        the expectations reflected in the forward-looking statements are reasonable
        based upon our knowledge of our business, we cannot absolutely predict or
        guarantee our future results, levels of activity, performance, or achievements.
        Moreover, neither we nor any other person assumes responsibility for the
        accuracy and completeness of such statements.
 
 We
        note
        that a variety of factors could cause our actual results and experience to
        differ materially from the anticipated results or other expectations expressed
        in our forward-looking statements. The risks and uncertainties that may affect
        the operations, performance, development and results of our business include,
        but are not limited to, the following: changes in consumer spending patterns;
        changes in consumer preferences and overall economic conditions; the impact
        of
        competition and pricing; the financial condition of the suppliers and
        manufacturers from whom we source our merchandise; economic and political
        instability in foreign countries or restrictive actions by the governments
        of
        foreign countries in which suppliers and manufacturers from whom we source
        products are located or in which we may actually conduct or intend to expand
        our
        business; changes in tax laws, or the laws and regulations governing direct
        or
        network marketing organizations; our ability to hire, train and retain a
        consistent supply of reliable and effective participants in our direct or
        network marketing operation; general economic, business and social conditions
        in
        the United States and in countries from which we may source products, supplies
        or customers; the costs of complying with changes in applicable labor laws
        or
        requirements, including without limitation with respect to health care; changes
        in the costs of interest rates, insurance, shipping and postage, energy,
        fuel
        and other business utilities; the reliability, longevity and performance
        of our
        licensors and others from whom we derive intellectual property or distribution
        rights in our business; the risk of non-payment by, and/or insolvency or
        bankruptcy of, customers and others owing indebtedness to us; threats or
        acts of
        terrorism or war; and strikes, work stoppages or slow downs by unions affecting
        businesses which have an impact on our ability to conduct our own business
        operations.
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  Forward-looking
        statements that we make, or that are made by others on our behalf with our
        knowledge and express permission, are based on a knowledge of our business
        and
        the environment in which we operate, but because of the factors listed above,
        actual results may differ from those in the forward-looking statements.
        Consequently, these cautionary statements qualify all of the forward-looking
        statements we make herein. We cannot assure the reader that the results or
        developments anticipated by us will be realized or, even if substantially
        realized, that those results or developments will result in the expected
        consequences for us or affect us, our business or our operations in the way
        we
        expect. We caution readers not to place undue reliance on these forward-looking
        statements, which speak only as of their dates, or on any subsequent written
        and
        oral forward-looking statements attributable to us or persons acting on our
        behalf are expressly qualified in their entirety by these cautionary statements.
        We do not undertake any obligation to release publicly any revisions to such
        forward-looking statements to reflect events or circumstances after the date
        hereof or thereof or to reflect the occurrence of unanticipated events.
 
 **ITEM
        1:****DESCRIPTION
        OF BUSINESS**
 
 **(a)**  **Business
        Development**
 
 Reclamation
        Consulting and Applications, Inc., (“us,” “we,” the “Company” or the
“Registrant”) is a Colorado corporation that currently specializes in the
        production and sale of its AlderoxTM products, including Alderox ® ASA-12 ® ,
        ASA
        -10 ® ,
        DCR ® ,
        KR-7 ® ,
        PaverBlend TM ,
        TSR ® ,
        and ASA
        Cleaners. We were originally formed in 1976, under the name “Vac-Tec Systems,
        Inc.” and operated primarily in the glass vaccum coating business. Subsequently,
        in early 1977, we were reorganized as a public shell corporation with no
        significant assets.
 
 Presently,
        we are engaged primarily in the production, sale and distribution of our
        Alderox ® line of
        products which are made from our patented formula relating specifically to
        an
        improved release agent for mitigating the sticking of asphalt, concrete and
        other similar products to various surfaces. Release agents are commonly applied
        to containers, mixers, truck beds and forms prior to pouring asphalt or concrete
        into them and act as a barrier to mitigate adhesion of the asphalt, concrete
        or
        other material to the relevant surfaces. The release agents included in our
        AlderoxTM line of products are comprised mostly of oils, especially a 100%
        biodegradable and otherwise environmentally friendly oil such as soybean
        oils.
        Our Alderox ® formulation may be comprised of any desired oil or combination of oils, filtered
        or unfiltered, with little or no water, so long as it meets the ranges of
        viscosity, specific gravity and other criteria determined by us to be the
        most
        effective for release agents.
 
 Our
        AlderoxTM line of products includes ASA-12 ® ,
        ASA-10 ® ,
        DCR ® ,
        KR-7 ® ,
        PaverBlend TM ,
        TSR ® ,
        and ASA
        Cleaners. ASA-12 ® and
        ASA-10 ® are an
        asphalt release agents and DCR ® is a
        drag chain lubricant, each of which was developed by us in response to the
        need
        for effective, economical and environmentally-friendly products in the asphalt
        industry. PaverBlend TM is also
        an asphalt related product used to keep paving equipment free from debris.
        KR7 ® is a
        concrete release agent also developed by us in response to the concrete
        industry’s need for effective, economical and environmentally-friendly products.
        TSR ® is an
        environmentally friendly product for the oil sands industry to reduce the
        build-up of clay, lime and mud on
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  the
        undercarriages and sides of transport vehicles and equipment. Our application
        equipment includes the Reliant 1, Reliant 2 and Reliant 3 control spray systems.
        Reliant 1 was specifically designed as a robotic automated spray system to
        control the amount and temperature of Alderox ASA-12 ® and or
        ASA-10 ® sprayed
        onto the beds of asphalt haul trucks. The pump system draws from a tank that
        stores the Alderox TM product
        and automatically applies a predetremined amount of product onto the truck
        bed.
        Reliant 2 is a munual hand held spray system which controls the amount of
        Alderox ASA-12 ® and or
        Alderox ASA-10 ® sprayed
        onto the beds of asphalt haul trucks and also draws from a storage tank.
        Reliant
        3 was designed as a specialized spray system for drag chain lubrication for
        use
        within the asphalt production and mining industries. Drag chains are large
        industrial chains used in the asphalt industry to drag or transport asphalt
        from
        production to distribution containers.
 
 On
        January 4, 2006, we entered into an Exclusive License Agreement with Billfighter
        Investments, Limited, an Anguilla limited liability company ("Billfighter"),
        pursuant to which we were granted the sole and exclusive, worldwide right
        and
        license to use, produce, manufacture, market, sell and distribute the Reliant
        I
        automated spray application system solely within mining and aggregate
        industries, including the exclusive, worldwide right to modify, at our expense,
        the Reliant I for application of our Alderox ® line of
        products, including our Alderox ® ASA-12 ® release
        agent to rail cars. The Reliant I is a fully automated robotic system used
        for
        the application of release agents such as our Alderox ® release
        agent products. The license granted pursuant to this Exclusive License Agreement
        will continue until terminated by either party due to a breach of the other's
        representations, warranties or covenants as contained in the Exclusive License
        Agreement, or by us upon six months prior written notice to Billfighter.
 
 As
        consideration for the license to the Reliant I, we have agreed to (i) issue
        4,000,000 restricted shares of our common stock with piggyback registration
        rights pursuant to a Subscription Agreement, dated as of January 4, 2006,
        by and
        between us and Billfighter (the "Subscription Agreement"); (ii) pay Billfighter
        the aggregate principal sum of $180,000 accruing interest on the balance
        outstanding at the rate of 10% per annum pursuant to a Promissory Note, dated
        as
        of January 4, 2006; and (iii) pay cash royalties equal to 10% of the net
        revenues generated by us from the sale and distribution of our Alderox(TM)
        products for application to rail cars using the Reliant I. Any failure to
        repay
        Billfighter all amounts due under the Note when due constitutes an "Event
        of
        Default" and allows Billfighter to declare such amounts immediately due and
        payable without presentment, demand, protest or other notice of any kind.
        We
        believe the issuance of the restricted shares of our common stock to Billfighter
        pursuant to the Subscription Agreement is exempt from the registration
        requirements of the Securities Act of 1933 pursuant to Section 4(2) and/or
        Regulation D promulgated thereunder.
 
 **(b)**  **Business
        of Issuer**
 
 **Principal
        Products and Serivces and their Markets**
 
 We
        are
        primarily engaged in the production and sale of our Alderox TM line of
        products, including Alderox ® ASA-12 ® ,
        ASA-10 ® DCR ® ,
        KR-7 ® ,
        PaverBlend TM ,
        TSR ® and ASA
        Cleaners. We manufacture, sell and service the Alderox ® line of
        products throughout the United States, Canada, Mexico and Puerto Rico through
        Applied Industrial Technologies under an exclusive distributorship agreement.
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  Alderox ® ASA-12 ® and
        ASA-10 ® are
        ready-to-use products that allows asphalt to slide easily from truck beds.
        Alderox ® DCR ® is a
        ready-to-use lubricant used to reduce start-up amps and eliminates power
        spiking
        while ensuring that highly-polymerized asphalt mixes do not build-up on drag
        chains or slats. Alderox ® PaverBlendTM is a ready-to-use cleaner that ensures that paving equipment is kept
        clean from debris. Alderox ® KR7 ® is a
        ready-to-use product that allows concrete to release easily from concrete
        molds
        and forms. Alderox ® TSR ® is an
        environmentally friendly product for the oil sands industry to reduce the
        build-up of clay, lime and mud on the undercarriages and sides of transport
        vehicles and equipment.
 
 We
        have
        obtained government approval from Environment Canada, an environmental agency
        of
        the government of Canada, for the sale and distrbituion of Alderox ® ASA-12 ® and
        KR-7 ® throughout
        Canada. Environment Canada has approved Alderox ® ASA-12 ® and
        KR-7 ® as
        the
        Canadian standard for similar consumer products, and both our products now
        carry
        the Canadian Environmental Choice EcoLogo. We plan to apply for national
        standard EcoLogo status in Canada for TSR ® and
        DCR ® in the
        future. We are not aware of any Canadian government approvals necessary for
        the
        sale of TSR ® ,
        DCR ® ,
        or ASA
        Cleaners.
 
 In
        the
        United States, we have obtained approval from the Departments of Transporation
        of the states of Connecticut, Alabama, Utah, Washington, Ohio and Oklahoma
        for
        the use of ASA-12 ® by state
        agencies and authorities within those states. We have obtained approval from
        the
        Departments of Transporation of the states of Alabama, Ohio and Massatusets
        for
        the use of ASA-10TM by state agencies and authorities within those states. We are
        not aware of any government approvals required for the sale of our
        Alderox ® line of
        products in the states of California, Florida, Hawaii, New Jersey, Pennsylvania,
        Alaska, New Mexico, West Virginia, Arizona, Tennessee or Oregon. We have
        applied
        for approval of the sale of Alderox ® ASA-12 ® in the
        states of Texas, New York, Nevada, Louisiana, Mississippi, Ohio, Maryland,
        Missouri, Massachusetts and Wyoming, and
        we
        currently are in the process of applying for approvals for the sale of
        Alderox ® ASA-12 ® within
        other states as well. We are not aware of any United States federal approvals
        necessary prior to the sale of Alderox ® KR7 ® ,
        DCR ® ,
        PaverBlend TM ,
        TSR ® or ASA
        Cleaners **.**
 
 Our
        management believes the advantages of the Alderox ® line of
        products over its competitors are as follows:
 
 ·  our
        products are 100% biodegradable;
 ·  our
        products are completely non-hazardous;
 ·  our
        products are easily applied;
 ·  our
        products cause no negative impact to equipment or asphalt/concrete;
        and
 ·  our
        products are use an exclusive filming technology
 
 **Marketing
        & Sales**
 
 Our
        marketing program includes the support of the exclusive distribution agreement
        between the Company and Applied Industrial Technologies throughout the United
        States, Canada, Mexico and Puerto Rico. This support includes the development
        of
        compliance data, sales materials, product demonstrations and sales leads.
        Compliance data is performance data we generate from on-site pilot testing,
        and
        includes a comparison of the characteristics of asphalt release from trucks
        prior to applying Alderox ® ASA-12 ® and
        after applying Alderox ® ASA-12 ® with
        other competitive products currently in use in our target markets. Within
        the
        North American market, we utilize our exclusive distributor Applied Industrial
        Technologies
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  (“Applied”).
        The Applied network encompasses more than 4,600 associates at more than
        450 facilities in 48 U.S. states, 5 Canadian provinces, Puerto Rico
        and Mexico.
 
 We
        entered into an exclusive Distributor Agreement with Applied on April 6,
        2006.
        Pursuant to the Agreement, we appointed Applied the exclusive distributor
        of our
        Alderox ® ,
        ASA-12 ® ,
        KR7 ® ,
        DCR ® ,
        Paver
        Blend(TM) and TSR ® products
        in the United States, Puerto Rico, Canada and Mexico, except for any
        relationships that we may have with distributors of these products existing
        at
        the time we entered into the agreement. The term of the distributorship
        engagement is two years from April 4, 2006, although the parties, by mutual
        written agreement, may renew the Agreement for additional terms. On July
        1,
        2006, Alderox ® ASA-10 ® and
        Alderox Aerosol were added to Applied’s exclusivity.
 
 Under
        the
        terms of the agreement, Applied has agreed to purchase certain of our products
        from us, freight-on-board our production facilities. Payment terms are net
        30
        days or net 10 days with a 2% discount.
 Applied
        has agreed to do the following:
 
 (i)
              use
                  its best efforts to professionally and actively promote and sell
                  our
                  products in its assigned territory;
 
 (ii)
              only
                  sell our products under the trademarks for the products owned by
                  us;
 
 (iii)
              maintain
                  sufficient inventories of our products, at Applied's discretion,
                  to enable
                  Applied to effectively satisfy demand for our products in its assigned
                  territory;
 
 (iv)
              in
                  distributing our products in its assigned territory, comply with
                  all
                  provisions of applicable laws, rules and
                  regulations;
 
 (v)
              cooperatively
                  work with us in matters relating to the marketing, sales, forecasting,
                  training, servicing, and corresponding with
                  customers;
 
 (vi)
              market,
                  through its marketing department, only the asphalt and cement product
                  release agents, form oils, curing agents, lubricants and cleaners,
                  which
                  are used in the construction, paving and similar industries and
                  which are
                  sold under our trademarks Alderox®,
                  ASA-12®,
                  KR7®,
                  DCR®,
                  Paver Blend(TM) and TSR®in
                  its industry marketing programs during the
                  term;
 
 (vii)
              not
                  sell the products through sub-distributors without our prior written
                  consent; and
 
 (viii)
              not
                  export our products outside its assigned territory without our
                  prior
                  written consent.
 
 Pursuant
        to the agreement, we have agreed to (a) supply Applied with our products
        as
        requested; (b) supply Applied with sales and technical assistance regarding
        our
        products to support Applied's sales effort; and (c) supply Applied with sales
        and promotional materials from time to time.
 
 The
        agreement can be terminated by either party upon sixty (60) days' prior written
        notice in the event of a breach of the agreement by the other party after
        allowing for a reasonable cure period, or upon ninety (90) days' prior written
        notice to the other party. Upon termination of the agreement, we have agreed
        to
        accept a
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  one
        time
        stock return of salable standard merchandise without charging Applied a
        restocking fee and to credit Applied's account the greater of Applied's actual
        purchase price of the returned stock or the current price then in effect
        at the
        time of the return.
 
 **Competition**
 
 To
        our
        management’s knowledge, we compete with over sixty (60) other companies who have
        competing products The market in which we compete is fragemented, and no
        single
        firm dominates the market as a whole. Some of our competitors are considerably
        larger than us and have substantially more resources. Some of our competitors
        are smaller than us, have less financial resources, and operate strictly
        on a
        regional basis.
 
 Competition
        in this industry focuses on price, quality, features, performance,
        specialization, expertise, reliability, technology, customer relationships,
        marketing, advertising, sales, publicity, distribution, serving particular
        market niches, and appealing to particular consumers. Our largest competitors
        in
        the markets we serve are Compound Technologies, Inc. and Zep Manufacturing
        Company.
 
 **Raw
        Materials**
 
 Our
        products are manufactured using ingredients that are 100% natural. The formulas
        and methods used in our Alderox ® line of
        products have been patented in the United States. The raw materials necessary
        for the manufacture of the our Alderox ® line of
        products are readily available from numerous sources and we are not dependent
        on
        any particular supplier for these items.
 
 **Dependence
        on a Few Customers**
 
 The
        domestic sales of our Alderox ® line of
        products and equipment are not dependent on one or a few major customers
        but are
        dependent on one or a few distributors.
 
 **Intellectual
        Property Rights**
 
 We
        have
        been issued a patent with respect to our Alderox® Release Agent Formulas and
        Methods from the United States Patent and Trademark Office. (the “USPTO”), and
        we have a patent pending in Mexico **** for
        patent protection under the Patent Cooperation Treaty. Our patent is protected
        in all participating States of the World Intellectual Property Organization
        (the
“WIPO”). We have registered six trademarks with the USPTO for the following:
        Alderox ® ,
        KR7 ® ,
        ASA-12 ® ,
        DCR ® PaverBlendTM and TSR ® .
 
 **Environmental
        Issues**
 
 The
        industry in which we compete is subject to environmental laws and regulations
        concerning emissions into the air, discharges into waterways, and the
        generation, handling, storage and disposal of waste materials, some of which
        may
        be hazardous. These laws and regulations are constantly evolving and we cannot
        predict accurately the effect, if any, they will have on our business in
        the
        future. It is our policy to comply with all applicable environmental, health
        and
        safety laws and regulations. In many instances, the regulations have not
        been
        finalized, or are frequently being modified. Even where regulations have
        been
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  adopted,
        they are subject to varying and contradicting interpretations and
        implementation. In some cases, compliance can only be achieved by capital
        expenditure. We cannot accurately predict what capital expenditures, if any,
        may
        be required. We believe that our operations currently are in compliance with
        all
        applicable laws and regulations on environmental matters.
 
 Environmental
        laws could become more stringent over time, imposing greater compliance costs
        and increasing risks and penalties associated with any violations. As a
        generator of non-hazardous materials, we are subject to financial exposure
        with
        regard to our properties even if we fully comply with these laws. In addition,
        we utilize facilities that are located in industrial areas and have lengthy
        operating histories. As a consequence, it is possible that historical or
        neighboring activities have affected properties we currently own, and that,
        as a
        result, additional environmental issues may arise in the future, the precise
        nature of which we cannot now predict. Any present or future noncompliance
        with
        environmental laws or future discovery of contamination could have a material
        adverse effect on our results of operations or financial condition.
 
 **Government
        Regulation**
 
 Regulations
        governing the sale of asphalt release agents are enacted on a state-by-state
        basis. Each state has its own approval process, with some being more stringent
        than others. This process is designed to assure that the products that are
        approved meet certain governmental environmental regulations specific to
        that
        state. Our customers are responsible for compliance with these regulations
        and
        we have not assumed any responsibility for compliance as a provider of products
        to our customers. Not all states require approval prior to the sale of our
        Alderox ® line of
        products. We are not aware of any state or federal regulations that require
        governmental approval prior to the sale or use of concrete release agents
        such
        as Alderox ® KR7 ® ,
        drag
        chain lubricants such as Alderox ® DCR ® ,
        non-stick undercoatings and coatings, such as Alderox ® TSR ® ,
        cleaners such as PaverBlendTM or our other ASA Cleaners.
 
 **After
        Market Sales Responsibility**
 
 We
        warrant to our customers that our Alderox ® line of
        products will perform to their intended purposes.
 
 **Research
        and Development**
 
 Our
        products and the technology underlying our products are in the early stages
        of
        market acceptance. Our management estimates that we have spent approximately
        $791,000 within the last three years on research and development efforts,
        which
        costs have been expensed, in part, as a sales expense.
  **Employees**
 
 We
        currently have eight full-time employees.
 
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  **ITEM
        2.****DESCRIPTION
        OF PROPERTY**
 
 We
        own no
        real property.
 
 We
        presently lease approximately 3,540 square feet of office space located at
        940
        Calle Amanecer, Suite E San Clemente, CA 92673 pursuant to a written lease
        agreement $4,101 per month. This five-year lease agreement was entered into
        on
        June 1, 2006 and expires on May 31, 2011. In addition, we lease approximately
        9,020 square feet of warehouse space located at 3752 West 2270 South, West
        Valley City, UT 84120 pursuant to a written lease at a monthly rental rate
        of
        $5,067. This lease is set to expire on September 1, 2007.
  **ITEM
        3. LEGAL PROCEEDINGS**
  From
        time
        to time we are involved in legal proceedings relating to claims arising out
        of
        operations in the normal course of business, as well as claims arising from
        our
        status as an issuer of securities and/or a publicly reporting company. Below
        is
        a brief summary of our existing, pending and known threatened litigation
        as of
        the date of this report:
 
 On
        April
        15, **** 2005
        a
        complaint was filed by Jamestown, L.C. against us in the matter entitled
        Jamestown L.C. vs. Reclamation Consulting and Applications, Inc. Case No.
        050907049, filed with the Third Judicial District Court, County of Salt Lake,
        State of Utah. The complaint alleges unjust enrichment and seeks past due
        rent
        in the amount of $54,272.58 plus interest and attorney fees. Our management
        has
        denied that the plaintiffs are owed the amounts sought and we intend to
        vigorously defend this action on the basis brought by the plaintiffs.
        Specifically, our management contends that we were precluded from using the
        facilities leased to us by Jamestown, L.C. to manufacture our products due
        to
        existing violations of fire code regulations on the property, and that we
        were
        forced to leave the property by governmental authorities. Accordingly, we
        could
        not perform under the lease agreement. Based upon a stipulation of the parties
        in this matter, the parties have agreed to stay all proceedings pending
        mediation and arbitration. On September 22, 2005, this matter was
        arbitrated/mediated in Salt Lake City, Utah, and the parties entered into
        a
        Memorandum of Understanding. Pursuant to the Memorandum of Understanding,
        we
        have agreed to pay the plaintiff the sum of $30,000 on March 1, 2006, and
        $3,100
        per month for 24 months commencing on April 1, 2006, subject to our option
        to
        pay the entire settlement amount at a 20% discount. As of June 30, 2006,
        we are
        in compliance with the settlement agreement.
  On
        May 2,
        2005, a complaint was filed by Pacific Business Capital Corporation against
        us,
        our President, Gordon Davies, and our Vice President, Michael Davies, in
        the
        matter entitled Pacific Business Capital vs. Reclamation Consulting and
        Applications, Inc., et. al., Case No. 05CC05777, filed with the Superior
        Court
        of State of California, County of Orange. The complaint alleges, among other
        things, a cause of action for breach of contract and seeks the return of
        approximately $55,000, which the plaintiffs allege they loaned us under a
        “partly written, partly oral” agreement, pursuant to which a total of $80,000
        was loaned to us. Our management has denied that the plaintiffs are owed
        the
        amounts sought and we intend to vigorously defend this action on the basis
        brought by the plaintiffs. Specifically, our management denies that any such
        agreement for such loan ever existed, and that we never received any funds
        pursuant thereto, if any, from the plaintiffs. On August 2, 2005, a hearing
        on
        our Demurrer to the Complaint, filed on May 2, 2005, was held,
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            to Table of Contents**
  pursuant
        to which the court granted our Demurrer on the grounds set forth therein,
        but
        granted plaintiffs leave to amend their Complaint. On August 29, 2005,
        plaintiffs again filed an amended complaint against us, Mr. Gordon Davies,
        and
        Mr. Michael Davies. On September 5, 2006, the parties reached an oral settlement
        agreement under which we agreed to pay PBCC a total of $21,000 over the course
        of 11 months. We are to pay PBCC $5,000 by September 29, 2006; $1,500 per
        month
        beginning October 1, 2006 and ending July 1, 2007; and $1,000 on August 1,
        2007.
        In the event that the principal amount is paid in full by January 2, 2007
        there
        will be a $2,000 discount to the payoff amount. There is a 10-day grace period
        for each scheduled payment and there is a deed as security on property owned
        by
        our CEO, Mr. Michael Davies. No interest is due under the settlement agreement
        if we comply with the terms thereof. In the event that we are in default
        of the
        settlement agreement, a 10% simple interest per annum will be added, and
        the
        entire amount shall immediately become due upon our default. An Order to
        Show
        Cause hearing regarding dismissal is currently scheduled for December 17,
        2007.
        As of the date of filing of this Annual Report, we have paid PBCC $6,500.
 
 On
        September 25, 2006, a Complaint was filed by AID Equipment, LLC. against
        us in a
        matter entitled *AID
        Equipment vs. Reclamation Consulting And Application, Inc* .,
        Case
        No: 060700802, filed in the Seventh Judicial District Court In And For Carbon
        County, State Of Utah. The complaint alleges that we engaged the services
        of AID
        Equipment to supply and fabricate equipment for a project for us and that
        our
        president endorsed a credit application in return for the services to be
        performed valued at $20,342.56. Plaintiffs are requesting damages in the
        amount
        of $17,286.49 and for attorneys’ fees, cost of court and expenses of litigation.
        Our management denies that the plaintiffs are owed the amounts sought, and
        we
        intend to vigorously defend this action on the basis brought by the plaintiffs.
        Specifically, our management denies that any such credit application existed
        and
        that our Company issued a purchase order for such services. The Company is
        currently in the process of filing an answer to the complaint due 30 days
        from
        September 25, 2006.
  **ITEM
        4.****SUBMISSION
        OF MATTERS TO VOTE OF SECURITY SHAREHOLDERS**
  No
        matters were submitted to a vote of our security holders during the fourth
        quarter of the fiscal year ended June 30, 2006.
 
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              to Table of
              Contents**
  **PART
        II**
 
 **ITEM
        5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
        MATTERS**
 
 Our
        common stock trades over-the-counter on the electronic Bulletin Board under
        the
        trading symbol "RCAA.” The closing sales price of our common stock on June 30,
        2006, was $0.23 per share **.**
 
 The
        following table indicates quarterly high and low price per share for our
        common
        stock during the fiscal years ended June 30, 2006 and 2005. These prices
        represent quotations among dealers without adjustments for retail mark-ups,
        markdowns or commissions, and may not represent actual transactions. The
        market
        for our shares has been sporadic and at times very limited.
  **Period**
              
              **High
                  Bid**
              
              **Low
                  Bid**
              
              **High
                  Ask**
              
              **Low
                  Ask**4th
                  Quarter ended June 30, 2006
              
              $
              0.38
              
              $
              0.06
              
              $
              0.40
              
              $
              0.073rd
                  Quarter ended March 31, 2006
              
              
              0.16
              
              
              0.05
              
              
              0.18
              
              
              0.062nd
                  Quarter ended December 31, 2005
              
              
              0.11
              
              
              0.06
              
              
              0.13
              
              
              0.071st
                  Quarter ended September 28, 2005
              
              
              0.19
              
              
              0.10
              
              
              0.22
              
              
              0.124th
                  Quarter ended June 30, 2005
              
              
              0.32
              
              
              0.19
              
              
              0.35
              
              
              0.213rd
                  Quarter ended March 31, 2005
              
              
              0.38
              
              
              0.21
              
              
              0.39
              
              
              0.222nd
                  Quarter ended December 31, 2004
              
              
              0.38
              
              
              0.18
              
              
              0.40
              
              
              0.231st
                  Quarter ended September 28, 2004
              
              
              0.45
              
              
              0.31
              
              
              0.49
              
              
              0.35
 
 **Number
        of Shareholders**
 
 At
        June
        30, 2006, we had approximately 730 stockholders of record of our common stock.
        At September 12, 2006, we had approximately 736 stockholders of record of
        our
        common stock. These figures do not include beneficial owners of common stock
        held in nominee or street name, as we cannot accurately estimate the number
        of
        these beneficial owners.
  **Dividend
        Policy**
 
 We
        did
        not declare or pay any dividends during our fiscal year ended June 30, 2006
        and
        2005. The payment of dividends on our common stock, if any, is dependent
        upon
        the amounts of our future after-tax earnings, if any, and is subject to the
        discretion of our Board of Directors. Our Board of Directors is not legally
        obligated to declare dividends, even if we are profitable.
 
 **Penny
        Stock**
 
 Our
        common stock is subject to the provisions of Section 15(g) and Rule 15g-9
        of the
        Securities Exchange Act of 1934, as amended (the “Exchange Act”), commonly
        referred to as the “penny stock rule.” Section 15(g) sets forth certain
        requirements for transactions in penny stocks, and Rule 15g-9(d) (1)
        incorporates the definition of “penny stock” that is found in Rule 3a51-1 of the
        Exchange Act. The SEC generally defines
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            to Table of Contents**
  “penny
        stock” to be any equity security that has a market price less than $5.00 per
        share, subject to certain exceptions. If our Common Stock is deemed to be
        a
        penny stock, trading in the shares will be subject to additional sales practice
        requirements on broker-dealers who sell penny stocks to persons other than
        established customers and accredited investors. “Accredited investors” are
        persons with assets in excess of $1,000,000 or annual income exceeding $200,000,
        or $300,000 together with their spouse. For transactions covered by these
        rules,
        broker-dealers must make a special suitability determination for the purchase
        of
        such security and must have the purchaser’s written consent to the transaction
        prior to the purchase. Additionally, for any transaction involving a penny
        stock, unless exempt, the rules require the delivery, prior to the first
        transaction, of a risk disclosure document, prepared by the SEC, relating
        to the
        penny stock market. A broker-dealer also must disclose the commissions payable
        to both the broker-dealer and the registered representative, and current
        quotations for the securities. Finally, monthly statements must be sent
        disclosing recent price information for the penny stocks held in an account
        and
        information on the limited market in penny stocks. Consequently, these rules
        may
        restrict the ability of broker-dealers to trade and/or maintain a market
        in our
        Common Stock and may affect the ability of our shareholders to sell their
        shares.
 
 **Securities
        Authorized For Issuance Under Equity Compensation Plans**
 
 We
        do not
        have any securities authorized for issuance under any equity compensation
        plans.
 
 **Recent
        Sales of Unregistered Securities**
 
 During
        the twelve months ended June 30, 2006, we issued and/or sold the securities
        set
        forth below without registration under the Securities Act of 1933.
 
 No
        underwriters were involved in these transactions. Selling prices for the
        shares
        may have been discounted from then prevailing market prices to reflect the
        restricted status of the shares or the urgency of our need for capital. When
        shares were issued for property or services, in each instance the valuation
        of
        the property or services was based on the board of director’s determination of
        the value received for the shares, unless otherwise specified below.
 
 In
        the
        case of sales of our securities, such securities were sold by our officers
        without the use of an underwriter. In effecting the sales, we relied on the
        exemption authority provided by Section 4(2) of the Securities Act of 1933,
        as
        amended, relating to sales not involving any public offering, and Regulation
        S,
        relating to securities sold in bona fide offshore transactions. We believe
        that
        all such sales were made by our executive officers in private, negotiated
        transactions without any advertising, public announcements or general
        solicitation. The purchasers of the shares represented themselves in writing
        to
        be, and we believe them to be, members of one or more of the following classes
        of purchaser:
 
 a.
              Officers,
                  directors, promoters or control persons of the issuer;
 b.
              Accredited
                  investors, as defined in Rule 501 under Regulation D of the Securities
                  Act; or
 c.
              Individuals
                  who:
 (i)
              Are
                  knowledgeable and sophisticated in investment matters;
 (ii)
              Are
                  able to assess the risks of an investment such as in our securities;
 (iii)
              Are
                  financially able to bear the risk of a loss of their entire investment;
                  and
 (iv)
              Have
                  access to pertinent information regarding the issuer and its
                  operations.
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            to Table of Contents**
  The
        shares are subject to the resale provisions of Rule 144 under the Securities
        Act
        of 1933, as amended, and may not be sold or transferred without registration
        except in accordance with that rule. Certificates representing the securities
        bear a legend to that effect.
 
 **Issuance
        of Common Stock**
 
 During
        the year ended June 30, 2006, we issued 7,896,897 shares of common stock
        for
        conversions of notes and interest amounting to $842,262; 7,611,150 shares
        of
        common stock for the acquisition of an intangible asset valued at $500,000;
        662,500 shares of common stock for services rendered amounting to $35,000;
        and
        3,274,998 shares of common stock for the cashless exercise of warrants amounting
        to $852,799.
  **Issuance
        of Stock Options and Warrants**
 
 During
        the year ended June 30, 2006, we granted 6,288,444 fully vested options to
        various consultants for services rendered which were accounted for using
        the
        fair value of the options granted based on the Black-Scholes option-pricing
        model. We recorded $347,031 as consulting expense during the year ended June
        30,
        2006.
 
 In
        addition, we have issued 2,250,000 warrants to a consultant in fiscal 2005,
        which vested at the rate of 750,000 in each of the first three quarters of
        2006.
        We recorded $409,500 as consulting expense for the year ended June 30, 2006.
 
 **Purchases
        of Equity Securities**
 
 We
        are
        required by the Securities Act of 1933 to disclose, in tabular format, any
        repurchases of our securities in the fourth quarter of our fiscal year ended
        June 30, 2006. We did not repurchase any of our securities in the fourth
        quarter
        of our fiscal year ended June 30, 2006, and accordingly, we have eliminated
        such
        table.
 
 **ITEM
        6.****MANAGEMENT’S
        DISCUSSION AND ANALYSIS******
 
 The
        following presentation of Management’s Discussion and Analysis has been prepared
        by internal management and should be read in conjunction with the financial
        statements and notes thereto included in Item 7 of this Annual Report on
        Form
        10-KSB. Except for the historical information contained herein, the discussion
        in this report contains certain forward-looking statements that involve risks
        and uncertainties, such as statements of our business plans, objectives,
        expectations and intentions as of the date of this filing. The cautionary
        statements about reliance on forward-looking statements made earlier in this
        document should be given serious consideration with respect to all
        forward-looking statements wherever they appear in this report, notwithstanding
        that the “safe harbor” protections available to some publicly reporting
        companies under applicable federal securities law do not apply to us as an
        issuer of penny stocks. Our actual results could differ materially from those
        discussed here.
 
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              to Table of
              Contents**
  **Results
        of Operations for the Twelve Months Ending June 30, 2006 and June 30, 2005.**
  **For
                    the Twelve Months Ending****30-Jun-06**
                
                
                
                **30-Jun-05**
                
                
                
                Change
                
                
                ChangeNet
                    Revenues
                
                $
                96,122
                
                
                100.00
                %
                
                $
                242,965
                
                
                100.00
                %
                
                
                (146,843
                )
                
                -60.44
                %Cost
                    of Revenues
                
                
                150,670
                
                
                156.75
                %
                
                
                192,937
                
                
                79.41
                %
                
                
                (42,267
                )
                
                -21.91
                %Gross
                    Profit (Loss)
                
                
                (54,548
                )
                
                -56.75
                %
                
                
                50,028
                
                
                20.59
                %
                
                
                (104,576
                )
                
                -209.03
                %Operating
                    Expenses
                
                
                3,229,011
                
                
                3359.28
                %
                
                
                2,210,588
                
                
                909.84
                %
                
                
                1,018,423
                
                
                46.07
                %Loss
                    from Operations
                
                
                (3,283,559
                )
                
                -3416.03
                %
                
                
                (2,160,560
                )
                
                -889.25
                %
                
                
                (1,122,999
                )
                
                51.98
                %Other
                    Income (Expense)Interest
                    Income
                
                
                0
                
                
                0.00
                %
                
                
                60,491
                
                
                24.90
                %
                
                
                (60,491
                )
                
                -100.00
                %Loss
                    on uncollectible notes receivable
                
                
                (10,608
                )
                
                -11.04
                %
                
                
                (1,080,320
                )
                
                -444.64
                %
                
                
                1,069,712
                
                
                99.02
                %Interest
                    Expense
                
                
                (1,280,668
                )
                
                -1332.34
                %
                
                
                (486,795
                )
                
                -200.36
                %
                
                
                (793,873
                )
                
                163.08
                %Legal
                    Settlement
                
                
                (21,000
                )
                
                -21.85
                %
                
                
                (34,625
                )
                
                -14.25
                %
                
                
                (13,625
                )
                
                39.35
                %Loss
                    on Collateralized Shares
                
                
                (110,000
                )
                
                -114.44
                %
                
                
                0
                
                
                
                
                
                
                (110,000
                )Change-Value
                    of Derivative Liability
                
                
                (2,508,656
                )
                
                -2609.87
                %
                
                
                0
                
                
                
                
                
                
                (2,508,656
                )Total
                    Other Expense
                
                
                (3,930,932
                )
                
                -4089.52
                %
                
                
                (1,541,249
                )
                
                -634.35
                %
                
                
                (2,389,683
                )
                
                155.05
                %Loss
                    before provision for income tax
                
                
                (7,214,491
                )
                
                -7505.56
                %
                
                
                (3,701,809
                )
                
                -1523.60
                %
                
                
                (3,512,682
                )
                
                94.89
                %Provision
                    for Income Taxes
                
                
                800
                
                
                0.83
                %
                
                
                800
                
                
                0.33
                %
                
                
                0
                
                
                0.00
                %Net
                    Loss
                
                
                (7,215,291
                )
                
                -7506.39
                %
                
                
                (3,702,609
                )
                
                -1523.93
                %
                
                
                (3,512,682
                )
                
                94.87
                %
 
 **Net
        Revenues**
 
 Net
        Revenues for the twelve months ended June 30, 2006 decreased to $96,122 from
        $242,965 for the twelve months ended June 30, 2005. The decrease in net sales
        of
        $146,843, or approximately 61%, over the 2005 period is due primarily to
        the
        reorganization of our sales representative infrastructure.
 
 **Cost
        of Revenues**
 
 Cost
        of
        Revenues for the twelve months ended June 30, 2006 decreased to $150,670
        from
        $192,937 for the twelve months ended June 30, 2005. The overall decrease
        in Cost
        of Revenues of $42,267, or approximately 22%, over the 2005 period is directly
        attributable to the reorganization of our sales representative
        infrastructure
 
 **Gross
        Profits/Loss**
 
 Overall
        gross profit/ loss for the twelve months ended June 30, 2006 is a loss of
        $54,548 compared to a gross profit of $50,028 for the twelve months ended
        June
        30, 2005. The overall decrease in gross profits of $104,576 or approximately
        209% over the 2005 period is directly attributable to research and development
        and costs attributed to fixed expenses. Purchases of equipment for the
        development of spray application system caused the increase in COS for the
        year
        ended June 30, 2006 to $42,100 or 1.793% as compared to $2.224 for the year
        ended June 30, 2005.
 
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              Contents**
  **Operating
        Expenses**
 
 Total
        operating expenses for the twelve months ended June 30, 2006 increased to
        $3,229,011 from $2,210,588 for the twelve months ended June 30, 2005. The
        overall increase in operating expenses of $1,018,423 or approximately 46%,
        over
        the 2005 period is covered below in our discussions of Selling, General and
        Administrative Expenses.
 
 **Selling,
        General and Administrative Expenses**
 
 Selling,
        general and administrative expenses for the twelve months ended June 30,
        2006
        increased to $3,229,011 from $2,210,588 for the twelve months ended June
        30,
        2005. The overall increase in operating expenses of $1,018,423 or approximately
        46%, over the 2005 period is due primarily to costs associated with financing
        activities, including, without limitation, fees for professional and consulting
        services and loss through conversion of notes at discounted
        prices.
 
 **Operating
        Losses**
 
 Total
        operating losses for the twelve months ended June 30, 2006 increased to
        $3,283,559 from $2,160,560 for the twelve months ended June 30, 2005. The
        overall increase in operating losses of $1,122,999, or approximately 52%
        over
        the period is due primarily to costs associated with financing activities,
        including, without limitation, fees for professional and consulting services
        and
        loss through conversion of notes at discounted prices.
 
 **Other
        Income and Expenses**
 
 Other
        expenses for the twelve months ended June 30, 2006 increased to $3,930,932
        from
        $1,541,249 from for the twelve months ended June 30, 2005. The overall increase
        in our other expenses of $2,389,638, or approximately 155% over the 2005
        period
        is covered below in our discussions of Interest Income, Interest Expense,
        Legal
        Settlement, Loss of Collateralized Shares, and Change-Value of Derivative
        Liability,.
 
 **Interest
        Income**
 
 We
        had no
        interest income for the twelve months ended June 30, 2006 compared to $60,491
        for the twelve months ended June 30, 2005. The overall decrease in our interest
        income of $60,491 or approximately 100% over the 2005 period is due primarily
        to
        the termination of the revolving loan agreement between the Company and North
        American Systems, Inc.
 
 **Loss
        on Uncollectible Notes Receivable**
 
 For
        the
        twelve months ended June 30, 2006, we recorded a loss on uncollectible notes
        receivable of $10,608, compared to $1,080,320 for the year ended June 20,
        2005.
        The significant loss on uncollectible notes receivable recognized for the
        year
        ended June 30, 2005 was due to the insolvency of North America Systems,
        Inc.
 
 **Interest
        Expense**
 
 Interest
        Expense for the twelve months ended June 30, 2006 increased to $1,280,668
        from
        $486,795 for the twelve months ended June 30, 2005. The overall increase
        in our
        Interest Expense of $793,873 or
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            to Table of Contents**
  approximately
        163% over the 2005 period is due primarily to the amortization of debt discount
        associated with financing activities.
 
 **Legal
        Settlement**
 
 Legal
        Settlement for the twelve months ended June 30, 2006 decreased to $21,000
        from
        $34,625 for the twelve months ended June 30, 2005. This decrease represents
        the
        settlement with Pacific Business Capital Corporation.
 
 **Loss
        on Collateralized Shares**
 
 For
        the
        twelve months ended June 30, 2006, we recorded a loss of collateralized shares
        of $110,000, and for the twelve months ended June 30, 2005, we did not record
        a
        loss of collateralized shares. Our loss from collateralized shares for the
        twelve months ended June 30, 2006 is due to the breach of a financing agreement
        whereas securities were used as collateral and transferred to a third party
        without authorization by the Company.
 
 **Change-Value
        of Derivative Liability**
 
 For
        the
        twelve months ended June 30, 2006, we recorded a change-value of derivative
        liability of $2,508,656 and for the twelve months ended June 30, 2005, we
        did
        not record a recorded change-value of derivative liability. Our change of
        value
        of derivative liability is mostly due to additional convertible debt issued
        during the 2006 fiscal year with warrants attached.
 
 **Net
        Loss**
 
 Net
        Loss
        for the twelve months ended June 30, 2006 increased to $7,215,291 from
        $3,702,609 for the twelve months ended June 30, 2005. This increase in Net
        Loss
        of $3,512,682 or approximately 95% over the 2005 period is due primarily
        to
        financing activities and the reorganization of our sales representative
        infrastructure.
 
 **Liquidity
        and Capital Resources**
 
 June
                  30,
              
              June
                  30,2006
              
              2005Net
                  cash provided by (used in) operating activities
              
              $
              (2,570,546
              )
              $
              (1,510,848
              )Net
                  cash provided by (used in) investing activities
              
              
              (8,130
              )
              
              (306,659
              )Net
                  cash provided by (used in) financing activities
              
              
              2,578,676
              
              
              1,816,464
 
 **General**
 
 For
        the
        twelve months ended June 30, 2006, we had negative cash flows resulting from
        $2,570,546 of cash used in our operating activities, $8,130 of cash used
        in our
        investing activities, and $2,578,676 of cash provided by our financing
        activities. Accordingly, for the twelve months ended June 30, 2006, our funds
        from operations were insufficient to cover our daily operations as further
        explained below.
  -17-
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            to Table of Contents**
  **Cash
        Flows from Operating Activities**
 
 Net
        cash
        used in our operating activities of $2,570,546 for the twelve months ended
        June
        30, 2006 was primarily attributable to a net loss of $7,215,291, adjustments
        to
        reconcile net loss to net cash used in our operating activities in the amount
        of
        $4,644,745, principally loss on change in fair value of derivative and warrant
        liabilities of $2,508,656, issuance of stock options and warrants for services
        rendered of $756,531, issuance of shares for services rendered of $67,400,
        amortization of discount on notes payable of $914,638, deprecation of
        $53,820,net increase in current assets of $41,387, increase in accounts payable
        and accrued expenses of $181,705, and no customer deposits.
 
 **Cash
        Flows from Investing Activities**
 
 Net
        cash
        used in our investing activities of $8,130 for the twelve months ended June
        30,
        2006 was cash used in acquisition of property and equipment in the amount
        of
        $8,130.
 
 **Cash
        Flows from Financing Activities**
 
 Net
        cash
        provided by our financing activities of $2,578,676 for the twelve months
        ended
        June 30, 2006 was proceeds on notes payable of $3,744,379 and payments on
        notes
        payable of $1,165,703.
 
 **Internal
        Sources of Liquidity**
 
 For
        the
        twelve months ended June 30, 2006, the revenues generated from our operations
        were insufficient to fund our daily operations. Gross loss for fiscal year
        2006
        was $54,548, which was insufficient to meet our operating expenses of $3,229,011
        for the same period. There is no assurance that funds from our future operations
        will meet the requirements of our daily operations in the future. In the
        event
        that funds from our operations will be insufficient to meet our operating
        requirements, we will need to seek other sources of financing to maintain
        liquidity.
 
 **External
        Sources of Liquidity**
 
 We
        actively pursue all potential financing options as we look to secure additional
        funds to both stabilize and grow our business operations. Our management
        will
        review any financing options at their disposal, and will judge each potential
        source of funds on its individual merits. There can be no assurance that
        we will
        be able to secure additional funds from debt or equity financing, as and
        when we
        need to, or if we can, that the terms of such financing will be favorable
        to us
        or our existing stockholders. As a result, our independent registered public
        accounting firm has issued a “going concern” modification on its report dated
        October 13, 2006.
 
 At
        June
        30, 2006, we have debt owing to related parties aggregating $1,559,846 as
        summarized in Note 7 to the financial statements.
 
 At
        June
        30, 2006, we have debt owing to non-related parties (net of unamortized
        discount) aggregating $646,099 as summarized in Note 8 to the financial
        statements.
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  **ITEM
        7.****FINANCIAL
        STATEMENTS**
 
 Our
        financial statements are included beginning immediately following the signature
        page to this Report.
 
 **ITEM
        8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE**
 
 None.
 
 **ITEM
        8A.****CONTROLS
        AND PROCEDURES**
 
 **Disclosure
        Controls and Procedure** s
 
 As
        required by Rule 13a-15(b) under the Securities Exchange Act of 1934 (the
        “Exchange Act”), we carried out an evaluation of the effectiveness of the design
        and operation of our disclosure controls as of the end of the period covered
        by
        this report, June 30, 2006. This evaluation was carried out under the
        supervision and with the participation of our President, Mr. Gordon W. Davies,
        and our Chief Financial Officer, Mr. Michael C. Davies (collectively, the
        “Certifying Officers”). Based upon that evaluation, our Certifying Officers
        concluded that as of the end of the period covered by this report, June 30,
        2006, our disclosure controls and procedures are effective in timely alerting
        management to material information relating to us and required to be included
        in
        our periodic filings with the Securities and Exchange Commission (the
“Commission”).
 
 Disclosure
        controls and procedures are controls and procedures that are designed to
        ensure
        that information required to be disclosed in our periodic reports under the
        Exchange Act is recorded, processed, summarized and reported, within the
        time
        periods specified in the Commission's rules and forms. Disclosure controls
        and
        procedures include, without limitation, controls and procedures designed
        to
        ensure that information required to be disclosed in our periodic reports
        that we
        file under the Exchange Act is accumulated and communicated to our management,
        including our principal executive and principal financial officers, or persons
        performing similar functions, as appropriate to allow timely decisions regarding
        required disclosure.
 
 **Internal
        Control Over Financial Reporting**
 
 Further,
        as required by Rule 13a-15(d) of the Exchange Act and under the supervision
        and
        with the participation of our Certifying Officers, we carried out an evaluation
        as to whether there has been any change in our internal control over financial
        reporting during our fiscal quarter ended June 30, 2006. Based upon this
        evaluation, we have concluded that there has not been any change in our internal
        control over financial reporting during our fiscal quarter ended June 30,
        2006,
        that has materially affected, or is reasonably likely to materially affect,
        our
        internal control over financial reporting.
 
 Internal
        control over financial reporting is a process designed by, or under the
        supervision of, our principal executive and principal financial officers,
        or
        persons performing similar functions, and effected by our board
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  of
        directors, management and other personnel, to provide reasonable assurance
        regarding the reliability of financial reporting and the preparation of
        financial statements for external purposes in accordance with generally accepted
        accounting principles. Internal control over financial reporting includes
        those
        policies and procedures that: (i) pertain to the maintenance of records that
        in
        reasonable detail accurately and fairly reflect the transactions and
        dispositions of our assets; (ii) provide reasonable assurance that transactions
        are recorded as necessary to permit preparation of financial statements in
        accordance with generally accepted accounting principles, and that our receipts
        and expenditures are being made only in accordance with authorizations of
        our
        management and directors; and (iii) provide reasonable assurance regarding
        prevention or timely detection of unauthorized acquisition, use or disposition
        of our assets that could have a material effect on the financial
        statements.
 
 **ITEM
        9.****DIRECTORS
        AND OFFICERS OF THE REGISTRANT**
 
 Our
        executive officers and directors, and their respective ages as of September
        26,
        2006, are as follows:
 
 NAME
              
              AGE
              
              POSITION
              
              SINCEGordon
                  W. Davies
              
              38
              
              President
                  and Director
              
              December
                  1997Michael
                  C. Davies
              
              37
              
              Chief
                  Executive Officer, Chief Financial Officer, Vice President and
                  Director
              
              December
                  1997
 
 **Gordon
        W. Davies** currently serves as our Director and President, positions he has held since
        December 1997. From 1991 to 1994, Mr. Davies served as an Accounts Executive
        for
        Innovative Environmental Services, Ltd., a company primarily involved in
        the
        sales and marketing of wastewater treatment equipment in Vancouver, British
        Columbia, Canada. During 1993, he was employed for some time as a Sales Manager
        for Transenviro, Inc., an international supplier of wastewater treatment
        equipment and process design engineering located in Irvine, California.
        Subsequently, from 1994 to 1996, Mr. Davies, was employed as a Sales/Marketing
        & Proposals Manager for Babcock King-Wilkinson, LP, a limited partnership
        involved in the business of wastewater treatment system process
        design/engineering and equipment supply operations on a worldwide basis located
        in Irvine, California.
 
 From
        1996
        to 2000, Mr. Davies served as a Director and the President of Aquadynamic
        Technologies, Inc. and as a Director of its wholly owned subsidiary, Aquatek,
        Inc. From 1996 to 1998, Mr. Davies also served as the General Manager of
        Wil-Flow, Inc.
 
 **Michael
        C. Davies** currently
        serves as our Director, Vice President and Chief Financial Officer, positions
        he
        has held since December 1997. On April 10, 2006, Michael C. Davies assumed
        the
        position of Chief Executive Officer of our company. From 1988 to 1991 Mr.
        Davies
        served as the Owner/Manager of Fuel Oil Polishing Company, a company located
        in
        Vancouver, British Columbia, Canada, and primarily involved in the sales,
        marketing and project management of fuel oils polishing within the Province
        of
        British Columbia. Subsequently, from 1991 to 1993, he served as an Accounts
        Executive with Innovative Environmental Services, Ltd., a company primarily
        involved in the sales and marketing of wastewater treatment equipment in
        Vancouver, British Columbia, Canada. From 1993 to 1994 he served as the
        Marketing Manager for
  -20-
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  Transenviro,
        Inc., an international supplier of wastewater treatment equipment and process
        design engineering located in Irvine, California. From 1994 to 1996, Mr.
        Davies
        served as the Marketing Manager for Babcock King-Wilkinson, LP, a wastewater
        treatment business located in Irvine, California.
 
 From
        1996
        to 2000, Mr. Davies also served as the Vice President and Director for
        Aquadynamic Technologies, Inc., and its wholly owned subsidiary, Aquatek,
        Inc.
        Aquadynamic Technologies, Inc. is an engineering design business and supplier
        of
        computer-automated process and motor control systems for water and wastewater
        treatment systems.
 
 From
        1996
        to 1998 Mr. Davies also served as the Vice President of Sales and as a Director
        for Wil-Flow, Inc., the sole supplier of a patented Rapid Gravity Dewatering
        (“RGD”) wastewater sludge dewatering system.
 
 **Term
        of Office**
 
 Our
        directors are elected for a one-year term to hold office until the next annual
        general meeting of our shareholders, or until removed from office in accordance
        with our bylaws and applicable law. Our officers are appointed by our Board
        of
        Directors and hold office until removed by the Board.
 
 **Family
        Relationships**
 
 Mr.
        Gordon W. Davies, our President and Director, is the brother of Michael C.
        Davies, our Chief Executive Officer, Chief Financial Officer, Vice President
        and
        Director.
 
 **Audit
        Committee and Financial Expert Disclosures**
 
 Section
        301 of the Sarbanes-Oxley Act of 2003, and SEC regulations implementing that
        provision require that public companies disclose a determination by their
        Board
        of Directors as to the existence of a financial expert on their audit committee
        and, if none is determined to exist, that the Board of Directors has determined
        that no one serving on its Board of Directors meets the qualification of
        a
        financial expert as defined in the Sarbanes-Oxley Act and implementing
        regulations.
 
 As
        of
        June 30, 2006, and as of the date of filing of this report, we have not created
        any standing committees of the Board of Directors, including an audit committee.
        Accordingly, our entire Board of Directors serves as our audit committee.
        We
        also disclose that our Board has determined that we have not, and we do not,
        possess on our Board of Directors anyone who qualifies as an audit committee
        financial expert and, unless and until one is identified and agrees to serve,
        we
        will continue to rely on outside professional consultants who advise us with
        respect to audit matters.
 
 **Changes
        to Procedures Regarding Nomination of Directors to the Board of
        Directors**
 
 During
        our fiscal year ended June 30, 2006, there were no material changes to the
        procedures by which our security holders may recommend nominees to our board
        of
        directors.
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  **Section
        16(a) Beneficial Ownership Reporting Compliance**
  Section
        16(a) of the Exchange Act requires our executive officers and directors,
        and
        persons who beneficially own more than ten percent of our equity securities,
        to
        file reports of ownership and changes in ownership with the Securities and
        Exchange Commission. Officers, directors and greater than ten percent
        shareholders are required by SEC regulation to furnish us with copies of
        all
        Section 16(a) forms they file. Based solely upon review of the copies of
        such
        reports furnished to us during, and with respect to, the fiscal year ended
        June
        30, 2006 or any written representations we received from a director, officer,
        or
        beneficial owner of more than 10% of our common stock that no other reports
        were
        required during that period, we believe that, for the fiscal year ended June
        30,
        2006, all Section 16(a) filing requirements applicable to our reporting persons
        were met.
 
 **Code
        of Ethics**
 
 We
        have
        adopted a Code of Ethics applicable to our principal executive officers,
        principal financial officers, principal accounting officers or controllers,
        or
        persons performing similar functions. Our Code of Ethics has been filed as
        an
        Exhibit to our Annual Report on Form 10KSB for the fiscal year 2006 and is
        available upon request by writing to our Company at the address set forth
        on the
        first page of this Annual Report.
 
 **ITEM
        10.****EXECUTIVE
        COMPENSATION**
 
 **Compensation
        of Directors**
 
 Directors
        were not compensated for any services they provided as directors on the
        Company’s board of directors for the fiscal year ended June 30, 2006.
 
 **Compensation
        of Executives**
 
 The
        following table reflects compensation paid or accrued during the indicated
        fiscal years (ending on June 30 th of the
        indicated year) with respect to compensation paid or accrued by us to or
        on
        behalf of our executive officers.
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  **Long
                  Term**
                **Compensation****Annual
                  Compensation****Awards**
              
              **Payouts****Other**
              
              **Restricted**
              
              **Securities****Annual**
              
              **Stock**
              
              **Underlying**
              
              **LTP**
              
              **All
                  Other****Salary**
              
              **Bonus**
              
              **Compensation**
              
              **Awards**
              
              **Options**
              
              **Payouts**
              
              **Compensation****Name
                  and Principal Position**
              
              **Year**
              
              **($)**
              
              **($)**
              
              **($)**
              
              **($)**
              
              **(#)**
              
              **($)**
              
              **($)**Mr.
                  Gordon W. Davies (1)
              
              
              2006
              
              
              135,200
              
              
              —
              
              
              —
              
              
              —
              
              
              
              
              
              2,000,000
              
              
              —
              
              
              —President
                  and Director
              
              
              2005
              
              
              135,200
              
              
              —
              
              
              —
              
              
              —
              
              
              
              
              
              1,000,000
              
              
              —
              
              
              —2004
              
              
              135,200
              
              
              —
              
              
              —
              
              
              —
              
              
              
              
              
              —
              
              
              —
              
              
              —Mr.
                  Michael C. Davies
              
              
              2006
              
              
              135,200
              
              
              —
              
              
              —
              
              
              —
              
              
              
              
              
              2,000,000
              
              
              —
              
              
              —Chief
                  Executive Officer, Vice President, Chief
              
              
              2005
              
              
              135,200
              
              
              —
              
              
              —
              
              
              —
              
              
              
              
              
              1,000,000
              
              
              —
              
              
              —Financial
                  Officer and Director
              
              
              2004
              
              
              135,200
              
              
              —
              
              
              —
              
              
              —
              
              
              
              
              
              —
              
              
              —
              
              
              —
 
 **Employment
        Agreements**
 
 On
        January 6, 2005, we entered into employment agreements with Mr. Gordon Davies
        to
        serve as our President and with Mr. Michael Davies to serve as our Executive
        Vice President and Chief Financial Officer, each for a term of five years
        and at
        a compensation rate of $135,200 per annum for the first year of employment,
        and
        increasing by 20% on each anniversary date of their respective employment
        agreements, provided we achieve a minimum net profit of $250,000 in that
        particular fiscal year. In addition, the employment agreements provide for
        bonuses on a sliding scale based on us achieving certain levels of net profits
        in each fiscal year. Pursuant to the employment agreements, we have agreed
        to
        pay each of these executive officers a bonus equal to 10% of their base salary
        in any fiscal year in which our net profit equals or exceed $250,000. This
        percentage increases on a sliding scale as net profits in any fiscal year
        over
        the five year contract term increase above $500,000, with a bonus equal to
        100%
        of base salary if we realize a net profit of $2,500,000 or more in any fiscal
        year. In addition, the employment agreements grant Mr. Gordon Davies and
        Mr.
        Michael Davies options to purchase 2,500,000 shares of our restricted common
        stock, 1,500,000 of which were carried over from our previous employment
        agreement with Mr. Gordon Davies and Mr. Michael Davies. These options vested
        according to the following schedule: 500,000 options vested on January 15,
        2002
        at an exercise price of $0.40 per share, 500,000 options vested on January
        15,
        2003 at an exercise price of $0.40 per share, 500,000 options vested on January
        15, 2004 at an exercise price of $0.40 per share, and on January 15, 2005,
        1,000,000 options vested at an exercise price of $0.25 per share. On June
        15,
        2006 additional option were granted to Mr. Gordon Davies and Mr. Michael
        Davies
        each to purchase 2,000,000 restricted common stock at an exercise price of
        $0.15
        per share. Each of the employment agreements contain certain protective and
        other provisions, including a death or disability
  -23-
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  benefit
        of three (3) months’ pay plus three (3) months’ benefits. Copies of each of
        these employment agreements are attached hereto as Exhibits and by this
        reference incorporated herein.
 
 **Option
        Grants In The Last Fiscal Year**
 
 The
        following table provides information concerning individual grants of stock
        options during fiscal 2006 to our President, Mr. Gordon W. Davies and our
        Chief
        Executive Officer, Chief Financial Officer and Vice President Mr. Michael
        C.
        Davies (collectively, the “Named Executive Officers”). The exercise prices in
        each case equal the last reported sales price per share of our common stock
        as
        reported by the Over-the-Counter Bulletin Board on the date of grant. The
        percentage of total options granted to our employees in the last fiscal year
        is
        based on options to purchase an aggregate of 5,200,000 shares of common stock
        granted to all of our employees in fiscal 2006:
  NUMBER
                  OF SHARES OF
              
              PERCENT
                  OF TOTALCOMMON
                  STOCK
              
              OPTIONS
                  GRANTED
              
              EXERCISEUNDERLYING
                  OPTIONS
              
              TO
                  EMPLOYEES IN
              
              PRICE
              
              EXPIRATIONNAME
              
              GRANTED
                  (#)
              
              LAST
                  FISCAL YEAR
              
              ($/SH)
              
              DATEGordon
                  W. Davies
              
              
              2,000,000
              
              
              38
              %
              $
              0.15
              
              
              06/15/2011Michael
                  C. Davies
              
              
              2,000,000
              
              
              38
              %
              $
              0.15
              
              
              06/15/2011
 
 **Fiscal
        Year End Option Values**
 
 No
        options were exercised to any of the Named Executive Officers during the
        2005
        fiscal year.
 
 The
        following table sets forth the number of shares of our common stock subject
        to
        exercisable and unexercisable stock options that the Named Executive Officers
        held at June 30, 2006:
  NUMBER
                  OF SECURITIES UNDERLYING
              
              VALUE
                  OF UNEXERCISED IN-THE-MONEYUNEXERCISED
                  OPTIONS AT FISCAL YEAR END
              
              OPTIONS
                  AT FISCAL YEAR ENDNAME
              
              EXERCISABLE
              
              UNEXERCISABLE
              
              EXERCISABLE
              
              UNEXERCISABLEGordon
                  W. Davies
              
              
              4,500,000
              
              
              0
              
              $
              160,000
              
              
              0Michael
                  C. Davies
              
              
              4,500,000
              
              
              0
              
              $
              160,000
              
              
              0
 
 **ITEM
        11.****SECURITY
        OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT**
 
 **Securities
        Authorized For Issuance Under Equity Compensation Plans**
  The
        following table discloses, in tabular format, information regarding our equity
        securities authorized for issuance pursuant to any compensation plans as
        of the
        end of our fiscal year ended June 30, 2006.
  -24-
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  Plan
                Category
              
              Number
                  of Securities to be issued upon exercise of outstanding options,
                  warrants
                  and rights
              
              Weighted-average
                  exercise price of outstanding options, warrants and rights
              
              Number
                  of Securities remaining available for future issuance under equity
                  compensation plans (excluding securities reflected in column
                  (a))(a)
              
              (b)
              
              (c)Equity
                  compensation plans approved by security holders
              
              
              0
              
              
              0
              
              
              0Equity
                  compensation plans not approved by security holders
              
              
              28,803,750
              
              $
              0.28
              
              
              0Total
              
              
              28,803,750
              
              $
              0.28
              
              
              0
 
 The
        following table sets forth certain information regarding the beneficial
        ownership of our common stock (including common stock acquirable within 60
        days
        pursuant to options, warrants, conversion privileges or other rights) as
        of
        October 13, 2006 (i) by each of the our directors and executive officers,
        (ii)
        all executive officers and directors as a group, and (iii) all persons known
        by
        us to own beneficially more than 5% of our common stock. All persons listed
        have
        sole voting and investment power over the indicated shares unless otherwise
        indicated.
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              Contents**
   **BENEFICIAL
                  OWNERSHIP****BENEFICIAL
                  OWNER (1)**
              
              **NUMBER
                  OF**
                **SHARES
                  (2)**
              
              **PERCENT
                  OF**
                **TOTAL
                  (2)**Mr.
                  Michael C. Davies
              
              
              4,764,400
                  (3
              )
              
              9.7
              %940
                  Calle AmanecerSuite
                  ESan
                  Clemente, California 92673Mr.
                  Gordon W. Davies
              
              
              4,990,400
                  (3
              )
              
              10.0
              %940
                  Calle AmanecerSuite
                  ESan
                  Clemente, California 92673Mr.
                  Kurt Baum
              
              
              2,791,743
              
              
              5.6
              %680
                  S. Avon AvenueAzusa,
                  California 91702Randy
                  Ricker
                6030
                  N. Street
                Omaha,
                  NE 68117
              
              
              4,657,250
              
              
              9.5
              %All
                  Officers and Directors as a Group (2 persons)
              
              
              9,754,800
                  (4
              )
              
              19.7
              %
 
 (1)
              Beneficial
                  Ownership is determined in accordance with the rules of the Securities
                  and
                  Exchange Commission and generally includes voting or investment
                  power with
                  respect to securities. Shares of common stock subject to options
                  or
                  warrants currently exercisable or convertible, or exercisable or
                  convertible within 60 days of October 13, 2006 are deemed outstanding
                  for
                  computing the percentage of the person holding such option or warrant
                  but
                  are not deemed outstanding for computing the percentage of any
                  other
                  person.
 (2)
              Based
                  upon 49,066,358 shares issued and outstanding on July 20, 2006.
 (3)
              Includes
                  4,500,000 shares issuable upon currently exercisable stock options.
 (4)
              Includes
                  9,000,000 shares issuable upon currently exercisable stock options.
 
 **ITEM
        12.****CERTAIN
        RELATIONSHIPS AND RELATED TRANSACTIONS**
  **Relationships**
 
 Mr.
        Gordon Davies, our President and Director, and Mr. Michael Davies, our Chief
        Executive Officer and Director, are brothers, and currently jointly serve
        as the
        sole Directors of our Company. Collectively, they own approximately 19.7%
        of our
        total outstanding common stock, on a fully diluted basis, as of the date
        of this
        Report
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  **Related
        Party Transactions**
 
 At
        June
        30, 2006, we have debt owing to related parties aggregating $1,559,846 as
        follows:
 
 o
              We
                  have unsecured convertible notes payable to some of our shareholders,
                  bearing interest at 10% per annum, convertible into shares of our
                  common
                  stock at $0.25 per share and due upon demand. At June 30, 2006,
                  the
                  aggregate principal and interest due and owing under these notes
                  was
                  $26,000.
 
 We
        have
        an unsecured convertible note payable to a shareholder, bearing interest
        at 15%
        per annum, convertible into shares of our common stock at $0.75 per share
        and
        due on June 30, 2006. Pursuant to the terms of the note, we are required
        to make
        monthly payments in the aggregate amount of $1,833. At June 30, 2006, the
        aggregate principal and interest due and owing under these notes was $3,167.
        Under the terms of the note, we are currently in default of the note. In
        the
        event that the note holder institute legal proceeding to collect this note
        and
        prevails, we will have to pay the note holder his costs incurred in connection
        with documentation of the loan; costs of collection, including attorneys’ fees
        paid or incurred in connection with the collection of the note; and costs
        of
        suit, including reasonable attorneys’ fees.
 
 o
              We
                  have an unsecured note payable to a shareholder, bearing interest
                  at 15%
                  per annum and due upon demand. At June 30, 2006, the aggregate
                  principal
                  due and owing under these notes was
                  $13,140.
 
 o
              We
                  have unsecured notes payable to some of our shareholders, bearing
                  interest
                  at 10% per annum and due upon demand. At June 30, 2006, the aggregate
                  principal due and owing under these notes was
                  $1,477,539.
 
 o
              We
                  have unsecured notes payable to some of our shareholders, bearing
                  interest
                  per annum at the credit card rate and due on August 27, 2006. At
                  June 30,
                  2006, the aggregate principal due and owing under these notes was
                  $25,000.
 
 o
              We
                  have an unsecured payable to a shareholder, bearing interest at
                  a rate of
                  15% per annum. At June 30, 2006, the aggregate principal due was
                  $15,000.
                  Under the terms of the note, we are currently in default of the
                  note. In
                  the event that the note holder institute legal proceeding to collect
                  this
                  note and prevails, we will have to pay the note holder his costs
                  incurred
                  in connection with documentation of the loan; costs of collection,
                  including attorneys’ fees paid or incurred in connection with the
                  collection of the note; and costs of suit, including reasonable
                  attorneys’
                  fees.
 
 **** Total
        interest expense recorded on related-party notes payable for fiscal 2006
        was
        $85,866.
 
 **ITEM
        13.****EXHIBITS.******
 
 The
        exhibit index immediately following the signature page of this Report is
        hereby
        incorporated herein by reference.
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  **ITEM
        14.****PRINCIPAL
        ACCOUNTANT FEES AND SERVICES******
 
 Effective
        June 30, 2006 and 2005, we appointed Corbin & Company, Inc. to serve as our
        independent auditors for the fiscal year ended June 30, 2006 and 2005,
        respectively. Our Board of Directors pre-approves all services performed
        by our
        principal auditors.
 
 During
        fiscal years 2006 and 2005, accrued fees owed by us to Corbin & Company,
        Inc. and/or Kabani & Company, Inc., as applicable, are as follows:
 
 **Audit
        Fees**
 
 **2006**
              **2005**95,000
              43,000
 
 **Audit
        Related Fees**
 
 **2006**
              **2005**5,000
              4,000
 
 Audit
        Fees and Audit Related Fees consist of fees billed for professional services
        rendered for auditing our financial statements, reviews of interim financial
        statements included in quarterly reports, services performed in connection
        with
        other filings with the Securities & Exchange Commission and related comfort
        letters and other services that are normally provided by Corbin & Company,
        Inc. in connection with statutory and regulatory filings or
        engagements.
 
 **Tax
        Fees**
 
 **2006**
              **2005**0
              0
  Tax
        Fees
        consists of fees billed for professional services for tax compliance, tax
        advice
        and tax planning. These services include assistance regarding federal, state
        and
        local tax compliance and consultation in connection with various transactions
        and acquisitions.
 
 **All
        Other Fees**
 
 **2006**
              **2005**0
              0
 
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  **SIGNATURES**
 
 In
        accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
        this report to be signed on its behalf by the undersigned, thereunto duly
        authorized.
 
 **RECLAMATION
        CONSULTING AND APPLICATIONS, INC.**
 
 
 By: 
        /s/Gordon W. Davies
 Gordon
        W.
        Davies
 President
        and Director
 Date:
        October 13, 2006
  In
        accordance with the Securities Exchange Act, this report has been signed
        below
        by the following persons on behalf of the registrant and in the capacities
        and
        on the dates indicated.
 
 By: 
        /s/Michael C. Davies
 Michael
        C. Davies
 Chief
        Executive Officer, Chief Financial Officer and Director
 Date:
        October 13, 2006
 -29-
 **Back
            to Table of Contents**
  **RECLAMATION
          CONSULTING AND APPLICATIONS, INC.**
 
 **FINANCIAL
          STATEMENTS**
 
 **For
          The Years Ended June 30, 2006 and 2005**
 
 ***with***
 
 **REPORT
          OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
  **Back
              to Table of Contents**
 **RECLAMATION
            CONSULTING AND APPLICATIONS, INC.**
  **TABLE
            OF CONTENTS**
 **Report
                    of Independent Registered Public Accounting Firm**
                F-1**Financial
                    Statements:**Balance
                    Sheet
                F-3Statements
                    of Operations
                F-4Statements
                    of Stockholders’ Deficit
                F-5Statements
                    of Cash Flows
                F-6Notes
                    to Financial Statements
                F-8
 **Back
            to Table of Contents**
   **REPORT
        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
 
 
 
 Board
        of
        Directors and Stockholders
 Reclamation
        Consulting and Applications, Inc.
 
 
 We
        have
        audited the accompanying balance sheet of Reclamation Consulting and
        Applications, Inc. (the “Company”) as of June 30, 2006 and the related
        statements of operations, stockholders’ deficit and cash flows for each of the
        years in the two year period then ended. These financial statements are the
        responsibility of the Company’s management. Our responsibility is to express an
        opinion on these 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 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 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 financial statements referred to above present fairly, in all
        material respects, the financial position of Reclamation Consulting and
        Applications, Inc. as of June 30, 2006 and the results of its operations
        and its
        cash flows for each of the years in the two year period then ended in conformity
        with accounting principles generally accepted in the United States of
        America.
 
 As
        discussed in Note 1 to the financial statements, the Company has incurred
        recurring losses and has yet to establish profitable operations. These factors,
        among others, raise substantial doubt about its ability to continue as a
        going
        concern. Management’s plans regarding these matters are also described in Note
        1. The financial statements do not include any adjustments that might result
        from the outcome of this uncertainty.
 
 
 
  /s/CORBIN
        & COMPANY, LLP
 Irvine,
        California
 October
        13, 2006
 F-1
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            to Table of Contents**
   **RECLAMATION
          CONSULTING AND APPLICATIONS, INC.**
 **BALANCE
          SHEET**
 **JUNE
          30, 2006**
 ******ASSETS****CURRENT
                    ASSETS:**Cash
                    and cash equivalents
                
                
                
                
                $
                -Accounts
                    receivable
                
                
                
                
                
                17,108Inventories
                
                
                
                
                
                64,520Other
                    prepaid expenses and current assets
                
                
                
                
                
                23,954Total
                    current assets
                
                
                
                
                
                105,582Property
                    and equipment, net
                
                
                
                
                
                45,210License
                    Agreement, net
                
                
                
                
                
                475,000Deferred
                    financing costs, net
                
                
                
                
                
                27,500Deposits
                
                
                
                
                
                25,658$
                678,950**LIABILITIES
                    AND STOCKHOLDERS'
                    DEFICIT****CURRENT
                    LIABILITIES:**Accounts
                    payable and bank overdraft
                
                
                
                
                $
                247,169Accrued
                    professional fees
                
                
                
                
                
                117,125Payroll
                    taxes payable
                
                
                
                
                
                161,842Accrued
                    interest payable
                
                
                
                
                
                139,430Other
                    accrued expenses
                
                
                
                
                
                154,414Current
                    portion of accrued judgment payables
                
                
                
                
                
                58,200Notes
                    payable - related parties
                
                
                
                
                
                1,559,846Current
                    portion of notes payable
                
                
                
                
                
                293,350Total
                    current liabilities
                
                
                
                
                
                2,731,376Accrued
                    judgment payable, net of current portion
                
                
                
                
                
                27,600Notes
                    payable, net of current portion and debt discount
                
                
                
                
                
                352,749Derivative
                    liabilities
                
                
                
                
                
                4,539,772Total
                    liabilities
                
                
                
                
                
                7,651,497**COMMITMENTS
                    AND CONTINGENCIES****STOCKHOLDERS'
                    DEFICIT:**Common
                    stock, $0.01 par value;150,000,000
                    shares authorized, 49,066,358shares
                    issued and outstanding
                
                
                
                
                
                490,664Committed
                    shares
                
                
                
                
                
                32,400Additional
                    paid-in capital
                
                
                
                
                
                14,549,807Treasury
                    stock (1,500,000 shares), at cost
                
                
                
                
                
                (15,000
                )Accumulated
                    deficit
                
                
                
                
                
                (22,030,418
                )Total
                    stockholders' deficit
                
                
                
                
                
                (6,972,547
                )$
                678,950
  See
        report of independent registered public accounting firm and accompanying
        notes
        to the financial statements.
  F-2
 **Back
            to Table of Contents**
  **RECLAMATION
          CONSULTING AND APPLICATIONS, INC.**
 **STATEMENTS
          OF OPERATIONS**
 **FOR
          THE YEARS ENDED JUNE 30, 2006 AND 2005**
 **2006**
                
                **2005**Net
                    revenue
                
                $
                96,122
                
                $
                242,965Cost
                    of revenue
                
                
                150,670
                
                
                192,937Gross
                    profit (Loss)
                
                
                (54,548
                )
                
                50,028Selling,
                    general and administrative expenses
                
                
                3,229,011
                
                
                2,210,588Loss
                    from operations
                
                
                (3,283,559
                )
                
                (2,160,560
                )Other
                    income (expense):Interest
                    income
                
                
                -
                
                
                60,491Loss
                    on uncollectible notes receivable
                
                
                (10,607
                )
                
                (1,080,320
                )Interest
                    expense
                
                
                (1,280,668
                )
                
                (486,795
                )Legal
                    settlement
                
                
                (21,000
                )
                
                (34,625
                )Change
                    in fair value of derivative liabilities
                
                
                (2,508,656
                )
                
                -Loss
                    on collateralized shares
                
                
                (110,000
                )
                
                -(3,930,931
                )
                
                (1,541,249
                )Loss
                    before provision for income taxes
                
                
                (7,214,491
                )
                
                (3,701,809
                )Provision
                    for income taxes
                
                
                800
                
                
                800Net
                    loss
                
                $
                (7,215,291
                )
                $
                (3,702,609
                )Net
                    loss per share - basic and diluted
                
                $
                (0.19
                )
                $
                (0.13
                )Weighted-average
                    common shares outstanding - basic and diluted
                
                
                37,069,761
                
                
                27,491,556
  See
        report of independent registered public accounting firm and accompanying
        notes
        to the financial statements.
  F-3
 **Back
            to Table of Contents**
  **RECLAMATION
          CONSULTING AND APPLICATIONS, INC.**
 **STATEMENTS
          OF STOCKHOLDERS' DEFICIT**
 **FOR
          THE YEARS ENDED JUNE 30, 2006 AND 2005**
 **Common
                    Stock**
                
                **Additional**
                
                
                
                
                
                
                
                **Total****Number
                    of**
                
                
                
                **Paid-in**
                
                **Treasury**
                
                **Shares
                    to**
                
                **Accumulated**
                
                **Stockholders'****Shares**
                
                **Amount**
                
                **Capital**
                
                **Stock**
                
                **Be
                    Issued**
                
                **Deficit**
                
                **Deficit**Balance
                    at July 1, 2004
                
                
                25,492,620
                
                
                254,926
                
                
                10,895,296
                
                
                (15,000
                )
                
                5,000
                
                
                (11,112,519
                )
                
                27,703Issuance
                    of common shares for cash
                
                
                1,922,943
                
                
                19,229
                
                
                452,027
                
                
                
                
                
                5,000
                
                
                
                
                
                476,256Issuance
                    of shares for services rendered
                
                
                1,672,750
                
                
                16,728
                
                
                391,390
                
                
                
                
                
                (5,000
                )
                
                
                
                
                403,118Conversion
                    of notes payable
                
                
                732,500
                
                
                7,325
                
                
                139,175
                
                
                
                
                
                
                
                
                
                
                
                146,500Conversion
                    of interest payable
                
                
                25,000
                
                
                250
                
                
                4,650
                
                
                
                
                
                
                
                
                
                
                
                4,900Cancellation
                    of common shares for legal settlement
                
                
                (225,000
                )
                
                (2,250
                )
                
                (67,525
                )
                
                
                
                
                
                
                
                
                
                
                (69,775
                )Issuance
                    of stock options for services rendered
                
                
                
                
                
                
                
                
                495,530
                
                
                
                
                
                
                
                
                
                
                
                495,530Common
                    shares to be issued for conversion of note payable (100,000
                    shares)
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                20,000
                
                
                
                
                
                20,000Beneficial
                    conversion feauture of convertible debt
                
                
                
                
                
                
                
                
                100,000
                
                
                
                
                
                
                
                
                
                
                
                100,000Stock
                    warrants reclassified as derivative liabilities
                
                
                
                
                
                
                
                
                (678,546
                )
                
                
                
                
                
                
                
                
                
                
                (678,546
                )Net
                    loss
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (3,702,609
                )
                
                (3,702,609
                )Balance
                    at June 30, 2005
                
                
                29,620,813
                
                $
                296,208
                
                $
                11,731,997
                
                $
                (15,000
                )
                $
                25,000
                
                $
                (14,815,128
                )
                $
                (2,776,923
                )Cancellation
                    of shares to be issued
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (25,000
                )
                
                
                
                
                (25,000
                )Issuance
                    of shares for services rendered
                
                
                662,500
                
                
                6,625
                
                
                28,375
                
                
                
                
                
                
                
                
                
                
                
                35,000Common
                    shares to be issued for services rendered
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                32,400
                
                
                
                
                
                32,400Conversion
                    of notes payable and accrued interest
                
                
                7,896,897
                
                
                78,969
                
                
                763,293
                
                
                
                
                
                
                
                
                
                
                
                842,262Beneficial
                    conversion feauture of convertible debt
                
                
                
                
                
                
                
                
                687,889
                
                
                
                
                
                
                
                
                
                
                
                687,889Issuance
                    of shares for intagible asset
                
                
                7,611,150
                
                
                76,112
                
                
                424,396
                
                
                
                
                
                
                
                
                
                
                
                500,508Cashless
                    exercise of warrants
                
                
                3,274,998
                
                
                32,750
                
                
                (32,750
                )
                
                
                
                
                
                
                
                
                
                
                -Relcass
                    of derivative liabity to APIC for warrants exercised
                
                
                
                
                
                
                
                
                946,607
                
                
                
                
                
                
                
                
                
                
                
                946,607Net
                    loss
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (7,215,291
                )
                
                (7,215,291
                )Balance
                    at June 30, 2006
                
                
                49,066,358
                
                $
                490,664
                
                $
                14,549,807
                
                $
                (15,000
                )
                $
                32,400
                
                $
                (22,030,419
                )
                $
                (6,972,548
                )
  See
        report of independent registered public accounting firm and accompanying
        notes
        to the financial statements.
 F-4
 **Back
            to Table of Contents**
  **RECLAMATION
          CONSULTING AND APPLICATIONS, INC.**
 **STATEMENTS
          OF CASH FLOWS**
 **FOR
          THE YEARS ENDED JUNE 30, 2006 AND 2005**
 **2006**
                
                **2005****CASH
                    FLOWS FROM OPERATING ACTIVITIES:**Net
                    loss
                
                $
                (7,215,291
                )
                $
                (3,702,609
                )Adjustments
                    to reconcile net loss to net cash used inoperating
                    activities:Change
                    in fair value of derivative and warrant liabilities
                
                
                2,508,656
                
                
                -Loss
                    on uncollectible notes receivable
                
                
                10,608
                
                
                1,080,320Loss
                    on collateralized shares
                
                
                110,000
                
                
                -Issuance
                    of stock options for services rendered
                
                
                756,531
                
                
                495,530Issuance
                    of shares for services rendered
                
                
                67,400
                
                
                403,118Fair
                    value of derivative liabilities recorded to interest expense
                
                
                -
                
                
                330,535Cancellation
                    of common shares for legal settlement
                
                
                -
                
                
                (69,775
                )Amortization
                    of discount on notes payable
                
                
                914,638
                
                
                62,500Depreciation
                
                
                53,820
                
                
                8,201(Increase)
                    decrease in current assets:Accounts
                    receivable
                
                
                3,499
                
                
                (31,215
                )Inventories
                
                
                (18,828
                )
                
                (45,692
                )Prepaid
                    expenses and other assets
                
                
                56,716
                
                
                (89,375
                )Increase
                    (decrease) in current liabilities:Accounts
                    payable and accrued expenses
                
                
                181,705
                
                
                55,156Customer
                    deposits
                
                
                -
                
                
                (7,542
                )Total
                    adjustments
                
                
                4,644,745
                
                
                2,191,761Net
                    cash used in operating activities
                
                
                (2,570,546
                )
                
                (1,510,848
                )**CASH
                    FLOWS FROM INVESTING ACTIVITIES:**Advances
                    on notes receivable
                
                
                -
                
                
                (301,902
                )Acquisition
                    of property and equipment
                
                
                (8,130
                )
                
                (4,757
                )Net
                    cash used in investing activities
                
                
                (8,130
                )
                
                (306,659
                )**CASH
                    FLOWS FROM FINANCING ACTIVITIES:**Proceeds
                    on notes payable and convertible debentures
                
                
                3,744,379
                
                
                1,875,466Payment
                    of deferred financing costs
                
                
                (1,165,703
                )
                
                (40,000
                )Payments
                    on notes payable and convertible debentures
                
                
                -
                
                
                (495,258
                )Issuance
                    of common shares for cash
                
                
                -
                
                
                476,256Net
                    cash provided by financing activities
                
                
                2,578,676
                
                
                1,816,464Net
                    (decrease) increase in cash and cash equivalents
                
                
                -
                
                
                (1,043
                )**CASH
                    AND CASH EQUIVALENTS, BEGINNING OF YEAR**
                
                
                -
                
                
                1,043**CASH
                    AND CASH EQUIVALENTS, END OF YEAR**
                
                $
                -
                
                $
                -
  
 Continued
 F-5
 **Back
            to Table of Contents**
  **RECLAMATION
          CONSULTING AND APPLICATIONS, INC.**
 **STATEMENTS
          OF CASH FLOWS**
 **FOR
          THE YEARS ENDED JUNE 30, 2006 AND 2005**
 **(Continued)**
 **SUPPLEMENTAL
                    DISCLOSURE OF CASH FLOW INFORMATION:****2006**
                
                **2005****Cash
                    paid for:**Interest
                
                $
                270,140
                
                $
                62,755Income
                    taxes
                
                
                
                
                $
                -
                
                $
                -**Non-cash
                    investing and financing activities:**Conversion
                    of notes payable and accrued interest to common stock
                
                
                
                
                $
                842,262
                
                $
                171,400Beneficial
                    conversion feature of convertible debt
                
                
                
                
                $
                -
                
                $
                100,000Debt
                    discount on convertible debt
                
                
                
                
                $
                1,200,000
                
                $
                700,000Issuance
                    of notes payable for cancellation of share to be issued
                
                
                
                
                
                25,000
                
                
                -Stock
                    warrants reclassified as derivative liabilities
                
                
                
                
                $
                -
                
                $
                678,546Issuance
                    of shares and note payable in exchange for a license
                
                
                
                
                
                500,000
                
                
                -Acquisition
                    of fixed assets through reduction of accounts receivable
                
                
                
                
                $
                -
                
                $
                44,902Cashless
                    conversion of warrants and related derivative liability
                
                
                
                
                $
                946,607
                
                $
                -Conversion
                    of BCF to additional paid in capital for paydowns of convertible
                    notes
                
                
                
                
                $
                687,889
                
                $
                -
  See
        report of independent registered public accounting
        firm and accompanying notes to the financial statements.
  F-6
 **Back
            to Table of Contents**
  **RECLAMATION
        CONSULTING AND APPLICATIONS, INC.**
 
 **NOTES
        TO FINANCIAL STATEMENTS**
 
 **For
        The Years Ended June 30, 2006 and 2005**
 
  **NOTE
        1** **-** **ORGANIZATION AND BASIS OF PRESENTATION**
 
 Organization
 
 Reclamation
        Consulting and Applications, Inc. (the “Company”) is a Colorado corporation,
        originally formed in 1976. The Company’s primary business is the production and
        sale of their Alderox® line of products and applicator systems. The Alderox®
line of products is a line of release agent that was developed by the Company
        in
        response to industries need for an effective, economical and environmentally
        friendly product that eliminated or reduced the build up of materials on
        equipment. The Company’s customers are located throughout the United
        States.
 
 Basis
        of Presentation
 
 The
        Company's financial statements are prepared using the accrual method of
        accounting in accordance with accounting principles generally accepted in
        the
        United States and have been prepared on a going concern basis, which
        contemplates the realization of assets and the settlement of liabilities
        in the
        normal course of business. The Company has incurred cumulative losses of
        $22,030,418, including net losses of $7,215,291 and $3,702,609 for the years
        ended June 30, 2006 and 2005, respectively.
 
 In
        view
        of the matters described in the preceding paragraph, recoverability of a
        major
        portion of the recorded asset amounts shown in the accompanying balance sheet
        is
        dependent upon future sustainable profitable operations of the Company, which
        in
        turn is dependent upon the Company’s ability to raise additional capital, obtain
        financing, increase its customer base and manage its costs. The financial
        statements do not include any adjustments relating to the recoverability
        and
        classification of recorded asset amounts or amounts and classification of
        liabilities that might be necessary should the Company be unable to continue
        as
        a going concern.
 
 Management
        has taken the following steps, which it believes are sufficient to provide
        the
        Company with the ability to continue as a going concern: (i) obtaining
        additional equity and debt financing (see Notes 7 and 11); (ii) controlling
        of
        salaries and general and administrative expenses; (iii) managing accounts
        payable; and (iv) evaluating its distribution and marketing
        methods.
 
 **NOTE
        2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**
 
 Use
        of
        Estimates
 
 The
        preparation of financial statements in conformity with accounting principles
        generally accepted in the United States of America requires management to
        make
        estimates and assumptions that affect the reported amounts of assets and
        liabilities, disclosure of contingent assets and liabilities at the date
        of the
        financial statements and the reported amounts of revenues and expenses during
        the reporting period. Significant estimates include the realizability of
        long-lived assets, the fair value of derivative and warrant liabilities,
        and the
        fair value of common shares/options granted for services. Actual results
        could
        differ from those estimates.
 F-7
 **Back
            to Table of Contents**
  **RECLAMATION
        CONSULTING AND APPLICATIONS, INC.**
 
 **NOTES
        TO FINANCIAL STATEMENTS**
 
 **For
        The Years Ended June 30, 2006 and 2005**
 
  **NOTE
        2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued**
 
 Cash
        Equivalents
 
 For
        purposes of the statements of cash flows, the Company considers cash equivalents
        to include highly liquid investments with original maturities of three months
        or
        less.
 
 Accounts
        Receivable
 
 The
        Company performs periodic evaluations of its customers and maintains allowances
        for potential credit losses as deemed necessary. The Company generally does
        not
        require collateral to secure its accounts receivable. The Company estimates
        credit losses and returns based on management’s evaluation of historical
        experience and current industry trends. Although the Company expects to collect
        amounts due, actual collections may differ from the estimated amounts.
 
 Inventories
 
 Inventories
        consist of raw materials and finished goods and are stated at the lower of
        cost
        (determined using the average cost method) or market. The Company regularly
        monitors potential excess or obsolete inventories by comparing the market
        value
        to cost. When necessary, the Company reduces the carrying amount of inventories
        to their market value.
 
 Property
        and Equipment
 
 Property
        and equipment are stated at cost. Major renewals and improvements are charged
        to
        the asset accounts while replacements, maintenance and repairs that do not
        improve or extend the lives of the respective assets are expensed. At the
        time
        property and equipment are retired or otherwise disposed of, the asset and
        related accumulated depreciation accounts are relieved of the applicable
        amounts. Gains or losses from retirements or sales are credited or charged
        to
        income.
 
 The
        Company depreciates its property and equipment using the straight-line method
        over the following estimated useful lives:
  Computers
                    and office equipment
                3-5
                    yearsTest
                    equipment
                5
                    yearsVehicles
                5
                    years




F-8
 **Back
          to Table of Contents**


**RECLAMATION
        CONSULTING AND APPLICATIONS, INC.**
 
 **NOTES
        TO FINANCIAL STATEMENTS**
 
 **For
        The Years Ended June 30, 2006 and 2005**
 
  **NOTE
        2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
        continued**


Long-Lived
        Assets
 
 The
        Company accounts for its long-lived assets in accordance with Statement of
        Financial Accounting Standards (“SFAS”) No. 144, “ *Accounting
        for the Impairment or Disposal of Long-Lived Assets* .”
SFAS
        No. 144 requires that long-lived assets be reviewed for impairment whenever
        events or changes in circumstances indicate that the historical cost carrying
        value of an asset may no longer be appropriate. The Company assesses
        recoverability of the carrying value of an asset by estimating the future
        net
        cash flows expected to result from the asset, including eventual disposition.
        If
        the future undiscounted net cash flows are less than the carrying value of
        the
        asset, an impairment loss is recorded equal to the difference between the
        asset’s carrying value and fair value or disposable value. As of June 30, 2006,
        the Company does not believe there has been any impairment of its long-lived
        assets. There can be no assurance, however, that market conditions will not
        change or demand for the Company’s products and services will continue, which
        could result in impairment of long-lived assets in the future.
 
 Income
        Taxes
 
 The
        Company accounts for income taxes under the provisions of SFAS No. 109,
“ *Accounting
        for Income Taxes* .”
Under
        SFAS No. 109, deferred tax assets and liabilities are recognized for future
        tax
        benefits or consequences attributable to temporary differences between the
        financial statement carrying amounts of existing assets and liabilities and
        their respective tax bases. Deferred tax assets and liabilities are measured
        using enacted tax rates expected to apply to taxable income in the years
        in
        which those temporary differences are expected to be recovered or settled.
        A
        valuation allowance is provided for significant deferred tax assets when
        it is
        more likely than not that such assets will not be realized through future
        operations.
 
 Convertible
        Debentures
 
 In
        certain instances, the convertible feature of the Company’s notes payable
        provides for a rate of conversion that is below market value (see Notes 7
        and
        8). This feature is characterized as a beneficial conversion feature ("BCF"),
        which is recorded by the Company pursuant to Emerging Issues Task Forces
        ("EITF") Issue No. 98-5, " *Accounting
        for Convertible Securities with Beneficial Conversion Features or Contingently
        Adjustable Conversion Ratios* ,"
        and
        EITF Issue No. 00-27, " *Application
        of EITF Issue No. 98-5 to Certain Convertible Instruments* ."
 
 The
        Company's convertible debt is recorded net of the debt discount related to
        the
        BCF. The Company amortizes the discount to interest expense over the life
        of the
        debt on a straight-line basis, which approximates the effective interest
        method.
        For the years ended June 30, 2006 and 2005, the Company recorded
        $37,500  and
        $62,500 **,** respectively, of amortization related to the BCF.
 F-9
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 **RECLAMATION
          CONSULTING AND APPLICATIONS, INC.**
 
 **NOTES
          TO FINANCIAL STATEMENTS**
 
 **For
          The Years Ended June 30, 2006 and 2005**
 **NOTE
        2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued**
 
 Deferred
        Financing Costs
 
 The
        Company records direct costs of obtaining debt as deferred financing costs
        and
        amortizes these costs to interest expense over the life of the debentures
        on a
        straight-line basis, which approximates the effective interest method.
 
 Fair
        Value of Financial Instruments
 
 The
        Company’s financial instruments consist of cash and cash equivalents, accounts
        receivable, accounts payable, accrued expenses, related-party notes payable
        and
        notes payable. Pursuant to SFAS No. 107, “ *Disclosures
        About Fair Value of Financial Instruments* ,”
the
        Company is required to estimate the fair value of all financial instruments
        at
        the balance sheet date. The Company cannot determine the estimated fair value
        of
        related-party notes payable as the transactions originated with related parties
        and instruments similar to its convertible notes payable could not be located.
        Other than these items, the Company considers the carrying values of its
        financial instruments in the financial statements to approximate their fair
        values.
 
 Derivative
        Financial Instruments
 
 The
        Company’s derivative financial instruments consist of embedded derivatives
        related to the Callable Secured Convertible Term Notes (the “Notes”) entered
        into on June 23, 2005 (see Note 8). These embedded derivatives include certain
        conversion features, variable interest features, call options and default
        provisions. The accounting treatment of derivative financial instruments
        requires that the Company record the derivatives and related warrants at
        their
        fair values as of the inception date of the agreement and at fair value as
        of
        each subsequent balance sheet date ($2,621,775 as of June 30, 2006). In
        addition, under the provisions of EITF Issue No. 00-19, “ *Accounting
        for Derivative Financial Instruments Indexed to, and Potentially Settled
        in, a
        Company's Own Stock* ,”
as
        a
        result of entering into the Notes, the Company is required to classify all
        other
        non-employee stock options and warrants as derivative liabilities and mark
        them
        to market at each reporting date. The
        fair
        value of such options and warrants at June 30, 2006 totaled
        $1,917,997.  Any
        change in fair value will be recorded as non-operating, non-cash income or
        expense at each reporting date. If the fair value of the derivatives is higher
        at the subsequent balance sheet date, the Company will record a non-operating,
        non-cash charge. If the fair value of the derivatives is lower at the subsequent
        balance sheet date, the Company will record non-operating, non-cash income.
        For
        the year ended June 30, 2006 the Company recorded expense for the change
        in fair
        value of $2,508,656. Conversion-related derivatives were valued using the
        Binomial Option Pricing Model with the following assumptions: dividend yield
        of
        0%; annual volatility of 166%; and risk free interest rate of 5.16% as well
        as
        probability analysis related to trading volume restrictions. The remaining
        derivatives were valued using discounted cash flows and probability analysis.
        The derivatives are classified as long-term liabilities (see Note 8).
 F-10
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 **RECLAMATION
          CONSULTING AND APPLICATIONS, INC.**
 
 **NOTES
          TO FINANCIAL STATEMENTS**
 
 **For
          The Years Ended June 30, 2006 and 2005**
 **NOTE
        2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued**
 
 Revenue
        Recognition
 
 The
        Company recognizes revenue in accordance with Staff Accounting Bulletin (“SAB”)
        No. 101, “ *Revenue
        Recognition in Financial Statements* ,”
as
        revised by SAB No. 104. As such, the Company recognizes revenue when persuasive
        evidence of an arrangement exists, title transfer has occurred, the price
        is
        fixed or readily determinable and collectibility is probable. Sales are recorded
        net of sales discounts.
 
 Revenues
        from sales to distributors and agents are recognized upon shipment when there
        is
        evidence that an arrangement exists, delivery has occurred under the Company’s
        standard FOB shipping point terms, the sales price is fixed or determinable
        and
        the ability to collect sales proceeds is reasonably assured. The contracts
        regarding these sales do not include any rights of return or price protection
        clauses.
 
 Net
        Loss Per Share
 
 The
        Company adopted the provisions of SFAS No. 128, “ *Earnings
        Per Share”* (“EPS”).
        SFAS No. 128 provides for the calculation of basic and diluted earnings per
        share. Basic EPS includes no dilution and is computed by dividing income
        or loss
        available to common shareholders by the weighted average number of common
        shares
        outstanding during the period. Diluted EPS reflects the potential dilution
        of
        securities that could share in the earnings or losses of the entity. Dilution
        is
        computed by applying the treasury stock method for options and warrants and
        the
“as - if converted” method for convertible debentures. Under this method,
        options and warrants are assumed to be exercised at the beginning of the
        period
        (or at the time of issuance, if later) as if funds obtained thereby were
        used to
        purchase common stock at the average market price during the
        period.
  For
        the
        years ended June 30, 2006 and 2005, basic and diluted loss per share are
        the
        same since the calculation of diluted per share amounts would result in an
        anti-dilutive calculation that is not permitted and therefore not included.
        Such
        dilutive amounts would have included shares potentially issuable pursuant
        to
        convertible debentures (see Notes 7 and 8) and outstanding options and warrants
        (see Note 11) **.**
 
 Issuance
        of Stock for Non-Cash Consideration
 
 All
        issuances of the Company's stock for non-cash consideration have been assigned
        a
        per share amount equaling either the market value of the shares issued or
        the
        value of consideration received, whichever is more readily determinable.
        The
        majority of the non-cash consideration received pertains to services rendered
        by
        consultants and others and has been valued at the market value of the shares
        on
        the dates issued. In certain instances, the Company has discounted the values
        assigned to the issued shares for illiquidity and/or restrictions on resale
        (see
        Note 11).
 F-11
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  **RECLAMATION
          CONSULTING AND APPLICATIONS, INC.**
 
 **NOTES
          TO FINANCIAL STATEMENTS**
 
 **For
          The Years Ended June 30, 2006 and 2005**
 
  **NOTE
          2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
          continued**
 
 Stock-Based
        Compensation
  The
        Company accounts for non-employee stock-based compensation under SFAS No.
        123
        " *Accounting
        For Stock-Based Compensation* ." 
SFAS No. 123 defines a fair value based method of accounting for stock-based
        compensation.  However, SFAS No. 123 allows an entity to continue to
        measure compensation cost related to stock and stock options issued to employees
        using the intrinsic method of accounting prescribed by Accounting Principles
        Board Opinion No. 25 ("APB 25"), " *Accounting
        for Stock Issued to Employees* ." Under
        APB 25, compensation cost, if any, is recognized over the respective vesting
        period based on the difference, on the date of grant, between the fair value
        of
        the Company's common stock and the grant price. Entities electing to remain
        with
        the accounting method of APB 25 must make pro forma disclosures of net income
        (loss) and earnings (loss) per share, as if the fair value method of accounting
        defined in SFAS No. 123 had been applied.
  In
        December 2004, the Financial Accounting Standards Board ("FASB") issued SFAS
        No.
        123 (revised 2004 *),
        "Share-Based Payment"* ("SFAS
        No. 123(R)"), which is a revision of SFAS No. 123.  SFAS 123(R) supersedes
        APB 25 and amends SFAS No. 95, " *Statement
        of Cash Flows* ." 
Generally, the approach in SFAS No. 123(R) is similar to the approach described
        in SFAS No. 123.  However, SFAS No. 123(R) requires all share-based
        payments to employees, including grants of employee stock options, to be
        recognized in the income statement based on their fair values.  Pro forma
        disclosure is no longer an alternative.  The provisions of this statement
        are effective for the Company as of July 1, 2006.  The Company expects to
        adopt SFAS No. 123(R) in the first fiscal quarter of 2007.
  SFAS
        No.
        123(R) requires companies to recognize in the income statement the grant-date
        fair value of stock options and other equity-based compensation issued to
        employees.  SFAS No. 123(R) also establishes accounting requirements for
        measuring, recognizing and reporting share-based compensation, including
        income
        tax considerations.  Upon adoption of SFAS No. 123(R), the Company will be
        required to determine the transition method to be used at the date of
        adoption.  The allowed transition methods are the modified prospective
        application and the modified retrospective application.  Under the modified
        prospective application, the cost of new awards and awards modified, repurchased
        or cancelled after the required effective date and the portion of awards
        for
        which the requisite service has not been rendered (unvested awards) that
        are
        outstanding as of the required effective date will be recognized as the
        requisite service is rendered on or after the required effective date.  The
        compensation cost for that portion of awards shall be based on the grant-date
        fair value of those awards as calculated for either recognition or pro forma
        disclosures under SFAS No. 123.  The modified retrospective application
        requires companies to record compensation expense for all unvested stock
        options
        and restricted stock beginning with the first disclosed period restated. 
The Company plans to adopt SFAS No. 123(R) using the modified prospective
        application.
 F-12
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  **RECLAMATION
          CONSULTING AND APPLICATIONS, INC.**
 
 **NOTES
          TO FINANCIAL STATEMENTS**
 
 **For
          The Years Ended June 30, 2006 and 2005**
 
  **NOTE
          2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
          continued**
  As
        permitted by SFAS No. 123, the Company currently accounts for share-based
        payments to employees using APB 25's intrinsic value method and, as such,
        generally recognizes no compensation cost for employee stock options. 
Accordingly, the adoption of SFAS No. 123(R)'s fair value method will have
        a
        negative impact on the Company's results of operations, although it will
        have no
        impact on its overall financial position.  The impact of adopting SFAS No.
        123(R) cannot be predicted at this time because it will depend on levels
        of
        share-based payments granted in the future.  However, had the Company
        adopted SFAS No. 123(R) in prior periods, the impact of that standard would
        have
        approximated the impact of SFAS No. 123 as described in the disclosure of
        pro
        forma net loss and loss per share.  SFAS No. 123(R) also requires the
        benefits of tax deductions in excess of recognized compensation cost to be
        reported as a financing cash flow, rather than as an operating cash flow
        as
        required under current accounting literature.  The requirement will reduce
        net operating cash flows and increase net financing cash flows in periods
        of adoption.
 
 Had
        the
        Company determined employee stock-based compensation cost based on a fair
        value
        model at the grant date for its stock options under SFAS No. 123, the Company's
        net loss and net loss per share for the year ended June 30, 2006 would have
        been
        adjusted to the pro forma amounts, as follows (in thousands, except per share
        amounts):
 
 2006
              
              2005Net
                  loss - as reported
              
              $
              (7,215
              )
              $
              (3,703
              )Stock-based
                  compensation expense determined under fair-valuebased
                  method, net of tax
              
              
              (348
              )
              
              (112
              )Pro
                  forma net loss
              
              $
              (7,563
              )
              $
              (3,815
              )Basic
                  and diluted net loss per share:As
                  reported
              
              $
              (0.19
              )
              $
              (0.13
              )Pro
                  forma
              
              $
              (0.20
              )
              $
              (0.14
              )
 
 Concentrations
        of Credit Risk
 
 The
        Company maintains its cash balances at financial institutions that are insured
        by the Federal Deposit Insurance Corporation (“FDIC”) up to $100,000. From
        time-to-time, the Company’s cash balances exceed the amount insured by the FDIC.
        Management believes the risk of loss of cash balances in excess of the insured
        limit to be low.
 
 The
        majority of revenues in the years ended June 30, 2006 and 2005 were generated
        from a few customers. For the year ended June 30, 2006, total sales to two
        major
        customers amounted to $56,695 and as of June 30, 2006, no amounts were due
        from
        these major customers. For the year ended June 30, 2005, sales to the two
        major
        customers amounted to $178,822.
 F-13
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  **RECLAMATION
          CONSULTING AND APPLICATIONS, INC.**
 
 **NOTES
          TO FINANCIAL STATEMENTS**
 
 **For
          The Years Ended June 30, 2006 and 2005**
 
  **NOTE
          2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
          continued**
 
 Reclassifications
 
 Certain
        amounts in June 30, 2005 financial statements have been reclassified to conform
        with the June 30, 2006 presentation. Such reclassification had no effect
        on net
        loss as previously reported.
 
 **NOTE
        3 - ACCOUNTS RECEIVABLE**
 
 All
        accounts receivable are trade related. These receivables are current and
        no
        reserve for uncollectible accounts is deemed necessary.
 
 **NOTE
        4 - INVENTORIES**
 
 Inventories
        consist of the following as of June 30, 2006:
 Raw
                    materials
                
                $
                17,403Finished
                    goods
                
                
                47,117$
                64,520
 
 **NOTE
        5 - PROPERTY AND EQUIPMENT**
 
 The
        following is a summary of property and equipment at June 30, 2006:
  Computers
                  and office equipment
              
              $
              23,335Test
                  equipment
              
              
              38,103Vehicles
              
              
              17,40878,846Less
                  accumulated depreciation
              
              
              (33,636
              )$
              45,210
 
 **NOTE
        6 - DEFERRED FINANCING COSTS**
 
 Deferred
        financing costs consist of the following as of June 30, 2006:
  Cost
                
                $
                40,000Less
                    accumulated amortization
                
                
                (12,500
                )$
                27,500
 Amortization
        expense was $12,500 and 0 for the years ended June 30, 2006 and 2005,
        respectively, and is included in interest expense in the accompanying statement
        of operations.
 F-14
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  **RECLAMATION
          CONSULTING AND APPLICATIONS, INC.**
 
 **NOTES
          TO FINANCIAL STATEMENTS**
 
 **For
          The Years Ended June 30, 2006 and 2005**
 
  **NOTE
          7 - NOTES PAYABLE - RELATED PARTIES**
 
 Notes
        payable - related parties consists of the following at June 30,
        2006:
 Unsecured
                    notes payable to shareholders, bearing interest at 10 percent
                    per annum,
                    convertible to common stock at $0.25 per share, due on
                    demand
                
                $
                26,000Unsecured
                    note payable to shareholder, bearing interest at 15 percent per
                    annum,
                    convertible to common shares at $0.75 per share, monthly principal
                    payments of $1,833, due on demand
                
                
                3,167Unsecured
                    notes payable to shareholder, bearing interest at 15 percent
                    per annum,
                    due on demand
                
                
                13,140Unsecured
                    notes payable to shareholders, bearing interest at 10 percent
                    per annum,
                    due on demand
                
                
                1,477,539Unsecured
                    notes payable to shareholders, $2,500 interest payable due on
                    maturity
                    August 27, 2006 as defined, due on demand
                
                
                25,000Unsecured
                    note payable to shareholder, bearing interest at 15 percent per
                    annum,
                    monthly principal and interest of $1,917, due on October
                    2006
                
                
                15,000$
                1,559,846
 During
        the year ended June 30, 2006, the Company issued 5,171,897 shares of its
        common
        stock for the conversion of $273,262 of principal and interest in connection
        with notes payable-related parties. The notes and accrued interest were
        converted at the fair market value on the date of conversion.
 
 Interest
        expense on notes payable - related parties for the years ended June 30, 2006
        and
        2005 was **$** 85,866 **a** nd
        $55,619, respectively. All related-party notes payable are reflected as current
        liabilities as they are either due on demand or mature before June 30,
        2007 **.**
 F-15
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  **RECLAMATION
          CONSULTING AND APPLICATIONS, INC.**
 
 **NOTES
          TO FINANCIAL STATEMENTS**
 
 **For
          The Years Ended June 30, 2006 and 2005**
 
  **NOTE
          8 - NOTES PAYABLE**
 
 Notes
        payable consist of the following at June 30, 2006:
 Callable,
                    secured convertible notes, net of unamortized debt discount of
                    $959,361
                    (see below)
                
                $
                352,749Note
                    payable, bearing interest at 15 percent per annum, convertible
                    to common
                    shares at $0.40 per share, due on demand, secured by substantially
                    all
                    assets of the Company.
                
                
                125,000Notes
                    payable, bearing interest at 10 percent per annum and paid semi-annually,
                    convertible to common shares at $0.40 or $0.45 per share, due
                    on demand,
                    secured by substantially all assets of the Company.
                
                
                47,500Note
                    payable, bearing interest at 15 percent per annum, convertible
                    to common
                    shares at $0.75 per share, due on demand, secured by substantially
                    all
                    assets of the Company.
                
                
                50,000Secured
                    notes payable, bearing interest at 15 percent per annum, convertible
                    to
                    common shares at $0.40 per share, due on demand.
                
                
                55,850Unsecured
                    notes payable, bearing interest at 15 percent per annum, due
                    on
                    demand
                
                
                15,000Subtotal
                
                
                646,099Less
                    current portion
                
                
                (293,350
                )$
                352,749
 During
        the year ended June 30, 2005, the Company borrowed $50,000 from an investor
        which was repaid during the period ending December 31, 2005. The investor
        has an
        option to convert up to the full loan amount into restricted shares of the
        Company’s common stock at $0.25 per share. The Company recorded a discount on
        the debt of $50,000 related to BCF. Amortization of the debt discount for
        the
        years ended June 30, 2006 and 2005 was $37,500 and $12,500,
        respectively.
 
 On
        June
        23, 2005, the Company entered into a Securities Purchase Agreement (the “SPA”)
        with AJW Offshore, Ltd., AJW Qualified Partners, LLC, AJW Partners, LLC and
        New
        Millennium Capital Partners II, LLC (collectively, the “Investors”) for the sale
        of (i) $2,000,000 in Notes and (ii) warrants to purchase 8,000,000 shares
        of the
        Company’s common stock.
 
 The
        Investors are obligated to provide the Company with the funds as follows:
  · $700,000
        was disbursed on June 23, 2005;
 · $600,000
        was disbursed on July 28, 2005 ;
 · $700,000
        was disbursed on December 28, 2005, after the related registration statement
        became effective
 
 The
        Notes
        bear interest at 10%, mature three years from the date of issuance and are
        convertible into the Company’s common stock, at the investors' option, at the
        lower of $0.21 per share or 50% of the average of the three lowest intraday
        trading prices for the common stock on the Over-The-Counter Bulletin Board
        for
        the 20 trading days before, but not including, the conversion date.
 F-16
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  **RECLAMATION
          CONSULTING AND APPLICATIONS, INC.**
 
 **NOTES
          TO FINANCIAL STATEMENTS**
 
 **For
          The Years Ended June 30, 2006 and 2005**
 
  **NOTE
          8 - NOTES PAYABLE, continued**
 
 The
        full
        principal amount of the Notes is due upon a default under the terms of the
        SPA.
        In addition, the Company granted the Investors a security interest in
        substantially all of its assets and intellectual property. In the event the
        Company breaches any representation or warranty in the SPA, the Company is
        required to pay a penalty in shares or cash, at the election of the Investors,
        in an amount equal to three percent of the outstanding principal amount of
        the
        Notes per month plus accrued and unpaid interest.
 
 The
        warrants are exercisable until five years from the date of issuance at a
        purchase price of $0.28 per share. The Investors may exercise the warrants
        on a
        cashless basis if the shares of common stock underlying the warrants are
        not
        then registered pursuant to an effective registration statement. In the event
        the Investors exercise the warrants on a cashless basis, the Company will
        not
        receive any proceeds. In addition, the exercise price of the warrants will
        be
        adjusted in the event the Company issues common stock at a price below market,
        with the exception of any securities issued as of the date of the warrants
        or
        issued in connection with the Notes issued pursuant to the SPA.
 
 The
        Investors have agreed to restrict their ability to convert their Notes or
        exercise their warrants and receive shares of the Company’s common stock such
        that the number of shares of common stock held by them in the aggregate and
        their affiliates after such conversion or exercise does not exceed 4.99%
        of the
        then issued and outstanding shares of common stock.
 
 Under
        a
        Guaranty and Pledge Agreement, Mr. Gordon Davies, the Company’s President,
        agreed (i) to unconditionally guarantee the timely and full satisfaction
        of all
        obligations, whether matured or unmatured, now or hereafter existing or created
        and becoming due and payable to the Investors, their successors, endorsees,
        transferees or assigns under the SPA and other transaction documents to the
        extent of 517,400 shares of the Company’s common stock owned by Mr. Davies, and
        (ii) to grant to the Investors, their successors, endorsees, transferees
        or
        assigns a security interest in the 517,400 shares, as collateral security
        for
        such obligations.
 
 The
        Notes
        include certain features that are considered embedded derivative financial
        instruments, such as a variety of conversion options, a variable interest
        rate
        feature, events of default and a variable liquidated damages clause. These
        features are described below, as follows:
 
 ·
              The
                  Notes’ conversion features are identified as an embedded derivative and
                  have been bifurcated and recorded on the Company’s balance sheet at their
                  fair value;
 ·
              The
                  Company has a partial call option to allow the Company to pre-empt
                  the
                  conversion of the Notes in a given month and partially offset the
                  BCF,
                  which is identified as an embedded derivative and has been bifurcated
                  and
                  recorded on the Company’s balance sheet at its fair
                  value;
 ·
              Annual
                  interest on the Notes is equal to 10% provided that no interest
                  shall be
                  due and payable for any month in which the Company’s trading price is
                  greater than $0.3125 for each trading day of the month, which potential
                  interest rate reduction is identified as an embedded derivative
                  and has
                  been bifurcated and recorded on the Company’s balance sheet at its fair
                  value;
 ·
              The
                  SPA includes a penalty provision based on any failure to meet and/or
                  maintain registration requirements for shares issuable under the
                  conversion of the note or exercise of the warrants, which represents
                  an
                  embedded derivative, but such derivative has a de minimus value
                  and has
                  not been included in this analysis at June 30, 2006;
                  and
  F-17
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  **RECLAMATION
          CONSULTING AND APPLICATIONS, INC.**
 
 **NOTES
          TO FINANCIAL STATEMENTS**
 
 **For
          The Years Ended June 30, 2006 and 2005**
 
  **NOTE
          8 - NOTES PAYABLE, continued**
 
 ·
              The
                  SPA contains certain events of default including not having adequate
                  shares registered to effectuate allowable conversions; in that
                  event, the
                  Company is required to pay a conversion default payment at 24%
                  interest,
                  which is identified as an embedded derivative and has been bifurcated
                  and
                  recorded on the Company’s balance sheet at its fair
                  value.
 
 In
        December 2005, the Company registered the shares in connection with the notes.
        The holders of the notes have not demanded payment of any liquidated damages
        and
        have informally agreed to waive all liquidated damages due and owing to them
        pursuant to their registration rights. As a result, no accrual has been made
        as
        of June 30, 2006.
 
 The
        fair
        value of the embedded derivatives was $924,189.
 
 In
        conjunction with the Notes, the Company issued warrants to purchase 8,000,000
        shares of common stock. The accounting treatment of the derivatives and warrants
        requires that the Company record the warrants at their fair value, which
        totaled
        $1,697,587 and $525,934 at June 30, 2006 and 2005 respectively.
 
 The
        Company recorded the $1,900,000 of fair value of the derivatives and warrants
        to
        debt discount, which will be amortized to interest expense over the term
        of the
        Notes. During the year ended June 30, 2005 the excess balance was recorded
        as
        interest expense. During the year ended June 30, 2006, $299,000 of the notes
        and
        accrued interest was converted into 2,725,000 shares of common stock. The
        Company repaid $388,889 of the principal balance of the notes. Amortization
        expense on this debt discount for the year ended June 30, 2006 was $877,138.
 
 The
        market price of the Company’s common stock significantly impacts the extent to
        which the Company may be required or may be permitted to convert the
        unrestricted and restricted portions of the Notes into shares of the Company’s
        common stock. The lower the market price of the Company’s common stock at the
        respective times of conversion, the more shares the Company will need to
        issue
        to convert the principal and interest payments then due on the Notes. If
        the
        market price of the Company’s common stock falls below certain thresholds, the
        Company will be unable to convert any such repayments of principal and interest
        into equity, and the Company will be forced to make such repayments in cash.
        The
        Company’s operations could be materially adversely impacted if the Company is
        forced to make repeated cash payments on the Notes.
 
 Future
        minimum principal payments (excluding the debt discount) are as follows under
        notes payable for the year ending June 30:
  2007
              
              $
              293,3502008
              
              
              12,1102009
              
              
              1,300,000$
              1,605,460
  F-18
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  **RECLAMATION
          CONSULTING AND APPLICATIONS, INC.**
 
 **NOTES
          TO FINANCIAL STATEMENTS**
 
 **For
          The Years Ended June 30, 2006 and 2005**
 
  **NOTE
          9 - COMMITMENTS AND CONTINGENCIES**
 
 Operating
        Leases
 
 The
        Company conducts its operations utilizing leased facilities and equipment
        under
        non-cancelable operating lease agreements expiring at various dates through
        2011. Future minimum lease commitments, excluding property taxes and insurance
        for the years ending June 30 are:
 
 2007
              
              $
              108,1762008
                2009
                2010
                2011
              
              
              60,599
                49,215
                49,215
                16,405$
              283,609
 
 Rent
        expense for all leased facilities and equipment was $90,351 and $67,277 for
        the
        years ended June 30, 2006 and 2005, respectively.
 
 Litigation
 
 In
        September 2005, litigation between the Company and a former lessor was settled
        through arbitration. The complaint alleged breach of contract by the Company
        for
        not paying amounts due as per the lease terms. The terms of the settlement
        require the Company to pay $30,000 on March 1, 2006. Beginning April 1, 2006,
        the Company is required to pay monthly installments of $3,100 for twenty-four
        months. These amounts are recorded as an accrued judgment payable on the
        accompanying balance sheet. The Company may prepay the remaining balance
        at a
        twenty percent discount at any time. If the Company defaults on any of the
        required payments, the additional $40,000 due under the terms of the original
        lease will become due and payable. This amount has not been accrued as the
        Company believes the possibility of default under the agreement is remote.
        The
        payment of the settlement is personally guaranteed by Mr. Gordon
        Davies.
 F-19
 **Back
            to Table of Contents**
  **RECLAMATION
          CONSULTING AND APPLICATIONS, INC.**
 
 **NOTES
          TO FINANCIAL STATEMENTS**
 
 **For
          The Years Ended June 30, 2006 and 2005**
 
  **NOTE
          9 - COMMITMENTS AND CONTINGENCIES, continued**
 
 On
        May 2,
        2005, a complaint was filed by Pacific Business Capital Corporation against
        the
        Company, our President, Gordon Davies, and our Vice President, Michael Davies.
        The complaint alleges, among other things, a cause of action for breach of
        contract and seeks the return of approximately $55,000, which the plaintiff
        alleges they loaned us under a “partly written, partly oral” agreement, pursuant
        to which a total of $80,000 was loaned to the Company. Our management has
        denied
        that the plaintiff is owed the amounts sought and we intend to vigorously
        defend
        this action on the basis brought by the plaintiff. Specifically, our Company’s
        management denies that any such agreement ever existed, and that the Company
        never received any funds pursuant thereto, if any, from the plaintiff. On
        September 5, 2006, a settlement was reached whereas the Company agreed to
        pay
        PBCC a total of $21,000 over the course of 11 months. We are obligated to
        pay
        PBCC $5,000 by September 29, 2006; $1,500 per month beginning October 1,
        2006
        and ending July 1, 2007; and $1,000 on August 1, 2007, the total of which
        is
        recorded under judgement payable. In the event that the principal amount
        is paid
        in full by January 2, 2007 there will be a $2,000 discount to the payoff
        amount.
        There is a 10-day grace period for each scheduled payment and there is a
        deed as
        security on property owned by our CEO, Mr. Michael Davies. No interest is
        due
        under the settlement agreement if we comply with the terms thereof. In the
        event
        that we are in default of the settlement agreement, a 10% simple interest
        per
        annum will be added, and the entire amount shall immediately become due upon
        our
        default. An Order to Show Cause hearing regarding dismissal is currently
        scheduled for December 17, 2007.
  Future
          minimum payments under the settlement agreements for the years ending June
          30
          are:
 
 2007
                
                $
                58,2002008
                
                
                27,900$
                86,100
 
 **Loss on
        Collateralized Shares**
 
 In
        April
        2006 the Company entered into an agreement to borrow $300,000 from a third
        party
        and collateralized 1,500,000 shares of the Company’s common shares in order to
        consummate the loan. The collateralized shares were the property of one of
        the
        Company’s shareholders. The loan never funded and the
        agreement was voided. During the return of the collateralized shares to the
        shareholder a total of 500,000 shares were mishandled and could not be located.
        The Company is still working to recover the missing shares but has set up
        an
        accrual for the loss to the shareholder for $110,000, which has been included
        in
        accrued expenses as of June 30, 2006 in the accompanying balance
        sheet.
  F-20
 **Back
            to Table of Contents**
  **RECLAMATION
          CONSULTING AND APPLICATIONS, INC.**
 
 **NOTES
          TO FINANCIAL STATEMENTS**
 
 **For
          The Years Ended June 30, 2006 and 2005**
 
  **NOTE
          9 - COMMITMENTS AND CONTINGENCIES, continued**
 
 Indemnities
        and Guarantees
 
 The
        Company has made certain indemnities and guarantees, under which it may be
        required to make payments to a guaranteed or indemnified party in relation
        to
        certain actions or transactions. The Company indemnifies its directors,
        officers, employees and agents, as permitted under the laws of the State
        of
        California. In connection with its facility leases, the Company has indemnified
        its lessors for certain claims arising from the use of the facilities. The
        Company is also required to indemnify the Investors under the terms of the
        Notes. The duration of the guarantees and indemnities varies, and is generally
        tied to the life of the agreement. These guarantees and indemnities do not
        provide for any limitation of the maximum potential future payments the Company
        could be obligated to make. Historically, the Company has not been obligated
        nor
        incurred any payments for these obligations and, therefore, no liabilities
        have
        been recorded for these indemnities and guarantees in the accompanying balance
        sheet.
 
 **NOTE
        10 - INCOME TAXES**
 
 The
        provision (benefit) for income taxes consists of the following for the years
        ended June 30:
 
 **2006**
              
              **2005**Current:Federal
              
              $
              —
              
              $
              —State
              
              
              800
              
              
              800800
              
              
              800DeferredFederal
              
              
              (1,870,000
              )
              
              (1,240,000
              )State
              
              
              (330,000
              )
              
              (220,000
              )(2,200,000
              )
              
              (1,460,000
              )Less
                  change in valuation allowance
              
              
              2,200,000
              
              
              1,460,000—
              
              
              —$
              800
              
              $
              800
 
 The
        components of the net deferred tax asset as of June 30, 2006 is as
        follows:
 
 2006Net
                  operating loss carryforwards
              $
              8,100,000Valuation
                  allowance
              
              (8,100,000
              )$
              —
 
 Deferred
        income taxes are provided for the tax effects of temporary differences in
        the
        reporting of income and deductions for financial statement and income tax
        reporting purposes and arise principally from net operating loss carryforwards
        and accelerated depreciation methods used for income tax reporting.
 F-21
 **Back
            to Table of Contents**
  **RECLAMATION
          CONSULTING AND APPLICATIONS, INC.**
 
 **NOTES
          TO FINANCIAL STATEMENTS**
 
 **For
          The Years Ended June 30, 2006 and 2005**
 
  **NOTE
          10 - INCOME TAXES, continued**
 
 The
        Company’s effective tax rate differs from the federal and state statutory rates
        due to the valuation allowance recorded for the deferred tax asset due to
        unused
        net operating loss carryforwards. An allowance has been provided for by the
        Company which reduced the tax benefits accrued by the Company for its net
        operating losses to zero, as it cannot be determined when, or if, the tax
        benefits derived from these operating losses will materialize.
 
 As
        of
        June 30, 2006, the Company has available net operating loss carryforwards
        of
        approximately $26,000,000 for federal and state purposes which expire in
        various
        years through 2026 and 2016 for federal and California purposes, respectively.
        The Company’s use of its net operating losses may be restricted in future years
        due to the limitations pursuant to IRC Section 382 on changes in ownership.
 
 
 The
        following is a reconciliation of the provision for income taxes at the expected
        rates to the income taxes reflected in the statements of
        operations:
 
 **2006**
              
              **2005**Tax
                  expense (benefit) at federal statutory rate
              
              
              (34
              )%
              
              (34
              )%State
                  tax expense, net of federal tax effect
              
              
              (6
              )
              
              (6
              )Permanent
                  differences
              
              
              1
              
              
              1Change
                  in valuation allowance
              
              
              (39
              )
              
              (39
              )—
              %
              
              —
              %
 
 **NOTE
        11 - STOCKHOLDERS’ EQUITY**
 
 On
        March
        3, 2006 the Company amended its Articles of Incorporation increasing the
        authorized shares from 75,000,000 to 150,000,000 and creating a new class
        of
        5,000,000 preferred shares which have not been designated as of June 30,
        2006.
 
 Common
        Stock
 
 During
        the years ended June 30, 2006 and 2005 the Company issued common shares at
        various times, as described per the following. The shares were valued at
        the
        average fair market value of the freely trading shares of the Company as
        quoted
        on OTCBB on the date of issuance *.* Restricted shares were discounted for illiquidity and restrictions on
        trading.
 
 2005
 
 During
        the year ended June 30, 2005, the Company issued 1,922,943 shares of common
        stock and committed to issue common stock for cash amounting $476,256.
 
 During
        the year ended June 30, 2005, the Company issued 1,672,750 shares of common
        stock for services rendered amounting $403,118.
 F-22
 **Back
            to Table of Contents**
  **RECLAMATION
          CONSULTING AND APPLICATIONS, INC.**
 
 **NOTES
          TO FINANCIAL STATEMENTS**
 
 **For
          The Years Ended June 30, 2006 and 2005**
 
  **NOTE
          11 - STOCKHOLDERS’ EQUITY, continued**
 
 During
        the year ended June 30, 2005, the Company cancelled 225,000 shares amounting
        $69,775 as part of a legal settlement.
 
 During
        the year ended June 30, 2005, the Company issued 732,500 shares of common
        stock
        and committed to issue 100,000 shares of common stock amounting to $166,500
        for
        the conversion of notes payable.
 
 During
        the year ended June 30, 2005, the Company issued 25,000 shares of common
        stock
        amounting to $4,900 for the payment of accrued interest.
 
 2006
 
 During
        the year ended June 30, 2006 the Company cancelled shares to be issued in
        exchange for a note payable of $25,000. Also during fiscal 2006 the Company
        committed to issue shares for services rendered valued at $32,400.
 
 During
        the year ended June 30, 2006 the Company issued 7,611,150 shares of its common
        stock for the conversion of $500,508 of principal and interest in connection
        with the note payable issued as part of the license transaction.
 
 During
        the year ended June 30, 2006, the Company issued 7,346,006 shares of common
        stock for conversion of notes amounting to $818,127. Related to the conversion
        of notes payable the Company recorded additional paid in capital of $687,889
        as
        a reduction to the derivative liability included on the balance
        sheet.
 
 During
        the year ended June 30, 2006, the Company issued 550,891 shares of common
        stock
        for interest amounting to $24,135.
 
 During
        the year ended June 30, 2006, the Company issued 662,500 shares of common
        stock
        for services rendered amounting to $35,000.
 
 During
        the year ended June 30, 2006, warrant holders exercised their warrants on
        a
        cashless basis. The holders converted a total of 4,264,000 warrants for
        3,279,998 shares of the Company’s common stock. Related to these transactions
        the Company recorded additional paid in capital of $946,607 as a reduction
        to
        the derivative liability on the balance sheet.
 
 
 Stock
        Options and Warrants
 
 The
        Company has no stock option plans.
 
 The
        number and weighted average exercise prices of options and warrants granted
        by
        the Company are as follows for the years ended June 30, 2006 and 2005:
 F-23
 **Back
            to Table of Contents**
  **RECLAMATION
          CONSULTING AND APPLICATIONS, INC.**
 
 **NOTES
          TO FINANCIAL STATEMENTS**
 
 **For
          The Years Ended June 30, 2006 and 2005**
 
  **NOTE
          11 - STOCKHOLDERS’ EQUITY, continued**
 
 
 **Number
                  of Options and Warrants**
              
              **Weighted-Average**
                **Exercise
                  Price**Outstanding,
                  July 1, 2004
              
              
              6,193,750
              
              $
              0.40Granted
              
              
              16,248,000
              
              
              0.27Exercised
              
              
              —
              
              
              —Forfeited/expired
              
              
              —
              
              
              —Outstanding,
                  June 30, 2005
              
              
              22,441,750
              
              
              0.31Granted
              
              
              11,488,444
              
              
              0.13Exercised
              
              
              (4,264,000
              )
              
              0.06Forfeited/expired
              
              
              (862,444
              )
              
              0.25Outstanding,
                  June 30, 2006
              
              
              28,803,750
              
              $
              0.28Exercisable,
                  June 30, 2006
              
              
              28,803,750
              
              $
              0.28Weighted
                  average fair value of options and warrantsgranted
                  during the year ended June 30, 2006
              
              
              
              
              $
              0.07
 
 Following
        is a summary of the status of options and warrants outstanding at June 30,
        2006:
 
 **Exercise
                  Price**
              
              **Outstanding**
              
              **Weighted
                  Average Remaining Contractual Life (Years)**
              
              **Exercisable**$0.06
              
              
              4,000,000
              
              
              4.5
                  years
              
              
              4,000,000$0.15
                  -$0.25
              
              
              7,610,000
              
              
              4.0
                  years
              
              
              6,410,000$0.28
              
              
              8,000,000
              
              
              4.0
                  years
              
              
              8,000,000$0.30
              
              
              3,000,000
              
              
              5.9
                  years
              
              
              750,000$0.40
              
              
              6,043,750
              
              
              2.9
                  years
              
              
              6,043,750$0.56
              
              
              150,000
              
              
              4.0
                  years
              
              
              150,000
  F-24
 **Back
            to Table of Contents**
  **RECLAMATION
          CONSULTING AND APPLICATIONS, INC.**
 
 **NOTES
          TO FINANCIAL STATEMENTS**
 
 **For
          The Years Ended June 30, 2006 and 2005**
 
  **NOTE
          11 - STOCKHOLDERS’ EQUITY, continued**
 
 The
        Company granted 6,288,444 and 8,248,000 options to various consultants for
        services rendered which were accounted for using the fair value of the options
        granted based on the Black-Scholes option-pricing model. The Company recorded
        $756,531 and $495,530 as consulting expense during the years ended June 30,
        2006
        and 2005, respectively. The Company has issued 2,250,000 warrants to a
        consultant that vest at the rate of 750,000 warrants each on August 17, 2005,
        November 17, 2005 and February 17, 2005. The fair value of each group of
        750,000
        warrants is $136,500 and will be recognized as compensation expense in the
        accompanying financial statements upon vesting. The Company granted options
        to
        purchase 4,000,000 shares of common stock to its officers and 1,200,000
        to employees on June 15, 2006. There was no intrinsic value under APB
        25 related to the employee grant.
 
 The
        Company accounts for stock based compensation to employees under APB 25 using
        the intrinsic value method. Pro
        forma
        information of the effect on operations as required by SFAS No. 123 has been
        determined as if the Company had accounted for its employee stock options
        under
        the fair value method of that statement. Pro forma information using the
        Black-Scholes method at the date of grant was based on the following assumptions
        for the years ended June 30, 2006 and 2005:
  **2006**
              
              **2005**Expected
                  life
              
              
              1-5
                  years
              
              
              1-5
                  yearsRisk-free
                  interest rate
              
              
              4
              %
              
              5
              %Dividend
                  yield
              
              
              0
              %
              
              0
              %Volatility
              
              
              141
              %
              
              50
              %
 **NOTE
        12 - LICENSE**
 
 Effective
        January 4, 2006, the Company entered into a license agreement with Billfighter
        Investments Limited (“Billfighter’), a related party, in which the Company
        agreed to grant 4,000,000 shares of common stock and a note payable in the
        amount of $180,000 for the ability to utilize certain technology owned by
        Billfighter. The shares were valued at $320,000 based on the fair market
        value
        on the date of grant of $0.08 per share, resulting in a total value of $500,000.
        The principal of $180,000 and interest of $558 was converted the following
        day,
        January 5, 2006, into 3,611,150 shares of common stock based on fair market
        value on that date of $0.05 per share. The license grants the Company the
        sole
        and exclusive right and license to use, produce, manufacture, market, sell
        and
        distribute the licensed product within a defined territory. The Company also
        agrees to pay cash royalties in the amount of 10% of net revenues generated
        by
        the license when used to apply product to rail cars only. The license has
        no
        defined term and is subject to termination by either party. The Company believes
        that the license has a useful life of 10 years and is amortizing the cost
        on a
        straight-line basis over the term. Amortization expense of $25,000 was
        recognized for the year ended June 30, 2006, and is included in selling,
        general
        and administrative expenses in the accompanying statements of
        operations.
 
 **NOTE
        13 - SUBSEQUENT EVENTS**
 
 In
        July
        2005, the Company borrowed $112,200 from a shareholder. The loan bears interest
        at ten percent per annum and is payable on demand.
 F-25
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            to Table of Contents**
  **EXHIBIT
        INDEX**
  Exhibit
                  No.
              Description3.(I)
                  (1)
              Articles
                  of Incorporation of Vac-Tec Systems, Inc. dated February 27,
                  1976.3.(I)
                  (1)
              Articles
                  of Amendment to the Articles of Incorporation of Val-Tec Systems,
                  Inc.
                  dated March 10, 1976.3.(I)
                  (1)
              Articles
                  of Incorporation of Vac-Tec Systems, Inc. dated May 12, 1976.3.(I)
                  (1)
              Articles
                  of Amendment to Articles of Incorporation of Vac-Tec Systems, Inc.
                  dated
                  February 15, 1998.3.3
                  (4)
              Articles
                  of Amendment to the Articles of Incorporation of Recycling Centers
                  of
                  America, Inc. dated January 16, 2002.3(II)
                  (1)
              By-laws
                  of Val-Tec Systems, Inc.4.1
                  (9)
              Securities
                  Purchase Agreement, dated June 23, 2005, by and among Reclamation
                  Consulting and Applications, Inc. and AJW Offshore, Ltd., AJW Qualified
                  Partners, LLC, AJW Partners, LLC and New Millennium Capital Partners
                  II,
                  LLC.4.2
                  (9)
              Callable
                  Secured Convertible Note issued to AJW Offshore, Ltd., dated June
                  23,
                  2005.4.3
                  (9)
              Callable
                  Secured Convertible Note issued to AJW Qualified Partners, LLC,
                  dated June
                  23, 2005.4.4
                  (9)
              Callable
                  Secured Convertible Note issued to AJW Partners, LLC, dated June
                  23,
                  2005.4.5
                  (9)
              Callable
                  Secured Convertible Note issued to New Millennium Capital Partners
                  II,
                  LLC, dated June 23, 2005.4.6
                  (9)
              Stock
                  Purchase Warrant issued to AJW Offshore, Ltd., dated June 23,
                  2005.4.7
                  (9)
              Stock
                  Purchase Warrant issued to AJW Qualified Partners, LLC, dated June
                  23,
                  2005.4.8
                  (9)
              Stock
                  Purchase Warrant issued to AJW Partners, LLC, dated June 23,
                  2005.4.9
                  (9)
              Stock
                  Purchase Warrant issued to New Millennium Capital Partners II,
                  LLC, dated
                  June 23, 2005.
  **Back
            to Table of Contents**
  4.10
                  (9)
              Registration
                  Rights Agreement, dated as of June 23, 2005, by and among Reclamation
                  Consulting and Applications, Inc., AJW Offshore, Ltd., AJW Qualified
                  Partners, LLC, AJW Partners, LLC and New Millennium Capital Partners
                  II,
                  LLC.4.11
                  (9)
              Security
                  Agreement, dated as of June 23, 2005, by and among Reclamation
                  Consulting
                  and Applications, Inc., AJW Offshore, Ltd., AJW Qualified Partners,
                  LLC,
                  AJW Partners, LLC and New Millennium Capital Partners II,
                  LLC.4.12
                  (9)
              Intellectual
                  Property Security Agreement, dated June 23, 2005, by and among
                  Reclamation
                  Consulting and Applications, Inc., AJW Offshore, Ltd., AJW Qualified
                  Partners, LLC, AJW Partners, LLC and New Millennium Capital Partners
                  II,
                  LLC.4.13
                  (9)
              Guaranty
                  and Pledge Agreement, dated June 23, 2005, by and among Reclamation
                  Consulting and Applications, Inc., Gordon Davies, AJW Offshore,
                  Ltd., AJW
                  Qualified Partners, LLC, AJW Partners, LLC and New Millennium Capital
                  Partners II, LLC.10.1
                  (4)
              Employment
                  Agreement between Reclamation Consulting and Applications, Inc.
                  and Gordon
                  Davies, dated as of January 1, 2002.10.2
                  (4)
              Employment
                  Agreement between Reclamation Consulting and Applications, Inc.
                  and
                  Michael Davies, dated as of January 1, 2002.10.3
                  (5)
              Distribution
                  Agreement between Progear Environmental Solutions, Inc. and Reclamation
                  Consulting and Applications, Inc. dated June 4, 2003.10.4
                  (5)
              Professional
                  Services Agreement between Paul Petit and Reclamation Consulting
                  and
                  Applications, Inc. dated May 6, 2003.10.5
                  (5)
              Manufacturing
                  Agreement between North American Systems, Inc. and Reclamation
                  Consulting
                  and Applications, Inc. dated October 14, 2003.10.6
                  (5)
              Revolving
                  Loan Agreement between North American Systems, Inc. and Reclamation
                  Consulting and Applications, Inc. dated July 30, 2003.10(A)
                  (1)
              Employment,
                  Confidentiality and Non-Competition Agreement between Recycling
                  Centers of
                  America, Inc. and Bruce Selk, dated as of May 26, 1999.10(B)
                  (1)
              Employment
                  Agreement between Recycling Centers of America, Inc. and Michael
                  Davies,
                  dated as of June 1, 1999.10(C)
                  (1)
              Employment
                  Agreement between Recycling Centers of America, Inc. and Gordon
                  Davies,
                  dated as of June 1, 1999.
  **Back
            to Table of Contents**
  
 10(D)
                  (1)
              OEM
                  Agreement between Pall Filtron, Inc. and Brody Special Projects
                  Company,
                  dated as of June 30, 1999.10(E)
                  (1)
              Transfer
                  Agreement by and among Recycling Centers of America, Inc. and Steve
                  Madsen
                  and John D. Ewing, dated as of November 15, 1999.10.7
                  (6)
              Employment
                  Agreement between Reclamation Consulting and Applications, Inc.
                  and
                  Michael Davies, dated June 30, 2004.10.8
                  (6)
              Employment
                  Agreement between Reclamation Consulting and Applications, Inc.
                  and Gordon
                  Davies, dated June 30, 2004.10.9
                  (6)
              Distributorship
                  Agreement between Reclamation Consulting and Applications, Inc.
                  and North
                  American Marketing, Inc., dated July 30, 2003.10.10
                  (5)
              Distributorship
                  Agreement between Reclamation Consulting and Applications, Inc.
                  and North
                  American Systems, Inc.10.11
                  (5)
              Security
                  Agreement between Reclamation Consulting and Applications, Inc.
                  and North
                  American Systems, Inc., dated July 30, 200310.12
                  (7)
              Agreement
                  between Reclamation Consulting and Applications, Inc. and North
                  American
                  Systems, Inc., dated November 8, 200410.13
                  (13)
              Employment
                  Agreement between Reclamation Consulting and Applications, Inc.
                  and Gordon
                  Davies, dated as of January 6, 2005.10.14
                  (13)
              Employment
                  Agreement between Reclamation Consulting and Applications, Inc.
                  and
                  Michael Davies, dated as of January 6, 2005.10.15
                  (13)
              Contract
                  Sales Representative Agreement, dated as of November 15, 2004,
                  by and
                  between Reclamation Consulting and Applications, Inc. the Company
                  and
                  Rosiane Jacomini.10.16
                  (13)
              Addendum
                  to Contract Sales Representative Agreement dated as of November
                  15, 2004,
                  by and between Reclamation Consulting and Applications, Inc. and
                  Rosiane
                  Jacomini.10.17
                  (13)
              Addendum
                  to Contract Sales Representative Agreement dated as of November
                  15, 2004,
                  by and between Reclamation Consulting and Applications, Inc. and
                  Rosiane
                  Jacomini.10.18
                  (13)
              Distributorship
                  Agreement, dated as of August 10, 2004, by and between Reclamation
                  Consulting and Applications, Inc. and Aurtech Marketing, Pty.,
                  Ltd.
  **Back
            to Table of Contents**
  10.19
                  (13)
              Distribution
                  Agreement, dated as of December 5, 2003, by and between Reclamation
                  Consulting and Applications, Inc. and Canadian Release Agents,
                  Ltd.10.20
                  (13)
              Distributorship
                  Agreement, dated as of July 12, 2005, by and between Reclamation
                  Consulting and Applications, Inc. and Mark Lang.10.21
                  (13)
              Sales
                  Representative Agreement, dated as of July 7, 2005, by and between
                  Reclamation Consulting and Applications, Inc. and Jimmy
                  Watts.10.22
                  (13)
              Distributorship
                  Agreement, dated as of February 3, 2005, by and between Reclamation
                  Consulting and Applications, Inc. and ITA Asphalt
                  Limited.10.23
                  (13)
              Distributorship
                  Agreement, dated as of June 30, 2005, by and between Reclamation
                  Consulting and Applications, Inc. and Don Pickett.10.24
                  (13)
              Contract
                  Sales Representative Agreement, dated as of October 27, 2004, by
                  and
                  between Reclamation Consulting and Applications, Inc. and Dennis
                  Jackman.10.25
                  (13)
              Addendum
                  to Contract Sales Representative Agreement by and between Reclamation
                  Consulting and Applications, Inc. and Dennis Jackman.10.30*
              Property
                  Lease dated as of April 2005 by and between Reclamation Consulting
                  and
                  Applications, Inc. and Boyd Enterprises Utah, L.L.C.10.31*
              Property
                  Lease dated as of April 4, 2006 by and between Reclamation Consulting
                  and
                  Applications, Inc. and Olen Commercial Realty Corp.10.32*
              Memorandum
                  of Understanding dated as of September 22, 2005 by and between
                  Reclamation
                  Consulting and Applications, Inc. and Jamestown, L.C.11
                  (1)
              Statement
                  of Computation of Earnings Per Share for the years 1998 and
                  1999.12
                  (1)
              Subsidiaries
                  of Recycling Centers of America, Inc. (as of March 2,
                  2000).14.1
                  (14)
              Code
                  of Ethics for Reclamation Consulting and Applications,
                  Inc.16.1
                  (2)
              Letter
                  regarding change of accountant from Stuart Rubin, CPA dated July
                  8,
                  2002.16.1
                  (3)
              Letter
                  regarding change of accountant from Stuart Rubin, CPA dated July
                  8,
                  2002.16.1
                  (11)
              Letter
                  regarding change of accountant from Kabani & Company, Inc., dated July
                  25, 2005.16.1
                  (12)
              Letter
                  regarding change of accountant from Kabani & Company, Inc., dated July
                  25, 2005.
  **Back
            to Table of Contents**
  16.1
                  (10)
              Letter
                  regarding change of accountant from Kabani & Company, Inc., dated July
                  6, 2005.17.1
                  (8)
              Resignation
                  of Paul Petit as Director of Reclamation Consulting and Applications,
                  Inc., dated June 21, 2005.31.1*
              Certification
                  of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
                  Act of 2002.31.2*
              Certification
                  of Treasurer Pursuant to Section 302 of the Sarbanes-Oxley Act
                  of
                  2002.32.1*
              Certification
                  of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley
                  Act of 2002.32.2*
              Certification
                  of Treasurer Pursuant to Section 906 of the Sarbanes-Oxley Act
                  of
                  2002.
 *
                Filed
                    herewith
 (1)
                  Filed
                      on March 8, 2000 as an exhibit to Reclamation Consulting’s (formerly known
                      as Recycling Centers of America, Inc.) registration statement
                      on Form
                      10-SB and incorporated herein by
                      reference.
 
 (2)
              Filed
                  on July 18, 2005 as an exhibit to Reclamation Consulting’s Report on Form
                  8-K dated June 3, 2002 and incorporated herein by
                  reference.
 
 (3)
              Filed
                  on July 19, 2005 as an exhibit to Reclamation Consulting’s Report on Form
                  8-K/A dated July 8, 2002 and incorporated herein by
                  reference.
 
 (4)
              Filed
                  on October 16, 2002 as an exhibit to Reclamation Consulting’s annual
                  report on Form 10-KSB for the fiscal year ended June 30, 2002 and
                  incorporated herein by reference.
 
 (5)
              Filed
                  on October 15, 2003 as an exhibit to Reclamation Consulting’s annual
                  report on Form 10-KSB for the fiscal year ended June 30, 2003 and
                  incorporated herein by reference.
 
 (6)
              Filed
                  on October 1, 2004 as an exhibit to Reclamation Consulting’s annual report
                  on Form 10-KSB for the fiscal year ended June 30, 2004 and incorporated
                  herein by reference.
 
 (7)
              Filed
                  on November 15, 2004 as an exhibit to Reclamation Consulting’s Report on
                  Form 8-K dated November 15, 2004 and incorporated herein by
                  reference.
 
 (8)
              Filed
                  on June 21, 2005 as an exhibit to Reclamation Consulting’s Report on Form
                  8-K dated June 21, 2005 and incorporated herein by
                  reference.
 
 (9)
              Filed
                  on June 28, 2005 as an exhibit to Reclamation Consulting’s Report on Form
                  8-K dated June 23, 2005 and incorporated herein by
                  reference.
 
 (10)
              Filed
                  on July 6, 2005 as an exhibit to Reclamation Consulting’s Report on Form
                  8-K dated July
                  6, 2005 and incorporated herein by
                  reference.
  (11)
              Filed
                  on July 26, 2005 as an exhibit to Reclamation Consulting’s Report on Form
                  8-K/A dated July 6, 2005 and incorporated herein by
                  reference.
 
 (12)
              Filed
                  on July 26, 2005 as an exhibit to Reclamation Consulting’s Report on Form
                  8-K/A dated July 25, 2005 and incorporated herein by
                  reference.
 
 (13)
              Filed
                  on July 27, 2005 as an exhibit to Reclamation Consulting’s registration
                  statement on Form SB-2 and incorporated herein by reference.
 
 (14)
              Filed
                  on October 17, 2005 as an exhibit to Reclamation Consulting’s annual
                  report on Form 10-KSB for the fiscal year ended June 20, 2005 and
                  incorporated herein by reference.