**UNITED      STATES **

**SECURITIES      AND EXCHANGE COMMISSION**

**WASHINGTON,      D.C. 20549**

**FORM      10-Q**

| x | QUARTERLY                REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE                ACT OF                1934 |
|---|--------------------------------------------------------------------------------------------------------------------------------------|

| o | TRANSITION                REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE                ACT OF                1934 |
|---|---------------------------------------------------------------------------------------------------------------------------------------|

| Delaware                                         | 11-2844247                           |
|--------------------------------------------------|--------------------------------------|
| (State                  or other jurisdiction of | (I.R.S.                  Employer    |
| incorporation                  or organization)  | Identification                  No.) |

----

**PART        1 – FINANCIAL INFORMATION**

**Item        1. Financial Statements**

| WINDSWEPT                  ENVIRONMENTAL GROUP, INC. AND SUBSIDIARIES |
|-----------------------------------------------------------------------|
| CONSOLIDATED                  BALANCE SHEETS                          |
| MARCH                  31, 2007 AND JUNE 30, 2006                     |

|                                                                                                                                                                                                                                                                         |   | March                  31, |        | June                  30, |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------|-------------|---------------------------|--------|
|                                                                                                                                                                                                                                                                         |   | 2007                       |        | 2006                      |   |
|                                                                                                                                                                                                                                                                         |   | (unaudited)                |        |                      |   |
| ASSETS:                                                                                                                                                                                                                                                                      |   |                       |        |                      |   |
| CURRENT                  ASSETS:                                                                                                                                                                                                                                             |   |                       |        |                      |   |
| Cash                                                                                                                                                                                                                                                                         |   | $                          | 376,680     |                      | $      | 610,884 |   |
| Accounts                  receivable, net of allowance for doubtful accounts of $2,737,041                  and                  $1,962,138, respectively                                                                                                                    |   |                       | 7,463,197   |                      |   | 11,235,904 |   |
| Inventory                                                                                                                                                                                                                                                                    |   |                       | 184,781     |                      |   | 211,058 |   |
| Costs                  and estimated earnings in excess of billings on uncompleted                  contracts                                                                                                                                                                |   |                       | 98,526      |                      |   | 71,720 |   |
| Prepaid                  expenses and other current assets                                                                                                                                                                                                                   |   |                       | 44,670      |                      |   | 204,832 |   |
| Total                  current assets                                                                                                                                                                                                                                        |   |                       | 8,167,854   |                      |   | 12,334,398 |   |
|                                                                                                                                                                                                                                                                         |   |                       |        |                      |   |   |   |
| PROPERTY                  AND EQUIPMENT, net of accumulated depreciation and amortization                  of                  $7,864,581 and $7,178,262, respectively                                                                                                       |   |                       | 2,580,413   |                      |   | 2,919,876 |   |
|                                                                                                                                                                                                                                                                         |   |                       |        |                      |   |   |   |
| OTHER                  ASSETS:                                                                                                                                                                                                                                               |   |                       |        |                      |   |   |   |
| Deferred                  financing costs                                                                                                                                                                                                                                    |   |                       | 1,489,476   |                      |   | 2,372,662 |   |
| Other                                                                                                                                                                                                                                                                        |   |                       | 149,966     |                      |   | 167,220 |   |
| Total                  other assets                                                                                                                                                                                                                                          |   |                       | 1,639,442   |                      |   | 2,539,882 |   |
|                                                                                                                                                                                                                                                                         |   |                       |        |                      |   |   |   |
| TOTAL                                                                                                                                                                                                                                                                        |   | $                          | 12,387,709  |                      | $      | 17,794,156 |   |
|                                                                                                                                                                                                                                                                         |   |                       |        |                      |   |   |   |
| LIABILITIES                  AND STOCKHOLDERS’ EQUITY/(DEFICIENCY):                                                                                                                                                                                                    |   |                       |        |                      |   |   |   |
|                                                                                                                                                                                                                                                                         |   |                       |        |                      |   |   |   |
| CURRENT                  LIABILITIES:                                                                                                                                                                                                                                        |   |                       |        |                      |   |   |   |
| Accounts                  payable                                                                                                                                                                                                                                            |   | $                          | 1,990,760   |                      | $      | 1,011,700 |   |
| Liability                  for repurchased account receivable                                                                                                                                                                                                                |   |                       | 150,000     |                      |   | 189,197 |   |
| Accrued                  expenses                                                                                                                                                                                                                                            |   |                       | 720,282     |                      |   | 1,569,993 |   |
| Billings                  in excess of costs and estimated earnings on uncompleted                  contracts                                                                                                                                                                |   |                       | 127,024     |                      |   | 42,400 |   |
| Secured                  convertible notes payable                                                                                                                                                                                                                           |   |                       | 1,167,010   |                      |   | - |   |
| Secured                  non-convertible notes payable                                                                                                                                                                                                                       |   |                       | 250,000     |                      |   | - |   |
| Accrued                  payroll and related fringe benefits                                                                                                                                                                                                                 |   |                       | 816,782     |                      |   | 429,717 |   |
| Current                  maturities of long-term debt                                                                                                                                                                                                                        |   |                       | 130,093     |                      |   | 188,310 |   |
| Income                  taxes payable                                                                                                                                                                                                                                        |   |                       | 37,077      |                      |   | 1,838,509 |   |
| Derivative                  liabilities: notes, warrants and options                                                                                                                                                                                                         |   |                       | -           |                      |   | 27,163,901 |   |
| Other                  current liabilities                                                                                                                                                                                                                                   |   |                       | 377,385     |                      |   | 121,533 |   |
| Total                  current liabilities                                                                                                                                                                                                                                   |   |                       | 5,766,413   |                      |   | 32,555,260 |   |
|                                                                                                                                                                                                                                                                         |   |                       |        |                      |   |   |   |
| LONG-TERM                  DEBT:                                                                                                                                                                                                                                             |   |                       |        |                      |   |   |   |
| Secured                  notes payable                                                                                                                                                                                                                                       |   |                       | 4,113,245   |                      |   | 500,000 |   |
| Other                                                                                                                                                                                                                                                                        |   |                       | 89,224      |                      |   | 188,244 |   |
| Total                  long-term debt                                                                                                                                                                                                                                        |   |                       | 4,202,469   |                      |   | 688,244 |   |
|                                                                                                                                                                                                                                                                         |   |                       |        |                      |   |   |   |
| SERIES                  A REDEEMABLE CONVERTIBLE PREFERRED STOCK, $.01 par value; 1,300,000                  shares                  authorized, issued and outstanding at March 31, 2007 and June 30,                  2006                                                 |   |                       | 1,300,000   |                      |   | 1,300,000 |   |
|                                                                                                                                                                                                                                                                         |   |                       |        |                      |   |   |   |
| COMMITMENTS                  AND CONTINGENCIES                                                                                                                                                                                                                               |   |                       |        |                      |   |   |   |
|                                                                                                                                                                                                                                                                         |   |                       |        |                      |   |   |   |
| STOCKHOLDERS’                  EQUITY(DEFICIENCY):                                                                                                                                                                                                                     |   |                       |        |                      |   |   |   |
| Series                  B preferred stock, $.01 par value; 50,000 shares issued and authorized;                  0                  shares outstanding at March 31, 2007 and June 30, 2006                                                                                   |   |                       | -           |                      |   | - |   |
|                                                                                                                                                                                                                                                                         |   |                       |        |                      |   |   |   |
| Nondesignated                  preferred stock, no par value; 8,650,000 shares authorized; 0 shares                  issued and outstanding at March 31, 2007 and June 30, 2006                                                                                              |   |                       | -           |                      |   | - |   |
|                                                                                                                                                                                                                                                                         |   |                       |        |                      |   |   |   |
| Common                  stock, $.0001 par value; 150,000,000 shares authorized; 36,679,100                  shares                  issued and outstanding at March 31, 2007 and 33,571,215 shares                  issued and                  outstanding at June 30, 2006 |   |                       | 3,668       |                      |   | 3,357 |   |
|                                                                                                                                                                                                                                                                         |   |                       |        |                      |   |   |   |
| Additional                  paid-in-capital                                                                                                                                                                                                                                  |   |                       | 45,194,007  |                      |   | 38,429,185 |   |
| Accumulated                  deficit                                                                                                                                                                                                                                         |   |                       | (44,078,848 | )                         |   | (55,181,890 | ) |
| Total                  stockholders’ equity (deficiency)                                                                                                                                                                                                               |   |                       | 1,118,827   |                      |   | (16,749,348 | ) |
|                                                                                                                                                                                                                                                                         |   |                       |        |                      |   |   |   |
| TOTAL                                                                                                                                                                                                                                                                        |   | $                          | 12,387,709  |                      | $      | 17,794,156 |   |

| See                  notes to consolidated financial                  statements. |
|-----------------------------------------------------------------------------------|

----

|                                                                                                                                                         |   | Three                    Months Ended    |       | Thirteen                    Weeks Ended |   | Nine                    Months Ended                 |   | Thirty-Nine                    Weeks Ended |        |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------|------------|-----------------------------------------|--------|------------------------------------------------------|--------|--------------------------------------------|-------------|
|                                                                                                                                                         |   |   March                    31, |       |  March                    28,      |   |     March                    31, |   | March                    28,               |        |
|                                                                                                                                                         |   |   2007                         |       |  2006                              |   |     2007                         |   | 2006                                       |        |
|                                                                                                                                                         |   |                                     |       |  (Restated)                        |   |                                                 |   | (Restated)                                 |        |
| Revenues                                                                                                                                                     |   | $                                        | 3,064,582  |                                    | $      | 7,213,546                                            |   | $                                          | 7,571,851   |   | $ | 30,092,227 |   |
|                                                                                                                                                         |   |                                     |            |                                    |   |                                                      |   |                                       |             |   |   |  |   |
| Cost                    of revenues                                                                                                                          |   |                                     | 2,533,293  |                                    |   | 3,778,943                                            |   |                                       | 7,531,592   |   |   | 16,354,923 |   |
|                                                                                                                                                         |   |                                     |            |                                    |   |                                                      |   |                                       |             |   |   |  |   |
| Gross                    profit                                                                                                                              |   |                                     | 531,289    |                                    |   | 3,434,603                                            |   |                                       | 40,259      |   |   | 13,737,304 |   |
|                                                                                                                                                         |   |                                     |            |                                    |   |                                                      |   |                                       |             |   |   |  |   |
| Operating                    expenses:                                                                                                                       |   |                                     |            |                                    |   |                                                      |   |                                       |             |   |   |  |   |
| Selling,                    general and administrative expenses                                                                                              |   |                                     | 995,176    |                                    |   | 1,616,921                                            |   |                                       | 4,843,622   |   |   | 7,077,015 |   |
|                                                                                                                                                         |   |                                     |            |                                    |   |                                                      |   |                                       |             |   |   |  |   |
| (Loss)/income                    from operations                                                                                                             |   |                                     | (463,887   | )                                       |   | 1,817,682                                            |   |                                       | (4,803,363  | ) |   | 6,660,289 |   |
|                                                                                                                                                         |   |                                     |            |                                    |   |                                                      |   |                                       |             |   |   |  |   |
| Other                    expense (income):                                                                                                                   |   |                                     |            |                                    |   |                                                      |   |                                       |             |   |   |  |   |
| Mark-to-market                    loss/(gain) on embedded derivatives                                                                                        |   |                                     | 0          |                                    |   | 4,467,838                                            |   |                                       | (15,721,986 | ) |   | 3,276,205 |   |
| Interest                    expense                                                                                                                          |   |                                     | 578,228    |                                    |   | 513,412                                              |   |                                       | 2,369,950   |   |   | 2,958,629 |   |
| Gain                    on partial extinguishment of embedded derivative liability and                    (loss) from                    exercise of options |   |                                     | 0          |                                    |   | (156,774                                             | )      |                                       | (987,105    | ) |   | 449,850 |   |
| Gain                    on extinguishment of debt                                                                                                            |   |                                     | 0          |                                    |   | 0                                                    |   |                                       | 0           |   |   | (156,774 | ) |
| Other                    (income)/ expense, net                                                                                                              |   |                                     | (69        | )                                       |   | (43,915                                              | )      |                                       | (39,880     | ) |   | (21,405 | ) |
| Total                    other expense/ (income):                                                                                                            |   |                                     | 578,159    |                                    |   | 4,780,561                                            |   |                                       | (14,379,021 | ) |   | 6,506,505 |   |
|                                                                                                                                                         |   |                                     |            |                                    |   |                                                      |   |                                       |             |   |   |  |   |
| (Loss)/income                    before benefit/provision for income taxes                                                                                   |   |                                     | (1,042,046 | )                                       |   | (2,962,879                                           | )      |                                       | 9,575,658   |   |   | 153,784 |   |
|                                                                                                                                                         |   |                                     |            |                                    |   |                                                      |   |                                       |             |   |   |  |   |
| (Benefit)/provision                    for income taxes                                                                                                      |   |                                     | (215,095   | )                                       |   | 399,854                                              |   |                                       | (1,527,384  | ) |   | 3,567,210 |   |
|                                                                                                                                                         |   |                                     |            |                                    |   |                                                      |   |                                       |             |   |   |  |   |
| Net                    (loss)/income                                                                                                                         |   |                                     | (826,951   | )                                       |   | (3,362,733                                           | )      |                                       | 11,103,042  |   |   | (3,413,426 | ) |
|                                                                                                                                                         |   |                                     |            |                                    |   |                                                      |   |                                       |             |   |   |  |   |
| Dividends                    on preferred stock                                                                                                              |   |                                     | 19,500     |                                    |   | 19,500                                               |   |                                       | 58,500      |   |   | 58,500 |   |
|                                                                                                                                                         |   |                                     |            |                                    |   |                                                      |   |                                       |             |   |   |  |   |
| Net(loss)/                    income attributable to common shareholders                                                                                     |   | $                                        | (846,451   | )                                       | $      | (3,382,233                                           | )      | $                                          | 11,044,542  |   | $ | (3,471,926 | ) |
|                                                                                                                                                         |   |                                     |            |                                    |   |                                                      |   |                                       |             |   |   |  |   |
| Basic                    and diluted net loss per common share:                                                                                              |   |                                     |            |                                    |   |                                                      |   |                                       |             |   |   |  |   |
| Basic                    and diluted                                                                                                                         |   | $                                        | (0.02      | )                                       | $      | (0.10                                                | )      | $                                     | (0.11       | ) | $ | (0.10 | ) |
|                                                                                                                                                         |   |                                     |            |                                    |   |                                                      |   |                                       |             |   |   |  |   |
| Weighted                    average number of common shares outstanding:                                                                                     |   |                                     |            |                                    |   |                                                      |   |                                       |             |   |   |  |   |
| Basic                    and diluted                                                                                                                         |   |                                     | 36,094,703 |                                    |   | 33,571,215                                           |   |                                       | 34,615,597  |   |   | 33,343,615 |   |

| See                  notes to consolidated financial                  statements. |
|-----------------------------------------------------------------------------------|

----

|                                                             |   | Common                  Stock     |         |                       |   |                                            |   |               |         |
|------------------------------------------------------------------|--------|-----------------------------------|--------------|----------------------------|--------|--------------------------------------------|--------|--------------------|--------------|
|                                                             |   | Number                  of Shares |         | Par                  Value |   | AdditionalPaid-in                  Capital |   | AccumulatedDeficit |         | Total |   |
| Balance                  at June 30, 2006                        |   |                              | 33,571,215   |                       | $      | 3,357                                      |   | $                  | 38,429,185   |   | $ | (55,181,890 | ) | $ | (16,749,348 | ) |
|                                                             |   |                              |         |                       |   |                                       |   |               |         |   |   |   |   |   |   |   |
| Conversion                  of notes                             |   |                              | 3,107,885    |                       |   | 311                                        |   |               | 279,399      |   |   |   |   |   | 279,710 |   |
| Extinguishment                  of embedded derivative liability |   |                              |         |                       |   |                                       |   |               | 6,539,023    |   |   |   |   |   | 6,539,023 |   |
| Tax                  benefit on exercise of options              |   |                              |         |                       |   |                                       |   |               | 4,900        |   |   |   |   |   | 4,900 |   |
| Dividends                  on series A preferred stock           |   |                              |         |                       |   |                                       |   |               | (58,500      | ) |   |   |   |   | (58,500 | ) |
| Net                  income                                      |   |                              |    |                       |   |                                  |   |               |    |   |   | 11,103,042 |   |   | 11,103,042 |   |
|                                                             |   |                              |         |                       |   |                                       |   |               |         |   |   |   |   |   |   |   |
| Balance                  at March 31, 2007                       |   |                              | 36,679,100   |                       | $      | 3,668                                      |   | $                  | 45,194,007   |   | $ | (44,078,848 | ) | $ | 1,118,827 |   |

----

|                                                                                                                                                  |   | Nine                  Months Ended |        | Thirty-Nine                  Weeks Ended |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|-------------|------------------------------------------|--------|
|                                                                                                                                                  |   | March                    31, 2007  |        | March                    28, 2006        |   |
|                                                                                                                                                  |   |                               |        | (Restated)                               |   |
| CASH                  FLOWS FROM OPERATING ACTIVITIES:                                                                                                |   |                               |        |                                     |   |   |   |
| Net                  income/(loss)                                                                                                                    |   | $                                  | 11,103,042  |                                     | $      | (3,413,426 | ) |
| Adjustments                  to net cash (used in)/provided by operating activities                                                                   |   |                               |        |                                     |   |   |   |
| Mark-to-market                  income on embedded derivative liabilities                                                                             |   |                               | (15,721,986 | )                                        |   | 3,276,205 |   |
| Non-cash                  interest expense on convertable secured note                                                                                |   |                               | 851,653     |                                     |   | 881,451 |   |
| (Gain)/loss                  on exercise of options -Laurus                                                                                           |   |                               | (987,105    | )                                        |   | 449,850 |   |
| Depreciation                  and amortization                                                                                                        |   |                               | 686,319     |                                     |   | 569,082 |   |
| Provision                  for doubtful accounts, net                                                                                                 |   |                               | 774,903     |                                     |   | 1,350,000 |   |
| Amortization                  of deferred financing cost                                                                                              |   |                               | 891,936     |                                     |   | 884,734 |   |
| Amortization                  of discount on secured convertible note                                                                                 |   |                               | 239,339     |                                     |   | 661,520 |   |
| Stock-based                  compensation                                                                                                             |   |                               | 0           |                                     |   | 1,450,389 |   |
| Gain                  on extinguishment of debt                                                                                                       |   |                               | 0           |                                     |   | (156,774 | ) |
| Changes                  in operating assets and liabilities:                                                                                         |   |                               |        |                                     |   |   |   |
| Accounts                  receivable                                                                                                                  |   |                               | 2,808,607   |                                     |   | (6,946,888 | ) |
| Inventory                                                                                                                                             |   |                               | 26,277      |                                     |   | (87,664 | ) |
| Costs                  and estimated earnings in excess of billings on uncompleted                  contracts                                         |   |                               | (26,806     | )                                        |   | (189,239 | ) |
| Prepaid                  expenses and other current assets                                                                                            |   |                               | 160,162     |                                     |   | (154,124 | ) |
| Other                  assets                                                                                                                         |   |                               | 17,254      |                                     |   | 99,075 |   |
| Accounts                  payable and accrued expenses                                                                                                |   |                               | 129,349     |                                     |   | (177,136 | ) |
| Accrued                  payroll and related fringe benefits                                                                                          |   |                               | 387,065     |                                     |   | (40,540 | ) |
| Income                  tax payable                                                                                                                   |   |                               | (1,796,532  | )                                        |   | 2,906,407 |   |
| Other                  current liabilities                                                                                                            |   |                               | 250,538     |                                     |   | 485,161 |   |
| Billings                  in excess of costs and estimated earnings on uncompleted                  contracts                                         |   |                               | 84,624      |                                     |   | (54,916 | ) |
|                                                                                                                                                  |   |                               |        |                                     |   |   |   |
| NET                  CASH(USED IN)/PROVIDED BY OPERATING ACTIVITIES:                                                                                  |   |                               | (121,361    | )                                        |   | 1,793,167 |   |
|                                                                                                                                                  |   |                               |        |                                     |   |   |   |
| CASH                  FLOWS FROM INVESTING ACTIVITIES:                                                                                                |   |                               |        |                                     |   |   |   |
| Purchases                  of property and equipment                                                                                                  |   |                               | (346,856    | )                                        |   | (1,085,517 | ) |
| Proceeds                  from third party receivables                                                                                                |   |                               | 189,197     |                                     |   | 0 |   |
| NET                  CASH USED IN INVESTING ACTIVITIES                                                                                                |   |                               | (157,659    | )                                        |   | (1,085,517 | ) |
|                                                                                                                                                  |   |                               |        |                                     |   |   |   |
| CASH                  FLOWS FROM FINANCING ACTIVITIES:                                                                                                |   |                               |        |                                     |   |   |   |
| Principal                  payments of long-term debt                                                                                                 |   |                               | (157,237    | )                                        |   | (153,102 | ) |
| Principal                  payments of secured notes payable                                                                                          |   |                               | 0           |                                     |   | (689,063 | ) |
| Exercise                  of stock options                                                                                                            |   |                               | 0           |                                     |   | 150 |   |
| Cancellation                  of liability to a related party                                                                                         |   |                               | (39,197     | )                                        |   | 0 |   |
| Payments                  for deferred financing costs                                                                                                |   |                               | (8,750      | )                                        |   | (2,314,172 | ) |
| Repayment                  and cancellation of secured note payable to a related party                                                                |   |                               | 0           |                                     |   | (2,750,000 | ) |
| Proceeds                  from secured notes payable                                                                                                  |   |                               | 250,000     |                                     |   | 7,350,000 |   |
| NET                  CASH PROVIDED BY FINANCING ACTIVITIES                                                                                            |   |                               | 44,816      |                                     |   | 1,443,813 |   |
|                                                                                                                                                  |   |                               |        |                                     |   |   |   |
| NET                  (DECREASE)/INCREASE IN CASH                                                                                                      |   |                               | (234,204    | )                                        |   | 2,151,463 |   |
|                                                                                                                                                  |   |                               |        |                                     |   |   |   |
| CASH                  – BEGINNING OF PERIOD                                                                                                     |   |                               | 610,884     |                                     |   | 512,711 |   |
|                                                                                                                                                  |   |                               |        |                                     |   |   |   |
| CASH                  – END OF PERIOD                                                                                                           |   | $                                  | 376,680     |                                     | $      | 2,664,174 |   |
|                                                                                                                                                  |   |                               |        |                                     |   |   |   |
| Cash                  paid during the period for:                                                                                                     |   |                               |        |                                     |   |   |   |
| Interest                                                                                                                                              |   | $                                  | 331,665     |                                     | $      | 251,671 |   |
| Income                  taxes                                                                                                                         |   | $                                  | 14,587      |                                     | $      | 0 |   |
|                                                                                                                                                  |   |                               |        |                                     |   |   |   |
| SUPPLEMENTAL                  SCHEDULE OF NON-CASH ACTIVITIES:                                                                                        |   |                               |        |                                     |   |   |   |
| Extinguishment                  of derivative liabilities                                                                                             |   | $                                  | 6,539,023   |                                     | $      | 0 |   |
| Reduction                  of long-term debt through conversion into stock - Laurus                                                                   |   | $                                  | 117,596     |                                     | $      | 0 |   |
| Laurus                  option conversion                                                                                                             |   | $                                  | 100,000     |                                     | $      | 0 |   |
| Tax                  benefit on Laurus option conversion                                                                                              |   | $                                  | 4,900       |                                     | $      | 0 |   |
| Recognition                  of embedded derivative liabilities, net of effect of maturity deferral                  of                  $311,832     |   | $                                  | 0           |                                     | $      | 7,368,895 |   |
| Recognition                  of discount on secured convertible note,net of effect of maturity                  deferral                  of $134,004 |   | $                                  | 0           |                                     | $      | 6,644,207 |   |
| Capitalized                  gain on extinguishment of secured note payable – related                  party                                    |   | $                                  | 0           |                                     | $      | 1,122,794 |   |
| Financing                  cost related to guaranties of CEO remunerated through sale of discounted                  shares                           |   | $                                  | 0           |                                     | $      | 1,195,708 |   |
| Property                  and equipment acquired through financing                                                                                    |   | $                                  | 0           |                                     | $      | 217,912 |   |
| Account                  receivable repurchased in connection with refinancing                                                                        |   | $                                  | 0           |                                     | $      | 189,197 |   |
| Paid-in                  capital arising from reduction in derivative option liability on                  option                  exercise           |   | $                                  | 0           |                                     | $      | 135,000 |   |
| Capitalized                  cancellation of put right relating to redeemable common                  stock                                           |   | $                                  | 0           |                                     | $      | 76,089 |   |
| Financing                  cost related to issuance of options to preferred                  stockholders                                             |   | $                                  | 0           |                                     | $      | 44,650 |   |

| See                  notes to consolidated financial                  statements |
|----------------------------------------------------------------------------------|

----

| 1. | BASIS                FOR PRESENTATION - The accompanying unaudited consolidated financial                statements include the accounts of Windswept Environmental Group,                Inc.                (the “Company”) and its subsidiaries, Trade-Winds Environmental                Restoration, Inc. (“Trade-Winds”) and North Atlantic Laboratories, Inc.                All inter-company accounts and transactions have been eliminated                in                consolidation. The unaudited consolidated financial statements have                been                prepared by the Company in accordance with accounting principles                generally                accepted in the United States of America (“generally accepted accounting                principles”) for interim financial statements and with the instructions to                Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do                not                include all of the information and footnotes required by generally                accepted accounting principles for complete financial statements.                In the                opinion of the Company, all adjustments (consisting of only normal                and                recurring accruals) considered necessary to present fairly the financial                position of the Company and its subsidiaries on a consolidated basis                as of                March 31, 2007, the results of operations for the three and nine                months                ended March 31, 2007 and the thirteen and thirty-nine weeks ended                March                28, 2006 and cash flows for the nine months ended March 31, 2007                and the                thirty-nine weeks ended March 28, 2006 have been included. Certain                prior                period amounts have been reclassified to conform to the March 31,                2007                presentation. |
|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2. | STOCK-BASED                COMPENSATION - The                Company consummated various transactions where it paid the consideration                primarily in options or warrants to purchase its common stock. These                transactions include financing transactions and providing incentives                to                attract, retain and motivate employees, officers and directors. |
|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | exercise                price (the price to be paid for a share of the Company’s common                stock); |
|--|--------|----------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|  | · | price                of the Company’s common stock on the day the options or warrants are                granted; |
|--|--------|-------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|  | · | the                expected number of days that the options or warrants will be held                before                they are exercised, based  on                the average of their vesting and contractual                periods; |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|  | · | trading                volatility of the Company’s common stock, based on historical prices for a                retrospective  period                equal to the expected holding period together with certain other                factors;                and |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|  | · | the                annual risk-free interest rate on the day the option or warrant is                granted                for the expected holding  period. |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 3. | NET                (LOSS)/ INCOME PER COMMON SHARE -Basic and diluted (loss)/ income                per                common share was calculated for all periods in accordance with the                requirements of Statement of Financial Accounting Standards No. 128,                “Earnings per Share”. The following table sets forth the computation of                the basic and diluted (loss) per share for the three and nine months                ended                March 31, 2007 and the thirteen and thirty-nine weeks ended March                28,                2006, respectively: |
|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                                                             |   |  Three                  MonthsEnded |       | Thirteen                  WeeksEnded |   | Nine                  Months Ended |   | Thirty-Nine                  Weeks Ended |        |
|----------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------|------------|--------------------------------------|--------|------------------------------------|--------|------------------------------------------|-------------|
|                                                                                                                             |   |  March                  31, 2007    |       | March                  28,2006       |   | March                  31, 2007    |   | March                  28,2006           |        |
| Numerator:                                                                                                                       |   |                                |       |                                 |   |                               |   |                                     |        |
| Net                  (loss)/ income attributable to common                  shareholders                                         |   | $                                        | (846,451   | )                                    | $      | (3,382,233                         | )      | $                                        | 11,044,542  |   | $ | (3,471,926 | ) |
| (Deduct)/Add:                                                                                                                    |   |                                     |       |                                 |   |                               |   |                                     |        |   |   |   |   |
| Mark-to-market                  gain                                                                                             |   |                                     | -          |                                 |   | -                                  |   |                                     | (15,721,986 | ) |   | - |   |
| Interest                  on convertible debt                                                                                    |   |                                     | -          |                                 |   | -                                  |   |                                     | 739,724     |   |   | - |   |
| Income                  tax effect                                                                                               |   |                                     | -          |                                 |   | -                                  |   |                                     | -           |   |   | - |   |
| Dividends                  on preferred stock                                                                                    |   |                                     | 19,500     |                                 |   | 19,500                             |   |                                     | 58,500      |   |   | 58,500 |   |
| Net                  (loss)/ income attributable to                  common shareholders and                  assumed conversion |   | $                                        | (826,951   | )                                    | $      | (3,362,733                         | )      | $                                        | (3,879,220  | ) | $ | (3,413,426 | ) |
| Denominator:                                                                                                                     |   |                                     |       |                                 |   |                               |   |                                     |        |   |   |   |   |
| Share                  reconciliation:                                                                                           |   |                                     |       |                                 |   |                               |   |                                     |        |   |   |   |   |
| Shares                  used for basic income/(loss)                  per share                                                  |   |                                     | 36,904,703 |                                 |   | 33,571,215                         |   |                                     | 34,615,597  |   |   | 33,343,615 |   |
| Effect                  of dilutive items:                                                                                       |   |                                     |       |                                 |   |                               |   |                                     |        |   |   |   |   |
| Stock                  options/warrants                                                                                          |   |                                     | -          |                                 |   | -                                  |   |                                     | -           |   |   | - |   |
| Convertible                  debt                                                                                                |   |                                     | -          |                                 |   | -                                  |   |                                     | -           |   |   | - |   |
| Shares                  used for diluted loss/income                  per share                                                  |   |                                     | 36,904,703 |                                 |   | 33,571,215                         |   |                                     | 34,615,597  |   |   | 33,343,615 |   |
| Net                  (loss)/income per share:                                                                                    |   |                                     |       |                                 |   |                               |   |                                     |        |   |   |   |   |
| Basic                  and diluted                                                                                               |   | $                                        | (.02       | )                                    | $      | (.10                               | )      | $                                        | (.11        | ) | $ | (.10 | ) |

| 4. | PROVISION                FOR INCOME TAXES - The provision for income taxes for the three and                nine                months ended March 31, 2007 and the thirteen and thirty-nine weeks                ended                March 28, 2006 consists of the                following: |
|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                             |   | Three                Months Ended |     | Thirteen                Weeks Ended |   | Nine                MonthsEnded |   | Thirty-Nine                Weeks Ended |       |
|----------------------------------|--------|-----------------------------------|----------|-------------------------------------|--------|---------------------------------|--------|----------------------------------------|------------|
|                             |   | March                31, 2007     |     | March                28, 2006       |   | March                31, 2007   |   | March                28, 2006          |       |
|                             |   |                              |     |                                |   |                            |   |                                   |       |
| Federal                - current |   | $                                 | (208,724 | )                                   | $      | 282,230                         |   | $                                      | (1,535,953 | ) | $ | 2,517,854 |   |
| State                - current   |   |                              | (6,371   | )                                   |   | 117,624                         |   |                                   | 8,569      |   |   | 1,049,356 |   |
| Total                            |   | $                                 | (215,095 | )                                   | $      | 399,854                         |   | $                                      | (1,527,384 | ) | $ | 3,567,210 |   |

| 5. | CONTINGENCIES                -                The                Company is a plaintiff in approximately 19 lawsuits, including those                described in the Notes to the Financial Statements included in the                Company’s Annual Report on Form 10-K for the year ended June 30, 2006,                claiming an aggregate of approximately $7,500,000 pursuant to which                it is                seeking to collect amounts it believes are owed to it by customers,                included in its accounts receivable, primarily with respect to                modifications to its scope of work. The defendants in these actions                have                asserted counterclaims for an aggregate of approximately                $1,500,000. |
|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 6. | FINANCING                AND RELATED PARTY TRANSACTIONS- On September 29, 2006, the Company                entered into                an Omnibus Amendment with Laurus Master Fund, Ltd. (“Laurus”) and amended                and restated its existing secured                convertible term note (the “Note”). The Omnibus Amendment and the Note                improve for the Company certain                terms of the original agreements. The Omnibus Amendment significantly                reduces the shares issuable to Laurus                and, among other things, includes the following                terms: |
|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Principal        Borrowing Terms and Prepayment**

|  | · | the                average closing price of the Company’s common stock for the five (5)                trading days immediately                prior to the  first                of each month is equal to or greater than                $.10; |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|  | · | the                amount of the payment then due is not an amount greater than thirty                percent (30%) of the aggregate                dollar trading volume of the common stock for the period of twenty-two                (22) trading days immediately                prior to the first day of each month for which payment is                due; |
|--|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|  | · | the                common stock to be issued has been registered under an effective                registration statement under the                Securities Act of 1933 or is otherwise covered by an exemption from                registration for resale pursuant                to Rule 144 of the Securities Act of                1933; |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|  | · | Laurus’                aggregate beneficial ownership of the Company’s shares of common stock                does not and would                not by virtue thereof exceed 9.99%; |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|  | · | the                Company is not in default of the Note;                and |
|--|--------|------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|  | · | the                maximum number of shares of common stock into which the Note is                convertible is not exceeded. |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------|

----

**Events      of Default and Collateral**

|  | · | a                failure to pay interest and principal payments under the Note when                due on                the first day of the month                or prior to the expiration of the three-business day grace period,                unless                agreed otherwise; |
|--|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|  | · | a                breach by the Company of any material covenant or term or condition                of the                Note in any agreement                made in connection therewith and, to the extent subject to cure,                the                continuation of such breach                without remedy                for a period of fifteen or thirty days, as the case may                be; |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|  | · | a                breach of any material representation or warranty made in the Note                or in                any agreement made in connection                therewith; |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|  | · | any                form of bankruptcy or insolvency proceeding instituted by or against                the                Company, which is not vacated within 30                days; |
|--|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|  | · | any                attachment or lien in excess of $75,000 in the aggregate made upon                the                Company’s assets or a judgment rendered against its property involving a                liability of more than $75,000 which shall remain unvacated, unbonded                or                unstated for a period of 30 days; |
|--|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|  | · | a                failure to timely deliver shares of common stock when due upon conversion                of the Note or a failure to timely deliver a replacement                note; |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|  | · | a                Securities and Exchange Commission (“SEC”) stop trade order or principal                market trading suspension of the Company’s common stock in effect for 5                consecutive trading days or 5 days during a period of 10 consecutive                trading days, if the Company is not able to cure such trading suspension                within 30 days of receiving notice or are not able to list its common                stock on another principal market within 60 days of such                notice; |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|  | · | an                indictment or threatened indictment of the Company or any of its                executive                officers under any criminal statute or commencement or threatened                commencement of criminal or civil proceedings against                the Company or any of its executive officers pursuant to which statutory                or proceeding  penalties                or remedies available include forfeiture of any of its property;                and |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|  | · | the                departure of Michael O’Reilly from senior                management. |
|--|--------|-----------------------------------------------------------------------------------------------|

**Registration      Rights**

**Non-Convertible      Secured Note**

| 7. | SUBSEQUENT                EVENTS |
|----|----------------------------------|

----

|   |   |   |
|--------|--------|--------|
|   | · | customers refusing to pay prior                  to receiving                  insurance reimbursements; |
|--------|--------|----------------------------------------------------------------------------------------------------------|

|   |   |   |
|--------|--------|--------|

|   | · | customers’ facility managers needing to wait                  for insurance adjustors to approve work before the remission of                  payment;                  and |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |   |
|--------|--------|--------|

|   | · | certain customers refusing to pay                  in                  connection with disputed work modifications. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   |   |   |
|--------|--------|--------|
|   | · | we generally do not commence projects                  until we                  have a fully executed contract; |
|--------|--------|------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|
|   | · | our contracts provide that our                  customers are                  directly obligated for our services; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|
|   | · | we require client approval with                  respect to the                  work performed or to be performed; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|
|   | · | we seek deposits or mobilization                  fees for our                  time and materials contracts; |
|--------|--------|---------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|
|   | · | we engage local legal counsel in                  the areas in                  which we operate in order to file liens against customers’ real property                  in the event of contract disputes; and |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|
|   | · | all invoices submitted for payment                  are                  reviewed for proper documentation. |
|--------|--------|-------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

----

|   |   |   |
|--------|--------|--------|
|  | · | the                prime interest rate was projected to increase 0.25% per quarter for                the                first year; |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------|

|   |   |   |
|--------|--------|--------|

|  | · | the                future volatility of common stock was projected at                150%; |
|--|--------|--------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|  | · | the                stock price annual growth rate was estimated at the cost of                equity; |
|--|--------|-------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|  | · | a                default on registration requirements was projected at                5.0%; |
|--|--------|---------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|  | · | other                forms of default were projected at 5.0% initially, increasing 0.1%                monthly; |
|--|--------|-----------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|  | · | the                availability of alternative financing to redeem the note, if exercise                of                redemption option was triggered,                starting at 0%, increasing monthly by 1% to a maximum of                25%; |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|  | · | the                twenty-two day trading volume remaining flat;                and |
|--|--------|-------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|  | · | the                weighted average reset period projected at                $0.0899 |
|--|--------|--------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   |   |   |
|--------|--------|--------|
|  | · | exercise                price (the price to be paid for a share in our                stock); |
|--|--------|-----------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|  | · | price                of our stock on the day the options or warrants are                granted; |
|--|--------|--------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|  | · | the                expected number of days that the options or warrants will be held                before                they are exercised, based on                the average of their vesting and contractual                periods; |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|  | · | trading                volatility of our stock, based on historical prices for a retrospective                period equal to the expected                holding period together with certain other factors, as applicable;                and |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|  | · | the                annual risk-free interest rate on the day the option or warrant is                granted                for the expected holding period. |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | the                original contract or other evidence provides a legal basis for the                claim; |
|--|--------|-------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|  | · | the                additional costs were caused by circumstances that were unforeseen                at the                contract date and were not the                result of deficiencies in our                performance; |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|  | · | costs                associated with the claims are identifiable;                and |
|--|--------|--------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|  | · | the                evidence supporting the claims is objective and                verifiable. |
|--|--------|-----------------------------------------------------------------------------------------------|

----

*Three      months ended March 31, 2007 and thirteen weeks ended March 28,      2006*

----

*Nine-months      ended March 31, 2007 and thirty-nine weeks ended March 28,      2006*

|  | · | the                  adoption of SFAS No. 123R, and the related inclusion in operating                  expenses                  of $1,450,389, the fair value                  of options vesting during the thirty-nine weeks ended March 28,                  2006. All                  but $56,250 of this unusually                  large amount of option expense arose from the employment-related                  option to                  purchase 15,469,964 shares                  granted to our chief executive officer, which grant of options                  was a                  required condition of the Laurus financing;                  and |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|  | · | a                decrease of $660,756 in professional fees and $111,040 in bad debt                expense. |
|--|--------|-------------------------------------------------------------------------------------------------------------|

----

|  | · | obtain                profitable environmental or related construction contracts. So long                as we                have sufficient working capital, we anticipate that we will continue                to                bid on large projects, although there can be no assurance that any                of our                bids will be accepted or that we will have sufficient working capital. |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|  | · | control                our selling, general and administrative expenses, which were increased                in                connection with our need to incur labor, operating and equipment                expenses                in relation to our operations in the Gulf Coast and Florida regions                during                fiscal 2006. In order to control our selling, general and administrative                expenses, we continue our process of optimizing the efficiency of                our                support staff through enhanced task allocation while reducing unneeded                resources and reviewing non-project related expenses in an effort                to                reduce costs, where appropriate, while preserving the quality of                our                service. |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|  | · | raise                additional capital or obtain additional financing. Management has                preliminarily explored additional funding sources, but has been unable                to                attract additional debt or equity capital. In addition, the existence                of                the Laurus and Spotless security interests may impair our ability                to raise                additional debt capital. No assurance can be given that we will be                able to                obtain additional debt or equity capital, although our management                expects                to continue seeking any such favorable                opportunities. |
|--|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|  | · | generate                positive cash flow from operations. We seek to obtain profitable                contracts                that generate gross profits more than sufficient to pay our expenses                as                well as addressing our difficulty with cash collections and slow                cash                flow. |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | customers                refusing to pay prior to receiving insurance                reimbursements; |
|--|--------|------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|  | · | customers’                facility managers needing to wait for insurance adjustors to approve                work                before the remission of                payment; and |
|--|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|  | · | certain                customers refusing to pay in connection with disputed work                modifications. |
|--|--------|-----------------------------------------------------------------------------------------------------------------|

----

|  | · | we                generally do not commence projects until we have a fully executed                contract; |
|--|--------|--------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|  | · | our                contracts provide that our customers are directly obligated for our                services; |
|--|--------|-----------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|  | · | we                require client approval with respect to the work performed or to                be                performed; |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|  | · | we                seek deposits or mobilization fees for time and material                contracts; |
|--|--------|------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|  | · | we                engage local legal counsel in the areas in which we operate in order                to                file liens against customers’ real  property                in the event of contract disputes; and |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|  | · | all                invoices submitted for payment are reviewed for proper                documentation. |
|--|--------|---------------------------------------------------------------------------------------------------------|

----

|                                                 |   | Total  |       | 1                Year |   | 2-3                Years |   | 4-5                Years |      | Thereafter |   |
|------------------------------------------------------|--------|--------|------------|-----------------------|--------|--------------------------|--------|--------------------------|-----------|------------|--------|
|                                                 |   |   |       |                  |   |                     |   |                     |      |       |   |
| Operating                Leases                      |   | $      | 3,543,193  |                  | $      | 582,248                  |   | $                        | 1,142,823 |       | $      | 1,043,075 |   | $ | 775,047 |   |
|                                                 |   |   |       |                  |   |                     |   |                     |      |       |   |   |   |   |   |   |
| Capitalized                Leases-Principal          |   |   | 219,317    |                  |   | 130,093                  |   |                     | 89,224    |       |   | - |   |   | - |   |
|                                                 |   |   |       |                  |   |                     |   |                     |      |       |   |   |   |   |   |   |
| Capitalized                Leases- Interest          |   |   | 13,137     |                  |   | 10,526                   |   |                     | 2,611     |       |   | - |   |   | - |   |
|                                                 |   |   |       |                  |   |                     |   |                     |      |       |   |   |   |   |   |   |
| Laurus                Note-Principal                 |   |   | 5,857,279  |                  |   | 900,122                  |   |                     | 4,957,157 |       |   | - |   |   | - |   |
|                                                 |   |   |       |                  |   |                     |   |                     |      |       |   |   |   |   |   |   |
| Laurus                Note-Interest Expense          |   |   | 939,270    |                  |   | 496,033                  |   |                     | 443,237   |       |   | - |   |   | - |   |
|                                                 |   |   |       |                  |   |                     |   |                     |      |       |   |   |   |   |   |   |
| Laurus                Non-Convertible Note-Principal |   |   | 250,000    |                  |   | 250,000                  |   |                     | -         |       |   | - |   |   | - |   |
|                                                 |   |   |       |                  |   |                     |   |                     |      |       |   |   |   |   |   |   |
| Laurus                Non-Convertible Note-Interest  |   |   | 34,635     |                  |   | 34,635                   |   |                     | -         |       |   | - |   |   | - |   |
|                                                 |   |   |       |                  |   |                     |   |                     |      |       |   |   |   |   |   |   |
| Spotless                Note-Principal               |   |   | 500,000    |                  |   | 432,401                  |   |                     | 67,599    |       |   | - |   |   | - |   |
|                                                 |   |   |       |                  |   |                     |   |                     |      |       |   |   |   |   |   |   |
| Spotless                Note-Interest Expense        |   |   | 78,872     |                  |   | 17,599                   |   |                     | 61,273    |       |   | - |   |   | - |   |
|                                                 |   |   |       |                  |   |                     |   |                     |      |       |   |   |   |   |   |   |
| Total                                                |   | $      | 11,435,703 |                  | $      | 2,853,557                |   | $                        | 6,763,924 |       | $      | 1,043,075 |   | $ | 775,047 |   |

|  | · | the                Laurus note at a rate of 10.25% per annum on convertible balance                and 2.25%                per annum on non-convertible balance; |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|  | · | the                Spotless note at a rate of 6.36% per annum; and |
|--|--------|--------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|  | · | an                aggregate of $219,317 of other long-term debt with maturities ranging                from                2 months to 34 months for financed trucks and vehicles with interest                rates                ranging from 0.01% to 13.99%. |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|  | · | the                timing of large projects in certain of our service areas, i.e., asbestos                and mold abatement and construction; |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|  | · | the                timing of catastrophes; and |
|--|--------|------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|  | · | inclement                weather conditions. In particular, extended periods of rain, cold                weather                or other inclement weather                conditions may result in delays in commencing or completing projects,                in                whole or in part. Any such                delays may adversely affect our operations and financial results                and may                adversely affect the performance                of other projects due to scheduling and staffing                conflicts. |
|--|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the                market acceptance and amount of sales of our                services; |
|--------|--------|------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | · | our                success in increasing revenues and reducing                expenses; |
|--------|--------|-----------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | · | the                frequency and magnitude of environmental disasters or disruptions                resulting in the need for the types of services we                provide; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | · | our                ability to service our debt and other financial obligations, particularly                if required to pay in cash; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | · | the                extent of the enactment, enforcement and strict interpretations of                laws                relating to environmental remediation; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | · | our                ability to obtain and manage new and large                projects; |
|--------|--------|----------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | · | the                competitive environment within the industries in which we                operate; |
|--------|--------|------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | · | our                ability to raise or access capital; |
|--------|--------|--------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | · | our                ability to continue as a going concern; |
|--------|--------|------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | · | our                ability to effectively implement and maintain internal controls and                procedures; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | · | our                dependence on key personnel; |
|--------|--------|-------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | · | our                ability to timely collect our accounts                receivable; |
|--------|--------|--------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | · | our                ability to attract and retain qualified personnel;                and |
|--------|--------|------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | · | the                other factors and information disclosed and discussed in other sections                of                this quarterly report on Form 10-Q and in our report on Form 10-K                for the                fiscal year ended June 30, 2006. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|  | · | Note                at a rate of 10.25% per annum; |
|--|--------|----------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|  | · | Spotless                note at a rate of 6.36% per annum; and |
|--|--------|----------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|  | · | Various                other debt for financed trucks and vehicles with maturities ranging                from 2                months to 34 months with                interest rates ranging from .01% to                13.99%. |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | 10.1 | Amended                and Restated Secured Term Note, dated April 17, 2007, issued by Windswept                to Laurus in the principal amount of                $500,000. |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10.2 | Reaffirmation                and Ratification Agreement, dated April 17, 2007, between Windswept                and                Laurus. |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------------|

|   | 31.1 | Certification                of Chief Executive Officer pursuant to Sarbanes-Oxley Section                302(a). |
|--------|------|-------------------------------------------------------------------------------------------------------------------|

|   | 31.2 | Certification                of Chief Financial Officer pursuant to Sarbanes-Oxley Section                302(a). |
|--------|------|-------------------------------------------------------------------------------------------------------------------|

|   | 32 | Certification                of Chief Executive Officer and Chief Financial Officer pursuant to                18                U.S.C. Section 1350. |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                              |                                                            |                                         |
|---------------------------------------------------|-----------------------------------------------------------------|----------------------------------------------|
|                                              | WINDSWEPT              ENVIRONMENTAL GROUP, INC.                |
|                                         |                                                       |                                    |
| Date: May              21,              2007 | By:                                                   | /s/ Michael              O’Reilly |
|                                              | MICHAEL              O’REILLY                             |
|                                              | President              and              Chief Executive Officer |
|                                              | (Principal                Executive Officer)                    |

|                                                  |                                             |                                                          |
|-------------------------------------------------------|--------------------------------------------------|---------------------------------------------------------------|
| Date: May                21,                2007 | By:                                    | /s/ Arthur                J.                Wasserspring |
|                                                  | ARTHUR                J. WASSERSPRING            |
|                                                  | Chief                Financial Officer           |
|                                                  | (Principal                    Financial Officer) |

----

| Exhibit                  No. |   | Description                                                                                                                                                                         |
|------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                         |   |                                                                                                                                                                                |
| 10.1                         |   | Amended                  and Restated Secured Term Note, dated April 17, 2007, issued by                  Windswept                  to Laurus in the principal amount of $500,000. |
|                         |   |                                                                                                                                                                                |
| 10.2                         |   | Reaffirmation                  and Ratification Agreement, dated April 17, 2007, between Windswept                  and                  Laurus.                                    |
|                         |   |                                                                                                                                                                                |
| 31.1                         |   | Certification                  of Chief Executive Officer pursuant to Sarbanes-Oxley Section                  302(a).                                                               |
|                         |   |                                                                                                                                                                                |
| 31.2                         |   | Certification                  of Chief Financial Officer pursuant to Sarbanes-Oxley Section                  302(a).                                                               |
|                         |   |                                                                                                                                                                                |
| 32                           |   | Certification                  of Chief Executive Officer and Chief Financial Officer pursuant                  to 18                  U.S.C. Section 1350.                         |

----