UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

(Mark One)

(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
    ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED APRIL 2, 2002, OR

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
    ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______ TO _____.

                         Commission File Number: 0-17072

                       WINDSWEPT ENVIRONMENTAL GROUP, INC.
                       -----------------------------------
             (Exact name of registrant as specified in its charter)

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

    100 Sweeneydale Avenue, Bay Shore, New York          11706
    -------------------------------------------          -----
    (Address of principle executive offices)             (Zip Code)

                                 (631) 434-1300
                                 --------------
              (Registrant's telephone number, including area code)

     Indicate by check mark whether the registrant (1) filed all reports
     required to be filed by Section 13 or 15(d) of the Securities Exchange Act
     of 1934 during the preceding 12 months (or for such shorter period that the
     registrant was required to file such reports) and (2) has been subject to
     such filing requirements for the past 90 days.
     Yes   X               No
          ---                  ---

     The number of shares of Common Stock, par value $.0001, outstanding on
April 30, 2002 was 77,936,358.


<PAGE>


                         PART 1 - FINANCIAL INFORMATION
  Item 1. Financial Statements

                       WINDSWEPT ENVIRONMENTAL GROUP, INC.
                           CONSOLIDATED BALANCE SHEETS
                         APRIL 2, 2002 AND JULY 3, 2001
<TABLE>
<CAPTION>
                                                                                              April 2,          July 3,
                                                                                                2002             2001
                                                                                            (Unaudited)
                                                                                          ---------------   ---------------
  ASSETS:
  <S>                                                                                     <C>               <C>
  CURRENT ASSETS:
     Cash                                                                                 $      159,070    $      323,732
     Accounts receivable, net of allowance for doubtful accounts of $815,053 and
         $570,409, respectively                                                                8,175,051         5,581,883
     Inventories                                                                                 272,212           208,064
     Costs and estimated earnings in excess of billings on uncompleted contracts                 614,442           686,528
     Prepaid expenses and other current assets                                                   255,646           122,172
                                                                                          ---------------   ---------------
     Total current assets                                                                      9,476,421         6,922,379

  PROPERTY AND EQUIPMENT, net of accumulated depreciation and amortization of
     $4,408,688 and $3,887,920, respectively                                                   1,240,223         1,118,382

  OTHER ASSETS                                                                                    96,116           151,807
                                                                                          ---------------   ---------------

  TOTAL                                                                                   $   10,812,760    $    8,192,568
                                                                                          ===============   ===============

  LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT):

  CURRENT LIABILITIES:
     Accounts payable                                                                     $      752,755    $    1,150,987
     Accrued expenses                                                                          1,979,380         1,816,441
     Short-term notes payable to related party                                                   200,000         1,200,000
     Billings in excess of cost and estimated earnings on uncompleted contracts                  133,521           525,359
     Accrued payroll and related fringes                                                         635,864           568,741
     Current portion of convertible notes                                                        100,000           780,000
     Current portion of long-term debt                                                            73,503            67,302
     Income taxes payable                                                                      1,359,783           531,714
     Other current liabilities                                                                   529,350           338,872
                                                                                          ---------------   ---------------
     Total current liabilities                                                                 5,764,156         6,979,416
                                                                                          ---------------   ---------------

  CONVERTIBLE NOTE TO RELATED PARTY                                                                    -         2,000,000
                                                                                          ---------------   ---------------

  LONG-TERM DEBT                                                                                  80,590            14,250
                                                                                          ---------------   ---------------

  COMMITMENTS AND CONTINGENCIES

  REDEEMABLE COMMON STOCK AND STOCK OPTIONS                                                    1,266,754           386,058
                                                                                          ---------------   ---------------

  SERIES A REDEEMABLE CONVERTIBLE PREFERRED STOCK, $.01 par value; 1,300,000 shares
     authorized; 1,300,000 shares outstanding at April 2, 2002 and July 3, 2001                1,300,000         1,300,000
                                                                                          ---------------   ---------------

  STOCKHOLDERS' EQUITY (DEFICIT):
     Series B convertible preferred stock, $.01 par value; 50,000 shares authorized;
        0 and 9,346 shares outstanding at April 2, 2002 and July 3, 2001, respectively                 -                93
     Nondesignated preferred stock, no par value; 8,650,000 shares authorized; 0 shares
        outstanding                                                                                    -                 -
     Common stock, $.0001 par value; 150,000,000 shares authorized; 77,936,358 and
        38,481,254 shares outstanding at April 2, 2002 and July 3, 2001, respectively              7,794             3,848
     Additional paid-in-capital                                                               34,069,978        31,717,198
     Accumulated deficit                                                                     (31,676,512)      (34,208,295)
                                                                                          ---------------   ---------------
     Total stockholders' equity (deficit)                                                      2,401,260        (2,487,156)
                                                                                          ---------------   ---------------

  TOTAL                                                                                   $   10,812,760    $    8,192,568
                                                                                          ===============   ===============
</TABLE>
  See notes to consolidated financial statements.

                                       2
<PAGE>


                       WINDSWEPT ENVIRONMENTAL GROUP, INC.
                CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
                                                                 Thirteen Weeks Ended                Thirty-Nine Weeks Ended
                                                           ---------------------------------     ---------------------------------
                                                              April 2,           April 3,           April 2,           April 3,
                                                                2002               2001               2002               2001
                                                           --------------     --------------     --------------     --------------
    <S>                                                    <C>                <C>                <C>                <C>
    Revenues                                               $   5,823,792      $   3,909,836      $  26,559,419      $  17,283,475

    Cost of revenues                                           3,852,088          3,363,146         16,848,979         11,537,734
                                                           --------------     --------------     --------------     --------------

    Gross profit                                               1,971,704            546,690          9,710,440          5,745,741
                                                           --------------     --------------     --------------     --------------

    Operating expenses:
    Selling, general and administrative expenses               1,326,056            987,128          3,657,172          3,282,489
    Expense (benefit) related to variable accounting
       treatment for officer options                            (487,324)           249,644            880,696            165,635
                                                           --------------     --------------     --------------     --------------
       Total operating expenses                                  838,732          1,236,772          4,537,868          3,448,124
                                                           --------------     --------------     --------------     --------------

    Income (loss) from operations                              1,132,972           (690,082)         5,172,572          2,297,617
                                                           --------------     --------------     --------------     --------------

    Other expense (income):
       Interest expense                                           31,205             74,544            226,485            256,524
       Other, net                                                 (1,006)           (10,725)           (11,010)           (20,364)
                                                           --------------     --------------     --------------     --------------
       Total other expense                                        30,199             63,819            215,475            236,160
                                                           --------------     --------------     --------------     --------------

    Income (loss) before provision (benefit) for income
       taxes                                                   1,102,773           (753,901)         4,957,097          2,061,457

    Provision (benefit) for income taxes                         343,249           (254,233)         2,425,314            480,255
                                                           --------------     --------------     --------------     --------------

    Net income (loss)                                            759,524           (499,668)         2,531,783          1,581,202

    Dividends on Preferred Stock                                 (19,500)           (19,500)          (449,219)           (58,500)
                                                           --------------     --------------     --------------     --------------

    Net income (loss) attributable to common
       shareholders                                        $     740,024      $    (519,168)     $   2,082,564      $   1,522,702
                                                           ==============     ==============     ==============     ==============

    Basic and diluted net income (loss) per common share:
    Basic                                                           $.01              $(.01)              $.04               $.04
                                                                    ====              ======              ====               ====
    Diluted                                                         $.01              $(.01)              $.03               $.02
                                                                    ====              ======              ====               ====

    Weighted average number of common shares outstanding:
    Basic                                                     77,921,163         38,463,754         58,350,743         38,458,736
                                                           ==============     ==============     ==============     ==============
    Diluted                                                   86,967,474         38,463,754         86,222,738         82,409,763
                                                           ==============     ==============     ==============     ==============
</TABLE>


    See notes to consolidated financial statements.

                                       3

<PAGE>


                       WINDSWEPT ENVIRONMENTAL GROUP, INC.
           CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)

<TABLE>
<CAPTION>
                                       Preferred Stock         Common Stock
                                      -----------------     -------------------   Additional
                                       Number      Par      Number of     Par       Paid-in    Accumulated
                                      of Shares   Value      Shares      Value      Capital      Deficit          Total
                                      ---------   -----      ------      -----      -------      -------          -----
<S>                                   <C>          <C>    <C>           <C>      <C>           <C>              <C>
Balance at July 5, 2000                  9,346     $93    38,456,254    $3,846   $31,791,950   $(34,988,177)    $(3,192,288)

Exercise of stock options                    -       -        25,000         2         3,248              -          3,250
Dividends on Series A preferred stock        -       -             -         -       (78,000)             -         (78,000)
Net income                                   -       -             -         -             -        779,882         779,882
                                      ---------    ----   -----------   -------  ------------  -------------    ------------

Balance at July 3, 2001                  9,346      93    38,481,254     3,848    31,717,198    (34,208,295)     (2,487,156)

Exercise of stock options                    -       -       404,680        40        83,142              -          83,182
Dividends on Series A preferred
stock                                        -       -             -         -       (58,500)             -         (58,500)
Conversion of Series B preferred stock  (9,346)    (93)   10,495,174     1,050          (957)             -               -
Conversion of convertible note and
   related accrued and unpaid interest       -       -    28,555,250     2,856     2,329,095              -       2,331,951
Net income                                   -       -             -         -             -      2,531,783       2,531,783
                                      ---------    ----   -----------   -------  ------------  -------------    ------------
Balance at April 2, 2002                     -     $ -    77,936,358    $7,794   $34,069,978   $(31,676,512)    $ 2,401,260
                                      =========    ====   ===========   =======  ============  =============    ============
</TABLE>


See notes to consolidated financial statements.

                                       4
<PAGE>


                       WINDSWEPT ENVIRONMENTAL GROUP, INC.
                CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
                                                                                                       Thirty-Nine Weeks Ended
                                                                                                  ----------------------------------
                                                                                                     April 2,           April 3,
                                                                                                       2002               2001
                                                                                                  --------------    --------------
    <S>                                                                                           <C>               <C>
    CASH FLOWS FROM OPERATING ACTIVITIES:
       Net income                                                                                 $   2,531,783     $   1,581,202
       Adjustments to reconcile net income to net cash provided by (used in) operating
       activities:
          Depreciation and amortization                                                                 530,736           543,162
          Provision for doubtful accounts                                                               244,644           (87,205)
          Compensation expense related to officer options and redeemable common stock                   880,696           165,635
       Changes in operating assets and liabilities:
          Accounts receivable                                                                        (2,837,812)       (2,504,381)
          Inventories                                                                                   (64,148)            9,692
          Costs and estimated earnings in excess of billings on uncompleted contracts                    72,086          (656,771)
          Prepaid expenses and other current assets                                                    (133,474)          242,014
          Other assets                                                                                   45,723            37,578
          Accounts payable and accrued expenses                                                         233,158           (28,291)
          Accrued payroll and related fringes                                                            67,123            91,112
          Income taxes payable                                                                          828,069           484,749
          Other current liabilities                                                                     190,478          (106,115)
          Billings in excess of costs and estimated earnings on uncompleted contracts                  (391,838)          (87,243)
                                                                                                  --------------    --------------
    NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES                                               2,197,224          (314,862)
                                                                                                  --------------    --------------

    CASH FLOWS FROM INVESTING ACTIVITIES:
       Purchases of property and equipment                                                             (642,609)         (191,021)
                                                                                                  --------------    --------------
    NET CASH USED IN INVESTING ACTIVITIES                                                              (642,609)         (191,021)
                                                                                                  --------------    --------------

    CASH FLOWS FROM FINANCING ACTIVITIES:
       Principal payments of long-term debt                                                             (65,424)         (167,411)
       Proceeds from long-term debt                                                                     137,965                 -
       Repayment of convertible notes                                                                  (680,000)                -
       Payment of preferred dividends                                                                  (195,000)                -
       Proceeds from exercise of stock options                                                           83,182             3,250
       Proceeds from short-term notes payable                                                         1,750,000         1,600,000
       Repayments of short-term notes payable                                                        (2,750,000)       (1,400,000)
                                                                                                  --------------    --------------
    NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES                                              (1,719,277)           35,839
                                                                                                  --------------    --------------

    NET DECREASE IN CASH                                                                               (164,662)         (470,044)

    CASH - BEGINNING OF PERIOD                                                                          323,732           599,970
                                                                                                  --------------    --------------

    CASH - END OF PERIOD                                                                          $     159,070     $     129,926
                                                                                                  ==============    ==============

    Cash paid during the period for:
       Interest                                                                                   $     117,779     $      96,534
                                                                                                  ==============    ==============
       Taxes                                                                                      $   1,554,620     $       4,417
                                                                                                  ==============    ==============

    Non cash financing activities:
       Issuance of preferred stock dividend                                                       $     390,719     $      58,500
                                                                                                  ==============    ==============
       Conversion of accrued and unpaid interest to common stock                                  $     331,951     $           -
                                                                                                  ==============    ==============
       Conversion of convertible note to related party                                            $   2,000,000     $           -
                                                                                                  ==============    ==============
       Conversion of preferred stock                                                              $          93     $           -
                                                                                                  ==============    ==============
</TABLE>

    See notes to consolidated financial statements.

                                       5
<PAGE>


                       WINDSWEPT ENVIRONMENTAL GROUP, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.   BASIS  FOR  PRESENTATION  -  The  accompanying  unaudited  consolidated
     financial statements include the accounts of Windswept Environmental Group,
     Inc. (the  "Company")  and its  wholly-owned  subsidiaries.  The unaudited
     consolidated  financial  statements  have been  prepared  by the Company in
     accordance with 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 April 2, 2002, the results of
     operations for the thirteen and  thirty-nine  weeks ended April 2, 2002 and
     April 3, 2001 and cash flows for the thirty-nine  weeks ended April 2, 2002
     and April 3, 2001, have been  included.  Certain prior period amounts have
     been reclassified to conform to the April 2002 presentation.

     The results for the thirteen and thirty-nine  weeks ended April 2, 2002 and
     April 3, 2001 are not necessarily indicative of the results for an entire
     year. These unaudited consolidated financial statements should be read in
     conjunction with the Company's audited consolidated financial statements
     and notes thereto included in the Company's Form 10-K for the transition
     period from May 1, 2001 through July 3, 2001 and the Company's Form 10-K
     for the fiscal year ended April 30, 2001.

2.   LIQUIDITY AND BUSINESS RISKS - As of April 2, 2002, the Company had an
     accumulated deficit of $31,676,512. The Company has financed its operations
     to date primarily through issuance of debt and equity  securities,  through
     short-term  borrowings  from its majority  shareholder,  Spotless  Plastics
     (USA), Inc.("Spotless") and through cash generated from operations. In the
     opinion of management, the Company  expects to have  sufficient  working
     capital to fund current operations.  However,  market conditions and their
     effect on the  Company's liquidity may restrict the Company's use of cash.
     In the event that sufficient  positive  cash flow from operations  is not
     generated, the Company may need to seek additional financing from Spotless,
     although  Spotless is under no legal  obligation to provide such funds. The
     Company currently has no credit facility for additional borrowing.

     The above factors raise substantial doubt as to the Company's ability to
     continue as a going concern. The Company's financial statements have been
     prepared assuming that the Company will continue as a going concern. The
     financial statements do not include any adjustments that might result from
     the outcome of this uncertainty.

     After the terrorist attack on the World Trade Center on September 11, 2001,
     the  demand  for the  Company's  emergency  and  catastrophe  response
     services increased  dramatically.  As a result  of this  increased  demand,
     the  Company recorded  revenues  of  approximately   $16,200,000  for
     remediation   services performed in downtown  Manhattan  from September
     13, 2001 through April 2, 2002. Approximately  $13,000,000  of this revenue
     has been collected by April 2, 2002. Additionally, the Company continues
     to perform services related to the terrorist attack after April 2, 2002.
     The Company  believes that additional  revenues from such services will be
     generated in the foreseeable  future and that the expected receipt of these
     revenues  will  favorably  impact its  liquidity,  although no assurances
     can be made as to the expected volume or impact.

     As of April 2, 2002, the Company owed Spotless $200,000 on short-term loans
     to fund working  capital.  During the thirty-nine  weeks ended April 2,
     2002, in order to address cash flow and  operational  concerns and to fund
     the  increased payroll that  resulted from the greater level of work
     related to the World Trade Center  attack,  the  Company  borrowed
     $1,750,000  from  Spotless.  During the thirteen  weeks ended January 1,
     2002,  primarily as a result of cash  collected from the World Trade
     Center projects, the Company repaid $2,750,000 to Spotless. All current
     borrowings  from  Spotless  bear  interest at the London  Interbank
     Offering Rate  ("LIBOR")  plus 1 percent and are secured by all of the
     Company's assets.

                                       6
<PAGE>


     On March 15, 2002, the Company repaid $680,000 principal amount of 10%
     convertible notes upon their maturity. The repayment was funded through
     cash generated from operations and did not require any borrowings.

     Management believes the Company will require positive cash flow from
     operations to meet its working capital needs over the next twelve months.
     In the event that positive cash flow from operations is not generated, the
     Company may be required to seek additional financing to meet its working
     capital needs. Management continues to pursue additional funding sources.
     The Company anticipates revenue growth in new and existing service areas
     and continues to bid on large projects, though there can be no
     assurance that any of the Company's bids will be accepted. The Company
     is striving to improve its gross margin and control its selling, general
     and administrative expenses. There can be no assurance, however, that
     changes in the Company's plans or other events affecting the Company's
     operations will not result in accelerated or unexpected cash requirements,
     or that it will be successful in achieving positive cash flow from
     operations or obtaining additional financing. The Company's future cash
     requirements are expected to depend on numerous factors, including, but
     not limited to: (i) the ability to obtain environmental or related
     construction contracts, (ii) the ability to generate positive cash flow
     from operations, and the extent thereof, (iii) the ability to raise
     additional capital or obtain additional financing, and (iv) economic
     conditions.

3.   PROVISION (BENEFIT) FOR INCOME TAXES - The provision (benefit) for
     income taxes for the thirteen and thirty-nine weeks ended April 2,
     2002 and April 3, 2001 consists of the following:
<TABLE>
<CAPTION>
                            Thirteen Weeks Ended       Thirty-Nine Weeks Ended
                            ---------------------     -------------------------
                             April 2,    April 3,        April 2,      April 3,
                               2002       2001            2002          2001
                               ----       ----            ----          ----
     <S>                    <C>        <C>            <C>            <C>
     Federal - current      $243,407   $(179,411)     $1,712,997     $338,912
     State - current          99,842     (74,822)        712,317      141,343
                            ---------  ----------     -----------    ---------
     Total                  $343,249   $(254,233)     $2,425,314     $480,255
                            =========  ==========     ===========    =========
</TABLE>
     The effective rate for income taxes differs from the statutory rates
     primarily as a result of the utilization of federal and state net operating
     loss carryforwards of approximately $500,000 in the thirty-nine weeks
     ending April 2, 2002 and the nondeductible nature of the expense (benefit)
     related to the variable accounting treatment of officer options for which
     there is a 100% valuation allowance. At April 2, 2002, the Company had
     approximately $1,135,000 in net operating loss carryforwards for
     tax purposes that expire at various dates through 2020. Due to Spotless'
     acquisition of greater than 50% ownership in October 1999, the Company is
     limited to utilizing $68,000 of net operating loss carryforwards per annum.

     The Company has a 100% valuation allowance against deferred tax assets
     because management believes that it is more likely than not that such
     deferred tax assets will not be realized.

                                       7
<PAGE>


4.   INCOME (LOSS) PER COMMON SHARE - The calculation of basic and diluted
     income (loss) 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 net
     income (loss) per share for the thirteen and thirty-nine weeks ended
     April 2, 2002 and April 3, 2001, respectively:
<TABLE>
<CAPTION>
                                                           Thirteen Weeks Ended              Thirty-Nine Weeks Ended
                                                  -------------------------------     -------------------------------
                                                  April 2,         April 3,          April 2,          April 3,
                                                   2002             2001               2002             2001
                                                   ----             ----               ----             ----
     <S>                                       <C>              <C>                 <C>              <C>
     Numerator:
       Net income (loss) attributable to
         common shareholders                     $740,024        $(519,168)         $2,082,564       $1,522,702
       Add interest on convertible notes,
         net of tax                                 2,269                -             100,514           80,740
                                                 ---------       ----------         -----------      -----------
                                                 $742,293        $(519,168)         $2,183,078       $1,603,442
                                                 =========       ==========         ===========      ===========

     Denominator:
       Share reconciliation:
         Shares used for basic income
          (loss) per share                     77,921,163       38,463,754          58,350,743       38,458,736
         Effect of dilutive items:
          Stock options                         7,777,798                -           7,221,838        4,884,441
          Convertible securities                1,268,513                -          20,650,157       39,066,586
                                               -----------      -----------         -----------      -----------
         Shares used for dilutive income
          (loss) per share                     86,967,474       38,463,754          86,222,738       82,409,763
                                               ===========      ===========         ===========      ===========

     Net income (loss) per share:
       Basic                                         $.01            $(.01)               $.04             $.04
       Diluted                                       $.01            $(.01)               $.03             $.02
</TABLE>

     Included in convertible securities are the assumed conversion of
     convertible notes and preferred stock.

5.   CONTINGENCIES - On October 12, 2001, Trade-Winds Environmental Restoration,
     Inc. ("Trade-Winds"), a wholly-owned subsidiary of the Company, commenced
     an action in the New York State Supreme Court, County of New York, claiming
     that Trade-Winds is entitled to approximately $1,060,000 of contractual
     billings relating to a large mold remediation project. The court has
     ordered that the record of this action be sealed.

     On November 22, 1999, the Securities and Exchange Commission ("SEC")
     accepted the Company's settlement offer in its "Order Instituting Public
     Administrative Proceedings, Making Findings, Imposing Remedial Sanctions
     and Issuing Cease-and-Desist Order" (the "Order"). Under the terms of the
     Order, the Company neither admitted nor denied any allegations and did not
     incur any monetary fines in connection with an investigation of the
     Company by the SEC that stemmed from the prior convictions of two of the
     Company's former officers for violations of, among other things,
     the federal securities laws. The Order required the Company to develop
     and institute certain policies, procedures and manuals to improve its
     corporate governance, including the adoption of an audit committee charter,
     a formal conflict of interest policy and a formal employee handbook. The
     Order also required the Company to obtain a secure off site storage
     facility to store its backup data files and system software and to make
     certain reporting disclosures. The Company has implemented such policies,
     procedures and manuals, obtained an off site storage facility and made such
     disclosures.

     In November 1997, Trade-Winds was named as a third party defendant in an
     action commenced in the New York State Supreme Court, County of New York,
     under the caption Nicolai Grib and Vladislav Kazarov v. Trade-Winds
     Environmental Restoration, Inc. and Gulf Insurance Company, by a class of
     plaintiffs claiming to be entitled to additional wages while working for a
     subcontractor of Trade-

                                       8

<PAGE>

     Winds. The Company believes that a verdict in favor of the plaintiff will
     not have a material adverse effect on the Company's consolidated financial
     statements.

     The Company is a party to other litigation matters and claims that are
     normal in the course of its operations, and while the results
     of such litigation and claims cannot be predicted with certainty,
     management believes that the final outcome of such matters will not have
     a materially adverse effect on the Company's consolidated financial
     statements.

     In January 1996, Laboratory Testing Services, Inc. ("LTS"), a wholly-owned
     subsidiary of the Company, filed a Chapter 11 petition in United States
     Bankruptcy Court in the Eastern District of New York. Subsequently, this
     case was converted to a Chapter 7 Bankruptcy proceeding. Management
     believes that the Company's consolidated financial statements will not be
     materially affected by this proceeding.

     The Company signed a contract to perform various tasks at a site in Long
     Island, New York. As a result of the discovery of unusual subsoil
     conditions at the site, estimated contract completion costs have been
     revised. During the thirteen weeks ended April 2, 2002, costs incurred
     included, among other things, direct labor, subcontractor costs, equipment
     rental and disposal costs. Due to uncertainties inherent in the estimation
     process, management believes that there is a reasonable possibility that
     completion costs for the contract will be further revised in the near-term.
     The Company is in the process of negotiating additional contract
     change orders to address this situation. As of April 2, 2002, based upon
     the estimate to complete, the Company recognized a loss on this contract
     of approximately $860,000 for the life of the contract. As of April 2,
     2002, approximately $315,000 was included in accounts receivable related to
     this customer.

6.   RELATED PARTY TRANSACTIONS - On November 16, 2001, the Company exchanged
     $1,700,000 of short-term notes payable for a demand promissory note payable
     to Spotless that is secured by the Company's assets and the assets of its
     subsidiaries, pursuant to amendments to existing security agreements
     between each of the Company and its subsidiaries and Spotless. The
     promissory note had an original principal amount of $1,700,000 and accrues
     interest at the rate of LIBOR plus one percent (1%) per annum. Spotless
     may, but is under no obligation to, lend additional amounts to the
     Company under this secured promissory note. As of April 2, 2002,
     the Company owed Spotless $200,000 under this promissory note.

     On November 16, 2001, Spotless exercised its right to convert all principal
     and accrued and unpaid interest on the $2,000,000 Convertible Promissory
     Note (the "Convertible Note") issued to it by the Company in October 1999.
     As a result of the conversion of the Convertible Note and accrued and
     unpaid interest, the Company issued 28,555,250 shares of its common stock
     to Spotless's wholly-owned subsidiary, Windswept Acquisition Corp.
     ("Acquisition Corp.") in full satisfaction of the Convertible Note and the
     related accrued and unpaid interest.

     Additionally, on November 16, 2001, Acquisition Corp. exercised its right
     to convert all 9,346 shares of the Company's Series B preferred stock that
     the Company issued to it in October 1999. As a result of such conversion
     and in accordance with the terms of Company's Series B preferred stock,
     Acquisition Corp. was issued 9,346,000 shares of the Company's common'
     stock. As a result of Acquisition Corp.'s decision to exercise its right to
     convert and in accordance with the terms of the Company's Series B
     preferred stock, an additional 1,149,174 shares of the Company's common
     stock were issued to Acquisition Corp. The additional shares of
     common stock issued to Acquisition Corp. were calculated based upon a
     formula that takes into consideration the value of the Series B preferred
     stock on the date of issuance and the number of days elapsed from the date
     of the issuance of the Series B preferred stock through the conversion
     date. The issuance of the additional shares of common stock was recorded
     as a dividend of $390,719. The dividend represents the difference between
     the fair market value of the Company's common stock issued on November 16,
     2001 and the fair market value of the Company's common stock at the date
     the Series B preferred stock was issued.

     After giving effect to these conversions, Spotless currently beneficially
     owns 61,335,107 shares of the Company's common stock, which represents
     approximately 79% of the Company's issued and outstanding shares of common
     stock.

                                       9

<PAGE>


     As a result of the conversion of the Convertible Note, options to
     purchase 2,811,575 shares of the Company's common stock held by Michael
     O'Reilly, the President and Chief Executive Officer of the
     Company, immediately vested, pursuant to the terms of an option agreement
     between the Company and Mr. O'Reilly.

7.   RECENT ACCOUNTING PRONOUNCEMENTS - In June 2001, the Financial Accounting
     Standards Board ("FASB") issued Statement of Financial Accounting Standards
     ("SFAS") No. 141, "Business Combinations".  SFAS No. 141 applies
     prospectively to all business combinations initiated after June 30, 2001
     and to all business combinations accounted using the purchase method for
     which the date of acquisition is July 1, 2001, or later.  This statement
     requires all business combinations to be accounted for using one method,
     the purchase method.  Under previously existing accounting rules, business
     combinations were accounted for using one of two methods, the
     pooling-of-interests method or the purchase method.  The adoption of
     SFAS No. 141 did not have a significant impact on the Company's financial
     statements.

     In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
     Assets". SFAS No. 142 addresses financial accounting and reporting for
     acquired goodwill and other intangible assets. Under SFAS No. 142, goodwill
     and some intangible assets will no longer be amortized, but rather reviewed
     for impairment on a periodic basis. The provisions of this Statement are
     required to be applied starting with fiscal years beginning after December
     15, 2001. This Statement is required to be applied at the fiscal year
     beginning July 2, 2002 and to be applied to all goodwill and other
     intangible assets recognized in its financial statements at that
     date. Impairment losses for goodwill and certain intangible assets that
     arise due to the initial application of this Statement are to be reported
     as resulting from a change in accounting principle. Goodwill and intangible
     assets acquired after June 30, 2001, will be subject immediately to the
     provisions of this Statement. The adoption of SFAS No. 142 is not expected
     to have a material impact on the Company's financial statements.

     In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset
     Retirement Obligations". The standard requires entities to
     record the fair value of a liability for an asset retirement obligation
     in the period in which it is incurred. When the liability is initially
     recorded, the entity capitalizes a cost by increasing the carrying amount
     of the related long-lived asset. Over time, the liability is accreted to
     its present value each period, and the capitalized cost is depreciated over
     the useful life of the related asset. Upon settlement of the liability, an
     entity either settles the obligation for its recorded amount or
     incurs a gain or loss upon settlement. The standard is effective for
     fiscal years beginning after June 15, 2002. The adoption of SFAS 143 is
     not expected to have a material impact on the Company's financial
     statements.

     In October 2001, the FASB issued SFAS No. 144, "Accounting for the
     Impairment or Disposal of Long-Lived Assets". SFAS No. 144 replaces SFAS
     No. 121, "Accounting for the Impairment of Long-Lived Assets and for
     Long-Lived Assets to Be Disposed Of." SFAS No. 144 requires that long-lived
     assets be measured at the lower of carrying amount or fair value less cost
     to sell, whether reported in continuing operations or in discontinued
     operations. Therefore, discontinued operations will no longer be measured
     at net realizable value or include amounts for operating losses that
     have not yet occurred. SFAS No. 144 also broadens the reporting of
     discontinued operations to include all components of an entity with
     operations that can be distinguished from the rest of the entity and that
     will be eliminated from the ongoing operations of the entity in a disposal
     transaction. The provisions of SFAS No. 144 are effective for financial
     statements issued for fiscal years beginning after December 15, 2001. The
     adoption of SFAS 144 is not expected to have a material impact on the
     Company's financial statements.

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

Forward-looking  statements - Statements contained in this Quarterly Report
on Form 10-Q include "forward-looking statements" within the meaning of Section
27A of the Securities Act and Section 21E of the Exchange Act. Forward-looking
statements involve known and unknown risks, uncertainties and other factors
which could cause the actual results, performance and achievements, whether
expressed or implied by such forward-looking statements, not to occur or be
realized. Such forward-looking statements generally are based upon the

                                       10

<PAGE>


Company's best  estimates of future  results,  performance or  achievement,
based upon current conditions and the most recent results of operations.
Forward-looking statements may be identified by the use of forward-looking
terminology such as "may," "will," "expect," "believe," "estimate,"
"anticipate," "continue" or similar terms, variations of those terms or the
negative of those terms. Potential risks and uncertainties include, among other
things, such factors as:

        o    the market acceptance and amount of sales of the Company's
             services,
        o    the Company's success in increasing revenues and reducing
             expenses,
        o    the frequency and magnitude of environmental disasters or
             disruptions resulting in the need for the types of services the
             Company provides,
        o    the extent of the enactment, enforcement and strict interpretations
             of laws relating to environmental remediation,
        o    the competitive environment within the industries in which
             the Company operates,
        o    the Company's ability to raise additional capital,
        o    the Company's ability to attract and retain qualified personnel,
             and
        o    the other factors and information disclosed and discussed in other
             sections of this Quarterly Report on Form 10-Q and in the Company's
             Transition Report on Form 10-K for the period from May 1, 2001
             through July 3, 2001 and the Company's Annual Report on Form
             10-K for the fiscal year ended April 30,2001.

Investors should  carefully  consider such risks,  uncertainties  and other
information, disclosures and discussions which contain cautionary statements
identifying important factors that could cause actual results to differ
materially from those provided in the forward-looking statements. The Company
undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.

The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of the Company's results
of operations and financial condition. This discussion should be read in
conjunction with the Consolidated Financial Statements and notes thereto
appearing in Item 1.

CRITICAL ACCOUNTING POLICIES

Management's  discussion and analysis of its financial position and results
of operations are based upon the Company's unaudited consolidated financial
statements, which have been prepared in accordance with accounting principles
generally accepted in the United States of America. The preparation of these
unaudited financial statements requires management to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses and related disclosure of contingent assets and liabilities. Actual
results could differ from those estimates. Management believes that the critical
accounting policies and areas that require the most significant judgments and
estimates to be used in the preparation of the unaudited financial statements
are accounting for contracts, allowance for doubtful accounts and the valuation
allowance against deferred tax assets.

Contract  Accounting - Revenue derived from services  provided to customers
over periods of less than one month is recognized at the completion of the
related contracts. Revenue from firm fixed price contracts that extend over
periods of one month or more is recognized using the percentage-of-completion
method, measured by the percentage of costs incurred to date compared to
estimated total costs for each contract. Provisions for estimated losses on
uncompleted contracts are made in the period in which such losses are
determined. Changes in job performance, job conditions, estimated profitability,
the effect of contract penalty provisions and final contract settlements may
result in revisions to estimates of costs and income and are recognized in the
period in which the revisions are determined. Revenues from time and material
contracts that extend over a period of more than one month are recognized as
services are performed.

Allowance  for Doubtful  Accounts - The Company  maintains an allowance for
doubtful trade accounts receivable for estimated losses resulting from the
inability of its customers to make required payments. In determining
collectibility, the Company reviews available customer financial information
including public filings and credit reports and will also consult legal counsel
to assist in determining collectibility. When it is deemed probable that a
specific customer account is uncollectible, that balance is included in the
reserve calculation. Actual results could differ from these estimates under
different assumptions.

                                       11

<PAGE>

Deferred Tax Asset  Valuation  Allowance - The Company  records a valuation
allowance to reduce its deferred tax assets to the amount that is more likely
than not to be realized. Due to the Company's prior history of losses, the
Company has recorded a full valuation allowance against its net deferred tax
assets as of April 2, 2002. The Company currently provides for income taxes only
to the extent that it expects to pay cash taxes for current income. Should the
Company be profitable in the future at levels which cause management to conclude
that is more likely than not that it will realize all or a portion of the
deferred tax assets, the Company would record the estimated net realizable value
of the deferred tax assets at that time and would then provide for income taxes
at its combined federal and state effective rates.

RESULTS OF OPERATIONS

THIRTEEN WEEKS ENDED APRIL 2, 2002 AND APRIL 3, 2001

REVENUE

Total  revenues  for the  thirteen  weeks  ended  April 2, 2002 (the  "2002
period") increased by $1,913,956, or approximately 49%, to $5,823,792 from
$3,909,836 for the thirteen weeks ended April 3, 2001 (the "2001 period").
Revenues in the Company's Trade-Winds subsidiary increased $2,082,692 to
$5,656,101 in the 2002 period from $3,573,409 in the 2001 period. The increase
in Trade-Winds revenues of $2,082,692 was primarily attributable to
approximately $3,800,000 related to remediation work performed in the vicinity
of the World Trade Center as a result of the terrorist attack on September 11,
2001 and approximately $200,000 related to construction projects partially
offset by decreases in mold remediation projects of approximately $600,000,
approximately $700,000 in revenues from environmental remediation projects
primarily due to the loss of one customer and a decrease in spill response
projects of approximately $500,000. Revenues in the Company's North Atlantic
Laboratories, Inc. ("NAL") subsidiary increased $3,629, or 2%, to $167,691 in
the 2002 period from $164,062 in the 2001 period. Revenues in the Company's New
York Testing Laboratories, Inc. ("NYT") subsidiary decreased $172,365 to $0 in
the 2002 period from $172,365 in the 2001 period, due to the discontinuance of
NYT operations.

Cost of Revenues

Cost of revenues  increased  $488,942 to  $3,852,088  in the 2002 period as
compared to $3,363,146 in the 2001 period. This 15% increase was primarily
attributable to the labor costs of approximately $213,000 and equipment rental
costs of approximately $110,000 associated with remediation work performed in
the vicinity of the World Trade Center, increases in project manager costs of
approximately $170,000 due to an increase in the number of project managers and
approximately $100,000 of costs incurred on a pond rehabilitation project. These
increases were partially offset by a decrease of approximately $150,000 due to
the discontinued operations of NYT. Gross profit increased $1,425,014 to
$1,971,704, or 34% of total revenue, in the 2002 period from $546,690, or 14% of
total revenue, in the 2001 period. The increase in gross profit was primarily
attributable to the greater sales volume and greater gross margins in the 2002
period that resulted from the World Trade Center related work. The Company's
cost of revenues consists primarily of labor and labor related costs, insurance,
benefits, bonding and job related insurance, repairs, maintenance, equipment
rental, materials and supplies, disposal costs and depreciation of capital
equipment.

Selling, General and Administrative Expenses

Selling,  general  and  administrative  expenses  increased  by $338,928 to
$1,326,056 in the 2002 period from $987,128 in the 2001 period, and constituted
approximately 23% and 25% of revenues in the 2002 and 2001 periods,
respectively. The increase of $333,928 was partially due to increases in the bad
debt provision of approximately $329,000 and marketing expenses of approximately
$111,000 that was partially offset by decreases in legal expense of $109,000.

Expense (Benefit) Related to Variable Accounting Treatment for Officer Options

Under the terms of an employment  agreement with the Company and a separate
agreement with Spotless, the Company's President and Chief Executive Officer may
sell to the Company, or in certain circumstances to Spotless, all shares of
common stock of the Company held by him and all shares of common stock
underlying

                                       12

<PAGE>


vested options to purchase shares of common stock of the Company held
by him upon the occurrence of certain events. The expense related to variable
accounting treatment for officer options decreased by $736,968 to a benefit of
$(487,324) in the 2002 period from an expense of $249,644 in the 2001 period.
This was due to a decrease in the market price of the Company's common stock
that was partially offset by an increase in the number of vested options
outstanding. Due to the terms of the options, changes in the market price of the
Company's common stock, in either direction, result in a corresponding expense
or benefit.

Interest Expense

Interest  expense  decreased  by  $43,339,  or 58%,  to $31,205 in the 2002
period from $74,544 in the 2001 period. The decrease in interest expense was
primarily attributable to reductions in convertible debt and reductions in
LIBOR.

Provision (Benefit) for Income Taxes

The  provision  for income  taxes  increased  by  $597,482 to an expense of
$343,249 in the 2002 period from a benefit of $(254,233) in the 2001 period. The
increase was primarily attributable to increased taxable income in the 2002
period and the establishment of a 100% valuation allowance related to temporary
differences between book and tax income that was partially offset by the
utilization of federal and state net operating losses of approximately $500,000.

Net Income

Net income  increased by  $1,259,192  to $759,524 in the 2002 period from a
net loss of  $(499,668)  in the 2001 period.  The increase was the result of all
the factors discussed above.

THIRTY-NINE WEEKS ENDED APRIL 2, 2002 AND APRIL 3, 2001

Revenue

Total revenues for the thirty-nine  weeks ended April 2, 2002 (the "year to
date 2002 period") increased by $9,275,944, or approximately 54%, to $26,559,419
from $17,283,475 for the thirty-nine weeks ended April 3, 2001 (the "year to
date 2001 period"). Revenues in the Company's Trade-Winds subsidiary increased
approximately $9,900,000 to approximately $26,000,000 in the year to date 2002
period from approximately $16,100,000 in the year to date 2001 period. The
increase in Trade-Winds revenues of approximately $9,900,000 was primarily
attributable to approximately $16,200,000 related to remediation work performed
in the vicinity of the World Trade Center as a result of the terrorist attack on
September 11, 2001, approximately $1,500,000 in revenues from a mold remediation
contract related to a tropical storm in Houston, Texas, approximately $500,000
in revenues from asbestos remediation projects and approximately $300,000 from
construction projects that was partially offset by decreases in mold remediation
projects of approximately $7,300,000, approximately $700,000 in revenues from
environmental remediation projects primarily due to the loss of one customer and
a decrease in spill response projects of approximately $800,000. Revenues in the
Company's NAL subsidiary decreased approximately $51,000 to approximately
$560,000 in the year to date 2002 period from approximately $611,000 in the year
to date 2001 period. Revenues in the Company's NYT subsidiary decreased
approximately $550,000 to $0 in the year to date 2002 period from $550,000 in
the year to date 2001 period, due to the discontinuance of NYT operations.

Cost of Revenues

Cost of revenues  increased  $5,311,245 to  $16,848,979 in the year to date
2002 period as compared to $11,537,734 in the year to date 2001 period. The
increase of $5,311,245, or 46%, was primarily attributable to the labor costs of
approximately $2,675,000, union benefits of approximately $380,000, equipment
rental of approximately $370,000 and certain insurance costs of approximately
$750,000 associated with remediation work performed in the vicinity of the World
Trade Center. In addition, disposal costs increased by approximately $125,000,
project manager costs increased by approximately $450,000 due to an increase in
the number of project managers and project costs increased by approximately
$800,000 related to a pond rehabilitation project. These increases were
partially offset by a decrease of approximately $575,000 due to the discontinued
operations of NYT. Gross profit increased $3,964,699 to $9,710,440 in the year
to date 2002

                                       13

<PAGE>

period from  $5,745,741  in the year to date 2001  period.  The increase in
gross profit was primarily attributable to the greater revenue that resulted
from the World Trade Center related work. Gross profit percentage increased to
37% in the year to date 2002 period from 33% in the year to date 2001 period due
to the greater margins associated with the World Trade Center related work. The
Company's cost of revenues consists primarily of labor and labor related costs,
insurance, benefits, bonding and job related insurance, repairs, maintenance,
equipment rental, materials and supplies, disposal costs and depreciation of
capital equipment.

Selling, General and Administrative Expenses

Selling,  general  and  administrative  expenses  increased  by $374,683 to
$3,657,172 in the year to date 2002 period from $3,282,489 in the year to date
2001 period, and constituted approximately 14% and 19% of revenues in the year
to date 2002 and year to date 2001 periods, respectively. The increase of
$374,683 was partially due to increases in the bad debt provision of
approximately $223,000, marketing expenses of approximately $223,000, accounting
fees of approximately $56,000 and accruals for year-end bonuses of approximately
$68,000 that was partially offset by decreases in legal expense of $212,000.

Expense (Benefit) Related to Variable Accounting Treatment for Officer Options

Under the terms of an employment  agreement with the Company and a separate
agreement with Spotless, the Company's President and Chief Executive Officer may
sell to the Company, or in certain circumstances to Spotless, all shares of
common stock of the Company held by him and all shares of common stock
underlying vested options to purchase shares of common stock of the Company held
by him upon the occurrence of certain events. The expense related to variable
accounting treatment for officer options increased by $715,061 to $880,696 in
the year to date 2002 period from $165,635 in the year to date 2001 period. This
was due to an increase in the market price of the Company's common stock and an
increase in the number of vested options outstanding. Due to the terms of the
options, changes in the market price of the Company's common stock, in either
direction, result in a corresponding expense or benefit.

Interest Expense

Interest  expense  decreased  by $30,039,  or 12%, in the year to date 2002
period to $226,485 from  $256,524 in the year to date 2001 period.  The decrease
in interest expense was primarily attributable to reductions in convertible debt
and reductions in LIBOR  partially  offset by interest  charges  relating to the
conversion of the accrued and unpaid interest on the Spotless Convertible Note.

Provision for Income Taxes

The provision for income taxes increased by $1,945,059 to $2,425,314 in the
year to date 2002 period from $480,255 in the year to date 2001 period. The
increase was primarily attributable to increased taxable income in the year to
date 2002 period and the establishment of a 100% valuation allowance related to
temporary differences between book and tax income that was partially offset by
the utilization of federal and state net operating losses of approximately
$500,000.

Net Income

Net income increased by $950,581, or 60%, to $2,531,783 in the year to date
2002 period from  $1,581,202  in the year to date 2001 period.  The increase was
the result of all the factors discussed above.

Dividends

Dividends on preferred  stock increased by $390,719 to $449,219 in the year
to date 2002 period from $58,500 in the year to date 2001 period. As a result of
Acquisition Corp.'s decision to exercise its right to convert its preferred
stock and in accordance with the terms of the Company's Series B preferred
stock, an additional 1,149,174 shares of the Company's common stock were issued
to Acquisition Corp. The additional shares of common stock issued to Acquisition
Corp. were calculated based upon a formula that takes into consideration the
value of the Series B preferred stock on the date of issuance and the number of
days elapsed from the date of the issuance of the Series B preferred stock
through the conversion date. The issuance of the additional shares of common
stock was recorded as a dividend of $390,719.

                                       14

<PAGE>


LIQUIDITY AND CAPITAL RESOURCES AND RELATED PARTY TRANSACTIONS

As of April 2, 2002, the Company had an accumulated deficit of $31,676,512.
The Company has financed its operations to date primarily through issuance of
debt and equity securities, through short-term borrowings from its majority
shareholder, Spotless Plastics (USA), Inc. ("Spotless") and through cash
generated from operations. In the opinion of management, the Company expects to
have sufficient working capital to fund current operations for the next twelve
months. However, market conditions and their effect on the Company's liquidity
may restrict the Company's use of cash. In the event that sufficient positive
cash flow from operations is not generated, the Company may need to seek
additional financing from Spotless, although Spotless is under no legal
obligation to provide such funds. The Company currently has no credit facility
for additional borrowing.

The above factors raise  substantial  doubt as to the Company's  ability to
continue as a going concern. The Company's financial statements have been
prepared assuming that the Company will continue as a going concern. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

After the terrorist attack on the World Trade Center on September 11, 2001,
the demand for the Company's emergency and catastrophe response services
increased dramatically. As a result of this increased demand, the Company
recorded revenues of approximately $16,200,000 for remediation services
performed in downtown Manhattan from September 13, 2001 through April 2, 2002.
Approximately $13,000,000 of this revenue has been collected by April 2, 2002.
Additionally, the Company continues to perform services related to the terrorist
attack after April 2, 2002. The Company believes that additional revenues from
such services will be generated in the foreseeable future and that the expected
receipt of these revenues will favorably impact its liquidity, although no
assurances can be made as to the expected volume or impact.

As of April 2, 2002, the Company owed Spotless $200,000 on short-term loans
to fund working capital. During the thirty-nine weeks ended April 2, 2002, in
order to address cash flow and operational concerns and to fund the increased
payroll that resulted from the greater level of work related to the World Trade
Center attack, the Company borrowed $1,750,000 from Spotless. During the
thirteen weeks ended January 1, 2002, primarily as a result of cash collected
from the World Trade Center projects, the Company repaid $2,750,000 to Spotless.
All current borrowings from Spotless bear interest at the London Interbank
Offering Rate ("LIBOR") plus 1 percent and are secured by all of the Company's
assets.

On November 16, 2001, the Company exchanged  $1,700,000 of short-term notes
payable for a demand promissory note payable to Spotless that is secured by the
Company's assets and the assets of its subsidiaries, pursuant to amendments to
existing security agreements between each of the Company and its subsidiaries
and Spotless. The promissory note had an original principal amount of $1,700,000
and accrues interest at the rate of LIBOR plus one percent (1%) per annum.
Spotless may, but is under no obligation to, lend additional amounts to the
Company under this secured promissory note. As of April 2, 2002, the Company
owed Spotless $200,000 under this promissory note.

On November 16, 2001, Spotless exercised its right to convert all principal
and accrued and unpaid interest on the $2,000,000 Convertible Promissory Note
(the "Convertible Note") issued to it by the Company in October 1999. As a
result of the conversion of the Convertible Note and the accrued and unpaid
interest, the Company issued 28,555,250 shares of its common stock to Spotless's
wholly-owned subsidiary, Windswept Acquisition Corp. ("Acquisition Corp.") in
full satisfaction of the Convertible Note and the related accrued and unpaid
interest.

Additionally,  on November 16, 2001,  Acquisition Corp. exercised its right
to convert all 9,346 shares of the Company's Series B preferred stock that the
Company issued to it in October 1999. As a result of such conversion and in
accordance with the terms of Company's Series B preferred stock, Acquisition
Corp. was issued 9,346,000 shares of the Company's common stock. As a result of
Acquisition Corp. decision to exercise their right to convert and in accordance
with the terms of the Company's Series B preferred stock, an additional
1,149,174 shares of the Company's common stock were issued to Acquisition Corp.
The additional shares of common stock issued to Acquisition Corp. were
calculated based upon a formula that takes into consideration the value of the
Series B preferred stock on the date of issuance and the number of days elapsed
from the date of the issuance of the Series B preferred stock through the
conversion date. The issuance of the additional shares

                                       15

<PAGE>


of common  stock was  recorded  as a dividend  of  $390,719.  The  dividend
represents the difference  between the fair market value of the Company's common
stock  issued on November  16, 2001 and the fair market  value of the  Company's
common stock at the date the Series B preferred stock was issued.

After giving effect to these conversions,  Spotless currently  beneficially
owns  61,335,107  shares  of  the  Company's  common  stock,   which  represents
approximately  79% of the  Company's  issued  and  outstanding  shares of common
stock.

As a result of the conversion of the Convertible Note,  options to purchase
2,811,575 shares of the Company's common stock held by Michael O'Reilly, the
President and Chief Executive Officer of the Company, immediately vested,
pursuant to the terms of an option agreement between the Company and Mr.
O'Reilly.

On March 15, 2002,  the Company  repaid  $680,000  principal  amount of 10%
convertible  notes upon their  maturity.  The repayment was funded  through cash
generated from operations and did not require any borrowings.

The Company  expects to have positive cash flow from operations to meet its
working capital needs over the next twelve months. In the event that positive
cash flow from operations is not generated, the Company may be required to seek
additional financing to meet its working capital needs. Management continues to
pursue additional funding sources. The Company anticipates revenue growth in new
and existing service areas and continues to bid on large projects, though there
can be no assurance that any of the Company's bids will be accepted. The Company
is striving to improve its gross margin and control its selling, general and
administrative expenses. There can be no assurance, however, that changes in the
Company's plans or other events affecting the Company's operations will not
result in accelerated or unexpected cash requirements, or that it will be
successful in achieving positive cash flow from operations or obtaining
additional financing. The Company's future cash requirements are expected to
depend on numerous factors, including, but not limited to: (i) the ability to
obtain environmental or related construction contracts, (ii) the ability to
generate positive cash flow from operations, and the extent thereof, (iii) the
ability to raise additional capital or obtain additional financing, and (iv)
economic conditions.

The table below  summarizes  aggregate  maturities of future  minimum lease
payments under noncancelable operating leases as of April 2, 2002:
<TABLE>
<CAPTION>
                             Total           1 Year        2-3 Years       4-5 Years       Thereafter
    <S>                    <C>              <C>             <C>             <C>             <C>
    Operating Leases       $2,120,000       $354,000        $691,000        $747,000        $328,000
</TABLE>

CASH FLOW

Net cash  provided by operating  activities  was  $2,197,224 in the year to
date 2002 period. Operations for the year to date 2002 period, after adding back
non-cash items, provided cash of $4,187,859. Accounts receivable increased by
$2,837,812 due to billings related to the World Trade Center related projects.
Accounts payable and accrued expenses and accrued payroll increased $252,658 and
$67,123, respectively, primarily as a result of the World Trade Center related
projects. Income taxes payable increased $828,069 as a result of the increased
taxable income for the period. Cash used for capital expenditures was $642,609
in the year to date 2002 period primarily relating to equipment used on the
World Trade Center related projects.

During the thirty-nine  weeks ended April 2, 2002, in order to address cash
flow and operational concerns and to fund the increased payroll that resulted
from the greater level of work related to the World Trade Center attack, the
Company borrowed $1,750,000 from Spotless. During the thirteen weeks ended
January 1, 2002, primarily as a result of cash collected from the World Trade
Center related projects, the Company repaid $2,750,000 to Spotless. A balance of
$200,000 in loans from Spotless was outstanding as of April 2, 2002. All current
borrowings from Spotless bear interest at LIBOR plus 1 percent and are secured
by all of the Company's assets.

During  the year to date  2002  period,  the  Company  repaid  $680,000  of
convertible notes and paid preferred stock dividends of $195,000.

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<PAGE>


INFLATION

Inflation has not had a material  impact on the Company's  operations  over
the past three fiscal years or during the year to date 2002 period.

SEASONALITY

Since the Company and its  subsidiaries  are able to perform their services
throughout the year, the business is not considered seasonal in nature. However,
it is affected by the timing of large contracts in certain of its service areas,
i.e.,  asbestos and mold  abatement and  construction,  as well as the timing of
catastrophes.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company is exposed to  potential  loss from market risks that may occur
as a result of changes in the market price of the Company's common stock (with
respect to the variable accounting treatment of a put option for shares of
common stock and common stock options held by an officer of the Company) and as
a result of changes in interest rates (primarily with respect to its debt
obligations to Spotless). There have been no material changes to the market risk
disclosure as reported in the Company's Transition Report on Form 10-K for the
period ended July 3, 2001.

                           PART 2 - OTHER INFORMATION

Item 1.   Legal Proceedings
          -----------------

          Reference is hereby made to Note 5 to the Consolidated Financial
          Statements in Part I - Item 1 above and to Item 3 of the Company's
          Transition Report on Form 10-K for the period from May 1, 2001 through
          July 3, 2001 and to the references therein, for a discussion of all
          material pending legal proceedings to which the Company or any of its
          subsidiaries is party.

Item 2.   Changes in Securities
          ---------------------

          Not applicable.

Item 3.   Defaults upon Senior Securities
          -------------------------------

          Not applicable

Item 4.   Submission of Matters to a Vote of Security Holders
          ---------------------------------------------------

          Not applicable

Item 5.   Other Information
          -----------------

          Not applicable.

Item 6.   Exhibits and Reports on Form 8-K
          --------------------------------

(a)       Exhibits:

          None

(b)       Reports on Form 8-K

          There were no reports on Form 8-K filed during the thirteen-week
          period ended April 2, 2002.

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<PAGE>


                                   SIGNATURES

Pursuant to the  requirements  of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.

Dated: May 15, 2002
                                        WINDSWEPT ENVIRONMENTAL GROUP, INC.




                                        By: /s/ Michael O'Reilly
                                        MICHAEL O'REILLY,
                                        President and Chief Executive Officer
                                        (Principal Executive Officer)

                                        By: /s/ Charles L. Kelly, Jr.
                                        CHARLES L. KELLY, JR.
                                        Chief Financial Officer
                                        (Principal Financial Officer)



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