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 March 28, 2006

                                       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: 000-17072

                       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 Principal Executive Offices) (Zip Code)

                                 (631) 434-1300
                                 --------------
              (Registrant's Telephone Number, Including Area Code)

      Indicate by check mark whether the registrant: (1) has 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 |_| No |X| (This report is being filed late)

      Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, or a non-accelerated filer. See definition of
"accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange
Act. (check one):

Large accelerated filer |_|   Accelerated filer |_|   Non-accelerated filer |X|

      Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act.)

                                                                  Yes |_| No |X|

      Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest participle date. The number of shares of
Common Stock, par value $.0001, outstanding on May 23, 2006 was 33,755,620.

<PAGE>

                                    CONTENTS

PART I.  FINANCIAL INFORMATION................................................3

Item 1.  Unaudited Financial Statements:

         Consolidated Balance Sheets at March 28, 2006 and June 28, 2005......3

         Consolidated Statements of Operations for the Thirteen and
         Thirty-Nine Weeks Ended March 28, 2006 and March 29, 2005............4

         Consolidated Statement of Stockholders' Equity.......................5

         Consolidated  Statements  of Cash Flows for the Thirty-Nine Weeks
         Ended  March 28, 2006 and March 29, 2005.............................6

         Notes to Consolidated Financial Statements...........................7

Item 2.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations...............................................16

Item 3.  Quantitative and Qualitative Disclosures about Market Risk..........30

Item 4.  Controls and Procedures.............................................31

PART II. OTHER INFORMATION...................................................32

Item 1.  Legal Proceedings...................................................32

Item 2.  Unregistered Sale of Equity Securities and Use of Proceeds..........32

Item 3.  Defaults upon Senior Securities.....................................32

Item 4.  Submission of Matters to a Vote of Security Holders.................32

Item 5.  Other Information...................................................32

Item 6.  Exhibits............................................................33

Signatures...................................................................34


                                       2
<PAGE>

                                     PART I
                              FINANCIAL INFORMATION

Item 1. Financial Statements.

                       WINDSWEPT ENVIRONMENTAL GROUP, INC.
                     CONSOLIDATED BALANCE SHEETS (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                                 March 28,       June 28,
                                                                                                   2006            2005
                                                                                               ------------    ------------
                                                                                                (unaudited)     (restated)
<S>                                                                                            <C>             <C>
ASSETS:
CURRENT ASSETS:
   Cash                                                                                        $  2,664,174    $    512,711
   Accounts receivable, net of allowance for doubtful accounts of $2,857,831 and $1,507,831,
      respectively                                                                               12,541,422       6,755,338
   Inventory                                                                                        233,743         146,079
   Costs and estimated earnings in excess of billings on uncompleted contracts                      219,705          30,466
   Prepaid expenses and other current assets                                                        201,377          47,253
                                                                                               ------------    ------------
   Total current assets                                                                          15,860,421       7,491,847
                                                                                               ------------    ------------

PROPERTY AND EQUIPMENT, net of accumulated depreciation and amortization of $6,955,813
   and $6,386,731, respectively                                                                   2,976,992       2,242,645
                                                                                               ------------    ------------

OTHER ASSETS
   Deferred financing costs                                                                       2,669,796              --
   Other                                                                                            222,971         322,046
                                                                                               ------------    ------------
   Total other assets                                                                             2,892,767         322,046
                                                                                               ------------    ------------

TOTAL                                                                                          $ 21,730,180    $ 10,056,538
                                                                                               ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT):
CURRENT LIABILITIES:
   Accounts payable                                                                            $  1,022,295    $  1,174,840
   Liability for repurchased accounts receivable                                                    189,197              --
   Accrued expenses                                                                               1,433,285       1,611,256
   Secured note payable to a related party                                                               --       5,000,000
   Current portion of secured convertible note payable                                              280,973              --
   Billings in excess of cost and estimated earnings on uncompleted contracts                        28,400          83,316
   Accrued payroll and related fringe benefits                                                      488,327         528,867
   Current maturities of long-term debt                                                             209,020         169,612
   Income taxes payable                                                                           3,884,060         138,579
   Other current liabilities                                                                        974,629         489,468
                                                                                               ------------    ------------
   Total current liabilities                                                                      8,510,186       9,195,938
                                                                                               ------------    ------------

LONG-TERM DEBT:
   Secured convertible note payable                                                                 435,661              --
   Secured note payable                                                                             500,000              --
   Other                                                                                            222,802         197,400
                                                                                               ------------    ------------
      Total long-term debt                                                                        1,158,463         197,400
                                                                                               ------------    ------------

COMMITMENTS AND CONTINGENCIES
   Redeemable Common Stock                                                                               --          76,089
                                                                                               ------------    ------------

SERIES A REDEEMABLE CONVERTIBLE PREFERRED STOCK, $.01 par value; 1,300,000 shares
   authorized and outstanding at March 28, 2006 and June 28, 2005                                 1,300,000       1,300,000
                                                                                               ------------    ------------

STOCKHOLDERS' EQUITY (DEFICIT):
   Series B preferred stock, $.01 par value; 50,000 shares authorized; 0 shares
      outstanding                                                                                        --              --
   Nondesignated preferred stock, no par value; 8,650,000 shares
      authorized; 0 shares outstanding at March 28, 2006 and June 28, 2005                               --              --
   Common stock, $.0001 par value; 150,000,000 shares authorized; 33,755,620 shares
      outstanding at March 28, 2006 and 77,936,358 shares outstanding at June 28, 2005                3,375           7,794
   Additional paid-in-capital                                                                    42,770,070      33,944,017
   Accumulated deficit                                                                          (32,011,914)    (34,664,700)
                                                                                               ------------    ------------
   Total stockholders' equity (deficit)                                                          10,761,531        (712,889)
                                                                                               ------------    ------------

TOTAL                                                                                          $ 21,730,180    $ 10,056,538
                                                                                               ============    ============
</TABLE>

See notes to consolidated financial statements.


                                       3
<PAGE>

                       WINDSWEPT ENVIRONMENTAL GROUP, INC.
                CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>
                                                           Thirteen Weeks Ended               Thirty -Nine Weeks Ended
                                                   ----------------------------------      ----------------------------------
                                                   March 28, 2006      March 29, 2005      March 28, 2006      March 29, 2005
                                                   --------------      --------------      --------------      --------------
<S>                                                 <C>                 <C>                 <C>                 <C>
Revenues                                            $   7,213,546       $   4,801,832       $  30,092,227       $  17,639,617

Cost of revenues                                        3,778,946           3,433,054          16,354,923          12,165,045
                                                    -------------       -------------       -------------       -------------

Gross profit                                            3,434,600           1,368,778          13,737,304           5,474,572
                                                    -------------       -------------       -------------       -------------

Operating expenses (income):
Selling, general and administrative expenses            1,616,919           1,210,884           5,626,626           3,946,334
                                                    -------------       -------------       -------------       -------------

Income from operations                                  1,817,681             157,894           8,110,678           1,528,238
                                                    -------------       -------------       -------------       -------------

Other expense (income):
   Interest expense                                       683,677              53,577           1,912,087             320,033
   Other expense (income), net                            (43,916)            (29,891)            (21,405)            (31,445)
                                                    -------------       -------------       -------------       -------------
   Total other expense (income)                           639,761              23,686           1,890,682             288,588
                                                    -------------       -------------       -------------       -------------

Income before provision for income taxes                1,177,920             134,208           6,219,996           1,239,650
                                                    -------------       -------------       -------------       -------------

Provision for income taxes                                399,854               5,449           3,567,210              51,697
                                                    -------------       -------------       -------------       -------------

Net income                                                778,066             128,759           2,652,786           1,187,953

Dividends on preferred stock                               19,500              19,500              58,500              58,500
                                                    -------------       -------------       -------------       -------------

Net income attributable to common
   shareholders                                     $     758,566       $     109,259       $   2,594,286       $   1,129,453
                                                    =============       =============       =============       =============

Basic and diluted net income per common share:
Basic                                               $         .02       $         .00       $         .08       $         .01
                                                    =============       =============       =============       =============
Diluted                                             $         .01       $         .00       $         .02       $         .01
                                                    =============       =============       =============       =============

  Weighted average number of common shares
     outstanding:
Basic                                                  33,755,620          77,936,358          33,647,390          77,936,358
                                                    =============       =============       =============       =============
Diluted                                               182,937,616          78,039,266         183,575,334          78,007,077
                                                    =============       =============       =============       =============
</TABLE>

See notes to consolidated financial statements.


                                       4
<PAGE>

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

<TABLE>
<CAPTION>
                                                             Common Stock
                                                      ---------------------------
                                                        Number of                    Additional     Accumulated
                                                         Shares       Par Value    Paid-in Capital    Deficit         Total
                                                      ------------   ------------   ------------    ------------    ------------
<S>                                                    <C>           <C>            <C>             <C>             <C>
Balance at June 28, 2005                                77,936,358   $      7,794   $ 33,944,017    $(34,664,700)   $   (712,889)

Laurus Financing:
       Allocation of proceeds to warrants and
       options                                                  --             --      2,200,927              --       2,200,927

       Allocation of proceeds to beneficial
       conversion feature                                       --             --      2,200,927              --       2,200,927

       Assumed exercise of shares available for
       nominal consideration, including partial
       actual exercise to purchase 1,500,000
       shares                                            1,684,405            168            (18)             --             150

       Allocation of proceeds to beneficial
       conversion feature on second increase of
       financing                                                --             --         38,889              --          38,889

       Allocation of proceeds to beneficial
       conversion feature on third increase of
       financing                                                --             --        650,000              --         650,000

       Allocation of proceeds to beneficial
       conversion feature on fourth increase of
       financing                                                --             --      1,350,000              --       1,350,000

Spotless Transactions:
       Cancellation of Spotless shares, net of
       shares sold to Michael O'Reilly                 (45,865,143)        (4,587)         4,587              --              --

       Early extinguishment of Spotless Note,
       accrued interest and administrative fees
       (net of tax effect of $731,640)                          --             --      1,230,228              --       1,230,228

       Additional taxes attributable to
       cancellation of Spotless debt                            --             --       (107,434)             --        (107,434)

       Surrender of Redemption Right with
       respect to Common Stock                                  --             --         76,089              --          76,089
       Value of Spotless shares sold to Michael
       O'Reilly less consideration                              --             --      1,195,708              --       1,195,708

Options granted to preferred stockholders for
forbearance of mandatory redemption and
dividends                                                       --             --         44,650              --          44,650

Dividends on Series A preferred stock                           --             --        (58,500)             --         (58,500)

Net income                                                      --             --             --       2,652,786       2,652,786
                                                      ------------   ------------   ------------    ------------    ------------

Balance at March 28, 2006                               33,755,620   $      3,375   $ 42,770,070    $(32,011,914)   $ 10,761,531
                                                      ============   ============   ============    ============    ============
</TABLE>

See notes to consolidated financial statements.


                                       5
<PAGE>

                       WINDSWEPT ENVIRONMENTAL GROUP, INC.
                CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                            Thirty-Nine Weeks Ended
                                                                                        -------------------------------
                                                                                        March 28, 2006   March 29, 2005
                                                                                        --------------   --------------
                                                                                          (unaudited)      (unaudited)
<S>                                                                                       <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                                                             $ 2,652,786      $ 1,187,953

   Adjustments to reconcile net income to net cash provided by
      operating activities:
      Depreciation and amortization                                                           569,082          498,200
      Provision for doubtful accounts, net                                                  1,350,000          662,691
      Amortization of deferred financing cost                                                 884,734               --
      Amortization of beneficial conversion                                                   496,429               --
   Changes in operating assets and liabilities:
      Accounts receivable                                                                  (6,946,888)      (1,441,666)
      Inventory                                                                               (87,664)          28,850
      Costs and estimated earnings in excess of billings on uncompleted contracts            (189,239)         503,317
      Income tax refund                                                                            --          641,795
      Prepaid expenses and other current assets                                              (154,124)          21,549
      Other assets                                                                             99,075           32,391
      Accounts payable and accrued expenses                                                  (177,136)        (715,309)
      Accrued payroll and related fringe benefits                                             (40,540)        (284,430)
      Income tax payable                                                                    2,906,407               --
      Other current liabilities                                                               485,161           99,577
      Billings in excess of costs and estimated earnings on uncompleted contracts             (54,916)        (192,359)
                                                                                          -----------      -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES                                                   1,793,167        1,042,559
                                                                                          -----------      -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchases of property and equipment                                                     (1,085,517)         (83,303)
                                                                                          -----------      -----------
NET CASH USED IN INVESTING ACTIVITIES                                                      (1,085,517)         (85,303)
                                                                                          -----------      -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Principal payments of long-term debt                                                      (153,102)        (258,532)
   Principal payments of secured notes payable                                               (689,063)          27,413
   Exercise of stock options                                                                      150               --
   Payments for deferred financing costs                                                   (2,314,172)              --
   Repayment of secured note payable to a related party                                    (2,750,000)              --
   Proceeds from secured notes payable                                                      7,350,000               --
                                                                                          -----------      -----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                                         1,443,813         (231,119)
                                                                                          -----------      -----------

NET INCREASE IN CASH                                                                        2,151,463          728,137

CASH - BEGINNING OF PERIOD                                                                    512,711           63,562
                                                                                          -----------      -----------

CASH - END OF PERIOD                                                                      $ 2,664,174      $   791,699
                                                                                          ===========      ===========

Cash paid during the period for:
   Interest                                                                               $   251,671      $   209,220
                                                                                          ===========      ===========
   Income taxes                                                                           $        --      $    43,250
                                                                                          ===========      ===========

SUPPLEMENTAL SCHEDULE OF NON-CASH ACTIVITIES:
   Financing cost related to beneficial conversion value of secured note                  $ 4,239,816      $        --
                                                                                          ===========      ===========
   Capitalized gain on extinguishment of secured note payable - related party             $ 1,122,794      $        --
                                                                                          ===========      ===========
   Financing cost related to warrant and options                                          $ 2,200,927      $        --
                                                                                          ===========      ===========
   Capitalized cancellation of put right relating to redeemable common stock              $    76,089      $        --
                                                                                          ===========      ===========
   Property and equipment acquired through financing                                      $   217,912      $        --
   Financing cost related to guaranties of CEO remunerated through sale of discounted     ===========      ===========
      shares                                                                              $ 1,195,708      $        --
                                                                                          ===========      ===========
   Financing cost related to issuance of options to preferred stockholders                $    44,650      $        --
                                                                                          ===========      ===========
   Account receivable repurchased in connection with refinancing                          $   189,197      $        --
                                                                                          ===========      ===========

</TABLE>

See notes to consolidated financial statements

                                       6
<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 subsidiaries, Trade-Winds Environmental
      Restoration, Inc. ("Trade-Winds") and North Atlantic Laboratories, Inc.
      All intercompany 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 28, 2006, the results of operations for the thirteen and thirty-nine
      weeks ended March 28, 2006 and March 29, 2005 and cash flows for the
      thirty-nine weeks ended March 28, 2006 and March 29, 2005, have been
      included. Certain prior period amounts have been reclassified to conform
      to the March 28, 2006 presentation.

      The results for the thirteen and thirty-nine weeks ended March 28, 2006
      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 fiscal year ended June
      28, 2005, as amended.

      The Company has recognized the value of the equity instruments issued in
      connection with financing transactions described in Note 6 in accordance
      with Accounting Principles Board Opinion No. 14 and Emerging Issues Task
      Force (EITF) Consensuses 98-5 and 00-27. The intrinsic value of the
      options and the fair value of the warrants are calculated and the
      proportionate values of the resulting debt and equity components have been
      recognized as debt discounts with equivalent credits to equity. The
      beneficial conversion features of the warrants, including the effective
      values under EITF 00-27, have also been recognized. All of the discounts
      are being amortized over the life of the debt in accordance with the
      latter pronouncement.

2.    EMPLOYEE STOCK COMPENSATION--The Company's three stock option plans, which
      are shareholder approved, permit the grant of share options to its
      employees for up to 5,150,000 shares of common stock as stock
      compensation. All stock options under the plans are granted at the fair
      market value of the common stock at the grant date. Employee stock options
      vest immediately and generally expire 10 years from the grant date.

      Effective December 28, 2005, the Company's Plans are accounted for in
      accordance with the recognition and measurement provisions of Statement of
      Financial Accounting Standards ("FAS") No. 123 (revised 2004), Share-Based
      Payment ("FAS 123(R)"), which replaces FAS No. 123, Accounting for
      Stock-Based Compensation, and supersedes Accounting Principles Board
      Opinion ("APB") No. 25, Accounting for Stock Issued to Employees, and
      related interpretations. FAS 123(R) requires compensation costs related to
      share-based payment transactions, including employee stock options, to be
      recognized in the financial statements. In addition, the Company adheres
      to the guidance set forth within Securities and Exchange Commission
      ("SEC") Staff Accounting Bulletin ("SAB") No. 107, which provides the
      Staff's views regarding the interaction between SFAS No. 123(R) and
      certain SEC rules and regulations and provides interpretations with
      respect to the valuation of share-based payments for public companies.

      Prior to December 28, 2005, the Company accounted for similar transactions
      in accordance with APB No. 25 which employed the intrinsic value method of
      measuring compensation cost. Accordingly, compensation expense was not
      recognized for fixed stock options if the exercise price of the option
      equaled or exceeded the fair value of the underlying stock at the grant
      date.

      While FAS No. 123 encouraged recognition of the fair value of all
      stock-based awards on the date of grant as expense over the vesting
      period, companies were permitted to continue to apply the intrinsic
      value-based method of accounting prescribed by APB No. 25 and disclose
      certain pro-forma amounts as if the fair value approach of SFAS No. 123
      had been applied. In December 2002, FAS No. 148, Accounting for
      Stock-Based Compensation-Transition and Disclosure, an amendment of SFAS
      No. 123, was issued, which, in addition to providing alternative methods
      of transition for a voluntary change to the fair value method of
      accounting for stock-based employee compensation, required more prominent
      pro-forma disclosures in both the annual and interim financial statements.
      The Company complied with these disclosure requirements for all applicable
      periods prior to December 28, 2005.


                                       7
<PAGE>

      In adopting FAS 123(R), the Company applied the modified prospective
      approach to transition. Under the modified prospective approach, the
      provisions of FAS 123(R) are to be applied to new awards and to awards
      modified, repurchased or cancelled after the required effective date.
      Additionally, compensation cost for the portion of awards for which the
      requisite service has not been rendered that are outstanding as of the
      required effective date shall be recognized as the requisite service is
      rendered on or after the required effective date. The compensation cost
      for that portion of awards shall be based on the grant-date fair value of
      those awards as calculated for either recognition or pro-forma disclosures
      under FAS 123(R).

      Despite the adoption of FAS 123(R), the Company's results for the thirteen
      weeks ended March 28, 2006 did not include share-based compensation
      expense as all options were fully vested as of December 28, 2005. Stock
      compensation expense recorded under APB No. 25 in the Consolidated
      Statements of Operations for the thirteen weeks ended March 29, 2005
      totaled $0.

      Stock option compensation expense in 2006 is the estimated fair value of
      options granted amortized on a straight-line basis over the requisite
      vesting period for entire portion of the award.

      The following table addresses the additional disclosure requirements of
      FAS 123(R) in the period of adoption. The table illustrates the effect on
      net income and earnings per share as if the fair value recognition
      provisions of FAS No. 123 had been applied to all outstanding and unvested
      awards in the prior year comparable period.

<TABLE>
<CAPTION>
                                                                              For the thirteen weeks  For the thirty-nine
                                                                                      ended               weeks ended
                                                                                  March 29, 2005       March 29, 2005
                                                                              ----------------------  -------------------
        <S>                                                                              <C>                  <C>
         Net  income  attributable  to  common  stockholders,  as reported               $   109,259          $ 1,129,453
         Deduct:   Total   stock   based   compensation   expense
         determined  under the fair  value  based  method for all
         awards (no tax effect)                                                               25,937               77,807
                                                                                         -----------          -----------
         Pro forma net income attributable to common stockholders                        $    83,322          $ 1,051,646
                                                                                         ===========          ===========
         Net income per share:
            Basic and diluted - as reported                                              $       .00          $       .01
                                                                                         ===========          ===========
            Basic and diluted - pro forma                                                $       .00          $       .01
                                                                                         ===========          ===========
</TABLE>

      The Company granted no options under the Plan during the thirteen weeks
      ended March 28, 2006.

      The following table represents our stock options granted, exercised and
      forfeited during the third quarter of 2006.


                                       8
<PAGE>

<TABLE>
<CAPTION>
                                                      Weighted Average       Weighted Average          Aggregate
                                       Number of     Exercise Price per    Remaining Contractual    Intrinsic Value
               Stock Options            Shares             Share                   Term                per Share
         -----------------------       -----------   ------------------    ---------------------    ---------------
        <S>                            <C>                  <C>                    <C>                  <C>

         Outstanding at December
         28, 2005                      26,806,273           $  .09                    --                    --
           Granted                             --               --                    --                    --
           Exercised                           --               --                    --                    --
           Forfeited/expired                   --               --                    --                    --
         Outstanding at March 28,
         2006                          26,806,273           $  .09                  3.30                $  .07
                                       ==========           ======                ======                ======
         Exercisable at March 28,
         2006                          26,806,273           $  .09                  3.30                $  .07
                                       ==========           ======                ======                ======
</TABLE>


      No options were exercised during the third quarter of 2006 and 2005.

3.    NET INCOME PER COMMON SHARE--The calculation of basic and diluted net
      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."


                                       9
<PAGE>

      The following table sets forth the computation of the basic and diluted
      net income per share for the thirteen and thirty-nine weeks ended March
      28, 2006 and March 29, 2005, respectively:

<TABLE>
<CAPTION>
                                       Thirteen Weeks Ended            Thirty-Nine Weeks Ended
                                 -------------------------------   -------------------------------
                                 March 28, 2006   March 29, 2005   March 28, 2006   March 29, 2005
                                 --------------   --------------   --------------   --------------
<S>                              <C>              <C>              <C>              <C>
Numerator:
Net income attributable to
   common shareholders           $    758,566     $    109,259     $  2,594,286     $  1,129,453
Plus:
   Series A Preferred Stock
      Dividends                        19,500           19,500           58,500           58,500
   Interest on Convertible
      Debt                            179,213               --          496,429               --
                                 ------------     ------------     ------------     ------------
   Net Income Attributable
      to common
      shareholders and
      Assumed Conversion         $    957,279     $    128,759     $  3,149,215     $  1,187,953
                                 ============     ============     ============     ============
Denominator:
   Share reconciliation:
   Shares used for basic
      income per share             33,755,620       77,936,358       33,647,390       77,936,358
   Effect of dilutive items:
      Stock options/warrants       54,670,329          102,908       55,416,277           70,719
   Convertible Debt                81,666,667               --       81,666,667               --
   Interest on Convertible
      Debt                         11,545,000               --       11,545,000               --
   Series A Convertible
      Preferred Stock               1,300,000               --        1,300,000               --
                                 ------------     ------------     ------------     ------------
   Shares used for dilutive
       income per share           182,937,616       78,039,266      183,575,334       78,007,077
                                 ============     ============     ============     ============
Net income per share:
     Basic                       $        .02     $        .00     $        .08     $        .01
                                 ============     ============     ============     ============
     Diluted                     $        .01     $        .00     $        .02     $        .01
                                 ============     ============     ============     ============
</TABLE>


      The dilutive net income per share computations for the thirteen and
      thirty-nine week periods ended March 28, 2006 assume an increase in the
      authorized capital of the Company sufficient to accommodate the full
      exercise and conversion of outstanding options, warrants and the Laurus
      Note.

      The dilutive net income per share computations for the thirteen and
      thirty-nine week periods ended March 28, 2006 exclude 2,700,000 and
      2,700,000 shares, respectively, related to stock options because the
      effect of including them would be anti-dilutive. The dilutive net income
      per share computations for the thirteen week and thirty-nine week periods
      ended March 29, 2005 exclude 8,136,309 and 8,136,309 shares, respectively,
      related to stock options and warrants because the effect of including them
      would be anti-dilutive. For the periods ended March 29, 2005, 1,300,000
      shares of common stock issuable upon the exercise of the Series A
      Redeemable Convertible Preferred Stock were excluded from diluted earnings
      per share because the effect of including them would be anti-dilutive.


4.    PROVISION FOR INCOME TAXES--The provision for income taxes for the
      thirteen and thirty-nine weeks ended March 28, 2006 and March 29, 2005
      consists of the following:

<TABLE>
<CAPTION>
                            Thirteen Weeks Ended              Thirty-Nine Weeks Ended
                       ------------------------------   --------------------------------
                       March 28, 2006  March 29, 2005   March 28, 2006   March  29, 2005
                       --------------  --------------   --------------   ---------------
<S>                     <C>              <C>              <C>              <C>
Federal - current       $  282,230       $    2,860       $2,517,854       $   43,930
State - current            117,624            2,589        1,049,356            7,767
                        ----------       ----------       ----------       ----------
Total                   $  399,854       $    5,449       $3,567,210       $   51,697
                        ==========       ==========       ==========       ==========
</TABLE>

      The effective rate for income taxes differs from the statutory rate
      primarily as a result of the utilization of federal and state net
      operating losses. 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.

5.    CONTINGENCIES--On August 5, 2004, the Company commenced an action in the
      New York State Supreme Court, County of New York, seeking to collect
      approximately $1,255,000 of contractual billings relating to a large roof
      tar removal project. On October 15, 2004, the Economic Development
      Corporation filed an answer, denying the Company's claims. On November 4,
      2004, the Economic Development Corporation filed an amended answer denying
      the Company's claims and asserting counterclaims in unspecified amounts
      seeking liquidated damages, reimbursement for consultant's fees and breach
      of contract. The case is currently in pre-trial discovery. This aggregate
      amount of $1,255,000 was recorded when billed as revenues of $32,561,
      $726,257 and $496,182 during the Company's fiscal years ended July 2,
      2002, July 1, 2003 and June 29, 2004, respectively, and is included in the
      Company's accounts receivable because management believes that the
      realization of the full amount thereof is probable.

      In April 2003, the Company commenced a remediation project in New York
      City for a local utility to remove sediment from an oil storage tank.
      During the course of the project, the sediment in the tank was found to be
      substantially different than the sediment that the customer represented to
      be in the tank prior to the inception of the project. The Company
      continued to work on the project so as not to default on the terms which
      it understood to exist with the customer. The additional costs incurred to
      remove this matter were approximately $1,600,000. As of June 28, 2005, the
      Company recognized revenue of approximately $1,700,000 with respect to the
      original scope of this project. All amounts due under the original
      contract have been paid. The Company has not recognized the revenue
      associated with its claim because the amount thereof is not presently
      reliably estimable. The project has been completed and the customer has
      refused to acknowledge its liability for these additional charges billed.
      On October 22, 2004, the Company commenced an action against a local
      utility company in the New York State Supreme Court, County of New York,
      claiming that it is entitled to approximately $2,000,000 of contractual
      billings and related damages in connection with this matter. On December
      6, 2004, the local utility company filed an answer, denying its claims.
      The case is currently in pre-trial discovery.

      The Company is a plaintiff in approximately 17 lawsuits, including those
      described above, claiming an aggregate of approximately $7,173,000
      pursuant to which it is seeking to collect amounts it believes owed to it
      by customers that are included in its accounts receivable, primarily with
      respect to changed work orders or other modifications to its scope of
      work. The defendants in these actions have asserted counterclaims for an
      aggregate of approximately $500,000.

      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.


                                       11
<PAGE>

6.    FINANCING AND RELATED PARTY TRANSACTIONS--As of June 28, 2005, the Company
      owed Spotless Plastics (USA) Inc. $5,000,000 under the Spotless Loan, in
      the original principal amount of $1,700,000. The Spotless note was
      collateralized by all of the Company's assets. During the fiscal year
      ended June 29, 2004, the Company borrowed $3,300,000 from Spotless for
      working capital requirements and to fund losses. During the fiscal year
      ended July 1, 2003, the Company borrowed $2,325,000 from Spotless for
      working capital requirements and to fund certain fixed asset purchases.
      The Company repaid $825,000 to Spotless in the fiscal year ended July 1,
      2003.

      As of June 28, 2005, Spotless was due payment from third parties for
      accounts receivable in the amount of $158,469 purchased under its account
      receivable agreement dated February 5, 2004, with the Company. As of such
      date, Spotless had purchased from the Company an aggregate amount of its
      accounts receivable equaling $4,991,252 at an aggregate purchase discount
      of $911,202, for an aggregate purchase price of $4,080,050. The aggregate
      amount of the purchase discounts and monthly discount fees under this
      agreement were $255,585 for the fiscal year ending June 28, 2005. Pursuant
      to the account receivable finance agreement, Spotless was able to purchase
      certain of the Company's accounts receivable without recourse for cash,
      subject to certain terms and conditions. Pursuant to an administrative
      services arrangement, Spotless also provided the Company with certain
      administrative services including the services of its former vice
      president of finance and administration. During the Company's fiscal years
      2005, 2004 and 2003, the Company was charged by Spotless an administrative
      fee of $84,138, $131,556 and $101,256, respectively, of which $84,138
      remained unpaid and included in accrued expenses as of June 28, 2005. On
      June 30, 2005, Spotless agreed to forgive the $84,138 in administrative
      fees that was outstanding.

      On June 30, 2005, the Company entered into a financing transaction with
      Laurus Master Fund, Ltd. pursuant to the terms of a securities purchase
      agreement, as amended, and related documents. Under the terms of the
      financing transaction, the Company issued to Laurus:

      o     pursuant to the terms of a secured convertible term note, dated June
            30, 2005, a three-year note in the principal amount of $5,000,000.
            The Note bears interest at the prime rate as published in the Wall
            St. Journal plus 2% (but not to less than 7.25%), decreasing by 2%
            (but not less than 0%) for every 25% increase in the Market Price
            (as defined therein) of the Company's common stock above the fixed
            conversion price of $.09 following the effective date(s) of the
            registration statement or registration statements covering the
            shares of the Company's common stock underlying the Note and the
            warrant issued to Laurus;

      o     pursuant to the terms of an Option Agreement, dated June 30, 2005, a
            twenty-year option to originally purchase 30,395,179 shares of the
            Company's common stock at a purchase price of $0.0001 per share; and


      o     pursuant to the terms of a Common Stock Purchase Warrant, dated June
            30, 2005 a seven-year common stock purchase warrant to purchase
            13,750,000 shares of the Company's common stock at a purchase price
            of $.10 per share.

      After consummating the transaction on June 30, 2005 and prior to March 28,
      2006, Laurus subsequently provided additional financing to the Company on
      the same terms and conditions as follows:

      o     On July 13, 2005, Laurus loaned the Company an additional $350,000,
            and the Company amended and restated the Note to be in the principal
            amount of $5,350,000. The shares issuable upon conversion of the
            face value of this amended and restated Note had a beneficial
            conversion feature valued at $38,889 and was allocated to additional
            paid-in capital. The remaining $311,111 was added to the carrying
            value of the Note on the Company's balance sheet.

      o     On September 9, 2005, Laurus loaned the Company an additional
            $650,000, and the Company further amended and restated the Note to
            be in the principal amount of $6,000,000. The shares issuable upon
            conversion of the additional face value of this amended and restated
            Note had a beneficial conversion feature amounting to $650,000,
            which was allocated to additional paid-in capital. As a result, the
            carrying value thereof was $0.


                                       12
<PAGE>

      o     On October 6, 2005, Laurus loaned the Company an additional
            $1,350,000, and the Company further amended and restated the Note to
            be in the principal amount of $7,350,000. The shares issuable upon
            conversion of the additional face value of this amended and restated
            Note had a beneficial conversion feature amounting to $1,350,000,
            which was allocated to additional paid-in capital. As a result, the
            carrying value thereof of $0. (unaudited)

      The Note, in the principal amount of $6,201,561 as of May 5, 2006, is the
      only note issued to Laurus by the Company that is currently outstanding.
      Principal repayments were due to commence starting November 1, 2005 but,
      in November 2005, Laurus agreed to defer the initial repayment date until
      January 1, 2006. The principal monthly payments due November 1, 2005 and
      December 1, 2005 in the aggregate amount of $495,375 were deferred until
      June 30, 2008. Interest is payable monthly and started to accrue on August
      1, 2005.

      In conjunction with the Laurus transactions, the Company entered into a
      registration rights agreement, as amended, which obligated it, among other
      things, (1) to have the registration statement filed on October 3, 2005
      and registering a portion of the shares owned or underlying alternative
      securities owned by Laurus declared effective by the SEC by June 15, 2006
      and (2) to have a second registration statement, containing the Company's
      fiscal 2006 audited financial statements and including all of the shares
      covered by the securities owned by Laurus, declared effective by the SEC
      by December 30, 2006. If the Company fails to meet either deadline, it
      will be subject to a liquidated damages claim equal to 1.5% of the
      principal outstanding on the Note, for the first thirty days, prorated for
      partial periods (currently $3,100 per day based upon the $6,201,561
      principal amount of the Note currently outstanding), and then 2.0% of the
      principal outstanding on the Note, for each thirty day period, prorated
      for partial periods (currently $4,134 per day).

      The Company also issued a subordinated secured promissory note to Spotless
      in the principal amount of $500,000, bearing interest at LIBOR plus 1%.
      Pursuant to the terms of the note the Company issued to Spotless,
      amortized payments of $50,000 per month become due and payable beginning
      July 1, 2007 until all amounts due thereunder are fully paid, so long as
      the Company is not in default on the Laurus Note. The note the Company
      issued to Spotless, together with the $2,750,000 payment to Spotless
      referred to above, fully satisfied all of the Company's financial
      obligations to Spotless. In connection with this financing transaction,
      the Company, along with Spotless, terminated the account receivable
      finance agreement between them, except with respect to the Company's
      obligation to continue to collect and remit payment of accounts receivable
      that Spotless purchased under the agreement. As part of the transactions,
      Spotless assigned to the Company an account receivable with a balance of
      $189,197 and to the Company agreed to pay this amount to Spotless no later
      than June 30, 2006.

      On June 30, 2005, Messrs. Peter Wilson, John Bongiorno, Ronald Evans and
      Brian Blythe, who were nominees of Spotless, resigned as directors of the
      Company, and Mr. Charles L. Kelly, Jr., also a Spotless nominee, resigned
      as the Company's chief financial officer and as a director. In addition,
      Mr. Joseph Murphy, an employee of Spotless, resigned as the Company's vice
      president of finance and administration and secretary. Pursuant to a
      transition services agreement, Spotless agreed to provide the services of
      Mr. Murphy to the Company, including in relation to advice in the areas
      of:

      o     administration;
      o     accounting, finance and risk management; and
      o     assisting in the preparation and review of its reports filed with
            the SEC

      during a six-month transitional process for a fee of $5,000 per month and
      a payment of $25,000 to Mr. Murphy at the end of the transitional period.

      On June 30, 2005, Spotless, through one of its wholly owned subsidiaries,
      sold 15,469,964 shares of common stock of the Company to Michael O'Reilly,
      the Company's president and chief executive officer, in consideration for
      a non-recourse ten-year balloon promissory note in the principal amount of
      $120,500 issued by Mr. O'Reilly to Spotless, bearing interest at LIBOR
      plus 1%. Spotless also surrendered its remaining 45,865,143 shares to the
      Company for cancellation.


                                       13
<PAGE>

      Mr. O'Reilly issued a personal guaranty to Laurus for $3,250,000 of the
      Note.

      In addition, the Company issued a ten-year option exercisable at $.09 per
      share to Mr. O'Reilly to purchase 15,469,964 shares of common stock in
      connection with his:

      o     agreement to a new employment agreement, which (a) does not include
            a put right that existed in his old employment agreement requiring
            the Company, under certain circumstances, to buy his shares of
            common stock and shares underlying his options, and (b) calls for a
            base salary of $285,000 per year and a bonus equal to 2.5% of its
            pre-tax income, as defined in the employment agreement; and

      o     agreement to personally guarantee the Company's bonding obligations,

      each of which was a condition precedent to the consummation of its
      financing transaction with Laurus.

      The Company recorded the option pursuant to APB No. 25 because it was
      agreed to be issued in connection with Mr. O'Reilly's employment. No
      portion of this option was allocated to Mr. O'Reilly's guaranty to Laurus.

      On March 13, 2006, the Compensation Committee for the Company approved an
      increase in Mr. O'Reilly's base salary to $342,000 per year. In addition,
      in lieu of the bonus provided by the Employment Agreement, the Company
      agreed to pay Mr. O'Reilly an annual bonus for each fiscal year,
      commencing with the fiscal year ending in June 2006, in an amount equal to
      5% of EBITDA (Earnings Before Interest, Taxes, Depreciation and
      Amortization) determined in accordance with Generally Accepted Accounting
      Principles and calculated without taking into account any payments made by
      the Company to Laurus Master Fund, Ltd. The amount of such bonus and the
      date of payment shall be authorized by the Compensation Committee within
      90 days after the end of each fiscal year. An amendment to Mr. O'Reilly's
      employment agreement, effective as of March 13, 2006, was executed by Mr.
      O'Reilly and the Company to reflect these revisions to compensation.

      On May 24, 2005, the Company issued non-plan five-year options exercisable
      at $.01 per share and $0.1875 per share to Michael O'Reilly to purchase
      2,000,000 and 250,000 shares of common stock, respectively, in an effort
      to continue incentivizing him in his capacity as the Company's president
      and chief executive officer. The Company recorded these options based on
      the intrinsic value method and recognized an expense of $100,000 in
      connection therewith pursuant to APB No. 25.

      On June 30, 2005, the Company issued ten-year options exercisable at $.09
      per share to its series A convertible stock preferred stockholders,
      including Dr. Kevin J. Phillips, one of its directors, to purchase an
      aggregate of 500,000 shares of its common stock. The Company valued these
      options using the Black-Scholes valuation method and recorded deferred
      financing costs of $44,650 as a credit to additional paid-in capital in
      connection therewith. The Company also agreed to pay, out of legally
      available funds, accrued and unpaid dividends in an aggregate of (1)
      $35,000 to the series A convertible preferred stockholders, on each June
      30, 2005, September 30, 2005 and December 30, 2005 and (2) $50,000 to the
      series A convertible preferred stockholders on February 28, 2007. In the
      aggregate, this was in consideration for their agreement to:

      o     propose and vote in favor of an amendment to its certificate of
            incorporation in order to accommodate the full issuance of the
            shares of its common stock underlying the Note and the option and
            warrant the Company issued to Laurus;
      o     postpone their right, upon six months' notice after February 2007,
            to require the Company to redeem their series A convertible
            preferred stock, until the earlier of six months after the repayment
            of the Laurus Note or June 30, 2010;
      o     defer receipt of dividend payments on the series A convertible
            preferred stock due after June 30, 2005, until the earlier of six
            months after the repayment of the Laurus Note or June 30, 2010; and
      o     forbear from appointing a second director until the earlier of (a)
            June 30, 2008 or (b) the repayment in full of the Laurus Note.


                                       14
<PAGE>

      As of March 28, 2006, the Company has paid an aggregate of $70,000 to the
      series A convertible preferred stockholders for the payments due June 30,
      2005, September 30, 2005 and December 30, 2005.

      On June 30, 2005, Michael O'Reilly and the series A convertible preferred
      stock stockholders, including Dr. Kevin Phillips, who is a director,
      agreed, pursuant to a forbearance and deferral agreement to which the
      Company is a party, to propose and vote in favor of an amendment to the
      Company's Certificate of Incorporation in order to accommodate the full
      issuance of the shares of its common stock underlying the Note, the option
      and warrant the Company issued to Laurus at the Company's next annual
      shareholders meeting. In addition, Mr. O'Reilly, the series A convertible
      preferred stock stockholders and Anthony P. Towell, a director, entered
      into lock-up agreements with Laurus that prohibit a disposition of their
      shares of common stock and any and all related derivative securities until
      the earlier of (a) the repayment in full of the note the Company issued to
      Laurus or (b) June 30, 2010. On December 6, 2004, the Company issued a
      ten-year option exercisable at $0.035 per share to Dr. Kevin J. Phillips
      to purchase 100,000 shares under its 2001 Equity Incentive Plan in
      connection with his service as a director of the Company.

      As a result of these transactions, the Company has recorded deferred
      financing costs as follows:

<TABLE>
<CAPTION>
                                      Item                                                       Amount
<S>                                                                                             <C>
      Transactional, insurance costs and professional fees                                      $ 2,314,172
      Deemed cost to the Company of the 15,469,964 shares of common stock sold by Spotless
      to the Company's president and CEO                                                          1,195,708
      Options granted to preferred stockholders for forbearance of mandatory redemption and
      other rights                                                                                   44,650
      Balance                                                                                     3,554,530
      Amortization of deferred financing cost for the thirty-nine weeks ended March 28, 2006        884,734
      Total deferred financing costs                                                            $ 2,669,796
                                                                                                ===========
</TABLE>


      During its fiscal year ended July 1, 2003, the Company repaid a $100,000
      convertible note held by Anthony P. Towell, a director. This note was
      issued in 1997, provided for interest at a rate equal to 12% per annum and
      was convertible at a rate of $.15 per share of common stock. On May 24,
      2005, the Company issued a non-plan ten-year option exercisable at $0.06
      per share to Anthony P. Towell to purchase 250,000 shares in connection
      with his service on the then-existing special committee of the Company. On
      December 6, 2004, the Company issued a ten-year option exercisable at
      $0.035 per share to Anthony P. Towell under its 2001 Equity Incentive Plan
      in connection with his service as a director of the Company.

      On December 16, 1998, the Company entered into an operating lease
      agreement with Michael O'Reilly, its president and chief executive
      officer. Pursuant to the terms of the arrangement that expired in December
      2002 and has continued on a month-to-month basis thereafter, the Company
      leases a forty-two foot custom Topaz boat for monthly rental payments of
      $5,000. The leasing arrangement was necessitated by a marine assistance
      contract that expired on December 31, 2000, although the arrangement
      continues to provide the Company with its largest floating vessel capable
      of handling specialty equipment and facilitating an offshore support crew.
      The Company is responsible for all taxes, insurance and repairs pertaining
      to this boat.

      The Company had an oral understanding with Michael O'Reilly pursuant to
      which the Company paid the full carrying costs, including mortgage
      payments, of a condominium that he beneficially owned and that the Company
      used for marketing and employee-relations purposes. The full carrying
      costs during the Company's fiscal years ended June 28, 2005 and June 29,
      2004 were approximately $7,150 and $17,800, respectively. In connection
      with this arrangement, the Company also provided mitigation and
      restoration goods and services to Mr. O'Reilly in connection with severe
      water damage caused by a failed water heater at the condominium that he
      beneficially owned and allowed the Company to use for marketing and
      employee-relations purposes. In connection with these services, the
      Company's entire direct costs and allocated overhead, without a markup,
      equaled approximately $56,780.


                                       15
<PAGE>

      In February 1997, the Company issued 650,000 shares of redeemable
      convertible preferred stock to Dr. Kevin J. Phillips, a director, and an
      additional 650,000 shares of redeemable convertible preferred stock to a
      business partner of Dr. Phillips. During fiscal years 2005, 2004 and 2003,
      the Company paid an aggregate of $0, $39,000 and $78,000, respectively, of
      dividends and accrued interest to the redeemable convertible preferred
      stockholders.

      The Company paid a former director $24,385 and $46,926 for consulting
      services in its fiscal years 2004 and 2003, respectively.

      The Company believes that all transactions that the Company has entered
      into with its officers, directors and principal stockholders, except its
      provision of mitigation and restoration services to its president and
      chief executive officer as discussed above, have been on terms no less
      favorable to the Company than those available from unrelated third
      parties.

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

OVERVIEW

We, through our wholly-owned subsidiaries, provide a full array of emergency
response, remediation and disaster restoration services to a broad range of
clients. We have expertise in the areas of hazardous materials remediation,
microbial remediation, testing, toxicology, training, wetlands restoration,
wildlife and natural resources rehabilitation, asbestos and lead abatement,
technical advisory services, restoration and site renovation services.

Our revenues are derived primarily from providing emergency response,
remediation and disaster restoration services to new and repeat customers on
time and materials basis or pursuant to fixed-price contracts, including in
connection with sudden catastrophes, such as in connection with the services
that we had provided in the aftermath of Hurricanes Katrina and Wilma. In the
thirteen and thirty-nine week periods ended March 28, 2006 and fiscal 2005,
substantially all of our revenues were derived from time and materials
contracts. Under our fixed-price contracts, we assess the scope of work to be
done and contract to perform a specified scope of work for a fixed price,
subject to adjustment for work outside such scope of work, upon prior approval
by our customers. Because most of our projects consist of emergency or disaster
responses, which do not permit a definitive prior assessment of the full scope
of work entailed and require immediate attention in order to mitigate loss and
maximize recovery, most of our projects are performed on a time and materials
basis. Under our time and materials contracts, we charge our customers for
labor, equipment usage, allocated overhead and a markup relating thereto. Our
cost of revenues consists primarily of labor and labor-related costs, insurance,
benefits and insurance, travel and entertainment repairs, maintenance, equipment
rental, materials and supplies, disposal costs and depreciation of capital
equipment. Our selling, general, and administrative expenses primarily consist
of expenses related to provisions for doubtful accounts, legal fees, sales
salaries, marketing and consulting.

We have encountered difficulty with cash collections and slow cash flow due
primarily to factors including:

      o     customers refusing to pay prior to receiving insurance
            reimbursements;
      o     customers' facility managers needing to wait for insurance adjustors
            to approve work before the remission of payment; and
      o     certain customers refusing to pay in connection with disputed change
            orders.

In an effort to enhance our cash flows from operations, beginning in our 2005
fiscal year, we began implementing improvements in our billing and invoicing
procedures as follows:

      o     we generally do not commence projects until we have a fully executed
            contract;
      o     our service contracts provide that our customers are directly
            obligated for our services;
      o     we require client approval with respect to the work performed or to
            be performed;


                                       16
<PAGE>

      o     we generally seek deposits or mobilization fees for our time and
            materials contracts;
      o     we engage local legal counsel in the areas in which we operate to
            file liens against customers' real property in the event of contract
            disputes; and
      o     all invoices submitted for payment are reviewed for proper
            documentation.

Because some of these are relatively new changes, no assurances can be given
that they will be successful in improving our collections and cash flows.
Further, approximately 4% of our current projects are performed under procedures
that predate these improvements.

In light of the foregoing, we expect to generate sufficient cash flow from
operations to support our working capital needs and to adequately fund our
current operations for at least the next twelve months. However, any further
difficulty collecting our accounts receivable or further significant growth
could adversely affect our liquidity. In the event that we do not generate
sufficient positive cash flow from operations, we may need to seek additional
financing in addition to the financing provided by Laurus. Laurus is under no
obligation to provide any funding to us. Currently, we have no credit facility
for additional borrowing.

On June 30, 2005, we issued to Laurus a three-year secured convertible term note
in the principal amount of $5,000,000. Subsequently, Laurus loaned us an
additional $2,350,000, and we amended and restated the note accordingly. As of
May 5, 2006, the principal amount of the Laurus note outstanding equaled
$6,201,561. On November 10, 2005, Laurus agreed to defer the principal monthly
payments due in November and December 2005 in the aggregate amount of $495,375
until June 30, 2008, the maturity date of the Laurus note, in order to
facilitate financing of our gulf coast and Florida operations.

During the thirty-nine weeks ended March 28, 2006 we were engaged on various
projects within our customary scope of services for private sector commercial
and residential customers in the gulf coast and Florida regions. Revenue
recognized for the thirty-nine weeks ended March 28, 2006 in connection with
these projects were $20,954,075. For the thirteen weeks ended March 28, 2006,
our revenues from these projects were $4,136,000. We do not expect our revenues
from these projects will be material subsequent to March 28, 2006.

Management believes that we will be engaged to perform substantial additional
projects in the United States in the near term, possibly including federally
funded projects on which we have not focused to date; however, no assurance can
be given in this regard until contracts relating to these projects have been
executed.

Ability to Continue as a Going Concern

      Our independent auditors raised a concern in their report on our financial
statements for our 2005 fiscal year about our ability to continue as a going
concern. Due to our recurring losses from operations, working capital deficit,
stockholders' deficit and difficulty in generating sufficient cash flow to meet
our obligations and sustain our operations, there is "substantial doubt" about
our ability to continue as a going concern. Although we had a net profit of
$53,066 for our 2005 fiscal year and $2,652,786 for the thirty-nine weeks ended
March 28, 2006, and had positive working capital as of March 28, 2006, the
uncertainty about our ability to continue as a going concern may limit our
ability to access certain types of financing, or may prevent us from obtaining
financing on acceptable terms.

CRITICAL ACCOUNTING POLICIES

Management's discussion and analysis of our financial position and results of
operations is based upon our audited consolidated financial statements for our
fiscal year ended June 28, 2005, which have been prepared in accordance with
accounting principles generally accepted in the United States of America, and
our unaudited interim consolidated financial statements for our thirty-nine
weeks ended March 28, 2006. The preparation of these consolidated 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. We believe that the critical accounting policies and areas
that require the most significant judgments and estimates to be used in the
preparation of our consolidated financial statements are accounting for stock
based transactions, contracts, allowance for doubtful accounts and the valuation
allowance related to deferred tax assets.


                                       17
<PAGE>

Stock Based Transactions--We consummated various transactions where we paid the
consideration primarily in options or warrants to purchase our common stock.
These transactions include financing transactions and providing incentives to
attract, retain and motivate employees, officers and directors.

We have recognized the value of the equity instruments issued in connection with
financing transactions in accordance with Accounting Principles Board Opinion
No. 14 and Emerging Issues Task Force Consensuses 98-5 and 00-27. The intrinsic
value of the options and the fair value of the warrants issued in the Laurus
transaction were calculated and the proportionate values of the resulting debt
and equity components have been recognized as debt discounts with equivalent
increases in amounts reflected as equity. The beneficial conversion feature of
the Note issued to Laurus, including the effective values under EITF 00-27, has
also been recognized as a debt discount, with an equivalent increase in the
amount reflected as equity. All of these discounts are being amortized over the
three-year life of the debt in accordance with EITF 00-27. Once the transaction
value is determined, we record the transaction value as an expense with a
corresponding increase in paid-in capital.

Effective December 28, 2005, we adopted Statement of Financial Accounting
Standards ("FAS") No. 123 (revised 2004), Share-Based Payment ("FAS 123(R)"),
which replaces FAS No. 123, Accounting for Stock-Based Compensation, and
supersedes Accounting Principles Board Opinion ("APB") No. 25, Accounting for
Stock Issued to Employees, and related interpretations. FAS 123(R) requires
compensation costs related to share-based payment transactions, including
employee stock options, to be recognized in the financial statement using the
modified prospective approach to transition. Under the modified prospective
approach, the provisions of FAS 123(R) are to be applied to new awards and to
awards modified, repurchased or cancelled after the required effective date.
Additionally, compensation cost for the portion of awards not fully vested as of
the required effective date shall be recognized on a straight-line basis over
the requisite vesting period on or after the required effective date. The
compensation cost for that portion of awards shall be based on the grant-date
fair value of those awards as calculated for either recognition or pro-forma
disclosures under FAS 123(R). Prior to December 28, 2005, we accounted for
stock-based compensation in accordance with APB 25. APB 25 employed the
intrinsic value method of measuring compensation cost. Accordingly, compensation
expense was not recognized for fixed stock options if the exercise price of the
option equaled or exceeded the fair value of the underlying stock at the grant
date.

When options or warrants to purchase our common stock are used in transactions
with third parties, the transaction is valued using the Black-Scholes valuation
method. The Black-Scholes valuation method is widely accepted as providing the
fair market value of an option or warrant to purchase stock at a fixed price for
a specified period of time. Black-Scholes uses five variables to establish
market value of stock options or warrants:

      o     exercise price (the price to be paid for a share in our stock);
      o     price of our stock on the day the options or warrants are granted;
      o     number of days that the options or warrants can be exercised before
            they expire;
      o     trading volatility of our stock; and
      o     annual interest rate on the day the option or warrant is granted.

The determination of expected volatility requires management to make an estimate
and the actual volatility may vary significantly from that estimate.
Accordingly, the determination of the resulting expense is based on a management
estimate.

Revenue Recognition--Revenue derived from services provided to customers over
periods of less than one month is recognized when billed.

Revenue from claims, such as claims related to disputed change orders, is
recognized when realization is probable and the amount can be reliably
estimated, based upon meeting the following conditions:

      o     The original contract or other evidence provides a legal basis for
            the claim;
      o     The additional costs were caused by circumstances that were
            unforeseen at the contract date;
      o     Costs associated with the claims are identifiable; and
      o     The evidence supporting the claims is objective and verifiable.


                                       18
<PAGE>

Revenue from 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.

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 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. Revenue from claims, such as claims relating to
disputed change orders, is recognized when realization is probable and the
amount can be reliably estimated, based upon meeting the following conditions:

      o     The original contract or other evidence provides a legal basis for
            the claim;
      o     The additional costs were caused by circumstances that were
            unforeseen at the contract date;
      o     Costs associated with the claims are identifiable; and
      o     The evidence supporting the claims is objective and verifiable.

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--We maintain an allowance for doubtful trade
accounts receivable for estimated losses resulting from the inability of our
customers to make required payments. In determining collectibility, we review
available customer account and financial information, including public filings
and credit reports, current trends, credit policy, and accounts receivable aging
and may also consult legal counsel when appropriate. A considerable amount of
judgment is required when we assess the likelihood of our realization of
accounts receivables, including assessing the probability of collection and the
current credit worthiness of each customer. If the financial condition of our
customers were to deteriorate, resulting in an impairment of their ability to
make payments, an additional provision for doubtful accounts could be required.
The need to file a lawsuit in a particular case is determined by a variety of
factors, including the Company's mandate to aggressively pursue all monies owed.
The other considered factors include the responsiveness of the client, the
running of applicable limitations periods, the ability to perfect a lien against
the subject property, the value of the receivable compared to the costs of
litigation and the likelihood of success in the lawsuit. 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.

Deferred Tax Asset Valuation Allowance--We record a valuation allowance to
reduce our deferred tax assets to the amount that is more likely than not to be
realized. Due to our history of losses, we have recorded a full valuation
allowance against our net deferred tax assets as of June 28, 2005 and March 28,
2006. We currently provide for income taxes only to the extent that we expect to
pay cash taxes on current income. When we are profitable at levels which cause
management to conclude that is more likely than not that we will realize all or
a portion of our deferred tax assets, we record the estimated net realizable
value of our deferred tax assets at that time and provide for income taxes at
our combined federal and state effective rates.

RESULTS OF OPERATIONS

Thirteen weeks ended March 28, 2006 and March 29, 2005

Revenue

Total revenue for the thirteen weeks ended March 28, 2006 increased by
$2,411,714, or 50.2%, to $7,213,546 from $4,801,832 for the thirteen weeks ended
March 29, 2005. This increase in revenue was primarily attributable to
$4,136,000 in operations associated with Hurricanes Katrina and Wilma, $676,000
for the clean-up of non-weapons grade Anthrax in New York City and $540,000 for
the remediation of environmental contaminants from a New York City water
pollution control plant.


                                       19
<PAGE>

Cost of Revenues

Cost of revenues increased $345,892, or 10.1%, to $3,778,946 for the thirteen
weeks ended March 28, 2006 as compared to $3,433,054 for the thirteen weeks
ended March 29, 2005. This increase was primarily attributable to labor and
other costs relating to our work in connection with Hurricanes Katrina and
Wilma, the clean-up of non-weapons grade Anthrax in New York City and the
remediation of environmental contaminants from a New York City water pollution
control plant. Our cost of revenues consists primarily of labor and
labor-related costs, repairs, maintenance and rental of job equipment, materials
and supplies, testing and sampling, transportation, disposal and depreciation of
capital equipment.

Gross Profit

Gross profit increased by $2,065,822, or 150.9%, to $3,434,600, or 47.6% of
total revenue for the thirteen weeks ended March 28, 2006 as compared to
$1,368,778, or 28.5% of total revenue, for the thirteen weeks ended March 29,
2005. This increase in gross profit was due primarily due to a higher percentage
of higher margin equipment usage in connection with our hurricane-related
projects. Higher margins on equipment used on hurricane and other
catastrophe-related projects are necessary to compensate us for the fact that
this equipment is generally used less often, or may not be utilized at all, as
compared to equipment utilized for more routine projects.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased by $406,035, or 33.5%, to
$1,616,919 for the thirteen weeks ended March 28, 2006 from $1,210,884 for the
thirteen weeks ended March 29, 2005 and constituted approximately 22.4% and
25.2% of revenues in such periods, respectively. This increase was primarily
attributable to an expansion in the number of sales and marketing employees and
print advertisements. Our selling, general and administrative expenses primarily
consist of expenses related to provisions for doubtful accounts, professional
fees, salaries and related benefits, insurance, marketing and all other office-
and administrative-related expenses.

Benefit Related to Variable Accounting Treatment for Officer Options

Under the terms of a previous employment agreement we entered into and a
separate agreement with Spotless, our president and chief executive officer was
able to sell to us, or in certain circumstances to Spotless, all shares of our
common stock held by him and all shares of our common stock underlying vested
options to purchase shares of our common stock held by him upon the occurrence
of certain events. Due to the terms of the options, changes in the market price
of our common stock, in either direction, resulted in a corresponding expense or
benefit. There was no benefit or expense required to be recorded in the thirteen
weeks ended March 28, 2006 due to the elimination of this risk on June 30, 2005.
There was no benefit or expense required to be recorded in the thirteen weeks
ended March 29, 2005 due to the low market price of our common stock.

Interest Expense

Interest expense increased by $630,100, or 1,176.1%, to $683,677 for the
thirteen weeks ended March 28, 2006 from $53,577 for the thirteen weeks ended
March 29, 2005. This increase was primarily due to an increase of $207,419 of
interest expense incurred to Laurus, $179,213 of amortization of discounts, and
an increase of $297,044 attributable to the amortization of deferred financing
costs relating to the Laurus transaction, partially offset by a reduction of
$37,787 in interest expense incurred to Spotless. Due to the accounting of the
Laurus financing, we anticipate significant interest expense to be charged in
future periods.


                                       20
<PAGE>

Provision for Income Taxes

The provision for income taxes for the thirteen weeks ended March 28, 2006 was
$399,854 as compared to $5,449 for the thirteen weeks ended March 29, 2005. This
increase was the result of higher taxable income for the thirteen weeks ended
March 28, 2006, primarily attributable to hurricane-related work in that period.
The provision for taxes for the more recent period reflects an effective rate of
34%. The accounting expense for taxes currently payable attributable to timing
differences could not be offset by the future benefit of the reversal of such
timing differences because a full valuation allowance was recorded. Such
valuation was recorded because we do not believe that the utilization of the tax
benefit from net operating losses and other temporary differences are "more
likely than not" to be realized. As a result of a change in the Company's
ownership on June 23, 2005, net operating loss carryfowards are subject to
significant annual usage limitations which have not yet been determined.

Net Income

We generated net income of $778,066 and net income attributable to common
stockholders of $758,566 for the thirteen weeks ended March 28, 2006 as compared
to net income $128,759 and net income attributable to common stockholders of
$109,259 incurred for the thirteen weeks ended March 29, 2005. These changes
were the results of the factors discussed above.

Thirty-nine weeks ended March 28, 2006 and March 29, 2005

Revenue

Total revenue for the thirty-nine weeks ended March 28, 2006 increased by
$12,452,610, or 70.6%, to $30,092,227 from $17,639,617 for the thirty-nine weeks
ended March 29, 2005. This increase was primarily attributable to $20,954,075 of
revenue from work related to Hurricanes Katrina and Wilma, $676,000 associated
with our clean-up of non-weapons grade Anthrax in New York City, and $540,000
for our remediation of environmental contaminants from a New York City water
pollution control plant. In addition, $219,941 of revenues was recorded as the
result of the settlement of a claim for work performed on change orders, whose
associated costs were recognized in prior years. These increases were partially
offset by a decreased of $406,329 in work performed in relation to insurance
claims and a decrease of $786,099 in our spill and solid environmental
remediation.

Cost of Revenues

Cost of revenues increased $4,189,878, or 34.4%, to $16,354,923 for the
thirty-nine weeks ended March 28, 2006 as compared to $12,165,045 for the
thirty-nine weeks ended March 29, 2005. This increase was primarily attributable
to labor and other costs relating to our work in connection with Hurricanes
Katrina and Wilma, the clean-up of non-weapons grade Anthrax in New York City,
and the remediation of environmental contaminants from a New York City water
pollution control plant.

Gross Profit

Gross profit increase by $8,262,732, or 150.9%, to $13,737,304, or 45.6% of
total revenue for the thirty-nine weeks ended March 28, 2006 as compared to
$5,474,572, or 31.0% of total revenue, for the thirty-nine weeks ended March 29,
2005. This increase in gross profit was due primarily to a higher percentage of
higher margin equipment usage in connection with our Hurricane-related projects.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased by $1,680,292, or 42.6%,
to $5,626,626 for the thirty-nine weeks ended March 28, 2006 from $3,946,334 for
the thirty-nine weeks ended March 29, 2005 and constituted approximately 18.7%
and 22.4% of revenues in such periods, respectively. This increase in selling,
general and administrative expenses was primarily attributable to an increased
provision of $1,250,000 for doubtful accounts, and increased accounting and
legal fees of $588,628. The increase in the allowance for doubtful accounts
reflects the substantial increase in sales and accounts receivable. Of the total
$1,250,000 increase to the allowance for doubtful accounts, $2,756,222 is
related to the receivables that are in dispute. Of this total, $1,706,339 is
related to four claims that were open as of June 29, 2004 and the balance of
$1,049,883 was for nine additional claims that arose during fiscal 2005. These
were partially offset by a decrease of $87,440 in consulting fees and $44,190 in
marketing expenses.


                                       21
<PAGE>

Benefit Related to Variable Accounting Treatment for Officer Options

Under the terms of a previous employment agreement we entered into and a
separate agreement with Spotless, our president and chief executive officer was
able to sell to us, or in certain circumstances to Spotless, all shares of our
common stock held by him and all shares of our common stock underlying vested
options to purchase shares of our common stock held by him upon the occurrence
of certain events. Due to the terms of the options, changes in the market price
of our common stock, in either direction, resulted in a corresponding expense or
benefit. There was no benefit or expense required to be recorded in the
thirty-nine weeks ended March 28, 2006 due to the elimination of this risk on
June 30, 2005. There was no benefit or expense required to be recorded in the
thirty-nine weeks ended March 29, 2005 due to the low market price of our common
stock.

Interest Expense

Interest expense increased by $1,592,054, or 497.5%, to $1,912,087 for the
thirty-nine weeks ended March 28, 2006 from $320,033 for the thirty-nine weeks
ended March 29, 2005. This increase was primarily due to an increase of $530,924
of interest expense incurred to Laurus, $496,429 of amortization of discounts,
and an increase of $884,734 attributable to the amortization of deferred
financing costs relating to the Laurus transaction, partially offset by a
reduction of $117,961 in interest expense incurred to Spotless.

Provision for Income Taxes

The provision for income taxes for the thirty-nine weeks ended March 28, 2006
was $3,567,210 as compared to $51,697 for the thirty-nine weeks ended March 29,
2005. This increase was the result of higher taxable income for the thirty-nine
weeks ended March 28, 2006, primarily attributable to hurricane-related work in
that period. The provision for taxes for the more recent period reflects an
effective rate of 57.4%. The accounting expense for taxes currently payable
attributable to timing differences could not be offset by the future benefit of
the reversal of such timing differences because a full valuation allowance was
recorded. Such valuation was recorded because we do not believe that the
utilization of the tax benefit from net operating losses and other temporary
differences are "more likely than not" to be realized. As a result of a change
in the Company's ownership on June 23, 2005, net operating loss carryfowards are
subject to significant annual usage limitations which have not yet been
determined.

Net Income

We generated net income of $2,652,786 and net income attributable to common
stockholders of $2,594,286 for the thirty-nine weeks ended March 28, 2006 as
compared to net income $1,187,953 and net income attributable to common
stockholders of $1,129,453 incurred for the thirty-nine weeks ended March 29,
2005. These changes were the results of the factors discussed above.

Liquidity and Capital Resources

As of March 28, 2006, we had a cash balance of $2,664,174, working capital of
$7,350,235 and stockholders' equity of $10,761,531. As of June 28, 2005, we had
a cash balance of $512,711, a working capital deficit of ($1,704,091) and a
stockholders' deficit of ($712,889). As of June 29, 2004, we had cash balances
of $63,562, a working capital deficit of ($2,103,971) and stockholders' deficit
of ($787,955). We generated a net profit of $2,594,286, a net profit of $53,066
and a net loss of ($3,535,334) for our thirty-nine weeks ended March 28, 2006
and our fiscal years ended June 28, 2005 and June 29, 2004, respectively.

Accounts receivable, net allowance of doubtful accounts, at March 28, 2006, June
28, 2005 and June 29, 2004 were $12,541,422, $6,755,338 and $6,652,806,
respectively. For these periods, approximately $2,756,000, $1,976,000 and
$1,706,000, respectively, of these amounts were disputed claims subject to
collection litigation, primarily relating to disputes over changed work orders
or other modifications to scope of our work. We do not believe that the disputed
receivables had a material effect on liquidity for the periods presented.


                                       22
<PAGE>

Net cash provided by operating activities was $1,793,167 for the thirty-nine
weeks ended March 28, 2006, as compared to the net cash provided by operations
of $1,042,559 for the thirty-nine weeks ended March 29, 2005. Accounts
receivable increased by $5,786,084, or 85.7%, as of March 28, 2006 to
$12,541,422, from $6,755,338 as of June 28, 2005, primarily as a result of work
performed in connection with Hurricanes Katrina and Wilma. Accounts payable and
accrued expenses decreased by $330,516, or 11.9%, as of March 28, 2006 to
$2,455,580, from $2,786,096 as of June 28, 2005, primarily as a result of
accelerated payments to our venders as a result of our favorable cash position.

Net cash provided by financing activities for the thirty-nine weeks ended March
28, 2006 was $1,443,813 as compared to cash used by financing activities of
$231,119 for the thirty-nine weeks ended March 29, 2005, primarily as a result
of $7,350,000 received in connection with our borrowings from Laurus, the
proceeds of which borrowings were used to pay related transaction and other
expenses in the amount of $2,314,172 and repay indebtedness to Spotless in the
amount of $2,750,000. These transactions resulted in a net increase of
$2,350,000 in borrowings and the cancellation of $1,230,228 of our previous
secured note payable to Spotless. The balance of the proceeds, in the amount of
$2,053,011, was used to fund working capital and our initial Hurricane Katrina
mobilization costs. Financing activities for the thirty-nine weeks ended March
29, 2005 used net cash of $258,532 for long-term debt repayment.

Cash used for capital expenditures increased to $1,085,517, during the
thirty-nine weeks ended March 28, 2006, as compared to $83,303 for the
thirty-nine weeks ended March 29, 2005, due to the cost of equipment purchased
to perform the work in the Gulf Coast region. At this time, we do not have any
other material commitments or plans for capital expenditures. We intend,
however, to make additional capital expenditures, to the extent our financial
condition permits, as may be required in connection with rendering our services
in the future.

Historically, we have financed our operations primarily through issuance of debt
and equity securities, through short-term borrowings from our former majority
shareholder, and through cash generated from operations. We expect to generate
sufficient cash flow from operations to support our working capital needs and to
adequately fund our current operations for at least the next twelve months.
However, any further difficulty collecting our accounts receivable or further
significant growth could adversely affect our liquidity. In the event that we do
not generate sufficient positive cash flow from operations, or if we experience
changes in our plans or other events that adversely affect our operations or
cash flow, we may need to seek additional financing in addition to the financing
provided by Laurus. Laurus is under no obligation to provide any funding to us.
Currently, we have no credit facility for additional borrowing.

Our future cash requirements are expected to depend on numerous factors,
including, but not limited to our ability to:

      o     Obtain profitable environmental or related construction contracts.
            So long as we have sufficient working capital, we anticipate
            continued revenue growth in new and existing service areas and to
            continue to bid on large projects, though there can be no assurance
            that any of our bids will be accepted or that we will have
            sufficient working capital. We were recently engaged on various
            projects within our customary scope of services for private sector
            commercial and residential customers in the gulf coast and Florida
            regions in connection with the aftermath of Hurricanes Katrina and
            Wilma. Revenue recognized for the thirty-nine weeks ended March 28,
            2006, in connection with these projects, were $20,954,075. For the
            thirteen weeks ended March 28, 2006, our revenues from these
            projects were$4,562,559. We do not expect that our revenues from
            these projects will be material subsequent to March 28, 2005.
      o     Control our selling, general and administrative expenses, which have
            recently 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. In order to control our selling,
            general and administrative expenses, we have or are in the process
            of optimizing the efficiency of our support staff through training
            and 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.
      o     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. Laurus
            indicated to us that it did not intend to provide any additional
            financing at the time that it loaned an additional $1,350,000 to us
            in October 2005. 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.


                                       23
<PAGE>

      o     Generate positive cash flow from operations. We seek to obtain
            profitable contracts that generate gross profits more than
            sufficient to pay our expenses. Our plans for our 2006 fiscal year
            included concentrating our efforts in the gulf coast and Florida
            regions in connection with the aftermath of Hurricanes Katrina and
            Wilma and addressing our difficulty with cash collections and slow
            cash flow.

We have experienced difficulties with cash collections and slow cash flow due
primarily to factors including:

      o     customers refusing to pay prior to receiving insurance
            reimbursements;
      o     customers' facility managers needing to wait for insurance adjustors
            to approve work before the remission of payment; and
      o     certain customers refusing to pay in connection with disputed change
            orders.

In an effort to enhance our cash flows from operations, beginning in our 2005
fiscal year, we began implementing and are continuing to implement improvements
in our billing and invoicing procedures as follows:

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

Due to the nature of our business, which includes responding to emergency
situations on a 24 hours/7 days a week basis, we, on occasion, will commence an
emergency project prior to obtaining a formal contract. In these situations, we
may commence emergency services upon the oral authorization of the property
owners or their agents or government workers (e.g. police or Coast Guard). In
these isolated instances, we do not incur significant expense and require on
executed contract within 48 hours of commencement of work.

Because some of these are relatively new changes, no assurances can be given
that they will be successful in improving our collections and cash flows.
Further, approximately 4% of our current projects are performed under procedures
that predate these improvements.

On June 30, 2005, we issued to Laurus Master Fund, Ltd. a three-year secured
convertible term note in the principal amount of $5,000,000. Subsequently,
Laurus loaned us an additional $2,350,000, and we amended and restated the note
accordingly. As of May 5, 2006, the principal amount of the Note, as a result of
repayments, outstanding equaled $6,201,561.

Laurus holds a senior security interest in our and our subsidiaries assets
collateralizing the Note, including a pledge of the stock of our subsidiaries.
In addition, Spotless holds a subordinated security interest collateralizing our
$500,000 note issued to Spotless, which bears interest at a rate of LIBOR plus
1% per annum and is required to be repaid at a rate of $50,000 per month
commencing July 1, 2007. The existence of these security interests may impair
our ability to raise additional debt capital.

Under the terms of the Note, which matures on June 30, 2008, we are required to
make monthly repayments of principal, on the first of each month, to Laurus in
the amount of $229,687.50, which commended as of January 1, 2006. Principal
repayments were originally due to commence starting November 1, 2005 but, in
November 2005, Laurus agreed to defer the initial repayment date until January
1, 2006. The principal monthly payments due November 1, 2005 and December 1,
2005 in the aggregate amount of $495,375 have been deferred until June 30, 2008.
Interest is payable monthly and started to accrue on August 1, 2005. All
required interest payments as of the date of this report have been made. We are
required to pay such amounts in shares of our common stock should all of the
following conditions be satisfied:


                                       24
<PAGE>

      o     the average closing price of our common stock for the five (5)
            trading days immediately prior each first of the month is equal to
            or greater than $.10;
      o     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 of each month;
      o     the common stock underlying the Note and the warrant issued to
            Laurus 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;
      o     Laurus' aggregate beneficial ownership of our shares of common stock
            does not and would not by virtue thereof exceed 4.99%; and
      o     we are not in default of the Note.

If any of these conditions are not satisfied, we will be required to make
payments in cash in an amount equal to 103% of the principal amount, plus
accrued interest, then due. Should we be required to pay cash, this may have an
adverse effect on our cash flow and liquidity.

The Note may be redeemed by us in cash by paying the holder of the Note 120% of
the principal amount, plus accrued interest. As discussed below, the holder of
the Note may convert all or a portion of the Note, together with related
interest and fees, into fully paid shares of our common stock at any time. The
number of shares to be issued shall equal the total amount of the Note to be
converted, divided by an initial fixed conversion price of $.09.

If we issue shares of common stock to a third-party for consideration below the
fixed conversion price of $.09 per share or issue derivative securities
convertible into or exercisable for shares of common stock at prices below the
fixed conversion price of $.09 per share, then the fixed conversion price of the
Note will be reduced to such lower issuance or exercise price. In addition, the
conversion price of the Note may be adjusted pursuant to customary anti-dilution
provisions, such as if we pay a stock dividend, reclassify our capital stock or
subdivide or combine our outstanding shares of common stock into a greater or
lesser number of shares.

We may receive proceeds from the exercise of the option and the warrant
described above if Laurus elects to pay the exercise price in cash rather than
executing a cashless exercise. Laurus may effect a cashless exercise of the
warrant if the market price of our common stock exceeds the per share exercise
price, and it may effect a cashless exercise of the option if (a) the market
price of our common stock exceeds the per share exercise price and (b) (1) we
have not registered the shares underlying the option pursuant to an effective
registration statement or (2) an event of default under the Note has occurred
and is continuing. Upon a cashless exercise, in lieu of paying the exercise
price in cash, Laurus would receive shares of our common stock with a value
equal to the difference between the market price per share of our common stock
at the time of exercise and the exercise price per share set forth in the option
and the warrant, multiplied by the number of shares with respect to which the
option or warrant is exercised. There would be no proceeds payable to us upon a
cashless exercise of the option or the warrant. There can be no assurances that
Laurus will exercise the option and warrant or that it will elect to pay the
exercise price in cash in lieu of a cashless exercise. On September 12, 2005, we
issued 1,500,000 shares of our common stock to Laurus in connection with its
partial exercise of the Option at an exercise price of $.0001 per share for an
aggregate exercise price of $150.

Laurus has contractually agreed to restrict its ability to convert the Note
and/or exercise its warrant and option if such conversion and/or exercise would
cause its beneficial ownership of shares of our common stock to exceed 4.99% of
the outstanding shares of our common stock. The 4.99% limitation is null and
void without notice to us upon the occurrence and during the continuance of an
event of default or upon 75 days' prior written notice to us. As of the date of
this report, Laurus beneficially owns 1,500,000 shares of our common stock, or
approximately 4.46% of our outstanding common stock. As a result, Laurus could
only acquire up to approximately 184,405 additional shares, which would
constitute a conversion of approximately $16,596 of the principal amount of the
Note, while remaining in compliance with the 4.99% limitation. Because Laurus is
irrevocably prohibited from waiving this 4.99% limitation, except as described
above, even if the other conditions allowing us to pay in shares of common stock
have been satisfied, if Laurus cannot or does not reduce its ownership of our
common stock at a time when such reduction would be necessary to allow us to
make a payment in shares of common stock, we would be required to pay Laurus in
cash. This may have an adverse effect on our cash flow and liquidity.


                                       25
<PAGE>

In the event we default on the Note, we will be required to pay 120% of the
outstanding principal amount of the Note, plus accrued but unpaid interest. Upon
the occurrence of an event of default, the interest rate changed will be
increased by 2% per month until the default is cured. The Note is secured by a
lien on substantially all of our assets, including the stock of our
subsidiaries, all cash, cash equivalents, accounts, accounts receivable, deposit
accounts, inventory, equipment, goods, fixtures, documents, instruments,
including promissory notes, contract rights and general intangibles, including
payment intangibles. The Master Security Agreement, dated June 30, 2005, between
us and Laurus contains no specific financial covenants. The Master Security
Agreement and the Note, as amended, define the circumstances under which they
can be declared in default and subject to termination, including:

      o     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;
      o     a breach by us of any material covenant or term or condition of the
            Note or 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;
      o     a breach by us of any material representation or warranty made in
            the Note or in any agreement made in connection therewith;
      o     any form of bankruptcy or insolvency proceeding instituted by or
            against us, which is not vacated within 30 days;
      o     any attachment or lien in excess of $75,000 in the aggregate made
            upon our assets or a judgment rendered against our property
            involving a liability of more than $75,000 which shall remain
            unvacated, unbonded or unstayed for a period of 30 days;
      o     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;
      o     an SEC stop trade order or principal market trading suspension of
            our common stock is in effect for 5 consecutive trading days or 5
            days during a period of 10 consecutive trading days, if we are not
            able to cure such trading suspension within 30 days of receiving
            notice or are not able to list our common stock on another principal
            market within 60 days of such notice;
      o     a failure to have authorized and reserved shares of our common stock
            for issuance on or before November 1, 2006 sufficient to provide for
            the full conversion of the Note, and full exercise of the option and
            warrant issued by us to Laurus;
      o     an indictment or threatened indictment of us or any of our executive
            officers under any criminal statute or commencement or threatened
            commencement of criminal or civil proceedings against us or any of
            our executive officers pursuant to which statutory or proceeding
            penalties or remedies available include forfeiture of any of our
            property; and
      o     the departure of Michael O'Reilly from our senior management.

We also entered into a Funds Escrow Agreement, dated June 30, 2005, with Laurus
and Loeb & Loeb LLP, as escrow agent, pursuant to the requirements of the
Security Agreement. Under the terms of the Funds Escrow Agreement, the funds
from Laurus were placed in escrow pending receipt by the escrow agent of fully
executed transaction documents and disbursement instructions, upon receipt of
which such funds were released to us. No funds remain in escrow.

Pursuant to the terms of a Registration Rights Agreement, dated June 30, 2005
and as amended, we are obligated to (1) file a registration statement with the
Securities and Exchange Commission registering the resale of shares of our
common stock issuable upon a conversion of the Note and upon the exercise of the
option and warrant issued to Laurus up to the number of shares included in the
current registration statement and (2) after appropriate corporate action is
taken, to increase our authorized shares, and after our audited financial
statements for the 2006 fiscal year are final, to file a new or post-effective
registration statement(s) to cover all of the shares issuable upon conversion of
the Note and upon exercise of the option and warrant issued to Laurus. If the
first registration statement is not declared effective by June 15, 2006 by the
Securities and Exchange Commission, then we will be required to pay to Laurus
the following amounts:


                                       26
<PAGE>

      o     1.5% of the principal outstanding on the Note, for the first thirty
            days, prorated for partial periods, which equals $3,100 per day
            based upon the $6,201,561 principal amount of the Note outstanding
            on May 5, 2006; and
      o     2.0% of the principal outstanding on the Note, for each thirty day
            period, prorated for partial periods, which equals $4,134 per day.

In addition, penalties at the same percentage rates apply in the event that the
second registration statement is not declared effective by December 30, 2006 by
the Securities and Exchange Commission.

The proceeds we received in connection with the financing transaction and
subsequent borrowings from Laurus were used to pay the amounts set forth below
to the persons or for the purposes set forth below:

<TABLE>
<S>                                                                             <C>
      Spotless Debt

      o     Former majority stockholder and senior secured lender (Spotless),
            consisting of approximately $2,650,000 in settlement of the
            principal and $100,000 in interest                                  $    2,750,000
                                                                                --------------

      Transaction Expenses

      o     Laurus transaction fee                                                   1,750,000
      o     Laurus Capital Management, LLC management and due diligence fees           262,900
      o     Loeb & Loeb escrow fee                                                       2,000
      o     Insurance premiums                                                          37,500
      o     Legal fees                                                                 146,773
      o     Special committee and advisor fees                                          61,136
      o     Payments to series A preferred stockholders                                 35,000
                                                                                --------------

            Sub-total                                                                2,295,309
                                                                                --------------

      Other Payments

      o     Audit fees                                                                   50,000
      o     Insurance premiums                                                          276,711
      o     Initial Hurricane Katrina mobilization costs                                238,173
      o     Working capital                                                           1,739,807
                                                                                --------------

            Sub-total                                                                 2,304,691
                                                                                --------------

      Total                                                                      $    7,350,000
                                                                                ===============
</TABLE>


                                       27
<PAGE>

The table below summarizes contractual obligations and commitments as of March
28, 2006, including principal and interest payments on our debt (1).

<TABLE>
<CAPTION>
                                   Total        1 Year     2-3 Years    4-5 Years   Thereafter
                                ----------   ----------   ----------   ----------   ----------
<S>                             <C>          <C>          <C>          <C>          <C>
Operating Leases                $  703,326   $  670,537   $   32,789   $       --           --

Capitalized Leases--Principal      431,822      209,114      196,995       25,713           --

Capitalized Leases--Interest        36,523       23,564       12,678          281           --

Laurus Note--
Principal                        6,660,937    2,756,256    3,904,681           --           --

Laurus Note
Interest Expense--Cash             760,224      506,419      253,805           --           --

Spotless Note--Principal           500,000           --      500,000           --           --

Spotless Note--
Interest Expense                    13,828           --       13,828           --           --
                                ----------   ----------   ----------   ----------   ----------

Total                           $9,106,660   $4,165,890   $4,914,776   $   25,994   $       --
                                ==========   ==========   ==========   ==========   ==========
</TABLE>

----------

(1) This table reflects the effectiveness of Laurus' agreement to defer the
initial monthly amortization repayment in the amount of $229,688 from November
1, 2005 until January 1, 2006.

These amounts are based on assumed interest payments reflecting:

      o     the Laurus Note at a rate of 8.75% per annum;
      o     the Spotless note at a rate of 5.86% per annum; and
      o     an aggregate of $431,822 of other long-term debt with maturities
            ranging from 3 months to 54 months for financed trucks and vehicles
            with interest rates ranging from 3.95% to 13.99%.

Off-Balance Sheet Arrangements

Although we do not have any financing arrangements that have not been recorded
in our financial statements, our transaction with Laurus resulted in a
significant discount that reduced the carrying value on our balance sheet of our
debt obligation to Laurus. As of March 28, 2006, the Note had a principal
balance of $6,660,937 with a corresponding discount of $5,944,304, resulting in
a carrying amount of $716,634 on our balance sheet, $280,973 of which is
included as a current liability and $435,661 of which is included as long-term
debt.

Effect of Inflation

Inflation has not had a material impact on our operations during fiscal years
ended June 28, 2005, June 29, 2004 and July 1, 2003, except that we experienced
an increase of 75% in fuel costs during the third quarter of this fiscal year
due to increased oil prices.


                                       28
<PAGE>

Seasonality

Since we and our subsidiaries are able to perform most of our services
throughout the year, our business is not considered seasonal in nature. However,
we are affected by:

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

                           FORWARD-LOOKING STATEMENTS

Statements contained in this Form 10-Q include "forward-looking statements"
within the meaning of Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act of 1934, as amended, that are based on the beliefs and
current expectations of and assumptions made by our management. 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.
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 our best estimates of future results, performance or achievement, based
upon current conditions and the most recent results of operations. Actual
results could differ materially from any expectation, estimate or projection
conveyed by these statements and there can be no assurance that any such
expectation, estimate or projection will be met. Numerous important factors,
risks and uncertainties affect our operating results and could cause actual
results to differ from the results implied by these or any other forward looking
statements. These potential factors, risks and uncertainties include, among
other things, such factors as:

      o     the market acceptance and amount of sales of our services;
      o     our 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 we
            provide;
      o     our ability to service our debt and other financial obligations,
            particularly if required to pay in cash;
      o     the extent of the enactment, enforcement and strict interpretations
            of laws relating to environmental remediation;
      o     our ability to obtain and manage new and large projects;
      o     the competitive environment within the industries in which we
            operate;
      o     our ability to raise or access capital;
      o     our ability to continue as a going concern;
      o     our ability to effectively implement and maintain its internal
            controls and procedures;
      o     our dependence on key personnel;
      o     our ability to timely collect its accounts receivable;
      o     our 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 our report on
            Form 10-K for the fiscal year ended June 28, 2005.

You 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.

Except as may be required, we undertake no obligation to publicly update or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise.


                                       29
<PAGE>

The foregoing discussion and analysis provides information which management
believes is relevant to an assessment and understanding of our 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 and with the consolidated financial statements included in
our annual report on Form 10-K for the period ended June 28, 2005.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Equity Price Risk--Our primary market risk exposure relates to the shares of
common stock issuable upon conversion of the Note, which we originally issued to
Laurus in June 2005. In connection with the issuance of the Note, we issued to
Laurus a warrant to purchase 13,750,000 shares of our common stock and an option
to purchase 30,395,175 shares of our common stock. On September 12, 2005, we
issued 1,500,000 shares of our common stock to Laurus in connection with its
partial exercise of its option. The option issued to Laurus has been recorded at
its intrinsic value, which is based on the difference between the exercise price
per share and the market price per share of our common stock on June 30, 2005,
the date of issuance at the inception date of the agreement. The warrant, along
with shares of common stock issuable upon exercise thereof, have been recorded
at their relative fair value at the June 30, 2005 inception date of the
agreement, and will be recorded at fair value at each subsequent balance sheet
date. Any change in value between reporting periods will be recorded as a
non-operating, non-cash charge at each reporting date. The impact of these
non-operating, non-cash charges could have an adverse effect on our stock price
in the future. The Note also exposes us to additional risks also relating to our
own common stock because if Laurus is unable to convert the loan into common
stock due to low price or low trading volume in the market, we then must repay
the loan in cash at a 3% premium.

The intrinsic value of the option and the fair value of the warrant and the
underlying shares of common stock are tied in a large part to our stock price.
If our stock price increases between reporting periods, the option, warrant and
underlying shares of common stock become more valuable. As such, there is no way
to forecast what the non-operating, non-cash charges will be in the future or
what the future impact will be on our financial statements.

Interest Rate Sensitivity--Interest rate risk is the risk that interest rates on
our debt is fully dependent upon the volatility of these rates. We do not use
derivative financial instruments to manage interest rate risk. The Laurus Note
bears interest at the prime rate as published in the Wall St. Journal plus 2%
(but not to less than 7.25%), decreasing by 2% (but not to less than 0%) for
every 25% increase in the Market Price (as defined therein) of our common stock
above the fixed conversion price of $.09 following the effective date of the
registration statement covering the common stock issuable upon conversion.
Should the price of our common stock maintain a price equal to 125% of $.09 for
a twelve month period and if our registration statement registering the shares
of our common stock underlying the Note and warrant has been declared effective
by the Securities and Exchange Commission, we would benefit from a reduced
interest rate of 2% on the outstanding principal amount for that twelve-month
period. On June 30, 2005, we also issued a variable interest rate secured
promissory note in the principal amount of $500,000 to Spotless Plastics (USA),
Inc., bearing interest at LIBOR plus 1%. We also have various other debt with
maturities ranging from 3 months to 54 months aggregating to $431,822 for
financed trucks and vehicles. A hypothetical 1% increase in the interest rate
applicable to the outstanding amounts of the Laurus and Spotless notes along
with the various other debt for financed trucks and vehicles would increase our
interest expense by approximately $70,000 annually. This hypothetical
calculation reflects the assumed interest payments for the:

      o     Note at a rate of 8.75% per annum;
      o     Spotless note at a rate of 5.86% per annum; and
      o     various other debt for financed trucks and vehicles with maturities
            ranging from 3 months to 54 months with interest rates ranging from
            3.95% to 13.99%.


                                       30
<PAGE>

Item 4. Controls and Procedures.

Evaluation of disclosure controls and procedures

We maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our reports under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the SEC's rules and forms, and that such information is accumulated and
communicated to management, including our chief executive officer and chief
financial officer, to allow timely decisions regarding required disclosure. As
required by Rule 13a-15(b) of the Securities Exchange Act of 1934, an evaluation
was performed under the supervision and with the participation of the chief
executive officer and the chief financial officer of the effectiveness of the
design and operation of our "disclosure controls and procedures" (as defined
under Rule 13a-15(e) and Rule 15d-15(e)) as of the end of the period covered by
this quarterly report on Form 10-Q filed with the SEC. Based upon that
evaluation and in connection with their determination that the matters described
immediately below relating to changes to our internal control over financial
reporting were not material, our chief executive officer and our chief financial
officer concluded that our disclosure controls and procedures, as of March 28,
2006, were effective in timely alerting them to material company information
required to be included in our periodic filings with the Securities and Exchange
Commission.

Changes in internal control over financial reporting

During the period covered by this report, there were no changes in the Company's
internal control over financial reporting that materially affected or are
reasonably likely to materially affect, the Company's internal control over
financial reporting.


                                       31
<PAGE>

                            PART II OTHER INFORMATION

Item 1. Legal Proceedings.

On August 5, 2004, we commenced an action in the New York State Supreme Court,
County of New York, seeking to collect approximately $1,255,000 of contractual
billings relating to a large roof tar removal project. On October 15, 2004, the
Economic Development Corporation filed an answer, denying our claims. On
November 4, 2004, the Economic Development Corporation filed an amended answer
denying our claims and asserting counterclaims. The case is currently in
pre-trial discovery.

In April 2003, we commenced a remediation project in New York City for a local
utility to remove sediment from an oil storage tank. During the course of the
project, the sediment in the tank was found to be substantially different than
the sediment that the customer represented to be in the tank prior to the
inception of the project. We continued to work on the project so as not to
default on the terms which it understood to exist with the customer. The
additional costs incurred to remove this matter were approximately $1,600,000.
As of June 28, 2005, we recognized revenue of approximately $1,700,000 with
respect to the original scope of this project. All amounts due under the
original contract have been paid. We have not recognized the revenue associated
with its claim. The project has been completed and the customer has refused to
acknowledge its liability for these additional charges billed. On October 22,
2004, we commenced an action against a local utility company in the New York
State Supreme Court, County of New York, claiming that we are entitled to
approximately $2,000,000 of contractual billings and related damages in
connection with this matter. On December 6, 2004, the local utility company
filed an answer, denying our claims. The case is currently in pre-trial
discovery.

We are a plaintiff in approximately 17 lawsuits claiming an aggregate of
approximately $7,173,000 pursuant to which we are seeking to collect amounts we
believe are owed to us by customers that are included in our accounts
receivable, primarily with respect to changed work orders or other modifications
to our scope of work. The defendants in these actions have asserted
counterclaims for an aggregate of approximately $500,000.

We are a party to other litigation matters and claims that are normal in the
course of our 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 our consolidated
financial statements.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

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.


                                       32
<PAGE>

Item 6. Exhibits.

The following exhibits are included as part of this report:

10.1  Amendment and Fee Waiver Agreement, dated January 13, 2006, by and between
      Windswept and Laurus (Incorporated by reference to Exhibit 10.1 of
      Windswept's Current Report on Form 8-K (Date of Report: January 13, 2006)
      filed with the SEC on January 18, 2006).

10.2  Amendment and Fee Waiver Agreement, dated February 28, 2006, by and
      between Windswept and Laurus (Incorporated by reference to Exhibit 10.1 of
      Windswept's Current Report on Form 8-K (Date of Report: February 28, 2006)
      filed with the SEC on March 2, 2006).

10.3  Amendment and Fee Waiver Agreement, dated March 20, 2006, by and between
      Windswept and Laurus (Incorporated by reference to Exhibit 10.1 of
      Windswept's Current Report on Form 8-K (Date of Report: March 20, 2006)
      filed with the SEC on March 22, 2006).

10.4  Amendment No.1 to Employment Agreement of Michael O'Reilly, effective as
      of March 13, 2006 (Incorporated by reference to Exhibit 10.1 of
      Windswept's Current Report on Form 8-K (Date of Report: April 13, 2006)
      filed with the SEC on April 17, 2006).

31.1  Certification pursuant to Section 302(a) of the Sarbanes-Oxley Act of
      2002.

31.2  Certification pursuant to Section 302(a) of the Sarbanes-Oxley Act of
      2002.

32.1  Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
      Section 906 of the Sarbanes-Oxley Act of 2002.


                                       33
<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.

                                WINDSWEPT ENVIRONMENTAL GROUP, INC.

Date: May 24, 2006              By: /s/ Michael O'Reilly
                                    -------------------------------------------
                                    MICHAEL O'REILLY,
                                    President and Chief Executive Officer
                                    (Principal Executive and Financial Officer)


                                       34
<PAGE>

                                  Exhibit Index

10.1  Amendment and Fee Waiver Agreement, dated January 13, 2006, by and between
      Windswept and Laurus (Incorporated by reference to Exhibit 10.1 of
      Windswept's Current Report on Form 8-K (Date of Report: January 13, 2006)
      filed with the SEC on January 18, 2006).

10.2  Amendment and Fee Waiver Agreement, dated February 28, 2006, by and
      between Windswept and Laurus (Incorporated by reference to Exhibit 10.1 of
      Windswept's Current Report on Form 8-K (Date of Report: February 28, 2006)
      filed with the SEC on March 2, 2006).

10.3  Amendment and Fee Waiver Agreement, dated March 20, 2006, by and between
      Windswept and Laurus (Incorporated by reference to Exhibit 10.1 of
      Windswept's Current Report on Form 8-K (Date of Report: March 20, 2006)
      filed with the SEC on March 22, 2006).

10.4  Amendment No.1 to Employment Agreement of Michael O'Reilly, effective as
      of March 13, 2006 (Incorporated by reference to Exhibit 10.1 of
      Windswept's Current Report on Form 8-K (Date of Report: April 13, 2006)
      filed with the SEC on April 17, 2006).

31.1  Certification pursuant to Section 302(a) of the Sarbanes-Oxley Act of
      2002.

31.2  Certification pursuant to Section 302(a) of the Sarbanes-Oxley Act of
      2002.

32.1  Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
      Section 906 of the Sarbanes-Oxley Act of 2002.