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 December 27, 2005,

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

     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.

     Large accelerated filer     Accelerated filer     Non-accelerated filer  X
                             ---                   ---                       ---

     Indicate by check mark whether the registrant is an accelerated filer (as
     defined in Rule 12b-2 of the Exchange Act.)     Yes         No   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
                                                          ---        ---

     The number of shares of Common Stock, par value $.0001, outstanding on
     January 27, 2006 was 33,571,215.

<PAGE>

                         PART 1 - FINANCIAL INFORMATION

  ITEM 1. FINANCIAL STATEMENTS
                       WINDSWEPT ENVIRONMENTAL GROUP, INC.
                           CONSOLIDATED BALANCE SHEETS
                       DECEMBER 27, 2005 AND JUNE 28, 2005
<TABLE>
<CAPTION>
                                                                                                   December 27,        June 28,
                                                                                                       2005              2005
                                                                                                  --------------    --------------
                                                                                                    (unaudited)        (restated)
  <S>                                                                                             <C>               <C>
  ASSETS:

  CURRENT ASSETS:
     Cash                                                                                         $   2,494,266     $     512,711
     Accounts receivable, net of allowance for doubtful accounts of $2,757,831 and $1,507,831,
        respectively                                                                                 13,182,621         6,755,338
     Inventory                                                                                          202,950           146,079
     Costs and estimated earnings in excess of billings on uncompleted contracts                        215,997            30,466
     Prepaid expenses and other current assets                                                          394,773            47,253
                                                                                                  --------------    --------------
     Total current assets                                                                            16,490,607         7,491,847
                                                                                                  --------------    --------------

  PROPERTY AND EQUIPMENT, net of accumulated depreciation and amortization of $6,739,039
     and $6,386,731, respectively                                                                     2,986,156         2,242,645
                                                                                                  --------------     -------------
  OTHER ASSETS
     Deferred financing costs                                                                         2,966,840                 -
     Other                                                                                              170,000           322,046
                                                                                                  --------------    --------------
     Total other assets                                                                               3,136,840           322,046
                                                                                                  --------------    --------------

  TOTAL                                                                                           $  22,613,603     $  10,056,538
                                                                                                  ==============    ==============

  LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT):

  CURRENT LIABILITIES:
     Accounts payable                                                                             $   1,985,409     $   1,174,840
     Liability for repurchased accounts receivable                                                      189,197                 -
     Accrued expenses                                                                                 1,575,391         1,611,256
     Secured note payable to a related party                                                                  -         5,000,000
     Current portion of secured convertible note payable                                                413,234                 -
     Billings in excess of cost and estimated earnings on uncompleted contracts                          62,350            83,316
     Accrued payroll and related fringe benefits                                                        520,715           528,867
     Current maturities of long-term debt                                                               207,805           169,612
     Income taxes payable                                                                             4,140,361           138,579
     Other current liabilities                                                                          686,809           489,468
                                                                                                  --------------    --------------
     Total current liabilities                                                                        9,781,271         9,195,938
                                                                                                  --------------    --------------

  LONG-TERM DEBT:
     Secured convertible note payable                                                                   813,249                 -
     Secured note payable                                                                               500,000                 -
     Other                                                                                              216,118           197,400
                                                                                                  --------------    --------------
        Total long-term debt                                                                          1,529,367           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 December 27, 2005 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 December 27, 2005 and June 28, 2005                                                     -                 -
     Common stock, $.0001 par value; 150,000,000 shares authorized; 33,755,620 shares
        outstanding at December 27, 2005 and 77,936,358 shares outstanding at June 28, 2005.              3,375             7,794
     Additional paid-in-capital                                                                      42,789,570        33,944,017
     Accumulated deficit                                                                            (32,789,980)      (34,664,700)
                                                                                                  --------------    --------------
     Total stockholders' equity (deficit)                                                            10,002,965          (712,889)
                                                                                                  --------------    --------------

  TOTAL                                                                                           $  22,613,603     $  10,056,538
                                                                                                  ==============    ==============
</TABLE>
  See notes to consolidated financial statements.

                                       2
<PAGE>

                       WINDSWEPT ENVIRONMENTAL GROUP, INC.
                CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
                                                                 Thirteen Weeks Ended               Twenty-Six Weeks Ended
                                                           --------------------------------    --------------------------------
                                                            December 27,      December 28,      December 27,       December 28,
                                                                2005              2004              2005               2004
                                                           --------------    --------------    --------------    --------------
    <S>                                                    <C>               <C>               <C>               <C>
    Revenues                                               $  17,714,342     $   7,359,279     $  22,878,681     $  12,837,785

    Cost of revenues                                           8,190,707         4,369,867        12,575,980         8,731,991
                                                           --------------    --------------    --------------    --------------

    Gross profit                                               9,523,635         2,989,412        10,302,701         4,105,794
                                                           --------------    --------------    --------------    --------------

    Operating expenses (income):
    Selling, general and administrative expenses               2,503,303         1,502,846         4,009,705         2,735,450
                                                           --------------    --------------    --------------    --------------
    Income from operations                                     7,020,332         1,486,566         6,292,996         1,370,344
                                                           --------------    --------------    --------------    --------------

    Other expense (income):
       Interest expense                                          664,575            55,352         1,228,410           266,456
       Other expense (income), net                                   457             (755)            22,510            (1,322)
                                                           --------------    --------------    --------------    --------------
       Total other expense (income)                              665,032            54,597         1,250,920           265,134
                                                           --------------    --------------    --------------    --------------

    Income before provision for income taxes                   6,355,300         1,431,969         5,042,076         1,105,210

    Provision for income taxes                                 3,159,138            43,659         3,167,356            46,248
                                                           --------------    --------------    --------------    --------------

    Net income                                                 3,196,162         1,388,310         1,874,720         1,058,962

    Dividends on preferred stock                                  19,500            19,500            39,000            39,000
                                                           --------------    --------------    --------------    --------------

    Net income attributable to common
       shareholders                                        $   3,176,662     $   1,368,810     $   1,835,720     $   1,019,962
                                                           ==============    ==============    ==============    ==============

    Basic and diluted net income per common share:
    Basic                                                         $0.09             $0.02             $0.05             $0.01
                                                                  ======            ======            ======            ======
    Diluted                                                       $0.02             $0.02             $0.01             $0.01
                                                                  ======            ======            ======            ======

    Weighted average number of common shares outstanding:
    Basic                                                     33,755,620        77,936,358        33,593,275        77,936,358
                                                           ==============    ==============    ==============    ==============
    Diluted                                                  184,368,852        77,961,149       184,206,507        77,980,720
                                                           ==============    ==============    ==============    ==============
</TABLE>
    See notes to consolidated financial statements.

                                       3

<PAGE>

                       WINDSWEPT ENVIRONMENTAL GROUP, INC.
           CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
<TABLE>
<CAPTION>
                                                         Common Stock
                                                         ------------            Additional
                                                    Number of                      Paid-in       Accumulated
                                                     Shares        Par Value       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           1,684,405            168             (18)                              150
             1,500,000 shares

             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                                     1,350,000                         1,350,000
             fourth increase of financing
Spotless Transactions:
             Cancellation of Spotless shares,
             net of shares sold to Michael       (45,865,143)        (4,587)          4,587                                 0
             O'Reilly

             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                                               (39,000)                          (39,000)

Net income                                                 -              -               -         1,874,720       1,874,720
                                                 ------------        -------    ------------     -------------    ------------

Balance at December 27, 2005                      33,755,620         $3,375     $42,789,570      $(32,789,980)    $10,002,965
                                                 ============        =======    ============     =============    ============
</TABLE>
See notes to consolidated financial statements.

                                       4

<PAGE>

                       WINDSWEPT ENVIRONMENTAL GROUP, INC.
                CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
                                                                                                     Twenty-Six Weeks Ended
                                                                                              --------------------------------
                                                                                               December 27,      December 28,
                                                                                                   2005              2004
                                                                                              --------------    --------------
                                                                                               (unaudited)        (unaudited)
    <S>                                                                                       <C>               <C>
    CASH FLOWS FROM OPERATING ACTIVITIES:
       Net income                                                                             $   1,874,720     $   1,058,962
       Adjustments to reconcile net income to net cash provided by
          operating activities:
          Depreciation and amortization                                                             352,308           331,053
          Provision for doubtful accounts, net                                                    1,250,000           711,594
          Amortization of deferred financing cost                                                   587,690                 -
          Amortization of beneficial conversion                                                     317,216                 -
       Changes in operating assets and liabilities:
          Accounts receivable                                                                    (7,488,086)       (4,175,461)
          Inventory                                                                                 (56,871)           31,889
          Costs and estimated earnings in excess of billings on uncompleted contracts              (185,531)           48,003
          Income tax refund                                                                               -           641,795
          Prepaid expenses and other current assets                                                (347,520)           50,908
          Other assets                                                                              152,046            28,000
          Accounts payable and accrued expenses                                                     886,573         1,379,494
          Accrued payroll and related fringe benefits                                                (8,152)          (19,326)
          Income tax payable                                                                      3,140,989                 -
          Other current liabilities                                                                 133,532           613,807
          Billings in excess of costs and estimated earnings on uncompleted contracts               (20,966)         (227,430)
                                                                                              --------------    --------------

    NET CASH PROVIDED BY OPERATING ACTIVITIES                                                       587,948           473,288
                                                                                              --------------    --------------

    CASH FLOWS FROM INVESTING ACTIVITIES:
       Purchases of property and equipment                                                         (938,756)          (56,011)
                                                                                              --------------    --------------
    NET CASH USED IN INVESTING ACTIVITIES                                                          (938,756)          (56,011)
                                                                                              --------------    --------------

    CASH FLOWS FROM FINANCING ACTIVITIES:
       Principal payments of long-term debt                                                        (100,152)         (134,508)
       Proceeds from long-term debt                                                                 157,063                 -
       Exercise of stock options                                                                        150                 -
       Payments for deferred financing costs                                                     (2,312,830)                -
       Repayment of secured note payable to a related party                                      (2,761,868)                -
       Proceeds from secured notes payable                                                        7,350,000                 -
                                                                                              --------------    --------------
    NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                                           2,332,363          (134,508)
                                                                                              --------------    --------------

    NET INCREASE IN CASH                                                                          1,981,555           282,769

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

    CASH - END OF PERIOD                                                                      $   2,494,266     $     346,331
                                                                                              ==============    ==============

    Cash paid during the period for:
       Interest                                                                               $       91,477    $     190,098
                                                                                              ===============   ==============
       Income taxes                                                                           $            -    $       2,250
                                                                                              ===============   ==============

    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                                      $      157,063    $           -
                                                                                              ===============   ==============
       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.

                                       5

<PAGE>


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

1.       BASIS FOR PRESENTATION - The accompanying unaudited consolidated
         financial statements include the accounts of Windswept Environmental
         Group, Inc. (the "Company") and its 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
         December 27, 2005, the results of operations for the thirteen and
         twenty-six weeks ended December 27, 2005 and December 28, 2004 and cash
         flows for the twenty-six weeks ended December 27, 2005 and December
         28, 2004, have been included.  Certain prior period amounts have been
         reclassified to conform to the December 27, 2005 presentation.

         The results for the thirteen and twenty-six weeks ended December 27,
         2005 and December 28, 2004 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.       STOCK-BASED COMPENSATION - The Company applies the
         intrinsic-value-based method of accounting prescribed by Accounting
         Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued
         to Employees", and related interpretations including FASB
         Interpretation No. 44, "Accounting for Certain Transactions Involving
         Stock Compensation, an Interpretation of APB Opinion No. 25", issued in
         March 2000, to account for its fixed-plan stock options.  Under this
         method, compensation expense is recorded on the date of grant only if
         the current market price of the underlying stock exceeds the exercise
         price.

         Statement of Financial Accounting Standards No. 123, "Accounting for
         Stock-Based Compensation", ("SFAS 123") established accounting and
         disclosure requirements using a fair-value-based method of accounting
         for stock-based employee compensation plans.  As allowed by SFAS 123,
         the Company has elected to continue to apply the intrinsic-value-based
         method of accounting described above, and has adopted only the
         disclosure requirements of SFAS 123, as amended by SFAS 148,
         "Accounting for Stock-Based Compensation-Transition and Disclosure an
         Amendment of FASB Statement No. 123."


                                       6

<PAGE>

         The following table illustrates the effect on net (loss) income
         attributable to common shareholders and net (loss) income per
         share if the Company had applied the fair value recognition
         provisions of SFAS No. 123, "Accounting for Stock-Based
         Compensation," to stock-based employee compensation for all
         periods:
<TABLE>
<CAPTION>
                                                  Thirteen Weeks Ended                Twenty-Six Weeks Ended
                                            --------------------------------    --------------------------------
                                              December 27,     December 28,      December 27,     December 28,
                                                  2005             2004              2005              2004
                                            --------------    --------------    --------------    --------------
             <S>                            <C>               <C>               <C>               <C>
             Net income attributable to
                 common shareholders
                 as reported                $   3,176,662     $   1,368,810     $   1,835,720     $   1,019,962
             Less: Stock-based
                 employee compensation
                 cost determined under
                 the fair value method,
                 net of related tax                56,250            25,935           112,500            51,870
                 effects
                                            --------------    --------------    --------------    --------------
             Pro forma net income
                 attributable to common
                 shareholders               $    3,120,412   $    1,342,875     $   1,723,220     $    968,092
                                            ===============  ===============    ==============    =============

             Net income per share:
                Basic - as reported                  $0.09             $.02             $0.05             $.01
                                                     ======            =====            ======            =====
                Basic - pro forma                    $0.09             $.02             $0.05             $.01
                                                     ======            =====            ======            =====
                Diluted - as reported                $0.08             $.02             $0.05             $.01
                                                     ======            =====            ======            =====
                Diluted - pro forma                  $0.02             $.02             $0.01             $.01
                                                     ======            =====            ======            =====
</TABLE>
3.            NET INCOME PER COMMON SHARE -The calculation of basic and
              diluted net (loss) income per common share was calculated for all
              periods in accordance with the requirements of Statement of
              Financial Accounting Standards No. 128, "Earnings per Share."

                                       7

<PAGE>

              The following table sets forth the computation of the basic and
              diluted net income per share for the thirteen and twenty-six weeks
              ended December 27, 2005 and December 28, 2004, respectively:
<TABLE>
<CAPTION>
                                                   Thirteen Weeks Ended               Twenty-Six Weeks Ended
                                            --------------------------------    --------------------------------
                                             December 27,      December 28,     December 27,        December 28,
                                                 2005              2004             2005               2004
                                            --------------    --------------    --------------    --------------
            <S>                             <C>               <C>               <C>               <C>
            Numerator:
             Net income attributable to
                common shareholders         $   3,176,662     $   1,368,810     $   1,835,720     $   1,019,962

             Plus:
                Series A Preferred
                   Stock Dividends                 19,500                 -            39,000                 -
                Interest on Convertible
                   Debt                           168,491                 -           289,656                 -
                                            --------------    --------------    --------------    --------------
             Net Income Attributable to
                common shareholders
                and Assumed Conversion      $   3,364,653     $   1,368,810     $   2,164,376     $   1,019,962
                                            ==============    ==============    ==============    ==============
             Denominator:
                Share reconciliation:
                Shares used for basic
                   income per share            33,755,620        77,936,358        33,593,275        77,936,358
                Effect of dilutive items:
                   Stock options/warrants      56,101,565            24,791        56,101,565            44,362
                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          184,368,852        77,961,149       184,206,507        77,980,720
                                            ==============    ==============    ==============    ==============
             Net income per share:
                  Basic                              $.09              $.02              $.05              $.01
                  Diluted                            $.02              $.02              $.01              $.01
</TABLE>

              The dilutive net income per share computations for the thirteen
              and twenty-six week periods ended December 27, 2005 assume an
              increase in the authorized capital of the Company sufficient to
              accomodate the full exercise of and conversion of outstanding
              options, warrants and the Laurus Note.

              The dilutive net income per share computations for the thirteen
              and twenty-six week periods ended December 27, 2005 exclude
              1,700,000 and 1,700,000 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 twenty-six week periods ended December 28,
              2004 exclude 3,910,309 and 3,710,309 shares, respectively,
              related to stock options and warrants because the effect of
              including them would be anti-dilutive. For the periods ended
              December 28, 2004, 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.

                                       8

<PAGE>

4.            PROVISION FOR INCOME TAXES - The provision for income taxes for
              the thirteen and twenty-six weeks ended December 27, 2005 and
              December 28, 2004 consists of the following:
<TABLE>
<CAPTION>
                   Thirteen Weeks Ended Twenty-Six Weeks Ended
                           --------------------------------    --------------------------------
                            December 27,      December 28,      December 27,      December 28,
                                2005              2004              2005              2004
                           --------------    --------------    --------------    --------------
<S>                        <C>               <C>               <C>               <C>
Federal - current          $   2,235,624     $      41,070     $   2,235,624     $      41,070
State - current                  923,514             2,589           931,732             5,178
                           --------------    --------------    --------------    --------------
Total                      $   3,159,138     $      43,659     $   3,167,356     $      46,248
                           ==============    ==============    ==============    ==============
</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 18 lawsuits, including
              those described above, claiming an aggregate of approximately
              $5,000,000 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.

                                       9

<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
              December 27, 2005, 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.
              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

                                       10

<PAGE>

                  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 $6,890,625 as of February 2,
              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, to file its initial registration statement
              on Form S-1 with the SEC on or before November 22, 2005 or be
              subject to a liquidated damages claim. Laurus waived the
              liquidated damages accruing on November 23, 2005 and granted an
              extension until March 1, 2006, during which time no liquidated
              damage claims will be assessed.

              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, which resulted in a credit of $4,587 to
              additional paid-in capital.

              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:

                                       11

<PAGE>

                  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 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 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 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 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 secured convertible term note that the Company has
                      issued to Laurus.

              As of December 27, 2005, the Company has paid an aggregate of
              $70,000 to the series A convertible preferred stockholders for the
              payments due June 30, 2005 and September 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 to be held by March 1, 2006. 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 Phillips to purchase 100,000 shares under its 2001
              Equity Incentive Plan in connection with his service as a director
              of the Company.

                                       12

<PAGE>

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

                                 ITEM                                AMOUNT
                      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 twenty-six
                        weeks ended
                        December 27, 2005                             587,690
                                                                  ------------
                      Total deferred financing costs              $ 2,966,840
                                                                  ------------

              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 Tony
              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 Tony 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, we 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 us 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.

              In February 1997, the Company issued 650,000 shares of redeemable
              convertible preferred stock to Dr. Kevin 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.

                                       13

<PAGE>

              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.

     7.       SUBSEQUENT EVENTS - On January 13, 2006, Laurus agreed to (a)
              postpone the date by which the Company must have the Form S-1
              declared effective until March 1, 2006 and (b) postpone the date
              by which the Company must increase its authorized capital from
              January 31, 2006 until March 1, 2006.

     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 are providing in the aftermath of Hurricanes Katrina and
     Wilma. In the thirteen and twenty-six week periods ended December 27, 2005
     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; 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.

                                       14

<PAGE>

     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 February 2, 2006, the principal amount of the Laurus note outstanding
     equaled $6,890,625. 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.

     We currently are engaged on various projects within our customary scope of
     services for private sector commercial and residential customers in the
     gulf coast and Florida regions. Under time and materials contracts or other
     arrangements, we have billed in excess of $9.8 million of work that we have
     completed in connection with these projects through January 31, 2006. We
     have also billed in excess of $8.9 million for projects in these areas that
     are still in progress. As of January 1, 2006 we have billed an aggregate of
     over $20 million of time and materials projects during our fiscal 2006.
     Management believes that we will be engaged to perform additional
     projects in this region in the near term; however, no assurance can be
     given in this regard until contracts relating to these projects have been
     executed.

     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 fiscal quarter ended December 27, 2005. 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.

     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 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, 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.

                                       15

<PAGE>

     When options or warrants to purchase our common stock are used as
     incentives for employees, officers or directors, we use the intrinsic value
     method in accordance with the recognition and measurement principles of
     Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
     Employees," as permitted by Statement of Financial Accounting Standards
     "SFAS" No. 123. The intrinsic value method calculates the value of the
     option or warrant at the difference between the exercise price per share
     and the market price per share of the common stock on the day the option or
     warrant is granted, except that such value is zero if the exercise price is
     higher than the market price of the common stock. Once the transaction
     value is determined, we record the transaction value as an expense with a
     corresponding increase in paid-in capital.

     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.

     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. 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. 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 December 27, 2005. 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.

                                       16

<PAGE>

     RESULTS OF OPERATIONS

     THIRTEEN WEEKS ENDED DECEMBER 27, 2005 AND DECEMBER 28, 2004

     Revenue

     Total revenues for the thirteen weeks ended December 27, 2005 increased by
     $10,355,063, or 140.7%, to $17,714,342 from $7,359,279 for the thirteen
     weeks ended December 28, 2004. This increase in revenue was primarily
     attributable to $14,108,400 of revenues from work relating to Hurricane
     Katrina and $1,320,769 of revenues from work relating to Hurricane Wilma,
     and was partially offset by a $573,968 decrease in spill related work.

     Cost of Revenues
     ----------------

     Cost of revenues increased $3,820,840 or 87.4%, to $8,190,707 for the
     thirteen weeks ended December 27, 2005 as compared to $4,369,867 for the
     thirteen weeks ended December 28, 2004. This increase was primarily
     attributable to labor and other costs relating to our work in connection
     with Hurricanes Katrina and Wilma. Our cost of revenues consists primarily
     of labor and labor-related costs, payroll taxes, benefits, training,
     job-related insurance costs, travel and travel-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 $6,534,223, or 218.6%, to $9,523,635, or 53.7%,
     of total revenues for the thirteen weeks ended December 27, 2005 as
     compared to $2,989,412, or 40.6%, of total revenues for the thirteen weeks
     ended December 28, 2004. 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 $1,000,457, or
     66.6%, to $2,503,303 for the thirteen weeks ended December 27, 2005 from
     $1,502,846 for the thirteen weeks ended December 28, 2004 and constituted
     approximately 14.1% and 20.4% of revenues in such periods, respectively.
     This increase was primarily attributable to an increased provision of
     $700,000 to our allowance for doubtful accounts, increased accounting and
     legal fees of $71,628, and a $15,090 increase in marketing expenses. These
     were partially offset by a decrease of $25,314 in management fees. 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 December 27,
     2005 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
     December 28, 2004 due to the low market price of our common stock.

     Interest Expense
     ----------------

     Interest expense increased by $609,223, or 1,100.6%, to $664,575 for the
     thirteen weeks ended December 27, 2005 from $55,352 for the thirteen weeks
     ended December 28, 2004. This increase was primarily due to an increase of
     $168,491 of interest expense incurred to Laurus, $181,958 of amortization
     of discounts, and an increase of $296,211 attributable to the amortization
     of deferred financing costs relating to the Laurus transaction, partially
     offset by a reduction of $40,620 in interest expense incurred to Spotless.

                                       17

<PAGE>

     Provision for Income Taxes
     --------------------------

     The provision for income taxes for the thirteen weeks ended December 27,
     2005 was $3,159,138 as compared to $43,659 for the thirteen weeks ended
     December 28, 2004. This increase was the result of higher taxable income
     for the thirteen weeks ended December 27, 2005, primarily attributable to
     our hurricane-related work in that period.

     Net Income
     ----------

     We generated net income of $3,196,162 and net income attributable to common
     stockholders of $3,176,662 for the thirteen weeks ended December 27, 2005,
     as compared to net income of $1,388,310 and net income attributable to
     common stockholders of $1,368,810 incurred for the thirteen weeks ended
     December 28, 2004. These changes were the result of the factors discussed
     above.

     TWENTY-SIX WEEKS ENDED DECEMBER 27, 2005 AND DECEMBER 28, 2004
     --------------------------------------------------------------

     Revenue
     -------

     Total revenues for the twenty-six weeks ended December 27, 2005 increased
     by $10,040,896, or 78.2%, to $22,878,681 from $12,837,785 for the
     twenty-six weeks ended December 28, 2004. This increase in revenue was
     primarily attributable to $15,070,747 of revenues from work relating to
     Hurricane Katrina and $1,320,769 of revenues from work relating to
     Hurricane Wilma. This increase was partially offset by a $1,063,799
     decrease in spill related work.

     Cost of Revenues
     ----------------

     Cost of revenues increased $3,843,989 or 44.0%, to $12,575,980 for the
     twenty-six weeks ended December 27, 2005 as compared to $8,731,991 for the
     twenty-six weeks ended December 28, 2004. This increase was primarily
     attributable to labor and other costs relating to our work in connection
     with Hurricanes Katrina and Wilma. Our cost of revenues consists primarily
     of labor and labor-related costs, payroll taxes, benefits, training,
     job-related insurance costs, travel and travel-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 $6,196,907, or 150.9%, to $10,302,701, or 45.0%,
     of total revenues for the twenty-six weeks ended December 27, 2005 as
     compared to $4,105,794, or 32.0%, of total revenues for the twenty-six
     weeks ended December 28, 2004. 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 $1,274,255, or
     46.6%, to $4,009,705 for the twenty-six weeks ended December 27, 2005 from
     $2,735,450 for the twenty-six weeks ended December 28, 2004 and constituted
     approximately 17.5% and 21.3% of revenues in such periods, respectively.
     This increase was primarily attributable to an increased provision of
     $1,250,000 to our allowance for doubtful accounts, increased accounting and
     legal fees of $303,726, and a $40,256 increase in marketing expenses. These
     were partially offset by a decrease of $114,316 in consulting fees. 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.

                                       18

<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 twenty-six weeks ended December 27,
     2005 due to the elimination of this risk on June 30, 2005. There was no
     benefit or expense required to be recorded in the twenty-six weeks ended
     December 28, 2004 due to the low market price of our common stock.

     Interest Expense
     ----------------

     Interest expense increased by $961,954, or 361.0%, to $1,228,410 for the
     twenty-six weeks ended December 27, 2005 from $266,456 for the thirteen
     weeks ended December 28, 2004. This increase was primarily due to an
     increase of $289,656 of interest expense incurred to Laurus, $317,216 of
     amortization of discounts, and an increase of $587,690 attributable to the
     amortization of deferred financing costs relating to the Laurus
     transaction, partially offset by a reduction of $226,021 in interest
     expense incurred to Spotless, including a decrease of $145,846 in interest
     expense recognized in connection with sales of accounts receivable to
     Spotless because there were no such sales in the twenty-six week period
     ended December 27, 2005.

     Provision for Income Taxes
     --------------------------

     The provision for income taxes for the twenty-six weeks ended December 27,
     2005 was $3,167,356 as compared to $46,248 for the twenty-six weeks ended
     December 28, 2004. This increase was the result of higher taxable income
     for the twenty-six weeks ended December 27, 2005, primarily attributable to
     hurricane-related work in that period.

     Net Income
     ----------

     We generated net income of $1,874,720 and net income attributable to common
     stockholders of $1,835,720, for the twenty-six weeks ended December 27,
     2005, as compared to net income of $1,058,962 and net income attributable
     to common stockholders of $1,019,962 incurred for the twenty-six weeks
     ended December 28, 2004. These changes were the result of the factors
     discussed above.

     LIQUIDITY AND CAPITAL RESOURCES

     As of December 27, 2005, we had a cash balance of $2,494,266, working
     capital of $6,079,337 and stockholders' equity of $10,002,965. As of
     September 27, 2005, we had a cash balance of $147,493, working capital of
     $1,845,015 and stockholders' equity of $5,583,738. 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
     $1,874,720, a net profit of $53,066 and a net loss of ($3,535,334) for our
     fiscal quarter ended December 27, 2005 and our fiscal years ended June 28,
     2005 and June 29, 2004, respectively.

     Net cash provided by operating activities was $587,948 for the twenty-six
     weeks ended December 27, 2005, as compared to the net cash provided by
     operations of $473,288 for the twenty-six weeks ended December 28, 2004.
     Accounts receivable increased by $4,233,848, or 36.8%, as of December 27,
     2005 to $15,751,255, from $11,517,407 as of December 28, 2004, primarily as
     a result of work performed in connection with Hurricanes Katrina and Wilma.
     Accounts payable and accrued expenses decreased by $1,156,854, or 24.0%, as
     of December 27, 2005 to $3,672,669, from $4,829,523 as of December 28,
     2004, 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 twenty-six weeks ended December 27, 2005 was $2,332,363,
     as compared to cash used by financing activities of $134,508 for the
     twenty-six weeks ended December 28, 2004, primarily as a direct 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 $2,650,000. These transactions resulted in a net increase of
     $2,350,000 in borrowings

                                       19

<PAGE>


     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 twenty-six weeks ended December 28,
     2004 used net cash of $134,508 for long-term debt repayment.

     Cash used for capital expenditures increased to $938,756, during the
     twenty-six weeks ended December 27, 2005, as compared to $56,011 for the
     twenty-six weeks ended December 28, 2004, 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 currently are 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.  Under time and materials contracts
              or other arrangements, we have billed in excess of $9.8 million of
              work that we have completed in connection with these projects
              through January 31, 2006.  We have also billed in excess of $8.9
              million for projects in these areas that are still in progress.
              As of January 1, 2006 we have billed an aggregate of over $20
              million of time and materials projects during our fiscal 2006. In
              this connection, we also intend to focus on procuring time and
              materials contracts, which have historically generated higher
              gross margins.  We also intend to continue our marketing campaign,
              including radio and newspaper advertising and a public relations
              program, to inform residents of New Orleans and the surrounding
              gulf areas about our services.  Our management believes that we
              will be engaged to perform additional projects in this region
              for the foreseeable future; however, no assurance can be given in
              this regard until contracts relating to these projects have been
              executed.
        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.
        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
              include

                                       20

<PAGE>


              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.

     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 February 2, 2006, the principal amount
     of the Note, as a result of repayments, outstanding equaled $6,890,625. 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 Note.

     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:

        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;

                                       21

<PAGE>

        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.

     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

                                       22

<PAGE>

     Agreement and the Note 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 January 31, 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, as amended, we obligated to 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. We filed the registration
     statement on October 3, 2005 and are in the process of responding to a
     comment letter from the Securities and Exchange Commission dated October
     31, 2005. If the registration statement is not declared effective by March
     1, 2006 by the Securities and Exchange Commission, then we will be required
     to pay to Laurus the following amounts:

        o     1.5% of the principal outstanding on the Note, for the first
              thirty days, prorated for partial periods, which equals $3,445
              per day based upon the $6,890,625 principal amount of the Note
              currently outstanding; and
        o     2.0% of the principal outstanding on the Note, for each thirty
              day period, prorated for partial periods, which equals $4,594 per
              day.

                                       23

<PAGE>

     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>
<CAPTION>
         <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>

                                       24

<PAGE>


     The table below summarizes contractual obligations and commitments as of
     December 27, 2005, including principal and interest payments on our
     debt(1):
<TABLE>
<CAPTION>
                                     Total          1 Year        2-3 Years        4-5 Years
          <S>                       <C>            <C>            <C>              <C>
          Operating Leases          $ 953,727      $ 692,009      $ 261,718        $     -

          Capitalized Leases -
          Principal
                                      423,923        207,806        196,087         20,030

          Capitalized Leases -
          Interest
                                       44,769         27,330         16,907            532

          Laurus Note -
          Principal                 7,350,000      1,378,128      5,971,872              -

          Laurus Note
          Interest Expense - Cash     888,623        538,496        350,127              -

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

          Spotless Note -
          Interest Expense             13,828              -         13,828              -
                                  ------------   ------------    -----------       --------
Total                             $10,174,870    $ 2,843,769     $7,310,539        $20,562

     ------------
<FN>
     (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.
</FN>
</TABLE>

         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 $423,923 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 December 27, 2005, the Note
     had a principal balance of $7,350,000 with a corresponding discount of
     $6,123,517, resulting in a carrying amount of $1,226,483 on our balance
     sheet, $413,234 of which is included as a current liability and $813,249 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 8.1% in fuel costs during the second quarter of
     this year due to increased oil prices.

                                       25

<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 its 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.

                                       26

<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 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 $413,234 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%.

                                       27

<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. The design of any system of control is based in part
     upon certain assumptions about the likelihood of future events, and there
     can be no assurance that any design will succeed in achieving our stated
     purpose under all potential future conditions. 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 December 27, 2005, 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

     In connection with our first quarter fiscal 2006 review, we identified
     issues arising in connection with a change in our accounting staff during
     such period regarding the timing and related processing of cash receipts
     and allocation of costs associated with our contract and billing procedures
     and have implemented the following measures:

        o  We have modified our calendar quarterly period end dates in our
           computer system to correspond with our actual quarterly period ending
           dates in order to enhance the accurate and timely processing of our
           cash receipts for each quarterly report. We have also emphasized to
           our accounting staff that they must record transactions on the dates
           that they occur instead of batching such transactions for processing
           at the end of one of our monthly, quarterly or annual periods.
        o  We have modified the way in which we allocate our costs to specific
           projects in an effort to more precisely record our project costs.

     We are assigning a high priority to the short-term and long-term correction
     of our internal controls over financial reporting and will continue to
     evaluate the effectiveness of such internal controls on an on-going basis
     and will take further action as might be appropriate. Other than
     implementing the improvements discussed above, there were no changes in our
     internal controls over financial reporting that have materially affected,
     or are reasonably likely to materially affect, those controls.

                                       28

<PAGE>


                           PART 2 - 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 18 lawsuits claiming an
                  aggregate of approximately $5,000,000 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
                  ---------------------------------------------------

                  Note applicable.

     ITEM 5.      OTHER INFORMATION
                  -----------------

                  Not applicable.

                                       29

<PAGE>


     ITEM 6.    EXHIBITS
                --------

                The following exhibits are included as part of this report:

                10.1      Amendment and Deferral Agreement, dated November 10,
                          2005, 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: November 10, 2005) filed with the SEC on
                          November 14, 2005).
                10.2      Amendment and Deferral Agreement, dated November 23,
                          2005, 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: November 23, 2005) filed with the SEC on
                          November 29, 2005).
                10.3      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).
                31.1      Certification of Chief Executive Officer pursuant to
                          Sarbanes-Oxley Section 302(a).
                31.2      Certification of Chief Financial Officer pursuant to
                          Section 302(a).
                32.1      Certification of Chief Executive Officer and Chief
                          Financial Officer pursuant to 18 U.S.C. Section 1350.

                                       30

<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: February 8, 2006            By:    /s/ Michael O'Reilly
                                           -------------------------------------
                                           MICHAEL O'REILLY,
                                           President and Chief Executive Officer
                                           (Principal Executive Officer)





     Date: February 8, 2006            By:   /s/ Andrew C. Lunetta
                                           -------------------------------------
                                           ANDREW C. LUNETTA
                                           Chief Financial Officer
                                           (Principal Financial Officer)

                                       31