**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON
      D.C. 20549**










**FORM
      10-KSB**




(Mark
      One)





x
            ANNUAL
                REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
                1934





For
      the
      fiscal year ended December 31, 2006





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





For
      the
      transition period from ________________ to ________________





Commission
      File Number 0-26843





**RG
      America, Inc.**


(Name
      of
      Small Business Issuer in Its Charter)




Nevada
            75-2823489(State
                or Other Jurisdiction of
            (I.R.S.
                Employerof
                Incorporation or Organization)
            Identification
                No.)1507
                Capital Avenue, Suite 101, Plano, Texas
            75074(Address
                of Principal Executive Offices)
            (Zip
                Code)




(972)
      919-4774


(Issuer’s
      Telephone Number, Including Area Code)





Securities
      registered under Section 12(b) of the Exchange Act:




Title
                of Each Class
            
            Name
                of Each Exchange on Which RegisteredNone
            
            None




Securities
      registered under Section 12(g) of the Exchange Act:





Common
      Stock, $0.001 Par Value Per Share


(Title
      of
      Class)





Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act. o





Check
      whether the issuer: (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 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
o










Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of registrant’s knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of this Form 10-KSB or any
      amendment to this Form 10-KSB. o





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes
o
      No x





State
      Issuer’s revenues for its most recent fiscal year.  $
      20,373,047





As
      of May
      14, 2007, the aggregate market value of our common stock, $0.001 par value,
      held
      by non-affiliates was approximately $2,195,159 (21,951,585 shares at $0.10
      per
      share, which was the last reported sales price of the Company’s common stock on
      the Over the Counter Bulletin Board for such date). (See definition of affiliate
      in Rule 12b-2 of the Exchange Act.)





As
      of May
      14, 2007, there were 29,252,093 shares of our common stock issued and
      outstanding.





Transitional
      Small Business Disclosure Format (check one): Yes
o
      No x





**TABLE
      OF CONTENTS**





**Page****PART
                I**Item
                1.
            
            Description
                of Business
            
            5Item
                2.
            
            Description
                of Property
            
            18Item
                3
            
            Legal
                Proceedings
            
            19Item
                4.
            
            Submission
                of Matters to a Vote of Security Holders
            
            19**PART
                II**Item
                5.
            
            Market
                for Common Equity, Related Stockholder Matters and Small Business
                Issuer
                Purchases of Equity Securities
            
            20Item
                6.
            
            Management’s
                Discussion and Analysis or Plan of Operation
            
            23Item
                7.
            
            Financial
                Statements
            
            35Item
                8.
            
            Changes
                in and Disagreements with Accountants on Accounting and Financial
                Disclosure
            
            36Item
                8A.
            
            Controls
                and Procedures
            
            37Item
                8B.
            
            Other
                Information
            
            37**PART
                III**Item
                9.
            
            Directors,
                Executive Officers, Promoters and Control Persons; Compliance with
                Section
                16(a) of the Exchange Act
            
            37Item
                10.
            
            Executive
                Compensation
            
            41Item
                11.
            
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            
            44Item
                12.
            
            Certain
                Relationships and Related Transactions
            
            46Item
                13.
            
            Exhibits
                and Financial Statement Schedules
            
            47Item
                14.
            
            Principal
                Accountant Fees and Services
            
            49**SIGNATURES**
            
            
            
            50




3


**SPECIAL
      NOTE REGARDING FORWARD-LOOKING STATEMENTS**





In
      addition to historical information, this Annual Report contains statements
      that
      plan for or anticipate the future, including without limitation statements
      under
      the captions “Description of Business,” “Risk Factors” and “Management’s
      Discussion and Analysis or Plan of Operation.” These forward-looking statements
      include statements about our future business plans and strategies, future
      actions, future performance, costs and expenses, interest rates, outcome of
      contingencies, financial condition, results of operations, liquidity, objectives
      of management, and other such matters, as well as certain projections and
      business trends, and most other statements that are not historical in nature,
      that are “forward-looking” within the meaning of the Private Securities
      Litigation Reform Act of 1995.





The
      Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for
      forward-looking information to encourage companies to provide prospective
      information about themselves without fear of litigation so long as that
      information is identified as forward-looking and is accompanied by meaningful
      cautionary statements identifying important factors that could cause actual
      results to differ materially from those projected in the information.
      Forward-looking information may be included in this Annual Report or may be
      incorporated by reference from other documents we have filed with the Securities
      and Exchange Commission (the “SEC”). You can identify these forward-looking
      statements by the use of words like “may,” “will,” “could,” “should,” “project,”
“believe,” “anticipate,” “expect,” “plan,” “estimate,” “forecast,” “potential,”
“intend,” “continue” and variations of these words or comparable words.
      Forward-looking statements do not guarantee future performance, and because
      forward-looking statements involve future risks and uncertainties, there are
      factors that could cause actual results to differ materially from those
      expressed or implied. These risks and uncertainties include, without limitation,
      those described under “RISK FACTORS” in Item 1 of this Annual Report and those
      detailed from time to time in our filings with the SEC.





We
      have
      based the forward-looking statements relating to our operations on management’s
      current expectations, estimates, and projections about us and the industry
      in
      which we operate. These statements are not guarantees of future performance
      and
      involve risks, uncertainties and assumptions that we cannot predict. In
      particular, we have based many of these forward-looking statements on
      assumptions about future events that may prove to be inaccurate. Because
      forward-looking statements involve future risks and uncertainties, there are
      factors that could cause actual results to differ materially from those
      anticipated by these forward-looking statements. For example, a few of the
      uncertainties that could affect the accuracy of forward-looking statements
      include:




·
            Changes
                in general economic and business conditions affecting
                us;





·
            Changes
                in the assumptions used in making forward-looking
                statements;





·
            Legal
                or policy developments that diminish our
                appeal;





·
            Changes
                in our business strategies;





·
            Our
                limited operating history;





·
            The
                degree and nature of our
                competition;





·
            Our
                ability to employ and retain qualified employees;
                and





·
            The
                other factors referenced in this Annual Report, including without
                limitation, under the captions “Description of Business,” “Risk Factors”
                and “Management’s Discussion and Analysis or Plan of
                Operation.”





These
      risks are not exhaustive. Other sections of this Annual Report include
      additional factors which could adversely impact our business and financial
      performance. Moreover, we operate in a competitive and changing environment.
      New
      risk factors emerge from time to time and it is not possible for our management
      to predict all risk factors, nor can we assess the impact of all factors on
      our
      business or to the extent to which any factor, or combination of factors, may
      cause actual results to differ materially from those contained in any
      forward-looking statements. Given these risks and uncertainties, we caution
      you
      not to place undue reliance on forward-looking statements as a prediction of
      actual results. All forward-looking statements are made only as of the date
      of
      this Annual Report. Except for our ongoing obligation to disclose material
      information as required by federal securities laws, we do not intend to update
      you concerning any future revisions to any forward-looking statements to reflect
      events or circumstances occurring after the date of this Annual Report. We
      undertake no obligation to publicly update or revise any forward-looking
      statements, whether as a result of new information or future
      events.


4


**PART
      I**





**Item
      1.**  **Description
      of Business**





**OUR
      BUSINESS DEVELOPMENT**





*For
      a
      description of significant recent developments to our business, please refer
      to
“Item 6. Management’s Discussion and Analysis or Plan of Operation - RECENT
      DEVELOPMENTS”*





RG
      America, Inc. (“we,” “us,” “our”, “RG” or “the Company”), a Nevada corporation
      formerly known as Invvision Capital, Inc., is a publicly-traded company (OTCBB:
      RGMI.OB) that provides a broad array of fee-based services that address clients’
risk management needs for their real estate assets. This is accomplished by
      addressing procedures and costs associated with the risk of a possible loss
      such
      as loss control activities and purchasing traditional insurance products. We
      also address the consequences of a loss after it has occurred by adjusting
      claims, restoring property and minimizing business interruption costs.





We
      were
      incorporated in May 1998 under the name “Asset Servicing Corporation.” On July
      10, 2000, we merged with ParkPass.com, Inc. and changed our name to “Omni
      ParkPass, Inc.” On April 28, 2001, we acquired all of the outstanding shares of
      Invvision Capital, Inc., a Texas corporation, and changed our name to “Invvision
      Capital, Inc.” In August 2002, after a series of sales of our active business
      lines, we became an inactive publicly-held corporation. From August 2002 through
      November 2003, we remained an inactive publicly-held corporation pursuing
      business ventures with a privately-held company in the commercial and industrial
      real estate business.





Effective
      as of December 30, 2003, we acquired all of the capital stock of Restoration
      Group America 2003, Inc. (“RGA 2003”), which holds the intellectual property
      rights to PropertySMART ® and
      its
      wholly-owned subsidiaries: (a) RG Insurance Services, Inc. (“RGIS”), which is a
      general insurance agency; (b) RG Risk Management, Inc. (“RGRM”), which is
      engaged in the business of providing claims management services; (c) RG
      Restoration, Inc., also known as “The Restoration Group” (“TRG”), which is
      engaged in the business of performing commercial property insurance restoration
      services; and (d) Restoration Group America, Inc. (“RGAI”), which held
      employment contracts with key management. RGA 2003 maintains the rights to
      our
      intellectual property and RGAI is the subsidiary that employs our employees.
      All
      of the foregoing entities are Texas corporations, and RGIS, RGRM, TRG and RGAI
      are now our indirect wholly-owned subsidiaries.





On
      August
      10, 2004, we acquired all of the common stock of Practical Business Solutions
      2000, Inc. (“PBS 2000”). The aggregate purchase price was $350,000, which
      payment consisted of 166,667 restricted shares of our common stock. The terms
      included (i) an agreement by the stockholders of PBS 2000 to escrow 55,555
      shares of our common stock for a period of two years to satisfy certain
      potential indemnifiable claims; and (ii) an agreement granting piggyback
      registration rights for the resale of 5,850 of the purchase consideration
      shares.





On
      December 16, 2004, we determined that as a result of a material impairment
      of
      PBS 2000, we would wind down and close the PBS 2000 operation. As a result
      of
      the loss of the key employee as related to PBS 2000, its valuation was
      significantly impaired and the entire goodwill recorded from the acquisition
      of
      PBS 2000 in the amount of $401,033 was recorded as an Impairment of Goodwill
      in
      the Consolidated Statement of Operations for the year ended December 31, 2004.
      Additionally, PBS 2000’s net book assets of $144,661 were written off and
      charged to Impairment of Subsidiary in the Consolidated Statement of Operations
      for the year ended December 31, 2004.





On
      March
      16, 2005, 55,555 shares of our common stock held in escrow related to the
      acquisition of PBS 2000 were cancelled. This transaction was recorded as a
      recovery of impairment of $116,669 in the first quarter of 2005 as reflected
      in
      the accompanying Consolidated Statement of Operations for the year ended
      December 31, 2005.





On
      October 12, 2005, RGA 2003 acquired all of the common stock of Total
      Professional Restoration, Inc. from Mr. Jerod Yates. The aggregate purchase
      price was $750,000 plus an option to Mr. Yates to convert our outstanding debt
      to Mr. Yates into restricted stock as described below. The $750,000 purchase
      price was paid by the issuance of 1,875,000 restricted shares of our common
      stock, based upon a price of $0.40 per share, which restricted shares will
      vest
      ratably to Mr. Yates over five years of employment with RGA. We also granted
      to
      Mr. Yates, at his sole option, an option to convert our outstanding debt to
      the
      seller into restricted shares of our common stock based upon a price of $0.30
      per share. The option period expired on January 10, 2006 without being exercised
      and we have paid this debt in cash. However, since the fair market value of
      our
      common stock was $0.45 per share as determined by recent private offerings
      of
      stock, we recorded the purchase price at $843,750. When recording this
      transaction, $843,750 was recorded as deferred compensation and will be
      amortized over Mr. Yates’ five year employment agreement with RGA 2003. Also on
      October 12, 2005, in connection with the acquisition of Total Professional
      Restoration, Inc., we entered into an employment agreement with Mr.
      Yates.




5




**OUR
      COMPANIES**





**Financial
      Services Division**





***RG
      Insurance Services, Inc (“RGIS”).***





**Retail** -




·
            RGIS
                is a Texas-based agency licensed to operate as a full lines general
                insurance agency.





·
            RGIS
                is a multi-lines general agency licensed to write property, casualty
                and
                employee benefits coverage.





·
            RGIS
                will serve as the lead retail agent for our PropertySMART®insurance program as described
                below.





·
            RGIS
                will continue to grow both commercial and personal insurance business
                lines and non- PropertySMART®business lines, and expand existing
                relationships.





**Wholesale-**




·
            We
                are in the process of investigating other highly rated carriers to
                front
                our PropertySMART®program and to be the administrator and underwriter for
                PropertySMART®.





***RG
      Financial Services (“RGFS”)***





·
            RGFS
                intends to market credit and financial products for owners, managers
                and
                tenants with a target market of approximately 38 million residential
                rental units in North America.





**Insurance
      Restoration Services Division -** *For
      a
      description of significant recent developments related to this entity, please
      refer to “Item 6. Management’s Discussion and Analysis or Plan of Operation -
      RECENT DEVELOPMENTS.*




***RG
      Risk Management, Inc. (“RGRM”)***





·
            RGRM
                provides claims management, inspection and underwriting services,
                administers our loss prevention program and supports our
                PropertySMART®program by performing all of these services for the
                client.





·
            Our
                goal is to lower the incidence of loss and thereby lower premium
                rates
                upon renewal.





***RG
      Restoration, Inc., d/b/a The Restoration Group (“TRG”)***





·
            TRG
                performs restoration, remediation, construction and construction
                management on all property types, but specializes in garden style
                multi-family and high rise condo and other commercial properties
                that have
                suffered an insured loss such as fire, flood, hurricane, wind or
                hail
                damage.





·
            TRG
                chooses whether to perform work as the contractor on each project
                or as a
                construction manager, earning management fees. TRG will also manage
                all
                PropertySMART®losses.





·
            TRG
                will work both for PropertySMART®policy holders as well as on losses outside the
                program.





**·**
            TRG
                has focused primarily on hurricane insurance restoration in recent
                years
                and continues to work on restoration projects from hurricanes Katrina,
                Rita and Wilma.




6




***RG
      Roofing, Inc. (“RGR”)***





·
            RGR
                provides both full and emergency roofing restoration and re-construction
                of condo, multi-family, single family and commercial real estate
                properties that have suffered an insurance loss and are in need of
                repair
                or replacement.





·
            RGR’s
                roofing team has significant experience in all forms of roofing,
                from
                traditional composite shingle to metal, flat and high-rise roof
                structures.





·
            RGRI
                also provides us with more flexibility to work on multiple stages
                of
                numerous restoration projects at the same
                time.





**Additional
      Companies**





The
      following subsidiaries support our primary business lines:





·
            CTFD,
                Inc. - Rental of construction, site remediation and restoration equipment.





·
            CTFD
                Marine, Inc. - Ownership of marine equipment.





·
            Urban
                Logic, Inc. - Non-operating entity.





·
            RG
                Florida GC, Inc. - General contractor entity for Florida
                operations.





·
            RG
                Florida SC, Inc. - Subcontractor entity for Florida
                operations.





·
            Invvision
                Funding Inc. - Non-operating
                entity.





·
            RG
                Industries, Inc. - Non-operating
                entity.





·
            Practical
                Business Solutions 2000, Inc. - Non-operating
                entity.





·
            Restoration
                Group America, 2003, Inc. - holding company for Intellectual
                Property.





·
            Restoration
                Group America, Inc. - holding company for employees, payroll, rents,
                overhead.





·
            Total
                Professional Restoration, Inc. dba Remediation
                Group.




7


**OUR
      BUSINESS**





We
      focus
      on two main lines of business: (1) insurance restoration services and (2)
      financial services which are detailed below - *For
      a
      description of significant recent developments to our business, please refer
      to
“Item 6. Management’s Discussion and Analysis or Plan of Operation - RECENT
      DEVELOPMENTS”*





**Insurance
      Restoration Services Division** **“** **Restoration
      Group** **”**





***Recovery***





The
      recovery division’s licensed insurance adjusters address our client’s immediate
      questions and concerns about their insurance loss. Immediately after a loss,
      we
      begin assisting them by examining their policy to analyze any coverage questions
      and establish a professional line of communication with the insurance company's
      representative. Our in-house adjusters prepare an independent estimate and
      establish an agreed **** scope
      of
      the damage to present in the insurance claim package to the insurance company’s
      adjuster in a familiar format, all in an effort to maximize our client’s
      interests within the policy and settle the claim.





***Remediation***





The
      remediation division provides immediate response to handle all forms of fire,
      smoke and water restoration, from emergency clean up, demolition and board
      to-up
      water extraction, drying and dehumidification. Our personnel are fully trained
      to provide the highest quality of service with the most advanced equipment.
      The
      team has project experience ranging from single, multi-family and high-rise
      condos to casinos and government buildings. With our mobile catastrophe
      equipment and teams, we can handle projects throughout the United States.





***Reconstruction***





The
      reconstruction division that involves selective demolition and complete
      reconstruction, to return the structure to it’s pre-loss condition. It focuses
      on both interior and exterior re-construction of condo, multi-family, retail,
      commercial and industrial properties.





***Roofing***





The
      roofing division provides both full and emergency roofing restoration and
      re-build of condo, multi-family, single family and commercial real estate
      properties that have suffered an insurance loss and are in need of repair or
      replacement. Our roofing team has experience in all forms of roofing, from
      traditional single and multi-family shingle to metal, flat, and high rise
      structures.





**Financial
      Services Division**





***Insurance
      Division***





The
      insurance division multi-lines general agency, licensed to write property,
      casualty, and employee benefits coverage with a specific focus in the
      proprietary PropertySMART ® program,
      a property and casualty insurance solution for the multi-family housing and
      commercial property industries. This innovative insurance product saves the
      policy holder money, reduces loss exposure for the carrier, and provides a
      higher level of service to all parties.




**Risk
      Management**





A
      full-service risk management division designed primarily for the multi-family
      housing and commercial property industries. Additionally, the Company provides
      the sales and marketing of selected financial services (including
      PropertySMART ® ),
      targeted at the multi-family housing and commercial real estate industries
      and
      their tenants.




All
      our
      businesses are built upon superior service and customer value generation. We
      believe these provide synergies for our clients and provide us with a
      diversified stream of recurring revenue. Our corporate objective is to ensure
      that each business compliments and reinforces the other divisions. Marketing
      efforts for each of the divisions are both closely coordinated and
      complementary, sharing certain key elements.





8




**The
      Market**





Below
      are
      a few basic facts and figures about the industries in which we do
      business:





·
            Overall
                construction, put in place in 2006, exceeded $1.19 trillion in the
                U.S.,
                up 4.8% from $1.143 trillion in
                2005.





·
            World
                insurance premiums (property/casualty and life/health) totaled $3.426
                trillion in 2005, (according to Swiss
                Re).





·
            Data
                from Highline/National Association of Insurance Commissioners shows
                U.S.
                insurance premiums totaled $955.6 billion in 2005, down 0.1 percent
                from
                2004.





·
            The
                same data show premiums in the property/casualty sector totaled $427.4
                billion (excluding state funds), while life/health premiums totaled
                $528.2
                billion.





·
            The
                transaction value of insurance-related mergers and acquisitions totaled
                $32.7 billion in 2005, up from $14.2 billion in
                2004.





·
            There
                were 2,725 property/casualty insurance companies in the United States
                in
                2005, compared with 2,700 in 2004. Many of these companies were part
                of
                larger entities.





·
            The
                property/casualty insurance industry's rate of return on a statutory
                basis
                was 10.4 percent in 2005, up from 9.3 percent in
                2004.





·
            The
                property/casualty insurance industry had after tax net income of
                $46.9
                billion in 2005, up from $38.4 billion dollars in
                2004.





·
            U.S.
                property/casualty insurers are expected to pay homeowners and businesses
                $9.2 billion for 2006 insured property losses from 33 events, down
                significantly from the record set in 2005, when insurers paid $61.8
                billion in catastrophe claims (according to preliminary estimates
                by ISO’s
                Property Claim Services (PCS)
                unit).





·
            In
                2006, the only storm to cause notable damage was Tropical Storm Ernesto.
                It produced $245 million in insured losses. In 2005, five hurricanes
                caused $57.7 billion in insured
                damages.





Insurance
      is one of the largest and fastest growing operating expenses of all real estate
      operating costs, such as apartments and other commercial properties, exceeded
      only by debt service costs and (occasionally) property taxes. Market research
      indicates a near-crisis situation exists in many segments of the multi-family
      housing industry, caused by significant increases in premiums, higher
      deductibles, and in some cases the inability to obtain adequate insurance
      coverage under virtually any terms and conditions. Near-record low interest
      rates in the recent past have enticed first time home buyers out of apartments,
      as unemployment forces other tenants to leave and move in with family or
      friends. The resulting higher-than-planned-for vacancy rates have made rapidly
      rising insurance costs even more difficult to absorb. This is especially true
      in
“B”, “C” and “D” rated properties. Other than reducing insurance coverage
      through higher policy deductibles or some form of self-insurance (which
      increases business risk and usually violates mortgage requirements), property
      owners and managers have little opportunity to control insurance costs when
      “hard markets” in the insurance industry restrict their ability to obtain
      competitive insurance.





These
      conditions have aggravated the adversarial relationship that historically exists
      between insurance carriers, adjusters and property owners, which is a major
      reason for spiraling premiums and the cost of claims. This tenuous relationship
      is further complicated by the confusion that often arises regarding who the
      ultimate decision maker is in the restoration contractor selection process.
      The
      standard Insurance Services Office (ISO) commercial fire insurance policy reads
      in part:





“In
      the
      event of loss or damage covered by this Coverage Form, at our option, we will
      either:




1.
            Pay
                the value of lost or damaged
                property;





2.
            Pay
                the cost of repairing or replacing the lost or damaged
                property;





3.
            Take
                all or any part of the property at an agreed or appraised value;
                or





4.
            Repair,
                rebuild or replace the propertywith other property of like kind and
                quality.”




9




However,
      insurers traditionally do not exercise clause 4, effectively abdicating the
      contractor selection decision to the property owner/manager. This situation
      leads to turmoil, extra costs and ineffectiveness, and we determined there
      were
      business opportunities available if we could influence the resolution process.
      As a result, we created PropertySMART ® .
      We
      believe that PropertySMART ® and our
      various integrated operating businesses provide us with a business opportunity.
      We also believe that we can manage each of these businesses to compliment each
      other so that growth in any one area will drive growth in our other
      divisions.





Each
      of
      our subsidiaries claims either the States of Texas or Florida as its home and
      its largest markets. Although we will focus nationally, our operating companies
      share a primary marketing territory in the Gulf and Southern Atlantic Coast
      states through Virginia, as well as interior states including Arizona, Arkansas,
      Colorado, Kansas, Kentucky, Missouri, Nevada, New Mexico, Oklahoma and Tennessee
      (to name the major target areas). These states comprise approximately 40% of
      the
      U.S. population (113 million people). Additionally, according to the U.S. Census
      Bureau, these states include approximately 38% of all renter-occupied housing
      units, including 5 million housing units in structures with 10 or more units
      (approximately 34% of the national total. Historically, at an average of $560
      per month, the median gross rent in these states is $42 below the national
      average, putting property owners and managers under additional pressure to
      control insurance and other operating costs. According to the U.S. Census
      Bureau, the median household income in our target markets is 5.7% higher than
      the national average. Additionally, these states are largely non-union, and
      are
      generally recognized as having above-average insurance regulatory climates.
      Demographics aside, natural disasters such as coastal winds, floods, hurricanes,
      hail and tornado losses have caused traditional insurers to withdraw or curtail
      business while simultaneously raising premiums in recent years, thereby
      encouraging self-insurance and spawning non-standard residual market vehicles.





**Our
      Services and Products**





PropertySMART ® ****** *(* ***Property*** ** ***S*** *trategically* ***M*** *anaged* ***A*** *lternative* ***R*** *isk* ***T*** *ransfer)*





Property
      owners and managers enter into a “loss control partnership” with us to reduce
      loss frequency and severity. This partnership includes developing and
      implementing an effective loss control program, and restoring properties quickly
      and economically. The benefits of this partnership include:





·
            Significantly
                reduced “loss of rents” costs, due to a reduction in restoration
                periods.





·
            Pre-Agreed
                upon construction profit margins over actual costs, as compared to
                much
                higher margins in traditional restoration
                contracts.





·
            Reduced
                loss frequency and severity, due to stronger underwriting and loss
                control
                efforts, including encouraging the use of fire suppression systems
                in oven
                hoods, fire retardant paint sealers, safety education and incentive
                programs for property owners and property
                managers.





·
            Elimination
                of “inherited tails” on pre-existing hail-damaged roofs through more
                thorough pre-underwriting loss control
                inspections.





·
            Elimination
                of claims inflation through accelerated loss resolution, settled
                equitably
                for all parties.





·
            Improved
                retention of high quality insurance
                clients.





·
            Minimal
                or no deductibles.





·
            Realignment
                of the interests of both insurance carriers and property owners,
                to
                provide both adequate coverage and prompt claim settlements, resulting
                in
                reduced premiums.





·
            Extensive
                loss control consulting efforts and comprehensive underwriting.





Additionally,
      the following items represent attributes of the PropertySMART ® program
      that we believe provide significant advantages for us:


·
              We
                  have filed an application with the United States Patent and Trademark
                  Office and PropertySMART®is
                  now patent pending.  ·
              PropertySMART®is
                  now a registered trademark.  ·
              The
                  program will be launched with commitments for exclusive initial
                  capacity
                  from a highly rated insurance
                  carrier.
  10
 ·
              The
                  program includes up to six potential revenues streams including:
                  wholesale
                  commissions; retail commissions; adjusting and claims administration
                  fees;
                  restoration or construction management fees; and a contingent element
                  of
                  incentive-based commissions.  ·
              We
                  believe that our carrier partner in the PropertySMART®program has committed to pricing that is competitive with or better
                  than
                  the current pricing available in the
                  marketplace.  ·
              Historically,
                  there are approximately over 16 million apartment units in the
                  United
                  States (approximately 38 million total rental units in North America).
                  Initially, the program’s market focus for multi-family will be on two and
                  three-story garden style apartment complexes with wood frame construction.
                  We anticipate that the program will launch initially in Texas,
                  then grow
                  to the surrounding southwestern states and ultimately across North
                  America.  ·
              We
                  have previously performed work for the owners of several hundred
                  thousand
                  apartment units and have existing relationships with owners and
                  managers
                  of approximately 1,000,000 additional
                  units.  ·
              We
                  do not plan to perform much, if any, of the actual restoration
                  construction work itself under the PropertySMART®program. Rather, we will be the construction manager, allowing
                  us to
                  significantly expand the scope of work we are able to
                  handle.  ·
              PropertySMART®is
                  anticipated to deliver significant economic advantages including
                  cost
                  controls or reduction in costs, streamlined claims administration
                  and
                  superior services to multi-family and commercial property owners
                  and
                  managers.




***Insurance
      Coverage***





·
            We
                currently operate both a retail and wholesale insurance agency and
                have
                the ability to handle the insurance placement needs for virtually
                all
                lines of consumer and business insurance including general liability,
                workers compensation, property, commercial automobile, umbrella,
                directors
                and officers liability (D&O), errors and omissions (E&O),
                employment practices liability (EPLI), surety bonds, group health,
                life
                and disability insurance. We place these types of coverage through
                major
                insurance companies including, but not limited to, Zurich, Travelers,
                Hartford, AIG, and Lloyd’s of London, among
                others.


·
            In
                addition to providing property insurance for the future
                PropertySMART®program, we currently offer multi-line agency services for apartment
                owners’ other insurance needs including workers compensation, employee
                benefits, automobile, general liability policies, etc.





***Risk
      Management Services (Within PropertySMART*** ***®*** ***)***




·
            We
                have established a vertically integrated set of services to address
                the
                various levels of risk at covered properties. Risk management includes
                all
                procedures and costs associated with the “risk” of a possible loss, such
                as loss control activities, pre-inspections and purchasing appropriate
                insurance products. It also includes dealing with the consequences
                of a
                loss after it has occurred, such as adjusting claims, restoring damaged
                property and minimizing business interruption costs.


·
            We
                are not the insurance carrier.
                However, we consider the ability to generate fee income from risk
                management services without incurring certain business risks typically
                associated with underwriting (insurance cycles, adverse loss reserve
                development, regulatory issues, etc.) as a significant strategic
                advantage
                of our business plan.





***Insurance
      Restoration Services***





·
            Our
                insurance restoration division has traditionally targeted the multi-family
                housing industry. We do not actively pursue contracts involving total
                losses or rebuilding “from the ground up”, but concentrate on projects
                where the restoration of damaged structures is
                possible.


·
            Hurricanes,
                tornadoes, hail storms, floods and fires, along with a host of other
                natural and man-made perils, combine to generate a year-round stream
                of
                potential customers without regard for the state of the economy or
                global
                market influences.


·
            There
                are generally two parts to the insurance restoration industry: remediation
                (or mitigation) and reconstruction. Currently, the majority of our
                revenues are derived from
                reconstruction.




11




·
            Although
                the primary source of future business is expected to come from servicing
                customers of the program PropertySMART®and their losses, we intend to continue to pursue
                non-PropertySMART®related business through historic marketing channels and
                efforts.


·
            The
                hospitality (hotel/motel) and restaurant industries are both likely
                candidates for a near-term breakout opportunity into a new market
                segment.
                Because of their similarities to the multi-family
                industry.




**Our
      Business Plan -** *For
      a
      description of significant recent developments to our business, please refer
      to
“Item 6. Management’s Discussion and Analysis or Plan of Operation - RECENT
      DEVELOPMENTS”*





·
            We
                anticipate that the introduction of PropertySMART®will be made to our first potential customers by July 1, 2007.


·
            We
                believe our growth will be partly self-directed and exponential.
                We
                foresee long term potential growth in a largely untapped market for
                this
                type of solution and our plans anticipate eventually having a significant
                number of units in PropertySMART®.


·
            We
                believe that we can expand this program into other segments, such
                as the
                hospitality and restaurant industries, thereby fueling further growth
                with
                minimal increase of overhead.


·
            We
                believe that the cash generation from PropertySMART®will permit us to evaluate opportunities to continue to add to our
                suite
                of services, thereby further fueling growth and the generation of
                additional profit.





**Our
      Competition**





While
      any
      business faces competition, we do not believe that we have any direct
      competitors with respect to the integrated “suite of services” we offer,
      particularly with respect to PropertySMART ® .





Independent
      of PropertySMART ® ,
      our
      financial services and insurance restoration entities both operate in very
      large
      industries, each with substantial competition. In Texas, there are approximately
      5,400 separate insurance agencies, employing 80,000 insurance agents. Of these,
      approximately 2,500 insurance agencies provide commercial insurance services.
      We
      focus on commission-based property and casualty insurance placements, as well
      as
      providing ancillary Life, Accident and Health insurance for selected businesses.
      We seek to maintain a competitive advantage over the other agencies discussed
      above through our customer service and the future promotion of our
      PropertySMART ® program.





Our
      insurance restoration divisions operate in a multi-billion dollar per year
      industry where there are low barriers to entry and minimal regulation.
      Consequently, the industry is highly fragmented, with thousands of restoration
      contractors ranging in size from international giants to individual handymen
      working from the back of a pickup truck. However, despite the industry confusion
      and competition, we seek to maintain a competitive advantage over other
      restoration companies through PropertySMART ® .





**Government
      Regulations That Affect Our Business**





Our
      insurance agency subsidiary, RGIS, is regulated by the Texas Department of
      Insurance (“TDI”) and other state insurance regulatory bodies where we may do
      business. Among other regulations and requirements, TDI requires the following
      from our agency:





·
            Errors
                & Omissions insurance in the amount of at least $1,000,000;


·
            All
                RGIS officers and voting shareholders must be licensed individually
                as
                insurance agents; and


·
            All
                RGIS employees producing new business or consulting clients on insurance
                purchasing or premium issues must hold an insurance
                license.





RGIS
      meets all of the above TDI requirements as well as other statutory regulations
      where applicable. Our other subsidiaries are subject to various state and local
      laws and regulations regarding construction activities and building
      codes.




12





None
      of
      our employees are represented by a labor union. We believe we have, and will
      continue to have, a good working relationship with all of our employees.
      Management meets with employees periodically to discuss our objectives, as
      well
      as more specific labor issues, such as scheduling, compensation, work rules
      and
      safety. Much of the labor on our re-construction and restoration crews are
      independent laborers hired on a job-by-job basis.





Additionally,
      we have a large non-employee workforce of contractors and sub-contractors
      providing services to the Company on an as needed basis.





**Our
      Employees**




As
      of
      December 31, 2006, we had 37 employees comprised of 36 full-time employees
      and 1
      part-time consultant as detailed below:





Sales
            
            
            5Administration
            
            
            14Operations
            
            
            18




Additionally,
      we have a large non-employee workforce of contractors and sub-contractors
      providing services to the Company.




**RISK
      FACTORS**





Any
      investment in our common stock involves a high degree of risk. In addition
      to
      the other information contained in this report, including risks and
      uncertainties described elsewhere, you should carefully consider the following
      risk factors and all of the information contained in this Annual Report in
      evaluating us or deciding whether to purchase our common stock. The risks and
      uncertainties described below or elsewhere in this Annual Report are not the
      only ones we face. Additional risks and uncertainties not presently known to
      us
      or that we currently deem immaterial also may impair our business and
      operations. The following list of risk factors should not be considered as
      all
      inclusive. If any of the following risks were to occur, our business, financial
      condition, operating results and cash flows could be materially affected, all
      of
      which might cause the trading price of our common stock to decline, and you
      could lose all or part of any investment you may make in our common
      stock.





Our
      actual results may differ materially from those anticipated in our
      forward-looking statements. We operate in a market environment that is difficult
      to predict and that involves significant risks and uncertainties, many of which
      will be beyond our control. Refer also to “SPECIAL NOTE REGARDING
      FORWARD-LOOKING STATEMENTS” at the beginning of this Annual Report.





***Going
      Concern Risk***





We
      have
      had in the past and could have future losses, deficits and deficiencies in
      liquidity, which could impair our ability to continue as a going concern. Our
      independent registered public accounting firm has indicated that certain factors
      raise doubt about our ability to continue as a going concern and these factors
      are discussed in Note 2 to our audited financial statements as of December
      31,
      2006. Since our inception, we have suffered recurring losses from operations
      and
      have been dependent on existing stockholders, new investors, and capital sources
      to provide the cash resources to sustain our operations.





Our
      accompanying consolidated financial statements have been prepared assuming
      that
      we will continue as a going concern. We had a net loss of $9,856,537 for the
      year ended December 31, 2006 and at December 31, 2006, current liabilities
      exceeded current assets by $3,362,616, stockholders’ deficit was $2,361,909 and
      we had an accumulated deficit of $14,740,537.





Our
      long-term viability as a going concern is dependent on certain key factors,
      including without limitation our ability to continue to obtain sources of
      outside financing to support near term operations and to allow us to continue
      to
      make investments, and our ability to increase profitability and sustain a cash
      flow level that will ensure support for continuing operations.




13





We
      cannot
      give assurance that we will achieve or sustain profitability or generate
      sufficient cash flow from operations in the future to meet our planned capital
      expenditures, working capital and debt service requirements. If required, our
      ability to obtain additional financing from other sources depends on many
      factors beyond our control, including the state of the capital markets and
      the
      prospects for our business. The necessary additional financing may not be
      available to us or may be available only on terms that would result in further
      dilution to the current owners of our common stock.





We
      have
      substantial current obligations in the form of trade accounts payable, accrued
      expenses and notes payable as of December 31, 2006. Our substantial debt
      obligations pose risks to our business and stockholders by:





·
            Making
                it more difficult for us to satisfy our
                obligations;


·
            Requiring
                us to dedicate a substantial portion of our cash flow to principal
                and
                interest payments on our debt obligations, thereby reducing the
                availability of our cash flow to fund working capital, capital
                expenditures and other corporate
                requirements;


·
            Impeding
                us from obtaining additional financing in the future for working
                capital,
                capital expenditures and general corporate purposes;
                and


·
            Making
                us more vulnerable to a downturn in our business and limiting our
                flexibility to plan for, or react to, changes in our
                business.





We
      cannot
      give assurance that we will generate sufficient cash flow from operations or
      obtain additional financing to meet scheduled debt payments and financial
      covenants. If we fail to make any required payment under the agreements and
      related documents governing our indebtedness or fail to comply with the
      financial and operating covenants contained in them, we would be in default.





***We
      have a need for additional financing.***





We
      require substantial capital to pursue our operating strategy. We need additional
      working capital to finance the accounts receivables generated by our
      construction division and to hire additional sales and marketing people as
      our
      business grows in states outside of Texas. Although we have successfully
      structured a $10,000,000 credit facility for funding construction accounts
      receivable, we will need additional funding beyond this facility and we do
      not
      have an alternate funding facility in place to handle these additional business
      needs. We will need additional capital (i) to retire our indebtedness; (ii)
      for
      working capital requirements; (iii) to obtain additional systems and
      improvements to our facilities and equipment; and (iv) to satisfy further
      capital requirements. We cannot assure you that we will be able to raise needed
      capital from other sources on terms favorable to us. If we are unable to obtain
      sufficient capital in the future, our ability to pursue our business strategy
      and our results of operations for future operations may be
      impaired.





***We
      have significant financial and operational covenants.***





We
      currently have a $10,000,000 credit facility that contains an amended and
      restated Security Agreement including, among other things, a stock pledge
      agreement, a guaranty from us and all of our subsidiaries and certain covenants
      and obligations in order to secure the funds obtained from the credit facility.
      If we are determined to be in default of the credit facility covenants, the
      impact on our business could be materially detrimental.





***Our
      additional financing requirements could result in dilution to existing
      stockholders.***





If
      additional financing is required, it could be obtained through one or more
      transactions that could effectively dilute the ownership interests of our
      then-current stockholders. Further, there can be no assurances that we will
      be
      able to secure such additional financing. We have the authority to issue
      additional shares of our common stock, as well as additional classes or series
      of ownership interests or debt obligations that may be convertible into any
      class or series of our ownership interests. We are authorized to issue up to
      300,000,000 shares of our common stock and 35,000,000 shares of preferred stock,
      $0.001 par value per share. Such securities may be issued without the approval
      or other consent of the holders of our common stock.




14




***Established
      competitors with greater resources may make it difficult for us to market our
      products effectively, offer our products or services, and compete
      effectively***





The
      property insurance and insurance restoration businesses are highly competitive
      and many of our competitors have substantially greater resources than we do.
      We
      compete with both large national writers and smaller regional companies,
      including companies that serve the independent agency market and companies
      that
      sell insurance directly to consumers. Some of these companies may have certain
      competitive advantages over us, including increased name recognition, loyalty
      of
      their customer base, lower cost structures and longer operating histories.
      Competition in the property insurance market has historically included offering
      significant rate discounts, and there can be no assurance that these conditions
      will not recur. Although a number of national insurers that are much larger
      than
      us do not currently compete in a material way in the multi-family property
      market, if one or more of these companies decided to enter the market, it could
      have a material adverse effect on us. These companies include some that may
      be
      able to sustain significant losses in order to acquire market share, as well
      as
      others that use distribution methods that compete with our distribution
      channels. There can be no assurance that we will be able to compete effectively
      against these companies in the future.





***Our
      future success will be dependent on our ability to attract and retain key
      personnel***





Our
      future success depends significantly upon the efforts of certain key management
      personnel, including: Bruce A. Hall, our Chief Executive Officer and Chief
      Financial Officer; James A. Rea, our President and Chief Operating Officer;
      Kevin L. Dahlberg, our Executive Vice President and President of our subsidiary
      RGIS; and William Fink, the Chief Operating Officer of RGIS. We have entered
      into agreements with Messrs. Hall, Rea, Dahlberg and Fink as members of our
      management team. There is no assurance that we will be able to satisfactorily
      maintain such agreements. The loss of key personnel could adversely affect
      our
      business. As we continue to grow, we will need to recruit and retain additional
      qualified management personnel, and there can be no assurance that we will
      be
      able to do so. We currently do not maintain key man life insurance on any of
      our
      management team members.





***The
      substantial growth projected by us, if achieved, must be efficiently and
      effectively managed***





Our
      projected growth will likely place a significant strain on our managerial,
      operational and financial resources. We need to:




·
            improve
                our financial and management controls, reporting systems and procedures;


·
            expand,
                train and manage our workforce for marketing, sales and support;
                and


·
            manage
                multiple relationships with various customers, investors and third
                parties.





***We
      are dependent on the results of operations of our
      subsidiaries***





As
      a
      holding company without significant operations of our own, the principal sources
      of our funds are management fees, dividends and other distributions from our
      operating subsidiaries. In turn, our principal sources of revenues for our
      operating subsidiaries are construction revenues on the restoration services
      provided to our clients and commissions earned on insurance policies. Our
      rights, and consequently your rights as stockholders, to participate in any
      distribution of assets of our operating subsidiaries are subject to prior claims
      of customers and creditors, if any (except to the extent that our rights, if
      any, as a creditor are recognized). Consequently, our ability to pay debts,
      expenses and cash dividends to our stockholders may be limited.





***We
      have not officially launched PropertySMART*** ***®***





We
      have
      not yet partnered with the required highly-rated insurance carrier to launch
      the
      PropertySMART ® program
      and, provide commitments for exclusive initial capacity for the program and
      front the program in the United States. Our business plan and projections are
      focused significantly on the PropertySMART ® program
      and if we are unable to successfully launch PropertySMART ® ,
      it
      could have a material adverse effect on our business plan.


15


***The
      market pricing for PropertySMART*** ***®*** ***may not be competitive***




We
      believe that the future carrier partner in the PropertySMART ® program
      will commit to pricing that is competitive with or better than the current
      pricing available in the marketplace. If we are unable to obtain such
      competitive or favorable pricing, the advantages of PropertySMART ®  discussed
      in this Annual Report may not provide enough of an incentive for clients to
      utilize the program. If this happens, it could have a material adverse effect
      on
      our business plan and projections.





***We
      have a limited market for our common stock, and our stock price is
      volatile***





Our
      common stock is not listed on a national securities exchange or quoted on the
      Nasdaq Global Market or Nasdaq Small Capital Market. Instead, our common stock
      is currently quoted on the OTC Bulletin Board under the symbol “RGMI.OB.”
Trading on the OTC Bulletin Board is sporadic and highly volatile. The market
      price for our common stock has fluctuated in the past and may continue to
      fluctuate in the future. The market price of our common stock is subject to,
      and
      will continue to be subject to, a variety of factors, including without
      limitation:





·
            the
                business environment;


·
            the
                operating results of companies in the industries we
                serve;


·
            future
                announcements concerning our business or that of our competitors
                or
                customers;


·
            the
                introduction of new products or changes in product pricing policies
                by us
                or our competitors;


·
            litigation
                matters;


·
            changes
                in analysts’ earnings statements or performance
                estimates;


·
            developments
                in the financial markets;


·
            quarterly
                operating results;


·
            perceived
                dilution from stock issuances for acquisitions and other transactions;
                and


·
            market
                conditions of securities traded on the OTC Bulletin
                Board.





Furthermore,
      stock prices for many companies fluctuate for reasons that may be unrelated
      to
      their operating results. Those fluctuations and general economic, political
      and
      market conditions, such as recessions, international currency fluctuations
      or
      terrorist or military actions, as well as public perception of equity values
      of
      publicly traded companies, may adversely affect the market price of our common
      stock.





***There
      is no assurance of an established public trading market for our common
      stock***





Although
      our common stock trades on the OTC Bulletin Board, a regular trading market
      for
      our common stock may not be sustained in the future. The NASD (National
      Association of Stock Dealers) has enacted recent changes that limit quotations
      on the OTC Bulletin Board to securities of issuers that are current in their
      reports filed with the SEC. The effect on the OTC Bulletin Board of these rule
      changes and other proposed changes cannot be determined at this time. The OTC
      Bulletin Board is an inter-dealer, over-the-counter market that provides
      significantly less liquidity than the NASD’s automated quotation system (the
“Nasdaq Stock Market”). Quotes for stocks included on the OTC Bulletin Board are
      not listed in the financial sections of newspapers as are those for the NASDAQ
      Stock Market. Therefore, prices for securities traded solely on the OTC Bulletin
      Board may be difficult to obtain and holders of our common stock may be unable
      to resell their securities at or near their original offering price, or at
      any
      price.





***Our
      common stock is considered a “penny stock” and may be difficult to
      sell***





Our
      common stock is considered to be a “penny stock” since it meets one or more of
      the definitions in Rule 3a51-1 promulgated under the Exchange Act. These include
      but are not limited to the following: (i) the stock trades at a price less
      than
      $5 per share; (ii) we are NOT traded on a “recognized” national securities
      exchange; (iii) we are NOT quoted on the Nasdaq Stock Market; (iv) we are NOT
      have a market value of listed securities of $50 million; or (v) it does NOT
      have
      a minimum bid price of $4 per share. The principal result or effect of being
      designated a “penny stock” is that securities broker-dealers cannot recommend
      the stock but must trade in it on an unsolicited basis. Section 15(g) of the
      Exchange Act, and Rule 15g-2 promulgated thereunder by the SEC, require
      broker-dealers dealing in penny stocks to provide potential investors with
      a
      document disclosing the risks of penny stocks and to obtain a manually signed
      and dated written receipt of the document before effecting any transaction
      in a
      penny stock for the investor’s account.




16





Potential
      investors in our common stock are urged to obtain and read such disclosure
      carefully before purchasing any shares that are deemed to be “penny stock.”
Moreover, Rule 15g-9 requires broker-dealers in penny stocks to approve the
      account of any investor for transactions in such stocks before selling any
      penny
      stock to that investor. This procedure requires the broker-dealer to (i) obtain
      from the investor information concerning his or her financial situation,
      investment experience and investment objectives; (ii) reasonably determine,
      based on that information, that transactions in penny stocks are suitable for
      the investor and that the investor has sufficient knowledge and experience
      as to
      be reasonably capable of evaluating the risks of penny stock transactions;
      (iii)
      provide the investor with a written statement setting forth the basis on which
      the broker-dealer made the determination in clause (ii) above; and (iv) receive
      a signed and dated copy of such statement from the investor, confirming that
      it
      accurately reflects the investor’s financial situation, investment experience
      and investment objectives. Compliance with these requirements may make it more
      difficult for holders of our common stock to resell their shares to third
      parties or to otherwise dispose of them in the market or otherwise.





***Shares
      eligible for future sale may adversely affect the market price of our common
      stock, as the future sale of a substantial amount of our stock in the public
      marketplace could reduce the price of our common
      stock.***





From
      time
      to time, certain of our stockholders may be eligible to sell all or some of
      their shares of common stock by means of ordinary brokerage transactions in
      the
      open market pursuant to Rule 144 (“Rule 144”) promulgated under the Securities
      Act of 1933, as amended (the “Securities Act”), subject to certain limitations.
      In general, pursuant to Rule 144, a stockholder (or stockholders whose shares
      are aggregated) who has satisfied a one-year holding period may, under certain
      circumstances, sell within any three-month period a number of securities that
      does not exceed the greater of 1% of the then outstanding shares of common
      stock
      or the average weekly trading volume of the class during the four calendar
      weeks
      prior to such sale. Rule 144 also permits, under certain circumstances, the
      sale
      of securities, without any limitations, by a non-affiliate of the Registrant
      that has satisfied a two-year holding period. Any substantial sale of common
      stock pursuant to Rule 144 may have an adverse effect on the market price of
      our
      common stock by creating an excessive supply.





***Concentration
      of stock ownership***





Our
      officers, directors and a small number of principal stockholders directly and
      beneficially own greater than 50% of the issued and outstanding shares of our
      common stock. As a result, these stockholders possess significant influence,
      giving them the ability, if they were to vote in unison, to control the election
      of our directors, to authorize or prevent proposed significant corporate
      transactions and to control any other corporate actions requiring stockholder
      approval. Such stock ownership and control may also have the effect of delaying
      or preventing a future change in control; impeding a merger, consolidation,
      takeover or other business combination; or discouraging a potential acquirer
      from making a tender offer.





***If
      we fail to maintain effective internal controls over financial reporting, the
      price of our common stock may be adversely affected***





Although
      we have not identified any material weaknesses in our internal controls over
      financial reporting to date, the assessment required pursuant to rules adopted
      by the SEC pursuant to the Sarbanes-Oxley Act of 2002 may uncover weaknesses
      or
      conditions that need to be addressed, the disclosure of which may have an
      adverse impact on investor confidence and the price of our common stock. Failure
      to establish and maintain appropriate internal controls over financial
      reporting, or any failure of those controls once established, could have a
      material adverse effect on our business, financial condition or results of
      operations or raise concerns for investors. Any actual or perceived weaknesses
      or conditions in our internal controls over financial reporting that need to
      be
      addressed may have a material adverse effect on the price of our common
      stock.





***We
      do not expect to pay cash dividends in the foreseeable
      future.***





We
      have
      not paid cash dividends on our common stock since our inception, and we do
      not
      plan to pay any cash dividends on our common stock in the foreseeable
      future.




17





***Our
      business depends on the demand for restoration and construction and interior
      services, if the demand for those services decreases, our revenues could
      decline*** *.*





Our
      business depends upon the demand for the services that we provide, which include
      restoration and construction services that we provide to residential home owners
      and commercial properties. Because of our significant emphasis on the
      construction and reconstruction of residential and commercial properties, we
      would be adversely affected by any slowdown in the growth of, or reduction
      in
      demand for, these services. Demand for our restoration services is event-based
      and depends upon the frequency and intensity of natural disasters and the type
      and scope of damage to properties. Additionally, demand for our services depends
      on numerous other factors, including: the amount and growth of household income;
      the financial condition of the end user of our services, and whether an
      insurance policy or reimbursement from the federal or state government is
      available to pay the cost of our services; changes in mortgage rates and
      decreases in housing growth in markets which we operate; and general economic
      conditions. If
      demand
      for the restoration and construction services decreases, then we may experience
      a decline in sales resulting in decreased profits. If demand for our services
      decreases and our management fails to implement appropriate adjustments, then
      our profitability could suffer and the price of our common stock could decline.





**SPECIFIC
      RISKS RELATED TO RESTORATION AND CONSTRUCTION SERVICES**





***The
      need for restoration services is unpredictable and depends upon the nature
      and
      extent of weather-related emergencies.***




Our
      restoration services are significantly impacted by the frequency and intensity
      of weather-related emergencies, which causes the results of this segment of
      our
      business to fluctuate. Historically, the nature and frequency of weather-related
      emergencies has fluctuated between periods of relative calm, as compared to
      periods with weather-related events of greater frequency or intensity. In a
      period with few weather-related emergencies or in which weather-related
      emergencies cause comparatively less damage, we expect our revenues from this
      business segment to decline. Although emergencies and disasters will always
      occur, we cannot predict the frequency of occurrence, where they will occur
      and
      the extent of damage that will result. All of these factors impact the need
      for
      restoration and construction services. If the need for restoration services
      decline, our results of operations could suffer.





***If
      we fail to win contracts that are ultimately reimbursable by insurers and
      federal, state and local governments, it may impede our ability to grow our
      restoration services segment.***





The
      end
      users of our restoration services currently consist primarily of large
      commercial businesses and homeowners that have the funds and resources to begin
      recovery of their properties that have been damaged in natural disasters. We
      believe that individuals and smaller commercial businesses who have experienced
      damage or destruction to their homes and properties, but do not have the
      resources to respond immediately, will rely upon insurance companies and
      federal, state and local governments to assist them in repairing their
      properties. We pursue bids on recovery services contracts, the costs of which
      are likely to be reimbursed by insurance agencies and government branches and
      agencies. Some of our competitors may have better resources than we do or may
      have long standing relationships that will place us at a competitive
      disadvantage in winning contracts that are ultimately reimbursable by insurance
      or government funds. If we are unsuccessful in obtaining contracts that are
      reimbursable by insurance and government funds, it may impede the ability of
      our
      restoration and construction services segment to continue to grow, which could
      result in a reduction in revenues and a decline in the price of our common
      stock.





***If
      insurance proceeds and federal funds are not available to our customers, then
      our revenues may decline, and the demand for our restoration and construction
      services may decline.***





There
      is
      no assurance that any particular contract for our restoration and construction
      services segment will ultimately be paid by insurance or reimbursed by
      government funds. If insurance proceeds or federal funds are not available
      to
      reimburse customers for our restoration and construction services, then our
      current customers may delay or forego payment on current projects, and potential
      new customers may delay projects until funds are available, or decide not to
      rebuild. If a lack of insurance proceeds or federal funds causes a delay in
      payment or a failure to pay one or more individual material contracts, or a
      significant aggregate amount of smaller contracts, then our revenues could
      decline, perhaps significantly. Furthermore, overall demand for recovery
      services could decrease, resulting in decreased demand for our services and
      a
      decrease in our revenues.




18





***Public
      adjusting firms in Texas may not make referrals to restoration companies in
      which they have a financial interest.***





Since
      September 1, 2003, under the provisions of S.B. 127, the Texas legislature
      has
      banned public adjusting firms within the State of Texas from referring
      restoration services contracts to restoration companies in which they have
      a
      financial interest or financial gain. Prior to September 1, 2003, restoration
      companies such as our company had historically derived a large portion of their
      revenues from contracts for restoration services that had been referred to
      them
      by public adjustment firms that had a financial interest in the referral.
      Accordingly, public adjustment firms may be less likely to make referrals of
      restoration services to companies such as ours because they may no longer have
      a
      direct financial incentive to do so. As a result, there is no assurance that
      we
      will be able to obtain sufficient revenues from new restoration services
      contracts in the future. This would have a material adverse affect on our
      financial results.





**Item
      2.**  **Description
      of Property.**





Our
      principal executive and administrative offices are presently located at 1507
      Capital Avenue, Suite 101, Plano, Texas 75074. These offices, which are leased
      pursuant to a 26 month lease that became effective September 1, 2005, consist
      of
      approximately 6,636 square feet of office and warehouse space at a base rent
      of
      $4,000 per month commencing November 1, 2005, with a total of $104,000 to be
      paid over the life of the lease. We consider these facilities to be suitable
      and
      adequate for our needs for the foreseeable future. In the opinion of our
      management, our properties are adequately covered by insurance.





Through
      our subsidiary Restoration Group America, Inc., we previously leased our
      corporate headquarters under a short-term lease that expired in December 2003
      and that was continued on a month-to-month basis at a monthly rental rate of
      $12,971 through August 31, 2005.





**Item
      3.**  **Legal
      Proceedings.**





During
      the period covered by this Annual Report, and as of the present date, we were
      not and are not a party to any material legal proceedings, nor were or are
      we
      aware of any threatened litigation of a material nature against us, except
      as
      set forth below.





The
      Company has accrued $97,307 of withholding taxes payable as of December 31,
      2006. Of this amount, $89,842 represents unpaid past due Federal payroll taxes
      and related penalties and interest. Of this liability, $25,113 is for RGA and
      the Company has structured an installment agreement with the Internal Revenue
      Service to pay the entire amount. In addition, with the acquisition of PBS,
      the
      Company assumed PBS’s $64,729 of unpaid Federal payroll taxes and employee
      withholdings and related penalties and interest





The
      Company recorded $150,000 of Other Expense in 2005 related to the anticipated
      settlement of a lawsuit with a shareholder from Invvision Capital,
      Inc.





Dale
      Ferraro, a former consultant with TRG, has threatened litigation against the
      Company based upon a memorandum of understanding. Mr. Ferraro claims that he
      is
      owed $90,000 in commissions for work performed by TRG in Florida and
      Mississippi. The Company disputes that these monies are owed to Mr. Ferraro.
      The
      Company has not yet been served with a lawsuit, but in the event such a suit
      is
      filed, the Company anticipates that it will raise a number of affirmative
      defenses and file counterclaims against Mr. Ferraro. We are unable at this
      time
      to make an assessment of the outcome of this dispute.





In
      August
      2005, the Company received correspondence from the SEC. The correspondence
      related to SEC Staff comments, in the ordinary course of business, regarding
      the
      Company’s Form 10-KSB for the year ended December 31, 2004 and the Company’s
      Form 10-QSB for the three months ended March 31, 2005. The Company replied
      to
      the SEC comments before the end of August 2005. On October 13, 2005, the Company
      received correspondence from the SEC regarding our response made in August
      2005.
      The Company replied to the SEC comments before the end of November 2005. In
      January 2006, the Company received correspondence from the SEC regarding our
      response made in November 2005. The Company replied to the SEC comments before
      the end of February 2006. In July 2006, the Company received correspondence
      from
      the SEC regarding our response made in February 2006. The Company replied to
      the
      SEC comments before the end of September 2006. We cannot predict with certainty
      what, if any, regulatory or financial consequences may result from the
      foregoing. See Recent Developments.




19





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





None


20


**PART
      II**





**Item
      5.**  **Market
      for Common Equity and Related Stockholder Matters.**





**Market
      Information**





Our
      common stock is traded over the counter and is currently quoted on the OTC
      Bulletin Board under the ticker symbol “RGMI.OB.” The table below sets forth the
      high and low bid information for our common stock for the periods indicated,
      as
      reported on the OTC Bulletin Board. These quotations reflect inter-dealer
      prices, without retail mark-up, mark-down or commission, and may not represent
      actual transactions.





**High**
            
            **Low**Fiscal
                Year Ending 2006Fourth
                Quarter
            
            $
            0.52
            
            $
            0.17Third
                Quarter
            
            $
            1.00
            
            $
            0.49Second
                Quarter
            
            $
            1.80
            
            $
            0.61First
                Quarter
            
            $
            0.75
            
            $
            0.30Fiscal
                Year Ending 2005Fourth
                Quarter
            
            $
            0.95
            
            $
            0.32Third
                Quarter
            
            $
            1.00
            
            $
            0.21Second
                Quarter
            
            $
            0.62
            
            $
            0.21First
                Quarter
            
            $
            1.00
            
            $
            0.48





On
      May
      14, 2007, the closing bid price for a share our common stock, as reported on
      the
      OTC Bulletin Board, was $0.10.





**Holders**





As
      of May
      14, 2007, there were approximately 430 stockholders of record of our common
      stock, which does not include shareholders whose shares are held in street
      or
      nominee names, and no shares of our preferred stock were issued or
      outstanding.





**Dividends**





No
      cash
      dividends have been declared or paid on our common stock since our inception.
      No
      restrictions limit our ability to pay dividends on our common stock. We do
      not
      expect to pay any dividends in the near future.


21


**Securities
      Authorized For Issuance Under Equity Compensation Plans**





The
      following table sets forth information as of December 31, 2006 concerning shares
      of our common stock authorized for issuance under our 2004 Omnibus Stock Option
      Plan, which is the only equity compensation plan under which any of our equity
      securities are authorized for issuance.





**Number
                of**
              **securities
                to**
              **be
                issued upon**
              **exercise
                of**
              **outstanding**
              **options,**
              **warrants**
              **and
                rights**
              **(a)**
            
            **Weighted-**
              **average
                exercise**
              **price
                of**
              **outstanding**
              **options,**
              **warrants**
              **and
                rights**
              **(b)**
            
            **Number
                of securities**
              **remaining
                available for future issuance**
              **under
                equity**
              **compensation
                plans**
              **(excluding
                securities**
              **reflected
                in column (a))**
              **(c)**Equity
                compensation plans approved by securityholders
            
            
            4,291,669
            
            $
            0.38
            
            
            708,331Equity
                compensation plans not approved by securityholders
            
            
            0
            
            
            0
            
            
            0Total
            
            
            4,291,669
            
            $
            0.38
            
            
            708,331





**Recent
      Sales of Unregistered Securities**





On
      March
      10, 2006, the Company issued 33,333 shares of common stock at approximately
      $0.30 per share related to an unrecorded 2004 stock transaction. The share
      price
      of $0.30 was utilized as the fair market value on the issuance date based upon
      the price of common stock sold in a previous private placement offering in
      2004.





On
      March
      31, 2006, we subscribed 11,334 shares of common stock in order to correct an error in the
      amount of common stock issued related to a 2005 stock transaction. There was
      no
      effective share price for the issuance as it reflected a correction of a
      transfer agent error and was recorded as a reclass between paid in capital
      and
      common stock subscribed.





On
      March
      31, 2006, we subscribed 11,538 shares of common stock in exchange for accrued vacation owed
      an employee through December 31, 2005 at $0.32 a share and accrued expenses
      on our books
      was reduced $3,692. The share price of $0.32 was utilized as the fair market
      value based upon the closing price of common stock on the issuance date of
      January 1, 2006.





On
      March
      31, 2006, we subscribed 22,028 shares of common stock at $0.45 per share in conversion of
      a
      note payable to a non-related party. The share price of $0.45 was utilized
      as
      the fair market value on the grant date based upon the price of common stock
      sold in a private placement offering at the approximate time of the note
      payable.





On
      March
      31, 2006, we subscribed 573,889 shares of common stock in exchange for director fees for our directors at $0.45 a share, and accrued expenses on our books
      were reduced $258,250. The share price of $0.45 was utilized as the fair market
      value on the grant date based upon the price of common stock sold in a private
      placement offering at the approximate time the services were
      performed.





In
      May
      2006, Laurus Master
      Fund, Ltd. (“Laurus”) converted $525,000 of Minimum
      Borrowing Note balance into 1,281,707 shares of the Company’s common stock, at
      the amended agreement rate of $0.41 per share.





In
      May
      2006, the Company issued 33,333 shares of common stock in exchange for
      outstanding compensation owed an officer at $0.45 a share and accrued
      compensation on our books
      was reduced $15,000. The share price of $0.45 was utilized as the fair market
      value on the issuance date based upon the price of common stock sold in a recent
      private placement offering at the time the salary was earned.




22





In
      May
      and June 2006, we issued
      68,083 shares of common stock to several individuals as a correction for
      unrecorded issuances. The average share price was approximately $0.30 and was
      determined by a combination of contracted stock price and fair market value,
      based at the time that the issuances should have been made and was recorded
      as a
      debit to paid in capital and stock compensation.





In
      June
      2006, we issued
      15,316 shares of common stock in exchange for outstanding compensation owed
      an
      employee at $0.45 a share and accrued compensation on our books
      was reduced $6,892. The share price of $0.45 was utilized as the fair market
      value on the issuance date based upon the price of common stock sold in a recent
      private placement offering at the time the salary was earned.





In
      July
      2006, we issued
      22,720 shares of common stock in exchange for consulting services to a former
      employee at $0.95 a share and recorded $21,584 to stock compensation. The share
      price of $0.95 was utilized as the fair market value based upon the closing
      price of common stock on the issuance date of July 27, 2006.





In
      July
      2006, we issued
      18,333 shares of common stock in exchange for outstanding accounts payable
      owed
      a third party at $0.45 a share and accounts payable on our books
      was reduced $8,250. The share price of $0.45 was utilized as the negotiated
      value based on the value of the existing accounts payable to the third
      party.





In
      July
      2006, we issued
      833 shares of common stock in exchange for employment services to an employee
      at
      $1.00 a share and recorded $833 to stock compensation. The share price of $1.00
      was utilized as the fair market value based upon the closing price of common
      stock on the issuance date of July 31, 2006.




23


**Item
      6.**  **Management’s
      Discussion and Analysis or Plan of Operation.**





The
      following discussion and analysis of our financial condition and results of
      operations is qualified by reference to, and should be read in conjunction
      with,
      our audited consolidated financial statements included in this Annual Report
      (the “ *Financial
      Statements* ”),
      and
      the accompanying notes thereto, and the other financial information appearing
      elsewhere in this Annual Report. The analysis set forth below is provided
      pursuant to applicable SEC regulations and is not intended to serve as a basis
      for projections of future events. As discussed above, our actual results may
      differ materially from those anticipated in our forward-looking statements.
      Please also refer to “SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS”
beginning on page 4 of this Annual Report and “RISK FACTORS” beginning on page
      13 of this Annual Report.





**OVERVIEW**





For
      a
      description of the historical development of our business, please refer to
“Item
      1. Description of Business - OUR BUSINESS DEVELOPMENT” beginning on page 5 of
      this Annual Report.





We
      had a
      net loss of $9,856,537 for the year ended December 31, 2006 and at December
      31,
      2006, current liabilities exceeded current assets by $3,362,616, stockholders’
deficit was $2,361,909 and we had an accumulated deficit of
      $14,740,537.





Our
      long-term viability as a going concern is dependent on certain key factors,
      including without limitation our ability to continue to obtain sources of
      outside financing to support near term operations and to allow us to continue
      to
      make investments, and our ability to increase profitability and sustain a cash
      flow level that will ensure support for continuing operations.





**RECENT
      DEVELOPMENTS**





On
      March
      8, 2007, we received a written notice of default in relation to $1,600,000
      of
      promissory notes (the “Notes”) that became due and payable on January 31, 2007.
      The holders of the Notes are several “accredited investors” as defined in Rule
      501(a) of Regulation D promulgated under the Securities Act of 1933, as amended
      (the “Securities Act”). The Notes are subordinated to our existing senior
      indebtedness of the Company to Laurus.




We
      have
      been negotiating with the holders of the Notes in relation to a retraction
      of
      the notice of default or receiving a forbearance agreement until certain events
      occurred. However, we have been unable to reach an agreement with the holders
      to
      resolve the notice of default and do not have the financial capacity to repay
      the Notes at this time. Although we are currently in discussion with a third
      party with respect to the repayment of the Notes by such third party, there
      is
      no assurance that wet will be able to reach an agreement on terms reasonably
      acceptable to us.




On
      March
      30, 2007, we and certain of our wholly-owned subsidiaries entered into a
      Consulting Agreement (“Consulting Agreement”) with Fireline Restoration, Inc., a
      wholly owned subsidiary of Home Solutions of America, Inc. (“HSOA”). We are a
      borrower under a certain loan transaction with Laurus and are not currently
      in
      compliance with the obligations with respect to the loan, and HSOA is in the
      business of providing restoration and other construction services.





The
      Consulting Agreement specifies that HSOA will provide consulting services to
      us
      and to outsource any and all construction and related duties and services under
      our currently existing and future construction contracts and projects
      (collectively, the “Construction Contracts”). Additionally, we are in the
      process of assigning to HSOA one or more of the Construction Contracts, and
      will
      assign to HSOA additional Construction Contracts upon obtaining the proper
      consent from the customers to the respective contracts. As a result of the
      Consulting Agreement, the estimated remaining revenue from the Construction
      Contracts will be captured by HSOA.




24





The
      consulting services to be provided by HSOA will consist of the complete and
      total outsourcing of any and all functions, rights, preferences, rights to
      payment and obligations under the Construction Contracts. In connection with
      the
      Consulting Services, HSOA shall have the power and authority, for itself and
      in
      the stead and on behalf of us, to do any or all of the following:




·
            Control
                completely the projects contemplated by the Construction
                Contracts;


·
            Deal
                directly with the customers, suppliers, and subcontractors under
                the
                Construction Contracts;


·
            Negotiate
                directly with the customers, suppliers, and subcontractors regarding
                payment and pricing under the Construction
                Contracts;


·
            Process
                payment applications and payroll applications on behalf of us with
                respect
                to the Construction Contracts, and make determinations as to the
                proper
                payment thereof;


·
            Deal
                directly with Laurus for additional advances and funding, under the
                Loan
                and otherwise, that may be necessary in connection with the performance
                of
                the Construction Contracts, including without limitation, arranging
                for
                Laurus to make such additional advances on our behalf, which advances
                may
                be funded directly to HSOA; and


·
            To
                do all other things HSOA reasonably deems necessary to carry out
                and
                perform the Construction Contracts and the terms of this
                Agreement.




As
      a
      result of the above Consulting Agreement, we will shift our core business focus
      to function primarily as a financial and insurance services company with a
      specific focus on our proprietary, patent pending, PropertySMART® program, a
      property and casualty insurance solution for the multi-family housing and
      commercial property industries. Our insurance divisions include a multi-lines
      general agency, licensed to write property, casualty, small business, employee
      benefits and other related coverage’s with a specific focus on its
      PropertySMART® program. This innovative insurance product saves the policy
      holder money, reduces loss exposure for the carrier, and provides a higher
      level
      of service to all parties.




Additionally,
      we have determined that the Consulting Agreement will meet the disposition
      of
      assets criteria established by SFAS 144 - “ *Accounting
      for the Impairment or Disposal of Long Lived Assets* ”
and
      will record our construction operations in our unaudited consolidated financial
      statements for the three months ended March 31, 2007 to be included in our
      March
      31, 2007 Form 10-QSB.




On
      March
      29, 2007, we received correspondence from the SEC regarding our response made
      in
      September 2006. We responded to the SEC comments on the filing date of this
      Form
      10-KSB with the SEC. We cannot predict with certainty what, if any, regulatory
      or financial consequences may result from the foregoing.





On
      May 9,
      2007, J. Kenneth Dunn resigned as a director of the Company for personal
      reasons. There were no disagreements with the Company on any matter related
      to
      the Company’s operations, policies or practices.





**GOING
      CONCERN**





Our
      independent registered public accounting firms’ reports on our financial
      statements for the fiscal years ended December 31, 2006 and 2005 include an
      emphasis paragraph in addition to their audit opinion stating that recurring
      losses from operations, a working capital deficiency and accumulated deficit
      raise doubt about our ability to continue as a going concern. The Financial
      Statements do not include any adjustments to reflect the possible effects on
      recoverability and classification of assets or the amounts and classification
      of
      liabilities that may result from the inability to continue as a going concern.
      For more information, please refer to “RISK FACTORS - Going Concern
      Risk”.





**CRITICAL
      ACCOUNTING ESTIMATES AND POLICIES**




The
      methods, estimates and judgment we use in applying our most critical accounting
      policies have a significant impact on the results we report in our financial
      statements. The SEC has defined the most critical accounting policies as the
      ones that are most important to the portrayal of our financial condition and
      results, and require us to make our most difficult and subjective judgments,
      often as a result of the need to make estimates of matters that are inherently
      uncertain. Based upon this definition, our most critical estimates include
      the
      impairment of goodwill, the impairment of long-lived assets, the valuation
      for
      non-cash issuances of common stock, the allowance for doubtful accounts, revenue
      recognition for construction contracts and insurance premiums and the valuation
      allowance for deferred tax assets and liabilities. We also have other key
      accounting estimates and policies, but we believe that these other policies
      either do not generally require us to make estimates and judgments that are
      as
      difficult or as subjective, or it is less likely that they would have a material
      impact on our reported results of operations for a given period. For additional
      information see Note 3, “Summary of Significant Accounting Policies,” in the
      notes to the Financial Statements. Although we believe that our estimates and
      assumptions are reasonable, they are based upon information presently available.
      Actual results may differ significantly from these estimates.




25





**IMPAIRMENT
      OF GOODWILL**





Goodwill
      represents the excess purchase price over the fair market value of the nets
      assets acquired. In accordance with Statement of Financial Accounting Standards
      (“SFAS”) No. 141, “ *Business
      Combinations”* ,
      and
      SFAS No. 142, *“Goodwill
      and Other Intangible Assets”* ,
      goodwill is not amortized but is subject to annual impairment tests. On December
      16, 2004, as a result of a material impairment of PBS 2000, we would wind down
      and close the PBS 2000 operation. As a result, we believe that the PBS 2000
      valuation was significantly impaired and as a result of our impairment analysis,
      the entire goodwill recorded from the acquisition of PBS 2000 in the amount
      of
      $401,033 was impaired and was recorded as an impairment expense. On
      March
      16, 2005, the 55,556 shares of common stock held in escrow related to the
      acquisition of PBS 2000 were cancelled. This transaction was recorded as a
      recovery of impairment of $116,669 in the first quarter of 2005.





**IMPAIRMENT
      OF LONG-LIVED ASSETS**





We
      account for the impairment of long-lived assets in accordance with SFAS No.
      144,
“ *Accounting
      for the Impairment or Disposal of Long-Lived Assets* ,”
which
      requires that long-lived assets be reviewed for impairment whenever events
      or
      changes in circumstances indicate that the book value of the asset may not
      be
      recoverable. Recoverability of the asset is measured by comparison of its
      carrying amount to the undiscounted cash flow that the asset or asset group
      is
      expected to generate. If such assets or asset groups are considered to be
      impaired, the loss recognized is the amount by which the carrying amount of
      the
      property, if any, exceeds its fair market value. On December 16, 2004, due
      to
      lack of expected PBS 2000 future cash flows, we wound down and closed the PBS
      2000 operation. As a result, we believe that the PBS 2000 valuation was
      significantly impaired and as a result of our impairment analysis, the net
      book
      value of PBS 2000 assets of $144,661 were written off and recorded as an
      Impairment of Subsidiary. On
      March
      16, 2005, the 55,556 shares of common stock held in escrow related to the
      acquisition of PBS 2000 were cancelled. This transaction was recorded as a
      recovery of impairment of $116,669 in the first quarter of 2005.





**VALUATION
      OF NON-CASH ISSUANCES OF COMMON STOCK**





We
      issued
      common stock to several parties in non-cash transactions during the years ended
      December 31, 2006 and 2005. For these issuances, valuation was determined based
      upon the recent sales of stock prices obtained in private offerings of our
      common stock completed during the years ended December 31, 2006 and 2005 or
      the
      value of such existing liabilities satisfied.





**ALLOWANCE
      FOR DOUBTFUL ACCOUNTS**





We estimate
      the allowance for doubtful accounts based upon a review of outstanding
      receivables, historical collection information, and existing economic
      conditions. Our management reviews the customer accounts on a routine basis
      to
      determine if an account should be charged off.





**REVENUE
      RECOGNITION - CONSTRUCTION**





The
      majority of revenues are generated through the successful bidding and execution
      of remediation and reconstruction contracts. We perform work under fixed price
      as well as negotiated contracts. The contract period varies with approximately
      ninety percent of the contracts being completed within twelve months of the
      start date. We recognize revenues from contracts on the percentage of completion
      method, measured by multiplying the contract amount, including change orders,
      by
      the proportion of costs incurred to date, to estimated total costs for each
      contract. Contracts in progress are valued at cost plus accrued profit, less
      billings to date on uncompleted contracts. This method is used because
      management considers it to be the best available measure of progress on
      contracts in process. Allocated job costs include all direct material, labor
      costs and sub-contracting expenses and various direct costs which can be
      specifically allocated to individual contracts. Unallocated contract costs
      as
      well as general and administrative expenses are charged to expense as incurred.
      Provisions for losses on uncompleted contracts are made in the period in which
      such losses are determined without reference to percentage completion. Changes
      in job performance, job conditions and estimated profitability, including those
      arising from contract penalty provisions, and final contract settlements may
      result in revisions to costs as well as income and are recognized in the period
      in which revisions are determined. The liability account Deferred revenue in
      the
      accompanying Consolidated Balance Sheet includes those amounts that have been
      billed out to the customer but the revenue has not yet been earned.




26





**REVENUE
      RECOGNITION - INSURANCE**





Insurance
      premiums collected are primarily for terms of one year.  We recognize
      commission revenue ratably over the course of the year as the commissions are
      earned and defer revenue recognition on commissions not yet earned.  The
      liability account Deferred Revenue in the accompanying Consolidated Balance
      Sheet includes those amounts that would have to be paid to the insurance carrier
      if an insurance policy was cancelled. Insurance revenue represented 0.2% and
      0.7% in 2006 and 2005, respectively.





**VALUATION
      ALLOWANCE FOR DEFERRED TAX ASSETS AND LIABILITIES**





In
      assessing the recoverability of deferred tax assets and liabilities, our
      management considers whether it is more likely than not that some portion or
      all
      of the deferred tax assets and liabilities will be realized.




27


**RESULTS
      OF OPERATIONS**





Fiscal
      year ended December 31, 2006 compared to fiscal year ended December 31,
      2005:





**Year
                Ended****December
                31,****2006**
            
            **2005****Revenues**
            
            $
            20,373,047
            
            $
            20,624,443**Cost
                of revenues**
            
            
            15,384,544
            
            
            11,448,710**Gross
                profit**
            
            
            4,988,503
            
            
            9,175,733**Operating
                expenses:**Selling,
                general and administrative
            
            
            3,937,530
            
            
            1,992,582Compensation,
                payroll taxes and benefits
            
            
            4,176,111
            
            
            2,698,112Stock
                compensation
            
            
            1,521,887
            
            
            358,237Consulting
                and contract labor
            
            
            782,101
            
            
            503,820Professional
            
            
            553,733
            
            
            367,599Recovery
                of impairment
            
            
            -
            
            
            (116,669
            )Impairment
                of leasehold improvements
            
            
            -
            
            
            123,230Rent
            
            
            513,332
            
            
            411,609Depreciation
            
            
            299,969
            
            
            109,211**Total
                operating expenses**
            
            
            11,784,663
            
            
            6,447,731**Operating
                income (loss)**
            
            
            (6,796,160
            )
            
            2,728,002**Other
                expense:**Other
                income (expense), net
            
            
            85,811
            
            
            (143,000
            )Interest
                and financing cost, net
            
            
            (3,146,188
            )
            
            (516,451
            )**Total
                other expense**
            
            
            (3,060,377
            )
            
            (659,451
            )**Net
                income (loss)**
            
            $
            (9,856,537
            )
            $
            2,068,551




28





*Revenues* *:*





Revenues
      decreased $251,396, or 1.2%, to $20,373,047 for 2006 from $20,624,443 in 2005.
      The decrease was primarily due to a year end reconciliation of estimated project
      insurance proceeds and costs to complete, resulting in the inability to
      recognize revenues in 2006 under percentage of completion accounting.
      Additionally, by December 31, 2006, we had drawn almost 100% of our $10,000,000
      credit facility with Laurus and as a result, have been both financially and
      operationally challenged in relation to providing sufficient capital to fund
      projects, impacting revenues for 2006 significantly.





*Cost
      of Revenues:*





Cost
      of
      revenues increased $3,935,834, or 34%, to $15,384,544 for 2006 from $11,448,710
      in 2005. The increase was primarily due to a year end reconciliation of
      estimated project insurance proceeds and costs to complete, resulting in higher
      costs to complete projects under percentage of completion accounting.





*Operating
      Expenses* *:*





Operating
      expenses increased $5,336,932, or 83%, to $11,784,663 for 2006 from $6,447,731
      for 2005. The increase was primarily due to a $1,477,999 increase in
      compensation, payroll taxes and benefits, a $1,944,948 increase in selling,
      general and administrative and a $1,163,650 increase in stock compensation.
      The
      increase in compensation, payroll taxes and benefits and selling, general and
      administrative was directly related to our hurricane storm related construction
      work in Florida, Louisiana and Mississippi. Specifically, compensation increases
      were directly related to an approximate 50% increase in employees from 2006
      to
      2005. In addition, selling, general and administrative increases were related
      to
      $1,262,934 of bad debt reserves recorded in 2006. The increase in stock
      compensation was primarily from our decision to accelerate vesting of employee
      stock options





*Other
      Income (Expense)* *:*





Other
      income (expense) increased $2,400,926 of expense or 364%, to $3,060,377 of
      expense for 2006 from $659,451 of expense in for 2005. The increase in expense
      was primarily from a $2,629,737 increase in interest and financing cost,
      consisting almost entirely of interest and fees for the Laurus Secured
      Convertible Note and the bridge loan promissory notes. Additionally, the
      increase was from the amortization for warrants and placement fees from
      financing transactions. The warrants were valued at $1,155,230 and are being
      amortized to interest expense over the life of the associated debt.





*Liquidity
      and Capital Resources:*





Cash
      was
      $487,116 at December 31, 2006 as compared to $683,346 at December 31, 2005,
      a
      decrease of $196,230, or 29%. Working capital deficit was $3,362,616 at December
      31, 2006 as compared to a working capital surplus of $2,554,610 at December
      31,
      2005, a negative change of $5,917,226, or 232%. The decrease in cash was
      primarily due to $5,795,173 of net cash used in operating activities, offset
      by
      $5,404,285 of net cash provided by investing activities. The net cash provided
      by financing activities was primarily from $16,812,955 of proceeds from the
      issuance of notes payable for the Laurus credit facility, offset by $11,291,092
      of repayments of notes payable for the Laurus credit facility. The net cash
      used
      in operating activities was primarily from an adjusted net operating loss of
      $5,076,120 ($9,856,537 reported net operating loss less non-cash adjusting
      items), a $2,045,310 increase in contracts receivable and a $751,389 decrease
      in
      accounts payable, offset by $1,025,002 increase in accrued expenses and a
      $737,335 increase in unbilled revenue.





Decreased
      cash flow as of December 31, 2006 is directly related to the Company’s existing
      credit facility with Laurus. As of December 31, 2006, we have drawn almost
      100%
      of our $10,000,000 credit facility with Laurus. Additionally, the maximum
      advance rate allowed under the credit facility is 50% of allowable contract
      receivables. As a result of these constraints, we have been both financially
      and
      operationally challenged in relation to providing sufficient capital to fund
      projects and provide working capital for overhead requirements. We have been
      significantly challenged to complete existing projects with limited capital
      available, primarily because of the 50% advance rate and this has directly
      impacted the aging of our accounts receivable. Typically, our contracts are
      based upon insurance proceeds and because of the challenge of finishing the
      projects, the collection of the insurance proceeds timing has been extended
      and
      the ability for us to commence new projects has been impacted
      negatively.




29





Additionally,
      because of the delay in advancing projects due to capital constraints as
      discussed above, a significant portion of our accounts receivable that have
      been
      financed with Laurus previously have become ineligible due to the time the
      accounts receivable had been outstanding. As a result, even though we received
      significant accounts receivable payments from customers in 2006, there was
      no
      capacity to receive additional funding from Laurus based upon the ineligible
      accounts receivable. Accordingly, we structured an amendment of the agreement
      whereby Laurus agreed to “over-advance” payments to us in accordance with
      project requirements.





As
      a
      result of the above capital constraints, we have, through our exclusive
      financial advisor, Southwest Securities, Inc., has had numerous discussions
      with
      several potential capital sources to alleviate the current capital constraints,
      as well as provide funding for additional growth of the restoration division
      and
      potential strategic acquisitions, as well as its insurance division and pending
      launch of its proprietary insurance product, PropertySMARTTM. However, we have
      been unsuccessful in our efforts to raise additional capital.





The
      Company cannot provide assurance that it will generate sufficient cash flow
      from
      operations or obtain additional financing to meet scheduled debt payments and
      financial covenants. If the Company fails to make any required payment under
      the
      agreements and related documents governing indebtedness or fails to comply
      with
      the financial and operating covenants contained in them, the Company would
      be in
      default. The consolidated financial statements do not include any adjustments
      to
      reflect the possible effects on recoverability and classification of assets
      or
      the amounts and classification of liabilities, which may result from the
      inability of RG to continue as a going concern.





*Operating
      Activities*





Cash
      used
      in operating activities was $5,795,173 for the year ended December 31, 2006
      as
      compared to $4,229,692 for the year ended December 31, 2005, an increase of
      $1,565,481, or 37%. The increase in cash used in operating activities resulted
      primarily from an $2,045,310 increase in contracts receivable, a $737,335
      increase in unbilled revenue and deferred revenue, net; offset by a $751,389
      decrease in trade accounts payable and a $1,025,002 increase in accrued
      expenses.





*Investing
      Activities*





Cash
      provided in investing activities was $194,658 for the year ended December 31,
      2006 as compared to $1,474,342 cash used for the year ended December 31, 2005,
      an increase of $1,669,000, or 106%. The increase in cash provided in investing
      activities resulted primarily from $180,342 purchases for property and
      equipment, $100,000 of proceeds from certificates of deposit and $275,000
      proceeds from note receivable in 2006 versus $999,342 of purchases for property
      and equipment and $140,000 of net investment in certificates of deposit and
      a
      $335,000 increase in notes receivable in 2005.





*Financing
      Activities*





Cash
      flows provided by financing activities was $5,404,285 for the year ended
      December 31, 2006 as compared to $6,276,035 for the year ended December 31,
      2005, a decrease of $871,750, or 14%. The decrease in cash provided by financing
      activities was primarily due to there were zero proceeds from the sale of common
      stock in 2006 versus $1,055,150 in 2005.





Our
      principal uses of cash to date have been for operating activities and we have
      funded our operations primarily by incurring indebtedness and selling our common
      stock.





Our
      indebtedness obligations pose a significant liquidity risk to our business
      and
      stockholders by requiring us to dedicate a substantial portion of our cash
      flow
      to principal and interest payments on our debt obligations, thereby reducing
      the
      availability of our cash flow to fund working capital, capital expenditures
      and
      other corporate requirements. Additionally, these debt obligations may impede
      us
      from obtaining additional financing in the future for working capital, capital
      expenditures and other corporate requirements and may make us more vulnerable
      to
      a downturn in our business and limit our flexibility to plan for, or react
      to,
      changes in our business.




30





**DEBT
      OBLIGATIONS**




**SHORT-TERM
      DEBT**





*Our
      short-term debt at December 31, 2006 consisted of the
      following:*





***Bank
      Line of Credit***




$40,000
                bank line of credit, dated April 26, 2005, bearing interest at the
                bank’s
                prime rate plus 1.25 percent (10.65% at December 31, 2006), with
                an open
                ended payment term.
            
            $
            40,000





On
      May
      17, 2005, RG entered into a revolving line of credit facility with a bank in
      the
      amount of $40,000  and
      $40,000 was received by the Company against the facility. The outstanding
      balance of this revolving line of credit facility is $40,000 at December 31,
      2006. The revolving line of credit facility is fully secured by a $40,000
      certificate of deposit.





On
      July
      28, 2005, RG entered into a revolving line of credit facility with a bank in
      the
      amount of $100,000  and
      $100,000 was received by the Company against the facility. The outstanding
      balance of this revolving line of credit facility was $100,000 but paid in
      full
      in July 2006.





***Notes
      payable - Related Party***




$75,000
                unsecured promissory note dated October 2003, bearing interest at
                10% per
                annum and due on demand.
            
            $
            19,336$15,000
                unsecured promissory note dated October 2003, bearing interest at
                9.2% -
                monthly payments of $432 - due March 2007
            
            
            4,977$5,000
                unsecured promissory note dated July 30, 2004, bearing interest at
                10% per
                annum and due on demand.
            
            
            5,000$17,000
                unsecured promissory note dated January 9, 2006, non-interest bearing
                -
                monthly payments of $500 - due August 2007.
            
            
            5,500$12,000
                unsecured promissory note dated April 3, 2006, bearing interest at
                10.0% -
                monthly payments of $550 - due March 2008.
            
            
            7,812Less:
                Current portion
            
            
            (39,369
            )Long
                term portion
            
            $
            3,256




In
      October 2003, the Company executed a $75,000 unsecured promissory note, of
      which $19,336 was
      outstanding at December 31, 2006. The promissory note is with a former officer
      of RG, bears interest of 10% per annum and is due on demand. (See Related Party
      Transactions Note 14).




In
      October 2003, the Company executed a $15,000 unsecured promissory note, of
      which $4,977 was
      outstanding at December 31, 2006. The promissory note is with an officer of
      RG.
      The interest rate is 9.2% per annum with monthly principal and interest payments
      of $432 and is due March of 2007. (See Related Party Transactions Note 14).




In
      July
      2004, the Company executed a $5,000 unsecured promissory note, of which $5,000
      is outstanding at December 31, 2006. The promissory note is with an officer
      of
      RG, bears interest of 10% per annum and is due on demand. (See Related Party
      Transactions Note 14).




In
      January 2006, the Company had received $24,000 of property and equipment from
      a
      related third party in the form of $7,000 cash and a non interest bearing note
      of $17,000 with monthly payments of $500 until the note is paid in full. The
      outstanding principal balance of this note was $5,500 as of December 31, 2006.
      (See Related Party Transactions Note 14).




31




In
      April
      2006, the Company had received $12,000 of property and equipment from a related
      third party and in the form of a 10% per annum interest bearing note and is
      due
      March 2006. The outstanding principal balance of this note was $7,812 as of
      December 31, 2006. (See Related Party Transactions Note 14).




***Notes
      payable***




$17,000
                unsecured promissory note dated February 26, 2005, non- interest
                bearing
                and no defined repayment date.
            
            $
            17,000$5,000
                unsecured promissory note dated August 9, 2005, bearing interest
                at 10%
                per annum and due January 2006.
            
            
            5,000$10,000,000
                secured revolving note dated October 31, 2005, bearing interest at
                prime
                plus 2% (but never less than 6%) per annum and due October 31,
                2008.
            
            
            9,525,169Less:
                Un-amortized debt discount on $10,000,000 secured revolving note
                dated
                October 31, 2005.
            
            
            1,053,842$1,600,000
                unsecured promissory note dated May 2006, bearing interest at 12
                % - 18 %
                per annum and due January 2007.
            
            
            1,600,000$
            10,093,327





Through
      May 2004, the Company had received $185,100 of proceeds in the form of a loan
      from an unrelated third party. The Company is accruing interest at the rate
      of
      10% per annum for 90 days from June 15, 2004 and 18% subsequently. On February
      9, 2005, $2,500 of this loan was converted into 4,167 shares of the Company’s
      common stock. The outstanding principal balance of this note was $182,600 as
      of
      December 31, 2005. In 2006, the outstanding principal balance of $182,600 was
      assumed by two unrelated third parties in exchange for monies owed the Company
      for stock subscriptions.




On
      August
      8, 2004, through a previous acquisition, the Company assumed an $8,099 unsecured
      promissory note from an unrelated party. The Company was accruing interest
      at
      the rate of 8% per annum. In March 2006, the Company repaid the obligation
      through the issuance of 22,028 shares of RG common stock in exchange for the
      retirement of the promissory note plus accrued interest of $1,814.




On
      February 5, 2005, the Company received $7,000 of proceeds and on February 26,
      2005 the Company received $10,000 of proceeds in the form of a loan from an
      unrelated third party. This loan is a non-interest bearing note and does not
      have a defined repayment date. The outstanding principal balance of this note
      was $17,000 as of December 31, 2006.




On
      August
      9, 2005, the Company had received $5,000 of property and equipment from an
      unrelated third party and in the form of a 10% per annum interest bearing note
      and is due January 2006. The outstanding principal balance of this note was
      $5,000 as of December 31, 2006.




Effective
      October 31, 2005, the Company entered into a Security Agreement with Laurus
      Master Fund, Ltd. ("Laurus") for the sale by the Company to Laurus of a
      $1,400,000 secured convertible minimum borrowing note ("Minimum Borrowing Note")
      and a secured revolving note up to a maximum of $10,000,000 ("Revolving Note").
      In connection with the Minimum Borrowing Note and the Revolving Note, the
      Company issued to Laurus a common stock purchase warrant ("Warrant") to purchase
      up to 2,962,963 shares of the Company’s $0.001 par value per share common stock
      ("Common Stock") at $0.78 per share with a seven year term. The
      Company evaluated the warrant issuance in accordance with FAS No. 123 and
      utilized the Black Scholes method to determine valuation. As a result of its
      evaluation, the Company determined that the warrant valuation was $1,155,230
      and
      recorded this amount to debt discount and common stock warrants. The
      Company amortized $64,179 of the debt discount in 2005 and recorded this cost
      to
      interest expense, resulting in $1,091,051 in un-amortized debt discount on
      December 31, 2005. Additionally, the Company and Laurus entered into a
      registration rights agreement ("Registration Rights Agreement") covering the
      registration Common Stock underlying the Minimum Borrowing Note and the Warrant.




32




The
      Minimum Borrowing Note has an interest rate of Prime plus two percent (2.0%)
      and
      shall not be any time less than six percent (6.0%). The Minimum Borrowing Note
      is due together with any unpaid and accrued interest hereon, on October 31,
      2008
      (Maturity Date"). Laurus shall have the option, but not the obligation, at
      any
      time until the Maturity Date to convert all or any portion of the Minimum
      Borrowing Note and accrued interest into Common Stock at an exercise price
      of
      $0.71 per share. Additionally, the Company has the option, but not the
      obligation, to prepay the Minimum Borrowing Note by paying Laurus one hundred
      thirty percent (130%) of the principal amount of the Minimum Borrowing Note
      plus
      accrued and unpaid interest. As a result of the Minimum Borrowing Note, the
      Company obtained $4,907,805 of proceeds, net of $841,195 of expenses. Of the
      $841,195 of expenses, $396,195 was paid to the Company's financial agent,
      Spencer Clarke, LLC for financial agent fees, $418,000 was paid to Laurus
      Capital Management, LLC for management, due-diligence and documentation fees,
      $25,000 was paid to Synergy Structures, for financial agent fees; and $2,000
      was
      paid to Loeb & Loeb LLP for escrow fees. The Company has recorded this note
      under current liabilities because the agreement with Laurus requires that monies
      borrowed are returned within 210 days.




The
      Revolving Note has an interest rate of Prime plus two percent (2.0%) and shall
      not be any time less than six percent (6.0%). The interest rate was 13.25%
      at
      December 31, 2006. The Revolving Note is due together with any unpaid and
      accrued interest hereon, on the Maturity Date. Laurus shall have the option,
      but
      not the obligation, at any time until the Maturity Date to convert all or any
      portion of the Revolving Note and accrued interest into Common Stock at an
      exercise price of $0.71 per share.




The
      Security Agreement includes among other things, a stock pledge agreement, a
      guaranty from the Company and all of its subsidiaries and certain covenants
      and
      obligations in order to secure the funds obtained from the above mentioned
      items. The Security Agreement also includes a funding formula that determines
      a
      maximum amount of funds that the Company can be advanced at any point in time
      and an allowance for Laurus to override the formula and advance registrant
      funds
      over the funding formula. Laurus elected the option to override the formula
      and
      advanced the Company $250,000 on October 31, 2005. The advance has an interest
      rate of prime plus five percent (5.0%) and is payable with the outstanding
      balance of the Minimum Borrowing Note. The interest rate was 10.25% at December
      31, 2006. At December 31, 2006, no funds were available for additional borrowing
      under the Revolving Note.





Effective
      February 15, 2006 ("Effective Date"), the Company amended and restated the
      Security Agreement dated October 31, 2005 with Laurus Master Fund, Ltd.
      ("Laurus") for the sale by the Company to Laurus of a $1,400,000 secured
      convertible Minimum Borrowing Note, a secured Revolving Note up to a maximum
      of
      $10,000,000, a common stock purchase warrant ("Original Warrant") to purchase
      up
      to 2,962,963 shares of RG’s $0.001 par value per share Common Stock and a
      Registration Rights Agreement covering the registration of Common Stock
      underlying the Minimum Borrowing Note and the Warrant. As a result of the
      Minimum Borrowing Note amendment, the Company obtained an additional $5,539,479
      of proceeds, net of $203,805 of expenses which was paid to the Company’s
      financial advisor, Spencer Clarke. The indebtedness is classified as current
      in
      accordance with EITF 95-22 *“Balance
      sheet classification of borrowings outstanding under revolving credit agreements
      that include both a subjective acceleration clause and a lock-box
      agreement”* .





The
      Minimum Borrowing Note was amended and restated as a Secured Convertible Note
      ("Secured Convertible Note") and was increased from $1,400,000 to $5,000,000.
      Laurus has the option, but not the obligation, to convert all or any portion
      of
      the Secured Convertible Note and accrued interest into Common Stock at $0.41
      per
      share, as amended from the previous $0.71 per share. The Secured Convertible
      Note continues to have an interest rate of Prime plus two percent (2.0%), shall
      not be at any time less than six percent (6.0%) and is due together with any
      unpaid and accrued interest hereon, on October 31, 2008 (“Maturity Date").
      Additionally, RG continues to have the option, but not the obligation, to prepay
      the Secured Convertible Note by paying Laurus one hundred thirty percent (130%)
      of the principal amount of the Secured Convertible Note plus accrued and unpaid
      interest.





The
      amended and restated Revolving Note was changed to be non-convertible whereby
      Laurus no longer has an option to convert all or any portion of the Revolving
      Note into Common Stock. The Revolving Note continues to have an interest rate
      of
      Prime plus two percent (2.0%), shall not be any time less than six percent
      (6.0%) and is due together with any unpaid and accrued interest hereon, on
      the
      Maturity Date.





The
      amended and restated Security Agreement continues to include among other things,
      a stock pledge agreement, a guaranty from the Company and all of its
      subsidiaries and certain covenants and obligations in order to secure the funds
      obtained from the above mentioned items. The amended Security Agreement
      continues to include a funding formula that determines a maximum amount of
      funds
      that the Company can be advanced at any point in time and an allowance for
      Laurus to override the formula and advance registrant funds over the funding
      formula.


33


The
      amended and restated documents comprising the above items were previously filed
      on Form 8-K.




The
      Company evaluated the modification to the restated security agreement in
      accordance with EITF No. 96-19 and No. 05-07 and determined the modification
      resulted in a substantial change. The Company evaluated the new arrangement
      under EITF 00-27 and noted there is a beneficial conversion feature of $638,258
      related to Minimum Borrowing Note that was recorded as a debt discount. This
      amount was calculated as the difference between the effective conversion price
      of $0.40 calculated under EITF 00-27 and the $0.45 fair market value of the
      Company's common stock at the transaction date. The effective conversion amount
      was calculated based on the $5,000,000 Minimum Borrowing Note and the debt
      discount related to the warrants issued in 2005 of $150,446. The warrants issued
      in 2006 were related to the Revolver Note and were therefore not included in
      the
      calculation of the beneficial conversion on the Minimum Borrowing Note. The
      debt
      discount is being amortized over the remaining life of the debt through October
      2008 and during the year ended December 31, 2006, the Company amortized to
      interest expense $206,206 of the amount resulting in a debt discount balance
      of
      $432,052 as of December 31, 2006.





In
      January through March 2006, the Company borrowed an additional $5,743,284 and
      repaid $2,535,919 to Laurus in accordance with terms of the secured revolving
      note.





In
      April
      through June 2006, the Company borrowed an additional $5,374,276 and repaid
      $4,338,301 to Laurus in accordance with terms of the secured revolving
      note.





In
      May
      2006, Laurus converted $525,500 of the Minimum Borrowing Note balance into
      1,281,707 shares of the Company’s common stock, at the amended agreement rate of
      $0.41 per share. The Company issued a warrant to Spencer Clarke for their
      financial advisory assistance related to this Minimum Borrowing Note conversion
      to the Company’s common stock for 128,170 warrants exercisable at an average of
      $1.27 per share with the warrants expiring on May 2009. The warrants are
      exercisable on a cash basis only and have “piggy-back” registration rights. The
      issuance of the warrants was made in reliance of the Securities Act, which
      provide for exemptions from the registration requirements of the Securities
      Act
      for transactions not involving a public offering. The
      Company valued the warrant utilizing the Black Scholes method to determine
      valuation. As a result of its evaluation, the Company determined that the
      warrant valuation was $116,191 and recorded this amount to additional paid
      in
      capital and common stock warrants.  The
      average price of $1.27 per share was based upon the fair market value price
      of
      common stock when the agreement was made as indicated on the over the counter
      stock exchange.





In
      May
      2006, the Company commenced a bridge loan transaction in the amount of
      $2,000,000 through the private placement of Promissory Notes (“Notes”) to
      several “accredited investors” as defined in Rule 501(a) of Regulation D
      promulgated under the Securities Act of 1933, as amended (the “Securities Act”)
      (“Holders”). This private placement was arranged by our financial advisor on the
      transaction, Spencer Clarke, LLC (“Spencer Clarke”).





Effective
      June 30, 2006, the Company concluded the transaction and in total, issued
      $1,600,000 of Notes and received $1,424,000 of proceeds, net of $176,000 of
      expenses paid to Spencer Clarke. The terms of the Notes include the payment
      of
      interest at a rate of 12% per annum with a maturity date equal to the earlier
      of: (i) August 30, 2006, or (ii) closing and partial funding of a subordinated
      debt facility up to $25,000,000 or at least $3,000,000 of our equity or
      equity-linked securities, or (iii) upon or after the occurrence of an Event
      of
      Default as defined in the Notes. The Notes are subordinated to existing senior
      indebtedness of the Company to Laurus Master Fund, Ltd. In consideration of
      this
      Note, the Company issued 50% warrant coverage on the Notes or 606,060 warrants
      exercisable at $1.32 per share with the warrants expiring on June 30, 2008,
      to
      Holders. The warrants are exercisable on a cash basis only and have “piggy-back”
registration rights. None of the warrants have been exercised as of December
      31,
      2006 and no fees or commissions were paid in connection with the issuance of
      the
      warrants to Spencer Clarke. The issuance of the warrants was made in reliance
      of
      the Securities Act, which provide for exemptions from the registration
      requirements of the Securities Act for transactions not involving a public
      offering. The
      Company valued the warrants utilizing the Black Scholes method to determine
      valuation. As a result of its evaluation, the Company determined that the
      warrant valuation was $308,358 and recorded this amount to debt discount and
      common stock warrants. The debt discount was amortized over the life of the
      loan
      through August 30, 2006 and recorded as interest expense.  The
      $1.32 per share was based upon a premium equal to 125% of the fair market value
      price of common stock when the agreement was made as indicated on the over
      the
      counter stock exchange. All
      of
      the Holders are “accredited investors” as defined in the Securities Act and are
      now existing creditors of the Company. The underlying common stock from the
      exercise of the warrants shall not be offered, sold or transferred other than
      pursuant to an effective registration statement under the Securities Act or
      an
      exemption from such registration requirements. Additionally, the Company issued
      a warrant to Spencer Clarke for their financial advisory assistance with this
      bridge note placement for 60,606 warrants exercisable at $1.39 per share with
      the warrants expiring on June 30, 2008. The warrants are exercisable on a cash
      basis only and have “piggy-back” registration rights. The issuance of the
      warrants was made in reliance of the Securities Act, which provide for
      exemptions from the registration requirements of the Securities Act for
      transactions not involving a public offering. The
      Company valued the warrants utilizing the Black Scholes method to determine
      valuation. As a result of its evaluation, the Company determined that the
      warrant valuation was $30,239 and recorded this amount to interest expense
      and
      common stock warrants.  The
      $1.39 per share was based upon a premium equal to 125% of the fair market value
      price of common stock plus 5% when the agreement was made as indicated on the
      over the counter stock exchange.





34




Effective
      August 30, 2006, the Company executed a modification and extension agreement
      (the “Agreement”) in relation to the $1,600,000 of Promissory Notes (“Notes”) as
      discussed above.





The
      Agreement modifies the terms of the Notes as follows:




·
            The
                maturity date of the Notes was extended to October 31,
                2006.


·
            The
                interest rate on the Notes was increased from 12% per annum to 15%
                per
                annum effective August 31, 2006. The increased interest rate is only
                applicable from August 31, 2006 until either October 31, 2006 or
                such
                earlier time that the Notes are repaid in
                full.


·
            In
                the event that the Notes are not repaid in full by the due date of
                October
                31, 2006, certain additional considerations related to previously
                issued
                common stock warrants shall be
                amended.





Effective
      October 31, 2006, the Company executed a second modification and extension
      agreement (the “Agreement”) in relation to the $1,600,000 of Promissory Notes
      (“Notes”) as discussed above.





The
      Agreement modifies the terms of the Notes as follows:




·
            The
                maturity date of the Notes was extended to January 31,
                2007.


·
            The
                interest rate on the Notes was increased from 15% per annum to 18%
                per
                annum effective August 31, 2006. The increased interest rate is only
                applicable from November 1, 2006 until either January 31, 2007 or
                such
                earlier time that the Notes are repaid in
                full.


·
            In
                consideration of the second agreement, the warrants to purchase shares
                of
                the Company’s common stock that were previously issued to the Note Holders
                solely in connection with the issuance of the Notes, shall be amended
                as
                follows:


i)
            The
                exercise period will be four (4) years from November 1, 2006 through
                November 1, 2010.


ii)
            The
                exercise price shall be changed to $0.32 per
                share.


iii)
            A
                cashless option shall be added to the
                Warrants.


iv)
            Additional
                Warrants will be issued to the Note Holders to reflect a ration of
                100%
                warrant coverage to the amount of the borrowed funds. In total, $1,600,000
                of funds were loaned to the Company by the Note Holders and the total
                warrant coverage will now be 1,600,000 warrants divided among the
                Warrant
                Holders based upon the amount of their respective
                investment


v)
            Piggy-back
                registration rights will be granted to the
                warrants.


·
            The
                Company will pay the Note Holders twenty five percent (25%) of the
                accrued
                interest due and payable as of October 31, 2006 upon the execution
                of this
                Second Agreement. The remaining seventy five percent (75%) of accrued
                interest due and payable as of October 31, 2006 will be paid on January
                31, 2007.





The
      Company valued the warrant utilizing the Black Scholes method to determine
      valuation. As a result of its evaluation, the Company determined that the
      warrant valuation was $105,214 and recorded this amount to prepaid interest
      and
      common stock warrants. As
      of
      December 31, 2006, $70,143 of this prepaid interest was expensed to interest
      expense. The
      $0.32
      per share was based upon the fair market value price of common stock when the
      agreement was made as indicated on the over the counter stock exchange.




35





In
      July
      through September 2006, the Company borrowed an additional $807,110 and repaid
      $178,000 to Laurus in accordance with terms of the secured revolving note.
      The
      Company amended their agreement with Laurus to include an “over borrowing”
feature, and had an outstanding balance of $10,095,950 on the secured revolving
      note as of September 30, 2006.





In
      October through December 2006, the Company borrowed an additional $3,668,090
      and
      repaid $4,238,871 to Laurus in accordance with terms of the secured revolving
      note. The Company amended their agreement with Laurus to include an “over
      borrowing” feature, and had an outstanding balance of $9,525,169 on the secured
      revolving note as of December 31, 2006.





See
      Recent Developments for further discussion of the Notes.





**Off-Balance
      Sheet Arrangements**





We
      have
      no off-balance sheet arrangements that have or are reasonably likely to have
      a
      current or future effect on our financial condition, changes in financial
      condition, revenues or expenses, results of operations, liquidity, capital
      expenditures or capital resources that is material to investors.





**Recent
      Accounting Developments**





In
      July
      2006, the Financial Accounting Standards Board, or FASB, issued Interpretation
      48, *Accounting
      for Uncertainty in Income Taxes—An Interpretation of FASB Statement
      109* ,
      or FIN
      48, which clarifies the accounting and disclosure requirements for uncertainty
      in tax positions, as defined. FIN 48 requires a two-step approach to evaluate
      tax positions and determine if they should be recognized in the financial
      statements. The two-step approach involves recognizing any tax positions that
      are *“more
      likely that not”* to occur
      and then measuring those positions to determine if they are recognizable in
      the
      financial statements. We adopted FIN 48 on January
      1, 2007 and its
      adoption did not result in a material cumulative-effect adjustment.





**2007
      OUTLOOK**




As
      a
      result of the Consulting Agreement discussed in Recent Developments previously,
      we will shift our core business focus to function primarily as a financial
      and
      insurance services company with a specific focus on our proprietary, patent
      pending, PropertySMART® program, a property and casualty insurance solution for
      the multi-family housing and commercial property industries. Our insurance
      divisions include a multi-lines general agency, licensed to write property,
      casualty, small business, employee benefits and other related coverage’s with a
      specific focus on its PropertySMART® program. This innovative insurance product
      saves the policy holder money, reduces loss exposure for the carrier, and
      provides a higher level of service to all parties.





Our
      ability to successfully implement our new business focus as a Financial and
      insurance services company will be heavily dependent on securing additional
      capital to supplement the anticipated timeframe required for the business to
      achieve sufficient revenues and cash flows to cover our operating expenses
      . As
      a result, we are searching for an alternative means of securing additional
      capital, which may include the sale of additional shares of our common stock
      or
      the issuance of additional debt securities. Additionally, we require additional
      funds for working capital and for growth opportunities. However, there is no
      assurance that additional equity or debt financing will be available on terms
      acceptable to our management or that the additional financing will be available
      when we require the funds.





**Item
      7.**  **Financial
      Statements.**





Our
      Financial Statements are attached as Appendix A (following the Exhibits) and
      are
      hereby incorporated by reference and included as part of this Annual Report.
      An
      index to our Financial Statements is provided in response to Item 13 of this
      Annual Report.





36





**Item
      8.**  **Changes
      In and Disagreements with Accountants on Accounting and Financial
      Disclosure.**





None.





**Item
      8A.**  **Controls
      and Procedures.**





(a) Evaluation
      of Disclosure Controls and Procedures : Based
      on
      their evaluation required by Rule 13a-15(b) promulgated under the Exchange
      Act,
      our Chief Executive
      Officer and Chief Financial Officer have concluded that, as of December 31, 2006, our disclosure controls and procedures
      (as defined in Rule 13a-15(e) promulgated under the Exchange Act) are
      effective in alerting them on a timely basis to material information relating
      to
      us (including our consolidated subsidiaries) required to be included in our
      periodic filings under the Exchange Act. Since December 31, 2006, there have
      not
      been any significant changes in our disclosure controls and procedures or in
      other factors that could significantly affect such controls.





(b) Changes
      in Internal Control Over Financial Reporting : There
      were no significant changes in our internal control over financial reporting
      identified in connection with the evaluation required by Rule 13a-15(d)
      promulgated under the Exchange Act that occurred during the fiscal quarter
      ended
      December 31, 2006 that has materially affected, or is reasonably likely to
      materially affect, our internal control over financial reporting.





**Limitations
      on the Effectiveness of Controls**





Our
      management, including our Chief Executive Officer and Chief Financial Officer,
      does not expect that our disclosure controls and internal controls will prevent
      all error and all fraud. A control system, no matter how well conceived and
      operated, can provide only reasonable, not absolute, assurance that the
      objectives of the control system are met. Further, the design of a control
      system must reflect the fact that there are resource constraints, and the
      benefits of controls must be considered relative to their costs. Because of
      the
      inherent limitations in all control systems, no evaluation of controls can
      provide absolute assurance that all control issues and instances of fraud,
      if
      any, within the Company have been detected. These inherent limitations include
      the realities that judgments in decision-making can be faulty, and that
      breakdowns can occur because of simple error or mistake. Additionally, controls
      can be circumvented by the individual acts of some persons, by collusion of
      two
      or more people, or by management or board override of the control.





The
      design of any system of controls also 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 its stated goals under all potential future
      conditions; over time, control may become inadequate because of changes in
      conditions, or the degree of compliance with the policies or procedures may
      deteriorate. Because of the inherent limitations in a cost-effective control
      system, misstatements due to error or fraud may occur and not be detected.





**CEO
      and CFO Certifications**





Appearing
      as exhibits 31.1 and 31.2 to this Annual Report are certifications of our Chief
      Executive Officer and Chief Financial Officer, as required in accordance with
      Section 302 of the Sarbanes-Oxley Act of 2002. The disclosures in this Item
      8A
      of this Annual Report are related to the evaluation referred to in the Section
      302 certifications and this information should be read in conjunction with
      the
      Section 302 certifications for a more complete understanding of the topics
      presented.





**Item
      8B.**  **Other
      Information.**





None.




**PART
      III**





**Item
      9.**  **Directors,
      Executive Officers, Promoters and Control Persons; Compliance with Section
      16(A)
      Of the Exchange Act.**





**Directors
      and Executive Officers**




37





The
      following table sets forth the name, age, positions held and term of service
      for
      each of our directors and executive officers. All of our current directors
      were
      elected at our annual meeting of stockholders on December 15, 2005 to serve
      for
      one year or until their respective successors are duly elected and qualify.
      All
      of our officers serve at the pleasure of the board of directors. There are
      no
      arrangements or understandings with respect to the selection of directors or
      officers.





**Name**
            
            **Age**
            
            **Positions
                with the Company**
            
            **Term
                of Service**John
                Brobjorg(4)
            
            50
            
            Corporate
                Controller
            
            Since
                July 2004Kevin
                L. Dahlberg
            
            44
            
            Executive
                Vice President,
              Vice
                President - Investor Relations and Secretary;
              President
                of RG Insurance Services, Inc.
            
            Since
                December 2003Bruce
                A. Hall
            
            50
            
            Chief
                Executive Officer and Chief Financial Officer
            
            Since
                May 2004Michael
                A. Jenkins(1,2,3)
            
            65
            
            Director
            
            Since
                March 2004Paul
                S. Johnson(1,2,3)
            
            73
            
            Director
            
            Since
                February 2004Edward
                P. Rea
            
            66
            
            Director
                and Executive Chairman
            
            Since
                December 2003James
                A. Rea
            
            39
            
            Director,
                President and Chief Operating Officer
            
            Since
                December 2003




(1)
            Current
                member of Audit Committee.(2)
            Current
                member of Compensation Committee.(3)
            Current
                member of Nominating Committee.(4)
            Mr.
                Brobjorg resigned his position with the Company effective May 1,
                2007.





*John
      N. Brobjorg, Corporate Controller*





Mr.
      Brobjorg has been our Corporate Controller on a consulting basis since January
      2005. Prior to that, he served as our Corporate Controller as an employee from
      July 2004 to January 2005. Mr. Brobjorg is a financial executive with extensive
      experience as a corporate controller and in related financial management
      positions in the hi-tech, manufacturing, energy, clinical laboratory and
      consulting industries. He is also the Corporate Controller of Dent Zone
      International, Inc., a paintless dent repair company, a position he has held
      since April 2005, and he was the Corporate Controller of Claridge Capital
      Partners, a medical services company, from December 2004 to March 2005. Prior
      to
      joining us, Mr. Brobjorg performed financial and accounting contract work for
      various companies from June 2003 to June 2004. Prior to that, from October
      1999
      to May 2003, he was the Corporate Controller of Probex Corporation, a formerly
      publicly traded used oil recycling company that filed for protection under
      Chapter 7 of the United States Bankruptcy Code in May 2003. He has also held
      senior level positions at Praxair Inc., Corning Clinical Laboratories, Convex
      Computer Corporation and Amsoil, Inc. Mr. Brobjorg holds a CMA designation
      and
      earned a Master of Arts degree in International Business from the University
      of
      Texas and a Bachelor of Arts degree in Economics and a Senior Accounting
      Certificate from the University of Minnesota. As discussed above, Mr. Brobjorg
      resigned his position with us effective May 1, 2007.





*Kevin
      L. Dahlberg, Executive Vice President, Vice President - Investor Relations
      and
      Secretary; President of RG Insurance Services, Inc.*





Mr.
      Dahlberg has been our Executive Vice President since December 2004, Vice
      President - Investor Relations since June 2004, and Secretary since January
      2005. Mr. Dahlberg has also been President of our subsidiary RG Insurance
      Services, Inc. since January 2005. He also previously served as our Senior
      Vice
      President - Finance from December 2003 to June 2004. He was previously employed
      with Moore Remodeling & Construction, L.P. and MCS, L.P. as a principal and
      partner from September 2002 to December 2003. Prior to that, Mr. Dahlberg was
      employed by Hillwood Investments, a Perot Company, from March 2000 to August
      2002 as a Vice President. Mr. Dahlberg obtained a Bachelor of Arts in Business
      Administration degree from Baylor University with majors in Entrepreneurship,
      Management and Real Estate in 1985. He also holds Series 6, Series 7 and Series
      63 Securities Licenses and a Texas Property & Casualty Insurance
      License.


38


*Bruce
      A. Hall, Chief Executive Officer and Chief Financial Officer*




Mr.
      Hall
      has been our Chief Executive Officer since July 1, 2006 and our Chief Financial
      Officer since May 2004. Mr. Hall is a senior financial executive with extensive
      experience serving as a CFO and in related financial management positions in
      the
      real estate development, energy, consulting and manufacturing industries. He
      is
      also the Chief Executive Officer and Chief Financial Officer of Dent Zone
      International, Inc., a paintless dent repair company, a position he has held
      since January 2005. He has also held senior level positions at Recognition
      Equipment, Inc. and Harris Adacom Corporation. Mr. Hall was formerly Chief
      Financial Officer of Probex Corporation, a formerly publicly traded used oil
      recycling company that filed for protection under Chapter 7 of the United States
      Bankruptcy Code in May 2003. He has also been a senior financial and management
      consultant and multi-family housing developer and began his career in public
      accounting with Arthur Young & Company, a predecessor of Ernst & Young
      LLP. Mr. Hall holds both CPA (Certified Public Accountant) and CMA (Certified
      Management Accountant) designations and is a graduate of the University of
      Texas
      at Austin.





*Michael
      A. Jenkins, Independent Director*





Mr.
      Jenkins has been a member of our board of directors since March 2004. He is
      currently President of Leisure and Recreation Concepts, Inc., a design and
      consulting firm located in Dallas, Texas, a position he has held since 1970.
      Additionally, Mr. Jenkins has been President and Managing Director of Dallas
      Summer Musicals, Inc., a musical theater company, since 1974. Mr. Jenkins
      attended Baylor University from 1960 to 1963.





*Paul
      S. Johnson Jr., Independent Director*





Mr.
      Johnson has been a member of our board of directors since February 2004. Mr.
      Johnson retired from the U.S. Naval Reserves in 1991 with the rank of 2-star
      admiral. From November 2003 to October 2005, he was the Chief Executive Officer
      of two car rental companies, Addison Auto Rental, LLC and North Texas Auto
      Rental, LLC. Prior to that, from June 2001 to November 2003, he was Chief
      Executive Officer of Classic Auto, an automobile body work company. From July
      1989 to the present, Mr. Johnson has been employed by American East as a Captain
      on Boeing 727 aircraft. He is a graduate of Iowa State University where he
      obtained a Bachelors of Science degree. On October 14, 2005, Mr. Johnson filed
      for personal protection under Chapter 7 of the United States Bankruptcy
      Code.





*Edward
      P. Rea, Director and Executive Chairman*





Edward
      P.
      Rea has been our Executive Chairman and a director since April 2001. Mr. Rea
      is
      also the Chairman of Rea Brothers Limited, an Ontario, Canada corporation,
      which
      is an investment company, a position he has held since September 1964. From
      June
      1994 to October 2004, he served as Chairman of The Crafter’s Marketplace, Ltd.,
      which operated a chain of retail stores in Canada. He has also been an
      independent business consultant since 1998. Mr. Rea was formerly Chairman of
      INVA #1, Inc., a former wholly-owned nominee subsidiary of the Company that
      filed involuntary bankruptcy under Chapter 11 of the United States Bankruptcy
      Code on December 3, 2002 and was ultimately sold to an investor through the
      bankruptcy court. Mr. Rea is the father of our Chief Executive Officer and
      director, John E. Rea, and our President, Chief Operating Officer and director,
      James A. Rea.





*James
      A. Rea, Director, President and Chief Operating Officer*





James
      A.
      Rea has been our President since March 2005, our Chief Operating Officer since
      December 2003, and a director since March 2004. Mr. Rea also previously served
      as our President from December 2003 to June 2004. Prior to joining us, Mr.
      Rea
      was President and Chief Operating Officer of The Restoration Group, Inc. from
      June 2001 to December 2003. He was President of Tenax, Inc., a home building
      company, from February 1999 to June 2001. Mr. Rea attended Texas Tech
      University. Mr. Rea is the brother of our Chief Executive Officer and director,
      John E. Rea, and the son of our Executive Chairman, Mr. Edward P.
      Rea.





**Family
      Relationships**





Our
      Executive Chairman and director, Edward P. Rea, is the father of our President,
      Chief Operating Officer and director, James A. Rea. Additionally, Edward P.
      Rea
      is the father of John E. Rea, a consultant for us and our former Chief Executive
      Officer and former Director.




39





**Identification
      of the Audit Committee**





Our
      board
      of directors maintain a standing Audit Committee established in accordance
      with
      Section 3(a)(58)(A) of the Exchange Act. The Audit Committee assists the board
      of directors in exercising its fiduciary responsibilities for oversight of
      audit
      and related matters, including corporate accounting, reporting and control
      practices. It is also responsible for recommending to our board of directors
      the
      independent auditors to be engaged for the following fiscal year. The Audit
      Committee is currently comprised of Messrs. Dunn, Jenkins and Johnson. All
      of
      the current members of the Audit Committee are independent in accordance with
      the existing requirements of NASDAQ’s listing standards. The Audit Committee
      will meet periodically with our management, financial personnel and independent
      auditors to review our internal accounting controls and auditing and financial
      reporting matters.





**Audit
      Committee Financial Expert**





Our
      board
      of directors has determined that we do not currently have an audit committee
      financial expert serving on our Audit Committee, despite our continued efforts
      to attract an audit committee financial expert. Previously, we did not provide
      Directors and Officers (“D&O”) liability insurance and this was a detriment
      to our ability to attract qualified candidates to fill this position. However,
      we now do provide D&O coverage and are currently in the process of searching
      for an individual to serve on our board of directors and the Audit Committee
      who
      would qualify as an audit committee financial expert.





**Section
      16(a) Beneficial Ownership Reporting Compliance**




Section
      16(a) of the Securities Exchange Act of 1934 requires our directors and
      officers, and persons who beneficially own more than ten percent of our common
      stock, to file with the SEC reports of beneficial ownership on Form 3 and
      changes in beneficial ownership of our common stock and other equity securities
      on Form 4 or Form 5. SEC regulations require all officers, directors and greater
      than 10% stockholders to furnish us with copies of all Section 16(a) forms
      they
      file.





To
      the
      best of our knowledge, no officer, director and/or beneficial owner of more
      than
      10% of our Common Stock, failed to file reports on a timely basis as required
      by
      Section 16(a) of the Exchange Act during the period covered by this
      report.





**Principal
      Executive and Financial Code of Ethics**





In
      fiscal
      2004, we adopted a code of ethics that applies to our Chief Executive Officer,
      Chief Financial Officer and Corporate Controller. We will provide a copy of
      our
      code of ethics to any person without charge, upon request sent to our Corporate
      Secretary at 1507 Capital Avenue, Suite 101, Plano, Texas
      75074.


40


**Item
      10.**  **Executive
      Compensation.**





We
      provided named executive officers and our other employees with a salary to
      compensate them for services rendered during the fiscal year. Salary amounts
      for
      the named executive officers are determined for each executive based on his
      or
      her position and responsibility, and on past individual performance. Salary
      levels are typically considered annually as part of our performance review
      process. Merit based increases to salaries of the named executive officers
      are
      based on our board of directors’ assessment of the individual’s
      performance.





The
      following table shows for the fiscal year
      ending December 31, 2006 the
      compensation awarded or paid by RG America, Inc. to its Chief Executive Officer
      and its
      named
      executive officers as that term is defined in Item 402(a)(2) of Regulation
      S-B.





**Summary
      Compensation Table**





Name
              and
              Principal
              Position
            
            Year
            
            Salary
              ($)
            
            Bonus
              ($)
            
            Stock
              Awards
              ($)
            
            Option
              Awards
              ($)
            
            Non-
              Equity
              Incentive
              Plan
              Compensation
              ($)
            
            Change
                in
              Pension
                Value
              and
              Nonqualified
              Deferred
              Compensation
              Earnings
            
            All
                other
              Compensation
              ($)
            
            Total
              ($)Bruce
                A. Hall, Chief Executive Officer, Chief Financial
                Officer(1)
            
            
            2006
            
            $
            90,000
            
            $
            59,710
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            $
            6,000(2
            )
            $
            155,710John
                E. Rea, Former Chief Executive Officer(3)
            
            
            2006
            
            $
            60,000
            
            $
            175,000
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            $
            6,000(4
            )
            $
            241,000James
                A. Rea,
              Chief
                Operating Officer
            
            
            2006
            
            $
            120,000
            
            $
            325,961
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            $
            12,000
                (5
            )
            $
            457,961Kevin
                L. Dahlberg, Executive Vice President
            
            
            2006
            
            $
            144,383
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            
            
            $
            6,000(6
            )
            $
            150,383




(1)
      Effective May 1, 2006, Bruce A. Hall, our Chief Financial Officer, became an
      employee. Previously, Mr. Hall was our Chief Financial Officer on a consulting
      basis. Effective July 1, 2006, Mr. Hall became our Chief Executive Officer
      in
      addition to his position as Chief Financial Officer.




(2)
      Mr.
      Hall receives an annual transportation allowance of $12,000 and an annual health
      insurance allowance up to $6,000.




(3)
      John
      E. Rea resigned as our Chief Executive Officer effective June 30, 2006.




(4)
      John
      E. Rea received an annual transportation allowance of $12,000 an annual health
      insurance allowance of up to $9,000 and an annual membership and education
      dues
      and fees allowance of $10,000 for the Young President’s Organization and was
      paid commission on sales equal to 1.75% of gross revenue though June 30, 2006.
      Effective July 1, 2006, the commission agreement with John E. Rea was
      terminated.




(5)
      James
      A. Rea receives an annual transportation allowance of $12,000, an annual health
      insurance allowance of up to $6,000 and was paid commission on sales equal
      to
      1.75% of gross revenue though June 30, 2006. Effective July 1, 2006, the
      commission agreement with James A. Rea was terminated




(6)
      Mr.
      Dahlberg receives an annual transportation allowance of $6,000 and an annual
      health insurance allowance of up to $6,000.





**Option
      Grants in Last Fiscal Year**





We
      do not
      currently have any outstanding stock appreciation rights (SARs). No options
      or
      warrants were granted in 2006 to any executive officers.


41
  **Aggregated
        Option Exercises** **in
        Last Fiscal Year and Fiscal Year End Option Values**





No
      options were exercised in 2006 by any executive officers.





**Outstanding
      Equity Awards at Fiscal Year-End**





We
      do not
      currently have any outstanding stock appreciation rights (SARs). The following
      table sets forth outstanding options held by our named executive officers.




**Outstanding
      Equity Awards at**


**Fiscal
      Year-End Table**




Option
                Awards
            
            Stock
                AwardsName
            
            Number
                of
              Securities
              Underlying
              Unexercised
              Options
              (#)
              Exercisable
            
            Number
                of
              Securities
              Underlying
              Unexercised
              Options
              (#)
              Unexercisable
            
            Equity
              Incentive
                Plan
              Awards:
              Number
                of
              Securities
              Underlying
              Unexercised
              Unearned
              Options
              (#)
            
            Option
              Exercise
              Price
              ($)
            
            Option
              Expiration
                Date
            
            Number
                of
              Shares
                or
              Units
                of Stock
              That
                Have
              Not
                Vested
              (#)
            
            Market
                Value
              of
                Shares or
              Units
                of Stock
              That
                Have
              Not
                Vested
              ($)
            
            Equity
              Incentive
                Plan
              Awards:
              Number
                of
              Unearned
              Shares,
                Units
              or
                Other
              Rights
                That
              Have
                Not
              Vested
              (#)
            
            Equity
              Incentive
                Plan
              Awards:
              Market
                or
              Payout
                Value
              of
                Unearned
              Shares,
                Units
              or
                Other Rights
              That
                Have Not
              Vested
              ($)Bruce
                A. Hall
            
            
            666,667
            
            
            -
            
            
            -
            
            $
            0.50
            
            
            July
                25, 2014
            
            
            -
            
            
            -
            
            
            -
            
            
            -John
                E. Rea
            
            
            833,333
            
            
            -
            
            
            -
            
            $
            0.30
            
            
            July
                25, 2014
            
            
            -
            
            
            -
            
            
            -
            
            
            -James
                A. Rea
            
            
            833,333
            
            
            -
            
            
            -
            
            $
            0.30
            
            
            July
                25, 2014
            
            
            -
            
            
            -
            
            
            -
            
            
            -Kevin
                L. Dahlberg
            
            
            583,333
            
            
            -
            
            
            -
            
            $
            0.30
            
            
            July
                25, 2014
            
            
            -
            
            
            -
            
            
            -
            
            
            -




**Director** **Compensation**





In
      fiscal
      2005, our board of directors approved a plan for director compensation. Each
      director is paid $12,000 as an annual retainer for services; $1,500 for each
      board meeting attended in person or $1,000 for each board meeting attended
      via
      teleconference and $1,500 for attending our annual meeting of stockholders.
      Additionally, committee members are paid $750 for each committee meeting
      attended, with the chairman paid $1,000. The
      following table sets forth specific compensation paid to each of our
      non-executive directors for the year ended December 31, 2006.




42


**Director
      Compensation Table**


Name
              
              Fees
                  Earned
                or
                  Paid in
                Cash
                ($)
              
              Stock
                  Awards
                ($)
              
              Option
                  Awards
                ($)
              
              Non-Equity
                Incentive
                  Plan
                Compensation
                ($)
              
              Change
                  in
                Pension
                  Value
                and
                Nonqualified
                Deferred
                Compensation
                Earnings
              
              All
                  Other
                Compensation
                ($)
              
              Total
                ($)James.
                  A Rea
              
              $
              12,000
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              $
              12,000Bruce
                  A. Hall
              
              $
              6,000
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              $
              6,000Edward
                  P. Rea
              
              $
              12,000
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              $
              12,000Paul
                  S. Johnson
              
              $
              12,000
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              $
              12,000John
                  E. Rea
              
              $
              6,000
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              $
              6,000Michael
                  A. Jenkins
              
              $
              12,000
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              $
              12,000J.
                  Kenneth Dunn
              
              $
              12,000
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              $
              12,000





**Employment
      Contracts and Termination of Employment, and Change-in-Control Arrangements**





We
      have
      an employment agreement with our Chief Executive Officer and Chief Financial
      Officer, Bruce A. Hall (the “ *Bruce
      A. Hall Agreement* ”).
      The
      Bruce A. Hall Agreement provides for an annual base salary of $240,000, a
      transportation allowance of $1,000 per month, health insurance allowance of
      up
      to $500 per month, participation in any savings and retirement plan and welfare
      benefit plans adopted by us and other standard provisions. The Bruce A. Hall
      Agreement also provides for a one-time net termination fee of $1,000,000 upon
      any early termination by us.





We
      have
      an employment agreement with our Chief Operating Officer, James A. Rea (the
      “ *James
      A. Rea Agreement* ”).
      The
      James A. Rea Agreement provides for an annual base salary of $240,000, a
      transportation allowance of $1,000 per month, a health insurance allowance
      of up
      to $750 per month, a sales commission equal to 1.75% of the Company’s
      consolidated gross revenue, participation in any savings and retirement plan
      and
      welfare benefit plans adopted by us and other standard provisions. The James
      A.
      Rea Agreement also provides for a one-time net termination fee of $1,000,000
      upon any early termination by us. Previously, the James A. Rea Agreement
      included a sales commission equal to 1.75% of our consolidated gross revenue.
      However, we terminated the commission effective July 1, 2006.





We
      have
      an employment agreement with our Executive Vice President, Vice President -
      Investor Relations and Secretary, Kevin L. Dahlberg (the “ *Dahlberg
      Agreement* ”).
      The
      Dahlberg Agreement provides for an annual base salary of $120,000, a
      transportation allowance of $500 per month, a health insurance allowance of
      up
      to $500 per month and participation in any savings and retirement plan and
      welfare benefit plans adopted by us and other standard provisions. **** In
      addition, the Dahlberg Agreement provides that Mr. Dahlberg’s annual base salary
      will increase to $150,000 upon our raising a total of $4,000,000 in new equity
      or upon our obtaining either (a) 50,000 or more apartment units placed into
      our
      PropertySMART ® program
      or (b) $8,000,000 in annual PropertySMART ® gross
      revenues. Mr. Dahlberg’s salary will increase to $180,000 upon our becoming cash
      flow positive with a net operating income equal to 5% of sales.




43





We
      have
      an employment agreement with our President - RG Insurance Services, Inc.,
      William P. Fink (the “Fink *Agreement* ”).
      The
      Fink Agreement provides for an annual base salary of $120,000, a transportation
      allowance of $500 per month, a health insurance allowance of up to $500 per
      month and participation in any savings and retirement plan and welfare benefit
      plans adopted by us and other standard provisions.





We
      have
      an employment agreement with our President of RG Restoration, Inc., Jerod Yates
      (the “Yates *Agreement* ”).
      The
      Yates Agreement provides for an annual base salary of $120,000, a transportation
      allowance of $1,000 per month, a health insurance allowance of up to $500 per
      month and participation in any savings and retirement plan and welfare benefit
      plans adopted by us and other standard provisions. Previously, the Yates
      Agreement included a sales commission equal to 1.75% of our consolidated gross
      revenue. However, we terminated the commission effective July 1,
      2006.





**Item
      11.**  **Security
      Ownership of Certain Beneficial Owners and Management and Related Stockholder
      Matters.**





**Security
      Ownership of Certain Beneficial Owners**





The
      following table sets forth, as of May 14, 2007, the name, address, amount and
      nature of beneficial ownership and percentage of such ownership of each person
      or group known to us to be the beneficial owner of more than 5% of the
      outstanding shares of our common stock. Except as noted below, each holder
      has
      sole voting and investment power with respect to all shares of common stock
      listed as beneficially owned.





**Name
                And Address Of**
              **Beneficial
                Owner**
            
            **Amount
                And Nature**
              **Of
                Beneficial Ownership****(1)**
            
            **Percent
                Of**
              **Class****(2)**JAAVBR,
                LP(3)
            
            
            3,216,667
            
            
            11.0
            %1507
                Capital Avenue, Suite 101Plano,
                Texas 75074DKWFLP
                LP
            
            
            3,200,000
            
            
            10.9
            %8235
                Douglas Ave., Suite 106Dallas,
                Texas 75225J
                2
                Family LP(4)
            
            
            3,200,000
            
            
            10.9
            %1507
                Capital Avenue, Suite 101Plano,
                Texas 75074Jades
                Family LP
            
            
            3,200,000
            
            
            10.9
            %8235
                Douglas Ave., Suite 106Dallas,
                Texas 75225Jerod
                Yates
            
            
            1,875,000
            
            
            6.4
            %1233
                Tracey Lynn Drive, Suite AAbilene,
                Texas 79601




(1)
            Includes
                all shares of our common stock with respect to which each holder
                directly,
                through any contract, arrangement, understanding, relationship or
                otherwise, has or shares the power to vote or direct voting of such
                shares
                or to dispose or direct the disposition of such shares.(2)
            Based
                upon 29,252,093 shares outstanding as of May 14, 2007.(3)
            James
                A. Rea, our President, Chief Operating Officer and director, is a
                limited
                partner of JAAVBR, LP. And the President of its general
                partner.


44


(4)
            John
                E. Rea, our former Chief Executive Officer and director, is a limited
                partner of J 2 Family LP and the President of its general
                partner




**Security
      Ownership of Management**





The
      following table sets forth, as of May 14, 2007, the name, address, amount and
      nature of beneficial ownership and percentage of such ownership of (i) each
      of
      our current directors and executive officers; and (ii) all directors and
      executive officers as a group. Except as noted below, each holder has sole
      voting and investment power with respect to all shares of common stock listed
      as
      beneficially owned.





**Name
                And Address Of**
              **Beneficial
                Owner**
            
            **Amount
                And Nature**
              **Of
                Beneficial Ownership****(1)**
            
            **Percent
                Of**
              **Class****(2)**James
                A. Rea
            
            
            4,055,485
            (3)
            
            13.4
            %1507
                Capital Avenue, Suite 101Plano,
                Texas 75074Edward
                P. Rea
            
            
            1,634,164
            (4)
            
            5.5
            %1507
                Capital Avenue, Suite 101Plano,
                Texas 75074Bruce
                A. Hall
            
            
            714,286
            (5)
            
            2.4
            %836
                Blue Jay LaneCoppell,
                Texas 75019Kevin
                L. Dahlberg
            
            
            679,908
            (6)
            
            2.1
            %1507
                Capital Avenue, Suite 101Plano,
                Texas 75074Paul
                S. Johnson
            
            
            101,751
            (8)
            
            *2122
                Country Club Drive, # 280Carrollton,
                Texas 75006Michael
                A. Jenkins
            
            
            124,722
            
            
            *2151
                Fort Worth AvenueDallas,
                Texas 75211All
                directors and executive officers as a group (6 persons)
            
            
            7,310,066
            
            
            23.1
            %







(*)
            Less
                than 1 percent(1)
            Includes
                all shares of our common stock with respect to which each holder
                directly,
                through any contract, arrangement, understanding, relationship or
                otherwise, has or shares the power to vote or direct voting of such
                shares
                or to dispose or direct the disposition of such shares.(2)
            Based
                upon 29,252,093 shares outstanding as of May 14, 2007.(3)
            Includes
                (i) 833,333 shares that James A. Rea has the right to acquire within
                60
                days upon the exercise of options; (ii) 1,784 shares owned by Tenax,
                Inc.;
                (iii) 3,451 shares owned by JR Holdings, Inc.; (iv) 3,216,667 shares
                owned
                by JAAVBR, LP; and (v) 250 shares owned by members of James A. Rea’s
                immediate family. James A. Rea is President of Tenax, Inc. and JR
                Holdings, Inc. and a limited partner of JAAVBR, LP.(4)
            Includes
                (i) 250,000 shares that Edward P. Rea has the right to acquire within
                60
                days upon the exercise of options; and (ii) 1,384,164 shares owned
                by Rea
                Brothers Limited. Edward P. Rea is Chairman of Rea Brothers
                Limited.(5)
            Includes
                (i) 666,667 shares that Mr. Hall has the right to acquire within
                60 days
                upon the exercise of options; and (ii) 47,619 shares owned by BHDH
                Family,
                L.P., an entity owned by members of Mr. Hall’s immediate family. Mr. Hall
                has no ownership interest or position in BHDH Family,
                L.P.


45




(6)
            Includes
                583,333 shares that Mr. Dahlberg has the right to acquire within
                60 days
                upon the exercise of options.(7)
            Includes
                42 shares owned by members of Mr. Johnson’s immediate
                family.




**Item
      12.**  **Certain
      Relationships and Related Transactions.**




In
      January, 2006, we received $17,000 of property from a related party in return
      for a non-interest bearing note with monthly principal payments of $500. The
      outstanding principal balance of this note was $5,500 as of December 31,
      2006.




The
      Chairman of the Board earns $10,000 per month for consulting services. In
      addition, the Chairman of the Board earns a commission based upon a percentage
      of revenue. For January through March 2006, $39,712 in consulting services
      and
      $28,981 in commissions were paid to the Chairman resulting in a consulting
      services balance due of $9,231 and a commission balance due of $70,788 at March
      31, 2006. For April through June 2006, $32,308 in consulting services and
      $23,077 in commission were paid to the Chairman resulting in a consulting
      services balance due of $9,231 and a commission balance due of $47,999 at June
      30, 2006. For July through September 2006, $18,417 in consulting services and
      $15,385 in commission were paid to the Chairman resulting in a consulting
      services balance due of $18,462 and a commission balance due of $61,695 at
      September 30, 2006. For October through December 2006, $32,307 in consulting
      services and $26,923 in commission were paid to the Chairman resulting in a
      consulting services balance due of $20,769 and a commission balance due of
      $34,772 at December 31, 2006.




Effective
      July 1, 2006, we entered into a consulting agreement with J2 Capital Inc.,
      whose
      principal is our former Chief Executive Officer, and who is also the son of
      our
      Chairman of the Board, and the brother of our Chief Operating Officer. The
      terms
      of the agreement include $11,000 per month for consulting services and a
      commission based upon a percentage of revenue. For July through September 2006,
      $20,308 in consulting services and $53,846 in commission were paid to J2 Capital
      Inc., resulting in a consulting services balance due of $12,292 and a commission
      balance due of $171,713 at September 30, 2006. For October through December
      2006, $35,539 in consulting services and $94,230 in commissions were paid to
      J2
      Capital Inc., resulting in a consulting services balance due of $10,154 and
      a
      commission balance due of $77,482 at December 31, 2006.




In
      January through March 2006, one of our construction crews made $50,755 of
      personal repairs in the home of our Chief Operating Officer in exchange for
      a
      reduction of monies previously owed this officer. In April through June 2006,
      one of our construction crews made $8,211 of personal repairs in the home of
      our
      Chief Operating Officer in exchange for a reduction of monies previously owed
      this officer.




We
      are
      leasing three vehicles from Rea Brothers, Ltd. (“Rea Brothers”), a company
      controlled by our Chairman of the Board, for general business purposes. In
      January through March 2006, we paid Rea Brothers $4,266 in lease payments.
      In
      April through June 2006, we paid Rea Brothers $8,532 in lease payments. In
      July
      through September 2006, we paid Rea Brothers $4,266 in lease payments. In
      October through December 2006, we paid Rea Brothers $4,266 in lease
      payments.




In
      April,
      2006, we received $12,000 of property from a related party and in return for
      a
      10% interest bearing note with monthly payments of $550. The outstanding
      principal balance of this note was $7,812 as of December 31, 2006.




In
      June
      2006, our Chief Operating Officer, who is also a Director, forgave $64,606
      of
      commissions due and payable in relation to second quarter 2006 storm related
      business. In June 2006, our former Chief Executive Officer and a former
      Director, forgave $64,606 of commissions due and payable in relation to second
      quarter 2006 storm related business. In June 2006, our Chairman of the Board,
      who is also the father of our former Chief Executive Officer and our Chief
      Operating Officer, forgave $23,493 of commissions due and payable in relation
      to
      second quarter 2006 storm related business. In June 2006, our Chief Financial
      Officer and current Chief Executive Officer, forgave $35,239 of commissions
      due
      and payable in relation to second quarter 2006 storm related business. As a
      result of the above items, our directors and officers forgave a total of
      $187,944 of commissions in relation to second quarter 2006 storm related
      business. This was originally recorded to commission expense and accrued
      liabilities, and as result of the forgiveness, was recorded as a reduction
      to
      commission expense and accrued liabilities.




46





**Item
      13.**  **Exhibits
      and Financial Statement Schedules**





Exhibits
      are incorporated herein by reference or are filed with this Form 10-K as
      indicated below (numbered in accordance with Item 601 of
      Regulation S-B):





Exhibit
                No.
            
            Description3.1
            
            Amended
                and Restated Articles of Incorporation (incorporated by reference
                to
                Exhibit 3.1 to Form 10-KSB filed April 18, 2006)3.2(*)
            
            Restated
                Bylaws (incorporated herein by reference to Exhibit 3.2 to Form
                10-KSB filed April 15, 2004)4.1(*)
            
            2004
                Omnibus Stock Option Plan (incorporated herein by reference to
                Exhibit 4.1 to Form 10-QSB filed August 24, 2005)4.2(*)
            
            Form
                of Senior Subordinated Convertible Debenture (incorporated herein
                by
                reference to Exhibit 4.3 to Form 10-QSB filed August 24,
                2005)4.3(*)
            
            Amendment
                Number 1 to Subordinated Secured Convertible Debenture (incorporated
                herein by reference to Exhibit 99.1 to Form 8-K filed August 4,
                2005)4.4(*)
            
            Form
                of Common Stock Warrant (incorporated herein by reference to
                Exhibit 99.2 to Form 8-K filed August 4, 2005)4.5(*)
            
            Form
                of Promissory Note dated June 30, 2006 (incorporated herein by reference
                to Exhibit 99.1 to Form 8-K filed July 5, 2006)4.6(*)
            
            Form
                of Subscription Agreement 2006 (incorporated herein by reference
                to
                Exhibit 99.2 to Form 8-K filed July 5, 2006)4.7(*)
            
            Form
                of Common Stock Warrant (incorporated herein by reference to Exhibit
                99.3
                to Form 8-K filed July 5, 2006)4.8(*)
            
            Modification
                and Extension Agreement to Promissory Note dated August 30, 2006
                (Incorporated herein by reference to Exhibit 99.1 to Form 8-K filed
                September 8, 2006)4.9(*)
            
            Modification
                and Extension Agreement to Promissory Note dated August 30, 2006
                (Incorporated herein by reference to Exhibit 99.1 to Form 8-K filed
                September 8, 2006)4.10(*)
            
            Notice
                of Default of Promissory Notes dated March 8, 2007 (incorporated
                herein by
                reference to Form 8-K filed March 27, 2007)10.1(*)
            
            Consulting
                Agreement dated February 1, 2005 between Bruce A. Hall and the Company
                (incorporated herein by reference to Exhibit 10.1 to Form 10-QSB
                filed August 24, 2005)10.2(*)
            
            Consulting
                Agreement dated February 1, 2005 between John N. Brobjorg and the
                Company
                (incorporated herein by reference to Exhibit 10.2 to Form 10-QSB
                filed August 24, 2005)10.3(*)
            
            Consulting
                Agreement dated January 1, 2005 between Schooner Realty and the Company
                (incorporated herein by reference to Exhibit 10.3 to Form 10-QSB
                filed August 24, 2005)10.4(*)
            
            Employment
                Agreement dated March 1, 2005 between Frank Dahlberg and the Company
                (incorporated herein by reference to Exhibit 10.4 to Form 10-QSB
                filed August 24, 2005)10.5(*)†
            
            Employment
                Agreement dated October 19, 2004 between James A. Rea and the Company
                (incorporated herein by reference to Exhibit 10.5 to Form 10-QSB
                filed August 24, 2005)10.6(*)
            
            Employment
                Agreement dated October 19, 2004 between John E. Rea and the Company
                (incorporated herein by reference to Exhibit 10.6 to Form 10-QSB
                filed August 24, 2005)10.7(*)
            
            Employment
                Agreement dated December 1, 2004 between Kevin Dahlberg and the Company
                (incorporated herein by reference to Exhibit 10.7 to Form 10-QSB
                filed August 24, 2005)10.8(*)
            
            Consulting
                Agreement dated April 1, 2005 between Richard Nelson and the Company
                (incorporated herein by reference to Exhibit 10.8 to Form 10-QSB
                filed August 24, 2005)10.9(*)
            
            Financial
                Advisory Agreement dated February 1, 2005 between Spencer Clarke
                LLC and
                the Company (incorporated herein by reference to Exhibit 10.9 to Form
                10-QSB filed August 24, 2005)10.10(*)
            
            Memorandum
                of Understanding for the Acquisition of Total Professional Restoration,
                Inc. and Offer of Employment for Mr. Jerod Yates (incorporated herein
                by
                reference to Exhibit 10.1 to Form 8-K filed October 13,
                2005)




47




10.11(*)
            Amended
                and Restated Security Agreement dated February 15, 2006 among Laurus
                Master Fund, Ltd., the Company and certain of its subsidiaries
                (incorporated herein by reference to Exhibit 99.1 to Form 8-K filed
                February 23, 2006)10.12(*)
            Master
                Security Agreement dated October 31, 2005 among Laurus Master Fund,
                Ltd.,
                the Company and certain of its subsidiaries (incorporated herein
                by
                reference to Exhibit 99.2 to Form 8-K filed November 9,
                2005)10.13(*)
            Amended
                and Restated Secured Convertible Note dated February 15, 2006 among
                Laurus
                Master Fund, Ltd., the Company and certain of its subsidiaries
                (incorporated herein by reference to Exhibit 99.3 to Form 8-K filed
                February 23, 2006)10.14(*)
            Amended
                and Restated Secured Non-Convertible Revolving Note dated February
                15,
                2006 among Laurus Master Fund, Ltd., the Company and certain of its
                subsidiaries (incorporated herein by reference to Exhibit 99.4 to
                Form 8-K filed February 23, 2006)10.15(*)
            Amended
                and Restated Registration Rights Agreement dated February 15, 2006
                between
                the Company and Laurus Master Fund, Ltd. (incorporated herein by
                reference
                to Exhibit 99.5 to Form 8-K filed February 23,
                2006)10.16(*)
            Funds
                Escrow Agreement dated October 31, 2005 among the Company, Laurus
                Master
                Fund, Ltd. and Loeb & Loeb LLP (incorporated herein by reference to
                Exhibit 99.6 to Form 8-K filed November 9, 2005)10.17(*)
            Amended
                and Restated Common Stock Purchase Warrant dated February 15, 2006
                between
                the Company and Laurus Master Fund, Ltd. (incorporated herein by
                reference
                to Exhibit 99.6 to Form 8-K filed February 23,
                2006)10.18(*)
            Stock
                Pledge Agreement dated October 31, 2005 among Laurus Master Fund,
                Ltd.,
                the Company and certain of its subsidiaries (incorporated herein
                by
                reference to Exhibit 99.9 to Form 8-K filed November 9,
                2005)10.19(*)
            Subsidiary
                Guaranty dated October 31, 2005 among Laurus Master Fund, Ltd. and
                certain
                subsidiaries of the Company (incorporated herein by reference to
                Exhibit 99.10 to Form 8-K filed November 9, 2005)10.20(*)
            Reaffirmation
                and Ratification Agreement dated February 15, 2006 among Laurus Master
                Fund, Ltd., the Company and certain of its subsidiaries (incorporated
                herein by reference to Exhibit 99.7 to Form 8-K filed February 23,
                2006)10.21(*)
            Common
                Stock Purchase Warrant dated February 15, 2006 between the Company
                and
                Laurus Master Fund, Ltd. (incorporated herein by reference to
                Exhibit 99.7 to Form 8-K filed February 23, 2006)10.22
            Consulting
                Agreement dated March 29, 2007 by and the Company and Fireline
                Restoration, Inc.21.1
            Subsidiaries
                of RG America, Inc.31.1
            Certification
                Pursuant to Section 302 of the Sarbanes-Oxley Act of
                200231.2
            Certification
                Pursuant to Section 302 of the Sarbanes-Oxley Act of
                200232.1
            Certification
                Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 200232.2
            Certification
                Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002







*  Previously
      filed.




48


**Item
      14.**  **Principal
      Accountant Fees And Services**





*Audit
      Fees*





An
      aggregate of $135,399 in fees was billed by Whitley Penn for the fiscal year
      ended December 31, 2006 for professional services rendered by Whitley Penn
      for
      the audit of our annual financial statements and review of financial statements
      included in our Form 10-QSB filings or services that are normally provided
      by
      the accountant in connection with statutory and regulatory filings or
      engagements for such fiscal year.





An
      aggregate of $77,648 in fees was billed by Whitley Penn for the fiscal year
      ended December 31, 2005 for professional services rendered by Whitley Penn
      for
      the audit of our annual financial statements and review of financial statements
      included in our Form 10-QSB filings or services that are normally provided
      by
      the accountant in connection with statutory and regulatory filings or
      engagements for such fiscal year.





*Audit-Related
      Fees*





No
      fees
      were billed by Whitley Penn for the fiscal year ended December 31, 2006 for
      assurance and related services by Whitley Penn that are reasonably related
      to
      the performance of the audit or review of our financial statements and are
      not
      reported under the caption “ *Audit
      Fees* ”
      above.





An
      aggregate of $9,910 in fees was billed by Whitley Penn for the fiscal year
      ended
      December 31, 2005 for assurance and related services by Whitley Penn that are
      reasonably related to the performance of the audit or review of our financial
      statements and are not reported under the caption “ *Audit
      Fees* ”
      above.





*Tax
      Fees*





An
      aggregate $19,480 in fees was billed by Whitley Penn for the fiscal year ended
      December 31, 2006 for professional services rendered by Whitley Penn for tax
      compliance, tax advice and tax planning.





No
      fees
      were billed for the fiscal year ended December 31, 2005 for professional
      services rendered by Whitley Penn, as applicable, for tax compliance, tax advice
      and tax planning.





*All
      Other Fees*





No
      fees
      were billed for the fiscal years ended December 31, 2006 or 2005 for products
      and services provided by Whitley Penn, as applicable, other than the services
      reported under the captions “ *Audit
      Fees* ”
and
      “ *Audit-Related
      Fees* ”
      above.





*Pre-Approval
      Policies and Procedures*





Our
      standing Audit Committee pre-approves all audit and non-audit services provided
      by our independent auditors. The Audit Committee’s charter prohibits the Audit
      Committee from engaging our independent auditors to perform any specific
      non-audit services proscribed by law or regulation. The Audit Committee may
      delegate pre-approval authority to one or more of its members. The Audit
      Committee’s pre-approval policies and procedures do not include delegation to
      management of the Audit Committee’s responsibilities under the Exchange Act. The
      decisions of any Audit Committee member to whom pre-approval authority is
      delegated must be presented to the full Audit Committee at its next scheduled
      meeting. All “Audit-Related” fees billed for the fiscal year ended December 31,
      2006 were approved by the Audit Committee. Since no “Audit-Related” fees were
      billed for the fiscal year ended December 31, 2005, and no “Tax” or “All Other”
fees were billed for the fiscal years ended December 31, 2006 or 2005, the
      Audit
      Committee was not required to approve any such fees. None of the hours expended
      on Whitley Penn’s engagement to audit our financial statements for the fiscal
      year ended December 31, 2006 were attributed to work performed by persons other
      than Whitley Penn’s full-time, permanent employees.




49


**SIGNATURES**





In
      accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
      this report to be signed on its behalf by the undersigned, thereunto duly
      authorized.


RG AMERICA, INC.By:
            /s/
                Bruce A. HallBruce
                A. Hall
              Chief
                Executive OfficerDate:May
              18, 2007




In
      accordance with the Exchange Act, this report has been signed below by the
      following persons on behalf of the registrant and in the capacities and on
      the
      dates indicated.




**Signature**
            
            **Title**
            
            **Date**/s/
                Bruce A. Hall
               Bruce A. Hall
            
            Chief
                Executive Officer, Chief Financial Officer (Principal Financial Officer)
                and Director
            
            May
                18, 2007/s/
                Edward P. Rea
              Edward
                P. Rea
            
            Executive
                Chairman and Director
            
            May
                18, 2007/s/
                Michael A. Jenkins
              Michael
                A. Jenkins
            
            Director
            
            May
                18, 2007/s/
                Paul S. Johnson, Jr.
              Paul
                S. Johnson, Jr.
            
            Director
            
            May
                18, 2007/s/
                James A. Rea
              James
                A. Rea
            
            Director
            
            May
                18, 2007






50




Page
                No.Report
                of Independent Registered Public Accounting Firm
            F-2Consolidated
                Balance Sheet at December 31, 2006
            F-3Consolidated
                Statements of Operations for the years ended December 31, 2006 and
                2005
            F-5Consolidated
                Statements of Changes in Stockholders’ Equity (Deficit) for the years
                ended December
                31, 2006 and 2005
            F-6Consolidated
                Statements of Cash Flows for the years ended December 31, 2006 and
                2005
            F-8Notes
                to Consolidated Financial Statements
            F-9





1




REPORT
      OF
      INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To
      the
      Board of Directors and Stockholders


RG
      America, Inc. and Subsidiaries





We
      have
      audited the accompanying consolidated balance sheet of RG America, Inc. and
      subsidiaries as of December 31, 2006, and the related consolidated statements
      of
      operations, changes in stockholders’ equity (deficit) and cash flows for the
      years ended December 31, 2006 and 2005. These consolidated financial statements
      are the responsibility of the Company’s management. Our responsibility is to
      express an opinion on these consolidated financial statements based on our
      audits.





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. The Company is not required to
      have, nor were we engaged to perform, an audit of its internal control over
      financial reporting. An audit includes consideration of internal control over
      financial reporting as a basis for designing audit procedures that are
      appropriate in the circumstances, but not for the purpose of expressing an
      opinion on the effectiveness of the Company's internal control over financial
      reporting. Accordingly, we express no such opinion. An audit also includes
      examining, on a test basis, evidence supporting the amounts and disclosures
      in
      the financial statements, assessing the accounting principles used and
      significant estimates made by management, as well as evaluating the overall
      financial statement presentation. We believe that our audits provide a
      reasonable basis for our opinion.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the consolidated financial position of RG America,
      Inc. and subsidiaries at December 31, 2006, and the results of their
      consolidated operations and their consolidated cash flows for the years ended
      December 31, 2006 and 2005, in conformity with accounting principles generally
      accepted in the United States of America.





The
      accompanying consolidated financial statements have been prepared assuming
      the
      Company will continue as a going concern. As discussed in Note 2 to the
      consolidated financial statements, the Company has previously incurred net
      losses, which have resulted in a significant accumulated deficit at December
      31,
      2006. The Company has substantial obligations with no current resources to
      satisfy these obligations raising substantial doubt about its ability to
      continue as a going concern. Management’s plans as to these matters are also
      described in Note 2. The consolidated financial statements do not include any
      adjustments to reflect the possible future effects on the recoverability and
      classification of assets or the amounts and classification of liabilities that
      might result from the outcome of this uncertainty.








/s/
      Whitley Penn LLP





Dallas,
      Texas


May
      15,
      2007





2





**RG
                AMERICA, INC. AND SUBSIDIARIES****CONSOLIDATED
                BALANCE SHEET**




**December
                31,****2006****ASSETS****Current
                assets:**Cash
                and cash equivalents
            
            $
            487,116Investment
                in certificate of deposit
            
            
            40,000Contracts
                receivable, net of allowance for doubtfulaccounts
                of $1,645,826
            
            
            9,686,916Unbilled
                revenue
            
            
            2,776,643Prepaid
                expenses - net of accumulated amortizationof
                $571,068
            
            
            736,634Other
                receivables
            
            
            5,094Notes
                receivable
            
            
            95,885Investment
                in available-for-sale securities
            
            
            210,000**Total
                current assets**
            
            
            14,038,288**Property
                and equipment, net of****accumulated
                depreciation of $450,188**
            
            
            951,888**Other
                non-current assets**
            
            
            52,075**Total
                assets**
            
            $
            15,042,251




The
      accompanying notes are an integral part of the consolidated financial
      statements.




3


**RG
                AMERICA, INC. AND SUBSIDIARIES****CONSOLIDATED
                BALANCE SHEET*****(continued)***




**December
                31,****2006****LIABILITIES
                AND STOCKHOLDERS' DEFICIT****LIABILITIES****Current
                liabilities:**Accounts
                payable, trade
            
            $
            3,704,494Accounts
                payable, related party
            
            
            219,467Accrued
                expenses
            
            
            2,956,885Withholding
                taxes payable
            
            
            97,307Deferred
                revenue
            
            
            682,107Bank
                line-of-credit
            
            
            40,000Notes
                payable - related party
            
            
            39,369Notes
                payable - net of debt discount $1,485,894
            
            
            9,661,275**Total
                current liabilities**
            
            
            17,400,904**Long-term
                debt - related party**
            
            
            3,256**Total
                liabilities**
            
            
            17,404,160**Commitments
                and contingencies**
            
            
            -**STOCKHOLDERS'
                DEFICIT****Stockholders'
                deficit**Preferred
                stock, $.001 par value, 35,000,000 sharesauthorized,
                none issued and outstanding
            
            
            -Common
                stock, $.001 par value, 300,000,000 sharesauthorized,
                29,252,093 issued and outstanding
            
            
            29,252Common
                stock subscribed, 3,333,333 shares
            
            
            3,333Additional
                paid in capital
            
            
            9,721,736Common
                stock warrants
            
            
            3,000,557Accumulated
                other comprehensive loss
            
            
            (376,250
            )Accumulated
                deficit
            
            
            (14,740,537
            )**Total
                stockholders' deficit**
            
            
            (2,361,909
            )**Total
                liabilities and stockholders' deficit**
            
            $
            15,042,251




The
      accompanying notes are an integral part of the consolidated financial
      statements.




4





**RG
                AMERICA, INC. AND SUBSIDIARIES****CONSOLIDATED
                STATEMENTS OF OPERATIONS**




**Year
                Ended****December
                31,****2006**
            
            **2005****Revenues**
            
            $
            20,373,047
            
            $
            20,624,443**Cost
                of revenues**
            
            
            15,384,544
            
            
            11,448,710**Gross
                profit**
            
            
            4,988,503
            
            
            9,175,733**Operating
                expenses:**Selling,
                general and administrative
            
            
            3,937,530
            
            
            1,992,582Compensation,
                payroll taxes and benefits
            
            
            4,176,111
            
            
            2,698,112Stock
                compensation
            
            
            1,521,887
            
            
            358,237Consulting
                and contract labor
            
            
            782,101
            
            
            503,820Professional
            
            
            553,733
            
            
            367,599Recovery
                of impairment
            
            
            -
            
            
            (116,669
            )Impairment
                of leasehold improvements
            
            
            -
            
            
            123,230Rent
            
            
            513,332
            
            
            411,609Depreciation
            
            
            299,969
            
            
            109,211**Total
                operating expenses**
            
            
            11,784,663
            
            
            6,447,731**Operating
                income (loss)**
            
            
            (6,796,160
            )
            
            2,728,002**Other
                expense:**Other
                income (expense), net
            
            
            85,811
            
            
            (143,000
            )Interest
                and financing cost, net
            
            
            (3,146,188
            )
            
            (516,451
            )**Total
                other expense**
            
            
            (3,060,377
            )
            
            (659,451
            )**Net
                income (loss)**
            
            $
            (9,856,537
            )
            $
            2,068,551**Other
                comprehensive loss**Unrealized
                loss on investment in available-for-sale securities
            
            
            376,250
            
            
            -**Total
                comprehensive income (loss)**
            
            $
            (10,232,787
            )
            $
            2,068,551**Earnings
                (loss) per share - basic**
            
            $
            (0.31
            )
            $
            0.08**Earnings
                (loss) per share - diluted**
            
            $
            (0.31
            )
            $
            0.07**Basic
                weighted average outstanding shares**
            
            
            31,915,763
            
            
            26,036,864**Diluted
                weighted average outstanding shares**
            
            
            31,915,763
            
            
            27,901,621





The
      accompanying notes are an integral part of the consolidated financial
      statements.




5


**RG
      AMERICA, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)**


**YEARS
      ENDED DECEMBER 31, 2006 and 2005**




Common
                Stock
            
            Additional
            
            Deferred
            
            Common
            
            
            
            Total
              Stockholders’Preferred
                Stock
            
            Common
                Stock
            
            Subscribed
            
            Paid-In
            
            Stock
            
            Stock
            
            Accumulated
            
            EquityShares
            
            Amount
            
            Shares
            
            Amount
            
            Shares
            
            Amount
            
            Capital
            
            Compensation
            
            Warrants
            
            Deficit
            
            (Deficit)**Balance
                at December 31, 2004**
            
            
            -
            
            
            -
            
            
            19,770,390
            
            
            19,770
            
            
            4,661,919
            
            
            (271,238
            )
            
            5,517,675
            
            
            (53,125
            )
            
            130,000
            
            
            (6,952,551
            )
            
            (1,609,469
            )Stock
                issued for subscribed stock
            
            
            
            
            
            
            
            
            4,158,049
            
            
            4,158
            
            
            (4,158,047
            )
            
            (4,158
            )
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Stock
                issued for professional services
            
            
            -
            
            
            -
            
            
            7,050
            
            
            7
            
            
            -
            
            
            -
            
            
            4,223
            
            
            -
            
            
            -
            
            
            -
            
            
            4,230Proceeds
                from sale of common stock
            
            
            -
            
            
            -
            
            
            90,000
            
            
            90
            
            
            2,655,556
            
            
            2,656
            
            
            1,052,404
            
            
            -
            
            
            -
            
            
            -
            
            
            1,055,150Stock
                issued for conversion of notes payable
            
            
            -
            
            
            -
            
            
            4,167
            
            
            4
            
            
            -
            
            
            -
            
            
            2,496
            
            
            -
            
            
            -
            
            
            -
            
            
            2,500Stock
                issued for conversion of convertible debentures
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            888,896
            
            
            889
            
            
            399,111
            
            
            -
            
            
            -
            
            
            -
            
            
            400,000Stock
                issued for conversion of accrued expense
            
            
            -
            
            
            -
            
            
            331,594
            
            
            333
            
            
            162,763
            
            
            163
            
            
            152,254
            
            
            -
            
            
            -
            
            
            -
            
            
            152,750Stock
                issued for conversion of accounts payable
            
            
            -
            
            
            -
            
            
            121,042
            
            
            121
            
            
            -
            
            
            -
            
            
            24,346
            
            
            -
            
            
            -
            
            
            -
            
            
            24,467Stock
                issued for other non current asset
            
            
            -
            
            
            -
            
            
            45,455
            
            
            45
            
            
            (34,091
            )
            
            (34
            )
            
            7,489
            
            
            -
            
            
            -
            
            
            -
            
            
            7,500Unrecorded
                stock adjustment
            
            
            -
            
            
            -
            
            
            26,670
            
            
            26
            
            
            -
            
            
            -
            
            
            (26
            )
            
            -
            
            
            -
            
            
            -
            
            
            -Stock
                issued for TPR acquisition
            
            
            -
            
            
            -
            
            
            1,875,000
            
            
            1,875
            
            
            -
            
            
            -
            
            
            841,875
            
            
            (843,750
            )
            
            -
            
            
            -
            
            
            -Stock
                cancelled related to PBS acquisition
            
            
            -
            
            
            -
            
            
            (55,556
            )
            
            (56
            )
            
            -
            
            
            -
            
            
            (116,613
            )
            
            -
            
            
            -
            
            
            -
            
            
            (116,669
            )Stock
                warrant issued for debt services
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            1,189,629
            
            
            -
            
            
            1,189,629Stock
                warrant issued for equity services
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (290,700
            )
            
            -
            
            
            290,700
            
            
            -
            
            
            -Stock
                issued for equity services
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            35,445
            
            
            36
            
            
            3,964
            
            
            -
            
            
            -
            
            
            -
            
            
            4,000Issuance
                of employee stock options and related amortization
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            19,375
            
            
            23,044
            
            
            -
            
            
            -
            
            
            42,419Stock
                option issued for consultant
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            309,351
            
            
            -
            
            
            -
            
            
            -
            
            
            309,351Conversion
                sweetener on convertible debentures
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            116,881
            
            
            -
            
            
            -
            
            
            -
            
            
            116,881Net
                income, year ended December 31, 2005
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            2,068,551
            
            
            2,068,551**Balance
                at December 31, 2005**
            
            
            -
            
            $
            -
            
            
            26,373,861
            
            $
            26,373
            
            
            4,212,441
            
            $
            (271,686
            )
            $
            8,044,105
            
            $
            (873,831
            )
            $
            1,610,329
            
            $
            (4,884,000
            )
            $
            3,651,290




The
      accompanying notes are an integral part of the consolidated financial
      statements.





6




**RG
      AMERICA, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)**


**YEARS
      ENDED DECEMBER 31, 2006 and 2005 (continued)**




Common
                Stock
            
            Additional
            
            Deferred
            
            Common
            
            Unrealized
                Gain/Loss
            
            
            
            Total
                Stockholders’Preferred
                Stock
            
            Common
                Stock
            
            Subscribed
            
            Paid-In
            
            Stock
            
            Stock
            
            Investment
            
            Accumulated
            
            EquityShares
            
            Amount
            
            Shares
            
            Amount
            
            Shares
            
            Amount
            
            Capital
            
            Compensation
            
            Warrants
            
            Security
            
            Deficit
            
            (Deficit)**Balance
                at December 31, 2005**
            
            
            -
            
            $
            -
            
            
            26,373,861
            
            $
            26,373
            
            
            4,212,441
            
            $
            (271,686
            )
            $
            8,044,105
            
            $
            (873,831
            )
            $
            1,610,329
            
            $
            -
            
            $
            (4,884,000
            )
            $
            3,651,290Stock
                issued for subscribed stock
            
            
            
            
            
            
            
            
            1,406,240
            
            
            1,407
            
            
            (1,406,240
            )
            
            (1,407
            )
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Stock
                issued for professional services
            
            
            -
            
            
            -
            
            
            68,553
            
            
            69
            
            
            -
            
            
            -
            
            
            39,765
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            39,834Stock
                issued in exchange for notes receivable
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            275,898
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            275,898Stock
                issued for conversion of notes payable
            
            
            -
            
            
            -
            
            
            1,281,707
            
            
            1,282
            
            
            22,028
            
            
            22
            
            
            534,109
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            535,413Stock
                issued for conversion of accrued expense
            
            
            -
            
            
            -
            
            
            48,649
            
            
            48
            
            
            585,427
            
            
            586
            
            
            283,199
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            283,833Stock
                issued for conversion of accounts payable
            
            
            -
            
            
            -
            
            
            18,333
            
            
            18
            
            
            -
            
            
            -
            
            
            8,232
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            8,250Stock
                issued for employee compensation
            
            
            -
            
            
            -
            
            
            5,000
            
            
            5
            
            
            -
            
            
            -
            
            
            2,078
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            2,083Unrecorded
                stock adjustment
            
            
            -
            
            
            -
            
            
            49,750
            
            
            50
            
            
            3,010
            
            
            3
            
            
            (7,053
            )
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (7,000)Subscribed
                stock cancelled related to Strategy Corp
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (83,333
            )
            
            (83
            )
            
            (49,917
            )
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (50,000)Stock
                warrant issued for debt services
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            1,013,049
            
            
            -
            
            
            -
            
            
            1,013,049Stock
                warrant issued for equity services
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (120,230
            )
            
            -
            
            
            120,230
            
            
            -
            
            
            -
            
            
            -Stock
                warrant issued for consulting services
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            256,949
            
            
            -
            
            
            -
            
            
            256,949Employee
                stock option amortization
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            349,190
            
            
            873,831
            
            
            -
            
            
            -
            
            
            -
            
            
            1,223,021Note
                payable beneficial conversion feature value as a result of Laurus
                note
                payable modification
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            638,258
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            638,258Unrealized
                loss on investment securities
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (376,250
            )
            
            -
            
            
            (376,250Net
                loss, year ended December 31, 2006
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (9,856,537
            )
            
            (9,856,537**Balance
                at December 31, 2006**
            
            
            -
            
            $
            -
            
            
            29,252,093
            
            $
            29,252
            
            
            3,333,333
            
            $
            3,333
            
            $
            9,721,736
            
            $
            -
            
            $
            3,000,557
            
            $
            (376,250
            )
            $
            (14,740,537
            )
            $
            (2,361,909)




The
      accompanying notes are an integral part of the consolidated financial
      statements.




7




**RG
                AMERICA, INC. AND SUBSIDIARIES****CONSOLIDATED
                STATEMENTS OF CASH FLOWS**




**Years
                Ended****December
                31,****2006**
            
            **2005****Operating
                Activities:**Net
                income (loss)
            
            $
            (9,856,537
            )
            $
            2,068,551Adjustments
                to reconcile net income (loss) to net cash used inoperating
                activities:Depreciation
            
            
            299,969
            
            
            109,211Leasehold
                improvement impairment
            
            
            -
            
            
            123,230Provision
                for doubtful accounts
            
            
            1,262,934
            
            
            412,945Amortization
                of deferred compensation
            
            
            1,223,021
            
            
            41,819Non
                cash interest expense
            
            
            1,715,338
            
            
            227,793Stock
                options issued for consulting services
            
            
            -
            
            
            309,351Stock
                warrant issued for consulting services
            
            
            256,949
            
            
            -Stock
                issued for professional services
            
            
            39,834
            
            
            4,230Stock
                issued for employee compensation
            
            
            2,083
            
            
            -Stock
                cancelled related to acquisition
            
            
            (50,000
            )
            
            (116,669
            )Amortization
                of stock warrant issued for debt services
            
            
            30,239
            
            
            34,399Stock
                issued for equity services
            
            
            -
            
            
            4,000Gain
                on forgiveness of debt
            
            
            -
            
            
            (1,000
            )Changes
                in operating assets and liabilities:Contracts
                receivable
            
            
            (2,045,310
            )
            
            (8,032,657
            )Unbilled
                revenue and deferred revenue, net
            
            
            737,335
            
            
            (3,304,659
            )Prepaid
                expenses
            
            
            80,291
            
            
            (129,651
            )Other
                receivables
            
            
            3,239
            
            
            (55,532
            )Other
                non current assets
            
            
            6,775
            
            
            (46,350
            )Accounts
                payable - trade
            
            
            (751,389
            )
            
            3,358,505Accounts
                payable - related party
            
            
            219,467
            
            
            -Accrued
                expenses
            
            
            1,025,002
            
            
            940,766Withholding
                taxes payable
            
            
            5,587
            
            
            (177,974
            )**Net
                cash used in operating activities**
            
            
            (5,795,173
            )
            
            (4,229,692
            )**Investing
                Activities:**Investment
                in certificate of deposit
            
            
            -
            
            
            (279,728
            )Proceeds
                from investment in certificate of deposit
            
            
            100.000
            
            
            139,728Notes
                receivable
            
            
            275,000
            
            
            (335,000
            )Purchases
                of property and equipment
            
            
            (180,342
            )
            
            (999,342
            )**Net
                cash provided by (used in) investing activities**
            
            
            194,658
            
            
            (1,474,342
            )**Financing
                Activities:**Repayments
                of notes payable - related party
            
            
            (17,578
            )
            
            (23,950
            )Repayments
                of notes payable
            
            
            (11,291,092
            )
            
            (57,831
            )Repayments
                of bank line of credit
            
            
            (100,000
            )
            
            (334,597
            )Proceeds
                from bank line of credit
            
            
            -
            
            
            309,582Proceeds
                from sale of common stock
            
            
            -
            
            
            1,055,150Proceeds
                from issuance of notes payable
            
            
            16,812,955
            
            
            4,924,805Proceeds
                from issuance of notes payable - related party
            
            
            -
            
            
            2,876Proceeds
                from issuance of convertible debenture notes
            
            
            -
            
            
            400,000**Net
                cash provided by financing activities**
            
            
            5,404,285
            
            
            6,276,035**Net
                (decrease) increase in cash and cash equivalents**
            
            
            (196,230
            )
            
            572,001**Cash
                and cash equivalents at beginning of year**
            
            
            683,346
            
            
            111,345**Cash
                and cash equivalents at end of year**
            
            
            487,116
            
            
            683,346**Supplemental
                Disclosure of Cash Flow Information:**Cash
                paid during the year for interest
            
            $
            1,523,422
            
            $
            125,134Cash
                paid during the year for income taxes
            
            $
            -
            
            $
            -




The
      accompanying notes are an integral part of the consolidated financial
      statements.




8





**RG
                AMERICA, INC. AND SUBSIDIARIES****CONSOLIDATED
                STATEMENTS OF CASH FLOWS (*****Continued*****)**





**Year
                Ended****December
                31,****2006**
            
            **2005****Supplemental
                Disclosure of Non-Cash Investing and Financing
                Transactions:**Stock
                issued for conversion of accounts payable
            
            $
            8,250
            
            $
            24,467Stock
                issued for conversion of accrued expense
            
            
            283,833
            
            
            152,750Note
                payable related party issued for conversion of accrued
                expense
            
            
            -
            
            
            11,666Note
                payable issued for purchase of property and equipment
            
            
            29,000
            
            
            5,000Stock
                issued in exchange for note receivable
            
            
            275,898
            
            
            -Accounts
                receivable offset with accounts payable
            
            
            525,000
            
            
            -Stock
                issued for conversion of notes payable
            
            
            535,413
            
            
            2,500Stock
                issued in exchange for convertible debentures
            
            
            -
            
            
            400,000Deferred
                compensation reversal
            
            
            9,450
            
            
            -Stock
                issued for other non current asset
            
            
            -
            
            
            7,500Unrealized
                loss on investment for-sale-securities
            
            
            376,250
            
            
            -Warrant
                issued for credit facility
            
            
            912,667
            
            
            -Warrant
                issued for equity advisory services
            
            
            120,230
            
            
            290,700Accounts
                receivable other issued for deferred revenue
            
            
            -
            
            
            437,500Note
                payable beneficial conversion feature value
            
            
            638,258
            
            
            -Stock
                adjustment
            
            
            7,000
            
            
            -Receivable
                for MBI Financial, Inc. stock
            
            
            875,000
            
            
            -




The
      accompanying notes are an integral part of the consolidated financial
      statements.




9


**RG
        America, Inc. and Subsidiaries**
 **Notes
        to Consolidated Financial Statements**
 **December
        31, 2006**


**1.**  **HISTORY
      AND NATURE OF BUSINESS**





RG
      America, Inc. (“RG” or the “Company”), formerly known as Invvision Capital, Inc.
      (“Invvision”) is a publicly-traded company that provides a broad array of
      fee-based services that address clients' risk management needs for their real
      estate assets. This is accomplished by addressing procedures and costs
      associated with the risk of a possible loss such as loss control activities
      and
      purchasing traditional insurance products. RG also addresses the consequences
      of
      a loss after it has occurred by adjusting claims, restoring property and
      minimizing business interruption costs.





Effective
      as of December 30, 2003, RG acquired all of the capital stock of Restoration
      Group America 2003, Inc., a Texas corporation (“RGA 2003”) and its wholly-owned
      subsidiaries in a transaction that was accounted for as a combination of
      entities under common control. The wholly-owned subsidiaries of RGA 2003 that
      were acquired included: (i) RG Insurance Services, Inc., a Texas corporation
      (“RGIS”) which is a general insurance agency, (ii) RG Risk Management, Inc., a
      Texas corporation (“RGRM”) which is engaged in the business of providing claims
      management services, (iii) RG Restoration, Inc., a Texas corporation (“RGR”)
      which is engaged in the business of performing commercial property restoration
      services and (iv) Restoration Group America, Inc., a Texas corporation (“RGA”)
      which holds the intellectual property rights to the proprietary
      PropertySMARTSM SM program.
      The entities sometimes referred to herein as RGIS, RGRM, RGR and RGA are now
      indirect wholly-owned subsidiaries of RG America, Inc.





According
      to the terms of the Acquisition Agreement between RG and RGA 2003, in
      April
      2004, RG issued 13,333,333 shares of our common stock to the shareholders of
      RGA
      2003 as follows: 10,000,000 shares once the Amended and Restated Articles of
      Incorporation were declared effective and 3,333,333 shares upon the satisfaction
      of certain conditions. As a result of this issuance, 3,333,333 shares were
      unissued subject to the satisfaction of certain additional conditions. In June
      2004, the required conditions were met and the Company has recorded the
      3,333,333 shares as Common Stock Subscribed.





Additional
      RGA Companies that support the Company’s primary business lines
      are:





·
            CTFD,
                Inc. - Rental of construction, site remediation and restoration equipment.





·
            CTFD
                Marine, Inc. - Ownership of marine equipment.





·
            Urban
                Logic, Inc. - Non-operating entity.





·
            RG
                Florida GC, Inc. - General contractor entity for Florida
                operations.





·
            RG
                Florida SC, Inc. - Subcontractor entity for Florida
                operations.





·
            Invvision
                Funding Inc. - Non-operating
                entity.





·
            RG
                Industries, Inc. - Non-operating
                entity.





·
            Practical
                Business Solutions 2000, Inc. - Non-operating
                entity.





·
            Restoration
                Group America, 2003, Inc. - holding company for Intellectual
                Property.





·
            Restoration
                Group America, Inc. - holding company for employees, payroll, rents,
                overhead.





·
            Total
                Professional Restoration, Inc. dba Remediation
                Group.





10


**RG
        America, Inc. and Subsidiaries**
 **Notes
        to Consolidated Financial Statements**
 **December
        31, 2006**




On
      August
      10, 2004, RG acquired all of the common stock of Practical Business Solutions
      2000, Inc. (“PBS”). The aggregate purchase price was $350,000, which was
      purchased with 166,667 restricted shares of RG’s common stock. The terms
      included (1) an agreement by the stockholders of PBS to escrow 55,555 shares
      of
      common stock shares for a period of two years to satisfy certain potential
      indemnifiable claims and (2) and an agreement by RG granting piggyback
      registration rights for the resale of 5,850 of the purchase consideration
      shares.




On
      December 16, 2004, RG determined that as a result of a material impairment
      of
      PBS, it would wind down and close the PBS operation. As a result of the loss
      of
      the key employee as related to PBS, its valuation had been significantly
      impaired and the entire goodwill recorded from the acquisition of PBS in the
      amount of $401,033 was impaired and RG recorded this amount as an Impairment
      of
      Goodwill. Additionally, PBS net book assets of $144,661 were written off and
      charged to Impairment of Subsidiary. On
      March
      16, 2005, the 55,556 shares of RG’s common stock shares at $2.10 per share
      (post-split) held in escrow related to the acquisition of PBS were cancelled.
      This transaction was recorded as a recovery of impairment of
      $116,669.




On
      October 12, 2005, RGA acquired all of the common stock of Total Professional
      Restoration, Inc. (TPR) (“Seller”). The aggregate purchase was $750,000 plus the
      balance of the Company's outstanding debt to the Seller. The terms included
      (1)
      purchase price of $750,000 paid by the issuance of one million eight Hundred
      Seventy Five Thousand (1,875,000) restricted shares of the Company's $0.001
      par
      value common stock ("Common Stock"), based upon a share price of forty cents
      ($0.40) per share, that will vest ratably to Seller over five year’s of
      employment with RGA, and (2) at Seller's sole option , the option to convert
      the
      outstanding debt totaling $255,754 owed by the Company to Seller into restricted
      shares of the Company's Common Stock based upon a share price of thirty cents
      ($0.30) per share. The option period was for ninety (90) days subsequent to
      the
      transaction date and expired without being exercised. All of the $255,754 owed
      to Seller was paid by December 31, 2006. However, since the fair market value
      of
      the Company’s stock was $0.45 per share as determined by recent private
      offerings of stock, RG recorded the purchase price at $843,750. When recording
      this transaction, $843,750 was recorded as deferred compensation and will be
      amortized over the seller’s five year employment agreement with RGA.
      Subsequently in September 2006, the remaining balance of this deferred
      compensation was fully expensed as a result of the accelerated vesting of
      employee stock options.





Additionally,
      on the transaction date, the Company entered into an employment agreement with
      Mr. Jerod Yates, the previous sole owner of Seller. The acquisition and
      employment agreements are filed on Form 8-K.




Effective
      October 31, 2005, the Company entered into a Security Agreement with Laurus
      Master Fund, Ltd. ("Laurus") for the sale by the Company to Laurus of a
      $1,400,000 secured convertible minimum borrowing note ("Minimum Borrowing Note")
      and a secured revolving note up to a maximum of $10,000,000 ("Revolving Note").
      In connection with the Minimum Borrowing Note and the Revolving Note, the
      Company issued to Laurus a common stock purchase warrant ("Warrant") to purchase
      up to 2,962,963 shares of the Company’s $0.001 par value per share common stock
      ("Common Stock") at $0.78 per share with a seven year term. Additionally, the
      Company and Laurus entered into a registration rights agreement ("Registration
      Rights Agreement") covering the registration of the Common Stock underlying
      the
      Minimum Borrowing Note and the Warrant.




11


**RG
        America, Inc. and Subsidiaries**
 **Notes
        to Consolidated Financial Statements**
 **December
        31, 2006**


The
      Minimum Borrowing Note has an interest rate of Prime plus two percent (2.0%)
      and
      shall not be any time less than six percent (6.0%). The Minimum Borrowing Note
      is due together with any unpaid and accrued interest thereon, on October 31,
      2008 (“Maturity Date”). Laurus shall have the option, but not the obligation, at
      any time until the Maturity Date to convert all or any portion of the Minimum
      Borrowing Note and accrued interest into Common Stock at an exercise price
      of
      $0.71 per share. Additionally, the Company has the option, but not the
      obligation, to prepay the Minimum Borrowing Note by paying Laurus one hundred
      thirty percent (130%) of the principal amount of the Minimum Borrowing Note
      plus
      accrued and unpaid interest. As a result of the Minimum Borrowing Note, the
      Company obtained $4,907,805 of proceeds, net of $841,195 of expenses. Of the
      $841,195 of expenses, $396,195 was paid to the Company's financial agent,
      Spencer Clarke, LLC for financial agent fees, $418,000 was paid to Laurus
      Capital Management, LLC for management, due-diligence and documentation fees,
      $25,000 was paid to Synergy Structures, for financial agent fees, and $2,000
      was
      paid to Loeb & Loeb LLP for escrow fees. The Company has recorded this note
      under current liabilities because the agreement with Laurus requires that monies
      borrowed are returned within 210 days.




The
      Revolving Note has an interest rate of Prime plus two percent (2.0%) and shall
      not be any time less than six percent (6.0%). The Revolving Note is due together
      with any unpaid and accrued interest hereon, on the Maturity Date. Laurus shall
      have the option, but not the obligation, at any time until the Maturity Date
      to
      convert all or any portion of the Revolving Note and accrued interest into
      Common Stock at an exercise price of $0.71 per share.




The
      Security Agreement includes among other things, a stock pledge agreement, a
      guaranty from the Company and all of its subsidiaries and certain covenants
      and
      obligations in order to secure the funds obtained from the above mentioned
      items. The Security Agreement also includes a funding formula that determines
      a
      maximum amount of funds that the Company can be advanced at any point in time
      and an allowance for Laurus to override the formula and advance registrant
      funds
      over the funding formula. Laurus elected the option to override the formula
      and
      advanced the Company $250,000 on October 31, 2005. The advance has an interest
      rate of prime plus five percent (5.0%) and is payable with the outstanding
      balance of the Minimum Borrowing Note.




12




**RG
      America, Inc. and Subsidiaries**


**Notes
      to Consolidated Financial Statements**


**December
      31, 2006**


**2.**  **GOING
      CONCERN**





The
      accompanying consolidated financial statements of RG have been prepared assuming
      that the Company will continue as a going concern. However, the Company has
      incurred net losses, which have resulted in a significant accumulated deficit
      at
      December 31, 2006. Although the Company had a net loss of $9,856,537 for the
      year ended December 31, 2006, the Company previously had net income of
      $2,068,551 for the year ended December 31, 2005. At December 31, 2006, current
      liabilities exceeded current assets by $3,362,616, stockholders’ deficit was
      $2,361,909 and RG had an accumulated deficit of $14,740,537.





The
      ability of RG to continue as a going concern is dependent on the successful
      implementation of its business plan, obtaining additional capital, and
      generating sufficient revenues and cash flows. The financial statements do
      not
      include any adjustments that might be necessary if the Company is unable to
      continue as a going concern.





The
      time
      required for RG to become profitable is highly uncertain, and the Company cannot
      be assured that it will achieve or sustain profitability or generate sufficient
      cash flow from operations to meet planned capital expenditures, working capital
      and debt service requirements. If required, the ability to obtain additional
      financing from other sources also depends on many factors beyond the control
      of
      RG, including the state of the capital markets and the prospects for business
      growth. The necessary additional financing may not be available or may be
      available only on terms that would result in further dilution to the current
      owners of RG common stock.




As
      of
      December 31, 2006, the Company has drawn $9,525,169 of its $10,000,000 credit
      facility with Laurus. Additionally, the maximum advance rate allowed under
      the
      credit facility is 50% of allowable contract receivables. As a result of these
      constraints, the Company has been both financially and operationally challenged
      in relation to providing sufficient capital to fund projects and provide working
      capital for overhead requirements. The Company has been significantly challenged
      to complete existing projects with limited capital available, primarily because
      of the 50% advance rate and this has directly impacted the aging of the
      Company’s accounts receivable. Typically, the Company’s contracts are based upon
      insurance proceeds and because of the challenge of finishing the projects,
      the
      collection of the insurance proceeds timing has been extended. Additionally,
      the
      ability of the Company to commence new projects has been impacted by the
      above.




The
      Company is nearing the completion of several projects and has received
      significant payments from certain customers. With the collection of these
      proceeds, additional capacity under the Laurus credit facility was provided
      for
      not only existing projects, but new projects in the Company’s pipeline and
      backlog. However, because of the significant delay in advancing projects due
      to
      capital constraints as discussed above, a significant portion of the Company’s
      accounts receivable that have been financed with Laurus previously had become
      ineligible due to the time the accounts receivable had been outstanding. As
      a
      result, even though the Company received significant accounts receivable
      payments from customers in September 2006, there was no capacity to receive
      additional funding from Laurus based upon the ineligible accounts receivable.
      Accordingly, the Company structured an amendment of the agreement whereby Laurus
      agreed to “over-advance” payments to the Company in accordance with project
      requirements.




13


**RG
        America, Inc. and Subsidiaries**
 **Notes
        to Consolidated Financial Statements**
 **December
        31, 2006**


As
      a
      result of the above capital constraints, the Company, through its exclusive
      financial advisor, Southwest Securities, Inc., has had numerous discussions
      with
      several potential capital sources to alleviate the current capital constraints,
      as well as provide funding for additional growth of the restoration division
      and
      potential strategic acquisitions, as well as its insurance division and pending
      launch of its proprietary insurance product, PropertySMARTTM.




On
      March
      8, 2007, the Company received a written Notice of Default in relation to
      $1,600,000 of Promissory Notes (Notes”) that became due and payable on January
      31, 2007. The Notes are issued to several “accredited investors” as defined in
      Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as
      amended (the “Securities Act”) (“Holders”). The Notes are subordinated to
      existing Senior Indebtedness of the Company to Laurus Master Fund, Ltd.
      (“Laurus”).




The
      Company has been negotiating with the Holders in relation to a retraction of
      the
      Notice of Default or receiving a forbearance agreement until certain events
      occurred. However, the Company has been unable to reach an agreement with the
      Holders to resolve the Notice of Default and do not have the financial capacity
      to repay the Notes at this time. Although the Company is currently in discussion
      with a third party with respect to the repayment of the Notes by such third
      party, there is no assurance that we will be able to reach an agreement on
      terms
      reasonably acceptable to the Company.




On
      March
      30, 2007, the Company and certain of our wholly-owned subsidiaries entered
      into
      a Consulting Agreement (“Agreement”) with Fireline Restoration, Inc., a wholly
      owned subsidiary of Home Solutions of America, Inc. (“Consultant”). The Company
      is a borrower under a certain loan transaction (“Loan”) with Laurus Master Fund,
      Ltd. (“Lender”) and is not currently in compliance with the obligations with
      respect to the Loan, and Consultant is in the business of providing restoration
      and other construction services.




The
      Agreement specifies that Consultant will provide consulting services to the
      Company and to outsource any and all construction and related duties and
      services under RG’s currently existing and future construction contracts and
      projects (collectively, the “Construction Contracts”).  Additionally, the
      Company is in the process of assigning to the Consultant one or more of the
      Construction Contracts, and will assign to the Consultant additional
      Construction Contracts upon obtaining the proper consent from the customers
      to
      the respective contracts. As a result of the Agreement, the estimated remaining
      revenue from the Construction Contracts will be captured by the
      Consultant.




The
      consulting services to be provided by the Consultant will consist of the
      complete and total outsourcing of any and all functions, rights, preferences,
      rights to payment and obligations under the Construction Contracts.  In
      connection with the Consulting Services, the Consultant shall have the power
      and
      authority, for itself and in the stead and on behalf of us, to do any or all
      of
      the following:




·
            Control
                completely the projects contemplated by the Construction
                Contracts;




·
            Deal
                directly with the customers, suppliers, and subcontractors under
                the
                Construction Contracts;




14


**RG
          America, Inc. and Subsidiaries**
 **Notes
          to Consolidated Financial Statements**
 **December
          31, 2006**


·
            Negotiate
                directly with the customers, suppliers, and subcontractors regarding
                payment and pricing under the Construction
                Contracts;




·
            Process
                payment applications and payroll applications on behalf of the Company
                with respect to the Construction Contracts, and make determinations
                as to
                the proper payment thereof;




·
            Deal
                directly with Lender for additional advances and funding, under the
                Loan
                and otherwise, that may be necessary in connection with the performance
                of
                the Construction Contracts, including without limitation, arranging
                for
                Lender to make such additional advances on RG’s behalf, which advances may
                be funded directly to the Consultant;
                and




·
            To
                do all other things the Consultant reasonably deems necessary to
                carry out
                and perform the Construction Contracts and the terms of this
                Agreement.




As
      a
      result of the above Agreement, we will shift our core business focus to function
      primarily as a financial and insurance services company with a specific focus
      on
      our proprietary, patent pending, PropertySMART® program, a property and casualty
      insurance solution for the multi-family housing and commercial property
      industries.  RG’s insurance divisions include a multi-lines general agency,
      licensed to write property, casualty, small business, employee benefits and
      other related coverage’s with a specific focus on its PropertySMART®
program.  This innovative insurance product saves the policy holder money,
      reduces loss exposure for the carrier, and provides a higher level of service
      to
      all parties.




The
      Company cannot provide assurance that it will generate sufficient cash flow
      from
      operations or obtain additional financing to meet scheduled debt payments and
      financial covenants. If the Company fails to make any required payment under
      the
      agreements and related documents governing indebtedness or fails to comply
      with
      the financial and operating covenants contained in them, the Company would
      be in
      default. The consolidated financial statements do not include any adjustments
      to
      reflect the possible effects on recoverability and classification of assets
      or
      the amounts and classification of liabilities, which may result from the
      inability of RG to continue as a going concern.




**3.**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES**





**Basis
      of Presentation**





In
      the
      opinion of management, the accompanying balance sheet and related statements
      of
      operations, changes in stockholders’ equity and cash flows include all
      adjustments necessary for fair presentation in conformity with generally
      accepted accounting principles in the United States of America (U.S. GAAP).





**Principles
      of Consolidation**





The
      accompanying consolidated financial statements include the general accounts
      of
      RG and RGA 2003 and their subsidiaries listed previously as of December 31,
      2006, and all significant intercompany transactions, accounts and balances
      have
      been eliminated.




15


**RG
          America, Inc. and Subsidiaries**
 **Notes
          to Consolidated Financial Statements**
 **December
          31, 2006**


**Accounting
      Estimates**





When
      preparing financial statements in conformity with U.S. GAAP, management must
      make estimates based on future events which affect the reported amounts of
      assets and liabilities, the disclosure of contingent assets and liabilities
      as
      of the date of the financial statements, and revenues and expenses during the
      reporting period. Actual results could differ from these estimates. Significant
      estimates in the accompanying financial statements include the impairment of
      goodwill, the valuation for non-cash issuances of common stock, the allowance
      for doubtful accounts, revenue recognition for construction contracts and
      insurance premiums and the valuation allowance for deferred tax assets and
      liabilities.





**Cash
      and Cash Equivalents**





Cash
      and
      cash equivalents include all highly liquid investments with a maturity date
      of
      three months or less when purchased.





**Contracts
      Receivable**




Contracts **** receivable
      result from the performance of remediation and reconstruction services based
      on
      both fixed-price and negotiated contract prices. In accordance with terms of
      some contracts, a certain percentage of the total contract price is withheld
      pending customer acceptance at the completion of the contract. Accordingly,
      these amounts have been classified as “retainage” and are included as a
      component of contracts receivable. The Company estimates
      the allowance for doubtful accounts based upon a review of outstanding
      receivables, historical collection information, and existing economic
      conditions. Management reviews the customer accounts on a routine basis to
      determine collectibility and if an account should be charged off. The Company
      generally does not require collateral.




**Value
      of Investments**





The
      Company invests in various marketable equity instruments and accounts for such
      investments in accordance with Statement of Financial Accounting Standards
      No.
      115 "Accounting for Certain Investments in Debt and Equity Securities" ("SFAS
      115").




Certain
      securities that the Company may invest in may be determined to be
      non-marketable. Non-marketable securities where the Company owns more than
      20%
      of the investee are accounted for at cost pursuant to APB No. 18, "The Equity
      Method of Accounting for Investments in Common Stock" ("APB 18").




Management
      determines the appropriate classification of its investments at the time of
      acquisition and reevaluates such determination at each balance sheet date.
      Available-for-sale securities are carried at fair value, with unrealized gains
      and losses, net of tax, reported as a separate component of stockholders'
      equity. Investments classified as held-to-maturity are carried at amortized
      cost. In determining realized gains and losses, the cost of the securities
      sold
      is based on the specific identification method.




16


**RG
          America, Inc. and Subsidiaries**
 **Notes
          to Consolidated Financial Statements**
 **December
          31, 2006**


The
      Company periodically reviews its investments in marketable and non-marketable
      securities and impairs any securities whose value is considered non-recoverable.
      The Company's determination of whether a security is other than temporarily
      impaired incorporates both quantitative and qualitative information; GAAP
      requires the exercise of judgment in making this assessment, rather than the
      application of fixed mathematical criteria. The Company considers a number
      of
      factors including, but not limited to, the length of time and the extent to
      which the fair value has been less than cost, the financial condition and near
      term prospects of the issuer, the reason for the decline in fair value, changes
      in fair value subsequent to the balance sheet date, and other factors specific
      to the individual investment. The Company's assessment involves a high degree
      of
      judgment and accordingly, actual results may differ materially from the
      Company's estimates and judgments. The Company recorded no impairment charges
      for securities during either the years ended December 31, 2006 and 2005,
      respectively.




**Property
      and Equipment**




Fixed
      assets greater than $1,000 are recorded at cost and depreciated over their
      useful lives, which range from three to seven years, using the straight-line
      method. Maintenance and repair expense are expensed as incurred. Leasehold
      improvements have useful expected lives of the lesser of useful life or lease
      agreement with expected renewals. Machinery and equipment have useful expected
      lives from 3 - 5 years. Furniture and fixtures have useful expected lives of
      3
      years.




**Accounting
      for the Impairment of Long-Lived Assets**





The
      Company accounts for the impairment of long-lived assets in accordance with
      SFAS
      No. 144, “ *Accounting
      for the Impairment or Disposal of Long-Lived Assets”* ,
      which
      requires that long-lived assets be reviewed for impairment whenever events
      or
      changes in circumstances indicate that the book value of the asset may not
      be
      recoverable. Recoverability of the asset is measured by comparison of its
      carrying amount to the undiscounted cash flow that the asset or asset group
      is
      expected to generate. If such assets or asset groups are considered to be
      impaired, the loss recognized is the amount by which the carrying amount of
      the
      property if any, exceeds its fair market value.




17


**RG
          America, Inc. and Subsidiaries**
 **Notes
          to Consolidated Financial Statements**
 **December
          31, 2006**


**Fair
      Value of Financial Instruments**





The
      Company defines the fair value of a financial instrument as the amount at which
      the instrument could be exchanged in a current transaction between willing
      parties. The carrying value of contracts receivable, accounts payable and
      accrued liabilities approximates fair value because of the short maturity of
      those instruments. The estimated fair value of the Company’s rights and
      obligations are estimated based on the current rates offered to it for similar
      maturities. Based on prevailing interest rates and the short-term maturity
      of
      all of the Company’s notes receivable and indebtedness, management believes that
      the fair value of RG’s rights and obligations approximates book value at
      December 31, 2006.





**Goodwill**




Goodwill
      represents the excess purchase price over the fair market value of the net
      assets acquired. In accordance with SFAS No. 141, “ *Business
      Combinations”* ,
      and
      SFAS No. 142, *“Goodwill
      and Other Intangible Assets”* ,
      goodwill is not amortized but is subject to annual impairment tests. On December
      16, 2004, the Company determined that as a result of a material impairment
      of
      PBS, it would wind down and close the PBS operation. As a result, the Company
      believes that the PBS valuation was significantly impaired and as a result
      of
      its impairment analysis, the entire goodwill recorded from the acquisition
      of
      PBS in the amount of $401,033 was impaired and RG recorded this amount as
      Impairment of Goodwill.




On
      March
      16, 2005, the 55,556 shares of common stock held in escrow related to the
      acquisition of PBS were cancelled. This transaction was recorded as a recovery
      of impairment of $116,669 in the first quarter of 2005 as reflected in the
      accompanying Consolidated Statement of Operations as of December 31,
      2005.




**Revenue
      Recognition - Construction**




The
      majority of revenues are generated through the successful bidding and execution
      of remediation and reconstruction contracts. The Company performs work under
      fixed price as well as negotiated contracts. The contract period varies with
      approximately ninety percent of the contracts being completed within twelve
      months of the start date. The Company recognizes revenues from contracts on
      the
      percentage of completion method, measured by multiplying the contract amount,
      including change orders, by the proportion of costs incurred to date, to
      estimated total costs for each contract. Contracts in progress are valued at
      cost plus accrued profit, less billings to date on uncompleted contracts. This
      method is used because management considers it to be the best available measure
      of progress on contracts in process. Allocated job costs include all direct
      material, labor costs and sub-contracting expenses and various direct costs
      which can be specifically allocated to individual contracts. Unallocated
      contract costs as well as general and administrative expenses are charged to
      expense as incurred. Provisions for losses on uncompleted contracts are made
      in
      the period in which such losses are determined without reference to percentage
      completion. Changes in job performance, job conditions and estimated
      profitability, including those arising from contract penalty provisions, and
      final contract settlements may result in revisions to costs as well as income
      and are recognized in the period in which revisions are determined. The
      liability account Deferred Revenue in the accompanying Consolidated Balance
      Sheet includes those amounts that have been billed out to the customer but
      the
      revenue has not yet been earned.





18


**RG
          America, Inc. and Subsidiaries**
 **Notes
          to Consolidated Financial Statements**
 **December
          31, 2006**


**Revenue
      Recognition - Insurance**




Insurance
      premiums collected are primarily for terms of one year.  The Company
      recognizes commission revenue ratably over the course of the year as the
      commissions are earned and defer revenue recognition on commissions not yet
      earned.  The liability account Deferred Revenue in the accompanying
      consolidated balance sheet includes those amounts that would have to be paid
      to
      the insurance carrier if an insurance policy was cancelled. Insurance revenue
      represented 0.2% and 0.7% of total revenues in 2006 and 2005,
      respectively.




**Stock-Based
      Compensation**




Effective
      January 1, 2006, the Company adopted the fair value recognition provisions
      of
      Statement of Financial Accounting Standards (“SFAS”) No. 123(R), *“Share-Based
      Payments* , *”* using
      the modified prospective application method. Under this transition method,
      compensation cost recognized for the year ended December 31, 2006, includes
      the
      applicable amounts of: (a) compensation cost of all stock-based payments granted
      prior to, but not yet vested as of January 1, 2006 (based on the grant-date
      fair
      value estimated in accordance with the original provisions of SFAS No. 123
      and
      previously presented in pro forma footnote disclosures), and (b) compensation
      cost for all stock-based payments granted subsequent to January 1, 2006 (based
      on the grant-date fair value estimated in accordance with the new provisions
      of
      SFAS No. 123(R)). In September, 2006, the Company concluded an evaluation on
      the
      impact of accelerating the vesting of the Company’s employee stock options to
      simplify the accounting requirements related to SFAS No. 123(R). In September
      2006, the Company vested all outstanding employee stock options. As result
      of
      the accelerated vesting of employee stock options, the Company expensed the
      remaining unvested Black-Scholes valuation balance of $252,320 of compensation
      cost of all stock based employee payments. Results for periods prior to January
      1, 2006, have not been restated. The compensation cost recognized for the twelve
      months ended December 31, 2006 was $358,640 as a result of implementing SFAS
      No.
      123(R), including $252,320 of stock based payments above. In addition, as result
      of the accelerated vesting of employee stock options, the Company expensed
      the
      remaining balance of $714,093 of deferred stock compensation.




The
      Company’s computations for employee grants were made using a Black-Scholes model
      using the following weighted average assumptions: 2006- expected life of 4.90
      years; risk free rate of 4.87%; no dividends during the expected life; and
      a
      volatility of 178.42%. The weighted average fair value of options granted in
      2006 was $0.64; expected life of 3.41 years; risk free rate of 4.14%; no
      dividends during the expected life; and a volatility of 162.63%. The weighted
      average fair value of options granted in 2005 was $0.36.




19


**RG
          America, Inc. and Subsidiaries**
 **Notes
          to Consolidated Financial Statements**
 **December
          31, 2006**


If
      the
      computed fair values of all the Company’s stock-based awards were amortized to
      expense over the vesting period of the awards as specified under SFAS No.
      123(R), net income would have been:


Year
                  EndedDecember
                  31, 2005Net
                  income from continuing operations, as reported (thousands)
              
              $
              2,069Add
                  stock-based compensation expenses Included in net income
                  (thousands)
              
              
              42Less
                  total stock-based employee compensation expense determined under
                  the fair
                  value based method for all awards (thousands)
              
              
              199Pro
                  forma net income (thousands)
              
              $
              1,912Earnings
                  per share:Basic
                  - as reported
              
              $
              0.08Diluted
                  - as reported
              
              $
              0.07Basic
                  and diluted - pro-forma
              
              $
              0.07Basic
                  weighted average outstanding shares
              
              
              26,036,864Diluted
                  weighted average outstanding shares
              
              
              27,901,621





**Income
      Taxes**





Income
      taxes are accounted for under the asset and liability method of SFAS No. 109 *“Accounting
      for Income Taxes* .”
Under
      SFAS 109, deferred tax assets and liabilities are recognized for the future
      tax
      consequences attributable to differences between the financial statement
      carrying amounts of existing assets and liabilities and their respective tax
      bases and operating loss and tax credit carryforwards. Deferred tax assets
      and
      liabilities are measured using enacted tax rates expected to apply to taxable
      income in the years in which those temporary differences are expected to be
      recovered or settled. Under SFAS 109, the effect on deferred tax assets and
      liabilities of a change in tax rates is recognized in income in the period
      that
      includes the enactment date. Valuation reserves are provided for the deferred
      tax assets when, based on available evidence, it is more likely than not that
      some or all of the deferred tax assets will not be realized.





**Earnings
      Per Share**




Basic
      earnings (loss) per common share (Basic EPS) excludes dilution and is computed
      by dividing net income (loss) by the weighted average number of common shares
      outstanding or subscribed during the period. Diluted earnings (loss) per share
      (Diluted EPS) reflects the potential dilution that could occur if stock options
      or other contracts to issue common stock, such as warrants or convertible notes,
      were exercised or converted into common stock.




20


**RG
          America, Inc. and Subsidiaries**
 **Notes
          to Consolidated Financial Statements**
 **December
          31, 2006**


**Year
                Ended**
              **December
                31,********2006**
            
            ******2005**Net
                income (loss), as reported (numerator)
            
            $
            (9,856,537
            )
            $
            2,068,551Net
                income (loss), for diluted earnings per share - income available
                to
                shareholders after assumed conversion as reported
                (numerator)
            
            $
            (9,856,537
            )
            $
            2,099,387Weighted
                average number of common shares outstanding (denominator) -
                basic
            
            
            31,915,763
            
            
            26,036,864Effect
                of dilutive securities:Employee
                stock options
            
            
            -
            
            
            1,393,216Warrants
            
            
            -
            
            
            41,686Convertible
                debentures
            
            
            -
            
            
            429,855Weighted
                average number of common shares outstanding (denominator) -
                dilutive
            
            
            31,915,763
            
            
            27,901,621Net
                income (loss) per share - basic
            
            $
            (0.31
            )
            $
            0.08Net
                income (loss) per share - diluted
            
            $
            (0.31
            )
            $
            0.07





The
      number of outstanding employee stock options, warrants and any contingently
      issuable shares that could potentially dilute earnings per share in the future,
      but were not included in the computation of diluted earnings per share for
      these
      periods presented because of their impact was anti-dilutive for the periods
      presented are as follows: 25,604,338 for the year ended December 31, 2006 and
      5,335,184 for the year ended December 31, 2005.





**Accumulated
      Other Comprehensive Income**





As
      of the
      date of these consolidated financial statements, the Company had a component
      of
      other comprehensive loss as defined by SFAS No. 130 *“Accumulated
      Other Comprehensive Income (Loss)”* other
      than its net loss. The $376,250 other comprehensive loss for 2006 is a result
      of
      the Company’s investment in MBI Financial, Inc’s. common stock decreasing in
      value based on the stock market value as of December 31, 2006.




21


**RG
          America, Inc. and Subsidiaries**
 **Notes
          to Consolidated Financial Statements**
 **December
          31, 2006**


**Reclassifications**





Certain
      amounts in the year ended December 31, 2005 financial statements have been
      reclassified to conform to the 2006 presentation.




**New
      Accounting Standards**





In
      July
      2006, the Financial Accounting Standards Board, or FASB, issued Interpretation
      48, *Accounting for Uncertainty in Income Taxes—An Interpretation of FASB
      Statement 109*, or FIN 48, which clarifies the accounting and disclosure
      requirements for uncertainty in tax positions, as defined. FIN 48 requires
      a
      two-step approach to evaluate tax positions and determine if they should be
      recognized in the financial statements. The two-step approach involves
      recognizing any tax positions that are *“more likely that not”* to occur
      and then measuring those positions to determine if they are recognizable in
      the
      financial statements. The Company adopted FIN 48 on January
      1, 2007 and its adoption did not result in a material cumulative-effect
      adjustment.




**4.**
            **CONTRACTS**




**A)
      CONSTRUCTION CONTRACTS**




Construction
      contracts receivable were comprised of the following at December 31,
      2006:


Contract
                  receivables billed:Completed
                  contracts
              
              $
              5,430,424Contracts
                  in progress
              
              
              5,680,927Retainage
              
              
              218,104Less:
                  Allowance for doubtful accounts
              
              
              (
                  1,645,826
              )$
              9,683,629




The
      asset
      account, “Unbilled revenue”, represents revenues recognized in excess of amounts
      billed. The liability account “Deferred revenue” represents billings in excess
      of revenues recognized.




Balances
      at December 31, 2006 were comprised of the following:




Costs
                incurred on uncompleted contracts
            
            $
            18,656,824Estimated
                earnings
            
            
            6,538,30925,195,133Less:
                Billings to date
            
            
            (
                23,080,783
            )$
            2,114,350Balance
                sheet presentation:Unbilled
                revenue
            
            $
            2,776,643Deferred
                revenue
            
            
            (
                662,292
            )$
            2,114,351




22


**RG
          America, Inc. and Subsidiaries**
 **Notes
          to Consolidated Financial Statements**
 **December
          31, 2006**


**B)
        INSURANCE CONTRACTS**


Insurance
                  receivable
              
              $
              3,287Balance
                  sheet presentation:Unbilled
              
              $
              -Deferred
                  revenue
              
              
              (19,815
              )$
              (
                  19,815
              )




**5.  MARKETABLE
      SECURITIES AND NOTES RECEIVABLE**




In
      June
      2002, a third party issued the Company a promissory note for $20,000. On
      December 31, 2006, the outstanding balance of the promissory note is $16,000.
      There is no stated interest rate or due date. In addition, there is no
      collateral on this promissory note.




In
      June
      2004, the Company received from a corporation, which is a strategic partner
      of
      RG, a warrant to purchase 333,333 shares of their common stock through June
      2009
      at a price of $19.50 per share in exchange for current and ongoing strategic
      financial services. No value was assigned to the warrant since the exercise
      price of $19.50 per share significantly exceeds the fair market value of the
      stock price per share on the measurement date.




In
      December 2005, the Company entered into a consulting service agreement with
      a
      third party unrelated client in which the Company was to provide services over
      a
      one year period in exchange for 700,000 shares in the client’s common stock.
      These shares were received in 2006 and at December 31, 2006, are recorded as
      Investment In Available-for-Sale Securities at their fair market value of
      $210,000 or $0.30 per share, as determined by the market price as indicated
      by
      the publicly traded stock price. The company recognized an aggregate $586,250
      of
      revenue on a monthly basis from December 2005 through November 2006 as a result
      of the consulting service agreement.




On
      December 5, 2005, a third party issued the Company a secured promissory note
      for
      $335,000. This note was granted in conjunction with the Company’s agreement to
      provide consulting services and the receipt of 700,000 shares of the above
      client’s common stock. The rate of interest is 15% per annum and computed on the
      basis of a 365 day year for the actual number of days lapsed. The principal
      plus
      all accrued but previously unpaid interest is due and payable on the earliest
      of
      i) February 5, 2006, ii) immediately prior to the closing of the acquisition
      of
      a majority of stock of the third party by another entity by means of a
      transaction or a series of related transactions, iii) the closing of a financing
      the third party which results in at least $500,000 in net proceeds to the third
      party, or iv) the closing of the sale of all or substantially all of the assets
      of the third party, unless the third party stockholders of record prior to
      such
      acquisition or sale set forth in ii) and iv) above shall hold at least 50%
      of
      the voting power of the acquiring or surviving entity immediately after such
      acquisition or sale. This note receivable is secured by a pledge of shares
      representing 51% of the outstanding shares of the third party and 400,000 shares
      of RG America, Inc. common stock registered in the name of Rea Brothers, Ltd.
      As
      of December 31, 2006, this note has $60,000 principal outstanding and $19,885
      interest accrued.




23


**RG
          America, Inc. and Subsidiaries**
 **Notes
          to Consolidated Financial Statements**
 **December
          31, 2006**


**6.**  **IMPAIRMENT**




On
      August
      10, 2004, RG acquired all of the common stock of Practical Building Solutions
      Inc (“PBS”). The aggregate purchase was $350,000, which payment consisted of
      166,667 restricted shares of RG’s common stock.




On
      December 16, 2004, the Company determined that as a result of a material
      impairment of PBS, the Company would wind down and close the PBS operation.
      As a
      result of the loss of the key employee as related to PBS, its valuation was
      significantly impaired and the entire goodwill recorded from the acquisition
      of
      PBS in the amount of $401,033 was impaired and the Company recorded this amount
      as Impairment of Goodwill. Additionally, PBS’ net book assets of $144,661 were
      written off and charged to Impairment of Subsidiary in the Statement of
      Operations for the year ended December 31, 2004.




On
      March
      16, 2005, the 55,556 shares of our common stock held in escrow as related to
      the
      acquisition of PBS were cancelled. This transaction was recorded as a recovery
      of impairment of $116,669 in the first quarter of 2005 as reflected in the
      accompanying Consolidated Statement of Operations.




**7.
      PROPERTY AND EQUIPMENT**





Property
      and equipment were as follows at December 31, 2006:




Leasehold
                improvements
            
            $
            403,434Machinery
                and equipment
            
            
            919,973Furniture
                and fixtures
            
            
            78,669Accumulated
                depreciation
            
            
            (450,188
            )$
            951,888




**8.
      DEBT**




**SHORT-TERM
      DEBT**





*Our
      short-term debt at December 31, 2006 consisted of the
      following:*





***Bank
      Line of Credit***




$40,000
                bank line of credit, dated April 26, 2005, bearing interest at the
                bank’s
                prime rate plus 1.25 percent (9.5% at December 31, 2006), with an
                open
                ended payment term.
            
            $
            40,000





24


**RG
          America, Inc. and Subsidiaries**
 **Notes
          to Consolidated Financial Statements**
 **December
          31, 2006**


On
      May
      17, 2005, RG entered into a revolving line of credit facility with a bank in
      the
      amount of $40,000  and
      $40,000 was received by the Company against the facility. The outstanding
      balance of this revolving line of credit facility is $40,000 at December 31,
      2006. The revolving line of credit facility is fully secured by a $40,000
      certificate of deposit.





On
      July
      28, 2005, RG entered into a revolving line of credit facility with a bank in
      the
      amount of $100,000  and
      $100,000 was received by the Company against the facility. The outstanding
      balance of this revolving line of credit facility was $100,000 but paid in
      full
      in July 2006.





***Notes
      payable - Related Party***




$75,000
                unsecured promissory note dated October 2003, bearing interest at
                10% per
                annum and due on demand.
            
            $
            19,336$15,000
                unsecured promissory note dated October 2003, bearing interest at
                9.2% -
                monthly payments of $432 - due March 2007
            
            
            4,977$5,000
                unsecured promissory note dated July 30, 2004, bearing interest at
                10% per
                annum and due on demand.
            
            
            5,000$17,000
                unsecured promissory note dated January 9, 2006, non interest bearing
                -
                monthly payments of $500 - due August 2007
            
            
            5,500$12,000
                unsecured promissory note dated April 3, 2006, bearing interest at
                10.0% -
                monthly payments of $550 - due March 2008
            
            
            7,812Less:
                Current portion
            
            
            (39,369
            )Long
                term portion
            
            $
            3,256




In
      October 2003, the Company executed a $75,000 unsecured promissory note, of
      which $19,336 was
      outstanding at December 31, 2006. The promissory note is with a former officer
      of RG, bears interest of 10% per annum and is due on demand. (See Related Party
      Transactions Note 14).




In
      October 2003, the Company executed a $15,000 unsecured promissory note, of
      which $4,977 was
      outstanding at December 31, 2006. The promissory note is with an officer of
      RG.
      The interest rate is 9.2% per annum with monthly principal and interest payments
      of $432 and is due March of 2007. (See Related Party Transactions Note 14).




In
      July
      2004, the Company executed a $5,000 unsecured promissory note, of which $5,000
      is outstanding at December 31, 2006. The promissory note is with an officer
      of
      RG, bears interest of 10% per annum and is due on demand. (See Related Party
      Transactions Note 14).




In
      January 2006, the Company had received $24,000 of property and equipment from
      a
      related third party in the form of $7,000 cash and a non interest bearing note
      of $17,000 with monthly payments of $500 until the note is paid in full. The
      outstanding principal balance of this note was $5,500 as of December 31, 2006.
      (See Related Party Transactions Note 14).




25


**RG
          America, Inc. and Subsidiaries**
 **Notes
          to Consolidated Financial Statements**
 **December
          31, 2006**


In
      April
      2006, the Company had received $12,000 of property and equipment from a related
      third party and in the form of a 10% per annum interest bearing note and is
      due
      March 2006. The outstanding principal balance of this note was $7,812 as of
      December 31, 2006. (See Related Party Transactions Note 14).




***Notes
      payable***




$17,000
                unsecured promissory note dated February 26, 2005, non- interest
                bearing
                and no defined repayment date.
            
            $
            17,000$5,000
                unsecured promissory note dated August 9, 2005, bearing interest
                at 10%
                per annum and due January 2006.
            
            
            5,000$10,000,000
                secured revolving note dated October 31, 2005, bearing interest at
                prime
                plus 2% (but never less than 6%) per annum and due October 31,
                2008.
            
            
            9,525,169Less:
                Un-amortized debt discount on $10,000,000 secured revolving note
                dated
                October 31, 2005.
            
            
            1,053,842$1,600,000
                unsecured promissory note dated May 2006, bearing interest at 12
                % - 18 %
                per annum and due January 2007.
            
            
            1,600,000$
            10,093,327




Through
      May 2004, the Company had received $185,100 of proceeds in the form of a loan
      from an unrelated third party. The Company is accruing interest at the rate
      of
      10% per annum for 90 days from June 15, 2004 and 18% subsequently. On February
      9, 2005, $2,500 of this loan was converted into 4,167 shares of the Company’s
      common stock. The outstanding principal balance of this note was $182,600 as
      of
      December 31, 2005. In 2006, the outstanding principal balance of $182,600 was
      assumed by two unrelated third parties in exchange for monies owed the Company
      for stock subscriptions.




On
      August
      8, 2004, through a previous acquisition, the Company assumed an $8,099 unsecured
      promissory note from an unrelated party. The Company was accruing interest
      at
      the rate of 8% per annum. In March 2006, the Company repaid the obligation
      through the issuance of 22,028 shares of RG common stock in exchange for the
      retirement of the promissory note plus accrued interest of $1,814.




On
      February 5, 2005, the Company received $7,000 of proceeds and on February 26,
      2005 the Company received $10,000 of proceeds in the form of a loan from an
      unrelated third party. This loan is a non-interest bearing note and does not
      have a defined repayment date. The outstanding principal balance of this note
      was $17,000 as of December 31, 2006.




On
      August
      9, 2005, the Company had received $5,000 of property and equipment from an
      unrelated third party and in the form of a 10% per annum interest bearing note
      and is due January 2006. The outstanding principal balance of this note was
      $5,000 as of December 31, 2006.




26


**RG
          America, Inc. and Subsidiaries**
 **Notes
          to Consolidated Financial Statements**
 **December
          31, 2006**


Effective
      October 31, 2005, the Company entered into a Security Agreement with Laurus
      Master Fund, Ltd. ("Laurus") for the sale by the Company to Laurus of a
      $1,400,000 secured convertible minimum borrowing note ("Minimum Borrowing Note")
      and a secured revolving note up to a maximum of $10,000,000 ("Revolving Note").
      In connection with the Minimum Borrowing Note and the Revolving Note, the
      Company issued to Laurus a common stock purchase warrant ("Warrant") to purchase
      up to 2,962,963 shares of the Company’s $0.001 par value per share common stock
      ("Common Stock") at $0.78 per share with a seven year term. The
      Company evaluated the warrant issuance in accordance with FAS No. 123 and
      utilized the Black Scholes method to determine valuation. As a result of its
      evaluation, the Company determined that the warrant valuation was $1,155,230
      and
      recorded this amount to debt discount and common stock warrants. The
      Company amortized $64,179 of the debt discount in 2005 and recorded this cost
      to
      interest expense, resulting in $1,091,051 in un-amortized debt discount on
      December 31, 2005. Additionally, the Company and Laurus entered into a
      registration rights agreement ("Registration Rights Agreement") covering the
      registration Common Stock underlying the Minimum Borrowing Note and the Warrant.




The
      Minimum Borrowing Note has an interest rate of Prime plus two percent (2.0%)
      and
      shall not be any time less than six percent (6.0%). The Minimum Borrowing Note
      is due together with any unpaid and accrued interest hereon, on October 31,
      2008
      (Maturity Date"). Laurus shall have the option, but not the obligation, at
      any
      time until the Maturity Date to convert all or any portion of the Minimum
      Borrowing Note and accrued interest into Common Stock at an exercise price
      of
      $0.71 per share. Additionally, the Company has the option, but not the
      obligation, to prepay the Minimum Borrowing Note by paying Laurus one hundred
      thirty percent (130%) of the principal amount of the Minimum Borrowing Note
      plus
      accrued and unpaid interest. As a result of the Minimum Borrowing Note, the
      Company obtained $4,907,805 of proceeds, net of $841,195 of expenses. Of the
      $841,195 of expenses, $396,195 was paid to the Company's financial agent,
      Spencer Clarke, LLC for financial agent fees, $418,000 was paid to Laurus
      Capital Management, LLC for management, due-diligence and documentation fees,
      $25,000 was paid to Synergy Structures, for financial agent fees; and $2,000
      was
      paid to Loeb & Loeb LLP for escrow fees. The Company has recorded this note
      under current liabilities because the agreement with Laurus requires that monies
      borrowed are returned within 210 days.




The
      Revolving Note has an interest rate of Prime plus two percent (2.0%) and shall
      not be any time less than six percent (6.0%). The interest rate was 10.25%
      at
      December 31, 2006. The Revolving Note is due together with any unpaid and
      accrued interest hereon, on the Maturity Date. Laurus shall have the option,
      but
      not the obligation, at any time until the Maturity Date to convert all or any
      portion of the Revolving Note and accrued interest into Common Stock at an
      exercise price of $0.71 per share.




The
      Security Agreement includes among other things, a stock pledge agreement, a
      guaranty from the Company and all of its subsidiaries and certain covenants
      and
      obligations in order to secure the funds obtained from the above mentioned
      items. The Security Agreement also includes a funding formula that determines
      a
      maximum amount of funds that the Company can be advanced at any point in time
      and an allowance for Laurus to override the formula and advance registrant
      funds
      over the funding formula. Laurus elected the option to override the formula
      and
      advanced the Company $250,000 on October 31, 2005. The advance has an interest
      rate of prime plus five percent (5.0%) and is payable with the outstanding
      balance of the Minimum Borrowing Note. The
      interest rate was 13.25% at December 31, 2006. At December 31, 2006, no funds
      were available for additional borrowing under the Revolving Note.




27


**RG
          America, Inc. and Subsidiaries**
 **Notes
          to Consolidated Financial Statements**
 **December
          31, 2006**


Effective
      February 15, 2006 ("Effective Date"), the Company amended and restated the
      Security Agreement dated October 31, 2005 with Laurus Master Fund, Ltd.
      ("Laurus") for the sale by the Company to Laurus of a $1,400,000 secured
      convertible Minimum Borrowing Note, a secured Revolving Note up to a maximum
      of
      $10,000,000, a common stock purchase warrant ("Original Warrant") to purchase
      up
      to 2,962,963 shares of RG’s $0.001 par value per share Common Stock and a
      Registration Rights Agreement covering the registration of Common Stock
      underlying the Minimum Borrowing Note and the Warrant. As a result of the
      Minimum Borrowing Note amendment, the Company obtained an additional $5,539,479
      of proceeds, net of $203,805 of expenses which was paid to the Company’s
      financial advisor, Spencer Clarke. The indebtedness is classified as current
      in
      accordance with EITF 95-22 *“Balance
      sheet classification of borrowings outstanding under revolving credit agreements
      that include both a subjective acceleration clause and a lock-box
      agreement”* .





The
      Minimum Borrowing Note was amended and restated as a Secured Convertible Note
      ("Secured Convertible Note") and was increased from $1,400,000 to $5,000,000.
      Laurus has the option, but not the obligation, to convert all or any portion
      of
      the Secured Convertible Note and accrued interest into Common Stock at $0.41
      per
      share, as amended from the previous $0.71 per share. The Secured Convertible
      Note continues to have an interest rate of Prime plus two percent (2.0%), shall
      not be at any time less than six percent (6.0%) and is due together with any
      unpaid and accrued interest hereon, on October 31, 2008 (“Maturity Date").
      Additionally, RG continues to have the option, but not the obligation, to prepay
      the Secured Convertible Note by paying Laurus one hundred thirty percent (130%)
      of the principal amount of the Secured Convertible Note plus accrued and unpaid
      interest.





The
      amended and restated Revolving Note was changed to be non-convertible whereby
      Laurus no longer has an option to convert all or any portion of the Revolving
      Note into Common Stock. The Revolving Note continues to have an interest rate
      of
      Prime plus two percent (2.0%), shall not be any time less than six percent
      (6.0%) and is due together with any unpaid and accrued interest hereon, on
      the
      Maturity Date.





The
      amended and restated Security Agreement continues to include among other things,
      a stock pledge agreement, a guaranty from the Company and all of its
      subsidiaries and certain covenants and obligations in order to secure the funds
      obtained from the above mentioned items. The amended Security Agreement
      continues to include a funding formula that determines a maximum amount of
      funds
      that the Company can be advanced at any point in time and an allowance for
      Laurus to override the formula and advance registrant funds over the funding
      formula.





The
      amended and restated documents comprising the above items were previously filed
      on Form 8-K.





The
      Company evaluated the modification to the restated security agreement in
      accordance with EITF No. 96-19 and No. 05-07 and determined the modification
      resulted in a substantial change. The Company evaluated the new arrangement
      under EITF 00-27 and noted there is a beneficial conversion feature of $638,258
      related to Minimum Borrowing Note that was recorded as a debt discount. This
      amount was calculated as the difference between the effective conversion price
      of $0.40 calculated under EITF 00-27 and the $0.45 fair market value of the
      Company's common stock at the transaction date. The effective conversion amount
      was calculated based on the $5,000,000 Minimum Borrowing Note and the debt
      discount related to the warrants issued in 2005 of $150,446. The warrants issued
      in 2006 were related to the Revolver Note and were therefore not included in
      the
      calculation of the beneficial conversion on the Minimum Borrowing Note. The
      debt
      discount is being amortized over the remaining life of the debt through October
      2008 and during the year ended December 31, 2006, the Company amortized to
      interest expense $206,206 of the amount resulting in a debt discount balance
      of
      $432,052 as of December 31, 2006.




28


**RG
          America, Inc. and Subsidiaries**
 **Notes
          to Consolidated Financial Statements**
 **December
          31, 2006**


In
      January through March 2006, the Company borrowed an additional $5,743,284 and
      repaid $2,535,919 to Laurus in accordance with terms of the secured revolving
      note.





In
      April
      through June 2006, the Company borrowed an additional $5,374,276 and repaid
      $4,338,301 to Laurus in accordance with terms of the secured revolving
      note.





In
      May
      2006, Laurus converted $525,500 of the Minimum Borrowing Note balance into
      1,281,707 shares of the Company’s common stock, at the amended agreement rate of
      $0.41 per share. The Company issued a warrant to Spencer Clarke for their
      financial advisory assistance related to this Minimum Borrowing Note conversion
      to the Company’s common stock for 128,170 warrants exercisable at an average of
      $1.27 per share with the warrants expiring on May 2009. The warrants are
      exercisable on a cash basis only and have “piggy-back” registration rights. The
      issuance of the warrants was made in reliance of the Securities Act, which
      provide for exemptions from the registration requirements of the Securities
      Act
      for transactions not involving a public offering. The
      Company valued the warrant utilizing the Black Scholes method to determine
      valuation. As a result of its evaluation, the Company determined that the
      warrant valuation was $116,191 and recorded this amount to additional paid
      in
      capital and common stock warrants.  The
      average price of $1.27 per share was based upon the fair market value price
      of
      common stock when the agreement was made as indicated on the over the counter
      stock exchange.





In
      May
      2006, the Company commenced a bridge loan transaction in the amount of
      $2,000,000 through the private placement of Promissory Notes (“Notes”) to
      several “accredited investors” as defined in Rule 501(a) of Regulation D
      promulgated under the Securities Act of 1933, as amended (the “Securities Act”)
      (“Holders”). This private placement was arranged by our financial advisor on the
      transaction, Spencer Clarke, LLC (“Spencer Clarke”). Effective June 30, 2006,
      the Company concluded the transaction and in total, issued $1,600,000 of Notes
      and received $1,424,000 of proceeds, net of $176,000 of expenses paid to Spencer
      Clarke. The terms of the Notes include the payment of interest at a rate of
      12%
      per annum with a maturity date equal to the earlier of: (i) August 30, 2006,
      or
      (ii) closing and partial funding of a subordinated debt facility up to
      $25,000,000 or at least $3,000,000 of our equity or equity-linked securities,
      or
      (iii) upon or after the occurrence of an Event of Default as defined in the
      Notes. The Notes are subordinated to existing senior indebtedness of the Company
      to Laurus Master Fund, Ltd. In consideration of this Note, the Company issued
      50% warrant coverage on the Notes or 606,060 warrants exercisable at $1.32
      per
      share with the warrants expiring on June 30, 2008, to Holders. The warrants
      are
      exercisable on a cash basis only and have “piggy-back” registration rights. None
      of the warrants have been exercised as of December 31, 2006 and no fees or
      commissions were paid in connection with the issuance of the warrants to Spencer
      Clarke. The issuance of the warrants was made in reliance of the Securities
      Act,
      which provide for exemptions from the registration requirements of the
      Securities Act for transactions not involving a public offering. The
      Company valued the warrants utilizing the Black Scholes method to determine
      valuation. As a result of its evaluation, the Company determined that the
      warrant valuation was $308,358 and recorded this amount to debt discount and
      common stock warrants. The debt discount was amortized over the life of the
      loan
      through August 30, 2006 and recorded as interest expense.  The
      $1.32 per share was based upon a premium equal to 125% of the fair market value
      price of common stock when the agreement was made as indicated on the over
      the
      counter stock exchange. All
      of
      the Holders are “accredited investors” as defined in the Securities Act and are
      now existing creditors of the Company. The underlying common stock from the
      exercise of the warrants shall not be offered, sold or transferred other than
      pursuant to an effective registration statement under the Securities Act or
      an
      exemption from such registration requirements. Additionally, the Company issued
      a warrant to Spencer Clarke for their financial advisory assistance with this
      bridge note placement for 60,606 warrants exercisable at $1.39 per share with
      the warrants expiring on June 30, 2008. The warrants are exercisable on a cash
      basis only and have “piggy-back” registration rights. The issuance of the
      warrants was made in reliance of the Securities Act, which provide for
      exemptions from the registration requirements of the Securities Act for
      transactions not involving a public offering. The
      Company valued the warrants utilizing the Black Scholes method to determine
      valuation. As a result of its evaluation, the Company determined that the
      warrant valuation was $30,239 and recorded this amount to interest expense
      and
      common stock warrants.  The
      $1.39 per share was based upon a premium equal to 125% of the fair market value
      price of common stock plus 5% when the agreement was made as indicated on the
      over the counter stock exchange.




29


**RG
          America, Inc. and Subsidiaries**
 **Notes
          to Consolidated Financial Statements**
 **December
          31, 2006**


Effective
      August 30, 2006, the Company executed a modification and extension agreement
      (the “Agreement”) in relation to the $1,600,000 of Promissory Notes (“Notes”) as
      discussed above.





The
      Agreement modifies the terms of the Notes as follows:




·
            The
                maturity date of the Notes was extended to October 31,
                2006.





·
            The
                interest rate on the Notes was increased from 12% per annum to 15%
                per
                annum effective August 31, 2006. The increased interest rate is only
                applicable from August 31, 2006 until either October 31, 2006 or
                such
                earlier time that the Notes are repaid in
                full.





·
            In
                the event that the Notes are not repaid in full by the due date of
                October
                31, 2006, certain additional considerations related to previously
                issued
                common stock warrants shall be
                amended.





Effective
      October 31, 2006, the Company executed a second modification and extension
      agreement (the “Agreement”) in relation to the $1,600,000 of Promissory Notes
      (“Notes”) as discussed above.





The
      Agreement modifies the terms of the Notes as follows:




·
            The
                maturity date of the Notes was extended to January 31,
                2007.






30
 
 **RG
            America, Inc. and Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **December
            31, 2006**


·
            The
                interest rate on the Notes was increased from 15% per annum to 18%
                per
                annum effective August 31, 2006. The increased interest rate is only
                applicable from November 1, 2006 until either January 31, 2007 or
                such
                earlier time that the Notes are repaid in
                full.





·
            In
                consideration of the second agreement, the warrants to purchase shares
                of
                the Company’s common stock that were previously issued to the Note Holders
                solely in connection with the issuance of the Notes, shall be amended
                as
                follows:





i)
            The
                exercise period will be four (4) years from November 1, 2006 through
                November 1, 2010.





ii)
            The
                exercise price shall be changed to $0.32 per
                share.





iii)
            A
                cashless option shall be added to the
                Warrants.





iv)
            Additional
                Warrants will be issued to the Note Holders to reflect a ration of
                100%
                warrant coverage to the amount of the borrowed funds. In total, $1,600,000
                of funds were loaned to the Company by the Note Holders and the total
                warrant coverage will now be 1,600,000 warrants divided among the
                Warrant
                Holders based upon the amount of their respective
                investment





v)
            Piggy-back
                registration rights will be granted to the
                warrants.





·
            The
                Company will pay the Note Holders twenty five percent (25%) of the
                accrued
                interest due and payable as of October 31, 2006 upon the execution
                of this
                Second Agreement. The remaining seventy five percent (75%) of accrued
                interest due and payable as of October 31, 2006 will be paid on January
                31, 2007.





The
      Company valued the warrant utilizing the Black Scholes method to determine
      valuation. As a result of its evaluation, the Company determined that the
      warrant valuation was $105,214 and recorded this amount to prepaid interest
      and
      common stock warrants. As
      of
      December 31, 2006, $70,143 of this prepaid interest was expensed to interest
      expense. The
      $0.32
      per share was based upon the fair market value price of common stock when the
      agreement was made as indicated on the over the counter stock
      exchange.





In
      July
      through September 2006, the Company borrowed an additional $807,110 and repaid
      $178,000 to Laurus in accordance with terms of the secured revolving note.
      The
      Company amended their agreement with Laurus to include an “over borrowing”
feature, and had an outstanding balance of $10,095,950 on the secured revolving
      note as of September 30, 2006.





In
      October through December 2006, the Company borrowed an additional $3,668,090
      and
      repaid $4,238,871 to Laurus in accordance with terms of the secured revolving
      note. The Company amended their agreement with Laurus to include an “over
      borrowing” feature, and had an outstanding balance of $9,525,169 on the secured
      revolving note as of December 31, 2006.





See
      Subsequent Events Note for further discussion of the Notes.




**9.**  **STOCKHOLDERS’
      EQUITY**





**Capital
      Structure**




The
      Company is authorized to issue up to 300,000,000 shares of common stock, $.001
      par value per share, of which 29,252,093 were issued and outstanding at December
      31, 2006. The Company is also authorized to issue up to 35,000,000 shares of
      preferred stock, $.001 par value per share, of which none were issued and
      outstanding at December 31, 2006. Additionally, the Company had 3,333,333 common
      shares subscribed but not issued at December 31, 2006 and these have been
      recorded as Common Stock Subscribed.




31


**RG
          America, Inc. and Subsidiaries**
 **Notes
          to Consolidated Financial Statements**
 **December
          31, 2006**


**Issuances
      of Common Stock**




On
      March
      10, 2006, the Company issued 33,333 shares of RG’s common stock at approximately
      $0.30 per share related to an unrecorded 2004 stock transaction. The share
      price
      of $0.30 was utilized as the fair market value on the issuance date based upon
      the price of common stock sold in a previous private placement offering in
      2004.




In
      May
      2006, Laurus converted $525,000 of the Minimum Borrowing Note balance into
      1,281,707 shares of the Company’s common stock at the amended agreement rate of
      $0.41 per share.





In
      May
      2006, the Company issued 33,333 shares of common stock in exchange for
      outstanding compensation owed an officer at $0.45 a share and accrued
      compensation was reduced $15,000. The share price of $0.45 was utilized as
      the
      fair market value on the issuance date based upon the price of common stock
      sold
      in a recent private placement offering at the time the salary was
      earned.




In
      May
      and June 2006, the Company issued 68,083 shares of RG’s common stock to several
      individuals as a correction for unrecorded issuances. The average share price
      was approximately $0.30 and was determined by a combination of contracted stock
      price and fair market value, based at the time that the issuances should have
      been made, and was
      recorded as a debit to paid in capital and stock compensation .




In
      June
      2006, the Company issued 15,316 shares of common stock in exchange for
      outstanding compensation owed an employee at $0.45 a share and accrued
      compensation was reduced $6,892. The share price of $0.45 was utilized as the
      fair market value on the issuance date based upon the price of common stock
      sold
      in a recent private placement offering at the time the salary was
      earned.




In
      July
      2006, the Company issued 22,720 shares of common stock in exchange for
      consulting services to a former employee at $0.95 a share and recorded $21,584
      to stock compensation. The share price of $0.95 was utilized as the fair market
      value based upon the closing price of common stock on the issuance date of
      July
      27, 2006.




In
      July
      2006, the Company issued 18,333 shares of common stock in exchange for
      outstanding accounts payable owed a third party at $0.45 a share and accounts
      payable on the Company’s books was reduced $8,250. The share price of $0.45 was
      utilized as the negotiated value based on the value of the existing accounts
      payable to the third party.




In
      July
      2006, the Company issued 833 shares of common stock in exchange for employment
      services to an employee at $1.00 a share and recorded $833 to stock
      compensation. The share price of $1.00 was utilized as the fair market value
      based upon the closing price of common stock on the issuance date of July 31,
      2006.




32


**RG
          America, Inc. and Subsidiaries**
 **Notes
          to Consolidated Financial Statements**
 **December
          31, 2006**


**Common
      Stock Subscribed**




On
      March
      31, 2006, the Company subscribed 11,334 shares of RG’s common stock in order to
      correct an error in the amount of common stock issued related to a 2005 stock
      transaction. There was no effective share price for the issuance as it reflected
      a correction of a transfer agent error and was recorded as a reclassification
      between paid in capital and common stock subscribed.




On
      March
      31, 2006, the Company subscribed 11,538 shares of common stock in exchange
      for
      accrued vacation owed an employee through December 31, 2005 at $0.32 a share
      and
      accrued expenses on the Company’s books was reduced $3,692. The share price of
      $0.32 was utilized as the fair market value based upon the closing price of
      common stock on the issuance date of January 1, 2006.




On
      March
      31, 2006, the Company subscribed 22,028 shares of common stock at $0.45 per
      share in conversion of a note payable to a non-related party. The share price
      of
      $0.45 was utilized as the fair market value on the grant date based upon the
      price of common stock sold in a private placement offering at the approximate
      time of the note payable.




On
      March
      31, 2006, the Company subscribed 573,889 shares of common stock in exchange
      for
      director fees for the Company’s directors at $0.45 a share, and accrued expenses
      on the Company’s books were reduced $258,250. The share price of $0.45 was
      utilized as the fair market value on the grant date based upon the price of
      common stock sold in a private placement offering at the approximate time the
      services were performed.




In
      April
      2006, the Company determined that a September 2004 financing transaction, which
      resulted in the subscription of 83,333 shares of RG’s common stock valued at
      $50,000, was cancellable because
      certain conditions regarding this transaction were not met .
      The
      Company cancelled the stock subscription and recorded $50,000 to other income.





In
      May
      2006, the Company cancelled a stock subscription for 8,333 shares of RG’s common
      stock to an investor as a correction for an unrecorded issuance.




**Common
      Stock Warrants**




Effective
      February 15, 2006, the Company amended and restated a Security Agreement dated
      October 31, 2005 with Laurus Master Fund, Ltd. ("Laurus") for the sale by the
      Company to Laurus of a $1,400,000 secured convertible minimum borrowing note
      ("Minimum Borrowing Note") and a secured revolving note up to a maximum of
      $10,000,000 ("Revolving Note"). The amended and restated Original Warrant to
      purchase 2,962,963 shares of Common Stock was changed whereby the exercise
      price
      was decreased from $0.78 per share to $0.55 per share. The warrant continues
      to
      have an expiration term date of October 31, 2012 and all other provisions of
      the
      Original Warrant remain the same. As
      a
      result of its evaluation, the Company determined that the warrant modification
      valuation was $25,729 and recorded this amount to debt discount and common
      stock
      warrants. The debt discount will be amortized as interest expense over the
      three
      year duration of the Revolving Note.  The
      $0.55 per share was based upon the 122% of the price of common stock sold in
      a
      recent private placement offering at the time this Security Agreement was
      amended. Additionally, a new warrant to purchase up to 1,363,636 shares of
      Common Stock was granted to Laurus at an exercise price of $0.55 per share
      and
      has an expiration term date of February 15, 2013. As a result of its evaluation,
      the Company determined that the warrant valuation was $543,509 and recorded
      this
      amount to debt discount and common stock warrants. The debt discount will be
      amortized as interest expense over the three year duration of the Revolving
      Note.  The
      $0.55 per share was based upon the 122% of the price of common stock sold in
      a
      recent private placement offering at the time this Security Agreement was
      amended.




33


**RG
          America, Inc. and Subsidiaries**
 **Notes
          to Consolidated Financial Statements**
 **December
          31, 2006**


In
      May
      2006, the Company commenced a bridge loan transaction in the amount of
      $2,000,000 through the private placement of Promissory Notes (“Notes”) to
      several “accredited investors” as defined in Rule 501(a) of Regulation D
      promulgated under the Securities Act of 1933, as amended (the “Securities Act”)
      (“Holders”). This private placement was arranged by our financial advisor on the
      transaction, Spencer Clarke, LLC (“Spencer Clarke”). Effective June 30, 2006,
      the Company concluded the transaction and in total, issued $1,600,000 of Notes
      and received $1,424,000 of proceeds, net of $176,000 of expenses paid to Spencer
      Clarke. The terms of the Notes include the payment of interest at a rate of
      12%
      per annum with a maturity date equal to the earlier of: (i) August 30, 2006,
      or
      (ii) closing and partial funding of a subordinated debt facility up to
      $25,000,000 or at least $3,000,000 of our equity or equity-linked securities,
      or
      (iii) upon or after the occurrence of an Event of Default as defined in the
      Notes. The Notes are subordinated existing Senior Indebtedness of the Company
      to
      Laurus Master Fund, Ltd. In consideration of this Note, the Company issued
      50%
      warrant coverage on the Notes or 606,060 warrants exercisable at $1.32 per
      share
      with the warrants expiring on June 30, 2008, to Holders. The warrants are
      exercisable on a cash basis only and have “piggy-back” registration rights. None
      of the warrants have been exercised as of December 31, 2006 and no fees or
      commissions were paid in connection with the issuance of the warrants to Spencer
      Clarke. The issuance of the warrants was made in reliance of the Securities
      Act,
      which provide for exemptions from the registration requirements of the
      Securities Act for transactions not involving a public offering. The
      Company valued the warrants utilizing the Black Scholes method to determine
      valuation. As a result of its evaluation, the Company determined that the
      warrant valuation was $308,358 and recorded this amount to debt discount and
      common stock warrants. The debt discount was amortized over the life of the
      loan
      through August 30, 2006 and recorded as interest expense.  The
      $1.32 per share was based upon a premium equal to 125% of the fair market value
      price of common stock when the agreement was made as indicated on the over
      the
      counter stock exchange. All
      of
      the Holders are “accredited investors” as defined in the Securities Act and are
      now existing creditors of the Company. The underlying common stock from the
      exercise of the warrants shall not be offered, sold or transferred other than
      pursuant to an effective registration statement under the Securities Act or
      an
      exemption from such registration requirements. The Company issued a warrant
      to
      Spencer Clarke for their financial advisory assistance with this bridge note
      placement for 60,606 warrants exercisable at $1.39 per share with the warrants
      expiring on June 30, 2008. The warrants are exercisable on a cash basis only
      and
      have “piggy-back” registration rights. The issuance of the warrants was made in
      reliance of the Securities Act, which provide for exemptions from the
      registration requirements of the Securities Act for transactions not involving
      a
      public offering. The
      Company valued the warrant utilizing the Black Scholes method to determine
      valuation. As a result of its evaluation, the Company determined that the
      warrant valuation was $30,239 and recorded this amount to interest expense
      and
      common stock warrants.  The
      $1.39 per share was based upon a premium equal to 125% of the fair market value
      price of common stock plus 5% when the agreement was made as indicated on the
      over the counter stock exchange.




34


**RG
          America, Inc. and Subsidiaries**
 **Notes
          to Consolidated Financial Statements**
 **December
          31, 2006**


In
      May
      2006, Laurus converted $525,500 of the Minimum Borrowing Note balance into
      1,281,707 shares of the Company’s common stock, at the amended agreement rate of
      $0.41 per share. The Company issued a warrant to Spencer Clarke for their
      financial advisory assistance related to this Minimum Borrowing Note conversion
      to the Company’s common stock for 128,170 warrants exercisable at an average of
      $1.27 per share with the warrants expiring on May 2009. The warrants are
      exercisable on a cash basis only and have “piggy-back” registration rights. The
      issuance of the warrants was made in reliance of the Securities Act, which
      provide for exemptions from the registration requirements of the Securities
      Act
      for transactions not involving a public offering. The
      Company valued the warrants utilizing the Black Scholes method to determine
      valuation. As a result of its evaluation, the Company determined that the
      warrant valuation was $116,191 and recorded this amount to additional paid
      in
      capital and common stock warrants.  The
      average price of $1.27 per share was based upon the fair market value price
      of
      common stock when the agreement was made as indicated on the over the counter
      stock exchange.





In
      June
      2006, in return for investor relations consulting, the Company issued three
      five
      year stock warrants to third parties to purchase a total of 100,000 shares
      of
      the Company’s common stock at an exercise price of $0.45 per share. The Company
      valued the warrants utilizing the Black Scholes method to determine valuation.
      As a result of its evaluation, the Company determined that the warrant valuation
      was $82,604 and recorded this amount to stock compensation and common stock
      warrants. The share price of $0.45 was utilized as the fair market value on
      the
      grant date based upon the price of common stock sold in a recent private
      placement offering at the time consulting agreement was negotiated.




In
      September 2006, the Company issued a three year stock warrant for consulting
      services, to a former employee to purchase a total of 375,000 shares of the
      Company’s common stock at an exercise price of $0.30 per share. The Company
      valued the warrants utilizing the Black Scholes method to determine valuation.
      As a result of its evaluation, the Company determined that the warrant valuation
      was $174,345 and recorded this amount to stock compensation and common stock
      warrants. The share price of $0.60 was utilized as the fair market value on
      the
      grant date based upon the price of common stock sold in a recent private
      placement offering at the time consulting agreement was negotiated.




In
      September 2006, the Company corrected a three year warrant transaction from
      September 30, 2005 for equity related consulting services to a third party
      to
      purchase a total of 12,646 shares of the Company’s common stock at an exercise
      price of $0.47 per share. The Company valued the warrants utilizing the Black
      Scholes method. As a result of its evaluation, the Company determined that
      the
      warrant valuation was $4,039 and recorded this amount to additional paid in
      capital and common stock warrants. The share price of $0.45 was utilized as
      the
      fair market value on the grant date to agree to with the original stock warrant
      corrected.




In
      October 2006, the Company entered into a second modification and extension
      agreement with the holders of the $1,600,000 bridge note loan in return for
      the
      following modifications to the original warrants issued in June 2006: i) the
      exercise period will be four (4) years from November 1, 2006 through November
      1,
      2010, ii) the exercise price shall be changed to $0.32 per share, iii) a
      cashless option shall be added to the Warrants, iv) additional Warrants will
      be
      issued to the Note Holders to reflect a ration of 100% warrant coverage to
      the
      amount of the borrowed funds. In total, $1,600,000 of funds were loaned to
      the
      Company by the Note Holders and the total warrant coverage will now be 1,600,000
      warrants divided among the Warrant Holders based upon the amount of their
      respective investment, and v) piggy-back registration rights will be granted
      to
      the warrants. The Company valued the warrants utilizing the Black Scholes method
      to determine valuation. As a result of its evaluation, the Company determined
      that the warrant valuation was $105,214 and recorded this amount to prepaid
      interest and common stock warrants. As of December 31, 2006, $70,143 of this
      prepaid interest was expensed to interest expense. The $0.32 per share was
      based
      upon the fair market value price of common stock when the agreement was made
      as
      indicated on the over the counter stock exchange.




35


**RG
          America, Inc. and Subsidiaries**
 **Notes
          to Consolidated Financial Statements**
 **December
          31, 2006**


**Stock
      Options**




In
      August
      2004, the Company adopted the 2004 Omnibus Stock Option Plan (the “2004 Plan”).
      The purpose of the 2004 Plan is to advance the business and development of
      the
      Company and its shareholders by affording to the employees, directors and
      officers of the Company the opportunity to acquire a proprietary interest in
      the
      Company by the grant of Options to such persons under the 2004 Plan's terms.
      The
      2004 Plan reserved 5,000,000 shares for grant or issuance upon the exercise
      of
      options granted under the plan. Stock Options under the Plan may be granted
      by
      the Board of Directors or a Compensation Committee of the Board of Directors.
      The exercise prices for Options granted will be at the fair market value of
      the
      common stock at the time of the grant if a public market develops for the common
      stock or not less than the most recent price at which the Company had sold
      its
      common stock.




In
      September 2006, the Company made the decision to accelerate the vesting of
      its
      employee stock options to simplify the accounting requirements related to SFAS
      No. 123(R). As a result, the Company recorded $252,320 to stock compensation
      expense and the offset was recorded to additional paid in capital. In addition,
      as result of the accelerated vesting of employee stock options, the Company
      expensed the remaining balance of $714,093 of deferred stock
      compensation.





The
      following table summarizes activity related to options:




**Number
                of Shares**
            
            **Weighted
                Average Exercise Price**Balance
                at December 31, 2005
            
            
            4,468,336
            
            $
            0.37Granted
            
            
            83,333
            
            
            0.67Exercised
            
            
            -
            
            
            -Forfeited
            
            
            260,000
            
            
            0.30Balance
                at December 31, 2006
            
            
            4,291,669
            
            $
            0.38




36


**RG
          America, Inc. and Subsidiaries**
 **Notes
          to Consolidated Financial Statements**
 **December
          31, 2006**


The
      Company’s computations for employee grants in 2006 were made using a
      Black-Scholes model using the following weighted average assumptions: expected
      life of 4.90 years; risk free rate of 4.87%; no dividends during the expected
      life; and a volatility of 178.42%. The weighted average fair value of options
      granted in 2006 was $0.64.




All
      but
      241,666 options to purchase RG’s common stock at December 31, 2006 have been
      issued with exercise prices equal to or greater than fair market value on the
      date of issuance. The Company recorded stock compensation expense of $358,640
      related to options for the year ended December 31, 2006, including the one
      time
      $252,320 expense related to the accelerated vesting of options discussed above.
      Previously, the Company recorded expense for options that vest pro rata on
      a
      straight line basis.  In
      addition, as result of the accelerated vesting of employee stock options, the
      Company expensed the remaining balance of $714,093 of deferred stock
      compensation.





The
      terms
      of options to purchase our common stock are summarized below:




**Options
                Outstanding**
            
            **Options
                Exercisable**Range
                of Exercise Prices
            
            Number
              Outstanding
                at
              December
                31, 2006
            
            Weighted
                Average Remaining Contractual Life
            
            Weighted
                Average Exercise Price
            
            Number
                Exercisable at December 31, 2006
            
            Weighted
                Average Exercise Price$0.30
                - $0.91
            
            
            4,291,669
            
            
            7.28
                Years
            
            $
            0.38
            
            
            4,291,669
            
            $
            0.38




In
      April
      2006, 83,333 employee stock options were granted to an employee who is an
      officer at a strike price of $0.67 per share. The stock option’s per share price
      was based upon a five day trailing average of the fair market value as indicated
      on the stock market.




In
      December 2006, 260,000 employee stock options were forfeited due to employee
      terminations.




**10.**  **INCOME
      TAXES**





There
      was
      no income tax during 2006 and 2005 due to the Company’s net loss.




37


**RG
          America, Inc. and Subsidiaries**
 **Notes
          to Consolidated Financial Statements**
 **December
          31, 2006**


The
      Company’s tax expense differs from the “expected” tax expense (benefit) for the
      years ended December 31, (computed by applying the Federal Corporate tax rate
      of
      34% to the loss before taxes), as follows:





2006
            
            2005Computed
                “expected” tax expense (benefit)
            
            $
            (3,351,223
            )
            $
            703,307Change
                in valuation allowance
            
            
            3,351,223
            
            
            (703,307
            )$
            -
            
            $
            -





The
      tax
      effects of temporary differences that gave rise to significant portions of
      deferred tax assets and liabilities at December 31, 2006 are as
      follows:




**Deferred
                tax assets:**Net
                operating losses
            
            $
            2,497,291Allowance
                for doubtful accounts
            
            
            608,956Accrued
                compensation and director fees
            
            
            529,087Stock
                option compensation expense
            
            
            452,518Investment
                in marketable securities
            
            
            139,2134,227,065**Deferred
                tax liabilities:**Depreciation
                expense
            
            
            (285,640
            )Net
                deferred tax asset
            
            
            3,941,425Valuation
                allowance
            
            
            (3,941,425Net
                deferred taxes
            
            $
            -





In
      assessing the recoverability of deferred tax assets, management considers
      whether it is more likely than not that some portion or all of the deferred
      tax
      assets will be realized in the future. Based on such evaluation, management
      has
      recorded a full valuation allowance for the Company’s net deferred tax assets.
      Net operating loss carry-forwards aggregate approximately $6,749,000 and expire
      in the years through 2026.





**11.**  **LEASE
      COMMITMENTS**





Effective
      September 1, 2005, the Company signed a 26 month lease and relocated the
      corporate headquarters to 1507 Capital Avenue #101, Plano, TX 75074. The
      premises consist of approximately 6,636 square feet of office and warehouse
      space. Base rent of $4,000 per month started November 1, 2005, with a total
      of
      $104,000 paid over the life of the lease.




Additionally,
      the Company has a non-cancelable equipment lease that is treated as an operating
      lease for financial statement purposes.




The
      Company has various building leases associated with the storm business in
      Florida and Mississippi that are treated as operating leases for financial
      statement purposes.




In
      addition, the Company has several auto leases that are treated as operating
      leases for financial statement purposes. The Company is leasing three vehicles
      from Rea Brothers for general business purposes. In 2006, the Company paid
      Rea
      Brothers $25,640 in lease payments.




38


**RG
          America, Inc. and Subsidiaries**
 **Notes
          to Consolidated Financial Statements**
 **December
          31, 2006**


Rental
      expense charged to operations under operating leases for the years ended
      December 31, 2006 and 2005 was $508,400 excluding sublease income of $0 and
      $128,994 excluding sublease income of $11,674, respectively.




The
      future minimum lease payments for the non-cancelable operating lease are as
      follows:




**Year
                ended December 31:**
            
            **Amount**2007
            
            $
            188,0222008
            
            
            104,0802009
            
            
            9,0182010
            
            
            4,959Thereafter
            
            
            -Total
            
            $
            306,079




**12.**  **COMMITMENTS
      AND CONTINGENCIES**





From
      time
      to time, the Company may become subject to proceedings, lawsuits and other
      claims in the ordinary course of business including proceedings related to
      environmental and other matters. Such matters are subject to many uncertainties
      and outcomes are not predictable with assurance.




The
      Company is subject to various unasserted claims from vendors for non-payment
      of
      accounts payable plus related legal fees. Excluding legal fees, which cannot
      be
      estimated, the Company has included all amounts in accounts payable as of
      December 31, 2006.




The
      Company has accrued $97,307 of withholding taxes payable as of December 31,
      2007. Of this amount, $89,842 represents unpaid past due Federal payroll taxes
      and related
      penalties and interest. Of this liability, $25,113 is for RGA and the Company
      has structured an installment agreement with the Internal Revenue Service to
      pay
      the entire amount. In addition, with the acquisition of PBS, the Company assumed
      PBS’s $64,729 of unpaid Federal payroll taxes and employee withholdings and
      related penalties and interest





The
      Company recorded $150,000 of Other Expense in 2005 related to the anticipated
      settlement of a lawsuit with a shareholder from Invvision Capital,
      Inc.





Dale
      Ferraro, a former consultant with TRG, has threatened litigation against the
      Company based upon a memorandum of understanding. Mr. Ferraro claims that he
      is
      owed $90,000 in commissions for work performed by TRG in Florida and
      Mississippi. The Company disputes that these monies are owed to Mr. Ferraro.
      The
      Company has not yet been served with a lawsuit, but in the event such a suit
      is
      filed, the Company anticipates that it will raise a number of affirmative
      defenses and file counterclaims against Mr. Ferraro. We are unable at this
      time
      to make an assessment of the outcome of this dispute.


39




**RG
        America, Inc. and Subsidiaries**
 **Notes
        to Consolidated Financial Statements**
 **December
        31, 2006**


The
      Company is obligated under various employment agreements with members of
      executive management that provide for annual compensation and transportation
      allowances along with other general employee benefits. Additionally, certain
      agreements require payments if the agreements are terminated early.




In
      August
      2005, the Company received correspondence from the SEC. The correspondence
      related to SEC Staff comments, in the ordinary course of business, regarding
      the
      Company’s Form 10-KSB for the year ended December 31, 2004 and the Company’s
      Form 10-QSB for the three months ended March 31, 2005. The Company replied
      to
      the SEC comments before the end of August 2005. On October 13, 2005, the Company
      received correspondence from the SEC regarding our response made in August
      2005.
      The Company replied to the SEC comments before the end of November 2005. In
      January 2006, the Company received correspondence from the SEC regarding our
      response made in November 2005. The Company replied to the SEC comments before
      the end of February 2006. In July 2006, the Company received correspondence
      from
      the SEC regarding our response made in February 2006. The Company replied to
      the
      SEC comments before the end of September 2006. We
      cannot
      predict with certainty what, if any, regulatory or financial consequences may
      result from the foregoing. (See Subsequent Events Note 15)





The
      Company is obligated under a five year consulting service agreement with the
      Company’s Chairman of the Board that provides for monthly payment of $10,000 per
      month. (See Related Party Transaction Note 14)





Effective
      July 1, 2006, the Company entered into a consulting agreement with J2 Capital
      Inc., whose principal is the Company’s former Chief Executive Officer, and who
      is also the son of the Company’s Chairman of the Board, and the brother of our
      Chief Operating Officer. The terms of the agreement include $11,000 per month
      for consulting services and a commission based upon a percentage of revenue.
      (See Related Party Transaction Note 14)




**13.**  **CONCENTRATIONS
      OF RISK**





The
      Company sells its services to customers in the United States. The Company
      performs ongoing credit evaluations of its customers’ financial condition and
      generally requires no collateral.





Our
      financial instruments that are potentially exposed to credit risk consist
      primarily of cash and cash equivalents, contracts receivable, and accounts
      payable, for which the carrying amounts approximate fair value. At certain
      times
      during the year, our demand deposits held in banks exceeded the federally
      insured limit of $100,000. At December 31, 2006, the uninsured deposits totaled
      $454,347.




Suppliers
        representing over 10% of purchases were as follows:


**2006**
            
            **2005**Klydesdale
                Construction
            
            
            11
            %
            
            0
            %Texano
                Construction
            
            
            11
            %
            
            18
            %




40
 
 **RG
            America, Inc. and Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **December
            31, 2006**


Customers
                representing over 10% of revenues were as follows:**2006**
            
            
            **2005**The
                Manors at Inverrary
            
            
            30
            %
            
            0
            %Land’s
                End Condos
            
            
            12
            %
            
            12
            %Anatole
                Bay Condo Association
            
            
            18
            %
            
            0
            %Pier
                8 Condominium Association
            
            
            12
            %
            
            0
            %Pinnacle
                Entertainment
            
            
            1
            %
            
            27
            %




The
      majority of our revenue for 2006 was derived from services provided in the
      states of Florida, Louisiana, and Mississippi.




**14.**  **RELATED
      PARTY TRANSACTIONS**




In
      January, 2006, the Company received $17,000 of property from a related party
      in
      return for a non-interest bearing note with monthly principal payments of $500.
      The outstanding principal balance of this note was $5,500 as of December 31,
      2006.




The
      Chairman of the Board earns $10,000 per month for consulting services. In
      addition, the Chairman of the Board earns a commission based upon a percentage
      of revenue. For January through March 2006, $39,712 in consulting services
      and
      $28,981 in commissions were paid to the Chairman resulting in a consulting
      services balance due of $9,231 and a commission balance due of $70,788 at March
      31, 2006. For April through June 2006, $32,308 in consulting services and
      $23,077 in commission were paid to the Chairman resulting in a consulting
      services balance due of $9,231 and a commission balance due of $47,999 at June
      30, 2006. For July through September 2006, $18,417 in consulting services and
      $15,385 in commission were paid to the Chairman resulting in a consulting
      services balance due of $18,462 and a commission balance due of $61,695 at
      September 30, 2006. For October through December 2006, $32,307 in consulting
      services and $26,923 in commission were paid to the Chairman resulting in a
      consulting services balance due of $20,769 and a commission balance due of
      $34,772 at December 31, 2006.




Effective
      July 1, 2006, the Company entered into a consulting agreement with J2 Capital
      Inc., whose principal is the Company’s former Chief Executive Officer, and who
      is also the son of the Company’s Chairman of the Board, and the brother of our
      Chief Operating Officer. The terms of the agreement include $11,000 per month
      for consulting services and a commission based upon a percentage of revenue.
      For
      July through September 2006, $20,308 in consulting services and $53,846 in
      commission were paid to J2 Capital Inc., resulting in a consulting services
      balance due of $12,292 and a commission balance due of $171,713 at September
      30,
      2006. For October through December 2006, $35,539 in consulting services and
      $94,230 in commissions were paid to J2 Capital Inc., resulting in a consulting
      services balance due of $10,154 and a commission balance due of $77,482 at
      December 31, 2006.




In
      January through March 2006, one of the Company's construction crews made $50,755
      of personal repairs in the home of the Company's Chief Operating Officer in
      exchange for a reduction of monies previously owed this officer. In April
      through June 2006, one of the Company's construction crews made $8,211 of
      personal repairs in the home of the Company's Chief Operating Officer in
      exchange for a reduction of monies previously owed this officer.




41


**RG
          America, Inc. and Subsidiaries**
 **Notes
          to Consolidated Financial Statements**
 **December
          31, 2006**


The
      Company is leasing three vehicles from Rea Brothers, Ltd. (“Rea Brothers”), a
      Company controlled by our Chairman of the Board, for general business purposes.
      In January through March 2006, the Company paid Rea Brothers $4,266 in lease
      payments. In April through June 2006, the Company paid Rea Brothers $8,532
      in
      lease payments. In July through September 2006, the Company paid Rea Brothers
      $4,266 in lease payments. In October through December 2006, the Company paid
      Rea
      Brothers $4,266 in lease payments.




In
      April,
      2006, the Company received $12,000 of property from a related party and in
      return for a 10% interest bearing note with monthly payments of $550. The
      outstanding principal balance of this note was $7,812 as of December 31,
      2006.




In
      June
      2006, the Company’s Chief Operating Officer, who is also a Director, forgave
      $64,606 of commissions due and payable in relation to second quarter 2006 storm
      related business. In June 2006, the Company’s former Chief Executive Officer and
      a former Director, forgave $64,606 of commissions due and payable in relation
      to
      second quarter 2006 storm related business. In June 2006, the Company’s Chairman
      of the Board, who is also the father of the Company’s former Chief Executive
      Officer and the Company’s Chief Operating Officer, forgave $23,493 of
      commissions due and payable in relation to second quarter 2006 storm related
      business. In June 2006, the Company’s Chief Financial Officer, forgave $35,239
      of commissions due and payable in relation to second quarter 2006 storm related
      business. As a result of the above items, the Company’s directors and officers
      forgave a total of $187,944 of commissions in relation to second quarter 2006
      storm related business. This was originally recorded to commission expense
      and
      accrued liabilities, and as result of the forgiveness, was recorded as a
      reduction to commission expense and accrued liabilities.




**15.**  **SUBSEQUENT
      EVENTS**




On
      March
      8, 2007, the Company received a written Notice of Default in relation to
      $1,600,000 of Promissory Notes (Notes”) that became due and payable on January
      31, 2007. The Notes are issued to several “accredited investors” as defined in
      Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as
      amended (the “Securities Act”) (“Holders”). The Notes are subordinated to
      existing Senior Indebtedness of the Company to Laurus Master Fund, Ltd.
      (“Laurus”).




The
      Company has been negotiating with the Holders in relation to a retraction of
      the
      Notice of Default and or receiving a forbearance agreement until certain events
      occurred. However, the Company has been unable to reach an agreement with the
      Holders to resolve the Notice of Default and do not have the financial capacity
      to repay the Notes at this time. Although the Company is currently in discussion
      with a third party with respect to the repayment of the Notes by such third
      party, there is no assurance that we will be able to reach an agreement on
      terms
      reasonably acceptable to the Company.




On
      March
      30, 2007, the Company and certain of our wholly-owned subsidiaries entered
      into
      a Consulting Agreement (“Agreement”) with Fireline Restoration, Inc., a wholly
      owned subsidiary of Home Solutions of America, Inc. (“Consultant”). The Company
      is a borrower under a certain loan transaction (“Loan”) with Laurus Master Fund,
      Ltd. (“Lender”) and is not currently in compliance with the obligations with
      respect to the Loan, and Consultant is in the business of providing restoration
      and other construction services.




42


**RG
          America, Inc. and Subsidiaries**
 **Notes
          to Consolidated Financial Statements**
 **December
          31, 2006**


The
      Agreement specifies that Consultant will provide consulting services to the
      Company and to outsource any and all construction and related duties and
      services under RG’s currently existing and future construction contracts and
      projects (collectively, the “Construction Contracts”).  Additionally, the
      Company is in the process of assigning to the Consultant one or more of the
      Construction Contracts, and will assign to the Consultant additional
      Construction Contracts upon obtaining the proper consent from the customers
      to
      the respective contracts. As a result of the Agreement, the estimated remaining
      revenue from the Construction Contracts will be captured by the
      Consultant.




The
      consulting services to be provided by the Consultant will consist of the
      complete and total outsourcing of any and all functions, rights, preferences,
      rights to payment and obligations under the Construction Contracts.  In
      connection with the Consulting Services, the Consultant shall have the power
      and
      authority, for itself and in the stead and on behalf of us, to do any or all
      of
      the following:




·
            Control
                completely the projects contemplated by the Construction
                Contracts;




·
            Deal
                directly with the customers, suppliers, and subcontractors under
                the
                Construction Contracts;




·
            Negotiate
                directly with the customers, suppliers, and subcontractors regarding
                payment and pricing under the Construction
                Contracts;




·
            Process
                payment applications and payroll applications on behalf of the Company
                with respect to the Construction Contracts, and make determinations
                as to
                the proper payment thereof;




·
            Deal
                directly with Lender for additional advances and funding, under the
                Loan
                and otherwise, that may be necessary in connection with the performance
                of
                the Construction Contracts, including without limitation, arranging
                for
                Lender to make such additional advances on RG’s behalf, which advances may
                be funded directly to the Consultant;
                and




·
            To
                do all other things the Consultant reasonably deems necessary to
                carry out
                and perform the Construction Contracts and the terms of this
                Agreement.




As
      a
      result of the above Agreement, the Company will shift its core business focus
      to
      function primarily as a financial and insurance services company with a specific
      focus on our proprietary, patent pending, PropertySMART® program, a property and
      casualty insurance solution for the multi-family housing and commercial property
      industries.  RG’s insurance divisions include a multi-lines general agency,
      licensed to write property, casualty, small business, employee benefits and
      other related coverage’s with a specific focus on its PropertySMART®
program.  This innovative insurance product saves the policy holder money,
      reduces loss exposure for the carrier, and provides a higher level of service
      to
      all parties.




Additionally,
      the Company has determined that the Agreement will meet the disposition of
      assets criteria established by FAS 144 - “ *Accounting
      for the Impairment or Disposal of Long Lived Assets* ”
and
      will record the Company’s construction operations as discontinued in its
      unaudited consolidated financial statements for the three months ended March
      31,
      2007 to be included in its March 31, 2007 Form 10-QSB.




43


**RG
          America, Inc. and Subsidiaries**
 **Notes
          to Consolidated Financial Statements**
 **December
          31, 2006**


On
      March
      29, 2007, the Company received correspondence from the SEC regarding our
      response made in September 2006. The Company responded to the SEC comments
      on
      the filing date of the December 31, 2006 Form 10-KSB with the SEC. The Company cannot
      predict with certainty what, if any, regulatory or financial consequences may
      result from the foregoing.





On
      May 9,
      2007, J. Kenneth Dunn resigned as a director of the Company for personal
      reasons. There were no disagreements with the Company on any matter related
      to
      the Company’s operations, policies or practices.





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