**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-QSB**


(Mark
      One)


þ
            
            **QUARTERLY
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934**


**For
      the quarterly period ended September 30, 2006**


o
            
            **TRANSITION
                REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
                ACT**


**For
      the Transition Period from** **** **to** **** ****





**Commission
      file number 08-80429**





**RG
      AMERICA, INC.**


(Exact
      name of small business issuer as specified in its charter)


Nevada
              (State
                or other jurisdiction of
              incorporation
                or organization)
            
            75-2823489
              (I.R.S.
                Employer
              Identification
                No.)





1507
      Capital Avenue, Suite 101


Plano,
      TX
      75074


(Address
      of principal executive offices)





972-919-4774


(Issuer’s
      telephone number)





N/A


(Former
      name, former address and former fiscal year, if changed since last
      report)





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 þ No 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 þ





State
      the
      number of shares outstanding of each of the issuer’s classes of common equity,
      as of the latest practicable date: Common Stock, $.001 par value, 29,235,426
      shares outstanding as of November 2, 2006. Additionally, there are 3,350,000
      shares issuable but not outstanding as of November 2, 2006.





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











**RG
      AMERICA, INC.**


**FORM
      10-QSB**





**TABLE
      OF CONTENTS**


PagePART
                  I - FINANCIAL INFORMATION
              
              
              1Item
                  1. Consolidated Financial Statements (Unaudited)
              
              
              2Item
                  2. Management's Discussion and Analysis or Plan of
                  Operation.
              
              
              18Item
                  3. Controls and Procedures.
              
              
              31PART
                  II - OTHER INFORMATION
              
              
              31Item
                  1. Legal Proceedings
              
              
              31Item
                  2. Unregistered Sales of Equity Securities and use of
                  Proceeds
              
              
              32Item
                  3. Defaults Upon Senior Securities
              
              
              33Item
                  4. Submission of Matters to a Vote of Security Holders
              
              
              33Item
                  5. Other Information
              
              
              33Item
                  6. Exhibits
              
              
              33SIGNATURES
              
              
              34







**PART
      I - FINANCIAL INFORMATION**





Item
      1.
      Consolidated Financial Statements (Unaudited)





Filed
      herewith are the following unaudited financial statements:





Consolidated
      Balance Sheet at September 30, 2006





Consolidated
      Statements of Operations for the three and nine months ended September 30,
      2006
      and 2005





Consolidated
      Statements of Cash Flows for the nine months ended September 30, 2006 and
      2005





Notes
      to
      Consolidated Financial Statements





1


**RG
                AMERICA, INC. AND SUBSIDIARIES****CONSOLIDATED
                BALANCE SHEET****(Unaudited)****ASSETS****September
                30,****2006****Current
                assets:**Cash
                and cash equivalents
            
            $
            601,838Restricted
                cash
            
            
            2,775,716Investment
                in certificate of deposit
            
            
            40,000Contracts
                receivable, net of allowance for doubtful
              accounts
                of $757,651
            
            
            12,022,045Unbilled
                revenue
            
            
            6,309,707Prepaid
                expenses - net of accumulated amortization of $483,984
            
            
            780,884Other
                receivables
            
            
            105,343Notes
                receivable
            
            
            268,021Investment
                in available-for-sale securities
            
            
            182,000**Total
                current assets**
            
            
            23,085,554**Property
                and equipment, net of****accumulated
                depreciation of $380,490**
            
            
            982,768**Other
                non-current assets**
            
            
            92,855**Total
                assets**
            
            $
            24,161,177





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





2


**RG
                AMERICA, INC. AND SUBSIDIARIES****CONSOLIDATED
                BALANCE SHEET*****(continued)*****(Unaudited)****LIABILITIES
                AND STOCKHOLDERS' EQUITY****LIABILITIES****September
                30,****2006****Current
                liabilities:**Accounts
                payable, trade
            
            
            5,792,490Accrued
                expenses
            
            
            2,406,475Withholding
                taxes payable
            
            
            100,416Deferred
                revenue
            
            
            224,358Bank
                line-of-credit
            
            
            40,000Notes
                payable - related parties
            
            
            42,402Notes
                payable, net of debt discount of $1,197,548
            
            
            10,520,402**Total
                current liabilities**
            
            
            19,126,543**Long-term
                debt - related party**
            
            
            3,589**Total
                liabilities**
            
            
            19,130,132**Commitments
                and contingencies**
            
            
            -**STOCKHOLDERS'
                EQUITY****Stockholders'
                equity**Preferred
                stock, $.001 par value, 35,000,000 sharesauthorized,
                none issued and outstanding
            
            
            -Common
                stock, $.001 par value, 300,000,000 sharesauthorized,
                29,235,426 issued and outstanding
            
            
            29,235Common
                stock subscribed, 3,350,000 shares
            
            
            (68,948
            )Additional
                paid in capital
            
            
            9,083,478Common
                stock warrants
            
            
            2,895,343Accumulated
                other comprehensive loss
            
            
            (404,250
            )Accumulated
                deficit
            
            
            (6,503,813
            )**Total
                stockholders' equity**
            
            
            5,031,045**Total
                liabilities and stockholders' equity**
            
            $
            24,161,177





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




3




**RG
                AMERICA, INC. AND SUBSIDIARIES****CONSOLIDATED
                STATEMENTS OF OPERATIONS****(Unaudited)****Three
                Months Ended**
            
            
            
            **Nine
                Months Ended****September
                30,**
            
            
            
            **September
                30,****2006**
            
            **2005**
            
            
            
            **2006**
            
            **2005****Revenues**
            
            $
            4,299,760
            
            $
            5,295,053
            
            
            
            
            $
            21,796,779
            
            $
            10,314,571**Cost
                of revenues**
            
            
            2,366,353
            
            
            3,435,377
            
            
            
            
            
            13,192,499
            
            
            6,281,345**Gross
                profit**
            
            
            1,933,407
            
            
            1,859,676
            
            
            
            
            
            8,604,280
            
            
            4,033,226**Operating
                expenses:**Selling,
                general and administrative
            
            
            378,546
            
            
            398,854
            
            
            
            
            
            1,698,029
            
            
            986,516Compensation,
                payroll taxes and benefits
            
            
            1,486,999
            
            
            801,718
            
            
            
            
            
            3,331,806
            
            
            1,556,507Stock
                compensation
            
            
            1,213,063
            
            
            5,243
            
            
            
            
            
            1,521,887
            
            
            320,081Consulting
                and contract labor
            
            
            240,594
            
            
            184,098
            
            
            
            
            
            691,838
            
            
            305,877Professional
            
            
            130,654
            
            
            64,931
            
            
            
            
            
            371,901
            
            
            196,236Recovery
                of impairment
            
            
            -
            
            
            -
            
            
            
            
            
            -
            
            
            (116,669
            )Impairment
                of leasehold improvements
            
            
            -
            
            
            123,230
            
            
            
            
            
            -
            
            
            123,230Rent
            
            
            120,355
            
            
            79,779
            
            
            
            
            
            430,853
            
            
            232,112Depreciation
            
            
            75,138
            
            
            31,188
            
            
            
            
            
            225,875
            
            
            71,631**Total
                operating expenses**
            
            
            3,645,349
            
            
            1,689,035
            
            
            
            
            
            8,272,189
            
            
            3,675,521**Income
                (loss) from operations**
            
            
            (1,711,942
            )
            
            170,641
            
            
            
            
            
            332,091
            
            
            357,705**Other
                expense:**Other
                income (expense), net
            
            
            19,285
            
            
            -
            
            
            
            
            
            90,225
            
            
            2,096Interest
                and financing cost, net
            
            
            (1,107,865
            )
            
            (54,617
            )
            
            
            
            
            (2,042,129
            )
            
            (186,006
            )**Total
                other expense**
            
            
            (1,088,580
            )
            
            (54,617
            )
            
            
            
            
            (1,951,904
            )
            
            (183,910
            )**Net
                income (loss)**
            
            $
            (2,800,522
            )
            $
            116,024
            
            
            
            
            $
            (1,619,813
            )
            $
            173,795**Other
                comprehensive income (loss)**Unrealized
                loss on investment in available- for-sale securities
            
            
            (404,250
            )
            
            -
            
            
            
            
            
            (404,250
            )
            
            -**Total
                comprehensive income (loss)**
            
            $
            (3,204,772
            )
            $
            116,024
            
            
            
            
            $
            (2,024,063
            )
            $
            173,795**Net
                income (loss) per share - basic**
            
            $
            (0.09
            )
            $
            -
            
            
            
            
            $
            (0.05
            )
            $
            0.01**Net
                income (loss) per share - diluted**
            
            $
            (0.09
            )
            $
            -
            
            
            
            
            $
            (0.05
            )
            $
            0.01**Basic
              weighted average outstanding shares**
            
            
            32,573,751
            
            
            25,026,928
            
            
            
            
            
            31,690,089
            
            
            24,693,771**Diluted
              weighted average outstanding shares**
            
            
            32,573,751
            
            
            27,039,130
            
            
            
            
            
            31,690,089
            
            
            26,614,341






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





4


**RG
                AMERICA, INC. AND SUBSIDIARIES****CONSOLIDATED
                STATEMENTS OF CASH FLOWS****(Unaudited)****Nine
                Months Ended****September
                30,****2006**
            
            **2005****Operating
                Activities:**Net
                income (loss)
            
            $
            (1,619,813
            )
            $
            173,795Adjustments
                to reconcile net income (loss) to net cash used inoperating
                activities:Depreciation
            
            
            225,875
            
            
            71,631Write
                off of investment in limited partnershipLeasehold
                improvement impairment
            
            
            -
            
            
            123,230Provision
                for doubtful accounts
            
            
            358,399
            
            
            112,026Amortization
                of deferred compensation
            
            
            864,381
            
            
            3,663Non-cash
                interest expense
            
            
            1,208,249
            
            
            -Stock
                options issued for consulting services
            
            
            -
            
            
            309,351Stock
                warrants issued for consulting services
            
            
            256,949
            
            
            -Stock
                options issued for employee services
            
            
            358,640
            
            
            -Stock
                issued for professional services
            
            
            40,667
            
            
            4,230Stock
                issued for employee compensation
            
            
            1,250
            
            
            -Stock
                cancelled related to acquisition
            
            
            (50,000
            )
            
            (116,669
            )Stock
                warrant issued for debt services
            
            
            30,239
            
            
            34,399Changes
                in operating assets and liabilities:Restricted
                cash
            
            
            (2,775,716
            )
            
            -Contracts
                receivable
            
            
            (2,950,954
            )
            
            (2,212,016
            )Unbilled
                revenue and deferred revenue, net
            
            
            (3,253,478
            )
            
            (868,966
            )Prepaid
                expenses
            
            
            88,054
            
            
            (54,398
            )Other
                receivables
            
            
            (32,248
            )
            
            (72,272
            )Increase
                in note receivablesOther
                non current assets
            
            
            (34,005
            )
            
            -Accounts
                payable - trade
            
            
            677,411
            
            
            1,369,053Accrued
                expenses
            
            
            474,592
            
            
            702,535Withholding
                taxes payable
            
            
            8,696
            
            
            (155,766
            )**Net
                cash used in operating activities**
            
            
            (6,122,812
            )
            
            (576,174
            )**Investing
                Activities:**Investment
                in certificate of deposit
            
            
            -
            
            
            (279,728
            )Proceeds
                from note receivable
            
            
            100,000
            
            
            -Purchases
                of property and equipment
            
            
            (137,128
            )
            
            (525,985
            )**Net
                cash used in investing activities**
            
            
            (37,128
            )
            
            (805,713
            )**Financing
                Activities:**Repayments
                of notes payable - related party
            
            
            (14,212
            )
            
            (15,170
            )Repayments
                of notes payable
            
            
            (7,052,221
            )
            
            (5,000
            )Repayments
                of bank line-of-credit
            
            
            (100,000
            )
            
            (195,015
            )Proceeds
                from issuance of notes payable
            
            
            13,144,865
            
            
            17,000Proceeds
                from issuance of convertible debenture notes
            
            
            -
            
            
            400,000Proceeds
                from sale of common stock
            
            
            -
            
            
            1,014,650Proceeds
                from bank line-of-credit
            
            
            100,000
            
            
            309,582**Net
                cash provided by financing activities**
            
            
            6,078,432
            
            
            1,526,047**Net
                increase (decrease) in cash and cash equivalents**
            
            
            (81,508
            )
            
            144,160**Cash
                and cash equivalents at beginning of period**
            
            
            683,346
            
            
            111,345**Cash
                and cash equivalents at end of period**
            
            $
            601,838
            
            $
            255,505Cash
                paid during the period for interest
            
            $
            1,204,137
            
            $
            83,016**Supplemental
                Disclosure of Non-cash Transactions:**Stock
                issued for conversion of accounts payable
            
            $
            8,250
            
            $
            24,467Stock
                issued for conversion of accrued expense
            
            
            283,833
            
            
            152,300Note
                payable related party issued for conversion of accrued
                expense
            
            
            -
            
            
            11,666Note
                payable issued for purchase of property and equipment
            
            
            29,000
            
            
            5,000Note
                payable offset with note receivable
            
            
            203,600
            
            
            -Stock
                issued for conversion of notes payable
            
            
            535,413
            
            
            2,500Deferred
                compensation reversal for terminated employees
            
            
            9,450
            
            
            -Stock
                issued in exchange for convertible debentures
            
            
            -
            
            
            400,000Stock
                issued for other non current asset
            
            
            -
            
            
            30,000Unrealized
                loss on investments available for sale securities
            
            
            404,250
            
            
            -Warrant
                issued for credit facility
            
            
            877,596
            
            
            -Warrant
                issued for equity advisory services
            
            
            120,230
            
            
            290,700Unrecorded
                stock adjustment
            
            
            7,000
            
            
            -MBI
                stock issued for note receivable
            
            
            875,000
            
            
            -







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




5


**1.**  **BASIS
      OF PRESENTATION**





The
      accompanying unaudited financial statements have been prepared in accordance
      with accounting principles generally accepted in the United States of America
      for interim financial information and with the instructions to Form 10-QSB
      of
      Regulation S-B. They do not include all information and footnotes required
      by
      accounting principles generally accepted in the United States of America for
      complete financial statements. However, except as disclosed herein, there has
      been no material change in the information disclosed in the notes to the
      consolidated financial statements for the year ended December 31, 2005 included
      in the Company's Annual Report on Form 10-KSB filed with the Securities and
      Exchange Commission. The interim consolidated unaudited financial statements
      should be read in conjunction with those consolidated financial statements
      included in the Form 10-KSB. In the opinion of Management, all adjustments
      considered necessary for a fair presentation, consisting solely of normal
      recurring adjustments, have been made. Operating results for the three months
      and nine months ended September 30, 2006 are not necessarily indicative of
      the
      results that may be expected for the year ending December 31, 2006.





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





The
      accompanying consolidated financial statements have been prepared assuming
      that
      the Company will continue as a going concern. The Company has previously
      incurred net losses, which have resulted in a significant accumulated deficit
      at
      September 30, 2006. The Company had net loss of $1,619,813
      for the nine months ended September 30, 2006, compared to net income of $173,795
      for the nine months ended September 30, 2005. In addition, at September 30,
      2006, the Company has an accumulated deficit of $6,503,813.





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 consolidated financial
      statements do not include any adjustments that might be necessary if the Company
      is unable to continue as a going concern.





The
      Company can give no assurance that it will become profitable 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
      September 30, 2006, the Company has $2,775,716 of restricted cash which was
      collected from customers that are directly related to the Company’s existing
      credit facility with Laurus. As of September 30, 2006, the Company has drawn
      100% 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 in September 2006,
      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.





6




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.





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.** **NATURE
          OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
          POLICIES**





**Net
      Income (Loss) Per Share**





Basic
      net
      income (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 net income (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.





**Three
                Months Ended**
              **September
                30,**
            
            **Nine
                Months Ended**
              **September
                30,********2006**
            
            ******2005**
            
            ******2006**
            
            ******2005**Net
                income (loss), as reported (numerator)
            
            $
            (2,800,522
            )
            $
            116,024
            
            $
            (1,619,813
            )
            $
            173,795Net
                income, for diluted earnings per share - income available to shareholders
                after assumed conversion as reported (numerator)
            
            $
            (2,800,522
            )
            $
            128,123
            
            $
            (1,619,813
            )
            $
            204,872Weighted
                average number of common shares outstanding (denominator) -
                basic
            
            
            32,573,751
            
            
            25,026,928
            
            
            31,690,089
            
            
            24,693,771Effect
                of dilutive securities:Employee
                stock options
            
            
            -
            
            
            1,347,571
            
            
            -
            
            
            1,308,850Warrants
            
            
            -
            
            
            5,211
            
            
            -
            
            
            38,580Convertible
                debt
            
            
            -
            
            
            629,420
            
            
            -
            
            
            573,140Weighted
                average number of common shares outstanding (denominator) -
                dilutive
            
            
            32,573,751
            
            
            27,039,130
            
            
            31,690,089
            
            
            26,614,341Net
                income per share - basic
            
            $
            (0.09
            )
            $
            0.00
            
            $
            (0.05
            )
            $
            0.01Net
                income per share - diluted
            
            $
            (0.09
            )
            $
            0.00
            
            $
            (0.05
            )
            $
            0.01





7




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: 24,771,004 for the three months ended September 30,
      2006 and 24,771,004 for the nine months ended September 30, 2006.





**Reclassifications**





Certain
      amounts in the three months and nine months ended September 30, 2005 financial
      statements have been reclassified to conform to the 2006
      presentation.





**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 three months and nine months ended
      September 30, 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 three
      months and nine months ended September 30, 2006 was $252,320 and $358,640 as
      a
      result of implementing SFAS No. 123(R), respectively 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.








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 123,
      as
      amended, net income (loss) would have been:


For
                  the three months
              
              
              For
                  the nine monthsended
                  Sep. 30, 2005
              
              
              ended
                  Sep. 30, 2005Net
                  income from continuingoperations,
                  as reported
              
              $
              116,024
              
              $
              173,795Add
                  stock-based compensation expensesIncluded
                  in net income
              
              
              1,013
              
              
              4,263Less
                  total stock-based employee compensationexpense
                  determined under the fair valuebased
                  method for all awards
              
              
              (30,807
              )
              
              (93,580
              )Pro
                  forma net income (loss)
              
              $
              86,230
              
              $
              84,478Earnings
                  (loss) per share:Basic
                and diluted - as reported
              
              $
              0.00
              
              $
              0.01Basic
                and diluted - pro forma
              
              $
              0.00
              
              $
              0.00




8




**4.** **CONTRACTS**




**A)
      CONSTRUCTION CONTRACTS**




Construction
      contracts receivable were comprised of the following at September 30,
      2006:




Contract
                receivables billed:Completed
                contracts
            
            $
            8,247,123Contracts
                in progress
            
            
            4,496,206Retainage
            
            
            35,879Less:
                Allowance for doubtful accounts
            
            
            (
                757,651
            )$
            12,021,557





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 September 30, 2006 were comprised of the following:




Costs
                incurred on uncompleted contracts
            
            $
            17,695,255Estimated
                earnings
            
            
            9,992,00527,687,260Less:
                Billings to date
            
            
            (21,555,091
            )$
            6,132,169




Balance
                  sheet presentation:
            
            $
            6,309,707Unbilled
                  revenue
            
            
            (177,538
            )Deferred
                revenue
            
            
            6,132,169








Insurance
              receivable
            
            
            488Balance
                sheet presentation:
            
            
            -Unbilled
                revenue
            
            $
            (16,487
            )Deferred
                revenue
            
            
            (16,487
            )


C)OTHER
      CONTRACTS




Balance
                  sheet presentation:
            
            $
            -Unbilled
                  revenue
            
            
            (30,333
            )Deferred
                revenue
            
            
            (30,333
            )




9





**5.
      DEBT**




**SHORT-TERM
      DEBT**





Significant
      current period changes in short-term debt at September 30, 2006 consisted of
      the
      following:





***Bank
      Line-of-Credit***




In
      July
      2006, the Company paid off a $100,000 bank line-of-credit.





***Notes
      payable - Related Parties***




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 $15,500 as of September
      30,
      2006.


In
      April,
      2006, the Company received $12,000 of property from a related party in return
      for a 10% interest bearing note with monthly payments of $550. The outstanding
      principal balance of this note was $9,243 as of September 30, 2006.





***Notes
      payable***




On
      August
      8, 2004, through a previous acquisition, we 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.




Effective
      February 15, 2006 ("Effective Date"), 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"), a secured
      revolving note up to a maximum of $10,000,000 ("Revolving Note"), 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 ("Common Stock") and a registration
      rights agreement ("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.





10




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 Registrant 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.





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 September 30, 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 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.





11




Effective
      August 30, 2006, the Company executed a modification and extension agreement
      (the “Agreement”) in relation to $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.





See
      Subsequent Events Note for further discussion of the Notes.





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.





**7.**  **STOCKHOLDERS’
      EQUITY**





**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 on the Company’s 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.





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 .





12




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 on the Company’s 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, 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.





**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 reclass 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.





13




**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.





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 September 30, 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.





14




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
      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 warrant 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 an ex-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 warrant 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 warrant 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.





**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.





15




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
            
            
            -
            
            
            -Balance
                at September 30, 2006
            
            
            4,551,669
            
            $
            0.38





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 4.65 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 our common stock at September 30, 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 nine months ended September 30, 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
              September
                30, 2006
            
            Weighted
                Average Remaining Contractual Life
            
            Weighted
                Average Exercise Price
            
            Number
                Exercisable at September 30, 2006
            
            Weighted
                Average Exercise Price$0.30
                - $0.9120
            
            
            4,551,669
            
            
            7.55
                Years
            
            $
            0.38
            
            
            4,551,669
            
            $
            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 These stock options per share
      price
      was based upon a five day trailing average of the fair market value as indicated
      on the stock market.





**8.**  **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.





16




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
      September 30, 2006. The Company is unaware of any material claims, proceedings
      or lawsuits as of September 30, 2006.





The
      Company has included $100,416 of unpaid Federal payroll taxes and employee
      withholdings and
      related penalties and interest in the account classified withholding taxes
      payable as of September 30, 2006. Of this liability, $35,687 is for RGA and
      the
      Company has structured an agreement with the Internal Revenue Service to pay
      the
      entire amount. In addition, with a previous acquisition, the Company assumed
      $64,729 of unpaid Federal payroll taxes and employee withholdings and related
      penalties and interest.





**9.**  **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 $15,500 as of September
      30,
      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 was 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 was 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 was 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.




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 thru September 2006, $20,308 in consulting services and $53,846 in
      commission was 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.




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.




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
      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 $9,243 as of September 30,
      2006.




17




In
      June
      2006, the Company’s Chief Operating Officer and who is also a Director, forgave
      $64,606 of commissions due and payable in relation to 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 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
      storm related business. In June 2006, the Company’s Chief Financial Officer,
      forgave $35,239 of commissions due and payable in relation to storm related
      business. As a result of the above items, the Company’s directors and officers
      forgave a total of $187,944 of commissions.





**10.
      SUBSEQUENT EVENTS**





Effective
      October 31, 2006, the first modification and extension agreement in relation
      to
      the $1,600,000 of Notes as previously discussed expired. The Company is
      negotiating a second modification and extension agreement (the “Second
      Agreement”) in relation to $1,600,000 of Notes and anticipates having this
      completed before November 30, 2006.





In
      October 2006, the Company paid Laurus $2,775,716 that was classified as
      restricted cash as of September 30, 2006. As of October 31, 2006, the
      outstanding balanced for the Laurus note payable is approximately $7,500,000.





**Item
      2. Management's Discussion and Analysis or Plan of
      Operation.**





**SPECIAL
      NOTE REGARDING FORWARD-LOOKING STATEMENTS**





The
      following is a discussion of our financial condition, results of operations,
      liquidity and capital resources. This discussion should be read in conjunction
      with our unaudited financial statements and the notes thereto included elsewhere
      in this Form 10-QSB and with our annual report on Form 10-KSB for the year
      ended
      December 31, 2005.




Some
      of
      the statements under “Description of Business,” “Risk Factors,” “Management's
      Discussion and Analysis or Plan of Operation,” and elsewhere in this Report and
      in our periodic filings with the Securities and Exchange Commission constitute
      forward-looking statements. These statements involve known and unknown risks,
      significant uncertainties and other factors what may cause actual results,
      levels of activity, performance or achievements to be materially different
      from
      any future results, levels of activity, performance or achievements expressed
      or
      implied by such forward- looking statements. Such factors include, among other
      things, those listed under “Risk Factors” and elsewhere in this Report.





In
      some
      cases, you can identify forward-looking statements by terminology such as “may,”
“will,” “should,” “could,” “intends,” “expects,” “plans,” “anticipates,”
“believes,” “estimates,” “predicts,” “potential” or “continue” or the negative
      of such terms or other comparable terminology.





The
      forward-looking statements herein are based on current expectations that involve
      a number of risks and uncertainties. Such forward-looking statements are based
      on assumptions that we will obtain or have access to adequate financing for
      each
      successive phase of its growth, that there will be no material adverse
      competitive or technological change in condition of our business, that our
      Chief
      Executive Officer, Chief Operating Officer and other significant employees
      will
      remain employed as such by us, and that there will be no material adverse change
      in the Company's operations, business or governmental regulation affecting
      us.
      The foregoing assumptions are based on judgments with respect to, among other
      things, further economic, competitive and market conditions, and future business
      decisions, all of which are difficult or impossible to predict accurately and
      many of which are beyond our control.





18




Although
      our management believes that the expectations reflected in the forward-looking
      statements are reasonable, management cannot guarantee future results, levels
      of
      activity, performance or achievements. Moreover, neither management nor any
      other persons assumes responsibility for the accuracy and completeness of such
      statements.





**GENERAL**





RG
      America, Inc. (“RG” or the “Company”), formerly known as Invvision Capital, Inc.
      (“Invvision”) is a reporting company pursuant to Section 12 (g) of the
      Securities Exchange Act of 1934, as amended, and its shares of common stock
      are
      publicly traded on the NASD Over The Counter Electronic Bulletin Board (“OTCBB”)
      under the symbol “RGMI”. We provide a broad array of synergistic products and
      services that address several key financial aspects of the commercial real
      estate market.





**RECENT
      DEVELOPMENTS**





As
      of
      September 30, 2006, the Company has $2,775,716 of restricted cash which was
      collected from customers that are directly related to the Company’s existing
      credit facility with Laurus. As of September 30, 2006, the Company has drawn
      100% 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 in September 2006,
      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.





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.





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.





Effective
      October 31, 2006, the first modification and extension agreement in relation
      to
      the $1,600,000 of Notes as previously discussed expired. The Company is
      negotiating a second modification and extension agreement (the “Second
      Agreement”) in relation to $1,600,000 of Notes and anticipates having this
      completed before November 30, 2006.





In
      October 2006, the Company paid Laurus $2,775,716 that was classified as
      restricted cash as of September 30, 2006. As of October 31, 2006, the
      outstanding balanced for the Laurus note payable is approximately $7,500,000.





19





**RESULTS
      OF OPERATIONS**




***Three
      months and nine months ended September 30, 2006 compared to the three months
      and
      nine months ended September 30, 2005*** ****





**RG
                AMERICA, INC. AND SUBSIDIARIES****CONSOLIDATED
                STATEMENTS OF OPERATIONS****(Unaudited)****Three
                Months Ended**
            
            **Nine
                Months Ended****September
                30,**
            
            **September
                30,****2006**
            
            **2005**
            
            **2006**
            
            **2005****Revenues**
            
            $
            4,299,760
            
            $
            5,295,053
            
            $
            21,796,779
            
            $
            10,314,571**Cost
                of revenues**
            
            
            2,366,353
            
            
            3,435,377
            
            
            13,192,499
            
            
            6,281,345**Gross
                profit**
            
            
            1,933,407
            
            
            1,859,676
            
            
            8,604,280
            
            
            4,033,226**Operating
                expenses:**Selling,
                general and administrative
            
            
            378,546
            
            
            398,854
            
            
            1,698,029
            
            
            986,516Compensation,
                payroll taxes and benefits
            
            
            1,486,999
            
            
            801,718
            
            
            3,331,806
            
            
            1,556,507Stock
                compensation
            
            
            1,213,063
            
            
            5,243
            
            
            1,521,887
            
            
            320,081Consulting
                and contract labor
            
            
            240,594
            
            
            184,098
            
            
            691,838
            
            
            305,877Professional
            
            
            130,654
            
            
            64,931
            
            
            371,901
            
            
            196,236Recovery
                of impairment
            
            
            -
            
            
            -
            
            
            -
            
            
            (116,669
            )Impairment
                of leasehold improvements
            
            
            -
            
            
            123,230
            
            
            -
            
            
            123,230Rent
            
            
            120,355
            
            
            79,779
            
            
            430,853
            
            
            232,112Depreciation
            
            
            75,138
            
            
            31,188
            
            
            225,875
            
            
            71,631**Total
                operating expenses**
            
            
            3,645,349
            
            
            1,689,035
            
            
            8,272,189
            
            
            3,675,521**Income
                (loss) from operations**
            
            
            (1,711,942
            )
            
            170,641
            
            
            332,091
            
            
            357,705**Other
                expense:**Other
                income (expense), net
            
            
            19,285
            
            
            -
            
            
            90,225
            
            
            2,096Interest
                and financing cost, net
            
            
            (1,107,865
            )
            
            (54,617
            )
            
            (2,042,129
            )
            
            (186,006
            )**Total
                other expense**
            
            
            (1,088,580
            )
            
            (54,617
            )
            
            (1,951,904
            )
            
            (183,910
            )**Net
                income (loss)**
            
            $
            (2,800,522
            )
            $
            116,024
            
            $
            (1,619,813
            )
            $
            173,795**Other
                comprehensive income (loss)**Unrealized
                loss on investment in available- for-sale securities
            
            
            (404,250
            )
            
            -
            
            
            (404,250
            )
            
            -**Total
                comprehensive income (loss)**
            
            $
            (3,204,772
            )
            $
            116,024
            
            $
            (2,024,063
            )
            $
            173,795





20





**Three
      Months Ended September 30, 2006 Compared To The Three Months Ended September
      30,
      2005**





*Revenue* *:*




Operating
      revenue decreased $995,293, or 19%, to $4,299,760 for the three months ended
      September 30, 2006, from $5,295,053 for the three months ended September 30,
      2005. RGA continues to work in storm related construction work in Florida,
      Louisiana and Mississippi, but cash flow constraints as a result of the
      Company’s existing credit facility with Laurus Master Funds is beginning to
      significantly hinder current revenue as well as future revenue
      growth.




*Cost
      of Sales* *:*




Cost
      of
      sales decreased $1,069,024, or 31%, to $2,366,353 for the three months ended
      September 30, 2006, from $3,435,377 for the three months ended September 30,
      2005. The decrease was primarily the result of RG’s cash flow constraints
      discussed above under Revenue which have significantly hindered current revenue
      and future revenue growth.





*Operating
      Expenses* *:*




Operating
      expenses increased $1,956,314 or 116%, to $3,645,349 for the three months ended
      September 30, 2006 from $1,689,035 for the three months ended September 30,
      2005. The increase was primarily the result of $685,281 of increased
      compensation (primarily related to increased number of employees and
      commissions), $1,207,820 of increased stock compensation (of which $966,413
      was
      related to the accelerated vesting of employee stock options), $56,496 of
      increased consulting and contract labor, $65,723 of increased professional
      expense, $40,576 of increased rent, and $43,950 of increased depreciation as
      result of RG’s storm related construction work in Florida, Louisiana and
      Mississippi. These increases were offset by a decrease of $20,308 related to
      a
      reduction in selling, general and administration expenses and by a decrease
      of
      $123,230 related to impairment of leasehold improvements.





*Other
      Income (Expense)* *:*




Other
      expense increased to $1,088,580 of expense for the three months ended September
      30, 2006 from $54,617 of expense for the three months ended September 30, 2005.
      The increase was primarily the result of interest expense and financing costs
      related to the Secured Convertible Note and bridge loan Promissory
      Notes.





*Other
      Comprehensive Income (Loss)* *:*




Other
      comprehensive loss increased $404,250, to $404,250 of loss for the three months
      ended September 30, 2006 from zero for the three months ended September 30,
      2005. The increase was the result of a devaluation of investment in
      available-for-sale securities.





**Nine
      Months Ended September 30, 2006 Compared To The Nine Months Ended September
      30,
      2005**





*Revenue* *:*




Operating
      revenue increased $11,482,208, or 111%, to $21,796,779 for the nine months
      ended
      September 30, 2006, from $10,314,571 for the nine months ended September 30,
      2005. The increase was primarily the result of RG’s continued growth in storm
      related construction work in Florida, Louisiana and Mississippi.




*Cost
      of Sales* *:*




Cost
      of
      sales increased $6,911,154, or 110%, to $13,192,499 for the nine months ended
      September 30, 2006, from $6,281,345 for the nine months ended September 30,
      2005. The increase was primarily the result of RG’s continued growth in storm
      related construction work in Florida, Louisiana and Mississippi.





*Operating
      Expenses* *:*




Operating
      expenses increased $4,596,668 or 125%, to $8,272,189 for the nine months ended
      September 30, 2006 from $3,675,521 for the nine months ended September 30,
      2005.
      The increase was primarily the result of $711,513 of increased SGA, $1,775,299
      of increased compensation, $1,201,806 of increased stock compensation (of which
      $966,413 was related to the accelerated vesting of employee stock options),
      $385,961 of increased consulting and contract labor, $175,665 of increased
      professional expense, $116,669 of decreased recovery of impairment, $198,741
      of
      increased rent, and $154,244 of increased depreciation as result of RG’s
      increased storm related construction work in Florida, Louisiana and Mississippi.
      In addition, the increase was offset by the result of no recovery of impairment
      in the nine months ended September 30, 2006 as compared to the $123,230 recovery
      of impairment recorded in the nine months ended September 30, 2005.





21




*Other
      Income (Expense)* *:*




Other
      expense increased to $1,951,904 of expense for the nine months ended September
      30, 2006 from $183,910 of expense and financing costs for the nine months ended
      September 30, 2005. The increase was primarily the result of interest expense
      and financing costs related to the Secured Convertible Note and bridge loan
      Promissory Notes.





*Other
      Comprehensive Income (Loss)* *:*




Other
      comprehensive loss increased $404,250, to $404,250 of loss for the nine months
      ended September 30, 2006 from $0 of loss for the nine months ended September
      30,
      2005. The increase was the result of a devaluation of investment in
      available-for-sale securities.





**Liquidity
      and Capital Resources**





Cash
      and
      cash equivalents were $601,838 at September 30, 2006 as compared to $683,346
      at
      December 31, 2005 and working capital was $3,959,011 at September 30, 2006
      as
      compared to $2,554,610 at December 31, 2005. The increase in the working capital
      is primarily due to a $2,592,555 increase in contracts receivable, a $2,509,042
      increase in unbilled revenue, a $408,273 decrease in other receivables, a
      $2,775,716 increase in restricted cash, offset by a $669,161 increase in
      accounts payable, a $188,945 increase in accrued expenses, a $595,686 decrease
      in deferred revenue, and a $5,649,754 increase in notes payable.





Decreased
      cash flow as of September 30, 2006 is directly related to the Company’s existing
      credit facility with Laurus. As of September 30, 2006, the Company has drawn
      100% 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 in September 2006,
      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.





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.





22




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:* Net cash
      used in operating activities was $6,122,812 for the nine months ended September
      30, 2006 compared to $576,174 net cash used in operating activities for the
      nine
      months ended September 30, 2005. The increase in cash used in operations
      resulted primarily from the Company’s continued storm related construction work
      in Florida, Louisiana and Mississippi.





*Investing
      Activities:* Net cash
      used in investing activities was $37,128 for the nine months ended September
      30,
      2006 compared to $805,713 for the nine months ended September 30, 2005. The
      decrease was the result of a $100,000 maturity of a certificate of deposit
      during the nine months ended September 30, 2006 as compared to a $279,728
      investment in a certificate of deposit recorded during the nine months ended
      September 30, 2005. In addition, the decrease was the result of $137,128
      investment in property and equipment in the nine months ended September 30,
      2006
      as compared to the $525,985 investment in property and equipment recorded in
      the
      nine months ended September 30, 2005.





*Financing
      Activities:* Net cash
      provided by financing activities was $6,078,432 for the nine months ended
      September 30, 2006 compared to $1,526,047 for the nine months ended September
      30, 2005. The increase of net cash provided by financing activities of
      $4,492,644 is primarily result of $11,544,865 proceeds from issuance of a
      secured revolving note offset by the repayment of $7,052,221 on the secured
      revolving note. In addition, $1,600,000 was received as a bridge loan in the
      form of promissory notes.





**SHORT-TERM
      DEBT**





Significant
      current period changes in short-term debt during the nine months ended September
      30, 2006 consisted of the following:





***Bank
      Line-of-Credit***




In
      July
      2006, the Company paid off a $100,000 bank line of credit.





***Notes
      payable - Related Parties***




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 $15,500 as of September
      30,
      2006.




In
      April,
      2006, the Company received $12,000 of property from a related party in return
      for a 10% interest bearing note with monthly payments of $550. The outstanding
      principal balance of this note was $9,243 as of September 30, 2006.





***Notes
      payable***




On
      August
      8, 2004, through a previous acquisition, we 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.




23




Effective
      February 15, 2006 ("Effective Date"), 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"), a secured
      revolving note up to a maximum of $10,000,000 ("Revolving Note"), 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 ("Common Stock") and a registration
      rights agreement ("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 Registrant 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.





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.





24




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 September 30, 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 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.





Effective
      August 30, 2006, the Company executed a modification and extension agreement
      (the “Agreement”) in relation to $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.





25




See
      Subsequent Events Note for further discussion of the Notes.





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.





**STOCKHOLDERS’
      EQUITY**





**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 on the Company’s 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.





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 on the Company’s 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, 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 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.





**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 reclass between
      paid in capital and common stock subscribed.





26




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.





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 September 30, 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.





27




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
      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 warrant 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 an ex-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 warrant 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 warrant 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.





28




**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
            
            
            -
            
            
            -Balance
                at September 30, 2006
            
            
            4,551,669
            
            $
            0.38





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 4.65 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 our common stock at September 30, 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 nine months ended September 30, 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.





29





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





**----------Options
                Outstanding----------**
            **----------Options
                Exercisable----------**





Range
                of Exercise Prices
            
            Number
              Outstanding
                at
              September
                30, 2006
            
            Weighted
                Average Remaining Contractual Life
            
            Weighted
                Average Exercise Price
            
            Number
                Exercisable at September 30, 2006
            
            Weighted
                Average Exercise Price$0.30
                - $0.9120
            
            
            4,551,669
            
            
            7.55
                Years
            
            $
            0.38
            
            
            4,551,669
            
            $
            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 These stock options per share
      price
      was based upon a five day trailing average of the fair market value as indicated
      on the stock market.





***Liquidity***





To
      continue with our business plan, we will require additional short-term working
      capital and we have not previously generated sufficient cash from operations
      to
      fund our operating activities for the next twelve months.





The
      ability of RG to continue as a going concern is dependent on the ability to
      further implement the business plan, obtain additional capital, and generate
      sufficient revenues and cash flows. The consolidated financial statements do
      not
      include any adjustments that might be necessary if we are unable to continue
      as
      a going concern.





The
      Company can give no assurance that it will 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.





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 indebtedness or fail to comply with the financial
      and operating covenants contained in them, we would be in default. 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, which may result from the inability of RG to continue as a going
      concern.





We
      cannot
      be assured that the business will provide sufficient proceeds, if any, and
      borrowings under any interim financing we are able to secure will be sufficient
      to meet projected cash flow needs.





As
      of
      September 30, 2006, the Company has $2,775,716 of restricted cash which was
      collected from customers but are directly related to the Company’s existing
      credit facility with Laurus. As of September 30, 2006, the Company has drawn
      100% 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.





30




The
      Company is nearing the completion of several projects and in September 2006,
      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.





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.





**Off-Balance
      Sheet Arrangements**




We
      have
      no off-balance sheet arrangements, other than commitments and contingencies
      as
      disclosed.





**2006
      OUTLOOK**





The
      ability to invest further will be heavily dependent on securing additional
      capital from investors or debt financing along with the successful
      implementation of the business strategy. There is no assurance that additional
      equity or debt financing will be available on terms acceptable to RG management.





If
      we are
      unable to obtain additional capital or successfully implement our business
      strategy, this will have a significant impact on our ability to continue as
      a
      going concern.




**Item
      3. Controls and Procedures.** ****





Bruce
      A.
      Hall, our Chief Executive Officer and our Chief Financial Officer, has concluded
      that our disclosure controls and procedures are appropriate and effective.
      He
      has evaluated these controls and procedures as of the date of this report on
      Form 10-QSB. There were no significant changes in our internal controls or
      in
      other factors that could significantly affect these controls subsequent to
      the
      date of their evaluation, including any corrective actions with regard to
      significant deficiencies and material weaknesses.





**PART
      II - OTHER INFORMATION**





**Item
      1. Legal Proceedings**





From
      time
      to time we 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.





We
      are
      subject to various unasserted claims from vendors for non-payment of accounts
      payable plus related legal fees. Excluding legal fees, which cannot be
      estimated, we have included all amounts in accounts payable as of September
      30,
      2006. The Company is unaware of any material proceedings, lawsuits or claims
      as
      of September 30, 2006.




The
      Company has included $100,416 of unpaid Federal payroll taxes and employee
      withholdings and related penalties and interest in the account classified
      withholding taxes payable as of September 30, 2006. Of this liability, $35,687
      is for RGA and the Company has structured an agreement with the Internal Revenue
      Service to pay the entire amount. In addition, with a previous acquisition,
      the
      Company assumed $64,729 of unpaid Federal payroll taxes and employee
      withholdings and related penalties and interest.





31




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





**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 on the Company’s 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.





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 on the Company’s 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, 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.





**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 reclass 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.





32




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.





**Item
      3. Defaults Upon Senior Securities**





None





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





None





**Item
      5. Other Information**





None





**Item
      6. Exhibits** ****





(a) Exhibits




Exhibit
            
            
            Title
            
            
            Location31.1
            
            
            Certification
                by Principal Executive Officer
            
            
            Attached31.2
            
            
            Certification
                of Principal Financial Officer
            
            
            Attached32
            
            
            Certifications
                of Principal Executive and Financial Officer Pursuant to
                906
            
            
            Attached





33


**SIGNATURES**





Pursuant
      to the requirements of the Securities Exchange Act of 1934, as amended, this
      report has been signed by the following persons on behalf of RG America, Inc.,
      in the capacities and on the dates indicated.








NAME
                AND SIGNATURE
            
            TITLE
            DATE/s/
              Bruce A. Hall
            
            Principal
              Executive Officer
            November
              8, 2006Bruce A.
              Hall/s/
                Bruce A. Hall
            
            Principal
                Financial Officer
            November
              8, 2006Bruce
                A. Hall




34