This discussion and analysis should be read in conjunction with our financial statements and notes thereto included in this Annual Report on Form 10-KSB. Operating results are not necessarily indicative of results that may occur in future periods.

Overview

We provide structural decontamination and protective coating products and services, including building diagnostic assessment and inspections, indoor air quality testing, complete mold decontamination, a series of preventive maintenance programs and water intrusion emergency response service. Our products and services are available in new construction and occupied phases of multi-family, single family and commercial buildings. To date, we have provided our mold prevention service to over 700 national and regional single and multi-family home builders. Our clients include national home builders such as Lennar Corporation, DR Horton, Inc. and Centex, Inc., regional home builders such as Issa Homes, Inc. and Lenox Homes and multi-family home builders such as The Hanover Company, Bosa Development and Gables Residential. In December 2007, we announced that we had expanded our service offerings to provide a comprehensive approach to indoor environmental issues throughout the life cycle of a building. The expanded service offering named, "Trinity", is an all-inclusive three in one service platform involving inspection, correction and protection to manage water related problems that can cause mold contamination. With this added capability, we can now provide multi-family and commercial developers, owners and property managers with a single, full-service company to handle their indoor environmental issues.

Although we believe we are broadening our market coverage by expanding our service offerings to provide a comprehensive approach to indoor environmental issues throughout the life cycle of a building and by selling our products and services to builders, managers and owners of both new and existing structures, we continue to lose money on an operating and cash flow basis. We believe that the principle reason why we have yet to be cash flow positive and profitable is because we have historically marketed and sold our services primarily to the residential new construction industry, which has experienced a steady and significant decline since 2006.

Our strategy is to become a leading provider of structural decontamination and protective coating products and services to the new construction and occupied residential and commercial building industry. The key elements of our strategy are to acquire and develop proprietary technology in the areas of building decontamination and mold protection, enhance our existing strategic relationships and develop new ones, expand our service offerings and expand our capability and market coverage. Further, we expect to continue to control our costs and increase our gross margins as revenue increases. By executing this strategy we intend to grow sales and reach operating profitability in 2008.

Our future financial condition and operating performance may be affected by several industry trends. The major trends that we believe will have a positive impact on our business are the demand for products and services relating to structural decontamination and protective coating services within new and existing structures. In addition, we believe that if we are successful in acquiring desired intellectual property related to mold and bacteria decontamination, we may be able to achieve a certain competitive advantage in the delivery of products and services in the areas of structural decontamination and protective coatings. Public awareness of health risks associated with mold contamination, the growth in mold-related insurance claims and litigation and the high cost of mold remediation and public awareness of the dangers of hospital acquired infections could contribute to our growth. On the other hand, increasing levels of inventory in the new housing construction industry, the general decline in the rate of growth of the new home construction industry, mold remediation competition and delays in building owners or managers adopting our products and services could retard our growth. While we may be negatively impacted by these trends, we believe we will be able to manage these challenges through competitive product and service offerings in strategic markets and through continued efforts to control costs.

We measure our business using both financial and other operating metrics. The financial metrics include revenue, gross margin, operating expenses and income from continuing operations. The operating metrics include new sales order activity, service schedule, material usage and crew productivity.

New Sales Activity. With this metric we measure the level of new customer commitments in terms of new clients and dollar value of sales. We use this metric to gauge the effectiveness of our sales efforts. The data is gathered by sales representatives, by region and by month. We monitor new sales activity between project type: single-family versus multi-family. We also analyze new sales based on regional builders' and national builders' activity.

Service Schedule. We utilize this data to evaluate the demand for services in each service center or region. This measurement allows us to identify unused service capacity and to shift capacity, when necessary, to service centers with greater demand.

Material Usage. We use this metric to gauge the relative usage of material in each service center and region. The material usage rate for blast media can vary depending on the amount of mold contamination on the wood surfaces required to be removed, the relative humidity of the region and the proficiency of the crews. We monitor the material usage rate in order to help identify service centers that may need operational improvements or training to decrease their relative cost of service.

Crew Productivity. This measure focuses on our cost of service. We have planning standards for each region that we use to plan crew labor requirements. Measuring productivity (how many square feet of space are treated in a day) allows us to analyze the effectiveness of our labor force and crew leaders. Anticipated productivity by project also is a determining factor in project pricing. Again, the productivity levels vary depending on the type of project (single-family versus multi-family), the climate conditions, the training level and the experience of the crew and the amount of contamination to be removed from the project.

Critical Accounting Policies

Revenue Recognition

Revenue is based on contracts for agreed upon fees entered into with customers for the services to be completed and is recognized when the service is completed, the amount of the service and contract value is determinable, and collection is reasonably assured. The resulting accounts receivable are reported at their principal amounts and adjusted for an estimated allowance for uncollectible amounts, if appropriate. We do not require collateral on our accounts receivable.

Impairment of Long-Lived Assets

We have adopted SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which addresses significant issues relating to the implementation of SFAS No. 121 and develops a single accounting model, based on the framework established in SFAS No. 121 for long-lived assets to be disposed of by sale, whether or not such assets are deemed to be a business. SFAS No. 144 also modifies the accounting and disclosure rules for discontinued operations. We did not note any indicators of impairment during the years ended December 31, 2007 and 2006.

Allowances for Doubtful Accounts

We make judgments as to our ability to collect outstanding receivables and provide allowances for the applicable portion of receivables when collection becomes doubtful. Provisions are made based upon a specific review of all significant outstanding invoices. The allowance for doubtful accounts was $54,352 at December 31, 2007.

Income Taxes

We account for income taxes in accordance with SFAS Statement No. 109, "Accounting for Income Taxes." Deferred income taxes are recorded for the expected tax consequences in future years of temporary differences between the tax bases of assets and liabilities and their financial reporting amount at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

In July 2006, FASB issued FASB Interpretation (FIN) No. 48, "Accounting for Uncertainty in Income Taxes-an Interpretation of FASB Statement No. 109" (FIN 48). This Interpretation clarifies the accounting for uncertainty in income taxes recognized in a company's financial statements. FIN 48 requires companies to determine whether it is "more likely than not" that a tax position will be sustained upon examination by the appropriate taxing authorities before any part of the benefit can be recorded in the financial statements. It also provides guidance on the recognition, measurement and classification of income tax uncertainties, along with any related interest and penalties. We were subject to the provisions of FIN 48 as of January 1, 2007, and we have analyzed filing positions in all of the federal and state jurisdictions where we are required to file income tax returns, as well as all open tax years in these jurisdictions. We have identified our federal tax return and our state tax returns in California, Florida and Louisiana as "major" tax jurisdictions, as defined. The periods subject to examination for our federal return are the 2004 through 2006 tax years. The periods subject to examination for our state returns in California and Florida are years 2003 through 2006 and in Louisiana are years 2004 through 2006. We believe that our income tax filing positions and deductions will be sustained on audit and do not anticipate any adjustments that will result in a material change to our financial position. Therefore, no reserves for uncertain income tax positions have been

recorded pursuant to FIN 48, and, as such, we did not record a cumulative effect adjustment related to the adoption of FIN 48. Our policy for recording interest and penalties associated with audits is to record such items as a component of income taxes.

Stock-based Compensation

On January 1, 2006, we adopted Statement of Financial Accounting Standards No. 123 (revised 2004), "Share-Based Payment", or SFAS 123(R), which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors including employee stock options based on estimated fair values. SFAS 123(R) supersedes our previous accounting under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees", or APB 25, for periods beginning in fiscal 2006. In March 2006, the SEC issued Staff Accounting Bulletin No. 107, or SAB 107, relating to SFAS
123(R). We have applied the provisions of SAB 107 in our adoption of SFAS 123(R).

We adopted SFAS 123(R) using the modified prospective application transition method, which required the application of the accounting standard as of January 1, 2006, the first day of the 2006 year. Share-based compensation expense recognized under SFAS 123(R) for the years ended December 31, 2007 and 2006 was $125,351 and $123,190, respectively.

SFAS 123(R) requires companies to estimate the fair value of share-based payment awards on the grant-date using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in our consolidated statement of operations.

Share-based compensation expense recognized during the current period is based on the value of the portion of share-based payment awards that is ultimately expected to vest. SFAS 123(R) requires forfeitures to be estimated at the time of grant in order to estimate the amount of share-based awards that will ultimately vest. The forfeiture rate is based on historical rates. Share-based compensation expense recognized in our consolidated statement of operations includes (i) compensation expense for share-based payment awards granted prior to, but not yet vested as of January 1, 2006, based on the grant-date fair value estimated in accordance with the pro forma provisions of SFAS 123 and
(ii) compensation expense for the share-based payment awards granted subsequent to December 31, 2005, based on the grant-date fair value estimated in accordance with the provisions of SFAS 123(R). As share-based compensation expense recognized in the condensed consolidated statement of operations is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures.

Results of Operations

The following table sets forth the percentage relationship to total revenues of items included in our Consolidated Statements of Operations for the years indicated:

Fiscal 2007 Compared to Fiscal 2006



                                                  Year Ended December 31,          Increase         %
                                                   2007             2006          (Decrease)      Change
Revenue, net                                   $  6,672,736     $  9,425,307     $ (2,752,571 )     29.2 %
Cost of revenue                                   3,551,983        5,364,534       (1,812,551 )     33.8 %

Gross margin                                      3,120,753        4,060,773         (940,020 )     23.1 %
Selling, general and administrative expenses      8,399,625        9,153,207         (753,582 )      8.2 %

Loss from operations                             (5,278,872 )     (5,092,434 )       (186,438 )      3.7 %
Interest income (expense)                          (432,444 )     (2,478,686 )      2,046,242       82.6 %

Loss before provision for income taxes           (5,711,316 )     (7,571,120 )      1,859,804       24.5 %
Provision for income taxes                           11,093              908           10,185     1121.7 %

Net loss                                       $ (5,722,409 )   $ (7,572,028 )   $  1,845,619       24.4 %

Year Ended December 31, 2007 Compared to Year Ended December 31, 2006

Revenues

Total revenues for 2007 were $6,672,736 compared to $9,425,307 in 2006, a decrease of $2,752,571 or 29.2%. The overall decrease in revenue is attributable to a slowdown in the restoration business in the Gulf region and reduced levels of single-family mold prevention revenue due to the contraction in the new construction housing market. The decline was partially offset by significant increases in our Midwest region and multi-family mold prevention projects.

Revenue growth for 2007 compared to 2006 by region is summarized below:

                                                                                                        Percentage
                 Year Ended        Percentage         Year Ended        Percentage       Increase        Increase
Region        December 31, 2007    of Revenue      December 31, 2006    of Revenue      (Decrease)      (Decrease)
California   $         3,409,941         51.1 %   $         4,805,432         51.0 %   $ (1,395,491 )        (29.0 %)
Florida                1,489,545         22.3 %             1,666,617         17.7 %       (177,072 )        (10.6 %)
Gulf                     655,120          9.8 %             2,617,760         27.8 %     (1,962,640 )        (75.0 %)
Midwest                  719,389         10.8 %                94,233          0.9 %        625,156          663.4 %
Other                    398,741          6.0 %               241,265          2.6 %        157,476           65.3 %

Total        $         6,672,736        100.0 %   $         9,425,307        100.0 %   $ (2,752,571 )        (29.2 %)

Revenue in the California region for 2007 was $3,409,941 compared to $4,805,432 in 2006, a decrease of $1,395,491 or 29.0%. The decrease is due to the new construction slowdown in California as builders reduced new housing starts in an effort to lower their inventory.

Revenue in the Florida region for 2007 was $1,489,545 compared to $1,666,617 in 2006, a decrease of $177,072 or 10.6%. The decrease is due to the slow down in the construction industry.

Revenue in the Gulf region for 2007 was $655,120 compared to $2,617,760 in 2006, a decrease of $1,962,640 or 75.0%. The decrease is primarily attributable to the lower level of consumer driven restoration projects due to money flow delays and homeowner indecisiveness. In September 2007, we closed our Gulf region service centers in an effort to reduce costs.

Revenue in the Midwest region for 2007 was $719,389 compared to $94,233 in 2006, an increase of $625,156 or 663.4%. The Midwest region was established in the third quarter of 2006 to capture the market opportunity associated with new housing starts in Houston, Dallas, San Antonio and Austin, Texas. This region, where we sell our mold prevention services to both multi-and single-family builders, has experienced strong growth since opening in 2006.

Other region revenue comprises multi-family projects serviced outside of existing regions, where we do not currently have service centers established. Other revenue for 2007 was $398,741 compared to $241,265 in 2006, an increase of $157,476 or 65.3%. In the first nine months of 2007, projects were completed in Arizona, Colorado, Massachusetts and Virginia.

We also analyze revenue based on type of construction treated. Revenue associated with national builder projects for 2007 was $1,728,893 compared to $2,326,255 in 2006, a decrease of $597,362 or 25.7%. Revenue associated with single family construction for 2007 was $1,982,567 compared to $5,100,492 in 2006, a decrease of $3,117,925 or 61.1%. Revenue associated with multi-family construction for 2007 was $2,961,276 compared to $1,998,560 in 2006, an increase of $962,716 or 48.2%.

Cost of Revenue



       Year Ended
      December 31,    Percent of         Year Ended        Percent of       Increase
          2007         revenues       December 31, 2006     Revenues       (Decrease)
     $    3,551,983         53.2 %   $         5,364,534         56.9 %   $ (1,812,551 )

Cost of revenue includes the material, labor and other costs directly related to providing our services, including the depreciation expense relating to equipment used to provide our services. Cost of revenue for 2007 was $3,551,983 compared to $5,364,534 in 2006, a decrease of $1,812,551 or 33.8%. The decrease was a result of higher average pricing, improved labor productivity and an overall decrease in raw material costs due to improved pricing and optimized usage.

Raw material costs have decreased as a percentage of revenue from 11.6% for 2006 to 9.9% for 2007. This decrease is attributable to an overall material cost price reduction which was implemented in the third quarter of 2006, a change in blast media that occurred in the third quarter of 2007, as well as optimized material usage.

Direct labor cost as a percentage of revenue decreased from 28.9% for 2006 to 27.5% for 2007. The decrease is primarily a result of higher average pricing, increased labor utilization through improved job scheduling and the use of productivity tools such as new sprayers, box trucks and improved soda pot performance.

Other costs of revenue include costs associated with fuel, service vehicle rental, equipment rental, equipment depreciation, direct supplies and other costs directly associated with the services we provide. Other direct costs have decreased as a percentage of revenue from 16.1% for 2006 to 15.8% for 2007. The decrease is primarily a result of our decision in the third quarter of 2006 to purchase equipment that had previously been rented.

Selling, General and Administrative Costs



        Year Ended
       December 31,    Percent of         Year Ended        Percent of      Increase
           2007         Revenues       December 31, 2006     Revenues      (Decrease)
      $    8,399,625        125.9 %   $         9,153,207         97.1 %   $  (753,582 )

Selling, general and administrative costs include corporate and regional overhead such as compensation and benefits for sales, administrative and executive personnel, rent, insurance, professional fees, travel and office related expenses. Selling, general and administrative costs for 2007 were $8,399,625 compared to $9,153,207 in 2006, a decrease of $753,582 or 8.2%. In September of 2007, we closed our Gulf region restoration operation centers, consolidated the offices of Chief Executive Officer, President and Chief Operating Officer under one person, eliminated various discretionary services and reorganized our sales and operations organization in an effort to improve our sales and operations effectiveness. These cost reduction actions resulted in a significantly lower selling, general and administrative expense level in the fourth quarter of 2007.

Interest Income (Expense)



      Year Ended
     December 31,      Percent of         Year Ended          Percent of       Increase
         2007           Revenues       December 31, 2006       Revenues       (Decrease)
    $     (432,444 )          6.5 %   $        (2,478,686 )         23.1 %   $ (1,133,635 )

Net interest expense for 2007 was $432,444 compared to $2,478,686 in 2006, a decrease of $1,133,635 or 45.7%. The decrease is directly attributable to the Company retiring debt after successfully completing its initial public offering of Units.

On July 19, 2007 we entered into a Security Agreement (the "Security Agreement") with Calliope Capital Corporation, a Delaware corporation ("Calliope"). Pursuant to the Security Agreement, we issued to Calliope a Secured Convertible Note in the aggregate principal amount of $2,000,000 and obtained a maximum $2,000,000 revolving credit facility. The term of the Secured Convertible Note is for three years at an interest rate per annum equal to the "prime rate" as published in the Wall Street Journal from time to time plus two percent (2.0%), subject to a floor of 9.0% and a ceiling of 11.0% Calliope has the right, but not the obligation, at any time to convert all or any portion of the outstanding principal amount and accrued interest on the Secured Convertible Note into fully paid and non-assessable shares of our common stock at a fixed conversion price equal to $1.85 per share.

Interest charges associated with the Secured Convertible Note and beneficial conversion, including amortization of the debt discount, totaled $389,926 for the year ended December 31, 2007.

We earned interest income of $130,514 from cash investments during 2007.

LIQUIDITY AND CAPITAL RESOURCES

Since inception, we have funded our operations from internally generated funds, the proceeds from the sale of debt and equity securities and payment of obligations with our common stock. As of December 31, 2007, our working capital was $1.3 million, compared to $4.4 million as of December 31, 2006. The primary reason for this decrease is the operating loss during 2007.

Our net loss was $5,722,409 and $7,572,028 during the twelve months ended December 31, 2007 and 2006, respectively. Net interest expense for the twelve months ended December 31, 2007 was $432,444 as compared to net interest expense of $2,478,686 in the twelve months ended December 31, 2006. The primary reason for this change is due to the receipt of proceeds from the public offering of our Units, which proceeds were used to retire certain debt during 2006. Interest charges associated with the Secured Convertible Note and beneficial conversion, including amortization of the debt discount, totaled $389,926 for the year ended December 31, 2007.

During the year ended December 31, 2007, our working capital decreased from $4,379,463 as of December 31, 2006 to $1,253,617 or a decrease of $3,125,846. The principal reasons for the decrease in working capital were as follows:

• Cash decreased by $3,387,810 primarily as a result of our operating loss for the period, offset by $1,679,034 in net funds we received in connection with the issuance of the Secured Convertible Note.

• Accrued payroll related expenses decreased $549,807 as a result of payment of payroll related obligations.

• Accounts receivable decreased by a net $483,079 primarily due to our decrease in revenue for the year.

• Accounts payable and accrued liabilities decreased $350,846 as a result of cost reductions we enacted throughout the year.

• Short term notes payable increased by $177,455, net of underlying debt discount, due to the issuance of the Secured Convertible Note.

• Short term lease line of credit decreased $146,326 as a result of us paying off a lease line of credit in June 2007.

• Prepaid expenses and deposits increased by $136,569 as the result of renewing our annual General Liability and Workers Compensation policy in August 2007.

Given the recurring operating losses, accumulated deficit and the uncertainty as to whether we will be able to obtain additional financing, there is substantial doubt about our ability to continue as a going concern.

We plan to raise additional capital in the first half of 2008 to fund ongoing business operations. In the ordinary course of business, we expect to engage in discussions with various persons in connection with additional financing. If we raise additional funds through the issuance of equity securities, our existing stockholders' percentage ownership will be diluted. These equity securities may also have rights superior to our common stock. Additional debt or equity financing may not be available when needed or on satisfactory terms. If adequate funds are not available on acceptable terms, we may be unable to expand our products and services as planned, respond to competition, pursue the development or acquisition of desired proprietary technology or continue our operations.

Aggregate Contractual Obligations

The following summarizes our long-term contractual obligations as of December 31, 2007:

Contractual Obligations Total 2008 2009 2010 2011 Thereafter Operating leases $ 776,945 $ 494,684 $ 280,234 $ 2,027 $ - $ -

Off-Balance Sheet Arrangements

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

RISK FACTORS THAT MAY AFFECT FUTURE RESULTS

We operate in a rapidly changing environment that involves a number of risks, some of which are beyond our control. A number of these risks are listed below. . . .