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      schrieb am 23.11.05 12:45:59
      Beitrag Nr. 1 ()
      Unbedingt vor Investment lesen. Sehr lang, aber um so interessanter
      -------
      21-Nov-2005

      Quarterly Report



      ITEM 2. MANAGEMENT`S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
      OVERVIEW

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

      Our revenues are derived from projects for which we work either on a time and materials basis or pursuant to a fixed price contract. In the thirteen week period ended September 27, 2005 and fiscal 2005, substantially all of our revenues were derived from time and materials contracts. Under our fixed-price contracts, we assess the scope of work to be done and contract to perform a specified scope of work for a fixed price, subject to adjustment for work outside such scope of work, upon prior approval by our customers. Because most of our projects consist of emergency or disaster responses, which do not permit a definitive prior assessment of the full scope of work entailed and require immediate attention in order to mitigate loss and maximize recovery, most of our projects are performed on a time and materials basis. Under our time and materials contracts, we charge our customers for labor, equipment usage, allocated overhead and a markup relating thereto.

      We have encountered slow collections of certain of our accounts receivable. We expect to have sufficient working capital to fund our current operations as long as we do not encounter further difficulty collecting our accounts receivable. However, market conditions, including expenses incurred in connection with hurricanes Katrina and Wilma, and their effect on our liquidity may restrict our use of cash. In the event that sufficient positive cash flow from operations is not generated, we may need to seek additional financing in addition to the financing provided by the financing transactions entered into with Laurus. Laurus is under no obligation to provide any funding to us. Currently, we have no credit facility for additional borrowing.

      We currently are engaged on various projects for private sector commercial and residential customers in the gulf coast and Florida regions. Under time and materials contracts or other arrangements, we have billed in excess of $2.2 million of work that we have completed in connection with these projects. We have also billed in excess of $7.4 million for these projects that are still in progress. As of October 31, 2005 during our fiscal 2006, we have billed an aggregate of over of $11 million of time and materials projects. Management believes that

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

      As described above, we have encountered difficulty with cash collections and slow cash flow due primarily to factors including:

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

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

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

      Because some of these are relatively new changes, no assurances can be given that they will be successful in improving our collections and cash flows. Further, approximately 5% of our current projects are performed under procedures that predate these improvements.

      On June 30, 2005, we issued to Laurus a three-year secured convertible term note in the principal amount of $5,000,000. Subsequently, Laurus loaned us an additional $2,350,000, and we amended and restated the note accordingly. As of November 21, 2005, the principal amount of the Laurus note outstanding equaled $7,350,000. On November 10, 2005, Laurus agreed to defer the principal monthly payments due in November and December 2005 in the aggregate amount of $495,375 until June 30, 2008, the maturity date of the Laurus note, in order to facilitate financing of our gulf coast and Florida operations.

      ABILITY TO CONTINUE AS A GOING CONCERN

      Our independent auditors raised a concern in their report on our financial statements for our 2005 fiscal year about our ability to continue as a going concern. Our auditors have stated that due to our recurring losses from operations, working capital deficit, stockholders` deficit and difficulty in generating sufficient cash flow to meet our obligations and sustain our operations, there is "substantial doubt" about our ability to continue as a going concern. Although we generated a net profit of $82,441 for our 2005 fiscal year, we have recorded a loss of $(1,239,781) for the quarter ended September 27, 2005 and the uncertainty about our ability to continue as a going concern may limit our ability to access certain types of financing, or may prevent us from obtaining financing on acceptable terms.

      CRITICAL ACCOUNTING POLICIES

      Management`s discussion and analysis of our financial position and results of operations are based upon our unaudited interim consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these audited consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. Actual results could differ from those estimates. We believe that the critical accounting policies and areas that require the most significant judgments and estimates to be used in the preparation of the unaudited interim consolidated financial statements are accounting for stock based transactions, contracts, allowance for doubtful accounts and the valuation allowance related to deferred tax assets.

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

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

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

      Once the transaction value is determined, GAAP requires us to record the transaction value as an expense or asset as determined by the transaction and to record an increase in paid-in capital.

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

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

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

      Contract Accounting - Revenue derived from services provided to customers over periods of less than one month is recognized at the completion of the related contracts. Revenue from firm fixed price contracts that extend over periods of one month or more is recognized using the percentage-of-completion method, measured by the percentage of costs incurred to date compared to estimated total costs for each contract. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, estimated profitability, the effect of contract penalty provisions and final contract settlements may result in revisions to estimates of costs and income and are recognized in the period in which the revisions are determined. Revenue from claims is recognized when realization is probable and the amount can be reliably estimated. Revenues from time and material contracts that extend over a period of more than one month are recognized as services are performed.

      Allowance for Doubtful Accounts - We maintain an allowance for doubtful trade accounts receivable for estimated losses resulting from the inability of our customers to make required payments. In determining collectibility, we review available customer financial information including public filings and credit reports and may also consult legal counsel to assist in determining collectibility. When it is deemed probable that a specific customer account is uncollectible, that balance is included in the reserve calculation. Actual results could differ from these estimates under different assumptions.

      Deferred Tax Asset Valuation Allowance - We record a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized. Due to our history of losses, we have recorded a full valuation

      allowance against our net deferred tax assets as of June 28, 2005. We currently provide for income taxes only to the extent that it expects to pay cash taxes on current income. Should we be profitable in the future at levels which cause management to conclude that is more likely than not that it will realize all or a portion of the deferred tax assets, we would record the estimated net realizable value of the deferred tax assets at that time and would then provide for income taxes at our combined federal and state effective rates.

      RESULTS OF OPERATIONS

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

      Revenue

      Total revenues for the thirteen weeks ended September 27, 2005 decreased by $314,167, or 5.7%, to $5,164,339 from $5,478,506 for the thirteen weeks ended September 28, 2004. This decrease in revenue was primarily attributable to a decrease of approximately $900,000 in our emergency, disaster response and remediation work (associated primarily with the hurricanes in Florida in the fiscal 2004 period) and an approximately $500,000 decrease in our spill and soil environmental remediation. These decreases were partially offset by an approximately $900,000 increase in our asbestos, lead and mold work, and a $300,000 increase in restoration work.

      Our revenues in the thirteen weeks ended September 27, 2005 reflect revenues of approximately $456,000, generated from work relating to hurricanes Katrina and Wilma, the revenues attributable to which we expect to be reflected primarily in later periods.

      Cost of Revenues

      Cost of revenues increased $23,147 or 0.5%, to $4,385,270 for the thirteen weeks ended September 27, 2005 as compared to $4,362,123 for the thirteen weeks ended September 28, 2004. This increase was primarily attributable to an increase of approximately $808,000 in payroll, including fringe benefits, an increase of approximately $103,000 for travel and travel-related expenses associated with the mobilization to Louisiana to begin the cleanup of the damage caused by Hurricane Katrina and an increase in leasing expenses of approximately $42,000 attributed to the rental of three premises, which together serve as a satellite office, regional command center, training center and housing for our employees sent to the Gulf Coast, partially offset by the favorable effect of not recording as a cost of revenue costs in excess of billings approximately $492,000 of costs relating to Hurricane Katrina work that had not yet been billed, in addition to a decrease of approximately $396,000 in direct job-related costs relating to subcontractor expenses, materials, supplies, equipment rental, and waste disposal costs.

      Selling, General and Administrative Expenses

      Selling, general and administrative expenses increased by $274,370, or 22.0%, to $1,506,404 for the thirteen weeks ended September 27, 2005 from $1,232,034 for the thirteen weeks ended September 28, 2004 and constituted approximately 29% and 22.5% of revenues in such periods, respectively. This increase was primarily attributable to an increase of $50,000 to our bad debt reserve, increases in insurance costs of approximately $26,000, increased accounting and legal fees of approximately $206,000 and a $25,000 increase in marketing expenses. These were partially offset by a decrease of approximately $117,000 in consulting fees that were expended in the fiscal 2004 period.

      Benefit Related to Variable Accounting Treatment for Officer Options

      Under the terms of a previous employment agreement with us and a separate agreement with Spotless, our President and chief executive officer was able to sell to us, or in certain circumstances to Spotless, all shares of our common stock held by him and all shares of our common stock underlying vested options to purchase shares of our common stock held by him upon the occurrence of certain events. There was no benefit or expense required to be recorded in the thirteen weeks ended September 27, 2005 due to elimination of this risk on June 30, 2005. There was no benefit or expense required to be recorded in the thirteen weeks ended September 28, 2004 due to the low market price of our common stock. Due to the terms of the options, changes in the market price of our common stock, in either direction, resulted in a corresponding expense or benefit.

      Interest Expense

      Interest expense increased by $382,938 to $594,042 for the thirteen weeks ended September 27, 2005 from $211,104 for the thirteen weeks ended September 28, 2004. This increase was due to approximately $176,000 of interest expense incurred to Laurus, approximately $135,000 of which related to the amortization of discounts, and an increase of approximately $283,000 attributable to the amortization of deferred financing costs relating to the Laurus transaction partially offset by a reduction of $65,000 in interest expense incurred to Spotless and a decrease of approximately $146,000 due to the lack of sales of accounts receivable to Spotless in the thirteen week period ended September 27, 2005.

      Provision for Income Taxes

      The provision for income taxes for the thirteen weeks ended September 27, 2005 was $8,218 as compared to $2,589 for the thirteen weeks ended September 28, 2004. This increase was the result of higher taxable income for the thirteen weeks ended September 27, 2005 primarily attributable to the cancellation of debt owed to our former majority stockholder and senior secured lender.

      In addition, we have a tax liability of $686,893 in connection with the cancellation of a secured note payable to a related party, which has been credited to additional paid-in capital.

      Net Loss

      A net loss of $(1,239,781) was incurred for the thirteen weeks ended September 27, 2005 as compared to a net loss of ($328,545) incurred for the thirteen weeks ended September 28, 2004. The change was the result of the factors discussed above.

      LIQUIDITY AND CAPITAL RESOURCES

      As of September 27, 2005, we had a cash balance of $147,493, working capital of $2,597,138 and stockholders` equity of $5,552,011. As of June 28, 2005, we had a cash balance of $512,711, working capital deficit of $(1,690,676) and a stockholders` deficit of $(683,514).

      Historically, we have financed our operations primarily through issuance of debt and equity securities, through short-term borrowings from our former majority shareholder, and through cash generated from operations. In our opinion, we expect to have sufficient working capital to fund our current operations as long as we do not encounter further difficulty collecting our accounts receivable. However, market conditions, including expenses incurred in connection with hurricanes Katrina and Wilma, and their effect on our liquidity may restrict our use of cash. In the event that sufficient positive cash flow from operations is not generated or is generated slowly in connection with the eight to sixteen months that it typically takes us to collect on accounts receivables, for example, we may need to seek additional financing. We currently have no credit facility for additional borrowing.

      As of the quarter ended September 27, 2005, we purchased in excess of $371,000 of additional trucks and vehicles to assist us in responding to the damage caused by Hurricane Katrina. At this time, we do not have any other material commitments for capital expenditures. We intend, however, to make additional capital expenditures, to the extent our financial resources permit, as may be required in connection with rendering our services in the future.

      Our liquidity was adversely affected by its unrecouped costs incurred in connection with an oil storage tank project in 2003. We believe that we will be successful in collecting for this project, but no assurance can be given as to the timing or amount of any such recovery. Management believes that we will require positive cash flow from operations to meet our working capital needs over the next twelve months unless we increase our borrowings from Laurus or obtain debt or equity financing from a third party. Management has preliminarily explored additional funding sources, but has been unable to attract additional debt or equity capital. So long as we have sufficient working capital, we anticipate continued revenue growth in new and existing service areas and continue to bid on large projects, though there can be no assurance that any of our bids will be accepted or that we will have sufficient working capital. We are striving to improve our gross margin and control our selling, general and administrative expenses, subject to our need to incur labor, capital and equipment expenses in connection with our operations in hurricane-affected areas. There can be no assurance, however, that changes in our plans or other events affecting our operations will not result in accelerated or unexpected cash requirements, or that we will be successful in

      achieving positive cash flow from operations or obtaining additional financing.

      As described above, we have encountered difficulty with cash collections and slow cash flow due primarily to factors including:

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

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

      o we generally do not commence projects until we have a fully executed contract;
      o our service contracts provide that our customers are directly obligated for our services;
      o we require client approval with respect to the work performed or to be performed; o we generally seek deposits ranging from 33% to 50% for time and materials contracts;
      o we engage local legal counsel in the areas in which we operate to file liens against customers` real property in the event of contract disputes; and
      o all invoices submitted for payment are reviewed for proper documentation.

      Because some of these are relatively new changes and function only as general guidelines with ideal success being ultimately dependent on our customers` behavior, no assurances can be given that they will be successful in improving our collections and cash flows. Further, approximately 5% of our current projects are performed under procedures that predate these improvements.

      On June 30, 2005, we issued to Laurus Master Fund, Ltd. a three-year secured convertible term note in the principal amount of $5,000,000. Subsequently, Laurus loaned us an additional $2,350,000, and we amended and restated the note accordingly. As of November 21, 2005, the principal amount of the Laurus note outstanding equaled $7,350,000. On November 10, 2005, Laurus agreed to defer the principal monthly payments due in November and December 2005 in the aggregate amount of $495,375 until June 30, 2008, the maturity date of the Laurus note.

      Laurus holds a senior security interest in our and our subsidiaries assets collateralizing the Note, including a pledge of the stock of our subsidiaries. In addition, Spotless holds a subordinated security interest collateralizing our $500,000 note issued to Spotless. The existence of these security interests may impair our ability to raise additional debt capital.

      Net cash used in operating activities was $416,408 for the thirteen weeks ended September 27, 2005 as compared to net cash provided by operations of $287,432 for the thirteen weeks ended September 28, 2004. Accounts receivable increased by $1,654,817 for the thirteen weeks ended September 27, 2005 primarily as a result of hurricane-related work billed toward the end of the period and difficulties with cash collections. Accounts receivable increased by $999,315 for the thirteen weeks ended September 28, 2004 primarily as a result of increased sales related to hurricanes in Florida. Accounts payable and accrued expenses increased by $1,994,724 for the thirteen weeks ended September 27, 2005 primarily as a result of the costs associated with our mobilization efforts in Louisiana in addition to an increase of $528,000 for insurance premiums. Accounts payable and accrued expenses increased by $131,437 for the thirteen weeks ended September 28, 2004 as a result of an increased volume of remediation activity.

      Cash used for capital expenditures increased to $885,482 during the thirteen weeks ended September 27, 2005 as compared to $56,011 for the thirteen weeks ended September 28, 2004 due to the purchase of 10 trucks, 5 campers, 1 trailer and 1 life raft, blowers, dehumidifiers and other assets to be utilized in the clean-up efforts relating to Hurricane Katrina.

      Cash provided by financing activities for the thirteen weeks ended September 27, 2005 was $936,672, primarily as a direct result of $3,329,435 received in connection with our debt restructuring with Laurus, which included a net increase of $1,500,000 in borrowings and the cancellation of $686,893 of our previous secured note payable to Spotless. Financing activities for the thirteen weeks ended September 28, 2004 used net cash of $157,063 as a result of long-term debt repayment.

      As of June 28, 2005, we owed Spotless Plastics (USA) Inc. ("Spotless") $5,000,000 under a promissory note dated November 16, 2001, in the original principal amount of $1,700,000. The Spotless note was collateralized by all of our assets.

      As of June 28, 2005, Spotless was due payment from third parties for purchased accounts receivable in the amount of $349,985 under our account receivable agreement dated February 5, 2004, with us. As of such date, Spotless had purchased from us an aggregate amount of our accounts receivable equaling $4,991,252 at an aggregate discount of $911,202, for an aggregate purchase price of $4,080,050. Pursuant to the account receivable finance agreement, Spotless was able to purchase at a discount certain of our accounts receivable without recourse for cash, subject to certain terms and conditions. This accounts receivable finance agreement has been terminated.

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

      o pursuant to the terms of a secured convertible term note, dated June 30, 2005, a three-year note in the principal amount of $5,000,000 (as amended and restated, the "Note"). The Note bears interest at the prime rate as published in the Wall St. Journal plus 2% (but not less than 7.25%), decreasing by 2% (but not less than 0%) for every 25% increase in the Market Price (as defined therein) of our common stock above the fixed conversion price of $0.09 following the effective date(s) of the registration statement or registration statements covering the shares of our common stock underlying the Note and the warrant issued to Laurus;
      o pursuant to the terms of an Option Agreement, dated June 30, 2005, a twenty-year option to purchase 30,395,179 shares of our common stock at a purchase price of $0.0001 per share, and
      o pursuant to the terms of a Common Stock Purchase Warrant, dated June 30, 2005 a seven-year common stock purchase warrant to purchase 13,750,000 shares of our common stock at a purchase price of $0.10 per share.

      After consummating the transaction on June 30, 2005, Laurus subsequently provided additional financing to us on the same terms and conditions as follows:

      o on July 13, 2005, Laurus loaned us an additional $350,000, and we amended and restated the Note, to be in the principal amount of $5,350,000;
      o on September 9, 2005, Laurus loaned us an additional $650,000, and we further amended and restated the Note to be in the principal amount of $6,000,000; and
      o on October 6, 2005, Laurus loaned us an additional $1,350,000, and we further amended and restated the Note to be in the principal amount of $7,350,000. This is the only note outstanding payable by us to Laurus.

      The proceeds received by us in connection with the financing transaction and subsequent borrowings from Laurus as of November 3, 2005 were used to pay the amounts set forth below to the persons or for the purposes set forth below:

      o Former majority stockholder and senior secured lender,
      consisting of approximately $2,650,000 in settlement of the
      principal and $100,000 in interest $ 2,750,000
      o Laurus transaction fee 1,750,000
      o Laurus Capital Management, LLC management and due diligence fees 262,900
      . . .
      Avatar
      schrieb am 30.11.05 11:58:01
      Beitrag Nr. 2 ()
      hmmm...237 Leute haben den Beitrag gelesen und keiner hat eine Meinung dazu??

      Ich seh das so, daß Windswept erhebliche Probleme hat offene Rechnungen einzutreiben. Wenn sie das in den Griff bekommen und mal einen grösseren (Staatlichen!?) Auftrag bekommen/veröffentlichen dann sollte das auch wieder aufwärts gehen..

      ?!
      Avatar
      schrieb am 01.12.05 13:18:03
      Beitrag Nr. 3 ()
      weil hier alle schweigend beten...
      Avatar
      schrieb am 04.12.05 14:20:35
      Beitrag Nr. 4 ()
      und noch eine wichtige News (vom 29.11.05)
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      Form 8-K for WINDSWEPT ENVIRONMENTAL GROUP INC
      ----------------------------------------------------------

      29-Nov-2005

      Entry into Material Agreement, Other Events

      Item 1.01 Entry into a Material Definitive Agreement.
      Windswept Environmental Group, Inc. has entered into an Amendment and Fee Waiver Agreement with Laurus Master Fund, Ltd., dated as of November 23, 2005 (the "Amendment and Fee Waiver Agreement"), pursuant to which Laurus agreed to amend the terms of the:

      o Amended and Restated Secured Convertible Term Note issued by Windswept to Laurus on October 6, 2005, in the aggregate principal amount of $7,350,000 (the "Note"), maturing on June 30, 2008;
      o option issued by Windswept to Laurus on June 30, 2005 to purchase 30,395,179 shares of Windswept`s common stock (the "Option");
      o warrant issued by Windswept to Laurus on June 30, 2005 to purchase 13,750,000 shares of Windswept`s common stock (the "Warrant");
      o securities purchase agreement between Windswept and Laurus dated as of June 30, 2005 (the "Securities Purchase Agreement"); and
      o registration rights agreement between Windswept and Laurus dated as of June 30, 2005 (the "Registration Rights Agreement").

      The terms of the Note, the Option, the Warrant and the Securities Purchase Agreement previously required Windswept to reserve from its authorized and unissued common stock sufficient number of shares to provide for the issuance of shares upon the full conversion and/or exercise of the Note, the Option and the Warrant, as applicable, after the earlier to occur of (a) December 31, 2005 and
      (b) the date of Windswept`s next shareholders` annual meeting (the "Additional Authorization Date"). The Amendment and Fee Waiver Agreement extended the Additional Authorization Date to the earlier to occur of (a) January 31, 2005 and (b) the date of Windswept`s next shareholders` annual meeting.

      The Registration Rights Agreement previously set forth Windswept`s obligations to register the shares of common stock underlying the Note, the Option and the Warrant by (a) filing a registration statement on Form S-1 (the "Registration Statement") and (b) having the Registration Statement declared effective by the Securities and Exchange Commission by November 22, 2005. The Registration Rights Agreement provided that beginning November 23, 2005, Windswept would be required to pay to Laurus the following fees (the "Fees") in the event that the Registration Statement was not effective by November 22, 2005:

      o 1.5% of the principal outstanding on the Note, for the first thirty days, prorated for partial periods, which equals $3,675 per day based upon the $7,350,000 principal amount of the Note currently outstanding; and
      o 2.0% of the principal outstanding on the Note, for each subsequent thirty day period, prorated for partial periods, which currently equals $4,900 per day.

      Pursuant to the Amendment and Fee Waiver Agreement, the date by which the Registration Statement must be declared effective by the Securities and Exchange Commission has been postponed from November 22, 2005 to February 10, 2006. As a result, the date by which any other Fees may accrue and become payable has been postponed until February 10, 2006. In addition, the Fees that accrued relating to the lack of effectiveness of the Registration Statement on November 23, 2005 have been waived by Laurus.

      Windswept requested the Amendment and Fee Waiver Agreement in order to maximize its flexibility in responding to a Securities and Exchange Commission comment letter that it received on October 31, 2005 in relation to the Registration Statement, which it filed on October 3, 2005. Windswept remains obligated to perform its obligations under the Note, as amended, the Warrant, the Option, the Securities Purchase Agreement and the Registration Rights Agreement, except to the extent modified by the Amendment and Fee Waiver Agreement. A copy of the Amendment and Fee Waiver Agreement is attached as Exhibit 10.01 and is incorporated by reference.


      Item 8.01 Other Events

      As described herein, Windswept plans to hold its next shareholders` annual meeting in January 2006 instead of December 2005. The exact date of the meeting and the related record date will be determined by Windswept`s board of directors and set forth in the definitive proxy statement to be mailed to its record holders as of a date to be determined.


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