The accompanying consolidated
financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization
of assets and liabilities and commitments in the normal course of business. The accompanying consolidated financial statements
do not reflect any adjustments that might result if the Company is unable to continue as a going concern. The Company has
experienced substantial losses, has a working capital deficiency of approximately $4.4 million, a Stockholders deficiency of approximately
$4.2 million and is in default on its Line of Credit at December 31, 2011, which raises substantial doubt about the Company's ability
to continue as a going concern. Additionally, the Company is in violation of loan covenants and several of our creditors of the
acquisition entity have obtained judgments on amounts due them and the Company is dependent upon the continued cooperation and
forbearance of its lenders and creditors.
Additionally, the factoring
agreement described in Note 17 has been terminated and an alternative source of financing receivables has not been obtained. Also,
as of September 30, 2012, the Company has delinquent payroll taxes and union benefits arising in 2012 of approximately $900,000
and $700,000 respectively.
In addition to the transactions
described in Note 17 of the Notes to the Consolidated Financial Statements, management's plans are to raise additional capital
either in the form of common stock or convertible securities to pursue the remediation business. There can be no assurance, however,
that the Company will be successful in accomplishing its objectives.