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

Management Discussion and Analysis

Nine Months Ended September 30, 2008 versus Nine Months Ended September 30, 2007

Exousia is a company built upon two bits of core science. The first is Vistamer which is used as an additive to many products to improve performance of those products. Vistamer is patented and its primary application by Exousia is as an additive to Industrial Coatings. The second bit of core science is "RPA", Rubber Plastic Alloy which can be sold in pellet form or as a composite material in applications such as truck Cargo Boxes and shipping containers. With these these two bits of core science as a foundation, Exousia is organized into two distinct business segments, Industrial Coatings and Advanced Materials, operating in the United States and China.

On March 5, 2008 the Company acquired Aegeon, LLC which is an industrial coatings manufacturer with over 30 years if continuous operations in the Houston, Texas area. Prior to this acquisition the company had no revenues so a comparison versus the same time period last year is not meaningful. For the nine months ended September 30, 2008, Paints and Coatings revenues were $1,081,998. The sales were primarily from the customer base acquired from Aegeon. Gross Margins were 19.87%. Due to competitive markets the market price has held firm while raw material costs have increased slightly.

Since the acquisition, the Company has been actively involved in increasing the production capacity of the plant facility. There have been changes in the overall plant design to allow for more staging areas and raw materials to facilitate a more timely production approach. As part of an overall reorganization plan, the Company has segmented sales from production. The sales effort will include direct sales to industrial customers and the establishment of a network of distributorships and agents. The production focus is on efficient operations and negotiations with vendors to lower the unit costs. The combination of higher sales, economies of scale and lower unit costs are expected to increase the Gross Margins.

In the third quarter, the company has begun to implement its reorganization plan. Two new sales people were hired and trained to sell industrial coatings. Their efforts are expected to begin resulting in direct sales in the fourth quarter. The company has not been successful yet in signing distributors but expects to do so in the fourth quarter. As a result of these efforts sales are expected to be significantly higher in the fourth quarter as compared to the third quarter.

In the third quarter, the production facilities in Tianjin China were completed and all equipment installed. The first batch of coatings was made to supply samples to a potential customer in September. The first training session was hosted by the Company in October in the plant facilities in Tianjin. It was aimed primarily at the Company's #1 distributor in China, the Northern Industrial Group. The Company has also placed a full time sales person working on developing direct sales in China and is also continuing to add distributors in the Southern and Western regions of China.

The combination of the training efforts for the existing customer base, the direct sales efforts, and the additions to the distributor network is expected to result in the first sales in China in the fourth quarter.

The Company views the development of RPA as a significant growth opportunity. The markets are wide but the company is focusing primarily on the transportation industry. Applications include container moving boxes and truck cargo boxes. Using RPA as the core Raw material, the company has produced a product called "Trusscore" which is manufactured into panels that form the side walls of the containers and cargo boxes. These panels are significantly lighter yet stronger and more durable than the traditional steel walls and can result in 15-40% greater fuel economy.

This technological advantage of lighter weight and greater durability has been demonstrated by the company. In 2006 the company built a 24 foot cargo box to serve as a demonstration of the features and durability. After two years and 40,000 + miles in service the results that are discussed above and now demonstrable. The Company plans to hire a Product Champion and build an operating division around these products in 2009. There has been a great deal of interest in RPA in both pellet form and in Trusscore from companies in China. The Company plans to market these products initially in China through exporting and depending upon demand may build a plant in China in late 2009 or early 2010.

Liquidity and Capital Resources

As of September 30, 2008, current assets were $1,583,830 and current liabilities were $501,449. As of December 31, 2007, current assets were $522,104 and current liabilities were $776,988. Revenues for the nine months ended September 30, 2008 and 2007 were $1,081,998 and $62,424, respectively, resulting in losses of $7,234,074 and $915,714 for the nine months ended September 30, 2008 and 2007, respectively. The largest expense item in 2008 has been stock based compensation for services. This is a non-cash expense. Cash used in operating activities was $2,776,924 and $391,851 for the nine months ended September 30, 2008 and 2007, respectively. The next changes are primarily a result of increased activity in 2008. The company has maintained inventory levels relatively constant. The changes in resources are increased Accounts Receivable and Accounts Payable.

The financial statements are prepared using principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company does not have significant cash or other material liquid assets, nor an established source of revenue sufficient to cover operating costs and to allow the Company to continue as a going concern. In the future, the Company may experience significant fluctuations in results of operations. If required to obtain additional debt and equity financing, illiquidity could suppress the value and price of the shares if and when trading in those shares develops. However, future offerings of securities may not be undertaken, and if undertaken, may not be successful or the proceeds derived from these offerings may be less than anticipated and/or may be insufficient to fund operations and meet the needs of our business plan. The current working capital is not sufficient to cover expected cash requirements for 2008 or to bring the Company to a positive cash flow position. It is possible that the Company will never become profitable and will not be able to continue as a going concern.