12. RESTATEMENT

9 Months Ended

Sep. 30, 2012

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12. RESTATEMENT

Due to an accounting error, the Company has restated its consolidated financial statements as of and for the nine months ended September 30, 2011 to reflect a correction to an understatement of deferred income that results from allocating the revenue received under extended warranty arrangements over the life of the warranty.  Also, in the original filing revenue was overstated due to recognition of sales prior to the installation of the products.  In addition the Company is restating the September 30, 2011 consolidated financial statements due to the reclassification of common stock that was issued to a holder of a note payable.  The Company had originally recorded the issuance of the stock as a payment in full for the note and related costs however after a further review of the legal documents it was determined that the debt was not satisfied but instead the ultimate resolution of the debt was contingent on events that were still unfolding. The Company’s summarized consolidated financial statement elements comparing the restated financial statement elements to those originally filed are as follows:

Consolidated Financial Statement Elements as of and for the nine months ended September 30, 2011

	Original			Restated			Change
Consolidated Balance Sheet:
Accounts receivable		374,028			212,276			(161,752	)
Inventory		108,267			176,716			68,449
Total assets		1,483,571			1,390,268			( 93,303	)
Accounts payable		782,797			687,764			( 95,033	)
Stock settlement payable		0			163,366			163,366
Deferred revenue		0			241,765			241,765
Current liabilities		1,793,144			2,103,242			310,098
Total liabilities		1,822,865			2,132,963			310,098
Stock settlement in process		0			163,366			163,366
Accumulated Deficit
Beginning of period		(22,837,787	)		(22,953,904	)		(116,117	)
End of period		(23,206,116	)		(23,446,151	)		(240,035	)
Total stockholders’ deficit		( 339,294	)		(742,695	)		(403,401	)
Consolidated Statement of Operations:
Revenue		576,735			281,525			(295,210	)
Cost of sales		198,023			114,254			(83,769	)
Gross profit		378,712			167,271			(211,441	)
Operating expenses		575,968			577,827			1,859
Net Operating income (loss)		(197,256	)		(410,556	)		(213,300	)
Revenue sharing		(70,135	)		0			70,135
Gain from renegotiated debt		0			19,247			19,247
Loss on equity transactions		0			(48,106	)		(48,106	)
Interest Expense		(100,938	)		(52,832	)		48,106
Net loss		(368,329	)		(492,247	)		(123,918	)