RESTATEMENT OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Subsequent to the issuance of our condensed consolidated financial statements for the quarter ended September 30, 2011, we have re-evaluated our interpretation of the management warrant grant set forth in the Summary of Debt Reorganization and Financing dated July 14, 2011 and have determined that it should have been expensed in the quarter ended September 30, 2011.

The Company granted 5,344,356 warrants to management on September 13, 2011, in accordance with the Summary of Debt Reorganization and Financing agreement. The Company valued the warrants utilizing the black scholes method with the following inputs: stock price of $0.17, exercise price of $0.17, volatility of 158.09%, term of 10 years, risk free rate of 2% and dividend rate of 0%. The warrants are fully vested upon grant. Total expense for period ended September 30, 2011 is $908,540.

The effect of this restatement is to change previously reported expenses, net loss and loss per share for the three and nine months ended September 30, 2011. The restatement relates to the timing of warrant expense and has no impact on our previously reported cash position and total assets.

Impact of the Restatement on our condensed Consolidated Financial Statements

Our condensed consolidated financial statements presented in this Quarterly Report on Form 10-Q/A has been restated to reflect the impact from the restatement adjustments described above, as follows:

RECONCILIATION OF CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	As of September 30, 2011
	As
	Reported						As
	Previously			Adjustments			Restated
Assets
Current Assets
Cash	$	501,220		$	-		$	501,220
Accounts receivable, net		23,315			-			23,315
Inventories, net		287,687			-			287,687
Prepaid expenses		124,619			-			124,619
Total Current Assets		936,841			-			936,841

Patents, net		5,662			-			5,662
Deposits		23,651			-			23,651
Total Assets	$	966,154		$	-		$	966,154

Liabilities and Stockholders' Deficit
Current Liabilities:
Accounts payable and accrued expenses	$	2,025,894		$	-		$	2,025,894
Obligations to be settled in stock		373,000			-			373,000
Customer Prepayments		59,976			-			59,976
Short-term debt, net of unamortized debt discount		1,004,347			-			1,004,347
Total Current Liabilities		3,463,217			-			3,463,217

Long-term debt		1,455,128			-			1,455,128
Total Liabilities		4,918,345			-			4,918,345

Commitment and Contingencies

Preferred stock, Convettible Series G, authorized 200,000, par value $1 stated value $50: 116,685 shares issued and outstanding		5,414,565			-			5,414,565

Stockholders' Deficit
Preferred stock, authorized 500,000, par value $1
Convertible Series B, 65,141 shares issued and outstanding		130,282			-			130,282
Convertible Series C, 64,763 shares issued and outstanding		64,763			-			64,763
Convertible Series D, 0 shares issued and outstanding		-			-			-
Convertible Series E, 0 shares issued and outstanding		-			-			-
Convertible Series F, 0 shares issued and outstanding		-			-			-
Common stock, par value $0.001; authorized 2,000,000,000 shares; issued and outstanding 23,756,893		23,757			-			23,757
Additional paid-in capital		63,432,590			908,540			64,341,130
Common stock subscribed		1,079,148			-			1,079,148
Accumulated Deficit		(74,097,296	)		(908,540	)		(75,005,836	)
Total Stockholders' Deficit		(3,952,191	)		-			(3,952,191	)

Total Liabilities and Stockholders' Deficit	$	966,154		$	-		$	966,154

RECONCILIATION OF CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended									Nine Months Ended
	September 30, 2011									September 30, 2011
	As									As
	Previously						As			Previously						As
	Reported			Adjustments			Restated			Reported			Adjustments			Restated
Total Revenues	$	14,537		$	-		$	14,537		$	118,752		$	-		$	118,752
Cost of Goods Sold		8,496			-			8,496			64,282			-			64,282
		6,041			-			6,041			54,470			-			54,470

Research and development cost		12,006			-			12,006			29,454			-			29,454
Selling, general and administrative expenses		911,705			908,540			1,820,245			1,993,708			908,540			2,902,248
Total operating expenses		923,711			908,540			1,832,251			2,023,162			908,540			2,931,702

Loss from Operations		(917,670	)		(908,540	)		(1,826,210	)		(1,968,692	)		(908,540	)		(2,877,232	)

Other Income (Expense)
Gain incurred in connection with troubled debt restructuring, net		668,583			-			668,583			668,583			-			668,583
Loss on debt modification		(1,129,321	)		-			(1,129,321	)		(1,129,321	)		-			(1,129,321	)
Amortization of debt discount		(48,717	)		-			(48,717	)		(190,937	)		-			(190,937	)
Interest expense		(204,241	)		-			(204,241	)		(674,932	)		-			(674,932	)
Total Other Income (Expense)		(713,696	)		-			(713,696	)		(1,326,607	)		-			(1,326,607	)
Loss before provision for Income Taxes		(1,631,366	)		(908,540	)		(2,539,906	)		(3,295,299	)		(908,540	)		(4,203,839	)

Provision for Income Taxes		-			-			-			-			-			-
Net Loss		(1,631,366	)		(908,540	)		(2,539,906	)		(3,295,299	)		(908,540	)		(4,203,839	)
Preferred Dividend		(46,500	)		-			(46,500	)		(46,500	)		-			(46,500	)

Net Loss applicable to common shareholders	$	(1,677,866	)	$	(908,540	)	$	(2,586,406	)	$	(3,341,799	)	$	(908,540	)	$	(4,250,339	)

Net Loss per Common Share Basic and Diluted	$	(0.07	)	$	(0.04	)	$	(0.11	)	$	(0.14	)	$	(0.04	)	$	(0.18	)

Weighted Average Number of
Common Shares Outstanding - Basic And Diluted		23,756,893			23,756,893			23,756,893			23,756,893			23,756,893			23,756,893

RECONCILIATION OF CONDENDSED CONSOLIDATED STATEMENTS OF CASH FLOW

(Unaudited)

	As of September 30, 2011
	As
	Reported						As
	Previously			Adjustments			Restated
Cash Flows from Operating Activities
Net Loss	$	(3,295,299	)	$	(908,540	)	$	(4,203,839	)
Adjustments to Reconcile Net Loss to
Net Cash used in Operations
Extinguishment of debt		(668,583	)		-			(668,583	)
Debt modification		1,129,321			-			1,129,321
Depreciation and amortization		432			-			432
Amortization of debt discount		190,937			-			190,937
Equity securities for professional services		175,000			-			175,000
Warrants grant issued for compensation		-			908,540			908,540

Changes in Assets and Liabilities
Accounts receivable		(22,070	)		-			(22,070	)
Inventories		(160,966	)		-			(160,966	)
Prepaid expenses		129,615			-			129,615
Customer prepayments		42,178			-			42,178
Liability for stock to be issued		25,000			-			25,000
Accounts payable and accrued expenses		534,566			-			534,566
Net Cash Used in Operating Activities		(1,919,869	)		-			(1,919,869	)

Net Cash Used in Investing Activities		-			-			-
Cash Flows from Financing Activities
Proceeds from loans and notes payable		1,500,000			-			1,500,000
Proceeds from Preferred Stock		950,000			-			950,000
Repayment of loans and notes payable		(30,000	)		-			(30,000	)
Net Cash Provided by Financing Activities		2,420,000			-			2,420,000

Net Increase (Decrease) in Cash		500,131			-			500,131
Cash at beginning of period		1,089			-			1,089
Cash at end of period	$	501,220		$	-		$	501,220

Supplemental Disclosure of Cash Flow information:
Cash paid during the period for:
Interest Expense	$	15,671		$	-		$	15,671
Income Taxes	$	-		$	-		$	-