UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~March 3031, ~~2010~~2011.

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission file number: 000-51763

COMCAM INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of

incorporation or organization)

23-2976562

(I.R.S. Employer

Identification No.)

1140 McDermott Drive, West Chester, Pennsylvania 19380

(Address of principal executive offices) (Zip Code)

(610) 436-8089

(Registrant’s telephone number, including area code)

n/a

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller reporting company þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. The number of shares outstanding of the issuer’s common stock, $0.0001 par value (the only class of voting stock), at ~~November~~May 1116, ~~2010~~2011, was 1216,~~921~~178,~~618~~312.

~~TABLE OF CONTENTS~~1

TABLE OF CONTENTS PART 1- FINANCIAL INFORMATION
Item1.	Financial Statements:	3
	Consolidated Balance Sheets as of March 31, 2011(unaudited) and December 31, 2010	4
	Unaudited Consolidated Statements of Operations for the three month periods ended March 31, 2011 and March 31, 2010	5
	Unaudited Consolidated Statements of Cash Flows for the three month periods ended March 31, 2011 and March 31, 2010	6
	Notes to Unaudited Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	19
Item 4.	Controls and Procedures	19
	PART II-OTHER INFORMATION
Item 1.	Legal Proceedings	20
Item 1A.	Risk Factors	20
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25
Item 3.	Defaults Upon Senior Securities	27
Item 4.	(Removed and Reserved)	27
Item 5.	Other Information	27
Item 6.	Exhibits	27
	Signatures	28
	Index to Exhibits	29

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements...................................................................................................... 3

Consolidated Balance Sheets as of September 30, 2010 (unaudited) and December 31, 2009 4

Unaudited Consolidated Statements of Operations for the three and nine month periods

ended September 30, 2010 and September 30, 2009..................................................... 5

Unaudited Consolidated Statements of Cash Flows for the nine month periods ended

September 30, 2010 and September 30, 2009............................................................... 6

Notes to Unaudited Consolidated Financial Statements................................................. 7

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11

Item 3. Quantitative and Qualitative Disclosures about Market Risk.......................................... 17

Item 4. Controls and Procedures................................................................................................ 17

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.......................................................................................................... 18

Item 1A. Risk Factors 18

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds........................................ 23

Item 3. Defaults upon Senior Securities..................................................................................... 24

Item 4. (Removed and Reserved).............................................................................................. 24

Item 5. Other Information.......................................................................................................... 24

Item 6. Exhibits......................................................................................................................... 24

Signatures.................................................................................................................................... 25

Index to Exhibits.......................................................................................................................... 26

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

As used herein, the terms “Company,” “we,” “our,” and “us” refer to ComCam International, Inc., a Delaware corporation, unless otherwise indicated. In the opinion of management, the accompanying unaudited financial statements included in this Form 10-Q reflect all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the results of operations for the periods presented. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year.

COMCAM INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
		September 30,	December 31,
		2010	2009
ASSETS		(Unaudited)	(Audited)
Current assets:
Cash	$	728,451	217,783
Accounts receivable		673,559	1,190,927
Costs and estimated earnings in excess of
billings on uncompleted contracts		80,062	1,874
Prepaid expenses		15,525	9,595
Note receivable		-	36,667
Total current assets		1,497,597	1,456,846
Property and equipment, net		169,853	110,842
Intangible assets, net		407,648	700,502
Other assets		24,396	10,806
Total assets	$	2,099,494	2,278,996
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable	$	435,959	711,734
Accrued expenses		182,591	259,439
Billings in excess of costs and estimated
earnings on uncompleted contracts		417,318	468,938
Related party payables		-	36,667
Current portion of long-term debt		1,018,218	1,766,568
Total current liabilities		2,054,086	3,243,346
Accrued expenses		18,651	-
Long-term debt		465,000	-
Total liabilities		2,537,737	3,243,346
Commitments and contingencies
Stockholders' deficit:
Preferred stock, $.0001 par value; 2,000,000
shares authorized, no shares issued and outstanding		-	-
Common stock, $.0001 par value; 100,000,000 shares
authorized, 12,921,618 and 6,982,640 shares issued and
outstanding, respectively		1,292	698
Additional paid-in capital		6,919,614	5,316,303
Stock subscription receivable		-	(1,000)
Accumulated deficit		(7,359,149)	(6,280,351)
Total stockholders' deficit		(438,243)	(964,350)
Total liabilities and stockholders' deficit	$	2,099,494	2,278,996

The accompanying notes are an integral part of these financial statement.

COMCAM INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
		March 31,		December 31,
		2011		2010
ASSETS		(Unaudited)		(Audited)
Current assets:
Cash	$	772,526		517,493
Accounts receivable		572,423		836,342
Costs and estimated earnings in excess of
billings on uncompleted contracts		428,829		114,827
Prepaid expenses		7,176		11,712
Total current assets		1,780,954		1,480,374
Property and equipment, net		145,144		157,263
Intangible assets, net		399,062		447,389
Other assets		173,456		23,926
Total assets	$	2,498,616		2,108,952
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	757,826		381,153
Accrued expenses		108,208		123,140
Billings in excess of costs and estimated
earnings on uncompleted contracts		87,103		387,923
Current portion of long-term debt		865,000		841,650
Total current liabilities		1,818,137		1,733,866
Accrued expenses		153,000		176,000
Long-term debt		176,568		641,568
Total liabilities		2,147,705		2,551,434
Commitments and contingencies
Stockholders' equity (deficit):
Preferred stock, $0.0001 par value; 2,000,000
shares authorized, no shares issued and outstanding		-		-
Common stock, $0.0001 par value; 100,000,000 shares
authorized, 16,168,312 and 13,684,312 shares issued and
outstanding, respectively		1,617		1,368
Additional paid-in capital		8,589,556		7,194,492
Deferred stock compensation		(47,925	)	-
Accumulated deficit		(8,192,337	)	(7,638,342	)
Total stockholders' equity (deficit)		350,911		(442,482	)
Total liabilities and stockholders' equity (deficit)	$	2,498,616		2,108,952

The accompanying notes are an integral part of these financial statements

COMCAM INTERNATIONAL, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
		Three Months Ended			Nine Months Ended
Three Months Ended March 31, 2011 and 2010
		September 30,			September 30,
		2011			2010
		2010		2009	2010		2009
Revenues, net	$	1,381,531			947,540
Revenues, net	$	1,028,863		1,620	2,527,387		18,130
Cost of revenues		1,050,330			710,678
Cost of revenues		682,082		1,200	1,881,195		4,200
Gross profit		331,201			236,862
Gross profit		346,781		420	646,192		13,930
Operating expenses:
Operating expenses:
General and administrative expenses		837,886			492,471
General and administrative expenses		341,550		191,048	1,657,011		306,607
Research and development expenses		2,192			3,088
Research and development expenses		1,862		-	7,837		50
		840,078			495,559
		343,412		191,048	1,664,848		306,657
Loss from operations		(508,877	)		(258,697	)
Income (loss) from operations		3,369		(190,628)	(1,018,656)		(292,727)
Other income (expense):
Other income (expense):
Interest income		355			419
Interest income		97		1,671	667		1,671
Interest expense		(25,473	)		(27,671	)
Interest expense		(20,597)		(22,724)	(74,534)		(65,549)
		(25,118	)		(27,252	)
Debt extinguishment income		-		-	13,725		-
Loss before provision for income taxes		(533,995	)		(285,949	)
		(20,500)		(21,053)	(60,142)		(63,878)
Provision for income taxes		20,000			-
Loss before provision for income taxes		(17,131)		(211,681)	(1,078,798)		(356,605)
Net loss	$	(553,995	)		(285,949	)
Provision for income taxes		-		-	-		-
Net loss per common share - basic and diluted	$	(0.04	)		(0.04	)
Net loss	$	(17,131)		(211,681)	(1,078,798)		(356,605)
Weighted average common and common
Net loss per common share - basic and diluted	$	(0.00)		(0.04)	(0.10)		(0.08)
equivalent shares		14,659,134			7,858,751
Weighted average common and common
equivalent shares		12,717,509		5,475,683	10,537,403		4,443,561

The accompanying notes are an integral part of these financial statements

COMCAM INTERNATIONAL, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 2010 and 2009
Three Months Ended March 31, 2011 and 2010
		2010		2009
		2011			2010
Cash flows from operating activities:
Net loss	$	(1553,~~078,798)~~995	)	~~(356,605)~~	(285,949	)
Adjustments to reconcile net loss to net
cash used in operating activities:
Common stock issued for services		390,000		114,500
Stock, options, and warrants compensation expense		491,824			-
Depreciation and amortization		~~321~~60,~~741~~775		~~9,512~~	126,258
Loss on disposal of assets		~~10,449~~-		-	853
(Increase) decrease in:
Accounts receivable		~~517~~263,~~368~~919		-	250,733
Prepaid expenses		(54,~~930)~~536		-	3,919
Related party receivable		-		(8,054)
Costs and estimated earnings in excess of
Costs and estimated earnings in excess of
billings on uncompleted contracts		(314,002	)		(4,436	)
billings on uncompleted contracts		(78,188)		-
Other assets		(149,530	)		(523	)
Other assets		(13,590)		-
Increase (decrease) in:
Increase (decrease) in:
Accounts payable		376,673			(143,703	)
Accounts payable		(142,275)		29,094
Accrued expenses		86,732			35,563
Accrued expenses		121,708		146,108
Billings in excess of costs and estimated
Related party payables		-		(2,120)
earnings on uncompleted contracts		(300,820	)		(103,076	)
Billings in excess of costs and estimated
Net cash used in operating activities		(33,888	)		(120,361	)
earnings on uncompleted contracts		(51,620)		-
Cash flows from investing activities:
Net cash used in operating activities		(9,135)		(67,565)
Payments received on note receivable		-			-
Cash flows from investing activities:
Purchase of property and equipment		(329	)		(5,411	)
Issuance of note receivable		-		(36,667)
Net cash used in investing activities		(329	)		(5,411	)
Payments received on note receivable		36,667		-
Cash flows from financing activities:
Purchase of property and equipment		(98,347)		-
Payments on related party payable		-			-
Net cash used in investing activities		(61,680)		(36,667)
Payments on long-term debt		(415,000	)		(95,562	)
Cash flows from financing activities:
Proceeds from issuance of debt		400,000			-
Checks in excess of cash		-		17,541
Issuance of common stock		304,250			382,500
Payments on related party payable		(36,667)		36,667
Net cash provided by financing activities		289,250			286,938
Payments on long-term debt		(158,350)		-
Net increase in cash		255,033			161,166
Issuance of common stock		776,500		49,000
Cash, beginning of period		517,493			217,783
Net cash provided by financing activities		581,483		103,208
Cash, end of period	$	772,526			378,949
Net increase (decrease) in cash		510,668		(1,024)
Cash, beginning of period		217,783		1,024
Cash, end of period	$	728,451		-

The accompanying notes are an integral part of these financial statements

COMCAM INTERNATIONAL, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2011

Note 1 – Organization and Summary of Significant Accounting Policies

Organization

The consolidated financial statements consist of Comcam International, Inc. (Comcam) and its wholly owned subsidiary Pinnacle Integrated Systems, Inc. (Pinnacle). Collectively, these entities are referred to as “the Company”.

Comcam International, Inc. was organized under the laws of the state of Delaware on September 19, 1998. The Company’s operations consist primarily of the research and development of advanced compact video systems that utilize built-in digital compression technology. Pinnacle is a security systems integrator focused on correctional facilities across the United States, providing turnkey system design and installation, maintenance contracts, and field support technicians.

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared by management in accordance with the instructions in Form 10-Q and, therefore, do not include all information and footnotes required by generally accepted accounting principles and should, therefore, be read in conjunction with the Company’s Form 10-K for the year ended December 31, ~~2009~~2010, filed with the Securities and Exchange Commission. These statements do include all normal recurring adjustments which the Company believes necessary for a fair presentation of the statements. The interim operations are not necessarily indicative of the results to be expected for the full year ended December 31, ~~2010~~2011.

Additional Footnotes Included By Reference

Except as indicated in the following Notes, there have been no other material changes in the information disclosed in the notes to the financial statements included in the Company’s Form 10-K for the year ended December 31, ~~2009~~2010, filed with the Securities and Exchange Commission. Therefore, those footnotes are included herein by reference.

Note 2 – Going Concern

As of ~~September~~March 3031, ~~2010~~2011, the Company has negative working capital, ~~a stockholders’ deficit,~~ and has incurred losses since inception. These factors taken alone raise substantial doubt about the Company’s ability to continue as a going concern. However, management is in the process of procuring additional financing to expand marketing efforts and product development which actions, if successful, will enable the Company to continue as a going concern. Nevertheless, there can be no assurance that sufficient financing will be available to the Company to successfully pursue its marketing and product development efforts.

COMCAM INTERNATIONAL, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2011

Note 3 – Long-Term Debt

Long-term debt consists of the following:

		September 30,	December 31,
		March 31, 2011 (Unaudited)	December 31, 2010 (Audited)
		2010	2009
		(Unaudited)	(Audited)
Note payable to Robert Betty, bearing interest at
3%, secured by the common stock and assets of
Pinnacle, and due in five monthly installments of
$200,000, beginning February 15, 2010. The Company is
$200,000, beginning February 15, 2010.	$	-	841,650
in default of the agreement.	$	841,650	1,000,000
Notes payable to Paul Higbee, bearing interest
Notes payable to Paul Higbee, bearing interest at 8%, due
at 8%, due March 2012, secured by the intellectual
March 2012, secured by the intellectual property of the
property of the Company.		465,000	465,000
Company.		465,000	465,000
Note payable to Doug Bartek, bearing interest at
Unsecured note payable to Global Megatrend, bearing
18%, secured by the assets and common stock of
interest at 7.5% and due on demand. The note may be
Pinnacle, due in four quarterly installments of
converted to common shares of the Company, at the option
$100,000 , beginning May 2011		400,000	-
of the holder, based on certain terms related to
Unsecured note payable to Global Megatrend,
outstanding shares and per share prices. The Company is in
bearing interest at 7.5% and due December 2012.
default of the agreement.		176,568	176,568
The note may be converted to common shares of
Convertible debenture to HNI, LLC of $125,000 bearing
the Company, at the option of the holder, based
interest at 12%, and due on demand.		-	125,000
on certain terms related to outstanding shares
		1,483,218	1,766,568
and per share prices.		176,568	176,568
Less current portion		(1,018,218)	(1,766,568)
		1,041,568	1,483,218
	$	465,000	-
Less current portion		(865,000)	(841,650)
	$	176,568	641,568

Note 4 – Stock Benefit Plans

As of May 18, 2010 the Company terminated its previous stock benefit plan established on May 3, 2007. On May 28, 2010 the Company adopted a new stock benefit plan (the Plan) whereby it may issue common stock or grant common stock options to employees or other individuals, including consultants or advisors, who contribute to the Company’s success. A total of 2,000,000 shares of common stock are subject to the Plan’s provisions. As of September 30, 2010 no stock has been optioned, issued or granted under the Plan.

COMCAM INTERNATIONAL, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

~~September~~March 3031, ~~2010~~2011

Note 54 – Supplemental Cash Flow Information

During the ~~nine~~three months ended ~~September~~March 3031, ~~2010~~2011, the Company:

· Issued 1352,~~363,930~~000 shares of common stock in ~~exchange~~satisfaction ~~for~~of $~~438~~110,~~405~~475 of ~~long-term~~accrued ~~debt,~~expenses ~~accounts~~and ~~payable~~$47,925 ~~and~~of ~~accrued~~deferred ~~expenses~~stock compensation.

· Issued 1800,~~530,~~000 shares of common stock in exchange for ~~services~~$352,000 ~~rendered~~of tolong-term ~~the~~debt, ~~Company~~$14,189 inof ~~the~~accrued ~~amount~~expenses, and recognized debt extinguishment income of $~~390~~88,~~000~~839. The debt extinguishment income was recorded as an increase in additional paid-in capital due to the related party nature of the transaction.

~~· Issued~~During ~~3,106,000~~the ~~shares~~three ofmonths ~~common~~ended ~~stock~~March in31, ~~exchange for $776~~2010,~~500~~ inthe ~~cash.~~Company:

· ~~Recognized~~Issued ~~debt~~508,200 ~~extinguishment~~shares ~~income~~ of ~~$13,725~~common ~~from~~stock ~~the~~in ~~discharge~~exchange for $127,050 of ~~certain~~accrued ~~accounts~~interest ~~payable~~expense.

~~· Cancelled~~During the ~~stock~~three ~~subscription~~months ~~receivable~~ended ofMarch 31, 2011 and 2010, cash paid for interest was $10 and $9,~~000.~~438 respectively, and no amounts were paid for income taxes.

~~During~~In April 2011, the ~~nine~~Company ~~months~~entered ~~ended~~into ~~September~~a ~~30,~~letter ~~2010~~of ~~and~~intent ~~2009,~~to ~~cash~~acquire ~~paid~~1st ~~for~~Choice ~~interest~~Security ~~was~~Solutions ~~$23~~of Georgia,~~300~~ Inc. in a stock and ~~$0,~~cash ~~respectively~~transaction expected to close in June 2011.

Note 5 – Common Stock Options and Warrants

Common stock options and warrants consist of:

				Exercise
	Number of			Price
	Options	Warrants		Per Share
Outstanding at January 1, 2011	-	-	$	-
Granted, vested, and excercisable	885,000	100,000		.50
Outstanding at March 31, 2011	885,000	100,000	$	.50

Note 6 – Subsequent Events

~~The~~In April 2011, the Company ~~has~~entered ~~evaluated~~into ~~subsequent~~a ~~events~~secured ~~from~~promissory ~~the~~note ~~balance~~wherein ~~sheet~~it ~~date~~borrowed ~~through~~$50,000 ~~the~~for ~~date~~a ~~the~~period ~~financial~~of ~~statements~~18 ~~were~~months, ~~issued~~including interest at 12% per annum. The ~~Company~~lender iswas ~~not~~also ~~aware~~granted oftwo ~~any~~five-year ~~subsequent~~warrants ~~events~~to ~~which~~purchase ~~would~~up ~~require~~to ~~recognition~~220,000 orshares ~~disclosure~~of incommon ~~the~~stock ~~financial~~at ~~statements~~$0.60 for 100,000 warrants and $0.75 for 120,000 warrants.

In April 2011, the Company entered into a letter of intent to acquire 1^st Choice Security Solutions of Georgia in a stock and cash transaction expected to close in June 2011.

The Company has evaluated subsequent events from the balance sheet date through the date the financial statements were issued and determined there were no additional items to disclose.

COMCAM INTERNATIONAL, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2011

Note 7 – Recent Accounting Pronouncements

In ~~April 2010~~January 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2011-01 (“ASU”) ~~No. 2010~~2011-~~13,~~01) ~~“Effect~~Receivables of(Topic ~~Denominating~~310): ~~the~~Deferral ~~Exercise Price~~ of athe ~~Share-Based~~Effective ~~Payment~~Date ~~Award~~of inDisclosures ~~the~~about ~~Currency~~Troubled ofDebt ~~the~~Restructurings ~~Market~~ in ~~Which~~Update ~~the~~No. ~~Underlying Equity Security Trades” (“ASU~~ 2010-~~13”)~~20. ASU ~~2010~~2011-1301 ~~addresses~~temporarily delays the ~~classification~~effective date of athe ~~share-based~~disclosures ~~payment~~about ~~award~~troubled ~~with~~debt anrestructurings. The ~~exercise~~effective ~~price~~date ~~denominated in the currency~~ of ~~a market in which~~ the ~~underlying~~new ~~equity~~disclosures ~~security~~about ~~trades.~~troubled ~~FASB~~debt ~~Accounting~~restructurings ~~Standards~~for ~~Codification~~public ~~(“ASC”)~~entities ~~Topic~~and ~~718 was amended to clarify that a share-based payment award with an exercise price denominated in~~ the ~~currency~~guidance offor adetermining ~~market~~what inconstitutes ~~which~~ a ~~substantial~~troubled ~~portion~~debt ofrestructuring ~~the~~will ~~entity’s~~then ~~equity securities trade shall not~~ be ~~considered to contain a market, performance, or service condition~~coordinated. ~~Therefore~~ Currently, ~~such~~the anguidance ~~award~~ is ~~not~~anticipated to be ~~classified as a liability if it otherwise qualifies for equity classification. The amendments in ASU 2010-13 are~~ effective for ~~fiscal~~interim ~~years,~~ and ~~interim~~annual periods ~~within~~ending ~~those fiscal years, beginning on or~~ after ~~December~~ June 15, ~~2010, with early application permitted~~2011. The WeCompany dodoes not ~~anticipate~~expect ~~that~~ the ~~adoption~~provisions of ~~this~~ASU ~~guidance~~2011-01 ~~will~~to have a material ~~impact~~effect on ~~our~~its financial position, ~~and~~ results of operations. or cash flows.

In ~~February 2010~~October 2009, the FASB issued Accounting Standards Update (“ASU”) No. ~~2010~~2009-0913, Multiple-Deliverable Revenue Arrangements, or “~~Amendments~~ASU to2009-13.” ~~Certain~~ASU ~~Recognition~~2009-13 establishes the accounting and ~~Disclosure~~reporting ~~Requirements”~~guidance ~~(“ASU~~for ~~2010~~arrangements that include multiple revenue-~~09”)~~generating activities, ~~which~~and ~~amends~~provides ~~ASC~~amendments ~~Topic~~to ~~855~~the criteria for separating deliverables, ~~“Subsequent~~and ~~Events~~measuring and allocating arrangement consideration to one or more units of accounting.” The amendments toin ~~ASC~~ASU ~~Topic~~2009-13 ~~855~~also doestablish ~~not~~a ~~change~~hierarchy ~~existing~~for ~~requirements~~determining tothe ~~evaluate~~selling ~~subsequent~~price ~~events,~~of ~~but:~~a ~~(i) defines~~deliverable. Enhanced disclosures are also required to provide information about a ~~“SEC~~vendor’s ~~Filer,”~~multiple-deliverable ~~which~~revenue wearrangements, ~~are;~~including ~~(ii) removes~~information about the ~~definition~~nature and terms of athe ~~“Public~~arrangement, ~~Entity”;~~significant deliverables, and ~~(iii) for~~the ~~SEC~~vendor’s ~~Filers,~~performance ~~reverses~~within arrangements. The amendments also require providing information about the ~~requirement~~significant judgments made and changes to ~~disclose~~those judgments and about how the ~~date~~application ~~through~~of ~~which~~the ~~subsequent~~relative ~~events~~selling-price ~~have~~method ~~been~~affects ~~evaluated~~the timing or amount of revenue recognition. The amendments in ASU ~~2010~~2009-0913 ~~was~~are effective prospectively for usrevenue ~~upon~~arrangements ~~issuance~~entered into or materially modified in fiscal years beginning on or after June 15, 2010, or January 1, 2011 for us. ~~This~~The ~~guidance~~adoption of ASU 2009-13 did not have a material impact on our financial position ~~and~~or results of operations.

In ~~January~~ July 2010, the FASB issued ASU No. 2010-~~06,~~20 “~~Improving~~ Disclosures about ~~Fair~~the ~~Value~~credit ~~Measurements”~~quality ~~(“ASU 2010-06”). ASU 2010-06 requires new disclosures for (i) transfers~~ of ~~assets~~financing ~~and~~receivables ~~liabilities in~~ and ~~out of levels one and two fair value measurements, including a description of~~ the ~~reasons~~allowance for ~~such~~credit ~~transfers~~losses”, ~~and~~which ~~(ii) additional~~requires ~~information~~expanded in the reconciliation for fair value measurements using significant unobservable inputs (level three). This guidance also clarifies existing disclosure requirements including (i) the level of disaggregation used when providing fair value measurement disclosures ~~for each class of assets and liabilities and (ii) the requirement to provide disclosures~~ about the ~~valuation~~credit ~~techniques~~quality ~~and~~of ~~inputs~~an ~~used~~entity’s tofinancing ~~measure~~receivables ~~fair value for both recurring~~ and ~~nonrecurring~~its ~~fair~~allowance ~~value measurements~~ for ~~level~~credit ~~two~~loss ~~and~~on ~~three~~a ~~assets~~disaggregated ~~and liabilities~~basis. This ASU ~~2010-06~~ is effective for ~~interim and~~ annual reporting periods ~~beginning~~ending ~~after~~on ~~December 15,~~or ~~2009, except for the disclosures about activity in the roll forward for level three fair value measurements, which is effective for fiscal years beginning~~ after December 15, ~~2010~~2011. The adoption of this ~~guidance~~ASU ~~has~~did not ~~had~~have a material impact on ~~our~~the ~~financial~~Company’s ~~position~~consolidated ~~and~~financial ~~results of operations~~statements.

~~Management~~In ~~believes~~April 2010, the ~~impact~~Financial ofAccounting ~~other~~Standards ~~recently~~Board (“FASB”) issued ~~standards~~Accounting ~~and~~Standards ~~updates~~Update (“ASU”) No. 2010-13, “Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades” (“ASU 2010-13”). ASU 2010-13 addresses the classification of a share-based payment award with an exercise price denominated in the currency of a market in which ~~are~~the ~~not~~underlying ~~yet~~equity ~~effective,~~security ~~will~~trades. ~~not~~FASB ~~have~~Accounting Standards Codification (“ASC”) Topic 718 was amended to clarify that a ~~material~~share-based ~~impact~~payment onaward with an exercise price denominated in the ~~Company~~currency of a market in which a substantial portion of the entity’s ~~consolidated~~equity ~~financial~~securities ~~position~~trade shall not be considered to contain a market, ~~results~~performance, ofor ~~operations~~service condition. Therefore, such an award is not to be classified as a liability if it otherwise qualifies for equity classification. The amendments in ASU 2010-13 are effective for fiscal years, and interim periods within those fiscal years, beginning on or ~~cash~~after ~~flows~~December 15, ~~upon~~2010. The adoption of this guidance will not have a material impact on our financial position and results of operations.

Other pronouncements issued by the FASB or other authoritative accounting standards groups with future effective dates are either not applicable or are not expected to be significant to the financial statements of the Company.

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management’s Discussion and Analysis of Financial Condition and Results of Operations and other parts of this quarterly report contain forward-looking statements that involve risks and uncertainties. Forward-looking statements can be identified by words such as “anticipates,” “expects,” “believes,” “plans,” “predicts,” and similar terms. Forward-looking statements are not guarantees of future performance and our actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include but are not limited to those discussed in the subsection entitled Forward-Looking Statements and Factors That May Affect Future Results and Financial Condition below. The following discussion should be read in conjunction with our financial statements and notes thereto included in this report. Our fiscal year end is December 31. All information presented herein is based on the three ~~and nine~~ month ~~periods~~period ended ~~September~~March 3031, ~~2010~~2011.

Discussion and Analysis

Our financial condition and results of operations depend primarily on revenue generated from the sale of our products and specialized services in addition to our ability to realize additional debt or equity financing. We can provide no assurance that revenue going forward will provide sufficient cash flows to sustain our operations though revenue approximating that required to sustain operations is anticipated ~~through~~in ~~our~~ fiscal year ~~end~~2011. Further, although we have no commitments for financing we remain in the process of procuring additional equity financing as we seek to redress any shortfall in cash flows to sustain operations while seeking to expand our business.

~~Summary~~Business

~~The~~We ~~Company~~have istwo ~~both~~operating adivisions. ~~network~~One ~~solutions~~focuses ~~innovator~~on ~~and~~product adevelopment, ~~provider~~manufacturing ~~of fusion technologies for security products~~ and ~~modern~~sales ~~networks.~~world-wide ~~Our~~while ~~proprietary~~the ~~digital~~other ~~wireless~~focuses ~~camera~~on ~~systems~~the ~~and security~~ integration ~~solutions~~of ~~address complex~~ command- and- control ~~applications~~systems for ~~rapid-deployment~~correctional ~~military~~facilities ~~situations,~~across ~~borders,~~the ~~ports,~~United ~~airports, and detention facilities~~States.

Our product division has developed a video fusion platform that adds next generation, real-time, interactive command-and-control capabilities to legacy security systems for greater performance at lower cost. The platform seamlessly integrates a suite of analytics, ~~and~~including third-party security solutions – access control, biometrics, radio frequency identification (RFID), chemical detection and seismic detection – to improve real-time decision -making for critical events over any wireless network. WeOur ~~accomplish~~products ~~this~~have ~~through~~been ~~the~~deployed ~~sale~~with orthe ~~licensing~~Department of: i)Defense, ~~intelligent~~Immigration ~~camera~~& Customs Enforcement, and ~~micro-server~~many ~~devices,~~other ~~ii)~~law enforcement and intelligence agencies in addition to businesses across a ~~suite~~wide range of ~~software~~industries. ~~and~~On ~~software~~our ~~toolkits~~own, ~~for~~or ~~command-and-control,~~working ~~mobile~~with ~~display,~~prime ~~and~~government ~~storage/data~~contractors ~~management~~like DRS, Motorola, and ~~iii)~~Siemens, ~~specialized~~our ~~"Intelligent~~products ~~Video~~are ~~Analysis"~~deployed ~~software~~in ~~applications~~such ~~using~~diverse ~~biometrics,~~locales ~~sensors,~~as ~~motion~~the ~~detection/tracking~~John F. Kennedy International Airport, ~~access~~isolated ~~control~~sections of the Texas-Mexico border, and ~~other~~remote ~~functions~~mountain passes in Afghanistan.

~~The~~Our ~~Company’s~~systems ~~applications~~division ~~have~~acts ~~been~~as ~~deployed with~~ the ~~Department~~general ofcontractor ~~Defense~~or ~~(DOD),~~plays ~~Federal~~a ~~Bureau~~key ofsupport ~~Investigation~~role ~~(FBI),~~to ~~Immigration~~leading &government ~~Customs~~integrators. ~~Enforcement~~Our ~~(ICE),~~focus ~~and~~to ~~many~~date ~~other~~has ~~law~~been ~~enforcement~~on installing and ~~intelligence~~integrating ~~agencies~~security systems in ~~addition~~juvenile to ~~businesses~~super-maximum ~~across~~security acorrectional ~~wide~~facilities. ~~range~~We ofenable ~~industries.~~our Onclients ~~our~~to ~~own~~reach orfurther ~~working~~operational ~~with~~excellence ~~prime~~by ~~government~~providing ~~contractors~~a ~~like~~complete ~~DRS,~~range ~~Motorola,~~of ~~and~~security ~~Siemens,~~integration ~~our~~services. ~~products~~In ~~are~~the ~~deployed~~past inthree ~~such~~years ~~diverse~~we ~~locales~~have ascompleted ~~the~~more ~~John~~than F.15 ~~Kennedy~~security ~~International~~integration ~~Airport~~projects, ~~isolated~~with ~~sections~~the oflargest topping $4.2M. We have the ~~Texas-Mexico~~skill ~~border,~~set and ~~remote~~the ~~mountain~~resources ~~passes~~to successfully complete projects in ~~Afghanistan~~the $10M-$15M range.

11Business Development Strategy

~~Our~~We ~~business~~are ~~expanded~~pursuing innumerous ~~2009~~new ~~with~~domestic ~~our~~and ~~acquisition~~international ofsales ~~Pinnacle~~opportunities ~~Integrated~~intended ~~Systems,~~to ~~Inc.~~increase ~~(“Pinnacle”),~~revenue aby ~~security~~leveraging our product and systems ~~integrator~~divisions ofto ~~correctional~~provide ~~facilities~~turn-key solutions across ~~the~~a ~~United~~spectrum ~~States.~~of ~~Pinnacle~~applications ~~provides~~within ~~turnkey~~the ~~system~~security ~~design~~industry. ~~and~~While ~~installation,~~expanding ~~maintenance~~marketing ~~contracts,~~efforts ~~and~~to ~~field~~reach ~~support~~new ~~technicians.~~customers Aswe acontinue ~~systems~~to ~~integrator~~focus ~~Pinnacle~~on ~~can~~offering ~~take~~our ~~the~~services ~~role~~as ofan ~~the~~original ~~prime~~equipment ~~contractor~~manufacturer or(OEM) ~~can~~for ~~play~~strategic aresellers, ~~key~~in ~~support~~order ~~role~~ to ~~leading~~serve ~~government~~as ~~integrators.~~a ~~Over~~research ~~the~~and ~~past~~development ~~three~~partner, ~~years~~and ~~Pinnacle~~to ~~has~~develop ~~completed~~a ~~more~~network ~~than~~of ~~15 projects~~dealers, ~~with~~resellers ~~the~~and ~~largest~~system ~~topping~~integrators ~~$4.2~~with ~~million,~~differing ~~utilizing~~targeted amarket ~~skill~~expertise. ~~set~~Meanwhile ~~and~~we ~~the~~continue ~~resources~~ to ~~successfully~~service ~~complete~~existing ~~projects~~customers inwith ~~the~~our ~~$10-$15~~products ~~million~~and ~~range~~services.

Product Division

We intend to leverage pilot installations on the US/Mexico border, the Port of Philadelphia, and with Immigration and Customs Enforcement to focus on closing new proposals and contracts with the Department of Homeland Security. The key to this line of business is a value added reseller (VAR) agreement signed with DRS in 2010 offering an off-the-shelf advanced thermal tracking solution to be bundled with our microserver and software algorithms which addresses a major US initiative to fight border drug trafficking.

We are also focused on transforming non-recurring engineering contracts that utilize our hardware and software designs into opportunities to develop a recurring royalty model. Our near term intention is to take advantage of certain installations that utilize our cloud computing platform which allows franchise operators and large retail chains to improve remote operations management.

We also intend to develop a program to monetize our patents related to the integration of live video and analytics through a web portal used to make real time command and control decisions.

Systems Division

We are focused on pursuing new contracts related to the incremental integration of security measures utilized by correctional facilities. Our business has been limited in the past by an inability to secure performance bonds at a reasonable cost. We have recently overcome this limitation and going forward we are confident in our ability to procure new contracts. In addition, we have expanded our highly profitable long-term maintenance agreement program to existing and future integration customers with a goal of establishing a recurring revenue stream from this business unit.

Mergers and Acquisitions

We intend to continue to seek out the acquisition of companies and products that add synergistic distribution partners and broader application integration. Our intention is to target companies with intellectual properties in biometric algorithms, RFID sensors, and prison perimeter offerings.

During April of this year we announced that we had entered into a letter of intent to acquire all of the issued and outstanding shares of 1st Choice Security Solutions of Georgia (1st Choice), a leading OEM supplier of ultra-long range RFID technology in a stock and cash transaction expected to close June 2011.

Our business development strategy is prone to significant risks and uncertainties which can have an immediate impact on efforts to realize net cash flow and deter future prospects of revenue growth. We have a limited history of generating revenue which cannot be viewed as an indication of continued growth and a historical record of incurring losses. Should we be unable to consistently generate revenue and reduce or stabilize expenses on a consolidated basis to the point where we can realize net cash flow, such failure will have an immediate impact on our ability to continue our business operations.

Our financial condition and results of operations going forward will continue to depend primarily on revenue generated from the sale of specialized services and our ability to realize additional debt or equity financing. We can provide no assurance that future revenue will provide sufficient cash flow to sustain operations although the achievement of this milestone is anticipated in the near term. Further, we have no immediate commitments for additional financing though management is committed to procuring the capital required to develop our business.

Results of Operations

During the ~~nine~~three month period ended ~~September~~March 3031, ~~2010~~2011, we were engaged in (i) ~~the~~developing ~~ongoing development and sale of~~ our Internet Protocol remote control platform cameras, micro servers, associated software, and unique end-to-end network solutions, (ii) providing turnkey system design and installation, maintenance contracts, and field support technicians ~~through~~to ~~Pinnacle~~correctional facilities, (iii) ~~entering~~completing ~~into~~debt afinancing ~~joint~~arrangements, ~~venture~~(iv) ~~agreement~~securing ~~intended to offer~~ a ~~turnkey~~performance ~~franchise~~bond ~~management system as a monthly service to the restaurant industry,~~ and (iv) satisfying continuous public disclosure requirements.

Revenue

Revenue for the three months ended ~~September~~March 3031, ~~2010~~2011, increased to $1,~~028~~381,~~863~~531 from $1947,~~620~~540 for the three months ended ~~September~~March 3031, ~~2009. Revenue for the nine months ended September 30,~~ 2010, ~~increased~~an toincrease ~~$2,527,387~~of ~~from $18,130 for the nine months ended September 30, 2009~~46%. The increase in revenue over the comparable ~~periods~~period is ~~primarily~~ due to ~~Pinnacle’s~~the ~~sales~~procurement inof ~~the~~new ~~current~~contracts ~~periods~~by our systems division. We expect to continue to increase revenues in future periods through anthe ~~increase~~sale inof ~~(i)~~services ~~Pinnacle’s sales~~ to correction facilities and ~~(ii) sales of our next generation~~ video products.

Cost of revenue for the three months ended ~~September~~March 3031, ~~2010~~2011, was $~~682~~1,~~082~~050,330 compared to $1710,~~200~~678 for the three months ended ~~September~~March 3031, ~~2009. Cost of revenue for the nine months ended September 30,~~ 2010, ~~was~~an ~~$1,881,195~~increase ~~compared~~of ~~to $4,200 for the nine months ended September 30, 2009~~48%. The increase in the cost of revenue in the current ~~periods~~period can be primarily attributed to the increase in ~~costs~~revenue ofover ~~materials~~the ~~sold~~comparative period. We expect ~~costs~~the cost of revenue to increase in future periods along with aincreases ~~corresponding increase~~ in ~~sales of our products~~revenue.

Gross profit for the three months ended ~~September~~March 3031, ~~2010~~2011, increased to $~~346~~331,~~781~~201 from $~~420~~236,862 for the three months ended ~~September~~March 3031, ~~2009. Gross profit for the nine months ended September 30,~~ 2010, ~~increased~~an toincrease ~~$646,192~~of ~~from $13,930 for the nine months ended September 30, 2009~~40%. The increase in gross profit over the comparable periods is primarily attributable to ~~increases~~the increase in revenue over the comparative periods. We expect that gross profit will continue to increase in ~~the~~correlation ~~near~~with ~~term~~anticipated ~~and~~increases ~~that~~in ~~gross profit as a percentage of~~ revenue ~~will~~over ~~remain relatively constant in~~ future periods.

~~Operating~~ Expenses

Operating expenses for the three months ended ~~September~~March 3031, ~~2010~~2011, increased to $~~343~~840,~~412~~078 from $~~191~~495,~~048~~559 for the three months ended ~~September~~March 3031, ~~2009. Operating expenses for the nine months ended September 30,~~ 2010, ~~increased~~an toincrease ~~$1,664,848~~of ~~from $306,657 for the nine months ended September 30, 2009~~70%. The increase in operating expenses over the comparative periods is primarily attributable to anstock ~~increase~~options ~~in general~~ and ~~administrative~~warrant ~~expenses~~compensation ~~to $341,550 from $191,048 for the three month periods and to $1,657,011 from $306,607 for the nine month periods~~expense. ~~The~~We ~~increase~~expect inthat operating expenses ~~over~~will ~~the~~remain ~~comparable~~relatively ~~periods~~constant ~~is primarily attributable to the operations of the Pinnacle, the Company’s wholly owned subsidiary. We expect operating expenses to decrease~~ in ~~future periods as~~ the ~~Company~~near ~~consolidates~~term ~~its~~after ~~day~~adjusting tofor ~~day~~any ~~operations~~stock ~~with~~options ~~that~~or ofwarrant ~~Pinnacle~~compensation expense.

12Depreciation and amortization expenses for the three months ended March 31, 2011 and 2010 were $60,775 and $126,258, respectively. The decrease in depreciation and amortization expenses over the respective periods can be attributed to a decrease in fixed assets as well as the amortization of intangible assets.

Depreciation and amortization expenses for the nine months ended September 30, 2010 and 2009 were $321,741 and $9,512, respectively. The increase in depreciation and amortization expenses in the nine month period ended can be attributed to the addition of fixed assets owned by Pinnacle as well as the amortization of intangible assets related to the acquisition of Pinnacle.

Other Income (Expense)

Interest income for the three months ended ~~September~~March 3031, ~~2010,~~2011 was $97355 as compared to $~~1,671~~419 for the three months ended ~~September~~March 3031, ~~2009~~2010. ~~Interest~~The decrease in interest income ~~for~~over the ~~nine~~comparable ~~months~~periods ~~ended~~is ~~September~~primarily ~~30,~~attributable ~~2010,~~to ~~was~~the ~~$667~~repayment asof ~~compared~~a note receivable. We expect that interest income will continue to ~~$1,671~~decrease ~~for~~in the ~~nine~~near ~~months~~term ~~ended~~as ~~September~~we ~~30,~~use ~~2009.~~current assets to maintain operations and meet obligations.

Interest expense for the three months ended September 30, 2010, decreased to $20,597 from $22,724 for the three months ended September 30, 2009. Interest expense for the nine months ended September 30, 2010, increased to $74,534 from $65,549 for the nine months ended September 30, 2009. The Company expects that losses from interest expense will fluctuate over future periods as management strives to reduce debt.13

~~Net~~Interest ~~Losses~~expense for the three months ended March 31, 2011 was $25,473 as compared to $27,671 for the three months ended March 31, 2010. The decrease in interest expense over the comparable periods can be attributed to the satisfaction of debt owed to a related party incurred in connection with the acquisition of our systems division. We expect that interest expense will continue to decrease in the near term as management strives to reduce debt pursuant to debt settlement or equity financing.

Net losses for the three months ended September 30, 2010, decreased to $17,131 from $211,681 for the three months ended September 30, 2009. Net losses for the nine months ended September 30, 2010, increased to $1,078,798 from $356,605 for the nine months ended September 30, 2009. The decrease in losses over the comparative three month periods is primarily due to the increase in revenues in the current three month period. The increase in losses over the comparative nine month periods can be attributed to the increase in general and administrative expenses in the current nine month period. We expect net losses to transition to net income in 2011 as indicated by the decrease in net losses in the current three month period. Loss

Net loss for the three months ended March 31, 2011, was $553,995 as compared to a net loss of $285,949 for the three months ended March 31, 2010, an increase of 94%. The increase in net loss over the comparable period can be attributed to stock options and warrant compensation expense during the current three month period. We expect to transition to net income in the near term with anticipated increases in revenue and consistency in operating expenses.

Income Tax Expense (Benefit)

~~The~~We ~~Company~~have ~~has~~ an income tax benefit resulting from net operating losses to offset any future operating profit. The net operating loss carry forwards at ~~September~~December 3031, 2010, was ~~over~~approximately $76,~~000~~195,000. These losses will begin to expire in the year 2019. The amount of net operating loss carry forwards that can be used in any one year can be limited by significant changes in the ownership ~~of the Company~~ and by the applicable tax laws which are in effect at the time such carry forwards are utilized. Some states do not allow us to file consolidated income tax returns and offset our net operating loss carryforwards against Pinnacle’s taxable income. When applicable, we record income taxes payable and income tax expense for these states.

Impact of Inflation

~~The~~We ~~Company~~believe ~~believes~~ that inflation has had a negligible effect on operations over the past three years. Weand ~~believe~~ that we can offset any inflationary ~~increases~~pressures ~~in the cost of materials and labor~~ by ~~increasing sales and~~ improving operating efficiencies.

Capital Expenditures

~~The~~We ~~Company~~ made no significant capital expenditures on property or equipment for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2010~~2011 or ~~2009~~2010.

Liquidity and Capital Resources

~~The~~At ~~Company~~March ~~had a working capital deficit of $556,489 as of September 30, 2010 and of $1,786,500 as of December~~ 31, ~~2009.~~2011 ~~The~~we ~~Company~~ had ~~current~~a ~~assets~~working ofcapital ~~$1,497,597~~deficit ~~and total assets~~ of $237,~~099,494 as of September 30, 2010~~183. Current assets consisted primarily of cash totaling $728,451 and accounts receivable of $673,559, estimated earnings in excess of billings on uncompleted contracts of $80,062 and pre-paid expenses of $15,525. Total assets include current assets and intangible assets of $407,648, property and equipment of $169,853 and other assets of $24,396. The Company had current liabilities of $2,045,086 and total liabilities of $2,537,737 as of September 30, 2010. Liabilities consisted primarily of accounts payable of $435, 959, accrued expenses of $182, 591, excess billings on uncompleted contracts of $417,318, the current portion of long-term debt of $1,018,218, and long-term debt of $465,000.

~~Cash~~At ~~flows~~March ~~used~~31, in2011we ~~operating~~had ~~activities~~current ~~were~~assets of $91,~~135~~780,954 ~~for~~that ~~the~~consisted ~~nine~~of ~~months~~cash ~~ended~~totaling ~~September 30~~$772, ~~2010~~526, asaccounts ~~compared~~receivable toof $67572,~~565 for the nine months ended September 30~~423, ~~2009.~~estimated ~~The~~earnings ~~decrease~~ in ~~cash~~excess ~~flows~~of ~~used~~billings inon ~~operating~~uncompleted ~~activities~~contracts ~~over~~of ~~the~~$428,829 ~~comparative~~and ~~periods~~prepaid ~~can be primarily attributed to the increase in~~ expenses ~~related~~of to$7,176. ~~the~~Total ~~issuance~~assets of ~~stock~~$2,498,616 ~~for~~include ~~services~~current ~~and~~assets ~~the~~as ~~increase~~well inas ~~accounts~~intangible ~~receivable.~~assets Weof ~~expect~~$399,062, toproperty ~~generate~~and ~~cash~~equipment ~~flow~~of ~~from~~$145,144 ~~operating~~and ~~activities~~other ~~over~~assets ~~the~~of ~~near term as net losses transaction to net income~~$173,456.

~~Cash~~At ~~flows~~March ~~used~~31, in2011 ~~investing~~we ~~activities~~had ~~were~~current liabilities of $611,~~680~~818,137 ~~for~~that ~~the~~consisted ~~nine~~of ~~months~~accounts ~~ended~~payable ~~September~~of 30$757, ~~2010~~826, asaccrued ~~compared~~expenses toof $36108,~~667~~208, ~~for~~excess ~~the~~billings ~~nine~~on ~~months~~uncompleted ~~ended~~contracts ~~September~~of 30$87,103 ~~2009.~~and ~~Cash flows used in investing activities in~~ the current ~~period~~portion ~~are~~of ~~from~~long-term ~~the~~debt ~~purchase~~ of ~~property~~$865,000. ~~and~~Total ~~equipment~~liabilities ~~which~~of ~~was~~$2,147,705 ~~partially~~include ~~offset~~current byliabilities ~~payments~~as ~~received~~well onas along-term ~~note~~debt ~~receivable.~~of ~~The~~$176,568 ~~Company~~and ~~expects~~accrued toexpenses ~~continue~~of ~~to use cash flows in investing activities in future periods~~$153,000.

~~Cash~~Total ~~flows~~stockholders’ ~~provided~~equity bywas ~~financing activities were~~ $~~581~~350,~~483~~911 ~~for the nine months ended September 30, 2010,~~ as ~~compared~~of toMarch ~~$103~~31,~~208~~ ~~for the nine months ended September 30, 2009~~2011. Cash flows provided by financing activities for the current period are attributable to the issuance of common stock for cash which was partially offset by a payment on long-term debt and payments to a related party. We expect to continue to provide cash flow from financing activities in the near term.

We may not have sufficient current assets or operational cash flow to meet our obligations or satisfy cash needs through 2010. Sources for other prospective financings may consist of loans from shareholders, the sale of equity, or loans from other sources. Although we have funded our cash needs from inception from revenue, sales of our equity, and a series of debt transactions we can provide no assurance that we will be able to obtain sufficient financing. If we are unable to increase our cash flows from operating activities or obtain sufficient financing, we may not be able to continue operations.

The Company has no lines of credit or other bank financing arrangements.

The Company has no commitments for future capital expenditures that were material at September 30, 2010.

The Company has a 2010 Benefit Plan registered under Form S-8 pursuant to which it could issue or option shares of its common stock to employees, directors, officers, consultants or advisors on the terms and conditions set forth therein. As of September 30, 2010, 2,000,000 shares remained available for issuance or grant under this plan.

The Company has no current plans for the purchase or sale of any plant or equipment.

The Company has no current plans to make any changes in the number of employees.

Cash flows used in operations were $33,888 for the three months ended March 31, 2011 as compared to $120,361 for the three months ended March 31, 2010. The ~~Company~~change ~~does~~in ~~not~~cash flows used in operations over the comparative periods can be primarily attributed to an increase in accounts payable. We expect to ~~pay~~have cash ~~dividends~~flows provided by operating activities with an anticipated transition to net income in the ~~foreseeable~~near ~~future~~term.

Cash flows used in investing activities were $329 for the three months ended March 31, 2011 as compared to $5,411 for the three months ended March 31, 2010. Cash flows used in investing activities in the current period are from the purchase of property and equipment. We expect to continue to use cash flows in investing activities in future periods.

Cash flows provided by financing activities were $289,250 for the three months ended March 31, 2011 as compared to $286,938 for the three months ended March 31, 2010. Cash flows provided by financing activities for the current period are attributable to the issuance of common stock for cash and debt instruments offset by payments on long-term debt. We expect to continue to have cash flow provided by financing activities.

We had certain long-term debt obligations as of March 31, 2011:

· Unsecured note payable to Global Convertible Megatrend, Ltd. (“Global Megatrend”) in the amount of $176,568 bearing interest at 7.5% and due in December 2012. The note may be converted to our common shares, at the option of the holder, based on certain terms related to outstanding shares and per share prices. Accrued interest at March 31, 2011 was $5,028.

· Secured note payable to Paul Higbee in the amount of $465,000 bearing interest at 8%, due on March 31, 2012. Accrued interest at March 31, 2011 was $37,200.

· Secured promissory note payable to Bartek Investments -1, Ltd. in the amount of $400,000 bearing interest at 18%, with quarterly principal payments of $100,000 due on May 25, 2011, August 25, 2011, and November 25, 2011 with a final payment of $172,000 on February 25, 2012. The obligation is secured by the stock of our wholly owned subsidiary, Pinnacle.

We have a 2010 Benefit Plan registered under Form S-8 pursuant to which we can issue or option shares of its common stock to employees, directors, officers, consultants or advisors on the terms and conditions set forth therein. As of March 31, 2011we had granted 885,000 stock options for a two year term at an exercise price of $0.50 a share under the Benefit Plan to the following individuals:

*Individuals*	*Options*
Dale (Reed) Adams	50,000
Ruairidh Campbell	100,000
Kevin Betty	55,000
Don Cavett	100,000
Nick Carman	60,000
Richard Delaney	50,000
Kelly Eitner	10,000
Andy Finkel	50,000
Amy Largent	50,000
Brad Largent	50,000
Christie Peters	15,000
Richard Reed	50,000
Carolyn Scheppner	50,000
Bernard Ritter	5,000
Jason Verdu	5,000
Michael Vidro	60,000
Greg Palammaci	100,000
Shawn Teigen	25,000
*Total*	*885,000*

Our current assets are sufficient to maintain operations but insufficient to return to product research, development or manufacture over the next twelve (12) months. We need a minimum of $3,000,000 in debt or equity financing to fund these product related activities, expand our marketing efforts or raise our performance bond capacity, all of which are integral to our business success. Unfortunately, we have no commitments or arrangements for this financing, though management is actively pursuing acceptable arrangements for prospective debt or equity placements. Our inability to obtain financing would have a material adverse affect on our business operations.

We have no lines of credit or other bank financing arrangements in place.

We have no commitments for future capital expenditures that were material at March 31, 2011.

We have no defined benefit plan or contractual commitment with any of our officers or directors.

We have no current plans for the purchase or sale of any plant or equipment.

We have no current plans to make any changes in the number of employees.

We do not expect to pay cash dividends in the foreseeable future.

Off-Balance Sheet Arrangements

As of ~~September~~March 3031, ~~2010,~~2011 ~~the~~we ~~Company~~have ~~has~~ no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to stockholders.

Going Concern

~~The~~Our ~~Company’s~~ auditors have expressed an opinion as to our ability to continue as a going concern as a result of an accumulated deficit of $67,~~280~~638,~~351~~342 as of December 31, ~~2009,~~2010 ~~which~~and ~~deficit~~a ~~has~~working ~~increased~~capital ~~to $7,359,149 as of September 30, 2010~~deficit. Our ability to continue as a going concern isremains ~~subject~~dependent toon ~~the~~an ability ~~of the Company~~ to ~~transition~~realize to net income ~~as anticipated in 2011~~ and/or obtaining ~~additional~~financing ~~funding~~ from outside sources. Management’s plan to address ~~the~~our ~~Company’s~~ ability to continue as a going concern includes (i) increases in revenue; (ii) decreases in general and administrative costs; (iii) financing from private placement sources; and (iv) converting outstanding debt to equity. Although ~~the~~we ~~Company~~believe ~~believes~~ that itwe will be able to remain a going concern, through the methods discussed above, there can be no assurances that such methods will prove successful.

Critical Accounting Policies

In Note 1 to the audited financial statements for the years ended December 31, ~~2009~~2010 and ~~2008~~2009, included in our Form 10-K, ~~the~~we ~~Company~~ discussed those accounting policies that are considered to be significant in determining the results of operations and its financial position. ~~The~~We ~~Company~~believe ~~believes~~ that the accounting principles utilized by itus conform to accounting principles generally accepted in the United States. The preparation of financial statements requires ~~Company~~our management to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. By their nature, these judgments are subject to an inherent degree of uncertainty. On an on-going basis, ~~the~~we ~~Company~~evaluate ~~evaluates~~ estimates. ~~The~~Our ~~Company~~estimates ~~bases~~are ~~its~~based ~~estimates~~ on historical experience and other facts and circumstances that are believed to be reasonable, and the results form the basis for making judgments about the carrying value of assets and liabilities. The actual results may differ from these estimates under different assumptions or conditions.

Revenue Recognition

~~The~~We ~~Company~~generate ~~generates~~ revenues from product sales, consulting, installation of security systems, and support and maintenance contracts. ~~The~~Our ~~Company’s~~ revenue recognition policy is as follows:

· Development and Delivery of Security Systems - Profits on long-term contracts are recorded primarily using the percentage of completion method for individual contracts. Estimated percentage of completion is determined on the basis of total costs expended as a percentage of total estimated costs. As ~~the~~our ~~Company's~~ long-term contracts extend over one or more years, revisions in cost and profit estimates are reflected in the accounting period that the revisions become known. ~~Because~~Due ofto the inherent uncertainties in estimating costs, it is at least reasonably possible that the estimates used will change within the near term.

o Contract costs include all direct materials, labor, and other costs. General and administrative costs are charged to expense as incurred. At the time a loss on a contract is expected, the entire amount of the estimated loss is recognized.

o The asset, "Costs and estimated earnings in excess of billings on uncompleted contracts," represents revenues earned in excess of amounts billed. The liability, "Billings in excess of costs and estimated earnings on uncompleted contracts," represents billings in excess of revenues earned.

Support and Maintenance Revenue – Revenue from support and maintenance agreements is recognized ratably over the term of the agreement, which in most instances is one year.

Service Revenue – Revenue from system upgrades is recognized as the services are performed. Revenue from training and development services is recognized as the services are performed.

Product Sales Revenue – Revenue from product sales is recognized at the time the product is shipped and invoiced and collectibility is reasonably assured. ~~The~~We ~~Company~~believe ~~believes~~ that revenue should be recognized at the time of shipment as title passes to the customer at the time of shipment.

Consulting Revenue – Revenues from consulting services are recognized when a consulting agreement is executed that establishes the amount and scope of service to be provided, the consulting services have been performed, and the Company has no additional rescission, refund, or customer satisfaction requirements, and collectibility of the amount billed is reasonably assured. 17

Consulting Revenue – Revenues from consulting services are recognized when a consulting agreement is executed that establishes the amount and scope of service to be provided, the consulting services have been performed, and we have no additional rescission, refund, or customer satisfaction requirements, and collectibility of the amount billed is reasonably assured.

Forward-Looking Statements and Factors That May Affect Future Results and Financial Condition

The statements contained in the section titled Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this current report, with the exception of historical facts, are forward-looking statements. Forward-looking statements reflect our current expectations and beliefs regarding our future results of operations, performance, and achievements. These statements are subject to risks and uncertainties and are based upon assumptions and beliefs that may or may not materialize. These statements include, but are not limited to, statements concerning:

· our anticipated financial performance;

· the sufficiency of existing capital resources;

· our ability to raise additional capital to fund cash requirements;

· uncertainties related to our business;

· increases in revenues;

· the volatility of the stock market and;

· general economic conditions.

We wish to caution readers that our operating results are subject to various risks and uncertainties that could cause our actual results to differ materially from those discussed or anticipated including the factors set forth in the section entitled Risk Factors included elsewhere in this report. We also wish to advise readers not to place any undue reliance on the forward-looking statements contained in this report, which reflect our beliefs and expectations only as of the date of this report. We assume no obligation to update or revise these forward-looking statements to reflect new events or circumstances or any changes in our beliefs or expectations, other than as required by law.

16 Stock-Based Compensation

We have adopted Accounting Standards Codification Topic (“ASC”) 718, (formerly SFAS No.123) (revised 2004) (SFAS No. 123R), Share-Based-Payment, which addresses the accounting for stock-based payment transactions in which an enterprise receives employee services in exchange for (a) equity instruments of the enterprise or (b) liabilities that are based on the fair value of the enterprise’s equity instruments or that may be settled by the issuance of such equity instruments.

We account for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with ASC 505. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services.

Recent Accounting Pronouncements

Please see Note 7 to our consolidated financial statements for recent accounting pronouncements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

In connection with the preparation of this report on Form 10-Q, an evaluation was carried out by ~~the~~our ~~Company’s~~ management, with the participation of the chief executive officer and the chief financial officer, of the effectiveness of ~~the~~our ~~Company’s~~ disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”)). Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Commission’s rules and forms and that such information is accumulated and communicated to management, including the chief executive officer and the chief financial officer, to allow timely decisions regarding required disclosures.

Based on that evaluation, ~~the~~our ~~Company’s~~ management concluded, as of the end of the period covered by this report, that ~~the~~our ~~Company’s~~ disclosure controls and procedures were effective in recording, processing, summarizing, and reporting information required to be disclosed, within the time periods specified in the Commission’s rules and forms, and that such information was accumulated and communicated to management, including the chief executive officer and the chief financial officer, to allow timely decisions regarding required disclosures.

Changes in Internal Control over Financial Reporting

There have been no changes in internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the period ended ~~September~~March 3031, ~~2010~~2011 that materially affected, or are reasonably likely to materially affect, ~~the~~our ~~Company’s~~ internal control over financial reporting.

1719

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 1A. RISK FACTORS

~~The~~Our ~~Company’s~~ operations and securities are subject to a number of risks. Below we have identified and discussed the material risks that we are likely to face. Should any of the following risks occur, they will adversely affect our business, financial condition, and/or results of operations as well as the future trading price and/or the value of our securities.

Risks Related to ~~the~~our ~~Company’s~~ Business

~~THE~~OUR ~~COMPANY’S~~ ABILITY TO CONTINUE AS A GOING CONCERN IS IN QUESTION

~~The~~Our ~~Company’s~~ auditors included an explanatory statement in their report on our consolidated financial statements for the years ended December 31, ~~2009~~2010 and ~~2008~~2009, stating that there are certain factors which raise substantial doubt about ~~the~~our ~~Company’s~~ ability to continue as a going concern. These factors include ~~limited~~an ~~revenue~~accumulated ~~generating~~deficit ~~activities in place,~~ and ~~losses~~working ~~since~~capital ~~inception~~deficit.

~~THE~~WE ~~COMPANY~~HAVE ~~HAS~~ A HISTORY OF LOSSES AND MAY INCUR LOSSES FOR THE FORESEEABLE FUTURE

~~The~~We ~~Company~~ had an accumulated deficit of over $78,~~000~~192,~~000~~337 as of ~~September~~March 3031, ~~2010~~2011 and a net operating loss. We do ~~not~~ expect tonet ~~achieve~~income ~~profitability~~ in the next twelve months ~~and~~but can provide no ~~assurances~~assurance ~~that~~to wethis ~~will~~end. ~~ever~~Should ~~achieve~~we ~~profitability~~realize ornet income in the ~~event~~near ~~that~~term we docan ~~achieve~~provide ~~profitability~~no assurance that we will be able to sustain ~~that~~net ~~profitability~~income over time.

~~IF THE COMPANY DOES NOT GENERATE SUFFICIENT CASH FLOW FROM OPERATIONS AND IS UNABLE TO OBTAIN ADDITIONAL CAPITAL TO OPERATE ITS BUSINESS,~~ WE MAY NOT BE ABLE TO ~~EFFECTIVELY~~DEVELOP ~~CONTINUE~~NEW ~~OPERATIONS~~ PRODUCTS

AsWe ofhave ~~September,~~historically ~~2010, the Company~~ had adifficulty ~~working~~producing ~~capital~~our ~~deficit~~products because of ~~$556,489. We do not expect to generate sufficient~~ cash flow ~~from~~shortages. ~~operations~~Though towe ~~cover~~have ~~our~~recently ~~expenditures~~resumed ~~until~~limited ~~2011.~~production ~~Until~~of ~~the~~our ~~point~~products, atour ~~which~~future ~~cash~~success ~~flow~~depends ~~from~~in ~~operations~~a ~~match~~significant ~~expenditures~~part weon ~~will~~our ~~have~~ability to ~~obtain~~evolve ~~additional~~our ~~working~~hardware ~~capital~~and ~~from~~software ~~debt~~and ~~or equity placements~~ to ~~effectively~~develop ~~continue~~and ~~our~~introduce ~~operations.~~new ~~However,~~products weand ~~have~~technologies noin ~~commitment~~response ~~for~~to ~~the~~market ~~provision of additional working capital~~demands. ~~Should~~If weadequate befunds ~~unable~~are tonot ~~secure~~available, ~~additional~~our ~~capital~~ability to ~~cover~~develop ~~our~~or ~~short~~enhance ~~fall~~products inand ~~cash~~services ~~flow,~~or ~~such~~otherwise ~~condition~~respond ~~would cause us~~ to ~~reduce~~competitive ~~expenditures~~pressures ~~which~~would ~~could~~be ~~have~~significantly ~~a material adverse effect on our business~~limited.

18THE VIDEO MONITORING SURVEILLANCE INDUSTRY IS SUBJECT TO RAPID TECHNOLOGICAL CHANGE AND OUR PRODUCTS COULD BECOME OBSOLETE AT ANY TIME

~~THE~~Evolving ~~COMPANY~~technology, ~~MAY~~updated ~~NOT~~industry BEstandards, ~~SUCCESSFUL~~and INfrequent ~~INTEGRATING~~new ~~THE~~product ~~BUSINESS~~and ~~OPERATIONS~~service OFintroductions ~~PINNACLE~~characterize ~~INTO~~the ~~OUR~~video ~~BUSINESS~~surveillance ~~OPERATIONS~~systems and security integration services markets; our products could become obsolete at any time. Competitors could develop products similar to or better than our own, ~~STIFLING~~finish ~~GROWTH~~development ~~AND~~of ~~DISRUPTING~~new ~~OUR~~technologies ~~BUSINESS~~in advance of our research and development, or be more successful at marketing new products, any of which factors may hurt our prospects for success.

~~The~~THE ~~Company’s~~MARKET ~~recent~~ACCEPTANCE ~~acquisition~~OF ofOUR ~~Pinnacle~~PRODUCTS ~~involves~~IS ~~the~~CRITICAL ~~integration~~TO ofOUR companies that have previously operated independently. Successful integration will depend on our ability to consolidate operations and procedures and to integrate Pinnacle’s management team with our own. If we are unable to do so, we may not realize the anticipated potential benefits of the acquisition, our business development could be stifled, and results of operations may suffer. Difficulties could include the loss of key employees, the disruption of Pinnacle’s ongoing businesses, and possible inconsistencies in standards, controls, procedures and policies. GROWTH

~~THE~~We ~~COMPANY~~generate ~~MAY~~revenue ~~NOT~~from BEthe ~~ABLE~~design TOand ~~DEVELOP~~sale ~~NEW~~of ~~PRODUCTS~~video surveillance systems and security integration services; therefore, market acceptance of our products is critical. If our customers do not accept or purchase our products, then our revenue, cash flow and/or operating results will be negatively impacted.

We have historically had difficulty producing our products because of cash flow shortages. Though we have recently resumed the production of our products, our future success depends in a significant part on our ability to evolve our hardware and software and to develop and introduce new products and technologies in response to market demands. If adequate funds are not available, the Company’s ability to develop or enhance products and services or otherwise respond to competitive pressures would be significantly limited.

THE VIDEO MONITORING SURVEILLANCE INDUSTRY IS SUBJECT TO RAPID TECHNOLOGICAL CHANGE AND THE COMPANY'S PRODUCTS COULD BECOME OBSOLETE AT ANY TIME

Evolving technology, updated industry standards, and frequent new product and service introductions characterize the video surveillance systems and security integration services markets; our products could become obsolete at any time. Competitors could develop products similar to or better than our own, finish development of new technologies in advance of the Company’s research and development, or be more successful at marketing new products, any of which factors may hurt our prospects for success.

THE MARKET ACCEPTANCE OF THE COMPANY’S PRODUCTS IS CRITICAL TO THE COMPANY’S GROWTH

The Company generates revenue from the design and sale of video surveillance systems and security integration services; therefore, market acceptance of our products is critical. If our customers do not accept or purchase our products, then our revenue, cash flow and/or operating results will be negatively impacted.

THE COMPANY COMPETES WITH LARGER AND BETTER-FINANCED CORPORATIONS

Competition within the international market for video surveillance systems and security integration services is intense. While the Company’s products are distinguished by next-generation innovations that are more sophisticated, flexible and cost effective than many competitive products currently in the market place, a number of entities offer video surveillance systems, and new competitors may enter the market in the future. Some of our existing and potential competitors have longer operating histories, greater name recognition, larger customer bases and significantly greater financial, technical and marketing resources than we do, including well known multi-national corporations.

THE COMPANY IS LARGELY DEPENDENT UPON FEW CUSTOMERS We have in the past, and may in the future lose our customers or a substantial portion of our business with one or more major customers. If we do not sell products to our existing customers in the quantities anticipated, or if our customers reduce or terminate their relationships with us, market perception of our products and technology, growth prospects, and financial condition and results of operations could be harmed. Any termination of our relationship with our largest customers or any other customers could materially reduce our revenue.

THE COMPANY DEPENDS UPON LIMITED SOURCE SUPPLIERS

The Company utilizes third party electronic assemblers for its board sets which the Company final assembles in its West Chester, Pennsylvania facility. Many components are purchased from such source suppliers as Freescale Semiconductor, and Analog Devices, Inc. We anticipate that the Company will continue to depend upon one or few manufacturers, as well as a limited number of source suppliers, which dependence, reduces the level of control we have and exposes us to significant risks such as inadequate capacity, late delivery, substandard quality and higher prices, all of which could adversely affect the Company’s business.

THE COMPANY’S SUCCESS DEPENDS ON THE COMPANY’S ABILITY TO ATTRACT AND RETAIN KEY PERSONNEL

The Company’s future success will depend substantially on the continued service and performance of Don Gilbreath, Robert Betty and other key personnel. We have relatively few senior personnel, and so the loss of Don Gilbreath, Robert Betty or any other key employees could have a material adverse effect on the Company’s business prospects, financial condition and results of operations. Our future success also depends on the Company’s ability to identify, attract, hire, train, retain and motivate technical, managerial and sales personnel. Competition for such personnel is intense, and we cannot assure that we will succeed in attracting and retaining such personnel. Our failure to attract and retain the necessary technical, managerial and sales personnel could have a material adverse effect on our business prospects, financial condition and results of operations.

MISAPPROPRIATION OF PROPRIETARY RIGHTS OR CLAIMS OF INFRINGEMENT OR LEGAL ACTIONS RELATED TO INTELLECTUAL PROPERTY COULD ADVERSELY IMPACT THE COMPANY'S FINANCIAL CONDITION

The Company's success depends significantly on protecting proprietary technology. Despite the Company's efforts to protect its proprietary rights, unauthorized parties may attempt to copy or otherwise obtain and use our technology or products. Monitoring unauthorized use of the Company's technology is difficult, and we cannot be certain that the steps we have taken will prevent misappropriation of our technology, particularly in foreign countries where the laws may not protect our proprietary rights as fully as in the United States.

In addition, from time to time, third parties may assert patent, copyright, trademark and other intellectual property rights claims against us with respect to existing or future products or technology. If there is a successful claim of infringement and the Company fails or is unable to develop non-infringing technology or license the infringed or similar technology on a timely basis, the Company's business and results of operations could be seriously harmed.

~~THE~~WE ~~COMPANY’S~~COMPETE ~~BUSINESS~~WITH ISLARGER ~~SUBJECT~~AND TOBETTER-FINANCED ~~GOVERNMENTAL REGULATIONS~~ CORPORATIONS

~~International,~~Competition ~~national~~within ~~and~~the ~~local~~international ~~standards~~market ~~set~~for byvideo ~~governmental~~surveillance ~~regulatory~~systems ~~authorities~~and ~~set~~security ~~the~~integration ~~regulations~~services byis ~~which~~intense. ~~communications~~While ~~are~~our ~~transmitted~~products ~~within~~are ~~and~~distinguished ~~across~~by ~~respective~~next-generation ~~territories.~~innovations ~~The~~that ~~Company's~~are ~~fixed~~more ~~and~~sophisticated, ~~mobile~~flexible ~~digital video cameras~~ and ~~communication~~cost ~~systems~~effective ~~are~~than ~~subject~~many tocompetitive ~~such~~products ~~regulation~~currently in ~~addition~~the ~~to national~~marketplace, ~~state~~a ~~and~~number ~~local~~of ~~taxation.~~entities ~~Our~~offer ~~products~~video ~~may~~surveillance ~~be required to meet Federal Communications Commission approval~~systems, ~~specifically~~and ~~for~~new ~~Classes~~competitors Amay &enter Bthe ofmarket ~~Part~~in ~~15 for~~ the ~~telephone~~future. ~~related~~Some ~~applications~~ of our ~~hardware~~existing ~~products. Further, climate change legislation~~ and ~~greenhouse~~potential ~~gas~~competitors ~~regulation~~have islonger ~~becoming~~operating ~~increasingly~~histories, ~~ubiquitous.~~greater ~~Although~~name ~~the~~recognition, ~~Company~~larger ~~successfully~~customer ~~operates~~bases ~~within~~and ~~current~~significantly ~~governmental~~greater ~~regulations~~financial, ittechnical isand ~~possible~~marketing ~~that~~resources ~~regulatory~~than ~~changes~~we ~~could~~do, ~~negatively~~including ~~impact~~well ~~our~~known ~~operations~~multi-national ~~and cause us to diminish or cease operations~~corporations.

~~THE~~WE ~~COMPANY’S~~ARE ~~PRODUCTS~~LARGELY ~~ARE~~DEPENDENT ~~SUBJECT~~UPON TOFEW ~~ENVIRONMENTAL~~CUSTOMERS We ~~LAWS~~have in the past, and may in the future lose our customers or a substantial portion of our business with one or more major customers. If we do not sell products to our existing customers in the quantities anticipated, or if our customers reduce or terminate their relationships with us, market perception of our products and technology, growth prospects, and financial condition and results of operations could be harmed. Any termination of our relationship with our largest customers or any other customers could materially reduce our revenue.

~~New~~WE ~~hazardous~~DEPEND ~~materials~~ON ~~restrictions~~ONE ~~have~~MANUFACTURER ~~been~~AND ~~and~~LIMITED ~~are~~SOURCE being sought in numerous jurisdictions worldwide. As these restrictions take effect, the Company may need to change the components it uses in certain key products. These components may be difficult to procure or more expensive than the components we currently use. As such, current and future environmental regulations could negatively impact our operations.SUPPLIERS

~~Risks~~Pennsylvania-based ~~Related~~Strategic Manufacturing Technologies, Inc. currently procures our components and manufactures our video surveillance systems. Our components are purchased for us from such source suppliers as Motorola, Inc., and Analog Devices, Inc. We anticipate that we will continue to depend upon one or few manufacturers, as well as a limited number of source suppliers, which dependence reduces the ~~Company’s~~level ~~Stock~~of control we have and exposes us to significant risks such as inadequate capacity, late delivery, substandard quality and higher prices, all of which could adversely affect our business. We currently have no agreement with Strategic Manufacturing Technologies, Inc. for the manufacture of our video surveillance systems.

~~THE~~If ~~COMPANY~~our ~~MAY~~suppliers ~~NEED~~were TOunable ~~RAISE~~to ~~ADDITIONAL~~provide ~~CAPITAL~~parts TOin ~~FUND~~the ~~OPERATIONS~~volumes ~~WHICH~~needed ~~COULD~~or ~~ADVERSELY~~at ~~AFFECT~~an ~~OUR~~acceptable ~~SHAREHOLDERS~~price, our manufacturer and we would have to identify and qualify acceptable replacements from alternative sources of supply. If we were unable to obtain these components in a timely fashion, we would likely not be able to meet demand. Any disruption of either component procurement or manufacturing delays could adversely affect our results of operations.

~~The~~OUR ~~Company~~SUCCESS ~~may~~DEPENDS ~~need~~ON toTHE ~~raise~~ABILITY ~~additional~~TO ~~capital~~ATTRACT toAND ~~fund~~RETAIN ~~operations~~KEY ~~until~~PERSONNEL such time as our revenues match our expenditures. We expect that revenue will match expenditures by 2011. Until the point at which cash flow from operations can match expenditures we may have to realize up to $3,000,000 additional capital for operations. Capital realized would be used for research and development expenses, marketing costs and general and administrative expenses. We have no commitment from any sources of financing to provide us with any needed capital requirements. Any equity financing will obligate us to issue additional shares of the Company’s common stock which will result in dilution to existing shareholders. If we are unable to obtain sufficient capital, then we will need to restrict or even cease operations, which actions would adversely affect our shareholders.

WeOur ~~incur~~future ~~significant~~success ~~expenses~~will asdepend asubstantially ~~result~~on the continued service and performance of Don Gilbreath, Robert Betty and other key personnel. We have relatively few senior personnel, and so the ~~Sarbanes-Oxley~~loss ~~Act~~of Don Gilbreath, Robert Betty or any other key employees could have a material adverse effect on our business prospects, financial condition and results of ~~2002~~operations. Our future success also depends on our ability to identify, ~~which~~attract, ~~expenses~~hire, train, retain and motivate technical, managerial and sales personnel. Competition for such personnel is intense, and we cannot assure that we will ~~continue~~succeed in attracting and retaining such personnel. Our failure to ~~negatively~~attract ~~impact~~and retain the necessary technical, managerial and sales personnel could have a material adverse effect on our business prospects, financial ~~performance~~condition and results of operations.

We incur significant legal, accounting and other expenses as a result of the Sarbanes-Oxley Act of 2002, as well as related rules implemented by the Commission, which control the corporate governance practices of public companies. Compliance with these laws, rules and regulations, including compliance with Section 404 of the Sarbanes-Oxley Act of 2002, has substantially increased our expenses and made some activities more time-consuming and costly than previously, which expenses continue to negatively impact our financial performance.

THE COMPANY’S STOCK PRICE IS VOLATILE

The market price for our common stock is subject to significant volatility and trading volumes are low. Factors affecting the Company’s market price could include:

~~· the~~MISAPPROPRIATION ~~Company’s~~OF ~~perceived~~PROPRIETARY ~~prospects;~~RIGHTS OR CLAIMS OF INFRINGEMENT OR LEGAL ACTIONS RELATED TO INTELLECTUAL PROPERTY COULD ADVERSELY IMPACT OUR FINANCIAL CONDITION

Our success also depends significantly on protecting proprietary technology. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy or otherwise obtain and use our technology or products. Monitoring unauthorized use of our technology is difficult, and we cannot be certain that the steps we have taken will prevent misappropriation of our technology, particularly in foreign countries where the laws may not protect our proprietary rights as fully as in the United States.

In addition, from time to time, third parties may assert patent, copyright, trademark and other intellectual property rights claims against us with respect to existing or future products or technology. If there is a successful claim of infringement and we fail or are unable to develop non-infringing technology or license the infringed or similar technology on a timely basis, our business and results of operations could be seriously harmed.

OUR BUSINESS IS SUBJECT TO GOVERNMENTAL REGULATIONS

International, national and local standards set by governmental regulatory authorities set the regulations by which communications are transmitted within and across respective territories. Our fixed and mobile digital video cameras and communication systems are subject to such regulation in addition to national, state and local taxation. Our products may be required to meet Federal Communications Commission approval, specifically for Classes A & B of Part 15 for the telephone related applications of our hardware products. Further, climate change legislation and greenhouse gas regulation is becoming increasingly ubiquitous. Although we successfully operate within current governmental regulations it is possible that regulatory changes could negatively impact our operations and cause us to diminish or cease operations.

OUR PRODUCTS ARE SUBJECT TO ENVIRONMENTAL LAWS

New hazardous materials restrictions have been and are being sought in numerous jurisdictions worldwide. As these restrictions take effect, we may need to change the components it uses in certain key products. These components may be difficult to procure or more expensive than the components we currently use. As such, current and future environmental regulations could negatively impact our operations.

Risks Related to our Stock

WE WILL NEED TO RAISE ADDITIONAL CAPITAL TO FUND AN EXPANSION OF OPERATIONS WHICH COULD ADVERSELY AFFECT OUR SHAREHOLDERS

We will need to raise additional capital to fund an expansion of operations up to $3,000,000. Capital realized would be used for research and development expenses, product manufacture, marketing costs and performance bonds. We have no commitment from any sources of financing to provide us with any needed capital requirements. Any equity financing will obligate us to issue additional shares of our common stock which would result in dilution to existing shareholders.

We incur significant expenses as a result of being REGISTERED WITH THE COMMISSION, which EXPENSES negatively impact our financial performance.

We incur significant legal, accounting and other expenses as a result of the Sarbanes-Oxley Act of 2002, as well as related rules implemented by the Commission, which control the corporate governance practices of public companies. Compliance with these laws, rules and regulations, including compliance with Section 404 of the Sarbanes-Oxley Act of 2002, as discussed in the following risk factor, has substantially increased our expenses, including legal and accounting costs, and made some activities more time-consuming and costly.

OUR STOCK PRICE IS VOLATILE

The market price for our common stock is subject to significant volatility and trading volumes are low. Factors affecting our stock price could include:

· our perceived prospects;

· negative variances in our operating results, and achievement of key business targets;

· limited trading volume in shares of ~~the~~our ~~Company’s~~ common stock in the public market;

· sales or purchases of large blocks of our stock;

· changes in, or ~~the Company’s~~ failure to meet, earnings estimates;

· changes in securities analysts’ buy/sell recommendations;

· differences between our reported results and those expected by investors and securities analysts;

· announcements of new contracts ~~by the Company~~ or our competitors;

· announcements of legal claims against us;

· market reaction to any acquisitions, joint ventures or strategic investments announced by us or our competitors;

· developments in the financial markets;

· general economic, political or stock market conditions.

In addition, our stock price may fluctuate in ways unrelated or disproportionate to our operating performance. The general economic, political and stock market conditions that may affect the market price of ~~the~~our ~~Company’s~~ common stock are beyond our control. The market price of ~~the~~our ~~Company’s~~ common stock at any particular time may not remain the market price in the future. In the past, securities class action litigation has been instituted against companies following periods of volatility in the market price of their securities. Any such litigation, if instituted against us, could result in substantial costs and a diversion of management’s attention and resources.

~~The~~OUR ~~Company’s~~STOCK ~~common~~IS ~~stock~~A isPENNY ~~currently~~STOCK ~~deemed~~AND, ~~to be “penny stock”~~THEREFORE, ~~which~~SHAREHOLDERS ~~makes~~MAY itFACE ~~more~~SIGNIFICANT ~~difficult~~RESTRICTIONS ~~for~~ON ~~investors~~THEIR toSTOCK ~~sell their shares.~~

~~The~~Our ~~Company’s~~stock ~~common~~differs ~~stock~~from ismany ~~and~~stocks ~~will~~in bethat ~~subject~~it tois ~~the~~a “"penny stock”." ~~rules~~The ~~adopted~~Commission ~~under~~defines ~~section~~a ~~15(g)~~penny stock in Rule 3a51-1 of the Exchange Act. ~~The~~as, ~~penny~~generally ~~stock~~speaking, ~~rules~~those ~~apply~~securities towhich ~~companies~~are ~~whose common stock is~~ not listed on ~~the~~either NASDAQ ~~Stock Market~~ or ~~other~~a national securities exchange and ~~trades~~are atpriced ~~less~~under ~~than~~ $5~~.00~~, ~~per~~excluding ~~share~~securities orof issuers that (a) have ~~tangible~~ net ~~worth~~tangible ofassets ~~less~~greater than $~~5,000,000 ($~~2~~,000,000~~ million if ~~the~~they ~~company~~have ~~has~~ been ~~operating~~in ~~for~~operation ~~three~~at orleast ~~more~~three years~~). These rules require~~, ~~among~~(b) ~~other~~have ~~things,~~net ~~that~~tangible ~~brokers~~assets ~~who~~greater ~~trade penny stock to persons other~~ than ~~“established~~$5 ~~customers”~~million ~~complete~~if ~~certain documentation, make suitability inquiries of investors and provide investors with certain information concerning trading~~ in ~~the~~operation ~~security,~~less ~~including~~than athree ~~risk disclosure document and quote information under certain circumstances. Many brokers have decided not to trade penny stocks because of the requirements of the penny stock rules and~~years, asor a(c) ~~result,~~average ~~the~~revenue ~~number~~ of ~~broker-dealers~~at ~~willing~~least to$6 ~~act~~million ~~as market makers in such securities is limited. If the Company remains subject to the penny stock rules~~ for ~~any significant period, it could have an adverse effect on~~ the ~~market,~~last ifthree ~~any, for the Company’s securities~~years. IfOTCBB ~~the Company’s~~ securities are ~~subject~~considered ~~to the~~ penny ~~stock~~stocks ~~rules,~~unless ~~investors~~they ~~will~~qualify ~~find~~for itone ~~more difficult to dispose~~ of the ~~Company’s securities~~exclusions.

2223

The Commission has adopted a number of rules to regulate penny stocks. These rules include, but are not limited to, Rules 3a5l-l, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6 and 15g-9 under the Exchange Act. Since our securities constitute a "penny stock" within the meaning of the rules, the rules would apply to us and our securities. The rules may further affect the ability of owners of shares to sell their securities in any market that may develop for them. There may be a limited market for penny stocks, due to the regulatory burdens on broker-dealers. The market among dealers may not be active. Investors in penny stock often are unable to sell stock back to the dealer that sold them the stock. The mark-ups or commissions charged by the broker-dealers may be greater than any profit a seller may make. Because of large dealer spreads, investors may be unable to sell the stock immediately back to the dealer at the same price the dealer sold the stock to the investor. In some cases, the stock may fall quickly in value. Investors may be unable to reap any profit from any sale of the stock, if they can sell it at all.

Shareholders should be aware that, according to the Commission Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. These patterns include:

control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer;
manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases;
"boiler room" practices involving high pressure sales tactics and unrealistic price projections by inexperienced sales persons;
excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and
the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses.

Our internal controls over financial reporting may not be considered effective in the future, which could result in a loss of investor confidence in our financial reports and in turn have an adverse effect on our stock price.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 we are required to furnish a report by our management on our internal controls over financial reporting. Such report must contain, among other matters, an assessment of the effectiveness of our internal controls over financial reporting as of the end of the year, including a statement as to whether or not our internal controls over financial reporting are effective. This assessment must include disclosure of any material weaknesses in our internal controls over financial reporting identified by management. If we are unable to continue to assert that our internal controls are effective, our shareholders could lose confidence in the accuracy and completeness of our financial reports, which in turn could cause our stock price to decline.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

OnPurchases ~~July 12, 2010, the Company authorized the issuance~~ of ~~30,000~~Equity ~~shares~~Securities ofmade ~~common~~by ~~stock to Windstone Capital Advisors, Inc., pursuant to~~ the ~~terms~~Issuer ~~of an agreement dated May 4, 2010, amended on July 12, 2010, for the rendition of investor relations~~ and ~~capital~~Affiliated ~~advisory services, valued at $0.50 per share, pursuant to exemption provided by Section 4(2) of the Securities Act of 1933, as amended (“Securities Act”).~~Purchasers

~~The~~On ~~Company~~March ~~complied~~22, ~~with~~2011 ~~the~~we ~~exemption~~authorized ~~requirements~~the issuance of ~~Section~~352,000 ~~4(2)~~shares of ~~the~~our ~~Securities~~common ~~Act~~stock ~~based~~to onDon ~~the~~Gilbreath ~~following~~pursuant ~~factors:~~to ~~(1) the issuance was an isolated private transaction that did not involve~~ a ~~public~~debt ~~offering;~~settlement ~~(2)~~agreement ~~there~~whereby ~~was one offeree; (3)~~ the ~~offeree~~parties ~~stated~~agreed ~~an intention not~~ to ~~resell~~convert the ~~stock;~~debt ~~(4)~~obligation ~~there~~due ~~have~~to ~~been~~Don noGilbreath ~~subsequent~~for or2010 ~~contemporaneous~~salary ~~public~~in ~~offerings of~~ the ~~stock;~~amount ~~(5)~~of ~~the~~$88,000, ~~stock~~or ~~was~~at ~~not~~$0.25 ~~broken~~a ~~down~~share, ~~into~~in ~~smaller~~reliance ~~denominations;~~on ~~and~~Section 4(62) ~~the discussions that lead to the issuance~~ of the ~~stock~~Securities ~~took~~Act ~~place~~of ~~directly~~1933, ~~between~~as ~~the~~amended ~~offeree and~~ (the ~~Company~~“Securities Act”).

~~During~~We ~~the~~made ~~three~~this ~~month~~offering ~~period~~pursuant ~~ended~~to ~~September~~Section ~~30,~~4(2) ~~2010,~~of the ~~Company~~Securities ~~authorized~~Act based on the ~~issuance~~following offactors: ~~408,000~~(1) ~~shares~~the ofissuance ~~common~~was ~~stock~~an toisolated 5private ~~persons~~transaction orwhich ~~entities~~did innot ~~exchange~~involve ~~for~~a ~~$102,000~~public ~~valued~~offering; at(2) ~~$0.25~~the ~~per~~offeree ~~share,~~has ~~pursuant~~access to the ~~exemption~~kind ~~provided by Rule 506~~ of ~~Regulation~~information Dwhich ofregistration ~~the~~would ~~Securities~~disclose; ~~Act~~ and ~~Section 4~~(23) of the ~~Securities~~offeree ~~Act~~is tofinancially ~~the following individuals and entities:~~ sophisticated.

Investor	Shares	Consideration
James M. Huntley Jr.	100,000	$25,000
Gabor Sztamentis	100,000	$25,000
Bahanna Group, LLC.	140,000	$35,000
James B. Crowther, Jr.	20,000	$5,000
Anthony and Kelly Jones	48,000	$12,000

On February 21, 2011 we authorized the issuance of 800,000 shares of our common stock to Robert Betty pursuant to an agreement in satisfaction of a note payable valued at $0.50 per share, in reliance on Section 4(2) of the Securities Act.

~~The~~We ~~Corporation~~made ~~complied~~this ~~with~~offering ~~the~~pursuant ~~requirements~~to ofSection ~~Rule~~4(2) ~~506~~ of ~~Regulation D of~~ the Securities Act bybased on the following factors: (i1) ~~foregoing~~the ~~any~~issuance ~~general~~was ~~solicitation~~an orisolated ~~advertising~~private totransaction ~~market~~which ~~the~~did ~~securities;~~not ~~(ii)~~involve ~~selling~~a ~~only~~public ~~to accredited investors~~offering; (~~iii~~2) ~~having not violated antifraud prohibitions with~~ the ~~information~~offeree ~~provided~~has access to the ~~investors;~~kind ~~(iv)~~of ~~being~~information ~~available~~which toregistration ~~answer~~would ~~questions by the investors~~disclose; and (v3) ~~issuing~~the ~~restricted~~offeree ~~securities~~is tofinancially ~~the investors~~sophisticated.

23Recent Sales of Unregistered Securities

~~The~~On ~~Company~~April ~~complied~~1, ~~with~~2011 ~~the~~we ~~exemption~~authorized ~~requirements~~the grant of ~~Section~~220,000 ~~4(2)~~warrants ofto ~~the~~Bayberry ~~Securities~~Capital, ~~Act~~Inc. ~~based~~for on the ~~following~~purchase ~~factors:~~of ~~(1)~~100,000 ~~the~~shares ~~issuance~~of ~~was~~common anstock ~~isolated~~at ~~private~~$0.60 ~~transaction~~per ~~that~~share ~~did~~for ~~not involve~~ a ~~public~~period ~~offering;~~of ~~(2)~~five ~~there~~years ~~were~~and 5120,000 ~~offerees;~~shares ~~(3)~~of ~~the~~common ~~offerees stated an intention not to resell the~~ stock; ~~(4)~~at ~~there~~$0.75 ~~have~~for ~~been~~a noperiod ~~subsequent~~of orfive ~~contemporaneous~~years, ~~public~~pursuant ~~offerings~~to of the ~~stock;~~terms ~~(5)~~and ~~the~~conditions ~~stock~~of ~~was~~a ~~not~~promissory ~~broken~~note ~~down~~for ~~into~~$50,000, ~~smaller~~in ~~denominations;~~reliance ~~and~~on Section 4(62) ~~the discussions that lead to the issuance~~ of the ~~stock~~Securities ~~took place directly between the offerees and the Company~~Act.

We made this offering pursuant to Section 4(2) of the Securities Act based on the following factors: (1) the issuance was an isolated private transaction which did not involve a public offering; (2) the offeree has access to the kind of information which registration would disclose; and (3) the offeree is financially sophisticated.

On February 25, 2011 we authorized the grant of 100,000 warrants to Bartek Investments -1, Ltd., for the purchase of shares of common stock at $0.50 per share for a period of five years, pursuant to the terms and conditions of a promissory note for $400,000, in reliance on Section 4(2) of the Securities Act.

On January 18, 2011 we authorized the issuance of 65,000 shares of common stock to Flaherty Financial News, Inc., in exchange for services valued at $16,250 or $0.25 per share, in reliance on Section 4(2) of the Securities Act.

On January 18, 2011 we authorized the issuance of 1,099,600 shares of common stock in exchange for $274,900 in cash or $0.25 per share, pursuant to exemption provided by Rule 506 of Regulation D of the Securities Act, to the following individuals and entities:

*Investor*	*Shares*	*Consideration*
Ron E. Barker	20,000	$5,000
Bahanna Group, LLC	100,000	$25,000
Bahanna Group, LLC	40,000	$10,000
Bahanna Group, LLC	100,000	$25,000
Sean Collins	20,000	$5,000
Tom R. Fishler	100,000	$25,000
Thomas Hoggard	30,000	$7,500
James M. Huntley Jr.	100,000	$25,000
Tony Jones	32,000	$8,000
Tony Jones	48,000	$12,000
Tony Jones	40,000	$10,000
Mark A. Scott	20,000	$5,000
SDT Holdings, LLC	100,000	$25,000
IRA FBO John R. Shand Jr. Pershing LLC as Custodian Roth Accountant	56,000	$14,000
IRA FBO John R. Shand Jr. Pershing LLC as Custodian Roth Accountant	44,000	$11,000
IRA FBO John R. Shand Jr. Pershing LLC as Custodian Roth Accountant	39,600	$9,900
Gabor Sztamenits	100,000	$25,000
Dan Traxler	60,000	$15,000
Pamala R. Wood	10,000	$2,500
Lou Wood	40,000	$10,000
Totals	1,099,600	$274,900

We complied with the requirements of Rule 506 of Regulation D of the Securities Act by: (i) foregoing any general solicitation or advertising to market the securities; (ii) selling only to accredited investors; (iii) having not violated antifraud prohibitions with the information provided to the investors; (iv) being available to answer questions by the investors; and (v) issuing restricted securities to the investors.

On January 12, 2011 we authorized the issuance of 50,000 shares of common stock to Equiti-Trend Advisors, LLC. in exchange for services valued at $12,250 or $0.25 per share, in reliance on Section 4(2) of the Securities Act.

During the quarter ended March 31, 2011 we accounted for the issuance of 917,000 shares of common stock in exchange for $229,250 in cash or $0.25 per share, pursuant to exemption provided by Rule 506 of Regulation D of the Securities Act, to the following individuals:

*Investor*	*Shares*	*Consideration*
Lou Wood	183,000	$45,750
John R. Shand	34,000	$8,500
Mark Jon Bowman	100,000	$25,000
William Steele	100,000	$25,000
Joseph P. Saline	400,000	$100,000
W. Reed	100,000	$25,000
Totals	917,000	$229,250

ITEM 3. DEFAULTS ON SENIOR SECURITIES

~~The Company has a note payable to Robert Betty, a director of the Company, which note is secured by the common stock and assets of Pinnacle~~None. ~~The Company is in default of the terms of the note with $841,650 remaining due.~~

ITEM 4. (REMOVED AND RESERVED)

Removed and reserved.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

Exhibits required to be attached by Item 601 of Regulation S-K are listed in the Index to Exhibits on page 2629 of this Form 10‑Q, and are incorporated herein by this reference.

2427

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

ComCam International, Inc.	Date
/s/ Don Gilbreath By: Don Gilbreath Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer and Director	~~November~~May 1116, ~~2010~~2011

2528

EXHIBITS

Exhibit Description

3 (i)* Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to the Form 10-SB/A filed with the Commission on June 26, 2006).

3 (ii)* Bylaws of the Company (incorporated by reference to the Form 10-SB/A filed with the Commission on June 26, 2006).

10 (i)* Employment Agreement between the Company, ComCam, Inc. and Don Gilbreath dated June 22, 2005 (incorporated by reference to the Form 10-SB/A filed with the Commission on June 26, 2006).

10 (ii)* ~~Joinder,~~ Amendment and ~~Consent~~Assignment ~~Agreement~~of ~~between~~Convertible ~~ComCam,~~Debenture ~~Inc.,~~between the Company and ~~HNI~~Global Convertible Megatrend, ~~LLC~~LTD, dated ~~September~~June 2830, 2007 (incorporated by reference to the Form 10-~~QSB~~K/A filed with the Commission on ~~November~~January 14, ~~2007~~2011).

10 (iii)* Joinder, Amendment and Consent Agreement between ComCam, Inc., the Company and HNI, LLC dated ~~February~~September 1428, ~~2008~~2007 (incorporated by reference to the Form 10-KQSB filed with the Commission on ~~April~~November 14, ~~2008~~2007).

10 (iv)* ~~Amended~~Amendment ~~and~~Agreement ~~Restated Debenture between the Company and HNI~~ dated ~~July~~February 1014, ~~2009~~2008 (incorporated by reference to the Form 10-QK filed with the Commission on ~~January~~April 2714, ~~2010~~2008).

10 (v)* ~~Share~~ Amended ~~Purchase~~and ~~Agreement~~Restated Debenture between the Company, ~~Pinnacle Integrated Systems, Inc., Robert Betty~~ and ~~Feng~~HNI ~~Brown~~ dated ~~December~~July 3010, 2009 (incorporated by reference to the Form 810-KQ filed with the Commission on ~~December~~January 3127, ~~2009~~2010).

10 (vi)* Share Purchase Agreement between the Company, Pinnacle Integrated Systems, Inc., Robert Betty and Feng Brown dated December 30, 2009 (incorporated by reference to the Form 8-K filed with the Commission on December 31, 2009).

10 (vii)* Secured Promissory Note from Paul Higbee dated March 31, 2010 (incorporated by reference to the Form 10-K/A filed with the Commission on January 14, 2011).

10 (viii)* Debt Settlement Agreement between the Company and Paul Higbee dated March 31, 2010 (incorporated by reference to the Form 10-K/A filed with the Commission on January 14, 2011).

10(ix)* Restated Accord and Satisfaction Agreement dated March 24, 2011 (incorporated by reference to the Form 8-K/A filed with the Commission on May 16, 2011.

14* Code of Ethics adopted March 24, 2008 (incorporated by reference to the Form 10-K filed with the Commission on April 14, 2008).

21* Subsidiaries (incorporated by reference to the Form 10-K filed with the Commission on April 16, 2010).

31 Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14 of the Securities and Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (attached).

32 Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (attached).

99* Pinnacle Integrated Systems, Inc. audited financial statements for the period ended December 30, 2009 and the years ended December 31, 2008 and 2007 (predecessor to ComCam International, Inc.) (incorporated by reference to the Form 10-KA/2 filed with the Commission on March 9, 2011).

* Incorporated by reference to previous filings of the Company.

2629

Filing Compare · COMCAM INTERNATIONAL INC