**EXHIBIT
      99.1**





**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**




Report
              of Independent Registered Public
              Accounting Firm
            
            
            F-1Consolidated
              Balance Sheet as of December 31,
              2006
            
            
            F-2Consolidated
              Statements of Operations for the
              Years Ended December 31, 2006 and 2005
            
            
            F-4Consolidated
              Statements of Stockholders'
              Equity/(Deficiency) for the Years Ended December 31, 2006 and
              2005
            
            
            F-5Consolidated
              Statements of Cash Flows for the
              Years Ended December 31, 2006 and 2005
            
            
            F-6Notes
              to Consolidated Financial
              Statements
            
            
            F-7









REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM








To
      the
      Audit Committee of the


Board
      of
      Directors and Shareholders


of
      Simtrol, Inc. and Subsidiaries





We
      have
      audited the accompanying consolidated balance sheet of Simtrol, Inc. and
      Subsidiaries (the “Company”) as of December 31, 2006, and the related consolidated statements
      of operations, changes in stockholders’ equity/(deficiency) and cash flows for
      the years ended December 31, 2006 and 2005. These financial statements are
      the
      responsibility of the Company’s management. Our responsibility is to express an
      opinion on these financial statements based on our audits.





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States).  Those standards require that
      we plan and perform the audit to obtain reasonable assurance about whether
      the
      financial statements are free of material misstatement. The
      Company is not required to have, nor were we engaged to perform, an audit of
      its
      internal control over financial reporting. Our audit included consideration
      of
      internal control over financial reporting as a basis for designing audit
      procedures that are appropriate in the circumstances, but not for the purpose
      of
      expressing an opinion on the effectiveness of the Company’s internal control
      over financial reporting. Accordingly, we express no such opinion. An
      audit also includes examining, on a test basis, evidence supporting the amounts
      and disclosures in the financial statements, assessing the accounting principles
      used and significant estimates made by management, as well as evaluating the
      overall financial statement presentation.  We believe that our audits
      provide a reasonable basis for our opinion.





In
      our
      opinion, the financial statements referred to above present fairly, in all
      material respects, the consolidated financial position of Simtrol, Inc. and
      Subsidiaries, as of December 31, 2006, and the consolidated results of their
      operations and their cash flows for the years ended December 31, 2006 and 2005
      in conformity with United States generally accepted accounting principles.





The
      accompanying consolidated financial statements have been prepared assuming
      that
      the Company will continue as a going concern. As discussed in Note 2 to the
      consolidated financial statements, at December 31, 2006 the Company has a
      working capital deficiency of $1,861,713 and has not achieved a sufficient
      level
      of revenues to support its business and has suffered recurring losses from
      operations. These factors raise substantial doubt about the Company’s ability to
      continue as a going concern. Management's plans regarding these matters are
      also
      described in Note 2. The consolidated financial statements do not include any
      adjustments that might result from the outcome of this uncertainty.





/s/
      Marcum & Kliegman LLC





New
      York,
      New York


April
      16,
      2007





F-1




SIMTROL,
      INC. AND SUBSIDIARIES


CONSOLIDATED
      BALANCE SHEET


December
      31, 2006





ASSETS





CURRENT
                ASSETSAccounts
                receivable
            
            $
            84,369Prepaid
                expenses and other current assets
            
            
            14,708Total
                Current Assets
            
            
            99,077LONG-TERM
                ASSETSProperty
                and equipment, net
            
            
            16,831Right
                to license intellectual property
            
            
            130,000Customer
                list
            
            
            40,000TOTAL
                ASSETS
            
            $
            $285,908




The
      accompanying notes are an integral part of these consolidated financial
      statements.




F-2




SIMTROL,
      INC. AND SUBSIDIARIES


CONSOLIDATED
      BALANCE SHEET


December
      31, 2006





LIABILITIES
      AND STOCKHOLDERS’ DEFICIENCY





LIABILITIES





CURRENT
                LIABILITIESCash
                overdraft
            
            $
            1,420Accounts
                payable
            
            
            268,478Accrued
                expenses
            
            
            105,678Notes
                payable
            
            
            387,351Dividend
                payable on default of convertible preferred stock
            
            
            1,171,863Shares
                to be issued
            
            
            26,000Total
                Current Liabilities
            
            
            1,960,790Shares
                to be issued, less current portion
            
            
            52,000TOTAL
                LIABILITIES
            
            
            2,012,790COMMITMENTS
                AND CONTINGENCIESSTOCKHOLDERS'
                DEFICIENCYPreferred
                stock, $.00025 par value; 800,000 shares authorized:Series
                A Convertible Preferred Stock, 450,000 designated; 384,666 issued
                and
                outstanding; liquidation value $1,153,998
            
            
            96Common
                stock, authorized 40,000,000 shares of$.001
                par value; 4,930,004 shares issued and outstanding
            
            
            4,930Additional
                paid-in capital
            
            
            63,646,515Accumulated
                deficit
            
            
            (65,378,423
            )Total
                Stockholders’ Deficiency
            
            
            (1,726,882
            )TOTAL
                LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
            
            $
            $285,908




The
      accompanying notes are an integral part of these consolidated financial
      statements.




F-3




SIMTROL,
      INC. AND SUBSIDIARIES


CONSOLIDATED
      STATEMENTS OF OPERATIONS


For
      the
      Years Ended December 31, 2006 and 2005





2006
            
            2005Revenues:Software
                licenses
            
            $
            159,659
            
            $
            67,418Service
            
            
            65,033
            
            
            57,228Total
                revenues
            
            
            224,692
            
            
            124,646Cost
                of revenuesSoftware
                licenses
            
            
            3,873
            
            
            1,037Service
            
            
            1,867
            
            
            3,796Total
                cost of revenues
            
            
            5,740
            
            
            4,833Gross
                profit
            
            
            218,952
            
            
            119,813Operating
                expensesSelling,
                general and administrative
            
            
            1,502,983
            
            
            1,060,926Research
                and development
            
            
            416,982
            
            
            437,374Total
                operating expenses
            
            
            1,919,965
            
            
            1,498,300Loss
                from operations
            
            
            (1,701,013
            )
            
            (1,378,487
            )Other
                income/(expenses):Other
                income/(expense)
            
            
            (11,174
            )
            
            12,435Sale
                of intellectual property
            
            
            250,000
            
            
            -Total
                other income
            
            
            238,826
            
            
            12,435Net
                loss
            
            $
            (1,462,187
            )
            $
            (1,366,051
            )Dividend
                on covenant default of convertible preferred stock
            
            
            800,613
            
            
            371,250Deemed
                preferred dividend
            
            
            -
            
            
            624,918Net
              loss attributable to common
              shareholders
            
            $
            (2,262,800
            )
            $
            (2,362,220
            )Net
                loss per common share-basic and diluted
            
            $
            (0.52
            )
            $
            (0.63
            )Weighted
                average number of common shares outstanding
            
            
            4,349,737
            
            
            3,730,650




The
      accompanying notes are an integral part of these consolidated financial
      statements.




F-4




SIMTROL,
      INC. AND SUBSIDIARIES


CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS' EQUITY/(DEFICIENCY)


For
      the
      Years Ended December 31, 2006 and 2005


Common
                  stock
              
              
              Preferred
                  StockNumber
                  of
                Shares(1)
              
              
              Par
                  value
              
              
              Number
                  of Shares
              
              
              Par
                  value
              
              
              Additional
                Paid-in
                capital
              
              
              Accumulated
                  deficit
              
              
              TotalBalance,
                  January 1, 2005
              
              
              3,712,914
              
              
              3,713
              
              
              -
              
              
              -
              
              
              62,815,568
              
              
              (62,550,184
              )
              
              269,097Net
                  Loss for the period
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (1,366,052
              )
              
              (1,366,052
              )Issuance
                  of common stock for IR services
              
              
              10,000
              
              
              10
              
              
              
              
              
              
              
              
              7,890
              
              
              
              
              
              7,900Issuance
                    of convertible preferred stock in private placements,
                    net
              
              
              
              
              
              
              
              
              450,000
              
              
              113
              
              
              1,162,283
              
              
              
              
              
              1,162,396Dividend
                    payable on covenant default of convertiblepreferred
                    stock
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (371,250
              )
              
              
              
              
              (371,250
              )Issuance
                  of common stock to directors
              
              
              32,770
              
              
              33
              
              
              
              
              
              
              
              
              26,667
              
              
              
              
              
              26,700Balance,
                  December 31, 2005
              
              
              3,755,684
              
              $
              3,756
              
              
              450,000
              
              $
              113
              
              $
              63,641,158
              
              $
              (63,916,236
              )
              $
              (271,209
              )Net
                  Loss for the period
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (1,462,187
              )
              
              (1,462,187
              )Conversion
                  of Preferred Stock
              
              
              261,336
              
              
              261
              
              
              (65,334
              )
              
              (17
              )
              
              (244
              )
              
              
              
              
              -Dividend
                    payable on covenant default of convertiblepreferred
                    stock
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (800,613
              )
              
              
              
              
              (800,613
              )Issuance
                  of common stock to directors
              
              
              87,984
              
              
              88
              
              
              
              
              
              
              
              
              36,012
              
              
              
              
              
              36,100Stock-based
                  compensation amortization
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              469,027
              
              
              
              
              
              469,027Exercises
                  of stock options
              
              
              625,000
              
              
              625
              
              
              
              
              
              
              
              
              249,375
              
              
              
              
              
              250,000Issuance
                  of common stock for purchase
              
              
              200,000
              
              
              200
              
              
              
              
              
              
              
              
              51,800
              
              
              
              
              
              52,000Balance,
                  December 31, 2006
              
              
              4,930,004
              
              $
              4,930
              
              
              384,666
              
              $
              96
              
              $
              63,646,515
              
              $
              (65,378,423
              )
              $
              (1,726,882
              )




The
      accompanying notes are an integral part of these consolidated financial
      statements.




F-5




SIMTROL,
      INC. AND SUBSIDIARIES


CONSOLIDATED
      STATEMENTS OF CASH FLOWS


For
      the
      Years Ended December 31, 2006 and 2005


2006
              
              2005Cash
                  flows from operating activities:Net
                  loss
              
              $
              (1,462,187
              )
              $
              (1,366,052
              )Adjustments
                  to reconcile net loss to net cash used in operating
                  activities:Gain
                  on sale of intellectual property
              
              
              (250,000
              )
              
              -Depreciation
                  and amortization
              
              
              9,733
              
              
              36,086Stock-based
                  compensation
              
              
              505,127
              
              
              26,700Changes
                  in operating assets and liabilities:Accounts
                  receivable
              
              
              (81,476
              )
              
              17,431Prepaid
                  expenses and other current assets
              
              
              1,922
              
              
              235Other
                  assets
              
              
              -
              
              
              2,530Interest
                  payable
              
              
              8,351
              
              
              -Accounts
                  payable
              
              
              117,010
              
              
              (23,591
              )Accrued
                  expenses
              
              
              9,693
              
              
              27,247Deferred
                  revenue
              
              
              (19,144
              )
              
              2,478Net
                  cash used in operating activities
              
              
              (1,160,971
              )
              
              (1,276,936
              )Cash
                  flows from/(used in) investing activities:Purchases
                  of property and equipment
              
              
              (5,200
              )
              
              (21,660
              )Proceeds
                  from sale of intellectual property
              
              
              250,000
              
              
              -Net
                  cash provided by/(used in) investing activities
              
              
              244,800
              
              
              (21,660
              )Cash
                  flows from /(used in) financing activities:Net
                  proceeds from exercise of stock options
              
              
              250,000
              
              
              -Proceeds
                  from notes payable issuance
              
              
              416,000
              
              
              -Repayment
                  of note payable
              
              
              (37,000
              )
              
              -Deposit
                  returned from cancelled offering
              
              
              (12,000
              )
              
              -Cash
                  overdraft
              
              
              1,420
              
              
              -Common
                  stock issued for investor relations performed
              
              
              -
              
              
              7,900Deposit
                  received in cancelled offering
              
              
              -
              
              
              12,000Net
                  proceeds from stock issuances
              
              
              -
              
              
              1,162,396Net
                  cash provided by financing activities
              
              
              618,420
              
              
              1,182,296Decrease
                  in cash and cash equivalents
              
              
              (297,751
              )
              
              (116,300
              )Cash
                  and cash equivalents, beginning of the year
              
              
              297,751
              
              
              414,051Cash
                  and cash equivalents, end of the year
              
              $
              0
              
              $
              297,751Supplementary
                  disclosure:Interest
                  paid
              
              $
              213
              
              $
              4,381Income
                  taxes paid
              
              $
              -
              
              $
              -Supplemental
                  schedule of non cash investing and financing activities:Non
                  cash investing and financing activities:Dividend
                  payable on covenant default of convertible preferred stock
              
              $
              800,613
              
              $
              371,250Beneficial
                  conversion feature of preferred stock
              
              $
              -
              
              $
              24,918Common
                  stock issued for investor relations performed
              
              $
              -
              
              $
              7,900Issuance
                  of common stock in acquisition of JDS interest
              
              $
              52,000
              
              $
              -




The
      accompanying notes are an integral part of these consolidated financial
      statements.




F-6




SIMTROL,
      INC. AND SUBSIDIARIES


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


December
      31, 2006 and 2005





**NOTE
      1 - Nature of Operations and Basis of Presentation**





Simtrol,
      Inc., formerly known as VSI Enterprises, Inc., was incorporated in Delaware
      in
      September 1988 and, together with its wholly-owned subsidiaries (the "Company"),
      develops, markets, and supports software based audiovisual control systems
      and
      videoconferencing products that operate on PC platforms. The Company operates
      at
      a single facility in Norcross, Georgia and its sales are primarily in the United
      States.





**NOTE
      2 - Going Concern Uncertainty**





As
      of
      December 31, 2006, the Company had a cash overdraft of $1,420 and a working
      capital deficiency of $1,861,713. In addition, the Company has not achieved
      a
      sufficient level of revenues to support its business and has suffered recurring
      losses from operations. The Company has relied on periodic investments in the
      form of common stock, convertible debt, and notes payable since the fourth
      quarter of 2001 to sustain its operations. The Company currently requires
      substantial amounts of capital to fund current operations and for the payment
      of
      past due obligations, including operating expenses, and the continued
      development and deployment of its ONGOER and OnGuard product lines. During
      2005,
      the Company issued $1,350,000 of convertible preferred stock (see Note 5).
      On
      February 15, 2006, the Company sold various patents (see Note 6). In June 2006,
      two directors of the Company exercised options to purchase 625,000 shares in
      aggregate for total proceeds to the Company of $250,000 (see Note 6). The
      Company also issued a $37,000 note payable to one member of the Board of
      Directors on June 9, 2006. On June 30, 2006, the Company repaid the note plus
      the accrued interest (10% per annum). The Company also issued notes payable
      of
      $379,000 to one member of the Board of Directors during the year ended December
      31, 2006. At December 31, 2006, these notes plus $8,351 of accrued interest
      (10%
      per annum) were outstanding (see Note 5).





On
      February 15, 2006 the Company formed a joint venture, named Justice Digital
      Solutions, LLC (“JDS”), with Integrated Digital Systems, LLC (“IDS”), a
      multifaceted integrator based in Livonia, Michigan, to develop and sell a
      judicial arraignment software solution based on the success of a deployment
      in
      Oakland County, Michigan. However,
      there can be no assurance that the Company will be successful in its attempts
      to
      develop and deploy its ONGOER and OnGuard product lines, to generate positive
      cash flows or raise sufficient capital essential to its survival, or that JDS
      will be successful in its attempts to sell its judicial arraignment software.
       On November 28, 2006, the Company purchased the 50% of the joint venture
      owned by IDS (See Note 11) and on March 16, 2007 the Company completed
      the sale of $3,525,000 of securities in a private placement of 4,700 units
      (at
      $750 per unit) consisting of one share of Series B Convertible Preferred Stock
      and one warrant to purchase 2,000 shares of our common stock at an exercise
      price of $0.375 per share. Each share of Series B Convertible Preferred Stock
      has a conversion price of $0.375 per share (1 Series B Convertible Preferred
      share equals 2,000 shares of common stock). The warrants have three-year terms.
      See Note 13. The Company intends to use the proceeds of the private placement
      to
      hire additional sales and software development personnel to expand its sales
      efforts for its audiovisual control and monitoring and digital arraignment
      software, as well as to develop new integrated software products for its Curiax
      platform.





To
      the extent that the Company is unable to generate or raise the necessary
      operating capital, it will become necessary to curtail operations. Additionally,
      even if the Company does raise operating capital, there can be no assurance
      that
      the net proceeds will be sufficient to enable it to develop its business to
      a
      level where it will generate profits and positive cash flows.





These
      matters raise substantial doubt about the Company’s ability to continue as a
      going concern.  However, the accompanying financial statements have been
      prepared on a going concern basis, which contemplate the realization of assets
      and satisfaction of liabilities in the normal course of business. The financial
      statements do not include any adjustments relating to the recoverability of
      the
      recorded assets or the classification of the liabilities that might be necessary
      should the Company be unable to continue as a going concern.





**NOTE
      3 - Significant Accounting Policies**





Principles
      of Consolidation


The
      consolidated financial statements include the accounts of the Company and its
      wholly-owned subsidiaries. All intercompany transactions and balances have
      been
      eliminated in consolidation.




F-7




SIMTROL,
      INC. AND SUBSIDIARIES


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


December
      31, 2006 and 2005





Loss
      Per Share


Statement
      of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share",
      requires the presentation of basic and diluted earnings per share ("EPS").
      Basic
      EPS is computed by dividing loss available to common stockholders by the
      weighted-average number of common shares outstanding for the period. Diluted
      EPS
      includes the potential dilution that could occur if options or other contracts
      to issue common stock were exercised or converted. The following equity
      securities are not reflected in diluted loss per share because their effects
      would be anti-dilutive:




December
                31, 2006
            
            December
                31, 2005Options
            
            
            1,775,025
            
            
            1,075,775Warrants
            
            
            4,897,737
            
            
            4,937,880Convertible
              Preferred Stock
            
            
            1,538,664
            
            
            1,800,000Total
            
            
            8,211,426
            
            
            7,183,655





Accordingly,
      basic and diluted loss per share are identical.





Stock-Based
      Compensation





The
      Company’s 2002 Stock Option Plan (the Plan), which is stockholder approved,
      permits the grant of options to its employees, directors, and consultants for
      up
      to 2,500,000 shares of common stock. Option awards are granted with an exercise
      price equal to the market price of the Company’s stock on the date of the grant
      in accordance with the Plan; the options generally have five-year contractual
      terms for directors and 10 years for employees and vest immediately for
      directors and over four years for employees.





The
      Company implemented FAS 123R in the first quarter of 2006. The statement
      requires companies to expense the value of employee stock options and similar
      awards. Under FAS 123R, share-based payment awards result in a cost that will
      be
      measured at fair value on the awards’ grant date based on the estimated number
      of awards that are expected to vest. Compensation costs for awards that vest
      will not be reversed if the awards expire without being exercised. Stock
      compensation expense under FAS 123R was $505,127 during 2006. Of this total,
      $41,154 was classified as research and development expense and $463,973 was
      classified as selling, general, and administrative expense.




Under
      the
      accounting provisions of FAS 123R, the Company’s net loss to common stockholders
      and net loss per common share would have been adjusted to the pro forma amounts
      indicated below during 2005.





Net
                loss attributable to common stockholders, as reported
            
            
            ($2,362,220
            )Add:
                stock-based employee compensation expense
              determined
                under the intrinsic value method
            
            
            -Less:
                 stock-based employee compensation expense
              determined
                under fair value-based methods for all awards
            
            
            (208,308
            )Pro
                forma net loss
            
            
            ($2,570,528
            )Net
                loss per share as reported-basic and diluted
            
            
            ($0.63
            )Pro
                forma net loss per share- basic and diluted
            
            
            ($0.69
            )








The
      Company uses historical data to estimate option exercises and employee
      terminations within the valuation model and historical stock prices to estimate
      volatility. The fair values for options issued during the years ended December
      31, 2006 and 2005 were estimated at the date of grants using a Black-Scholes
      option-pricing model to be $373,349 and $383,172, respectively, with the
      following weighted-average assumptions:




F-8




SIMTROL,
      INC. AND SUBSIDIARIES


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


December
      31, 2006 and 2005





Assumptions
            
            2006
            
            2005Risk-free
                rate
            
            
            4.88-4.92
            %
            
            4.75
            %Annual
                rate of dividends
            
            
            0
            
            
            0Volatility
            
            
            90-148
            %
            
            77-109
            %Average
                life
            
            
            2.9
                years
            
            
            5
                years




The
      Black-Scholes option valuation model was developed for use in estimating the
      fair value of traded options, which have no vesting restrictions and are fully
      transferable. In addition, option valuation models require the input of highly
      subjective assumptions, including the expected stock price volatility. The
      Company’s employee stock options have characteristics significantly different
      from those of traded options, and changes in the subjective input assumptions
      can materially affect the fair value estimate.





A
      summary
      of option activity under the Plan as of December 31, 2006 and changes during
      the
      year then ended are presented below:




Options
            
            Shares
            
            Weighted-Average
                Exercise Price
            
            Weighted-Average
                Remaining Term
            
            Aggregate
                Intrinsic ValueOutstanding
                January 1, 2006
            
            
            1,075,775
            
            $
            2.46Granted
            
            
            1,550,000
            
            $
            0.39Exercised
            
            
            (625,000
            )
            $
            0.40Terminated
            
            
            (225,750
            )
            $
            2.30Outstanding
                at December 31, 2006
            
            
            1,775,025
            
            $
            1.40
            
            
            6.2
            
            $
            2,184,949Exercisable
                at December 31, 2006
            
            
            1,230,570
            
            $
            1.69
            
            
            5.0
            
            $
            1,909,837





The
      weighted-average grant-date fair values of options granted during the years
      ended December 31, 2006 and 2005 were $0.24 and $0.56, respectively. The total
      intrinsic value of options exercised during 2006 was $106,007. There were no
      options exercised during 2005.





As
      of
      December 31, 2006, there was $252,589 of total unrecognized compensation cost
      related to nonvested share-based compensation arrangements granted under the
      Plan. That cost is expected to be recognized over a weighted average period
      of
      2.8 years. The total fair values of shares vested during the years ended
      December 31, 2006 and 2005 was $172,578 and $168,813, respectively.





At
      December 31, 2006, 770,300 options remain available for grant under the
      Company’s 2002 Stock Option Plan.





The
      following table summarizes information about stock options outstanding at
      December 31, 2006:





F-9




SIMTROL,
      INC. AND SUBSIDIARIES


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


December
      31, 2006 and 2005





Options
                Outstanding
            
            Options
                ExercisableRange
                of Exercise Price
            
            Number
                Outstanding at December 31, 2006
            
            Weighted
                Average Remaining Contractual Life (Years)
            
            Weighted
                Average Exercise Price
            
            Number
                Exercisable at December 31, 2006
            
            Weighted
                Average Exercise Price$0.26-$0.90
            
            
            1,437,500
            
            
            6.29
            
            $
            0.51
            
            
            955,625
            
            $
            0.47$1.10-$2.00
            
            
            180,000
            
            
            7.44
            
            $
            1.95
            
            
            120,000
            
            $
            1.96$2.25-$2.50
            
            
            86,300
            
            
            4.18
            
            $
            2.30
            
            
            86,300
            
            $
            2.30$3.50-$4.80
            
            
            33,650
            
            
            3.40
            
            $
            4.27
            
            
            31,070
            
            $
            4.23$9.10-$28.72
            
            
            21,700
            
            
            2.92
            
            $
            17.86
            
            
            21,700
            
            $
            17.86$40.00-$147.48
            
            
            15,875
            
            
            3.22
            
            $
            43.07
            
            
            15,875
            
            $
            43.071,775,025
            
            
            6.18
            
            $
            1.40
            
            
            1,230,570
            
            $
            1.69





Revenue
      Recognition





Revenues
      consist of the sale of software control devices, videoconferencing systems
      and
      related maintenance contracts on these systems. The Company sold two different
      products during 2006 and 2005: its PC-based software products, ONGOER and
      OnGuard, and its older proprietary hardware and software product, Omega.
      Revenues from the sale of hardware and software are recognized upon the transfer
      of title when shipped. Revenues on maintenance contracts are recognized ratably
      over the term of the related sales contract. As of December 31, 2006, there
      were
      $0 of deferred revenues as all maintenance contracts on the Company’s older
      Omega products have terminated.




Cash
      and Cash Equivalents





For
      financial reporting purposes, the Company considers all highly liquid
      investments with a maturity of three months or less when purchased to be cash
      equivalents. The Company does not have cash balances in banks in excess of
      the
      maximum amount insured by the FDIC as of December 31, 2006.





Allowance
      for Doubtful Accounts





The
      allowance for doubtful accounts reflects management’s best estimate of the
      probable losses inherent in the account receivable balance. Management
      determines the allowance based on known troubled accounts, historical
      experience, and other currently available evidence.





Property
      and Equipment





Property
      and equipment are stated at cost. Depreciation and amortization are provided
      for
      in amounts sufficient to relate the cost of depreciable assets to operations
      over the shorter of their estimated useful lives or lease terms, ranging from
      3-10
      years on a straight-line basis. Leasehold improvements made in 2002 were
      amortized over 36 months, the term of the initial lease on the company’s
      facility.





Software
      Development Costs





All
      software development costs are charged to expense as incurred until
      technological feasibility has been established for the product. **** Software
      development costs incurred after technological feasibility has been established
      are capitalized and amortized, commencing with product release, using the
      greater of the income forecast method or on a straight-line
      basis over the useful life of the product. The Company did not capitalize any
      software development costs during either 2006 or 2005 and all assets were fully
      amortized by December 31, 2006.





F-10




SIMTROL,
      INC. AND SUBSIDIARIES


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


December
      31, 2006 and 2005





Income
      Taxes


The
      Company accounts for income taxes using the liability method, which requires
      the
      determination of deferred tax assets and liabilities based on the differences
      between the financial and tax bases of assets and liabilities using enacted tax
      rates
      in effect for the year in which differences are expected to reverse.
 Deferred tax assets are adjusted by a valuation allowance, if, based on
      the weight of available evidence, it is more likely than not that some portion
      or all of the deferred tax assets will not be realized.





At
      December 31, 2006, the Company has net operating loss carryforwards of
      approximately $46,542,000, which expire through 2026.  Pursuant to Section
      382 of the Internal Revenue Code regarding substantial changes in ownership,
      utilization of these losses may be limited.  Based on this and the fact
      that the Company has generated operating losses through December 31, 2006,
      the
      deferred tax asset of approximately $18,330,000 has been offset by a full
      valuation allowance of $18,330,000.




A
      reconciliation of the expected federal statutory rate
      of 34% to the Company's actual rate as reported for each of the periods
      presented is as follows:




Year
              Ended
            
            
            Year
              EndedDecember
              31, 2006
            
            
            December
              31, 2005Expected
              Statutory Rate
            
            
            (34.0
            %)
            
            (34.0
            %)State
              income tax rate, net of federal
              benefit
            
            
            (3.96
            %)
            
            (3.96
            %)(37.96
            %)
            
            (37.96
            %)Valuation
              Allowance
            
            
            (37.96
            %)
            
            (37.96
            %)(0.00
            %)
            
            (0.00
            %)





Fair
      Value of Financial Instruments





Management
      believes that the carrying amounts of certain financial instruments, including
      cash and cash equivalents, accounts receivable, accounts payable and accrued
      expenses approximate their fair values as of each balance sheet date given
      the
      relatively short maturity of each of these instruments. The fair value of the
      Company's debt approximates
      fair value based on borrowing rates currently available to the Company for
      borrowings with comparable terms and conditions.





Use
      of
      Estimates





The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosure of contingent assets and liabilities at the date
      of
      the financial statements and the reported amounts
      of revenue and expenses during the reporting period. Critical estimates include
      management's judgments associated with: determination of an allowance for
      doubtful accounts receivable, deferred income tax valuation allowance
      and the capitalization, depreciation and amortization of certain long-term
      assets (primarily software development costs). Actual results could differ
      from
      those estimates.





New
      Accounting Pronouncements





In
      December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
      153, "Exchanges of Nonmonetary Assets." This Statement amends APB Opinion 29
      to
      eliminate the exception for nonmonetary exchanges of similar productive assets
      and replaces it with a general exception for exchanges of nonmonetary assets
      that do not have commercial substance. A nonmonetary exchange has commercial
      substance if the future cash flows of the entity are expected to change
      significantly as a result of the exchange. The provisions of SFAS No. 153 are
      effective for nonmonetary asset exchanges occurring in fiscal periods beginning
      after June 15, 2005. Earlier application is permitted for nonmonetary asset
      exchanges occurring in fiscal periods beginning after December 16, 2004. The
      provisions of SFAS No. 153 should be applied prospectively. The
      adoption of this pronouncement did not have a material effect on the Company's
      consolidated financial statements.





In
      June
      2005, the FASB issued SFAS No. 154, “Accounting Changes and Errors Corrections,
      a replacement of APB Opinion No. 20 and SFAS No. 3.” This statement applies to
      all voluntary changes in accounting principle, and changes the requirements
      for
      accounting for and reporting of a change in accounting principle. SFAS No.
      154
      requires retrospective application to prior periods’ financial statements of a
      voluntary change in accounting principle unless it is impractical. APB Opinion
      No. 20 previously required that most voluntary changes in accounting principle
      be recognized by including in net income of the period of the change the
      cumulative effect of changing to the new accounting
      principle. SFAS No. 154 improves financial reporting because its requirements
      enhance the consistency of financial reporting between periods. During the
      reporting period, the Company did not have any accounting changes or error
      corrections.




F-11




SIMTROL,
      INC. AND SUBSIDIARIES


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


December
      31, 2006 and 2005





In
      February 2006, the FASB issued Statement of Financial Accounting Standard
      155 - Accounting for Certain Hybrid Financial Instruments (“SFAS 155”), which
      eliminates the exemption from applying SFAS 133 to interests in securitized
      financial assets so that similar instruments are accounted for similarly
      regardless of the form of the instruments.
      SFAS 155 also allows the election of fair value measurement at acquisition,
      at
      issuance, or when a previously recognized financial instrument is subject to
      a
      remeasurement event. Adoption is effective for all financial instruments
      acquired or issued after the beginning of the first fiscal year that begins
      after September 15, 2006. Early adoption is permitted **.** The
      adoption of SFAS 155 is not expected to have a material effect on **** the
      Company's **** consolidated
      financial position, results of operations or cash flows.




In
      March 2006, the FASB issued Statement of Financial Accounting Standard 156
      - Accounting for Servicing of Financial Assets (“SFAS 156”), which requires all
      separately recognized servicing assets and servicing liabilities be initially
      measured at fair value. SFAS 156 permits, but does not require, the subsequent
      measurement of servicing assets and servicing liabilities at fair value.
      Adoption is required as of the beginning of the first fiscal year that begins after
      September 15, 2006. Early adoption is permitted. The
      adoption of SFAS 156 is not expected to have a material effect on the
      Company's **** consolidated
      financial position, results of operations or cash flows.





In
      June
      2006, the FASB issued FASB Interpretation No. 48 ("FIN 48"), Accounting for
      Uncertainty in Income Taxes.  FIN 48 prescribes a recognition threshold and
      measurement attribute for the financial statement recognition and measurement
      of
      a tax position taken or expected to be taken in a tax return.  FIN 48 also
      provides guidance on derecognition, classification, interest and penalties,
      accounting in interim periods, disclosure, and transition.  FIN 48 is
      effective for fiscal years beginning after December 15, 2006.  The Company
      has not yet completed its analysis of the impact that FIN 48 may have on its
      financial condition, results of operations, cash flows or
      disclosures.




In
      September 2006, the FASB issued SFAS 157 “Fair Value Measurements” (“SFAS 157”),
      which defines fair value, establishes a framework for measuring fair value,
      and
      expands disclosures about fair value measurements. The provisions of SFAS 157
      are effective for the first fiscal year beginning after November 2007. The
      Company is currently evaluating the impact of adopting SFAS 157 on its financial
      statements.




In
      September 2006, the SEC issued Staff Accounting Bulletin SAB 108, “Considering
      the Effects of Prior Year Misstatements when Quantifying Misstatements in
      Current Year Financial Statements” (“SAB 108”). SAB 108 provides guidance on how
      prior year misstatements should be taken into consideration when quantifying
      misstatements in current year financial statements for purposes of determining
      whether the current year’s financial statements are materially misstated. SAB
      108 is effective for the first fiscal year ending after November 15, 2006.
      The adoption of SAB 108 did not impact the Company’s financial
      statements.




In
      December 2006, FASB issued FASB Staff Position EITF 00-19-2 “Accounting for
      Registration Payment Arrangements,” which specifies that the contingent
      obligation to make future payments or otherwise transfer consideration under
      a
      registration payment arrangement should be separately recognized and measured
      in
      accordance with SFAS No. 5, “Accounting for Contingencies.” Adoption of EITF
      00-19-02 is required for fiscal years beginning after December 15, 2006. The
      Company is currently evaluating the expected effect of EITF 00-19-02 on our
      consolidated financial statements and are currently not yet in a position to
      determine such effects.




In
      February 2007, the FASB issued SFAS 159, “The Fair Value Option for Financial
      Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 provides companies
      with an option to report selected financial assets and liabilities at fair
      value
      and establishes presentation and disclosure requirements designed to facilitate
      comparisons between companies that choose different measurement attributes
      for
      similar types of assets and liabilities. SFAS 159 is effective for fiscal years
      beginning after November 15, 2007. The Company is in the process of
      evaluating the impact of the adoption of this statement on the Company’s results
      of operations and financial condition.




F-12




SIMTROL,
      INC. AND SUBSIDIARIES


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


December
      31, 2006 and 2005





**NOTE
      4 - Property and Equipment**





Property
      and equipment consist of the following as of December 31, 2006:





Machinery
                and equipment
            
            $
            367,491Furniture
                and fixtures
            
            
            39,150Leasehold
                improvements
            
            
            21,318427,959Less
                accumulated depreciation and amortization
            
            
            (411,128
            )$
            16,831





Depreciation
      and amortization expense was $9,733 and $36,086 for the years ended December
      31,
      2006 and 2005, respectively, and is included in selling, general and
      administrative expense in the accompanying consolidated statements of
      operations.





**NOTE
      5 - Related Party Transaction**





In
      order
      to fund its operations, the Company issued a $37,000 note payable to one member
      of the Board of Directors on June 9, 2006. The debt accrued interest at 10%
      and
      was uncollateralized. The proceeds of this debt were utilized for working
      capital purposes. On June 30, 2006, the Company repaid the note plus the accrued
      interest of $213.





In
      order
      to fund its operations, the Company also issued notes payable of $379,000 to
      one
      member of the Board of Directors during the year ended December 31, 2006. The
      debt accrued interest at 10% and is uncollateralized. The proceeds of this
      debt
      were utilized for working capital purposes. At December 31, 2006, these notes
      plus $8,351 of accrued interest were outstanding. See Note 13.





**NOTE
      6 - Stockholders’ Equity/(Deficiency)**




During
      2005, the Company issued 10,000 shares of restricted common stock valued at
      $7,900 in exchange for investor relations services performed for the Company
      by
      an investor relations consultant. The Company also issued 32,770 shares
      of
      restricted stock valued at $26,700 to Board Members as compensation during
      2005.
      The Company also issued 87,984 shares of restricted common stock valued at
      $36,100 to Board Members for service during 2006. All amounts were recorded
      at
      the fair value of the stock on the date of the issuances.





During
      2005, the Company issued 450,000 units of securities, with each unit consisting
      of: one share of Series A Convertible Preferred Stock, a warrant to purchase
      two
      shares of common stock at an exercise price of $1.00 per common share expiring
      in five years, and a warrant to purchase two shares of common stock at an
      exercise price of $1.25 per common share expiring in five years, for total
      gross
      proceeds of $1,350,000 (net proceeds of $1,162,396 after offering costs
      including placement fees). The Certificate of Designation establishing the
      terms
      of the Series A Convertible Preferred Stock included the following
      terms:





·
            the
                Holder may convert one share of the preferred stock into four shares
                of
                common stock at any time and without limitation;
                and





·
            without
                approval of a majority of the Series A Preferred Stock Holders, the
                Company cannot incur debt in excess of an aggregate of $1.0 million
                outside of trade debt in the normal course of business. Such debt
                may only
                be secured by accounts receivables and shall not encumber any copyrights,
                marketing materials, software code or any other proprietary technology,
                software or product processes, patents or patent licenses of the
                Company;
                and





·
            beginning
                the quarter ending December 31, 2005 and for every subsequent quarter
                the
                Series A Preferred Stock is outstanding, if the Company’s net working
                capital (defined as current assets less current liabilities) is less
                than
                twenty five per cent (25%) of the total amount of gross proceeds
                raised in
                the Offering (defined as a “Quarterly Default”), then for each Quarterly
                Default, the Holders of the Series A Preferred Stock will receive
                additional shares of Series A Preferred Stock equal to 25% of the
                number
                of shares of Series A Preferred Stock held by the Holder at the time
                of
                the Quarterly Default. The net working capital will be tested on
                a
                quarterly basis, based on the Company’s most recent Form 10-QSB or Form
                10-KSB or other appropriate filing. At December 31, 2006, the Company
                had
                failed to meet the net working capital test for quarters ending December
                31, 2005, March 31, 2006, June 30, 2006, and September 30, 2006.
                As a
                result, therefore, the Company recorded a dividend payable on the
                covenant
                default of convertible preferred stock of $1,171,863 as of December
                31,
                2006; and




F-13




SIMTROL,
      INC. AND SUBSIDIARIES


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


December
      31, 2006 and 2005





·
            Series
                A Convertible Preferred shares have full voting rights on an “as
                converted” basis; and





·
            the
                liquidation value of the Series A Preferred Stock is $3.00 per share,
                and
                if the Company at any time while the Series A Preferred Stock is
                outstanding, shall offer, sell, grant any option to purchase or offer,
                sell or grant any right to reprice its securities, or otherwise dispose
                of
                or issue (or announce any offer, sale, grant or any
                option to purchase or other disposition) any common stock or common
                stock
                equivalents entitling any person to acquire shares of common stock,
                at an
                effective price per share less than the then conversion price of
                $0.75,
                then the conversion price shall be reduced to equal the subsequent
                price.
                Exempt transactions for purposes of the repricing provision include
                the
                issuance of (a) shares of common stock or options to employees, officers
                or directors of the Company pursuant to any stock or option plan
                duly
                adopted by a majority of the non-employee members of the Board of
                Directors of the Company or a majority of the members of a committee
                of
                non-employee directors established for such purpose,and
                (b) securities issued pursuant to acquisitions or strategic transactions,
                provided any such issuance shall only be to a person which is, itself
                or
                through its subsidiaries, an operating company in a business synergistic
                with the business of the Company and in which the Company receives
                benefits in addition to the investment of funds, but shall notinclude
                a transaction in which the Company is issuing securities primarily
                for the
                purpose of raising capital or to an entity whose primary business
                is
                investing in securities.






In
      connection with the issuance of the securities above, $498,731 of the net
      proceeds received was allocated to the fair value of the warrants granted to
      purchase 1,800,000 shares of common stock, and a beneficial conversion feature
      of $624,918
      was recorded to reflect the discount on the common shares that would result
      from
      the conversion of the Series A Preferred Stock, based on the relative fair
      values of the warrants and conversion feature of the Series A Preferred Stock.
      This beneficial conversion feature is recorded as a deemed dividend to the
      preferred stockholders in the consolidated statement of operations.





See
      Note
      13 to the consolidated financial statements regarding modifications made to
      the
      Series A convertible preferred stock subsequent to December 31,
      2006.





On
      July
      15, 2005, the Company issued 345,444 warrants to Westminster Securities as
      a
      placement fee for placing 364,004 units of the above financing. The exercise
      price of the warrants is $0.75 per share of common stock and the warrants have
      a
      five-year term.





On
      July
      21, 2005, the Company granted options to purchase 275,000 shares of stock to
      employees. On November 8, 2005, the Company granted options to purchase an
      additional 275,000 shares of stock to employees. The options have a four-year
      vesting period and were granted at exercise prices equal to the fair value
      of
      the Company’s common stock on those dates.





On
      December 29, 2005 the Company received a $12,000 deposit from an investor in
      a
      potential private placement that was canceled .
      The
      $12,000 was returned to the investor in January 2006.





On
      July
      15, 2005, the Company issued 345,444 warrants to Westminster Securities as
      a
      placement fee for placing 364,004 units of the above financing. The exercise
      price of the warrants is $0.75 per share of common stock and the warrants have
      a
      five-year term.




F-14




SIMTROL,
      INC. AND SUBSIDIARIES


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


December
      31, 2006 and 2005





On
      February 22, 2006, two holders of Series A Preferred Stock of Simtrol, Inc.
      (the
“Company”) elected to convert an aggregate of 65,334 shares of Series A
      Preferred Stock to common stock of the Company, pursuant to the conversion
      terms
      of the Series A Preferred Stock. On February 22, 2006, the Company issued an
      aggregate of 261,336 shares of its common stock to the two stockholders upon
      the
      surrender of their Series A Preferred Stock for conversion.





On
      June
      26, 2006, the non-employee directors of Simtrol approved an amendment to the
      Company’s 2002 Stock Option Plan to increase the authorized common stock
      available for the Plan to 2,500,000 shares from the previously authorized amount
      of 1,250,000.





In
      June
      2006, the Company granted the non-employee directors options to purchase
      1,340,000 shares of stock. Two directors of the Company exercised stock options
      to purchase 625,000 shares of common stock for total proceeds to the Company
      of
      $250,000.





On
      August
      24, 2006, the Company granted options to purchase 135,000 shares of stock to
      employees. The options have a four-year vesting period and were granted at
      an
      exercise price equal to the fair value of the Company’s common stock on that
      date.





On
      November 22, 2006, the Company granted options to purchase 25,000 shares of
      stock to a consultant. The options have a four-year vesting period and were
      granted at an exercise price equal to the fair value of the Company’s common
      stock on that date.





On
      November 17 and 21, 2006, the Company granted options to purchase a total of
      50,000 shares of stock to employees. The options have a four-year vesting period
      and were granted at exercise prices equal to the fair value of the Company’s
      common stock on the grant dates.





On
      November 28, 2006, the Company signed an agreement to acquire the remaining
      fifty percent (50%) membership interest in JDS from Integrated Digital Systems,
      LLX (“IDS”). Following the acquisition the Company owned 100% of JDS.





On
      November 28, 2006, the Company issued 200,000 shares of restricted common stock
      to IDS as partial consideration for purchasing the membership interest. See
      Note
      11.





**NOTE
      7 - Stock Warrants**





The
      Company has stock purchase warrants for 4,897,737 shares of common stock
      outstanding at December 31, 2006. A roll forward of the warrant totals for
      2006
      and 2005 is as follows:





2006
            
            2005Warrants
                outstanding at beginning of year
            
            
            4,937,880
            
            
            2,792,436Granted
            
            
            -
            
            
            2,145,444Exercised
            
            
            -
            
            
            -Terminated
            
            
            (40,143
            )
            
            -Warrants
                outstanding at December 31
            
            
            4,897,737
            
            
            4,937,880





The
      range
      of exercise prices of the warrants was $0.75 to $7.50 and the weighted average
      exercise price was approximately $1.49 at December 31, 2006. The range of
      exercise prices of the warrants was $0.75 to $7.50 and the weighted average
      exercise price was approximately $1.49 at December 31, 2005.





F-15




SIMTROL,
      INC. AND SUBSIDIARIES


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


December
      31, 2006 and 2005





**NOTE
      8- Major Customers**





Revenue
      from one customer of $78,000 comprised approximately 35% of our consolidated
      revenues for 2006. At December 31, 2006, related accounts receivable from this
      customer comprised 46% of consolidated receivables.





Revenue
      from one customer totaled $57,571, or approximately 46% of consolidated
      revenues for 2005.





Management
      believes that concentration of credit risk with respect to trade receivables
      is
      minimal due to the composition of the customer base. The end users for the
      company’s products are primarily large national and multinational companies and
      agencies of the U.S. government. Allowances are maintained for potential credit
      losses, and such losses have been within management's expectations.





**NOTE
      9 - Operating Leases**





The
      Company leases office space and equipment under noncancellable operating leases
      expiring at various dates through 2007.





The
      future minimum lease payments required under operating leases are $41,359 as
      of
      December 31, 2006.





Rent
      expense for the years ended December 31, 2006 and 2005 was $40,716 and $46,822,
      respectively.





**NOTE
      10- Litigation**





The
      Company is not currently involved in any legal proceedings nor was it involved
      in any legal proceedings during 2006.





**NOTE
      11 - Acquisition of Justice Digital Solutions LLC**





On
      February 15, 2006 Simtrol formed a joint venture with Integrated Digital
      Systems, LLC (“IDS”), an integrator based in Livonia, Michigan to develop and
      sell a judicial arraignment software solution based on the success of a
      deployment in Oakland County, Michigan. The new joint venture, Justice Digital
      Solutions L.L.C., a Michigan limited liability company ("JDS"), is headquartered
      in Sterling Heights, Michigan, with its development staff and testing center
      located in Norcross, Georgia.





IDS
      contributed to JDS all of IDS’ interest in a software license agreement between
      IDS and the County of Oakland, Michigan Constitutional Corporation, including
      the exclusive worldwide rights to copy, modify, market, distribute, and
      sublicense the software developed pursuant to the software license agreement
      (the “OakVideo Software”). The license agreement requires the licensee to pay a
      royalty equal to five percent of all software revenues for products based on
      the
      OakVideo Software for the period of the license agreement (initially 10 years
      from date of licensing agreement on October 28, 2005). Simtrol contributed
      to
      JDS a non-exclusive, worldwide, royalty-free license to integrate, copy, modify,
      market, distribute and sublicense Simtrol’s ONGOER and OnGuard software for use
      with and into the OakVideo Software, and Simtrol transferred to JDS any and
      all
      exclusive worldwide rights to copy, modify, market, distribute, and sublicense
      certain digital court recording software under development by Simtrol. JDS
      initially launched a judicial arraignment solution based on the integration
      of
      Simtrol’s products with the OakVideo Software in 2006.





On
      November 28, 2006, the Company signed an agreement to acquire an additional
      fifty percent (50%) membership interest in JDS from IDS. Following the
      acquisition the Company owned 100% of JDS.





As
      consideration for the transfer of the membership interest in JDS from IDS to
      the
      Company, the Company will issue Five Hundred Thousand (500,000) restricted
      shares of its common stock to IDS according to the following installment
      schedule:




F-16




SIMTROL,
      INC. AND SUBSIDIARIES


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


December
      31, 2006 and 2005





·
            Two
                Hundred Thousand (200,000) restricted common shares of the Company's
                capital stock to IDS on November 28,
                2006;





·
            One
                Hundred Thousand (100,000) restricted common shares of the Company's
                capital stock to IDS on November 22,
                2007;





·
            One
                Hundred Thousand (100,000) restricted common shares of the Company's
                capital stock to IDS on November 22, 2008;
                and





·
            One
                Hundred Thousand (100,000) restricted common shares of the Company's
                capital stock to IDS on November 22,
                2009.





In
      addition, JDS will pay IDS five percent (5%) of the gross revenues of JDS,
      from
      whatever source derived, during calendar years 2007 and 2008, and two and
      one-half percent (2.5%) of the gross revenues of JDS during calendar year 2009.





**NOTE
      12 - Intangibles**





In
      conjunction with the purchase of the IDS interest in JDS (see Note 11), the
      Company recorded an intangible asset of $130,000 on November 28, 2006,
      representing the fair value of 500,000 shares of common stock paid and payable
      to IDS, to reflect the value of the license to use the OakVideo Software. This
      amount will be amortized over the estimated remaining life of the license
      agreement for JDS’ use of the OakVideo software (through October 2015-see Note
      2).


The
        Company also recorded a customer list of $40,000 in conjunction with the
        purchase of the IDS interest in JDS. The $40,000 will be amortized on a
        straight-line basis through December 31, 2007.





**NOTE
      13 - Subsequent Events**





On
      January 28, 2007, the Compensation Committee of the Board of Directors (the
      "Committee") of the Company approved an amendment to the Company's 2002 Stock
      Option Plan (the "Plan") to increase the number of shares of common stock
      authorized for issuance under the Plan to 4,000,000 shares from the previously
      authorized amount of 2,500,000 shares.





The
      Company's Plan permits the grant of options to its employees, directors and
      consultants for up to 4,000,000 shares of the Company's common stock. Option
      awards under the Plan are granted with an exercise price equal to or above
      the
      market price of the Company's common stock on the date of the grant, in
      accordance with the terms of the Plan.





The
      options granted under the Plan generally have five-year contractual terms for
      directors and ten-year contractual terms for employees. The options granted
      under the Plan generally vest immediately for directors and over a four-year
      period for employees.





On
      January 31, 2007, the Company granted options to purchase 1,400,000 shares
      of
      stock to employees. The options have a three-year vesting period and were
      granted at an exercise price equal to the fair value of the Company’s common
      stock on that date.





On
      January 31, 2007, the Company issued 480,000 shares of its restricted common
      stock to Triton Business Development Services (“Triton”), an Atlanta-bases
      provider of critical business planning, resource, and development services
      in
      conjunction with an agreement dated October 18, 2006.





On
      February 1, 2007, the Company signed an advisory services agreement (the
      "Agreement") with Triton, an Atlanta-based provider of critical business
      planning, resource and development services.




F-17




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      INC. AND SUBSIDIARIES


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


December
      31, 2006 and 2005





As
      a part
      of the Agreement, Triton will provide the Company with financial and strategic
      planning services that include capital formation, structure and funding
      strategies, investor relations consultation, human resources assessment and
      development, and an organizational review of the Company’s processes, practices,
      and procedures. The term of the Agreement is 24 months.





Triton’s
      compensation will consist of cash and restricted shares of the Company's common
      stock over the term of the Agreement. A monthly cash retainer of $10,000 will
      be
      paid by the Company. Additionally, 640,000 restricted shares of
      the
      Company's common stock will be deposited to a restricted account. The 640,000
      restricted shares of the Company's common stock will earned ratably over the
      24-month term of the Agreement by Triton. On Janurary 31, 2007, February 28,
      2007, and March 31, 2007, the Company issued 11,200, 26,700, and 26,700 shares
      of restricted common stock pursuant to the Agreement.





The
      offer
      and sale of the shares issued in connection with the Agreement were exempt
      from
      the registration requirements of the Securities Act of 1933, as amended (the
      "Act"), pursuant to Rule 506 and Section 4(2) of the Act. In connection with
      the
      sales, the Company did not conduct any general solicitation or advertising,
      and
      the Company complied with the requirements of Regulation D relating to the
      restrictions on the transferability of the shares issued.





On
      January 30, 2007, the Company received a notice of effectiveness from the State
      of Delaware regarding the Certificate of Amendment of Certificate of
      Incorporation of the Company (the "Amendment"), which modified the rights of
      the
      holders of the Company's Series A Convertible Preferred Stock. The Amendment
      provides for, among other things: (i) each holder of the Company's Series A
      Convertible Preferred Stock to receive one additional share of Series A
      Convertible Preferred Stock for each share owned; (ii) the addition of an 8%
      face value noncumulative coupon, payable semi-annually in cash or common stock
      of the Company; (iii) pre-emptive rights for holders of the Company's Series
      A
      Convertible Preferred Stock; (iv) the addition of a redemption feature whereby
      the Series A Convertible Preferred Stock is callable at $3.75 per share at
      the
      option of the Company; (v) the addition of a mandatory conversion feature
      whereby the Series A Convertible Preferred Stock is automatically converted
      to common
      stock of the Company in the event that the bid price of the Company's common
      stock closes at or above $1.00 for 20 consecutive trading days and the average
      daily trading volume of the Company's common stock is equal to or greater than
      $150,000; and (vi) the amendment of the provision requiring unanimous approval
      for an increase in the number of shares designated as Series A Convertible
      Preferred Stock to require a majority approval for an increase in the number
      of
      shares designated as Series A Convertible Preferred Stock. The Amendment also
      eliminated the working capital test that previously occurred at quarter end
      per
      the previous Series A Convertible Preferred Stock terms and increased the
      authorized number of Series A Convertible Preferred shares from the previous
      450,000 to 770,000.





In
      accordance with the receipt of a notice of effectiveness from the State of
      Delaware regarding the Certificate of Amendment of Certificate of Incorporation
      of the Company, which modified the rights of the holders of the Company's Series
      A Convertible Preferred Stock, the Company issued 384,666 shares of Series
      A
      Convertible Preferred stock on January 31, 2007 to the existing Series A
      Convertible Preferred stockholders. Each shareholder also
      received warrants to purchase two shares of common stock for each share of
      Series A Convertible Preferred Stock issued on January 31, 2007, for a total
      of
      769,332 shares with an exercise price of $0.375/share.





In
      February 2007, JDS paid IDS $40,000 it received from an existing customer per
      the terms of the acquisition of IDS’ interest in JDS.





During
      the first quarter of 2007, three individuals, including one member of the Board
      of Directors of the Company, loaned the Company a total of $317,500. The funds
      were utilized for working capital purposes of the Company. The loans were due
      on
      demand and interest is payable at a rate of 12 percent per annum on the date
      of
      repayment. The loans were uncollateralized.





On
      February 20, 2007, the Certificate of Designation establishing the terms of
      a
      Series B Preferred Stock was filed. Certain terms of the Series B Preferred
      Stock are as follows:





·
            The
                Series B Preferred Stock stated value is $750.00 and each share converts
                to 2,000 shares of common stock. Holder may convert the Series B
                Preferred
                Stock into common stock at the conversion price of $0.375 at any
                time and
                without limitation; and




F-18




SIMTROL,
      INC. AND SUBSIDIARIES


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


December
      31, 2006 and 2005




·
            Without
                approval of a majority of the Series B Preferred Stock Holders, the
                Company shall not incur debt (other than debt collateralized by accounts
                receivable of the Company) in excess of an aggregate of $1.5 million
                outside of trade debt in the normal course of business. The terms
                of such
                debt shall not encumber any copyrights, marketing materials, software
                code
                or any other proprietary technology, software or product processes,
                patents or patent licenses; and





·
            The
                Series B Preferred Stock will pay a 12% (based on Stated value)
                noncumulative coupon, payable semi-annually (June 30, December 31)
                in cash
                or common stock (common stock value deemed
                $0.375 for purpose of dividend payment if closing price of common
                stock on
                payment date is less than
                $0.375).




·
            If
                the Company has a current registration statement on file covering
                those
                common shares represented by Series B Preferred Stock and the Company’s
                Common Stock bid price closes at or above $1.00 for 20 consecutive
                trading
                days and the average daily trading volume of the Common Stock is
                equal to
                or greater than $150,000, then Series B Preferred Stock will automatically
                convert to common at $0.375 per common
                share.




·
            Series
                B Preferred Stock Holders receive pre-emptive right to participate
                in
                subsequent equity rounds at the same pro rata percentage of ownership
                they
                currently own in Company on an as-converted basis
                today.





·
            Series
                B Preferred Stock callable at $1,875/share at option of
                Company.





·
            A
                total of 4,700 shares of Series B Preferred Stock were
                designated.





On
      March
      16, 2007, the Company completed the sale of $3,525,000 of securities in a
      private placement of 4,700 units (at $750 per unit) consisting of one share
      of
      Series B Convertible Preferred Stock and one warrant to purchase 2,000 shares
      of
      our common stock at an exercise price of $0.375 per share. Each share of Series
      B Convertible Preferred Stock has a conversion price of $0.375 per share (1
      Series B Convertible Preferred share equals 2,000 shares of common stock).
      The
      warrants have three-year terms.





Three
      note holders, including one member of the Board of Directors, exchanged all
      outstanding interest and principal due from the Company (totaling $710,210)
      under their notes payable for units in the private placement. In conjunction
      with the exchange, the Company issued the holders additional warrants to
      purchase an aggregate of 710,210 shares of the Company’s common stock at an
      exercise price of $0.375 per share. The warrants have five-year terms.





The
      Company intends to file a resale registration statement on Form SB-2 to register
      the common stock underlying the Series B Convertible Preferred Stock, the
      warrants issued in conjunction with the exchange of the notes payable, and
      the
      warrants in the private placement.





On
      March
      16, 2007, one stockholder converted 8,000 shares of the Company’s Series A
      Convertible Preferred Stock to 32,000 shares of the Company’s common stock.





On
      March
      21, 2007, one warrant holder exercised warrants allowing the purchase of 130,668
      shares of our common stock via a cashless exercise provision. Per the terms
      of
      the warrant agreement, the Company issued the holder 87,685 share of its
      restricted common stock on that date.





On
      March
      30, 2007, two warrant holders exercised warrants allowing the purchase of
      128,000 shares of our common stock via a cashless exercise provision. Per the
      terms of the warrant agreements, the Company issued the holders 104,960 share
      of
      its restricted common stock on that date.




F-19




SIMTROL,
      INC. AND SUBSIDIARIES


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


December
      31, 2006 and 2005





On
      March
      31, 2007, we issued 1,937 shares of common stock to Board Members as
      compensation in lieu of cash fees for attendance at board meetings during the
      three months ended March 31, 2007. These amounts were recorded at the fair
      value
      of the Company’s common stock on that date.





On
      April
      2, 2007, one warrant holder exercised warrants allowing the purchase of 32,000
      shares of our common stock via a cashless exercise provision. Per the terms
      of
      the warrant agreement, the Company issued the holder 25,782 shares of its
      restricted common stock on that date.





On
      April
      9, 2007, two shareholders converted 8,334 shares of the Company’s Series A
      Convertible Preferred Stock to 33,336 shares of the Company’s common stock.





On
      April
      10, 2007, the Company granted options to purchase 75,000 shares of stock to
      one
      employee. The options have a three-year vesting period and were granted at
      an
      exercise price equal to the fair value of the Company’s common stock on that
      date.





F-20