| Delaware                          | 95-4106894                           |
|-----------------------------------|--------------------------------------|
| (State or other jurisdiction      | (I.R.S. Employer Identification No.) |
| of incorporation or organization) |                                 |

| Large Accelerated Filer ¨ |   | Accelerated Filer ¨    |
|--------------------------------|--------|-----------------------------|
| Non-accelerated filer ¨   |   | Smaller Reporting Company x |

----

| Class                                     |   | Outstanding September 30, 2010 |
|-------------------------------------------|--------|--------------------------------|
|                                      |   |                           |
| Common Stock, par value $0.0001 per share |   | 54,959,638 shares              |

----

|  Index |                          |                                                                                                                             |   | Page No. |
|-------------|-------------------------------|----------------------------------------------------------------------------------------------------------------------------------|--------|----------|
| PART I.     | FINANCIAL INFORMATION         |                                                                                                                             |   |     |
|        |                          |                                                                                                                             |   |     |
|        | ITEM 1.                       | Financial Statements (Unaudited)                                                                                                 |   |     |
|        |                          |                                                                                                                             |   |     |
|        |                          | Statement Regarding Financial Information                                                                                        |   | 4        |
|        |                          |                                                                                                                             |   |     |
|        |                          | Unaudited Condensed Consolidated Balance Sheets as of August 31, 2010 and February 28, 2010                                      |   | 5        |
|        |                          |                                                                                                                             |   |     |
|        |                          | Unaudited Condensed Consolidated Statements of Operations for the Three and Six  Months Ended August 31, 2010 and 2009 |   | 6        |
|        |                          |                                                                                                                             |   |     |
|        |                          | Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended August 31, 2010 and 2009                      |   | 7        |
|        |                          |                                                                                                                             |   |     |
|        |                          | Notes to Unaudited Condensed Consolidated Financial Statements                                                                   |   | 8        |
|        |                          |                                                                                                                             |   |     |
|        | ITEM 2.                       | Management's Discussion and Analysis of Financial Condition and Results of Operations                                            |   | 16       |
|        |                          |                                                                                                                             |   |     |
|        | ITEM 4T.                      | Controls and Procedures                                                                                                          |   | 20       |
|        |                          |                                                                                                                             |   |     |
| PART II.    | OTHER INFORMATION             |                                                                                                                             |   |     |
|        |                          |                                                                                                                             |   |     |
|        | ITEM 2.                       | Unregistered Sales of Equity Securities and Use of Proceeds                                                                      |   | 20       |
|        |                          |                                                                                                                             |   |     |
|        | ITEM 6.                       | Exhibits                                                                                                                         |   | 20       |
|        |                          |                                                                                                                             |   |     |
|        | SIGNATURES AND CERTIFICATIONS |                                                                                                                             | 21     |

----

----

|                                                                                                                                                                                 |   | August 31, 2010 |          |   | February 28, 2010 |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------|---------------|--------|-------------------|--------|
| ASSETS                                                                                                                                                                               |   |            |          |   |              |   |
| Current assets:                                                                                                                                                                      |   |            |          |   |              |   |
| Cash and cash equivalents                                                                                                                                                            |   | $               | -             |   |              | $      | 45,294 |   |
| Accounts receivable, net of allowance for doubtful accounts of $50,000  at August  31 and February 28, 2010                                                      |   |            | 667,497       |   |              |   | 313,671 |   |
| Inventory - current                                                                                                                                                                  |   |            | 1,500,000     |   |              |   | 1,500,000 |   |
| Other current assets                                                                                                                                                                 |   |            | 292,274       |   |              |   | 241,749 |   |
| Total current assets                                                                                                                                                                 |   |            | 2,459,771     |   |              |   | 2,100,714 |   |
|                                                                                                                                                                                 |   |            |          |   |              |   |   |   |
| Property, plant, and equipment, net                                                                                                                                                  |   |            | 474,070       |   |              |   | 557,838 |   |
| Inventory, non-current, net of allowance for obsolete inventory of $2,467,459 and $2,212,626 at August 31 and February 28, 2010, respectively                                        |   |            | 2,079,301     |   |              |   | 2,140,194 |   |
|                                                                                                                                                                                 |   |            |          |   |              |   |
| Total assets                                                                                                                                                                         |   | $               | 5,013,142     |   |              | $      | 4,798,746 |   |
|                                                                                                                                                                                 |   |            |          |   |              |   |
| LIABILITIES AND STOCKHOLDERS' DEFICIT                                                                                                                                                |   |            |          |   |              |
| Current liabilities:                                                                                                                                                                 |   |            |          |   |              |   |   |   |
| Book overdraft                                                                                                                                                                       |   | $               | 37,089        |   |              | $      | - |   |
| Accounts payable                                                                                                                                                                     |   |            | 1,312,071     |   |              |   | 1,130,276 |   |
| Notes payable                                                                                                                                                                        |   |            | 440,000       |   |              |   | 547,500 |   |
| Notes payable- related party                                                                                                                                                         |   |            | 7,710,000     |   |              |   | 5,150,000 |   |
| Accrued expenses                                                                                                                                                                     |   |            | 2,992,394     |   |              |   | 2,221,759 |   |
| Customer advances                                                                                                                                                                    |   |            | 318,828       |   |              |   | 411,616 |   |
|  Stock to be issued                                                                                                                                                             |   |            | 704,000  |   |              |   | -  |   |
|                                                                                                                                                                                 |   |            |          |   |              |   |
| Total current liabilities                                                                                                                                                            |   |            | 13,514,382    |   |              |   | 9,461,151 |   |
|                                                                                                                                                                                 |   |            |          |   |              |   |   |   |
| Convertible note payable                                                                                                                                                             |   |            | 500,000       |   |              |   | 500,000 |   |
|                                                                                                                                                                                 |   |            |          |   |              |   |
| Total liabilities                                                                                                                                                                    |   |            | 14,014,382    |   |              |   | 9,961,151 |   |
|                                                                                                                                                                                 |   |            |          |   |              |   |   |   |
|                                                                                                                                                                                 |   |            |          |   |              |   |   |   |
| Commitments and contingencies                                                                                                                                                        |   |            |          |   |              |   |   |   |
|                                                                                                                                                                                 |   |            |          |   |              |   |   |   |
|                                                                                                                                                                                 |   |            |          |   |              |   |   |   |
| Stockholders' deficit :                                                                                                                                                              |   |            |          |   |              |   |   |   |
| Common stock, $0.0001par value; 75,000,000 shares authorized at August 31 and February 28, 2010; 54,959,638 and 52,689,061 issued and outstanding at August 31 and February 28, 2010 |   |            | 5,496         |   |              |   | 5,268 |   |
| Additional paid-in capital                                                                                                                                                           |   |            | 376,658,447   |   |              |   | 374,890,469 |   |
| Accumulated deficit                                                                                                                                                                  |   |            | (385,665,183  | )      |              |   | (380,058,142 | ) |
|                                                                                                                                                                                 |   |            |          |   |              |   |
| Total stockholders' deficit                                                                                                                                                          |   |            | (9,001,240    | )      |              |   | (5,162,405 | ) |
|                                                                                                                                                                                 |   |            |          |   |              |   |
| Total liabilities and stockholders' deficit                                                                                                                                          |   | $               | 5,013,142     |   |              | $      | 4,798,746 |   |
|                                                                                                                                                                                 |   |            |          |   |              |   |

----

|                                                                             |   | Unaudited Three Months |        | Six Months |   |
|----------------------------------------------------------------------------------|--------|-----------------------------|-------------|------------|--------|
|                                                                             |   | 2010                        |        | 2009       |   | 2010 |   | 2009 |   |
| Net Revenues                                                                     |   | $                           | 997,479     |       | $      | 632,111 |   | $ | 1,585,467 |   | $ | 1,264,806 |   |
|                                                                             |   |                        |        |       |   |   |   |   |   |   |   |   |   |
| Cost of goods sold                                                               |   |                        | 483,713     |       |   | 519,944 |   |   | 783,847 |   |   | 821,036 |   |
|                                                                             |   |                        |        |       |   |   |   |   |   |   |   |   |   |
| Gross Profit                                                                     |   |                        | 513,766     |       |   | 112,167 |   |   | 801,620 |   |   |  443,770 |   |
|                                                                             |   |                        |        |       |   |   |   |   |   |   |   |   |   |
| Expenses                                                                         |   |                        |        |       |   |   |   |   |   |   |   |   |   |
| Engineering, research and development expenses                                   |   |                        | 350,965     |       |   | 555,143 |   |   | 812,655 |   |   | 1,064,275 |   |
| Selling, general and administrative expenses                                     |   |                        | 2,661,303   |       |   | 1,941,855 |   |   | 4,989,767 |   |   | 3,731,550 |   |
| Stock option compensation expense                                                |   |                        | 42,717      |       |   | 6,561,011 |   |   | 86,282 |   |   | 6,644,518 |   |
| Total costs and expenses                                                         |   |                        | 3,054,985   |       |   | 9,058,009 |   |   | 5,888,704 |   |   | 11,440,343 |   |
|                                                                             |   |                        |        |       |   |   |   |   |   |   |   |   |   |
| Loss from operations                                                             |   |                        | (2,541,219) |       |   | (8,945,842) |   |   | (5,087,084 ) |   |   | (10,996,573) | ) |
|                                                                             |   |                        |        |       |   |   |   |   |   |   |   |   |   |
| Other income and (expense)                                                       |   |                        |        |       |   |   |   |   |   |   |   |   |   |
| Interest expense, net                                                            |   |                        | (238,095)   |       |   | (235,829) |   |   | (458,621) |   |   | (336,233) |   |
| Loss on settlement of debt                                                       |   |                        | -           |       |   | - |   |   | (57,032) |   |   | - |   |
| Other income (expense), net                                                      |   |                        | -           |       |   | (19,075) |   |   | (4,303) |   |   | (21,850) |   |
| Total other income (expense)                                                     |   |                        | (238,095)   |       |   | (254,904) |   |   | (519,956) |   |   | (358,083) |   |
| Net Loss                                                                         |   | $                           | (2,779,314) |       | $      | (9,073,629) |   | $ | (5,607,040) |   | $ | (11,354,656) |   |
|                                                                             |   |                        |        |       |   |   |   |   |   |   |   |   |   |
| Total basic and diluted loss per share                                           |   | $                           | (0.05)      |       | $      | (0.19) |   | $ | (0.10) |   | $ | (0.24) |   |
| Weighted average shares used tocompute basic and diluted income (loss) per share |   |                        | 54,597,759  |       |   | 47,425,400 |   |   | 53,955,156 |   |   | 47,035,475 |   |

----

|                                                                        |   | 2010   |       |   | 2009   |   |
|-----------------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|
| Cash flow from operating activities:                                        |   |   |       |   |   |   |
| Net Loss                                                                    |   | $      | (5,607,040 | )      |   | $      | (11,354,656 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities: |   |   |       |   |   |   |   |   |
| Depreciation expense                                                        |   |   | 93,366     |   |   |   | 55,634 |   |
| Amortization of debt discount                                               |   |   | 72,000     |   |   |   | 140,566 |   |
| Loss on settlement of debt                                                  |   |   | 57,032     |   |   |   | 22,750 |   |
| Stock options and warrants expense                                          |   |   | 86,281     |   |   |   | 6,644,518 |   |
| Stock issued for services                                                   |   |   | 776,000    |   |   |   | - |   |
| (Increase) decrease in:Accounts receivable                                  |   |   | (353,826   | )      |   |   | (114,122 | ) |
| Inventory                                                                   |   |   | 60,893     |   |   |   | 213,497 |   |
| Other current assets and deposit                                            |   |   | (50,525    | )      |   |   | (54,507 | ) |
| Increase (decrease) in:                                                     |   |   |       |   |   |   |   |   |
| Accounts payable, customer deposit and accrued expenses                     |   |   | 1,095,199  |   |   |   | 756,557 |   |
| Net cash used in operations                                                 |   |   | (3,770,620 | )      |   |   | (3,689,763 | ) |
|                                                                        |   |   |       |   |   |   |   |   |
| Investing activities:                                                       |   |   |       |   |   |   |   |   |
| Acquisition of plant and equipment                                          |   |   | (9,599     | )      |   |   | (200,625 | ) |
|                                                                        |   |   |       |   |   |   |   |   |
|                                                                        |   |   |       |   |   |   |   |   |
| Financing activities:                                                       |   |   |       |   |   |   |   |   |
| Issuance of common stock                                                    |   |   | 470,925    |   |   |   | 785,000 |   |
| Proceeds from (repayments of) notes payable, net                            |   |   | 2,560,000  |   |   |   | 2,927,500 |   |
| Proceeds from stock to be issued                                            |   |   | 704,000    |   |   |   | - |   |
| Exercise of warrants                                                        |   |   | -          |   |   |   | 94,428 |   |
|                                                                        |   |   |       |   |   |   |   |   |
| Net cash provided by financing activities:                                  |   |   | 3,734,925  |   |   |   | 3,806,928 |   |
|                                                                        |   |   |       |   |   |   |   |   |
| Net increase (decrease) in cash & cash equivalents                      |   |   | (45,294    | )      |   |   | (83,460 | ) |
|                                                                        |   |   |       |   |   |   |   |   |
| Cash and cash equivalents at beginning of period                            |   |   | 45,294     |   |   |   | 317,256 |   |
|                                                                        |   |   |       |   |   |   |   |   |
| Cash and cash equivalents at end of period                                  |   | $      | -          |   |   | $      | 233,796 |   |
|                                                                        |   |   |       |   |   |   |   |   |
| Supplemental disclosures of cash flow information                           |   |   |       |   |   |   |   |   |
| Cash paid during the period for:                                            |   |   |       |   |   |   |   |   |
| Interest                                                                    |   | $      | 9,862      |   |   | $      | 17,424 |   |
| Income taxes                                                                |   | $      | -          |   |   | $      | - |   |

----

----

| Machinery and equipment | 5 to 10 years |
|-------------------------|---------------|
| Furniture and fixtures  | 7 years       |

----

|                                        |   | August 31, 2010 |       |   | February 28,2010 |   |
|---------------------------------------------|--------|-----------------|------------|--------|------------------|--------|
|                                        |   |            |       |   |             |   |
| Raw materials                               |   | $               | 2,343,214  |   |             | $      | 2,626,206 |   |
| Finished goods                              |   |            | 3,355,053  |   |             |   | 3,226,614 |   |
| Reserved for potential product obsolescence |   |            | (1,986,245 | )      |             |   | (2,076,018 | ) |
|                                        |   |            |       |   |             |   |   |   |
|                                        |   |            | 3,712,022  |   |             |   | 3,776,802 |   |
| Non-current portion                         |   |            | (2,079,301 | )      |             |   | (2,140,194 | ) |
| Discount on long term inventory             |   |            | (132,721   | )      |             |   | (136,608 | ) |
|                                        |   |            |       |   |             |   |   |   |
| Current portion                             |   | $               | 1,500,000  |   |             | $      | 1,500,000 |   |
|                                        |   |            |       |   |             |   |   |   |

|                                           |   | August 31, 2010 |      |   | February 28, 2010 |   |
|------------------------------------------------|--------|-----------------|-----------|--------|-------------------|--------|
|                                           |   |            |      |   |              |   |
| Machinery and equipment                        |   | $               | 964,111   |   |              | $      | 1,060,519 |   |
| Furniture and fixtures                         |   |            | 163,302   |   |              |   | 1,493,293 |   |
| Leasehold Improvements                         |   |            | 485,080   |   |              |   | 481,887 |   |
|                                           |   |            |      |   |              |   |   |   |
|                                           |   |            | 1,612,493 |   |              |   | 3,035,699 |   |
| Less accumulated depreciation and amortization |   |            | 1,138,423 |   |              |   | 2,477,861 |   |
|                                           |   |            |      |   |              |   |   |   |
| Property, plant and equipment, net             |   | $               | 474,070   |   |              | $      | 557,838 |   |
|                                           |   |            |      |   |              |   |   |   |

|                                 |   | August 31, 2010 |      |   | February 28, 2010 |   |
|--------------------------------------|--------|-----------------|-----------|--------|-------------------|--------|
|                                 |   |            |      |   |              |   |
| Accrued payroll and related expenses |   | $               | 2,110,660 |   |              | $      | 1,716,279 |   |
| Accrued interest                     |   |            | 851,469   |   |              |   | 494,830 |   |
| Other                                |   |            | 30,265    |   |              |   | 10,650 |   |
|                                 |   |            |      |   |              |   |   |   |
| Total                                |   | $               | 2,992,394 |   |              | $      | 2,221,759 |   |
|                                 |   |            |      |   |              |   |   |   |

|                                |   | August31, 2010 |    |   | February 28, 2010 |   |
|-------------------------------------|--------|----------------|---------|--------|-------------------|--------|
|                                |   |           |    |   |              |   |
| Demand notes payable  (a) |   | $              | 50,000  |   |              | $      | 90,000 |   |
| Convertible notes payable (b)       |   |           | 890,000 |   |              |   | 957,500 |   |
|                                |   |           | 940,000 |   |              |   | 1,047,500 |   |
|                                |   |           |    |   |              |   |   |   |
| Less: Current portion               |   |           | 440,000 |   |              |   | 547,500 |   |
|                                |   |           |    |   |              |   |   |   |
| Long-term portion                   |   | $              | 500,000 |   |              | $      | 500,000 |   |
|                                |   |           |    |   |              |   |   |   |

| Year Ending February 28, |   |   |                                   |
|--------------------------|--------|--------|----------------------------------------|
| 2011                     |   |   | $     440,000 |   |
| 2012                     |   |   | -                                      |   |
| 2013                     |   |   | 500,000                                |   |
| Total                    |   |   | $    940,000       |   |

|                           |   | 2006 Plan                       |
|--------------------------------|--------|---------------------------------|
|                           |   | Weighted-Average Exercise Price |   | Aggregate Intrinsic Value |   | Number of Options |
| Outstanding, February 28, 2010 |   | $1.50                           |   |   |   | 6,283,500 |
| Issued                         |   | $1.50                           |   |   |   | 224,000 |
| Cancelled                      |   | $1.50                           |   |   |   | (3,000) |
| Outstanding, August 31, 2010   |   | $1.50                           |   |   |   | 6,504,500 |

| Options Outstanding    |   | Exercisable Options |      |
|------------------------|--------|---------------------|-----------|
| Range of ExercisePrice |   | Number              |      | Weighted Average Remaining Life |   | Weighted Average Exercise Price |   | Weighted Average Remaining Life |   | Number |   | Weighted Average Exercise Price |   |
|   $1.50           |   |                | 6,504,500 |   |   | 3.73 years |   | $ | 1.50 |   |   | 3.70 years |   |   | 6,230,745 |   | $ | 1.50 |   |

|                           | Number of Shares | Exercise Prices |
|--------------------------------|------------------|-----------------|
| Outstanding, February 28, 2010 | 6,612,793        | $0.75-4.00      |
| Issued                         | 350,642          | $1.50           |
| Outstanding, August 31, 2010   | 6,963,435        | $0.75-4.00      |

----

| Range of Exercise Prices |   | Stock Warrants Outstanding |   | Stock Warrants Exercisable |   | Weighted-Average Remaining Contractual Life |   | Weighted-Average Exercise Price of Warrants Outstanding |   | Weighted-Average Exercise Price of Warrants Exercisable |   |  Intrinsic Value |
|--------------------------|--------|----------------------------|--------|----------------------------|--------|---------------------------------------------|--------|---------------------------------------------------------|--------|---------------------------------------------------------|--------|-----------------------|
| $1.50                    |   | 350,642                    |   | 350,642                    |   | 90 months                                   |   | $1.50                                                   |   | $1.50                                                   |   | $0.00                 |
| $0.75-1.25               |   | 1,354,710                  |   | 1,354,710                  |   | 47 months                                   |   | $1.25                                                   |   | $1.25                                                   |   | $0.00                 |
| $1.50                    |   | 1,900,000                  |   | 1,900,000                  |   | 46 months                                   |   | $1.50                                                   |   | $1.50                                                   |   | $0.00                 |
| $2.00-$3.00              |   | 1,934,991                  |   | 1,934,991                  |   | 6 months                                    |   | $2.44                                                   |   | $2.49                                                   |   | $0.00                 |
| $3.50                    |   | 805,589                    |   | 805,589                    |   | 16 months                                   |   | $3.50                                                   |   | $3.50                                                   |   | $0.00                 |
| $4.00                    |   | 617,503                    |   | 617,503                    |   | 5 months                                    |   | $4.00                                                   |   | $4.00                                                   |   | $0.00                 |
|                     |   | 6,963,435                  |   | 6,963,435                  |   |                                        |   |                                                    |   |                                                    |   |                  |

|          |   | 2010   |      |   | 2009   |   |
|---------------|--------|--------|-----------|--------|--------|--------|
|          |   |   |      |   |   |   |
| United States |   | $      | 833,593   |   |   | $      | 1,076,346 |   |
| Canada        |   |   | 430,786   |   |   |   | 162,293 |   |
| Asia          |   |   | 307,008   |   |   |   | 9,276 |   |
| Europe        |   |   | 6,580     |   |   |   | 16,891 |   |
| Other         |   |   | 7,500     |   |   |   | - |   |
|          |   |   |      |   |   |   |   |   |
| Total         |   | $      | 1,585,467 |   |   | $      | 1,264,806 |   |
|          |   |   |      |   |   |   |   |   |

| · | Our ability to generate positive cash flow from operations; |
|--------|-------------------------------------------------------------|

| · | Our ability to obtain additional financing to fund our operations; |
|--------|--------------------------------------------------------------------|

| · | Our business development and  operating development; and |
|--------|--------------------------------------------------------------------|

| · | Our expectations of growth in demand for our products. |
|--------|--------------------------------------------------------|