NOTE 3 - CONTRACTS IN PROGRESS

Costs and estimated earnings in excess of billings on uncompleted contracts represent accumulated project expenses and fees which have not been invoiced to customers as of the date of the balance sheet. These amounts are stated on the balance sheet as Unbilled Receivables of $690,686 and $587,015 as of January 31, 2011 and October 31, 2010 respectively.

Billings in excess of cost and estimated earnings on uncompleted contracts represent project invoices billed to customers that have not been earned as of the date of the balance sheet. These amounts are stated on the balance sheet as Deferred Revenue of $745,824 and $443,853 as of January 31, 2011 and October 31, 2010 respectively.

Revenue received as part of sales of equipment includes a provision for warranty and is treated as deferred revenue, along with extended warranty sales, with these amounts amortized over either 12 months, 36 months or 60 months from the date of sale depending on the product purchased. These products are sold as Through Life Support for said periods. These amounts are stated on the balance sheet as Warranty Liability of $1,514,319 and $770,330 as of January 31, 2011 and October 31, 2010 respectively.