**U.S.      Securities and Exchange Commission**

**Washington,      D.C.  20549**

**Form      10-KSB**

**x   ANNUAL      REPORT UNDER SECTION 13 OR 15(d) OF THE**

**SECURITIES      EXCHANGE ACT OF 1934**

**o   TRANSITION      REPORT UNDER SECTION 13 OR 15(d) OF THE**

**SECURITIES      EXCHANGE ACT OF 1934**

**STATMON      TECHNOLOGIES CORP.**

| **Nevada**                                                                                    |   | **83-0242652**                                      |
|-----------------------------------------------------------------------------------------------|--------|-----------------------------------------------------|
| (State                or other jurisdiction of incorporation or organization)                 |   | (I.R.S.                Employer Identification No.) |
|                                                                                          |
| **3000                Lakeside Drive, Suite 300 South, Bannockburn, IL                60015** |
| (Address                of principal executive offices) (Zip Code)                            |
|                                                                                          |
| **(847)                604-5366**                                                             |
| (Issuer’s                telephone number)                                              |

|  **Common                Stock, $0.01 par                value** |  **OTCBB**                                                            |
|-----------------------------------------------------------------------|----------------------------------------------------------------------------|
|  (Title                of class)                                 |  (Name                of exchange on which                registered) |

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**FORM      10-KSB**

**STATMON      TECHNOLOGIES CORP.**

**March      31, 2007**

**TABLE      OF CONTENTS**

|  PART                I                                                  |   |   | Page   |   |
|------------------------------------------------------------------------------|--------|--------|--------|--------|
|                                                                         |   |   |   |   |
| ITEM                1. Description of Business                               |   |   | 2      |   |
|                                                                         |   |   |   |   |
| ITEM                2. Description of Properties                             |   |   | 22     |   |
|                                                                         |   |   |   |   |
| ITEM                3. Legal Proceedings                                     |   |   | 22     |   |
|                                                                         |   |   |   |   |
| ITEM                4. Submission of Matters to a Vote of Securities Holders |   |   | 24     |   |

|  PART                II                                                                                                                          |   |   |   |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|
|                                                                                                                                                  |   |   |   |   |
| ITEM                5. Market for Common Equity, Related Stockholder Matters and Small                Business Issuer Purchases of Equity Securities. |   |   | 24     |   |
|                                                                                                                                                  |   |   |   |   |
| ITEM                6. Management’s Discussion and Analysis or Plan of                Operation                                                 |   |   | 26     |   |
|                                                                                                                                                  |   |   |   |   |
| ITEM                7. Financial Statements                                                                                                           |   |   | 34     |   |
|                                                                                                                                                  |   |   |   |   |
| ITEM                8. Changes In and Disagreements with Accountants on Accounting and                Financial Disclosure                            |   |   | 34     |   |
|                                                                                                                                                  |   |   |   |   |
| ITEM                8a. Controls and Procedures                                                                                                       |   |   | 34     |   |
|                                                                                                                                                  |   |   |   |   |
| ITEM                8b. Other Information                                                                                                             |   |   | 34     |   |

|  PART                III                                                                                                                                                                             |   |   |   |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|
|                                                                                                                                                                                                      |   |   |   |   |
| ITEM                9. Directors, Executive Officers, Promoters, Control Persons and                Corporate                Governance; Compliance with Section 16(a) of the Exchange                Act |   |   | 35     |   |
|                                                                                                                                                                                                      |   |   |   |   |
| ITEM                10. Executive Compensation                                                                                                                                                            |   |   | 38     |   |
|                                                                                                                                                                                                      |   |   |   |   |
| ITEM                11. Security Ownership of Certain Beneficial Owners and                Management                and Related Stockholder Matters                                                      |   |   | 40     |   |
|                                                                                                                                                                                                      |   |   |   |   |
| ITEM                12. Certain Relationships and Related Transactions, and Director                Independence                                                                                          |   |   | 41     |   |

| ITEM                13. Exhibits                               |   |   | 43     |   |
|----------------------------------------------------------------|--------|--------|--------|--------|
|                                                           |   |   |   |   |
| ITEM                14. Principal Accountant Fees and Services |   |   | 46     |   |
|                                                           |   |   |   |   |
| Signature                Page                                  |   |   | 47     |   |

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**ITEM      1.    **
**DESCRIPTION      OF BUSINESS**

**Company      Overview**

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**Products      and Services**

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**Software**

***Axess***

**Hardware**

***UIF-32      (Universal Interface Unit)***

***EIF-32+      (Embedded Interface Unit)***

***UVM-6      (Universal Voltage Monitor)***

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**Key        Features of Our Products**

|   | · | Operator                  friendly; |
|--------|--------|-------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | · | Minimizes                  field engineering requirements; |
|--------|--------|------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | · | Ease                  of implementation, installation, maintenance, and                  upgrade; |
|--------|--------|---------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | · | Scalable                  and customizable; |
|--------|--------|---------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | · | Fully                  secure including highest government approved                  encryption; |
|--------|--------|--------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | · | Ability                  to integrate the monitoring and management of a wide range of protocols                  and disparate systems and devices throughout a                  network; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | · | Low-cost,                  off-the-shelf hardware and software, utilizing the Windows operating                  system, used in conjunction with a standard personal computer,                  laptop,                  PDA, or other handheld computerized                  device; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | · | Real-time                  remote access, self-healing, control and monitoring of diverse                  systems,                  intelligent and passive devices across the                  network; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | · | Real-time                  digital data collection, aggregation and information management                  services; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | · | Automation,                  time and motion efficiencies through remote-site monitoring, managing                  and                  remote control capabilities from any web-enabled                  location; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | · | Network                  and device automation redundancy and "fail-safe" problem                  solving; |
|--------|--------|-------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | · | Top                  line revenue protection and insurance against system down-time                  by                  preemption and prevention rather than cure; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Preventative                  maintenance opportunities based upon trend analysis of collected                  data. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------|

**Customers**

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**Fiscal        2008 Goals**

|   | · | Continue                  to develop the Qualcomm/MediaFLO relationship, including working                  with                  Telco carriers adopting the MediaFLO Mobile TV platform, both domestically                  and through international partners and                  operators; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Focus                  directly on operators of Telco wireless networks and communications                  infrastructure providers; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Support                  the Nautel Navigation sales channel into the international air                  and sea                  navigational aid and beacon market; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Aggressively                  promote our flagship software product, “Axess”, and associated product                  lines into the existing and expanding sales and distribution channels,                  including Harris Broadcast, Pixelmetrix, Eddystone - Sound Broadcast                  Services, Ltd., Burst Communications, Synergy Systems and Nautel                  Radio; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Focus                  on high profile product positioning and increasing our exposure                  in the                  public financial and infrastructure technology                  markets; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Implement                  an aggressive investor relations and public market making program                  to                  educate the financial markets about us and to generate liquidity                  in the                  Company’s OTC Bulletin Board listed shares of common                  stock; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Expand                  our in-house sales engineering and channel business development                  team in                  the domestic and foreign markets; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Focus                  on the worldwide digital radio transmitter retrofit cycle working                  with the                  transmitter hardware manufacturers and                  integrators; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Identify                  strategic vertical market collaboration opportunities in the energy,                  power                  management, military, government and corporate infrastructure                  markets; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Identify                  strategic infrastructure integrators and operators and complimentary                  technologies for end-to-end solutions in the power supply, data                  center,                  wireless data delivery, embedded and sensor vertical                  markets; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Infrastructure        and Network Management**

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**Radio        and Television Broadcasting Industry**

**Software        Industry**

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**Business        Strategy - Potential New Vertical Markets**

|   | · | Wireless                  Infrastructure and Communications; |
|--------|--------|--------------------------------------------------------------|

|   | · | Building                  Radio Frequency and Security                  Management; |
|--------|--------|-------------------------------------------------------------------------------------|

|   | · | First                  Responder, Emergency Services, Government and                  Military; |
|--------|--------|-------------------------------------------------------------------------------------------------|

|   | · | Energy                  Industry; |
|--------|--------|-----------------------------------|

|   | · | Wireless                  and Microwave Tower Management; |
|--------|--------|-----------------------------------------------------------|

|   | · | Homeland                  Security - Remote Control, Monitoring and Surveillance;                  and |
|--------|--------|--------------------------------------------------------------------------------------------------------|

|   | · | Infrastructure                  - Remote Control, Monitoring and Data                  Aggregation. |
|--------|--------|-----------------------------------------------------------------------------------------------------|

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**Competition**

|   | · | Breadth                  of geographic presence; |
|--------|--------|--------------------------------------------------|

|   | · | Ease                  of integration; |
|--------|--------|---------------------------------------|

|   | · | Reliability; |
|--------|--------|--------------|

|   | · | Ability                  to offer turnkey solutions; |
|--------|--------|------------------------------------------------------|

|   | · | Customer                  service; |
|--------|--------|------------------------------------|

|   | · | Performance; |
|--------|--------|--------------|

|   | · | Flexibility;                  and |
|--------|--------|-----------------------------------|

|   | · | Scalability. |
|--------|--------|--------------|

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**Business        Development**

**Customer        Support and Service**

|   | · | Tiered                  levels of support and maintenance based on the size of the                  customer; |
|--------|--------|---------------------------------------------------------------------------------------------------------------|

|   | · | Centralized                  technical support; |
|--------|--------|-------------------------------------------------|

|   | · | On-site                  and twenty-four hour off-site technical                  support; |
|--------|--------|--------------------------------------------------------------------------------------------|

|   | · | Centralized                  and on-site training; |
|--------|--------|----------------------------------------------------|

|   | · | Application                  solution design services; and |
|--------|--------|------------------------------------------------------------|

|   | · | Non-warranty                  product replacement or repair. |
|--------|--------|--------------------------------------------------------------|

**Research        and Development**

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**Sources        and Availability of Materials**

**Patents,        Trademarks, Copyrights and Licenses**

**Licenses        and Warranties**

**Our        Employees**

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**CAUTIONARY        FACTORS THAT MAY AFFECT FUTURE RESULTS**

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**Risks        Related To Our Business**

| *Limited                  Operating History.*                                                                        |   | We                  have had a limited operating history upon which potential investors                  may                  base an evaluation of our prospects and there can be no assurance                  that we                  will achieve our objectives. Our prospects must be considered in                  light of                  the risks, expenses and difficulties frequently encountered by                  companies                  in their early stages of development, particularly companies in                  a rapidly                  evolving market, such as the market for automation, remote monitoring                  and                  process control software. Such risks include, but are not limited                  to, our                  ability to obtain and retain customers and attract a significant                  number of                  new customers, the growth of the wireless communications, broadcast                  and                  other markets we intend to pursue, our ability to implement our                  growth                  strategy, especially our sales and marketing efforts, and the introduction                  of new devices and computer network and control technologies by                  us and our                  competitors. |
|----------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| *We                  Have a History of Net Losses and May Never Achieve or Maintain                  Profitability.* |   | We                  have a history of incurring losses from operations. At March 31,                  2007, we                  had an accumulated deficit of approximately $12,960,000. We anticipate                  that our operating expenses will increase substantially in the                  foreseeable                  future as we increase our sales and marketing activities, attempt                  to                  develop new market verticals, and continue to develop our technology,                  products and services. These efforts may prove more expensive than                  we                  currently anticipate and we may incur significant additional costs                  and                  expenses in connection with our business development activities.                  Such                  costs and expenses could prevent us from achieving or maintaining                  profitability in future periods. In fiscal 2007, we reported net                  income in                  the third quarter, however, we may not be able to sustain or increase                  our                  profitability on a quarterly or annual basis in the                  future.                                                                                                       |
|                                                                                                                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| *Our                  Auditors Have Expressed a Going Concern Opinion.*                                              |   | Primarily                  as a result of our recurring losses and our lack of liquidity,                  we have                  received a report from our independent auditors that includes an                  explanatory paragraph describing their substantial doubt about                  our ability                  to continue as a going concern.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                                                                                                                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| *Concentration                  of Our Business in One Customer*                                                     |   | In                  fiscal 2007, MediaFLO accounted for approximately 69% of our revenues.                  We                  expect this percentage and the volume of our revenues derived from                  MediaFLO and its affiliates to grow in fiscal 2008. A loss of all                  or a                  substantial portion of this business would have a material adverse                  effect                  on our business, results of operations and financial                  condition.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |

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|                                                                                                                                  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|---------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| *Future                  Capital Needs, Uncertainty of Future Additional                  Financing.*                                 |   | We                  currently anticipate that our available funds and resources, including                  product sales, will not be sufficient to meet our anticipated needs                  for                  working capital and capital expenditures for the next twelve months.                  We                  will need to raise additional funds in the future in order to repay                  our                  existing indebtedness if we are not able to extend the maturity                  dates of                  our notes, as well as to pursue new market verticals, develop new                  or                  enhanced products, respond to competitive pressures and acquire                  complementary businesses or technologies. If we raise additional                  funds                  through the issuance of equity or convertible debt securities,                  the current                  stockholders may experience dilution and any such securities may                  have                  rights, preferences or privileges senior to those of the rights                  of our                  current shareholders. There can be no assurance that we can obtain                  additional financing or obtain it on terms favorable to us. If                  adequate                  funds are not available or not available on acceptable terms, we                  may not                  be able to fund our expansion, new market verticals, promote our                  products                  as we desire, take advantage of unanticipated acquisition opportunities,                  develop or enhance products or respond to competitive pressures.                  Any such                  inability could have a material adverse effect on our business,                  results of                  operation and financial condition. |
|                                                                                                                                  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| *We                  May Not be Able to Refinance Short-Term Promissory Notes that are                  Coming                  Due.* |   | As                  of March 31, 2007, we have issued approximately $4.5 million of                  short-term                  promissory notes, of which approximately $1,223,000 has been repaid,                  approximately $2.9 million has matured and approximately an additional                  $350,000 will mature by March 31, 2008. Our goal is to raise additional                  equity capital in fiscal 2008. In addition, we may seek to extend                  the                  maturity dates or convert to equity some or all of these notes                  in order to                  give us time to implement a longer-term financing strategy. We                  may be                  required to pay certain of the notes prior to the completion of                  our                  longer-term financing strategy and, in this connection, issue additional                  short-term debt or equity securities to raise the capital to do                  so. If we                  are unable to either extend the maturity dates of the notes or                  repay them                  through raising additional capital, the holders of such notes could                  demand                  payment, causing our insolvency, which would have a material adverse                  effect on our business, results of operations and financial condition.                  There can be no assurance that we will be able to raise sufficient                  capital                  to retire this short-term debt, or be able to do so on terms acceptable                  to                  us.                                                                                                                                                                                                                                                                          |

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| *Failure                  to timely file certain regulatory filings.*                                                                                                                                                       |   | During                  the year ended March 31, 2007, the Company received notices from                  the                  Federal and State taxing authorities relating to $114,000 of past                  due                  payroll taxes and in July 2006, the Company paid such amounts in                  full. As                  of March 31, 2007, the Company was delinquent in its filing of                  several                  years’ Federal, State and local compensation related filings, related                  to                  amounts paid to the Company’s founders who are the Chief Executive                  Officer, Chief Technical Officer and one other individual for payroll                  reporting purpose. As the Company has not been in a position to                  comply                  with the Chief Executive Officer and the Chief Technology Officer                  employment contracts the Company has decided to classify these                  individuals                  as non-employees. For payroll tax reporting purposes, through December                  31,                  2006, the gross unreported compensation amounts aggregated to                  approximately $1,400,000 for the three individuals. Management                  of the                  Company has indicated that it will rectify the non-reporting of                  several                  years of compensation to these individuals by August 15, 2007 through                  the                  filing of Federal forms 1099 and 1096. The Company also plans to                  pay                  accrued compensation of approximately $425,000 to the Chief Executive                  Officer and Chief Technology Officer which the Company has accrued                  prior                  to March 31, 2007. At the time of this filing, approximately $130,000                  of                  accrued compensation due to the other individual has been paid                  which was                  utilized to pay the related income taxes on $301,829 of the above                  mentioned $1,400,000 of unreported 1099 income to the respective                  taxing                  authorities. Such payroll tax reporting classification is subject                  to audit                  by the Internal Revenue Service and other state and local taxing                  authorities, which, upon review, could determine that such individuals’                  compensation should have been reported on the basis that such individuals                  are employees. Accordingly, depending on such potential audit,                  the Company                  may be subject to additional payroll related liabilities the amount                  of                  which, if any, is not determinable at this time. |
|                                                                                                                                                                                                                        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| *Undetected                  Errors or Failures in Our Software Could Result in Loss or Delay                  in the                  Market Acceptance of Our Product, Lost Sales or Costly                  Litigation.* |   | Because                  our software products are complex, they may contain errors that                  can be                  detected at any point in a product's lifecycle. While we continually                  test                  our products for errors, errors in our products may be found in                  the future                  even after our products have been commercially introduced. Detection                  of                  any significant errors may result in, among other things, loss                  of, or                  delay in, market acceptance and sales of our products, diversion                  of                  development resources, injury to our reputation, increased service                  and                  warranty costs or costly litigation. Additionally, because our                  products                  support or rely on other systems and applications, any software                  errors or                  bugs in these systems or applications may result in errors in the                  performance of our software, and it may be difficult or impossible                  to                  determine where the error resides. Product errors could harm our                  business                  and have a material adverse effect on our business, results of                  operation                  and financial condition.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
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| *A                  Successful Products Liability Claim Could Require Us to Pay Substantial                  Damages and Result in Harm to Our Business                  Reputation.*                                       |   | The                  manufacture and sale of our products involve the risk of product                  liability                  claims. We do not carry product liability insurance. A successful                  claim                  brought against us could require us to pay substantial damages                  and result                  in harm to our business reputation, remove our products from the                  market or                  otherwise adversely affect our business and                  operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |

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| *Broadcast                  Industry Resistance to Change.*                   |   | Our                  initial target market, television/radio broadcasting, is considered                  by                  many to be mature, of limited size and finite. Certain senior engineering                  management in this market segment tends to have a comfort zone                  with                  existing operations and may not readily see a reason to change                  from the                  *status                  quo*.                  We must convince broadcast customers that there can be material                  cost-savings and management efficiencies realized through the utilization                  of our array of products. Furthermore, we must demonstrate to the                  customer                  that by not utilizing our products, the customer may fall behind                  the                  technology curve being embraced by certain of its                  competitors.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
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| *Fluctuations                  in Quarterly Operating Results.*               |   | We                  expect to experience significant fluctuations in future quarterly                  operating results that may be caused by many factors, including,                  among                  others, the volume of orders that we receive from MediaFLO and                  Qualcomm,                  delays in our introduction of product enhancements for the facilities                  management, automation, remote monitoring and control software                  market;                  introduction of new product or products enhancement for such market                  by our                  competitors or other providers of hardware, software and components                  costs                  associated with product or technology acquisitions; the size and                  timing of                  individual orders, software "bugs" or other product quality problems,                  competition and pricing in the software industry; seasonality of                  revenues;                  customer order deferrals in anticipation of new products; market                  acceptance of new products; reductions in demand for existing products                  and                  shortening of product life cycles as a result of new product                  introductions; changes in operating expenses; changes in our personnel;                  changes in regulatory requirements; mix of products sold; and general                  economic conditions. As a result, we believe that period-to-period                  comparisons of our past results of operations may not necessarily                  be                  relied upon as indications of future performance. |
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| *Failure                  to Manage Growth Will Adversely Affect Operations.* |   | We                  plan, given sufficient capital, to significantly expand our distribution,                  sales, marketing, research and development activities, hire additional                  employees as needed, expand internal information, accounting and                  billing                  systems and establish additional sales channels throughout the                  United                  States and the world. In addition, given sufficient capital, we                  plan to                  expand our infrastructure by investing in additional software and                  programming talent. In order to successfully manage growth, management                  must identify, attract, motivate, train and retain highly skilled                  managerial, financial, engineering, business development, sales                  and                  marketing and other personnel. Competition for this type of personnel                  is                  intense. If we fail to effectively manage our growth, our business                  and                  viability will be materially and adversely impacted.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
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| *Dependence                  on Microsoft Windows.*                           |   | Our                  software products are designed for use with personal computers                  and devices                  running in the Microsoft Windows operating environment, and future                  sales                  of our products are dependent upon continued use of Windows and                  Windows                  NT. In addition, changes to Windows or Windows NT may require us                  to                  continually upgrade our products. Any inability to produce upgrades                  or any                  material delay in doing so would adversely affect our operating                  results.                  The successful introduction of new operating system or improvements                  of                  existing operating systems that compete with Windows or Windows                  NT also                  could adversely affect sales of our products and have a material                  adverse                  effect on our operating results.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |

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| *We                  May Fail to Keep Pace With Rapidly Changing                  Technologies.*                                                                           |   | The                  vertical market segments we are targeting are characterized by                  rapidly                  changing technology, evolving industry standards and frequent new                  product                  and service introductions. These factors require management to                  continually                  improve the performance, features and reliability of the array                  of our                  products. We may not respond quickly enough or on a cost-effective                  basis                  to these developments. We may not achieve widespread acceptance                  of our                  services before our competitors offer products and services with                  speed,                  performance, features and quality similar to or better than our                  products                  or that are more cost-effective than our services.                                                                    |
|                                                                                                                                                                       |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| *We                  May Not Be Able to Compete Effectively.*                                                                                                              |   | The                  market for automation, monitoring and process control software                  is rapidly                  evolving and highly competitive. Many of our competitors and potential                  competitors have substantially greater financial, technical, and                  managerial and marketing resources, longer operating histories,                  greater                  name recognition and more established relationships than we do.                  Since our                  business is partially dependent on the overall success of the Internet                  as                  a communication medium, we also compete with traditional hardware                  based                  broadcast technology management in the radio and television and                  other                  industries that we are targeting. We expect competition from these                  and                  other types of competitors to increase significantly. |
|                                                                                                                                                                       |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| *We                  May Experience Difficulties in Integrating Businesses, Products                  and                  Technologies We May Acquire into Our Business.* |   | Given                  sufficient financing, we may acquire businesses, products and technologies                  and enter into joint ventures and strategic relationships with                  other                  companies. Any of these transactions expose us to additional risks,                  including the assimilation and integration of the operations of                  the                  combined companies; retaining key personnel; the potential disruption                  of                  our core business; and the potential additional expenses associated                  with                  amortization of acquired intangible assets, integration costs and                  unanticipated liabilities or contingencies.                                                                                                                                                                                                                                                     |
|                                                                                                                                                                       |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| *Loss                  of Key Personnel Could Harm Our Business.*                                                                                                          |   | Given                  the early stage of development of our business, we depend highly                  on the                  performance and efforts of our CEO, Geoffrey Talbot, our CTO, Peter                  Upfold, our COO, Kevin Harris, our EVP of Programming, Nigel Brownett,                  and                  the Board of Directors. If we lose the service of any member of                  our                  management team or other key personnel, our business prospects                  will be                  materially and adversely impacted.                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                                                                                                                                                                       |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| *Enactment                  of New Laws or Changes in Government Regulations Could Adversely                  Affect                  Our Business.*                       |   | We                  are not currently required to comply with direct regulation by                  any                  domestic or foreign governmental agency, other than regulations                  applicable                  to businesses generally and laws or regulations directly applicable                  to the                  Internet. However, due to the increasing popularity of the Internet,                  it is                  possible that additional laws may be adopted regarding the Internet,                  any                  of which could materially harm our business. The adoption of any                  additional laws may decrease the growth of Internet use, which                  could lead                  to a decrease in the demand for our services or increase our cost                  of doing                  business.                                                                                                                               |

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| *Our                  Products Could Infringe on the Intellectual Property Rights of                  Others,                  Which May Lead to Costly Litigation, Lead to Payment of Substantial                  Damages or Royalties and/or Prevent Us from Manufacturing and Selling                  Our                  Current and Future Products.* |   | If                  third parties assert that our products or technologies infringe                  upon their                  intellectual property rights, our reputation and ability to license                  or                  sell our products could be harmed. Whether or not the litigation                  has                  merit, it could be time consuming and expensive for us and divert                  the                  attention of our technical and management personnel from other                  work. In                  addition, these types of claims could be costly to defend and result                  in                  our loss of significant intellectual property rights. A                  determination that we are infringing the proprietary rights of                  others                  could have a material adverse effect on our products, results of                  operations and financial condition. If we infringe on a third party’s                  patent, we cannot assure that we will be able to successfully redesign                  our                  products or processes to avoid such infringement. Accordingly,                  an adverse                  determination in a judicial or administrative proceeding or failure                  to                  obtain necessary licenses could prevent us from manufacturing and                  selling                  our products and could require us to pay substantial damages and/or                  royalties. |
|                                                                                                                                                                                                                                                                                                                                                          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| *The                  Inability to Obtain Patent and Copyright Protection for Our Technology                  or                  Misappropriation of Our Software and Intellectual Property Could                  Adversely                  Affect Our Competitive Position.*                                                                              |   | Our                  success depends on internally developed computer code, technologies,                  know-how, trademarks and related intellectual properties. We regard                  the                  technology as proprietary and will attempt to protect it by implementing                  security password codes, seeking patents, copyrights or trademarks,                  and by                  invoking trade secret laws and confidentiality and nondisclosure                  agreements. These legal means, however, afford only limited protection                  and                  may not adequately protect our rights. Further, despite these precautions,                  it may be possible for a third party to obtain and use our services                  or                  technology without authorization. Third parties also may develop                  similar                  technology independently through reverse engineering                  techniques.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|                                                                                                                                                                                                                                                                                                                                                          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                                                                                                                                                                                                                                                                                                                                          |   | We                  intend to apply for registration of certain copyrights and a number                  of key                  trademarks and service marks and intend to introduce new trademarks                  and                  service marks, if we deem such actions appropriate under the                  circumstances. We may not be successful in obtaining registration                  for one                  or more of these trademarks. Litigation may be necessary in the                  future to                  enforce our intellectual property rights, protect our trade secrets                  or                  determine the validity and scope of the proprietary rights of others.                  Litigation could result in substantial costs and diversion of resources                  and management attention. In addition, we cannot assure that competitors                  or other parties have not filed or in the future will not file                  applications for, have not received or in the future will not receive,                  patents or obtain additional proprietary rights relating to products                  or                  processes used or proposed to be used by us. In that case, our                  competitive                  position could be harmed and we may be required to obtain licenses                  to                  patents or proprietary rights of others.                                                                                                             |
|                                                                                                                                                                                                                                                                                                                                                          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                                                                                                                                                                                                                                                                                                                                          |   | In                  addition, the laws of some of the countries in which our products                  are or                  may be sold may not protect our products and intellectual property                  to the                  same extent as U.S. laws, if at all. We may be unable to protect                  our                  rights in proprietary technology in these                  countries.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |

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|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
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|   |   | Our                  technologies and trademarks may be claimed to conflict with or                  infringe                  upon the patent, trademark or other proprietary rights of third                  parties.                  If this occurred, we would have to defend ourselves against such                  challenges, which could result in substantial costs and the diversion                  of                  resources. Any of these events could materially harm our                  business. |

| **Risks                  Related To The Industry**                                                                                                                                                                                                                                                                    |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                  |
| *If                  We Fail to Successfully Introduce New Products and Enhancements,                  Our                  Future Growth May Suffer. Certain Products at an Early Stage of                  Development are the Areas of Our Expected Future Growth and                  Sustainability.*            |   | As                  part of our growth strategy, we intend to develop and introduce                  certain                  new products and enhancements. Such products and enhancements are                  currently in research and development, and we have generated no                  revenues                  from such potential products and may never generate revenues. A                  substantial portion of our resources have been, and for the foreseeable                  future will continue to be dedicated to our research programs and                  the                  development of products and enhancements. If we do not introduce                  these new                  products and enhancements on a timely basis, or if they are not                  well                  accepted by the market, our business and the future growth of our                  business                  may suffer. There can be no assurance that we will be able to develop                  a                  commercial product from these projects. Our competitors may succeed                  in                  developing technologies or products that are more effective than                  ours. |
|                                                                                                                                                                                                                                                                                                                  |   |   |
| *If                  We Do Not Update and Enhance Our Technologies, They Will Become                  Obsolete                  or Noncompetitive. Our Competitors May Succeed in Developing Products,                  and                  Obtaining Related Regulatory Approval, Faster than                  Us.* |   | We                  operate in a highly competitive industry and competition is likely                  to                  intensify. Emerging technologies, extensive research and new product                  introductions characterize the market for our products and services.                  We                  believe that our future success will depend in large part upon                  our ability                  to conduct successful research in our fields of expertise, to discover                  new                  technologies as a result of that research, to develop products                  based on                  our technologies, and to commercialize those products. If we fail                  to stay                  at the forefront of technological development, we will be unable                  to                  compete effectively. Our                  existing and potential competitors may possess substantial financial                  and                  technical resources and production and marketing capabilities greater                  than                  ours. We cannot assure that we will be able to compete effectively                  with                  existing or potential competitors or that these competitors will                  not                  succeed in developing technologies and products that would render                  our                  technology and products obsolete and noncompetitive. Our competitors’                  product advances could erode our position in the market                  rapidly.In                  addition, because our products are dependent upon other operating                  systems,                  we will need to continue to respond to technological advances in                  these                  operating systems. |
|                                                                                                                                                                                                                                                                                                                  |   |   |
| *Our                  Success Depends, in Part, on Attracting Customers Who Will Embrace                  the New                  Technologies Offered by Our Products.*                                                                                                                                             |   | It                  is vital to our long-term growth that we establish customer awareness                  and                  persuade the market to embrace the new technologies offered by                  our                  products. This may require in certain instances a modification                  to the                  culture and behavior of customers to be more accepting of technology                  and                  automation. Organizations may be reluctant or slow to adopt changes                  or new                  ways of performing processes and instead may prefer to resort to                  habitual                  behavior within the organization. Our marketing plan must overcome                  this                  obstacle, invalidate deeply entrenched assumptions and reluctance                  to                  behavioral change and induce customers to utilize our products                  rather than                  the familiar options and processes they currently use. If we fail                  to                  attract additional customers at this early stage, our business                  and the                  future growth of our business may                  suffer. |

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|                                                                                                                                                                                                                                                                        |
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| **Risks                  Related To Our Securities**                                                                                                                                                                                                                        |
| *Our                  Stock Price is Likely to be Highly Volatile Because of Several                  Factors,                  Including a Limited Public Float.*                                                                                                          |   | The                  market price of our common stock is likely to be highly volatile                  because                  there has been a relatively thin trading market for our stock,                  which                  causes trades of small blocks of stock to have a significant impact                  on our                  stock price. Our common stock may not be able to be resold following                  periods of volatility because of the market's adverse reaction                  to                  volatility. |
|                                                                                                                                                                                                                                                                        |   |   |
|                                                                                                                                                                                                                                                                        |   | Other                  factors that could cause such volatility may include, among other                  things: · Actual                  or anticipated fluctuations in our operating results; · Announcements                  concerning our business or those of our competitors or                  customers; · Changes                  in the volume of our business with MediaFLO and its                  affiliates; · Changes                  in financial estimates by securities analysts or our failure to                  perform as                  anticipated by the analysts; · Announcements                  of technological innovations; · Conditions                  or trends in the industry; · Litigation; · Patents                  or proprietary rights; · Departure                  of key personnel; · Failure                  to hire key personnel; and · General                  market conditions. |
|                                                                                                                                                                                                                                                                        |   |   |
| *Because                  Our Common Stock is Considered a Penny Stock, Any Investment in                  Our Common                  Stock is Considered to be a High-Risk Investment and is Subject                  to                  Restrictions on Marketability.* |   | Our                  common stock is currently traded on the OTC Bulletin Board (ticker                  symbol                  “STCA.OB”) and is considered a “penny stock”. The                  SEC has adopted rules that regulate broker-dealer practices in                  connection                  with transactions in "penny stocks". Penny stocks generally are                  equity                  securities with a price of less than $5.00 (other than securities                  registered on certain national securities exchanges or quoted on                  the                  NASDAQ system, provided that current price and volume information                  with                  respect to transactions in such securities is provided by the exchange                  or                  system). The penny stock rules require a broker-dealer, prior to                  a                  transaction in a penny stock not otherwise exempt from those rules,                  to                  deliver a standardized risk disclosure document prepared by the                  SEC that                  specifies information about penny stocks and the nature and significance                  of risks of the penny stock market. The broker-dealer also must                  provide                  the customer with bid and offer quotations for the penny stock,                  the                  compensation of the broker-dealer and any salesperson in the transaction,                  and monthly account statements indicating the market value of each                  penny                  stock held in the customer's account. In addition, the penny stock                  rules                  require that, prior to a transaction in a penny stock not otherwise                  exempt                  from those rules, the broker-dealer must make a special written                  determination that the penny stock is a suitable investment for                  the                  purchaser and receive the purchaser's written agreement to the                  transaction. These disclosure requirements may have the effect                  of reducing                  the trading activity in the secondary market for our common                  stock. |

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|                                                |   | Since                  our common stock is subject to the regulations applicable to penny                  stocks,                  the market liquidity for our common stock could be adversely affected                  because the regulations on penny stocks could limit the ability                  of                  broker-dealers to sell our common stock and thus the ability for                  our                  common stock to be sold in the secondary market. In                  order for the return of the security deposits, the Company must                  make its                  lease payments on time. In                  order for the return of the security deposits, the Company must                  make its                  lease payments on time.                                                                                                                                                                                      |
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| *Control                  by Certain Stockholders.* |   | Our                  Directors and Executive Officers beneficially own approximately                  36% of our                  outstanding shares of common stock. If these stockholders act as                  a group,                  they will have effective control of all matters requiring stockholder                  approval, including the election of Directors and approval of significant                  corporate transactions. Such control may have the effect of delaying                  or                  preventing a change in control of us, impeding a merger, consolidation,                  takeover or other business combination involving us or discourage                  a                  potential acquirer from making a tender offer or otherwise attempting                  to                  obtain control of us, which could have a material adverse effect                  on the                  market price of our common stock. |
|                                                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| *Absence                  of Dividends.*            |   | We                  do not anticipate paying any cash dividends in the foreseeable                  future. See                  "Item 5 - Market for the Common Equity and Related Stockholder                  Matters."                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |

**ITEM        2.  **
**DESCRIPTION        OF PROPERTIES**

**ITEM        3.  **
**LEGAL        PROCEEDINGS**

| [a] | On                  June 16, 2005 the Company filed an action in the Superior Court                  of the                  State of California, County of Los Angeles, Central District, case                  No.                  BC335098, against Application Science and Technology LLC, Chad                  Kalebic,                  Michael Hurst, Anthony Briede and others (the “Defendants”). The Company                  initiated the litigation after ongoing and recurring feedback from                  the                  marketplace that the Defendants were actively interfering with                  the                  Company’s business relationships and violating contractual agreements                  despite formal warnings to cease and desist. The case included                  allegations                  of: Unfair Competition; Violations of California Business Code,                  Sections                  17.200 ET SEQ and 17.000 ET SEQ; Intentional Interference with                  Plaintiffs                  Business Relationships, Negligent Interference with Plaintiff’s Business                  Relationships; Slander and Injunction. The Company retained litigation                  counsel on a one-third contingency basis of the net benefit to                  the                  Company. The Company was to advance and pay the Court filing and                  costs and                  expenses of the litigation. On                  December 6, 2005, after                  losing a demurrer which they filed against the Statmon complaint,                  the                  Defendants in case No. BC335098 filed a Cross Complaint in the                  Superior                  Court of California against Statmon Technologies Corp. and employees                  Mr.                  Geoffrey Talbot and Mr. Ken Dillard as Cross Defendants/Plaintiffs                  claiming Breach of Settlement Agreement, Intentional Interference                  with                  Contractual Relationships, Intentional Interference with Prospective                  Business Relationships, Defamation, Trade Libel, Violation of California                  Business and Professional Code, Negligent Interference with Prospective                  Business Relationships and Negligent Interference with Contractual                  relationships. A defense to the cross-complaint was furnished                  by an insurance carrier of Statmon. In addition, the Defendants                  in case                  No. BC335098 filed a Complaint For Declaratory Relief in the United                  States                  District                  Court                  For The Northern District of Illinois, Eastern Division seeking                  to secure                  a judicial determination and declaration that they had independently                  developed their own software without impermissibly copying Statmon’s                  software and that the Defendant’s software does not infringe upon any                  Statmon copyright. The California state case was stayed (temporarily                  stopped) by the court pending resolution of the declaratory relief                  action                  filed in the United States District Court in Illinois. It was anticipated                  that the California state litigation would resume thereafter unless a                  settlement were reached. The matter has now been settled. There                  is no                  monetary recovery by either side in the California Superior Court                  case,                  either on the Complaint or Cross-complaint, and the California                  Superior                  Court case has been dismissed in its entirety. An agreed to judgment                  was                  entered in the Chicago case providing that Application Science                  and                  Technology LLC did not copy or infringe upon the Stamon software.                  Each                  side is responsible for its own attorneys' fees, costs and                  expenses. |
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| [b] | Since                  March 31, 2007 an action was filed by the Epstein Family Trust                  against                  Statmon Technologies Corp. alleging failure to pay two notes totaling                  $75,000 ($25,000 and $50,000) plus accrued interest and seeking                  attorney’s                  fees and costs in addition to the principal and interest. There                  was a                  guarantee by Geoffrey Talbot on the note for $25,000, the CEO of                  Statmon,                  so Mr. Talbot was joined as a party defendant. The case number                  is BC 371                  276. It was filed on May 17, 2007 in Los Angeles Superior Court                  for breach                  of contract and similar causes of action. Negotiations are ongoing                  to                  attempt to resolve this case. |
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| [c] | Other                  -                  During                  the year ended March 31, 2007, the Company received notices from                  the                  Federal and State taxing authorities relating to $114,000 of past                  due                  payroll taxes and in July 2006, the Company paid such amounts in                  full. As                  of March 31, 2007, the Company was delinquent in its filing of                  several                  years’ Federal, State and local compensation related filings, related                  to                  amounts paid to the Company’s founders who are the Chief Executive                  Officer, Chief Technical Officer and one other individual for payroll                  reporting purpose. As the Company has not been in a position to                  comply                  with the Chief Executive Officer and the Chief Technology Officer                  employment contracts the Company has decided to classify these                  individuals                  as non-employees. For payroll tax reporting purposes, through December                  31,                  2006, the gross unreported compensation amounts aggregated to                  approximately $1,400,000 for the three individuals. Management                  of the                  Company has indicated that it will rectify the non-reporting of                  several                  years of compensation to these individuals by August 15, 2007 through                  the                  filing of Federal forms 1099 and 1096. The Company also plans to                  pay                  accrued compensation of approximately $425,000 to the Chief Executive                  Officer and Chief Technology Officer which the Company has accrued                  prior                  to March 31, 2007. At the time of this filing, approximately $130,000                  of                  accrued compensation due to the other individual has been paid                  which was                  utilized to pay the related income taxes on $301,829 of the above                  mentioned $1,400,000 of unreported 1099 income to the respective                  taxing                  authorities. Such payroll tax reporting classification is subject                  to audit                  by the Internal Revenue Service and other state and local taxing                  authorities, which, upon review, could determine that such individuals’                  compensation should have been reported on the basis that such individuals                  are employees. Accordingly, depending on such potential audit,                  the Company                  may be subject to additional payroll related liabilities the amount                  of                  which, if any, is not determinable at this                  time. |
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**ITEM      4.  **
**SUBMISSION      OF MATTERS TO A VOTE OF SECURITY HOLDERS**

| **ITEM                5.  ** | **MARKET                FOR THE COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS                ISSUER PURCHASES OF EQUITY                SECURITIES** |
|----------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Market      Prices**

*www.bigcharts.com*

|                                            |   | High                Bid |   | Low                Bid |   |
|-------------------------------------------------|--------|-------------------------|--------|------------------------|--------|
| Fiscal                Year Ended March 31, 2007 |   |                    |   |                   |   |
| 1st                Quarter                      |   |                    | 0.60   |                   |   | 0.40 |   |
| 2nd                Quarter                      |   |                    | 0.90   |                   |   | 0.43 |   |
| 3rd                Quarter                      |   |                    | 0.91   |                   |   | 0.62 |   |
| 4th                Quarter                      |   |                    | 1.14   |                   |   | 0.65 |   |
|                                            |   |                    |   |                   |   |   |   |
| Fiscal                Year Ended March 31, 2006 |   |                    |   |                   |   |   |   |
| 1st                Quarter                      |   |                    | 0.95   |                   |   | 0.60 |   |
| 2nd                Quarter                      |   |                    | 0.75   |                   |   | 0.40 |   |
| 3rd                Quarter                      |   |                    | 0.55   |                   |   | 0.31 |   |
| 4th                Quarter                      |   |                    | 0.42   |                   |   | 0.28 |   |

**Dividends**

**Equity      Compensation Plan Information**

**Recent      Issuances of Unregistered Securities **

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|   | · | In                May 2006, the Company issued 30,000 shares of common stock and warrants                to                purchase 25,000 shares of its common stock at an exercise price of                $1.00                per share with a term of five years in connection with the issuance                of a                $25,000 promissory note due one year from the date of issuance bearing                interest at 10% per annum. As of June 30, 2007, the note is in default                and                is accruing interest at the penalty rate of 15% per annum. Per the                terms                of the note, the Company issued an additional 30,000 shares of common                stock related to this note at November 15, 2006. The Company paid                commission of 10% of the face value of the note and issued warrants                to                purchase 2,500 shares of common stock exercisable at $1.00 per share                for a                term of five years in connection with this new                debt. |
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|   | · | In                June 2006, the Company issued 310,000 shares of common stock and                warrants                to purchase 540,000 shares of its common stock at an exercise price                of                $1.25 per share with a term of five years and warrants to purchase                10,000                shares of its common stock at an exercise price of $1.25 per share                with a                term of three years in connection with the issuance of three $100,000                promissory notes due sixty days from the date of issuance bearing                interest                at 10% per annum and a $10,000 promissory note due 180 days from                the date                of issuance bearing interest at 10% per annum. As of June 30, 2007,                the                principal balances of the three $100,000 notes have been repaid and                the                $10,000 note is in default and accruing interest at the penalty interest                rate of 15% per annum. The Company owes a commission of 10% of the                face                value of the notes and issued warrants to purchase 30,000 shares                of common                stock exercisable at $1.25 per share for a term of five years in                connection with the three $100,000 notes. |
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|   | · | In                July 2006, the Company issued 70,000 shares of common stock and warrants                to purchase 50,000 shares of its common stock at an exercise price                of                $1.25 per share with a term of five years and warrants to purchase                20,000                shares of its common stock at an exercise price of $1.25 per share                with a                term of three years in connection with the issuance of a $50,000                promissory note due 60 days from the date of issuance bearing interest                at                10% per annum and a $20,000 promissory note due 180 days from the                date of                issuance bearing interest at 10% per annum. As of June 30, 2007,                the                principal balance of the $50,000 note has been repaid and the $20,000                note                is in default and accruing interest at the penalty rate of 15% per                annum.                The Company owes a commission of 10% of the face value of the note                and                issued warrants to purchase 5,000 shares of common stock exercisable                at                $1.25 per share for a term of five years in connection with the $50,000                note. |
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|   | · | On                July 19, 2006, Kevin Harris, the Chief Operating Officer (“COO”) of the                Company, loaned the Company $50,000, represented by a note bearing                no                interest and due in 180 days. This note represents the funds advanced                by                Mr. Harris primarily for the 2006 National Association of Broadcasters                tradeshow and for other expenses. As consideration for the loan,                the                Company granted Mr. Harris 50,000 shares of common stock and warrants                to                purchase 50,000 shares of common stock exercisable at a price of                $1.25 per                share for a term of five years. The loan was repaid in full on October                16,                2006. |
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|   | · | In                September 2006, the Company issued                75,000 shares of common stock and warrants to purchase 75,000 shares                of                its common stock at an exercise price of $1.00 per share with a term                of                five years in connection with the issuance of $125,000 of promissory                notes                due November 30, 2006 bearing interest at 10% per annum.                Per the default terms of the notes, on December 21, 2006, the Company                issued an additional 75,000 shares of its common stock and warrants                to                purchase 75,000 shares of its common stock at an exercise price of                $1.00                per share with a term of five years as consideration for an extension                of                the due date of the notes to November 30, 2007. The Company paid                a                commission of 10% of the face value of the notes and issued warrants                to                purchase 12,500 shares of its common stock exercisable at $1.00 per                share                for a term of five years in connection with the $125,000                notes. |
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|   | · | In                October 2006, the Company issued 45,000 shares of common stock and                warrants to purchase 45,000 shares of its common stock at an exercise                price of $1.00 per share with a term of five years in connection                with the                issuance of $75,000 of promissory notes due November 30, 2006 bearing                interest at 10% per annum. Per the default terms of the notes, on                December                21, 2006, the Company issued an additional 45,000 shares of its common                stock and warrants to purchase 45,000 shares of its common stock                at an                exercise price of $1.00 per share with a term of five years as                consideration for an extension of the due date of the notes to November                30, 2007. The Company paid a commission of 10% of the face value                of the                notes and issued warrants to purchase 7,500 shares of its common                stock                exercisable at $1.00 per share for a term of five years in connection                with                the $75,000 notes. |
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|   | · | In                March 2007, the Company issued 75,000 shares of its common stock                and                warrants to purchase 75,000 shares of its common stock at an exercise                price of $1.00 per share with a term of five years in connection                with the                issuance of $125,000 of promissory notes due 90 days from the date                of                issuance bearing interest at 10% per annum. Per the default terms                of the                notes, on June 27, 2007, the Company issued an additional 75,000                shares of                its common stock and warrants to purchase 75,000 shares of its common                stock at an exercise price of $1.00 per share with a term of five                years as                consideration for an extension of the due date of the notes to June                27,                2008. The Company paid a commission of 10% of the face value of the                notes                and issued warrants to purchase 12,500 shares of common stock exercisable                at $1.00 per share for a term of five years in connection with the                $125,000 notes. |
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|   | · | On                April 2, 2006, the Company issued 25,000 shares of common stock per                the                default terms of a $50,000 secured promissory note that matured on                April                2, 2006. A total of 50,000 shares of common stock has been issued                in                connection with this secured promissory note since its date of                issuance. |
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|   |   |   |
|--------|--------|--------|

|   | · | On                April 17, 2006, the Company issued 20,000 shares of common stock                per the                default terms of a $40,000 secured promissory note that matured on                April17, 2006. A total of 40,000 shares of common stock has been                issued in                connection with this secured promissory note since its date of                issuance. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | · | On                May 1, 2006, the Company issued 25,000 shares of common stock per                the                default terms of a $50,000 secured promissory note that matured on                May 1,                2006. A total of 50,000 shares of common stock has been issued in                connection with this secured promissory note since its date of                issuance. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | · | On                May 14, 2006, the Company issued 8,000 shares of common stock per                the                default terms of a $16,000 promissory note that matured on May 14,                2006. A                total of 16,000 shares of common stock has been issued in connection                with                this promissory note since its date of                issuance. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | · | On                May 30, 2006, the Company issued 50,000 shares of common stock per                the                default terms of a $100,000 secured promissory note that matured                on May                30, 2006. A total of 100,000 shares of common stock has been issued                in                connection with this secured promissory note since its date of                issuance. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | · | On                September 25, 2006, the Company issued 75,000 shares of common stock                related to a consulting agreement with a third                party. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | · | On                October 13, 2006, the Company issued 100,000 shares of common stock                related to the extension of a$110,000 principal amount                note. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | · | At                the end of each fiscal quarter, the Company issued 75,000 shares                of common                stock in connection with secured Senior Notes that are in default                for a                total of 300,000 share of common stock for the fiscal                year. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | · | At                March 31, 2007, the Company had issued 54,540 shares of common stock                in                connection with a $100,000 Senior Subordinated secured note that                is in                default. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | · | The                Company has granted warrants to purchase 1,007,529 shares of common                stock                at an exercise price of $1.00 per share and warrants to purchase                1,693,200                shares of common stock at an exercise price of $1.50 per share related                to                penalty provisions for promissory notes in default. The Company will                issue                the penalty warrants to the holders upon payment of such notes. These                warrants were valued at $1,508,935. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**ITEM      6.  **
**MANAGEMENT’S      DISCUSSION AND ANALYSIS OR PLAN OF OPERATION**

----

**OVERVIEW**

----

**Off-Balance      Sheet Arrangements**

**RESULTS      OF OPERATIONS**

**YEARS      ENDED MARCH 31, 2007 AND 2006**

***Revenues***

***Cost      of Sales***

***Selling,      General and Administrative Expenses***
**.      **

***Other      Expense***

----

***Net      Loss***

**LIQUIDITY      AND CAPITAL RESOURCES**

|   | · | (i)                $50,000 principal amount promissory note bearing interest at 10%                per annum                and due 90 days from the date of issuance, (ii) 30,000 shares of                common                stock and (iii) warrants to purchase 30,000 shares of common stock                exercisable at a price of $1.00 per share for a term of five years.                This                note matured on July 2, 2007. Per the default terms of the note,                the                Company will issue an additional 30,000 shares of common stock and                warrants to purchase 30,000 shares of its common stock at an exercise                price of $1.00 per share with a term of five years as consideration                for an                extension of the due date of the notes to July 2,                2008. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | · | (i)                $25,000 principal amount promissory note bearing interest at 10%                per annum                and due 90 days from the date of issuance, (ii) 15,000 shares of                common                stock and (iii) warrants to purchase 15,000 shares of common stock                exercisable at a price of $1.00 per share for a term of five years.                This                note matured on July 8, 2007. Per the default terms of the note,                the                Company will issue an additional 15,000 shares of common stock and                warrants to purchase 15,000 shares of our common stock at an exercise                price of $1.00 per share with a term of five years as consideration                for an                extension of the due date of the notes to July 8,                2008. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   |   |   |
|--------|--------|--------|

|   | · | (i)                $20,000 principal amount promissory note bearing interest at 10%                per annum                and due one year from the date of issuance, (ii) 20,000 shares of                common                stock and (iii) warrants to purchase 20,000 shares of common stock                exercisable at a price of $1.25 per share for a term of five years.                This                note matures on April 16, 2008 after which interest will increase                to 15%                per annum until the note is repaid. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | · | (i)                $200,000 principal amount secured promissory note bearing interest                at 10%                per annum and due 180 days from the date of issuance, (ii) 150,000                shares                of common stock and (iii) warrants to purchase 150,000 shares of                common                stock exercisable at a price of $1.00 per share for a term of five                years.                This note matures on October 24, 2007. Per the default terms of the                note,                if the Company does not repay the note by the maturity date, it will                issue                an additional 100,000 shares of common stock and warrants to purchase                100,000 shares of its common stock at an exercise price of $1.00                per share                with a term of five years as consideration for an extension of the                due                date of the notes to October 24, 2008. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | · | (i)                $50,000 principal amount promissory note bearing interest at 10%                per annum                and due 180 days from the date of issuance, (ii) 30,000 shares of                common                stock and (iii) warrants to purchase 30,000 shares of common stock                exercisable at a price of $1.50 per share for a term of five years.                This                note matures on November 19, 2007. Per the default terms of the note,                if                the Company does not repay the note by the maturity date, it will                issue an                additional 30,000 shares of common stock and warrants to purchase                30,000                shares of its common stock at an exercise price of $1.50 per share                with a                term of five years as consideration for an extension of the due date                of                the notes to November 19, 2008. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | · | (i)                $25,000 principal amount promissory note bearing interest at 10%                per annum                and due 180 days from the date of issuance, (ii) 15,000 shares of                common                stock and (iii) warrants to purchase 15,000 shares of common stock                exercisable at a price of $1.50 per share for a term of five years.                This                note matures on November 26, 2007. Per the default terms of the note,                if                the Company does not repay the note by the maturity date, it will                issue an                additional 15,000 shares of common stock and warrants to purchase                15,000                shares of its common stock at an exercise price of $1.50 per share                with a                term of five years as consideration for an extension of the due date                of                the notes to November 26, 2008. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | · | (i)                $17,000 principal amount promissory note bearing interest at 10%                per annum                and due 180 days from the date of issuance, (ii) 10,200 shares of                common                stock and (iii) warrants to purchase 10,200 shares of common stock                exercisable at a price of $1.50 per share for a term of five years.                This                note matures on December 2, 2007. Per the default terms of the note,                if                the Company does not repay the note by the maturity date, it will                issue an                additional 10,200 shares of common stock and warrants to purchase                10,200                shares of its common stock at an exercise price of $1.50 per share                with a                term of five years as consideration for an extension of the due date                of                the notes to December 2, 2008. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | · | (i)                $10,000 principal amount promissory note bearing interest at 10%                per annum                and due 180 days from the date of issuance, (ii) 6,000 shares of                common                stock and (iii) warrants to purchase 6,000 shares of common stock                exercisable at a price of $1.50 per share for a term of five years.                This                note matures on December 19, 2007. Per the default terms of the note,                if                the Company does not repay the note by the maturity date, it will                issue an                additional 6,000 shares of common stock and warrants to purchase                6,000                shares of its common stock at an exercise price of $1.50 per share                with a                term of five years as consideration for an extension of the due date                of                the notes to December 19, 2008. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**CRITICAL      ACCOUNTING POLICIES AND ESTIMATES**

**Accounts      Receivable - Allowance for Doubtful Accounts **

**Revenue      Recognition**

----

**Effects      of Recent Accounting Policies **

----

----

**ITEM      7.  **
**FINANCIAL      STATEMENTS**

**ITEM      8.  **
**CHANGES      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL      DISCLOSURE**

**ITEM      8A.**
**CONTROLS      AND PROCEDURES**

**ITEM      8B.**
**OTHER      INFORMATION**

----

**ITEM      9.  **
**DIRECTORS,      EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS; COMPLIANCE WITH SECTION      16(A) OF THE EXCHANGE ACT**

| Name                                          |   | Age      |   | Position                                                                                                |   | Director                and/or Officer Since                                                                                          |
|-----------------------------------------------|--------|----------|--------|---------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------|
| Geoffrey                P. Talbot             |   | 59       |   | Chairman,                President, Chief Executive Officer & Chief Financial Officer               |   | Chairman,                President, Chief Executive Officer and Chief Financial Officer since                June                2002 |
|                                          |   |     |   |                                                                                                    |   |                                                                                                                                  |
| Peter                J. Upfold                |   | 44       |   | Chief                Technology Officer, Vice Chairman, Director and                Treasurer/Secretary |   | Vice                Chairman, Chief Technology Officer and Director since June                2002                                    |
|  Kevin                R. Harris          |   |  38 |   |  Chief                Operating Officer                                                            |   |  Since                April 2004                                                                                                 |
|  Leonard                Silverman, Ph.D. |   |  67 |   |  Director                                                                                          |   |  Director                since June 2002                                                                                         |
|  Robert                B. Fields         |   |  69 |   |  Director                                                                                          |   |  Director                since June 2002                                                                                         |

*Geoffrey      P. Talbot*

*Peter      J. Upfold*

*Kevin      R. Harris*

----

*Leonard      Silverman, Ph.D.*

*Robert      B. Fields *

**Committees      of the Board of Directors**

***Audit      Committee***

***Compensation      Committee***

----

**Compliance      with Section 16(a) of the Securities Act of 1934**

**Code      of Ethics**

----

**ITEM      10.  **
**EXECUTIVE      COMPENSATION**

| Name                (a)                              |   | Year(b) |     | Salary($)                (c) |   | Bonus($)                (d) |   | StockAwards($)                (e) |   | OptionAwards($)                (f) |   | Non-EquityIncentivePlanCompensation($)                (g) |   | Change                inPensionValue                andNonqualifiedDeferredCompensationEarnings($)                (h) |   | All                OtherCompensation($)                (i) |   | Total($) (j) |   |
|------------------------------------------------------|--------|---------|----------|------------------------------|--------|-----------------------------|--------|-----------------------------------|--------|------------------------------------|--------|-----------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------|--------|-------------------|--------|
| Geoffrey                P. Talbot (1) (2)            |   |    | 20072006 |                         | $$     | 170,000160,000              |   | $$                                | 6,667  |                               | $$     |                                                           |   | $$                                                                                                                    |        |                                                       | $$     |                   |   | $$ |  |   | $$ | 11,9057,051                (3 | ) | $$ | 188,572167,051 |   |
| Peter                J. Upfold(1)                (2) |   |    | 20072006 |                         | $$     | 170,000160,000              |   | $$                                | 6,667  |                               | $$     |                                                           |   | $$                                                                                                                    |        |                                                       | $$     |                   |   | $$ |  |   | $$ | 15,24912,350                (3 | ) | $$ | 191,916172,350 |   |
| Kevin                R. Harris                       |   |    | 20072006 |                         | $$     | 153,333150,000              |   | $$                                | 6,250  |                               | $$     |                                                           |   | $$                                                                                                                    |        |                                                       | $$     |                   |   | $$ |  |   | $$ |  |   | $$ | 159,583150,000 |   |

----

***Compensation      Policy***

***Compensation      Components***

***Base      Salary***

***Stock      Options***

***Bonuses***

***Other***

**Director      Compensation **

----

**ITEM      11.  **
**SECURITY      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER      MATTERS**

| **Name                and Address of Beneficial Owner Group**                 |   | **Amount                of Common Stock and Warrants and Nature of Beneficial                Ownership** |      | **Percent                of Class of Common Stock** |   |
|-------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------|-----------|-----------------------------------------------------|--------|
| Geoffrey                P. Talbot, Chairman, President, CEO, and CFO (1)      |   |                                                                                                     | 1,746,180 |                                                |   | 11.33 | % |
| Peter                J. Upfold, CTO, Vice Chairman, Secretary/Treasurer (1)   |   |                                                                                                     | 2,811,603 |                                                |   | 18.25 | % |
| Leonard                Silverman, Ph.D., Director (2)(3)                      |   |                                                                                                     | 333,000   |                                                |   | 2.15 | % |
| Robert                B. Fields, Director (2)(3)                              |   |                                                                                                     | 214,000   |                                                |   | 1.39 | % |
| Kevin                R. Harris, Chief Operating Officer (4)                   |   |                                                                                                     | 520,000   |                                                |   | 3.32 | % |
| Thieme                Consulting, Inc. (5)                                    |   |                                                                                                     | 2,012,006 |                                                |   | 13.06 | % |
| Martin                E. Jacobs (6)                                           |   |                                                                                                     | 1,034,328 |                                                |   | 6.52 | % |
| Dean                Delis (7)                                                 |   |                                                                                                     | 4,592,150 |                                                |   | 24.97 | % |
| All                Executive Officers and Directors as a Group (five persons) |   |                                                                                                     | 5,624,783 |                                                |   | 36.43 | % |

|   | (1) | The                address of Geoffrey P. Talbot and Peter J. Upfold is 3000 Lakeside                Drive,                Suite 300 South, Bannockburn, IL 60015. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | (2) | The                address of Leonard Silverman, Ph.D. and Robert B. Fields is c/o Statmon                Technologies Corp., 3000 Lakeside Drive, Suite 300 South, Bannockburn,                IL                60015. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | (3) | Dr.                Leonard Silverman and Robert Fields each received 100,000 shares                for their                services as Directors on December 31, 2002. The Company has granted                a                total of 108,000 and 9,000 warrants to purchase shares of its common                stock                to Dr. Silverman and Mr. Fields, respectively, in connection with                loans                that they made to the Company in previous years. The warrants are                exercisable at $1.00 per share for three-year terms. See “Certain                Relationships and Related Transactions.” |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | (4) | The                address of Kevin R. Harris is c/o Statmon Technologies Corp., 3000                Lakeside Drive, Suite 300 South, Bannockburn, IL 60015. Includes                warrants                to purchase 220,000 shares of common stock exercisable at a price                of $1.00                per share and warrants to purchase 50,000 shares of common stock                exercisable at $1.25 per share. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | (5) | The                address of Thieme Consulting, Inc. is 845 third Ave., 14th                Floor, New York, New York 10022. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | (6) | The                address of Martin E. Jacobs is 3415 South Sepulveda Boulevard, Suite                640,                Los Angeles, CA 90034. Includes warrants to purchase 453,232 shares                of                common stock exercisable at $1.50 per                share. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | (7) | The                address of Dean Delis is 2929 Campus Drive, Ste. 175, San Mateo,                CA 94405.                Includes warrants to purchase 892,839 shares of common stock exercisable                at $1.00 per share, warrants to purchase 590,000 shares of common                stock                exercisable at $1.25 per share and warrants to purchase 1,503,411                shares                of common stock exercisable at $1.50 per                share. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**ITEM      12.  **
**CERTAIN      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR      INDEPENDENCE**

----

----

**ITEM      13.  **
**EXHIBITS**

| **Exhibit** | **Description** |
|-------------|-----------------|

| 2.1 | Agreement                and Plan of Reorganization (1) |
|-----|---------------------------------------------------------|

| 3.1 | Articles                of Incorporation (2) |
|-----|----------------------------------------------|

| 3.2 | Articles                of Amendment of Articles of Incorporation                (3) |
|-----|--------------------------------------------------------------------------------------|

| 3.3 | Amended                and Restated Bylaws of the Company                (6) |
|-----|------------------------------------------------------------------------------|

| 4.1 | Registration                Rights Agreement dated October 12, 2001 between Statmon Technologies                Corp.                and Thieme Consulting, Inc. (6) |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.2 | Form                of Stock Certificate (6) |
|-----|----------------------------------------------|

| 4.3 | Form                of Common Stock Purchase Warrant (exercisable at $5.00 per share)                (6) |
|-----|----------------------------------------------------------------------------------------------------------|

| 4.4 | Form                of Common Stock Purchase Warrant (exercisable at $2.00 per share)                (6) |
|-----|----------------------------------------------------------------------------------------------------------|

| 4.5 | Form                of Common Stock Purchase Warrant (exercisable at $1.00 per share)                (6) |
|-----|----------------------------------------------------------------------------------------------------------|

| 4.6 | Form                of Common Stock Purchase Warrant (exercisable at $1.50 per share)                (8) |
|-----|----------------------------------------------------------------------------------------------------------|

| 4.7 | Form                of Common Stock Purchase Warrant (exercisable at $1.25 per share)                (8) |
|-----|----------------------------------------------------------------------------------------------------------|

| 10.1 | Share                Purchase Agreement (Sino Global Development Limited)                (4) |
|------|----------------------------------------------------------------------------------------------|

| 10.2 | Share                Purchase Agreement (Systems & Technology Corp.)                (4) |
|------|---------------------------------------------------------------------------------------------|

| 10.3 | Share                Purchase Agreement (Ace Capital Investment Limited)                (4) |
|------|---------------------------------------------------------------------------------------------|

| 10.4 | Share                Purchase Agreement (Powerlink International Finance Inc.)                (4) |
|------|---------------------------------------------------------------------------------------------------|

| 10.5 | Employment                Agreement, dated as of July 1, 2004, by and between Statmon Technologies                Corp. and Geoffrey P. Talbot, as amended.                (6) |
|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.6 | Employment                Agreement, dated as of July 1, 2004, by and between Statmon Technologies                Corp. and Peter J. Upfold, as amended.                (6) |
|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.7 | Agreement                for Purchase and Sale of Remote Monitoring Products, dated February                25,                2003 between Statmon Technologies Corp. and Harris Corporation, as                amended. (6) |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.8 | Premises                lease by and between Statmon Technologies Corp. as tenant and Maple                Plaza,                Ltd. as Landlord (7) |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.9 | Addendum                to Premises lease by and between Statmon Technologies Corp. as tenant                and                Maple Plaza, Ltd. as Landlord (7) |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.10 | Promissory                Note dated as of October 15, 2001 in the amount of $125,000 issued                by                Statmon Technologies Corp. to Thieme Consulting, Inc.                (6) |
|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.11 | Promissory                Note dated as of November 7, 2001 in the amount of $100,000 issued                by                Statmon Technologies Corp. to Global Opportunity Fund Limited.                (6) |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.12 | Promissory                Note dated as of November 6, 2001 in the amount of $25,000 issued                by                Statmon Technologies Corp. to Veninvest.                (6) |
|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.13 | Promissory                Note Extension Agreement dated as of February 7, 2003 between Statmon                Technologies Corp. and Thieme Consulting, Inc., The Global Opportunity                Fund and Veninvest. (6) |
|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.14 | Pledge                and Security Agreement between Statmon Technologies Corp. and Thieme                Consulting, Inc. (6) |
|-------|--------------------------------------------------------------------------------------------------------------------------------|

----

| 10.15 | Subordination                Agreement between Statmon Technologies Corp. and Thieme Consulting,                Inc.                (6) |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------|

| 10.16 | Promissory                Note dated December 2, 2002 issued by Statmon Technologies Corp.                to                L&F Silverman in the principal amount of $15,000.                (6) |
|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.17 | Promissory                Note dated October 31, 2003 issued by Statmon Technologies Corp.                to                L&F Silverman, PhD. in the principal amount of $10,000.                (6) |
|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.18 | Promissory                Note dated October 31, 2003 issued by Statmon Technologies Corp.                to Robert                B. Fields. (6) |
|-------|---------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.19 | Form                of Promissory Note issued by Statmon Technologies Corp. to purchasers                of                Units from April 2002 to June 2007.                (6) |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.20 | Deal                Point Memorandum regarding Statmon eBI Solutions, LLC. Between Statmon                Technologies Corp. and eBI Solutions, LLC.                (6) |
|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.21 | Non-exclusive                Reseller Agreement dated May 26, 2006 between Statmon Technologies                Corp.                and Harris Corporation (8) |
|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.22 | Form                of Senior Subordinated Promissory Note issued by Statmon Technologies                Corp. to Dean Delis (8) |
|-------|----------------------------------------------------------------------------------------------------------------------------------|

| 10.23 | Form                of Promissory Note issued by Statmon Technologies Corp. to Martin                E.                Jacobs (8) |
|-------|-----------------------------------------------------------------------------------------------------------------------------------|

| 10.24 | *                Agreement for Purchase and Sale of Remote Monitoring Products, dated                September 7, 2006 between Statmon Technologies Corp. and MediaFlo                USA,                Inc. |
|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.25 | *                Premises lease by and between Statmon Technologies Corp. as tenant                and YPI                Bannockburn, LLC as Landlord |
|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------|

| 14.1 | Code                of Ethics (6) |
|------|-----------------------------------|

| 14.2 | Charter                of Audit Committee (6) |
|------|-----------------------------------------------|

| 14.3 | * Charter                of Compensation Committee |
|------|---------------------------------------------------------|

| 21.1 | List                of Subsidiaries of the Company (6) |
|------|--------------------------------------------------------|

| 24.1 | * Power                of Attorney. |
|------|------------------------------------------|

| 31.1 | *                Certification of the Chief Executive Officer required by Rule 13a-14(a)                or                Rule 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley                Act of 2002. |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 31.2 | *                Certification of the Chief Financial Officer required by Rule 13a-14(a)                or                Rule 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley                Act of 2002. |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 32.1 | *                Certification of the Company’s Chief Executive Officer Certification,                pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section                906 of                the Sarbanes-Oxley Act of 2002. |
|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 32.2 | *                Certification of the Company’s Chief Financial Officer Certification,                pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section                906 of                the Sarbanes-Oxley Act of 2002. |
|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (1) | Incorporated                by reference to Statmon Technologies Corp.’s Form 8-K/A filed on October                15, 2002, previously filed as Item 10.1 on Exhibit to Form                8-K. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |
|--------|--------|

| (2) | Incorporated                by reference to Viable Resources Inc.’s Form 10-K filed March 31,                1981. |
|-----|--------------------------------------------------------------------------------------------------------------------------|
|   |   |
|--------|--------|

| (3) | Incorporated                by reference to Statmon Technologies Corp.’s Form 8-K/A filed on October                15, 2002. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------|
|   |   |
|--------|--------|

| (4) | Incorporated                by reference to Statmon Technologies Corp.’s Form 8-K filed on May 31,                2002. |
|-----|-------------------------------------------------------------------------------------------------------------------------------|
|   |   |
|--------|--------|

| (5) | Incorporated                by reference to Statmon Technologies Corp.’s Form 8-K/A filed on June 10,                2004. |
|-----|----------------------------------------------------------------------------------------------------------------------------------|
|   |   |
|--------|--------|

| (6) | Incorporated                by reference to Statmon Technologies Corp.’s Form 10-KSB filed on                September 14, 2004. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------|
|   |   |
|--------|--------|

| (7) | Incorporated                  by reference to Statmon Technologies Corp.’s Form 10-KSB filed on July 14,                  2005. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------|
|   |   |
|--------|--------|

| (8) | Incorporated                by reference to Statmon Technologies Corp.’s Form 10-KSB filed on July 14,                2006. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------|

----

----

**ITEM      14.**
**PRINCIPAL      ACCOUNTANT FEES AND SERVICES**

|                                |   | For                  the Year Ended March 31, |    |
|-------------------------------------|--------|-----------------------------------------------|---------|
|                                |   | 2007                                          |    | 2006 |   |
|                                |   |                                          |    |   |   |
| Audit                  Fees         |   | $                                             | 140,000 |   | $ | 132,700 |   |
| Audit                  Related Fees |   |                                          | -       |   |   | - |   |
| Tax                  Fees           |   |                                          | 7,500   |   |   | 10,850 |   |
| All                  Other Fees     |   |                                          | -       |   |   | - |   |
|                                |   |                                          |    |   |   |   |   |
| Total                  Fees         |   | $                                             | 147,500 |   | $ | 143,550 |   |

----

**SIGNATURES**

|         |                                                                                                                                                            |                   |
|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------|
|         | STATMON                TECHNOLOGIES CORP.,a                Nevada corporation                                                                                   |
|    |                                                                                                                                                       |              |
|         | By:                                                                                                                                                   | /s/ Geoffrey P. Talbot |
|         | Geoffrey                P. TalbotChairman,                CEO, President and Chief Financial Officer(Principal                Financial and Accounting Officer) |
|         |                                                                                                                                                                 |

| **Signatures**                             |   | **Title**                                                           |   | **Date**                     |
|--------------------------------------------|--------|---------------------------------------------------------------------|--------|------------------------------|
|                                       |   |                                                                |   |                         |
| /s/              Geoffrey P. Talbot        |   |                                                                |   |                         |
| GEOFFREY                P. TALBOT          |   | Chairman,                CEO, President and Chief Financial Officer |   | July                16, 2007 |
|                                       |   |                                                                |   |                         |
| /s/              Peter J. Upfold           |   |                                                                |   |                         |
| PETER                J. UPFOLD             |   | Vice                Chairman, CTO, Treasurer/Secretary              |   | July                16, 2007 |
|                                       |   |                                                                |   |                         |
| /s/              Leonard Silverman, Ph. D. |   |                                                                |   |                         |
| LEONARD                SILVERMAN, Ph. D.   |   | Director                                                            |   | July                16, 2007 |
|                                       |   |                                                                |   |                         |
| /s/              Robert B.Fields           |   |                                                                |   |                         |
| ROBERT                B. FIELDS            |   | Director                                                            |   | July                16, 2007 |

----

**INDEX      TO CONSOLIDATED FINANCIAL STATEMENTS**

|                                                                                                                                          |   | Page                (s) |                       |
|-----------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|----------------------------|
| Report                of Independent Registered Public Accounting Firm                                                                        |   |                    | F-1                        |   |
|                                                                                                                                          |   |                    |                       |   |
| Financial                Statements:                                                                                                          |   |                    |                       |   |
| Consolidated                Balance Sheet as of March 31, 2007                                                                                |   |                    | F-2                        |   |
|                                                                                                                                          |   |                    |                       |   |
| Consolidated                Statements of Operations for the Years Ended March 31, 2007 and March                31,                2006      |   |                    | F-3                        |   |
|                                                                                                                                          |   |                    |                       |   |
| Consolidated                Statements of Stockholders’ Deficiency for the Years Ended March 31, 2007                and March 31, 2006 |   |                    | F-4                        |   |
|                                                                                                                                          |   |                    |                       |   |
| Consolidated                Statements of Cash Flows for the Years Ended March 31, 2007 and March                31,                2006      |   |                    | F-5                        |   |
|                                                                                                                                          |   |                    |                       |   |
| Notes                to Consolidated Financial Statements                                                                                     |   |                    | F-6                to F-21 |   |

----

----

----

**STATMON      TECHNOLOGIES CORP. AND SUBSIDIARIES**

**CONSOLIDATED      BALANCE SHEET**

|                                                                                                         |   |   |        |
|--------------------------------------------------------------------------------------------------------------|--------|--------|-------------|
| **ASSETS**                                                                                                   |   |   |        |
| Current                  Assets:                                                                             |   |   |        |
| Cash                                                                                                         |   | $      | 87,058      |   |
| Accounts                  receivable                                                                         |   |   | 229,052     |   |
| Inventories                                                                                                  |   |   | 60,748      |   |
| Prepaid                  expense and other current assets                                                    |   |   | 62,221      |   |
|                                                                                                         |   |   |        |   |
| Total                  Current Assets                                                                        |   |   | 439,079     |   |
|                                                                                                         |   |   |        |   |
| Property                  and Equipment, net                                                                 |   |   | 41,331      |   |
|                                                                                                         |   |   |        |   |
| Deferred                  Financing Costs                                                                    |   |   | 176,659     |   |
| Security                  Deposits                                                                           |   |   | 217,065     |   |
|                                                                                                         |   |   |        |   |
|                                                                                                         |   |   |        |   |
| Total                  Assets                                                                                |   | $      | 874,134     |   |
|                                                                                                         |   |   |        |   |
| **LIABILITIES                  AND STOCKHOLDERS' DEFICIENCY**                                                |   |   |        |   |
| Current                  Liabilities:                                                                        |   |   |        |   |
| Notes                  payable (including $1,262,700 due to related parties), net of debt                    |   |   |        |   |
| discount                  of $48,894                                                                         |   | $      | 3,272,806   |   |
| Accounts                  payable                                                                            |   |   | 575,089     |   |
| Accrued                  expenses                                                                            |   |   | 417,558     |   |
| Accrued                  compensation                                                                        |   |   | 417,636     |   |
| Interest                  payable (including $509,003 due to related parties)                                |   |   | 1,227,806   |   |
| Deferred                  revenue                                                                            |   |   | 208,506     |   |
|                                                                                                         |   |   |        |   |
| Total                  Liabilities                                                                           |   |   | 6,119,401   |   |
|                                                                                                         |   |   |        |   |
| Commitments                  and Contingencies                                                               |   |   |        |   |
|                                                                                                         |   |   |        |   |
| Stockholders'                  Deficiency:                                                                   |   |   |        |   |
| Preferred                  stock, $.01 par value, 10,000,000 shares authorized, none                  issued |   |   |        |   |
| and                  outstanding                                                                             |   |   | -           |   |
| Common                  stock, $.01 par value, 100,000,000 shares authorized,                                |   |   |        |   |
| 15,051,022                  issued and outstanding                                                           |   |   | 150,510     |   |
| Additional                  paid-in capital                                                                  |   |   | 7,564,386   |   |
| Accumulated                  deficit                                                                         |   |   | (12,960,163 | ) |
|                                                                                                         |   |   |        |   |
| Total                  Stockholders' Deficiency                                                              |   |   | (5,245,267  | ) |
|                                                                                                         |   |   |        |   |
| Total                  Liabilities and Stockholders' Deficiency                                              |   | $      | 874,134     |   |

----

**STATMON      TECHNOLOGIES CORP. AND SUBSIDIARIES**

**CONSOLIDATED      STATEMENTS OF OPERATIONS**

|                                                                              |   | For                  the Years Ended March 31, |       |
|-----------------------------------------------------------------------------------|--------|------------------------------------------------|------------|
|                                                                              |   | 2007                                           |       | 2006 |   |
|                                                                              |   |                                           |       |   |   |
| Revenues                                                                          |   | $                                              | 3,714,761  |   | $ | 1,261,879 |   |
|                                                                              |   |                                           |       |   |   |   |   |
| Cost                  of Sales                                                    |   |                                           | 811,798    |   |   | 363,916 |   |
|                                                                              |   |                                           |       |   |   |   |   |
| Gross                  Profit                                                     |   |                                           | 2,902,963  |   |   | 897,963 |   |
|                                                                              |   |                                           |       |   |   |   |   |
| Selling,                  General and Administrative Expenses                     |   |                                           | 2,950,039  |   |   | 2,315,198 |   |
|                                                                              |   |                                           |       |   |   |   |   |
| Operating                  Loss                                                   |   |                                           | (47,076    | ) |   | (1,417,235 | ) |
|                                                                              |   |                                           |       |   |   |   |   |
| Other                  Expense:                                                   |   |                                           |       |   |   |   |   |
| Interest                  (including $226,388 and $115,187 to related parties for |   |                                           |       |   |   |   |   |
| 2007                  and 2006 periods, respectively)                             |   |                                           | 525,974    |   |   | 372,466 |   |
| Common                  stock and warrants issued in association with             |   |                                           |       |   |   |   |   |
| debt                  (including $940,834 and $337,911 to related parties         |   |                                           |       |   |   |   |   |
| for                  2006 and 2005 periods, respectively)                         |   |                                           | 1,876,258  |   |   | 619,479 |   |
| Amortization                  of debt discount                                    |   |                                           | 399,241    |   |   | 516,931 |   |
| Amortization                  of deferred financing costs                         |   |                                           | 403,705    |   |   | 111,890 |   |
| Total                  Other Expense                                              |   |                                           | 3,205,178  |   |   | 1,620,766 |   |
|                                                                              |   |                                           |       |   |   |   |   |
| NET                  LOSS                                                         |   | $                                              | (3,252,254 | ) | $ | (3,038,001 | ) |
|                                                                              |   |                                           |       |   |   |   |   |
| NET                  LOSS PER COMMON SHARE - Basic and Diluted                    |   | $                                              | (0.23      | ) | $ | (0.23 | ) |
|                                                                              |   |                                           |       |   |   |   |   |
| Weighted                  Average Number of Common Shares Outstanding -           |   |                                           |       |   |   |   |   |
| Basic                  and Diluted                                                |   |                                           | 14,412,720 |   |   | 13,063,520 |   |

----

**STATMON      TECHNOLOGIES CORP. AND SUBSIDIARIES**

**CONSOLIDATED      STATEMENT OF STOCKHOLDERS’ DEFICIENCY**

|                                                                       |   |                          |       |    |   | Additional  |   |          |      | Total      |   |
|----------------------------------------------------------------------------|--------|-------------------------------|------------|---------|--------|-------------|--------|---------------|-----------|------------|--------|
|                                                                       |   | Common                  Stock |       | paid-in |   | Accumulated |   | Stockholder's |      |
|                                                                       |   | Shares                        |       | Amount  |   | capital     |   | deficit       |      | Deficiency |   |
|                                                                       |   |                          |       |    |   |        |   |          |      |       |   |
| Balance,                  March 31, 2005                                   |   |                          | 12,436,057 |    | $      | 124,361     |   | $             | 3,896,368 |       | $      | (6,669,909 | ) | $ | (2,649,180 | ) |
|                                                                       |   |                          |       |    |   |        |   |          |      |       |   |   |   |   |   |   |
| Issuance                  of debt related penalty shares              |   |                          | 322,725    |    |   | 3,227       |   |          | 169,454   |       |   |   |   |   | 172,681 |   |
| Issuance                  of shares and warrants related to new debt  |   |                          | 829,700    |    |   | 8,297       |   |          | 389,509   |       |   |   |   |   | 397,806 |   |
| Issuance                  of debt related penalty warrants            |   |                          |       |    |   |        |   |          | 447,757   |       |   |   |   |   | 447,757 |   |
| Issuance                  of warrants to placement agent              |   |                          |       |    |   |        |   |          | 26,070    |       |   |   |   |   | 26,070 |   |
|                                                                       |   |                          |       |    |   |        |   |          |      |       |   |   |   |   |   |   |
| Net                  Loss                                             |   |                          |       |    |   |        |   |          |      |       |   | (3,038,001 | ) |   | (3,038,001 | ) |
|                                                                       |   |                          |       |    |   |        |   |          |      |       |   |   |   |   |   |   |
| Balance,                  March 31, 2006                                   |   |                          | 13,588,482 |    |   | 135,885     |   |          | 4,929,158 |       |   | (9,707,910 | ) |   | (4,642,867 | ) |
|                                                                       |   |                          |       |    |   |        |   |          |      |       |   |   |   |   |   |   |
| Issuance                  of debt related penalty shares              |   |                          | 732,540    |    |   | 7,325       |   |          | 500,097   |       |   |   |   |   | 507,422 |   |
| Issuance                  of shares related to new debt               |   |                          | 655,000    |    |   | 6,550       |   |          | 376,096   |       |   |   |   |   | 382,646 |   |
| Issuance                  of shares for financing related services    |   |                          | 75,000     |    |   | 750         |   |          | 54,000    |       |   |   |   |   | 54,750 |   |
| Issuance                  of debt related penalty warrants            |   |                          | -          |    |   |        |   |          | 1,591,735 |       |   |   |   |   | 1,591,735 |   |
| Issuance                  of warrants to placement agent              |   |                          | -          |    |   |        |   |          | 20,300    |       |   |   |   |   | 20,300 |   |
| Issuance                  of warrants to employees                         |   |                          | -          |    |   |        |   |          | 93,000    |       |   |   |   |   | 93,000 |   |
|                                                                       |   |                          |       |    |   |        |   |          |      |       |   |   |   |   |   |   |
| Net                  Loss                                             |   |                          |       |    |   |        |   |          |      |       |   | (3,252,254 | ) |   | (3,252,254 | ) |
|                                                                       |   |                          |       |    |   |        |   |          |      |       |   |   |   |   |   |   |
| Balance,                  March 31, 2007                                   |   |                          | 15,051,022 |    | $      | 150,510     |   | $             | 7,564,386 |       | $      | (12,960,164 | ) | $ | (5,245,267 | ) |

----

**STATMON      TECHNOLOGIES CORP. AND SUBSIDIARIES**

**CONSOLIDATED      STATEMENTS OF CASH FLOWS**

|                                                                             |   | For                  the Years Ended March 31,   |       |
|----------------------------------------------------------------------------------|--------|------------------------------------------------------------|------------|
|                                                                             |   | 2007                                                       |       |  2006 |   |
| CASH                  FLOWS FROM OPERATING ACTIVITIES:                           |   |                                                       |       |    |   |
| Net                  loss                                                        |   | $                                                          | (3,252,254 | ) | $ | (3,038,001 | ) |
| Adjustments                  to reconcile net loss to net cash provided by/      |   |                                                       |       |   |   |   |   |
| (used                  in) operating activities:                                 |   |                                                       |       |   |   |   |   |
| Depreciation                                                                |   |                                                       | 11,427     |   |   | 16,801 |   |
| Common                  stock and warrants issued in association with debt  |   |                                                       | 1,876,258  |   |   | 619,479 |   |
| Amortization                  of debt discount                              |   |                                                       | 399,241    |   |   | 516,931 |   |
| Amortization                  of deferred financing costs                   |   |                                                       | 403,705    |   |   | 111,890 |   |
| Non-cash                  stock based compensation charge                   |   |                                                       | 93,000     |   |   |   |   |
| Changes                  in operating assets and liabilities:               |   |                                                       |       |   |   |   |   |
|  Accounts                  receivable                                       |   |                                                       | (46,614    | ) |   | (51,255 | ) |
|  Inventories                                                                |   |                                                       | (15,359    | ) |   | 23,133 |   |
|  Prepaid                  expense and other current assets                  |   |                                                       | (37,638    | ) |   | 1,402 |   |
|  Security                  Deposits                                         |   |                                                       | (206,600   | ) |   | (3,150 | ) |
|  Accounts                  payable                                          |   |                                                       | 120,546    |   |   | 49,115 |   |
|  Accrued                  expenses                                          |   |                                                       | (35,334    | ) |   | 175,965 |   |
|  Accrued                  compensation                                      |   |                                                       | 82,676     |   |   | 157,474 |   |
|  Interest                  payable                                          |   |                                                       | 478,758    |   |   | 369,139 |   |
|  Deferred                  revenue                                          |   |                                                       | 145,551    |   |   | 18,484 |   |
| NET                  CASH PROVIDED BY/(USED IN) OPERATING ACTIVITIES             |   |                                                       | 17,363     |   |   | (1,032,593 | ) |
|                                                                             |   |                                                       |       |   |   |   |   |
| CASH                  FLOWS USED IN INVESTING ACTIVITIES:                        |   |                                                       |       |   |   |   |   |
| Purchase                  of property and equipment                              |   |                                                       | (37,468    | ) |   | (1,184 | ) |
|                                                                             |   |                                                       |       |   |   |   |   |
| CASH                  FLOWS FROM FINANCING ACTIVITIES*:*                         |   |                                                       |       |   |   |   |   |
| Proceeds                  from notes payable                                     |   |                                                       | 752,000    |   |   | 1,024,700 |   |
| Repayment                  of notes payable                                      |   |                                                       | (597,000   | ) |   | (50,000 | ) |
| Deferred                  financing costs                                        |   |                                                       | (114,172   | ) |   | (66,562 | ) |
| NET                  CASH PROVIDED BY FINANCING ACTIVITIES                       |   |                                                       | 40,828     |   |   | 908,138 |   |
|                                                                             |   |                                                       |       |   |   |   |   |
| NET                  INCREASE/(DECREASE) IN CASH                                 |   |                                                       | 20,723     |   |   | (125,639 | ) |
|                                                                             |   |                                                       |       |   |   |   |   |
| CASH,                  BEGINNING OF YEAR                                         |   |                                                       | 66,335     |   |   | 191,974 |   |
|                                                                             |   |                                                       |       |   |   |   |   |
| CASH,                  END OF YEAR                                               |   | $                                                          | 87,058     |   | $ | 66,335 |   |
|                                                                             |   |                                                       |       |   |   |   |   |
| SUPPLEMENTAL                  DISCLOSURE OF CASH FLOW INFORMATION:               |   |                                                       |       |   |   |   |   |
| Cash                  paid for:                                                  |   |                                                       |       |   |   |   |   |
| Interest                                                                    |   | $                                                          | 25,223     |   | $ | 3,327 |   |
| Income                  Taxes                                               |   | $                                                          | 4,814      |   | $ | 917 |   |
|                                                                             |   |                                                       |       |   |   |   |   |
| NON-CASH                  INVESTING AND FINANCING ACTIVITIES:                    |   |                                                       |       |   |   |   |   |
|                                                                             |   |                                                       |       |   |   |   |   |
| Value                  of Common Stock and Warrants issued related to new debt   |   | $                                                          | 344,146    |   | $ | 397,806 |   |
|                                                                             |   |                                                       |       |   |   |   |   |
| Value                  of warrants issued to Placement Agent                     |   | $                                                          | 20,300     |   | $ | 26,070 |   |
|                                                                             |   |                                                       |       |   |   |   |   |
| Value                  of common stock issued to Placement Agent for Investor    |   |                                                       |       |   |   |   |   |
| relation                  services                                          |   | $                                                          | 54,750     |   | $ | - |   |
|                                                                             |   |                                                       |       |   |   |   |   |
| Placement                  Agent commissions accrued and not yet paid            |   | $                                                          | 47,500     |   | $ | 99,000 |   |
|                                                                             |   |                                                       |       |   |   |   |   |
| Value                  of Common Stock and Warrants related to extension of      |   |                                                       |       |   |   |   |   |
| notes                  payable                                              |   | $                                                          | 261,400    |   | $ | - |   |
|                                                                             |   |                                                       |       |   |   |   |   |
| Accrued                  interest reclassified as notes payable                  |   | $                                                          | 22,000     |   | $ | - |   |
|                                                                             |   |                                                       |       |   |   |   |   |

----

**1.           BUSINESS          DESCRIPTION, GOING CONCERN AND MANAGEMENT          PLANS**

**Company      Overview**

**History**

----

**1.**
**BUSINESS      DESCRIPTION, GOING CONCERN AND MANAGEMENT PLANS, **
**continued**

**Going      Concern**

**Management      Plans**

----

**2.**
**CERTAIN      SIGNIFICANT ACCOUNTING POLICIES**

|   | *a.* | Basis                of Consolidation                -                The consolidated financial statements include the accounts of the                Company's wholly-owned subsidiaries, Statmon-eBI Solutions, LLC and                STC                Software Corp. All inter-company accounts and transactions have been                eliminated in consolidation. |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | *b.* | Use                of Estimates -                The preparation of financial statements in conformity with US GAAP                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 revenues and expenses during the reporting period.                Actual results could differ from those estimates. |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | *c.* | Property                and Equipment -                Property and equipment are stated at cost. Depreciation is calculated                on a                straight-line basis over five years, which is the estimated useful                life of                the assets. |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | *d.* | Research                and Development -                Research and development expenditures are charged to operations as                incurred. Research and development expenditures were approximately                $804,000 in fiscal 2007 and $553,000 in fiscal                2006. |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | *e.* | Inventories -                Inventories are priced at the lower of cost (first-in, first-out)                or                market and consists primarily of finished goods. Raw materials and                Work In                Process are deemed immaterial. |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | *f.* | Net                Loss Per Share                -                Basic                net loss per share is computed using the weighted average number                of shares                of outstanding common stock***.***For                all periods presented, diluted net loss per share was the same as                basic                net loss per share since the inclusion of the warrants would have                been                anti-dilutive. Securities that could potentially dilute basic earnings                per                share (“EPS”) in the future and that were not included in the computation                of diluted EPS because to do so would have been anti-dilutive for                the                periods presented, consist of warrants to purchase 9,225,177 and                7,057,298                shares of common stock as of March 31, 2007 and 2006,                respectively. |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | *g.* | Income                Taxes                -                Deferred taxes represent the tax effects of differences between the                financial reporting and tax bases of the Company’s assets and liabilities                at the enacted tax rates in effect for the years in which the differences                are expected to reverse. The Company evaluates the recoverability                of                deferred tax assets and establishes a valuation allowance when it                is more                likely than not that some portion or all of the deferred tax assets                will                not be realized. Income tax expense consists of the tax payable for                the                period and the change during the period in deferred tax assets and                liabilities. |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | *h.* | Deferred                Financing Costs -                Deferred financing costs are costs incurred in connection with debt                financings and amortized over the term of the related debt. If any                or all                of the related debt is repaid prior to its maturity date, a pro-rata                share                of the related deferred financing costs are written off and recorded                as                amortization expense in the period of the repayment in the consolidated                statement of operations. |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | *i.* | Fair                Value of Financial Instruments -                The carrying amounts reported in the balance sheet for cash, receivables,                accounts payable and accrued expenses approximate fair value based                on the                short-term maturities of these instruments. The carrying amounts                of the                Company’s notes payable approximate fair value based on the prevailing                market interest rates. |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**2.**
**CERTAIN      SIGNIFICANT ACCOUNTING POLICIES, continued**

|   | *j.* | Impairment                of Long-Lived Assets -                The Company reviews long-lived assets and certain identifiable assets                on a                quarterly basis for impairment whenever circumstances and situations                change such that there is an indication that the carrying amounts                may not                be recovered. As of March 31, 2007, the Company does not believe                that any                impairment has occurred. |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | *k.* | Revenue                Recognition -                Statement of Position (“SOP”) 97-2, Software Revenue Recognition, issued                by the American Institute of Certified Public Accountants ("AICPA")                and                SOP 98-9, “Modification of SOP 97-2, Software Revenue Recognition, with                Respect to Certain Transactions,” applies to all entities that earn                revenue from licensing, selling, or otherwise marketing computer                software.                Management believes its current revenue recognition policies and                practices                are consistent with SOP 97-2. |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | *l.* | Stock-Based                Compensation                -                The                Company follows Statement of Financial Accounting Standards No. 123                ("SFAS                No. 123"), "Accounting for Stock-Based Compensation". SFAS No. 123                establishes accounting and reporting standards for stock-based employee                compensation plans. This statement allows companies to choose between                the                fair value-based method of accounting as defined in this statement                and the                intrinsic value-based method of accounting as prescribed by Accounting                Principles Board Opinion No. 25 ("APB 25"), "Accounting for Stock                Issued                to Employees". |
|--|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**2.**
**CERTAIN      SIGNIFICANT ACCOUNTING POLICIES, continued**

|   | *m.* | Shipping                and Handling                -                Shipping and handling costs incurred are either billed to the customer                and                included as part of cost of sales or charged to cost of sales as                incurred.  |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | *n.* | Amortization                of Debt Discount-                Debt discount is amortized on a straight-line basis over the life                of the                related notes. |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | *o.* | New                Accounting Pronouncements                - |
|--------|------|---------------------------------------------------------------|

----

**2.**
**CERTAIN      SIGNIFICANT ACCOUNTING POLICIES, continued**

----

**2.          **
**CERTAIN          SIGNIFICANT ACCOUNTING POLICIES, continued**

**3.**
**PROPERTY      AND EQUIPMENT**

|                                            |   |   |    |
|-------------------------------------------------|--------|--------|---------|
| Computer                  Equipment             |   | $      | 69,283  |   |
| Software                                        |   |   | 13,008  |   |
| Office                  Equipment               |   |   | 31,502  |   |
|                                            |   |   | 113,794 |   |
|                                            |   |   |    |   |
| Less:                  accumulated depreciation |   |   | 72,463  |   |
|                                            |   |   |    |   |
|                                            |   | $      | 41,331  |   |
|                                            |   |   |    |   |

----

**4.**
**NOTES      PAYABLE**

|                                                            |   |   |   |   |   |
|-----------------------------------------------------------------|--------|--------|--------|--------|--------|
| Senior                  Notes Payable - Thieme Consulting, Inc. |   |   |   |   |   |
| -                  related party                                |   |   | [a     | ]      | $      | 250,000 |   |
| Senior                  Subordinated Notes Payable - Delis      |   |   |   |   |   |   |   |
| -                  related party                                |   |   | [b     | ]      |   | 775,000 |   |
| Senior                  Subordinated Notes Payable              |   |   | [c     | ]      |   | 365,000 |   |
| Notes                  Payable - various(Including $244,700     |   |   |   |   |   |   |   |
| from                  related parties)                          |   |   | [d     | ]      | $      | 1,931,700 |   |
|                                                            |   |   |   |   |   |   |   |
|                                                            |   |   |   |   |   |   |   |
|                                                            |   |   |   |   |   | 3,321,700 |   |
|                                                            |   |   |   |   |   |   |   |
| Less:                  Debt Discount                            |   |   |   |   |   | (48,894 | ) |
|                                                            |   |   |   |   |   |   |   |
|                                                            |   |   |   |   |   |   |   |
|                                                            |   |   |   |   | $      | 3,272,806 |   |
|                                                            |   |   |   |   |   |   |   |

----

**4.**
**NOTES      PAYABLE, continued**

----

**5.**
**EQUITY      TRANSACTIONS**

** **

|                                                                    |   | Shares |       | Weighted                  Average Exercise Price |   | Exercisable |   |
|-------------------------------------------------------------------------|--------|--------|------------|--------------------------------------------------|--------|-------------|--------|
|                                                                         |   |   |       |                                             |   |        |   |
|                                                                    |   |   |       |                                             |   |        |   |
| Warrants                  outstanding and exercisable at March 31, 2005 |   |   | 4,623,992  |                                             | $      | 1.35        |   |   | 4,623,992 |   |
|                                                                    |   |   |       |                                             |   |        |   |   |   |   |
| Granted                                                                 |   |   | 2,707,562  |                                             |   | 1.17        |   |   |   |   |
| Canceled                                                                |   |   | -          |                                             |   | -           |   |   |   |   |
| Expired                                                                 |   |   | (274,256   | )                                                |   | -           |   |   |   |   |
| Exercised                                                               |   |   | -          |                                             |   | -           |   |   |   |   |
|                                                                    |   |   |       |                                             |   |        |   |   |   |   |
| Warrants                  outstanding and exercisable at March 31, 2006 |   |   | 7,057,298  |                                             | $      | 1.28        |   |   | 7,057,298 |   |
|                                                                    |   |   |       |                                             |   |        |   |   |   |   |
| Granted                                                                 |   |   | 3,985,729  |                                             |   | 1.17        |   |   |   |   |
| Canceled                                                                |   |   | -          |                                             |   | -           |   |   |   |   |
| Expired                                                                 |   |   | (1,817,851 | )                                                |   | -           |   |   |   |   |
| Exercised                                                               |   |   | -          |                                             |   | -           |   |   |   |   |
|                                                                    |   |   |       |                                             |   |        |   |   |   |   |
| Warrants                  outstanding and exercisable at March 31, 2007 |   |   | 9,225,176  |                                             | $      | 1.28        |   |   | 9,225,176 |   |

| Range                  of Exercise |   | Number                  Outstanding |      | Weighted                  Average Remaining Years of Contractual Life |   | Weighted Average                  Exercise Price |   | Number                  Exercisable |   |
|------------------------------------|--------|-------------------------------------|-----------|-----------------------------------------------------------------------|--------|-------------------------------------------------------|--------|-------------------------------------|--------|
| $1.00                              |   |                                | 5,807,897 |                                                                  |   | 2.02                                                  |   | $                                   | 1.00   |   |   | 5,807,897 |   |
|                               |   |                                |      |                                                                  |   |                                                  |   |                                |   |   |   |   |   |
| $1.25                  - 2.00      |   |                                | 3,167,279 |                                                                  |   | 2.73                                                  |   |                                | 1.44   |   |   | 3,167,279 |   |
|                               |   |                                |      |                                                                  |   |                                                  |   |                                |   |   |   |   |   |
| $5.00                              |   |                                | 250,000   |                                                                  |   | 0.13                                                  |   |                                | 5.00   |   |   | 250,000 |   |
|                               |   |                                |      |                                                                  |   |                                                  |   |                                |   |   |   |   |   |
| $1.00                  - 5.00      |   |                                | 9,225,176 |                                                                  |   | 2.21                                                  |   | $                                   | 1.26   |   |   | 9,225,176 |   |

----

**5.**
**EQUITY      TRANSACTIONS, continued**

**6.      **
**INCOME      TAXES**

|                                                           |   | For                  the Years Ended |   |
|----------------------------------------------------------------|--------|--------------------------------------|--------|
|                                                           |   | March                  31,           |   |
|                                                           |   | 2007                                 |   | 2006 |   |
|                                                           |   |                                 |   |   |   |
| Federal                  statutory rate                        |   |                                 | (34    | )% |   | (34 | )% |
| State                  income tax rate, net of federal benefit |   |                                 | (6     | )% |   | (6 | )% |
| Valuation                  allowance                           |   |                                 | 40     | % |   | 40 | % |
|                                                           |   |                                 |   |   |   |   |   |
| Effective                  rate                                |   |                                 | -0-    | % |   | -0- | % |

**7.**
**COMMITMENTS      AND CONTINGENCIES**

----

**7.**
**COMMITMENTS      AND CONTINGENCIES, continued**

| 2008   |   | $      | 456,706    |   |
|--------|--------|--------|------------|--------|
| 2009   |   |   | 414,706    |   |
| 2010   |   |   | 454,305    |   |
| 2011   |   |   | 332,857    |   |
| 2012   |   |   | 276,049    |   |
| 2013   |   |   | 92,970     |   |
|   |   | $      | 2,027,5932 |   |

----

**7.**
**COMMITMENTS      AND CONTINGENCIES, continued**

|   | [c] | Employment                Agreements                -                On September 16, 2000, Geoffrey P. Talbot and Peter J. Upfold entered                into                employment agreements with the Company providing for annual compensation                in the first year of employment of $160,000. Because of conditions                contained in certain loan agreements, the commencement date of the                subject                employment agreements was delayed until the satisfaction of certain                conditions, which the Board of Directors deemed satisfied as of July                1,                2004. The compensation paid or accrued to Talbot and Upfold during                the                period prior to the commencement dates of their employment agreements                at                approximately 50% of the contract rate was treated as consulting                fees as                reported in SEC filings to date. Talbot and Upfold have verbally                agreed to                defer a portion of their contractual compensation until the Company                receives at least $2 million of new capital and repays certain senior                notes, at which time the respective parties will be paid at their                contractual rate of pay. As such, Talbot and Upfold received gross                pay of                $114,416 and $126,340, respectively, for the period April 1, 2006                to March                31, 2007 and $85,532 each for the period July 1, 2004 to March 31,                2005                and $114,107 each for the period April 1, 2005 to March 31, 2006,                and the                Company has accrued $62,250 and $50,326, respectively, for the period                April 1, 2006 to March 31, 2007 and $34,468 and $45,893 of compensation                each for each for the period April 1, 2005 to March 31, 2006period,                respectively. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**7.   **
**COMMITMENTS      AND CONTINGENCIES, continued**

|  | [d] | Other                -                During                the year ended March 31, 2007, the Company received notices from                the                Federal and State taxing authorities relating to $114,000 of past                due                payroll taxes and in July 2006, the Company paid such amounts in                full. As                of March 31, 2007, the Company was delinquent in its filing of several                years’ Federal, State and local compensation related filings, related to                amounts paid to the Company’s founders who are the Chief Executive                Officer, Chief Technical Officer and one other individual for payroll                reporting purpose. As the Company has not been in a position to comply                with the Chief Executive Officer and the Chief Technology Officer                employment contracts the Company has decided to classify these individuals                as non-employees. For payroll tax reporting purposes, through December                31,                2006, the gross unreported compensation amounts aggregated to                approximately $1,400,000 for the three individuals. Management of                the                Company has indicated that it will rectify the non-reporting of several                years of compensation to these individuals by August 15, 2007 through                the                filing of Federal forms 1099 and 1096. The Company also plans to                pay                accrued compensation of approximately $425,000 to the Chief Executive                Officer and Chief Technology Officer which the Company has accrued                prior                to March 31, 2007. At the time of this filing, approximately $130,000                of                accrued compensation due to the other individual has been paid which                was                utilized to pay the related income taxes on $301,829 of the above                mentioned $1,400,000 of unreported 1099 income to the respective                taxing                authorities. Such payroll tax reporting classification is subject                to audit                by the Internal Revenue Service and other state and local taxing                authorities, which, upon review, could determine that such individuals’                compensation should have been reported on the basis that such individuals                are employees. Accordingly, depending on such potential audit, the                Company                may be subject to additional payroll related liabilities the amount                of                which, if any, is not determinable at this                time. |
|--|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**8**
**MAJOR      CUSTOMERS, FOREIGN REVENUE AND CONCENTRATION OF CREDIT      RISK**

|   | [a] | Major                Customers |
|--------|-----|--------------------------------|

|   | [b] | Foreign                Revenue |
|--------|-----|--------------------------------|

|   | [c] | Concentration                of Credit Risk |
|--------|-----|---------------------------------------------|

----

**9.**
**SUBSEQUENT      EVENTS**

|   | · | (i)                $50,000 principal amount promissory note bearing interest at 10%                per annum                and due 90 days from the date of issuance, (ii) 30,000 shares of                common                stock and (iii) warrants to purchase 30,000 shares of common stock                exercisable at a price of $1.00 per share for a term of five years.                This                note matured on July 2, 2007. Per the default terms of the note,                the                Company will issue an additional 30,000 shares of common stock and                warrants to purchase 30,000 shares of its common stock at an exercise                price of $1.00 per share with a term of five years as consideration                for an                extension of the due date of the notes to July 2,                2008. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | · | (i)                $25,000 principal amount promissory note bearing interest at 10%                per annum                and due 90 days from the date of issuance, (ii) 15,000 shares of                common                stock and (iii) warrants to purchase 15,000 shares of common stock                exercisable at a price of $1.00 per share for a term of five years.                This                note matured on July 8, 2007. Per the default terms of the note,                the                Company will issue an additional 15,000 shares of common stock and                warrants to purchase 15,000 shares of its common stock at an exercise                price of $1.00 per share with a term of five years as consideration                for an                extension of the due date of the notes to July 8,                2008. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | · | (i)                $20,000 principal amount promissory note bearing interest at 10%                per annum                and due One Year from the date of issuance, (ii) 20,000 shares of                common                stock and (iii) warrants to purchase 20,000 shares of common stock                exercisable at a price of $1.25 per share for a term of five years.                This                note matures on April 16, 2008 after which interest will increase                to 15%                per annum until the note is repaid. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | (i)                $200,000 principal amount secured promissory note bearing interest                at 10%                per annum and due 180 days from the date of issuance, (ii) 150,000                shares                of common stock and (iii) warrants to purchase 150,000 shares of                common                stock exercisable at a price of $1.00 per share for a term of five                years.                This note matures on October 24, 2007. Per the default terms of the                note,                if the Company does not repay the note by the maturity date, it will                issue                an additional 100,000 shares of common stock and warrants to purchase                100,000 shares of its common stock at an exercise price of $1.00                per share                with a term of five years as consideration for an extension of the                due                date of the notes to October 24, 2008. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | · | (i)                $50,000 principal amount promissory note bearing interest at 10%                per annum                and due 180 days from the date of issuance, (ii) 30,000 shares of                common                stock and (iii) warrants to purchase 30,000 shares of common stock                exercisable at a price of $1.50 per share for a term of five years.                This                note matures on November 19, 2007. Per the default terms of the note,                if                the Company does not repay the note by the maturity date, it will                issue an                additional 30,000 shares of common stock and warrants to purchase                30,000                shares of its common stock at an exercise price of $1.50 per share                with a                term of five years as consideration for an extension of the due date                of                the notes to November 19, 2008. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | · | (i)                $25,000 principal amount promissory note bearing interest at 10%                per annum                and due 180 days from the date of issuance, (ii) 15,000 shares of                common                stock and (iii) warrants to purchase 15,000 shares of common stock                exercisable at a price of $1.50 per share for a term of five years. This                note matures on November 26, 2007. Per the default terms of the note,                if                the Company does not repay the note by the maturity date, it will                issue an                additional 15,000 shares of common stock and warrants to purchase                15,000                shares of its common stock at an exercise price of $1.50 per share                with a                term of five years as consideration for an extension of the due date                of                the notes to November 26, 2008. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | · | (i)                $17,000 principal amount promissory note bearing interest at 10%                per annum                and due 180 days from the date of issuance, (ii) 10,200 shares of                common                stock and (iii) warrants to purchase 10,200 shares of common stock                exercisable at a price of $1.50 per share for a term of five years.                This                note matures on December 2, 2007. Per the default terms of the note,                if                the Company does not repay the note by the maturity date, it will                issue an                additional 10,200 shares of common stock and warrants to purchase                10,200                shares of its common stock at an exercise price of $1.50 per share                with a                term of five years as consideration for an extension of the due date                of                the notes to December 2, 2008. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**9.**
**SUBSEQUENT      EVENTS, continued**

|   | · | (i)                $10,000 principal amount promissory note bearing interest at 10%                per annum                and due 180 days from the date of issuance, (ii) 6,000 shares of                common                stock and (iii) warrants to purchase 6,000 shares of common stock                exercisable at a price of $1.50 per share for a term of five years.                This                note matures on December 19, 2007. Per the default terms of the note,                if                the Company does not repay the note by the maturity date, it will                issue an                additional 6,000 shares of common stock and warrants to purchase                6,000                shares of its common stock at an exercise price of $1.50 per share                with a                term of five years as consideration for an extension of the due date                of                the notes to December 19, 2008. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----