**UNITED      STATES SECURITIES AND EXCHANGE COMMISSION**

| x | ANNUAL                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF                1934 |
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| o | TRANSITION                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF                1934 |
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**STATMON      TECHNOLOGIES CORP.**

| Nevada                                                                                      | 83-0242652                                          |
|---------------------------------------------------------------------------------------------|-----------------------------------------------------|
| (State                or other jurisdiction ofincorporation                or organization) | (I.R.S.                Employer Identification No.) |

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**TABLE      OF CONTENTS**

|                                                                                                                                                       | **Page** |
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|                                                                                                                                                       |     |
| PART                  I                                                                                                                                    |     |
|                                                                                                                                                       |     |
| ITEM                  1. Description of Business                                                                                                           | 1        |
|                                                                                                                                                       |     |
| ITEM                  2. Description of Properties                                                                                                         | 20       |
|                                                                                                                                                       |     |
| ITEM                  3. Legal Proceedings                                                                                                                 | 20       |
|                                                                                                                                                       |     |
| ITEM                  4. Submission of Matters to a Vote of Securities Holders                                                                             | 21       |
|                                                                                                                                                       |     |
| PART                  II                                                                                                                                   |     |
|                                                                                                                                                       |     |
| ITEM                  5. Market for the Common Equity and Related Stockholder                  Matters                                                     | 21       |
|                                                                                                                                                       |     |
| ITEM                  6. Management’s Discussion and Analysis or Plan of                  Operation                                                  | 24       |
|                                                                                                                                                       |     |
| ITEM                  7. Financial Statements                                                                                                              | 30       |
|                                                                                                                                                       |     |
| ITEM                  8. Changes In and Disagreements with Accountants on Accounting                  and                  Financial Disclosure            | 31       |
|                                                                                                                                                       |     |
| ITEM                  8a. Controls and Procedures                                                                                                          | 31       |
|                                                                                                                                                       |     |
| PART                  III                                                                                                                                  |     |
|                                                                                                                                                       |     |
| ITEM                  9. Directors, Executive Officers, Promoters, and Control Persons;                  Compliance with Section 16(a) of the Exchange Act | 32       |
|                                                                                                                                                       |     |
| ITEM                  10. Executive Compensation                                                                                                           | 34       |
|                                                                                                                                                       |     |
| ITEM                  11. Security Ownership of Certain Beneficial Owners and Management                  and                  Related Stockholder Matters | 36       |
|                                                                                                                                                       |     |
| ITEM                  12. Certain Relationships and Related Transactions                                                                                   | 37       |
|                                                                                                                                                       |     |
| ITEM                  13. Exhibits and Reports on Form 8-K                                                                                                 | 39       |
|                                                                                                                                                       |     |
| ITEM                  14. Principal Accountant Fees and Services                                                                                           | 41       |
|                                                                                                                                                       |     |
| Signature                  Page                                                                                                                            | 42       |

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| **ITEM              1.         ** | **DESCRIPTION                OF BUSINESS** |
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**Company      Overview**

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**History**

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*Software      History*

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**Products      and Services**

**Software**

***Axess***

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**Hardware**

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

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

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

**Key      Features of Our Products**

| ·                            | Ease                of implementation, installation, maintenance, and                upgrade; |
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| ·               | Fully                scalable and customizable; |
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| ·               | Ability                to integrate the monitoring and management of a wide range of protocols                and disparate systems and devices; |
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| ·               | 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; |
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| ·               | Real-time                remote access, self-healing, control and monitoring of diverse systems,                intelligent and passive devices; |
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| ·               | Real-time                digital data collection, aggregation and information management services; |
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| ·               | Time                and motion efficiencies through remote-site monitoring, managing                and                remote control capabilities from any web-enabled                location; |
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| ·               | Device                automation redundancy and "fail-safe" problem                solving; |
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| ·               | Additional                assurance against system down-time by preemption and prevention rather                than cure; |
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| **·**            ** ** | Preventative                maintenance opportunities based upon trend analysis of collected                data;                and |
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| ·                            | The                ability to “daisy-chain” the hardware devices from a single serial or LAN                (Local Area Network) connection. |
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**Customers**

**Fiscal      2007 Goals**

| ·                            | Aggressively                promote the Company’s flagship software product “Axess” and associated                product lines into the existing and expanding sales and distribution                channels including Harris Broadcast, Pixelmetrix, US Energy Systems,                Eddystone - Sound Broadcast Services, Ltd., Burst Communications,                Synergy                Systems, MTD Systems and Nautel Navigation and                Radio; |
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| ·               | Focus                on opportunities in the emerging wireless multicasting for Mobile                TV &                Multimedia and the evolution of mobile                entertainment; |
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| ·               | Focus                on high profile product positioning and increasing the Company’s exposure                in the public financial and vertical                markets; |
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| ·               | Implement                an aggressive investor relations and public market making program                to                generate liquidity in the Company’s OTC Bulletin Board listed shares of                common stock. |
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| ·               | Expand                the in-house sales and sales channel business development team in                the                domestic and foreign markets; |
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| ·               | Focus                on the worldwide digital radio transmitter retrofit cycle working                with the                transmitter hardware manufacturers and                integrators; |
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| ·               | Identify                strategic vertical market collaboration opportunities in the energy,                telecommunications, power management, military, government and corporate                infrastructure markets; |
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| ·               | Identify                strategic vertical market integrators and operators with complimentary                technologies for end-to-end solutions including power supply, data                center,                wireless data delivery, embedded and sensor                technologies; |
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| ·               | Recruit                appropriate industry experts for our target strategic vertical markets;                such experts understand the needs and have deep industry knowledge                and                contacts, plus a vision for the integration of our products and                services; |
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| ·               | Evaluate                private label/OEM opportunities domestically and internationally                to                exploit our technology in markets and for applications within and                beyond                our current scope. |
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**Radio      and Television Broadcasting Industry**

**Software      Industry**

**Business      Strategy - Potential New Vertical Markets**

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| ·               | Wireless                and Telecommunications; |
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| ·               | Building                Radio Frequency and Security                Management; |
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| ·               | First                Responder, Emergency, Government and                Military; |
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| ·               | Energy                Industry; |
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| ·               | Wireless                and Microwave Tower Management; |
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| ·               | Homeland                Security - Remote Control, Monitoring and Surveillance;                and |
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| ·               | Infrastructure                - Remote Control, Monitoring and Data                Aggregation. |
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**Competition**

| ·               | Breadth                of geographic presence; |
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| ·               | Ease                of integration; |
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| ·               | Reliability; |
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| ·               | Ability                to offer turnkey solutions; |
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| ·               | Customer                service; |
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| ·               | Performance; |
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| ·               | Flexibility;                and |
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| ·               | Scalability. |
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**Business      Development**

**Customer      Support and Service**

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

| ·               | On-site                and twenty-four hour off-site technical                support; |
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| ·               | Centralized                and on-site training; |
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| ·               | 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**

**Employees**

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**CAUTIONARY      FACTORS THAT MAY AFFECT FUTURE RESULTS**

**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 broadcast and other markets we intend                to                pursue, our ability to implement our growth strategy, especially                the sales                and marketing efforts, and the introduction of new devices and computer                network and control technologies by us and our                competitors. |
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| *We                Have a History of Net Losses and May Never Achieve or Maintain                Profitability.*  |   | We                have a history of incurring losses from operations. As of March 31,                2006,                we had an accumulated deficit of approximately $9,708,000. 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. If we do achieve profitability in                any                period, we may not be able to sustain or increase our profitability                on a                quarterly or annual basis.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
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| *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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
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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. |

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| *We                May Not be Able to Refinance Short-Term Promissory Notes that are                Coming                Due.*                                                                                      |   | As                of March 31, 2006, we have issued approximately $3.45 million of                short-term promissory notes of which approximately $300,000 has been                repaid, approximately $2.3 million has matured and approximately                an                additional $850,000 will mature by March 31, 2007. Our goal is to                raise                additional equity capital before the end of calendar year 2006. 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.*                                                                                                                                                  |   | We                are in the process of making certain delinquent Federal, State and                Local                compensation related filings and payments, which may subject us to                additional payroll related liabilities, the amount of which cannot                be                determined at this time. Management has indicated that such delinquent                filings and payments are expected to be completed no later than the                end of                our third fiscal quarter.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|                                                                                                                                                                                                                      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| *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 maybe 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 these products, the customer may fall behind                the                technology curve being embraced by certain of their                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, 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 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.                                                                                   |
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| *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.                                                                                                                                                                                                                           |
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| *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 head of programming, Nigel Brownett,                and the Board of Directors. If we lose the service of any members                of our                management team or other key personnel, our business prospects will                be                materially and adversely impacted.                                                                                                                                                                                                                                                                                                                                                                                                           |
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| *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, revenues and                income.                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. |
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| *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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|                                                                                                                                                                                                                                                                                                                                     |   | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |

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**Risks      Related To The Industry**

| *If                We Fail to Successfully Introduce New Products, 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. Such products 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. If we do not introduce                these new                products 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |

----

**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 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,                which                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.  |

----

|                                                    |   | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|---------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| *Control                by Certain Stockholders.*  |   | Our                Directors and Executive Officers beneficially own approximately 39%                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 materially 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** |
|--------------------------|----------------------------------------------|

| **ITEM3.** | **LEGAL                PROCEEDINGS** |
|------------|--------------------------------------|

----

| **ITEM              4.** | **SUBMISSION                OF MATTERS TO A VOTE OF SECURITIES                HOLDERS** |
|--------------------------|-----------------------------------------------------------------------------------------|

| **ITEM                5 . ** | **MARKET                FOR THE COMMON EQUITY AND RELATED STOCKHOLDER                MATTERS** |
|----------------------------------------|------------------------------------------------------------------------------------------------|

**Market      Prices**

*www.bigcharts.com*

|                                            |   | High                Bid |   | Low                Bid |
|-------------------------------------------------|--------|-------------------------|--------|------------------------|
| 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                   |
|                                            |   |                    |   |                   |
| Fiscal                Year Ended March 31, 2005 |   |                    |   |                   |
| 1st                Quarter                      |   | 1.46                    |   | 0.76                   |
| 2nd                Quarter                      |   | 0.86                    |   | 0.52                   |
| 3rd                Quarter                      |   | 0.95                    |   | 0.63                   |
| 4th                Quarter                      |   | 0.98                    |   | 0.70                   |

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**Dividends**

**Equity      Compensation Plan Information**

**Recent      Issuances of Unregistered Securities **

|   | · | In                April 2005, the Company issued 100,000 shares of common stock and                100,000                warrants to purchase shares of our common stock at an exercise price                of                $1.50 per share in association with the issuance of a $100,000 promissory                note due one year from the date of issuance bearing interest at 10%                per                annum. As of June 30, 2006, 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 is granting penalty warrants at the rate of 10,000 per                month                which will continue until note                repayment. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In                May 2005, the Company issued 100,000 shares of common stock and 100,000                warrants to purchase shares of our common stock at an exercise price                of                $1.50 per share in association with the issuance of a $75,000 promissory                note due one year from the date of issuance bearing interest at 10%                per                annum and a $25,000 promissory note due one year from the date of                issuance                bearing interest at 10% per annum. As of June 30, 2006, the notes                are in                default and are accruing interest at the penalty rate of 15% per                annum.                Per the terms of the notes, the Company is granting aggregate penalty                warrants at the rate of 10,000 per month which will continue until                the                notes are repaid. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In                June 2005, the Company issued 50,000 shares of common stock and 50,000                warrants to purchase shares of our common stock at an exercise price                of                $1.50 per share in association with the issuance of a $50,000 promissory                note due one year from the date of issuance bearing interest at 10%                per                annum. As of June 30, 2006, 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 is granting penalty warrants at the rate of 5,000 per                month                which will continue until the note is                repaid. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In                July 2005, the Company issued                110,000 shares of common stock and 210,000 warrants to purchase shares                of                our common stock at an exercise price of $1.50 per share in association                with the issuance of a $10,000 promissory note due July 18, 2006                bearing                interest at 10% per annum, a $75,000 promissory note due July 15,                2006                bearing interest at 10% per annum and a $25,000 promissory note due                July                15, 2006 bearing interest at 10% per annum.                The default penalty provisions of these promissory notes include                an                increase in the interest rate of 5% per annum and, after a 30-day                default                period, the Company will grant varying amounts of penalty warrants on                a monthly basis until the notes are repaid in                full. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In                August 2005, the Company issued 116,700 shares of common stock, 16,700                warrants to purchase shares of our common stock at an exercise price                of                $1.50 per share and 110,000 warrants to purchase shares of common                stock at                an exercise price of $1.25 per share in association with the issuance                of a                $16,700 promissory note due August 9, 2006 bearing interest at 10%                per                annum and a $110,000 promissory note due August 9, 2006 bearing interest                at 20% per annum. The default penalty provisions of these promissory                notes                include an increase in the interest rate of 5% per annum and, after                a                30-day default period, we will grant varying amounts of penalty warrants                on a monthly basis until the notes are repaid in                full. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | In                September 2005, the Company issued 150,000 shares of common stock                and                150,000 warrants to purchase shares of our common stock at an exercise                price of $1.50 per share in association with the issuance of a $100,000                promissory note due one year from the date of issuance bearing interest                at                10% per annum and a $100,000 promissory note due 30 days from the                date of                issuance bearing interest at 10% per annum. As of June 30, 2006,                the                $100,000 promissory note due in one year is current and the $100,000                promissory note due 30 days is in default and accruing interest at                15% per                annum. Per the terms of the note, the Company is granting penalty                share                and warrants at the rate of 4,545 per month which will continue until                the                note is repaid. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In                November 2005, the Company issued 25,000 shares of common stock and                25,000                warrants to purchase shares of our common stock at an exercise price                of                $1.50 per share in association 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, 2006, the notes are                current. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In                December 2005, the Company issued 50,000 shares of common stock and                50,000                warrants to purchase shares of our common stock at an exercise price                of                $1.50 per share in association with the issuance of a $50,000 promissory                note that was repaid in full during December                2005. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In                February 2006, the Company issued 45,000 shares of common stock in                association 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                $40,000                promissory note due 60 days from the date of issuance bearing interest                at                10% per annum. As of June 30, 2006, the notes are in default and                are                accruing interest at the penalty rate of 15% per annum. Per the terms                of                the notes, the Company granted 45,000 penalty shares upon                default. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In                March 2006, the Company issued 83,000 shares of common stock in                association with the issuance of a $50,000 promissory note due 60                days                from the date of issuance bearing interest at 10% per annum, a $16,000                promissory note due 60 days from the date of issuance bearing interest                at                10% per annum and a $100,000 promissory note due 60 days from the                date of                issuance bearing interest at 10% per annum. As of June 30, 2006,                the notes                are in default and are accruing interest at the penalty rate of 15%                per                annum. Per the terms of the notes, the Company granted 83,000 penalty                shares upon default. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | On                September 30, 2005, the Company granted warrants to purchase 75,000                shares                of common stock exercisable at a price of $1.50 per share for a term                of                three years as commission for $750,000 of capital raised between                March                2005 and September 2005. These warrants were valued at                $21,750. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | On                March 31, 2006, the Company granted warrants to purchase 24,000 shares                of                common stock exercisable at a price of $1.50 per share for a term                of three                years as commission for $240,000 of capital raised between January                2006                and March 2006. These warrants were valued at                $4,320. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | 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                December 31, 2005, the Company issued 9,090 shares of common stock                in                connections with a secured note that is in default. The Company issued                an                additional 13,635 shares of common stock and granted warrants to                purchase                22,725 shares of common stock exercisable at a price of $1.50 per                share                for a term of three years at March 31, 2006 in connection with the                same                secured note in default. These warrants were valued at                $4,091. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The                Company has granted warrants to purchase 1,703,812 shares of common                stock                at an exercise price of $1.00 per share related to penalty provisions                for                promissory notes in default. The Company has granted additional warrants                to purchase 70,325 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                $443,666. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

**OVERVIEW**

----

**Off-Balance        Sheet Arrangements**

**RESULTS      OF OPERATIONS**

**YEARS      ENDED MARCH 31, 2006 AND 2005**

***Revenues***

----

***Cost      of Sales***

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

***Other      Expense***

***Net      Loss***

**LIQUIDITY      AND CAPITAL RESOURCES**

----

|   | ·  | (i)                $25,000 principal amount promissory note bearing interest at 10%                per annum                and due 365 days from the date of issuance, (ii) 30,000 shares of                common                stock and (iii) warrants to purchase 25,000 shares of common stock                exercisable at a price of $1.00 per share for a term of five                years. |
|--------|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | (i)                $100,000 principal amount promissory note bearing interest at 10%                per                annum and due 60 days from the date of issuance, (ii) 100,000 shares                of                common stock and (iii) warrants to purchase 340,000 shares of common                stock                exercisable at a price of $1.25 per share for a term of five years.                This                note matures on July 31, 2006 after which interest will increase                to 15%                per annum until the note is repaid. |
|--|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | (i)                $10,000 principal amount promissory note bearing interest at 10%                per annum                and due 180 days from the date of issuance, (ii) 10,000 shares of                common                stock and (iii) warrants to purchase 10,000 shares of common stock                exercisable at a price of $1.25 per share for a term of three years.                This                note matures on December 3, 2006 after which interest will increase                to 15%                per annum until the note is repaid. |
|--|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | (i)                $100,000 principal amount promissory note bearing interest at 10%                per                annum and due 60 days from the date of issuance, (ii) 100,000 shares                of                common stock and (iii) warrants to purchase 100,000 shares of common                stock                exercisable at a price of $1.25 per share for a term of five years.                This                note matures on August 15, 2006 after which interest will increase                to 15%                per annum until the note is repaid. |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | (i)                $100,000 principal amount promissory note bearing interest at 10%                per                annum and due 60 days from the date of issuance, (ii) 100,000 shares                of                common stock and (iii) warrants to purchase 100,000 shares of common                stock                exercisable at a price of $1.25 per share for a term of five years.                This                note matures on August 29, 2006 after which interest will increase                to 15%                per annum until the note is repaid. |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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**CRITICAL      ACCOUNTING POLICIES AND ESTIMATES**

**Accounts      Receivable - Allowance for Doubtful Accounts **

----

**Revenue      Recognition**

**Effects      of Recent Accounting Policies **

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| **ITEM              7.** | **FINANCIAL                STATEMENTS** |
|--------------------------|-----------------------------------------|

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

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

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| **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       |   | 58     |   | Chairman,                President, Chief Executive Officer & Chief Financial Officer               |   | Chairman,                President, Chief Executive Officer and Chief Financial Officer since                June                2002 |
|                                    |   |   |   |                                                                                                    |   |                                                                                                                                  |
| Peter                J. Upfold          |   | 43     |   | Chief                Technology Officer, Vice Chairman, Director and                Treasurer/Secretary |   | Vice                Chairman, Chief Technology Officer and Director since June                2002                                    |
|                                    |   |   |   |                                                                                                    |   |                                                                                                                                  |
| Kevin                R. Harris          |   | 37     |   | Chief                Operating Officer                                                                  |   | Since                April 2004                                                                                                       |
|                                    |   |   |   |                                                                                                    |   |                                                                                                                                  |
| Leonard                Silverman, Ph.D. |   | 66     |   | Director                                                                                                |   | Director                since June 2002                                                                                               |
|                                    |   |   |   |                                                                                                    |   |                                                                                                                                  |
| Robert                B. Fields         |   | 68     |   | Director                                                                                                |   | Director                since June 2002                                                                                               |

*Geoffrey      P. Talbot*

*Peter      J. Upfold*

*Kevin      R. Harris*

----

*Leonard      Silverman, Ph.D.*

*Robert      B. Fields *

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

----

| **ITEM              10.** | **EXECUTIVE                COMPENSATION** |
|---------------------------|-------------------------------------------|

| **Annual                Compensation**         |   | **Long                Term Compensation** |   |
|------------------------------------------------|--------|-------------------------------------------|--------|
| **Name                and Principal Position** |   | **Fiscal                Year**            |   | **Salary($)** |   | **Bonus($)** |   | **Other                Annual Compensation** |   | **Common                Stock Underlying Options and Warrants** |   | **All                Other Compensation****(3)** |   |
| Geoffrey                P. Talbot,             |   |                                      | 2006   |   | $ | 160,000 |   |   |   |   |   | — |   |   |   |   | $ | 7,051 |   |
| President,                Chairman             |   |                                      | 2005   |   |   | 120,000 |   |   |   |   | $ | 20,333 |   |   |   |   |   | 12,997 |   |
| &                CEO (1)(2)                |   |                                      | 2004   |   |   | — |   |   |   |   |   | 81,333 |   |   |   |   |   | 10,792 |   |
|                                           |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Peter                J. Upfold,                |   |                                      | 2006   |   | $ | 160,000 |   |   |   |   |   | — |   |   |   |   | $ | 12,350 |   |
| Vice                Chairman &             |   |                                      | 2005   |   |   | 120,000 |   |   |   |   | $ | 20,333 |   |   |   |   |   | 9,662 |   |
| CTO                Treasurer/Secretary (1)(2)  |   |                                      | 2004   |   |   | — |   |   |   |   |   | 81,333 |   |   |   |   |   | 11,032 |   |
|                                           |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Kevin                R. Harris                 |   |                                      | 2006   |   | $ | 150,000 |   |   |   |   |   | — |   |   |   |   |   | — |   |
| COO                                            |   |                                      | 2005   |   |   | 150,000 |   |   |   |   |   | — |   |   |   |   |   | — |   |

----

**Director      Compensation **

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

| **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                                                                                                    |   |   | 12.31                                                 | %      |
|                                                                            |   |   |                                                                                                         |   |   |                                                  |   |
| Peter                  J. Upfold, CTO, Vice Chairman, Secretary/Treasurer (1)   |   |   | 2,814,270                                                                                                    |   |   | 19.85                                                 | %      |
|                                                                            |   |   |                                                                                                         |   |   |                                                  |   |
| Leonard                  Silverman, Ph.D., Director (2)(3)                      |   |   | 352,544                                                                                                      |   |   | 2.46                                                  | %      |
|                                                                            |   |   |                                                                                                         |   |   |                                                  |   |
| Robert                  B. Fields, Director (2)(3)                              |   |   | 216,272                                                                                                      |   |   | 1.52                                                  | %      |
|                                                                            |   |   |                                                                                                         |   |   |                                                  |   |
| Kevin                  R. Harris, Chief Operating Officer (4)                   |   |   | 420,000                                                                                                      |   |   | 2.92                                                  | %      |
|                                                                            |   |   |                                                                                                         |   |   |                                                  |   |
| Thieme                  Consulting, Inc. (5)                                    |   |   | 1,977,006                                                                                                    |   |   | 13.69                                                 | %      |
|                                                                            |   |   |                                                                                                         |   |   |                                                  |   |
| Martin                  E. Jacobs (6)                                           |   |   | 823,129                                                                                                      |   |   | 5.71                                                  | %      |
|                                                                            |   |   |                                                                                                         |   |   |                                                  |   |
| Dean                  Delis (7)                                                 |   |   | 3,362,605                                                                                                    |   |   | 20.83                                                 | %      |
|                                                                            |   |   |                                                                                                         |   |   |                                                  |   |
| All                  Executive Officers and Directors as a Group (five persons) |   |   | 5,549,266                                                                                                    |   |   | 39.07                                                 | %      |

|   | (1) | The                  address of Geoffrey P. Talbot and Peter J. Upfold is 345 North                  Maple                  Drive, Suite 120, Beverly Hills, CA                  90210. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | The                  address of Leonard Silverman, Ph.D. and Robert B. Fields is c/o                  Statmon                  Technologies Corp., 345 North Maple Dr., Suite 120, Beverly Hills,                  CA                  90210. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (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 127,544 and 11,272 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., 345                  N. Maple                  Dr., Suite 120, Beverly Hills, CA 90210. Includes warrants to purchase                  220,000 shares of common stock exercisable at a price of $1.00                  per                  share. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (5) | The                  address of Thieme Consulting, Inc. is 845 third Ave., 14th Floor,                  New                  York, New York 10022. Includes warrants to purchase 265,000 shares                  of                  common stock exercisable at $2.00 per                  share. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (6) | The                  address of Martin E. Jacobs is 11845 Olympic Blvd, Suite 645, Los                  Angeles,                  CA 90064. Includes warrants to purchase 242,033 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 505,806 shares of common stock exercisable                  at $1.00 per share and warrants to purchase 1,505,439 shares of                  common                  stock exercisable at $1.50 per                  share. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**ITEM        12.  **
**CERTAIN        RELATIONSHIPS AND RELATED TRANSACTIONS**

----

----

**ITEM        13.  **
**EXHIBITS        AND REPORTS ON FORM 8-K. **

| **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)                                                                                                                                             |
|        |   |                                                                                                                                                                                                                                                   |
| 4.7         |   | *                  Form of Common Stock Purchase Warrant (exercisable at $1.25 per                  share)                                                                                                                                             |
|        |   |                                                                                                                                                                                                                                                   |
| 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 2006. (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                                                                                                           |
|   |                                                                                                                                                                                                                                                        |
| 10.22  | *                  Form of Senior Subordinated Promissory Note issued by Statmon Technologies                  Corp. to Dean Delis                                                                                                                          |
|   |                                                                                                                                                                                                                                                        |
| 10.23  | *                  Form of Promissory Note issued by Statmon Technologies Corp. to                  Martin E.                  Jacobs                                                                                                                       |
|   |                                                                                                                                                                                                                                                        |
| 14.1   | Code                  of Ethics (6)                                                                                                                                                                                                                         |
|   |                                                                                                                                                                                                                                                        |
| 14.2   | Charter                  of Audit Committee (6)                                                                                                                                                                                                             |
|   |                                                                                                                                                                                                                                                        |
| 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.                                                                          |

----

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

|                                |       | **For                  the Year Ended March 31,** | ** ** |
|-------------------------------------|------------|---------------------------------------------------|------------|
|                                | ** ** | **2006**                                          | ** ** | **2005** |   |
|                                |       |                                              |       |   |   |
| Audit                  Fees         |       | $                                                 | 132,700    |   | $ | 102,500 |   |
| Audit                  Related Fees |       |                                              | —    |   |   | — |   |
| Tax                  Fees           |       |                                              | 10,850     |   |   | 26,450 |   |
| All                  Other Fees     |       |                                              | —    |   |   | — |   |
| Total                  Fees         |       | $                                                 | 143,550    |   | $ | 128,950 |   |

----

**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       |   | Chairman,                  CEO, President and Chief Financial Officer |   | July                  14, 2006       |
| GEOFFREY                  P. TALBOT        |   |                                                                  |   |                                 |
|                                       |   |                                                                  |   |                                 |
|                                       |   |                                                                  |   |                                 |
| /s/PETER                J. UPFOLD          |   | Vice                  Chairman, CTO, Treasurer/Secretary         |   | July                14, 2006         |
| PETER                  J. UPFOLD           |   |                                                                  |   |                                 |
|                                       |   |                                                                  |   |                                 |
|                                       |   |                                                                  |   |                                 |
| /s/LEONARD                SILVERMAN        |   | Director                                                         |   | July                  14, 2006  |
| LEONARD                  SILVERMAN, Ph. D. |   |                                                                  |   |                                 |
|                                       |   |                                                                  |   |                                 |
|                                       |   |                                                                  |   |                                 |
| /s/ROBERT                B. FIELDS         |   | Director                                                              |   | July                  14, 2006       |
| ROBERT                  B. FIELDS          |   |                                                                  |   |                                 |

----

**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, 2006                                                                                  |                          | F-2 |
|                                                                     |                                                                                                                                              |                          |   |
|                                                                     | Consolidated                  Statements of Operations for the Years Ended March 31, 2006 and                  March 31,                  2005    |                          | F-3 |
|                                                                     |                                                                                                                                              |                          |   |
|                                                                     | Consolidated                  Statements of Stockholders’ Deficiency for the Years Ended March 31, 2006                  and March 31, 2005 |                          | F-4 |
|                                                                     |                                                                                                                                              |                          |   |
|                                                                     | Consolidated                  Statements of Cash Flows for the Years Ended March 31, 2006 and                  March 31,                  2005    |                          | F-5 |
|                                                                     |                                                                                                                                              |                          |   |
| Notes                  to Consolidated Financial Statements              |                                                                                                                                              | F-6                  to F-18  |

----

----

**STATMON      TECHNOLOGIES CORP. AND SUBSIDIARIES**

**CONSOLIDATED      BALANCE SHEET**

| **ASSETS**                                                                                               |   |   |       |
|----------------------------------------------------------------------------------------------------------|--------|--------|------------|
| Current                Assets:                                                                           |   |   |       |
| Cash                                                                                                     |   | $      | 66,335     |   |
| Accounts                receivable                                                                       |   |   | 182,438    |   |
| Inventories                                                                                              |   |   | 45,389     |   |
| Prepaid                expense and other current assets                                                  |   |   | 24,583     |   |
| Total                Current Assets                                                                      |   |   | 318,745    |   |
|                                                                                                     |   |   |       |   |
| Property                and Equipment, net                                                               |   |   | 15,290     |   |
|                                                                                                     |   |   |       |   |
| Deferred                Financing Costs                                                                  |   |   | 79,742     |   |
| Other                Assets                                                                              |   |   | 10,465     |   |
| Total                Assets                                                                              |   | $      | 424,242    |   |
|                                                                                                     |   |   |       |   |
| **LIABILITIES                AND STOCKHOLDERS' DEFICIENCY**                                              |   |   |       |   |
| Current                Liabilities:                                                                      |   |   |       |   |
| Notes                payable (including $1,509,700 due to related parties), net of debt                  |   |   |       |   |
| discount                of $103,989                                                                      |   | $      | 3,062,711  |   |
| Accounts                payable                                                                          |   |   | 454,543    |   |
| Accrued                expenses                                                                          |   |   | 402,892    |   |
| Accrued                compensation                                                                      |   |   | 334,960    |   |
| Interest                payable (including $282,616 due to related parties)                              |   |   | 749,048    |   |
| Deferred                revenue                                                                          |   |   | 62,955     |   |
| Total                Liabilities                                                                         |   |   | 5,067,109  |   |
|                                                                                                     |   |   |       |   |
| 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,                              |   |   |       |   |
| 13,588,482                issued and outstanding                                                         |   |   | 135,885    |   |
| Additional                paid-in capital                                                                |   |   | 4,929,158  |   |
| Accumulated                deficit                                                                       |   |   | (9,707,910 | ) |
| Total                Stockholders' Deficiency                                                            |   |   | (4,642,867 | ) |
| Total                Liabilities and Stockholders' Deficiency                                            |   | $      | 424,242    |   |

----

**STATMON        TECHNOLOGIES CORP. AND SUBSIDIARIES**

**CONSOLIDATED        STATEMENTS OF OPERATIONS**

|                                                                                                                                                             |       | **For                  the Years Ended March 31,** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                                                                                                                                                       | ** ** | **2006**                                           | ** ** | **2005** |   |
|                                                                                                                                                             |       |                                               |       |   |   |   |   |
| Revenues                                                                                                                                                         |       | $                                                  | 1,261,879  |   | $ | 1,414,096 |   |
|                                                                                                                                                             |       |                                               |       |   |   |   |   |
| Cost                  of Sales                                                                                                                                   |       |                                               | 363,916    |   |   | 426,294 |   |
|                                                                                                                                                             |       |                                               |       |   |   |   |   |
| Gross                  Profit                                                                                                                                    |       |                                               | 897,963    |   |   | 987,802 |   |
|                                                                                                                                                             |       |                                               |       |   |   |   |   |
| Selling,                  General and Administrative Expenses                                                                                                    |       |                                               | 2,315,198  |   |   | 2,215,936 |   |
|                                                                                                                                                             |       |                                               |       |   |   |   |   |
| Operating                  Loss                                                                                                                                  |       |                                               | (1,417,235 | ) |   | (1,228,134 | ) |
|                                                                                                                                                             |       |                                               |       |   |   |   |   |
| Other                  Expense:                                                                                                                                  |       |                                               |       |   |   |   |   |
| Interest                  (including $115,187 and $57,015 to related parties for the years                  ending                  2006 and 2005, respectively) |       |                                               | 372,466    |   |   | 241,000 |   |
| Common                  stock and warrants issued in association with debt                                                                                       |       |                                               | 619,479    |   |   | 859,000 |   |
| Amortization                  of debt discount                                                                                                                   |       |                                               | 516,931    |   |   | 630,091 |   |
| Amortization                  of deferred financing costs                                                                                                        |       |                                               | 111,890    |   |   | 104,172 |   |
| Total                  Other Expense                                                                                                                             |       |                                               | 1,620,766  |   |   | 1,834,263 |   |
|                                                                                                                                                             |       |                                               |       |   |   |   |   |
| NET                  LOSS                                                                                                                                        |       | $                                                  | (3,038,001 | ) | $ | (3,062,397 | ) |
|                                                                                                                                                             |       |                                               |       |   |   |   |   |
| NET                  LOSS PER COMMON SHARE - Basic and Diluted                                                                                                   |       | $                                                  | (0.23      | ) | $ | (0.26 | ) |
|                                                                                                                                                             |       |                                               |       |   |   |   |   |
| Weighted                  Average Number of Common Shares Outstanding -                                                                                          |       |                                               |       |   |   |   |   |
| Basic                  and Diluted                                                                                                                               |       |                                               | 13,063,520 |   |   | 11,778,491 |   |

----

**STATMON        TECHNOLOGIES CORP. AND SUBSIDIARIES**

**CONSOLIDATED        STATEMENT OF STOCKHOLDERS’ DEFICIENCY**

|                                                                       |       | **Common                  Stock** | ** ** | **Additional****paid-in** | ** ** | **Accumulated** | ** ** | **Total****Stockholder's** | ** ** |
|----------------------------------------------------------------------------|------------|-----------------------------------|------------|---------------------------|------------|-----------------|------------|----------------------------|------------|
| ** **                                                                 | ** ** | **Shares**                        | ** ** | **Amount**                | ** ** | **capital**     | ** ** | **deficit**                | ** ** | **Deficiency** |   |
|                                                                       |       |                              |       |                      |       |            |       |                       |       |   |   |
| Balance,                  March 31, 2004                                   |       |                              | 11,717,661 |                      | $          | 117,177         |       | $                          | 2,341,252  |   | $ | (3,607,512 | ) | $ | (1,149,083 | ) |
|                                                                       |       |                              |       |                      |       |            |       |                       |       |   |   |   |   |   |   |   |
| Issuance                  of debt related penalty shares              |       |                              | 300,000    |                      |       | 3,000           |       |                       | 263,600    |   |   |   |   |   | 266,600 |   |
| Issuance                  of shares and warrants related to new debt  |       |                              | 765,000    |                      |       | 7,650           |       |                       | 435,650    |   |   |   |   |   | 443,300 |   |
| Issuance                  of debt related penalty warrants            |       |                              |       |                      |       |            |       |                       | 538,734    |   |   |   |   |   | 538,734 |   |
| Shares                  cancelled - litigation settlement             |       |                              | (1,120,000 | )                         |       | (11,200         | )          |                       | 11,200     |   |   |   |   |   | — |   |
| Shares                  issued - litigation settlement                |       |                              | 373,396    |                      |       | 3,734           |       |                       | (3,734     | ) |   |   |   |   | — |   |
| Issuance                  of debt related warrants                    |       |                              |       |                      |       |            |       |                       | 53,666     |   |   |   |   |   | 53,666 |   |
| Issuance                  of shares for services                      |       |                              | 400,000    |                      |       | 4,000           |       |                       | 256,000    |   |   |   |   |   | 260,000 |   |
|                                                                       |       |                              |       |                      |       |            |       |                       |       |   |   |   |   |   |   |   |
| Net                  Loss                                             |       |                              |       |                      |       |            |       |                       |       |   |   | (3,062,397 | ) |   | (3,062,397 | ) |
|                                                                       |       |                              |       |                      |       |            |       |                       |       |   |   |   |   |   |   |   |
| 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 | ) |

----

**STATMON      TECHNOLOGIES CORP. AND SUBSIDIARIES**

**CONSOLIDATED      STATEMENTS OF CASH FLOWS**

|                                                                           |       | **For                the Years Ended March 31,  ** | ** **    |
|--------------------------------------------------------------------------------|------------|--------------------------------------------------------------|---------------|
| ** **                                                                     | ** ** | **2006**                                                     | ** **    | **2005** |   |
| CASH                FLOWS FROM OPERATING ACTIVITIES:                           |       |                                                         |          |   |   |   |   |
| Net                loss                                                        |       | $                                                            | (3,038,001    | ) | $ | (3,062,397 | ) |
| Adjustments                to reconcile net loss to net cash                   |       |                                                         |          |   |   |   |   |
| used                in operating activities:                                   |       |                                                         |          |   |   |   |   |
| Depreciation                and amortization                              |       |                                                         | 16,801        |   |   | 13,865 |   |
| Common                stock and warrants issued in association with debt  |       |                                                         | 619,479       |   |   | 859,000 |   |
| Amortization                of debt discount                              |       |                                                         | 516,931       |   |   | 630,091 |   |
| Amortization                of deferred financing costs                   |       |                                                         | 111,890       |   |   | 104,172 |   |
| Non-cash                stock based compensation charge                   |       |                                                         |          |   |   | 260,000 |   |
| Changes                in operating assets and liabilities:               |       |                                                         |          |   |   |   |   |
|  Accounts                receivable                                       |       |                                                         | (51,255       | ) |   | 649,648 |   |
|  Inventories                                                              |       |                                                         | 23,133        |   |   | (68,522 | ) |
|  Prepaid                expense and other current assets                  |       |                                                         | 1,402         |   |   | 79,624 |   |
|  Other                assets                                              |       |                                                         | (3,150        | ) |   | (850 | ) |
|  Accounts                payable                                          |       |                                                         | 49,115        |   |   | (38,379 | ) |
|  Accrued                expenses                                          |       |                                                         | 175,965       |   |   | 50,035 |   |
|  Accrued                compensation                                      |       |                                                         | 157,474       |   |   | (9,335 | ) |
|  Interest                payable                                          |       |                                                         | 369,139       |   |   | 225,350 |   |
|  Deferred                revenue                                          |       |                                                         | 18,484        |   |   | (90,848 | ) |
| NET                CASH USED IN OPERATING ACTIVITIES                           |       |                                                         | (1,032,593    | ) |   | (398,546 | ) |
|                                                                           |       |                                                         |          |   |   |   |   |
| CASH                FLOWS USED IN INVESTING ACTIVITIES:                        |       |                                                         |          |   |   |   |   |
| Purchase                of property and equipment                              |       |                                                         | (1,184        | ) |   | (22,007 | ) |
|                                                                           |       |                                                         |          |   |   |   |   |
| CASH                FLOWS FROM FINANCING ACTIVITIES*:*                         |       |                                                         |          |   |   |   |   |
| Proceeds                from notes payable                                     |       |                                                         | 1,024,700     |   |   | 765,000 |   |
| Repayment                of notes payable                                      |       |                                                         | (50,000       | ) |   | (245,000 | ) |
| Deferred                financing costs                                        |       |                                                         | (66,562       | ) |   | — |   |
| NET                CASH PROVIDED BY FINANCING ACTIVITIES                       |       |                                                         | 908,138  |   |   | 520,000 |   |
|                                                                           |       |                                                         |          |   |   |   |   |
| NET                (DECREASE) INCREASE IN CASH                                 |       |                                                         | (125,639      | ) |   | 99,447 |   |
|                                                                           |       |                                                         |          |   |   |   |   |
| CASH,                BEGINNING OF YEAR                                         |       |                                                         | 191,974       |   |   | 92,527 |   |
|                                                                           |       |                                                         |          |   |   |   |   |
| CASH,                END OF YEAR                                               |       | $                                                            | 66,335        |   | $ | 191,974 |   |
|                                                                           |       |                                                         |          |   |   |   |   |
| SUPPLEMENTAL                DISCLOSURE OF CASH FLOW INFORMATION:               |       |                                                         |          |   |   |   |   |
| Cash                paid for:                                                  |       |                                                         |          |   |   |   |   |
| Interest                                                                  |       | $                                                            | 3,327         |   | $ | 27,204 |   |
|                                                                           |       |                                                         |          |   |   |   |   |
| Income                taxes                                               |       | $                                                            | 917           |   | $ | — |   |

----

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

**Company      Overview**

**Going      Concern**

**Management      Plans**

----

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

| **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 is 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                $553,000 in fiscal 2006 and $381,000 in fiscal                2005. |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | *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 7,057,298 and                4,596,150                shares of common stock as of March 31, 2006 and 2005,                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. |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

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

|   | *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. |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | *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, 2006, 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. |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  |   | Product                revenues from the sale of software licenses are recognized when evidence                of a license agreement exists, the fees are fixed and determinable,                collectibility is probable and vendor specific objective evidence                exists                to allocate the total fee to elements of the arrangements. The Company's                software license agreement entitles licensees limited rights for                upgrades                and enhancements for the version they have                licensed. |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  |   | Deferred                  revenue represents revenue billed for products and or/services                  not yet                  shipped or rendered. |
|--|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | *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". |
|--|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  |   | The                  Company has elected to continue to follow the accounting guidance                  provided                  by APB 25, as permitted for stock-based compensation relative to                  the                  Company employees. Stock and options granted to other parties in                  connection with providing goods and services to the Company are                  accounted                  for under the fair value method as prescribed by SFAS No. 123. |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| **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                -                On                September 28, 2005, the FASB ratified the following consensus reached                in                the Emerging Issues Task Force ("EITF") Issue 05-8 ("Income Tax                Consequences of Issuing Convertible Debt with a Beneficial Conversion                Feature"): a) The issuance of convertible debt with a beneficial                conversion feature results in a basis difference in applying SFAS                No. 109,                Accounting for Income Taxes. Recognition of such a feature effectively                creates a debt instrument and a separate equity instrument for book                purposes, whereas the convertible debt is treated entirely as a debt                instrument for income tax purposes. b) The resulting basis difference                should be deemed a temporary difference because it will result in                a                taxable amount when the recorded amount of the liability is recovered                or                settled. c) Recognition of deferred taxes for the temporary difference                should be reported as an adjustment to additional paid-in capital.                This                consensus is effective in the first interim or annual reporting period                commencing after December 15, 2005, with early application permitted. |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  |   | The                EITF reached a tentative conclusion on EITF Issue No. 05-1, "Accounting                for the Conversion of an Instrument That Becomes Convertible upon                the                Issuer's Exercise of a Call Option," that no gain or loss should                be                recognized upon the conversion of an instrument that becomes convertible                as a result of an issuer's exercise of a call option pursuant to                the                original terms of the instrument. The application of this pronouncement                is                not expected to have an impact on the Company's consolidated financial                statements. |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

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

----

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

| **3.** | **PROPERTY                AND EQUIPMENT** |
|--------|-------------------------------------------|

| Computer                  Equipment             |   | $      | 39,159 |   |
|-------------------------------------------------|--------|--------|--------|--------|
| Software                                        |   |   | 11,608 |   |
| Office                  Equipment               |   |   | 25,558 |   |
|                                            |   |   | 76,325 |   |
|                                            |   |   |   |   |
| Less:                  accumulated depreciation |   |   | 61,035 |   |
|                                            |   |   |   |   |
|                                            |   | $      | 15,290 |   |

----

| **4.** | **NOTES                  PAYABLE** |
|--------|------------------------------------|

|                                                            |   |   |   | **2006** |   |
|-----------------------------------------------------------------|--------|--------|--------|----------|--------|
|                                                            |   |   |   |     |   |
| Senior                  Notes Payable - Thieme Consulting, Inc. |   |   |   |     |   |   |   |
| -                  related party                                |   |   | [a     | ]        | $      | 250,000 |   |
| Senior                  Subordinated Notes Payable - Delis      |   |   |   |     |   |   |   |
| -                  related party                                |   |   | [b     | ]        |   | 1,015,000 |   |
| Senior                  Subordinated Notes Payable              |   |   | [c     | ]        |   | 365,000 |   |
| Notes                  Payable - various(Including $244,700     |   |   |   |     |   |   |   |
| from                  related parties)                          |   |   | [d     | ]        |   | 1,536,700 |   |
|                                                            |   |   |   |     |   |   |   |
|                                                            |   |   |   |     |   | 3,166,700 |   |
|                                                            |   |   |   |     |   |   |   |
| Less:                  Debt Discount                            |   |   |   |     |   | (103,989 | ) |
|                                                            |   |   |   |     |   |   |   |
|                                                            |   |   |   |     | $      | 3,062,711 |   |

----

| **4.** | **NOTES                PAYABLE, continued** |
|--------|---------------------------------------------|

----

| **5.** | **EQUITY                TRANSACTIONS** |
|--------|----------------------------------------|

|                                                                    |   | **Shares** |      | **Weighted                  Average Exercise Price** |   | **Exercisable** |   |
|-------------------------------------------------------------------------|--------|------------|-----------|------------------------------------------------------|--------|-----------------|--------|
|                                                                    |   |       |      |                                                 |   |            |   |
| Warrants                  outstanding and exercisable at March 31, 2004 |   |       | 2,882,106 |                                                 | $      | 1.43            |   |   | 2,882,106 |   |
|                                                                    |   |       |      |                                                 |   |            |   |   |   |   |
| Granted                                                                 |   |       | 1,741,886 |                                                 |   | 1.20            |   |   |   |   |
| Canceled                                                                |   |       | —   |                                                 |   | —         |   |   |   |   |
| Exercised                                                               |   |       | —   |                                                 |   | —         |   |   |   |   |
| 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 |   |

|                                   |   |                                    |      |                                                                      |   |                                                 |   |                                    |   |
|----------------------------------------|--------|-----------------------------------------|-----------|---------------------------------------------------------------------------|--------|------------------------------------------------------|--------|-----------------------------------------|--------|
| **Range                  of Exercise** |   | **Number                  Outstanding** |      | **Weighted                  Average Remaining Years of Contractual Life** |   | **Weighted                  Average Exercise Price** |   | **Number                  Exercisable** |   |
| $1.00                                  |   |                                    | 5,077,548 |                                                                      |   | 1.75                                                 |   | $                                       | 1.00   |   |   | 5,077,548 |   |
| $1.25                  - 2.00          |   |                                    | 1,729,750 |                                                                      |   | 1.95                                                 |   |                                    | 1.57   |   |   | 1,729,750 |   |
| $5.00                                  |   |                                    | 250,000   |                                                                      |   | 1.13                                                 |   |                                    | 5.00   |   |   | 250,000 |   |
| $1.00                  - 5.00          |   |                                    | 7,057,298 |                                                                      |   | 1.78                                                 |   | $                                       | 1.28   |   |   | 7,057,298 |   |

----

| **5.** | **EQUITY                TRANSACTIONS,                continued** |
|--------|------------------------------------------------------------------|

| **6.** | **INCOME                TAXES** |
|--------|---------------------------------|

|                                                             |   | For                  the Years EndedMarch                  31, |   |
|------------------------------------------------------------------|--------|----------------------------------------------------------------|--------|
|                                                             |   | 2006                                                           |   | 2005 |   |
|                                                             |   |                                                           |   |   |   |
| 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** |
|--------|--------------------------------------------------|

|   | [a] | Leases                -                The Company leases its office facilities and equipment under                non-cancelable lease arrangements. Rent expense was $145,082 and                $102,653                for the years ended March 31, 2006 and 2005, respectively. Future                annual                minimum lease payments under noncancellable operating leases for                the                fiscal years ending March 31 are as follows: |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2007   |   | 138,817 |
|--------|--------|---------|
| 2008   |   | 11,973  |
|   | $      | 150,790 |

----

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

|  | [b] | Legal                Proceedings                -                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 reoccurring 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 includes 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 has retained litigation                counsel on a 1/3 contingency basis of the net benefit to the Company.                The                Company will advance and pay the Court filing and third party costs                and                expenses of the litigation. |
|--|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | [c] | Employment                Agreements                -                On September 16, 2000, Geoffrey P. Talbot ("Talbot") and Peter J.                Upfold                ("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 $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,                the Company has accrued $34,468 and $45,893 of compensation for each                period, respectively. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

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

| **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)                $25,000 principal amount promissory note bearing interest at 10%                per annum                and due 365 days from the date of issuance, (ii) 30,000 shares of                common                stock and (iii) warrants to purchase 25,000 shares of common stock                exercisable at a price of $1.00 per share for a term of five                years. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | (i)                $100,000 principal amount promissory note bearing interest at 10%                per                annum and due 60 days from the date of issuance, (ii) 100,000 shares                of                common stock and (iii) warrants to purchase 340,000 shares of common                stock                exercisable at a price of $1.25 per share for a term of five years.                This                note matures on July 31, 2006 after which interest will increase                to 15%                per annum until the note is repaid. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | (i)                $10,000 principal amount promissory note bearing interest at 10%                per annum                and due 180 days from the date of issuance, (ii) 10,000 shares of                common                stock and (iii) warrants to purchase 10,000 shares of common stock                exercisable at a price of $1.25 per share for a term of three years.                This                note matures on December 3, 2006 after which interest will increase                to 15%                per annum until the note is repaid. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | (i)                $100,000 principal amount promissory note bearing interest at 10%                per                annum and due 60 days from the date of issuance, (ii) 100,000 shares                of                common stock and (iii) warrants to purchase 100,000 shares of common                stock                exercisable at a price of $1.25 per share for a term of five years.                This                note matures on August 15, 2006 after which interest will increase                to 15%                per annum until the note is repaid. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | (i)                $100,000 principal amount promissory note bearing interest at 10%                per                annum and due 60 days from the date of issuance, (ii) 100,000 shares                of                common stock and (iii) warrants to purchase 100,000 shares of common                stock                exercisable at a price of $1.25 per share for a term of five years.                This                note matures on August 29, 2006 after which interest will increase                to 15%                per annum until the note is repaid. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----