**UNITED      STATES SECURITIES AND EXCHANGE COMMISSION**

**Washington,      D.C.  20549**

**Form      10-KSB**

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

**SECURITIES      EXCHANGE ACT OF 1934**

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

**SECURITIES      EXCHANGE ACT OF 1934**

**STATMON      TECHNOLOGIES CORP.**

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

**3000      Lakeside Drive, Suite 300 South, Bannockburn, IL 60015**

**(847)      604-5366**

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

----

**FORM      10-KSB**

**STATMON      TECHNOLOGIES CORP.**

**March      31, 2008**

**TABLE      OF CONTENTS**

|                                                                                                                                                                                                       |   | Page   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|
|                                                                                                                                                                                                       |   |   |
| 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 Security Holders.                                                                                                                                |   | 21     |
|                                                                                                                                                                                                       |   |   |
| PART                II                                                                                                                                                                                     |
|                                                                                                                                                                                                       |   |   |
| ITEM                5. Market for Common Equity and Related Stockholder Matters and Small                Business Issuer Purchases of Equity Securities.                                                   |   | 21     |
|                                                                                                                                                                                                       |   |   |
| ITEM                6. Management’s Discussion and Analysis or Plan of                Operation.                                                                                                     |   | 26     |
|                                                                                                                                                                                                       |   |   |
| ITEM                7. Financial Statements.                                                                                                                                                               |   | 32     |
|                                                                                                                                                                                                       |   |   |
| ITEM                8. Changes In and Disagreements With Accountants on Accounting                and Financial                Disclosure.                                                            |   | 32     |
|                                                                                                                                                                                                       |   |   |
| ITEM                8A(T). Controls and Procedures.                                                                                                                                                        |   | 32     |
|                                                                                                                                                                                                       |   |   |
| ITEM                8B. Other Information.                                                                                                                                                                 |   | 33     |
|                                                                                                                                                                                                       |   |   |
| PART                III                                                                                                                                                                                    |
|                                                                                                                                                                                                       |   |   |
| ITEM                9. Directors, Executive Officers, Promoters, Control Persons and                Corporate                Governance; Compliance With Section 16(a) of the Exchange                Act. |   | 34     |
|                                                                                                                                                                                                       |   |   |
| ITEM                10. Executive Compensation.                                                                                                                                                            |   | 37     |
|                                                                                                                                                                                                       |   |   |
| ITEM                11. Security Ownership of Certain Beneficial Owners and                Management                and Related Stockholder Matters.                                                      |   | 39     |
|                                                                                                                                                                                                       |   |   |
| ITEM                12. Certain Relationships and Related Transactions, and Director                Independence.                                                                                          |   | 39     |
|                                                                                                                                                                                                       |   |   |
| ITEM                13. Exhibits.                                                                                                                                                                          |   | 42     |
|                                                                                                                                                                                                       |   |   |
| ITEM                14. Principal Accountant Fees and Services.                                                                                                                                            |   | 45     |
|                                                                                                                                                                                                       |   |   |
| Signature                Page                                                                                                                                                                              |   | 46     |

----

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

**Company      Overview**

----

----

**Products      and Services**

----

**Software**

***Axess***

***rOVIng***

----

***Accurate***

**Hardware**

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

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

**Key      Features of Our Products**

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

|   |   |   |
|--------|--------|--------|
|   | · | Minimize                field engineering travel requirements; |
|--------|--------|----------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

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

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

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

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

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

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

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

----

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

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

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

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

**Customers**

**Fiscal      2009 Goals**

|   | · | Continue                to develop the Qualcomm/MediaFLO relationship, including working                with                Telecom carriers, with emphasis on those adopting the MediaFLO Mobile                TV                platform, both domestically and through international partners, carrier                user groups and individual                operators; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Focus                directly on all operators of Telecom wireless networks and communications                infrastructure providers for sales of products and                services; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Collaborate                aggressively with Nautel Navigation and develop our exposure in the                aviation navigation market including the FAA and all other air and                sea                navigational aid and beacon market opportunities; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Aggressively                promote our software products, “Axess”, “rOVIng” and “Accurate” into the                existing and expanding sales and distribution channels, including                TAIC,                InfraCell, Harris Broadcast, Pixelmetrix, Eddystone - Sound Broadcast                Services, Ltd., and Nautel; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Focus                on high profile product positioning and increasing our public relations                exposure in the trade live television, magazine, internet and all                identified infrastructure and technology                markets; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Implement                an aggressive investor relations, internet and public market making                program to educate the financial markets about us and to generate                liquidity in our OTC Bulletin Board listed common                stock; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

----

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

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

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

**Infrastructure      and Network Management**

**Radio      and Television Broadcasting Industry**

----

**Software      Industry**

**Business      Strategy - Potential New Vertical Markets**

----

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

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

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

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

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

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

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

**Competition**

----

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

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

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

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

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

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

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

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

**Business      Development**

----

**Customer      Support and Service**

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

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

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

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

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

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

**Research      and Development**

**Sources      and Availability of Materials**

**Patents,      Trademarks, Copyrights and Licenses**

----

**Licenses      and Warranties**

**Our      Employees**

**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 wireless communications, broadcast                and                other markets we intend to pursue, our ability to implement our growth                strategy, especially our sales and marketing efforts, and the introduction                of new devices and computer network and control technologies by us                and our                competitors. |
|------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                             |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| *We                Have a History of Net Losses and May Never Achieve or Maintain                Profitability.* |   | We                have a history of incurring losses from operations. At March 31,                2008, we                had an accumulated deficit of approximately $19,897,000. 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.                                                                                                                                                                                                                                                                                                                                             |
|                                                                                                             |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| *Our                Auditors Have Expressed a Going Concern Opinion.*                                            |   | Primarily                as a result of our recurring losses and our lack of liquidity, we                have                received a report from our independent auditors that includes an                explanatory paragraph describing their substantial doubt about our                ability                to continue as a going concern.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                             |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| *Concentration                of Our Business in One Customer*                                                   |   | In                fiscal 2007 and 2008, MediaFLO accounted for approximately 69% and                54% of                our revenues, respectively. We expect the volume of our revenues                derived                from MediaFLO and its affiliates to grow in fiscal 2009 and the percentage                to continue to decrease as overall revenues and non-MediaFLO revenues                increase. A loss of all or a substantial portion of this business                would                have a material adverse effect on our business, results of operations                and                financial condition.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |

----

| *Future                Capital Needs, Uncertainty of Future Additional                Financing.*                                                                                                                   |   | We                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 continue as a going concern, let alone to fund our expansion                into 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. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| *Substantially                all of our assets are pledged to secure our                indebtedness.*                                                                                                             |   | In                connection with the March 2008 private placement, we executed a Security                Agreement pursuant to which we granted a security interest and lien                on all                of our assets. Since these assets represent substantially all of                our                assets, we will not have access to additional secured lending until                this                indebtedness is repaid, which may require us to raise additional                funds                through unsecured debt and equity offerings. Default under our debt                obligations would entitle our lenders to foreclose on our assets.                The                inability to raise additional working capital or the foreclosure                of our                assets could have a material adverse effect on our financial condition                and                results of operations. The lien will terminate when the note and                all                amounts due in connection with the Debentures have been paid, discharged                or satisfied in full.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|                                                                                                                                                                                                                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| *Undetected                Errors or Failures in Our Software Could Result in Loss or Delay                in the                Market Acceptance of Our Product, Lost Sales or Costly                Litigation.* |   | Because                our software products are complex, they may contain errors that can                be                detected at any point in a product's lifecycle. While we continually                test                our products for errors, errors in our products may be found in the                future                even after our products have been commercially introduced. Detection                of                any significant errors may result in, among other things, loss of,                or                delay in, market acceptance and sales of our products, diversion                of                development resources, injury to our reputation, increased service                and                warranty costs or costly litigation. Additionally, because our products                support or rely on other systems and applications, any software errors                or                bugs in these systems or applications may result in errors in the                performance of our software, and it may be difficult or impossible                to                determine where the error resides. Product errors could harm our                business                and have a material adverse effect on our business, results of operation                and financial condition.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |

----

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

----

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

----

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

----

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

**Risks      Related To The Industry**

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

----

**Risks      Related To Our Securities**

| *Our                Stock Price is Likely to be Highly Volatile Because of Several Factors,                Including a Limited Public Float.* |   | The                market price of our common stock is likely to be highly volatile                because                there has been a relatively thin trading market for our stock, which                causes trades of small blocks of stock to have a significant impact                on our                stock price. Our common stock may not be able to be resold following                periods of volatility because of the market's adverse reaction to                volatility. |
|-----------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |  Other              factors that could cause such volatility may include, among other              things: |
|--------|--------|-----------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                            |   |
|   |   | ·                                                                                                          | Actual                or anticipated fluctuations in our operating results; |
|   |   |                                                                                                            |   |
|   |   | ·                                                                                                          | Announcements                concerning our business or those of our competitors or                customers; |
|   |   |                                                                                                            |   |
|   |   | ·                                                                                                          | Changes                in the volume of our business with MediaFLO and its                affiliates; |
|   |   |                                                                                                            |   |
|   |   | ·                                                                                                          | Changes                in financial estimates by securities analysts or our failure to perform                as                anticipated by the analysts; |
|   |   |                                                                                                            |   |
|   |   | ·                                                                                                          | Announcements                of technological innovations; |
|   |   |                                                                                                            |   |
|   |   | ·                                                                                                          | Conditions                or trends in the industry; |
|   |   |                                                                                                            |   |
|   |   | ·                                                                                                          | Litigation; |
|   |   |                                                                                                            |   |
|   |   | ·                                                                                                          | Patents                or proprietary rights; |
|   |   |                                                                                                            |   |
|   |   | ·                                                                                                          | Departure                of key personnel; |
|   |   |                                                                                                            |   |
|   |   | ·                                                                                                          | Failure                to hire key personnel; and |
|   |   |                                                                                                            |   |
|   |   | ·                                                                                                          | General                market conditions. |

| *Because                Our Common Stock is Considered a Penny Stock, Any Investment in Our                Common                Stock is Considered to be a High-Risk Investment and is Subject to                Restrictions on Marketability.* |   | Our                common stock is currently traded on the OTC Bulletin Board (ticker                symbol                “STCA.OB”) and is considered a “penny stock”. The                SEC has adopted rules that regulate broker-dealer practices in connection                with transactions in "penny stocks". Penny stocks generally are equity                securities with a price of less than $5.00 (other than securities                registered on certain national securities exchanges or quoted on                the                NASDAQ system, provided that current price and volume information                with                respect to transactions in such securities is provided by the exchange                or                system). The penny stock rules require a broker-dealer, prior to                a                transaction in a penny stock not otherwise exempt from those rules,                to                deliver a standardized risk disclosure document prepared by the SEC                that                specifies information about penny stocks and the nature and significance                of risks of the penny stock market. The broker-dealer also must provide                the customer with bid and offer quotations for the penny stock, the                compensation of the broker-dealer and any salesperson in the transaction,                and monthly account statements indicating the market value of each                penny                stock held in the customer's account. In addition, the penny stock                rules                require that, prior to a transaction in a penny stock not otherwise                exempt                from those rules, the broker-dealer must make a special written                determination that the penny stock is a suitable investment for the                purchaser and receive the purchaser's written agreement to the                transaction. These disclosure requirements may have the effect of                reducing                the trading activity in the secondary market for our common                stock. |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                              |   | 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 of our                common                stock to be sold in the secondary market.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|---------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                              |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| *Control                by Certain Stockholders.* |   | Our                directors and executive officers and affiliates beneficially own                approximately 54% of our outstanding shares of common stock and                approximately 45% of all securities on a fully-diluted basis. If                these                stockholders act as a group, they will have effective control of                all                matters requiring stockholder approval, including the election of                Directors and approval of significant corporate transactions. Such                control                may have the effect of delaying or preventing a change in control                of us,                impeding a merger, consolidation, takeover or other business combination                involving us or discourage a potential acquirer from making a tender                offer                or otherwise attempting to obtain control of us, which could have                a                material adverse effect on the market price of our common                stock. |
|                                              |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| *Absence                of Dividends.*            |   | We                do not anticipate paying any cash dividends in the foreseeable future.                See                "Item 5 - Market for the Common Equity and Related Stockholder                Matters."                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |

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

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

| [a] | On                May 17, 2007 an action was filed in Los Angeles Superior Court for                breach                of contract and similar causes of action by the Epstein Family Trust                against the Company in relation to two outstanding promissory notes                issued                by the Company totaling $75,000 ($25,000 and $50,000) plus accrued                interest and seeking attorney’s fees and costs in addition to the                principal and interest. These notes were guaranteed by Mr. Geoffrey                Talbot, the Company's CEO, for up to $25,000, and therefore Mr. Talbot                was                joined in the legal action as a third-party defendant. The case number                is                BC 371 276. The parties have reached a conditional settlement agreement                where the plaintiff has agreed to convert all principal and interest                into                shares of common stock at a price of $1.00 per share, provided the                Company                completes both tranches of the Convertible Debenture and warrant                financing                in a timely manner. The Company is in receipt of the executed conversion                subscription documents and has issued the shares of common stock                related                to this conversion. Until such closing, the litigation has been put                on                hold. In the event the litigation is continued it will be defended                vigorously. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| [b] | On                December 20, 2007, a complaint was filed in the United States District                Court for the District of Colorado alleging additional commissions                are due                to a third party introducer. The plaintiff is demanding payment for                additional commission of $143,000 for the period ended September                30, 2007                and additional commissions through December 31, 2007. The Company                has                settled the matter and has accrued a payment due on or before July                7, 2008                of $89,683 as final settlement of all past and future amounts due                to said                party. As of the date of this filing, all amounts related to this                settlement have been paid and the matter is considered                closed. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| [c] | Other –                The Company has reported to the IRS the taxable income of the Chief                Executive Officer and Chief Technology Officer to date using forms                1099                and 1096. Since 2001, the Company has accrued approximately $575,000                as                accrued compensation which was calculated as the difference between                their                gross and net compensation for the period. The Company plans to pay                this                accrued compensation of approximately $575,000 to the Chief Executive                Officer and Chief Technology Officer to satisfy the tax obligations                related to the income reported. Such payroll tax reporting classification                is subject to audit by the Internal Revenue Service and other state                and                local taxing authorities, which, upon review, could determine that                such                individuals’ compensation should have been reported on the basis that such                individuals are employees. Accordingly, depending on such potential                audit,                the Company may be subject to additional payroll related liabilities                the                amount of which, if any, is not determinable at this                time. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**ITEM      4.  **
**SUBMISSION      OF MATTERS TO A VOTE OF SECURITY HOLDERS.**

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

**Market      Prices**

*www.finance.yahoo.com*

|                                            |   | High Bid |   | Low Bid |   |
|-------------------------------------------------|--------|---------------|--------|--------------|--------|
| Fiscal                Year Ended March 31, 2008 |   |          |   |         |   |   |   |
| 4th                Quarter                      |   |          | 1.15   |         |   | 0.86 |   |
| 3rd                Quarter                      |   |          | 1.16   |         |   | 0.91 |   |
| 2nd                Quarter                      |   |          | 1.59   |         |   | 0.79 |   |
| 1st                Quarter                      |   |          | 1.75   |         |   | 0.92 |   |
|                                            |   |          |   |         |   |   |   |
| Fiscal                Year Ended March 31, 2007 |   |          |   |         |   |   |   |
| 4th                Quarter                      |   |          | 1.14   |         |   | 0.65 |   |
| 3rd                Quarter                      |   |          | 0.91   |         |   | 0.62 |   |
| 2nd                Quarter                      |   |          | 0.90   |         |   | 0.43 |   |
| 1st                Quarter                      |   |          | 0.60   |         |   | 0.40 |   |

----

**Dividends**

**Equity      Compensation Plan Information**

**Recent      Issuances of Unregistered Securities **

| · | In                April 2007, we issued 30,000 shares of common stock and warrants                to                purchase 30,000 shares of common stock exercisable at a price of                $1.00 per                share for a term of five years in connection with a $50,000 principal                amount promissory note bearing interest at 10% per annum and due                90 days                from the date of issuance. This note matured on July 2, 2007. Per                the                default terms of the note, we issued an additional 30,000 shares                of common                stock and warrants to purchase 30,000 shares of its common stock                at an                exercise price of $1.00 per share with a term of five years as                consideration for an extension of the due date of the note to July                2,                2008. We paid a 10% cash commission to a placement agent and issued                warrants to purchase 5,000 shares of common stock exercisable at                a price                of $1.00 per share for a term of five years related to this sale.                This                Note was subsequently converted to equity on February 20, 2008 per                the                terms of the Note Exchange described                below. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | In                April 2007, we issued 15,000 shares of common stock and warrants                to                purchase 15,000 shares of common stock exercisable at a price of                $1.00 per                share for a term of five years in connection with a $25,000 principal                amount promissory note bearing interest at 10% per annum and due                90 days                from the date of issuance. This note matured on July 8, 2007. Per                the                default terms of the note, we issued an additional 15,000 shares                of common                stock and warrants to purchase 15,000 shares of its common stock                at an                exercise price of $1.00 per share with a term of five years as                consideration for an extension of the due date of the note to July                8,                2008. We paid a 10% cash commission to a placement agent and issued                warrants to purchase 2,500 shares of common stock exercisable at                a price                of $1.00 per share for a term of five years related to this sale.                This                Note and the related warrants were subsequently converted to equity                on                February 20, 2008 per the terms of the Note and Warrant Exchanges                described below. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | In                April 2007, we issued 20,000 shares of common stock and (iii) warrants                to                purchase 20,000 shares of common stock exercisable at a price of                $1.25 per                share for a term of five years in connection with a $20,000 principal                amount promissory note bearing interest at 10% per annum and due                one year                from the date of issuance. This note was to mature on April 16, 2008                after                which interest was to increase to 15% per annum until the note was                repaid.                This Note and the related warrants were subsequently converted to                equity                on February 20, 2008 per the terms of the Note and Warrant Exchanges                described below. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| · | In                April 2007, we issued 150,000 shares of common stock and warrants                to                purchase 150,000 shares of common stock exercisable at a price of                $1.00                per share for a term of five years in connection with a $200,000                principal                amount secured promissory note bearing interest at 10% per annum                and due                180 days from the date of issuance. This note matured on October                24, 2007.                Per the default terms of the note, if we do not repay the note by                the                maturity date, we will issue an additional 100,000 shares of common                stock                and warrants to purchase 100,000 shares of its common stock at an                exercise                price of $1.00 per share with a term of five years as consideration                for an                extension of the due date of the note to October 24, 2008. We paid                a 10%                cash commission to a placement agent and issued warrants to purchase                20,000 shares of common stock exercisable at a price of $1.00 per                share                for a term of five years related to this sale. We are currently                negotiating a short term extension which would supersede such extension                agreement. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | In                May 2007, we issued 30,000 shares of common stock and warrants to                purchase                30,000 shares of common stock exercisable at a price of $1.50 per                share                for a term of five years in connection with a $50,000 principal amount                promissory note bearing interest at 10% per annum and due 180 days                from                the date of issuance. This note matured on November 19, 2007. Per                the                default terms of the note, we have issued an additional 30,000 shares                of                common stock and warrants to purchase 30,000 shares of its common                stock at                an exercise price of $1.50 per share with a term of five years as                consideration for an extension of the due date of the note to November                19,                2008. We paid a 10% cash commission to a placement agent and issued                warrants to purchase 5,000 shares of common stock exercisable at                a price                of $1.00 per share for a term of five years related to this sale.                This                Note was subsequently converted to equity on February 20, 2008 per                the                terms of the Note Exchange described                below. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | In                May 2007, we issued 15,000 shares of common stock and warrants to                purchase                15,000 shares of common stock exercisable at a price of $1.50 per                share                for a term of five years in connection with a $25,000 principal amount                promissory note bearing interest at 10% per annum and due 180 days                from                the date of issuance. This note matured on November 26, 2007. Per                the                default terms of the note, we have issued an additional 15,000 shares                of                common stock and warrants to purchase 15,000 shares of its common                stock at                an exercise price of $1.50 per share with a term of five years as                consideration for an extension of the due date of the note to November                26,                2008. We paid a 10% cash commission to a placement agent and issued                warrants to purchase 2,500 shares of common stock exercisable at                a price                of $1.00 per share for a term of five years related to this sale.                This                Note and the related warrants were subsequently converted to equity                on                February 20, 2008 per the terms of the Note and Warrant Exchanges                described below. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | In                June 2007, we issued 10,200 shares of common stock and warrants to                purchase 10,200 shares of common stock exercisable at a price of                $1.50 per                share for a term of five years in connection with a $17,000 principal                amount promissory note bearing interest at 10% per annum and due                180 days                from the date of issuance. This note matured on December 2, 2007.                Per the                default terms of the note, we have recorded an additional 10,200                shares of                common stock and warrants to purchase 10,200 shares of its common                stock at                an exercise price of $1.50 per share with a term of five years as                consideration for an extension of the due date of the note to December                2,                2008. We paid a 10% cash commission to a placement agent and issued                warrants to purchase 1,700 shares of common stock exercisable at                a price                of $1.00 per share for a term of five years related to this sale.                This                Note and the related warrants were subsequently converted to equity                on                February 20, 2008 per the terms of the Note and Warrant Exchanges                described below. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | In                June 2007, we issued 6,000 shares of common stock and warrants to                purchase                6,000 shares of common stock exercisable at a price of $1.50 per                share for                a term of five years in connection with a $10,000 principal amount                promissory note bearing interest at 10% per annum and due 180 days                from                the date of issuance. This note matured on December 19, 2007. Per                the                default terms of the note, we have issued an additional 6,000 shares                of                common stock and warrants to purchase 6,000 shares of its common                stock at                an exercise price of $1.50 per share with a term of five years as                consideration for an extension of the due date of the note to December                19,                2008. We paid a 10% cash commission to a placement agent and issued                warrants to purchase 1,000 shares of common stock exercisable at                a price                of $1.00 per share for a term of five years related to this sale.                This                Note and the related warrants were subsequently converted to equity                on                February 20, 2008 per the terms of the Note and Warrant Exchanges                described below. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| · | In                October 2007, we issued 150,000 shares of common stock and warrants                to                purchase 150,000 shares of common stock exercisable at a price of                $1.25                per share for a term of five years in connection with a $150,000                principal                amount promissory note bearing interest at 15% per annum and due                365 days                from the date of issuance. This note matures on October 4, 2008.                The terms                of this note require the payment of monthly interest in advance.                We                reimbursed the note holder for fees of $7,500 related to this                note. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | In                October 2007, we issued 25,000 shares of common stock and warrants                to                purchase 25,000 shares of common stock exercisable at a price of                $1.20 per                share for a term of five years in connection with a $25,000 principal                amount promissory note bearing interest at 10% per annum and due                365 days                from the date of issuance. This note matures on October 22,                2008. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | On                March 5, 2008 (the “Closing Date”), we issued and sold debentures in a                total principal amount of $1,500,000, due March 5, 2010 (the “Debentures”)                to accredited investors in a private placement pursuant to a securities                purchase agreement (the “Purchase Agreement”). The Debentures are the                first tranche of up to an aggregate of $3,000,000 of Original Issue                Discount Senior Secured Convertible Debentures (for an aggregate                cash                subscription amount of up to $2,500,000). The Debentures have an                effective                interest rate of approximately 10% per annum. Any additional tranches                must                close within forty-five (45) days of the Closing Date unless extended                in                writing by the parties. After deducting the expenses of the private                placement, including prepaid interest, we received net proceeds of                approximately $1,190,000. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| · | On                June 27, 2007, we issued 45,000 shares of common stock and warrants                to                purchase 45,000 shares of common stock exercisable at a price of                $1.00 per                share for a term of five years per the extension terms of a $75,000                promissory note that matured on June 27, 2007. The extended maturity                for                this was June 27, 2008. This Note was subsequently converted to equity                on                February 20, 2008 per the terms of the Note Exchange described                below. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | On                June 29, 2007, we issued 30,000 shares of common stock and warrants                to                purchase 30,000 shares of common stock exercisable at a price of                $1.00 per                share for a term of five years per the extension terms of a $50,000                promissory note that matured on June 29, 2007. The extended maturity                for                this was June 29, 2008. This Note and the related warrants were                subsequently converted to equity on February 20, 2008 per the terms                of the                Note and Warrant Exchanges described                below. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | On                August 28, 2007, we issued 100,000 shares of common stock related                to an                extension settlement of a $132,000 principal amount                note. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | On                November 30, 2007, we issued 120,000 shares of common stock per the                default terms of 8 notes that matured on November 30, 2007. These                Notes                and some of the related warrants were subsequently converted to equity                on                February 20, 2008 per the terms of the Note and Warrant Exchanges                described below. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | At                the end of the first three fiscal quarters, we issued 75,000 shares                of                common stock and at February 29, 2008 the Company issued 50,000 shares                of                common stock in connection with secured Senior Notes that were in                default                for a total of 275,000 shares of common stock for the fiscal year.                The                Note has subsequently been subordinated to new debt and replaced                with a                new long-term note with a maturity date of June 4, 2010 bearing interest                at 10% per annum. All previously accrued interest related to this                note                through February 29, 2008 has been                paid. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | During                the year ended March 31, 2008, we had issued 49,995 shares of common                stock                and warrants to purchase 49,995 shares of common stock exercisable                at a                price of $1.00 per share for a term of five years in connection with                a                $100,000 Senior Subordinated secured note that was in default. This                Note                and all the related warrants were subsequently converted to equity                on                February 20, 2008 per the terms of the Note and Warrant Exchanges                described below. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | On                February 20, 2008, we recorded the issuance of 149,525 shares of                Common                Stock to two broker/dealers related to consulting contracts for financing                services related to the Note and Warrant Exchanges described                below. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | During                the year ended March 31, 2008, we granted three-year and five-year                penalty                warrants to purchase 1,559,600 shares of common stock at $1.00 per                share                and three-year and five-year penalty warrants to purchase 1,124,365                shares                of common stock at $1.50 per share in accordance with the penalty                provisions of the various loan agreements for notes in                default. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

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

**OVERVIEW**

----

----

**Off-Balance      Sheet Arrangements**

**RESULTS      OF OPERATIONS**

**YEARS      ENDED MARCH 31, 2008 AND 2007**

***Revenues***

***Cost      of Sales***

----

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

***Other      Expense***

***Net      Loss***

**LIQUIDITY      AND CAPITAL RESOURCES**

----

----

**CRITICAL      ACCOUNTING POLICIES AND ESTIMATES**

**Accounts      Receivable - Allowance for Doubtful Accounts **

**Revenue      Recognition**

**Effects      of Recent Accounting Policies **

----

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

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

**ITEM      8A(T).**
**CONTROLS      AND PROCEDURES.**

**Evaluation      of Disclosure Controls and Procedures**

----

**Changes      in Internal Control over Financial Reporting **

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

----

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

| Name                                    |   | Age    |   | Position                                                                                                 |   | Director                and/or Officer Since                                                                                          |
|-----------------------------------------|--------|--------|--------|----------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------|
|                                    |   |   |   |                                                                                                     |   |                                                                                                                                  |
| Geoffrey                P. Talbot       |   | 60     |   | Chairman,                President, Chief Executive Officer                & Chief Financial Officer |   | Chairman,                President, Chief Executive Officer and Chief Financial Officer since                June                2002 |
|                                    |   |   |   |                                                                                                     |   |                                                                                                                                  |
| Peter                J. Upfold          |   | 45     |   | Chief                Technology Officer, Vice Chairman, Director and                Treasurer/Secretary  |   | Vice                Chairman, Chief Technology Officer and Director since June                2002                                    |
|                                    |   |   |   |                                                                                                     |   |                                                                                                                                  |
| Kevin                R. Harris          |   | 39     |   | Chief                Operating Officer                                                                   |   | Since                April 2004                                                                                                       |
|                                    |   |   |   |                                                                                                     |   |                                                                                                                                  |
| Leonard                Silverman, Ph.D. |   | 68     |   | Director                                                                                                 |   | Director                since June 2002                                                                                               |
|                                    |   |   |   |                                                                                                     |   |                                                                                                                                  |
| Robert                B. Fields         |   | 70     |   | Director                                                                                                 |   | Director                since June 2002                                                                                               |

*Geoffrey      P. Talbot*

*Peter      J. Upfold*

*Kevin      R. Harris*

----

*Leonard      Silverman, Ph.D.*

*Robert      B. Fields *

**Committees      of the Board of Directors**

***Audit      Committee***

***Compensation      Committee***

----

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

**Code      of Ethics**

----

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

**Summary      Compensation Table**

| Name                and principalposition                (a) |   | Year(b) |         | Salary($)                (c) |   | Bonus($)                (d) |   | StockAwards($)                (e) |         | OptionAwards($)                (f) |   | Non-EquityIncentivePlanCompensation($)                (g) |   | Change                inPensionValue                andNonqualifiedDeferredCompensationEarnings($)                (h) |         | All                OtherCompensation($)                (i) |   | Total($) (j) |   |
|--------------------------------------------------------------|--------|---------|--------------|------------------------------|--------|-----------------------------|--------|-----------------------------------|--------------|------------------------------------|--------|-----------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------|--------------|------------------------------------------------------------|--------|-------------------|--------|
| Geoffrey                P. Talbot (1)                        |   |    | 2008         |                         | $      | 200,000                     |   | $                                 | -0-          |                               | $      |                                                      |   | $                                                                                                                     |              |                                                       | $      |                   |   | $ |  |   | $ | 13,536 | (2) | $ | 213,536 |   |
| President,                CEO, CFO                           |   |    | 2007         |                         | $      | 170,000                     |   | $                                 | 6,667        |                               | $      |                                                      |   | $                                                                                                                     |              |                                                       | $      |                   |   | $ |  |   | $ | 11,905 | (2) | $ | 188,572 |   |
|                                                         |   |    |    |                         |   |                   |   |                              |    |                               |   |                                                 |   |                                                                                                                  |    |                                                       |   |         |   |   |    |   |   |    |   |   |    |   |
| Peter                J. Upfold (1)Chief                      |   |    | 2008         |                         | $      | 200,000                     |   | $                                 | -0-          |                               | $      |                                                      |   | $                                                                                                                     |              |                                                       | $      |                   |   | $ |  |   | $ | 9,171 | (2) | $ | 209,171 |   |
| Technology                Officer                            |   |    | 2007         |                         | $      | 170,000                     |   | $                                 | 6,667        |                               | $      |                                                      |   | $                                                                                                                     |              |                                                       | $      |                   |   | $ |  |   | $ | 15,249 | (2) | $ | 191,916 |   |
|                                                         |   |    |    |                         |   |                   |   |                              |    |                               |   |                                                 |   |                                                                                                                  |    |                                                       |   |         |   |   |    |   |   |    |   |   |    |   |
| Kevin                R. Harris                               |   |    | 2008         |                         | $      | 190,000                     |   | $                                 | -0-          |                               | $      |                                                      |   | $                                                                                                                     |              |                                                       | $      |                   |   | $ |  |   | $ | 6,000 | (2)   | $ | 196,000 |   |
| COO                                                          |   |    | 2007         |                         | $      | 153,333                     |   | $                                 | 6,250        |                               | $      |                                                      |   | $                                                                                                                     |              |                                                       | $      |                   |   | $ |  |   | $ | -0- |   | $ | 159,583 |   |

***Compensation      Policy***

----

***Compensation      Components***

***Base      Salary***

***Stock      Options***

***Bonuses***

***Other***

**Director      Compensation **

----

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

| **Name                and Address of Beneficial Owner**                       |   | **Amount of Common****Stock and Warrants ****and****Nature of Beneficial****Ownership** |      | **Percent of Class** |   |
|-------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------|-----------|--------------------------------|--------|
|                                                                          |   |                                                                                                                       |      |                           |   |
| Geoffrey                P. Talbot, Chairman, President, CEO, and CFO (1)      |   |                                                                                                                       | 1,746,180 |                           |   | 7.41 | % |
|                                                                          |   |                                                                                                                       |      |                           |   |   |   |
| Peter                J. Upfold, CTO, Vice Chairman, Secretary/Treasurer (1)   |   |                                                                                                                       | 2,811,603 |                           |   | 11.92 | % |
|                                                                          |   |                                                                                                                       |      |                           |   |   |   |
| Leonard                Silverman, Ph.D., Director (2)(3)                      |   |                                                                                                                       | 303,219   |                           |   | 1.29 | % |
|                                                                          |   |                                                                                                                       |      |                           |   |   |   |
| Robert                B. Fields, Director (2)(3)                              |   |                                                                                                                       | 216,300   |                           |   | 0.92 | % |
|                                                                          |   |                                                                                                                       |      |                           |   |   |   |
| Kevin                R. Harris, Chief Operating Officer (4)                   |   |                                                                                                                       | 640,000   |                           |   | 2.67 | % |
|                                                                          |   |                                                                                                                       |      |                           |   |   |   |
| Thieme                Consulting, Inc. (5)                                    |   |                                                                                                                       | 2,212,006 |                           |   | 9.38 | % |
|                                                                          |   |                                                                                                                       |      |                           |   |   |   |
| Dean                Delis (6)                                                 |   |                                                                                                                       | 4,051,061 |                           |   | 17.07 | % |
|                                                                          |   |                                                                                                                       |      |                           |   |   |   |
| All                Executive Officers and Directors as a Group (five persons) |   |                                                                                                                       | 5,717,302 |                           |   | 24.20 | % |

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

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

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

|   | (4) | The                address of Mr. Harris is c/o Statmon Technologies Corp., 3000 Lakeside                Drive, Suite 300 South, Bannockburn, IL 60015. Includes 250,000 shares                of                common stock, warrants to purchase 340,000 shares of common stock                exercisable at a price of $1.00 per share and warrants to purchase                50,000                shares of common stock exercisable at $1.25 per                share. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

|   | (6) | The                address of Dean Delis is 2929 Campus Drive, Ste. 175, San Mateo,                CA 94405.                Includes warrants to purchase 150,000 shares of common stock exercisable                at $1.00 per share. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

----

----

----

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

| **Exhibit** |   | **Description**                                                                                                                                                                                                               |
|-------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |   |                                                                                                                                                                                                                          |
| 2.1         |   | Agreement                and Plan of Reorganization (1)                                                                                                                                                                       |
|        |   |                                                                                                                                                                                                                          |
| 3.1         |   | Articles                of Incorporation (2)                                                                                                                                                                                  |
|        |   |                                                                                                                                                                                                                          |
| 3.2         |   | Articles                of Amendment of Articles of Incorporation (3)                                                                                                                                                         |
|        |   |                                                                                                                                                                                                                          |
| 3.3         |   | Amended                and Restated Bylaws of the Company (6)                                                                                                                                                                 |
|        |   |                                                                                                                                                                                                                          |
| 4.1         |   | Registration                Rights Agreement dated October 12, 2001 between Statmon Technologies                Corp.                and Thieme Consulting, Inc. (6)                                                          |
|        |   |                                                                                                                                                                                                                          |
| 4.2         |   | Form                of Stock Certificate (6)                                                                                                                                                                                  |
|        |   |                                                                                                                                                                                                                          |
| 4.3         |   | Form                of Common Stock Purchase Warrant (exercisable at $5.00 per share)                (6)                                                                                                                      |
|        |   |                                                                                                                                                                                                                          |
| 4.4         |   | Form                of Common Stock Purchase Warrant (exercisable at $2.00 per share)                (6)                                                                                                                      |
|        |   |                                                                                                                                                                                                                          |
| 4.5         |   | Form                of Common Stock Purchase Warrant (exercisable at $1.00 per share)                (6)                                                                                                                      |
|        |   |                                                                                                                                                                                                                          |
| 4.6         |   | Form                of Common Stock Purchase Warrant (exercisable at $1.50 per share)                (8)                                                                                                                      |
|        |   |                                                                                                                                                                                                                          |
| 4.7         |   | Form                of Common Stock Purchase Warrant (exercisable at $1.25 per share)                (8)                                                                                                                      |
|        |   |                                                                                                                                                                                                                          |
| 4.8         |   | Form                of Subscription Agreement for Exchange (10)                                                                                                                                                               |
|        |   |                                                                                                                                                                                                                          |
| 4.9         |   | Form                of Original Issue Discount Senior Secured Convertible Debenture                (11)                                                                                                                       |
|        |   |                                                                                                                                                                                                                          |
| 4.10        |   | Common                Stock Purchase Warrant (11)                                                                                                                                                                             |
|        |   |                                                                                                                                                                                                                          |
| 4.11        |   | Form                of Additional Investment Right (11)                                                                                                                                                                       |
|        |   |                                                                                                                                                                                                                          |
| 10.1        |   | Share                Purchase Agreement (Sino Global Development Limited)                (4)                                                                                                                                  |
|        |   |                                                                                                                                                                                                                          |
| 10.2        |   | Share                Purchase Agreement (Systems & Technology Corp.) (4)                                                                                                                                                  |
|        |   |                                                                                                                                                                                                                          |
| 10.3        |   | Share                Purchase Agreement (Ace Capital Investment Limited) (4)                                                                                                                                                  |
|        |   |                                                                                                                                                                                                                          |
| 10.4        |   | Share                Purchase Agreement (Powerlink International Finance Inc.)                (4)                                                                                                                             |
|        |   |                                                                                                                                                                                                                          |
| 10.5        |   | Employment                Agreement, dated as of July 1, 2004, by and between Statmon Technologies                Corp. and Geoffrey P. Talbot, as amended. (6)                                                               |
|        |   |                                                                                                                                                                                                                          |
| 10.6        |   | Employment                Agreement, dated as of July 1, 2004, by and between Statmon Technologies                Corp. and Peter J. Upfold, as amended. (6)                                                                  |
|        |   |                                                                                                                                                                                                                          |
| 10.7        |   | Agreement                for Purchase and Sale of Remote Monitoring Products, dated February                25,                2003 between Statmon Technologies Corp. and Harris Corporation, as                amended. (6) |
|        |   |                                                                                                                                                                                                                          |
| 10.8        |   | Premises                lease by and between Statmon Technologies Corp. as tenant and Maple                Plaza,                Ltd. as Landlord (7)                                                                         |
|        |   |                                                                                                                                                                                                                          |
| 10.9        |   | Addendum                to Premises lease by and between Statmon Technologies Corp. as tenant                and                Maple Plaza, Ltd. as Landlord (7)                                                             |
|        |   |                                                                                                                                                                                                                          |
| 10.10       |   | Promissory                Note dated as of October 15, 2001 in the amount of $125,000 issued                by                Statmon Technologies Corp. to Thieme Consulting, Inc.                (6)                        |
|        |   |                                                                                                                                                                                                                          |
| 10.11       |   | Promissory                Note dated as of November 7, 2001 in the amount of $100,000 issued                by                Statmon Technologies Corp. to Global Opportunity Fund Limited.                (6)               |

----

| 10.12  |   | Promissory                Note dated as of November 6, 2001 in the amount of $25,000 issued                by                Statmon Technologies Corp. to Veninvest. (6)                                                                           |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                |
| 10.13  |   | Promissory                Note Extension Agreement dated as of February 7, 2003 between Statmon                Technologies Corp. and Thieme Consulting, Inc., The Global Opportunity                Fund and Veninvest. (6)                        |
|   |   |                                                                                                                                                                                                                                                |
| 10.14  |   | Pledge                and Security Agreement between Statmon Technologies Corp. and Thieme                Consulting, Inc. (6)                                                                                                                      |
|   |   |                                                                                                                                                                                                                                                |
| 10.15  |   | Subordination                Agreement between Statmon Technologies Corp. and Thieme Consulting,                Inc.                (6)                                                                                                             |
|   |   |                                                                                                                                                                                                                                                |
| 10.16  |   | Promissory                Note dated December 2, 2002 issued by Statmon Technologies Corp.                to                L&F Silverman in the principal amount of $15,000.                (6)                                                |
|   |   |                                                                                                                                                                                                                                                |
| 10.17  |   | Promissory                Note dated October 31, 2003 issued by Statmon Technologies Corp.                to                L&F Silverman, PhD. in the principal amount of $10,000.                (6)                                          |
|   |   |                                                                                                                                                                                                                                                |
| 10.18  |   | Promissory                Note dated October 31, 2003 issued by Statmon Technologies Corp.                to Robert                B. Fields. (6)                                                                                                   |
|   |   |                                                                                                                                                                                                                                                |
| 10.19  |   | Form                of Promissory Note issued by Statmon Technologies Corp. to purchasers                of                Units from April 2002 to June 2007. (6)                                                                                  |
|   |   |                                                                                                                                                                                                                                                |
| 10.20  |   | Deal                Point Memorandum regarding Statmon eBI Solutions, LLC. Between Statmon                Technologies Corp. and eBI Solutions, LLC. (6)                                                                                            |
|   |   |                                                                                                                                                                                                                                                |
| 10.21  |   | Non-exclusive                Reseller Agreement dated May 26, 2006 between Statmon Technologies                Corp.                and Harris Corporation (8)                                                                                      |
|   |   |                                                                                                                                                                                                                                                |
| 10.22  |   | Form                of Senior Subordinated Promissory Note issued by Statmon Technologies                Corp. to Dean Delis (8)                                                                                                                    |
|   |   |                                                                                                                                                                                                                                                |
| 10.23  |   | Form                of Promissory Note issued by Statmon Technologies Corp. to Martin                E.                Jacobs (8)                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                |
| 10.24  |   | Agreement                for Purchase and Sale of Remote Monitoring Products, dated September                7,                2006 between Statmon Technologies Corp. and MediaFLO USA, Inc.                (9)                                    |
|   |   |                                                                                                                                                                                                                                                |
| 10.25  |   | Premises                lease by and between Statmon Technologies Corp. as tenant and YPI                Bannockburn, LLC as Landlord (9)                                                                                                           |
|   |   |                                                                                                                                                                                                                                                |
| 10.26  |   | Securities                Purchase Agreement dated March 5, 2008 (11)                                                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                                |
| 10.27  |   | Security                Agreement dated March 5, 2008 (11)                                                                                                                                                                                          |
|   |   |                                                                                                                                                                                                                                                |
| 10.28  |   | Subsidiary                Guarantee dated March 5, 2008 (11)                                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                |
| 14.1   |   | Code                of Ethics (6)                                                                                                                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                |
| 14.2   |   | Charter                of Audit Committee (6)                                                                                                                                                                                                       |
|   |   |                                                                                                                                                                                                                                                |
| 14.3   |   | Charter                of Compensation Committee (9)                                                                                                                                                                                                |
|   |   |                                                                                                                                                                                                                                                |
| 21.1   |   | List                of Subsidiaries of the Company (6)                                                                                                                                                                                              |
|   |   |                                                                                                                                                                                                                                                |
| 24.1   |   | *                Power of Attorney.                                                                                                                                                                                                                 |
|   |   |                                                                                                                                                                                                                                                |
| 31.1   |   | *                Certification of the Chief Executive Officer required by Rule 13a-14(a)                or                Rule 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley                Act of 2002.                       |
|   |   |                                                                                                                                                                                                                                                |
| 31.2   |   | *                Certification of the Chief Financial Officer required by Rule 13a-14(a)                or                Rule 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley                Act of 2002.                       |
|   |   |                                                                                                                                                                                                                                                |
| 32.1   |   | *                Certification of the Company’s Chief Executive Officer Certification,                pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section                906 of                the Sarbanes-Oxley Act of 2002. |
|   |   |                                                                                                                                                                                                                                                |
| 32.2   |   | *                Certification of the Company’s Chief Financial Officer Certification,                pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section                906 of                the Sarbanes-Oxley Act of 2002. |

----

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

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

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

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

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

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

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

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

| (9) | Incorporated                by reference to Statmon Technologies Corp.’s Form 10-KSB filed on July 14,                2007. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------|

| (10) | Incorporated                by reference to Statmon Technologies Corp.’s Form 8-K filed on February                22, 2008. |
|------|------------------------------------------------------------------------------------------------------------------------------------|

| (11) | Incorporated                by reference to Statmon Technologies Corp.’s Form 8-K filed on March 7,                2008. |
|------|--------------------------------------------------------------------------------------------------------------------------------|

----

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

|                              |   | For the Year Ended March 31, |    |
|-----------------------------------|--------|-------------------------------------------------------|---------|
|                              |   | 2008                                                  |    | 2007 |   |
|                              |   |                                                  |    |   |   |
| Audit                Fees         |   | $                                                     | 175,000 |   | $ | 140,000 |   |
| Audit                Related Fees |   |                                                  | -       |   |   | - |   |
| Tax                Fees           |   |                                                  | 10,000  |   |   | 7,500 |   |
| All                Other Fees     |   |                                                  | -       |   |   | - |   |
| Total                Fees         |   | $                                                     | 185,000 |   | $ | 147,500 |   |

----

**SIGNATURES**

|   | STATMON                  TECHNOLOGIES CORP.,                          |
|--------|-----------------------------------------------------------------------|
|   | a                  Nevada corporation                                 |
|   |                                                                  |
| By:    | /s/                    Geoffrey P. Talbot                             |
|   | Geoffrey                  P. Talbot                                   |
|   | Chairman,                  CEO, President and Chief Financial Officer |
|   | (Principal                  Financial and Accounting Officer)         |
| Date:  | July                  14, 2008                                        |

| **Signatures**                                              |   | **Title**                                                |   | **Date**                         |
|-------------------------------------------------------------|--------|----------------------------------------------------------|--------|----------------------------------|
|                                                        |   |                                                     |   |                             |
| /s/                    GEOFFREY P. TALBOT    |   | Chairman,                  CEO, President and            |   | July                    14, 2008 |
| GEOFFREY                  P. TALBOT                         |   | Chief                  Financial Officer                 |   |                                  |
|                                                        |   |                                                     |   |                             |
| /s/                    PETER J. UPFOLD       |   | Vice                  Chairman, CTO, Treasurer/Secretary |   | July                  14, 2008   |
| PETER                  J. UPFOLD                            |   |                                                     |   |                             |
|                                                        |   |                                                     |   |                             |
| /s/                    LEONARD SILVERMAN, Ph. D.            |   | Director                                                 |   | July                  14, 2008   |
| LEONARD                  SILVERMAN, Ph. D.                  |   |                                                     |   |                             |
|                                                        |   |                                                     |   |                             |
| /s/                    ROBERT B. FIELDS                     |   | Director                                                 |   | July                  14, 2008   |
| 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, 2008                                                                                |   | F-2                        |
|                                                                                                                                          |   |                       |
| Consolidated                Statements of Operations for the Years Ended March 31, 2008 and March                31,                2007      |   | F-3                        |
|                                                                                                                                          |   |                       |
| Consolidated                Statements of Stockholders’ Deficiency for the Years Ended March 31, 2008                and March 31, 2007 |   | F-4                        |
|                                                                                                                                          |   |                       |
| Consolidated                Statements of Cash Flows for the Years Ended March 31, 2008 and March                31,                2007      |   | F-5                        |
|                                                                                                                                          |   |                       |
| Notes                to Consolidated Financial Statements                                                                                     |   | F-6                to F-22 |

----

----

----

**STATMON      TECHNOLOGIES CORP. AND SUBSIDIARIES**

**CONSOLIDATED      BALANCE SHEET**

| **ASSETS**                                                                                                                                  |   |   |        |
|---------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-------------|
| Current                Assets:                                                                                                              |   |   |        |   |
| Cash                                                                                                                                        |   | $      | 73,076      |   |
| Accounts                receivable                                                                                                          |   |   | 394,735     |   |
| Inventories                                                                                                                                 |   |   | 48,616      |   |
| Prepaid                expense and other current assets                                                                                     |   |   | 159,614     |   |
| Total                Current Assets                                                                                                         |   |   | 676,041     |   |
|                                                                                                                                        |   |   |        |   |
| Property                and Equipment, net                                                                                                  |   |   | 241,429     |   |
|                                                                                                                                        |   |   |        |   |
| Deferred                financing costs, net                                                                                                |   |   | 222,363     |   |
| Security                deposits and other assets                                                                                           |   |   | 128,640     |   |
| Total                Assets                                                                                                                 |   | $      | 1,268,473   |   |
|                                                                                                                                        |   |   |        |   |
| **LIABILITIES                AND STOCKHOLDERS' DEFICIENCY**                                                                                 |   |   |        |   |
| Current                Liabilities:                                                                                                         |   |   |        |   |
| Notes                payable (including $200,000 due to a related party), net of debt                discount                of $58,179     |   | $      | 593,821     |   |
| Accounts                payable                                                                                                             |   |   | 989,100     |   |
| Accrued                expenses                                                                                                             |   |   | 312,387     |   |
| Accrued                compensation                                                                                                         |   |   | 574,801     |   |
| Interest                payable (including $7,083 due to related party)                                                                     |   |   | 151,806     |   |
| Deferred                revenue                                                                                                             |   |   | 194,883     |   |
| Total                Current Liabilities                                                                                                    |   |   | 2,816,798   |   |
|                                                                                                                                        |   |   |        |   |
| Long-term                Liabilities:                                                                                                       |   |   |        |   |
| Notes                payable (including $250,000 due to related party), net of debt discount                of                $99,677       |   |   | 400,323     |   |
| Convertible                Note Payable, net of debt discount of $1,446,576                                                                 |   |   | 53,424      |   |
| Total                Liabilities                                                                                                            |   |   | 3,270,545   |   |
|                                                                                                                                        |   |   |        |   |
| 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, 23,579,553                issued                and outstanding |   |   | 235,794     |   |
| Additional                paid-in capital                                                                                                   |   |   | 17,658,841  |   |
| Accumulated                deficit                                                                                                          |   |   | (19,896,707 | ) |
| Total                Stockholders' Deficiency                                                                                               |   |   | (2,002,072  | ) |
| Total                Liabilities and Stockholders' Deficiency                                                                               |   | $      | (1,268,473  | ) |

----

**STATMON      TECHNOLOGIES CORP. AND SUBSIDIARIES**

**CONSOLIDATED      STATEMENTS OF OPERATIONS**

|                                                                                                                                                             |   | For the Years Ended March 31, |       |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------|------------|
|                                                                                                                                                             |   | 2008                                                   |       | 2007 |   |
|                                                                                                                                                             |   |                                                   |       |   |   |   |   |
| Revenues                                                                                                                                                         |   | $                                                      | 2,841,849  |   | $ | 3,714,761 |   |
|                                                                                                                                                             |   |                                                   |       |   |   |   |   |
| Cost                of Sales                                                                                                                                     |   |                                                   | 384,095    |   |   | 811,798 |   |
|                                                                                                                                                             |   |                                                   |       |   |   |   |   |
| Gross                Profit                                                                                                                                      |   |                                                   | 2,457,754  |   |   | 2,902,963 |   |
|                                                                                                                                                             |   |                                                   |       |   |   |   |   |
| Selling,                General and Administrative Expenses                                                                                                      |   |                                                   | 4,432,120  |   |   | 2,950,039 |   |
|                                                                                                                                                             |   |                                                   |       |   |   |   |   |
| Operating                Loss                                                                                                                                    |   |                                                   | (1,974,366 | ) |   | (47,076 | ) |
|                                                                                                                                                             |   |                                                   |       |   |   |   |   |
| Other                Expense:                                                                                                                                    |   |                                                   |       |   |   |   |   |
| Interest                (including $209,477 and $226,388 to related parties for 2008 and                2007                periods, respectively)               |   |                                                   | 576,102    |   |   | 525,974 |   |
| Common                stock and warrants issued in association with debt (including $1,354,247                and $940,834 to related parties for 2008 and 2007) |   |                                                   | 3,050,576  |   |   | 1,876,258 |   |
| Amortization                of debt discount                                                                                                                     |   |                                                   | 400,053    |   |   | 399,241 |   |
| Amortization                of deferred financing costs                                                                                                          |   |                                                   | 935,446    |   |   | 403,705 |   |
| Total                Other Expense                                                                                                                               |   |                                                   | 4,962,177  |   |   | 3,205,178 |   |
|                                                                                                                                                             |   |                                                   |       |   |   |   |   |
| NET                LOSS                                                                                                                                          |   | $                                                      | (6,936,543 | ) | $ | (3,252,254 | ) |
|                                                                                                                                                             |   |                                                   |       |   |   |   |   |
| NET                LOSS PER COMMON SHARE - Basic and Diluted                                                                                                     |   | $                                                      | (0.42      | ) | $ | (0.23 | ) |
|                                                                                                                                                             |   |                                                   |       |   |   |   |   |
| Weighted                Average Number of Common Shares Outstanding - Basic and                Diluted                                                           |   |                                                   | 16,566,039 |   |   | 14,412,720 |   |

----

**STATMON      TECHNOLOGIES CORP. AND SUBSIDIARIES**

**CONSOLIDATED      STATEMENTS OF STOCKHOLDERS’ DEFICIENCY**

|                                                                        |   |              |         |    |   | Additional   |   |          |         | Total      |   |
|-----------------------------------------------------------------------------|--------|-------------------|--------------|---------|--------|--------------|--------|---------------|--------------|------------|--------|
|                                                                        |   | Common Stock |         | paid-in |   | Accumulated  |   | Stockholders' |         |
|                                                                        |   | Shares            |         | Amount  |   | capital      |   | deficit       |         | Deficiency |   |
| Balance, March                31, 2006                                 |   |              | 13,588,482   |    |   | 135,885      |   |          | 4,929,158    |       |   | (9,707,910 | ) |   | (4,642,867 | ) |
| Issuance                of debt related penalty shares                      |   |              | 732,540      |    |   | 7,325        |   |          | 500,097      |       |   |   |   |   | 507,422 |   |
| Issuance                of common stock related to new debt                 |   |              | 655,000      |    |   | 6,550        |   |          | 376,096      |       |   |   |   |   | 382,646 |   |
| Issuance                of common stock for financing related services      |   |              | 75,000       |    |   | 750          |   |          | 54,000       |       |   |   |   |   | 54,750 |   |
| Issuance                of debt related penalty warrants                    |   |              | -            |    |   |         |   |          | 1,591,735    |       |   |   |   |   | 1,591,735 |   |
| Issuance                of warrants to placement agent                      |   |              | -            |    |   |         |   |          | 20,300       |       |   |   |   |   | 20,300 |   |
| Issuance                of warrants to employees                            |   |              | *-*          |    |   |         |   |          | *93,000*     |       |   |   |   |   | *93,000* |   |
|                                                                        |   |              |         |    |   |         |   |          |         |       |   |   |   |   |   |   |
| Net                Loss                                                     |   |              |    |    |   |    |   |          |    |       |   | (3,252,254 | ) |   | (3,252,254 | ) |
| Balance,                March 31, 2007                                      |   |              | 15,051,022   |    | $      | 150,510      |   | $             | 7,564,386    |       | $      | (12,960,164 | ) | $ | (5,245,268 | ) |
| Issuance                of debt related penalty common stock                |   |              | 544,995      |    |   | 5,449        |   |          | 610,440      |       |   |   |   |   | 615,889 |   |
| Issuance                of common stock related to new debt                 |   |              | 451,200      |    |   | 4,512        |   |          | 190,580      |       |   |   |   |   | 195,092 |   |
| Issuance                of warrants related to new debt                     |   |              |         |    |   |         |   |          | 836,662      |       |   |   |   |   | 836,662 |   |
| Issuance                of common stock for note extensions                 |   |              | 181,200      |    |   | 1,812        |   |          | 243,924      |       |   |   |   |   | 245,736 |   |
| Issuance                of warrants for note extensions                     |   |              |         |    |   |         |   |          | 203,034      |       |   |   |   |   | 203,034 |   |
| Issuance                of debt related penalty warrants                    |   |              | -            |    |   | -            |   |          | 2,252,186    |       |   |   |   |   | 2,252,186 |   |
| Issuance                of common stock to placement agent                  |   |              | 149,525      |    |   | 1,495        |   |          | 155,506      |       |   |   |   |   | 157,001 |   |
| Issuance                of warrants to placement agent                      |   |              |         |    |   |         |   |          | 94,178       |       |   |   |   |   | 94,178 |   |
| Issuance                of warrants to employees                            |   |              | -            |    |   | -            |   |          | 649,650      |       |   |   |   |   | 649,650 |   |
| Issuance                of warrants as forbearance on operating liabilities |   |              | -            |    |   | -            |   |          | 182,500      |       |   |   |   |   | 182,500 |   |
| Beneficial                conversion related to convertible debentures      |   |              |         |    |   |         |   |          | 673,836      |       |   |   |   |   | 673,836 |   |
| Issuance                of common stock related to debt exchange            |   |              | 4,073,975    |    |   | 40,740       |   |          | 4,033,235    |       |   |   |   |   | 4,073,975 |   |
| Issuance                of common stock related to warrant exchange         |   |              | 3,127,636    |    |   | 31,276       |   |          | (31,276      | )          |   |   |   |   | - |   |
|                                                                        |   |              |         |    |   |         |   |          |         |       |   |   |   |   |   |   |
| Net                Loss                                                     |   |              |    |    |   |    |   |          |    |       |   | (6,936,543 | ) |   | (6,936,543 | ) |
| Balance,                March 31, 2008                                      |   |              | 23,579,553   |    | $      | 235,794      |   | $             | 17,658,841   |       | $      | (19,896,707 | ) | $ | (2,002,072 | ) |

----

**STATMON      TECHNOLOGIES CORP. AND SUBSIDIARIES**

**CONSOLIDATED      STATEMENTS OF CASH FLOWS**

|                                                                                                                     |   | For the Years Ended March 31, |       |
|--------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------|------------|
|                                                                                                                     |   | 2008                                                   |       | 2007 |   |
| CASH                FLOWS FROM OPERATING ACTIVITIES:                                                                     |   |                                                   |       |   |   |   |   |
| Net                loss                                                                                                  |   | $                                                      | (6,936,543 | ) | $ | (3,252,254 | ) |
| Adjustments                to reconcile net loss to net cash (used in)/ provided by operating                activities: |   |                                                   |       |   |   |   |   |
| Depreciation                                                                                                             |   |                                                   | 18,353     |   |   | 11,427 |   |
| Common                stock and warrants issued in association with debt                                                 |   |                                                   | 3,050,576  |   |   | 1,876,258 |   |
| Amortization                of debt discount                                                                             |   |                                                   | 400,053    |   |   | 399,241 |   |
| Amortization                of deferred financing costs                                                                  |   |                                                   | 935,446    |   |   | 403,705 |   |
| Deferred                rent expense                                                                                     |   |                                                   | (33,082    | ) |   | (26,257 | ) |
| Non-cash                stock based compensation charge                                                                  |   |                                                   | 649,650    |   |   | 93,000 |   |
| Changes                in operating assets and liabilities:                                                              |   |                                                   |       |   |   |   |   |
| Accounts                receivable                                                                                       |   |                                                   | (165,683   | ) |   | (46,614 | ) |
| Inventories                                                                                                              |   |                                                   | 12,132     |   |   | (15,359 | ) |
| Prepaid                expense and other current assets                                                                  |   |                                                   | (97,393    | ) |   | (37,638 | ) |
| Security                deposits and other assets                                                                        |   |                                                   | 88,425     |   |   | (206,600 | ) |
| Accounts                payable                                                                                          |   |                                                   | 414,009    |   |   | 120,546 |   |
| Accrued                expenses                                                                                          |   |                                                   | (224,599   | ) |   | (9,077 | ) |
| Accrued                compensation                                                                                      |   |                                                   | 157,165    |   |   | 82,676 |   |
| Interest                payable                                                                                          |   |                                                   | 256,275    |   |   | 478,758 |   |
| Deferred                revenue                                                                                          |   |                                                   | (13,623    | ) |   | 145,551 |   |
| NET                CASH (USED IN)/PROVIDED BY OPERATING ACTIVITIES                                                       |   |                                                   | (1,488,839 | ) |   | 17,363 |   |
| CASH                FLOWS USED IN INVESTING ACTIVITIES:                                                                  |   |                                                   |       |   |   |   |   |
| Purchase                of property and equipment                                                                        |   |                                                   | (65,941    | ) |   | (37,468 | ) |
| CASH                FLOWS FROM FINANCING ACTIVITIES*:*                                                                   |   |                                                   |       |   |   |   |   |
| Proceeds                from notes payable                                                                               |   |                                                   | 572,000    |   |   | 752,000 |   |
| Proceeds                from convertible notes payable                                                                   |   |                                                   | 1,250,000  |   |   | - |   |
| Repayment                of notes payable                                                                                |   |                                                   | -          |   |   | (597,000 | ) |
| Deferred                financing costs                                                                                  |   |                                                   | (281,202   | ) |   | (114,172 | ) |
| NET                CASH PROVIDED BY FINANCING ACTIVITIES                                                                 |   |                                                   | 1,540,798  |   |   | 40,828 |   |
| NET                (DECREASE)/INCREASE IN CASH                                                                           |   |                                                   | (13,982    | ) |   | 20,723 |   |
| CASH,                BEGINNING OF PERIOD                                                                                 |   |                                                   | 87,058     |   |   | 66,335 |   |
| CASH,                END OF PERIOD                                                                                       |   | $                                                      | 73,076     |   | $ | 87,058 |   |
| SUPPLEMENTAL                DISCLOSURE OF CASH FLOW INFORMATION:                                                         |   |                                                   |       |   |   |   |   |
| Cash                paid for:                                                                                            |   |                                                   |       |   |   |   |   |
| Interest                                                                                                                 |   | $                                                      | 273,118    |   | $ | 25,223 |   |
| Income                Taxes                                                                                              |   | $                                                      | -          |   | $ | 4,814 |   |
| NON-CASH                INVESTING AND FINANCING ACTIVITIES:                                                              |   |                                                   |       |   |   |   |   |
| Issuance                of common stock related to debt acquisition                                                      |   | $                                                      | 195,092    |   | $ | 162,594 |   |
| Issuance                of warrants related to debt acquisition                                                          |   | $                                                      | 836,662    |   | $ | 181,552 |   |
| Issuance                of common stock for note extensions                                                              |   | $                                                      | 245,736    |   | $ | 178,600 |   |
| Issuance                of warrants for note extensions                                                                  |   | $                                                      | 203,034    |   | $ | 82,800 |   |
| Issuance                of common stock to placement agents                                                              |   | $                                                      | 157,001    |   | $ | 54,750 |   |
| Issuance                of warrants to placement agents                                                                  |   | $                                                      | 94,178     |   | $ | 20,300 |   |
| Issuance                of common stock related to debt exchange                                                         |   | $                                                      | 4,073,975  |   | $ | - |   |
| Beneficial                conversion related to convertible debentures                                                   |   | $                                                      | 673,836    |   | $ | - |   |
| Capitalization                of rent abatement                                                                          |   | $                                                      | 167,636    |   | $ | 36,993 |   |

----

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

**Company      Overview**

**Going      Concern**

----

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

**Management      Plans**

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

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

|  | *b.* | Accounting                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. |
|--|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

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

|  | *c.* | Allowance                for Doubtful Accounts                -                The Company recognizes an allowance for doubtful accounts to ensure                accounts receivable are not overstated due to uncollectibility. Reserves                are maintained for all customers based on a variety of factors, including                the length of time the receivables are past due, significant one-time                events and historical experience. An additional reserve for individual                accounts is recorded when the Company becomes aware of a customer’s                inability to meet its financial obligation, such as in the case of                bankruptcy filings or deterioration in the customer’s operating results or                financial position. If circumstances related to customers change,                estimates of the recoverability of receivables would be further adjusted.                As of March 31, 2008 the allowance for doubtful accounts was                $NIL. |
|--|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | *d.* | Property                and Equipment -                Property and equipment are stated at cost. The cost of property and                equipment is depreciated on a straight-line basis over the estimated                useful lives of the related assets. Leasehold improvements are amortized                over the lesser of the term of the related lease or the estimated                useful                lives of the assets. Maintenance and repairs are charged to operations                when incurred. Betterments and renewals are capitalized. When property                and                equipment are sold or otherwise disposed of, the asset account and                related                accumulated depreciation account are relieved, and any gain or loss                is                included in operations. |
|--|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Computer                Equipment     |   | 5                -                7 years                                                                        |
|---------------------------------------|--------|------------------------------------------------------------------------------------------------------------------|
| Software                              |   | 5                years                                                                                           |
| Office                Equipment       |   | 5                years                                                                                           |
| Leasehold                improvements |   | Lesser                of the life of the lease or the estimated useful life of the related                asset. |

|  | *e.* | Research                and Development -                Research and development expenditures are charged to operations as                incurred. Research and development expenditures were approximately                $1,280,000 and $804,000 for the years ended March 31, 2008 and 2007,                respectively. |
|--|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

|  | *g.* | 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 convertible notes and                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 convertible                notes                and warrants to purchase 6,571,448 and 9,225,177 shares of common                stock as                of March 31, 2008 and 2007,                respectively. |
|--|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

|  | *i.* | Fair                Value of Financial Instruments -                The carrying amounts reported in the consolidated 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 and convertible notes 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, 2008, the Company does not believe                that any                impairment has occurred. |
|--|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | *k.* | Revenue                Recognition -                The 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 our current revenue recognition policies and                practices                are consistent with SOP 97-2. |
|--|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | *l.* | Stock-Based                Compensation                -                The Company reports stock based compensation under Statements of                Financial                Accounting Standards ("SFAS") No. 123R ("123R") "Share Based Payment."                SFAS 123R requires all share-based payments to employees, including                grants                of employee stock options, to be recognized in the financial statements                based on their fair values. |
|--|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

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

|                                          |   |   |     | Weighted        |   |
|-----------------------------------------------|--------|--------|----------|-----------------|--------|
|                                          |   |   |     | Average         |   |
|                                          |   |   |     | Grant Date |   |
| Nonvested Shares                         |   | Shares |     | Fair Value |   |
| Nonvested                at April 1, 2007     |   |   | 275,000  |            | $      | 0.54 |   |
|                                          |   |   |     |            |   |   |   |
| Granted                                       |   |   | 670,000  |            | $      | 1.13 |   |
|                                          |   |   |     |            |   |   |   |
| Vested                                        |   |   | (870,000 | )               | $      | 0.95 |   |
|                                          |   |   |     |            |   |   |   |
| Expired                                       |   |   | —  |            | $      | — |   |
|                                          |   |   |     |            |   |   |   |
| Nonvested                at December 31, 2007 |   |   | 75,000   |            | $      | 1.02 |   |

|  | *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                -                In                December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business                Combinations” (“SFAS 141(R)”). SFAS 141(R) replaces SFAS No. 141,                “Business Combinations”, and is effective for the Company for business                combinations for which the acquisition date is on or after the beginning                of the first annual reporting period beginning on or after December                15,                2008. SFAS 141(R) requires the new acquiring entity to recognize                all                assets acquired and liabilities assumed in the transactions; establishes                an acquisition-date fair value for acquired assets and liabilities;                and                fully discloses to investors the financial effect the acquisition                will                have. The Company is evaluating the impact of this pronouncement                on the                Company’s consolidated financial position, results of operations and cash                flows. |
|--|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

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

----

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

| Computer                Equipment             |   | $      | 75,865             |   |
|-----------------------------------------------|--------|--------|--------------------|--------|
| Software                                      |   |   | 13,008             |   |
| Office                Equipment               |   |   | 33,462             |   |
| Leasehold                Improvements         |   |   | 209,910            |   |
|                                          |   |   | 332,245            |   |
|                                          |   |   |               |   |
| Less:                accumulated depreciation |   |   | 90,816             |   |
|                                          |   |   |     |   |
|                                          |   | $      | 241,429            |   |

| **4.** | **DEFERRED                FINANCING COSTS** |
|--------|---------------------------------------------|

| Deferred                financing costs       |   | $      | 235,618 |   |
|-----------------------------------------------|--------|--------|---------|--------|
| Less:                accumulated amortization |   |   | (13,255 | )      |
|                                          |   |   |    |   |
| Deferred                financing costs, net  |   | $      | 222,363 |   |

| **5.** | **EXCHANGE                AGREEMENT** |
|--------|---------------------------------------|

----

| **6.** | **SENIOR                SECURED ORIGINAL ISSUE DISCOUNT CONVERTIBLE                DEBENTURE** |
|--------|------------------------------------------------------------------------------------------------|

----

| **7.** | **NOTES                PAYABLE**  |
|--------|----------------------------------------|

| Current:                                                                                                     |   |   |    |   |
|--------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|
| Notes                Payable - Delis - related party[a]                                                      |   | $      | 200,000 |   |
| Notes                Payable - various[b]                                                                    |   |   | 452,000 |   |
|                                                                                                         |   | $      | 652,000 |   |
| Less:                Debt Discount                                                                           |   |   | (58,179 | )      |
| Total                Current Notes Payable                                                                   |   | $      | 593,821 |   |
| Long-term:                                                                                                   |   |   |    |   |
| Senior                Subordinated Notes Payable - Thieme Consulting, Inc. - related                party[c] |   |   | 250,000 |   |
| Senior                Subordinated Notes Payable[d]                                                          |   |   | 250,000 |   |
|                                                                                                         |   | $      | 500,000 |   |
| Less:                Debt Discount                                                                           |   |   | (99,677 | )      |
| Total                Long-term Notes Payable                                                                 |   | $      | 400,323 |   |

|  | [a] | On                April 27, 2007, the Company sold a unit consisting of (i) a $200,000                principal amount secured promissory note bearing interest at 10%                per annum                and due 180 days from the date of issuance, (ii) 150,000 shares of                common                stock and (iii) warrants to purchase 150,000 shares of common stock                exercisable at a price of $1.00 per share for a term of five years.                This                note matured on October 24, 2007. Per the default terms of the note,                if                the Company does not repay the note by the maturity date, it will                issue an                additional 100,000 shares of common stock and warrants to purchase                100,000                shares of its common stock at an exercise price of $1.00 per share                with a                term of five years as consideration for an extension of the due date                of                the note to October 24, 2008. The Company is currently negotiating                a short                term extension which would supersede such extension agreement and                anticipates repayment of the note from the net proceeds from the                current                round of financing. |
|--|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | [b] | These                Units generally consisted of (i) a promissory note bearing interest                generally at 10% per annum, (ii) a share of the Company’s common stock and                (iii) three or five-year warrant to purchase shares of common stock                at an                exercise price between $1.00 and $2.00 per share. The total amount                of                these notes is $452,000 and represents eight notes with initial maturity                dates between November 19, 2002 and October 21, 2008. Of these eight                notes, two were entered into during the year ended March 31, 2008                for a                total principal value of $175,000. In association with these notes,                the                Company issued 175,000 shares of common stock and warrants to purchase                175,000 shares of common stock for a term of five years and exercisable                between $1.20 and a $1.25 per share. In addition, during the year                ended                March 31, 2008, the Company sold units to seven other investors for                a                total principal amount of $197,000 that were exchanged per the Note                exchange described below. In association with these notes, the Company                issued 126,200 shares of common stock and warrants to purchase 126,200                shares of common stock for a term of five years at an exercise price                of                $1.00 to $1.50 per share. |
|--|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| **7.** | **NOTES                PAYABLE, continued** |
|--------|---------------------------------------------|

|  | [c] | In                October 2001, the Company issued three secured Promissory Notes to                three                related lenders (collectively, the “Senior Notes”) for a total of                $250,000, accruing interest at 10% per annum. In connection with                the                Senior Notes, Thieme Consulting, Inc. acquired 250,000 shares of                common                stock and a warrant to purchase 250,000 shares of common stock exercisable                for a five-year term at $2.00 per share which expired on October                31, 2006.                The three Senior Notes initial terms went into default on April 16,                2002,                May 6, 2002, and May 18, 2002, respectively, and have since accrued                interest at a penalty rate of 15% per annum. Pursuant to the loan                agreements penalty provisions, the Company has issued 25,000 shares                of                common stock per month until full repayment of the Senior Notes.                Subject                to certain subordination agreements entered into in March 2008, the                Company’s obligations under the Senior Notes are secured by a UCC                perfected lien on the assets of the Company plus certain priority                rights                over first new equity capital coming into the Company, effective                until the                Senior Notes are extinguished. The Company accrued $49,417 of interest                and                granted the note holder 275,000 penalty shares, valued at $330,250,                during                the year ended March 31, 2008. The Company accrued $37,500 of interest                and                granted the note holder 300,000 penalty shares, valued at $209,750,                during                the year ended March 31, 2007. |
|--|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | [d] | On                March 5, 2008, the Company entered into a new promissory note with                a                secured promissory note holder for $250,000 and extinguished the                original                note for $250,000 from August 2004. This new note is subordinated                to the                notes in Note 6 and [c] above. The new note has a maturity date of                June 4,                2010 and bears interest at 10% per annum. In consideration for entering                into the new note, the Company converted all of the accrued interest                due                on the August 2004 note of $125,445 into shares of restricted common                stock                at $1.00 per share, issued 703,871 shares of restricted common stock                in                exchange for 1,759,676 warrants (as more fully described below),                and                issued a new warrant to purchase 250,000 shares of common stock                exercisable for a five-year term at $1.20 per share which expire                on March                5, 2013. The Company accrued $36,541 of interest and granted the                note                holder penalty warrants to purchase 550,000 share of common stock                exercisable at $1.00 related to the August 2004 note during the year                ended                March 31, 2008. Subsequent to March 31, 2008, the Company has agreed                to                issue shares of common stock at a value of $1.00 per share in lieu                of cash                interest payments for the first 12 months of the new promissory note                dated                March 5, 2008. |
|--|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| **7.** | **NOTES                PAYABLE, continued** |
|--------|---------------------------------------------|

| **8.** | **EQUITY                TRANSACTIONS** |
|--------|----------------------------------------|

|  | [a] | Common                Stock |
|--|-----|-----------------------------|

----

| **8.** | **EQUITY                TRANSACTIONS,                continued** |
|--------|------------------------------------------------------------------|

|                                                                  |   | Shares |       | Weighted Average Exercise Price |   | Exercisable |   |
|-----------------------------------------------------------------------|--------|--------|------------|------------------------------------------------|--------|-------------|--------|
| Warrants                outstanding and exercisable at March 31, 2006 |   |   | 7,057,298  |                                           | $      | 1.28        |   |   | 7,057,298 |   |
| Granted                                                               |   |   | 3,985,729  |                                           |   | 1.17        |   |   |   |   |
| Canceled                                                              |   |   | -          |                                           |   | -           |   |   |   |   |
| Expired                                                               |   |   | (1,817,851 | )                                              |   | -           |   |   |   |   |
| Exercised                                                             |   |   | -          |                                           |   | -           |   |   |    |   |
| Warrants                outstanding and exercisable at March 31, 2007 |   |   | 9,225,176  |                                           | $      | 1.28        |   |   | 9,225,176 |   |
| Granted                                                               |   |   | 6,340,606  |                                           |   | 1.17        |   |   |   |   |
| Canceled                                                              |   |   | (9,030,942 | )                                              |   | -           |   |   |   |   |
| Expired                                                               |   |   | (1,490,266 | )                                              |   |        |   |   |   |   |
| Exercised                                                             |   |   | -          |                                           |   | -           |   |   |      |   |
| Warrants                outstanding and exercisable at March 31, 2008 |   |   | 5,044,574  |                                           | $      | 1.12        |   |   | 5,044,574 |   |

| Exercise Price         |   | NumberOutstanding |      | Weighted AverageRemaining Years ofContractual Life |   | WeightedAverageExercise Price |   | NumberExercisable |   |
|-----------------------------|--------|-------------------|-----------|------------------------------------------------------------------------|--------|------------------------------------|--------|-------------------|--------|
| $1.00                       |   |              | 2,412,700 |                                                                   |   | 3.03                               |   | $                 | 1.00   |   |   | 2,412,700 |   |
| $1.20                       |   |              | 2,051,874 |                                                                   |   | 4.93                               |   |              | 1.20   |   |   | 2,051,874 |   |
| $1.25                       |   |              | 445,000   |                                                                   |   | 2.84                               |   |              | 1.25   |   |   | 445,000 |   |
| $1.50                       |   |              | 135,000   |                                                                   |   | 0.13                               |   |              | 1.50   |   |   | 135,000 |   |
| $1.00                - 1.50 |   |              | 5,044,574 |                                                                   |   | 3.79                               |   | $                 | 1.12   |   |   | 5,044,574 |   |

----

| **8.** | **EQUITY                TRANSACTIONS,                continued** |
|--------|------------------------------------------------------------------|

**Net      Loss Per Share**

|                                             |   | March                31, |      |
|--------------------------------------------------|--------|--------------------------|-----------|
|                                             |   | 2008                     |      | 2007 |   |
| Warrants                to purchase common stock |   |                     | 5,044,574 |   |   | 9,225,177 |   |
| Convertible                notes payable         |   |                     | 1,526,874 |   |   | - |   |
| Total                                            |   |                     | 6,571,448 |   |   | 9,225,177 |   |

| Substantial                issuances after March 31, 2008 through July 11, 2008: |   |   |    |   |
|----------------------------------------------------------------------------------|--------|--------|---------|--------|
|                                                                             |   |   |    |   |
| Common                Stock issued to consultants                                |   |   | 150,000 |   |

| **9.** | **INCOME                TAXES** |
|--------|---------------------------------|

----

| **9.** | **INCOME                TAXES, continued** |
|--------|--------------------------------------------|

|                                                         |   | For the years ended March 31, |   |
|--------------------------------------------------------------|--------|--------------------------------------------------------|--------|
|                                                         |   | 2008                                                   |   | 2007 |   |
| Federal                statutory rate                        |   |                                                   | 34     | % |   | 34 | % |
| State                income tax rate, net of federal benefit |   |                                                   | 6      | % |   | 6 | % |
| Permanent                differences                         |   |                                                   | -28    | % |   | -29 | % |
| Valuation                allowance                           |   |                                                   | -12    | % |   | -11 | % |
| Effective                income tax rate                     |   |                                                   | 0      | % |   | 0 | % |

| **10.** | **COMMITMENTS                AND CONTINGENCIES** |
|---------|--------------------------------------------------|

|  | [a] | Leases                -                The Company leases its office facilities and equipment under                non-cancelable lease arrangements. The Company leases and maintains                its                principal place of business at 3000 Lakeside Drive, Suite 300 South,                Bannockburn, IL 60015. The Company leases approximately 10,000 square                feet                in this facility. The lease term began on February 1, 2007 and continues                to July 31, 2012. The straight line rent expense is $17,480 per month,                including current estimates for property taxes and operating costs. |
|--|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2009   |   | $      | 426,660   |   |
|--------|--------|--------|-----------|--------|
| 2010   |   |   | 396,629   |   |
| 2011   |   |   | 287,382   |   |
| 2012   |   |   | 211,798   |   |
| 2013   |   |   | 69,920    |   |
|   |   | $      | 1,392,389 |   |

----

| **10.** | **COMMITMENTS                AND CONTINGENCIES,                continued** |
|---------|----------------------------------------------------------------------------|

|  | [b] | Legal                Proceedings                -                On May 17, 2007, an action was filed in Los Angeles Superior Court                for                breach of contract and similar causes of action by the Epstein Family                Trust against the Company in relation to two outstanding promissory                notes                issued by the Company totaling $75,000 ($25,000 and $50,000) plus                accrued                interest and seeking attorney’s fees and costs in addition to the                principal and interest. These notes were guaranteed by Mr. Geoffrey                Talbot, the Company's CEO, for up to $25,000, and therefore Mr. Talbot                was                joined in the legal action as a third-party defendant. The case number                is                BC 371 276. The parties have reached a conditional settlement agreement                where the plaintiff has agreed to convert all principal and interest                into                shares of common stock at a price of $1.00 per share provided the                Company                completes the proposed Convertible Debenture and warrant financing                in a                timely manner. The Company is in receipt of the executed conversion                subscription documents and has issued the shares of common stock                related                to this conversion. Until such closing, the litigation has been put                on                hold. In the event the litigation is continued it will be defended                vigorously. |
|--|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | [c] | Employment                Agreements                -                On September 16, 2000, Geoffrey P. Talbot and Peter J. Upfold entered                into                employment agreements with the Company providing for annual compensation                in the first year of employment of $160,000. Because of conditions                contained in certain loan agreements, the commencement date of the                subject                employment agreements was delayed until the satisfaction of certain                conditions, which the Board of Directors deemed satisfied as of July                1,                2004. The compensation paid or accrued to Mr. Talbot and Mr. 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. Each of the foregoing employment                agreements has a five-year term through June 30, 2009. Effective                July 1,                2004, the agreements were amended. Both Mr. Talbot and Mr. Upfold                verbally                agreed to delay the second year contractual increase to $200,000                to                January 1, 2007. Therefore, for years four and five of the employment                agreements, annual salary increases, performance and incentive bonuses,                including the issuance of stock options, are to be negotiated and                approved                by the Compensation Committee on an annual basis immediately prior                to the                Company filing the previous years’ Form 10-KSB or June 30, whichever event                occurs first. |
|--|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | [d] | Product                Liability Insurance                -                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. |
|--|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | [e] | Other                -                The Company has reported to the IRS the taxable income of the Chief                Executive Officer and Chief Technology Officer to date using forms                1099                and 1096. Since 2001, the Company has accrued approximately $575,000                as                accrued compensation which was calculated as the difference between                their                gross and net compensation for the period. The Company plans to pay                this                accrued compensation of approximately $575,000 to the Chief Executive                Officer and Chief Technology Officer to satisfy the tax obligations                related to the income reported. |
|--|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| **10.** | **COMMITMENTS                AND CONTINGENCIES,                continued** |
|---------|----------------------------------------------------------------------------|

| **11.** | **MAJOR                CUSTOMERS, FOREIGN REVENUE AND CONCENTRATION OF CREDIT                RISK** |
|---------|-----------------------------------------------------------------------------------------------------|

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

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

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

| **12.** | **SUBSEQUENT                EVENTS** |
|---------|--------------------------------------|

----

| **12.** | **SUBSEQUENT                EVENTS, continued** |
|---------|-------------------------------------------------|

----