**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
 
 For
        the
        fiscal year ended MARCH 31, 2005
 
 [ 
                  ]
              TRANSITION
                  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                  OF 1934
 
 For
        the
        transition period from: ________________ to _________________
 
  Commission
        File No. 000-09751
  **STATMON
        TECHNOLOGIES CORP.**
 
 Nevada
              83-0242652(State
                  or other jurisdiction of
                incorporation
                  or organization)
              (I.R.S.
                  Employer Identification No.)
 
  345
        North
        Maple Drive, Suite 120
 Beverly
        Hills, CA
        90210
 (Address
        of principal Executive Offices Zip Code)
  Registrant’s
        telephone number, including area code: (310) 288-4580
  Securities
        registered under Section 12(b) of the Exchange Act: None
  ----------------------------------
 Securities
        registered under Section 12(g) of the Exchange Act: Common Stock, $.01 par
        value
 (Title
        of
        class)
  Check
        whether the issuer (1) filed all reports required to be filed by Section
        13 or
        15(d) of the Exchange Act during the past 12 months (or for such shorter
        period
        that the issuer was required to file such reports), and (2) has been subject
        to
        such filing requirements for the past 90 days.  Yes ý No  ̈
  Check
        if
        there is no disclosure of delinquent filers in response to Item 405 of
        Regulation S-B contained in this form, and no disclosure will be contained,
        to
        the best of issuer’s knowledge, in definitive proxy or information statements
        incorporated by reference in Part III of this Form 10-KSB or any amendment
        to
        this Form 10-KSB.  ̈
  State
        issuer’s revenues for its most recent fiscal year: $1,414,096
  As
        of
        June 30, 2005, 5,365,205 shares of the Company’s common stock, par value $.01
        per share, were held by non-affiliates which had a market value of approximately
        $3,776,644 based on available OTCBB quote at the average between the bid
        and
        asked price of $0.70. The number of shares of common stock of the registrant
        outstanding as of June 30, 2005 was 12,761,057.
  
  **TABLE
        OF CONTENTS**
  Page
  PART
        I
 ITEM
                      1. Description of Business
                  1ITEM
                      2. Description of Properties
                  20ITEM
                      3. Legal Proceedings
                  20ITEM
                      4. Submission of Matters to a Vote of Securities Holders
                  21
 
 PART
        II
 
 ITEM
                  5. Market for the Common Equity and Related Stockholder
                  Matters
              21ITEM
                  6. Management’s Discussion and Analysis of Financial Condition and Results
                  of Operation
              23ITEM
                  7. Financial Statements
              29ITEM
                  8. Changes In and Disagreements with Accountants on Accounting
                  and
                  Financial Disclosure
              29ITEM
                  8a. Controls and Procedures
              29
 
 PART
        III
 
 ITEM
                  9. Directors, Executive Officers, Promoters, and Control Persons;
                  Compliance with Section 16(a) of the Exchange Act
              29ITEM
                  10. Executive Compensation
              32ITEM
                  11. Security Ownership of Certain Beneficial Owners and
                  Management
              33ITEM
                  12. Certain Relationships and Related Transactions
              34
 
 PART
        IV
 
 ITEM
                  13. Exhibits and Reports on Form 8-K
              35ITEM
                  14. Principal Accountant Fees and Services
              37Signature
                  Page
              38
  
 This
        report contains forward-looking statements within the meaning of Section
        27A of
        the Securities Exchange Act of 1934. Some of such statements involve substantial
        risks and uncertainties. In some cases, you can identify these statements
        by
        forward-looking words such as "may," "might," "will," "should," "could,"
        "plan,"
        "project," "continue," "believe," "expect," "anticipate," "intend," "estimate"
        and other variations of these words or comparable words. In addition, any
        statements that refer to expectations, projections or other characterizations
        of
        events, circumstances or trends and that do not relate to historical matters
        are
        forward-looking statements. Such statements involve known and unknown risks,
        uncertainties and situations that might cause our or our industry's actual
        results, level of activity, performance or achievements to be materially
        different from any future results, level of activity, performance or
        achievements expressed or implied by these statements. Certain factors that
        might cause such a difference are discussed in the section entitled "Cautionary
        Factors that May Affect Future Results" on page 11 of this Form 10-KSB, along
        with any other cautionary language in this report, provide examples of risks,
        uncertainties and events that may cause our actual results to differ from
        the
        expectations described or implied in our forward-looking
        statements.
  Although
        we believe the expectations reflected in the forward-looking statements are
        reasonable, we cannot guarantee future results, levels of activity, performance
        or achievements. You should not place undue reliance on these forward-looking
        statements, which speak only as of the date of this report. Except as required
        by law, we do not undertake to update or revise any forward-looking statement,
        whether as a result of new information, future events or otherwise.
  In
        this
        Report, “Statmon”, “the Company”, “we”, “us”, or “our” refer to Statmon
        Technologies Corp. and its wholly-owned subsidiary Statmon-eBI Solutions,
        LLC.
  ITEM
        1.DESCRIPTION
        OF BUSINESS
 
 **Company
        Overview**
 
 Statmon
        Technologies Corp. (the “Company”) develops, markets and licenses a remote
        control, monitoring and facilities management platform designed for universal
        application across vertical markets. Customers utilize our proprietary
        application software and integration platform to connect and manage multiple
        site operations in real time by integrating disparate software systems with
        diverse numbers of analog and digital devices. Multiple sites can automatically
        interact with each other and report up stream to a single dashboard style
        application software with customized screens and drill-down control capabilities
        all accessible from any Internet or network connection. Additional features
        of
        the platform include automatic bi-directional control and response, root
        cause
        analysis, data aggregation and alarm notification. The platform proactively
        automates and optimizes mission critical devices and integrates facilities
        management operations. Our proprietary software products include the "Axess"
        and
        "Neuro" applications. Harris Broadcast Communications, a division of Harris
        Corporation (“Harris”) have re-badged Axess as “ReCon” under an OEM agreement
        for their Harris Broadcast clients. Axess, Neuro and ReCon interface with
        the
        Company’s integration products including the "EIF", "UIF" and "UVM" product
        lines.
 
 Our
        significant clients include General Electric - NBC/Telemundo Network, Viacom
        -
        CBS, Disney - ABC TV & Radio Networks, Harris Broadcast and Sinclair
        Broadcasting. We recently announced an alliance with Pixelmetrix Corporation
        Pte
        Ltd, a Singapore based leading digital test and measurement technology company
        focused on the broadcast and telecommunications industries. The Pixelmetrix
        alliance was formed to provide a unique control, management and test measurement
        solution for the digital television (DTV) and telecommunications markets.
        Additionally, we also recently announced a joint venture with US Energy Systems
        Corp., which is focused on the telecommunications, DC Power/stored energy
        and
        infrastructure markets. The US Energy joint venture has three Beta sites
        conducting live testing and capabilities analysis with governmental
        infrastructure clients with large numbers of remotes sites. We are beta testing
        with two battery monitoring device companies who have worldwide installations
        that include local, state and federal government, military, oil refining,
        petrochemical and energy infrastructure operations. We also provide specialized
        systems integration services to a variety of customers through our wholly-owned
        subsidiary, Statmon - eBI Solutions LLC (“SeBI”).
 
 1
 
 **History**
 
 The
        Company was previously known as Viable Resources Inc. ("Viable") and was
        incorporated in the State of Nevada on August 24, 1978 with authorized common
        stock of 25,000,000 shares at a par value of $0.01 per share. Between 1978
        and
        1992, Viable was engaged in the mining business. On February 29, 1984, Viable
        filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Act in
        the
        United States Bankruptcy Court in the District of Wyoming (the “Viable Resources
        Bankruptcy”). On July 13, 1988, the Bankruptcy Court issued the final decree
        closing the case of Viable Resources, Inc. (No. 84-00138-B), pursuant to
        Rule
        3022 under the U.S. Bankruptcy Act. During 1992, Viable ceased operations
        and it
        remained inactive until June 2002 when it proceeded with a reverse merger
        by
        acquiring all of the issued and outstanding common stock of Statmon Technologies
        Corp. (“Statmon Delaware”), a privately held Delaware corporation incorporated
        in June 2000. As a result, Statmon Delaware became a wholly-owned subsidiary
        of
        the Company and the principal shareholders of Statmon Delaware became the
        controlling shareholders of the Company. All pre-existing debt incurred or
        identified after the Viable Resources Bankruptcy had been extinguished by
        the
        statute of limitations or was previously settled before the transaction with
        Statmon Delaware.
  Prior
        to
        the transaction with Statmon Delaware, the Viable Board of Directors, and
        a
        majority of its shareholders as of May 22, 2002, approved the Agreement and
        Plan
        of Reorganization (the “Plan of Reorganization”) between the Company and Statmon
        Delaware. Under the Plan of Reorganization the Company changed its name to
        “Statmon Technologies Corp.” and exchanged 7,575,000 shares of its common stock
        (on a post reverse split basis) for all of the issued and outstanding common
        stock of Statmon Delaware. The Company's issued and outstanding common stock
        was
        consolidated (reverse split) on a one for sixteen basis on June 12, 2002,
        the
        effective date of the transaction.
  In
        connection with the Plan of Reorganization, the Company also issued warrants
        to
        purchase 250,000 shares of common stock (post reverse split) at $5.00 per
        share
        for a period of five years to the members of the Viable Board of Directors,
        all
        of whom resigned upon the appointment of the present members of the Board
        of
        Directors on June 13, 2002.
  To
        pursue
        systems integration and new vertical market opportunities for Statmon products,
        in June 2001 we established “Statmon Professional Services Organization”, d/b/a
“Statmon PSO”, in conjunction with Blue Skies LLC, (“Blue Skies”) an integration
        consulting firm controlled by Mr. John Hoff. Blue Skies introduced “eBI
        Solutions LLC” to the Company and in June 2002 in association with a joint
        venture we formed “SeBI” to replace the Statmon PSO activities and pursue
        specialized enterprise systems integration business and new vertical market
        opportunities for Statmon’s products.
 
 *Software
        History*
 
 Peter
        J.
        Upfold, our Chief Technical Officer (CTO), Vice Chairman, Director and largest
        shareholder, initially developed the proprietary technology upon which our
        software products are based for the Australian and New Zealand broadcast
        industry to monitor and control satellite earth-stations, television and
        radio
        transmitters, broadcasting towers, television and radio station devices and
        computer networks. After 12 years of development, the software and integration
        technology was launched in 1996 and it has been installed in more than 60
        broadcast sites in Australia and New Zealand, including satellite operator
        NewSkies-SATTEL and the Clear Channel controlled TRN-Radio New Zealand
        network.
 
 2
 In
        1998
        Mr. Upfold relocated to the United States from Australia and in early 1999,
        the
        North American versions of the technology were installed and tested in three
        mainstream California broadcasters, KABC Disney Radio, KJLA in Los Angeles
        and
        KESQ Palm Springs (FOX, Telemundo and Disney's ABC television affiliates,
        respectively).
 
 In
        June
        2000, Peter J. Upfold co-founded Statmon Delaware and assigned all of his
        rights, title and interest in the technology to Statmon Delaware through
        a
        Technology Assignment Agreement. On June 12, 2002, through an Exchange
        Agreement, Statmon Delaware became a wholly-owned subsidiary of the Company.
 
 In
        2001-2002, we installed our products throughout the GE Capital-owned NBC
        Television Network, inside the GE Capital wide area network (“WAN”) and also
        commenced rollouts for major broadcast station groups, including ABC-Disney,
        Telemundo (owned by NBC), Sinclair Broadcasting, Lin Television, Tribune,
        Hearst
        Argyle, Raycom and others.
 
 On
        January 18, 2003 we entered into a three-year original equipment manufacturer
        (“OEM”) distribution agreement with Harris Broadcast Communications, a division
        of Harris Corporation (“Harris”). Under this agreement Harris became our OEM
        broadcast industry distributor and received certain exclusivity rights based
        on
        minimum purchases of our software and hardware products. Harris’s right to
        exclusivity in the broadcast industry terminated on July 22, 2004, although
        we
        continue to work closely together. Harris is a dominant equipment manufacturer
        and software distributor in the broadcast market with over 1,600 sales engineers
        worldwide. Harris has branded our "Axess" application software as "ReCon".
        We
        have interfaced our software with the Harris transmitter line of hardware
        and
        software products. Sales and marketing of ReCon under the Harris banner were
        launched at the National Association of Broadcasters ("NAB") trade show in
        Las
        Vegas in April 2003. Our ReCon product received the prestigious *Broadcast
        Engineering* (The
        Journal of Digital Television) sponsored " *Broadcast
        Engineering 2003 Pick Hit Award* ."
 
 Certain
        of our significant clients, NBC/Telemundo, Sinclair Television and Lin
        Broadcasting, are excluded from the Harris OEM agreement, even during Harris’s
        exclusive period. With the termination of the Harris exclusivity restrictions
        we
        are now able to access complimentary sales channels in the broadcast market
        through our internal sales force and new sales channels including
        Pixelmetrix.
 
 **Products
        and Services**
 
 Our
        technology is a sophisticated control panel, or "dashboard style" management
        tool kit, linking digital and analog control and information generating elements
        on a wide scale or narrow channel basis. We believe that pre-packaged,
        product-based solutions such as ours are replacing custom “in-house” software
        and integration services. Our proprietary technology products offer
        bi-directional telemetry for remote control, automation, self-healing and
        monitoring of devices, systems and facilities in real time which results
        in
        improved operating efficiencies, headcount reductions and a greater return
        on
        investment (“ROI”). We believe additional ”value-add” can also be derived from
        the ability to process and disseminate vast amounts of gathered information
        into
        real time management information, as well as predictive trends analyses and
        statutory compliance reporting packages.
  We
        plan
        to launch a “central server model solution”, which allows the data to reside at
        a Statmon facility. This offering is attractive to customers who prefer
        outsourcing and pay for services as an ongoing operating expense rather than
        capital expenditure. We believe services or out-sourcing models are gaining
        popularity in the market place.
  During
        our brief history we have established a successful track record with major
        corporations including NBC, CBS, ABC and Harris, where our products are
        considered highly stable and reliable and the Company highly responsive to
        customers needs. Our products are fully scalable and are designed to offer
        off-the-shelf solutions to our business customers to help them deliver
        measurable improvements in their operating margins and asset management.
        In the
        government sector we believe that our products can make time critical
        institutional, defense and governmental infrastructure projects, such as
        first
        responder telecommunications, power and water management, Homeland Security
        and
        others achievable and affordable within capital budget constraints.
  3
 Asset
        management and security have become a major priority since September 11,
        2001,
        facilitating a worldwide review of the needs for real-time monitoring,
        automation and remote management capabilities. We believe that this environment
        has presented a significant opportunity for us to incorporate appropriate
        features and functionality into our proven application software. For example,
        the major television networks are automating the FCC required Emergency Alert
        System (EAS) alarm system with our software, as well as monitoring their
        mission-critical transmission, microwave links, studio and facilities management
        operations.
  We
        are
        making progress expanding outside the broadcast industry into other vertical
        markets where we are adapting our proprietary software and integration
        technologies to provide real time monitoring and remote control capabilities
        across a range of markets. We are interfacing front-end custom screen, protocols
        and system integration to industry specific analog and digital devices
        and different types of disparate network systems. We have aligned
        with
        three new strategic distribution partners who already have an install base
        where
        our products can be employed as middleware and/or provide complete end-to-end
        and system-wide facilities management solutions.
  **Software**
 
 ***Axess***
 
 The
        Axess
        software application remotely monitors devices, networks and systems where
        automatic control and response is required. With Axess, system operators
        and
        engineers can remotely manage operations at the device level
        and rely
        on the system’s automation capabilities, as well as alarm notification, root
        cause analysis and fault descriptions, triggered when situations exceed
        a
        predetermined range or parameters. Axess can take immediate pre-programmed
        action on its own, such as switching to a redundant system, segregating
        or
        resetting devices, running a control program, or disabling fault-causing
        issues. Axess operates on a Windows platform, is fully scalable and can
        simultaneously monitor large numbers of devices, networks and
        systems.
        ReCon is the Harris branded broadcast version of Axess.
  ***Neuro***
  Neuro
        is
        an embedded software engine and database designed for use with our EIF-32
        hardware. It incorporates features of Axess with the added benefit of
        self-monitoring and stand-alone operation or multi-site operation with Axess.
        The software enables the system operator or engineer to communicate
        remotely with devices and equipment situated in the field and
        control
        settings and to retrieve critical data without operators physically
        having
        to visit the site.
   **Hardware**
  ***UIF-32
        (Universal Interface Unit)***
 
 The
        UIF-32 is a universal interface designed to allow Axess to collect 32 channels
        of analog, logic type and control information. The UIF-32 translates the
        General
        Purpose Input and Output (“GPI/GPO”) channels into serial or TCP/Ethernet data
        streams for process by Axess. The UIF-32 is a “passive” device, which means it
        simply relays information from devices, such as temperature sensors, door
        alarms
        and light switches.
 
 4
 ***UIF-96S
        (Universal Interface Unit)***
 
 The
        UIF-96S is a universal interface designed to allow Axess to collect information
        from 96 logic type channels.
 
 ***EIF-32
        (Embedded Interface Unit)***
 
 The
        EIF-32 is a Universal Interface similar to the UIF-32, but upgraded with
        an
        embedded computer. The EIF-32 can be a stand-alone device or be integrated
        with
        the Axess software. It operates using the Neuro software, and can interface
        with
        our Axess software for enhanced functionality and multi-site operations.
        The
        EIF-32 is an intelligent device that enables the system operator or engineer
        to
        remotely connect to equipment situated in the field to retrieve critical
        data
        without visiting the site.
 
 ***UVM-6
        (Universal Voltage Monitor)***
 
 The
        UVM-6
        is a hardware interface that allows a host computer to accurately measure
        and
        monitor six different A.C. line voltage (mains) sources on a remote
        basis.
 
 **Key
        Features of Our Products**
 
 We
        have
        designed our proprietary software and hardware products with a number of
        key
        features to meet the needs of our customers in all markets,
        including:
  ·
              Ease
                  of implementation, installation, maintenance, and
                  upgrade;
 ·
                Fully
                    scalable and customizable;
 ·
              Ability
                  to integrate the monitoring and management of a wide range of protocols
                  and disparate systems and devices;
 ·
                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;
 ·
                Real-time
                    digital data collection, aggregation and information management
                    services;
 ·
              Time
                  and motion efficiencies through remote-site monitoring, managing
                  and
                  remote control capabilities from any web-enabled
                  location;
 ·
                Device
                    automation redundancy and "fail-safe" problem
                    solving;
 ·
              Additional
                  assurance against system down-time by preemption and prevention
                  rather
                  than cure;
  ·
                Preventative maintenance opportunities based
                  upon trend
                  analysis of collected data; and
 
 ·
                The
                    ability to “daisy-chain” the hardware devices from a single serial or LAN
                    (Local Area Network)
                    connection.
  5
 
 **Integration
        Services**
 
 Systems
        integration is an integral aspect of business development in the software
        industry. Our strategy is to leverage the value proposition of our remote
        control and monitoring products with full integration and end-to-end solutions
        across a range of vertical markets. In June 2001, we initiated Statmon PSO
        to
        provide integration services and support for our software products, hardware,
        as
        well as network support, e-business integration and ERP implementation services.
        To perform integration and consulting services for our clients, Statmon PSO
        contracted with consultancy firm Blue Skies LLC (“Blue Skies”), a related entity
        controlled by John Hoff, one of our principal shareholders, which continued
        until June 2003. Statmon PSO was replaced by Statmon- eBI Solutions, LLC
        (“SeBI”), formed to focus on opportunities in the e-business integration market
        and opportunities for the development of new software and hardware products
        to
        remote control and monitor systems at the device level up to the enterprise
        level.
  e-Business
        integration technology allows companies to effectively share and send data
        between different systems in real time within their organizations as well
        as
        with external partners such as suppliers and customers. Beyond the integration
        of disparate systems, e-Business integration solutions can enable the automation
        of entire business processes while allowing for flexible reconfiguration
        to
        maximize efficiencies and adapt to changing business needs. We believe that
        e-Business integration has become an essential technology for large and
        medium-sized organizations to increase efficiencies, reduce costs and drive
        customer value.
 
 **Customers**
 
 Customers
        for our software and hardware products include Harris, NBC/Telemundo-GE Capital,
        ABC-Disney, CBS-Viacom, Sinclair and Lin Television and major customers of
        Harris Broadcast, including Belo, Hearst Argyle and Tribune Broadcasting.
        These
        broadcast customers use our technology to monitor, automate and manage
        transmission, audio, video and data.
  Customers
        for our systems integration services include Blue Skies, Emi Music, Columbia
        Sportswear, Warner Music Group Services, Mountain High Resorts and WestCon.
  In
        fiscal
        2005, Harris, WestCon and Blue Skies represented 36%, 22% and 19% of our
        revenues, respectively. In fiscal 2004, Harris, WestCon and Mountain High
        Resorts represented 60%, 17% and 5% of our revenues, respectively.
 
 **Fiscal
        2006 Goals**
 
 Our
        goals
        for fiscal 2006, given sufficient capital, are to:
  ·
              Aggressively
                  promote the Company’s flagship software product “Axess” and associated
                  product lines into the expanded sales and distribution channels
                  including
                  the US Energy Systems Joint Venture, Pixelmetrix OEM, Nautel, BTECH
                  OEM
                  and the Harris Broadcast OEM;
  ·
              Ramp
                  up the product positioning and company profile in the financial
                  and
                  vertical markets;
  ·
              Expand
                  the in-house sales and sales channel business development
                  team;
  ·
              Increase
                  focus on the worldwide radio market and digital transmitter retrofit
                  cycle;
  6
  ·
              Identify
                  strategic vertical market collaboration opportunities in the energy,
                  telecommunications, power management, military, government and
                  corporate
                  infrastructure markets;
  ·
              Identify
                  strategic vertical market operators with complimentary technologies
                  for
                  end-to-end solutions including power supply, database, wireless
                  and sensor
                  technologies;
  ·
              Recruit
                  appropriate industry experts for our target strategic vertical
                  markets;
                  such experts understand the needs and have deep industry knowledge
                  and
                  contacts, plus a vision for the integration of our products and
                  services;
                  and
  ·
              Evaluate
                  private label/OEM opportunities domestically and internationally
                  to
                  exploit our technology in markets and for applications within and
                  beyond
                  our current scope.
  **Radio
        and Television Broadcasting Industry**
  Several
        significant rules issued by the Federal Communications Commission (FCC) of
        the
        United States in the late 1990’s opened opportunities for our products in the
        United States broadcast industry. These changes included (i) radio and other
        broadcast stations are allowed to operate “unattended”, provided a reliable
        remote control system is installed, (ii) station owners are permitted to
        own
        multiple stations in a single marketplace and broadcast multiple call signals
        from the same physical location, and (iii) stations are required to transmit
        both HDTV and analog television signals until 2006.
  These
        developments dramatically affected management and ownership structures in
        the
        radio and television broadcast industry. This is an industry that has
        traditionally been so competitive that radio and television station owners,
        management and employees would not even communicate with the teams from rival
        networks. The FCC rule changes have promoted rapid consolidation, making
        it
        common to find network giants such as ABC, FOX, and even new market share
        diluting competitors, operating out of a single building with common
        infrastructure and staff. We believe that these evolving broadcast industry
        circumstances will continue to provide on-going opportunities for us, including
        the central server model and the outsourcing of remote control and services.
  **Software
        Industry**
  With
        the
        solid benefits offered by a web-enabled system, we believe the majority of
        large
        enterprises will now transition their software to this architecture over
        the
        next decade. In fact, many software vendors are rushing to develop new
        functionality that was previously cost-prohibitive under either client/server
        or
        mainframe systems.
  As
        the
        software industry has evolved, so have the demands of enterprises purchasing
        software and integration services. Enterprises have become more discriminating
        and more influential in dictating their terms to the software industry.
        Enterprises increasingly want to buy from vendors that provide highly functional
        products within newer areas such as asset and facilities management, system
        and
        device control and monitoring, supply chain and procurement as well as in
        the
        bread-and-butter application areas such as Enterprise Resource Planning (ERP).
        Leading-edge, web-based architecture is also coming to be seen as an essential
        need for operations. Moreover, companies are beginning to expect software
        vendors to bear an increased portion of the integration burden by developing
        out-of-the box connectors to common applications and devices.
  **Business
        Strategy - Potential New Vertical Markets**
  We
        plan
        to launch our products into an expanding range of vertical markets, including
        power management, telecommunications, infrastructure, energy, institutional,
        defense and governmental markets.
  7
 We
        believe virtually any device, in any quantity, for any application, can be
        networked to provide full system integration for multiple site automation,
        monitoring, management, remote control and/or the aggregation of data. Our
        products are designed to be robust and adaptable to a multitude of vertical
        markets. We are focused on the ongoing development of our products and will
        seek
        strategic partners with pre-existing install bases and/or wide scale
        distribution. We believe these relationships will enable us to penetrate
        markets
        where we do not have a presence.
  Our
        acceptance by the major broadcasters has permitted us to demonstrate the
        powerful functions, capabilities and stability of our core technology platform.
        The current version of our proprietary software is designed to provide a
        low
        cost, non-customized solution to allow customers to monitor in real time,
        in
        digital or analog mode, many different varieties and numbers of sites, systems
        and remote devices. Our goal in this regard is to market our software as
        a
        cross-industry, cross-application, end-to-end or middleware solution that
        can
        demonstrate the same cost-saving efficiencies and fail-safe automation in
        a wide
        range of applications and markets as we currently do in the broadcast industry.
  Our
        product and integration business strategy is to directly license our proprietary
        products to all levels of broadcasters including Pixelmetrix and Harris as
        well
        as collaborating with systems integrators and strategic partners, like US
        Energy
        Systems Corp., for Joint Venture, Strategic Alliance, and/or Private Label/OEM
        distribution across the virtually unlimited range of vertical markets. We
        believe that collaboration with powerful strategic partners will identify
        solution opportunities utilizing the Statmon products for monitoring,
        self-healing, automated asset management and/or remote control of technical
        operations, including the aggregation of data.
  Our
        objective is to be perceived in the market as a leading remote control,
        monitoring and facilities management solution provider. We give our new
        customers extensive training in our technology and its functionalities and
        provide materials and customer support for the on-going maintenance, monitoring
        and use of our products. We may also provide this total solution through
        our
        strategic partnerships and joint ventures, so that our products and applications
        can achieve greater distribution and use.
  We
        are
        identifying Domestic and Foreign partners and proceeding with our evaluation
        and
        development of a number of additional vertical markets, including the
        following:
  ·
              Telecommunications;
  ·
              Energy
                  Industry;
  ·
              Tower
                  Management;
  ·
              Homeland
                  Security - Remote Control, Monitoring and Surveillance;
                  and
  ·
              Infrastructure
                  - Remote Control, Monitoring and Data
                  Aggregation.
  Examples
        of our capabilities within these potential new markets include assisting
        companies in the low cost management of power supply, remote site equipment
        and
        devices and other similar applications.
  **Competition**
 
 The
        monitoring and remote control of devices and disparate systems market is
        becoming more diverse everyday. The Microsoft touted "smart house" is a
        much-discussed example of remote device control. IBM has run network television
        commercials where a refrigerator calls a repairman before it breaks down.
        We
        have similar network-based Remote Device Management technologies currently
        implemented in the broadcast industry which are suitable for a broad range
        of
        applications including the consumer markets.
  8
 Several
        hardware-based vendors provide monitoring solutions to the radio and television
        broadcast facility industry. ILC is a direct software based competitor and
        AST
        has recently entered the market in an attempt to imitate Statmon’s products.
        Burk-Gentner, Mosley and others represent a significant portion of the
        marketplace primarily focused on transmitter monitoring. These products are
        quality offerings designed by companies and individuals who have strong industry
        contacts. These products are typically marketed directly to the engineering
        department at radio and television stations as a method of increased
        convenience. We believe that our products are a more comprehensive, convenient
        and cost-effective solution to information management needs and a solution
        applicable to all of our customers’ mission-critical business
        operations.
  For
        over
        ten years, many companies have targeted the manufacturing process and data
        center market with products similar in fit, form and function to us, including
        Hewlett Packard, IBM, National Instruments Corp., P.R.I. Automation, Kingfisher
        and Wonderware. These companies have achieved varying levels of success in
        the
        Manufacturing and Engineering Design market space. Although it does not appear
        that these companies are focused on expansion outside their core industries,
        they do represent a peripheral competitive threat to us.
  Our
        competitors in the systems integration business range from very large companies,
        such as IBM and Oracle, to medium and smaller-sized public and privately
        held
        companies that offer their services on national, regional and local levels.
  We
        compete in markets primarily on the basis of the following factors:
  ·
              Breadth
                  of geographic presence;
  ·
              Ease
                  of integration;
  ·
              Reliability;
  ·
              Ability
                  to offer turnkey solutions;
  ·
              Customer
                  service;
  ·
              Performance;
  ·
              Flexibility;
                  and
  ·
              Scalability.
  There
        are
        low barriers to entry to new or existing businesses seeking to offer services
        in
        all of the markets in which we compete. As a result, our business environment
        is
        intensely competitive, highly fragmented and rapidly changing. Competition
        can
        come from many sources and may be focused on different components of our
        business.
  Nearly
        all of our competitors have substantially greater financial, technical and
        marketing resources, larger customer bases, longer operating histories, greater
        name recognition and more established relationships in the industry than
        we
        have. In addition, a number of these competitors may merge or form strategic
        partnerships. As a result, certain of these competitors may be able to offer,
        or
        bring to market earlier, products or services that are superior to our own
        in
        terms of features, quality, pricing or other factors. Our failure to compete
        successfully in any of the markets in which we compete could have a material
        adverse effect on our business, prospects, results of operations, financial
        condition or on the price of our common stock.
  **Business
        Development**
 
 We
        believe that the most appropriately targeted customer will be the President,
        CEO, CFO or Vice-President of Engineering in organizations that manage multiple
        networks or facilities with numerous potential applications. Due to the
        executive level at which we are selling and the relatively large organizations
        that we are targeting, it will be necessary for our senior-level management
        to
        be actively involved in the sales process. In addition, we plan to supplement
        the business development team with industry specialists who can aid in the
        product development, selection of strategic partners and sales channel
        opportunities in each vertical market.
  9
 We
        plan
        to attend various symposiums for vendors, including national, state and local
        government conferences and symposiums, and to publicize our products and
        services in various trade journals, including security companies, contractors
        and the transportation industry. We will, however, place emphasis on our
        partnering model in which we will market to companies that have existing
        installed bases with product offerings where we are able to provide value-added
        products and services. We may structure these relationships through OEM license
        agreements, joint ventures, partnerships and similar arrangements.
  In
        order
        to fully maximize the potential of our technology and proprietary knowledge
        we
        will need to enlist the greater resources of strategic partners and
        distributors. These relationships will enable us to further penetrate our
        existing markets, as well as to enable us to penetrate markets where we do
        not
        have a presence. Licensing our products for private label/OEM distribution
        will
        allow us to broaden our revenue base on a marginal cost basis. We are actively
        seeking appropriate alliances and partnerships with entities in energy, power
        management, wireless, security, environmental, government infrastructure,
        defense and other strategic emerging markets. Furthermore, we are pursuing
        domestic and international software distributors that service the computer
        network and web server management markets.
 
 **Customer
        Support and Service**
 
 We
        believe that the support and service we provide to our customers are key
        competitive advantages and, as part of our strategy, we will continue to
        focus
        on the development of such support and service. The types of services that
        we
        provide to our customers include:
 
 ·
              Tiered
                  levels of support 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**
 
 Our
        research and development efforts are focused on constantly improving the
        functionality and performance of our software products and services. We obtain
        extensive product development input from our customers and potential customers
        and monitor our customers' evolving needs and changes in the marketplace.
        We
        believe our success will depend, in part, on our ability to develop and produce
        new software features, functionality and enhancements to our existing platform
        and products. We have made investments and continue to invest in research
        and
        development. Our research and development expenditures were approximately
        $381,000 in fiscal 2005 and $232,000 in fiscal 2004. If we are unable to
        develop
        new enhancements to our existing products on a timely basis, or if our new
        enhancements fail to achieve market acceptance, our business, prospects and
        results of operation will suffer.
  **Sources
        and Availability of Materials**
 
 We
        outsource the design and assembly of all of our specialized interface hardware
        products to a manufacturer that has a single facility in Canada. All of the
        components of our hardware products are off-the-shelf items that we can obtain
        from multiple sources, except for our printed circuit boards, which would
        need
        to be manufactured according to our design specifications. Our current
        third-party manufacturer has assured us that it has additional capacity through
        its own outsourcing contacts if our volume grows beyond its capacity or it
        is
        otherwise unable to perform. In addition, if needed, we believe that we could
        obtain alternative third-party manufacturers within a short period.
 
 10
 **Patents,
        Trademarks, Copyrights and Licenses**
 
 We
        have
        designed our software products for use with personal computers and devices
        running in the Microsoft Windows operating environment. We rely on internally
        developed computer code, new technologies and know-how to help us protect
        our
        intellectual property. In addition, we regard our technology as proprietary
        and
        attempt to protect it by implementing security password codes, encryption
        and
        may seek patents, copyrights or trademarks, where appropriate, and by invoking
        trade secret laws and confidentiality and non-disclosure agreements.
 
 We
        have
        trademark protection for our name on our products and intend to apply for
        registration of certain copyrights and key trademarks and service marks and
        intend to introduce new trademarks and service marks, where we deem appropriate.
        We have not applied for nor do we hold any patents on any of our products.
        We
        understand that the means that we have used afford only limited protection
        and
        may not adequately protect our rights. In addition, despite the precautions,
        it
        may be possible for a third-party to obtain our services or technology without
        authorization. We also run the risk of a third-party developing similar
        technology independently through reverse engineering techniques. In the event
        this occurs we will seek protection and remedy through the courts. Because
        of
        the dynamic state of the development of application software, we use the
        strategy that continual product enhancement and development is perhaps our
        best
        intellectual property protection, although this may not, in fact, be the
        case.
 
 **Licenses
        and Warranties**
 
 Our
        software products are designed for use with personal computers and devices
        running in the Microsoft Windows operating environment. We thus obtain licenses
        and warranties from Microsoft in this connection. While we do not offer
        warranties on our software and hardware products to our customers beyond
        replacement, we give our customers the benefit of whatever warranty protection
        we receive from Microsoft and other suppliers.
 
 **Employees**
 
 As
        of
        June 30, 2005 we had eleven full-time employees, of which two were engaged
        in
        sales, marketing and sales channel development; two were engaged in technical
        support and training; three were engaged in software development and
        engineering; and four were engaged in management, administration, finance
        and
        operations. None of our employees are covered by any collective bargaining
        agreement. We generally consider our relationship with our employees to be
        satisfactory and have never experienced a work stoppage.
  
 **CAUTIONARY
        FACTORS THAT MAY AFFECT FUTURE RESULTS**
 
 The
        disclosure and analysis in this report and in our other reports, press releases
        and public statements of our officers contain some forward-looking statements.
        Forward-looking statements give our current expectations or forecasts of
        future
        events, and may be identified by the fact that they do not relate strictly
        to
        historical or current facts. In particular, forward-looking statements include
        statements relating to future actions, prospective products or new product
        acceptance in the marketplace, future performance or results of current and
        anticipated products, sales efforts, expenses, and the outcome of contingencies
        and financial results. Many factors discussed in Part I of this report will
        be
        important in determining future results. We will have little or no control
        over
        many of these factors and any of these factors could cause our operating
        results
        and gross margins, and consequently the price of our common stock, to fluctuate
        significantly.
 
 11
 Any
        or
        all forward-looking statements in this report, any other report, and in any
        other public statements may turn out to be wrong. They can be affected by
        inaccurate assumptions or by known or unknown uncertainties. No forward-looking
        statement can be guaranteed, and actual results may differ materially. We
        undertake no obligation to publicly update forward-looking statements, except
        as
        required by law. Shareholders are advised to consult further disclosures
        on
        related subjects on our other reports filed with the Securities and Exchange
        Commission. The following cautionary discussion of risks, uncertainties and
        possible inaccurate assumptions are factors that our management believes
        could
        cause actual results to differ materially from expected and historical results.
        Factors other than those included below could also adversely affect our business
        results. The following discussion is provided pursuant to the Private Securities
        Litigation Reform Act of 1995.
  Prospective
        investors should carefully consider the following risk factors in evaluating
        our
        business and us. The factors listed below represent certain important factors
        which we believe could cause our business results to differ. These factors
        are
        not intended to represent a complete list of the general or specific risks
        that
        may affect us. It should be recognized that other risks may be significant,
        presently or in the future, and the risks set forth below may affect us to
        a
        greater extent than indicated.
  **Risks
        Related To Our Business**
  *Limited
                      Operating History.*
                  We
                      have had a limited operating history upon which potential investors
                      may
                      base an evaluation of its prospects and there can be no assurance
                      that we
                      will achieve our objectives. Our prospects must be considered
                      in light of
                      the risks, expenses and difficulties frequently encountered
                      by companies
                      in their early stages of development, particularly companies
                      in a rapidly
                      evolving market, such as the market for automation, remote
                      monitoring and
                      process control software. Such risks include, but are not limited
                      to, our
                      ability to obtain and retain customers and attract a significant
                      number of
                      new customers, the growth of the broadcast and other markets
                      we intend to
                      pursue, our ability to implement our growth strategy, especially
                      the sales
                      and marketing efforts, and the introduction of new devices
                      and computer
                      network and control technologies by us and our competitors.*We
                      Have a History of Net Losses and May Never Achieve or Maintain
                      Profitability.*
                  We
                      have a history of incurring losses from operations. As of March
                      31, 2005,
                      we had an accumulated deficit of approximately $6,670,000.
                      We anticipate
                      that our operating expenses will increase substantially in
                      the foreseeable
                      future as we increase our sales and marketing activities, attempt
                      to
                      develop new market verticals, and continue to develop our technology,
                      products and services. These efforts may prove more expensive
                      than we
                      currently anticipate and we may incur significant additional
                      costs and
                      expenses in connection with our business development activities.
                      Such
                      costs and expenses could prevent us from achieving or maintaining
                      profitability in future periods. If we do achieve profitability
                      in any
                      period, we may not be able to sustain or increase our profitability
                      on a
                      quarterly or annual basis.
  12
  *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.*Future
                        Capital Needs, Uncertainty of Future Additional
                        Financing.*
                    We
                        currently anticipate that our available funds and resources,
                        including
                        product sales, will not be sufficient to meet our anticipated
                        needs for
                        working capital and capital expenditures for the next twelve
                        months. We
                        will need to raise additional funds in the future in order
                        to repay our
                        existing indebtedness if we are not able to extend the maturity
                        dates of
                        our notes, as well as to pursue new market verticals, develop
                        new or
                        enhanced products, respond to competitive pressures and acquire
                        complementary businesses or technologies. If we raise additional
                        funds
                        through the issuance of equity or convertible debt securities,
                        the current
                        stockholders may experience dilution and any such securities
                        may have
                        rights, preferences or privileges senior to those of the
                        rights of our
                        current shareholders. There can be no assurance that we can
                        obtain
                        additional financing or obtain it on terms favorable to us.
                        If adequate
                        funds are not available or not available on acceptable terms,
                        we may not
                        be able to fund our expansion, new market verticals, promote
                        our products
                        as we desire, take advantage of unanticipated acquisition
                        opportunities,
                        develop or enhance products or respond to competitive pressures.
                        Any such
                        inability could have a material adverse effect on our business,
                        results of
                        operation and financial condition.*We
                        May Not be Able to Refinance Short-Term Promissory Notes
                        that are Coming
                        Due.*
                    We
                        issued approximately $2.2 million of short-term promissory
                        notes which
                        have matured or will mature by March 31, 2006. Our goal is
                        to raise
                        additional equity capital before the end of 2005. In addition,
                        we may seek
                        to extend the maturity dates of some or all of these notes
                        in order to
                        give us time to implement a longer-term financing strategy.
                        We may be
                        required to pay certain of the notes prior to the completion
                        of our
                        longer-term financing strategy and, in this connection, issue
                        additional
                        short-term debt or equity securities to raise the capital
                        to do so. If we
                        are unable to either extend the maturity dates of the notes
                        or repay them
                        through raising additional capital, the holders of such notes
                        could demand
                        payment, causing our insolvency, which would have a material
                        adverse
                        effect on our business, results of operations and financial
                        condition.
                        There can be no assurance that we will be able to raise sufficient
                        capital
                        to retire this short-term debt, or be able to do so on terms
                        acceptable to
                        us.*Failure
                        to timely file certain regulatory filings*
                    We
                        are in the process of filing certain delinquent Federal,
                        State and Local
                        compensation related filings, which may subject us to additional
                        payroll
                        related liabilities, the amount of which cannot be determined
                        at this
                        time.
  13
  *Undetected
                          Errors or Failures in Our Software Could Result in Loss
                          or Delay in the
                          Market Acceptance of Our Product, Lost Sales or Costly
                          Litigation.*
                      Because
                          our software products are complex, they may contain errors
                          that can be
                          detected at any point in a product's lifecycle. While we
                          continually test
                          our products for errors, errors in our products may be
                          found in the future
                          even after our products have been commercially introduced.
                          Detection of
                          any significant errors may result in, among other things,
                          loss of, or
                          delay in, market acceptance and sales of our products,
                          diversion of
                          development resources, injury to our reputation, increased
                          service and
                          warranty costs or costly litigation. Additionally, because
                          our products
                          support or rely on other systems and applications, any
                          software errors or
                          bugs in these systems or applications may result in errors
                          in the
                          performance of our software, and it maybe difficult or
                          impossible to
                          determine where the error resides. Product errors could
                          harm our business
                          and have a material adverse effect on our business, results
                          of operation
                          and financial condition.*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.*Industry
                          Resistance to Change.*
                      Our
                          initial target market, television/radio broadcasting, is
                          considered by
                          many to be mature, of limited size and finite. Certain
                          senior engineering
                          management in this market segment tends to have a comfort
                          zone with
                          existing operations and may not readily see a reason to
                          change from the*status
                          quo*.
                          We must convince broadcast customers that there can be
                          material
                          cost-savings and management efficiencies realized through
                          the utilization
                          of our array of products. Furthermore, we must demonstrate
                          to the customer
                          that by not utilizing these products, the customer may
                          fall behind the
                          technology curve being embraced by certain of their
                          competitors.*Fluctuations
                          in Quarterly Operating Results.*
                      We
                          expect to experience significant fluctuations in future
                          quarterly
                          operating results that may be caused by many factors, including,
                          among
                          others, delays in our introduction of products or product
                          enhancement for
                          the automation remote monitoring and process 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.
  14
  *Failure
                            to Manage Growth Will Adversely Affect Operations.*
                        We
                            plan to significantly expand our distribution, sales,
                            marketing, research
                            and development activities, hire additional employees
                            as needed, expand
                            internal information, accounting and billing systems
                            and establish
                            additional sales channels throughout the world. In addition,
                            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.
  15
  *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 head of programming,
                              Nigel Brownett,
                              and the Board of Directors. If we lose the service
                              of any members of our
                              management team or other key personnel, our business
                              prospects will be
                              materially and adversely impacted.*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,
                              revenues and income.
                              If we infringe on a third party’s patent, we cannot assure that we will be
                              able to successfully redesign our products or processes
                              to avoid such
                              infringement. Accordingly, an adverse determination
                              in a judicial or
                              administrative proceeding or failure to obtain necessary
                              licenses could
                              prevent us from manufacturing and selling our products
                              and could require
                              us to pay substantial damages and/or royalties.
  16
  *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.
  17
  **Risks
                      Related To The Industry***If
                      We Fail to Successfully Introduce New Products, Our Future
                      Growth May
                      Suffer. Certain Products at an Early Stage of Development are
                      the Areas of
                      Our Expected Future Growth and Sustainability.*
                  As
                      part of our growth strategy, we intend to develop and introduce
                      certain
                      new products. Such products are currently in research and development,
                      and
                      we have generated no revenues from such potential products
                      and may never
                      generate revenues. A substantial portion of our resources have
                      been, and
                      for the foreseeable future will continue to be dedicated to
                      our research
                      programs and the development of products. If we do not introduce
                      these new
                      products on a timely basis, or if they are not well accepted
                      by the
                      market, our business and the future growth of our business
                      may suffer.
                      There can be no assurance that we will be able to develop a
                      commercial
                      product from these projects. Our competitors may succeed in
                      developing
                      technologies or products that are more effective than ours.*If
                      We Do Not Update and Enhance Our Technologies, They Will Become
                      Obsolete
                      or Noncompetitive. Our Competitors May Succeed in Developing
                      Products, and
                      Obtaining Related Regulatory Approvals, 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.
  18
  **Risks
                        Related To Our Securities***Our
                        Stock Price is Likely to be Highly Volatile Because of Several
                        Factors,
                        Including a Limited Public Float.*
                    The
                        market price of our common stock is likely to be highly volatile
                        because
                        there has been a relatively thin trading market for our stock,
                        which
                        causes trades of small blocks of stock to have a significant
                        impact on our
                        stock price. Our common stock may not be able to be resold
                        following
                        periods of volatility because of the market's adverse reaction
                        to
                        volatility.
  Other
                          factors that could cause such volatility may include, among
                          other
                          things:·
                      Actual
                          or anticipated fluctuations in our operating results;·
                      Announcements
                          concerning our business or those of our competitors or
                          customers;·
                      Changes
                          in financial estimates by securities analysts or our failure
                          to perform as
                          anticipated by the analysts;·
                      Announcements
                          of technological innovations;·
                      Conditions
                          or trends in the industry;·
                      Litigation;·
                      Patents
                          or proprietary rights;·
                      Departure
                          of key personnel;·
                      Failure
                          to hire key personnel; and·
                      General
                          market conditions.
 *Because
                            Our Common Stock is Considered a Penny Stock, Any Investment
                            in Our Common
                            Stock is Considered to be a High-Risk Investment and
                            is Subject to
                            Restrictions on Marketability.*
                        Our
                            common stock is currently traded on the OTC Bulletin
                            Board (ticker symbol
                            “STCA.OB”) and is considered a “penny stock”.
                          
                          The
                            SEC has adopted rules that regulate broker-dealer practices
                            in connection
                            with transactions in "penny stocks". Penny stocks generally
                            are equity
                            securities with a price of less than $5.00 (other than
                            securities
                            registered on certain national securities exchanges or
                            quoted on the
                            NASDAQ system, provided that current price and volume
                            information with
                            respect to transactions in such securities is provided
                            by the exchange or
                            system). The penny stock rules require a broker-dealer,
                            prior to a
                            transaction in a penny stock not otherwise exempt from
                            those rules, to
                            deliver a standardized risk disclosure document prepared
                            by the SEC, which
                            specifies information about penny stocks and the nature
                            and significance
                            of risks of the penny stock market. The broker-dealer
                            also must provide
                            the customer with bid and offer quotations for the penny
                            stock, the
                            compensation of the broker-dealer and any salesperson
                            in the transaction,
                            and monthly account statements indicating the market
                            value of each penny
                            stock held in the customer's account. In addition, the
                            penny stock rules
                            require that, prior to a transaction in a penny stock
                            not otherwise exempt
                            from those rules, the broker-dealer must make a special
                            written
                            determination that the penny stock is a suitable investment
                            for the
                            purchaser and receive the purchaser's written agreement
                            to the
                            transaction. These disclosure requirements may have the
                            effect of reducing
                            the trading activity in the secondary market for our
                            common
                            stock.
  19
  Since
                            our common stock is subject to the regulations applicable
                            to
                            penny stocks, the market liquidity for our common stock
                            could be adversely
                            affected because the regulations on penny stocks could
                            limit the ability
                            of broker-dealers to sell our common stock and thus the
                            ability for our
                            common stock to be sold in the secondary market.*Control
                            by Certain Stockholders.*
                        Our
                            Directors and Executive Officers beneficially own approximately
                            43% of our
                            outstanding shares of common stock. If these stockholders
                            act as a group,
                            they will have effective control of all matters requiring
                            stockholder
                            approval, including the election of Directors and approval
                            of significant
                            corporate transactions. Such control may have the effect
                            of delaying or
                            preventing a change in control of us, impeding a merger,
                            consolidation,
                            takeover or other business combination involving us or
                            discourage a
                            potential acquirer from making a tender offer or otherwise
                            attempting to
                            obtain control of us, which could have a materially adverse
                            effect on the
                            market price of our common stock.*Absence
                            of Dividends.*
                        We
                            do not anticipate paying any cash dividends in the foreseeable
                            future. See
                            "Item 5 - Market for the Common Equity and Related Stockholder
                            Matters."
  ITEM
        2.DESCRIPTION
        OF PROPERTIES
 
 Statmon
        Technologies Corp. leases and maintains its principal place of business at
        345
        N. Maple Drive, Suite 120, Beverly Hills, California 90210. The Company renewed
        its lease on February 1, 2005 and increased the leased square footage from
        2,351
        to 3,953 square feet. The lease term runs through January 31, 2010 with an
        option to terminate after 36 months from the commencement date. The
        straight-line rent expense is $10,374 per month. On August 16, 2004, we entered
        into a six-month lease for a 150 square foot office in an executive office
        suite
        in Louisville, Kentucky at a rate of $850 per month. After lease expiration,
        we
        have continued to rent the space on a month-to-month basis. We use this as
        a
        regional sales and business development office.
  ITEM
        3.LEGAL
        PROCEEDINGS
 
 On
        February 25, 2003 the Company entered into a Work Out Agreement with Michael
        Hurst and Chad Kalebic individually and their affiliates, including “SDS LLC”
        (the “Plaintiffs”), pertaining to the termination of their commission-based
        sales arrangement with the Company. From mid-2000 to February 2003, the
        Plaintiffs had acted in various capacities with the Company, including
        functioning as its sales force. In mid-2003, a dispute developed between
        the
        parties over unpaid commissions and the release of common stock issued to
        them.
        On November 6, 2003, the Plaintiffs filed a lawsuit with the Superior Court
        of
        the State of California (Case No. BC305584) alleging breach of contract of
        the
        Work Out Agreement, requesting specific performance and making an application
        for writ of attachment of the Company’s assets. On December 1, 2003, the Company
        consented to the entry of an attachment order for $184,275, effective January
        30, 2004, which was the amount of the Plaintiffs’ claims for unpaid commissions
        and accrued compensation. The Plaintiffs also sought the delivery of 1,120,300
        restricted shares of common stock issued them but being held by the Company.
        On
        December 30, 2003, the Company paid the Plaintiffs $40,000 under protest,
        to be
        offset against the $184,275 claimed by the Plaintiffs and on January 30,
        2004,
        the Company made a cash deposit into a bank account for $144,275, which was
        attached by the Plaintiffs.
  20
 Effective
        June 14, 2004, the parties settled the lawsuit. Under the settlement the
        Company
        paid $164,275 in cash, including $144,275 from the release of the attached
        funds, and the Plaintiffs assigned 1,120,000 shares of common stock issued
        to
        them back to the Company for cancellation. The Company incurred approximately
        $8,000 of filing and third party costs in connection with the settlement
        and
        have issued 373,396 restricted and unregistered shares of its common stock
        pursuant to rule 144 of the Securities and Exchange Act of 1933 to its legal
        counsel in connection with the settlement.
  The
        Company was subject to several creditor related threatened legal proceedings
        and
        claims arising in the ordinary course of business in fiscal 2005. It has
        resolved all of these matters in a manner that did not have a material adverse
        effect on its financial condition, results of operations or cash
        flows.
  On
        June
        16, 2005 the Company filed an action in the Superior Court of the State of
        California, County of Los Angeles, Central District against Application Science
        and Technology LLC, Chad Kalebic, Michael Hurst, Anthony Briede and others.
        The
        Company initiated the litigation after ongoing and reoccurring feedback from
        the
        marketplace that the Defendants et. al. were actively interfering with the
        Company’s business relationships and violating contractual agreements despite
        formal warnings to cease and desist. The case includes: Unfair Competition;
        Violations of California Business Code, Sections 17.200 ET SEQ and 17.000
        ET
        SEQ; Intentional Interference With Plaintiffs Business Relationships, Negligent
        Interference With Plaintiff’s Business Relationships; Slander and Injunction.
        The Company has retained litigation counsel on a 1/3 contingency basis of
        the
        net benefit to the Company. Company will advance and pay the costs and expenses
        of litigation. The Company expects to prevail in the proceedings. However,
        in
        the event of an adverse decision, the Company may be liable for costs, expenses
        and/or attorney’s fees of the Defendant.
  ITEM
        4.SUBMISSION
        OF MATTERS TO A VOTE OF SECURITIES HOLDERS
 
 No
        matters were submitted to a vote of shareholders of the Company during the
        fiscal years ended March 31, 2005.
  ITEM
        5.MARKET
        FOR THE COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
 **Market
        Prices**
  The
        Company’s common stock, par value $.01 per share (the “Common Stock”), is
        currently quoted on the OTC Bulletin Board under the symbol “STCA.OB”. The
        high/low closing prices of the Company’s common stock were as follows for the
        periods below, as reported on *www.bigcharts.com* .
        The
        quotations below reflect inter-dealer bid prices without retail markup,
        markdown, or commission and may not represent actual transactions:
  21
  High
                  Bid
              Low
                  BidFiscal
                  Year Ended March 31, 20051st
                  Quarter
              1.46
              0.762nd
                  Quarter
              0.86
              0.523rd
                  Quarter
              0.95
              0.634th
                  Quarter
              0.98
              0.70Fiscal
                  Year Ended March 31, 20041st
                  Quarter
              1.46
              0.612nd
                  Quarter
              1.51
              0.713rd
                  Quarter
              1.40
              0.614th
                  Quarter
              1.36
              0.71
  As
        of
        June 30, 2005, we had approximately 1,713 shareholders of record for our
        common
        stock.
  **Dividends**
  We
        have
        not paid any cash dividends on our common stock since our inception and do
        not
        anticipate paying any cash dividends in the foreseeable future. We plan to
        retain our earnings, if any, to provide funds for the expansion of our business.
        Our Board of Directors will determine future dividend policy based upon
        conditions at that point, including our earnings and financial condition,
        capital requirements and other relevant factors.
  **Equity
        Compensation Plan Information**
  We
        have
        not adopted any equity compensation plans.
  **Recent
        Issuances of Unregistered Securities**
 
 Set
        forth
        below is a description of all of our sales of unregistered securities during
        the
        fiscal year end March 31, 2005. Unless otherwise indicated, such sales were
        exempt from registration under Section 4(2) of the Securities Act of 1933,
        as
        amended (the "Act"), as transactions not involving a public offering. Unless
        indicated, we did not pay any commissions to third parties in connection
        with
        the sales.
 
 Issuance
        of stock and warrants in relation to new debt:
 
 ·
              In
                  April 2004, the Company issued 20,000 shares of common stock and
                  20,000
                  warrants to purchase shares of our common stock at an exercise
                  price of
                  $1.00 per share in association with the issuance of a $20,000 promissory
                  note due 180 days from the date of issuance bearing interest at
                  10% per
                  annum.
 ·
              In
                  August 2004, the Company issued 250,000 shares of common stock
                  and 250,000
                  warrants to purchase shares of our common stock at an exercise
                  price of
                  $1.00 per share in association with the issuance of a $250,000
                  promissory
                  note due 180 days from the date of issuance bearing interest at
                  10% per
                  annum.
 ·
              In
                  October 2004, the Company issued 20,000 shares of common stock
                  and 20,000
                  warrants to purchase shares of our common stock at an exercise
                  price of
                  $1.00 per share in association with the issuance of a $20,000 promissory
                  note due 180 days from the date of issuance bearing interest at
                  10% per
                  annum.
 ·
              In
                  October 2004, the Companyissued
                  100,000 shares of common stock and 100,000 warrants to purchase
                  shares of
                  our common stock at an exercise price of $2.00 per share in association
                  with the issuance of a $100,000 promissory note due 365 days from
                  the date
                  of issuance bearing interest at 10% per
                  annum.
 ·
              In
                  December 2004, the Company issued 100,000 shares of common stock
                  and
                  100,000 warrants to purchase shares of our common stock at an exercise
                  price of $2.00 per share in association with the issuance of a
                  $100,000
                  promissory note due 365 days from the date of issuance bearing
                  interest at
                  10% per annum.
 22
  ·
                In
                    February 2005, the Company issued 25,000 shares of common stock
                    and 25,000
                    warrants to purchase shares of our common stock at an exercise
                    price of
                    $2.00 per share in association with the issuance of a $25,000
                    promissory
                    note due 365 days from the date of issuance bearing interest
                    at 10% per
                    annum.
 ·
              In
                  March 2005, the Company issued 225,000 shares of common stock and
                  225,000
                  warrants to purchase shares of our common stock at an exercise
                  price of
                  $1.50 per share in association with the issuance of a $225,000
                  promissory
                  note due 365 days from the date of issuance bearing interest at
                  10% per
                  annum.
 ·
              In
                  March 2005, the Company issued 25,000 shares of common stock and
                  25,000
                  warrants to purchase shares of our common stock at an exercise
                  price of
                  $1.50 per share in association with the issuance of a $25,000 promissory
                  note due 365 days from the date of issuance bearing interest at
                  10% per
                  annum.
 
 Other
        issuances of stock and warrants:
 
 ·
              In
                  September 2004, the Company issued 373,396 shares of common stock
                  to its
                  legal counsel in connection with the SDS litigation settlement.
                  The
                  Company cancelled 1,120,000 shares as a result of this settlement.
                  See the
                  discussion in Item 3.
 ·
              On
                  October 19, 2004, the Company issued warrants to purchase 103,700
                  shares
                  of common stock exercisable at a price of $1.00 per share for a
                  term of
                  three years in connection with a contract dated May 27, 2003 between
                  the
                  Company and Berwyn Capital & Advisory, LLC for their services as the
                  Company’s non-exclusive placement agent in connection with the private
                  placement of $1,037,000 worth of Units. These warrants were valued
                  at
                  $53,666.
 ·
              On
                  February 28, 2005, the Company issued 200,000 shares each of common
                  stock
                  to two employees in consideration for their ongoing efforts on
                  behalf of
                  the Company. These shares were valued at
                  $260,000.
 ·
              At
                  the end of each fiscal quarter, the Company issued 75,000 shares
                  of common
                  stock in connection with secured Senior Notes that are in default
                  for a
                  total of 300,000 share of common stock for the fiscal
                  year.
 ·
              The
                  Company has granted warrants to purchase 848,186 shares of common
                  stock at
                  an exercise price of $1.00 per share related to penalty provisions
                  for
                  promissory notes in default. The Company will issue the penalty
                  warrants
                  to the holders upon payment of such notes. These warrants were
                  valued at
                  $526,234.
 ·
              On
                  March 31, 2005, the Company granted warrants to purchase 25,000
                  shares of
                  common stock exercisable at a price of $1.00 per share for a term
                  of three
                  years to Source Capital Group, Inc. in connection with its sale
                  of
                  $250,000 of Units during fiscal 2005. These warrants were valued
                  at
                  $12,500.
 
 **ITEM
        6.MANAGEMENT’S
        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
        OPERATION**
 
 The
        following discussion should be read in conjunction with the financial
        statements. This Report contains forward-looking statements within the meaning
        of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
        Exchange Act of 1934. The words "believe," "expect," "anticipate," "intend,"
        "estimate," "may," "should," "could," "will," "plan," "future," "continue,"
        and
        other expressions that are predictions of or indicate future events and trends
        and that do not relate to historical matters identify forward-looking
        statements. These forward-looking statements are based largely on our
        expectations or forecasts of future events, can be affected by inaccurate
        assumptions, and are subject to various business risks and known and unknown
        uncertainties, a number of which are beyond our control. Therefore, actual
        results could differ materially from the forward-looking statements contained
        in
        this document, and readers are cautioned not to place undue reliance on such
        forward-looking statements. We undertake no obligation to publicly update
        or
        revise any forward-looking statements, whether as a result of new information,
        future events or otherwise. A wide variety of factors could cause or contribute
        to such differences and could adversely impact revenues, profitability, cash
        flows and capital needs. There can be no assurance that the forward-looking
        statements contained in this document will, in fact, transpire or prove to
        be
        accurate.
  23
 **OVERVIEW**
  We
        develop, market and license a remote control, monitoring and facilities
        management platform designed for universal application across vertical markets.
        Customers use our proprietary application software and integration platform
        to
        connect and manage multiple site operations in real time by integrating
        disparate software systems with diverse numbers of analog and digital devices.
        Multiple sites can automatically interact with each other and report up stream
        to a single dashboard style application software with customized screens
        and
        drill-down control capabilities all assessable from any Internet or network
        connection. Additional features of the platform include automatic bi-directional
        control and response, root cause analysis, data aggregation and alarm
        notification. The platform proactively automates and optimizes mission critical
        devices and integrates facilities management operations. Our proprietary
        software products include the "Axess" and "Neuro" applications. Harris Broadcast
        Communications, a division of Harris Corporation (“Harris”) have re-badged Axess
        as “ReCon” under an OEM agreement for their Harris Broadcast clients. Axess,
        Neuro and ReCon interface with the Company’s integration products including the
        "EIF", "UIF" and "UVM" product lines.
 
 The
        Company’s significant clients include General Electric - NBC/Telemundo Network,
        Viacom - CBS, Disney - ABC TV & Radio Networks, Harris Broadcast and
        Sinclair Broadcasting. The Company recently announced an alliance with
        Pixelmetrix Corporation Pte Ltd, a Singapore based leading digital test and
        measurement technology company focused on the broadcast and telecommunications
        industries. The Pixelmetrix alliance was formed to provide a unique control,
        management and test measurement solution for the digital television (DTV)
        and
        telecommunications markets. The Company recently announced a joint venture
        with
        US Energy Systems Corp., which is focused on the telecommunications, DC
        Power/stored energy and infrastructure markets. The US Energy joint venture
        has
        three Beta sites conducting live testing and capabilities analysis with
        governmental infrastructure clients. The Company is beta testing with two
        battery monitoring device companies who have worldwide install bases including
        local, state and federal government, military, oil refining, petrochemical
        and
        energy infrastructure operations.
  To
        pursue
        systems integration and new vertical market opportunities for Statmon products,
        in June 2001 we established “Statmon Professional Services Organization”, d/b/a
“Statmon PSO”, in conjunction with Blue Skies LLC, (“Blue Skies”) an integration
        consulting firm controlled by John Hoff. Blue Skies introduced “eBI Solutions
        LLC” to the Company and in June 2002 we formed “SeBI LLC” to replace the Statmon
        PSO activities and pursue specialized enterprise systems integration business
        and new vertical market opportunities.
 
 Our
        next
        stage of development, given sufficient capital, is to expand beyond our
        traditional broadcast industry activities into new vertical markets, including
        power and energy management, telecom, wireless, homeland security, environmental
        compliance and infrastructure management. The current versions of our
        proprietary application software and integration technologies are industry
        and
        market universal. We believe that the architectural design and functionality
        development curve of our products specifically address the needs and emerging
        demand for economical pre-packaged solutions facilitating improved operating
        efficiencies through device convergence and network automation, powerful
        remote
        control and monitoring capabilities in real time. We are in the process of
        identifying qualified strategic partners and distributors who already have
        established customer installation bases where our products can readily be
        employed as a middleware and/or provide stand alone end-to-end
        solutions.
  **RESULTS
        OF OPERATIONS**
  **YEARS
        ENDED MARCH 31, 2005 AND 2004**
  REVENUES
        - For the year ended March 31, 2005 total revenues decreased to $1,414,096
        compared to $2,511,356 for the same period last year. Revenues consisted
        of
        $737,482 of product revenues and $676,614 of integration services revenues
        for
        the year ended March 31, 2005. Revenues consisted of $1,770,211 of
        product
        revenues and $741,144 of integration services revenues for the year ended
        March
        31, 2004.  The decrease in product revenues of approximately $1,000,000
        is
        due to weak broadcast sales as the Company realigned its broadcast sales
        channel
        with Harris to a non-exclusive basis and the loss of the Sinclair Broadcasting
        business to a competitor. Harris has implemented several internal restructurings
        which impacted its inventory levels and product purchases from the Company
        in
        fiscal 2005. The Statmon distribution agreement with Harris reverted to a
        non-exclusive basis on July 18, 2004 when Harris failed to make the minimum
        purchases as required under its OEM agreement with the Company. Such agreement
        expires on February 24, 2006. Harris indicates that it remains committed
        to the
        long-term success of its ReCon branded version of the Statmon-owned Axess
        software application and suite of hardware integration products. While the
        Company continues to have confidence in the future of the Harris relationship,
        it is positioning itself to return to previous levels of revenue in the
        broadcast industry independent of the Harris relationship through internally
        developed sales and the addition of new sales channels including
        Pixelmetrix.
 
 24
 GROSS
        PROFIT - For the year ended March 31, 2005 gross profit decreased to $987,802
        compared to $1,785,770 for the same period last year. The decrease in gross
        profit relates to a corresponding decrease in revenues. Gross profit percentage
        decreased from approximately 71% for the year ended March 31, 2004 to
        approximately 70% for the year ended March 31, 2005.
  SELLING,
        GENERAL AND ADMINISTRATIVE EXPENSES- For the year ended March 31, 2005 operating
        expenses increased to $2,215,936 compared to $1,303,537 for the same period
        last
        year. Selling, general and administrative expenses were approximately 157%
        of
        sales for the year ended March 31, 2005, compared to approximately 52% of
        sales
        during the same period last year **.** The
        increase of approximately $910,000 in selling, general and administrative
        expenses can be partially attributed to an increase in audit, legal and other
        public company expenses of approximately $340,000. These increases are primarily
        related to our audit of the Company’s financial statements for the fiscal years
        ended March 31, 2004 and 2003 and the three months ended March 31, 2002,
        the
        quarterly reviews for June, September and December 2004 and the costs associated
        with the preparation of the Company’s corporate tax returns. Additional
        increases can be attributed to an increase in personnel related costs of
        approximately $255,000 partially related to the Company’s efforts to realign its
        sales efforts in the Broadcast market due to the decrease of Broadcast sales
        from Harris during the 2005 fiscal year and a non-cash charge for stock-based
        compensation to two employees of $260,000.
  OTHER
        EXPENSE - For the year ended March 31, 2005 other expense increased to
        $1,834,263 compared to $1,082,288 for the same period last year. This increase
        is primarily due to an increase in the amortization of financing costs of
        approximately $65,000 related to funds raised in fiscal 2004 and an increase
        in
        interest related expense of approximately $700,000 related to the borrowings,
        penalty interest rates and common stock and warrants issued in association
        with
        debt. The Company amortizes the value of stock and warrants issued in connection
        with debt over the life of the instrument.
 
 NET
        LOSS
        - As a result of the above, for the year ended March 31, 2005 the Company
        recorded a net loss of $3,062,397 compared to a net loss of $600,055 for
        the
        same period last year.
  **LIQUIDITY
        AND CAPITAL RESOURCES**
  Cash
        balances totaled $191,974 as of March 31, 2005 compared to $92,527 at March
        31,
        2004. In April through June 2005, we received net proceeds of $250,000 from
        the
        sale of Units, the details of which are discussed below.
 
 The
        Company has financed its cash requirements primarily through operations and
        short-term borrowings. From September 2000 to March 31, 2005, the Company
        has
        issued Units consisting of a promissory note, a share of common stock and
        a
        warrant to purchase a share of common stock to various lenders totaling
        $2,697,000. At March 31, 2005, $2,192,000 principal amount is
        outstanding.
 
 25
 Net
        cash
        used in operating activities was $398,546 and $884,017 for the years ended
        March
        31, 2005 and 2004, respectively. The use of cash in 2005 is the result of
        a net
        loss of approximately $3,075,000, partially offset by non-cash charges related
        to (i) depreciation of $13,865, (ii) common stock and warrants issued in
        association with debt of $859,000, (iii) amortization of debt discount of
        $630,091, (iv) amortization of deferred financing costs of $104,172, and
        (v)
        charges for stock-based compensation of $260,000, and a net change in operating
        assets and liabilities of approximately $797,000. The use of cash in 2004
        is the
        result of a net loss of approximately $600,055, partially offset by non-cash
        charges related to (i) depreciation of $10,237, (ii) common stock and warrants
        issued in association with debt of $572,427, (iii) amortization of debt discount
        of $359,257, and (iv) amortization of deferred financing costs of $38,961,
        and a
        net change in operating assets and liabilities of approximately
        ($1,265,000).
 
 Net
        cash
        used in investing activities was $22,007 and $2,602 for the years ended March
        31, 2005 and 2004, respectively. The use of cash in 2005 was primarily the
        result of a new capital lease for telephone equipment. The use of cash in
        2004
        was primarily the result of computer equipment purchases.
 
 Net
        cash
        provided by financing activities was $520,000 and $970,704 for the years
        ended
        March 31, 2005 and 2004, respectively. Net cash provided by financing
        activities in fiscal 2005 was the result of proceeds from issuance of (i)
        $290,000 of Units consisting of a 180 day promissory note bearing interest
        at
        10% per annum, a share of the Company’s common stock and three-year warrants to
        purchase shares at an exercise price of $1.00 per share, and (ii) $475,000
        of
        Units consisting of a 365 day promissory note bearing interest at 10% per
        annum,
        a share of the Company’s common stock and three-year warrants to purchase shares
        at an exercise price of $1.50 per share, offset by note repayments of $245,000.
        Net cash provided by financing activities in fiscal 2004 was the result of
        proceeds from issuance of $1,187,000 of Units consisting of a 180 day promissory
        note bearing interest at 10% per annum, a share of the Company’s common stock
        and three-year warrants to purchase shares at an exercise price of $1.00
        per
        share, offset by note repayments of $216,296.
  Between
        April and June 2005, the Company sold Units composed of (i) $250,000 principal
        amount of promissory notes bearing interest at 10% per annum and due 365
        days
        from the date of issuance, (ii) 250,000 shares of common stock and (iii)
        warrants to purchase 250,000 shares of common stock exercisable at a price
        of
        $1.50 per share for a term of three years.
 
 As
        of
        March 31, 2005, the Company had a working capital deficiency of approximately
        $2,687,000 including notes payable and accrued interest totaling approximately
        $2,350,000, net of applicable debt discount. The Company has no long-term
        debt.
 
 In
        order
        to continue our operations beyond December 2005, the Company will need to
        attain
        its revenue and profit margin goals, repay or obtain extensions on its existing
        debt and raise additional working capital through a private placement of
        equity
        or debt. The Company is currently in discussions with a placement agent related
        to a proposed equity placement. The Company intends to use the proceeds of
        any
        such offering to repay short-term debt, fund new market verticals and provide
        working capital. If the Company raises additional funds through the issuance
        of
        equity securities, the percentage ownership of its current stockholders would
        be
        reduced. In addition, these equity securities might have rights, preferences
        or
        privileges senior to the outstanding common stock.
 
 There
        can
        be no assurance that the Company will be able to raise the capital it requires
        in this time frame or at all or that it will be able to raise the capital
        in
        terms acceptable to it. In addition, there can be no assurances that the
        Company
        will be successful in obtaining extensions of its notes, if required. If
        it is
        not successful, the Company would seek to negotiate other terms for the issuance
        of debt, pursue bridge financing, negotiate with suppliers for a reduction
        of
        debt through issuance of stock, and/or seek to raise equity through the sale
        of
        its common stock. At this time management cannot assess the likelihood of
        achieving these objectives. If the Company is unable to achieve these
        objectives, the Company may be forced to cease its business operations, sell
        its
        assets and/or seek further protection under applicable bankruptcy
        laws.
  26
 Except
        as
        provided above, the Company has no present commitment that is likely to result
        in its liquidity increasing or decreasing in any material way. In addition,
        except as noted above, the Company knows of no trend, additional demand,
        event
        or uncertainty that will result in, or that is reasonably likely to result
        in,
        the Company’s liquidity increasing or decreasing in any material way. The
        Company has no material commitments for capital expenditures. The Company
        knows
        of no material trends, favorable or unfavorable, in its capital
        resources.
 
 The
        accompanying financial statements have been prepared in accordance with
        accounting principles generally accepted in the United State of America and
        assume that the Company will continue as a going concern. The Company has
        incurred net losses of approximately $6,670,000 since its inception.
        Additionally, the Company had net working capital deficiencies of approximately
        $2,687,000 and $1,178,000 at March 31, 2005 and 2004, respectively, and negative
        cash flows from operations for the year ended March 31, 2005 and 2004 of
        approximately $399,000 and $884,000, respectively. Those conditions raise
        substantial doubt about the Company’s ability to continue as a going concern.
        The accompanying financial statements do not include any adjustments that
        might
        result from the outcome of this uncertainty.
  **CRITICAL
        ACCOUNTING POLICIES AND ESTIMATES**
 
 Our
        financial statements are prepared in accordance with U.S. Generally Accepted
        Accounting Principles. Preparation of the statements in accordance with these
        principles requires that we make estimates, using available data and our
        judgment, for such things as valuing assets, accruing liabilities and estimating
        expenses. The following is a list of what we feel are the most critical
        estimations that we must make when preparing our financial
        statements.
 
 **Accounts
        Receivable - Allowance for Doubtful Accounts**
 
 We
        routinely review our accounts receivable, by customer account aging, to
        determine the collectability of the amounts due based on information we receive
        from the customer, past history and economic conditions. In doing so, we
        adjust
        our allowance accordingly to reflect the cumulative amount that we feel is
        uncollectible. This estimate may vary from the proceeds that we actually
        collect. If the estimate is too low, we may incur higher bad debt expense
        in the
        future resulting in lower net income. If the estimate is too high, we may
        experience lower bad debt expense resulting in higher net income.
 
 **Revenue
        Recognition**
 
 Statement
        of Position 97-2, Software Revenue Recognition ("SOP 97-2"), was issued in
        October 1997 by the American Institute of Certified Public Accountants ("AICPA")
        and was amended by Statement of Position 98-4 ("SOP 98-4"). SOP 97-2 provides
        revised and expanded guidance of software revenue recognition and applies
        to all
        entities that earn revenue from licensing, selling, or otherwise marketing
        computer software. Based on its interpretation of SOP 97-2 and SOP 98-4,
        the
        Company believes its current revenue recognition policies and practices are
        consistent with SOP 97-2 and SOP 98-4. Additionally, the AICPA issued SOP
        98-9
        in December 1998, which provides certain amendments to SOP 97-2, and is
        effective for transactions, entered into during the year ended December 31,
        2000.
 
 Product
        revenues from the sale of software licenses are recognized when evidence
        of a
        license agreement exists, the fees are fixed and determinable, collectibility
        is
        probable and vendor specific objective evidence exists to allocate the total
        fee
        to elements of the arrangements. The Company's software license agreement
        entitles the licensee limited rights for upgrades and enhancements for the
        version they have licensed.
 
 27
 **Effects
        of Recent Accounting Policies**
 
 In
        January 2003, the Financial Accounting Standards Board (“FASB”) issued
        Interpretation Number 46, "Consolidation of Variable Interest Entities" ("FIN
        No. 46"). This interpretation of Accounting Research Bulletin ("ARB") No.
        51,
        "Consolidated Financial Statements," provides guidance for identifying a
        controlling interest in a variable interest entity ("VIE") established by
        means
        other than voting interests. FIN No. 46 also requires consolidation of a
        VIE by
        an enterprise that holds such a controlling interest. In December 2003, the
        FASB
        completed its deliberations regarding the proposed modification to FIN No.
        46
        and issued Interpretation Number 46(R), "Consolidation of Variable Interest
        Entities - an Interpretation of ARB No. 51" ("FIN No. 46(R)"). The decisions
        reached included a deferral of the effective date and provisions for additional
        scope exceptions for certain types of variable interests. Application of
        FIN No.
        46(R) is required in financial statements of public entities that have interests
        in VIEs or potential VIEs commonly referred to as special-purpose entities
        for
        periods ending after December 15, 2003. Application by public small business
        issuers' entities is required in all interim and annual financial statements
        for
        periods ending after December 15, 2004. Management does not believe that
        the
        adoption of this pronouncement will have a material effect on the Company's
        financial statements.
 
 In
        November 2004, the FASB issued Statement of Financial Accounting Standards
        (“SFAS”) No. 151, “Inventory Costs, an amendment of ARB No. 43, Chapter 4.” SFAS
        No. 151 requires certain abnormal expenditures to be recognized as expenses
        in
        the current period. It also requires that the amount of fixed production
        overhead allocated to inventory be based on the normal capacity of the
        production facilities. The standard is effective for the fiscal year beginning
        January 1, 2006. It is not expected that SFAS No. 151 will have a material
        effect on the company’s Consolidated Financial Statements.
 
 In
        December 2004, the FASB issued SFAS No. 123 (revised 2004), "Shared-Based
        Payment." SFAS No. 123(R) addresses the accounting for share-based payment
        transactions in which an enterprise receives employee services in exchange
        for
        (a) equity instruments of the enterprise or (b) liabilities that are based
        on
        the fair value of the enterprise's equity instruments or that may be settled
        by
        the issuance of such equity instruments. SFAS No. 123(R) requires an entity
        to
        recognize the grant-date fair-value of stock options and other equity-based
        compensation issued to employees in the income statement. The revised statement
        generally requires that an entity account for those transactions using the
        fair-value-based method, and eliminates the intrinsic value method of accounting
        in APB 25, which was permitted under SFAS No. 123, as originally issued.
        The
        revised statement requires entities to disclose information about the nature
        of
        the share-based payment transactions and the effects of those transactions
        on
        the financial statements. SFAS No. 123(R) is effective for small business
        issuers financial statements for the first interim or annual reporting period
        that begins after December 15, 2005, with early adoption encouraged. The
        Company
        is currently evaluating the impact that this statement will have on its
        financial condition or results of operations.
 
 In
        June
        2005, the FASB published SFAS No. 154, ACCOUNTING CHANGES AND ERROR CORRECTIONS.
        SFAS No. 154 establishes new standards on accounting for changes in accounting
        principles. Pursuant to the new rules, all such changes must be accounted
        for by
        retrospective application to the financial statements of prior periods unless
        it
        is impracticable to do so. SFAS No. 154 completely replaces Accounting
        Principles Bulletin No. 20 and SFAS No. 3, though it carries forward the
        guidance in those pronouncements with respect to accounting for changes in
        estimates, changes in the reporting entity, and the correction of errors.
        The
        requirements in SFAS No. 154 are effective for accounting changes made in
        fiscal
        years beginning after December 15, 2005. The Company will apply these
        requirements to any accounting changes after the implementation
        date.
  28
 **ITEM
        7.FINANCIAL
        STATEMENTS**
 
 The
        financial statements of the Company are included following the signature
        page to
        this Form 10-KSB commencing on page F-1.
  **ITEM
        8.CHANGES** **IN
        AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
        DISCLOSURE**
 
 None
  ITEM
        8A.CONTROLS
        AND PROCEDURES
 
 The
        Company, under the supervision and with the participation of the Company's
        management, including the Company's Chief Executive Officer and Chief Financial
        Officer, has evaluated the effectiveness of the design and operation of the
        Company's "disclosure controls and procedures," as such term is defined in
        Rules
        13a-15e promulgated under the Exchange Act as of this report. Based upon
        that
        evaluation, the Chief Executive Officer and Chief Financial Officer has
        concluded that the Company's disclosure controls and procedures were effective
        as of the end of the period covered by this report to provide reasonable
        assurance that material information required to be disclosed by the Company
        in
        reports that it files or submits under the Exchange Act is recorded, processed,
        summarized and reported within the time periods specified in SEC rules and
        forms.
 
 Management
        is aware that there is a lack of segregation of duties at the Company due
        to the
        small number of employees dealing with general administrative and financial
        matters. This constitutes a material weakness in the financial reporting.
        However, at this time management has decided that considering the employees
        involved and the control procedures in place, the risks associated with such
        lack of segregation are insignificant and the potential benefits of adding
        additional employees to clearly segregate duties do not justify the expenses
        associated with such increases. Management will periodically reevaluate this
        situation. If the volume of the business increases and sufficient capital
        is
        secured, it is the Company's intention to increase staffing to mitigate the
        current lack of segregation of duties within the general administrative and
        financial functions.
 
 A
        control
        system, no matter how well conceived and operated, can provide only reasonable,
        not absolute, assurance that the objectives of the control system are met.
        Because of the inherent limitations in all control systems no evaluation
        of
        controls can provide absolute assurance that all control issues, if any,
        within
        a company have been detected. Such limitations include the fact that human
        judgment in decision-making can be faulty and that breakdowns in internal
        control can occur because of human failures, such as simple errors or mistakes
        or intentional circumvention of the established process.
  **ITEM
        9.DIRECTORS,
        EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS; COMPLIANCE WITH SECTION
        16(A) OF THE EXCHANGE ACT**
  Each
        Director of the Company serves for a term of one year and until his successor
        is
        elected at the Company’s annual shareholders’ meeting and is qualified, subject
        to removal by the Company’s shareholders. Each officer serves, at the pleasure
        of the Board of Directors, for a term of one year and until his successor
        is
        elected at the annual meeting of the Board of Directors and is
        qualified.
  The
        following table sets forth as of June 30, 2005, the name, age, and position
        of
        each Executive Officer and Director and the term of office of each Director
        of
        the Company.
  29
  Name
              
              Age
              
              Position
              
              Director
                  and/or Officer SinceGeoffrey
                  P. Talbot
              
              57
              
              Chairman,
                  President, Chief Executive Officer & Chief Financial Officer
              
              Chairman,
                  President, Chief Executive Officer and Chief Financial Officer
                  since June
                  2002Peter
                  J. Upfold
              
              42
              
              Chief
                  Technology Officer, Vice Chairman, Director and Secretary
              
              Vice
                  Chairman, Chief Technology Officer and Director since June
                  2002Kevin
                  R. Harris
              
              36
              
              Chief
                  Operating Officer
              
              Since
                  April 2004Leonard
                  Silverman, Ph.D.
              
              65
              
              Director
              
              Director
                  since June 2002Robert
                  B. Fields
              
              68
              
              Director
              
              Director
                  since June 2002
  Set
        forth
        below is certain biographical information regarding each of the Company’s
        current executive officers and directors as of June 30, 2005.
  *Geoffrey
        P. Talbot* is a
        co-founder and has served as our Chairman, Chief Executive Officer and interim
        Chief Financial Officer since our formation in June 2000. From April 1997
        to
        July 2000, Mr. Talbot was the Chief Executive Officer and a Director of J.C.
        Williamson Entertainment and J.C. Williamson Technologies in Los Angeles,
        California, a company that was involved in film production and
        technology.
  *Peter
        J. Upfold* is a
        co-founder and has served as our Vice Chairman, Chief Technical Officer and
        a
        director since our formation in June 2000. Mr. Upfold relocated to the United
        States from Australia in 1998. From 1998 to 2000 he introduced the technology
        upon which our products are based to the North American market and engaged
        in
        organizational activities for Statmon Delaware.
  *Kevin
        R. Harris* is our
        Chief Operating Officer since April 1, 2004. From Feb 2001 to March 2004,
        Mr.
        Harris served as the Senior Vice President of Finance and Corporate Controller
        for RKO Pictures, LLC. Prior to RKO, he was the Vice President of finance
        and
        controller for an internet content joint venture between DreamWorks SKG,
        Imagine
        Entertainment and Vulcan Ventures, Pop.com, LLC. From 1998 to 2000, Mr. Harris
        was the director of financial planning at Metro-Goldwyn-Mayer Studios, Inc.
        From
        1995 to 1998, Mr. Harris worked in the capacity as head of production finance
        and Assistant Controller at PolyGram Television where he oversaw all aspects
        of
        production finance, accounting and financial planning. From 1993 to 1995,
        Mr.
        Harris was a financial auditor at KPMG Peat Marwick. He is a licensed CPA
        (CA
        #72778) and graduated with honors from the California State University at
        San
        Bernardino earning his bachelor of science in business administration. Mr.
        Harris serves as the treasurer and a board member for two philanthropic
        entities, The Story Project and the Foundation for International Film
        Artists.
  *Leonard
        Silverman, Ph.D.* has been
        a member of our Board of Directors since our formation in June 2000. Dr.
        Silverman has spent most of his professional career at the University of
        Southern California (USC). He joined the faculty of USC in 1968, became a
        Full
        Professor of Electrical Engineering in 1977 and was elected Chairman of the
        Electrical Engineering Systems Department in 1982. He was appointed the fifth
        Dean of Engineering in 1984 and retired as the Dean in June 2001. Dr. Silverman
        is a member of the U.S. National Academy of Engineering. He currently serves
        as
        Director of Advanced MicroDevices (AMD). Dr. Silverman is the Chairman of
        our
        Compensation Committee and a member of our Audit Committee.
  30
 *Robert
        B. Fields* has
        been
        a member of the Company’s Board of Directors since its formation in June 2000.
        Since 1979 he served as the President of Tradestar Ltd., his wholly owned
        consulting firm that specializes in asset appreciation. Since February 15,
        2001,
        Mr. Fields serves as the Chairman of ActForex, Inc., a New York fully hosted
        management service provider of proprietary software for currency trading
        with
        over 20,000 registered traders. Mr. Fields was recently appointed to the
        Board
        of Genoil Inc. (OTCBB: GNOLF.OB). He was elected a Vice President and director
        of the Friars National Association Foundation, Inc., a philanthropy of the
        arts
        based in New York, in 1998, and has served as its Treasurer. He has been
        a
        member of eight Public Boards and a director of more than a dozen companies.
        Mr.
        Fields is the Chairman of our Audit Committee and a member of our Compensation
        Committee.
  Our
        bylaws allow our Board to fix the number of Directors between three and five.
        The number of Directors is currently fixed at four. Our Board of Directors
        has
        an Audit Committee, comprised of Mr. Fields, as Chairman, and Dr. Silverman,
        and
        a Compensation Committee, comprised of Dr. Silverman, as Chairman, and Mr.
        Fields. The Board has identified Mr. Fields, an independent Director, as
        its
        Audit Committee’s financial expert. We have adopted a Code of Ethics, which
        applies to our Principal Executive Officer, Principal Financial Officer and
        Principal Accounting Officer. A copy of the Code of Ethics may be obtained
        by
        any person without charge upon written request to us, attention: Investor
        Relations at 345 North Maple Drive, Suite 120, Beverly Hills, CA 90210.
  **Compliance
        with Section 16(a) of the Securities Act of 1934**
  Section
        16(a) of the Securities Act of 1934, as amended, requires the Company’s
        Directors and Executive Officers, and persons who own more than 10% of a
        registered class of the Company’s equity securities, to file with the Securities
        and Exchange Commission (“SEC”) initial reports of ownership and reports of
        changes in ownership of common stock and other equity securities of the
        Company.  Officers, Directors and greater than ten percent (10%)
        shareholders are required by SEC regulations to furnish the Company with
        copies
        of all Section 16(a) forms they file.
  To
        the
        Company's knowledge, based solely on a review of such materials as are required
        by the Securities and Exchange Commission, no officer, director or beneficial
        holder of more than ten percent of the Company's issued and outstanding shares
        of Common Stock failed to file in a timely manner with the Securities and
        Exchange Commission any form or report required to be so filed pursuant to
        Section 16(a) of the Securities Exchange Act of 1934, as amended, during
        the
        fiscal year ended March 31,2005 with the following exceptions: Dr. Silverman
        and
        Mr. Fields each failed to file two reports on Form 4 in a timely fashion
        during
        fiscal 2005. The reports would have contained disclosures regarding four
        transactions in the case of Dr. Silverman and two transactions in the case
        of
        Mr. Fields for the period from October 2004 to March 2005. The transactions
        involved the issuance of warrants in connections with loans these persons
        made
        to the Company in prior fiscal periods. Dr. Silverman and Mr. Fields will
        report
        such transactions on Form 5s. Mr. Harris failed to file a report on Form
        3 in a
        timely fashion in fiscal 2005. He made the appropriate filings after the
        close
        of the fiscal year.
  31
  **ITEM
        10.EXECUTIVE
        COMPENSATION**
 
 The
        following table summarizes (i) the President and Chief Executive Officer;
        and
        (ii) certain other highly compensated Executive Officers as of the fiscal
        years
        ended March 31, 2005, 2004 and 2003, based on salary and annual bonus.
  **Annual
                    Compensation**
                
                
                
                **Long
                    Term Compensation****Name
                    and Principal****Position**
                
                **Fiscal****Year**
                
                **Salary($)**
                
                **Bonus($)**
                
                **Other
                    Annual****Compensation**
                
                **Common
                    StockUnderlying Options****and
                    Warrants**
                
                **All
                    OtherCompensation**
                  **(3)**Geoffrey
                    P. Talbot,
                  President,
                    Chairman & CEO (1)(2)
                
                200520042003
                
                $120,000
                  -
                  -
                
                
                
                $20,333
                  81,333
                  81,333
                
                
                
                $12,997
                  10,792
                  6,019Peter
                    J. Upfold,
                  Vice
                    Chairman & CTO
                  Secretary
                    (1)(2)
                
                200520042003
                
                $120,000
                  -
                  -
                
                
                
                $20,333
                  81,333
                  81,333
                
                
                
                $9,662
                  11,032
                  7,255Kevin
                    R. Harris
                  COO
                
                2005
                
                $150,000
                
                
                
                -
                
                
                
                -
  (1)  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 Messrs. Talbot and Upfold during the period prior to the commencement
        dates
        of their employment agreements at approximately 50% of the contract rate
        has
        been treated as consulting fees as reported in SEC filings to date. Messrs.
        Talbot and Upfold have verbally agreed to defer a portion of their first
        year
        contractual compensation until the Company receives at least $2 million of
        new
        capital and repays certain senior notes, at which time the respective parties
        will be paid at their contractual rate of pay. As such, Messrs. Talbot and
        Upfold received gross pay of $85,532 each for the period July 1, 2004 to
        March
        31, 2005 and the Company accrued $34,468 of compensation each.
  The
        foregoing employment agreements have a five-year term through June 30, 2009.
        Effective July 1, 2004, the agreements were amended. In the second year of
        the
        employment agreements the salaries will adjust to $200,000 per annum. For
        years
        three, 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.
  (2)  From
        June
        2000 through December 31, 2001, Messrs. Talbot and Upfold were to be compensated
        at approximately $80,000 per year. The Company accrued $59,570 and $52,122
        for
        Messrs. Talbot and Upfold, respectively, through December 31, 2001. This
        accrued
        compensation will not be paid until the Company achieves certain milestones,
        as
        determined by its Board of Directors.
  (3)  Represents
        amounts the Company paid for leased automobiles provided to Messrs. Talbot
        and
        Upfold during the fiscal years indicated.
  32
 **Director
        Compensation**
  Directors
        who are neither employees of the Company nor of its affiliates receive no
        cash
        compensation for serving on the Board. The Company reimburses directors for
        any
        travel or other out-of-pocket expenses related to their service on the Board
        of
        Directors. On December 31, 2002, the Company issued 100,000 shares each to
        Leonard Silverman, Ph.D., and Robert B. Fields as compensation for their
        service
        on the Board of Directors and for serving without directors and officers
        liability insurance.
  Employment
        and any other arrangements between the Company and any named executive officer
        are described in Part III. Item 12 of this Form 10-KSB and are incorporated
        herein by this reference.
  **ITEM
                  11.**
              **SECURITY OWNERSHIP OF CERTAIN
                BENEFICIAL OWNERS AND MANAGEMENT**
 
 The
        following table sets forth, as of June 30, 2005, certain information regarding
        the beneficial ownership of the Company’s common stock by: (i) each person known
        by the company to be the beneficial owner of more than 5% of the outstanding
        shares of common stock, (ii) each Director and Executive Officer of the Company,
        and (iii) all Directors and the Executive Officers as a group.
  **Name
                  and Address of Beneficial Owner Group**
              
              **Amount
                  of CommonStock and Warrants andNature of Beneficial
                  Ownership**
              
              **Percent
                  of Classof Common Stock**Geoffrey
                  P. Talbot, Chairman, President,
                CEO,
                  and Interim CFO (1)
              
              1,746,180
              
              13.68%Peter
                  J. Upfold, CTO, Vice Chairman, Secretary/Treasurer and Director
                  (1)
              
              2,814,270
              
              22.05%Leonard
                  Silverman, Ph.D., Director (2)(3)
              
              316,544
              
              2.46%Robert
                  B. Fields, Director (2)(3)
              
              213,272
              
              1.67%Thieme
                  Consulting, Inc. (4)
              
              1,677,006
              
              12.87%Kevin
                  R. Harris, Chief Operating Officer (5)
              
              420,000
              
              3.24%All
                  Executive Officers and Directors as a Group (five persons)
              
              5,510,266
              
              43.11%
  (1)
              The
                  address of Geoffrey P. Talbot and Peter J. Upfold is 345 North
                  Maple
                  Drive, Suite 120, Beverly Hills, CA 90210.(2)
              The
                  address of Leonard Silverman, Ph.D. and Robert B. Fields is c/o
                  Statmon
                  Technologies Corp., 345 North Maple Dr., Suite 120, Beverly Hills,
                  CA
                  90210.(3)
              Dr.
                  Leonard Silverman and Robert Fields each received 100,000 shares
                  for their
                  services as Directors on December 31, 2002. In fiscal 2005, the
                  Company
                  issued 35,044 and 2,522 warrants to purchase shares of its common
                  stock to
                  Dr. Silverman and Mr. Fields, respectively, in connection with
                  loans that
                  they made to the Company in previous years. The warrants are exercisable
                  at $1.00 per share for three-year terms. See “Certain Relationships and
                  Related Transactions.”(4)
              The
                  address of Thieme Consulting, Inc. is 845 third Ave., 14thFloor, New York, New York 10022.(5)
              The
                  address of Kevin R. Harris is c/o Statmon Technologies Corp., 345
                  N. Maple
                  Dr., Suite 120, Beverly Hills, CA
                  90210.
 
 33
  **ITEM
        12.CERTAIN
        RELATIONSHIPS AND RELATED TRANSACTIONS**
 
 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
        has
        been treated as consulting fees as reported in SEC filings to date. Mr. Talbot
        and Mr. Upfold have verbally agreed to defer a portion of their first year
        contractual compensation until the Company receives at least $2 million of
        new
        capital and repays certain senior notes, at which time the respective parties
        will be paid at their contractual rate of pay. As such, Mr. Talbot and Upfold
        received gross pay of $85,532 each for the period July 1, 2004 to March 31,
        2005
        and deferred $34,468 of compensation each.
  The
        employment agreements have a five-year term through June 30, 2009. Effective
        July 1, 2004, the above agreements were amended. In year two of the employment
        agreements the salaries will adjust to $200,000 per annum. For years three,
        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.
  In
        October 2001, Thieme Consulting, Inc. and its affiliates loaned the Company
        $250,000, which was represented by senior notes (the “Senior Notes”). The Senior
        Notes matured in April and May 2002 and the Senior Notes have accrued interest
        since such dates at a rate of 15% per annum. In connection with the Senior
        Notes, Thieme Consulting acquired 250,000 shares of common stock and a warrant
        to purchase 250,000 shares of common stock, exercisable for a three-year
        term at
        $2.00 per share. Under the terms of the Senior Notes, the Company has issued,
        and continues to issue, 25,000 restricted shares of its common stock per
        month
        until it has repaid the Senior Notes in full. The holder of the Senior Notes
        has
        a lien on all of the assets of the Company and retains certain priority rights
        over new equity capital the Company raises. In fiscal 2005, the Company issued
        a
        total of 300,000 of restricted shares of its common stock to Thieme under
        terms
        of the Senior Notes and Senior Note extensions.
  In
        December 2002, Dr. Silverman, a Director, loaned the Company $15,000 under
        the
        terms of a promissory note bearing interest at a rate of 10% per annum. The
        promissory note matured on May 31, 2003 and is currently in default. In
        connection with the note, the Company issued Dr. Silverman 15,000 restricted
        shares of its common stock and has issued him 15,000 common stock purchase
        warrants exercisable at $1.00 per share for a three-year term. The Company
        continues to accrue interest at the stated penalty interest rate of 15% per
        annum and issue common stock purchase warrants exercisable at $1.00 per share
        for a three-year term at the rate of 2,500 per month as a penalty under the
        note
        until it is repaid.
  In
        October, 2003, Dr. Silverman, a Director, loaned the Company $10,000 under
        the
        terms of a promissory note bearing interest at a rate of 10% per annum. The
        promissory note matured on April 28, 2004 and is currently in default. In
        connection with the note, the Company issued Dr. Silverman 10,000 restricted
        shares of its common stock and has issued him 10,000 common stock purchase
        warrants exercisable at $1.00 per share for a three-year term. The Company
        continues to accrue interest at the stated penalty interest rate of 15% per
        annum and issue common stock purchase warrants exercisable at $1.00 per share
        for a three-year term at the rate of 500 per month as a penalty under the
        note
        until it is repaid.
  In
        October 2003, Robert B. Fields, a director, loaned the Company $5,000
        represented by a promissory note bearing interest at 10% per annum. The
        promissory note matured on April 28, 2004 and is currently in default. In
        connection with the loan, the Company issued Mr. Fields 5,000 restricted
        shares
        of its common stock and has issued him 5,000 common stock purchase warrants
        exercisable at $1.00 per share for a three-year term. The Company continues
        to
        accrue interest at the stated penalty interest rate of 15% per annum and
        issue
        common stock purchase warrants exercisable at $1.00 per share for a three-year
        term at the rate of 250 per month as a penalty under the note until it is
        repaid.
  34
  **ITEM
        13.EXHIBITS AND
        REPORTS ON FORM 8-K.**
 
 (a)
        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)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 Landlord10.9
                *
                    Addendum to Premises lease by and between Statmon Technologies
                    Corp. as
                    tenant and Maple Plaza, Ltd. as Landlord10.10
                Promissory
                    Note dated as of October 15, 2001 in the amount of $125,000 issued
                    by
                    Statmon Technologies Corp. to Thieme Consulting, Inc.
                    (6)
  35
  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 March 2005. (6)10.20
                  Deal
                      Point Memorandum regarding Statmon eBI Solutions, LLC. Between
                      Statmon
                      Technologies Corp. and eBI Solutions, LLC. (6)14.1
                  Code
                      of Ethics (6)14.2
                  Charter
                      of Audit Committee (6)21.1
                  List
                      of Subsidiaries of the Company (6)24.1
                  *
                      Power of Attorney.31.1
                  *
                      Certification of the Chief Executive Officer required by Rule
                      13a-14(a) or
                      Rule 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley
                      Act of 2002.31.2
                  *
                      Certification of the Chief Financial Officer required by Rule
                      13a-14(a) or
                      Rule 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley
                      Act of 2002.32.1
                  *
                      Certification of the Company’s Chief Executive Officer Certification,
                      pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
                      Section 906 of
                      the Sarbanes-Oxley Act of 2002.32.2
                  *
                      Certification of the Company’s Chief Financial Officer Certification,
                      pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
                      Section 906 of
                      the Sarbanes-Oxley Act of 2002.*
                      Filed herewith(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.
 
 (B)
        REPORTS ON FORM 8-K - none
  36
  **ITEM
        14.PRINCIPAL
        ACCOUNTANT FEES AND SERVICES**
 
 The
        following table summarizes the fees of Marcum & Kliegman, LLP our current
        independent auditor billed to us for each of the last two fiscal years for
        audit
        services and billed to us in each of the last two fiscal years for other
        services:
  For
                    the Year Ended March 31,2005
                
                2004Audit
                    Fees
                
                $
                102,500
                
                $
                72,000Audit
                    Related Fees
                
                
                -
                
                
                -Tax
                    Fees
                
                
                26,450
                
                
                -All
                    Other Fees
                
                
                -
                
                
                -Total
                    Fees
                
                $
                128,950
                
                $
                72,000
  Audit
        Fees: Consists of fees for professional services rendered by our principal
        accountants for the contemporaneous audit of the Company's annual financial
        statements and the review of quarterly financial statements or services that
        are
        normally provided by our principal accountants in connection with statutory
        and
        regulatory filings or engagements.
 
 Audit-Related
        Fees: Consists of fees for assurance and related services by our principal
        accountants that are reasonably related to the performance of the audit or
        review of the Company's financial statements and are not reported under "Audit
        Fees."
 
 Tax
        Fees:
        Consists of fees for professional services rendered by our principal accountants
        for tax advice.
 
 All
        Other
        Fees: Consists of fees for products and services provided by our principal
        accountants, other than the services reported under "Audit Fees," "Audit-Related
        Fees" and "Tax Fees" above.
 
 Under
        the
        Sarbanes-Oxley Act of 2002, all audit and non-audit services performed by
        the
        Company's independent accountants must now be approved in advance by the
        Audit
        Committee to assure that such services do not impair the accountants'
        independence from the Company. Accordingly, the Audit Committee has adopted
        an
        Audit and Non-Audit Services Pre-Approval Policy (the "Policy") which sets
        forth
        the procedures and the conditions pursuant to which services to be performed
        by
        the independent accountants are to be pre-approved. Pursuant to the Policy,
        certain services described in detail in the Policy may be pre-approved on
        an
        annual basis together with pre-approved maximum fee levels for such services.
        The services eligible for annual pre-approval consist of services that would
        be
        included under the categories of Audit Fees, Audit-Related Fees and Tax Fees
        in
        the above table as well as services for limited review of actuarial reports
        and
        calculations. If not pre-approved on an annual basis, proposed services must
        otherwise be separately approved prior to being performed by the independent
        accountants. In addition, any services that receive annual pre-approval but
        exceed the pre-approved maximum fee level also will require separate approval
        by
        the Audit Committee prior to being performed. The Audit Committee may delegate
        authority to pre-approve audit and non-audit services to any member of the
        Audit
        Committee, but may not delegate such authority to management.
  37
  **SIGNATURES**
 
 Pursuant
        to the requirements of Section 13 or 15(d) of the Securities Exchange Act
        of
        1934, the Company has duly caused this report on form 10-KSB to be signed
        on its
        behalf by the undersigned, thereunto duly authorized, this 14 th day of
        July 2005.
  STATMON
                    TECHNOLOGIES CORP.,
                  a
                    Nevada corporationBy:
              /s/ Geoffrey
                P. TalbotGeoffrey
                P. TalbotChairman,
                  CEO, President and Chief Financial Officer
                (Principal
                  Financial and Accounting Officer)
   Pursuant
        to the requirements of the Securities Exchange Act of 1934, as amended, this
        report has been signed below by following persons on behalf of the Registrant
        and in the capacities and on the dates indicated:
  **Signatures**
              
              **Title**
              
              **Date**/s/ Geoffrey
                P. Talbot
              
              Chairman,
                CEO, President and Chief Financial Officer
              
              July
                  14, 2005GEOFFREY
                  P. TALBOT/s/ Peter
                J. Upfold
              
              CTO
                and Director
              
              July
                  14, 2005PETER
                  J. UPFOLD/s/ Leonard
                Silverman
              
              Director
              
              July
                  14, 2005LEONARD
                  SILVERMAN/s/ Robert
                B. Fields
              
              Director
              
              July
                  14, 2005ROBERT
                  B. FIELDS
  38
  **INDEX
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 
 Page
                  (s)Report
                  of Independent Registered Public Accounting Firm
              
              F-1Financial
                  Statements:Consolidated
                  Balance Sheet as of March 31, 2005
              
              F-2Consolidated
                  Statements of Operations for the Years Ended March 31, 2005 and
                  March 31,
                  2004
              
              F-3Consolidated
                  Statements of Stockholders’ Deficiency for the Years Ended March 31, 2005
                  and March 31, 2004
              
              F-4Consolidated
                  Statements of Cash Flows for the Years Ended March 31, 2005 and
                  March 31,
                  2004
              
              F-5Notes
                  to Consolidated Financial Statements
              
              F-6
                  to F-15
 
 
  REPORT
        OF
        INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 -------------------------------------------------------
 
 Board
        of
        Directors and Stockholders of
 Statmon
        Technologies Corp.
  We
        have
        audited the accompanying consolidated balance sheet of Statmon Technologies
        Corp. and Subsidiaries (the "Company") as of March 31, 2005 and the related
        consolidated statements of operations, stockholders' deficiency, and cash
        flows
        for the years ended March 31, 2005 and 2004. These consolidated financial
        statements are the responsibility of the Company's management. Our
        responsibility is to express an opinion on these consolidated financial
        statements based on our audits.
  We
        conducted our audits in accordance with the standards of the Public Company
        Accounting Oversight Board (United States). Those standards require we plan
        and
        perform the audit to obtain reasonable assurance about whether the financial
        statements are free of material misstatement. The Company is not required
        to
        have, nor were we engaged to perform, an audit of its internal control over
        financial reporting. Our audits included consideration of internal control
        over
        financial reporting as a basis for designing audit procedures that are
        appropriate in the circumstances, but not for the purpose of expressing an
        opinion on the effectiveness of the Company’s internal control over financial
        reporting. Accordingly, we express no such opinion. An audit also includes
        examining, on a test basis, evidence supporting the amounts and disclosures
        in
        the financial statements, assessing the accounting principles used and
        significant estimates made by management, as well as evaluating the overall
        financial statement presentation. We believe that our audits provide a
        reasonable basis for our opinion.
 
 In
        our
        opinion, the consolidated financial statements referred to above present
        fairly,
        in all material respects, the consolidated financial position of Statmon
        Technologies Corp and Subsidiaries as of March 31, 2005 and the results of
        their
        operations and their cash flows for the years ended March 31, 2005 and 2004
        in
        conformity with accounting principles generally accepted in the United States
        of
        America.
  The
        accompanying consolidated financial statements have been prepared assuming
        that
        the Company will continue as a going concern. As shown in the consolidated
        financial statements, the Company incurred net losses of $3,062,397 and $600,055
        during the years ended March 31, 2005 and 2004, respectively. In addition,
        as of
        March 31, 2005, the Company had a working capital deficiency of $2,687,402.
        These conditions raise substantial doubt about the Company's ability to continue
        as a going-concern. Management's plans in regard to these matters are described
        in Note 1. The consolidated financial statements do not include any adjustments
        that might result from the outcome of this uncertainty.
 
 
 /s/
        Marcum & Kliegman LLP
 New
        York,
        New York
 June
        30,
        2005
 
 F-1
  **STATMON
        TECHNOLOGIES CORP. AND SUBSIDIARIES**
 **CONSOLIDATED
        BALANCE SHEET**
 **March
        31, 2005**
  **ASSETS**Current
                      Assets:Cash
                  
                  $
                  191,974Accounts
                      receivable
                  
                  
                  131,183Inventories
                  
                  
                  68,522Prepaid
                      expense and other current assets
                  
                  
                  25,985Total
                      Current Assets
                  
                  
                  417,664Property
                      and Equipment, net
                  
                  
                  30,907Other
                      assets
                  
                  
                  7,315Total
                      Assets
                  
                  $
                  455,886**LIABILITIES
                      AND STOCKHOLDERS' DEFICIENCY**Current
                      Liabilities:Notes
                      payable (including $280,000 due to related parties), net of
                      debt discount
                      of $222,156
                  
                  $
                  1,969,844Accounts
                      payable
                  
                  
                  405,429Accrued
                      expenses
                  
                  
                  127,927Accrued
                      compensation
                  
                  
                  177,486Interest
                      payable (including $129,000 due to related parties)
                  
                  
                  379,909Deferred
                      revenue
                  
                  
                  44,471Total
                      Liabilities
                  
                  
                  3,105,066Commitments
                      and ContingenciesStockholders'
                      Deficiency:Preferred
                      stock, $.01 par value, 5,000,000 share authorized, none issued
                      and
                      outstanding
                  
                  
                  -Common
                      stock, $.01 par value, 25,000,000 shares authorized, 12,436,057
                      issued and
                      outstanding
                  
                  
                  124,361Additional
                      paid-in capital
                  
                  
                  3,896,368Accumulated
                      deficit
                  
                  
                  (6,669,909
                  )Total
                      Stockholders' Deficiency
                  
                  
                  (2,649,180
                  )Total
                      Liabilities and Stockholders' Deficiency
                  
                  $
                  455,886
 
 
 The
        accompanying notes are an integral part of these consolidated financial
        statements.
  F-2
 **STATMON
        TECHNOLOGIES CORP. AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENTS OF OPERATIONS**
  For
                    the Years Ended March 31,2005
                
                2004Revenues
                
                $
                1,414,096
                
                $
                2,511,356Cost
                    of Sales (including $0 and $99,727 to related parties in2005
                    and 2004, respectively)
                
                
                426,294
                
                
                725,586Gross
                    Profit
                
                
                987,802
                
                
                1,785,770Selling,
                    General and Administrative Expenses
                
                
                2,215,936
                
                
                1,303,537Operating
                    (Loss)/Income
                
                
                (1,228,134
                )
                
                482,233Other
                    (Income)/Expense:Interest
                    expense
                
                
                241,000
                
                
                111,663Common
                    stock and warrants issued in association with debt
                
                
                859,000
                
                
                572,427Amortization
                    of debt discount
                
                
                630,091
                
                
                359,257Amortization
                    of deferred financing costs
                
                
                104,172
                
                
                38,941Total
                    Other Expense
                
                
                1,834,263
                
                
                1,082,288NET
                    LOSS
                
                $
                (3,062,397
                )
                $
                (600,055
                )NET
                    LOSS PER COMMON SHARE - Basic and Diluted
                
                $
                (0.26
                )
                $
                (0.06
                )Weighted
                    Average Number of Common Shares Outstanding -Basic
                    and Diluted
                
                
                11,778,491
                
                
                10,621,918
    The
          accompanying notes are an integral part of these consolidated financial
          statements.
  F-3
  **STATMON
        TECHNOLOGIES CORP. AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENT OF STOCKHOLDERS’ DEFICIENCY**
 For
        the
        Years Ended March 31, 2005 and 2004
  Common
                      Stock
                  
                  Additionalpaid-in
                  
                  Accumulated
                  
                  TotalStockholder'sShares
                  
                  Amount
                  
                  capital
                  
                  deficit
                  
                  DeficitBalance,
                      March 31, 2003
                  
                  
                  10,205,661
                  
                  $
                  102,057
                  
                  $
                  1,023,301
                  
                  $
                  (3,007,457
                  )
                  $
                  (1,882,099
                  )Issuance
                      of debt related penalty shares
                  
                  
                  300,000
                  
                  
                  3,000
                  
                  
                  300,500
                  
                  
                  
                  
                  
                  303,500Issuance
                      of common stock for services
                  
                  
                  25,000
                  
                  
                  250
                  
                  
                  25,225
                  
                  
                  
                  
                  
                  25,475Issuance
                      of shares and warrants related to new debt
                  
                  
                  1,187,000
                  
                  
                  11,870
                  
                  
                  748,775
                  
                  
                  
                  
                  
                  760,645Issuance
                      of debt related penalty warrants
                  
                  
                  
                  
                  
                  
                  
                  
                  243,451
                  
                  
                  
                  
                  
                  243,451Net
                      Loss
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (600,055
                  )
                  
                  (600,055
                  )Balance,
                      March 31, 2004
                  
                  
                  11,717,661
                  
                  $
                  117,177
                  
                  $
                  2,341,252
                  
                  $
                  (3,607,512
                  )
                  $
                  (1,149,083
                  )Issuance
                      of debt related penalty shares
                  
                  
                  300,000
                  
                  
                  3,000
                  
                  
                  263,600
                  
                  
                  
                  
                  
                  266,600Issuance
                      of shares and warrants related to new debt
                  
                  
                  765,000
                  
                  
                  7,650
                  
                  
                  435,650
                  
                  
                  
                  
                  
                  443,300Issuance
                      of debt related penalty warrants
                  
                  
                  
                  
                  
                  
                  
                  
                  538,734
                  
                  
                  
                  
                  
                  538,734Shares
                      cancelled - litigation settlement
                  
                  
                  (1,120,000
                  )
                  
                  (11,200
                  )
                  
                  11,200
                  
                  
                  
                  
                  
                  -Shares
                      issued - litigation settlement
                  
                  
                  373,396
                  
                  
                  3,734
                  
                  
                  (3,734
                  )
                  
                  
                  
                  
                  -Issuance
                      of debt related warrants
                  
                  
                  
                  
                  
                  
                  
                  
                  53,666
                  
                  
                  
                  
                  
                  53,666Issuance
                      of shares for services
                  
                  
                  400,000
                  
                  
                  4,000
                  
                  
                  256,000
                  
                  
                  
                  
                  
                  260,000Net
                      Loss
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (3,062,397
                  )
                  
                  (3,062,397
                  )Balance,
                      March 31, 2005
                  
                  
                  12,436,057
                  
                  $
                  124,361
                  
                  $
                  3,896,368
                  
                  $
                  (6,669,909
                  )
                  $
                  (2,649,180
                  )
     The
        accompanying notes are an integral part of these consolidated financial
        statements.
  F-4
  **STATMON
        TECHNOLOGIES CORP. AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 For
                    the Years Ended March 31,2005
                
                2004CASH
                    FLOWS FROM OPERATING ACTIVITIES:Net
                    loss
                
                $
                (3,062,397
                )
                $
                (600,055
                )Adjustments
                    to reconcile net loss to net cashused
                    in operating activities:Depreciation
                    and amortization
                
                
                13,865
                
                
                10,237Common
                    stock and warrants issued in association with debt
                
                
                859,000
                
                
                572,427Amortization
                    of debt discount
                
                
                630,091
                
                
                359,257Amortization
                    of deferred financing costs
                
                
                104,172
                
                
                38,961Non-cash
                    stock based compensation charge
                
                
                260,000
                
                
                -Changes
                    in operating assets and liabilities:Accounts
                    receivable
                
                
                649,648
                
                
                (357,373
                )Inventories
                
                
                (68,522
                )
                
                -Prepaid
                    expense and other current assets
                
                
                79,624
                
                
                (244,754
                )Other
                    assets
                
                
                (850
                )
                
                -Accounts
                    payable
                
                
                (38,379
                )
                
                (26,003
                )Accrued
                    expenses
                
                
                50,035
                
                
                (338,945
                )Accrued
                    compensation
                
                
                (9,335
                )
                
                (40,000
                )Interest
                    payable
                
                
                225,350
                
                
                37,242Deferred
                    revenue
                
                
                (90,848
                )
                
                (295,011
                )NET
                    CASH USED IN OPERATING ACTIVITIES
                
                
                (398,546
                )
                
                (884,017
                )CASH
                    FLOWS USED IN INVESTING ACTIVITIES:Purchase
                    of property and equipment
                
                
                (22,007
                )
                
                (2,602
                )CASH
                    FLOWS FROM FINANCING ACTIVITIES*:*Proceeds
                    from borrowings
                
                
                765,000
                
                
                1,187,000Repayment
                    of borrowings
                
                
                (245,000
                )
                
                (216,296
                )NET
                    CASH PROVIDED BY FINANCING ACTIVITIES
                
                
                520,000
                
                
                970,704NET
                    INCREASE IN CASH
                
                
                99,447
                
                
                84,085CASH,
                    BEGINNING OF YEAR
                
                
                92,527
                
                
                8,442CASH,
                    END OF YEAR
                
                $
                191,974
                
                $
                92,527SUPPLEMENTAL
                    DISCLOSURE OF CASH FLOW INFORMATION:Cash
                    paid for:Interest
                
                $
                27,204
                
                $
                74,684Income
                    Taxes
                
                $
                -
                
                $
                -
 
 The
        accompanying notes are an integral part of these consolidated financial
        statements.
 
 F-5
 **1.BUSINESS
        DESCRIPTION,
        GOING CONCERN AND MANAGEMENT PLANS**
 
 **Company
        Overview**
  Statmon
        Technologies Corp. (the “Company”) develops, markets and licenses industry
        universal remote control, monitoring and facilities management software and
        hardware integration products. Customers use the Company’s products to connect
        and bi-directionally integrate diverse numbers of analog and digital devices
        and
        disparate software systems to customized dashboard screens. Features include
        alarm notification, automatic control and response, all in real time. Multiple
        locations can be connected to each other and are accessible with any internet
        connected device from any location, proactively automating and optimizing
        mission critical and facilities management operations. The Company’s proprietary
        software products include the "Axess" and "Neuro" applications. Harris Broadcast
        Communications, a division of Harris Corporation (“Harris”) have re-badged Axess
        as “ReCon” under and OEM agreement for Harris clients. Axess, Neuro and ReCon
        interface with the "EIF", "UIF" and "UVM" hardware integration products.
        We also
        provide specialized systems integration services to a variety of customers
        through our wholly-owned subsidiary, Statmon - eBI Solutions LLC
        (“SeBI”).
  **Going
        Concern**
  The
        accompanying financial statements have been prepared in accordance with
        accounting principles generally accepted in the United States of America
        and
        assume that the Company will continue as a going concern. The Company has
        incurred net losses of approximately $6,670,000 since its inception.
        Additionally, the Company had a net working capital deficiency of approximately
        $2,687,000 at March 31, 2005 and negative cash flows from operations for
        the
        year ended March 31, 2005 and 2004 of approximately $399,000 and $884,000,
        respectively. Those conditions raise substantial doubt about the Company’s
        ability to continue as a going concern. The accompanying financial statements
        do
        not include any adjustments that might result from the outcome of this
        uncertainty.
  As
        more
        fully described in the Notes below, the Company funded its operations during
        fiscal 2005 and 2004 through the sale of Units consisting of notes, common
        stock
        and warrants to purchase shares of common stock resulting in net proceeds
        to the
        Company of $520,000 and $970,704, respectively. In addition, as more fully
        described in Note 9, the Company raised $250,000 in April through June 2005
        from
        the sale of Units.
  **Management
        Plans**
  The
        Company expects that the growth and expansion of operations will require
        capital
        infusions to repay short-term debt and fund the Company’s working capital needs.
        The Company is seeking to raise sufficient capital through a private placement
        of its equity or long-term debt securities in mid to late 2005. The Company
        is
        currently in discussions with a placement agent related to a proposed equity
        placement.
  There
        can
        be no assurances that the Company will be successful in obtaining the
        aforementioned financing or refinancing and or extension of its notes payable.
        If it is not successful, the Company would seek to negotiate other terms
        for the
        issuance of debt, and/or pursue bridge financing, negotiate with suppliers
        for a
        reduction of debt through issuance of stock, and seek to raise equity through
        the sale of its common stock. At this time management cannot assess the
        likelihood of achieving these objectives. If the Company is unable to achieve
        these objectives, the Company may be forced to cease its business operations,
        sell its assets and/or seek further protection under applicable bankruptcy
        laws.
  F-6
  **2.**
              **SUMMARY
                  OF SIGNIFICANT ACCOUNTING
                  POLICIES**
 
 *a.*
              Basis
                  of Consolidation-
                  For fiscal 2005, the consolidated financial statements include
                  the
                  accounts of the Company's wholly-owned subsidiary, Statmon-eBI
                  Solutions,
                  LLC. In fiscal 2004, the Company owned 51% of Statmon-eBI Solutions,
                  LLC
                  and on February 15, 2004, acquired the remaining 49% of the subsidiary.
                  All inter-company accounts and transactions have been
                  eliminated.
 
 *b.*
              Use
                  of Estimates-
                  The preparation of financial statements in conformity with accounting
                  principles generally accepted in the United States of America requires
                  management to make estimates and assumptions that affect the reported
                  amounts of assets and liabilities, and disclosure of contingent
                  assets and
                  liabilities at the date of the financial statements and the reported
                  amounts of revenues and expenses during the reporting period. Actual
                  results could differ from those estimates.
 
 *c.*
              Property
                  and Equipment-
                  Property and equipment is stated at cost. Depreciation is calculated
                  on a
                  straight-line basis over five years, which is the estimated useful
                  life of
                  the assets.
 
 *d.*
              Research
                  and Development-
                  Research and development expenditures are charged to operations
                  as
                  incurred. Research and development expenditures were approximately
                  $381,000 in fiscal 2005 and $232,000 in fiscal
                  2004.
 
 *e.*****
              Inventories-
                  Inventories are priced at the lower of cost (first-in, first-out)
                  or
                  market and consists of purchased parts, components and
                  supplies.
 
 *f.*****
              Net
                  Loss Per Share-Basic
                  net loss per share is computed using the weighted average number
                  of shares
                  of outstanding common stock***.***For
                  all periods presented, diluted net loss per share was the same
                  as basic
                  net loss per share since the inclusion of the warrants would have
                  been
                  anti-dilutive. Securities that could potentially dilute basic earnings
                  per
                  share (“EPS”) in the future and that were not included in the computation
                  of diluted EPS because to do so would have been anti-dilutive for
                  the
                  periods presented, consist of warrants to purchase 4,596,150 and
                  2,882,106
                  shares of common stock as of March 31, 2005 and 2004,
                  respectively.
 
 *g.*
              Income
                  Taxes-
                  Deferred taxes represent the tax effects of differences between
                  the
                  financial reporting and tax bases of the Company’s assets and liabilities
                  at the enacted tax rates in effect for the years in which the differences
                  are expected to reverse. The Company evaluates the recoverability
                  of
                  deferred tax assets and establishes a valuation allowance when
                  it is more
                  likely than not that some portion or all of the deferred tax assets
                  will
                  not be realized. Income tax expense consists of the tax payable
                  for the
                  period and the change during the period in deferred tax assets
                  and
                  liabilities.
 
 *h.*
              Fair
                  Value of Financial Instruments-
                  The carrying amounts reported in the balance sheet for cash, receivables,
                  accounts payable and accrued expenses approximate fair value based
                  on the
                  short-term maturities of these instruments. The carrying amounts
                  of the
                  Company’s notes payable approximate fair value based on the prevailing
                  market interest rates.
 
 *i.*
              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, 2005, the Company does not believe
                  that any
                  impairment has occurred.
 
 F-7
 
 **2.** **SUMMARY
        OF SIGNIFICANT ACCOUNTING POLICIES, continued**
 
 *j.*
              Revenue
                  Recognition-
                  Statement of Position (“SOP”) 97-2, Software Revenue Recognition, issued
                  by the American Institute of Certified Public Accountants ("AICPA")
                  and
                  SOP 98-9, “Modification of SOP 97-2, Software Revenue Recognition, with
                  Respect to Certain Transactions”, applies to all entities that earn
                  revenue from licensing, selling, or otherwise marketing computer
                  software.
                  The Company believes its current revenue recognition policies and
                  practices are consistent with SOP
                  97-2.
 
 Product
        revenues from the sale of software licenses are recognized when evidence
        of a
        license agreement exists, the fees are fixed and determinable, collectibility
        is
        probable and vendor specific objective evidence exists to allocate the total
        fee
        to elements of the arrangements. The Company's software license agreement
        entitles licensees limited rights for upgrades and enhancements for the version
        they have licensed.
 
 Deferred
        revenue represents revenue billed and collected for products and or/services
        but
        not yet shipped or rendered.
  *k.*
              Stock-Based
                  Compensation-As
                  permitted under Statement of Financial Accounting Standards ("SFAS")
                  No.
                  148, "Accounting for Stock-Based Compensation - Transition and
                  Disclosure", which amended SFAS No. 123 "Accounting for Stock-Based
                  Compensation," the Company has elected to continue to follow the
                  intrinsic
                  value method in accounting for its stock-based employee compensation
                  arrangements as defined by Accounting Principles Board Opinion
                  ("APB") No.
                  25, "Accounting for Stock Issued to Employees", and related
                  interpretations including Financial Accounting Standards Board
                  ("FASB")
                  Interpretation No. 44, "Accounting for Certain Transactions Involving
                  Stock Compensation", an interpretation of APB No.
                  25.
  For
        the
        years ended March 31, 2005 and 2004, the Company did not issue any options
        to
        its employees.
 
 *l.*
              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.
 
 *m.*
              Amortization
                  of Debt Discount-
                  Debt discount is amortized on a straight-line basis over the life
                  of the
                  related notes.
 
 *n.*
              New
                  Accounting Pronouncements-In
                  January 2003, the FASB issued Interpretation Number 46, "Consolidation
                  of
                  Variable Interest Entities" ("FIN No. 46"). This interpretation
                  of
                  Accounting Research Bulletin ("ARB") No. 51, "Consolidated Financial
                  Statements," provides guidance for identifying a controlling interest
                  in a
                  variable interest entity ("VIE") established by means other than
                  voting
                  interests. FIN No. 46 also requires consolidation of a VIE by an
                  enterprise that holds such a controlling interest. In December
                  2003, the
                  FASB completed its deliberations regarding the proposed modification
                  to
                  FIN No. 46 and issued Interpretation Number 46(R), "Consolidation
                  of
                  Variable Interest Entities - an Interpretation of ARB No. 51" ("FIN
                  No.
                  46(R)"). The decisions reached included a deferral of the effective
                  date
                  and provisions for additional scope exceptions for certain types
                  of
                  variable interests. Application of FIN No. 46(R) is required in
                  financial
                  statements of public entities that have interests in VIEs or potential
                  VIEs commonly referred to as special-purpose entities for periods
                  ending
                  after December 15, 2003. Application by public small business issuers'
                  entities is required in all interim and annual financial statements
                  for
                  periods ending after December 15, 2004. The adoption of FIN No.
                  46 did not
                  have any impact on the Company’s consolidated results of operations,
                  financial position or cash flows.
  F-8
 **2.** **SUMMARY
        OF SIGNIFICANT ACCOUNTING POLICIES, continued**
 
 In
        November 2004, the FASB issued SFAS No. 151, “Inventory Costs, an amendment of
        ARB No. 43, Chapter 4.” SFAS No. 151 requires certain abnormal expenditures to
        be recognized as expenses in the current period. It also requires that the
        amount of fixed production overhead allocated to inventory be based on the
        normal capacity of the production facilities. The standard is effective for
        inventory costs incurred during fiscal years beginning after June 15, 2005.
        Management does not expect that SFAS No. 151 will have a material effect
        on the
        company’s Consolidated Financial Statements.
 
 In
        December 2004, the FASB issued SFAS No. 123 (revised 2004), "Shared-Based
        Payment." SFAS 123(R) addresses the accounting for share-based payment
        transactions in which an enterprise receives employee services in exchange
        for
        (a) equity instruments of the enterprise or (b) liabilities that are based
        on
        the fair value of the enterprise's equity instruments or that may be settled
        by
        the issuance of such equity instruments. SFAS 123(R) requires an entity to
        recognize the grant-date fair-value of stock options and other equity-based
        compensation issued to employees in the income statement. The revised statement
        generally requires that an entity account for those transactions using the
        fair-value-based method, and eliminates the intrinsic value method of accounting
        in APB 25, which was permitted under SFAS No. 123, as originally issued.
 
 The
        revised statement requires entities to disclose information about the nature
        of
        the share-based payment transactions and the effects of those transactions
        on
        the financial statements. SFAS No. 123(R) is effective for small business
        issuers for the first interim or annual reporting period that begins after
        December 15, 2005, with early adoption encouraged. The Company is currently
        evaluating the impact that this statement will have on its financial condition
        or results of operations.
 
 In
        June
        2005, the FASB issued SFAS No. 154, ”Accounting Changes and Error Corrections -
        a replacement of APB Opinion No. 20 and FASB No. 3”, which establishes new
        standards on accounting for changes in accounting principles. Pursuant to
        the
        new rules, all such changes must be accounted for by retrospective application
        to the financial statements of prior periods unless it is impracticable to
        do
        so. SFAS No. 154 completely replaces Accounting Principles Bulletin No. 20
        and
        SFAS No. 3, though it carries forward the guidance in those pronouncements
        with
        respect to accounting for changes in estimates, changes in the reporting
        entity,
        and the correction of errors. The requirements in SFAS No. 154 are effective
        for
        accounting changes made in fiscal years beginning after December 15,
        2005.
  F-9
  **3.** **PROPERTY
        AND EQUIPMENT**
  Property
        and equipment at March 31, 2005 consists of the following:
  Computer
                    Equipment
                
                $
                37,976Software
                
                
                11,608Office
                    Equipment
                
                
                25,55875,142Less:
                    accumulated depreciation
                
                
                44,235$
                30,907
  Depreciation
          of property and equipment was $13,865 and $10,237 for the year ended March
          31,
          2005 and 2004, respectively.
  **4.**
              **RELATED
                  PARTY TRANSACTIONS**
  In
        connection with an agreement in June 2001 with Blue Skies LLC, an affiliate
        of
        John Hoff, a principal shareholder of the Company, the Company paid Blue
        Skies
        for its systems integration services $0 and $99,727 during the years ended
        March
        31, 2005 and 2004, respectively.
  **5.** **NOTES
        PAYABLE**
  Notes
        payable at March 31, 2005 consists of the following:
  2005Senior
                    Notes Payable - Thieme Consulting, Inc. - relatedparty
                
                
                [a
                ]
                $
                250,000Notes
                    Payable - various(Including $30,000from
                    related parties)
                
                
                [b
                ]
                
                1,942,0002,192,000Less:
                    Debt Discount
                
                
                
                
                
                (222,156
                )$
                1,969,844
  F-10
  **5** . **NOTES
        PAYABLE, continued**
 
 [a]
        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 three-year term
        at
        $2.00 per share. The three Senior Notes initial terms expired 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 and continues to issue 25,000 shares of
        common stock per month until full repayment of the Senior Notes. 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 fully
        repaid.
  On
        February 7, 2003 the Company entered into a promissory Note Extension Agreement
        with the holder of the Senior Notes. Pursuant to that agreement, the Company
        extended the Senior Notes until June 30, 2003 and is currently in default.
        The
        extension consideration was 200,000 shares of common stock which was valued
        at
        $36,385, with the 15% penalty interest rate continuing to accrue, plus, the
        Company will continue to issue the holders of the Senior Notes 25,000 shares
        per
        month or pro rata until repayment in full of all principal and interest.
        The
        note holder received 300,000 penalty shares during the year ended March 31,
        2005
        and March 31, 2004, valued at $266,600 and $303,500, respectively.
  [b]
        Between April 5, 2002 and March 31, 2004 the Company issued Units consisting
        of
        (i) a 180 day promissory note bearing interest at 10% per annum, (ii) a share
        of
        the Company’s common stock and (iii) three-year warrants to purchase shares of
        common stock at an exercise price of $1.00 per share to approximately 60
        investors for a total amount of $1,422,000. These notes had initial term
        maturity dates between October 5, 2002 and September 30, 2004. Between April
        1,
        2004 and March 31, 2005, the Company issued Units consisting of (i) 180 day
        promissory note bearing interest at 10% per annum, (ii) a share of the Company’s
        common stock and (iii) three-year warrants to purchase shares of common stock
        at
        an exercise price of $1.00 per share to three investors for a total amount
        of
        $290,000. These notes have maturity dates between September 29, 2004 and
        April
        10, 2005. At March 31, 2005, $245,000 principal amount of these notes have
        been
        repaid, plus interest of $27,204, with the remaining $1,467,000 principal
        amount
        of these notes still outstanding. Upon default, the notes accrued interest
        at
        15% per annum and provide for the issuance of monthly warrants as a penalty
        until the repayment of the notes in full. The warrants are exercisable at
        $1.00
        per share for three-year terms from their dates of issuance. The Company
        has
        accrued $194,328 of interest and granted 848,186 penalty warrants related
        to
        such notes during the year ended March 31, 2005. The 848,186 penalty warrants
        were valued at $526,234.
  Additionally
        for the year ended March 31, 2005, the Company issued Units investors consisting
        of (i) $475,000 principal amount promissory notes bearing interest at 10%
        per
        annum and due 365 days from the date of issuance, (ii) 475,000 shares of
        the
        Company’s common stock, and (iii) three-year warrants to purchase 475,000 shares
        of common stock at $1.50 per share. These notes have maturity dates between
        October 8, 2005 and March 16, 2006.
  During
        the year ended March 31, 2005 the Company issued 103,700 warrants to purchase
        shares of common stock at an exercise price of $1.00 per share, exercisable
        after one year from the date of issuance and expiring five years from the
        date
        of issuance pursuant to a placement agreement with a registered broker dealer,
        in relation to the sale of $1,037,000 of the Units included in Note 5(b)
        above.
        These 103,700 warrants were valued at $53,666. Additionally, the Company
        paid an
        aggregate of $27,000 in commissions related to $270,000 of Units issued during
        the period and granted three-year warrants to purchase 25,000 shares of common
        stock at $1.00 per share. These 25,000 warrants were valued at
        $12,500.
 
 F-11
 **6.** **EQUITY
        TRANSACTIONS**
  [a]
        Common Stock
  During
        the year ended March 31, 2005, the Company issued 300,000 shares of common
        stock
        to various parties as penalty shares associated with unpaid debt, 400,000
        shares
        of common stock to two key employees and 765,000 shares of common stock to
        note
        holders related to new debt in the period. Additionally, the Company issued
        373,396 shares of common stock and cancelled 1,120,000 share of common stock
        related to a legal settlement (see Note 8b).
  During
        the year ended March 31, 2004, the Company issued 300,000 shares of common
        stock
        to various parties as penalty shares associated with unpaid debt and 25,000
        shares of common stock to a trade creditor for an extension of payment terms.
        Additionally, the Company issued 1,187,000 shares of common stock to note
        holders related to new debt in the period.
  [b]
        Warrants
  The
        following table illustrates the Company’s warrant issuances and balances
        outstanding through March 31, 2005. The Company generally issues warrants
        to
        purchase shares of common stock in connection with debt and equity financing
        and
        to non-employee consultants.
  Weighted
                  AverageShares
              
              Exercise
                  Price
              
              ExercisableWarrants
                  outstanding at March 31, 2003
              
              
              1,514,256
              
              
              1.84
              
              
              1,514,256Granted
              
              
              1,417,850
              
              
              1.00Canceled
              
              
              (50,000
              )
              
              1.00Exercised
              
              
              -
              
              
              -Warrants
                  outstanding and exercisable at March 31, 2004
              
              
              2,882,106
              
              $
              1.43
              
              
              2,882,106Granted
              
              
              1,741,886
              
              
              1.20Canceled
              
              
              -
              
              
              -Exercised
              
              
              -
              
              
              -Warrants
                  outstanding and exercisable at March 31, 2005
              
              
              4,623,992
              
              $
              1.35
              
              
              4,623,992
  The
        following is additional information with respect to the Company’s warrants as of
        March 31, 2005.
  Weighted
                  Average
              
              WeightedNumber
              
              Remaining
                  Years of
              
              Average
              
              NumberRange
                  of Exercise
              
              Outstanding
              
              Contractual
                  Life
              
              Exercise
                  Price
              
              Exercisable$1.00
              
              
              3,623,992
              
              
              2.11
              
              $
              1.00
              
              
              3,623,992$1.50
                  - 2.00
              
              
              750,000
              
              
              2.37
              
              
              1.83
              
              
              750,000$5.00
              
              
              250,000
              
              
              2.13
              
              
              5.00
              
              
              250,000$1.00
                  - 5.00
              
              
              4,623,992
              
              
              2.16
              
              $
              1.35
              
              
              4,623,992
 
  Net
        Loss
        Per Share
  The
        above-mentioned warrants could potentially dilute basic earnings per share
        ("EPS"), in the future, and were not included in the computation of diluted
        EPS
        because to do so would have been anti-dilutive for the periods
        presented.
  F-12
 **6.** **EQUITY
        TRANSACTIONS, continued**
 
 [c]
        Preferred Stock
  On
        November 5, 2004 the Company amended and restated its Articles of Incorporation
        to authorize 5,000,000 shares of preferred stock with a par value of $.01
        per
        share. At the time of this filing, there are no shares of preferred stock
        issued
        and outstanding.
  **7.** **INCOME
        TAXES**
  As
        of
        March 31, 2005, the Company has net operating loss carry forwards of
        approximately $4,373,000 for Federal and State tax purposes expiring between
        calendar 2005 and 2025. These losses are subject to IRS and applicable state
        regulations and may be subject to significant limitations. The resulting
        deferred tax asset of approximately $1,700,000 as of March 31, 2005 represents
        a
        decrease of approximately $1,300,000 from the previous year and has been
        offset
        by a corresponding valuation allowance.
  The
        Company has recorded a full valuation allowance against the deferred tax
        assets,
        including the federal and state net operating loss carry forwards as management
        believes that it is more likely than not that substantially all of the deferred
        tax assets will not be realized.
  **8.** **COMMITMENTS
        AND CONTINGENCIES**
  *a.*
              Leases-
                  The Company leases its office facilities and equipment under
                  non-cancelable lease arrangements. Rent expense was $102,653 and
                  $86,683
                  for the years ended March 31, 2005 and 2004, respectively. Future
                  annual
                  minimum lease payments under noncancellable operating leases for
                  the
                  fiscal years ended March 31 are as follows:
  2006
              
              $
              $136,2672007
              
              
              129,9522008
              
              
              10,374$
              276,593
  *b.*
              Legal
                  Proceedings
  On
        February 25, 2003, the Company entered into a Work Out Agreement with Michael
        Hurst and Chad Kalebic individually and their affiliates including “SDS LLC”
        (the “Plaintiffs”) pertaining to the termination of their commission-based sales
        arrangement with the Company. From mid-2000 to February 2003, the Plaintiffs
        had
        acted in various capacities with the Company, including functioning as its
        sales
        force. In mid-2003, a dispute developed between the parties over unpaid
        commissions and the release of common stock issued to them. On November 6,
        2003,
        the Plaintiffs filed a lawsuit with the Superior Court of the State of
        California (Case No. BC305584) alleging breach of contract of the Work Out
        Agreement, requesting specific performance and making an application for
        writ of
        attachment of the Company’s assets. On December 1, 2003, the Company consented
        to the entry of an attachment order for $184,275, effective January 30, 2004,
        which was the amount of the Plaintiffs’ claims for unpaid commissions and
        accrued compensation. The Plaintiffs also sought the delivery of 1,120,300
        restricted shares of common stock issued them but being held by the Company.
        On
        December 30, 2003, the Company paid the Plaintiffs $40,000 under protest,
        to be
        offset against the $184,275 claimed by the Plaintiffs and on January 30,
        2004,
        the Company made a cash deposit into a bank account for $144,275, which was
        attached by the Plaintiffs.
  F-13
 **8.** **COMMITMENTS
        AND CONTINGENCIES, continued**
  Effective
        June 14, 2004, the parties settled the lawsuit. Under the settlement, the
        Company paid $164,275 in cash of which $18,650 was expensed during the period
        ended June 30, 2004, including $144,275 from the release of the attached
        funds,
        and the Plaintiffs assigned their rights to receive 1,120,000 shares of common
        stock back to the Company for cancellation on September 15, 2004. The Company
        incurred approximately $8,000 of filing and third party costs in connection
        with
        the settlement and reissued 373,396 restricted and unregistered shares of
        the
        1,120,000 shares of common stock, pursuant to the exemption provided by Section
        4(2) of the Securities Act, to its legal counsel in connection with the
        settlement.
  The
        Company was subject to several other legal proceedings and/or claims arising
        in
        the ordinary course of business in fiscal 2005. The Company has resolved
        all
        these matters in a manner that did not have a material adverse effect on
        its
        financial condition, results of operations or cash flows.
  On
        June
        16, 2005 the Company filed an action in the Superior Court of the State of
        California, County of Los Angeles, Central District against Application Science
        and Technology LLC, Chad Kalebic, Michael Hurst, Anthony Briede and others.
        The
        Company initiated the litigation after ongoing and reoccurring feedback from
        the
        marketplace that the Defendants et. al. were actively interfering with the
        Company’s business relationships and violating contractual agreements despite
        formal warnings to cease and desist. The case includes: Unfair Competition;
        Violations of California Business Code, Sections 17.200 ET SEQ and 17.000
        ET
        SEQ; Intentional Interference With Plaintiffs Business Relationships, Negligent
        Interference With Plaintiff’s Business Relationships; Slander and Injunction.
        The Company has retained litigation counsel on a 1/3 contingency basis of
        the
        net benefit to the Company. Company will advance and pay the costs and expenses
        of litigation. The Company expects to prevail in the proceedings. However,
        in
        the event of an adverse decision, the Company may be liable for costs, expenses
        and/or attorney’s fees of the Defendant.
  *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 to or
        accrued for Mr. Talbot and Mr. Upfold during the period prior to the
        commencement dates of their employment agreements at approximately 50% of
        the
        contract rate has been treated as consulting fees as reported in SEC filings
        to
        date. Mr. Talbot and Mr. Upfold have agreed to defer a portion of their first
        year contractual compensation until the Company receives at least $2 million
        of
        new capital and repays certain senior notes, at which time the respective
        parties will be paid at their contractual rate of pay. As such, Mr. Talbot
        and
        Upfold received gross pay of $85,532 each for the period July 1, 2004 to
        March
        31, 2005 and deferred $34,468 of compensation each.
  The
        employment agreements have a five-year term through June 30, 2009. Effective
        July 1, 2004, the above agreements were amended. In year two of the employment
        agreements, the salaries will adjust to $200,000 per annum. For years three,
        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.
  F-14
  **8.** **COMMITMENTS
        AND CONTINGENCIES, continued**
  *d.*
              Other
  The
        Company is in the process of filing certain delinquent Federal, State and
        Local
        compensation related filings, which may subject the Company to additional
        payroll related liabilities, the amount of which cannot be determined at
        this
        time. Management of the Company has indicated that such delinquent filings
        are
        expected to be completed no later than the end of the Company’s third fiscal
        quarter.
  **9.** **MAJOR
        CUSTOMERS AND CONCENTRATION OF CREDIT RISK**
  *a.*
              Major
                  Customers
  The
        Company sold a substantial portion of its product and services to three
        customers during the year ended March 31, 2005. Sales to these customers
        were
        approximately $519,000 (36%), $311,000 (22%) and $271,000 (19%). The accounts
        receivable balance for these customers at March 31, 2005 was approximately
        $56,000.
  The
        Company sold a substantial portion of its product and services to three
        customers during the year ended March 31, 2004. Sales to these customers
        were
        approximately $1,500,000 (60%), $430,000 (17%) and $130,000 (5%). The accounts
        receivable balance for these customers at March 31, 2004 was approximately
        $750,000.
  *b.*
              Concentration
                  of Credit Risk
  The
        Company maintains cash balances in one financial institution. The balances
        are
        insured by the Federal Deposit Insurance Corporation up to $100,000 per
        institution. From time to time, the Company's balances may exceed these limits.
        At March 31, 2005, uninsured cash balances did exist. The Company believes
        it is
        not exposed to any significant credit risk for cash.
 
 **10.**
              **SUBSEQUENT
                  EVENTS**
 
 Between
        April 29 and June 16, 2005, the Company sold Units composed of (i) $250,000
        principal amount of promissory notes bearing interest at 10% per annum and
        due
        365 days from the date of issuance, (ii) 250,000 shares of common stock and
        (iii) warrants to purchase 250,000 shares of common stock exercisable at
        a price
        of $1.50 per share for a term of three years.
 
 As
        of
        June 30, 2005, the Company is obligated to issue 75,000 additional shares
        of
        common stock associated with secured Senior Notes that are in
        default.
  F-15
 POWER
        OF
        ATTORNEY
  Each
        person whose signature appears below, hereby authorizes and appoints Geoffrey
        Talbot as his attorney-in-fact with full power of substitution and
        resubstitution, to sign and file on his behalf individually and in each such
        capacity stated, below, the Annual Report of Statmon Technologies Corp. on
        Form
        10-KSB for the year ending March 31, 2005, and any amendments thereto to
        be
        filed with the Securities and Exchange Commission, The NASDAQ Stock Market
        or
        similar body, and otherwise, as fully as such person could do in person,
        hereby
        verifying and confirming all that said attorneys-in-fact, or their or his
        substitutes or substitute, may lawfully do or cause to be done by virtue
        hereof.
  **Signatures**
              
              **Title**
              
              **Date**/s/ Geoffrey
                  P. Talbot
              
              President,
                  Chief Executive Officer, Chief  Financial
                  Officer and a Director
              
              July
                  14, 2005GEOFFREY
                  P. TALBOT/s/ Peter
                  J. Upfold
              
              Treasurer,
                  Secretary and a Director
              
              July
                  14, 2005PETER
                  J. UPFOLD/s/ Leonard
                  Silverman
              
              Director
              
              July
                  14, 2005LEONARD
                  SILVERMAN, Ph.D./s/ Robert
                  B. Fields
              
              Director
              
              July
                  14, 2005ROBERT
                  B. FIELDS
   F-16