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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-QSB



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(Mark One)

|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended March 31, 2007



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT
|- | ---------------------------------------------------------------------

For the transition period from  to

Commission file number 000-28739



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Satellite Security Corporation

(Exact name of small business issuer as specified in its charter)



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|                                                              |  |                                 
|------------------------------------------------------------- |  | --------------------------------
|Nevada                                                        |  | 91-1903590                      
|(State or other jurisdiction ofincorporation or organization) |  | (IRS EmployerIdentification No.)

P.O. Box 880263, San Diego, CA 92168-0263

(Address of principal executive offices)

619) 977-1515

(Issuers telephone number)



(Former name, former address and former fiscal year, if changed since last
report)



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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 registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.    YES  x    NO ̈

Indicated by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).    YES ̈NO  x

On May 15, 2007, the registrant had outstanding 110,981,560 shares of common stock, which is the
registrants only class of common equity.

Transitional Small Business Disclosure Format (Check
One)    YES ̈NO  x



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##### Table of Contents

TABLE OF CONTENTS



|        |  |                                                             |  |   
|------- |  | ----------------------------------------------------------- |  | --
|        |  | Part I  Financial Information                              |  |   
|        |  |                                                            
|Item 1. |  | Financial Statements (unaudited)                            |  | 2 
|Item 2. |  | Managements Discussion and Analysis or Plan of Operations  |  | 16
|Item 3. |  | Controls and Procedures                                     |  | 23
|        |  |                                                            
|        |  | Part II  Other Information                                 |  |   
|        |  |                                                            
|Item 1. |  | Legal Proceedings                                           |  | 24
|Item 2. |  | Unregistered Sales of Equity Securities and Use of Proceeds |  | 24
|Item 3. |  | Defaults Upon Senior Securities                             |  | 24
|Item 4. |  | Submission of Matters to a Vote of Security Holders         |  | 24
|Item 5. |  | Other Information                                           |  | 24
|Item 6. |  | Exhibits                                                    |  | 24



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##### Table of Contents

PART I  FINANCIAL INFORMATION



|ITEM 1. | FINANCIAL STATEMENTS
|------- | --------------------

Satellite Security
Corporation and Subsidiary

Consolidated Balance Sheet

(Unaudited)



|                                                                                                           |  |                |             |  
|---------------------------------------------------------------------------------------------------------- |  | -------------- | ----------- | -
|                                                                                                           |  | March 31, 2007 |            
|Assets                                                                                                     |  |                |             |  
|Current Assets                                                                                             |  |                |             |  
|Cash and cash equivalents                                                                                  |  | $              | 51,236      |  
|Accounts receivable, net of allowance for doubtful accounts of $56,048                                     |  |                |            |  
|Inventories, net of allowance of $138,986                                                                  |  |                |            |  
|Other current assets                                                                                       |  |                | 23,971      |  
|                                                                                                           |  |                |             |  
|Total Current Assets                                                                                       |  |                | 75,207      |  
|                                                                                                           |  |                |             |  
|Property and equipment, net                                                                                |  |                | 3,606       |  
|                                                                                                           |  |                |             |  
|Other Assets                                                                                               |  |                |             |  
|Debt issue costs, net                                                                                      |  |                | 266,625     |  
|Restricted cash for letter of credit                                                                       |  |                | 75,000      |  
|                                                                                                           |  |                |             |  
|Total Other Assets                                                                                         |  |                | 341,625     |  
|                                                                                                           |  |                |             |  
|Total Assets                                                                                               |  | $              | 420,439     |  
|                                                                                                           |  |                |             |  
|Liabilities and Shareholders Deficit                                                                      |  |                |             |  
|                                                                                                           | 
|Current Liabilities                                                                                        |  |                |             |  
|Accounts payable                                                                                           |  | $              | 579,307     |  
|Accrued expenses                                                                                           |  |                | 640,489     |  
|Customer prepayments                                                                                       |  |                | 477,576     |  
|Convertible notes payable                                                                                  |  |                | 786,575     |  
|Embedded derivative liability                                                                              |  |                | 3,554,808   |  
|Common stock warrant liability                                                                             |  |                | 683,614     |  
|Other debt                                                                                                 |  |                | 23,003      |  
|Notes and loans payable to related parties                                                                 |  |                | 204,252     |  
|                                                                                                           |  |                |             |  
|Total Current Liabilities                                                                                  |  |                | 6,949,624   |  
|                                                                                                           |  |                |             |  
|Non-Current Liabilities                                                                                    |  |                |             |  
|Notes payable to related parties, net of current portion                                                   |  |                | 792,865     |  
|                                                                                                           |  |                |             |  
|Total Non-Current Liabilities                                                                              |  |                | 792,865     |  
|                                                                                                           |  |                |             |  
|Total Liabilities                                                                                          |  |                | 7,742,489   |  
|                                                                                                           |  |                |             |  
|Commitments and Contingencies                                                                              |  |                |             |  
|                                                                                                           | 
|Shareholders Deficit                                                                                      |  |                |             |  
|Common stock, $0.001 par value Authorized - 250,000,000 shares Issued and outstanding - 110,981,560 shares |  |                | 110,982     |  
|Additional paid-in capital                                                                                 |  |                | 6,961,784   |  
|Accumulated deficit                                                                                        |  |                | (14,394,816 | )
|                                                                                                           |  |                |             |  
|Total Shareholders Deficit                                                                                |  |                | (7,322,050  | )
|                                                                                                           |  |                |             |  
|Total Liabilities and Shareholders Deficit                                                                |  | $              | 420,439     |  
|                                                                                                           |  |                |             |  

The accompanying notes are an integral part of these consolidated financial statements.



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Satellite Security Corporation and Subsidiary

Consolidated Statements of Discontinued Operations

(Unaudited)



|                                                                                    |  |                                     |             |   |      |   |            |  
|----------------------------------------------------------------------------------- |  | ----------------------------------- | ----------- | - | ---- | - | ---------- | -
|                                                                                    |  | For the three months endedMarch 31, |            
|                                                                                    |  | 2007                                |             |   | 2006 |  
|Revenues                                                                            |  | $                                   | 96,875      |   |      | $ | 205,888    |  
|                                                                                    |  |                                    
|Cost of Revenues                                                                    |  |                                     | 94,823      |   |      |   | 173,584    |  
|                                                                                    |  |                                     |             |   |      |   |            |  
|Gross Profit                                                                        |  |                                     | 2,052       |   |      |   | 32,304     |  
|Operating Expenses                                                                  |  |                                     |             |   |      |   |            |  
|Research and development                                                            |  |                                     | 69,986      |   |      |   | 74,533     |  
|Marketing and sales                                                                 |  |                                     | 42,010      |   |      |   | 132,994    |  
|General and administrative                                                          |  |                                     | 591,112     |   |      |   | 596,345    |  
|                                                                                    |  |                                     |             |   |      |   |            |  
|Total Operating Expenses                                                            |  |                                     | 703,107     |   |      |   | 803,872    |  
|                                                                                    |  |                                     |             |   |      |   |            |  
|Operating Loss from Discontinued Operations                                         |  |                                     | (701,055    | ) |      |   | (771,568   | )
|                                                                                    |  |                                    
|Other Income/(Expense)                                                              |  |                                     |             |   |      |   |            |  
|Interest expense                                                                    |  |                                     | (377,317    | ) |      |   | (125,845   | )
|Net change in fair value of common stock warrants and embedded derivative liability |  |                                     | (1,175,314  | ) |      |   |           |  
|Other income                                                                        |  |                                     | 23,772      |   |      |   |           |  
|                                                                                    |  |                                     |             |   |      |   |            |  
|Total Other Income/(Expense)                                                        |  |                                     | (1,528,859  | ) |      |   | (125,845   | )
|Net Loss from Discontinued Operations                                               |  | $                                   | (2,229,915  | ) |      | $ | (897,413   | )
|                                                                                    |  |                                     |             |   |      |   |            |  
|Basic and diluted loss per share from discontinued operations                       |  | $                                   | (0.02       | ) |      | $ | (0.01      | )
|                                                                                    |  |                                     |             |   |      |   |            |  
|Weighted average common shares outstanding                                          |  |                                     | 105,740,601 |   |      |   | 98,056,563 |  
|                                                                                    |  |                                     |             |   |      |   |            |  

The accompanying notes are an integral part of these consolidated financial statements.



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Satellite Security Corporation and Subsidiary

Consolidated Statements of Cash Flows from Discontinued Operations

(Unaudited)



|                                                                            |  |                                    |            |   |      |   |          |  
|--------------------------------------------------------------------------- |  | ---------------------------------- | ---------- | - | ---- | - | -------- | -
|                                                                            |  | For the three months endedMarch 31 |           
|                                                                            |  | 2007                               |            |   | 2006 |  
|Cash flows from operating activities:                                       |  |                                    |            |   |      |   |          |  
|Net loss from discontinued operations                                       |  | $                                  | (2,229,915 | ) |      | $ | (897,413 | )
|Adjustments to reconcile net loss to net cash used in operating activities: |  |                                    |            |   |      |   |          |  
|Non-cash interest expense                                                   |  |                                    | 271,233    |   |      |   | 98,609   |  
|Gain on change in value of warrants and embedded derivative liability       |  |                                    | 1,175,314  |   |      |   |         |  
|Share-based compensation expense                                            |  |                                    | 38,975     |   |      |   |         |  
|Depreciation and amortization                                               |  |                                    | 11,394     |   |      |   | 15,821   |  
|Amortization of debt issuance costs                                         |  |                                    | 28,767     |   |      |   |         |  
|Changes in operating assets and liabilities:                                |  |                                    |            |   |      |   |          |  
|Accounts receivable, net                                                    |  |                                    | 138,325    |   |      |   | (8,314   | )
|Inventories                                                                 |  |                                    | 1,060      |   |      |   | (18,416  | )
|Other current assets                                                        |  |                                    | (3,168     | ) |      |   |         |  
|Deferred costs                                                              |  |                                    | 6,108      |   |      |   |         |  
|Accounts payable                                                            |  |                                    | 56,119     |   |      |   | 53,068   |  
|Accrued expenses                                                            |  |                                    | 248,968    |   |      |   | 4,224    |  
|Deferred revenues/customer prepayments                                      |  |                                    | (41,435    | ) |      |   | 27,120   |  
|Other                                                                       |  |                                    |           |   |      |   | (2,202   | )
|                                                                            |  |                                    |            |   |      |   |          |  
|Net cash used in operating activities                                       |  |                                    | (298,255   | ) |      |   | (727,503 | )
|                                                                            |  |                                    |            |   |      |   |          |  
|Cash flows from investing activities:                                       |  |                                    |            |   |      |   |          |  
|Purchases of property and equipment                                         |  |                                    |           |   |      |   | (66,603  | )
|Deposit on inventory                                                        |  |                                    |           |   |      |   | (48,000  | )
|                                                                            |  |                                    |            |   |      |   |          |  
|Net cash used in investing activities                                       |  |                                    |           |   |      |   | (114,603 | )
|                                                                            |  |                                    |            |   |      |   |          |  
|Cash flows from financing activities:                                       |  |                                    |            |   |      |   |          |  
|Repayment of long-term debt                                                 |  |                                    | (1,886     | ) |      |   | (17,344  | )
|Proceeds from short-term loan                                               |  |                                    |           |   |      |   | 926,220  |  
|Proceeds from related party loan                                            |  |                                    | 66,000     |   |      |   |         |  
|Shareholder advances                                                        |  |                                    | 8,292      |   |      |   |         |  
|Shareholder repayments                                                      |  |                                    |           |   |      |   | (85,000  | )
|                                                                            |  |                                    |            |   |      |   |          |  
|Net cash provided by financing activities                                   |  |                                    | 72,406     |   |      |   | 823,876  |  
|                                                                            |  |                                    |            |   |      |   |          |  
|Net decrease in cash                                                        |  |                                    | (225,849   | ) |      |   | (18,230  | )
|                                                                            |  |                                   
|Cash and cash equivalents at beginning of year                              |  |                                    | 277,085    |   |      |   | 16,442   |  
|                                                                            |  |                                    |            |   |      |   |          |  
|Cash and cash equivalents at end of year                                    |  | $                                  | 51,236     |   |      | $ | (1,788   | )
|                                                                            |  |                                    |            |   |      |   |          |  
|Supplemental disclosure of cash flow information:                           |  |                                    |            |   |      |   |          |  
|Cash paid for interest                                                      |  | $                                  | 5,491      |   |      | $ | 19,895   |  
|                                                                            |  |                                    |            |   |      |   |          |  

The accompanying notes are an integral part of these consolidated financial statements.



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SATELLITE SECURITY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1  Basis of Presentation

The accompanying consolidated financial statements as of March 31, 2007 and for the three months ended March 31, 2007 and
2006, respectively, are unaudited. The consolidated financial statements and related notes have been prepared in accordance with generally accepted accounting principles applicable to interim periods. In the opinion of management, the consolidated
financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the consolidated financial position, operating results and cash flows for the periods presented. Certain prior year
amounts have been reclassified to conform to current period presentation.

The information contained in the following Condensed Notes to
the Consolidated Financial Statements is condensed from that which would appear in the annual consolidated financial statements; accordingly, the consolidated financial statements should be reviewed in conjunction with the consolidated financial
statements and related notes thereto contained in the Companys Annual Report on Form 10-KSB for the year ended December 31, 2006. It should be understood that the accounting measurements at an interim date inherently involve greater
reliance on estimates than at year-end. The results of operations for interim periods presented are not necessarily indicative of operating results for the entire year.

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has
incurred significant losses to date from operations, and has effectively ceased operations as of March 7, 2007. This factor, among others, including continuing negative cash flows from operations, negative working capital and shareholder
deficiencies indicate that the Company may be unable to continue as a going concern for a reasonable period of time. The financial statements do not include any adjustments relating to the recoverability of assets, the amounts of liabilities, and
their classifications that might be necessary should the Company be unable to continue as a going concern. The Companys continuation as a going concern is dependent on its ability to generate sufficient cash flow to meet its obligations on a
timely basis and ultimately to attain profitability.

As stated in the Companys Form 8-K filed on February 1, 2007, and
discussed more fully throughout its Form 10-KSB for the year ended December 31, 2006, the Company failed to make an interest payment in the amount of $83,178 under the terms of outstanding secured convertible notes, with an aggregate principal
amount of $3.3 million, which were issued in connection with a financing transaction on July 13, 2006 (the Notes). As also stated, such failure was a triggering event giving rise to an event of default under the Notes. The Company
also stated in its February 1, 2007 Form 8-K that its cash on hand at that time was sufficient to support its operations only through February 2007. The Company reported at that time that it was evaluating all options for reductions in
operating expenses and securing additional capital. The Companys obligation under the Notes, including the repayment obligations, are secured by a lien on substantially all of the Companys assets including its ownership interest in its
subsidiary, Satellite Security Systems, Inc., or Satellite, and its minority interest in Orbtech Holdings Limited.

On
February 23, 2007, the Company entered into an agreement with Allen Abraham Harrington pursuant to which the Company agreed to sell its 65,041,831 shares no par value capital stock of Orbtech Holdings Limited to Mr. Harrington in exchange
for Ten Million South African Rand (approximately $1.3 million based on conversion rates at the time the Company entered into the agreement). The consummation of the sale and purchase of such shares is expected to occur by June 23, 2007. The
holders of the Notes will have an interest in any proceeds from this transaction.

On March 7, 2007, the Companys operating
subsidiary, and sole source of revenue, Satellite, lacked sufficient working capital to continue to fund its operations in the ordinary course of business, and all Satellite employees were released.

As a result of the foregoing, the Company effectively ceased operations. The Company currently does not have any ongoing business operations or any
remaining revenue sources. The Company anticipates that it will sell its interest in Orbtech Holdings Limited to Mr. Harrington in accordance with the terms of that agreement. The Company is currently evaluating options for the sale or other
disposition of its Satellite subsidiary or assets. The Company is also evaluating options for acquiring or merging with another operating company. The Company has no other agreements or arrangements for financing or a strategic transaction in place
at this time, and no assurances can be given concerning whether the Company will receive additional financing or complete a strategic transaction or as to the terms of any financing or transaction.



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The Companys obligation under the Notes, including the repayment obligations, are secured by a lien
on substantially all of the Companys assets, including its ownership interest in Satellite, and its minority interest in Orbtech Holdings Limited. Accordingly, if the Company is successful in completing any sale of those assets, the holders of
the Notes will have an interest in any proceeds from such a transaction.

Management does not anticipate that the proceeds from the sale of
assets will be sufficient to repay all of the Companys remaining liabilities, including the Notes. Although the Company has an agreement to sell its interest in Orbtech Holdings Limited for approximately $1.3 million, the payment is not due
under that Agreement until June 23, 2007.

The Company currently has one operating subsidiary, Satellite, which, until Satellite
ceased operations on March 7, 2007 (see Note 2), was primarily engaged in the development and sale of asset tracking and monitoring solutions and services.

Note 2  Discontinued Operations

Since 2005, the Company continues to incurred significant losses from operations, as
well as continues to generate negative cash flows from operations, as well as continues to maintain an excess of current liabilities over current assets and a shareholders deficit as of March 31, 2007. On March 7, 2007, the
Companys operating subsidiary, and sole source of revenue, Satellite, lacked sufficient working capital to continue to fund its operations in the ordinary course of business, and all Satellite employees were released. The Company is currently
evaluating options for the disposition of that subsidiary or its assets.

As a result of the foregoing, Satellite has effectively ceased
operations. The Company currently does have any ongoing business operations or any remaining revenue sources. Accordingly, Satellites future operations will be limited to either the sale of Satellite and/or its assets, or the winding down of
Satellites remaining business and operations. The proceeds from the sale of assets will not be sufficient to repay all of the Companys remaining liabilities, including the Notes. Through the date of this report the Company continues to
solicit additional financing or a strategic transaction, including evaluating options for acquiring or merging with another operating company. The Company has no other agreements or arrangements for financing or a strategic transaction in place at
this time, and no assurances can be given concerning whether the Company will receive additional financing or complete a strategic transaction or as to the terms of any financing or transaction.

The Company is continuing to seek the funds necessary to retain financial and outside professional services in order to maintain our reporting
obligations under the Exchange Act while it continues to solicit additional financing or a strategic transaction. At the time of filing of this Quarterly Report on Form 10-QSB, no formal plan of liquidation has been discussed with or approved by the
Board of Directors. The holders of the Companys outstanding Secured Convertible Notes have the right to declare a default, request acceleration of the indebtedness and foreclose on their security interests in all the Companys assets. In
the event of a foreclosure or liquidation, the Company does not expect that any funds will be available for distribution to shareholders. Management funded its operations for the three months ended March 31, 2007 through unsecured borrowings
from our Chief Executive Officer, Zirk Engelbrecht, totaling $66,000.

SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Live Assets,sets forth the financial accounting and reporting requirements for discontinued operations. SFAS No. 144 uses a single accounting model, based on the framework established in SFAS No. 121, Accounting for Impairment
of Long-Lived Assets and for Long Lived Assets to Be Disposed Of, to account for all long-lived assets to be disposed of by sale, abandonment, or distribution to owners. This includes asset disposal groups meeting the criteria for presentation
as a discontinued operations. A long-lived asset held for sale shall be measured at the lower of its carrying amount or fair value less its cost to sell. Additionally, in accordance with SFAS No. 144, a loss shall be recognized for any
write-down to fair value less cost to sell. A gain shall be recognized for any subsequent recovery of cost. Lastly, a gain or loss not previously recognized that results from the sale of the asset should be recognized at the date of sale. Therefore,
the Companys discontinued operations are no longer measured on a net realizable value basis, and future operating losses are no longer recognized before they occur.



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Note 3  Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated
financial statements are prepared using accounting principles generally accepted in the United States of America and include the accounts of the Company and its wholly owned subsidiary, Satellite. All significant intercompany balances and
transactions have been eliminated.

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 also requires disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ
from those estimates. Significant estimates made by management include the viability of recognizing deferred tax assets, valuation of equity instruments, and the allowance for doubtful accounts. Significant changes in these estimates may have a
material impact on the financial statements.

Fair Value of Financial Instruments

The Company estimates the fair value of certain of its assets in accordance with Statement of Financial Accounting Standards (SFAS)
No. 107, Disclosures About Fair Value of Financial Instruments. At March 31, 2007, management believes that the carrying amounts of cash, accounts receivable, accounts payable, and accrued expenses approximate their fair value. The
Company believes that the carrying value of its loans approximate their fair values based on current market rates of interest, except related party debt. Management believes it is impracticable to determine the fair value of related party debt
because of the related party attributes of that debt.

Cash, Cash Equivalents and Restricted Cash

Cash and cash equivalents is comprised of cash and highly liquid time deposits held at a major financial institution, which from time to time exceed
federally insured limits. The Company believes that the risk of any loss related to its deposits is minimal.

Restricted cash in other
assets of $75,000 at March 31, 2007 represents a letter of credit deposit to secure the Companys leased facilities. On April 2, 2007, the Company was forced to vacate its office premises due to non-payment of rent, a default under
the terms of our lease. As of the date of this filing, the landlord has the option to collect these funds to apply to the remaining lease obligation, but has not yet done so.

Accounts Receivable

Accounts receivable are stated at the amounts that management expects to
collect. The Company is required to estimate the collectibility of its trade receivables. Considerable judgment is required in assessing the ultimate realization of these receivables. The Company performed ongoing credit evaluations of its
customers. In addition, the Company monitored collections and payments from its customers and maintained provisions for estimated credit losses based upon historical experience and specific customer circumstances. At March 31, 2007 the amount
of the accounting loss that the Company is at risk for these accounts receivable is limited to the carrying value.

Inventories

Inventories, which consist primarily of purchased parts and supplies, are stated at the lower of cost or market. Cost is determined by the first-in,
first-out (FIFO) method. The Company evaluates the need to record adjustments for impairment of inventory. At March 31, 2007 the inventory has been written down to its estimated net realizable value.

Debt Issuance Costs

Debt issuance costs are deferred
and amortized over the term of the related credit facility using the effective interest method. When a loan is paid in full (or converted or extinguished), any unamortized financing costs are removed from the related accounts and expensed. The
Company issued convertible notes in July 2006 and incurred issuance costs of $350,000, which are being amortized over the life of the notes. Amortization expense related to these costs is included in interest expense in the consolidated statement of
operations and was $28,767 and $0 for the three months ended March 31, 2007 and 2006, respectively.



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Deferred Costs

Deferred costs represent the cost of hardware associated with deferred monitoring revenue which is amortized over the period of monitoring service. At December 31, 2006 the Company recorded an impairment charge
of $110,451 on the value of deferred costs due to the determination that the asset would not be recovered.

Property and Equipment

Property and equipment is recorded at cost and depreciated using the straight-line method over the estimated useful lives of the assets, generally ranging
from three to five years. Expenditures for ordinary repairs and maintenance are expensed as incurred while major additions and improvements are capitalized.

Impairment of Long-Lived Assets

Long-lived assets, such as property and equipment, are reviewed for impairment annually and
whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted
future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of
the asset.

At December 31, 2006 the Company recorded an impairment charge on the net value of property and equipment of $100,012.

Warranty Reserve

The Companys
hardware is sold with a warranty against defects in material and workmanship for a period of one year from the date of sale. Hardware manufactured by third parties is typically covered by a one year warranty from the product manufacturer.
Anticipated future warranty costs are estimated, based upon historical expenses and an analysis of product field failures. At this time the Company believes, based on historical data collected over the last 24 months, that the current warranty
reserve is sufficient to cover the associated costs of repairing or replacing defective hardware remaining under warranty. However, since Satellite ceased operations in March 2007 and currently has no funding sources, management does not expect that
it will be able to meet any future warranty obligations that may arise.

Customer Prepayments

Customer prepayments relate primarily to amounts received in advance for monitoring services for which the period of service extends beyond the balance
sheet date.

Derivatives

Under
Emerging Issues Task Force (EITF) Issue No. 00-19, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Companys Own Stock, the initial balance sheet classification of contracts that
require net cash settlement are recorded as assets or liabilities and contracts that require settlement in shares are recorded as equity instruments. At each balance sheet date, the Company reviews contracts and equity instruments that are to be
settled in common stock to determine if sufficient common shares are available to satisfy the maximum number of shares that could be required to net-share settle the contracts, among other conditions. Changes in fair value are accounted for in the
consolidated statement of operations.

Warrant Derivative Liability

The Company accounts for warrants issued in connection with financing arrangements in accordance with EITF Issue No. 00-19, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in,
a Companys Own Stock (EITF 00-19). Pursuant to EITF 00-19, an evaluation of specifically identified conditions is made to determine whether the fair value of warrants issued is required to be classified as a derivative
liability. The fair value of warrants classified as derivative liabilities is adjusted for changes in fair value at each reporting period, and the corresponding non-cash gain or loss is recorded in the consolidated statement of operations.



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Revenues and Costs of Revenue

The Companys revenues are derived from two sources, the sale of hardware that uses Global Positioning System (GPS), cellular and ReFLEX paging technology, and the provisioning of asset tracking and
related monitoring services. Revenue related to the sale of hardware products is recognized upon delivery if no significant vendor obligations remain, the price is fixed or determinable and collection is reasonably assured. Monthly billings for
services are presented in advance of rendering the related services. Customer prepayments consists of advanced payments of these billings and are recognized as revenues ratably over the minimum service contract period, generally one to five years.
Costs of revenues include all direct material and labor costs and those indirect costs related to contract performance. The cost of installed hardware related to customer advance payments is amortized over the same period as the related revenue.
However, since Satellite has ceased operations and currently has no funding sources, management does not believe that it will be able to meet any future monthly service obligations that are outstanding as of March 31, 2007 in connection with
the service agreements.

Share-Based Compensation

On December 16, 2004, the Financial Accounting Standards Board (FASB) issued FASB Statement No. 123 (revised 2004), Share-Based Payment, which is a revision of FASB Statement No. 123,
Accounting for Stock-Based Compensation. Statement 123(R) supersedes APB Opinion No. 25 (APB 25), Accounting for Stock Issued to Employees, and amends FASB Statement No. 95, Statement of Cash Flows.
The approach to accounting for share-based payments in Statement 123(R) is similar to the approach described in Statement 123. However, Statement 123(R) requires all share-based payments to employees, including grants of employee stock options, to
be recognized in the financial statements based on their fair values and no longer allows pro forma disclosure as an alternative to financial statement recognition.

Under SFAS No. 123(R), share-based compensation cost is measured at the grant date, based on the estimated fair value of the award, and is recognized as an expense over the employees requisite service
period. The Company adopted the provisions of SFAS No. 123(R) effective January 1, 2006, using a modified prospective application, which provides for certain changes to the method for valuing share-based compensation. Under the modified
prospective application, prior periods are not revised for comparative purposes. The valuation provisions of SFAS No. 123(R) apply to new awards and to awards that are outstanding at the effective date and subsequently modified, repurchased or
cancelled. Estimated compensation expense for awards outstanding at the effective date will be recognized over the remaining service period using the compensation cost calculated for pro-forma disclosure purposes under SFAS No. 123.

On April 19, 2006, the shareholders of the Company adopted the 2006 Equity Incentive Plan to provide stock awards to eligible employees,
directors, and consultants of the Company and its affiliates. Shares reserved for issuance under the plan shall not exceed 20,000,000 shares. The 2006 Equity Incentive Plan is administered by the Board of Directors or a committee designated by the
Board. Available stock awards under the plan include (i) incentive stock options, (ii) non-statutory stock options, (iii) stock bonuses, and, (iv) rights to acquire restricted stock.

The Company used the Black-Scholes method (which models the value over time of financial instruments) to estimate the fair value at grant date of the
options. The Black-Scholes method uses several assumptions to value an option. The Company used the following assumptions:



| |  |  | Expected Dividend Yieldbecause the Company does not currently pay dividends, expected dividend yield is zero.
| | - |  | --------------------------------------------------------------------------------------------------------------



| |  |  | Expected Volatility in Stock Pricedue to the relatively short period of time since the Merger, the expected volatility in stock price reflects the historical
change in a competitor of the Companys stock price over the expected term of the stock option.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Risk-free Interest Ratereflects the average rate on a United States Treasury bond with maturity equal to the expected term of the option.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Expected Life of Stock Awardsreflects the simplified method to calculate an expected life based on the midpoint between the vesting date and the end of the
contractual term of the stock award.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

On March 7, 2007 Satellite released all of its employees. The Company recorded
share based compensation expense through each employees final date of service. The share-based compensation expense calculated using the Black-Scholes model for grants at March 31, 2007 is as follows:



|                           |  |                                         |       
|-------------------------- |  | --------------------------------------- | ------
|                           |  | For the threemonths endedMarch 31, 2007
|Research and development   |  | $                                       | 350   
|Marketing and sales        |  |                                         | 8,520 
|General and administrative |  |                                         | 8,105 
|                           |  |                                         |       
|Share-based compensation   |  | $                                       | 16,975
|                           |  |                                         |       



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There were no vested options available for purchase at the time Satellite ceased operations. Therefore,
all outstanding options were forfeited. A summary of option activity as of March 31, 2007 is as follows:



|                                         |  |            |   |  |                               |       |                                                     |     
|---------------------------------------- |  | ---------- | - |  | ----------------------------- | ----- | --------------------------------------------------- | ----
|Options                                  |  | Shares     |   |  | Weighted-AverageExercisePrice |       | Weighted-AverageRemainingContractualTerm
(in years)
|                                         |  |            |  
|Outstanding Options at December 31, 2006 |  | 9,123,077  |   |  | $                             | 0.127 |                                                     | 9.40
|                                         |  |            |  
|Granted                                  |  |           |   |  |                               |      |                                                     |    
|                                         |  |            |  
|Exercised                                |  |           |   |  |                               |      |                                                     |    
|                                         |  |            |  
|Forfeited, cancelled or expired          |  | (9,123,077 | ) |  | $                             | 0.127 |                                                     |    
|                                         |  |            |   |  |                               |       |                                                     |     
|Outstanding at March 31, 2007            |  |           |   |  |                               |      |                                                     |    
|                                         |  |            |   |  |                               |       |                                                     |     
|Exercisable at March 31, 2007            |  |           |   |  |                               |      |                                                     |    
|                                         |  |            |   |  |                               |       |                                                     |     

There were no new grants for the three months ended March 31, 2007. There were no options
exercised for the three months ended March 31, 2007.

Issuance of Stock for Non-cash Consideration

All issuances of the Companys common stock for non-cash consideration have been assigned a dollar amount equaling either the market value of the
shares issued or the value of consideration received, whichever is more readily determinable. The majority of the non-cash consideration received pertains to services rendered by consultants and others and has been valued at the market value of the
shares issued.

On January 22, 2007, the Board of Directors approved a stock grant under the terms of the 2006 Equity Incentive Plan
for $11,000 worth of shares of the Companys common stock to two consultants of the Company in exchange for future services to be rendered. In connection with the transaction, the Company recorded total consulting expense of $11,000 at
March 31, 2007.

The Companys accounting policy for equity instruments issued to consultants and vendors in exchange for goods
and services follows the provisions of EITF Issue No. 96-18, Accounting for Equity Instruments That are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services and EITF Issue No. 00-18,
Accounting Recognition for Certain Transactions Involving Equity Instruments Granted to Other Than Employees. The measurement date for the fair value of the equity instruments issued is determined at the earlier of (i) the date at which
a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant or vendors performance is complete.

Basic and Diluted Net Loss Per Share

The Company computes net loss per share in accordance with SFAS No. 128,
Earnings per Share. SFAS No. 128 requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders
(numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all instruments which could result in the issuance of potentially dilutive common shares outstanding during the period, if
any, including stock options, using the treasury stock method, and Convertible Notes, using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased
from the exercise of stock options or warrants. The potential issuance of additional common stock has not been included in the computation of diluted loss per share, as the effect would be anti-dilutive.



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Note 4  Property and Equipment

Property and equipment as of December 31, 2006 consists of the following:



|                               |  |   |          |  
|------------------------------ |  | - | -------- | -
|Furniture and equipment        |  | $ | 194,228  |  
|Software costs                 |  |   | 145,624  |  
|                               |  |   |          |  
|Total property and equipment   |  |   | 339,852  |  
|Less: Reserve for impairment   |  |   | (100,012 | )
|Less: Accumulated depreciation |  |   | (236,234 | )
|                               |  |   |          |  
|Net property and equipment     |  | $ | 3,606    |  
|                               |  |   |          |  

The Company has reduced the carrying amount of its property and equipment with an impairment
charge of $100,012 which is included in the accompanying consolidated statements of operations. As a result, the carrying amount of property and equipment totaled $3,606 at March 31, 2007. Depreciation expense for the three months ended
March 31, 2007 and 2006 was $11,394 and $15,821, respectively.

Note 5  Secured Convertible Notes, Embedded Derivative and Common Stock
Warrants

On July 13, 2006 the Company entered into a secured convertible note and warrant financing transaction (the Secured
Note Financing) with a group of unrelated accredited investors in which the Company issued an aggregate of: (i) $3.3 million of Secured Convertible Promissory Notes (the Notes); (ii) 18,006,221 Series A Warrants
exercisable at $0.13 per share and; (iii) 18,006,221 Series B Warrants exercisable at $0.143 per share. The Series A and Series B warrants expire on July 13, 2011.

The Secured Note Financing resulted in net proceeds to the Company of $2,947,550 after deducting finders fees of $330,000, note issue costs of
$20,000 and other expenses of $2,450. In connection with the Secured Note Financing, the Company also granted 3,601,244 Series A warrants at an exercise price of $0.13 per share to an investment banker as a finders fee. In addition, the
Company will be required to pay finders fees totaling 10% of the cash proceeds received by the Company upon exercise of any of the Series A or Series B Warrants. The Company used the proceeds from the Secured Note Financing for general working
capital purposes.

$350,000 of the transaction costs incurred in connection with the Secured Note Financing have been deferred and will be
amortized using the interest method over the three-year life of the Notes. Any transaction costs in connection with the future exercise of the warrants will be recognized at that date, when and if the warrants are exercised.

At the election of the holders of the Notes, any outstanding principal and interest due under the Notes may be converted into shares of the
Companys common stock at a conversion price equal to 75% of the volume weighted average price of the Companys common stock using the AQR function as reported by Bloomberg L.P. for the five trading days preceding the conversion date.
In addition, the Company has filed a registration statement with the Securities and Exchange Commission to register the resale of the shares of common stock underlying the Convertible Promissory Notes and the Series A and B Warrants in connection
with the Secured Note Financing. The registration statement has not been declared effective as of the date of this report.

The amounts
outstanding under the Secured Convertible Promissory Notes bear interest at the rate of 10% per annum, payable on a quarterly basis. The Notes mature on July 13, 2009 and are secured by a lien on substantially all of the Companys
assets, including a pledge of its shares in Satellite. The Company was unable to make the required interest payment for the quarter ended December 31, 2006 and for the quarter ended March 31, 2007 and is currently in default of our
obligations under the Notes. The entire balance of the Note has been reclassified as short term debt due to the default at December 31, 2006.

In accounting for the Notes and the Series A and Series B Warrants described above, the Company considered the guidance contained in EITF No. 00-19, Accounting for Derivative Financial Instruments Indexed To, and Potentially Settled In,
a Companys Own Common Stock, and SFAS No. 133 Accounting for Derivative Instruments and Hedging Activities. In accordance with the guidance provided in EITF No. 00-19, the Company determined that the conversion feature of the
Notes represents an embedded derivative since the note is convertible into a variable number of shares upon conversion and a liquidated damage clause contained in the Registration Rights Agreement related to the Notes requires the Company to pay
liquidated damages of 2.0% for each thirty (30) days, or part thereof, of the outstanding principal amount of the Notes, in cash or registered shares of common stock to the Note



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Holders in the event that a registration statement covering the shares underlying the Notes and warrants was not registered for sale and distribution under
the 1933 Act within forty-five (45) calendar days after the closing date of July 13, 2006 and caused to be declared effective not later than ninety (90) calendar days after the closing date or one hundred and fifty (150) calendar
days in the event the registration statement is reviewed by the Securities and Exchange Commission. Accordingly, the Notes are not considered to be conventional convertible debt under EITF No. 00-19 and thus the embedded conversion
feature must be bifurcated from the debt host and accounted for as a derivative liability.

The Company calculated the fair value of the
embedded conversion feature on July 13, 2006 using the Black-Scholes valuation model with the following assumptions: market price of $0.13; exercise price of $0.092, which represents a 25% discount to the Companys volume weighted average
price as reported on the OTC Bulletin Board for the five (5) day period prior to July 13, 2006; discount rate of 5.04%; expected volatility of 63% and an expected life of five (5) years. The fair value of $3,072,343 was recorded as a
debt discount, which reduced the carrying amount of the Notes. To determine the liability related to the warrants, the Company calculated the fair value of the warrants on July 13, 2006 using the Black-Scholes valuation model with the following
assumptions: market price of $0.13; exercise price of $0.13 and $0.143; discount rate of 5.04%; expected volatility of 63% and an expected life of five (5) years. The fair value of $2,924,024 was also recorded as a debt discount. Combined with
deferred debt issuance costs, the total debt discount attributable to the warrants and embedded conversion feature of $5,996,367 exceeded the principal amount of the Notes by $2,696,397. Accordingly this excess amount was charged directly to
interest expense on July 13, 2006. The remaining $3,300,000 of debt discount was intended to be amortized over the three year term of the Notes.

The Company is required to measure the fair value of the warrants and the embedded conversion feature on the date of each reporting period. The effect of this re-measurement will be to adjust the carrying value of the
liabilities related to the warrants and the embedded conversion feature. Accordingly, the Company re-measured the fair value of the warrants at September 30, 2006 and at December 31, 2006 using the Black-Scholes valuation model. The total
decrease in fair market value of the warrants for the year ended December 31, 2006 was $1,843,338.

The Company again re-measured the
fair value of the warrants at March 31, 2007 using the Black-Scholes valuation model with the following assumptions: market price of common stock on the measurement date of $0.04, exercise price of $0.13 and $0.143, discount rate of 4.48%,
expected volatility of 59.2%, and an expected life of five (5) years. This resulted in a fair market value in connection with the warrants of $397,071 at March 31, 2007. The decrease in fair market value of the warrants resulted in
non-cash interest income of $683,614.

The Company re-measured the fair value of the embedded conversion feature at September 30, 2006
and at December 31, 2006 using the Black-Scholes valuation model. The total decrease in the fair market value of the embedded conversion feature for the year ended December 31, 2006 was $1,089,920.

The Company again re-measured the fair value of the embedded conversion feature at March 31, 2007 using the Black-Scholes valuation model with the
following assumptions: market price of common stock on the measurement date of $0.04, exercise price of $0.025 which represents a 25% discount to the Companys volume weighted average price as reported on the OTC Bulletin Board for the five
(5) day period prior to the last trading day of the period, March 30, 2007; discount rate of 4.48%, expected volatility of 59.2% and an expected life of five (5) years. This resulted in a fair market value for the embedded conversion
feature of $3,554,808. The increase in the fair market value of the embedded conversion feature resulted in non-cash interest expense of $1,572,385. Combined with non-cash interest income related to the re-measurement of the fair value of the
warrants, the Company recorded non-cash interest expense of $1,175,314 in the quarter ended March 31, 2007 related to the net change in the fair market value of the common stock warrants and embedded derivative liability.

Under the terms of the Secured Note Financing the Company has a five (5) day grace period to pay any monetary amounts due under this Note, after
which grace period any monetary amounts not paid when due shall bear interest at a default interest rate of fifteen percent (15%) per annum. At December 31, 2006 there was $83,178 of unpaid interest due on the principal of the Note. There
was $3,076 of additional interest due on this unpaid balance at March 31, 2007.

In addition, on March 31, 2007 the Company
missed a second interest payment on the principal of the Note in the amount of $81,370.



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In connection with the $3.3 million convertible note and warrants under the Secured Note Financing the
Company agreed, pursuant to a Registration Rights Agreement, to prepare and file, within 45 days following the issuance of the note and warrants, a registration statement with the Securities and Exchange Commission covering the resale of the common
stock issuable upon conversion of the note and exercise of the warrants. The agreement stated that the registration statement must be declared effective by the Securities and Exchange Commission within 90 days of July 13, 2007, or 150 days in
the event the registration statement is reviewed by the Securities and Exchange Commission. The registration statement was reviewed by the Securities and Exchange Commission therefore the deadline for registration was December 10, 2006; however
as of the date of this report the registration statement has not been declared effective. Failure to secure the effectiveness of registration statement in the required time period constitutes a Non-Registration Event as defined in the Agreement.
During a Non-Registration Event the Company is required to pay the holder of the Notes liquidated damages of 2.0% of the principal amount of the notes for each 30 day period that the effectiveness of the registration is delayed until the
Companys registration obligations terminate on July 13, 2008. The Company can pay the damages in cash or elect to pay up to in shares of the common stock with registered shares of the Common Stock valued at 75% of the volume weighted
average price as reported on the OTC Bulletin Board for the five (5) trading days preceding such payment. The liquidated damages must be paid within ten (10) days after the end of each thirty (30) day period or part thereof for which
liquidated damages are payable. At March 31, 2007 accrued liquidation damages were $264,000 and the associated accrued interest was $4,069.

Note 6
 Debt

As of March 31, 2007, debt consisted of the following obligations:



|                                                                                                                                                                                                                                                                                                                                                                                            |  |   |        
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | - | -------
|Convertible notes payable:                                                                                                                                                                                                                                                                                                                                                                  |  |   |        
|                                                                                                                                                                                                                                                                                                                                                                                            | 
|Note payable-Secured Convertible Promissory Notes bearing interest at the rate of 10% per annum, payable on a quarterly basis net of
discount of $2,513,425. The Notes mature on July 13, 2009 and are secured by a lien on substantially all of the Companys assets. We are in default of this obligation as of March 31, 2007 and all debt has been reclassified to current
liabilities. |  | $ | 786,575
|                                                                                                                                                                                                                                                                                                                                                                                            |  |   |        
|Other debt:                                                                                                                                                                                                                                                                                                                                                                                 |  |   |        
|                                                                                                                                                                                                                                                                                                                                                                                            | 
|Note payablesoftware purchase, due by December 2007, payable in 48 monthly installments of $1,885, bearing interest at 9%, secured by
related software and guaranteed by a shareholder.                                                                                                                                                                                                    |  | $ | 23,003 
|                                                                                                                                                                                                                                                                                                                                                                                            |  |   |        

Note 7  Related Party Transactions

Notes and Loans

As of December 31, 2006, the Company had notes and loans to related parties
consisting of the following:



|                                                                                                     |  |   |          |  
|---------------------------------------------------------------------------------------------------- |  | - | -------- | -
|Advances  shareholders  unsecured, non-interest bearing, no terms for repayment.                   |  | $ | 188,731  |  
|Note payable-shareholder-unsecured, 203 installments of $7,000 remaining, imputed interest of 7.64%. |  |   | 808,386  |  
|                                                                                                     |  |   |          |  
|Total related party debt                                                                             |  |   | 997,117  |  
|                                                                                                     | 
|Less: current portion of related-party debt                                                          |  |   | (204,252 | )
|                                                                                                     |  |   |          |  
|Total non-current portion of related party debt                                                      |  | $ | 792,865  |  
|                                                                                                     |  |   |          |  

Leased Facilities

During the year ended December 31, 2005 the Company rented its facilities from a shareholder and former director. Rent owed to this shareholder amounted to $11,206 as of March 31, 2007 and is included in
accounts payable.



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Legal Fees

The Company engaged Workman Nydegger, a law firm, during 2006 and 2005. A relative of John Phillips, our former chief executive officer is an employee and shareholder of Workman Nydegger.

Note 8  Commitments and Contingencies

In the
course of business, the Company has been, and may continue to be, involved in various claims seeking monetary damages and other relief. The amount of the ultimate liability, if any, from such claims cannot be determined. However, in the opinion of
the Companys management, the ultimate liability for any legal claims currently pending against the Company will not have a material adverse affect on the Companys financial position, results of operations or cash flows. Insofar as
current legal claims against the Company that have been filed or are currently ongoing, see Part II, Item 1 below.

Note 9  Recent Accounting
Pronouncements

Uncertainty in Income Taxes

In July 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48). FIN 48 requires the use of a two-step approach for recognizing and measuring tax
benefits taken or expected to be taken in a tax return and disclosures regarding uncertainties in income tax positions. The Company is required to adopt FIN 48 effective January 1, 2007. The cumulative effect of initially adopting FIN 48 will
be recorded as an adjustment to opening retained earnings in the year of adoption and will be presented separately. Only tax positions that meet the more likely than not recognition threshold at the effective date may be recognized upon adoption of
FIN 48. The Company is currently evaluating the impact this new standard; however, the standard is not expected to have a significant impact on the financial position, results of operation or cash flows.

Fair Value Measurements

In September
2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS 157). SFAS 157 does not require new fair value measurements but rather defines fair value, establishes a framework
for measuring fair value and expands disclosure of fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The Company is currently assessing the impact of
SFAS 157 on the consolidated financial position and results of operations.

Quantifying and Evaluating the Materiality of Unrecorded
Misstatements

In September 2006, the SEC issued Staff Accounting Bulletin No. 108 (SAB 108). SAB 108 provides guidance
on quantifying and evaluating the materiality of unrecorded misstatements. SAB 108 is effective for fiscal years ending after November 15, 2006, with earlier application encouraged for any interim period of the first fiscal year ending after
November 15, 2006, filed after the publication of SAB 108 (September 13, 2006). The adoption of SAB 108 did not have a material impact on the consolidated financial position and results of operations.

Income Tax Consequences of Issuing Convertible Debt with a Beneficial Conversion Feature

In September 2005, the EITF reached a consensus on Issue No. 05-8, Income Tax Consequences of Issuing Convertible Debt with a Beneficial
Conversion Feature (EITF No. 05-8). Under EITF No. 05-8, issuance of convertible debt with a beneficial conversion feature recorded pursuant to EITF 98-5, Accounting for Convertible Securities with Beneficial
Conversion Features or Contingently Adjustable Conversion Ratios and EITF 00-27, Application of Issue No. 98-5 to Certain Convertible Instruments results in a temporary difference for purposes of applying SFAS 109. The
deferred taxes recognized for the temporary difference should be recorded as an adjustment to additional paid-in capital. The EITF No. 05-8 Consensus should be applied retrospectively to all instruments with a beneficial conversion feature
accounted for under EITF 98-5 and EITF 00-27 for periods beginning after December 15, 2005. The adoption of EITF 05-8 did not have a material impact on the financial statements.



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Modification of Convertible Debt Instruments

In November 2006, the EITF reached a final consensus in EITF Issue 06-6 Debtors Accounting for a Modification (or Exchange) of
Convertible Debt Instruments (EITF No. 06-6). EITF No. 06-6 addresses the modification of a convertible debt instrument that changes the fair value of an embedded conversion option and the subsequent recognition of
interest expense for the associated debt instrument when the modification does not result in a debt extinguishment pursuant to EITF No. 96-19, Debtors Accounting for a Modification or Exchange of Debt Instruments. The
consensus should be applied to modifications or exchanges of debt instruments occurring in interim or annual periods beginning after November 29, 2006. The Company is currently evaluating the impact of this guidance on the consolidated
financial position, results of operations or cash flows.

Accounting for a Previously Bifurcated Conversion Option in a Convertible Debt
Instrument

In November 2006, the FASB ratified EITF Issue No. 06-7, Issuers Accounting for a Previously
Bifurcated Conversion Option in a Convertible Debt Instrument When the Conversion Option No Longer Meets the Bifurcation Criteria in FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities (EITF
No. 06-7). At the time of issuance, an embedded conversion option in a convertible debt instrument may be required to be bifurcated from the debt instrument and accounted for separately by the issuer as a derivative under SFAS
No. 133, based on the application of EITF No. 00-19. Subsequent to the issuance of the convertible debt, facts may change and cause the embedded conversion option to no longer meet the conditions for separate accounting as a derivative
instrument, such as when the bifurcated instrument meets the conditions of Issue 00-19 to be classified in stockholders equity. Under EITF No. 06-7, when an embedded conversion option previously accounted for as a derivative under SFAS
No. 133 no longer meets the bifurcation criteria under that standard, an issuer shall disclose a description of the principal changes causing the embedded conversion option to no longer require bifurcation under SFAS No. 133 and the amount
of the liability for the conversion option reclassified to stockholders equity. EITF No. 06-7 should be applied to all previously bifurcated conversion options in convertible debt instruments that no longer meet the bifurcation criteria
in SFAS No. 133 in interim or annual periods beginning after December 15, 2006, regardless of whether the debt instrument was entered into prior or subsequent to the effective date of EITF No. 06-7. Earlier application of EITF
No. 06-7 is permitted in periods for which financial statements have not yet been issued. The Company is currently evaluating the impact of this guidance on the consolidated financial position, results of operations or cash flows.

Registration Payment Arrangements

In December 2006, the FASB issued FASB Staff Position (FSP) EITF 00-19-2 Accounting for Registration Payment Arrangements (FSP EITF 00-19-2) which specifies that the contingent obligation to make
future payments or otherwise transfer consideration under a registration payment arrangement should be separately recognized and measured in accordance with SFAS No. 5, Accounting for Contingencies. Adoption of FSP EITF 00-19-2
is required for fiscal years beginning after December 15, 2006. The Company is currently evaluating the expected effect of FSP EITF 00-19-2 on its consolidated financial statements and is currently not yet in a position to determine such
effects.

The Fair Value Option for Financial Assets and Financial Liabilities

In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial
Liabilities - Including an amendment to FASB Statement No. 115. This statement permits companies to choose to measure many financial instruments and other items at fair value. The objective is to improve financial reporting by providing
entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This Statement is expected to expand the use of
fair value measurement of accounting for financial instruments. This statement applies to all entities, including not for profit. The fair value option established by this statement permits all entities to measure eligible items at fair value at
specified election dates. This statement is effective as of the beginning of an entitys first fiscal year that begins after November 15, 2007. The Company is currently assessing the impact adoption of SFAS No. 159 will have on the
consolidated financial statements.

Note 10  Subsequent Events

On April 2, 2007, the Company was forced to vacate its office premises due to non-payment of rent, a default under the terms of our lease.



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##### Table of Contents

|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
|------- | ---------------------------------------------------------

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements. These forward-looking
statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or anticipated results, including those set forth under ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR
PLAN OF OPERATIONRisk Factors, below, and elsewhere in this report. In some cases, you can identify forward looking statements by terms such as may, intend, might, should,
could, would, expect, believe, anticipate, estimate, predict, potential, or the negative of these terms, and similar expressions are intended to identify
forward-looking statements. Such statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from those projected. Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof. We undertake no obligation to publicly release the result of any revisions to these forward-looking statements, which may be made to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events. The forward-looking statements in this report are based upon managements current expectations and beliefs, which management believes are reasonable.

In this report, unless the context indicates otherwise, the terms Company, we, us, and our refer to
Satellite Security Corporation, a Nevada corporation, and its subsidiaries.

OVERVIEW

We have been engaged in the business of providing satellite-based asset tracking solutions and services, through the operations of our wholly owned
subsidiary Satellite Security Systems, Inc. (Satellite) We acquired our interest in Satellite pursuant to a Merger Agreement dated December 9, 2005 pursuant to which Satellite was merged with and into a wholly owned
subsidiary of the Company effective December 31, 2005, as discussed in further detail in Note 1 to the Consolidated Financial Statements. In accordance with generally accepted accounting principles, the merger was accounted for as a public
shell merger. Accordingly the financial statements included in this report contain the historical results of operations of Satellite, except for the statements of changes in shareholders deficit, which has been converted to shares of the
Company based on the above merger ratios.

As previously reported we entered into a financing transaction on July 13, 2006, pursuant
to which we sold to accredited investors an aggregate of $3.3 million in Secured Convertible Notes (the Notes). We experienced a change in our President and failed to make an interest payment in the amount of $83,178 under the terms of
Notes. Each of those events was a triggering event giving the holders the right to declare an event of default and to accelerate all payment obligations due under the Notes. Our obligation under the Notes, including the repayment obligations, are
secured by a lien on substantially all of our assets including our ownership interest in Satellite our subsidiary, and our minority interest in Orbtech Holdings Limited. Accordingly, if we are successful in completing any sale of those assets, the
holders of the Notes will have an interest in any proceeds from such a transaction.

In our Current Report on Form 8-K filed on
February 1, 2007, we stated that our cash on hand was sufficient to support our operations only for the next 30 days, and that we were evaluating all options for reductions in operating expenses and securing additional capital.

Effective January 26, 2007, Steven Hallock resigned his position from our Board of Directors.

Effective February 15, 2007, Aidan Shields resigned his position as our Chief Financial Officer.

On February 23, 2007, we entered into an agreement with Mr. Allen Harington pursuant to which we agreed to sell all 65,041,831 shares no par
value capital stock of Orbtech Holdings Limited that we own to Mr. Harington in exchange for Ten Million South African Rand (approximately $1.3 million based on conversion rates at the time we entered into the agreement). The consummation of
the sale and purchase of such shares is to occur by June 23, 2007. The holders of the Notes will have an interest in any proceeds from this transaction.



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On March 7, 2007, our operating subsidiary, Satellite, which was our sole source of revenue, lacked
sufficient working capital to continue to fund its operations in the ordinary course of business, and all Satellite employees were released. We are evaluating options for the disposition of that subsidiary or its assets.

As a result of the foregoing, we have effectively ceased operations. We currently do not have any ongoing business operations or any remaining revenue
sources. We anticipate that we will sell our interest in Orbtech Holdings Limited to Mr. Harrington in accordance with the terms of our agreement. We are evaluating options for the sale or other disposition of our Satellite subsidiary or its
assets. We are also aggressively evaluating options for acquiring or merging with another operating company.

We do not anticipate that the
proceeds from the sale of assets will be sufficient to repay all of our remaining liabilities, including the Notes. Although we have an agreement to sell our interest in Orbtech Holdings Limited, for approximately $1.3 million, payment is not due
under that Agreement until June 23, 2007. Through the date of this report we have continued to solicit additional financing or a strategic transaction for our assets. We have no other agreements or arrangements for financing or a strategic
transaction in place at this time, and no assurances can be give concerning whether we will receive additional financing or complete a strategic transaction or as to the terms of any financing or transaction.

We are continuing to seek the funds necessary to retain financial and outside professional services in order to maintain our reporting obligations under
the Exchange Act.

RESULTS OF OPERATIONS

Revenues

Revenues were $96,875 for the three months ended March 31, 2007, compared to $205,888 for the same period in 2006. Revenues
decreased $109,013 or 53% for the three months ended March 31, 2007, compared to the same period in 2006. The decreases were primarily due to the cessation of operations of Satellite.

Cost of Revenues

Cost of revenues includes hardware,
wireless airtime expense and personnel-related costs for our Monitoring and Support Center (MSC). Costs of revenues were $94,823 or 98% of revenues for the three months ended March 31, 2007, compared to $173,584 or 84% of revenues
for the same period in 2006. Cost of revenues decreased $78,761, or 45%, for the three month period ended March 31, 2007 compared to the same period in 2006. The decrease in cost of revenues is related primarily to the cessation of operations
of Satellite. The increase in cost of revenues as a percentage of revenues is primarily attributable to a reduction in revenues and reduced leverage on fixed costs at the MSC.

Research and Development

Research and development expenses include payroll, and costs associated
with software development, product design and outsourcing. Research and development expenses were $69,986 for the three months ended March 31, 2007, compared to $74,533 for the same period in 2006. Research and development decreased $4,547, or
6%, for the three months ended March 31, 2007 compared to the same period a year ago. The decreases were primarily due to reductions in research and development related payroll due to the cessation of operations of Satellite on March 7,
2007.

Marketing and Sales Expenses

Marketing and sales expenses include payroll, and costs associated with advertising, promotions, trade shows, seminars, and similar programs, as well and travel expenses. Marketing and sales expenses were $42,010 for the three months ended
March 31, 2007, compared with $132,994 for the same period in 2006. Marketing and sales expenses decreased $90,984, or 68% for the three months ended March 31, 2007 compared to the same period a year ago. The decreases were primarily due
to a decrease in headcount at the beginning of the period and the cessation of operations of Satellite on March 7, 2007.



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General and Administrative

General and administrative expenses include payroll and costs associated with the finance, facilities, and legal and other administrative functions of the Company. General and administrative costs were $591,112 for
the three months ended March 31, 2007 compared with $596,345 for the same period in 2006. General and administrative expenses decreased $5,233 or 1%, for the three months ended March 31, 2007 compared to the same period a year ago. The
decreases in General and Administrative expenses were primarily due to the cessation of operations of Satellite on March 7, 2007, offset by increased expenses associated with penalties on the Notes and other financing costs.

Interest Expense

Interest expense was $377,317 for
the three months ended March 31, 2007 compared to $125,845 for the same period in 2006. The increase in interest expense for the three months ended March 31, 2007 was primarily due to the following:

Interest on the $3,300,000 of Notes issued with the $3,300,000 Convertible Debt and Warrant financing on July 13, 2006 at the rate of 10% per
annum and payable quarterly. Interest payable for the three months ended March 31, 2007 was $81,370. In addition we accrued $7,145 in additional interest and penalties due to non-payment of our December 31, 2006 interest payment and
non-registration.

Non-cash expenses associated with the Secured Note Agreement as of March 31, 2007. Interest expense on the
amortization of the debt discount for the three months ended March 31, 2007 was $271,233.

Net Change in Fair Value of Common Stock Warrants and
Embedded Derivative Liability

Net change in fair value of common stock warrants and embedded derivative liability of $1,175,314
consists of the net change in the carrying values of the liabilities for the common stock warrants and the embedded derivative liabilities related to the Secured Convertible Notes on March 31, 2007.

Net Loss

Net loss includes loss from operations and
interest expense. We recorded a net loss of $2,229,915 for the three months ended March 31, 2007 compared to a net loss of $897,413 for the same period in 2006. The increase in net loss for the three months ended March 31, 2007 as compared
to the same period of 2006 was due to an decrease in revenue of $109,013 offset by an decrease in cost of revenues of $78,761; a decrease in operating costs of $100,765; increased interest expense of $251,472; and the net change in fair value of
$1,175,314 on common stock warrants and embedded derivative related to the Notes issued on July 13, 2006 in connection with the Secured Note Financing and revalued on March 31, 2007.

LIQUIDITY AND CAPITAL RESOURCES

On March 31,
2007, we had cash of $51,236 and accounts receivable, net of allowance for doubtful accounts, of $0. Our working capital deficit as of March 31, 2007 was $6,874,417 compared to a deficit of $4,740,092 at December 31, 2006.

Net cash used in operating activities during the three months ended March 31, 2007 was $298,255. The primary use of cash from operating activities
was the net loss of $2,229,915. The primary sources of cash from operating activities was the non-cash expense of $1,175,314 from the change in value of warrants and embedded derivative liability, non-cash interest expense of $271,233, a decrease in
inventory of $138,325 and an increase in accrued expenses of $248,968.

There was no cash used by investing activities during the three
month period ended March 31, 2007. There are no significant capital expenditures planned by the Company within the foreseeable future.

Since our inception, we have financed our cash needs primarily through financing activities. Net cash provided by financing activities for the three months ended March 31, 2007 was $72,406 primarily from unsecured loans from our Chief
Executive Officer.



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As emphasized in the Report of Independent Registered Public Accounting Firm on our December 31,
2006 financial statements, we have incurred recurring negative cash flows from operations, significant losses, working capital deficits and increasing shareholder deficiencies. Further, we have yet to establish profitable operations. These factors,
among others, raise substantial doubt about our ability to continue as a going concern.

RISK FACTORS

This report includes forward-looking statements about our business and results of operations that are subject to risks and uncertainties. See
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS, above. Factors that could cause or contribute to such differences include those discussed below. In addition to the risk factors discussed below, we are also subject to additional risks
and uncertainties not presently known to us or that we currently deem immaterial. If any of these known or unknown risks or uncertainties actually occur, our business could be harmed substantially.

We have ceased operations.

We have ceased
the operations of Satellite, our sole operating subsidiary. Accordingly, our current operations have been limited to efforts to the sale of our current assets. We currently have no cash on hand and our remaining operations are supported through
loans from our sole director and chief executive officer, Mr. Zirk Engelbrecht. We are also looking to enter into a business combination with another operating company. However, no plans, arrangements or understandings currently exist with any
prospective candidates with respect to a business combination. We will not generate any revenues until, at the earliest, we successfully negotiate and structure transactions to finance future operations or after the consummation of a business
combination. We cannot assure you as to when, or if, we will successfully negotiate and structure transactions to finance future operations or a business combination will occur. If we are unable to negotiate and structure transactions to finance
future operations or enter into a business combination, we will not be able to continue as a going concern.

In order to continue as a going concern
will need to enter into a business combination and raise funds in the public or private capital markets. We do not know at this time whether we will be successful in entering into a business combination, the nature of the business that we would
undertake as a result of that combination, or the impact on our capital structure from any such combination or related financing.

We do not anticipate restarting our satellite based asset tracking business. Consequently, if we are to continue as a going concern, we will have to identify a target operating company and successfully enter into a business combination. No
contracts or arrangements with any target operating company exist at this time. We do not know what business any target operating company will be engaged in, or what risks we may face in connection with such a combination. Any combination will
likely result in a substantial recapitalization of our debt and equity. We cannot provide any guidance or assurance as to the possible terms of any recapitalization or financing, or the impact on the existing holders of our debt and equity. If we
fail to continue as a going concern, you may lose all of the value of your investment. Even if we are successful in obtaining additional funds, the terms of the financing may have the effect of substantially diluting your interest.

We are in default under the Notes we issued in our July 2006 Financing. If the holders of the Notes exercise their rights upon an event of default, they foreclose
on all of our assets.

We are in default under the terms of the Notes issued in our July 2006 Financing. The holders of the Notes
have the right, among other remedies, to declare the entire amount outstanding under the Notes immediately due and payable, together with interest and penalties. All of our material assets have been pledged as collateral for the Notes that we sold
in our recent July 2006 Financing. If such holders exercise these rights, the may force the sale of all of our remaining assets. In such event, we do not anticipate that there would be sufficient value from the sale of our assets to repay the Notes,
or provide any value to holders of our common stock.

The obligations and covenants we agreed to under our July 2006 Financing may impair our ability
to enter into a business combination or raise additional working capital.

In connection with our July 2006 Financing, we owe the
holders of our outstanding Notes approximately $3.3m in principal plus interest and penalties as of December 31, 2006. Even if we are successful in selling all or a portion of our assets, we do not believe that the proceeds would be sufficient
to fully repay our obligations under the Notes.



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In addition, we agreed: (i) so long as the Notes are outstanding, not to incur any additional liens
on our assets, subject to certain excepted issuances, (ii) not to enter into an agreement to, nor to issue, any equity, convertible debt or other securities convertible into our common stock or equity, nor modify any of the foregoing which may
be outstanding at anytime during the occurrence of any default under the Notes or until the registration statement has been effective for a period of six months; (iii) while the Notes are outstanding, if we issue equity or equity linked
securities at a price lower than the conversion price of the Notes, then such conversion price will be reduced to the same price of the securities so issued; and (iii) to grant the investors in our July 2006 Financing a right of first refusal
on our common stock and debt offerings, subject to certain limited exceptions extending for one year following the effectiveness of the registration statement. These restrictions make it more difficult for us to raise additional funds to sustain
operations or to negotiate and structure transactions to finance future operations.

As a result, our ability to close any business
combination or financing transaction we seek to enter into may be predicated upon our ability to get the holders of our Notes to agree to the transaction and to a modification of the terms of, or their rights under, the Notes. We have entered into
discussions with the holders of the Notes, but do not currently have any agreement with them. Our ability to secure their approval to any business combination or financing may impair our ability to close any such transaction.

Our ability to restart operations or successfully effect a business combination and to be successful afterwards will be completely dependent upon the efforts of
our key personnel, some of whom may join us following any future financing or business combination and may be unfamiliar with the requirements of operating a public company, which may adversely affect our operations.

Our ability to successfully restart operations or effect a business combination will be completely dependent upon the efforts of our current key
personnel. However, if we are successful in effecting a business combination, we anticipate employing other personnel including key management personnel. While we intend to closely scrutinize any additional individuals we engage after a business
combination or financing transaction, we cannot assure you that our assessment of these individuals will prove to be correct or that these individuals will remain with us. These individuals may be unfamiliar with the requirements of operating a
public company as well as United States securities laws which could cause us to expend time and resources helping them become familiar with such laws. This could be expensive and time-consuming and could lead to various regulatory issues that may
materially adversely affect our operations.

We are dependant upon the continued services and support from our sole director and chief executive
officer to continue our operations.

Our continued operations are substantially dependent on Zirk Engelbrecht. Mr. Engelbrecht
currently serves as our sole director and chief executive officer. In addition, Mr. Engelbrecht has provided the financial support necessary to maintain our status as a reporting company under the Securities Exchange Act of 2934, including
payment of the fees of our independent auditors and outside counsel. We currently have no unrestricted cash on hand and no other arrangements for payment of these services. Mr. Engelbrecht is engaged in other significant business endeavors and
is not obligated to contribute any specific number of hours per week to our affairs. If Mr. Engelbrechts other business affairs require him to devote substantial amounts of time to such affairs in excess of their current commitment
levels, it could limit his ability to devote time to our affairs and could have a negative impact on our ability to consummate any sale of assets, financing transaction or business combination. If Mr. Engelbrecht were to resign from his
position of director or Chief Executive Officer, or to withdraw his financial support, we may be forced to discontinue operations altogether.

The
sale of the shares of our common stock acquired in private placements could cause the price of our common stock to decline.

The
Notes we issued in our July 2006 Financing may be converted by the holder into shares of our common stock at any time. In addition, we issued warrants to purchase an aggregate of 39,613,686 shares of our common stock in our July 2006 Financing (the
Warrants). Under the terms of our July 2006 financing, we were required to register with the SEC the resale of the shares issuable upon conversion of the Notes and exercise of the Warrants. We have filed the registration statement, but
it has not been declared effective. Even if we do not secure the registration of the shares underlying the Notes and the warrants, commencing in July 2007 the investors may rely on the provisions of Rule 144 to begin effect sales and may resell the
shares of our common stock acquired upon the conversion and exercise of the Notes and warrants, respectively. We have no way of knowing whether or when the holders of the Notes will convert the Notes into shares, or whether or when such shares may
be sold. Depending upon market liquidity at the time, a sale of shares by the holders of the Notes at any given time could cause the trading price of our common stock to decline. The sale of a substantial number of shares of our common stock, or
anticipation of such sales, could make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect sales.



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The holders of the Notes have the ability to negatively affect our stock price and to create a greater dilution of
our then-existing stockholders.

The closing price of our stock on the day a holder of the Notes elects to convert an amount of the
Notes into shares of our common stock will affect the number of shares issued upon conversion. To the extent a holder converts amounts under the Notes during a period when our stock price is low, such holder will receive a larger number of shares of
our common stock as a result of the conversion, which such holder could sell at high volumes to drive the closing trading price downward. As the closing trading price is driven downward, a holder could convert portions of the Notes at successively
lower market rates, thereby causing a successively greater dilution of our then-existing stockholders, including the purchasers of stock from the holders, and causing a downward spiraling affect on the price of our stock (a so-called death
spiral).

We may issue additional shares of our capital stock, including through convertible debt securities, to finance future operations or
complete a business combination, which would reduce the equity interest of our stockholders and likely cause a change in control of our ownership.

Although we have no commitments as of the date of this report to issue any additional securities, we may issue a substantial number of additional shares of our common stock or preferred stock, or a combination of
both, including through convertible debt securities, to finance future operations or complete a business combination. The issuance of additional shares of our common stock or any number of shares of preferred stock, including upon conversion of any
debt securities:



| |  |  | may significantly reduce the equity interest of our current stockholders;
| | - |  | -------------------------------------------------------------------------



| |  |  | will likely cause a change in control if a substantial number of our shares of common stock or voting preferred stock are issued, which may affect, among other
things, our ability to use our net operating loss carryforwards, if any, and could also result in a change in management; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | may adversely affect prevailing market prices for our common stock.
| | - |  | -------------------------------------------------------------------

Because we may be deemed to have no independent directors, actions taken and expenses incurred by our officer and director on our behalf will generally not be subject to independent
review.

Zirk Engelbrecht, our Chief Executive Officer, is currently our sole director. Mr. Engelbrecht does not have an
employment agreement with us, and does not currently receive any compensation for his services. However, hi may receive compensation in the future and may receive reimbursement for out-of-pocket expenses incurred by him in connection with activities
on our behalf, such as identifying potential financing opportunities or target businesses and performing due diligence related thereto. Because of his position as our sole director and executive officer, we will not have the benefit of independent
directors examining the propriety of decisions made by Mr. Engelbrecht. Although we believe that all actions taken by Mr. Engelbrecht on our behalf will be in our best interests, we cannot assure you that this will be the case. If actions
are taken, or expenses are incurred that are not in our best interests, it could have a material adverse effect on our business and operations and the price of our stock.

A limited number of stockholders own approximately 48.67% of our stock and may act, or prevent certain types of corporate actions, to the detriment of other stockholders.

As of March 31, 2007, our directors, officers and greater than 5% stockholders own, approximately 48.67% of our issued and outstanding common stock.
Accordingly, these stockholders may, if they act together, exercise significant influence over all matters requiring stockholder approval, including the election of a majority of the directors and the determination of significant corporate actions.
This concentration could also have the effect of delaying or preventing a change in control that could otherwise be beneficial to our stockholders.

We have never paid dividends on our capital stock, and we do not anticipate paying any cash dividends in the foreseeable future.

We have paid no cash dividends on any of our classes of capital stock to date and we currently intend to retain our future earnings, if any, to fund the development and growth of our business. In addition, the terms
of the Notes prohibit us from making any dividend payment or distribution to holders of our common stock while any portion of the Notes remain outstanding. As a result, capital appreciation, if any, of our common stock will be your sole source of
gain for the foreseeable future.



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Our common stock is traded on the OTCBB, which may be detrimental to investors.

Our shares of common stock are currently traded on the Over-the-Counter Bulletin Board. Stocks traded on the OTCBB generally have limited trading volume
and exhibit a wide spread between the bid/ask quotation.

Our common stock is subject to penny stock rules.

Our common stock is subject to Rule 15g-1 through 15g-9 under the Exchange Act, which imposes certain sales practice requirements on broker-dealers which
sell our common stock to persons other than established customers and accredited investors (generally, individuals with net worths in excess of $1,000,000 or annual incomes exceeding $200,000 (or $300,000 together with their spouses)).
For transactions covered by this rule, a broker-dealer must make a special suitability determination for the purchaser and have received the purchasers written consent to the transaction prior to the sale. This rule adversely affects the
ability of broker-dealers to sell our common stock and purchasers of our common stock to sell their shares of such common stock. Additionally, our common stock is subject to the SEC regulations for penny stock. Penny stock includes any
equity security that is not listed on a national exchange and has a market price of less than $5.00 per share, subject to certain exceptions. The regulations require that prior to any non-exempt buy/sell transaction in a penny stock, a disclosure
schedule set forth by the SEC relating to the penny stock market must be delivered to the purchaser of such penny stock. This disclosure must include the amount of commissions payable to both the broker-dealer and the registered representative and
current price quotations for the common stock. The regulations also require that monthly statements be sent to holders of penny stock which disclose recent price information for the penny stock and information of the limited market for penny stocks.
These requirements adversely affect the market liquidity of our common stock.

Recently enacted and proposed changes in securities laws and
regulations are likely to increase our costs.

The Sarbanes-Oxley Act of 2002 that became law in July 2002 requires changes in some
of our corporate governance, public disclosure and compliance practices. The Act also requires the SEC to promulgate new rules on a variety of subjects. We expect these developments to increase our legal and financial compliance costs, and to make
some activities more difficult, such as stockholder approval of new option plans. We expect these developments to make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept
reduced coverage or incur substantially higher costs to obtain coverage. These developments could make it more difficult for us to attract and retain qualified members of our Board of Directors, particularly to serve on our audit committee, and
qualified executive officers. We are presently evaluating and monitoring regulatory developments and cannot estimate the timing or magnitude of additional costs we may incur as a result.



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|ITEM 3. | CONTROLS AND PROCEDURES
|------- | -----------------------

Our disclosure controls
and procedures are designed to ensure (i) that information we are required to disclose in the reports we file or submit under the Securities Exchange Act of 1934, as amended (the Exchange Act) are recorded, processed, summarized,
and reported within the time periods specified in the SECs rules and forms; and (ii) that information we are required to disclose in the reports we file or submit under the Exchange Act is accumulated and communicated to our management,
including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

We maintain disclosure controls and procedures designed to ensure that material information related to our company is recorded, processed, summarized and
reported within the time periods specified in the SEC rules and forms.

Under the supervision of our Chief Executive Officer, we evaluated
the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer concluded that as of March 31, 2007, the design
and operation of such disclosure controls and procedures were not effective at the reasonable assurance level because of a material weakness.

Material
Weakness.

The Public Company Accounting Oversight Board has defined a material weakness as a significant deficiency or
combination of significant deficiencies that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. In relation to the audit for the year ended
December 31, 2006, management and our independent auditor, Tauber & Balser, P.C., identified the following material weakness in our internal controls: During the audit for the year ended December 31, 2006, our auditors proposed
many audit adjustments that were discussed with management, with final concurrence that such adjustments should be recorded by management. The Company did not have in place adequate controls to ensure that the general ledger balances were accurate
and reported in accordance with generally accepted accounting principals applied in the United States.

Changes In Internal Controls Over Financial
Reporting.

No changes were made in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the
Exchange Act) during the quarter ended March 31, 2007 that has materially affected, or is likely to materially affect, our internal control over financial reporting. Subsequent to the year ended December 31, 2006, we were involved in a
number of significant events, including the resignation of our Chief Financial Officer and the cessation of operations of Satellite. With the cessation of operations, we released all but one of our employees and our internal control over financial
reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) is entirely at the Board of Directors level.

Limitations On Disclosure
Controls And Procedures.

Our management does not expect that our disclosure controls or internal controls over financial reporting will
prevent all errors or all instances of fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control systems objectives will be met. Further, the design of a control
system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute
assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of
simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain
assumptions about the likelihood of future events, and any design may not succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the
degree of compliance with policies or procedures. Because of the inherent limitation of a cost-effective control system, misstatements due to error or fraud may occur and not be detected.



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Our company (as a non-accelerated filer) is not now subject to the requirements of
Section 404(b) of the Sarbanes-Oxley Act, which requirements, subject to change, are now scheduled to be effective for fiscal years ending on or after December 15, 2008. Under Section 404(b), our auditors will be required to perform
an audit of managements assessment of the effectiveness of our internal control over financial reporting intended to enable us to issue a report, based on our audit, containing their opinions on both managements assessment and on the
effectiveness of our internal control over financial reporting. Section 404(a) of the Sarbanes-Oxley Act, however, requires management to conduct and report upon its own assessment of a companys internal control over financial reporting
for fiscal years ending on or after December 15, 2007, and, accordingly, places substantial responsibility on management to perform considerable work in preparing for this activity, not only in the design and conduct of its testing and other
assessment procedures in developing adequate, detailed documentation of the companys internal control policies and procedures, but also the procedures applied by management in conducting its assessment and the results thereof. With respect to
such preparation only, but not with respect to performing managements assessment procedures, our auditors are available to provide only limited assistance in documenting and making recommendations to management regarding internal controls,
subject to advance approval of the audit committee or equivalent financial oversight or governance body, but only to the extent that, in their sole judgment, our auditors believe their independence will not be impaired.

PART II  OTHER INFORMATION



|ITEM 1. | LEGAL PROCEEDINGS
|------- | -----------------

In the course of our business,
we have been, and may continue to be, involved in various claims seeking monetary damages and other relief. The amount of the ultimate liability, if any, from such claims cannot be determined. However, in the opinion of our management, the ultimate
liability for any legal claims currently pending or threatened against us will not have a material adverse effect on our financial position, results of operations or cash flows.



|ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|------- | -----------------------------------------------------------

None



|ITEM 3. | DEFAULTS UPON SENIOR SECURITIES
|------- | -------------------------------

None



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

None



|ITEM 5. | OTHER INFORMATION
|------- | -----------------

None.



|ITEM 6. | EXHIBITS
|------- | --------

Each exhibit identified below is filed as
a part of this report.



|            |  |                                                                                                                                                   
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                       
|10.1        |  | Agreement dated February 23, 2007 with Allen Abraham Harington pursuant to which we have agreed to sell our shares in Orbtech Holdings Limited.(1)
|            | 
|31.1        |  | Certification of Periodic Report by the Chief Executive Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                       
|            | 
|31.2        |  | Certification of Periodic Report by the Chief Financial Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                       
|            | 
|32.1        |  | Certification of Chief Executive Officer pursuant to 18 U.S.C, Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.   
|            | 
|32.2        |  | Certification of Chief Financial Officer pursuant to 18 U.S.C, Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.   

---

|(1) | Incorporated by reference from the registrants Current Report on Form 8-K, filed with the Commission on March 9, 2007.
|--- | -----------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



SATELLITE SECURITY CORPORATIONBy:

/s/ Mr. Zirk EngelbrechtMr. Zirk EngelbrechtChief Executive Officer


Dated: May 21,2007



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