UNITED
        STATES
 SECURITIES
        AND EXCHANGE COMMISSION
 WASHINGTON,
        D.C. 20549
 
 
 FORM
        10-QSB
 
 
 xQUARTERLY
        REPORT UNDER
        SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  
 For
        the
        quarterly period ended: November 30, 2007
 
 
 oTRANSITION
        REPORT UNDER
        SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
 
 For
        the
        transition period from __________ to ___________
 
 Commission
        file number: 000-32475
 
 ASTRATA
        GROUP INCORPORATED
 (Name
        of
        small business issuer in its charter)
  NEVADA
                
                84-1408762(State
                    or other jurisdiction ofincorporation
                    or organization)
                
                (I.R.S.
                    EmployerIdentification
                    Number)950
                    South Coast Dr., Suite 265, Costa Mesa, California
                
                92626(Address
                    of principal executive offices)
                
                (Zip
                    code)
 Issuer’s
        telephone number (714) 641-1512
 
 Securities
        registered under Section 12(b) of the Exchange Act:  None
 
 Securities
        registered under Section 12(g) of the Exchange Act:
 
 Common
        Stock, par value $0.0001
 (Title
        of
        class)
 
 Check  whether
        the Issuer (1) filed all reports  required to be filed by Section 13
        or 15(d) of the  Exchange  Act during the past 12 months (or
        for such shorter period that the registrant was required to file such
        reports),  and (2) has been subject to such filing requirements for
        the past 90 days.    Yes xNo
        o
  
 Indicate
        by check mark whether the
        registrant is a shell company (as defined in Rule 12b-2 of the Exchange
        Act).    YesoNox
  
 State
        the
        number of shares outstanding of each of the issuer's classes of common equity,
        as of January 15, 2008: 25,649,891
 
 Transitional
        Small Business Disclosure Format (Check One):     Yes o   
        No x
  
 
 Astrata Logo
 
 TABLE
        OF CONTENTS
  PagePart
                      I - Financial InformationItem
                      1    Financial Statements (Unaudited)Condensed
                      Consolidated Balance Sheet as of November 30, 2007
                  F-1Condensed
                      Consolidated Statements of Operations and Comprehensive
                    Loss
                      for the three and nine months ended November 30, 2007 and
                      2006
                  F-2Condensed
                      Consolidated Statements of Cash Flows for the
                    nine
                      months ended November 30, 2007 and 2006
                  F-3Notes
                      to Condensed Consolidated Financial Statements
                  F-4Item
                      2    Management’s Discussion and Analysis or Plan of
                      Operation
                  1Item
                      3    Controls and Procedures
                  9Part
                      II - Other InformationItem
                      1    Legal Proceedings
                  10Item
                      2    Unregistered Sales of Equity Securities and Use of
                      Proceeds
                  10Item
                      6    Exhibits and Reports on Form 8-K
                  10
 i
  PART
        I – FINANCIAL
        INFORMATION
  Item
        1:  Condensed
        Consolidated Financial Statements (Unaudited)
 
 These
        unaudited condensed consolidated
        financial statements have been prepared in accordance with accounting principles
        generally accepted in the United States of America for interim financial
        information and the Securities and Exchange Commission (the “SEC”) instructions
        to Form 10-QSB.  In the opinion of management, all adjustments
        considered necessary for a fair presentation, which (except where stated
        otherwise) consisted only of normal recurring adjustments, have been
        included.  Operating results for the interim period ended November 30,
        2007 are not necessarily indicative of the results anticipated for the entire
        fiscal year ending February 28, 2008.  This report should be read in
        conjunction with the Company’s February 28, 2007 annual report on Form 10-KSB
        filed with the SEC on May 30, 2007.
 
 ii
 ASTRATA
                    GROUP INCORPORATED AND
                    SUBSIDIARIESCONDENSED
                    CONSOLIDATED BALANCE
                    SHEET(UNAUDITED)NOVEMBER
                    30,
                    2007ASSETSCurrent
                    Assets:Cash
                    and cash equivalents
                
                $
                1,161,881Trade
                    and other receivables, net
                
                
                1,312,683Inventories
                
                
                296,355Other
                    assets
                
                
                410,643Discontinued
                    operations - current assets
                
                
                90,576Total
                    current assets
                
                
                3,272,138Property
                    and equipment, net
                
                
                679,491Certificate
                    of deposit-restricted
                
                
                412,987Goodwill
                
                
                300,000Discontinued
                    operations - other assets
                
                
                69,666Total
                    assets
                
                $
                4,734,282LIABILITIES
                    AND STOCKHOLDERS'
                    DEFICITCurrent
                    liabilitiesAccounts
                    payable
                
                $
                6,183,212Salaries
                    and benefits payable to officers and directors
                
                
                2,027,827Registration
                    rights penalties
                
                
                599,241Interest
                    payable
                
                
                1,402,338Income
                    taxes and related penalties payable
                
                
                508,765Convertible
                    notes payable to stockholders
                
                
                1,884,000Advances
                    from stockholders
                
                
                142,568Discontinued
                    operations - current liabilities
                
                
                241,466Current
                    portion of long-term liabilities
                
                
                800,377Billings
                    in excess of costs and estimated earnings on uncompleted
                    contract
                
                
                611,972Other
                    current liabilities
                
                
                400,354Total
                    current liabilities
                
                
                14,802,120Long-term
                    liabilities
                
                
                11,377Total
                    liabilities
                
                
                14,813,497Minority
                    interest
                
                
                40,114Stockholders'
                    deficitPreferred
                    stock, Series A convertible, $0.0001 par value, 10,000,000
                    sharesauthorized,
                    4,550,000 shares issued and outstanding with a liquidationpreference
                    of $2,800,000
                
                
                455Common
                    stock, $0.0001 par value, 100,000,000 sharesauthorized,
                    28,921,315 shares issued
                
                
                2,566and
                    25,649,891 shares outstandingAdditional
                    paid-in-capital
                
                
                34,321,430Accumulated
                    deficit
                
                
                (43,497,916
                )Accumulated
                    other comprehensive loss
                
                
                (945,864
                )Total
                    stockholders' deficit
                
                
                (10,119,329
                )Total
                    liabilities and stockholders' deficit
                
                $
                4,734,282See
                    accompanying notes to these condensed consolidated financial
                    statements.
 F-1
  ASTRATA
                  GROUP INCORPORATED AND
                  SUBSIDIARIESCONDENSED
                  CONSOLIDATED
                  STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSSFOR
                  THE THREE AND NINE MONTHS
                  ENDED NOVEMBER 30, 2007 AND 2006(UNAUDITED)THREE
                  MONTHS
              
              
              NINE
                  MONTHS2007
              
              
              2006
              
              
              2007
              
              
              2006Net
                  sales
              
              $
              4,718,503
              
              
              $
              758,035
              
              
              $
              10,350,895
              
              
              $
              2,097,241Cost
                  of goods sold
              
              
              3,502,922
              
              
              
              423,667
              
              
              
              7,446,564
              
              
              
              1,399,243Gross
                  profit
              
              
              1,215,581
              
              
              
              334,368
              
              
              
              2,904,331
              
              
              
              697,998Selling,
                  general and administrative expenses
              
              
              1,529,072
              
              
              
              2,106,828
              
              
              
              7,776,890
              
              
              
              6,073,663Research
                  and development
              
              
              -
              
              
              
              119,331
              
              
              
              -
              
              
              
              119,331Operating
                  loss
              
              
              (313,491
              )
              
              
              (1,891,791
              )
              
              
              (4,872,559
              )
              
              
              (5,494,996
              )Other
                  income (expense):Interest
                  expense
              
              
              (749,330
              )
              
              
              (1,529,043
              )
              
              
              (964,137
              )
              
              
              (1,964,632
              )Change
                  in fair value of derivative warrant liability
              
              
              -
              
              
              
              1,501,800
              
              
              
              -
              
              
              
              1,808,796Loss
                  on debt extinguishment
              
              
              -
              
              
              
              (4,419,250
              )
              
              
              -
              
              
              
              (4,419,250
              )Other
                  income
              
              
              81,376
              
              
              
              (30,048
              )
              
              
              83,013
              
              
              
              710Total
                  other income (expense)
              
              
              (667,954
              )
              
              
              (4,476,541
              )
              
              
              (881,124
              )
              
              
              (4,574,376
              )Loss
                  before minority interest and tax provision
              
              
              (981,445
              )
              
              
              (6,368,332
              )
              
              
              (5,753,683
              )
              
              
              (10,069,372
              )Income
                  tax provision
              
              
              677
              
              
              
              -
              
              
              
              500,677
              
              
              
              -Loss
                  before minority interest
              
              
              (982,122
              )
              
              
              (6,368,332
              )
              
              
              (6,254,360
              )
              
              
              (10,069,372
              )Equity
                  in net loss of affiliate
              
              
              -
              
              
              
              9,025
              
              
              
              -
              
              
              
              (9,803
              )Loss
                  from continuing operations
              
              
              (982,122
              )
              
              
              (6,359,307
              )
              
              
              (6,254,360
              )
              
              
              (10,079,175
              )Gain
                  (loss) on discontinued operations, net of tax
              
              
              (106,964
              )
              
              
              72,803
              
              
              
              (288,284
              )
              
              
              561,999Net
                  loss
              
              $
              (1,089,086
              )
              
              $
              (6,286,504
              )
              
              $
              (6,542,644
              )
              
              $
              (9,517,176
              )Net
                  loss from continuing operations applicableto
                  common stockholders consists of the following:Loss
                  from continuing operations
              
              $
              (982,122
              )
              
              $
              (6,359,307
              )
              
              $
              (6,254,360
              )
              
              $
              (10,079,175
              )Cumulative
                  undeclared dividends on preferred stock
              
              
              (56,000
              )
              
              
              (2,005,000
              )
              
              
              (168,000
              )
              
              
              (2,005,000
              )Net
                  loss from continuing operations applicableto
                  common stockholders
              
              $
              (1,038,122
              )
              
              $
              (8,364,307
              )
              
              $
              (6,422,360
              )
              
              $
              (12,084,175
              )Comprehensive
                  loss and its components consist of the following:Net
                  loss
              
              $
              (1,089,086
              )
              
              $
              (6,286,504
              )
              
              $
              (6,542,644
              )
              
              $
              (9,517,176
              )Foreign
                  currency translation adjustment, net of tax
              
              
              (478,349
              )
              
              
              (10,429
              )
              
              
              (978,376
              )
              
              
              (113,612
              )Comprehensive
                  loss
              
              $
              (1,567,435
              )
              
              $
              (6,296,933
              )
              
              $
              (7,521,020
              )
              
              $
              (9,630,788
              )Basic
                  and diluted earnings (loss) per common share:Continuing
                  operations applicable to common stockholders
              
              $
              (0.04
              )
              
              $
              (0.60
              )
              
              $
              (0.27
              )
              
              $
              (0.89
              )Discontinued
                  operations
              
              
              -
              
              
              
              0.01
              
              
              
              (0.01
              )
              
              
              0.04$
              (0.04
              )
              
              $
              (0.59
              )
              
              $
              (0.28
              )
              
              $
              (0.85
              )Weighted
                  average common shares outstanding:Basic
                  and diluted
              
              
              24,002,951
              
              
              
              13,877,950
              
              
              
              23,989,717
              
              
              
              13,563,893See
                  accompanying notes to these condensed consolidated financial
                  statements.
 F-2


ASTRATA
                  GROUP INCORPORATED AND
                  SUBSIDIARIESCONDENSED
                  CONSOLIDATED
                  STATEMENTS OF CASH FLOWSFOR
                  THE NINE MONTHS ENDED
                  NOVEMBER 30, 2007 AND 2006(UNAUDITED)2007
              
              
              2006CASH
                  FLOWS FROM OPERATING
                  ACTIVITIES:Net
                  loss
              
              $
              (6,542,644
              )
              
              $
              (9,517,176
              )Adjustments
                  to reconcile net loss to netcash
                  provided by (used in) operating activities:Gain
                  on sale of property and equipment
              
              
              -
              
              
              
              (7,274
              )Gain
                  on forgiveness of debt
              
              
              -
              
              
              
              (332,691
              )Depreciation
                  and amortization
              
              
              289,145
              
              
              
              309,686Gain
                  on disposal transactions relating to discontinued
                  operations
              
              
              (58,304
              )
              
              
              (1,608,254
              )Loss
                  on early termination of lease
              
              
              -
              
              
              
              101,886Amortization
                  of deferred compensation cost
              
              
              -
              
              
              
              300,375Change
                  in fair value of derivative warrant liability
              
              
              -
              
              
              
              (1,808,796
              )Deferred
                  financing costs and debt discount
              
              
              -
              
              
              
              1,606,171Loss
                  on debt extinguishment
              
              
              -
              
              
              
              4,419,250Stock-based
                  compensation
              
              
              2,350,009
              
              
              
              1,345,886Equity
                  instruments issued for financing
              
              
              66,000
              
              
              
              -Equity
                  in net loss of affiliate
              
              
              -
              
              
              
              9,803Unrealized
                  foreign currency exchange gain
              
              
              -
              
              
              
              (9,206
              )Changes
                  in operating assets and liabilities:Trade
                  and other receivables
              
              
              (349,302
              )
              
              
              2,545,583Inventories
              
              
              (166,790
              )
              
              
              2,261,136Other
                  assets
              
              
              406,252
              
              
              
              143,790Accounts
                  payable and accrued liabilities
              
              
              3,131,185
              
              
              
              (1,352,045
              )Taxes
                  and related penalties payable
              
              
              493,879
              
              
              
              6,509Billings
                  in excess of costs and estimated earnings on uncompleted
                  contract
              
              
              611,972
              
              
              
              -Deferred
                  tax liability
              
              
              -
              
              
              
              (22,911
              )Net
                  cash provided by (used in) operating activities
              
              
              231,402
              
              
              
              (1,608,278
              )CASH
                  FLOW FROM INVESTING
                  ACTIVITIES:Purchase
                  of property and equipment
              
              
              (394,315
              )
              
              
              (198,831
              )Proceeds
                  from sale of assets
              
              
              -
              
              
              
              135,246Investment
                  in affiliates
              
              
              11,741
              
              
              
              (73,267
              )Certificate
                  of deposit-restricted
              
              
              (412,987
              )
              
              
              (120,618
              )Net
                  cash used in investing activities
              
              
              (795,561
              )
              
              
              (257,470
              )CASH
                  FLOWS FROM FINANCING
                  ACTIVITIESRepayment
                  of long term liabilities
              
              
              (5,225
              )
              
              
              (259,817
              )Repayment
                  on long-term debt
              
              
              (600,000
              )
              
              
              -Repayment
                  on debentures
              
              
              -
              
              
              
              (550,000
              )Proceeds
                  from advances from stockholders
              
              
              192,770
              
              
              
              -Lines
                  of credit, net
              
              
              -
              
              
              
              (1,038,550
              )Proceeds
                  from advances from stockholders
              
              
              35,384
              
              
              
              1,216,741Proceeds
                  from issuance of preferred stock
              
              
              -
              
              
              
              2,365,500Proceeds
                  from warrants exercised for common stock
              
              
              2,750,000
              
              
              
              -Net
                  cash provided by financing activities
              
              
              2,372,929
              
              
              
              1,733,874Effect
                  of foreign currency
                  exchange rate changeson
                  cash and cash
                  equivalents
              
              
              (826,260
              )
              
              
              85,442Net
                  increase (decrease) in cash
                  and cash equivalents
              
              
              982,510
              
              
              
              (46,432
              )Cash
                  and cash equivalents at
                  beginning of period
              
              
              179,371
              
              
              
              436,532Cash
                  and cash equivalents at
                  end of period
              
              $
              1,161,881
              
              
              $
              390,100See
                  accompanying notes to these condensed consolidated financial
                  statements.
 F-3
 ASTRATA
            GROUP INCORPORATED AND SUBSIDIARIES
 NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
            THE THREE AND NINE MONTHS ENDED NOVEMBER 30, 2007 AND 2006
 (UNAUDITED)


1.
        ORGANIZATION, NATURE OF
        OPERATIONS, AND LIQUIDITY/GOING CONCERN CONSIDERATIONS
 
 Organization
 
 Astrata
        Group Incorporated (“Astrata,” or “Astrata Group”) and subsidiaries (sometimes
        hereafter collectively referred to as the “Company,” “we,” and “our”) currently
        operate exclusively in the Telematics sector of the Global Positioning System
        (“GPS”) industry. Telematics comprises the remote monitoring of assets in
        real-time (including tracking and tracing) whereby location, time and sensor
        status are communicated. Our products are deployed into diverse markets,
        including those described in “Nature of Operations” below.
 
 Nature
        of
        Operations
 
 We
        operate in the Telematics sector of the GPS industry. Our expertise is focused
        on advanced location-based IT products and services that combine positioning,
        wireless communications, and information technologies, which add measurable
        value to location–based information. We provide advanced positioning products,
        as well as monitoring and airtime services to commercial and governmental
        entities in a number of markets including homeland security, public safety,
        transportation, surveying, utility, construction, mining, and
        agriculture.
 
 Telematics
        products often focus on people and assets in hostile and demanding environments
        such as monitoring the movement of hazardous materials for homeland security
        purposes. This business also addresses the market for fleet management,
        workforce management, remote asset management and tracking, and emergency
        services by providing hardware for GPS information and data collection, as
        well
        as the software needed to access and analyze the data through the Internet.
        We
        offer airtime to communicate data from the vehicle or field locations to
        the
        customer’s data center  or provide access over the Internet to the
        data and application software. This allows critical real-time performance
        and
        monitoring data to be accessed and analyzed by supervisory, maintenance,
        or
        financial users and make real-time decisions for productivity improvement,
        cost
        reductions, safety improvement, or other critical decisions to be fed to
        the
        field.
 
 Examples
        of our products and services include surveying instrumentation using GPS
        and
        other augmenting technologies, such as wireless communication and lasers;
        fleet
        management for specialized machines, such as guidance for earth-moving
        equipment; positioning and IT technology for remote asset management and
        associated Telematics products, field data collection equipment, and products
        and airtime communications services for high volume track and trace
        applications. Positioning technologies employed by us include GPS and inertial
        navigation systems. Communication techniques employed by us include GSM (“Global
        Systems for Mobile Telecommunications”), cellular and satellite
        communications.
 
 Operational
        Considerations
 
 Astrata’s
        operations were strengthened during fiscal 2006 by the addition of certain
        key
        distribution partners in Western Europe and an increased presence in South
        East
        Asia based primarily on the successful delivery of the Hazmat (Hazardous
        Materials) Tracking Project to the Singapore Civil Defense Force.
 
 Recent
        Trends
 
 Our
        business strategy is to focus on the homeland security, hazardous materials,
        civil defense and business-to-business markets by providing our customers
        with
        comprehensive solutions to their needs. Frequently this involves additional
        integration such as sensors ranging from Radio Frequency Identification to
        biometrics, remote displays or augmenting technologies to allow tracking
        in
        tunnels.
 
 The
        Company entered into a fixed-price contract with a Singapore entity on April
        10,
        2007 to manufacture, ship and service approximately $93.5 million of its
        Telematics products (the “Contract”). Deliveries will take place overseas during
        a two-year period. The Contract includes a provision for substantial liquidated
        damages for unexcused delays in product deliveries and/or failure to satisfy
        certain customer-specified acceptance criteria. In addition, in the event
        of
        non-performance by the Company that remains uncorrected after notice from
        the
        customer and the expiration of a contractual grace period, the customer has
        the
        right to cancel the Contract. The Company’s proprietary Telematics system is
        undergoing significant customization/modification in order to achieve the
        functionality required by the customer.
  F-4
 ASTRATA
            GROUP INCORPORATED AND SUBSIDIARIES
 NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
            THE THREE AND NINE MONTHS ENDED NOVEMBER 30, 2007 AND 2006
 (UNAUDITED)
  1.
        ORGANIZATION, NATURE OF
        OPERATIONS, AND LIQUIDITY/GOING CONCERN CONSIDERATIONS
        (continued)
 
 Recent
        Trends
        (continued)
 
 In
        June
        2007, the Singapore Civil Defense Force (“SCDF”) awarded a $2.2 million contract
        for the Company's new Intelligent Immobilization System technology (the
“Immobilizer”).  The Immobilizer is an add-on module to the Company’s
        Telematics System, which SCDF has been using since 2005 to track, monitor
        and
        now immobilize vehicles transporting hazardous materials, as well as to alert
        SCDF if these vehicles deviate from their prescribed routes.
 
 Liquidity
        and Going Concern
        Considerations
 
 For
        the
        nine months ended November 30, 2007, we had a net loss of approximately $6.5
        million (of which $2.8 million was the estimated value of bonuses paid to
        certain employees for securing $93.5 million in new business under a contract
        (the “Contract”) - (see Note 4)).  We had positive cash flow from
        operating activities of approximately $0.2 million.  In addition, we
        had a working capital deficit of approximately $11.5 million and a stockholders’
deficit of approximately $10.1 million as of November 30, 2007.
 
 Our
        February 28, 2007 consolidated financial statements included a going concern
        paragraph. The going concern paragraph states that there is substantial doubt
        about the Company’s ability to continue as a going concern. Such consolidated
        financial statements and the accompanying condensed consolidated financial
        statements have been prepared assuming that the Company will continue as
        a going
        concern (based upon management’s plans discussed herein) which contemplates,
        among other things, the realization of assets and satisfaction of liabilities
        in
        the ordinary course of business. Accordingly, the aforementioned consolidated
        financial statements do not include any adjustments related to the
        recoverability and classification of asset carrying amounts or the amount
        and
        classification of liabilities that might result, should the Company be unable
        to
        continue as a going concern.
 
 The
        Company’s capital requirements depend on numerous factors, including the
        Company’s ability to fill its current backlog, rate of market acceptance of the
        Company’s products and services, the Company’s ability to service its customers,
        the ability to maintain and expand our customer base, the level of resources
        required to expand the Company’s marketing and sales organization, research and
        development activities and other factors. Management presently believes that
        cash generated from operations, combined with the Company’s current credit
        facilities and the debt and/or equity financing proposals now under
        consideration, will be sufficient to meet the Company’s anticipated liquidity
        requirements through February 2008. In order for us to fund our operations
        and
        continue this growth plan, substantial additional funding will be required
        from
        external sources.  Management currently intends to fund operations
        through a combination of borrowings under line(s) of credit, debt, and if
        necessary, equity-based transactions.  Management is in discussion
        with lending facilities and certain investors, who have expressed an interest
        in
        providing the Company with such investments.  These discussions are
        ongoing; however, there can be no assurance of the outcome of these
        negotiations.
 
 The
        Company entered into a fixed-price contract with a Singapore entity on April
        10,
        2007 to manufacture, ship and service approximately $93.5 million of its
        Telematics products. Deliveries will take place overseas during a two-year
        period. The Company’s proprietary Telematics system is undergoing significant
        customization/modification in order to achieve the functionality required
        by the
        customer.
 
 On
        December 19, 2007, Astrata Group Incorporated entered into a Series B
        Convertible Preferred Stock Purchase Agreement (the "Stock Purchase Agreement")
        with  Vision Opportunity China LP, and pursuant to the fund's allocation
        guidelines, Vision Opportunity Master Fund, Ltd. (collectively, the
        "Investors").  Under the terms of the Stock Purchase Agreement, the
        Investors purchased an aggregate of (i) $3,000,000 of Series B Convertible
        Preferred Stock and (ii) warrants to purchase a total of 8,611,428 shares
        of our
        common stock.  The Company intends to use the proceeds for working
        capital and general corporate purposes.
 
 Management
        is projecting growth in Telematics sales during fiscal 2008 and 2009, and
        has
        announced sales orders in this sector valued at a total of approximately
        $110
        million for the next two years. Other sales contracts are under negotiation,
        but
        at this time there can be no assurance regarding the ultimate success of
        these
        negotiations.
  F-5
 ASTRATA
            GROUP INCORPORATED AND SUBSIDIARIES
 NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
            THE THREE AND NINE MONTHS ENDED NOVEMBER 30, 2007 AND 2006
 (UNAUDITED)
  2.  CERTAIN
        SIGNIFICANT
        ACCOUNTING POLICIES
 
 The
        significant accounting policies presented below are designed to assist in
        understanding the Company’s condensed consolidated financial statements. Such
        condensed consolidated financial statements and these notes are the
        representation of the Company’s management, who is responsible for their
        integrity and objectivity. In the opinion of management, these accounting
        policies conform to accounting principles generally accepted in the United
        States of America (“GAAP”) in all material respects, and have been consistently
        applied in preparing the accompanying condensed consolidated financial
        statements.
 
 The
        accounting policies described in the following paragraphs should be read
        in
        conjunction with the Company’s February 28, 2007 annual report on Form 10-KSB
        (filed with the SEC on May 30, 2007), which includes all of the Company’s
        significant accounting policies.
 
 Principles
        of
        Consolidation
 
 The
        condensed consolidated financial statements included the accounts of Astrata
        Group and its majority-owned subsidiaries in which it has a controlling
        financial interest. All significant intercompany transactions and balances
        have
        been eliminated in consolidation. For reasons explained in Note 11
        (“Discontinued Operations”) to the Company’s February 28, 2007 consolidated
        financial statements, management deconsolidated the accounts of Astrata Systems
        (Pty) Limited (“Astrata Systems”) from the Company’s condensed consolidated
        financial statements effective June 2006.
 
 Use
        of
        Estimates
 
 The
        preparation of financial statements in conformity with GAAP requires management
        to make estimates and assumptions that affect the reported amounts of assets
        and
        liabilities and the disclosure of contingent assets and liabilities at the
        date
        of the financial statements, and the reported amounts of revenues and expenses
        during the reporting period. Significant estimates made by management include
        the deferred tax asset valuation allowance, allowance for doubtful accounts
        receivable, realization of inventories, goodwill and long-lived assets,
        stock-based compensation, and revenue recognition. Actual results could differ
        from these estimates.
 
 Risks
        and Uncertainties Related to
        International Operations
 
 Since
        inception in August 2004, the Company’s revenue-producing activities have been
        conducted exclusively outside the United States of America.  The
        Company’s customers, other end users of our products and services, and
        third-party manufacturers and other suppliers (collectively, “vendors”) engaged
        by the Company are located throughout the world.  As a result, our
        operations are subject to foreign political and economic uncertainties which
        are
        beyond our control.  The specific risks of operating in the
        international marketplace include abrupt changes in a foreign government’s
        policies/regulations, local or regional hostilities (such as war, terrorism
        and
        civil unrest) in foreign countries, and United States government policies
        restricting certain business transactions with a given foreign
        country.
 
 Some
        of the Company’s sales and
        supplier contracts with its customers and vendors are subject to unilateral
        cancellation (regardless of whether such action is permitted by the terms
        of the
        agreement), and certain accounts receivable may suddenly become doubtful
        of
        collection.  In addition, the lack of a well-developed legal system in
        some foreign countries may make it difficult to enforce all of the Company’s
        contractual rights.
 
 Other
        Concentrations
 
 The
        financial instrument that potentially exposes the Company to a concentration
        of
        credit risk principally consists of cash. The Company deposits its cash with
        high credit financial institutions, principally in Europe and Asia. The
        countries do not have any institutional depository insurance comparable to
        the
        United States, which insures bank balances up to $100,000 per bank. At November
        30, 2007, the Company’s cash balances in U.S. bank accounts totaled
        approximately $522,000 which exceeds the Federal Deposit Insurance Corporation
        limit of $100,000.
 
 The
        certificate of deposit described below (approximately $413,000 at November
        30,
        2007) is with a Singapore bank. Because the funds deposited were in U.S.
        dollars, such account is not eligible for coverage under Singapore’s Deposit
        Insurance Act.
 
 F-6
 ASTRATA
            GROUP INCORPORATED AND SUBSIDIARIES
 NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
            THE THREE AND NINE MONTHS ENDED NOVEMBER 30, 2007 AND 2006
 (UNAUDITED)
 
 2.  CERTAIN
        SIGNIFICANT
        ACCOUNTING POLICIES (continued)
 
 Other
        Concentrations
        (continued)
 
 The
        Company does not require collateral from its customers, but performs ongoing
        credit evaluations of its customers’ financial condition. Credit risk with
        respect to the accounts receivable is limited because of the large number
        of
        customers included in the Company’s customer base and the geographic dispersion
        of those customers. The Company also performs periodic reviews of collectability
        and provides an allowance for doubtful accounts
        receivable.  Management considers the allowance for doubtful accounts
        receivable at November 30, 2007 of approximately $22,000 to be
        adequate.
 
 Certificate
        of
        Deposit
 
 Under
        the terms of the Contract
        described in Note 4, the Company was required to provide a performance bond
        for
        the benefit of the customer.  In lieu of such bond, a certificate of
        deposit was initiated.  The certificate of deposit (the “CD”) bears
        interest at 5.1% per annum and matures in August 2009. Under the terms of
        the
        Company’s arrangement with the bank that issued the CD, the funds will not be
        available for withdrawal until August 2009. Thus, the CD is a restricted
        account
        which has been reported as a non-current asset in the accompanying condensed
        consolidated balance sheet.
 
 Inventories
 
 Inventories
        are stated at the lower of cost (first-in, first-out) or estimated market,
        and
        consist of only finished goods at November 30, 2007. Market is determined
        by
        comparison with recent sales or estimated net realizable value. Net realizable
        value is based on management’s forecasts for sales of the Company’s products and
        services in the ensuing years and/or consideration and analysis of any change
        in
        the customer base, products mix, or other factors that may impact the estimated
        net realizable value. Should the demand for the Company’s products and/or
        services prove to be significantly less than anticipated, the ultimate
        realizable value of the Company’s inventories could be substantially less than
        the amount reflected in the accompanying condensed consolidated balance
        sheet.
 
 Property
        and
        Equipment
 
 Property
        and equipment are stated at cost, and are being depreciated using the
        straight-line method over the estimated useful lives of the assets, which
        generally range from three to seven years. Leasehold improvements are amortized
        on a straight-line basis over the shorter of the estimated useful lives of
        the
        assets or the remaining lease terms. Maintenance and repairs are charged
        to
        expense as incurred. Significant renewals and betterments are capitalized.
        At
        the time of retirement, other disposition of property and equipment or
        termination of a lease, the cost and accumulated depreciation or amortization
        are removed from the accounts and any resulting gain or loss is reflected
        in
        results of operations.
 
 Goodwill
        and Other Intangible
        Assets
 
 Statement
        of Financial Accounting Standard (“SFAS”) No. 142, “Goodwill and Other
        Intangible Assets”, addresses how intangible assets that are acquired
        individually or with a group of other assets should be accounted for upon
        their
        acquisition and after they have been initially recognized in the consolidated
        financial statements. SFAS No. 142 requires that goodwill and identifiable
        intangible assets that have indefinite lives not be amortized but rather
        be
        tested at least annually for impairment, and intangible assets that have
        finite
        useful lives be amortized over their estimated useful lives. SFAS No. 142
        provides specific guidance for testing goodwill and intangible assets that
        will
        not be amortized for impairment, and expands the disclosure requirements
        about
        intangible assets in the years subsequent to their acquisition.
 
 Long-Lived
        Assets
 
 SFAS
        No.
        144 “Accounting for the Impairment or Disposal of Long-Lived Assets” addresses
        financial accounting and reporting for the impairment or disposal of long-lived
        asset. SFAS 144 requires that long-lived assets be reviewed for impairment
        whenever events or changes in circumstances indicate that their carrying
        amount
        may not be recoverable. If the cost basis of a long-lived asset is greater
        than
        the projected future undiscounted net cash flows from such assets, and
        impairment loss is recognized. Impairment losses are calculated as the
        difference between the cost basis of an asset and its estimated fair
        value.
 
 F-7
 ASTRATA
            GROUP INCORPORATED AND SUBSIDIARIES
 NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
            THE THREE AND NINE MONTHS ENDED NOVEMBER 30, 2007 AND 2006
 (UNAUDITED)
  2.  CERTAIN
        SIGNIFICANT
        ACCOUNTING POLICIES (continued)
 
 Long-Lived
        Assets(continued)
 
 As
        of
        November 30, 2007, management has determined that no new impairment indicators
        exist and therefore, no adjustments have been made to the carrying values
        of
        long-lived assets held for sale or held and used. There can be no assurance,
        however, that market conditions will not change or demand for the Company’s
        services and products will continue which could result in impairment of
        long-lived assets in the future.
 
 Discontinued
        Operations
 
 In
        accordance with SFAS No. 144, the Company accounts for the results of operations
        of a component of an entity that has been disposed of or that meets all of
        the
“held for sale” criteria as discontinued operations if (a) the component’s
        operations and cash flows have been (or are to be) eliminated from the ongoing
        operations of the entity as a result of the disposal transaction and (b)
        the
        Company did not have any significant continuing involvement in the operations
        of
        the component after the disposal transaction. When the applicable criteria
        are
        met, the component is classified as “held for sale” and its operations are
        reported as discontinued operations (See Note 12).
 
 Convertible
        Preferred
        Stock
 
 If
        the
        conversion feature of cumulative preferred stock is beneficial (i.e., the
        market
        price of the Company’s common stock exceeds the per-share conversion price when
        the preferred stock is issued), management accounts for the beneficial
        conversion feature (“BCF”) based on SFAS No. 133 “Accounting for Derivative
        Instruments and Certain Hedging Activities” (as amended) and an analysis of the
        rights of the preferred stock owners.  When management concludes that
        the economic risks and characteristics of the BCF are clearly and closely
        related to those of the “host contract “ (the preferred stock), the BCF (1) is
        not separated from the host contract or accounted for as a derivative financial
        instrument and (2) is measured using intrinsic value accounting.
 
 Revenue
        Recognition
 
 General
 
 Except
        as
        described in “Contract Accounting” below, the Company’s revenues are recorded in
        accordance with the SEC Staff Accounting Bulletin No. 104, “Revenue
        Recognition.” The Company recognizes revenue when persuasive evidence of an
        arrangement exists, delivery has occurred, the fee is fixed or determinable,
        and
        collectability is reasonably assured.  In instances where final
        acceptance of the product is specified by the customer or is uncertain, revenue
        is deferred until all acceptance criteria have been met.
 
 Sales
        as a
        Distributor
 
 Contracts
        and customer purchase orders are generally used to determine the existence
        of an
        arrangement. Shipping documents (and customer acceptance criteria, when
        applicable) are used to verify delivery. The Company assesses whether the
        fee is
        fixed or determinable based on the payment terms associated with the
        transaction, and whether the sales price is subject to refund or adjustment.
        The
        Company assesses collectability based primarily on the creditworthiness of
        the
        customer as determined by credit checks and analysis, as well as the customer’s
        payment history.
 
 In
        the
        Company’s Telematics operations, orders are generally shipped free-on-board
        shipping point, which means that such orders are recognized as revenue when
        the
        product is delivered to the carrier (shipped). Free-on-board shipping point
        also
        means that the customer bears all costs and risks of loss or damage to the
        goods
        prior to their receipt.
 
 F-8
 ASTRATA
            GROUP INCORPORATED AND SUBSIDIARIES
 NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
            THE THREE AND NINE MONTHS ENDED NOVEMBER 30, 2007 AND 2006
 (UNAUDITED)
  2.  CERTAIN
        SIGNIFICANT
        ACCOUNTING POLICIES(continued)
 
 Revenue
        Recognition
        (continued)
 
 Contract
        Accounting
 
 The
        Company is accounting for the Contract described above under the percentage-of
        completion method under the AICPA Statement of Position (“SOP”) 81-1,
“Accounting for Performance of Construction-Type and Certain Production –Type
        Contracts”. Under the percentage-of-completion method, revenues, expenses and
        profits are recognized as performance progresses on long-term contracts.
        Progress toward completion is measured using the cost-to-cost
        method.  The Company uses the estimated cost of goods (“COGS”) for the
        project to determine the associated recognized revenues in the periods in
        which
        they are earned under the percentage-of-completion method of
        accounting.  This is calculated by taking the current reporting period
        COGS against the total projected COGS to determine a percentage of completion;
        then applying the percentage against the Contract project total revenues
        to
        determine the revenues for the reporting period.
 
 Product
        Revenue
 
 Our
        Telematics equipment may be sold or provided as part of a monthly package
        which
        includes telecommunications, data warehousing and mapping.  These
        revenues are recognized over the life of such contracts as revenues are
        earned.
 
 Other
        Matters
 
 Revenue
        from distributors and resellers is recognized upon delivery, assuming that
        all
        other criteria for revenue recognition have been met. Distributors and resellers
        do not have the right of return.
 
 Customer
        incentive bonuses and other consideration received or receivable directly
        from a
        vendor for which the Company acts as a reseller are accounted for as a reduction
        in the price of the vendor’s products or services. When such incentive is
        pursuant to a binding arrangement, the amount received or receivable is deferred
        and amortized on a systematic basis over the life of the
        arrangement.
 
 Research
        and Development
        Costs
 
 Research
        and development costs relating to GPS positioning hardware and software systems
        to be sold or otherwise marketed that are incurred before technological
        feasibility of the products has been established and after general release
        of
        the product to customers are expensed as incurred. Management believes that
        technological feasibility is not established until a beta version of the
        software product exists. Historically, costs incurred during the period from
        when a beta version is available until general release to the public have
        not
        been material. Accordingly, the Company has not capitalized any software
        development costs.
 
 Stock-Based
        Compensation
 
 Effective
        March 1, 2006, the Company adopted the provisions of SFAS No. 123-R,
“Share-Based Payment” (“SFAS No. 123-R”). SFAS No. 123-R requires employee stock
        options and rights to purchase shares under stock participation plans to
        be
        accounted for under the fair value method and requires the use of an option
        pricing model for estimating fair value. Accordingly, share-based compensation
        is measured at the grant date, based on the fair value of the
        award.
 
 Under
        the
        modified prospective method of adoption for SFAS No.123-R, the compensation
        cost
        recognized by the Company beginning March 1, 2006 includes (a) compensation
        cost
        for all equity incentive awards granted prior to, but not yet vested as of
        March
        1, 2006, based on the grant-date fair value estimated in accordance with
        the
        original provisions of SFAS No. 123, and (b) compensation cost for all equity
        incentive awards granted subsequent to February 28, 2006, based on the
        grant-date fair value estimated in accordance with the provisions of SFAS
        No.
        123-R.
 
 F-9
 ASTRATA
            GROUP INCORPORATED AND SUBSIDIARIES
 NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
            THE THREE AND NINE MONTHS ENDED NOVEMBER 30, 2007 AND 2006
 (UNAUDITED)
  2.  CERTAIN
        SIGNIFICANT
        ACCOUNTING POLICIES(continued)
 
 Stock-Based
        Compensation (continued)
 
 Options
        granted by the Company generally expire five years from the grant date. Options
        granted to existing and newly hired employees generally vest over a three-year
        period from the date of grant. The effects of share-based compensation resulting
        from the application of SFAS No. 123-R to options granted under the Company’s
        equity incentive plan resulted in an expense of approximately $31,000 for
        the
        three months ended August 31, 2007 and $249,000 for the three months ended
        August 31, 2006 and an expense of approximately $450,000 for the nine months
        ended November 30, 2007 and approximately $978,000 for the nine months ended
        November 30, 2006.   All of the SFAS No. 123-R expenses for these
        options have been recorded as of November 30, 2007.  During the
        quarter ended May 31, 2007 the Company issued restricted common stock as
        compensation valued at approximately $1.8 million. These expenses have been
        reported and included in the selling, general and administrative expenses
        in the
        accompanying condensed consolidated statements of operations.
 
 In
        accordance with SFAS No.123-R, the Company adjusts share-based compensation
        on a
        quarterly basis for changes to the estimate of expected award forfeitures
        based
        on actual forfeiture experience. The effect of adjusting the forfeiture rate
        for
        all expense amortization after February 28, 2006 is recognized in the period
        the
        forfeiture estimate is changed. The effect of forfeiture adjustments in the
        three and nine months ended November 30, 2007 was insignificant.
 
 Options
        outstanding that have vested and are expected to vest as of November 30,
        2007
        are as follows:
  WeightedAverageWeighted
                
                
                RemainingAverage
                
                
                Contractual
                
                
                AggregateNumber
                    of
                
                
                Exercise
                
                
                Term
                    in
                
                
                IntrinsicShares
                
                
                Price
                
                
                Years
                
                
                Value
                    (a)Vested
                
                
                72,333
                
                
                $
                5.00
                
                
                
                2.1
                
                
                $
                -Expected
                    to vest
                
                
                36,167
                
                
                $
                5.00
                
                
                
                2.1
                
                
                
                -Total
                
                
                108,500
                
                
                
                
                
                
                
                
                
                
                $
                -
  (a)
              These
                  amounts represent the
                  difference between the exercise price and $0.75, the closing market
                  price
                  of the Company’s common stock on November 30, 2007 as quoted on the
                  Over-the-Counter Bulletin Board (“OTCBB”) under the symbol “ATTG” for all
                  in-the-money options
                  outstanding.
 
 F-10
 ASTRATA
            GROUP INCORPORATED AND SUBSIDIARIES
 NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
            THE THREE AND NINE MONTHS ENDED NOVEMBER 30, 2007 AND 2006
 (UNAUDITED)
  2.  CERTAIN
        SIGNIFICANT
        ACCOUNTING POLICIES(continued)
 
 Stock-Based
        Compensation (continued)
 
 Options
        outstanding that are expected to vest are net of estimated future forfeitures
        in
        accordance with the provisions of SFAS No. 123-R, which are estimated when
        compensation costs are recognized. Additional information with respect to
        stock
        option activity is as follows:
 
 Outstanding
                    OptionsWeightedShares
                
                
                
                
                
                Average
                
                
                AggregateAvailable
                    for
                
                
                Number
                    of
                
                
                Exercise
                
                
                IntrinsicGrant
                
                
                Shares
                
                
                Price
                
                
                Value
                    (b)February
                    28, 2007
                
                
                1,291,925
                
                
                
                1,024,750
                
                
                $
                3.56
                
                
                $
                -Grants
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Exercises
                
                
                -
                
                
                
                (94,520
                )
                
                
                1.30
                
                
                
                -Cancellations
                
                
                -
                
                
                
                (821,730
                )
                
                
                3.62
                
                
                
                -November
                    30, 2007
                
                
                2,291,500
                
                
                
                108,500
                
                
                $
                5.00
                
                
                $
                -Options
                    exercisable at:February
                    28, 2007
                
                
                
                
                
                
                549,833
                *
                
                $
                4.10November
                    30, 2007
                
                
                
                
                
                
                72,333
                
                
                $
                5.00
  (b)
              Represents
                  the excess (if any)
                  of the February 28, 2007 or November 30, 2007 market price of the
                  Company’s common stock over the exercise
                  price.
 
 *     This
        amount has
        been revised from that which was disclosed in the Company’s February 28, 2007
        Form 10-KSB
 
 Basic
        and Diluted Loss Per
        Share
 
 In
        accordance with FASB Statement No. 128, “Earnings Per Share”, the
        Company calculates basic and diluted net loss per share using the weighted
        average number of common shares outstanding during the periods presented
        and
        adjusts the amount of net loss, used in this calculation, for preferred stock
        dividends during the period.
 
 We
        incurred a net loss in each period
        presented, and as such, did not include the effect of potentially dilutive
        common stock equivalents in the diluted net loss per share calculation, as
        their
        effect would be anti-dilutive for all periods.  Potentially dilutive
        common stock equivalents would include the common stock issuable upon the
        conversion of preferred stock, the exercise of warrants, stock options and
        convertible debt.  As of November 30, 2007 and 2006, all potentially
        dilutive common stock equivalents amount to 40,341,334 and 41,299,035 shares,
        respectively.
 
 Reclassification
 
 Certain
        amounts in the prior period
        financial statements have been reclassified to conform to the current period
        presentation.
 
 F-11
 ASTRATA
            GROUP INCORPORATED AND SUBSIDIARIES
 NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
            THE THREE AND NINE MONTHS ENDED NOVEMBER 30, 2007 AND 2006
 (UNAUDITED)
  2.  CERTAIN
        SIGNIFICANT
        ACCOUNTING POLICIES(continued)
 
 Uncertain
        Income Tax
        Positions
 
 Effective
        March 1, 2007, the Company accounts for uncertain income tax positions in
        accordance with Financial Accounting Standards Board Interpretation (“FIN”) No.
        48 (“FIN 48”). This pronouncement, which is an interpretation of SFAS No. 109,
“Accounting for Income
        Taxes”, seeks to reduce the diversity in practice associated with certain
        aspects of measurement and recognition in accounting for income taxes. FIN
        48
        clarifies when tax benefits should be recorded in financial statements, and
        indicates how any tax reserves should be classified in the balance sheet.
        In
        addition, FIN 48 requires expanded disclosure with respect to the uncertainty
        in
        income taxes. See Note 5 for additional information.
 
 Recently
        Issued Accounting
        Pronouncements
 
 On
        December 4, 2007, the Financial Accounting Standards Board (“FASB”), issued FASB
        Statement No. 141 (Revised 2007), “Business Combinations”.
        Statement 141R will significantly change the accounting for business
        combinations. Under Statement 141R, an acquiring entity will be required
        to
        recognize all the assets acquired and liabilities assumed in a transaction
        at
        the acquisition-date fair value with limited exceptions. Statement 141R
        will change the accounting treatment for certain specific items,
        including:
 
 ·
              Acquisition
                  costs will be generally expensed as
                  incurred;
 ·
              Non-controlling
                  interests (formerly known as "minority interests" -- see Statement
                  160
                  discussion below) will be valued at fair value at the acquisition
                  date;
 ·
              Acquired
                  contingent liabilities will be recorded at fair value at the acquisition
                  date and subsequently measured at either the higher of such amount
                  or the
                  amount determined under existing guidance for non-acquired
                  contingencies;
 ·
              In-process
                  research and development will be recorded at fair value as an
                  indefinite-lived intangible asset at the acquisition
                  date;
 ·
              Restructuring
                  costs associated with a business combination will be generally
                  expensed
                  subsequent to the acquisition date;
                  and
 ·
              Changes
                  in deferred tax asset valuation allowances and income tax uncertainties
                  after the acquisition date generally will affect income tax
                  expense.
 
 Statement
        141R also includes a
        substantial number of new disclosure requirements. Statement 141 applies
        prospectively to business combinations for which the acquisition date is
        on or
        after the beginning of the first annual reporting period beginning on or
        after
        December 15, 2008. Earlier adoption is prohibited. Accordingly, a calendar
        year-end company is required to record and disclose business combinations
        following existing GAAP until January 1, 2009.  The Company does not
        believe the application of this standard will materially impact its consolidated
        financial statements.
 
 F-12
 ASTRATA
            GROUP INCORPORATED AND SUBSIDIARIES
 NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
            THE THREE AND NINE MONTHS ENDED NOVEMBER 30, 2007 AND 2006
 (UNAUDITED)
  2.  CERTAIN
        SIGNIFICANT
        ACCOUNTING POLICIES(continued)
 
 Recently
        Issued Accounting
        Pronouncements(continued)
 
 On
        December 4, 2007, the FASB issued FASB Statement No. 160,“Non-controlling
        Interests in
        Consolidated Financial Statements - An Amendment of
        ARB No.
        51”.
        Statement 160 establishes
        new accounting and reporting standards for the non-controlling interest in
        a
        subsidiary and for the deconsolidation of a subsidiary. Specifically, this
        statement requires the recognition of a non-controlling interest (minority
        interest) as equity in the consolidated financial statements and separate
        from
        the parent's equity. The amount of net income attributable to the
        non-controlling interest will be included in consolidated net income on the
        face
        of the income statement. Statement 160 clarifies that changes in a parent's
        ownership interest in a subsidiary that do not result in deconsolidation
        are
        equity transactions if the parent retains its controlling financial interest.
        In
        addition, this statement requires that a parent recognize a gain or loss
        in net
        income when a subsidiary is deconsolidated. Such gain or loss will be measured
        using the fair value of the non-controlling equity investment on the
        deconsolidation date. Statement 160 also includes expanded disclosure
        requirements regarding the interests of the parent and its non-controlling
        interest.  Statement 160 is effective for fiscal years, and interim periods
        within those fiscal years, beginning on or after December 15, 2008. Like
        Statement 141R discussed above, earlier adoption is prohibited.  The
        Company does not believe the application of this standard will materially
        impact
        its consolidated financial statements.
 
 3.
        INVENTORY
  Inventories
        consisted of the following as of November 30, 2007:
 
 Europe
                
                
                Asia
                
                
                TotalFinished
                    goods
                
                $
                20,588
                
                
                $
                275,767
                
                
                $
                296,355
 
 4.
        CONTRACT IN
        PROGRESS
 
 As
        disclosed in the Form 10-KSB for the year ended February 28, 2007, the Company’s
        Singapore subsidiary entered into a fixed-price contract with a Singapore
        entity
        on April 10, 2007 to manufacture, ship and service approximately $93.5 million
        of its Telematics products. Deliveries will take place overseas during a
        two-year period. The Contract includes a provision for substantial liquidated
        damages for unexcused delays in product deliveries and/or failure to satisfy
        certain customer-specified acceptance criteria. In addition, in the event
        of
        non-performance by the Company that remains uncorrected after notice from
        the
        customer and the expiration of a contractual grace period, the customer has
        the
        right to cancel the Contract. The Company’s proprietary Telematics system is
        undergoing significant customization/modification in order to achieve the
        functionality required by the customer.
 
 The
        Company is accounting for the Contract described above under the percentage-of
        completion method under the AICPA Statement of Position (“SOP”) 81-1,
“Accounting for Performance of Construction-Type and Certain Production –Type
        Contracts”. Under the percentage-of-completion method, revenues, expenses and
        profits are recognized as performance progresses on long-term contracts.
        Progress toward completion is measured using the cost-to-cost
        method.  The Company uses the estimated cost of goods (“COGS”) for the
        project to determine the associated recognized revenues in the periods in
        which
        they are earned under the percentage-of-completion method of
        accounting.  This is calculated by taking the current reporting period
        COGS against the total projected COGS to determine a percentage of completion;
        then applying the percentage against the Contract project total revenues
        to
        determine the revenues for the reporting period.  During the three and
        nine months ended November 30, 2007, the Company recognized approximately
        $3.2
        million and approximately $6.2 million, respectively, in revenue on the
        Contract.
 
 F-13
 ASTRATA
            GROUP INCORPORATED AND SUBSIDIARIES
 NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
            THE THREE AND NINE MONTHS ENDED NOVEMBER 30, 2007 AND 2006
 (UNAUDITED)
 
 4.
        CONTRACT IN PROGRESS
        (continued)
 
 Customer
        billing is determined by the “schedule of values” in accordance with the
        Contract terms as agreed to by all parties.  Timing differences
        between costs incurred and billings based on the Contract terms generate
        the
        billings in excess of costs and estimated earnings on uncompleted
        contract.
 
 Billings
        in excess of costs and
        estimated earnings on the Contract consisted of the following as of November
        30,
        2007:
 
 2007Costs
                    and estimated earnings on uncompleted contract
                
                
                3,138,028Billings
                    in excess of estimated earnings on uncompleted contract
                
                
                3,750,000Billings
                    in excess of costs and estimated earnings on uncompleted
                    contract
                
                $
                611,972
  5.  INCOME
        TAXES
 
 The
        Company adopted FIN 48 effective March 1, 2007.  Management has
        determined that the failure to file certain information returns (for the
        period
        from inception to and including the year ended February 28, 2007) may result
        in
        the assessment of income tax penalties.  As a result, management has
        accrued an estimate of such penalties at March 1, 2007.  Accordingly,
        the Company’s condensed consolidated statement of operations for the nine months
        ended November 30, 2007 includes an estimated expense of approximately $0.5
        million relating to potential income tax penalties.
 
 All
        open tax years of the Company
        remain subject to examination by tax authorities and, as applicable, certain
        foreign tax authorities.
 
 6.  NOTES
        PAYABLE
 
 During
        the quarter ended November 30,
        2007, certain stockholders advanced to the Company approximately $85,000
        in
        working capital at an annual interest rate of 15% payable upon demand and
        is
        included in the current portion of long-term liabilities in the accompanying
        condensed consolidated balance sheet.
 
 During
        the quarter ended November 30, 2007, the Company paid $0.6 million towards
        the
        reduction of the current portion of long-term liabilities.  During
        December 2007, the Company paid the remaining $0.6 million balance.
 
 7.
        OTHER MATTERS RELATING TO CERTAIN
        DEBT AND EQUITY INSTRUMENTS
 
 Because of certain convertible debt financings and the transactions described
          in
          the “10/13/06 Equity Financing Transactions” section of Note 8 to the Company’s
          February 28, 2007 consolidated financial statements included in of our
          Form
          10-KSB for the year then ended, the exercise prices of certain warrants
          outstanding at November 30, 2007 have been reduced pursuant to anti-dilution
          contractual requirements. As a result of the same transactions, the conversion
          prices of the $1.5 million convertible note payable to a stockholder issued
          in
          September 2004 (as amended in November 2004) and a $384,000 convertible
          note
          payable issued to the same stockholder in December 2004 have been reduced
          pursuant to anti-dilution contractual requirements. These debt instruments
          are
          outstanding at November 30, 2007 and are included in the convertible notes
          payable to stockholders on the accompanying condensed consolidated balance
          sheet. During November 2007, the Company modified the conversion feature
          of the
          convertible notes payable and granted the stockholder five-year warrants
          (which
          vested and became fully exercisable on the grant date) to purchase up to
          92,000
          shares of our common stock at an exercise price range of $1.00 to $1.50
          per
          share.  The Company analyzed the modification under EITF Issue No.
          96-49, “Debtor’s Accounting
          for a Modification or Exchange of Debt Instruments”,EITF Issue No.
          05-07, “Modification to
          Conversion Options Embedded in Debt Instruments and Related Issues”and
          EITF Issue No. 06-06, “Debtor’s Accounting for a
          Modification of Convertible Debt Instruments”.The Company has
          recorded the impact of these modifications as a finance charge of $66,000
          using
          Black-Scholes option pricing model to estimate the fair value.  In
          connection with the grant of the warrants, the Company also agreed to provide
          certain registration rights for a period not to exceed five years in respect
          of
          the shares underlying the warrants and for certain other shares then owned
          by
          the stockholder.  The registration rights agreement does not contain
          any specific deadlines or financial penalties relating to the filing or
          effectiveness of the registration statement.
 F-14
 ASTRATA
            GROUP INCORPORATED AND SUBSIDIARIES
 NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
            THE THREE AND NINE MONTHS ENDED NOVEMBER 30, 2007 AND 2006
 (UNAUDITED)
 
 7.
        OTHER MATTERS RELATING TO CERTAIN
        DEBT AND EQUITY INSTRUMENTS (continued)
 
 The
        combined effect of the adjustments
        described in the preceding paragraph and of similar adjustments relating
        to
        previous transactions is summarized as follows:
 
 Exercise
                    or Conversion Price Per ShareOriginal
                
                
                AdjustedAmount
                
                
                Amount379,720
                    warrants outstanding at February 28, 2005
                
                $
                5.00
                
                
                $
                2.221,043,106
                    warrants issued in April/May 2005
                
                
                3.50
                
                
                
                1.68Other
                    warrants issued after February 28, 2005:108,196
                    warrants
                
                
                5.00
                
                
                
                2.224,955
                    warrants
                
                
                3.50
                
                
                
                1.68$1,884,000
                    of convertible debt
                
                
                5.00
                
                
                
                2.22
 
 8.  EQUITY
        TRANSACTIONS
 
 During
        the quarter ended November 30, 2007, the Company issued 20,000 shares of
        its
        restricted common stock in exchange for services provided by consultants.
        Such
        shares were valued at approximately $15,300 (estimated to be the fair value
        based on the trading price on the issuance date).
 
 
 9.  OTHER
        COMMITMENTS AND
        CONTINGENCIES
 
 Legal
        Matters
 
 From
        time
        to time, the Company may be involved in various claims, lawsuits and disputes
        with third parties, actions involving allegations of discrimination or breach
        of
        contract incidental to the ordinary operations of the business.  The
        Company is not currently involved in any litigation which management believes
        could have a material adverse effect on the Company's financial position
        or
        results of operations.
 
 Registration
        Rights
        Penalties
 
 The
        Company is contractually liable for certain penalties because its registration
        statement was not filed (or expected to be declared effective by the SEC)
        by the
        deadline dates.  Based on the current estimate of the filing and
        effective dates of such registration statement and the contractual deadlines,
        as
        of November 30, 2007, the Company has accrued estimated penalties and related
        interest of approximately $0.6 million relating to the preferred stock and
        the
        April/May 2005 sale of equity units.
 
 Accrued
        Interest
        Expense
 
 A
        number
        of directors, officers, employees and consultants have deferred salaries,
        fees
        and/or expenses for significant periods of time to support the
        Company.  During November 2007, the Board of Directors authorized a 1%
        per month simple interest on balances that remained outstanding for over
        six
        months.  During November 2007 we accrued interest payable and expensed
        approximately $0.5 million included within interest expense in the condensed
        consolidated statement of operations.
  F-15
 ASTRATA
            GROUP INCORPORATED AND SUBSIDIARIES
 NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
            THE THREE AND NINE MONTHS ENDED NOVEMBER 30, 2007 AND 2006
 (UNAUDITED)
  10.
        SEGMENT REPORTING AND GEOGRAPHIC
        INFORMATION
 
 Because
        of the discontinued operations
        described in Note 12 referenced in “Geomatics” below, revenues (from continuing
        operations) reported in the accompanying condensed consolidated statements
        of
        operations relate exclusively to the Company’s Telematics operations. Thus,
        management has not reported the segment information otherwise required by
        SFAS
        No. 131, “Disclosure about Segments of an Enterprise and Related
        Information.”
 
 Until
        June 2006, the Company operated in the following two reportable
        segments:
 
 Geomatics
 
 Products,
        accessories and services related to the business of measurement and setting
        out
        (i.e. Survey, Mapping and Geographic Information Systems) and precise position
        monitoring (such as scanning excavations and industrial plants). Also included
        within this segment are the machine guidance products, accessories and services
        related to the business of guiding, controlling and monitoring machinery,
        including mobile machinery such as graders, dump trucks and drills as well
        as
        agricultural products which have tractor and crop-spraying guidance in
        them.
 
 The
        Company exited the Geomatics
        segment in June 2006.
 
 Telematics
 
 Products,
        accessories and services related to the business of remote monitoring of
        assets
        (including track-and-trace) whereby position, attributes, status and
        communication are involved.
 
 Certain
        condensed geographic
        information is presented below including property and equipment, revenues,
        gross
        profit (loss) and operating loss:
  For
                    the three months ended November 30, 2007:Property
                    and
                
                
                
                
                
                Gross
                
                
                Operating
                
                
                OperatingEquipment,
                    net
                
                
                Revenue
                
                
                Profit
                
                
                Expenses
                
                
                Income
                    (Loss)Asia
                
                $
                583,820
                
                
                $
                4,552,639
                
                
                $
                1,117,308
                
                
                $
                662,585
                
                
                $
                454,723United
                    States
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                794,691
                
                
                $
                (794,691
                )Western
                    Europe
                
                
                95,671
                
                
                
                165,864
                
                
                
                98,273
                
                
                
                71,796
                
                
                $
                26,477Total
                
                $
                679,491
                
                
                $
                4,718,503
                
                
                $
                1,215,581
                
                
                $
                1,529,072
                
                
                $
                (313,491
                )For
                    the three months ended November 30, 2006:Gross
                
                
                Operating
                
                
                OperatingRevenue
                
                
                Profit
                    (Loss)
                
                
                Expenses
                
                
                (Loss)Asia
                
                
                
                
                
                $
                670,097
                
                
                $
                338,557
                
                
                $
                362,916
                
                
                $
                (24,359
                )United
                    States
                
                
                
                
                
                
                -
                
                
                
                -
                
                
                
                1,059,212
                
                
                $
                (1,059,212
                )Western
                    Europe
                
                
                
                
                
                
                87,938
                
                
                
                (4,189
                )
                
                
                804,031
                
                
                $
                (808,220
                )Total
                
                
                
                
                
                $
                758,035
                
                
                $
                334,368
                
                
                $
                2,226,159
                
                
                $
                (1,891,791
                )
  F-16
 ASTRATA
            GROUP INCORPORATED AND SUBSIDIARIES
 NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
            THE THREE AND NINE MONTHS ENDED NOVEMBER 30, 2007 AND 2006
 (UNAUDITED)
  10.
        SEGMENT REPORTING AND GEOGRAPHIC
        INFORMATION(continued)
 
 Geographic
        Information
        (continued)
 
 For
                    the nine months ended November 30, 2007:Property
                    and
                
                
                
                
                
                Gross
                
                
                Operating
                
                
                OperatingEquipment,
                    net
                
                
                Revenue
                
                
                Profit
                
                
                Expenses
                
                
                (Loss)Asia
                
                $
                583,820
                
                
                $
                9,897,819
                
                
                $
                2,575,606
                
                
                $
                4,461,038
                
                
                $
                (1,885,432
                )United
                    States
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                2,538,216
                
                
                $
                (2,538,216
                )Western
                    Europe
                
                
                95,671
                
                
                
                453,076
                
                
                
                328,725
                
                
                
                777,636
                
                
                $
                (448,911
                )Total
                
                $
                679,491
                
                
                $
                10,350,895
                
                
                $
                2,904,331
                
                
                $
                7,776,890
                
                
                $
                (4,872,559
                )For
                    the nine months ended November 30, 2006:Gross
                
                
                Operating
                
                
                OperatingRevenue
                
                
                Profit
                    (Loss)
                
                
                Expenses
                
                
                (Loss)Asia
                
                
                
                
                
                $
                1,668,606
                
                
                $
                764,882
                
                
                $
                1,090,482
                
                
                $
                (325,600
                )United
                    States
                
                
                
                
                
                
                -
                
                
                
                -
                
                
                
                3,217,901
                
                
                $
                (3,217,901
                )Western
                    Europe
                
                
                
                
                
                
                428,635
                
                
                
                (66,884
                )
                
                
                1,884,611
                
                
                $
                (1,951,495
                )Total
                
                
                
                
                
                $
                2,097,241
                
                
                $
                697,998
                
                
                $
                6,192,994
                
                
                $
                (5,494,996
                )
 
 11.  LOSS
        PER COMMON
        SHARE
 
 The
        following is a reconciliation of
        the numerators and denominators of the basic and diluted loss per common
        share
        from continuing operations computations for the three and nine months ended
        November 30, 2007 and 2006.
 
 Three
                    Months
                
                
                Three
                    Months
                
                
                Nine
                    Months
                
                
                Nine
                    MonthsNovember
                    30,
                
                
                November
                    30,
                
                
                November
                    30,
                
                
                November
                    30,2007
                
                
                2006
                
                
                2007
                
                
                2006Numerator
                    for basic and diluted loss per common share:Loss
                    from continuing operations
                
                $
                (982,122
                )
                
                $
                (6,359,307
                )
                
                $
                (6,254,360
                )
                
                $
                (10,079,175
                )Cumulative
                    undeclared dividends on preferred stock
                
                
                (56,000
                )
                
                
                (2,005,000
                )
                
                
                (168,000
                )
                
                
                (2,005,000
                )Total
                    net loss from continuing operationsapplicable
                    to common stockholders
                
                $
                (1,038,122
                )
                
                $
                (8,364,307
                )
                
                $
                (6,422,360
                )
                
                $
                (12,084,175
                )Denominator
                    for basic and diluted loss per common share:Weighted
                    average number of common shares outstanding
                
                
                24,002,951
                
                
                
                13,877,950
                
                
                
                23,989,717
                
                
                
                13,563,893Basic
                    and diluted loss per common share:from
                    continuing operations
                
                $
                (0.04
                )
                
                $
                (0.60
                )
                
                $
                (0.27
                )
                
                $
                (0.89
                )
 
 F-17
 ASTRATA
            GROUP INCORPORATED AND SUBSIDIARIES
 NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
            THE THREE AND NINE MONTHS ENDED NOVEMBER 30, 2007 AND 2006
 (UNAUDITED)
 
 12.  DISCONTINUED
        OPERATIONS
 
 Introduction
 
 In
        the
        opinion of management, the Company’s future opportunities in the GPS industry
        are principally in the Telematics sector in the Southeast Asia, Western Europe,
        and United States markets, with particular emphasis on the homeland security
        business. In combination with certain operational issues in South Africa,
        the
        desire to outsource manufacturing activities, and the intent to
        restructure/relocate the research and development function, management reached
        a
        decision in the first quarter of fiscal 2007 to sell the Company’s Geomatics
        operations. The Company consummated certain disposal transactions in the
        second
        quarter of fiscal 2007. In addition, management placed Astrata Systems (a
        wholly-owned) subsidiary in South Africa) in liquidation during the quarter
        ended August 31, 2006.
 
 Management
        believes that the Company has not incurred any material contingent liabilities
        in connection with the transactions and events described in the preceding
        paragraph. The Company did not recognize any losses for write-downs (to fair
        value, less cost to sell) of any assets related to discontinued operations
        during the three and nine months ended November 30, 2007. As described in
        the
        following paragraph, operations reported as discontinued in the accompanying
        condensed consolidated statements of operations are not generating any
        significant cash flows.
 
 The
        Company had total receivables relating to discontinued Telematics operations
        (in
        South Africa) of approximately $91,000 at November 30, 2007. While management
        expects to collect such receivables, this does not involve any continuing
        operations; the business activity related thereto will be limited to the
        effort
        expended in the collection process. The collection of such receivables is
        a
        non-recurring event for the Company, and all of the cash will be used to
        pay
        liabilities that are reported as related to assets held for sale at November
        30,
        2007. Thus, management has concluded that the Company does not have any
        active continuing involvement with the components that have been classified
        as
        discontinued operations in the accompanying condensed consolidated financial
        statements.
 
 Other
        Matters
 
 The
        major classes of assets and
        liabilities related to discontinued operations as of November 30, 2007 are
        as
        follows:
  AssetsTrade
                    and other receivables
                
                $
                90,576Other
                    non-current assets
                
                
                69,666Total
                
                $
                160,242LiabilitiesTrade
                    and accrued payables
                
                $
                241,466
  13. 
          SUBSEQUENT EVENTS
  On
        December 19, 2007, Astrata Group Incorporated entered into a Series B
        Convertible Preferred Stock Purchase Agreement with Vision Opportunity
        China LP, and pursuant to the fund's allocation guidelines, Vision Opportunity
        Master Fund, Ltd. (collectively, the “Investors”).  Under
        the terms of the Stock Purchase Agreement, the Investors purchased an aggregate
        of (i) $3,000,000 of Series B Convertible Preferred Stock and (ii) warrants
        to
        purchase a total of 8,611,428 shares of our common stock.  The Company
        received net proceeds of approximately $2.7 million for working capital and
        general corporate purposes.
 
 F-18
  Item
        2:  Management’s
        Discussion and Analysis or Plan of Operation
 
 Overview
 
 The
        following discussion should be read in conjunction with the unaudited condensed
        consolidated financial statements and notes thereto of the Company appearing
        elsewhere in this report. Such financial statements have been prepared to
        reflect the Company’s financial position as of November 30, 2007, together with
        the results of operations for the three and nine months ended November 30,
        2007
        and 2006, and cash flows for the nine months ended November 30, 2007 and
        2006.
 
 Forward-Looking
        Statements
 
 Historical
        results and trends should not be taken as indicative of future operations.
        Management’s statements contained in this report that are not historical facts
        are forward-looking statements within the meaning of Section 27A of the
        Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of
        the Securities Exchange Act of 1934, as amended of the “Exchange Act”. Actual
        results may differ materially from those included in the forward-looking
        statements. We intend such forward-looking statements to be covered by the
        safe-harbor provisions for forward-looking statements contained in the Private
        Securities Litigation Reform Act of 1995, and are including this statement
        for
        the purposes of complying with those provisions. Forward-looking statements,
        which are based on certain assumptions and describe our future plans, strategies
        and expectations, are generally indentified by use if the word “believe,”
“expect,” “anticipate,” “project,” “prospects,” or similar expressions. Our
        ability to predict results or the actual effect of future plans or strategies
        is
        inherently uncertain. Factors which could have a material adverse affect
        on our
        operations and future prospects on a consolidated basis include, but are
        not
        limited to: changes in economic conditions generally in the United States
        of
        America and the other countries in which we operate, legislative regulatory
        changes, the political climate in the foreign countries in which we operate,
        the
        availability of capital, interest rates, competition, and changes in U.S.
        generally accepted accounting principles. These risks and uncertainties should
        be considered in evaluating forward-looking statements and undue reliance
        should
        not be placed on any such statements.  Further information concerning
        us and our business, including additional factors that could materially affect
        our financial results, are included herein and in our other filings with
        the
        Securities and Exchange Commission (the “SEC’).
 
 Company
        Overview
 
 Overview
 
 Astrata
        Group Incorporated is a U.S. publicly-held company, headquartered in Costa
        Mesa,
        California.  Astrata is focused on advanced location-based IT services
        and solutions (Telematics) that combine the Global Positioning System (“GPS”)
        positioning, wireless communications (satellite or terrestrial) and geographical
        information technology, which together enable businesses and institutions
        to
        monitor, trace, or control the movement and status of machinery, vehicles,
        personnel or other assets. The Company's intelligent vehicle tracking system
        currently in use in Singapore enables the Singapore Civil Defense Force to
        track
        trucks carrying hazardous materials and to halt the trucks in case they veer
        off
        course.  Astrata has designed, developed, manufactured and currently
        supports seven generations of Telematics systems with units deployed worldwide.
        Astrata has offices throughout the world including the United States, Europe
        and
        Asia.
 
 Nature
        of
        Operations
 
 We
        operate in the Telematics sector of the GPS industry.  Our expertise
        is focused on advanced location-based IT products and services that combine
        positioning, wireless communications, and information
        technologies.  We provide advanced positioning products, as well as
        monitoring and airtime services to commercial and governmental entities in
        a
        number of markets including homeland security, public safety, transportation,
        surveying, utility, construction, mining, and agriculture.
 
 Examples
        of our products and services include surveying instrumentation using GPS
        and
        other augmenting technologies, such as wireless communication and lasers;
        fleet
        management for specialized machines, such as guidance for earth-moving
        equipment; positioning and IT technology for remote asset management and
        associated Telematics products, field data collection equipment, and products
        and airtime communications services for high volume track and trace
        applications.
 
 Positioning
        technologies employed by us include GPS, laser, optical and inertial navigation
        systems.  Communication techniques employed by us include Global
        Systems for Mobile Telecommunications (“GSM”) cellular and satellite
        communications.
  Page
            1
  Telematics
  Telematics
        comprises the remote monitoring of assets in real-time (including tracking
        and
        tracing) whereby location, time and sensor status are
        communicated.  These products are deployed into diverse markets
        including homeland security, public safety, transportation services and
        construction.
 
 Telematics
        products often focus on people and assets in hostile and demanding environments
        such as monitoring the movement of hazardous materials for homeland security
        purposes.  This segment also addresses the market for fleet
        management, workforce management, remote asset management and tracking, and
        emergency services by providing hardware for GPS information and data
        collection, as well as the software needed to access and analyze the data
        through the Internet.  Our products combine positioning, wireless, and
        information technology and add measurable value to location-based
        information.  We offer airtime to communicate data from the vehicle or
        field location to the customer’s data center or provide access over the Internet
        to the data and application software.  This allows critical real-time
        performance and monitoring data to be accessed and analyzed by supervisory,
        maintenance, or financial users and make real-time decisions for productivity
        improvement, cost reductions, safety improvement, or other critical decisions
        to
        be fed to the field.
 
 Recent
        Trends
 
 Astrata’s
        Telematics operations were strengthened during fiscal 2007 by the addition
        of
        certain key distribution partners in Western Europe and an increased presence
        in
        South East Asia based primarily on the successful delivery of the previously
        announced Hazmat (Hazardous Materials) Tracking Project to the Singapore
        Civil
        Defense Force.
 
 Our
        Telematics strategy is to focus on the homeland security, hazardous materials,
        civil defense and business to business markets by providing our customers
        with
        comprehensive solutions to their needs.  Frequently this involves the
        additional integration such as sensors ranging from Radio Frequency
        Identification (RFID) to biometrics, remote displays or augmenting technologies
        to allow tracking in tunnels.
 
 In
        the
        first quarter of fiscal 2007, management reached a decision to divest the
        Geomatics business as part of a broader strategy to focus on the more developed
        Telematics markets in Europe, South East Asia and North America.
  The
          Company entered into a fixed-price contract with a Singapore entity on
          April 10,
          2007 to design, develop and manufacture approximately $93.5 million of
          its
          Telematics products. Deliveries will take place overseas during a two-year
          period. The Contract includes a provision for substantial liquidated damages
          for
          unexcused delays in product deliveries and/or failure to satisfy certain
          customer-specified acceptance criteria. In addition, in the event of
          non-performance by the Company that remains uncorrected after notice from
          the
          customer and the expiration of a contractual grace period, the customer
          has the
          right to cancel the Contract. The Company’s proprietary Telematics system is
          undergoing significant customization/modification in order to achieve the
          functionality required by the customer.
 
 In
        June
        2007, the Singapore Civil Defense Force (“SCDF”) awarded a $2.2 million contract
        for the Company's new Intelligent Immobilization System technology (the
“Immobilizer”).  The Immobilizer is an add-on module to the Company’s
        Telematics System, which SCDF has been using since 2005 to track, monitor
        and
        now immobilize vehicles transporting hazardous materials, as well as to alert
        SCDF if these vehicles deviate from their prescribed routes.
 
 Results
        of operations for the three
        months ended November 30, 2007 and 2006
 
 As
        discussed above (see Note 12 to the condensed consolidated financial statements
        included elsewhere herein), the Company discontinued its operations and exited
        South Africa. Accordingly, all South Africa operations are being reported
        as
        discontinued operations effective with the May 31, 2006 quarter.
 
 Revenues
 
 Net
        sales
        from continuing operations were approximately $4.7 million for the three
        months
        ended November 30, 2007, an increase of approximately $3.9 million compared
        to
        the three months ended November 30, 2006 of approximately $0.8 million. Our
        revenues increased approximately $0.7 million from the growing uses of our
        systems and approximately $3.2 million from the $93.5 million Contract awarded
        April 10, 2007 which is accounted for under the percentage-of-completion
        method.
 
 With
        the
        growing interests in the capabilities of our Telematics systems, we are
        anticipating continual growth in our revenues.
  Page
            2
  During
        the quarter ended May 31, 2007,
        we began performance under a 24-month contract pursuant to which we will
        provide
        $93.5 million of our products and services as discussed in Note 4 to the
        condensed consolidated financial statements included elsewhere herein. We
        account for contract revenue and expenses under Statement of Position (“SOP”)
        No. 81-1, “Accounting for Performance of Construction-Type and Certain
        Production-Type Contracts,” using the percentage-of-completion method. During
        this the quarter ended November 30, 2007, we recognized approximately $3.2
        million in revenues against this Contract.  We anticipate significant
        revenue to be generated under this Contract in future periods as we perform
        to
        the Contract.
 Gross
        Profit
 
 Gross
        profit increased approximately $0.9 million to approximately $1.2 million
        for
        the three months ended November 30, 2007 compared to the three months ended
        November 30, 2006 of approximately $0.3 million. Our normal gross margin
        (defined as gross profit divided by revenue) decreased to 26% from
        44%.  As previously disclosed, homeland security contracts which are
        generally sizable in nature carry a lower margin then our general commercial
        contracts.
 
 The
        Company is accounting for the Contract described above under the percentage-of
        completion method under SOP 81-1, “Accounting for Performance of
        Construction-Type and Certain Production –Type Contracts”. Under the
        percentage-of-completion method, revenues, expenses and profits are recognized
        as performance progresses on long-term contracts. Progress toward completion
        is
        measured using the cost-to-cost method.  The Company uses the
        estimated cost of goods (“COGS”) for the project to determine the associated
        recognized revenues in the periods in which they are earned under the
        percentage-of-completion method of accounting.  This is calculated by
        taking the current reporting period COGS against the total projected COGS
        to
        determine a percentage of completion; then applying the percentage against
        the
        Contract project total revenues to determine the revenues for the reporting
        period
 
 Selling,
        general and administrative
        expenses
 
 Selling,
        general and administrative expenses (“SG&A”) for the three months ended
        November 30, 2007 were approximately $1.5 million, a decrease of approximately
        $0.7 million compared to the three months ended November 30, 2006 of
        approximately $2.2 million.
 
 Our
        selling, general and administrative expenses are primarily related to staffing,
        third party consultants, facilities, and travel costs.  For the
        three-months ended November 30, 2007, we had approximately $0.6 million of
        SG&A expenses in Asia; approximately $0.1 million in Europe and
        approximately $0.8 million in Corporate. Our selling, general and administrative
        expenses may continue to increase as we progress through the $93.5 million
        Contract.
  Net
        Results of
        Operations
 
 Our
        operating loss was approximately $0.3 million for the three months ended
        November 30, 2007 compared with an operating loss of approximately $1.9 million
        for the three months ended November 30, 2006. This is primarily due to the
        reduction of operating expenses and the performance against the Contract
        awarded
        April 10, 2007. We expect this to continue as interest in our Telematics
        products continues to grow.
 
 Other
        income
        (expense)
 
 Interest
        expense was approximately $0.7 million for the three months ended November
        30,
        2007 and $1.5 million in 2006. This was caused by the amounts of debt required
        in 2006. The fair value adjustment for a warrant liability was a benefit
        of
        approximately $1.5 million and offset by a loss on debt extinguishment of
        approximately $4.4 million for the three months ended November 30,
        2006.  During the three months ended November 30, 2007, the Company
        recorded approximately $0.5 million in accrued interest for certain directors,
        officers, employees and consultants who deferred salaries, fees and/or expenses
        for a significant period of time to support the Company.  In November
        2007, the Company authorized a 1% per month simple interest on balances that
        remained outstanding for over six months.
 
 Page
            3
  Net
        Results
 
 We
        reported a net loss of approximately $1.1 million or $(0.04) per common share
        for the three months ended November 30, 2007 compared to a net loss of
        approximately $6.3 million or $(0.59) per common share for the three months
        ended November 30, 2006.   After factoring in the deemed dividend
        to the preferred stockholders of approximately $0.1 million for the three
        months
        ended November 30, 2007 and approximately $2.0 million for the three months
        ended November 30, 2006, our net loss from continuing operations applicable
        to common stockholders is approximately $1 million or $(0.04) per common
        share
        for the three months ended November 30, 2007; and approximately $8.4 million
        or
        $(0.60) per common share for the three months ended November 30,
        2006.
 
 We
        expect
        our losses will grow smaller and be eliminated as we progress through the
        $93.5
        million Contract and other contracts which we anticipate will be awarded
        in the
        near future.  There can be no assurance of future contracts being
        awarded as we move through the process of bidding on proposals.
 
 Results
        of operations for the nine
        months ended November 30, 2007 and 2006
 
 Revenues
  Net
        sales
        from continuing operations were approximately $10.3 million for the nine
        months
        ended November 30, 2007, an increase of approximately $8.2 million compared
        to
        the nine months ended November 30, 2006 of approximately $2.1 million. Our
        revenues increased approximately $2.0 million from the growing uses of our
        systems and approximately $6.2 million from the $93.5 million Contract awarded
        April 10, 2007 which is accounted for under the percentage-of-completion
        method.
 
 During
        the quarter ended May 31, 2007, we began performance under a 24-month contract
        pursuant to which we will provide $93.5 million of our products and services
        as
        discussed in Note 4 to the condensed consolidated financial statements included
        elsewhere herein. We account for contract revenue and expenses under SOP
        No.
        81-1, “Accounting for Performance of Construction-Type and Certain
        Production-Type Contracts,” using the percentage-of-completion method. During
        the nine months ended November 30, 2007, we recognized approximately $6.2
        million in revenues against this Contract.  We anticipate significant
        revenue to be generated under this Contract in future periods as we perform
        to
        the Contract
 
 Gross
        Profit
 
 Gross
        profit increased approximately $2.2 million to approximately $2.9 million
        for
        the nine months ended November 30, 2007 compared to the nine months ended
        November 30, 2006 of approximately $0.7 million. Our normal gross margin
        (defined as gross profit divided by revenue) decreased to 28% from
        33%.  As previously disclosed, homeland security contracts which are
        generally sizable in nature carry a lower margin then our general commercial
        contracts.
 
 The
        Company is accounting for the Contract described above under the percentage-of
        completion method SOP 81-1, “Accounting for Performance of Construction-Type and
        Certain Production –Type Contracts”. Under the percentage-of-completion method,
        revenues, expenses and profits are recognized as performance progresses on
        long-term contracts. Progress toward completion is measured using the
        cost-to-cost method. The Company uses the estimated COGS for the project
        to
        determine the associated recognized revenues in the periods in which they
        are
        earned under the percentage-of-completion method of accounting.  This
        is calculated by taking the current reporting period COGS against the total
        projected COGS to determine a percentage of completion; then applying the
        percentage against the Contract project total revenues to determine the revenues
        for the reporting period
 
 Selling,
        general and administrative
        expenses
 
 Selling,
        general and administrative expenses for the nine months ended November 30,
        2007
        were approximately $7.8 million, an increase of approximately $1.6 million
        compared to the nine months ended November 30, 2006 of approximately $6.2
        million.
 
 Our
        selling, general and administrative
        expenses are primarily related to staffing, third party consultants, facilities,
        and travel costs.  For the nine-months ending in November 30, 2007, we
        had approximately $4.5 million of SG&A expenses in Asia; approximately $0.8
        million in Europe; and approximately $2.5 million in Corporate. Our selling,
        general and administrative expenses may continue to increase as we progress
        through the $93.5 million Contract.
 
 Page
            4
 
 Net
        Results of
        Operations
 
 Our
        operating loss was approximately $4.9 million for the nine months ended November
        30, 2007 compared to an operating loss of approximately $5.5 million for
        the
        nine months ended November 30, 2006. The decrease was primarily due to the
        progress on the $93.5 million Contract. We expect this to continue as interest
        in our Telematics products continues to grow.
 
 Other
        income
        (expense)
 
 Interest
        expense for the nine months ended November 30, 2007 was approximately $1
        million
        as compared to approximately $2.0 million for the nine months ended November
        30,
        2006. This was caused by the amounts of debt required in 2006. The fair value
        adjustment for a warrant liability was a benefit of approximately $1.8 million
        and offset by a loss on debt extinguishment of approximately $4.4 million
        for
        the nine months ended November 30, 2006.  During the nine months ended
        November 30, 2007, the Company recorded approximately $0.5 million in accrued
        interest for certain directors, officers, employees and consultants who deferred
        salaries, fees and/or expenses for a significant period of time to support
        the
        Company.  In November 2007, the Company authorized a 1% per month
        simple interest on balances that remained outstanding for over six
        months.
 
 Net
        Results
 
 We
        reported a net loss of approximately $6.5 million or $(0.28) per common share
        for the nine months ended November 30, 2007 compared to a net loss of
        approximately $9.5 million or $(0.85) per common share for the nine months
        ended
        November 30, 2006.   After factoring in the deemed dividend to
        the preferred stockholders of approximately $0.2 million for the nine months
        ended November 30, 2007 and approximately $2.0 million for the nine months
        ended
        November 30, 2006, our net loss from continuing operations applicable to
        common stockholders is approximately $6.4 million or $(0.27) per common share
        for the nine months ended November 30, 2007; and approximately $12.1 million
        or
        $(0.89) per common share for the nine months ended November 30,
        2006.
 
 We
        expect
        our losses will grow smaller and be eliminated as we progress through the
        $93.5
        million dollar Contract and other contracts which we anticipate will be awarded
        in the near future.  There can be no assurance of future contracts
        being awarded as we move through the process of bidding on
        proposals.
 
 Liquidity
        and Capital
        Resources
 
 Balance
        Sheet Comparison of November
        30, 2007 to February 28, 2007
 
 Total
        assets increased by approximately $1.6 million from approximately $3.1 million
        as of February 28, 2007 to approximately $4.7 million as of November 30,
        2007.
        The increase is due to the increase in cash of approximately $1.0 million
        and an
        increase in trade accounts receivable of approximately $0.4
        million.
 
 Total
        liabilities increased by approximately $3.2 million from approximately $11.6
        million as of February 28, 2007 to approximately $14.8 million as of November
        30, 2007.  The increase is due to an increase in trade and accrued
        payables of approximately $1.7 million; and an increase in other current
        liabilities of approximately $1.4 million.
 
 Statement
        of Cash Flow
        Changes
 
 Our
        operating activities provided approximately $0.2 million in cash during the
        nine
        months ended November 30, 2007.  Our net loss of approximately $6.5
        million along with an increase in accounts receivable and inventories of
        approximately $0.5 million; offset by non-cash items of approximately $2.5
        million which include depreciation and amortization, equity instruments used
        for
        compensation, and an increase in accounts payable and accrued liabilities
        of
        approximately $4.2 million.
 
 At
        November 30, 2007, the Company had negative working capital of approximately
        $11.5 million.  The primary reason for the working capital deficit is
        the level of accounts payable, accrued salaries and benefits and other
        accruals.
 
 During
        the nine months, we used cash for investing of approximately $0.4
        million by acquiring a restricted certificate of deposit which matures in
        August 2009 and the purchase of property and equipment of approximately $0.4
        million.
 
 Page
            5
  Our
        cash
        flows provided by financing activities were approximately $2.4 million for
        the nine months ended November 30, 2007.  The Company received
        $2.8 million of cash from the exercise of warrants to acquire 2.0 million
        shares
        of common stock and 1.75 million shares of preferred stock and approximately
        $0.2 million in proceeds from the issuance of notes payable and offset by
        the
        repayment of approximately $0.6 million in principal repayments on our notes
        payable.  In order for the Company to finance operations and continue
        its growth plan, additional funding will be required from external
        sources.  Management plans on funding operations through a combination
        of equity capital and lines of credit.  Management is currently in
        negotiations with lenders following the award of a $ 93.5 million dollar
        contract deliverable over two years to provide lines of credit based on this
        Contract.
 
 Liquidity
        and Going Concern
        Considerations
 
 The
        accompanying consolidated financial statements have been prepared assuming
        we
        will continue in our present form, which contemplates, among other things,
        the
        realization of assets and satisfaction of liabilities in the ordinary course
        of
        business.  For the nine months ended November 30, 2007, we had a net
        loss of approximately $6.5 million and positive cash flow from operating
        activities of approximately $0.2 million.  In addition, we had a
        working capital deficit of approximately $11.5 million as of November 30,
        2007.
 
 Our
        February 28, 2007 consolidated financial statements included a going concern
        paragraph.  The going concern paragraph states that there is
        substantial doubt about the Company’s ability to continue as a going
        concern.  Such financial statements have been prepared assuming that
        the Company will continue as a going concern (based upon management’s plans
        discussed herein) which contemplates, among other things, the realization
        of
        assets and satisfaction of liabilities in the ordinary course of
        business.  Accordingly, the aforementioned consolidated financial
        statements do not include any adjustments related to the recoverability and
        classification of asset carrying amounts or the amount and classification
        of
        liabilities that might result, should the Company be unable to continue as
        a
        going concern.
 
 In
        February 2006, management revised our business plan to focus on the more
        developed markets in Europe, South East Asia and North America.
 
 The
        Company’s capital requirements depend on numerous factors, including the rate of
        market acceptance of the Company’s products and services, the Company’s ability
        to service its customers, the ability to maintain and expand our customer
        base,
        the level of resources required to expand the Company’s marketing and sales
        organization, research and development activities and other
        factors.  As more fully explained elsewhere herein, management
        presently believes that cash generated from operations, combined with the
        Company’s current credit facilities and the debt and/or equity financing
        proposals now under consideration, will be sufficient to meet the Company’s
        anticipated liquidity requirements through February 2008.
 
 Management
        is projecting growth in Telematics sales during fiscal 2008 and 2009, and
        has
        announced a recent contract in this sector valued at $93.5 million for delivery
        over the next two financial years with further extensions to this order now
        under negotiation.  Our order book for delivery over the next two
        years now exceeds $110 million.
 
 In
        June
        2007, the SCDF awarded a $2.2 million contract for the Company's new Intelligent
        Immobilization System technology.  The Immobilizer is an add-on module
        to the Company’s Telematics System, which SCDF has been using since 2005 to
        track, monitor and now immobilize vehicles transporting hazardous materials,
        as
        well as to alert SCDF if these vehicles deviate from their prescribed
        routes.
 
 On
        December 19, 2007, Astrata Group Incorporated entered into a Series B
        Convertible Preferred Stock Purchase Agreement (the "Stock Purchase Agreement")
        with  Vision Opportunity China LP, and pursuant to the fund's allocation
        guidelines, Vision Opportunity Master Fund, Ltd. (collectively, the
        "Investors").  Under the terms of the Stock Purchase Agreement, the
        Investors purchased an aggregate of (i) $3,000,000 of Series B Convertible
        Preferred Stock (the "Series B Preferred Shares") and (ii) warrants to purchase
        a total of 8,611,428 shares of our common stock (the "Warrants").  The
        Company intends to use the proceeds for working capital and general corporate
        purposes.
 
 In
        order
        for us to fund our operations and continue this growth plan, substantial
        additional funding will be required from external sources.  Management
        currently intends to fund operations through a combination of equity and
        lines
        of credit.  Management is in discussion with banks for lines of credit
        and certain investors, who had expressed an interest in making investments
        in
        the Company.  These discussions are ongoing; however, there can be no
        assurance of the outcome of these negotiations.
 
 Page
            6
  Common
        Stock
 
 During
        the quarter ended November 30, 2007, the Company issued 20,000 shares of
        its
        restricted common stock in exchange for services provided by consultants.
        Such
        shares were valued at approximately $15,300 (estimated to be the fair value
        based on the trading price on the issuance date).
 
 Off
        Balance Sheet
        Arrangements
 
 As
        of
        November 30, 2007, there were no off balance sheet arrangements. Please refer
        to
        Note 9 (“Other Commitments and Contingencies’) to the Company’s condensed
        consolidated financial statements included elsewhere herein for additional
        information.
 
 Inflation
 
 We
        do not
        believe that inflation has had a material effect on our business, financial
        condition, or results of operations. If our costs were to become subject
        to
        significant inflationary pressures, we may not be able to offset fully such
        higher costs through price increases. Our inability or failure to do so could
        adversely affect our business, financial condition, and results of
        operations.
 
 Foreign
        Currency Exchange Rate
        Risk
 
 The
        operations of our subsidiaries in international market results in exposure
        to
        fluctuations in foreign currency exchange rates. The potential of volatile
        foreign currency exchange rate fluctuation in the future could have a
        significant effect on our results of operations.  During the nine
        months ended November 30, 2007, we had transactions denominated in the British
        Pound, the Singapore Dollar, the Malaysian Ringgit, and the Brunei
        Dollar.
 
 Interest
        Rate
        Risk
 
 Since
        many of our credit facilities are
        directly based on various prime rates of interest, we are exposed to interest
        rate risk.
 
 Critical
        Accounting
        Policies
 
 In
        December 2001, the SEC requested that all registrants explain their most
        “critical accounting policies” in the Management Discussion and Analysis. The
        SEC indicated that a “critical accounting policies” is one which is both
        important to the portrayal of our financial condition and results, and requires
        management’s most difficult, subjective or complex judgments, often as a result
        of need to make estimates about the effect of matters that are inherently
        uncertain. We believe that the following accounting policies fit this
        definition.
 
 Revenue
        Recognition
 
 General
 
 The
        Company’s revenues are recorded in accordance with the SEC’s Staff Accounting
        Bulletin No. 104, “Revenue Recognition.” The Company recognizes revenue when
        persuasive evidence of an arrangement exits, delivery has occurred, the fee
        is
        fixed or determinable, and collectability is reasonably assured. In instances
        where final acceptance of the product is specified by the customer or is
        uncertain, revenue is deferred until all acceptance criteria have been
        met.
 
 Sales
        as a
        Distributor
 
 Contracts
        and customers purchase orders are generally used to determine the existence
        of
        an arrangement. Shipping documents (and customer acceptance criteria, when
        applicable) are used to verify delivery. The Company assesses whether the
        fee is
        fixed or determinable based on the payment terms associated with the
        transaction, and whether the sales price is subject to refund or adjustment.
        The
        Company assesses collectability based primarily on the creditworthiness of
        the
        customer as determined by credit checks and analysis, as well as the customer’s
        payment history.
 
 In
        the Company’s Telematics operations, orders are generally shipped free-on-board
        shipping point, which means that such orders are recognized as revenue when
        the
        product is delivered to the carrier (shipped). Free-on-board shipping point
        also
        means that the customer bears all costs and risks of loss or damage to the
        goods
        prior to their receipt.
 
 Page
            7
  Contract
        Accounting
 
 The
        Company is accounting for the Contract described above under the percentage-of
        completion method under SOP 81-1, “Accounting for Performance of
        Construction-Type and Certain Production –Type Contracts”. Under the
        percentage-of-completion method, revenues, expenses and profits are recognized
        as performance progresses on long-term contracts. Progress toward completion
        is
        measured using the cost-to-cost method.  The Company uses the
        estimated COGS for the project to determine the associated recognized revenues
        in the periods in which they are earned under the percentage-of-completion
        method of accounting.  This is calculated by taking the current
        reporting period COGS against the total projected COGS to determine a percentage
        of completion; then applying the percentage against the Contract project
        total
        revenues to determine the revenues for the reporting period.
 
 Product
        Revenue
 
 Our
        Telematics equipment may be sold or provided as part of a monthly package
        which
        includes telecommunications, data warehousing and mapping.  These
        revenues are recognized over the life of such contracts as revenues are
        earned.
 
 Other
        Matters
 
 Revenue
        from distributors and resellers is recognized upon delivery, assuming that
        all
        other criteria for revenue recognition have been met. Distributors and resellers
        do not have the right of return.
 
 Customer
        incentive bonuses and other consideration received or receivable directly
        from a
        vendor for which the Company acts as a reseller are accounted for as a reduction
        in the price of the vendor’s products or services. When such incentive is
        pursuant to a binding arrangement, the amount received or receivable is deferred
        and amortized on a systematic basis over the life of the
        arrangement.
 
 Stock-Based
        Compensation
 
 Effective
        March 1, 2006, the Company adopted the provisions of SFAS No. 123-R,
“Share-Based Payment” (“SFAS No. 123-R”). SFAS No. 123-R requires employee stock
        options and rights to purchase shares under stock participation plans to
        be
        accounted for under the fair value method and requires the use of an option
        pricing model for estimating fair value. Accordingly, share-based compensation
        is measured at the grant date, based on the fair value of the
        award.
 
 Under
        the
        modified prospective method of adoption for SFAS No.123-R, the compensation
        cost
        recognized by the Company beginning March 1, 2006 includes (a) compensation
        cost
        for all equity incentive awards granted prior to, but not yet vested as of
        March
        1, 2006, based on the grant-date fair value estimated in accordance with
        the
        original provisions of SFAS No. 123, and (b) compensation cost for all equity
        incentive awards granted subsequent to February 28, 2006, based on the
        grant-date fair value estimated in accordance with the provisions of SFAS
        No.
        123-R.
  Page
            8
  Item
        3:  Controls and
        Procedures
 
 We
        carried out an evaluation of the
        effectiveness of the design and operation of our disclosure controls and
        procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as
        of
        November 30, 2007.  This evaluation was carried out under the
        supervision and with the participation of our Chief Executive Officer and
        Chief
        Financial Officer.  Based upon that evaluation, our Chief Executive
        Officer and Chief Financial Officer concluded that, as of November 30, 2007
        our
        disclosure controls and procedures are not effective.
 
 On
        November 27, 2007, the Company filed
        Form 8-K which included facts that our prior independent registered public
        accounting firm included in a report dated July 18, 2007 to the Company’s board
        of directors and management on material weaknesses in internal control related
        to the audit of the Company’s consolidated financial statements as of and for
        the year ended February 28, 2007, and the Company’s unaudited consolidated
        financial statements as of and for the quarter ended May 31,
        2007.  Management’s responses to these material weaknesses in internal
        control were communicated to the Company’s board of directors in a letter dated
        November 2, 2007. The items the Company intends to address include, but are
        not
        limited to, the following:
 
 ·
              Establish
                  effective controls over the period-end closing and financial reporting
                  processes.  This will require the addition of personnel and the
                  creation of closing protocols for both the Company and its subsidiaries
                  as
                  well as the consolidation of all subsidiaries. As an initial step
                  in
                  August 2007, the Company appointed an independent Chief Financial
                  Officer
                  in recognition of the need for more focused attention to the improvement
                  financial and reporting controls.
 ·
              Establish
                  financial reporting systems to standardize the process for the
                  Company and
                  its subsidiaries as well as consolidation of all
                  subsidiaries.
 ·
              Establishment
                  of uniform internal controls and procedures designed to formalize
                  documentation of its accounting and operational policies and
                  procedures.  In addition procedures will be established to
                  address all material financial functions and
                  disciplines.
 ·
              Human
                  Resource functions will be enhanced to provide the necessary documentation
                  and procedures to assure that employee information, benefits and
                  policies
                  are accurate and timely
                  administered.
 
 Changes
        in Internal Control over Financial Reporting
 
 As
        of
        November 30, 2007, the Company identified additional material weaknesses
        due to
        the lack of review of the Contract awarded April 10, 2007 related to the
        revenue
        recognition method.  Through an in-depth analysis, the Company
        determined a change in revenue recognition method was necessary and promptly
        filed a Form 8-K, 4.02 Non-reliance on previous financial statements issued
        for
        May 31, 2007 and August 31, 2007, resulting in certain adjustments to revenues
        and cost of sales.  Additionally, finance charges relating to a debt
        modification was not identified by the Company in a timely manner.
 
 The
        Company intends to remediate the material weaknesses by the implementation
        of
        new financial reporting systems throughout its operations; adoption of uniform
        internal controls; and the addition of management personnel to monitor daily
        organizational activities which will ensure that information is being gathered,
        reviewed and disclosed at all levels of the Company and reported timely in
        various reports filed or submitted under the Exchange Act.
 
 Disclosure
        controls and procedures are controls and other procedures that are designed
        to
        ensure that information required to be disclosed in our reports filed or
        submitted under the Exchange Act are recorded, processed, summarized, and
        reported within the time periods specified in the SEC's rules and
        forms.  Disclosure controls and procedures include, without
        limitation, controls and procedures designed to ensure that information required
        to be disclosed in our reports filed under the Exchange Act is accumulated
        and
        communicated to management, including our Chief Executive Officer and Chief
        Financial Officer, to allow timely decisions regarding required
        disclosure.
 
 Limitations
        on the Effectiveness of
        Internal Controls
 
 Our
        management does not expect that our disclosure controls and procedures or
        our
        internal control over financial reporting will necessarily prevent all fraud
        and
        material error. An internal control system, no matter how well conceived
        and
        operated, can provide only reasonable, not absolute, assurance that the
        objectives of the control system are met. 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 the 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. Additionally, controls
        can be circumvented by the individual acts of some persons, by collusion
        of two
        or more people, or by management override of the internal control. The design
        of
        any system of controls also is based in part upon certain assumptions about
        the
        likelihood of future events, and there can be no assurance that any design
        will
        succeed in achieving its stated goals under all potential future conditions.
        Over time, control may become inadequate because of changes in conditions,
        or
        the degree of compliance with the policies or procedures may
        deteriorate.
 
 Page
            9
 
 PART
        II – OTHER
        INFORMATION
 
 Item
        1: Legal
        Proceedings
 
 From
        time
        to time, the Company may be involved in various claims, lawsuits, disputes
        with
        third parties, actions involving allegations of discrimination or breach
        of
        contract incidental to the ordinary operations of the business. The Company
        is
        not currently involved in any litigation which management believes could
        have a
        material adverse effect on the Company’s financial position or results of
        operations.
 
 
 Item
        1A: Risk
        Factors
 
 There
        were no material changes from the
        risk factors disclosed in the Company’s February 28, 2007 Form 10-KSB filed with
        the SEC on May 30, 2007.
 
 
 Item
        2: Unregistered Sales of Equity
        Securities and Use of Proceeds
 
 Common
        Stock
 
 During
        the quarter ended November 30, 2007, the Company issued 20,000 shares of
        its
        restricted common stock in exchange for services provided by consultants.
        Such
        shares were valued at approximately $15,300 (estimated to be the fair value
        based on the trading price on the issuance date).
 
 Item
        6: Exhibits and Reports on Form
        8-K
 
 a)
                Reports
                    on Form 8-K and Form 8-K/A, 4.01 Changes in Registrant’s Certifying
                    Accountant filed on November 27, 2007 and December 7, 2007, respectively.
  Report
                    on Form 8-K, 4.02 Non-Reliance on Previously Issued Financial
                    Statements
                    or a Related Audit Report or Completed Interim Review filed on
                    January 14,
                    2008.
 
 b)                     
          Exhibits:
 
 Exhibit
                  31.1
              Certificate
                  of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
                  Act of 2002.
 
 Exhibit
                  31.2
              Certificate
                  of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
                  Act of 2002.
 
 Exhibit
                  32.1
              Certificate
                  of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
                  Act of 2002.
 
 Exhibit
                  32.1
              Certificate
                  of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
                  Act of 2002.
 
 Page
            10
 
 SIGNATURES
 
 In
        accordance with Section 13 or 15(d)
        of the Exchange Act, the registrant caused this report to be signed on its
        behalf by the undersigned, thereunto duly authorized.
  ASTRATA
          GROUP INCORPORATED
 
 
 By:          /s/
          THOMAS A.
          WAGNER
 Thomas
          A.
          Wagner                                                                                                                                                               
Date: January 22, 2008
 Chief
          Financial Officer
 Page
          11