UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


WASHINGTON,
      D.C. 20549








FORM
      10-QSB/A








[X]
      QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934








For
      the
      quarterly period ended: August
      31, 2007








[ 
       ] TRANSITION 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 of incorporation or organization)
            
            (I.R.S.
                Employer Identification No.)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 [X]  No [   ]





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).  Yes [   ]  No [X]





State
      the
      number of shares outstanding of each of the issuer's classes of common equity,
      as of September
      28, 2007: 25,629,891


Transitional
      Small Business Disclosure Format (Check One):   Yes
      [  ]  No [X]



























TABLE
      OF CONTENTS





PagePart
                I - Financial InformationItem
                1      Financial Statements
                (Unaudited)Condensed
                Consolidated Balance Sheet as of August 31, 2007
            F-1Condensed
                Consolidated Statements of Operations and Comprehensive Loss for
                the three
                and six months ended August 31, 2007 and 2006
            F-2Condensed
                Consolidated Statements of Cash Flows for the six months ended August
                31,
                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
            10Part
                II - Other InformationItem
                1      Legal Proceedings
            11Item
                2      Unregistered Sales of Equity Securities
                and Use of Proceeds
            11Item
                6      Exhibits
            11








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 periods ended
        August 31, 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.
 
 This
        amendment of the Company’s August 31, 2007 Form 10-QSB is filed principally to
        (a) reflect the change of revenue recognition on a long-term contract to
        the
        percentage-of-completion method, under SOP 81-1, “Accounting for Performance of
        Construction-Type and Certain Production-Type Contracts”, and (b) revise Item 3
        to reflect the impact of 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 condensed consolidated
        financial statements as of and for the quarterly periods ended August 31,
        2007.





ii


ASTRATA
                    GROUP INCORPORATED AND
                    SUBSIDIARIESCONDENSED
                    CONSOLIDATED BALANCE
                    SHEET(UNAUDITED)August
                    31,
                    2007ASSETS
                
                (As
                    Restated)Current
                    Assets:Cash
                    and cash
                    equivalents
                
                $
                932,437Trade
                    and other receivables,
                    net
                
                
                2,516,229Inventories
                
                
                201,438Other
                    assets
                
                
                342,079Discontinued
                    operations - current
                    assets
                
                
                95,023Total
                    current
                    assets
                
                
                4,087,206Property
                    and equipment,
                    net
                
                
                689,618Certificate
                    of
                    deposit-restricted
                
                
                412,987Goodwill
                
                
                300,000Discontinued
                    operations - other
                    assets
                
                
                69,666Total
                    assets
                
                $
                5,559,477LIABILITIES
                    AND STOCKHOLDERS'
                    DEFICITCurrent
                    liabilitiesAccounts
                    payable
                
                $
                5,759,821Salaries
                    and benefits payable to
                    officers and directors
                
                
                2,075,394Registration
                    rights
                    penalties
                
                
                560,711Interest
                    payable
                
                
                849,894Income
                    taxes and related penalties
                    payable
                
                
                508,306Convertible
                    notes payable to
                    stockholders
                
                
                1,884,000Advances
                    from
                    stockholders
                
                
                57,184Discontinued
                    operations - current
                    liabilities
                
                
                244,831Current
                    portion of long-term
                    liabilities
                
                
                1,386,533Billings
                    in excess of costs and
                    estimated earnings on uncompleted contract
                
                
                2,154,045Other
                    current
                    liabilities
                
                
                384,604Total
                    current
                    liabilities
                
                
                15,865,323Long-term
                    liabilities
                
                
                12,583Total
                    liabilities
                
                
                15,877,906Minority
                    interest
                
                
                40,114Commitments
                    and
                    contingenciesStockholders'
                    deficitPreferred
                    stock, Series A
                    convertible, $0.0001 par value, 10,000,000 sharesauthorized,
                    2,800,000 shares issued and outstanding with a
                    liquidationpreference
                    of
                    $2,800,000
                
                
                280Common
                    stock, $0.0001 par value,
                    100,000,000 sharesauthorized,
                    28,901,315 shares issuedand
                    25,629,891
                    shares outstanding
                
                
                2,564Additional
                    paid-in-capital
                
                
                32,514,957Accumulated
                    deficit
                
                
                (42,408,829
                )Accumulated
                    other comprehensive
                    loss
                
                
                (467,515
                )Total
                    stockholders'
                    deficit
                
                
                (10,358,543
                )Total
                    liabilities and
                    stockholders' deficit
                
                $
                5,559,477See
                    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 SIX MONTHS ENDED
                    AUGUST 31, 2007 AND 2006(UNAUDITED)THREE
                    MONTHS
                
                
                SIX
                    MONTHS(As
                    Restated)
                
                
                
                
                
                (As
                    Restated)2007
                
                
                2006
                
                
                2007
                
                
                2006Net
                    sales
                
                $
                3,959,979
                
                
                $
                912,868
                
                
                $
                5,632,392
                
                
                $
                1,339,206Cost
                    of goods
                    sold
                
                
                2,863,381
                
                
                
                670,888
                
                
                
                3,943,642
                
                
                
                975,576Gross
                    profit
                
                
                1,096,598
                
                
                
                241,980
                
                
                
                1,688,750
                
                
                
                363,630Selling,
                    general and
                    administrative expenses
                
                
                2,288,314
                
                
                
                1,962,111
                
                
                
                6,247,818
                
                
                
                3,966,835Operating
                    loss
                
                
                (1,191,716
                )
                
                
                (1,720,131
                )
                
                
                (4,559,068
                )
                
                
                (3,603,205
                )Other
                    income
                    (expense):Interest
                    expense
                
                
                (121,358
                )
                
                
                (206,699
                )
                
                
                (214,807
                )
                
                
                (435,589
                )Change
                    in fair value of derivative
                    warrant liability
                
                
                -
                
                
                
                22,000
                
                
                
                -
                
                
                
                306,996Loss
                    on sale of
                    assets
                
                
                -
                
                
                
                (2,346
                )
                
                
                -
                
                
                
                (2,346
                )Other
                    income
                
                
                55
                
                
                
                32,789
                
                
                
                1,637
                
                
                
                33,105Total
                    other income
                    (expense)
                
                
                (121,303
                )
                
                
                (154,256
                )
                
                
                (213,170
                )
                
                
                (97,834
                )Loss
                    before minority interest and
                    income tax provision
                
                
                (1,313,019
                )
                
                
                (1,874,387
                )
                
                
                (4,772,238
                )
                
                
                (3,701,039
                )Income
                    tax
                    provision
                
                
                -
                
                
                
                -
                
                
                
                500,000
                
                
                
                -Loss
                    before minority
                    interest
                
                
                (1,313,019
                )
                
                
                (1,874,387
                )
                
                
                (5,272,238
                )
                
                
                (3,701,039
                )Minority
                    interest
                
                
                -
                
                
                
                335
                
                
                
                -
                
                
                
                -Equity
                    in net loss of
                    affiliate
                
                
                -
                
                
                
                (7,067
                )
                
                
                -
                
                
                
                (18,828
                )Loss
                    from continuing
                    operations
                
                
                (1,313,019
                )
                
                
                (1,881,119
                )
                
                
                (5,272,238
                )
                
                
                (3,719,867
                )Gain
                    (loss) on discontinued
                    operations, net of tax
                
                
                (11,313
                )
                
                
                1,420,370
                
                
                
                (181,320
                )
                
                
                489,196Net
                    loss
                
                $
                (1,324,332
                )
                
                $
                (460,749
                )
                
                $
                (5,453,558
                )
                
                $
                (3,230,671
                )Net
                    loss from continuing
                    operations applicableto
                    common stockholders consists of
                    the following:Loss
                    from continuing
                    operations
                
                $
                (1,313,019
                )
                
                $
                (1,881,119
                )
                
                $
                (5,272,238
                )
                
                $
                (3,719,867
                )Cumulative
                    undeclared dividends on
                    preferred stock
                
                
                (56,000
                )
                
                
                -
                
                
                
                (112,000
                )
                
                
                -Net
                    loss from continuing
                    operations applicableto
                    common
                    stockholders
                
                $
                (1,369,019
                )
                
                $
                (1,881,119
                )
                
                $
                (5,384,238
                )
                
                $
                (3,719,867
                )Comprehensive
                    loss
                    andits
                    components consist of the
                    following:Net
                    loss
                
                $
                (1,324,332
                )
                
                $
                (460,749
                )
                
                $
                (5,453,558
                )
                
                $
                (3,230,671
                )Foreign
                    currency translation
                    adjustment, net of tax
                
                
                (141,834
                )
                
                
                50,843
                
                
                
                (467,515
                )
                
                
                (32,677
                )Comprehensive
                    loss
                
                $
                (1,466,166
                )
                
                $
                (409,906
                )
                
                $
                (5,921,073
                )
                
                $
                (3,263,348
                )Basic
                    and diluted earnings (loss)
                    per common share:Continuing
                    operations applicable
                    to common stockholders
                
                $
                (0.06
                )
                
                $
                (0.14
                )
                
                $
                (0.23
                )
                
                $
                (0.29
                )Discontinued
                    operations
                
                
                -
                
                
                
                0.11
                
                
                
                (0.01
                )
                
                
                0.04$
                (0.06
                )
                
                $
                (0.03
                )
                
                $
                (0.24
                )
                
                $
                (0.25
                )Weighted
                    average common shares
                    outstanding:Basic
                    and
                    diluted
                
                
                23,406,905
                
                
                
                13,080,970
                
                
                
                23,168,760
                
                
                
                12,920,103See
                    accompanying notes to these
                    condensed consolidated financial statements.
 F-2
  ASTRATA
                    GROUP INCORPORATED AND
                    SUBSIDIARIESCONDENSED
                    CONSOLIDATED STATEMENTS
                    OF CASH FLOWSFOR
                    THE SIX MONTHS ENDED AUGUST
                    31, 2007 AND 2006(UNAUDITED)(As
                    Restated)2007
                
                
                2006CASH
                    FLOWS FROM OPERATING
                    ACTIVITIES:Net
                    loss
                
                $
                (5,453,558
                )
                
                $
                (3,230,671
                )Adjustments
                    to reconcile net loss
                    to netcash
                    provided by operating
                    activitiesGain
                    on sale of property and
                    equipment
                
                
                -
                
                
                
                (7,394
                )Gain
                    on forgiveness of
                    debt
                
                
                -
                
                
                
                (332,691
                )Depreciation
                    and
                      amortization
                
                
                193,229
                
                
                
                266,270Gain
                    on disposal transactions
                    relating to discontinued operations
                
                
                (59,057
                )
                
                
                (1,810,098
                )Loss
                    on early termination of
                    lease
                
                
                -
                
                
                
                101,886Amortization
                    of deferred
                    compensation cost
                
                
                -
                
                
                
                200,250Deferred
                    financing costs and debt
                    discount
                
                
                -
                
                
                
                (58,383
                )Issuance
                    of common stock for
                    services
                
                
                -
                
                
                
                38,252Stock-based
                    compensation
                
                
                2,303,359
                
                
                
                728,945Equity
                    in net loss of
                    affiliate
                
                
                -
                
                
                
                18,828Unrealized
                    foreign currency
                    exchange gain
                
                
                -
                
                
                
                (16,922
                )Changes
                    in operating assets and
                    liabilities:Trade
                    and other
                    receivables
                
                
                (1,619,774
                )
                
                
                2,635,709Inventories
                
                
                (83,269
                )
                
                
                2,857,494Other
                    assets
                
                
                449,022
                
                
                
                139,222Accounts
                    payable and accrued
                    liabilities
                
                
                2,376,874
                
                
                
                (1,271,698
                )Taxes
                    and related penalties
                    payable
                
                
                493,420
                
                
                
                6,401Billings
                    in excess of costs and
                    estimated earnings on uncompleted contract
                
                
                2,154,045
                
                
                
                -Deferred
                    tax
                    liability
                
                
                -
                
                
                
                (14,893
                )Net
                    cash provided by operating
                    activities
                
                $
                754,291
                
                
                $
                250,507CASH
                    FLOW FROM INVESTING
                    ACTIVITIES:Purchase
                    of property and
                    equipment
                
                
                (308,855
                )
                
                
                50,501Proceeds
                    from sale of
                    assets
                
                
                -
                
                
                
                36,978Investment
                    in
                    affiliates
                
                
                11,741
                
                
                
                (135,491
                )Certificate
                    of
                    deposit-restricted
                
                
                (412,987
                )
                
                
                (47,592
                )Net
                    cash used in investing
                    activities
                
                
                (710,101
                )
                
                
                (95,604
                )CASH
                    FLOWS FROM FINANCING
                    ACTIVITIESRepayment
                    of long term
                    liabilities
                
                
                (12,158
                )
                
                
                (279,298
                )Proceeds
                    from notes
                    payable
                
                
                179,323
                
                
                
                -Lines
                    of credit,
                    net
                
                
                -
                
                
                
                (1,149,790
                )Proceeds
                    from advances to
                    stockholders
                
                
                -
                
                
                
                731,017Proceeds
                    from warrants exercised
                    for common stock
                
                
                1,000,000
                
                
                
                -Net
                    cash provided by (used in)
                    financing activities
                
                
                1,167,165
                
                
                
                (698,071
                )Effect
                    of foreign currency
                    exchange rate changeson
                    cash and cash
                    equivalents
                
                
                (458,289
                )
                
                
                178,116Net
                    increase (decrease) in cash
                    and cash equivalents
                
                
                753,066
                
                
                
                (365,052
                )Cash
                    and cash equivalents at
                    beginning of period
                
                
                179,371
                
                
                
                436,532Cash
                    and cash equivalents at end
                    of period
                
                $
                932,437
                
                
                $
                71,480See
                    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 SIX MONTHS ENDED AUGUST 31, 2007 AND 2006
 (UNAUDITED)


1.
      ORGANIZATION, NATURE OF OPERATIONS, AND LIQUIDITY/GOING CONCERN
      CONSIDERATIONS





Restatement





The
      Company’s August 31, 2007 condensed consolidated financial statements have been
      restated to reflect the change of revenue recognition on a long-term contract
      to
      the percentage-of-completion method, under SOP 81-1, “Accounting for Performance
      of Construction-Type and Certain Production-Type Contracts”.  On April
      10, 2007, the Company entered into a fixed-price contract with a Singapore
      entity to design, develop and manufacture approximately $93.5 million of its
      Telematics products (the “Contract”).  Deliveries will take place
      overseas during a two-year period.  Our previously filed condensed
      consolidated financial statements as of and for the three and six months ended
      August 31, 2007 did not reflect the recognition of any revenue relating to
      this
      Contract.  After extensive review of the Contract and the related
      accounting literature, the Company believes that accounting for this Contract
      falls under the AICPA Statement of Position (SOP) 81-1 using the cost-to-cost
      method.





The
      effects of the restatement
      adjustments on our previously filed condensed consolidated financial statements
      as of and for the three and six month ended August 31, 2007 is presented
      below:


August
                  31,
                  2007As
                  Previously
              
              
              RestatementReported
              
              
              Adjustment
              
              
              As
                  RestatedAccounts
                  payable
              
              $
              5,748,586
              
              
              $
              11,235
              
              
              $
              5,759,821Billingsin excess of costsandestimatedearnings
                  on uncompleted contract
              
              $
              2,513,240
              
              
              $
              (359,195
              )
              
              $
              2,154,045Total
                  current
                  liabilities
              
              $
              16,213,283
              
              
              $
              (347,960
              )
              
              $
              15,865,323Total
                  liabilities
              
              $
              16,225,866
              
              
              $
              (347,960
              )
              
              $
              15,877,906Accumulated
                  deficit
              
              $
              (42,756,789
              )
              
              $
              347,960
              
              
              $
              (42,408,829
              )Total
                  stockholders'
                  deficit
              
              $
              (10,706,503
              )
              
              $
              347,960
              
              
              $
              (10,358,543
              )For
                  The Three Months Ended August
                  31, 2007As
                  Previously
              
              
              RestatementReported
              
              
              Adjustment
              
              
              As
                  RestatedNet
                  sales
              
              $
              1,615,133
              
              
              $
              2,344,846
              
              
              $
              3,959,979Cost
                  of goods
                  sold
              
              $
              893,382
              
              
              $
              1,969,999
              
              
              $
              2,863,381Gross
                  profit
              
              $
              721,751
              
              
              $
              374,847
              
              
              $
              1,096,598Selling,
                  generalandadministrative
                  expenses
              
              $
              2,083,044
              
              
              $
              205,270
              
              
              $
              2,288,314Stock-based
                  compensation
              
              $
              205,270
              
              
              $
              (205,270
              )
              
              $
              -Operating
                  loss
              
              $
              (1,566,563
              )
              
              $
              374,847
              
              
              $
              (1,191,716
              )Loss
                  before minority interestandprovision for income
                  taxes
              
              $
              (1,687,866
              )
              
              $
              374,847
              
              
              $
              (1,313,019
              )Loss
                  before minority
                  interest
              
              $
              (1,687,866
              )
              
              $
              374,847
              
              
              $
              (1,313,019
              )Loss
                  from continuing
                  operations
              
              $
              (1,687,866
              )
              
              $
              374,847
              
              
              $
              (1,313,019
              )Gain
                  (loss) on discontinued
                  operations, net of tax
              
              $
              (78
              )
              
              $
              (11,235
              )
              
              $
              (11,313
              )Net
                  loss
              
              $
              (1,687,944
              )
              
              $
              363,612
              
              
              $
              (1,324,332
              )Net
                  loss from continuing
                  operations applicableto
                  common stockholders
              
              $
              (1,743,866
              )
              
              $
              374,847
              
              
              $
              (1,369,019
              )Comprehensive
                  loss
              
              $
              (1,829,778
              )
              
              $
              363,612
              
              
              $
              (1,466,166
              )Basicanddiluted loss per common
                  share:Continuing
                  operations applicable to common stockholders
              
              $
              (0.07
              )
              
              $
              0.01
              
              
              $
              (0.06
              )Basicanddiluted loss per common
                  share
              
              $
              (0.07
              )
              
              $
              0.01
              
              
              $
              (0.06
              )





F-4
 ASTRATA
              GROUP INCORPORATED AND SUBSIDIARIES
 NOTES
              TO
              CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
              THE
              THREE AND SIX MONTHS ENDED AUGUST 31, 2007 AND 2006
 (UNAUDITED)





1.
      ORGANIZATION, NATURE OF
      OPERATIONS, AND LIQUIDITY/GOING CONCERN CONSIDERATIONS
      (continued)





Restatement
      (continued)





For
                The Six Months Ended August
                31, 2007As
                Previously
            
            
            RestatementReported
            
            
            Adjustment
            
            
            As
                RestatedNet
                sales
            
            $
            2,620,801
            
            
            $
            3,011,591
            
            
            $
            5,632,392Cost
                of goods
                sold
            
            $
            1,413,485
            
            
            $
            2,530,157
            
            
            $
            3,943,642Gross
                profit
            
            $
            1,207,316
            
            
            $
            481,434
            
            
            $
            1,688,750Selling,
                generalandadministrative
                expenses
            
            $
            5,707,380
            
            
            $
            540,438
            
            
            $
            6,247,818Stock-based
                compensation
            
            $
            418,199
            
            
            $
            (418,199
            )
            
            $
            -Operating
                loss
            
            $
            (4,918,263
            )
            
            $
            359,195
            
            
            $
            (4,559,068
            )Loss
                before provision for income
                taxesandminority
                interest
            
            $
            (5,131,433
            )
            
            $
            359,195
            
            
            $
            (4,772,238
            )Loss
                before minority
                interest
            
            $
            (5,631,433
            )
            
            $
            359,195
            
            
            $
            (5,272,238
            )Loss
                from continuing
                operations
            
            $
            (5,631,433
            )
            
            $
            359,195
            
            
            $
            (5,272,238
            )Loss
                on discontinued
                operations
            
            $
            (170,085
            )
            
            $
            (11,235
            )
            
            $
            (181,320
            )Net
                loss
            
            $
            (5,801,518
            )
            
            $
            347,960
            
            
            $
            (5,453,558
            )Net
                loss from continuing
                operations applicable to common
                stockholders
            
            $
            (5,631,433
            )
            
            $
            247,195
            
            
            $
            (5,384,238
            )Comprehensive
                loss
            
            $
            (6,269,033
            )
            
            $
            347,960
            
            
            $
            (5,921,073
            )Basicanddiluted loss per common
                share:Continuing
                operations applicable to common stockholders
            
            $
            (0.24
            )
            
            $
            0.01
            
            
            $
            (0.23
            )Basicanddiluted loss per common
                share
            
            $
            (0.25
            )
            
            $
            0.01
            
            
            $
            (0.24
            )Net
                cash provided by operating
                activities
            
            $
            753,871
            
            
            $
            420
            
            
            $
            754,291Net
                cash used in investing
                activities
            
            $
            (709,681
            )
            
            $
            (420
            )
            
            $
            (710,101
            )





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.





F-5
 ASTRATA
              GROUP INCORPORATED AND SUBSIDIARIES
 NOTES
              TO
              CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
              THE
              THREE AND SIX MONTHS ENDED AUGUST 31, 2007 AND 2006
 (UNAUDITED)





1.ORGANIZATION,
      NATURE OF OPERATIONS,
      AND LIQUIDITY/GOING CONCERN CONSIDERATIONS(continued)





Nature
      of
      Operations (continued)





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.





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
      six months ended August 31, 2007, we had a net loss of approximately $5.5
      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 the Contract
      - (see Note 4).  We had positive cash flow from operating activities
      of approximately $0.8 million. In addition, we had a working capital deficit
      of
      approximately $11.8 million and a stockholders’ deficit of approximately $10.4
      million as of August 31, 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.





F-6
 ASTRATA
              GROUP INCORPORATED AND SUBSIDIARIES
 NOTES
              TO
              CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
              THE
              THREE AND SIX MONTHS ENDED AUGUST 31, 2007 AND 2006
 (UNAUDITED)





1.ORGANIZATION,
      NATURE OF OPERATIONS,
      AND LIQUIDITY/GOING CONCERN CONSIDERATIONS(continued)





Liquidity
      and
      Going Concern Considerations (continued)





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.





In
      June
      2007, the 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.





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.





Management
      is projecting growth in Telematics sales during fiscal 2008 and 2009, and has
      announced two sales orders in this sector valued at a total of approximately
      $110 million. Other sales contracts are under negotiation, but at this time
      there can be no assurance regarding the ultimate success of these
      negotiations.








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.





F-7
 ASTRATA
              GROUP INCORPORATED AND SUBSIDIARIES
 NOTES
              TO
              CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
              THE
              THREE AND SIX MONTHS ENDED AUGUST 31, 2007 AND 2006
 (UNAUDITED)





2.  CERTAIN
      SIGNIFICANT
      ACCOUNTING POLICIES (continued)





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 August
      31, 2007, the Company’s cash balances in U.S. bank accounts totaled
      approximately $14,000, which is within the Federal Deposit Insurance Corporation
      limit of $100,000.





The
      certificate of deposit described below (approximately $413,000 at August 31,
      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.





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 August 31, 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.





F-8
 ASTRATA
              GROUP INCORPORATED AND SUBSIDIARIES
 NOTES
              TO
              CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
              THE
              THREE AND SIX MONTHS ENDED AUGUST 31, 2007 AND 2006
 (UNAUDITED)





2.  CERTAIN
      SIGNIFICANT
      ACCOUNTING POLICIES(continued)





Inventories





Inventories
      are stated at the lower of cost (first-in, first-out) or estimated market,
      and
      consist of only finished goods at August 31, 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
      assets. 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.





As
      of August 31, 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).





F-9
 ASTRATA
              GROUP INCORPORATED AND SUBSIDIARIES
 NOTES
              TO
              CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
              THE
              THREE AND SIX MONTHS ENDED AUGUST 31, 2007 AND 2006
 (UNAUDITED)





2.  CERTAIN
      SIGNIFICANT
      ACCOUNTING POLICIES (continued)





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





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 towards 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





F-10
 ASTRATA
              GROUP INCORPORATED AND SUBSIDIARIES
 NOTES
              TO
              CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
              THE
              THREE AND SIX MONTHS ENDED AUGUST 31, 2007 AND 2006
 (UNAUDITED)





2.  CERTAIN
      SIGNIFICANT ACCOUNTING
      POLICIES (continued)





Stock-Based
      Compensation (continued)





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.





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 $205,000 for
      the
      three months ended August 31, 2007 and $265,000 for the three months ended
      August 31, 2006 and an expense of approximately $418,000 for the six months
      ended August 31, 2007 and $729,000 for the six months ended August 31, 2006.
      During the quarter ended May 31, 2007 the Company issued restricted common
      stock
      as compensation valued at approximately $1,845,000.  These expenses
      have been reported within the selling, general and administrative expenses
      in
      the accompanying condensed consolidated statements of operations. The total
      remaining expense to be recognized on the unvested options is approximately
      $0.03 million.





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
      first and second quarter of fiscal 2008 was insignificant.





Options
      outstanding that have vested
      and are expected to vest as of August 31, 2007 are as follows:




WeightedAverageWeighted
              
              
              RemainingAverage
              
              
              Contractual
              
              
              AggregateNumber
                  of
              
              
              Exercise
              
              
              Term
                  in
              
              
              IntrinsicShares
              
              
              Price
              
              
              Years
              
              
              Value
                  (a)Vested
              
              
              483,166
              
              
              $
              4.49
              
              
              
              2.6
              
              
              $
              -Expected
                  to
                  vest
              
              
              447,064
              
              
              $
              3.78
              
              
              
              2.6
              
              
              
              -Total
              
              
              930,230
              
              
              
              
              
              
              
              
              
              
              $
              -





(a)
            These
                amounts represent the difference between the exercise price and $0.90,
                the
                closing market price of the Company’s common stock on August 31, 2007 as
                quoted on the Over-the-Counter Bulletin Board (“OTCBB”) under the symbol
                “ATTG” for all in-the-money options
                outstanding.





F-11
 ASTRATA
              GROUP INCORPORATED AND SUBSIDIARIES
 NOTES
              TO
              CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
              THE
              THREE AND SIX MONTHS ENDED AUGUST 31, 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
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -August
                  31,
                  2007
              
              
              1,469,770
              
              
              
              930,230
              
              
              $
              3.78
              
              
              $
              -Options
                  exercisable
                  at:February
                  28,
                  2007
              
              
              
              
              
              
              549,833
              *
              
              $
              4.10August
                  31,
                  2007
              
              
              
              
              
              
              483,166
              
              
              $
              4.49





(b)
            Represents
                the excess (if any) of the February 28, 2007 or August 31, 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 August 31,
      2007 and 2006, all potentially dilutive common stock equivalents amount to
      38,271,064 and 3,837,612 shares, respectively.





Reclassification





Certain
      amounts in the prior period
      financial statements have been reclassified to conform to the current period
      presentation.





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.





F-12
 ASTRATA
              GROUP INCORPORATED AND SUBSIDIARIES
 NOTES
              TO
              CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
              THE
              THREE AND SIX MONTHS ENDED AUGUST 31, 2007 AND 2006
 (UNAUDITED)





2.  CERTAIN
      SIGNIFICANT ACCOUNTING
      POLICIES (continued)





Recently
      Issued Accounting Pronouncements





In
      the
      opinion of management, neither the Financial Accounting Standards Board
      (“FASB”), its Emerging Issues Task Force, the AICPA, or the SEC have issued any
      accounting pronouncements since the Company filed its February 28, 2007 Form
      10-KSB that are expected to have a material impact on the Company’s future
      consolidated financial statements.





3.
      INVENTORY




Inventories
      consisted of the following
      as of August 31, 2007:




Europe
              
              
              Asia
              
              
              TotalFinished
                  goods
              
              $
              9,319
              
              
              $
              192,119
              
              
              $
              201,438





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 towards 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 six months ended August 31, 2007, the
      Company recognized approximately $2.3 million and $3 million, respectively,
      in
      revenue on this Contract.





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 August
      31,
      2007:





2007Costs
                  and estimated earnings on
                  uncompleted contract
              
              
              1,595,955Billings
                  in excess of estimated
                  earnings on uncompleted contract
              
              
              3,750,000Billings
                  in excess of costs and
                  estimated earnings on uncompleted contract
              
              $
              2,154,045





F-13
 ASTRATA
              GROUP INCORPORATED AND SUBSIDIARIES
 NOTES
              TO
              CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
              THE
              THREE AND SIX MONTHS ENDED AUGUST 31, 2007 AND 2006
 (UNAUDITED)





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 six months
        then ended August 31, 2007 includes an estimated expense of $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





In
      August
      2007, the Company received an unsecured note payable which is due on February
      11, 2008 and carries no interest and the imputed interest is
      insignificant.  This note replaces approximately $130,000 of accrued
      payables. The balance of the note is approximately $133,000 at August 31, 2007
      and is included in current portion of long- term liabilities in the accompanying
      condensed consolidated balance sheet.





During
      the quarter ended August 31, 2007 an unsecured note payable was issued by the
      Company with a principal balance of $1.2 million outstanding at August 31,
      2007
      (the “Note Payable”) that was due in three equal instalments of $400,000; the
      first two instalments were due prior to June 1, 2007.  In addition,
      the third instalment payment (which was due on July 15, 2007) had not been
      paid.  Accordingly, the entire principal balance of the Note Payable
      has been classified as current portion of long-term liabilities in the
      accompanying condensed consolidated balance sheet.  Management is
      currently in discussions with the creditor, seeking to restructure the terms
      of
      the Note.  During November 2007, the Company paid $0.6 million and in
      December 2007, paid the remaining $0.6 million.








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 August 31, 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 August 31, 2007 and are included in the convertible notes payable
      to stockholder on the accompanying condensed consolidated balance
      sheet.





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








F-14
 ASTRATA
              GROUP INCORPORATED AND SUBSIDIARIES
 NOTES
              TO
              CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
              THE
              THREE AND SIX MONTHS ENDED AUGUST 31, 2007 AND 2006
 (UNAUDITED)





8.  EQUITY
      TRANSACTIONS





During
      the quarter ended August 31, 2007, the Company issued an aggregate of 1,195,408
      shares of its unrestricted common stock in exchange for services provided by
      consultants.  Such shares were valued at approximately $916,000
      (estimated to be the fair value based on the trading prices on the issuance
      dates).





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 August 31, 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.





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.





F-15
 ASTRATA
              GROUP INCORPORATED AND SUBSIDIARIES
 NOTES
              TO
              CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
              THE
              THREE AND SIX MONTHS ENDED AUGUST 31, 2007 AND 2006
 (UNAUDITED)





10.
      SEGMENT REPORTING AND GEOGRAPHIC
      INFORMATION(continued)





Geographic
      Information





Certain
      condensed geographic
      information is presented below including property and equipment, revenues,
      gross
      profit (loss) and operating loss:





For
                the three months ended August
                31, 2007:Property
                and
            
            
            
            
            
            Gross
            
            
            Operating
            
            
            OperatingEquipment,
                net
            
            
            Revenue
            
            
            Profit
            
            
            Expenses
            
            
            Income
                (Loss)Asia
            
            $
            582,672
            
            
            $
            3,793,061
            
            
            $
            969,220
            
            
            $
            863,134
            
            
            $
            106,086United
                States
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,012,924
            
            
            $
            (1,012,924
            )Western
                Europe
            
            
            106,946
            
            
            
            166,918
            
            
            
            127,378
            
            
            
            412,256
            
            
            $
            (284,878
            )Total
            
            $
            689,618
            
            
            $
            3,959,979
            
            
            $
            1,096,598
            
            
            $
            2,288,314
            
            
            $
            (1,191,716
            )For
                the three months ended August
                31, 2006:Gross
            
            
            Operating
            
            
            OperatingRevenue
            
            
            Profit
                (Loss)
            
            
            Expenses
            
            
            (Loss)Asia
            
            
            
            
            
            $
            742,983
            
            
            $
            254,318
            
            
            $
            267,594
            
            
            $
            (13,276
            )United
                States
            
            
            
            
            
            
            -
            
            
            
            -
            
            
            
            912,480
            
            
            $
            (912,480
            )Western
                Europe
            
            
            
            
            
            
            169,885
            
            
            
            (12,338
            )
            
            
            782,037
            
            
            $
            (794,375
            )Total
            
            
            
            
            
            $
            912,868
            
            
            $
            241,980
            
            
            $
            1,962,111
            
            
            $
            (1,720,131
            )






For
                  the six months ended August
                  31, 2007:Property
                  and
              
              
              
              
              
              Gross
              
              
              Operating
              
              
              OperatingEquipment,
                  net
              
              
              Revenue
              
              
              Profit
              
              
              Expenses
              
              
              (Loss)Asia
              
              $
              582,672
              
              
              $
              5,345,180
              
              
              $
              1,458,298
              
              
              $
              3,798,453
              
              
              $
              (2,340,155
              )United
                  States
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              1,743,525
              
              
              $
              (1,743,525
              )Western
                  Europe
              
              
              106,946
              
              
              
              287,212
              
              
              
              230,452
              
              
              
              705,840
              
              
              $
              (475,388
              )Total
              
              $
              689,618
              
              
              $
              5,632,392
              
              
              $
              1,688,750
              
              
              $
              6,247,818
              
              
              $
              (4,559,068
              )For
                  the six months ended August
                  31, 2006:Gross
              
              
              Operating
              
              
              OperatingRevenue
              
              
              Profit
                  (Loss)
              
              
              Expenses
              
              
              (Loss)Asia
              
              
              
              
              
              $
              1,107,871
              
              
              $
              426,325
              
              
              $
              693,252
              
              
              $
              (266,927
              )United
                  States
              
              
              
              
              
              
              -
              
              
              
              -
              
              
              
              2,050,067
              
              
              $
              (2,050,067
              )Western
                  Europe
              
              
              
              
              
              
              231,335
              
              
              
              (62,695
              )
              
              
              1,223,516
              
              
              $
              (1,286,211
              )Total
              
              
              
              
              
              $
              1,339,206
              
              
              $
              363,630
              
              
              $
              3,966,835
              
              
              $
              (3,603,205
              )





F-16
 ASTRATA
              GROUP INCORPORATED AND SUBSIDIARIES
 NOTES
              TO
              CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
              THE
              THREE AND SIX MONTHS ENDED AUGUST 31, 2007 AND 2006
 (UNAUDITED)





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 six months ended August 31, 2007 and 2006.





Three
                  Months
              
              
              Three
                  Months
              
              
              Six
                  Months
              
              
              Six
                  MonthsAugust
                  31,
                  2007
              
              
              August
                  31,
                  2006
              
              
              August
                  31,
                  2007
              
              
              August
                  31,
                  2006Numerator
                  for basic and diluted
                  loss percommon
                  share:Loss
                  from continuing
                  operations
              
              $
              (1,313,019
              )
              
              $
              (1,881,119
              )
              
              $
              (5,272,238
              )
              
              $
              (3,719,867
              )Cumulative
                  undeclared dividends on
                  preferred stock
              
              
              (56,000
              )
              
              
              -
              
              
              
              (112,000
              )
              
              
              -Total
                  net loss from continuing
                  operationsapplicable
                  to common stockholders
              
              $
              (1,369,019
              )
              
              $
              (1,881,119
              )
              
              $
              (5,384,238
              )
              
              $
              (3,719,867
              )Denominator
                  for basic and diluted
                  loss per common share:Weighted
                  average number of common
                  shares outstanding
              
              
              23,406,905
              
              
              
              13,080,970
              
              
              
              23,168,760
              
              
              
              12,920,103Basic
                  and diluted loss per common
                  share:from
                  continuing
                  operations
              
              $
              (0.06
              )
              
              $
              (0.14
              )
              
              $
              (0.23
              )
              
              $
              (0.29
              )


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 six months ended August 31, 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 $95,000 at August 31, 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 August 31, 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.





F-17
 ASTRATA
              GROUP INCORPORATED AND SUBSIDIARIES
 NOTES
              TO
              CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
              THE
              THREE AND SIX MONTHS ENDED AUGUST 31, 2007 AND 2006
 (UNAUDITED)





12.  DISCONTINUED
      OPERATIONS (continued)





Other
      Matters





The
      major classes of assets and
      liabilities related to discontinued operations as of August 31, 2007 are as
      follows:





AssetsTrade
                  and other
                  receivables
              
              $
              95,023Other
                  non-current
                  assets
              
              
              69,666Total
              
              $
              164,689LiabilitiesTrade
                  and accrued
                  payables
              
              $
              244,831





F-18





Item
      2:  Management’s Discussion and Analysis or Plan of
      Operation





Restatement





The
      Company’s August 31, 2007 condensed consolidated financial statements have been
      restated reflect the change of revenue recognition on a long-term contract
      to
      the percentage-of-completion method, under SOP 81-1, “Accounting for Performance
      of Construction-Type and Certain Production-Type Contracts”.  On April
      10, 2007, the Company entered into a fixed-price contract with a Singapore
      entity to design, develop and manufacture approximately $93.5 million of its
      Telematics products (the “Contract”).  Deliveries will take place
      overseas during a two-year period.  Our previously filed condensed
      consolidated financial statements as of and for the six months ended August
      31,
      2007 did not reflect the recognition of any revenue relating to this
      Contract.  After extensive review of the Contract and the related
      accounting literature, the Company believes that accounting for this Contract
      falls under the AICPA Statement of Position (SOP) 81-1 using the cost-to-cost
      method.





The
      effects of the restatement adjustments on our previously filed condensed
      consolidated financial statements as of and for the six months ended August
      31,
      2007 are presented below:





August
                31,
                2007As
                Previously
            
            
            RestatementReported
            
            
            Adjustment
            
            
            As
                RestatedAccounts
                payable
            
            $
            5,748,586
            
            
            $
            11,235
            
            
            $
            5,759,821Billingsin excess of costsandestimatedearnings
                on uncompleted contract
            
            $
            2,513,240
            
            
            $
            (359,195
            )
            
            $
            2,154,045Total
                current
                liabilities
            
            $
            16,213,283
            
            
            $
            (347,960
            )
            
            $
            15,865,323Total
                liabilities
            
            $
            16,225,866
            
            
            $
            (347,960
            )
            
            $
            15,877,906Accumulated
                deficit
            
            $
            (42,756,789
            )
            
            $
            347,960
            
            
            $
            (42,408,829
            )Total
                stockholders'
                deficit
            
            $
            (10,706,503
            )
            
            $
            347,960
            
            
            $
            (10,358,543
            )For
                The Three Months Ended August
                31, 2007As
                Previously
            
            
            RestatementReported
            
            
            Adjustment
            
            
            As
                RestatedNet
                sales
            
            $
            1,615,133
            
            
            $
            2,344,846
            
            
            $
            3,959,979Cost
                of goods
                sold
            
            $
            893,382
            
            
            $
            1,969,999
            
            
            $
            2,863,381Gross
                profit
            
            $
            721,751
            
            
            $
            374,847
            
            
            $
            1,096,598Selling,
                generalandadministrative
                expenses
            
            $
            2,083,044
            
            
            $
            205,270
            
            
            $
            2,288,314Stock-based
                compensation
            
            $
            205,270
            
            
            $
            (205,270
            )
            
            $
            -Operating
                loss
            
            $
            (1,566,563
            )
            
            $
            374,847
            
            
            $
            (1,191,716
            )Loss
                before minority interestandprovision for income
                taxes
            
            $
            (1,687,866
            )
            
            $
            374,847
            
            
            $
            (1,313,019
            )Loss
                before minority
                interest
            
            $
            (1,687,866
            )
            
            $
            374,847
            
            
            $
            (1,313,019
            )Loss
                from continuing
                operations
            
            $
            (1,687,866
            )
            
            $
            374,847
            
            
            $
            (1,313,019
            )Gain
                (loss) on discontinued
                operations, net of tax
            
            $
            (78
            )
            
            $
            (11,235
            )
            
            $
            (11,313
            )Net
                loss
            
            $
            (1,687,944
            )
            
            $
            363,612
            
            
            $
            (1,324,332
            )Net
                loss from continuing
                operations applicableto
                common stockholders
            
            $
            (1,743,866
            )
            
            $
            374,847
            
            
            $
            (1,369,019
            )Comprehensive
                loss
            
            $
            (1,829,778
            )
            
            $
            363,612
            
            
            $
            (1,466,166
            )Basicanddiluted loss per common
                share:Continuing
                operations applicable to common stockholders
            
            $
            (0.07
            )
            
            $
            0.01
            
            
            $
            (0.06
            )Basicanddiluted loss per common
                share
            
            $
            (0.07
            )
            
            $
            0.01
            
            
            $
            (0.06
            )





Page
            1








For
                The Six Months Ended August
                31, 2007As
                Previously
            
            
            RestatementReported
            
            
            Adjustment
            
            
            As
                RestatedNet
                sales
            
            $
            2,620,801
            
            
            $
            3,011,591
            
            
            $
            5,632,392Cost
                of goods
                sold
            
            $
            1,413,485
            
            
            $
            2,530,157
            
            
            $
            3,943,642Gross
                profit
            
            $
            1,207,316
            
            
            $
            481,434
            
            
            $
            1,688,750Selling,
                generalandadministrative
                expenses
            
            $
            5,707,380
            
            
            $
            540,438
            
            
            $
            6,247,818Stock-based
                compensation
            
            $
            418,199
            
            
            $
            (418,199
            )
            
            $
            -Operating
                loss
            
            $
            (4,918,263
            )
            
            $
            359,195
            
            
            $
            (4,559,068
            )Loss
                before provision for income
                taxesandminority
                interest
            
            $
            (5,131,433
            )
            
            $
            359,195
            
            
            $
            (4,772,238
            )Loss
                before minority
                interest
            
            $
            (5,631,433
            )
            
            $
            359,195
            
            
            $
            (5,272,238
            )Loss
                from continuing
                operations
            
            $
            (5,631,433
            )
            
            $
            359,195
            
            
            $
            (5,272,238
            )Loss
                on discontinued
                operations
            
            $
            (170,085
            )
            
            $
            (11,235
            )
            
            $
            (181,320
            )Net
                loss
            
            $
            (5,801,518
            )
            
            $
            347,960
            
            
            $
            (5,453,558
            )Net
                loss from continuing
                operations applicableto
                common stockholders
            
            $
            (5,631,433
            )
            
            $
            247,195
            
            
            $
            (5,384,238
            )Comprehensive
                loss
            
            $
            (6,269,033
            )
            
            $
            347,960
            
            
            $
            (5,921,073
            )Basicanddiluted loss per common
                share:Continuing
                operations applicable to common stockholders
            
            $
            (0.24
            )
            
            $
            0.01
            
            
            $
            (0.23
            )Basicanddiluted loss per common
                share
            
            $
            (0.25
            )
            
            $
            0.01
            
            
            $
            (0.24
            )Net
                cash provided by operating
                activities
            
            $
            753,871
            
            
            $
            420
            
            
            $
            754,291Net
                cash used in investing
                activities
            
            $
            (709,681
            )
            
            $
            (420
            )
            
            $
            (710,101
            )





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 August 31, 2007, together with
      the results of operations for the three and six months ended August 31, 2007
      and
      2006, and cash flows for the six months ended August 31, 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’).





Page
            2





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





Weoperate in the Telematics sector ofthe GPS
      industry.  Ourexpertise is focused on
      advanced location-based IT productsandservices that combine positioning,
      wireless communications,andinformation
      technologies.We
      provideadvanced
      positioning products, as well as monitoringandairtime services to commercialandgovernmental entities in a
      number of markets
      including homelandsecurity, public safety,
      transportation, surveying, utility, construction, mining,andagriculture.





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.





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 homelandsecurity, public safety, transportation
      servicesandconstruction.





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.





Page
            3





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 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 August 31, 2007 and 2006





As
      discussed above (see Note 12 to the condensed consolidated financial statements
      included elsewhere herein), the Company has 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 million for the three months
      ended August 31, 2007, an increase of approximately $3.1 million compared to
      the
      three months ended August 31, 2006 of approximately $0.9 million, Our revenue
      increased by approximately $3 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.





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.
      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
      the three months ending August 31, 2007, we recognized approximately $3 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 $1.1 million for
      the three months ended August 31, 2007 compared to the three months ended August
      31, 2006 of approximately $0.2 million. Our normal gross margin (defined as
      gross profit divided by revenue) increased from 27% to 28%.  We expect
      our gross margins will improve with the increase in business
      opportunities.





Selling,
      general and administrative expenses





Selling
      general and administrative expenses for the three months ended August 31, 2007
      were approximately $2.3 million, an increase of approximately $0.3 million
      compared to the three months ended August 31, 2006 of approximately $2
      million.





In
      Asia,
      operating expenses for the three months ended August 31, 2007 were approximately
      $0.9 million, compared to the three months ended August 31, 2006 of
      approximately $0.3 million. In Europe, operating expenses for the three months
      ended August 31, 2007 were approximately $0.4 million with Corporate at
      approximately $0.8 million, compared Europe operating expenses for the three
      months ended August 31, 2006 of approximately $1 million with Corporate at
      approximately $0.9 million.  These expenses are primarily related to
      staffing, third party consultants, facilities and travel costs.  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 $1.2 million for the three months ended August
      31, 2007 compared to an operating loss of approximately $1.7 million for the
      three months ended August 31, 2006.





Page
            4





Other
      income (expense)





Interest
      expense was approximately $0.1
      million for the three months ended August 31, 2007 and $0.2 million in
      2006.





Net
      Results





We
      reported a net loss of approximately $1.3 million or $(0.06) per common share
      for the three months ended August 31, 2007 compared to a net loss of
      approximately $0.5 million or $(0.03) per common share for the three months
      ended August 31, 2006.   After factoring in the deemed dividend
      to the preferred stockholders of approximately $0.1 million, our net loss from
      continuing operations applicable to common stockholders is approximately
      $1.4 million or $(0.06) per common share for the three months ended August
      31,
      2007; and approximately $1.9 million or $(0.14) per common share for the three
      months ended August 31, 2006. Our discontinued operations resulted in a profit
      of approximately $1.4 million or $0.11 per common share for the three months
      ended August 31, 2006.





We
      expect
      our losses will grow smaller and be eliminated as we progress through the
      approximate $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.





Results
      of operations for the six months ended August 31, 2007 and 2006





Revenues





Net
      sales
      from continuing operations were approximately $5.6 million for the six months
      ended August 31, 2007, an increase of approximately $4.3 million compared to
      the
      six months ended August 31, 2006 of approximately $1.3 million. During this
      six
      months, we had an increase of approximately $1.3 million from increased
      awareness in Telematics capabilities and we have begun deliveries under the
      Contract entered into on April 10, 2007 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
      the six months ended August 31, 2007, we recognized approximately $3 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 $1.3 million to approximately $1.7 million for
      the six months ended August 31, 2007 compared to the six months ended August
      31,
      2006 of approximately $0.4 million. Our normal gross margin (defined as gross
      profit divided by revenue) increased from 27% to 30%. The increase is due to
      an
      increase in are general commercial contracts that carry a higher margin than
      our
      homeland security contracts.





Selling,
      general and administrative expenses





Selling
      general and administrative expenses for the six months ended August 31, 2007
      were approximately $6.2 million, an increase of approximately $2.2 million
      compared to the six months ended August 31, 2006 of approximately $4
      million.





In
      Asia,
      operating expenses for the six months ended August 31, 2007 were approximately
      $3.8 million, compared to the six months ended August 31, 2006 of approximately
      $0.7 million. In Europe, operating expenses for the six months ended August
      31,
      2007 were approximately $0.7 million with Corporate at approximately $1.7
      million, compared with the Europe operating expenses for the six months ended
      August 31, 2006 of approximately $1.2 million with Corporate at approximately
      $2.1 million.  These expenses are primarily related to staffing, third
      party consultants, facilities and travel costs.  The increase in these
      expenses was primarily due to the recognition of $2.8 million in bonuses paid
      to
      certain employees for securing $93.5 million in new business under the
      Contract.  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 $4.6 million for the six months ended August
      31, 2007 compared to an operating loss of approximately $3.6 million for the
      six
      months ended August 31, 2006. The increase in the operating loss was primarily
      due to the recognition of $2.8 million in bonuses paid to certain employees
      for
      securing $93.5 million in new business under the Contract.





Page
            5





Other
      income (expense)





Interest
      expense for the six months ended August 31, 2007 was approximately $0.2 million
      as compared to $0.4 million for the six months ended August 31, 2006. The fair
      value adjustment for a warrant liability was a benefit of approximately $0.3
      million for the six months ended August 31, 2006.





Net
      Results





We
      reported a net loss of approximately $5.5 million or $(0.24) per common share
      for the six months ended August 31, 2007 compared to a net loss of approximately
      $3.2 million or $(0.25) per common share for the six months ended August 31,
      2006. The increase in net loss was primarily due to the recognition of $2.8
      million in bonuses paid to certain employees for securing $93.5 million in
      new
      business under the Contract.  After factoring in the deemed dividend
      to the preferred stockholders of approximately $0.1 million, our net loss from
      continuing operations applicable to common stockholders is approximately
      $5.4 million or $(0.23) per common share; and approximately $3.7 million or
      $(0.29) per common share for the six months ended August 31, 2006. Our
      discontinued operations resulted in loss of approximately $0.2 million or
      $(0.01) per common share for the six months ended August 31, 2007 and a profit
      of approximately $0.5 million or $0.04 per common share for the six months
      ended
      August 31, 2006.





We
      expect
      our losses will grow smaller and be eliminated as we progress through the
      approximate $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 August 31, 2007 to February 28, 2007





Total
      assets increased by approximately $2.5 million from approximately $3.1 million
      as of February 28, 2007 to approximately $5.6 million as of August 31, 2007.
      The
      increase is due to the increase in cash of approximately $0.7 million, an
      increase in trade accounts receivable of approximately $1.6 million, an increase
      in inventory of approximately $0.1 and an increase in fixed assets of
      approximately $0.1.





Total
      liabilities increased by approximately $4.3 million from approximately $11.6
      million as of February 28, 2007 to approximately $15.9 million as of August
      31,
      2007.  The increase is due to an increase in trade and accrued
      payables of approximately $1.2 million; billings in excess of costs and
      estimated earnings on uncompleted contracts of approximately $2.2 million and
      an
      increase in other current liabilities of approximately $0.9
      million.





Statement
      of Cash Flow Changes





Our
      operating activities provided
      approximately$0.8million in cash during thesixmonths endedAugust31, 2007.  Our net loss of
      approximately $5.5million along withan increase in accounts
      receivableandinventories of approximately $1.7
      million; offset by non-cash items of approximately $2.4 million which include
      depreciationandamortization,andequity
      instruments used for
      compensation, deferred contracts in progress-netandother assets of approximately
      $0.4millionandan increase inbillings in excess of
      costsandestimated earnings on uncompleted
      contractsandaccounts
      payableandaccrued liabilities of approximately
      $5million.





AtAugust31, 2007, the Company had
      negative working
      capital of approximately $11.8million.  The primary reason
      for the working capital
      deficit is the level of accounts payableandaccrued salaries,benefitsandother accrualsofapproximately$7.8millionandexpensesunder
      a Contract
      pursuant to which will provide $93.5 million of our products and service
      recorded as billings in excess of costs and estimated earnings on uncompleted
      contractsof
      approximately $2.2million.





During
      thesix months,
      we usedcashfor
      investing of approximately
      $0.7millioninpropertyandequipmentandapproximately $0.4 millionby acquiringa restricted certificate of deposit
      which matures in August 2009.





Our
      cash flows provided by financingactivitieswereapproximately
      $1.2millionfor
      thesixmonths endedAugust31, 2007.The
      Companyreceived$1.0million of cash fromthe exercise of warrants
      to acquiretwomillionshares of common stockandapproximately $0.2 million in proceeds
      from the issuance of notes payable.  In order for the Company
      to
      finance operationsandcontinue its growth plan, additional
      funding will be required from external sources.  Management
      plans on funding operations through a combination of equity capitalandlines of credit.  Management
      is currently in negotiations with banks following the award ofthe$
      93.5 million dollarContractdeliverable
      over two years to
      provide lines of credit
      based on thisContract.





Page
            6





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 six months ended August 31, 2007, we had a net loss
      of approximately $5.5 million and positive cash flow from operating activities
      of approximately $0.8 million.  In addition, we had a working capital
      deficit of approximately $11.8 million as of August 31, 2007.





Our
      February 28, 2007 consolidated financial statements include 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 significant growth in Telematics sales during fiscal 2008 and
      2009
      as a result of 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.





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. .  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.





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 have 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.





Common
      Stock





During
      the quarter ended August 31, 2007, the Company issued an aggregate of 1,195,408
      shares of its unrestricted common stock in exchange for services provided by
      consultants.  Such shares were valued at approximately $916,000
      (estimated to be the fair value based on the trading prices on the issuance
      dates)





Off
      Balance Sheet Arrangements





As
      of
      August 31, 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.





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            7





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 six
      months ended August 31, 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.





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 towards 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.





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            8





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.





The
      Company’s condensed consolidated statements of operations have been reclassified
      to separately report discontinued operations.





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.





Other
      Recently Issued Accounting Pronouncements





In
      the
      opinion of management neither the FASB (including its Emerging Issues Task
      Force), the American Institute of Certified Public Accountants nor the SEC
      have
      issued any accounting pronouncements since the Company filed its February 28,
      2007 Form 10-KSB that are believed by management to have a material impact
      on
      the Company’s present or future consolidated financial statements.





Other
      recent accounting pronouncements issued by the FASB (including its Emerging
      Issues Task Force, or “EITF”), the AICPA, and the SEC did not or are not
      believed by management to have a material impact on the Company’s present or
      future consolidated financial statements.





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            9





Item
      3:  ControlsandProcedures





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
      August 31, 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 August 31, 2007 our
      disclosure controls and procedures were 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.





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.





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            10





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 August 31, 2007, the Company issued an aggregate of 1,195,408
      shares of its unrestricted common stock in exchange for services provided by
      consultants.  Such shares were valued at approximately $916,000
      (estimated to be the fair value based on the trading prices on the issuance
      dates).





Item
      6: 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
            11


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














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