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: May 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 July 11, 2007: 24,434,485





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 May 31, 2007
            F-1Condensed
                Consolidated Statements of Operations and Comprehensive Loss for
                the three
                months ended May 31, 2007 and 2006
            F-2Condensed
                Consolidated Statements of Cash Flows for the three months ended
                May 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
            9Part
                II - Other InformationItem
                1      Legal Proceedings
            10Item
                2      Unregistered Sales of Equity Securities
                and Use of Proceeds
            10Item
                6      Exhibits
            10








i





PART
      I – FINANCIAL INFORMATION





Item
      1:  Condensed Consolidated Financial Statements
      (Unaudited)





These
      unaudited condensed consolidated financial statements have been prepared in
      accordance with accounting principles generally accepted in the United States
      of
      America for interim financial information and the Securities and Exchange
      Commission (the “SEC”) instructions to Form 10-QSB.  In the opinion of
      management, all adjustments considered necessary for a fair presentation, which
      (except where stated otherwise) consisted only of normal recurring adjustments,
      have been included.  Operating results for the interim period ended
      May 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.





The
      Company’s May 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 quarter ended May 31, 2007.








ii


ASTRATA
                    GROUP INCORPORATED AND
                    SUBSIDIARIESCONDENSED
                    CONSOLIDATED BALANCE
                    SHEET(UNAUDITED)May
                    31,
                    2007ASSETS
                
                (As
                    Restated)Current
                    Assets:Cash
                    and cash
                    equivalents
                
                $
                1,010,277Trade
                    and other receivables,
                    net
                
                
                933,687Inventories
                
                
                246,143Other
                    assets
                
                
                321,433Discontinued
                    operations - current
                    assets
                
                
                95,121Total
                    current
                    assets
                
                
                2,606,661Property
                    and equipment,
                    net
                
                
                531,256Certificate
                    of
                    deposit-restricted
                
                
                412,987Goodwill
                
                
                300,000Investment
                    in and advances to
                    affiliate
                
                
                18,560Discontinued
                    operations - other
                    assets
                
                
                69,738Total
                    assets
                
                $
                3,939,202LIABILITIES
                    AND STOCKHOLDERS'
                    DEFICITCurrent
                    liabilitiesAccounts
                    payable
                
                $
                5,594,248Salaries
                    and benefits payable to
                    officers and directors
                
                
                2,070,828Billings
                    in excess of costs and
                    estimated earnings on uncompleted contract
                
                
                154,013Registration
                    rights
                    penalties
                
                
                560,711Interest
                    payable
                
                
                938,083Income
                    tax and related penalties
                    payable
                
                
                508,254Convertible
                    notes payable to
                    stockholder
                
                
                1,884,000Advances
                    from
                    stockholders
                
                
                57,184Discontinued
                    operations - current
                    liabilities
                
                
                245,083Current
                    portion of long-term
                    liabilities
                
                
                1,253,346Other
                    current
                    liabilities
                
                
                576,601Total
                    current
                    liabilities
                
                
                13,842,351Long-term
                    liabilities
                
                
                14,295Total
                    liabilities
                
                
                13,856,646Minority
                    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
                    $2,800,000.00
                
                
                280Common
                    stock, $0.0001 par value,
                    100,000,000 sharesauthorized,
                    27,705,909 shares issuedand
                    24,434,485
                    shares outstanding
                
                
                2,444Additional
                    paid-in-capital
                
                
                31,449,896Accumulated
                    deficit
                
                
                (41,084,497
                )Accumulated
                    other comprehensive
                    loss
                
                
                (325,681
                )Total
                    stockholders'
                    deficit
                
                
                (9,957,558
                )Total
                    liabilities and
                    stockholders' deficit
                
                $
                3,939,202See
                    accompanying notes to these
                    condensed consolidated financial statements.


F-1


ASTRATA
                  GROUP INCORPORATED AND
                  SUBSIDIARIESCONDENSED
                  CONSOLIDATED STATEMENTS
                  OF OPERATIONS AND COMPREHENSIVE LOSSFOR
                  THE THREE MONTHS ENDED MAY 31,
                  2007 AND 2006(UNAUDITED)THREE
                  MONTHS(As
                  Restated)2007
              
              
              2006Net
                  sales
              
              $
              1,672,413
              
              
              $
              426,338Cost
                  of goods
                  sold
              
              
              1,080,261
              
              
              
              304,688Gross
                  profit
              
              
              592,152
              
              
              
              121,650Selling,
                  generalandadministrative
                  expenses
              
              
              3,959,504
              
              
              
              2,004,723Operating
                  loss
              
              
              (3,367,352
              )
              
              
              (1,883,073
              )Other
                  income
                  (expense):Interest
                  expense
              
              
              (93,449
              )
              
              
              (228,890
              )Change
                  in fair value of derivative
                  warrant liability
              
              
              -
              
              
              
              284,996Other
                  income
              
              
              1,582
              
              
              
              316Total
                  other income
                  (expense)
              
              
              (91,867
              )
              
              
              56,422Loss
                  before minority interestandtax
                  provision
              
              
              (3,459,219
              )
              
              
              (1,826,651
              )Income
                  tax
                  provision
              
              
              500,000
              
              
              
              -Loss
                  before minority
                  interest
              
              
              (3,959,219
              )
              
              
              (1,826,651
              )Minority
                  interest
              
              
              -
              
              
              
              (335
              )Equity
                  in net loss of
                  affiliate
              
              
              -
              
              
              
              (11,761
              )Loss
                  from continuing
                  operations
              
              
              (3,959,219
              )
              
              
              (1,838,747
              )Loss
                  on discontinued operations,
                  net of tax
              
              
              (170,007
              )
              
              
              (931,174
              )Net
                  loss
              
              $
              (4,129,226
              )
              
              $
              (2,769,921
              )Net
                  loss from continuing
                  operations applicableto
                  common stockholders consists of
                  the following:Loss
                  from continuing
                  operations
              
              $
              (3,959,219
              )
              
              $
              (1,838,747
              )Cumulative
                  undeclared dividends on
                  preferred stock
              
              
              (56,000
              )
              
              
              -Net
                  loss from continuing
                  operations applicable to common stockholders
              
              $
              (4,015,219
              )
              
              $
              (1,838,747
              )Comprehensive
                  lossandits components consist of the
                  following:Net
                  loss
              
              $
              (4,129,226
              )
              
              $
              (2,769,921
              )Foreign
                  currency translation
                  adjustment, net of tax
              
              
              (358,195
              )
              
              
              (83,520
              )Comprehensive
                  loss
              
              $
              (4,487,421
              )
              
              $
              (2,853,441
              )Basicanddiluted loss per common
                  share:Continuing
                  operations applicable
                  to common stockholders
              
              $
              (0.19
              )
              
              $
              (0.15
              )Discontinued
                  operations
              
              
              (0.01
              )
              
              
              (0.07
              )$
              (0.20
              )
              
              $
              (0.22
              )Weighted
                  average common shares
                  outstanding:Basicanddiluted
              
              
              21,426,745
              
              
              
              12,676,878See
                  accompanying notes to these
                  condensed consolidated financial statements.


F-2
 ASTRATA
                  GROUP INCORPORATED AND
                  SUBSIDIARIESCONDENSED
                  CONSOLIDATED STATEMENTS
                  OF CASH FLOWSFOR
                  THE THREE MONTHS ENDED MAY 31,
                  2007 AND 2006(UNAUDITED)(As
                  Restated)2007
              
              
              2006CASH
                  FLOWS FROM OPERATING
                  ACTIVITIES:Net
                  loss
              
              $
              (4,129,226
              )
              
              $
              (2,769,921
              )Adjustments
                  to reconcile net loss
                  to netcash
                  provided by (used in)
                  operating activities:Gain
                  on sale of property and
                  equipment
              
              
              -
              
              
              
              2,405Depreciation
                  and
                  amortization
              
              
              86,236
              
              
              
              182,413Gain
                  on disposal transactions
                  relating to discontinued operations
              
              
              (59,304
              )
              
              
              -Loss
                  on early termination of
                  lease
              
              
              -
              
              
              
              101,886Amortization
                  of deferred
                  compensation cost
              
              
              -
              
              
              
              100,125Change
                  in fair value of derivative
                  warrant liability
              
              
              -
              
              
              
              (160,568
              )Issuance
                  of common stock for
                  services
              
              
              -
              
              
              
              38,251Stock-based
                  compensation
              
              
              2,057,629
              
              
              
              463,707Equity
                  in net loss of
                  affiliate
              
              
              -
              
              
              
              11,761Minority
                  interest
              
              
              -
              
              
              
              335Unrealized
                  foreign currency
                  exchange gain
              
              
              -
              
              
              
              (16,922
              )Changes
                  in operating assets and
                  liabilities:Trade
                  and other
                  receivables
              
              
              (68,385
              )
              
              
              (1,639,608
              )Inventories
              
              
              (126,987
              )
              
              
              156,423Assets
                  and liabilities held for
                  sale, net
              
              
              (4,974
              )
              
              
              -Other
                  assets
              
              
              451,320
              
              
              
              (25,109
              )Accounts
                  payable and accrued
                  liabilities
              
              
              1,723,260
              
              
              
              2,407,137Billings
                  in excess of costs and
                  estimated earnings on uncompleted contract
              
              
              154,013
              
              
              
              -Taxes
                  and related penalties
                  payable
              
              
              493,368
              
              
              
              18,904Deferred
                  tax
                  liability
              
              
              -
              
              
              
              (21,097
              )Net
                  cash provided by (used in)
                  operating activities
              
              $
              576,950
              
              
              $
              (1,149,878
              )CASH
                  FLOW FROM INVESTING
                  ACTIVITIES:Purchase
                  of property and
                  equipment
              
              
              (43,171
              )
              
              
              (52,372
              )Proceeds
                  from sale of
                  assets
              
              
              -
              
              
              
              36,978Investment
                  in
                  affiliates
              
              
              11,741
              
              
              
              (23,993
              )Certificate
                  of
                  deposit-restricted
              
              
              (416,477
              )
              
              
              (1,499
              )Net
                  cash used in investing
                  activities
              
              
              (447,907
              )
              
              
              (40,886
              )CASH
                  FLOWS FROM FINANCING
                  ACTIVITIESRepayment
                  of long term
                  liabilities
              
              
              (1,775
              )
              
              
              (14,968
              )Proceeds
                  from notes
                  payable
              
              
              46,183
              
              
              
              -Lines
                  of credit,
                  net
              
              
              -
              
              
              
              629,095Proceeds
                  from advances from
                  stockholders
              
              
              -
              
              
              
              330,340Proceeds
                  from warrants exercised
                  for common stock
              
              
              1,000,000
              
              
              
              -Net
                  cash provided by financing
                  activities
              
              
              1,044,408
              
              
              
              944,467Effect
                  of foreign currency
                  exchange rate changeson
                  cash and cash
                  equivalents
              
              
              (342,545
              )
              
              
              61,026Net
                  increase (decrease) in cash
                  and cash equivalents
              
              
              830,906
              
              
              
              (185,271
              )Cash
                  and cash equivalents at
                  beginning of period
              
              
              179,371
              
              
              
              436,532Cash
                  and cash equivalents at end
                  of period
              
              $
              1,010,277
              
              
              $
              251,261Cash
                  paid during the period
                  for:Interest
              
              $
              -
              
              
              $
              2,339Income
                  taxes
              
              $
              -
              
              
              $
              -See
                  accompanying notes to these
                  condensed consolidated financial statements.


F-3
 ASTRATA
              GROUP INCORPORATED AND SUBSIDIARIES
 NOTES
              TO
              CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
              THE
              THREE MONTHS ENDED MAY 31, 2007 AND 2006
 (UNAUDITED)





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





Restatement





The
      Company’s May 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 three months ended May
      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 months ended May
      31,
      2007 are presented below:





May
                31,
                2007As
                Previously
            
            
            RestatementReported
            
            
            Adjustment
            
            
            As
                RestatedTrade
                and other receivables,
                net
            
            $
            3,933,687
            
            
            $
            (3,000,000
            )
            
            $
            933,687Total
                current
                assets
            
            $
            5,606,661
            
            
            $
            (3,000,000
            )
            
            $
            2,606,661Total
                assets
            
            $
            6,939,202
            
            
            $
            (3,000,000
            )
            
            $
            3,939,202Billingsin excess of costs and
                estimatedearnings
                on uncompleted contract
            
            $
            3,138,361
            
            
            $
            (2,984,348
            )
            
            $
            154,013Total
                current
                liabilities
            
            $
            16,826,699
            
            
            $
            (2,984,348
            )
            
            $
            13,842,351Total
                liabilities
            
            $
            16,840,994
            
            
            $
            (2,984,348
            )
            
            $
            13,856,646Accumulated
                deficit
            
            $
            (41,068,845
            )
            
            $
            (15,652
            )
            
            $
            (41,084,497
            )Total
                stockholders'
                equity
            
            $
            (9,941,907
            )
            
            $
            (15,651
            )
            
            $
            (9,957,558
            )Total
                liabilities and
                stockholders' deficit
            
            $
            6,939,202
            
            
            $
            (3,000,000
            )
            
            $
            3,939,202For
                The Three Months Ended May 31,
                2007As
                Previously
            
            
            RestatementReported
            
            
            Adjustment
            
            
            As
                RestatedNet
                sales
            
            $
            1,005,668
            
            
            $
            666,745
            
            
            $
            1,672,413Cost
                of goods
                sold
            
            $
            520,103
            
            
            $
            560,158
            
            
            $
            1,080,261Gross
                profit
            
            $
            485,565
            
            
            $
            106,587
            
            
            $
            592,152Selling,
                general and
                administrative expenses
            
            $
            3,695,063
            
            
            $
            264,441
            
            
            $
            3,959,504Research
                and
                development
            
            $
            142,202
            
            
            $
            (142,202
            )
            
            $
            -Operating
                loss
            
            $
            (3,351,700
            )
            
            $
            (15,652
            )
            
            $
            (3,367,352
            )Loss
                before provision for income
                taxes and minority interest
            
            $
            (3,443,567
            )
            
            $
            (15,652
            )
            
            $
            (3,459,219
            )Loss
                before minority interest and
                equity income
            
            $
            (3,943,567
            )
            
            $
            (15,652
            )
            
            $
            (3,959,219
            )Loss
                from continuing
                operations
            
            $
            (3,943,567
            )
            
            $
            (15,652
            )
            
            $
            (3,959,219
            )Net
                loss
            
            $
            (4,113,574
            )
            
            $
            (15,652
            )
            
            $
            (4,129,226
            )Net
                loss from continuing operation
                applicableto
                common stockholders
            
            $
            (3,999,567
            )
            
            $
            (15,652
            )
            
            $
            (4,015,219
            )Comprehensive
                loss
            
            $
            (4,471,769
            )
            
            $
            (15,652
            )
            
            $
            (4,487,421
            )Basic
                and diluted loss per common
                share:Continuing
                operations applicable to common stockholders
            
            $
            (0.18
            )
            
            $
            (0.01
            )
            
            $
            (0.19
            )Basic
                and diluted loss per common share
            
            $
            (0.19
            )
            
            $
            (0.01
            )
            
            $
            (0.20
            )Net
                cash provided by (used in)
                operating activities
            
            $
            588,691
            
            
            $
            (11,741
            )
            
            $
            576,950Net
                cash used in investing
                activities
            
            $
            (459,648
            )
            
            $
            11,741
            
            
            $
            (447,907
            )








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





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





Organization





Astrata
      Group Incorporated (“Astrata,” or “Astrata Group”) and subsidiaries (sometimes
      hereafter collectively referred to as the “Company,” “we,” and “our”) currently
      operate exclusively in the Telematics sector of the Global Positioning System
      (“GPS”) industry. Telematics comprises the remote monitoring of assets in
      real-time (including tracking and tracing) whereby location, time and sensor
      status are communicated. Our products are deployed into diverse markets,
      including those described in “Nature of Operations” below.





Nature
      of Operations





We
      operate in the Telematics sector of the GPS industry. Our expertise is focused
      on advanced location-based IT products and services that combine positioning,
      wireless communications, and information technologies, which add measurable
      value to location–based information. We provide advanced positioning products,
      as well as monitoring and airtime services to commercial and governmental
      entities in a number of markets including homeland security, public safety,
      transportation, surveying, utility, construction, mining, and
      agriculture.





Telematics
      products often focus on people and assets in hostile and demanding environments
      such as monitoring the movement of hazardous materials for homeland security
      purposes. This business also addresses the market for fleet management,
      workforce management, remote asset management and tracking, and emergency
      services by providing hardware for GPS information and data collection, as
      well
      as the software needed to access and analyze the data through the Internet.
      We
      offer airtime to communicate data from the vehicle or field locations to the
      customer’s data center or provide access over the Internet to the data and
      application software. This allows critical real-time performance and monitoring
      data to be accessed and analyzed by supervisory, maintenance, or financial
      users
      and make real-time decisions for productivity improvement, cost reductions,
      safety improvement, or other critical decisions to be fed to the field.





Examples
      of our products and services include surveying instrumentation using GPS and
      other augmenting technologies, such as wireless communication and lasers; fleet
      management for specialized machines, such as guidance for earth-moving
      equipment; positioning and IT technology for remote asset management and
      associated Telematics products, field data collection equipment, and products
      and airtime communications services for high volume track and trace
      applications. Positioning technologies employed by us include GPS and inertial
      navigation systems. Communication techniques employed by us include GSM (“Global
      Systems for Mobile Telecommunications”), cellular and satellite
      communications.





Operational
      Considerations





Astrata’s
      operations were strengthened during fiscal 2006 by the addition of certain
      key
      distribution partners in Western Europe and an increased presence in South
      East
      Asia based primarily on the successful delivery of the Hazmat (Hazardous
      Materials) Tracking Project to the Singapore Civil Defense Force.





Recent
      Trends





Our
      business strategy is to focus on the homeland security, hazardous materials,
      civil defense and business-to-business markets by providing our customers with
      comprehensive solutions to their needs. Frequently this involves additional
      integration such as sensors ranging from Radio Frequency Identification to
      biometrics, remote displays or augmenting technologies to allow tracking in
      tunnels.





The
      Company entered into a fixed-price contract with a Singapore entity on April
      10,
      2007 to manufacture, ship and service approximately $93.5 million of its
      Telematics products (the “Contract”). Deliveries will take place overseas during
      a two-year period. The Contract includes a provision for substantial liquidated
      damages for unexcused delays in product deliveries and/or failure to satisfy
      certain customer-specified acceptance criteria. In addition, in the event of
      non-performance by the Company that remains uncorrected after notice from the
      customer and the expiration of a contractual grace period, the customer has
      the
      right to cancel the Contract. The Company’s proprietary Telematics system is
      undergoing significant customization/modification in order to achieve the
      functionality required by the customer.





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





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





Recent
      Trends (continued)





In
      June
      2007, the Singapore Civil Defense Force (“SCDF”) awarded a $2.2 million contract
      for the Company's new Intelligent Immobilization System technology (the
“Immobilizer”).  The immobilizer is an add-on module to the Company’s
      Telematics System, which SCDF has been using since 2005 to track, monitor and
      now immobilize vehicles transporting hazardous materials, as well as to alert
      SCDF if these vehicles deviate from their prescribed routes.





Liquidity
      and Going Concern Considerations





For
      the
      quarter ended May 31, 2007, we had a net loss of approximately $4.1 million
      (of
      which $2.8 million was the estimated value of bonuses paid to certain employees
      for securing $93.5 million in new business under a Contract - (see Note
      4).  We had positive cash flow from operating activities of
      approximately $0.6 million. In addition, we had a working capital deficit of
      approximately $11.2 million and a stockholders’ deficit of approximately $10
      million as of May 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.





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. .  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.





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





2.  CERTAIN
      SIGNIFICANT ACCOUNTING POLICIES





The
      significant accounting policies presented below are designed to assist in
      understanding the Company’s condensed consolidated financial statements. Such
      condensed consolidated financial statements and these notes are the
      representation of the Company’s management, who is responsible for their
      integrity and objectivity. In the opinion of management, these accounting
      policies conform to accounting principles generally accepted in the United
      States of America (“GAAP”) in all material respects, and have been consistently
      applied in preparing the accompanying condensed consolidated financial
      statements.





The
      accounting policies described in the following paragraphs should be read in
      conjunction with the Company’s February 28, 2007 annual report on Form 10-KSB
      (filed with the SEC on May 30, 2007), which includes all of the Company’s
      significant accounting policies.





Principles
      of Consolidation





The
      condensed consolidated financial statements included the accounts of Astrata
      Group and its majority-owned subsidiaries in which it has a controlling
      financial interest. All significant intercompany transactions and balances
      have
      been eliminated in consolidation. For reasons explained in Note 11
      (“Discontinued Operations”) to the Company’s February 28, 2007 consolidated
      financial statements, management deconsolidated the accounts of Astrata Systems
      (Pty) Limited (“Astrata Systems”) from the Company’s condensed consolidated
      financial statements effective June 2006.





Use
      of Estimates





The
      preparation of financial statements in conformity with GAAP requires management
      to make estimates and assumptions that affect the reported amounts of assets
      and
      liabilities and the disclosure of contingent assets and liabilities at the
      date
      of the financial statements, and the reported amounts of revenues and expenses
      during the reporting period. Significant estimates made by management include
      the deferred tax asset valuation allowance, allowance for doubtful accounts
      receivable, realization of inventories, goodwill and long-lived assets,
      stock-based compensation, and revenue recognition.  Actual results
      could differ from these estimates.





Risks
      and Uncertainties Related to International Operations





Since
      inception in August 2004, the Company’s revenue-producing activities have been
      conducted exclusively outside the United States of America.  The
      Company’s customers, other end users of our products and services, and
      third-party manufacturers and other suppliers (collectively, “vendors”) engaged
      by the Company are located throughout the world.  As a result, our
      operations are subject to foreign political and economic uncertainties which
      are
      beyond our control.  The specific risks of operating in the
      international marketplace include abrupt changes in a foreign government’s
      policies/regulations, local or regional hostilities (such as war, terrorism
      and
      civil unrest) in foreign countries, and United States government policies
      restricting certain business transactions with a given foreign
      country.





Some
      of the Company’s sales and
      supplier contracts with its customers and vendors are subject to unilateral
      cancellation (regardless of whether such action is permitted by the terms of
      the
      agreement), and certain accounts receivable may suddenly become doubtful of
      collection.  In addition, the lack of a well-developed legal system in
      some foreign countries may make it difficult to enforce all of the Company’s
      contractual rights.





Other
      Concentrations





The
      financial instrument that potentially exposes the Company to a concentration
      of
      credit risk principally consists of cash. The Company deposits its cash with
      high credit financial institutions, principally in Europe and Asia. The
      countries do not have any institutional depository insurance comparable to
      the
      United States, which insures bank balances up to $100,000 per bank. At May
      31,
      2007, the Company’s cash balances in U.S. bank accounts totaled approximately
      $238,000, which is approximately $138,000 in excess of the Federal Deposit
      Insurance Corporation limit of $100,000.





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





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





2.  CERTAIN
      SIGNIFICANT
      ACCOUNTING POLICIES(continued)





Other
      Concentrations (continued)





The
      Company does not require collateral from its customers, but performs ongoing
      credit evaluations of its customers’ financial condition. Credit risk with
      respect to the accounts receivable is limited because of the large number of
      customers included in the Company’s customer base and the geographic dispersion
      of those customers. The Company also performs periodic reviews of collectability
      and provides an allowance for doubtful accounts
      receivable.  Management considers the allowance for doubtful accounts
      receivable at May 31, 2007 of approximately $17,000 to be adequate.





Certificate
      of Deposit





Under
      the
      terms of the Contract described in Note 4, the Company was required to provide
      a
      performance bond for the benefit of the customer.  In lieu of such
      bond, a certificate of deposit was initiated.  The certificate of
      deposit (the “CD”) bears interest at 5.1% per annum and matures in August 2009.
      Under the terms of the Company’s arrangement with the bank that issued the CD,
      the funds will not be available for withdrawal until August 2009. Thus, the
      CD
      is a restricted account which has been reported as a non-current asset in the
      accompanying condensed consolidated balance sheet.





Inventories





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





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





2.  CERTAIN
      SIGNIFICANT
      ACCOUNTING POLICIES (continued)





Long-Lived
      Assets (continued)





As
      of May
      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).





Convertible
      Preferred Stock





If
      the
      conversion feature of cumulative preferred stock is beneficial (i.e., the market
      price of the Company’s common stock exceeds the per-share conversion price when
      the preferred stock is issued), management accounts for the beneficial
      conversion feature (“BCF”) based on SFAS No. 133 “Accounting for Derivative
      Instruments and Certain Hedging Activities” (as amended) and an analysis of the
      rights of the preferred stock owners.  When management concludes that
      the economic risks and characteristics of the BCF are clearly and closely
      related to those of the “host contract “ (the preferred stock), the BCF (1) is
      not separated from the host contract or accounted for as a derivative financial
      instrument and (2) is measured using intrinsic value accounting.





Revenue
      Recognition





General





Except
      as
      described in “Contract Accounting” below, the Company’s revenues are recorded in
      accordance with the SEC Staff Accounting Bulletin No. 104, “Revenue
      Recognition.” The Company recognizes revenue when persuasive evidence of an
      arrangement exists, delivery has occurred, the fee is fixed or determinable,
      and
      collectability is reasonably assured. In instances where final acceptance of
      the
      product is specified by the customer or is uncertain, revenue is deferred until
      all acceptance criteria have been met.





Sales
      as a Distributor





Contracts
      and customer purchase orders are generally used to determine the existence
      of an
      arrangement. Shipping documents (and customer acceptance criteria, when
      applicable) are used to verify delivery. The Company assesses whether the fee
      is
      fixed or determinable based on the payment terms associated with the
      transaction, and whether the sales price is subject to refund or adjustment.
      The
      Company assesses collectability based primarily on the creditworthiness of
      the
      customer as determined by credit checks and analysis, as well as the customer’s
      payment history.





In
      the
      Company’s Telematics operations, orders are generally shipped free-on-board
      shipping point, which means that such orders are recognized as revenue when
      the
      product is delivered to the carrier (shipped). Free-on-board shipping point
      also
      means that the customer bears all costs and risks of loss or damage to the
      goods
      prior to their receipt.





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





2.  CERTAIN
      SIGNIFICANT
      ACCOUNTING POLICIES (continued)





Revenue
      Recognition (continued)





Contract
      Accounting





The
      Company is accounting for the Contract described above under the percentage-of
      completion method under the AICPA Statement of Position (“SOP”) 81-1,
“Accounting for Performance of Construction-Type and Certain Production –Type
      Contracts”. Under the percentage-of-completion method, revenues, expenses and
      profits are recognized as performance progresses on long-term contracts.
      Progress 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.





Under
      the
      modified prospective method of adoption for SFAS No.123-R, the compensation
      cost
      recognized by the Company beginning March 1, 2006 includes (a) compensation
      cost
      for all equity incentive awards granted prior to, but not yet vested as of
      March
      1, 2006, based on the grant-date fair value estimated in accordance with the
      original provisions of SFAS No. 123, and (b) compensation cost for all equity
      incentive awards granted subsequent to February 28, 2006, based on the
      grant-date fair value estimated in accordance with the provisions of SFAS No.
      123-R.





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





2.  CERTAIN
      SIGNIFICANT ACCOUNTING
      POLICIES (continued)





Stock-Based
      Compensation(continued)





Options
      granted by the Company generally expire five years from the grant date. Options
      granted to existing and newly hired employees generally vest over a three-year
      period from the date of grant. The effects of share-based compensation resulting
      from the application of SFAS No. 123-R to options granted under the Company’s
      equity incentive plan resulted in an expense of approximately $213,000 for
      the
      three months ended May 31, 2007 and $464,000 for the three months ended May
      31,
      2006.  During the quarter ended May 31, 2007 the Company issued
      restricted common stock as compensation valued at approximately $1.8 million
      as
      more fully explained in Note 8.  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 $0.2
      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 quarter of fiscal 2008 was insignificant.





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


WeightedAverageWeighted
              
              
              RemainingAverage
              
              
              Contractual
              
              
              AggregateNumber
                  of
              
              
              Exercise
              
              
              Term
                  in
              
              
              IntrinsicShares
              
              
              Price
              
              
              Years
              
              
              Value
                  (a)Vested
              
              
              483,166
              
              
              $
              4.49
              
              
              
              2.8
              
              
              $
              -Expected
                  to
                  vest
              
              
              447,064
              
              
              $
              3.78
              
              
              
              2.8
              
              
              
              -Total
              
              
              930,230
              
              
              
              
              
              
              
              
              
              
              $
              -





(a)
            These
                amounts represent the difference between the exercise price and $1.23,
                the
                closing market price of the Company’s common stock on May 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 MONTHS ENDED MAY 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
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -May
                  31,
                  2007
              
              
              1,291,925
              
              
              
              930,230
              
              
              $
              3.78
              
              
              $
              -Options
                  exercisable
                  at:February
                  28,
                  2007
              
              
              
              
              
              
              683,167
              
              
              $
              4.10May
                  31,
                  2007
              
              
              
              
              
              
              483,166
              
              
              $
              4.49





(b)
            Represents
                the excess (if any) of the February 28, 2007 or May 31, 2007 market
                price
                of the Company’s common stock over the exercise
                price.





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 May 31, 2007
      and 2006, all potentially dilutive common stock equivalents amount to 38,220,720
      and 4,378,890 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 MONTHS ENDED MAY 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 May 31, 2007:





Europe
              
              
              Asia
              
              
              TotalFinished
                  goods
              
              $
              61,119
              
              
              $
              185,024
              
              
              $
              246,143


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 design, develop and manufacture approximately $93.5 million
      of its Telematics products. Deliveries will take place overseas during a
      two-year period. The Contract includes a provision for substantial liquidated
      damages for unexcused delays in product deliveries and/or failure to satisfy
      certain customer-specified acceptance criteria. In addition, in the event of
      non-performance by the Company that remains uncorrected after notice from the
      customer and the expiration of a contractual grace period, the customer has
      the
      right to cancel the Contract. The Company’s proprietary Telematics system is
      undergoing significant customization/modification in order to achieve the
      functionality required by the customer.





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 months ended May 31, 2007, the Company
      recognized approximately $0.7 million 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 on uncompleted contract.





Billings
      in excess of costs and
      estimated earnings on the Contract consisted of the following as of May 31,
      2007:


2007Costs
                  and estimated earnings on
                  uncompleted contract
              
              
              595,987Billings
                  in excess of estimated
                  earnings or uncompleted contract
              
              
              750,000Billings
                  in excess of costs and
                  estimated earnings on uncompleted contract
              
              $
              154,013





F-13
 ASTRATA
              GROUP INCORPORATED AND SUBSIDIARIES
 NOTES
              TO
              CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
              THE
              THREE MONTHS ENDED MAY 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 three months
      then ended includes an estimated expense of approximately $0.5 million relating
      to potential income tax penalties.





All
      open tax years of the Company
      remain subject to examination by tax authorities and, as applicable, certain
      foreign tax authorities.








6.  NOTES
      PAYABLE





In
      April
      2007, the Company received an unsecured note payable which is due on February
      4,
      2008 and carries an annual interest rate of 16.5%.  The balance of the
      note is approximately $46,000 at May 31, 2007 and is included in current portion
      of long-term liabilities in the accompanying condensed consolidated balance
      sheet.








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 May 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 notes payable to a stockholder issued
      in
      September 2004 (as amended in November 2004) and a $384,000 convertible notes
      payable issued to the same stockholder in December 2004 have been reduced
      pursuant to anti-dilution contractual requirements. These debt instruments
      are
      outstanding at May 31, 2007 and are included in the convertible notes payable
      to
      stockholder within 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
              
              
              $
              2.361,043,106
                  warrants issued in
                  April/May 2005
              
              
              3.50
              
              
              
              1.81Other
                  warrants issued after
                  February 28, 2005:108,196
                  warrants
              
              
              5.00
              
              
              
              2.364,955
                  warrants
              
              
              3.50
              
              
              
              1.81$1,884,000
                  of convertible
                  debt
              
              
              5.00
              
              
              
              2.36





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





8.  EQUITY
      TRANSACTIONS





During
      the quarter ended May 31, 2007, an investor who previously purchased 2.75
      million shares of the Company’s Preferred Stock and received warrants to
      purchase common stock in October and November 2006, exercised certain J warrants
      and received 2 million shares of the Company’s restricted common stock in
      exchange for a cash payment of $1 million and issuance by the Company of a
      V
      warrant with the following terms: exercisable into 1.2 million shares of
      restricted common stock at $1.35 per share, with a contractual life of five
      years. The common stock underlying the V warrant has the same registration
      rights as described in “The 10/13/06 Equity Financing Transactions” section of
      Note 8 to the consolidated financial statements included in the Company’s
      February 28, 2007 Form 10-KSB filed with the SEC on May 30, 2007.





During
      the quarter ended May 31, 2007,
      the Company issued 1,340,000 shares of its restricted common stock for the
      conversion of 670,000 shares of preferred stock.





During
      the quarter ended May 31, 2007,
      the Company issued 94,520 shares of common stock for the exercise of employee
      stock options.





During
      the quarter ended May 31, 2007, the Company also issued 2,145,000 shares of
      its
      restricted common stock in exchange for services provided by employees. Such
      shares were valued at approximately $1,844,700 and included in sales, general
      and administrative expenses in the condensed consolidated statement of
      operations (estimated to be the fair value based on the trading price on the
      issuance date, with a 15% discount from the market price).





In
      April
      2007, in connection with the Contract discussed in Note 4, the Company’s board
      of directors approved the issuance of 3,271,424 shares of restricted common
      stock to certain employees, officers and directors which will vest as follows:
      1,635,712 shares upon the completion and delivery of certain proprietary
      Telematics systems; and 1,635,712 upon the delivery of all remaining proprietary
      Telematics systems to the customer.  The individuals entitled to such
      award must be employed by the Company on the vesting dates. Based on a
      discounted market price (to account for the fact that the common stock would
      be
      restricted), the total grant-date estimated fair value of the stock awards
      described in this paragraph approximated $2.8 million.  Because
      vesting is conditioned upon both (i) continued employment (or continued
      membership on the Company’s board of directors) of the grantee and (ii) contract
      performance, which management feels it is probable these two conditions will
      be
      met. The Company has included this cost within the project cost estimates for
      the Contract.





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 May 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.





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





10.
      SEGMENT REPORTING AND GEOGRAPHIC INFORMATION





Because
      of the discontinued operations described in Note 12 referenced in “Geomatics”
below, revenues (from continuing operations) reported in the accompanying
      condensed consolidated statements of operations relate exclusively to the
      Company’s Telematics operations. Thus, management has not reported the segment
      information otherwise required by SFAS No. 131, “Disclosure about Segments of an
      Enterprise and Related Information.”





Until
      June 2006, the Company operated
      in the following two reportable segments:





Geomatics





Products,
      accessories and services related to the business of measurement and setting
      out
      (i.e. Survey, Mapping and Geographic Information Systems) and precise position
      monitoring (such as scanning excavations and industrial plants). Also included
      within this segment are the machine guidance products, accessories and services
      related to the business of guiding, controlling and monitoring machinery,
      including mobile machinery such as graders, dump trucks and drills as well
      as
      agricultural products which have tractor and crop-spraying guidance in
      them.





The
      Company exited the Geomatics
      segment in June 2006.





Telematics





Products,
      accessories and services
      related to the business of remote monitoring of assets (including
      track-and-trace) whereby position, attributes, status and communication are
      involved.





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 May 31,
                  2007:Property
                  and
              
              
              
              
              
              Gross
              
              
              Operating
              
              
              OperatingEquipment,
                  net
              
              
              Revenue
              
              
              Profit
              
              
              Expenses
              
              
              LossAsia
              
              $
              424,055
              
              
              $
              1,552,119
              
              
              $
              489,078
              
              
              $
              2,935,320
              
              
              $
              (2,446,242
              )United
                  States
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              730,600
              
              
              $
              (730,600
              )Western
                  Europe
              
              
              107,201
              
              
              
              120,294
              
              
              
              103,074
              
              
              
              293,584
              
              
              $
              (190,510
              )Total
              
              $
              531,256
              
              
              $
              1,672,413
              
              
              $
              592,152
              
              
              $
              3,959,504
              
              
              $
              (3,367,352
              )For
                  the three months ended May 31,
                  2006:Gross
              
              
              Operating
              
              
              OperatingRevenue
              
              
              Profit
                  (Loss)
              
              
              Expenses
              
              
              LossAsia
              
              
              
              
              
              $
              364,888
              
              
              $
              172,007
              
              
              $
              425,658
              
              
              $
              (253,651
              )United
                  States
              
              
              
              
              
              
              -
              
              
              
              -
              
              
              
              1,137,586
              
              
              $
              (1,137,586
              )Western
                  Europe
              
              
              
              
              
              
              61,450
              
              
              
              (50,357
              )
              
              
              441,479
              
              
              $
              (491,836
              )Total
              
              
              
              
              
              $
              426,338
              
              
              $
              121,650
              
              
              $
              2,004,723
              
              
              $
              (1,883,073
              )





F-16
 ASTRATA
              GROUP INCORPORATED AND SUBSIDIARIES
 NOTES
              TO
              CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
              THE
              THREE MONTHS ENDED MAY 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 months ended May 31, 2007 and 2006.





Three
                  Months
                  Ended
              
              
              Three
                  Months
                  EndedMay
                  31,
                  2007
              
              
              May
                  31,
                  2006Numerator
                  for basic and diluted
                  loss per common share:Loss
                  from continuing
                  operations
              
              $
              (3,959,219
              )
              
              $
              (1,838,747
              )Cumulative
                  undeclared dividends on
                  preferred stock
              
              
              (56,000
              )
              
              
              -Total
                  net loss from continuing
                  operationsapplicable
                  to common stockholders
              
              $
              (4,015,219
              )
              
              $
              (1,838,747
              )Denominator
                  for basic and diluted
                  loss per common share:Weighted
                  average number of common
                  shares outstanding
              
              
              21,426,745
              
              
              
              12,676,878Basic
                  and diluted loss per common
                  share:from
                  continuing
                  operations
              
              $
              (0.19
              )
              
              $
              (0.15
              )





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 months ended May 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 May 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 May 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 MONTHS ENDED MAY 31, 2007 AND 2006
 (UNAUDITED)





12.  DISCONTINUED
      OPERATIONS (continued)





Other
      Matters





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





AssetsTrade
                  and other
                  receivables
              
              $
              95,121Other
                  non-current
                  assets
              
              
              69,738Total
              
              $
              164,859LiabilitiesTrade
                  and accrued
                  payables
              
              $
              245,083


13.  SUBSEQUENT
      EVENTS





In
      June
      2007, the Singapore Civil Defense Force 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.  The Company
      anticipates recognizing revenue on the contract beginning in August
      2007.


F-18





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





Restatement





The
      Company’s May 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 three months ended May
      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 months ended May
      31,
      2007 are presented below:





May
                31,
                2007As
                Previously
            
            
            RestatementReported
            
            
            Adjustment
            
            
            As
                RestatedTradeandother receivables,
                net
            
            $
            3,933,687
            
            
            $
            (3,000,000
            )
            
            $
            933,687Total
                current
                assets
            
            $
            5,606,661
            
            
            $
            (3,000,000
            )
            
            $
            2,606,661Total
                assets
            
            $
            6,939,202
            
            
            $
            (3,000,000
            )
            
            $
            3,939,202Billingsin excess of costsandestimatedearnings
                on uncompleted contract
            
            $
            3,138,361
            
            
            $
            (2,984,348
            )
            
            $
            154,013Total
                current
                liabilities
            
            $
            16,826,699
            
            
            $
            (2,984,348
            )
            
            $
            13,842,351Total
                liabilities
            
            $
            16,840,994
            
            
            $
            (2,984,348
            )
            
            $
            13,856,646Accumulated
                deficit
            
            $
            (41,068,845
            )
            
            $
            (15,652
            )
            
            $
            (41,084,497
            )Total
                stockholders'
                equity
            
            $
            (9,941,907
            )
            
            $
            (15,651
            )
            
            $
            (9,957,558
            )Total
                liabilitiesandstockholders'
                deficit
            
            $
            6,939,202
            
            
            $
            (3,000,000
            )
            
            $
            3,939,202For
                The Three Months Ended May 31,
                2007As
                Previously
            
            
            RestatementReported
            
            
            Adjustment
            
            
            As
                RestatedNet
                sales
            
            $
            1,005,668
            
            
            $
            666,745
            
            
            $
            1,672,413Cost
                of goods
                sold
            
            $
            520,103
            
            
            $
            560,158
            
            
            $
            1,080,261Gross
                profit
            
            $
            485,565
            
            
            $
            106,587
            
            
            $
            592,152Selling,
                generalandadministrative
                expenses
            
            $
            3,695,063
            
            
            $
            264,441
            
            
            $
            3,959,504Researchanddevelopment
            
            $
            142,202
            
            
            $
            (142,202
            )
            
            $
            -Operating
                loss
            
            $
            (3,351,700
            )
            
            $
            (15,652
            )
            
            $
            (3,367,352
            )Loss
                before provision for income
                taxesandminority
                interest
            
            $
            (3,443,567
            )
            
            $
            (15,652
            )
            
            $
            (3,459,219
            )Loss
                before minority interestandequity
                income
            
            $
            (3,943,567
            )
            
            $
            (15,652
            )
            
            $
            (3,959,219
            )Loss
                from continuing
                operations
            
            $
            (3,943,567
            )
            
            $
            (15,652
            )
            
            $
            (3,959,219
            )Net
                loss
            
            $
            (4,113,574
            )
            
            $
            (15,652
            )
            
            $
            (4,129,226
            )Net
                loss from continuing operation
                applicableto
                common stockholders
            
            $
            (3,999,567
            )
            
            $
            (15,652
            )
            
            $
            (4,015,219
            )Comprehensive
                loss
            
            $
            (4,471,769
            )
            
            $
            (15,652
            )
            
            $
            (4,487,421
            )Basicanddiluted loss per common
                share:Continuing
                operations applicable to common stockholders
            
            $
            (0.18
            )
            
            $
            (0.01
            )
            
            $
            (0.19
            )Basicanddiluted loss per common
                share
            
            $
            (0.19
            )
            
            $
            (0.01
            )
            
            $
            (0.20
            )Net
                cash provided by (used in)
                operating activities
            
            $
            588,691
            
            
            $
            (11,741
            )
            
            $
            576,950Net
                cash used in investing
                activities
            
            $
            (459,648
            )
            
            $
            11,741
            
            
            $
            (447,907
            )








Page
            1





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





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 products and services that
      combine positioning, wireless communications, and information
      technologies.We
      provideadvanced
      positioning products, as well as monitoring and airtime services to commercial
      and governmental entities in a number of markets including homeland security,
      public safety, transportation, surveying, utility, construction, mining, and
      agriculture.





Examples
      of our products and services include surveying instrumentation using GPS and
      other augmenting technologies, such as wireless communication and lasers; fleet
      management for specialized machines, such as guidance for earth-moving
      equipment; positioning and IT technology for remote asset management and
      associated Telematics products, field data collection equipment, and products
      and airtime communications services for high volume track and trace
      applications.





Positioning
      technologies employed by us include GPS, laser, optical and inertial navigation
      systems.  Communication techniques employed by us include Global
      Systems for Mobile Telecommunications (“GSM”) cellular and satellite
      communications.





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            2





Telematics





Telematics
      comprises the remote monitoring of assets in real-time (including tracking
      and
      tracing) whereby location, time and sensor status are
      communicated.  These products are deployed into diverse markets
      including homeland security,
      public safety, transportation services and
      construction.





Telematics
      products often focus on people and assets in hostile and demanding environments
      such as monitoring the movement of hazardous materials for homeland security
      purposes.  This segment also addresses the market for fleet
      management, workforce management, remote asset management and tracking, and
      emergency services by providing hardware for GPS information and data
      collection, as well as the software needed to access and analyze the data
      through the Internet.  Our products combine positioning, wireless, and
      information technology and add measurable value to location-based
      information.  We offer airtime to communicate data from the vehicle or
      field location to the customer’s data center or provide access over the Internet
      to the data and application software.  This allows critical real-time
      performance and monitoring data to be accessed and analyzed by supervisory,
      maintenance, or financial users and make real-time decisions for productivity
      improvement, cost reductions, safety improvement, or other critical decisions
      to
      be fed to the field.





Recent
      Trends





Astrata’s
      Telematics operations were strengthened during fiscal 2007 by the addition
      of
      certain key distribution partners in Western Europe and an increased presence
      in
      South East Asia based primarily on the successful delivery of the previously
      announced Hazmat (Hazardous Materials) Tracking Project to the Singapore Civil
      Defense Force.





Our
      Telematics strategy is to focus on the homeland security, hazardous materials,
      civil defense and business to business markets by providing our customers with
      comprehensive solutions to their needs.  Frequently this involves the
      additional integration such as sensors ranging from Radio Frequency
      Identification (RFID) to biometrics, remote displays or augmenting technologies
      to allow tracking in tunnels.





In
      the
      first quarter of fiscal 2007, management reached a decision to divest the
      Geomatics business as part of a broader strategy to focus on the more developed
      Telematics markets in Europe, South East Asia and North America.





The
      Company entered into a fixed-price contract with a Singapore entity on April
      10,
      2007 to 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 May 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 $1.7 million for the three months
      ended May 31, 2007, an increase of approximately $1.3 million compared to the
      three months ended May 31, 2006 of approximately $0.4 million. Our revenues
      increased approximately $1 million from the growing uses of our systems and
      approximately $0.7 million from the $93.5 million Contract awarded April 10,
      2007 which is accounted for under the percentage-of-completion
      method.





With
      the growing interests in the
      capabilities of our Telematics systems, we are anticipating continual growth
      in
      our revenues.





Page
            3





During
      the quarter ended May 31, 2007, we began performance under a 24-month contract
      pursuant to which we will provide $93.5 million of our products and services
      as
      discussed in Note 4 to the condensed consolidated financial statements included
      elsewhere herein. We account for contract revenue and expenses under Statement
      of Position (“SOP”) No. 81-1, “Accounting for Performance of Construction-Type
      and Certain Production-Type Contracts,” using the percentage-of-completion
      method. During this the quarter ended May 31, 2007, we recognized approximately
      $0.7 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 $0.5 million to approximately $0.6 million for
      the three months ended May 31, 2007 compared to the three months ended May
      31,
      2006 of approximately $0.1 million. Our gross margin percentage (defined as
      gross profit divided by revenue) increased to 35% from 29% year over
      year.  This increase is primarily due to the under utilization of
      contracted communications in May 31, 2006.  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 May 31, 2007
      were
      approximately $4 million, an increase of approximately $2 million compared
      to
      the three months ended May 31, 2006 of approximately $2 million.





In
      Asia,
      operating expenses for the three months ending May 31, 2007 were approximately
      $2.9 million, compared to the three months ended May 31, 2006 of approximately
      $0.4 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 operating expenses in Asia may continue to increase as
      we progress through the Contract.





Net
      Results of Operations





Our
      operating loss was approximately $3.4 million for the three months ended May
      31,
      2007 compared to our operating loss of approximately $1.9 million for the three
      months ended May 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 approximately $93.5 million in new business under a
      Contract.





Other
      income (expense)





Interest
      expense for the three months ended May 31, 2007 was approximately $0.1 million
      as compared to $0.2 million for the quarter ended May 31, 2006. The fair value
      adjustment for a warrant liability was a benefit of approximately $0.3 million
      for the quarter ended May 31, 2006.





Net
      Results





We
      reported a net loss of approximately $4.1 million or $0.20 per common share
      for
      the three months ended May 31, 2007 compared to a net loss of approximately
      $2.8
      million or $0.22 per common share for the three months ended May 31, 2006. Our
      continuing operations resulted in a net loss of approximately $4.0
      million for the three months ended May 31, 2007. The increase in net loss
      was primarily due to the recognition of $2.8 million in bonuses paid to certain
      employees for securing approximately $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 $4.0 million
      or $0.19 per common share; and approximately $1.8 million or $0.15 per common
      share for the three months ended May 31, 2006. Our discontinued operations
      resulted in loss of approximately $0.2 million or $0.01 per common share for
      the
      three months ended May 31, 2007 and a loss of approximately $0.9 million or
      $0.07 per common share for the three months ended May 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.





Page
            4





Liquidity
      and Capital Resources





Balance
      Sheet Comparison of May 31, 2007 to February 28, 2007





Total
      assets increased by approximately $0.8 million from approximately $3.1 million
      as of February 28, 2007 to approximately $3.9 million as of May 31, 2007. The
      increase is due primarily to the increase in cash of approximately $0.8
      million.





Total
      liabilities increased by
      approximately $2.2 million from approximately $11.6 million as of February
      28,
      2007 to approximately $13.8 million as of May 31, 2007.  The increase
      is due to an increase in trade and accrued payables of approximately
      $1.3  million; an increase of income tax and penalties payable of
      approximately $0.5 million and an increase in other current liabilities of
      approximately $0.4 million.





Statement
      of Cash Flow Changes





Our
      operatingactivitiesprovidedapproximately $0.6million in cashduring the three months
      ended May 31,
      2007.Our
      net loss of approximately $4.1
      million along with an increase in inventories of approximately $0.1 million;
      offset by non-cash items of approximately $2.1 million which include
      depreciation and amortization, equity instruments used for compensation, and
      an
      increase in accounts payable and accrued liabilities of approximately $2.2
      million related to the new Contract.





AtMay
      31, 2007, the Company hadnegativeworking capital ofapproximately
      $11.2million.  The primary reason
      for the working capitaldeficitis the level of accounts payableand accrued
      salaries,benefitsand other accrualsofapproximately$9.2million.





During
      the quarter, we usedcashfor
      investing of approximately $0.4 millionby
      acquiringa restricted certificate
      of deposit
      which matures in August 2009.





Our
      cash flows provided by financingactivitieswereapproximately
      $1millionfor
      thethree months ended May
      31,
      2007.The
      Companyreceived$1million of cashfromthe
      exercise of warrants to acquiretwomillionshares of common stock.  In
      order for the Company to
      finance operations and continue its growth plan, additional funding will be
      required from external sources.  Management plans on funding
      operations through a
      combination of equity capitalandlines of credit.  Management
      is currently in negotiations with banks following the award oftheapproximately
      $93.5 million
      Contract deliverable over
      two years to provide lines of credit based on thisContract.





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 three months ended May 31, 2007, we had a net loss
      of approximately $4.1 million and positive cash flow from operating activities
      of approximately $0.6 million.  In addition, we had a working capital
      deficit of approximately $11.2 million as of May 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 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.





Page
            5





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 approximately $93.5
      million for delivery over the next two financial years with further extensions
      to this order now under negotiation.  Our order book for delivery over
      the next two years now exceeds $110 million.





In
      June
      2007, the 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. The Company
      anticipates recognizing revenue on the contract beginning in August
      2007.





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.





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 May 31, 2007, an Investor who purchased 2.75 million shares
      of
      the Company’s Preferred Stock and received warrants to purchase common stock in
      October and November 2006, exercised certain J warrants and received 2 million
      shares of the Company’s restricted common stock in exchange for a cash payment
      of $1 million and issuance by the Company of a V warrant with the following
      terms: exercisable into 1.2 million shares of restricted common stock at $1.35
      per share, with a contractual life of five years. The common stock underlying
      the V warrant has the same registration rights as described in “The 10/13/06
      Equity Financing Transactions” section of Note 8 to the consolidated financial
      statements included in the Company’s February 28, 2007 Form 10-KSB filed with
      the SEC on May 30, 2007.





During
      the quarter ended May 31, 2007,
      the Company issued 1,340,000 shares of its restricted common stock for the
      conversion of 670,000 shares of preferred stock.





During
      the quarter ended May 31, 2007,
      the Company issued 94,520 shares of common stock for the exercise of employee
      stock options.





During
      the quarter ended May 31, 2007, the Company also issued 2,145,000 shares of
      its
      restricted common stock in exchange for services provided by employees. Such
      shares were valued at approximately $1,844,700 (estimated to be the fair value
      based on the trading price on the issuance date, with a 15% discount from the
      market price).





In
      April
      2007, in connection with the contract discussed in Note 4, the Company’s board
      of directors approved the issuance of 3,271,424 shares of restricted common
      stock to certain employees, officers and directors which will vest as follows:
      i) 1,635,712 shares upon the completion and delivery of 3,500 prototype units;
      ii) 1,635,712 upon the delivery of all remaining units to the
      customer.  The individuals entitled to such award must be employed by
      the Company on the vesting dates.





Off
      Balance Sheet Arrangements





As
      of May
      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.





Page
            6





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 three
      months ended May 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.





Page
            7





Other
      Matters





Revenue
      from distributors and resellers is recognized upon delivery, assuming that
      all
      other criteria for revenue recognition have been met. Distributors and resellers
      do not have the right of return.





Customer
      incentive bonuses and other consideration received or receivable directly from
      a
      vendor for which the Company acts as a reseller are accounted for as a reduction
      in the price of the vendor’s products or services. When such incentive is
      pursuant to a binding arrangement, the amount received or receivable is deferred
      and amortized on a systematic basis over the life of the
      arrangement.





Stock-Based
      Compensation





Effective
      March 1, 2006, the Company adopted the provisions of SFAS No. 123-R,
“Share-Based Payment” (“SFAS No. 123-R”). SFAS No. 123-R requires employee stock
      options and rights to purchase shares under stock participation plans to be
      accounted for under the fair value method and requires the use of an option
      pricing model for estimating fair value. Accordingly, share-based compensation
      is measured at the grant date, based on the fair value of the
      award.





Under
      the
      modified prospective method of adoption for SFAS No.123-R, the compensation
      cost
      recognized by the Company beginning March 1, 2006 includes (a) compensation
      cost
      for all equity incentive awards granted prior to, but not yet vested as of
      March
      1, 2006, based on the grant-date fair value estimated in accordance with the
      original provisions of SFAS No. 123, and (b) compensation cost for all equity
      incentive awards granted subsequent to February 28, 2006, based on the
      grant-date fair value estimated in accordance with the provisions of SFAS No.
      123-R.





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.





Page
            8





Item
      3:  Controls and
      Procedures





We
      carried out an evaluation of the effectiveness of the design and operation
      of
      our disclosure controls and procedures (as defined in Exchange Act Rules
      13a-15(e) and 15d-15(e)) as of May 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 May 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.


·
            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.





Page
            9





PART
      II – OTHER INFORMATION





Item
      1: Legal Proceedings





From
      time
      to time, the Company may be involved in various claims, lawsuits, disputes
      with
      third parties, actions involving allegations of discrimination or breach of
      contract incidental to the ordinary operations of the business. The Company
      is
      not currently involved in any litigation which management believes could have
      a
      material adverse effect on the Company’s financial position or results of
      operations.








Item
      2: Unregistered Sales of Equity Securities and Use of Proceeds





Common
      Stock





During
      the quarter ended May 31, 2007, an Investor who purchased 2.75 million shares
      of
      the Company’s Preferred Stock and received warrants to purchase common stock in
      October and November 2006, exercised certain J warrants and received 2 million
      shares of the Company’s restricted common stock in exchange for a cash payment
      of $1 million and issuance by the Company of a V warrant with the following
      terms: exercisable into 1.2 million shares of restricted common stock at $1.35
      per share, with a contractual life of five years. The common stock underlying
      the V warrant has the same registration rights as described in “The 10/13/06
      Equity Financing Transactions” section of Note 8 to the consolidated financial
      statements included in the Company’s February 28, 2007 Form 10-KSB filed with
      the SEC on May 30, 2007.  The transactions described in this paragraph
      constituted exempt offerings under Section 4(2) of the Securities
      Act.





During
      the quarter ended May 31, 2007, the Company issued 1,340,000 shares of its
      restricted common stock for the conversion of 670,000 shares of preferred
      stock.  The transactions described in this paragraph constituted
      exempt offerings under Section 4(2) of the Securities Act.





During
      the quarter ended May 31, 2007,
      the Company issued 94,520 shares of common stock for the exercise of employee
      stock options.





During
      the quarter ended May 31, 2007, the Company also issued 2,145,000 shares of
      its
      restricted common stock in exchange for services provided by employees. Such
      shares were valued at approximately $1,844,700 (estimated to be the fair value
      based on the trading price on the issuance date, with a 15% discount from the
      market price).





In
      April
      2007, in connection with the contract discussed in Note 4, the Company’s board
      of directors approved the issuance of 3,271,424 shares of restricted common
      stock to certain employees, officers and directors which will vest as follows:
      i) 1,635,712 shares upon the completion and delivery of 3,500 prototype units;
      ii) 1,635,712 upon the delivery of all remaining units to the
      customer.  The individuals entitled to such award must be employed by
      the Company on the vesting 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
                32.2
            Certificate
                of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
                Act of 2002.








Page
            10





SIGNATURES





In
      accordance with Section 13 or 15(d)
      of the Exchange Act, the registrant caused this report to be signed on its
      behalf by the undersigned, thereunto duly authorized.








ASTRATA
      GROUP INCORPORATED








By:           /s/
      THOMAS A.
      WAGNER


Thomas
      A.
      Wagner                                                                                                                                                                                       
Date:  January 21, 2008


Chief
      Financial Officer