**UNITED STATES********SECURITIES AND EXCHANGE COMMISSION****Washington, D.C.  20549****Form 10-Q**

(Mark One)x   QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES   EXCHANGE ACT OF 1934

**For the quarterly period ended March 31, 2008**

 ̈   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from _______________ to _______________.**Commission file number 333-23617**
| **Material Technologies, Inc.**(Exact name of small business issuer as specified in its charter)  |
|---------------------------------------------------------------------------------------------------|
|                                                                                         |  |
| **Delaware**(State or other jurisdiction of							incorporation or organization)                  | **95-4622822**(I.R.S.  Employer							Identification No.) |
|                                                                                         |  |
| **11661 San Vicente Boulevard, Suite 707Los Angeles, CA**(Address of principal executive offices) | **90049**(Zip Code) |

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 large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

| Large accelerated filer |   ̈ |  | Accelerated filer         |   ̈ |
|-------------------------|-------------|--|---------------------------|-------------|
| Non-accelerated filer   |   ̈ |  | Smaller reporting company | x           |

----

 

APPLICABLE ONLY TO CORPORATE ISSUERS:

As of May 12, 2008, there were 194,459,421****shares of our Class A common stock issued and 176,330,406 shares outstanding.				Transitional Small Business Disclosure Format (check one):   Yes  ̈   No x

2

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**MATERIAL TECHNOLOGIES, INC.****TABLE OF CONTENTS**
| **PART I – FINANCIAL INFORMATION.........................................................................................**                                                                                                                                                                                                                                                         | **4**  |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                |        |
| Item 1.       Financial Statements..............................................................................................................                                                                                                                                                                                                      | 4      |
|                                                                                                                                                                                                                                                                                                                                                                                |        |
| Item 2.       Management’s Discussion and Analysis of Financial Condition and Results of						                  Operations........................................................................................................................... | 29     |
|                                                                                                                                                                                                                                                                                                                                                                                |        |
| Item 3.       Quantitative and Qualitative Disclosures about Market Risk...................................................                                                                                                                                                                                                                           | 37     |
|                                                                                                                                                                                                                                                                                                                                                                                |        |
| Item 4.       Controls and Procedures......................................................................................................                                                                                                                                                                                                           | 37     |
|                                                                                                                                                                                                                                                                                                                                                                                |        |
| Item 4T.     Controls and Procedures......................................................................................................                                                                                                                                                                                                                      | 38     |
|                                                                                                                                                                                                                                                                                                                                                                                |        |
| **PART II – OTHER INFORMATION...............................................................................................**                                                                                                                                                                                                                                                      | **38** |
|                                                                                                                                                                                                                                                                                                                                                                                |        |
| Item 1.       Legal Proceedings................................................................................................................                                                                                                                                                                                                       | 38     |
|                                                                                                                                                                                                                                                                                                                                                                                |        |
| Item 1A.    Risk Factors........................................................................................................................                                                                                                                                                                                                                     | 40     |
|                                                                                                                                                                                                                                                                                                                                                                                |        |
| Item 2.       Unregistered Sales of Equity Securities and Use of Proceeds.................................................                                                                                                                                                                                                                            | 40     |
|                                                                                                                                                                                                                                                                                                                                                                                |        |
| Item 3.       Defaults Upon Senior Securities............................................................................................                                                                                                                                                                                                             | 40     |
|                                                                                                                                                                                                                                                                                                                                                                                |        |
| Item 4.       Submission of Matters to a Vote of Security Holders.............................................................                                                                                                                                                                                                                        | 40     |
|                                                                                                                                                                                                                                                                                                                                                                                |        |
| Item 5.       Other Information.................................................................................................................                                                                                                                                                                                                      | 41     |
|                                                                                                                                                                                                                                                                                                                                                                                |        |
| Item 6.       Exhibits................................................................................................................................                                                                                                                                                                                                | 41     |

3

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| **MATERIAL TECHNOLOGIES, INC.**          |
|------------------------------------------|
| **(A Development Stage Company)**        |
|                                |  |  |  |  |  |
| **CONDENSED CONSOLIDATED BALANCE SHEET** |
|                                          |
|                                          |  |  |  |  |  |
|                                          |  |  |  |  | **March 31,** |
|                                          |  |  |  |  | **2008** |
|                                          |  |  |  |  |  |
|                                |  |  |  |  | **(Unaudited)** |
| **ASSETS**                               |  |  |
|                                |  |  |  |  |  |
|                                          | Current assets: |  |  |
|                                          |  | Cash and cash equivalents | $ |         533,373 |
|                                          |  | Investment in certificate of deposits and commercial paper |  |         717,539 |
|                                          |  | Accounts receivable |  |           24,290 |
|                                          |  | Inventories |  |           77,006 |
|                                          |  | Prepaid expenses and other current assets |  |           15,404 |
|                                          |  |  |  |  |  |
|                                |  |  |  |  |  |
|                                          |  |  | Total current assets |  |      1,367,612 |
|                                          |  |  |  |  |  |
|                                          | Property and equipment, net  |  |           94,673 |
|                                          | Intangible assets, net |  |             2,571 |
|                                          | Deposit |  |             2,348 |
|                                          |  |  |  |  |  |
|                                |  |  |  |  |  |
|                                          |  |  |  | $ |      1,467,204 |
|                                          |  |  |  |  | =========== |

Continued . . .4

----

 
| **MATERIAL TECHNOLOGIES, INC.**                      |                                                                      |                                                                                   |
|------------------------------------------------------|----------------------------------------------------------------------|-----------------------------------------------------------------------------------|
| **(A Development Stage Company)**                    |                                                                      |                                                                                   |
| **  **                                     |                                                                      |                                                                                   |  |  |  |  |
| **CONDENSED CONSOLIDATED BALANCE SHEET - Continued** |                                                                 |                                                                              |
|                                                      |
|                                            |                                                                      |                                                                                   |  |  |  |  |
|                                                      |                                                                      |                                                                                   |  |                                                      |  | **March 31,** |
|                                                      |                                                                      |                                                                                   |  |  |  | **2008** |
|                                                      |                                                                      |                                                                                   |  |  |  |  |
|                                                      |                                                                      |                                                                                   |  |  |  | **(Unaudited)** |
|                                       |                                                                      |                                                                                   |  |  |  |  |
| **LIABILITIES AND STOCKHOLDERS'  DEFICIT**      |                                                                      |                                                                                   |
|                                            |                                                                      |                                                                                   |  |  |  |  |
|                                                      | Current liabilities:                                                 |                                                                                   |  |
|                                                      |                                                                      | Accounts payable and accrued expenses                                             | $ | 437,859 |
|                                                      |                                                                      | Current portion of research and development sponsorship payable                   |  | 25,000 |
|                                                      |                                                                      | Notes payable                                                                     |  | 67,167 |
|                                                      |                                                                      | Convertible debentures and accrued interest payable, net of discount         |  | 2,942,292 |
|                                                      |                                                                      |                                                                                   |  |  |  |  |
|                                                      |                                                                      |                                                                                   |  | Total current liabilities |  | 3,472,318 |
|                                                      |                                                                      |                                                                                   |  |  |  |  |
|                                            |                                                                      |                                                                                   |  |  |  |  |
|                                                      | Accrued legal settlement                                        |                                                                                   | 250,000 |
|                                                      | Research and development sponsorship payable, net of current portion |                                                                                   | 774,215 |
|                                                      | Notes payable, long-term                                             |                                                                                   | 217,767 |
|                                                      | Derivative and warrant liabilities                                   |                                                                                   | 402,447 |
|                                                      |                                                                      |                                                                                   |  |  |  |  |
|                                                      |                                                                      |                                                                                   |  |  |  | 1,644,429 |
|                                                      |                                                                      |                                                                                   |  |  |  |  |
|                                            |                                                                      |                                                                                   |  |  |  |  |
|                                                      |                                                                      |                                                                                   |  | Total liabilities |  | 5,116,747 |
|                                                      |                                                                      |                                                                                   |  |  |  |  |
|                                            |                                                                      |                                                                                   |  |  |  |  |
|                                                      | Minority interest in consolidated subsidiary                         |                                                                                   | 825 |
|                                                      |                                                                      |                                                                                   |  |  |  |  |
|                                            |                                                                      |                                                                                   |  |  |  |  |
|                                                      | Commitments and contingencies                                        |                                                                                   |  |
|                                            |                                                                      |                                                                                   |  |  |  |  |
|                                                      | Stockholders' deficit:                                               |                                                                                   |  |
|                                                      |                                                                      | Class A preferred stock, $0.001 par value, liquidation preference                 |  |  |
|                                                      |                                                                      |                                                                                   | of  $720 per share; 350,000 shares authorized; 337 shares issued |  |  |
|                                                      |                                                                      |                                                                                   | and outstanding as of March 31, 2008 |  | - |
|                                                      |                                                                      | Class B preferred stock, $0.001 par value, liquidation preference of              |  |  |
|                                                      |                                                                      |                                                                                   | $10,000 per share; 15 shares authorized;  none issued and |  |  |
|                                                      |                                                                      |                                                                                   | outstanding as of March 31, 2008 |  | - |
|                                                      |                                                                      | Class C preferred stock, $0.001 par value, liquidation preference of              |  |  |
|                                                      |                                                                      |                                                                                   | $0.001 per share; 25,000,000 shares authorized; 1,517 shares issued |  |  |
|                                                      |                                                                      |                                                                                   | and outstanding as of March 31, 2008 |  | 1 |
|                                                      |                                                                      | Class D preferred stock, $0.001 par value, liquidation preference of              |  |  |
|                                                      |                                                                      |                                                                                   | $0.001 per share; 20,000,000 shares authorized; none shares issued |  |  |
|                                                      |                                                                      |                                                                                   | and outstanding as of March 31, 2008 |  | - |
|                                                      |                                                                      | Class E  convertible preferred stock, $0.001 par value, no liquidation  |  |  |
|                                                      |                                                                      |                                                                                   | preference; 60,000 shares authorized; 55,000 shares issued and |  |  |
|                                                      |                                                                      |                                                                                   | outstanding as of March 31, 2008 |  | 55 |
|                                                      |                                                                      | Class A Common Stock, $0.001 par value, 600,000,000 shares                        |  |  |
|                                                      |                                                                      |                                                                                   | authorized; 192,381,821 shares issued and 173,213,056 shares   |  |  |
|                                                      |                                                                      |                                                                                   | outstanding at March 31, 2008 |  | 173,213 |
|                                                      |                                                                      | Class B Common Stock, $0.001 par value, 600,000 shares authorized,                |  |  |
|                                                      |                                                                      |                                                                                   | issued and outstanding as of March 31, 2008 |  | 600 |
|                                                      |                                                                      | Warrants subscribed                                                               |  | 10,000 |
|                                                      |                                                                      | Additional paid-in-capital                                                        |  | 321,754,896 |
|                                                      |                                                                      | Deficit accumulated during the development stage                                  |  | (325,494,410) |
|                                                      |                                                                      | Treasury stock (92,977 shares at cost at March 31, 2008)                          |  | (94,723) |
|                                            |                                                                      |                                                                                   |  |  |  |  |
|                                                      |                                                                      |                                                                                   |  | Total stockholders' deficit |  | (3,650,368) |
|                                                      |                                                                      |                                                                                   |  |  |  |  |
|                                            |                                                                      |                                                                                   |  |  |  |  |
|                                                      |                                                                      |                                                                                   |  |  | $ | 1,467,204 |
|                                                      |                                                                      |                                                                                   |  |  |  | =========== |

See accompanying notes to the condensed consolidated financial statements				5

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| **MATERIAL TECHNOLOGIES, INC.**                                                                          |   |                                                                                                                                                                                                                                       |               |                 |               |                                  |
|----------------------------------------------------------------------------------------------------------|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------|-----------------|---------------|----------------------------------|
| **(A Development Stage Company)**                                                                        |   |                                                                                                                                                                                                                                       |               |                 |               |                                  |
| **  **                                                                                         |   |                                                                                                                                                                                                                                       |               |                 |               |                                  |
| **CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS**                                                      |
|                                                                                                          |
| **  **                                                                                         |   |                                                                                                                                                                                                                                       |               |                 |               |                                  |
|                                                                                                          |   |                                                                                                                                                                                                                                       |               |                 |               | **From								October 21, 1983** |
|                                                                                                          |   | **For the Three Months Ended**                                                                                                                                                                                                        |               | **(Inception)** |
|                                                                                                          |   | **                  March 31,                  ** |               | **through**     |
|                                                                                                          |   | **2007**                                                                                                                                                                                                                              |               | **2008**        |               | **March 31, 2008**               |
|                                                                                                          |   |                                                                                                                                                                                                                                       |               |                 |               |                                  |
|                                                                                                          |   | **(Unaudited)**                                                                                                                                                                                                                       |               | **(Unaudited)** |               | **(Unaudited)**                  |
|                                                                                                          |   | **(Restated)**                                                                                                                                                                                                                        |               |                 |               |                                  |
| Revenues:                                                                                                |   |                                                                                                                                                                                                                                       |               |                 |               |                                  |
|   Research and development                                                                          | $ | -                                                                                                                                                                                                                           |  $  | -     |  $  | 5,392,085                        |
|   Revenue from bridge testing                                                                       |   | 43,967                                                                                                                                                                                                                                |               | 1,090           |               | 319,714                          |
|   Other                                                                                             |   | -                                                                                                                                                                                                                           |               | -     |               | 274,125                          |
|                                                                                                          |   |                                                                                                                                                                                                                                       |               |                 |               |                                  |
|                                                                                                |   |                                                                                                                                                                                                                                       |               |                 |               |                                  |
|     Total revenues                                                                        |   | 43,967                                                                                                                                                                                                                                |               | 1,090           |               | 5,985,924                        |
|                                                                                                          |   |                                                                                                                                                                                                                                       |               |                 |               |                                  |
|                                                                                                |   |                                                                                                                                                                                                                                       |               |                 |               |                                  |
| Costs and expenses:                                                                                      |   |                                                                                                                                                                                                                                       |               |                 |               |                                  |
|   Research and development                                                                          |   | 217,501                                                                                                                                                                                                                               |               | 158,993         |               | 20,721,982                       |
|   General and administrative                                                                        |   | 21,459,164                                                                                                                                                                                                                            |               | 20,328,325      |               | 323,823,566                      |
|   Modification of research and development sponsorship						     agreement |   | -                                                                                                                                                                                                                                     |               | -               |               | 5,963,120                        |
|   Loss on settlement of lawsuits                                                                    |   | -                                                                                                                                                                                                                                     |               | -               |               | 1,267,244                        |
|                                                                                                          |   |                                                                                                                                                                                                                                       |               |                 |               |                                  |
|                                                                                                |   |                                                                                                                                                                                                                                       |               |                 |               |                                  |
|     Total costs and expenses                                                              |   | 21,676,665                                                                                                                                                                                                                            |               | 20,487,318      |               | 351,775,912                      |
|                                                                                                          |   |                                                                                                                                                                                                                                       |               |                 |               |                                  |
|                                                                                                |   |                                                                                                                                                                                                                                       |               |                 |               |                                  |
|       Loss from operations                                                      |   | (21,632,698)                                                                                                                                                                                                                          |               | (20,486,228)    |               | (345,789,988)                    |
|                                                                                                          |   |                                                                                                                                                                                                                                       |               |                 |               |                                  |
|                                                                                                |   |                                                                                                                                                                                                                                       |               |                 |               |                                  |
| Other income (expense):                                                                                  |   |                                                                                                                                                                                                                                       |               |                 |               |                                  |
|   Gain on modification of convertible debt                                                          |   | -                                                                                                                                                                                                                                     |               | -               |               | 586,245                          |
|   Loss on subcription receivables                                                                   |   |                                                                                                                                                                                                                                       |               |                 |               | (1,368,555)                      |
|   Interest expense                                                                                  |   | (978,235)                                                                                                                                                                                                                             |               | (370,991)       |               | (12,111,184)                     |
|   Other-than-temporary impairment of marketable                                                     |   |                                                                                                                                                                                                                                       |               |                 |               |                                  |
|     securities available for sale                                                         |   |                                                                                                                                                                                                                                       |               | -               |               | (9,785,947)                      |
|   Net unrealized and realized loss of marketable securities                                         |   | (8)                                                                                                                                                                                                                                   |               | (8)             |               | (9,398,226)                      |
|   Change in fair value of investments derivative liability                                          |   | -                                                                                                                                                                                                                                     |               | -               |               | (210,953)                        |
|   Change in fair value of derivative and warrant liabilities                                        |   | 15,977,420                                                                                                                                                                                                                            |               | 8,559,576       |               | 52,146,665                       |
|   Interest income                                                                                   |   | 3,372                                                                                                                                                                                                                                 |               | 12,443          |               | 479,325                          |
|   Other                                                                                             |   | -                                                                                                                                                                                                                                     |               | -               |               | (25,992)                         |
|                                                                                                          |   |                                                                                                                                                                                                                                       |               |                 |               |                                  |
|                                                                                                |   |                                                                                                                                                                                                                                       |               |                 |               |                                  |
|     Other income (expense), net                                                           |   | 15,002,549                                                                                                                                                                                                                            |               | 8,201,020       |               | 20,311,378                       |
|                                                                                                          |   |                                                                                                                                                                                                                                       |               |                 |               |                                  |
|                                                                                                |   |                                                                                                                                                                                                                                       |               |                 |               |                                  |
| Loss before provision for income taxes                                                                   |   | (6,630,149)                                                                                                                                                                                                                           |               | (12,285,208)    |               | (325,478,610)                    |
|                                                                                                |   |                                                                                                                                                                                                                                       |               |                 |               |                                  |
| Provision for income taxes                                                                               |   | (800)                                                                                                                                                                                                                                 |               | (800)           |               | (15,800)                         |
|                                                                                                          |   |                                                                                                                                                                                                                                       |               |                 |               |                                  |
|                                                                                                |   |                                                                                                                                                                                                                                       |               |                 |               |                                  |
|       Net loss                                                                  | $ | (6,630,949)                                                                                                                                                                                                                           | $             | (12,286,008)    | $             | (325,494,410)                    |
|                                                                                                          |   | ===========                                                                                                                                                                                                                           |               | ===========     |               | =============                    |
|                                                                                                |   |                                                                                                                                                                                                                                       |               |                 |               |                                  |
| Per share data:                                                                                          |   |                                                                                                                                                                                                                                       |               |                 |               |                                  |
|   Basic and diluted net loss per share                                                              | $ | (0.08)                                                                                                                                                                                                                                | $             | (0.09)          |               |                                  |
|                                                                                                          |   | ===========                                                                                                                                                                                                                           |               | ===========     |               |                                  |
|   Weighted average Class A common shares                                                            |   |                                                                                                                                                                                                                                       |               |                 |               |                                  |
|     outstanding - basic and diluted                                                       |   | 79,013,719                                                                                                                                                                                                                            |               | 138,561,659     |               |                                  |
|                                                                                                          |   | ===========                                                                                                                                                                                                                           |               | ===========     |               |                                  |

See accompanying notes to the condensed consolidated financial statements6

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| **MATERIAL TECHNOLOGIES, INC.**                   |                                                     |             |                                                                                                                                                                                                                                 |              |                 |               |
|---------------------------------------------------|-----------------------------------------------------|-------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------|-----------------|---------------|
| **(A Development Stage Company)**                 |                                                     |             |                                                                                                                                                                                                                                 |              |                 |               |
| **  **                                  |                                                     |             |                                                                                                                                                                                                                                 |              |                 |               |  |
| **CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS** |
|                                                   |
| **  **                                  |                                                     |             |                                                                                                                                                                                                                                 |              |                 |               |  |
|                                                   |                                                     |             |                                                                                                                                                                                                                                 |              |                 |               | **From								October 21, 1983** |
|                                                   |                                                     |             | **For the Three Months Ended**                                                                                                                                                                                                  |              | **(Inception)** |
|                                                   |                                                     |             | **                  March 31,                 ** |              | **through**     |
|                                                   |                                                     |             | **2007**                                                                                                                                                                                                                        |              | **2008**        |               | **March 31, 2008** |
|                                                   |                                                     |             |                                                                                                                                                                                                                                 |              |                 |               |  |
|                                                   |                                                     |             | **(Unaudited)**                                                                                                                                                                                                                 |              | **(Unaudited)** |               | **(Unaudited)** |
|                                                   |                                                     |             | **(Restated)**                                                                                                                                                                                                                  |              |                 |               |  |
|                                         |                                                     |             |                                                                                                                                                                                                                                 |              |                 |               |  |
| Net loss                                          | $                                                   | (6,630,949) |  $                                                                                                                                                                                                                    | (12,286,008) |  $    | (325,494,410) |
|                                                   |                                                     |             |                                                                                                                                                                                                                                 |              |                 |               |  |
|                               |                                                     |             |                                                                                                                                                                                                                                 |              |                 |               |  |
| Other comprehensive loss:                         |                                                     |             |                                                                                                                                                                                                                                 |              |                 |               |
|                                                   | Temporary increase (decrease) in market        |             |                                                                                                                                                                                                                                 |              |                 |               |  |
|                                                   |    value of securities available for sale |             | -                                                                                                                                                                                                                               |              |                 |               | - |
|                                                   | Reclassification to other-than-temporary            |             |                                                                                                                                                                                                                                 |              |                 |               |  |
|                                                   |    impairment of marketable securities    |             |                                                                                                                                                                                                                                 |              |                 |               |  |
|                                                   |    available for sale                     |             | -                                                                                                                                                                                                                               |              | -               |               |   - |
|                                                   |                                                     |             |                                                                                                                                                                                                                                 |              |                 |               |  |
|                                         |                                                     |             |                                                                                                                                                                                                                                 |              |                 |               |  |
|                                                   |                                                     |             | -                                                                                                                                                                                                                               |              | -               |               | - |
|                                                   |                                                     |             |                                                                                                                                                                                                                                 |              |                 |               |  |
|                                         |                                                     |             |                                                                                                                                                                                                                            |              |            |               |   |
| Net comprehensive loss                            | $                                                   | (6,630,949) |  $                                                                                                                                                                                                                    | (12,286,008) |  $    | (325,494,410) |
|                                                   |                                                     |             | ===========                                                                                                                                                                                                                     |              | ===========     |               | ============= |

See accompanying notes to the condensed consolidated financial statements7

----

 
| **MATERIAL TECHNOLOGIES, INC.**                                      |                                                            |                                           |               |                                                                                                                                                                                                                                 |               |                 |
|----------------------------------------------------------------------|------------------------------------------------------------|-------------------------------------------|---------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------|-----------------|
| **(A Development Stage Company)**                                    |                                                            |                                           |               |                                                                                                                                                                                                                                 |               |                 |
| **  **                                                     |                                                            |                                           |               |                                                                                                                                                                                                                                 |               |                 |  |  |
| **CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**                  | ** **                                                 |
|                                                                      |
| ** **                                                           |                                                            |                                           |               |                                                                                                                                                                                                                                 |               |                 |  |  |
|                                                                      |                                                            |                                           |               |                                                                                                                                                                                                                                 |               |                 |  | **From								October 21, 1983** |
|                                                                      |                                                            |                                           |               | **For the Three Months Ended**                                                                                                                                                                                                  |               | **(Inception)** |
|                                                                      |                                                            |                                           |               | **                 March 31,                  ** |               | **through**     |
|                                                                      |                                                            |                                           |               | **2007**                                                                                                                                                                                                                        |               | **2008**        |  | **March 31, 2008** |
|                                                                      |                                                            |                                           |               |                                                                                                                                                                                                                                 |               |                 |  |  |
|                                                                      |                                                            |                                           |               | **(Unaudited)**                                                                                                                                                                                                                 |               | **(Unaudited)** |  | **(Unaudited)** |
|                                                                      |                                                            |                                           |               | **(Restated)**                                                                                                                                                                                                                  |               |                 |  |  |
|                                                            |                                                            |                                           |               |                                                                                                                                                                                                                                 |               |                 |  |  |
| Cash flows from operating activities:                                |                                                            |                                           |               |                                                                                                                                                                                                                                 |               |                 |
|   Net loss                                                      |  $                                               | (6,630,949)                               |  $  | (12,286,008)                                                                                                                                                                                                                    |  $  | (325,494,410)   |
|   Adjustments to reconcile net loss to net cash used in         |                                                            |                                           |               |                                                                                                                                                                                                                                 |               |                 |
|     in operating activities:                          |                                                            |                                           |               |                                                                                                                                                                                                                                 |               |                 |
|                                                                      | Gain on modification of convertible debt                   |                                           | -             |                                                                                                                                                                                                                                 | -             |                 | (586,245) |
|                                                                      | Impairment loss                                       |                                           | 875,000       |                                                                                                                                                                                                                                 |               |                 | 21,391,528 |
|                                                                      | Loss on charge off of subscription receivables             |                                           | -             |                                                                                                                                                                                                                                 |               |                 | 1,368,555 |
|                                                                      | Issuance of common stock for services                      |                                           | 5,326,015     |                                                                                                                                                                                                                                 | 4,580,400     |                 | 211,065,240 |
|                                                                      | Increase in debt for services and fees                     |                                           | -             |                                                                                                                                                                                                                                 |               |                 | 4,456,625 |
|                                                                      | Officer's stock based compensation                         |                                           | 15,000,000    |                                                                                                                                                                                                                                 | 15,000,000    |                 | 81,575,342 |
|                                                                      | Issuance of common stock for modification of               |                                           |               |                                                                                                                                                                                                                                 |               |                 |  |
|                                                                      |   research and development sponsorship agreement      |                                           | -             |                                                                                                                                                                                                                                 |               |                 | 7,738,400 |
|                                                                      | Change in fair value of derivative and warrant liabilities |                                           |               |                                                                                                                                                                                                                                 |               |                 | (41,351,889) |
|                                                                      | Net realized and unrealized loss on marketable securities  |                                           | -             |                                                                                                                                                                                                                                 |               |                 | 7,895,705 |
|                                                                      | Other-than-temporary impairment of marketable         |                                           |               |                                                                                                                                                                                                                                 |               |                 |  |
|                                                                      |   securities available for sale                       |                                           | -             |                                                                                                                                                                                                                                 |               |                 | 9,785,946 |
|                                                                      | Legal fees incurred for note payable                       |                                           |               |                                                                                                                                                                                                                                 |               |                 | 1,456,142 |
|                                                                      | Accrued interest expense added to principal                |                                           | 78,122        |                                                                                                                                                                                                                                 | 130,984       |                 | 1,625,989 |
|                                                                      | Amortization of discount on convertible debentures         |                                           | 899,130       |                                                                                                                                                                                                                                 | 339,725       |                 | 10,446,002 |
|                                                                      | Change in fair value of investments derivative liability   |                                           | (15,977,420)  |                                                                                                                                                                                                                                 | (8,559,576)   |                 | (5,336,253) |
|                                                                      | Accrued interest income added to principal                 |                                           | (1,029)       |                                                                                                                                                                                                                                 | (2,407)       |                 | (307,405) |
|                                                                      | Depreciation and amortization                              |                                           | 974           |                                                                                                                                                                                                                                 | 5,310         |                 | 233,094 |
|                                                                      | Other non-cash adjustments                                 |                                           | -             |                                                                                                                                                                                                                                 |               |                 | (114,730) |
|                                                                      | (Increase) decrease in trade receivables              |                                           | 83,563        |                                                                                                                                                                                                                                 | 84,371        |                 | (74,618) |
|                                                                      | (Increase) decrease in inventories                         |                                           | -             |                                                                                                                                                                                                                                 | (14,790)      |                 | (77,006) |
|                                                                      | (Increase) decrease in prepaid expenses and other     |                                           |               |                                                                                                                                                                                                                                 |               |                 | - |
|                                                                      |     current assets                          |                                           | -             |                                                                                                                                                                                                                                 | 32,500        |                 | 275,073 |
|                                                                      | Increase in deposits                                       |                                           | -             |                                                                                                                                                                                                                                 |               |                 | (2,348) |
|                                                                      | (Decrease) increase in accounts payable and accrued        |                                           |               |                                                                                                                                                                                                                                 |               |                 | - |
|                                                                      |   expenses                                            |                                           | (33,796)      |                                                                                                                                                                                                                                 | (161,759)     |                 | 2,347,136 |
|                                                                      |                                                            |                                           |               |                                                                                                                                                                                                                                 |               |                 |  |  |
|                                                            |                                                            |                                           |               |                                                                                                                                                                                                                                 |               |                 |  |  |
|                                                                      |                                                            | Net cash used in operating activities     |               | (380,390)                                                                                                                                                                                                                       |               | (851,250)       |  | (11,684,127) |
|                                                                      |                                                            |                                           |               |                                                                                                                                                                                                                                 |               |                 |  |  |
|                                                            |                                                            |                                           |               |                                                                                                                                                                                                                                 |               |                 |  |  |
| Cash flows from investing activities:                                |                                                            |                                           |               |                                                                                                                                                                                                                                 |               |                 |
|   Proceeds from the sale of marketable securities               |                                                            | 95,007                                    |               | 300,000                                                                                                                                                                                                                         |               | 3,758,476       |
|   Purchase of marketable securities                             |                                                            | (1,517)                                   |               | -                                                                                                                                                                                                                               |               | (2,206,379)     |
|   Investment in certificate of deposits and commerical paper    |                                                            | -                                         |               | (565,000)                                                                                                                                                                                                                       |               | (1,965,000)     |
|   Maturities of certificate of deposits and commercial paper    |                                                            | -                                         |               | 858,922                                                                                                                                                                                                                         |               | 1,258,922       |
|   Payment received on officer loans                             |                                                            | -                                         |               | -                                                                                                                                                                                                                               |               | 876,255         |
|   Funds advanced to officers                                    |                                                            | -                                         |               | -                                                                                                                                                                                                                               |               | (549,379)       |
|   Proceeds received in acquisition of consolidated subsidiaries |                                                            |                                           |               |                                                                                                                                                                                                                                 |               | 600,000         |
|   Purchase of property and equipment                            |                                                            | -                                         |               | (17,167)                                                                                                                                                                                                                        |               | (373,419)       |
|   Investment in joint ventures                                  |                                                            | -                                         |               | -                                                                                                                                                                                                                               |               | (102,069)       |
|   Proceeds from foreclosure                                     |                                                            | -                                         |               | -                                                                                                                                                                                                                               |               | 44,450          |
|   Proceeds from the sale of property and equipment              |                                                            | -                                         |               | -                                                                                                                                                                                                                               |               | 19,250          |
|   Payment for license agreement                                 |                                                            | -                                         |               | -                                                                                                                                                                                                                               |               | (6,250)         |
|                                                                      |                                                            |                                           |               |                                                                                                                                                                                                                                 |               |                 |  |  |
|                                                            |                                                            |                                           |               |                                                                                                                                                                                                                                 |               |                 |  |  |
|                                                                      |                                                            | Net cash provided by investing activities |               | 93,490                                                                                                                                                                                                                          |               | 576,755         |  | 1,354,857 |
|                                                                      |                                                            |                                           |               |                                                                                                                                                                                                                                 |               |                 |  |  |

Continued . . .8

----

 
| **MATERIAL TECHNOLOGIES, INC.**                                                                                         |               |                                                                                                                                                                                                                                 |               |                                                                                                                                  |               |                                  |
|-------------------------------------------------------------------------------------------------------------------------|---------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------|----------------------------------------------------------------------------------------------------------------------------------|---------------|----------------------------------|
| **(A Development Stage Company)**                                                                                       |               |                                                                                                                                                                                                                                 |               |                                                                                                                                  |               |                                  |
| **  **                                                                                                        |               |                                                                                                                                                                                                                                 |               |                                                                                                                                  |               |                                  |
| **CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued**                                                                   | ** **    | ** **                                                                                                                                                                                                                      |
|                                                                                                                         |
|                                                                                                               |               |                                                                                                                                                                                                                                 |               |                                                                                                                                  |               |                                  |
|                                                                                                                         |               |                                                                                                                                                                                                                                 |               |                                                                                                                                  |               | **From								October 21, 1983** |
|                                                                                                                         |               | **For the Three Months Ended**                                                                                                                                                                                                  |               | **(Inception)**                                                                                                                  |
|                                                                                                                         |               | **                 March 31,                  ** |               | **through**                                                                                                                      |
|                                                                                                                         |               | **2007**                                                                                                                                                                                                                        |               | **2008**                                                                                                                         |               | **March 31, 2008**               |
|                                                                                                                         |               |                                                                                                                                                                                                                                 |               |                                                                                                                                  |               |                                  |
|                                                                                                                         |               | **(Unaudited)**                                                                                                                                                                                                                 |               | **(Unaudited)**                                                                                                                  |               | **(Unaudited)**                  |
|                                                                                                                         |               | **(Restated)**                                                                                                                                                                                                                  |               |                                                                                                                                  |               |                                  |
|                                                                                                               |               |                                                                                                                                                                                                                                 |               |                                                                                                                                  |               |                                  |
| Cash flow from financing activities:                                                                                    |               |                                                                                                                                                                                                                                 |               |                                                                                                                                  |               |                                  |
|   Proceeds from the sale of  common stock and warrants                                                        |  $  | 761,365                                                                                                                                                                                                                         |  $  | -                                                                                                                                |  $  | 9,445,953                        |
|   Proceeds from convertible debentures and other                                                                   |               |                                                                                                                                                                                                                                 |               |                                                                                                                                  |               |                                  |
|      notes payable                                                                                  |               | 200,000                                                                                                                                                                                                                         |               | -                                                                                                                                |               | 2,047,766                        |
|   Proceeds from the sale of preferred stock                                                                        |               | 100,000                                                                                                                                                                                                                         |               | -                                                                                                                                |               | 473,005                          |
|   Costs incurred in offerings                                                                                      |               | -                                                                                                                                                                                                                               |               | -                                                                                                                                |               | (1,130,932)                      |
|   Capital contributions                                                                                            |               | -                                                                                                                                                                                                                               |               | -                                                                                                                                |               | 301,068                          |
|   Purchase of treasury stock                                                                                       |               | (10,585)                                                                                                                                                                                                                        |               | (1,590)                                                                                                                          |               | (168,965)                        |
|   Principal reduction on notes payable                                                                        |               | -                                                                                                                                                                                                                               |               | (252)                                                                                                                            |               | (100,252)                        |
|   Payment on proposed reorganization                                                                               |               | -                                                                                                                                                                                                                               |               |                       - |               | (5,000)                          |
|                                                                                                                         |               |                                                                                                                                                                                                                                 |               |                                                                                                                                  |               |                                  |
|                                                                                                               |               |                                                                                                                                                                                                                                 |               |                                                                                                                                  |               |                                  |
|       Net cash provided by (used in) financing activities                                      |               | 1,050,780                                                                                                                                                                                                                       |               |              (1,842)                                                 |               | 10,862,643                       |
|                                                                                                                         |               |                                                                                                                                                                                                                                 |               |                                                                                                                                  |               |                                  |
|                                                                                                               |               |                                                                                                                                                                                                                                 |               |                                                                                                                                  |               |                                  |
| Net change in cash and cash equivalents                                                                                 |               | 763,880                                                                                                                                                                                                                         |               |          (276,337)                                                                       |               | 533,373                          |
|                                                                                                               |               |                                                                                                                                                                                                                                 |               |                                                                                                                                  |               |                                  |
| Cash and cash equivalents, beginning of period                                                                          |               | 129,296                                                                                                                                                                                                                         |               |           809,710                                                                   |               | -                                |
|                                                                                                                         |               |                                                                                                                                                                                                                                 |               |                                                                                                                                  |               |                                  |
|                                                                                                               |               |                                                                                                                                                                                                                                 |               |                                                                                                                                  |               |                                  |
| Cash and cash equivalents, end of period                                                                                |  $  | 893,176                                                                                                                                                                                                                         |  $  |           533,373                                                                   |  $  | 533,373                          |
|                                                                                                                         |               | ===========                                                                                                                                                                                                                     |               | ===========                                                                                                                      |               | =============                    |
|                                                                                                               |               |                                                                                                                                                                                                                                 |               |                                                                                                                                  |               |                                  |
|                                                                                                               |               |                                                                                                                                                                                                                                 |               |                                                                                                                                  |               |                                  |
| Supplemental disclosure of cash flow information:                                                                       |               |                                                                                                                                                                                                                                 |               |                                                                                                                                  |               |                                  |
|   Interest paid during the period                                                                                  | $             | 1,017                                                                                                                                                                                                                           |  $  |                  281                             |               |                                  |
|                                                                                                                         |               | ===========                                                                                                                                                                                                                     |               | ===========                                                                                                                      |               |                                  |
|   Income taxes paid during the period                                                                              | $             | 800                                                                                                                                                                                                                             |  $  |                  800                             |               |                                  |
|                                                                                                                         |               | ===========                                                                                                                                                                                                                     |               | ===========                                                                                                                      |               |                                  |
|                                                                                                               |               |                                                                                                                                                                                                                                 |               |                                                                                                                                  |               |                                  |
|                                                                                                               |               |                                                                                                                                                                                                                                 |               |                                                                                                                                  |               |                                  |
| Supplemental disclosures of non-cash investing and financing activities:                                                |               |
|                                                                                                               |               |                                                                                                                                                                                                                                 |               |                                                                                                                                  |               |                                  |
| 2008                                                                                                                    |               |                                                                                                                                                                                                                                 |               |                                                                                                                                  |               |                                  |
|                                                                                                               |               |                                                                                                                                                                                                                                 |               |                                                                                                                                  |               |                                  |
| During the three months ended March 31, 2008, the Company issued 4,229,612 shares of its Class A common shares in  |
| the conversion of $491,132 of convertible debt.                                                                         |               |                                                                                                                                                                                                                                 |               |                                                                                                                                  |               |                                  |
|                                                                                                               |               |                                                                                                                                                                                                                                 |               |                                                                                                                                  |               |                                  |
| During the three months ended March 31, 2008, the Company issued 8,207,500 shares of its Class A common stock      |
| for consulting  services valued at $3,580,400.                                                                     |               |                                                                                                                                                                                                                                 |               |                                                                                                                                  |               |                                  |
|                                                                                                               |               |                                                                                                                                                                                                                                 |               |                                                                                                                                  |               |                                  |

See accompanying notes to the condensed consolidated financial statements9

----

 
| **MATERIAL TECHNOLOGIES, INC.**                                                                                                                                                                                                                                |            |            |  |  |  |  |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------|--|--|--|--|
| **(A Development Stage Company)**                                                                                                                                                                                                                              |            |            |  |  |  |  |
| **  **                                                                                                                                                                                                                                               |            |            |  |  |  |  |
| **CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued**                                                                                                                                                                                                          | ** ** | ** ** |
|                                                                                                                                                                                                                                                                |
|                                                                                                                                                                                                                                                      |            |            |  |  |  |  |
| During the three months ended March 31, 2008, the Company issued 378,491 shares of its Class A common stock                                                                                                                                               |
| pursuant to the anti-dilution provisions of a settlement agreement.                                                                                                                                                                                            |            |            |
|                                                                                                                                                                                                                                                      |            |            |  |  |  |  |
| During the three months ended March 31, 2008, a former employee returned 450,000 shares of the Company's Class A                                                                                                                                               |
| common stock to treasury which were subsequently cancelled.                                                                                                                                                                                                    |
|                                                                                                                                                                                                                                                      |            |            |  |  |  |  |
| During the three months ended March 31, 2008, the Company issued 34,500,000 shares of its Class A common stock                                                                                                                                                 |
| in consideration of the exercise of cashless warrants. The Company accrued derivative liability in connection with the                                                                                                                               |
| granting of the warrants, which had a balance of $1,151,900 on the date of exercise. The liability balance was credited to equity.                                                                                                                        |
|                                                                                                                                                                                                                                                      |            |            |  |  |  |  |
| During the three months ended March 31, 2008, the Company's contingent obligation to Mr. Beck under a settlement                                                                                                                                               |
| agreement was reduced to $0, therefore the Company reduced its legal settlement liability by the remaining accrued provision of $230,000, which was credited to equity.                                                                                        |
|                                                                                                                                                                                                                                                      |            |            |  |  |  |  |
| 2007                                                                                                                                                                                                                                                      |            |            |  |  |  |  |
|                                                                                                                                                                                                                                                      |            |            |  |  |  |  |
| During the three months ended March 31, 2007, the Company issued 2,838,598 shares of its Class A common stock                                                                                                                                             |
| for consulting  services valued at $5,326,015.                                                                                                                                                                                                            |            |            |  |  |  |  |
|                                                                                                                                                                                                                                                      |            |            |  |  |  |  |
| During the three months ended March 31, 2007, the Company received $1,000,000 in consideration of issuing 2,500,000                                                                                                                                            |
| units. Each unit consists of one share of the Company's Class A common stock and a warrant to purchase                                                                                                                                                         |
| one share of the Company's common stock at a price of $.60 per share. In connection with the private offering                                                                                                                                                  |
| the Company paid $239,065 in fees and issued warrants to purchase 2,118,334 shares of the Company's                                                                                                                                                       |
| common stock at a price of $.60 per share.                                                                                                                                                                                                                |            |            |  |  |  |  |
|                                                                                                                                                                                                                                                      |            |            |  |  |  |  |
| During the three months ended March 31, 2007, the Company issued 50,000 shares of its Class E Series convertible                                                                                                                                               |
| preferred stock in exchange for receiving all of the outstanding shares of Stress Analysis Technologies, Inc.  ("SATI").                                                                                                                        |
| The Company valued the acquisition at $975,000 and charged off $875,000 as it deemed the intangible                                                                                                                                                            |
| assets acquired  to be fully impaired. In connection with this transaction, the Company issued an additional                                                                                                                                              |
| 5,000 preferred shares valued at $97,500 for fees in connection with the purchase. The $97,500 was charged to equity.                                                                                                                                          |
|                                                                                                                                                                                                                                                      |            |            |  |  |  |  |
| During the  three months ended March 31, 2007, the Company issued 10,800,000 shares in escrow pursuant to an                                                                                                                                         |
| agreement it has with its convertible debenture holders. During 2007, 5,800,000 shares of Class A common stock was                                                                                                                                        |
| issued  to certain debenture holders in the conversion of  $580,000 of indebtedness. In addition, for the redemption of 1,000,000 shares by certain debenture holders, the balance due on the debentures  was increased by $600,000.  |
|                                                                                                                                                                                                                                                      |            |            |  |  |  |  |
| During the three months ended March 31, 2007, the Company received 50,000 shares of prior issued common stock                                                                                                                                             |
| which was subsequently cancelled.                                                                                                                                                                                                                              |            |            |  |  |  |  |

See accompanying notes to the condensed consolidated financial statements				10

----

 

----

11

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----

12

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| Office and computer equipment | $ | 27,645    |
|-------------------------------|---|-----------|
| Manufacturing equipment       |   | 230,522   |
|                               |   |           |
|                               |   | 258,167   |
| Less accumulated depreciation |   | (163,494) |
|                               |   |           |
|                               | $ | 94,673    |
|                               |   | ========  |

13

----

 

----

|                                | **Period of									Amortization** | **** | **** | ****       |
|--------------------------------|------------------------------------|------|------|------------|
|                      | ****                               | **** | **** | ****       |
| Patent costs                   | 17 years                           |      | $    | 28,494     |
| License agreement (see Note 7) | 17 years                           |      |      | 6,250      |
| Website                        | 5 years                            |      |      | 5,200      |
|                                |                                    |      |      |            |
|                                |                                    |      |      | 39,944     |
| Less accumulated amortization  |                                    |      |      | (37,373)   |
|                                |                                    |      |      |            |
|                                |                                    |      | $    | 2,571      |
|                                |                                    |      |      | ========== |
|                                |                                    |      |      |            |
> 
2008                     $   807						2009                     $1,076						2010                     $   688

#### ****

**NOTE 7 – LICENSE AGREEMENTS**University of PennsylvaniaIn 1993, the Company entered into a license agreement with the University of Pennsylvania (the “University”) for the development and marketing of EFS. 				Under the terms of the agreement, the Company issued to the University one share of its common stock, and a 5% royalty on sales of the product.  The Company valued the license agreement at $6,250.  The license terminates upon the expiration of the underlying patents, unless sooner terminated as provided in the agreement.  The Company is amortizing the license over 17 years.

14

----

 

----

|    August 2, 2009                          | $30,000 |
|-----------------------------------------------------------|---------|
|    August 2, 2010                          | $30,000 |
|    August 2, 2011 and each year thereafter | $50,000 |

15

----

 

----

|    January 29, 2010 | $21,000 |
|------------------------------------|---------|
|    January 29, 2011 | $32,000 |
|    January 29, 2012 | $42,000 |

16

----

 

----

|    January 1, 2009                          | $10,000 |
|------------------------------------------------------------|---------|
|    January 1, 2010                          | $20,000 |
|    January 1, 2011 and each year thereafter | $30,000 |

17

----

 

----

18

----

 

----

At March 31, 2008, the fair value of the remaining outstanding warrants and conversion derivative liabilities were $402,447.  

19

----

 

----

|                                                         | **Fatigue Fuse**                                                                                                 | **EFS**                          | **Server									Array										System**                                         | ****

****

****

****

**X-Ray									DiffractionMethod**                      | **Nondestructive									evaluation and									stimulate									industrialinnovation** |
|--------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------|----------------------------------|----------------------------------------------------------------------------------|----------------------------------------------------------------------------------|------------------------------------------------------------------------------------------|
|                                                    |                                                                                                             |                             |                                                                             |                                                                             |                                                                                     |
| Tensiodyne 1985-1 R&D Partnership                        |                  -   * |       - |               - |               - |               -         |
|      Variety Investments, Ltd.      |           5.00%                                                     |       - |               - |               - |               -         |
| University of Pennsylvania (see Note 7)                      |                                                                                                        |                        |                                                                        |                                                                        |                                                                                |
|      Net sales of licensed products |                 -                     | 7.00%                            |               - |               - |               -         |
|      Net sales of services          |                 -                     | 2.50%                            |               - |               - |               -         |
| NCAT (see Note 7)                                            |                                                                                                        |                        |                                                                        |                                                                             |                                                                                     |
|      Net sales of licensed products |                 -                     |       - |         3.50%                                 |               - |               -         |
|      Sublicensing income            |                 -                     |       - |       25.00%                                            |               - |               -         |
| ISIS  (see Note 7)                                      |                                                                                                        |                             |                                                                             |                                                                             |                                                                                     |
|      Net sales of licensed products |                 -                     |       - |              -       |           2.5%                      |   -                                                                                 |
|      Sublicensing income                 |                 -                     |       - |              -       | 25.00%                                                                           |              -          |
| ISURF (see Note 7)                                           |                                                                                                             |                             |                                                                             |                                                                             |                                                                                     |
|      Net sales of licensed products |                 -                     |       - |              -       |               - | 3.0%                                                                                     |
|      Sublicensing income                 |                 -                     |       - |              -       |               - |        25.00%                                              |
| Shareholder                                                  | 1.00%                                                                                                            | 0.50%                            |              -       |               - |              -               |

20

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----

21

----

 

----

22

----

 

----

23

----

 

----

24

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----

****
|           Issued shares                                                                                                                                                                                                                                | 192,381,821  |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------|
|                                                                                                                                                                                                                                                                                                          |              |
|           Less shares held in escrow:                                                                                                                                                                                                                  |              |
|                Shares issued to the Company and held in escrow                                                                                                                                                                | (3,357,397)  |
|                Shares held in escrow pursuant to agreement debenture holders                                                                                                                                                  | (8,000,000)  |
|                Contingent shares held related to the Beck settlement for						                  antidilution purposes (see Note 10) | (7,805,368)  |
|                Other                                                                                                                                                                                                          | (6,000)      |
|                                                                                                                                                                                                                                                                                                          |              |
|                                                                                                                                                                                                                                                                                                          | (19,168,765) |
|                                                                                                                                                                                                                                                                                                          |              |
|                                                                                                                                                                                                                                                                                                |              |
| Outstanding shares (including shares committed)                                                                                                                                                                                                                                                          | 173,213,056  |
|                                                                                                                                                                                                                                                                                                          | ===========  |

25

----

 

----

****

****

26

----

 

----

27

----

 

----

|           Net loss as originally reported                      | $ | (4,863,128)  |
|------------------------------------------------------------------------------------------------------------------|---|--------------|
|           Adjust non-cash compensation to market               |   | (16,997,737) |
|           Adjust derivative and warrant liability to market    |   | 15,229,916   |
|                                                                                                                  |   |              |
|                                                                                                        |   |              |
|           Net loss – restated                             | $ | (6,630,949)  |
|                                                                                                        |   |              |
|           Basic and dilutive loss per share                    |   |              |
|                As originally reported | $ | (.06)        |
|                                                                                                                  |   | ===========  |
|                                                                                                        |   |              |
|                As restated            | $ | (.08)        |
|                                                                                                                  |   | ===========  |

28

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29

----

 

****

|                                            |   | Three Months							Ended							March 31,							2008 |   |   | Three Months							Ended							March 31,							2007 |   | Percentage							Change |
|-------------------------------------------------|--------|-----------------------------------------------------|--------|--------|-----------------------------------------------------|--------|-------------------------|
|                                                 |        |                                                     |        |        |                                                     |        |                         |
|                                       |        |                                                     |        |        |                                                     |        |                         |
| Revenue                                         | $      | 1,090                                               |   | $      | 43,967                                              |   | (97.52) %               |
| Research and development costs                  |   | 158,993                                             |   |   | 217,501                                             |   | (26.90)%                |
| General and administrative							 expenses |   | 20,328,325                                          |   |   | 21,459,164                                          |   | (5.27)%                 |
|                                       |   |                                                |   |   |                                                |   |                    |
| Loss from Operations                            | $      | (12,286,008)                                        |   | $      | (6,630,949)                                         |   | 85.28%                  |
|                                            | ==     | ============                                        |   | ==     | ============                                        |   |                    |

Our revenues were derived exclusively from bridge testing.

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|                                     |   | Three Months							Ended							March 31,							2008 |   | Three Months							Ended							March 31,							2007 |
|------------------------------------------|--------|-----------------------------------------------------|---|-----------------------------------------------------|
|                                          |        |                                                     |   |                                                     |
|                                |   |                                                     |   |                                                |
| Consulting services                      | $      | 4,742,660                                           | $ | 4,882,259                                           |
| Officer’s salary                   |   | 125,000                                             |   | 62,500                                              |
| Officer’s stock based compensation |        | 15,000,000                                          |   | 15,000,000                                          |
| Secretarial salaries                     |   | 31,573                                              |   | 22,409                                              |
| Office expense                           |   | 20,394                                              |   | 20,988                                              |
| Professional fees                        |        | 244,260                                             |   | 476,380                                             |
| Rent                                     |   | 7,746                                               |   | 7,512                                               |
| Marketing and advertising                |        | 61,070                                              |   | 37,765                                              |
| Impairment loss                          |        | -0-                                                 |   | 875,000                                             |
| Payroll taxes                            |        | 16,242                                              |   | 10,517                                              |
| Telephone                                |        | 4,219                                               |   | 5,865                                               |

Of the $4,742,660 in consulting expense for the three months ended March 31, 2008, $3,545,900 was related to the issuance of 8,057,500 shares of common stock.  In addition, we charged $1,000,000 in consulting fees through an increase in convertible debt of $1,000,000. Of the $4,882,259 in consulting expense for the three months ended March 31, 2007, $4,156,058 was related to the issuance of 1,861,300 shares of common stock. Of the $476,380 in professional  for the three months ended March 31, 2007, $446,500 was related to the issuance of 305,000 shares of common stock.

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|                                                                               |   | Three months Ended							March 31,							2008 |   |   | Three months Ended							March 31,							2007 |   | Percentage							Change |
|------------------------------------------------------------------------------------|--------|-----------------------------------------------|--------|--------|-----------------------------------------------|--------|-------------------------|
|                                                                                    |        |                                               |        |        |                                               |        |                         |
|                                                                          |   |                                          |   |   |                                          |   |                    |
| Gain on modification of							 convertible debt                               | $      | -0-                                           |   | $      | -0-                                           |   | 0%                      |
| Interest expense                                                                   |   | (370,991)                                     |   |   | (978,235)                                     |   | (62.08) %               |
| Net unrealized and realized							 loss of marketable securities              |        | (8)                                           |        |        | (8)                                           |        | 0%                      |
| Change in fair value of							 derivative and warrant							 liabilities |   | 8,559,576                                     |   |   | 15,977,420                                    |   | (46.43)%                |
| Interest income                                                                    |        | 12,443                                        |        |        | 3,372                                         |        | 269.01%                 |
| Other                                                                              |        | -0-                                           |        |        | -0-                                           |        | 0%                      |
| Provision for income taxes                                                    |        | (800)                                         |        |        | (800)                                         |   |                    |
| Net loss                                                                           | $      | (12,286,008)                                  |   | $      | (6,630,949)                                   |   | 85.28%                  |
|                                                                               | ==     | ============                                  |   | ==     | ============                                  |   |                    |

Our interest expense includes amortization of debt discounts totaling $399,725 during the three months ended March 31, 2008 and $899,130 during the three months ended March 31, 2007.  The change in fair value of derivative and warrant liabilities represents the change in derivative values related to warrants and convertible debt with Palisades Capital, LLC and Golden Gate Investors.

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|                                 |   | March 31,							2008 |  |   | March 31,							2007 |
|--------------------------------------|--------|----------------------|--|---|----------------------|
|                                      |        |                      |  |   |                      |
|                            |   |                      |  |   |                      |
| Cash                                 | $      | 533,373              |  | $ | 893,176              |
| Marketable securities – trading |   | 717,539              |  |   | 41,646               |
| Accounts receivable                  |   | 24,290               |  |   | 33,144               |
| Inventories                          |        | 77,006               |  |   | 0                    |
| Prepaid expenses and other           |   | 15,404               |  |   | 8,376                |
| Total current assets                 |   | 1,367,612            |  |   | 976,342              |
| Total assets                         |   |  1,467,204      |  |   | 987,003              |
| Total current liabilities            |   | 3,472,318            |  |   | 510,100              |
| Total liabilities                    |   | 5,116,747            |  |   | 4,830,110            |

Cash RequirementsFor the three months ended March 31, 2008, our net cash used in operations was $(851,250) compared to $(380,390) for the three months ended March 31, 2007. Negative operating cash flows during the three months ended March 31, 2008 were primarily created by a net loss from operations of $(12,286,008), offset by the issuance of stock for services of $4,580,000, amortization of discount on convertible debentures of $339,725 and an increase in officer stock based compensation of $15,000,000.  There was also an decrease in the fair value of derivative and warrant liabilities of $(8,559,576), accrued interest on debt of $130,984, net decrease in other assets of $105,384 and net decrease in other liabilities of $(161,759).

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**Item 6.       Exhibits**

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| 10.1         | Class A Common Stock Option Agreement with Robert M. Bernstein, dated April 22, 2008                                                                                                    |
|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|    |                                                                                                                                                                                         |
| 10.2         | Class A Common Stock Option Agreement with Robert M. Bernstein, dated May 6, 2008                                                                                                       |
|    |                                                                                                                                                                                         |
| 10.3         | Corporate Stock Redemption Agreement with Robert M. Bernstein, dated May 6, 2008                                                                                                        |
|    |                                                                                                                                                                                         |
| 31.1         | Certification of Chief Executive Officer Pursuant to the Securities Exchange Act of 1934, Rules 13a-14 and 15d-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|    |                                                                                                                                                                                         |
| 31.2         | Certification of Chief Financial Officer Pursuant to the Securities Exchange Act of 1934, Rules 13a-14 and 15d-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|    |                                                                                                                                                                                         |
| 32           | Certification Pursuant to 18 U.S.C., Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                |

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**SIGNATURES**

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

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| Dated: May 19, 2008 | /s/ Robert M. Bernstein                                      |
|---------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                     |    By:                                                                                                                                                                                                                                 | Robert M. Bernstein |
|                     |    Its:                                                                                                                                                                                                                                | President, Chief Executive						Officer, and Chief FinancialOfficer (Principal Executive						Officer, Principal Financial						Officer and Principal Accounting						Officer) |

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