**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION **

**Washington,      D.C.  20549 **

**FORM      10-QSB**

**x    QUARTERLY      REPORT UNDER SECTION 13 OR 15(d) OF **

**THE      SECURITIES EXCHANGE ACT OF 1934 **

**For      the quarterly period ended December 31, 2007 **

**or      **

**o    TRANSITION      REPORT UNDER SECTION 13 OR 15(d) OF **

**THE      EXCHANGE ACT **

**For      the transition period from         to          **

**STATMON      TECHNOLOGIES CORP. **

| **Nevada**                                                                    |   | **83-0242652**                                   |
|-------------------------------------------------------------------------------|--------|--------------------------------------------------|
| (State                or other jurisdiction of incorporation or organization) |   | (IRS                Employer Identification No.) |

| **3000                Lakeside Drive, Suite 300 South, Bannockburn, IL                60015**                   |   |
|-----------------------------------------------------------------------------------------------------------------|--------|
| (Address                of principal executive offices)                                                         |   |
| **(847)                604-5366**                                                                               |   |
| (Issuer’s                telephone number)                                                                |   |
| Former                name, former address and former fiscal year, if changed since last                report: |   |

| **Class**                                   |   | **Outstanding                at February 1, 2008** |
|---------------------------------------------|--------|----------------------------------------------------|
| Common                Stock, $.01 par value |   | 16,198,872                                         |

----

**FORM      10-QSB**

**STATMON      TECHNOLOGIES CORP.**

**December      31, 2007**

**TABLE      OF CONTENTS **

|                                                                                                                                               | Page(s) |
|----------------------------------------------------------------------------------------------------------------------------------------------------|---------|
| PART                1 - FINANCIAL INFORMATION                                                                                                      |    |
|                                                                                                                                               |    |
| Item                1. Financial Statements (unaudited).                                                                                           |    |
| Condensed                Consolidated Balance Sheet at December 31, 2007                                                                           | 3       |
| Condensed                Consolidated Statements of Operations for the Three Months Ended                December                31, 2007 and 2006 | 4       |
| Condensed                Consolidated Statements of Operations for the Nine Months Ended December                31, 2007 and 2006                 | 5       |
| Condensed                Consolidated Statements of Cash Flows for the Nine Months Ended December                31, 2007 and 2006                 | 6       |
| Notes                to Condensed Consolidated Financial Statements                                                                                | 7       |
| Item                2. Management’s Discussion and Analysis or Plan of                Operation.                                             | 17      |
| Item                3. Controls and Procedures.                                                                                                    | 24      |
|                                                                                                                                               |    |
| PART                II - OTHER INFORMATION                                                                                                         |    |
|                                                                                                                                               |    |
| Item                1. Legal Proceedings.                                                                                                          | 25      |
| Item                2. Unregistered Sales of Equity Securities and Use of                Proceeds.                                                 | 25      |
| Item                3. Defaults Upon Senior Securities.                                                                                            | 27      |
| Item                6. Exhibits.                                                                                                                   | 27      |
|                                                                                                                                               |    |
| SIGNATURES                                                                                                                                         | 28      |
|                                                                                                                                               |    |
| Exhibits                                                                                                                                           | 29      |
|                                                                                                                                               |    |
| Certifications                                                                                                                                     | 30      |

----

**ITEM      I — FINANCIAL STATEMENTS**

**STATMON      TECHNOLOGIES CORP. AND SUBSIDIARIES**

**CONDENSED      CONSOLIDATED BALANCE SHEET**

**DECEMBER      31, 2007**

**(UNAUDITED)**

| **ASSETS**                                                                                                                                 |   |   |        |   |
|--------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-------------|--------|
| Current                Assets:                                                                                                             |   |   |        |   |
| Cash                                                                                                                                       |   | $      | 87,517      |   |
| Accounts                receivable                                                                                                         |   |   | 70,153      |   |
| Inventories                                                                                                                                |   |   | 48,207      |   |
| Prepaid                expense and other current assets                                                                                    |   |   | 149,331     |   |
|                                                                                                                                       |   |   |        |   |
| Total                Current Assets                                                                                                        |   |   | 355,208     |   |
|                                                                                                                                       |   |   |        |   |
| Property                and Equipment, net                                                                                                 |   |   | 40,490      |   |
|                                                                                                                                       |   |   |        |   |
| Deferred                Financing Costs                                                                                                    |   |   | 363,724     |   |
| Security                Deposits                                                                                                           |   |   | 128,640     |   |
|                                                                                                                                       |   |   |        |   |
| Total                Assets                                                                                                                |   | $      | 888,062     |   |
|                                                                                                                                       |   |   |        |   |
| **LIABILITIES                AND STOCKHOLDERS' DEFICIENCY**                                                                                |   |   |        |   |
| Current                Liabilities:                                                                                                        |   |   |        |   |
| Notes                payable (including $1,462,700 due to related parties), net of debt                discount of $86,248                 |   | $      | 3,807,452   |   |
| Accounts                payable                                                                                                            |   |   | 902,955     |   |
| Accrued                expenses                                                                                                            |   |   | 338,973     |   |
| Accrued                compensation                                                                                                        |   |   | 507,279     |   |
| Interest                payable (including $654,281 due to related parties)                                                                |   |   | 1,616,601   |   |
| Deferred                revenue                                                                                                            |   |   | 182,005     |   |
|                                                                                                                                       |   |   |        |   |
| Total                Liabilities                                                                                                           |   |   | 7,355,265   |   |
|                                                                                                                                       |   |   |        |   |
| Commitments                and Contingencies                                                                                               |   |   |        |   |
|                                                                                                                                       |   |   |        |   |
| Stockholders'                Deficiency:                                                                                                   |   |   |        |   |
| Preferred                stock, $.01 par value, 10,000,000 shares authorized, none issued                and                outstanding    |   |   | -           |   |
| Common                stock, $.01 par value, 100,000,000 shares authorized,16,169,327 issued                and                outstanding |   |   | 161,693     |   |
| Additional                paid-in capital                                                                                                  |   |   | 11,489,541  |   |
| Accumulated                deficit                                                                                                         |   |   | (18,118,437 | )      |
|                                                                                                                                       |   |   |        |   |
| Total                Stockholders' Deficiency                                                                                              |   |   | (6,467,203  | )      |
|                                                                                                                                       |   |   |        |   |
| Total                Liabilities and Stockholders' Deficiency                                                                              |   | $      | 888,062     |   |

----

**STATMON      TECHNOLOGIES CORP. AND SUBSIDIARIES**

**CONDENSED      CONSOLIDATED STATEMENTS OF OPERATIONS**

**(UNAUDITED)**

|                                                                                                                                                                                                               |   | For the Three Months Ended December                31, |       |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------|------------|
|                                                                                                                                                                                                               |   | 2007                                                                            |       | 2006 |   |
|                                                                                                                                                                                                               |   |                                                                            |       |   |   |
| Revenues                                                                                                                                                                                                           |   | $                                                                               | 730,960    |   | $ | 2,260,860 |   |
|                                                                                                                                                                                                               |   |                                                                            |       |   |   |   |   |
| Cost                of Sales                                                                                                                                                                                       |   |                                                                            | 142,687    |   |   | 489,205 |   |
|                                                                                                                                                                                                               |   |                                                                            |       |   |   |   |   |
| Gross                Profit                                                                                                                                                                                        |   |                                                                            | 588,273    |   |   | 1,771,655 |   |
|                                                                                                                                                                                                               |   |                                                                            |       |   |   |   |   |
| Selling,                General and Administrative Expenses                                                                                                                                                        |   |                                                                            | 1,086,742  |   |   | 796,400 |   |
|                                                                                                                                                                                                               |   |                                                                            |       |   |   |   |   |
| Operating                (Loss)/Income                                                                                                                                                                             |   |                                                                            | (498,469   | ) |   | 975,255 |   |
|                                                                                                                                                                                                               |   |                                                                            |       |   |   |   |   |
| Other                Expense:                                                                                                                                                                                      |   |                                                                            |       |   |   |   |   |
| Interest                (including $54,645 and $61,596 to related parties for 2007 and 2006                periods, respectively)                                                                                  |   |                                                                            | 156,236    |   |   | 134,372 |   |
| Common                stock and warrants issued in association with debt (including $303,411                and                $262,351 to related parties for 2007 and 2006 periods,                respectively) |   |                                                                            | 738,866    |   |   | 504,029 |   |
| Amortization                of debt discount                                                                                                                                                                       |   |                                                                            | 63,298     |   |   | 73,217 |   |
| Amortization                of deferred financing costs                                                                                                                                                            |   |                                                                            | 174,115    |   |   | 137,392 |   |
| Total                Other Expense                                                                                                                                                                                 |   |                                                                            | 1,132,515  |   |   | 849,010 |   |
|                                                                                                                                                                                                               |   |                                                                            |       |   |   |   |   |
| NET                (LOSS)/INCOME                                                                                                                                                                                   |   | $                                                                               | (1,630,984 | ) | $ | 126,245 |   |
|                                                                                                                                                                                                               |   |                                                                            |       |   |   |   |   |
| NET                (LOSS)/INCOME PER COMMON SHARE - Basic and Diluted                                                                                                                                              |   | $                                                                               | (0.10      | ) | $ | 0.01 |   |
|                                                                                                                                                                                                               |   |                                                                            |       |   |   |   |   |
| Weighted                Average Number of Common Shares Outstanding - Basic and                Diluted                                                                                                             |   |                                                                            | 15,979,524 |   |   | 14,674,868 |   |

----

**STATMON      TECHNOLOGIES CORP. AND SUBSIDIARIES**

**CONDENSED      CONSOLIDATED STATEMENTS OF OPERATIONS**

**(UNAUDITED)**

|                                                                                                                                                             |   | For the                Nine Months Ended December 31, |       |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------|------------|
|                                                                                                                                                             |   | 2007                                                       |       | 2006 |   |
|                                                                                                                                                             |   |                                                       |       |   |   |
| Revenues                                                                                                                                                         |   | $                                                          | 2,372,190  |   | $ | 3,160,302 |   |
|                                                                                                                                                             |   |                                                       |       |   |   |   |   |
| Cost                of Sales                                                                                                                                     |   |                                                       | 383,393    |   |   | 700,466 |   |
|                                                                                                                                                             |   |                                                       |       |   |   |   |   |
| Gross                Profit                                                                                                                                      |   |                                                       | 1,988,797  |   |   | 2,459,836 |   |
|                                                                                                                                                             |   |                                                       |       |   |   |   |   |
| Selling,                General and Administrative Expenses                                                                                                      |   |                                                       | 3,432,255  |   |   | 2,083,938 |   |
|                                                                                                                                                             |   |                                                       |       |   |   |   |   |
| Operating                (Loss)/Income                                                                                                                           |   |                                                       | (1,443,458 | ) |   | 375,898 |   |
|                                                                                                                                                             |   |                                                       |       |   |   |   |   |
| Other                Expense:                                                                                                                                    |   |                                                       |       |   |   |   |   |
| Interest                (including $158,154 and $179,169 to related parties for 2007 and                2006                periods, respectively)               |   |                                                       | 413,469    |   |   | 405,862 |   |
| Common                stock and warrants issued in association with debt (including $1,155,054                and $654,404 to related parties for 2007 and 2006) |   |                                                       | 2,490,540  |   |   | 1,193,274 |   |
| Amortization                of debt discount                                                                                                                     |   |                                                       | 315,295    |   |   | 394,632 |   |
| Amortization                of deferred financing costs                                                                                                          |   |                                                       | 495,511    |   |   | 240,539 |   |
| Total                Other Expense                                                                                                                               |   |                                                       | 3,714,815  |   |   | 2,234,307 |   |
|                                                                                                                                                             |   |                                                       |       |   |   |   |   |
| NET                LOSS                                                                                                                                          |   | $                                                          | (5,158,273 | ) | $ | (1,858,409 | ) |
|                                                                                                                                                             |   |                                                       |       |   |   |   |   |
| NET                LOSS PER COMMON SHARE - Basic and Diluted                                                                                                     |   | $                                                          | (0.33      | ) | $ | (0.13 | ) |
|                                                                                                                                                             |   |                                                       |       |   |   |   |   |
| Weighted                  Average Number of Common Shares Outstanding - Basic and                  Diluted                                                       |   |                                                       | 15,618,282 |   |   | 14,246,672 |   |

----

**STATMON      TECHNOLOGIES CORP. AND SUBSIDIARIES**

**CONDENSED      CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(UNAUDITED)**

|                                                                                                                      |   | For the Nine Months Ended December 31, |       |
|---------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------|------------|
|                                                                                                                      |   | 2007                                                                 |       | 2006 |   |
| CASH                FLOWS FROM OPERATING ACTIVITIES:                                                                      |   |                                                                 |       |   |   |   |   |
| Net                loss                                                                                                   |   | $                                                                    | (5,158,273 | ) | $ | (1,858,409 | ) |
| Adjustments                to reconcile net loss to net cash (used in)/provided by operating                activities:   |   |                                                                 |       |   |   |   |   |
| Depreciation                                                                                                              |   |                                                                 | 7,806      |   |   | 8,582 |   |
| Common                stock and warrants issued in association with debt                                                  |   |                                                                 | 2,490,540  |   |   | 1,193,274 |   |
| Amortization                of debt discount                                                                              |   |                                                                 | 315,295    |   |   | 394,632 |   |
| Amortization                of deferred financing costs                                                                   |   |                                                                 | 495,511    |   |   | 240,539 |   |
| Non-cash                stock based compensation charge                                                                   |   |                                                                 | 550,200    |   |   | 48,000 |   |
| Changes                in operating assets and liabilities:                                                               |   |                                                                 |       |   |   |   |   |
| Accounts                receivable                                                                                        |   |                                                                 | 158,899    |   |   | (262,309 | ) |
| Inventories                                                                                                               |   |                                                                 | 12,541     |   |   | 2,892 |   |
| Prepaid                expense and other current assets                                                                   |   |                                                                 | (87,110    | ) |   | (41,181 | ) |
| Security                deposits                                                                                          |   |                                                                 | 88,425     |   |   | (3,000 | ) |
| Accounts                payable                                                                                           |   |                                                                 | 327,866    |   |   | 40,913 |   |
| Accrued                expenses                                                                                           |   |                                                                 | (78,585    | ) |   | (20,263 | ) |
| Accrued                compensation                                                                                       |   |                                                                 | 89,643     |   |   | 110,189 |   |
| Interest                payable                                                                                           |   |                                                                 | 388,795    |   |   | 380,628 |   |
| Deferred                revenue                                                                                           |   |                                                                 | (26,501    | ) |   | 104,436 |   |
| NET                CASH (USED IN)/PROVIDED BY OPERATING ACTIVITIES                                                        |   |                                                                 | (424,948   | ) |   | 338,923 |   |
|                                                                                                                      |   |                                                                 |       |   |   |   |   |
| CASH                FLOWS USED IN INVESTING ACTIVITIES:                                                                   |   |                                                                 |       |   |   |   |   |
| Purchase                of property and equipment                                                                         |   |                                                                 | (6,964     | ) |   | (11,909 | ) |
|                                                                                                                      |   |                                                                 |       |   |   |   |   |
| CASH                FLOWS FROM FINANCING ACTIVITIES*:*                                                                    |   |                                                                 |       |   |   |   |   |
| Proceeds                from notes payable                                                                                |   |                                                                 | 572,000    |   |   | 605,000 |   |
| Repayment                of notes payable                                                                                 |   |                                                                 | -          |   |   | (507,000 | ) |
| Deferred                financing costs                                                                                   |   |                                                                 | (139,629   | ) |   | (13,806 | ) |
| NET                CASH PROVIDED BY FINANCING ACTIVITIES                                                                  |   |                                                                 | 432,371    |   |   | 84,194 |   |
|                                                                                                                      |   |                                                                 |       |   |   |   |   |
| NET                INCREASE IN CASH                                                                                       |   |                                                                 | 459        |   |   | 411,208 |   |
|                                                                                                                      |   |                                                                 |       |   |   |   |   |
| CASH,                BEGINNING OF PERIOD                                                                                  |   |                                                                 | 87,058     |   |   | 66,335 |   |
|                                                                                                                      |   |                                                                 |       |   |   |   |   |
| CASH,                END OF PERIOD                                                                                        |   | $                                                                    | 87,517     |   | $ | 477,543 |   |
|                                                                                                                      |   |                                                                 |       |   |   |   |   |
| SUPPLEMENTAL                DISCLOSURE OF CASH FLOW INFORMATION:                                                          |   |                                                                 |       |   |   |   |   |
| Cash                paid for:                                                                                             |   |                                                                 |       |   |   |   |   |
| Interest                                                                                                                  |   | $                                                                    | 18,502     |   | $ | 25,078 |   |
| Income                Taxes                                                                                               |   | $                                                                    | -          |   | $ | - |   |
|                                                                                                                      |   |                                                                 |       |   |   |   |   |
| NON-CASH                INVESTING AND FINANCING ACTIVITIES:                                                               |   |                                                                 |       |   |   |   |   |
|                                                                                                                      |   |                                                                 |       |   |   |   |   |
| Value                of common stock and warrants issued related to new debt                                              |   | $                                                                    | 924,376    |   | $ | 295,647 |   |
|                                                                                                                      |   |                                                                 |       |   |   |   |   |
| Value                of warrants issued to placement agent                                                                |   | $                                                                    | 73,298     |   | $ | 20,300 |   |
|                                                                                                                      |   |                                                                 |       |   |   |   |   |
| Placement                agent commissions accrued and not yet paid                                                       |   | $                                                                    | 20,000     |   | $ | 50,000 |   |
|                                                                                                                      |   |                                                                 |       |   |   |   |   |
| Value                of common stock and warrants related to note payable                                                 |   | $                                                                    | 448,700    |   | $ | 261,400 |   |
|                                                                                                                      |   |                                                                 |       |   |   |   |   |
| Value                of common stock and warrants issued to Placement Agent for Investor                relation services |   | $                                                                    | 20,880     |   | $ | 54,750 |   |
|                                                                                                                      |   |                                                                 |       |   |   |   |   |
| Accrued                interest reclassified as notes payable                                                             |   | $                                                                    | -          |   | $ | 22,000 |   |

----

| **1.** | **BUSINESS                DESCRIPTION, GOING CONCERN AND MANAGEMENT                PLANS** |
|--------|--------------------------------------------------------------------------------------------|

**Company      Overview**

**Going      Concern**

----

| **1.** | **BUSINESS                DESCRIPTION, GOING CONCERN AND MANAGEMENT PLANS,                continued** |
|--------|-------------------------------------------------------------------------------------------------------|

**Management      Plans**

| **2.** | **CERTAIN                SIGNIFICANT ACCOUNTING                POLICIES** |
|--------|---------------------------------------------------------------------------|

|   | *a.* | Basis                of Consolidation                -                The consolidated financial statements of the Company include the                accounts                of its wholly-owned subsidiaries, Statmon-eBI Solutions, LLC, a Nevada                limited liability company and STC Software Corp., a Delaware corporation.                All inter-company accounts and transactions have been eliminated                in                consolidation. |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | *b.* | Use                of Estimates -                The preparation of financial statements in conformity with US GAAP                requires management to make estimates and assumptions that affect                the                reported amounts of assets and liabilities, and disclosure of contingent                assets and liabilities at the date of the financial statements and                the                reported amounts of revenues and expenses during the reporting period.                Actual results could differ from those estimates. |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| **2.** | **CERTAIN                SIGNIFICANT ACCOUNTING POLICIES                (continued)** |
|--------|---------------------------------------------------------------------------------------|

|   | *c.* | Research                and Development -                Research and development expenditures are charged to operations as                incurred. Research and development expenditures were approximately                $326,000 and $206,000 for the three months ended December 31, 2007                and                2006, respectively. Research and development expenditures were                approximately $963,000 and $538,000 for the nine months ended December                31,                2007 and 2006, respectively. |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | *d.* | Inventories -                Inventories are priced at the lower of cost (first-in, first-out)                or                market and consist primarily of finished goods. Raw materials and                Work In                Process are deemed immaterial. |
|--------|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | *e.* | Net                Loss Per Share                -                Basic                net loss per share is computed using the weighted average number                of shares                of outstanding common stock***.***For                all periods presented, diluted net loss per share was the same as                basic                net loss per share since the inclusion of the warrants would have                been                anti-dilutive. Securities that could potentially dilute basic earnings                per                share (“EPS”) in the future and that were not included in the computation                of diluted EPS because to do so would have been anti-dilutive for                the                periods presented consist of warrants to purchase 11,608,744 and                9,035,640                shares of common stock as of December 31, 2007 and 2006,                respectively. |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | *f.* | Deferred                Financing Costs                -                Deferred financing costs are costs incurred in connection with debt                financings and are amortized over the term of the related debt. If                any or                all of the related debt is repaid prior to its maturity date, a pro-rata                share of the related deferred financing costs is written off and                recorded                as amortization expense in the period of the repayment in the consolidated                statement of operations. |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | *g.* | Revenue                Recognition -                The Statement of Position (“SOP”) 97-2, “Software Revenue Recognition”,                issued by the American Institute of Certified Public Accountants                ("AICPA")                and SOP 98-9, “Modification of SOP 97-2, Software Revenue Recognition,                with Respect to Certain Transactions,” applies to all entities that earn                revenue from licensing, selling, or otherwise marketing computer                software.                Management believes our current revenue recognition policies and                practices                are consistent with SOP 97-2. |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | *h.* | Stock-Based                Compensation                -                Prior to April 1, 2006, the Company accounted for employee stock                transactions in accordance with Accounting Principle Board, APB Opinion                No. 25, “Accounting for Stock Issued to Employees.” The Company had                adopted the pro forma disclosure requirements of Statement of Financial                Accounting Standards No. 123, “Accounting For Stock-Based                Compensation.” |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| **2.** | **CERTAIN                SIGNIFICANT ACCOUNTING POLICIES                (continued)** |
|--------|---------------------------------------------------------------------------------------|

|                                     |   | Nine Months                  Ended |                          |
|------------------------------------------|--------|-----------------------------------------|-------------------------------|
|                                     |   | December                  31,           |                          | December 31,    |   |
|                                     |   | 2007                                    |                          | 2006     |   |
| Assumptions:                             |   |                                    |                               |   |   |  |   |
| Risk-free                  interest rate |   |                                    | 4.50                  to 5.28 | % |   | 5.25 | % |
|                                     |   |                                    |                               |   |   |  |   |
| Expected                  life, in years |   |                                    | 3.0                  to 5.0   |   |   | 3.0 |   |
|                                     |   |                                    |                               |   |   |  |   |
| Expected                  volatility     |   |                                    | 107                  to 111   | % |   | 105 | % |

|                                          |   |   |     | Weighted        |   |
|-----------------------------------------------|--------|--------|----------|-----------------|--------|
|                                          |   |   |     | Average         |   |
|                                          |   |   |     | Grant Date |   |
| Nonvested                Shares               |   | Shares |     | Fair Value |   |
| Nonvested                at April 1, 2007     |   |   | 275,000  |            | $      | 0.54 |   |
|                                          |   |   |          |            |   |  |   |
| Granted                                       |   |   | 670,000  |            | $      | 1.13 |   |
|                                          |   |   |          |            |   |  |   |
| Vested                                        |   |   | (740,000 | )               | $      | 0.92 |   |
|                                          |   |   |          |            |   |  |   |
| Expired                                       |   |   | —  |            | $      | — |   |
|                                          |   |   |          |            |   |  |   |
| Nonvested                at December 31, 2007 |   |   | 205,000  |            | $      | 1.09 |   |

----

| **2.** | **CERTAIN                SIGNIFICANT ACCOUNTING POLICIES                (continued)** |
|--------|---------------------------------------------------------------------------------------|

|  | *i.* | New                Accounting Pronouncements* *- In                December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business                Combinations” (“SFAS 141(R)”). SFAS 141(R) replaces SFAS No. 141,                “Business Combinations”, and is effective for the Company for business                combinations for which the acquisition date is on or after the beginning                of the first annual reporting period beginning on or after December                15,                2008. SFAS 141(R) requires the new acquiring entity to recognize                all                assets acquired and liabilities assumed in the transactions; establishes                an acquisition-date fair value for acquired assets and liabilities;                and                fully discloses to investors the financial effect the acquisition                will                have. The Company is evaluating the impact of this pronouncement                on the                Company’s consolidated financial position, results of operations and cash                flows. |
|--|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| **2.** | **CERTAIN                SIGNIFICANT ACCOUNTING POLICIES                (continued)** |
|--------|---------------------------------------------------------------------------------------|

| **3.** | **NOTES                PAYABLE**  |
|--------|----------------------------------------|

|  | · | (i)                $50,000 principal amount promissory note bearing interest at 10%                per annum                and due 90 days from the date of issuance, (ii) 30,000 shares of                common                stock and (iii) warrants to purchase 30,000 shares of common stock                exercisable at a price of $1.00 per share for a term of five years.                This                note matured on July 2, 2007. Per the default terms of the note,                the                Company issued an additional 30,000 shares of common stock and warrants                to                purchase 30,000 shares of its common stock at an exercise price of                $1.00                per share with a term of five years as consideration for an extension                of                the due date of the note to July 2,                2008. |
|--|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | (i)                $25,000 principal amount promissory note bearing interest at 10%                per annum                and due 90 days from the date of issuance, (ii) 15,000 shares of                common                stock and (iii) warrants to purchase 15,000 shares of common stock                exercisable at a price of $1.00 per share for a term of five years.                This                note matured on July 8, 2007. Per the default terms of the note,                the                Company issued an additional 15,000 shares of common stock and warrants                to                purchase 15,000 shares of its common stock at an exercise price of                $1.00                per share with a term of five years as consideration for an extension                of                the due date of the note to July 8,                2008. |
|--|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | (i)                $20,000 principal amount promissory note bearing interest at 10%                per annum                and due one year from the date of issuance, (ii) 20,000 shares of                common                stock and (iii) warrants to purchase 20,000 shares of common stock                exercisable at a price of $1.25 per share for a term of five years.                This                note matures on April 16, 2008 after which interest will increase                to 15%                per annum until the note is repaid. |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | (i)                $200,000 principal amount secured promissory note bearing interest                at 10%                per annum and due 180 days from the date of issuance, (ii) 150,000                shares                of common stock and (iii) warrants to purchase 150,000 shares of                common                stock exercisable at a price of $1.00 per share for a term of five                years.                This note matured on October 24, 2007. Per the default terms of the                note,                if the Company does not repay the note by the maturity date, it will                issue                an additional 100,000 shares of common stock and warrants to purchase                100,000 shares of its common stock at an exercise price of $1.00                per share                with a term of five years as consideration for an extension of the                due                date of the note to October 24, 2008. The Company is currently negotiating                a short term extension which would supersede such extension                agreement. |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| **3.** | **NOTES                PAYABLE (continued)** |
|--------|----------------------------------------------|

|  | · | (i)                $50,000 principal amount promissory note bearing interest at 10%                per annum                and due 180 days from the date of issuance, (ii) 30,000 shares of                common                stock and (iii) warrants to purchase 30,000 shares of common stock                exercisable at a price of $1.50 per share for a term of five years.                This                note matured on November 19, 2007. Per the default terms of the note,                the                Company has recorded an additional 30,000 shares of common stock                and                warrants to purchase 30,000 shares of its common stock at an exercise                price of $1.50 per share with a term of five years as consideration                for an                extension of the due date of the note to November 19,                2008. |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | (i)                $25,000 principal amount promissory note bearing interest at 10%                per annum                and due 180 days from the date of issuance, (ii) 15,000 shares of                common                stock and (iii) warrants to purchase 15,000 shares of common stock                exercisable at a price of $1.50 per share for a term of five years.                This                note matured on November 26, 2007. Per the default terms of the note,                the                Company has recorded an additional 15,000 shares of common stock                and                warrants to purchase 15,000 shares of its common stock at an exercise                price of $1.50 per share with a term of five years as consideration                for an                extension of the due date of the note to November 26,                2008. |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | (i)                $17,000 principal amount promissory note bearing interest at 10%                per annum                and due 180 days from the date of issuance, (ii) 10,200 shares of                common                stock and (iii) warrants to purchase 10,200 shares of common stock                exercisable at a price of $1.50 per share for a term of five years.                This                note matured on December 2, 2007. Per the default terms of the note,                the                Company has recorded an additional 10,200 shares of common stock                and                warrants to purchase 10,200 shares of its common stock at an exercise                price of $1.50 per share with a term of five years as consideration                for an                extension of the due date of the note to December 2,                2008. |
|--|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | (i)                $10,000 principal amount promissory note bearing interest at 10%                per annum                and due 180 days from the date of issuance, (ii) 6,000 shares of                common                stock and (iii) warrants to purchase 6,000 shares of common stock                exercisable at a price of $1.50 per share for a term of five years.                This                note matured on December 19, 2007. Per the default terms of the note,                the                Company has recorded an additional 6,000 shares of common stock and                warrants to purchase 6,000 shares of its common stock at an exercise                price                of $1.50 per share with a term of five years as consideration for                an                extension of the due date of the note to December 19,                2008. |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | (i)                $150,000 principal amount promissory note bearing interest at 15%                per                annum and due 365 days from the date of issuance, (ii) 150,000 shares                of                common stock and (iii) warrants to purchase 150,000 shares of common                stock                exercisable at a price of $1.25 per share for a term of five years.                This                note matures on October 4, 2008. The terms of this note require the                payment of monthly interest in advance. The Company reimbursed the                note                holder for fees of $7,500 related to this                note. |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | (i)                $25,000 principal amount promissory note bearing interest at 10%                per annum                and due 365 days from the date of issuance, (ii) 25,000 shares of                common                stock and (iii) warrants to purchase 25,000 shares of common stock                exercisable at a price of $1.20 per share for a term of five years.                This                note matures on October 22, 2008. |
|--|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| **3.** | **NOTES                PAYABLE (continued)** |
|--------|----------------------------------------------|

| **4.** | **EQUITY                TRANSACTIONS** |
|--------|----------------------------------------|

----

| **4.** | **EQUITY                TRANSACTIONS,                continued** |
|--------|------------------------------------------------------------------|

| **5.** | **COMMITMENTS                AND CONTINGENCIES** |
|--------|--------------------------------------------------|

|  | [a] | Legal                Proceedings                -                On May 17, 2007 an action was filed in Los Angeles Superior Court                for                breach of contract and similar causes of action by the Epstein Family                Trust against the Company in relation to two outstanding promissory                notes                issued by the Company totaling $75,000 ($25,000 and $50,000) plus                accrued                interest and seeking attorney’s fees and costs in addition to the                principal and interest. These notes were guaranteed by Mr. Geoffrey                Talbot, the Company's CEO, for up to $25,000, and therefore Mr. Talbot                was                joined in the legal action as a third-party defendant. The case number                is                BC 371 276. The parties have reached a conditional settlement agreement                where the plaintiff has agreed to convert all principal and interest                into                shares of common stock at a price of $1.00 per share provided the                Company                completes the proposed Convertible Debenture and warrant financing                in a                timely manner. The Company is in receipt of the conversion subscription                documents. Until such closing, the litigation has been put on hold.                In the                event the litigation is continued it will be defended vigorously.                 On December 20, 2007, a complaint                was filed                in the United States District Court for the District of Colorado                alleging                additional commissions are due to a third party introducer. The plaintiff                is demanding payment for additional commission of $143,000 for the                period                ended September 30, 2007 and additional commissions through December                31,                2007. A provision of approximately $183,000 has been made through                December                31, 2007, even though the obligation to pay additional commission                is in                dispute. The plaintiff is also seeking legal fees and costs which                are                nominal at time of filing and are not provided for. The plaintiff                is also                seeking a declaratory judgment from the Court to establish the term                of the                disputed agreement between the parties and remove any uncertainty                regarding future commissions of 10% on sales occurring after September                30,                2007, plus any other relief the Court may deem just. Statmon maintains                that the plaintiff’s action is entirely frivolous and disputes any                obligation to pay further commissions to the plaintiff based on specific                performance issues and intends to vigorously defend all aspects of                the                plaintiff’s complaints which may include filing a cross claim. In                addition, Statmon believes that the action was improperly filed in                Colorado and plans to move to transfer the case to Illinois or California                based on lack of personal jurisdiction, improper venue and the legal                doctrine of forum non convenience (inconvenient                forum). |
|--|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| **5.** | **COMMITMENTS                AND CONTINGENCIES,                continued** |
|--------|----------------------------------------------------------------------------|

|  | [b] | Other                -                As of the date of this filing, the Company has rectified the non-reporting                of several years of compensation to the Chief Executive Officer,                Chief                Technical Officer and one other individual through the filing of                Federal                forms 1099 and 1096. As the Company has not been in a position to                comply                with the Chief Executive Officer and the Chief Technology Officer                employment contracts the Company has decided to classify these individuals                as non-employees. For payroll tax reporting purposes, through December                31,                2006, the gross reported compensation amounts aggregated to approximately                $1,400,000 for the three individuals. The Company plans to pay accrued                compensation of approximately $425,000 to the Chief Executive Officer                and                Chief Technology Officer which the Company has accrued prior to March                31,                2007. At the time of this filing, approximately $130,000 of accrued                compensation due to the other individual has been paid which was                utilized                to pay the related income taxes on $301,829 of the above mentioned                $1,400,000 of unreported 1099 income to the respective taxing authorities.                Such payroll tax reporting classification is subject to audit by                the                Internal Revenue Service and other state and local taxing authorities,                which, upon review, could determine that such individuals’ compensation                should have been reported on the basis that such individuals are                employees. Accordingly, depending on such potential audit, the Company                may                be subject to additional payroll related liabilities the amount of                which,                if any, is not determinable at this                time. |
|--|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **6.** | **MAJOR                CUSTOMERS, FOREIGN REVENUE AND CONCENTRATION OF CREDIT                RISK** |
|--------|-----------------------------------------------------------------------------------------------------|

|  | [a] | Major                Customers |
|--|-----|--------------------------------|

|   | [b] | Foreign                Revenue |
|--------|-----|--------------------------------|

|   | [c] | Concentration                of Credit Risk |
|--------|-----|---------------------------------------------|

| **7.** | **SUBSEQUENT                EVENTS** |
|--------|--------------------------------------|

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**ITEM      2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS**

;      (ii)      our history of net losses and inability to achieve or maintain profitability;      (iii) our auditors’ expression of a substantial doubt about our ability to      continue as a going concern; (iv) our need for additional capital and the      uncertainty of obtaining it; (v) our ability to refinance or renegotiate      short-term promissory notes that have come due or are coming due; (vi) our      failure to timely make certain regulatory filings; (vii) the possibility of      undetected errors or failures in our software; (viii) the risk of products      liability claims; (ix) industry resistance to change; (x) fluctuations in our      quarterly operating results; (xi) failure to manage growth; (xii) dependence      on      Microsoft Windows platform; (xiii) our ability to keep pace with rapidly      changing technologies; (xiv) our ability to compete effectively; (xv)      difficulties in integrating businesses, products and technologies that we may      acquire; (xvi) loss of key personnel; (xvii) enactment of new laws or changes      in      government regulations could adversely affect our business; (xviii) our products      could infringe on the intellectual property rights of others; (xviv) our      inability to obtain patent and copyright protection for our technology or      misappropriation of our software and intellectual property; (xx) our failure      to      successfully introduce new products; (xxi) obsolescence of our technologies;      (xxii) our ability to attract customers who will embrace our new products and      technologies; (xxiii) our stock price which is likely to be highly volatile;      (xxiv) our common stock is considered a penny stock and is considered to be      a      high-risk investment and subject to restrictions on marketability; (xxv) control      by certain stockholders; and (xxvi) our increasing dependence on a single      customer. For a more detailed description of these and other cautionary factors      that may affect our future results, please refer to our Report on Form 10-KSB      for the fiscal year ended March 31, 2007 filed with the SEC.

**Recent      Developments for the Company **

**Overview      **

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**Off-Balance      Sheet Arrangements**

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**For      the Three Months Ended December 31, 2007 and 2006 **

**Results      From Operations **

***Revenues***

***Cost      of Sales***

***Selling,      General and Administrative Expenses***

***Other      Expense***

***Net      Income/(Loss)***

**For      the Nine Months Ended December 31, 2007 and 2006 **

**Results      From Operations **

***Revenues***

----

***Cost      of Sales***

***Selling,      General and Administrative Expenses***

***Other      Expense***

***Net      Income/(Loss)***

**Liquidity      and Capital Resources **

|   | · | (i)                $50,000 principal amount promissory note bearing interest at 10%                per annum                and due 90 days from the date of issuance, (ii) 30,000 shares of                common                stock and (iii) warrants to purchase 30,000 shares of common stock                exercisable at a price of $1.00 per share for a term of five years.                This                note matured on July 2, 2007. Per the default terms of the note,                the                Company issued an additional 30,000 shares of common stock and warrants                to                purchase 30,000 shares of its common stock at an exercise price of                $1.00                per share with a term of five years as consideration for an extension                of                the due date of the note to July 2,                2008. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | (i)                $25,000 principal amount promissory note bearing interest at 10%                per annum                and due 90 days from the date of issuance, (ii) 15,000 shares of                common                stock and (iii) warrants to purchase 15,000 shares of common stock                exercisable at a price of $1.00 per share for a term of five years.                This                note matured on July 8, 2007. Per the default terms of the note,                the                Company issued an additional 15,000 shares of common stock and warrants                to                purchase 15,000 shares of its common stock at an exercise price of                $1.00                per share with a term of five years as consideration for an extension                of                the due date of the note to July 8,                2008. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | (i)                $20,000 principal amount promissory note bearing interest at 10%                per annum                and due one year from the date of issuance, (ii) 20,000 shares of                common                stock and (iii) warrants to purchase 20,000 shares of common stock                exercisable at a price of $1.25 per share for a term of five years.                This                note matures on April 16, 2008 after which interest will increase                to 15%                per annum until the note is repaid. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | · | (i)                $200,000 principal amount secured promissory note bearing interest                at 10%                per annum and due 180 days from the date of issuance, (ii) 150,000                shares                of common stock and (iii) warrants to purchase 150,000 shares of                common                stock exercisable at a price of $1.00 per share for a term of five                years.                This note matured on October 24, 2007. Per the default terms of the                note,                if the Company does not repay the note by the maturity date, it will                issue                an additional 100,000 shares of common stock and warrants to purchase                100,000 shares of its common stock at an exercise price of $1.00                per share                with a term of five years as consideration for an extension of the                due                date of the note to October 24, 2008. A short term extension is currently                being negotiated between the                parties. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | (i)                $50,000 principal amount promissory note bearing interest at 10%                per annum                and due 180 days from the date of issuance, (ii) 30,000 shares of                common                stock and (iii) warrants to purchase 30,000 shares of common stock                exercisable at a price of $1.50 per share for a term of five years.                This                note matured on November 19, 2007. Per the default terms of the note,                the                Company has recorded an additional 30,000 shares of common stock                and                warrants to purchase 30,000 shares of its common stock at an exercise                price of $1.50 per share with a term of five years as consideration                for an                extension of the due date of the note to November 19,                2008. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | (i)                $25,000 principal amount promissory note bearing interest at 10%                per annum                and due 180 days from the date of issuance, (ii) 15,000 shares of                common                stock and (iii) warrants to purchase 15,000 shares of common stock                exercisable at a price of $1.50 per share for a term of five years.                This                note matured on November 26, 2007. Per the default terms of the note,                the                Company has recorded an additional 15,000 shares of common stock                and                warrants to purchase 15,000 shares of its common stock at an exercise                price of $1.50 per share with a term of five years as consideration                for an                extension of the due date of the note to November 26,                2008. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | (i)                $17,000 principal amount promissory note bearing interest at 10%                per annum                and due 180 days from the date of issuance, (ii) 10,200 shares of                common                stock and (iii) warrants to purchase 10,200 shares of common stock                exercisable at a price of $1.50 per share for a term of five years.                This                note matured on December 2, 2007. Per the default terms of the note,                the                Company has recorded an additional 10,200 shares of common stock                and                warrants to purchase 10,200 shares of its common stock at an exercise                price of $1.50 per share with a term of five years as consideration                for an                extension of the due date of the note to December 2,                2008. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | (i)                $10,000 principal amount promissory note bearing interest at 10%                per annum                and due 180 days from the date of issuance, (ii) 6,000 shares of                common                stock and (iii) warrants to purchase 6,000 shares of common stock                exercisable at a price of $1.50 per share for a term of five years.                This                note matured on December 19, 2007. Per the default terms of the note,                the                Company has recorded an additional 6,000 shares of common stock and                warrants to purchase 6,000 shares of its common stock at an exercise                price                of $1.50 per share with a term of five years as consideration for                an                extension of the due date of the note to December 19,                2008. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | § | (i)                $150,000 principal amount promissory note bearing interest at 15%                per                annum and due 365 days from the date of issuance, (ii) 150,000 shares                of                common stock and (iii) warrants to purchase 150,000 shares of common                stock                exercisable at a price of $1.25 per share for a term of five years.                This                note matures on October 4, 2008. The terms of this note require the                payment of monthly interest in advance. The Company reimbursed the                note                holder for fees of $7,500 related to this note.  |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | (i)                $25,000 principal amount promissory note bearing interest at 10%                per annum                and due 365 days from the date of issuance, (ii) 25,000 shares of                common                stock and (iii) warrants to purchase 25,000 shares of common stock                exercisable at a price of $1.20 per share for a term of five years.                This                note matures on October 22, 2008. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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**Going      Concern**

**Inflation      and Seasonality **

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**ITEM      3 - CONTROLS AND PROCEDURES **

**Evaluation      and Disclosure Controls and Procedures**

**Changes      in Internal Controls**

**Limitations      on the Effectiveness of Controls**

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**PART      II - OTHER INFORMATION **

| **ITEM                1.** |   | **Legal                Proceedings**                                          |   |
|----------------------------|--------|-------------------------------------------------------------------------------|--------|
|                       |   |                                                                          |   |
|                       |   |                                                                          |   | [a]                On May 17, 2007 an action was filed in Los Angeles Superior Court                for                breach of contract and similar causes of action by the Epstein Family                Trust against the Company in relation to two outstanding promissory                notes                issued by the Company totaling $75,000 ($25,000 and $50,000) plus                accrued                interest and seeking attorney’s fees and costs in addition to the                principal and interest. These notes were guaranteed by Mr. Geoffrey                Talbot, the Company's CEO, for up to $25,000, and therefore Mr. Talbot                was                joined in the legal action as a third-party defendant. The case number                is                BC 371 276. The parties have reached a conditional settlement agreement                where the plaintiff has agreed to convert all principal and interest                into                shares of common stock at a price of $1.00 per share provided the                Company                completes the proposed Convertible Debenture and warrant financing                in a                timely manner. The Company is in receipt of the conversion subscription                documents. Until such closing, the litigation has been put on hold.                In the                event the litigation is continued it will be defended vigorously.                 [b]                On                December 20, 2007, a complaint was filed in the United States District                Court for the District of Colorado alleging additional commissions                are due                to a third party introducer. The plaintiff is demanding payment for                additional commission of $143,000 for the period ended September                30, 2007                and additional commissions through December 31, 2007. A provision                of                approximately $183,000 has been made through December 31, 2007, even                though the obligation to pay additional commission is in dispute.                The                plaintiff is also seeking legal fees and costs which are nominal                at time                of filing and are not provided for. The plaintiff is also seeking                a                declaratory judgment from the Court to establish the term of the                disputed                agreement between the parties and remove any uncertainty regarding                future                commissions of 10% on sales occurring after September 30, 2007, plus                any                other relief the Court may deem just. Statmon maintains that the                plaintiff’s action is entirely frivolous and disputes any obligation to                pay further commissions to the plaintiff based on specific performance                issues and intends to vigorously defend all aspects of the plaintiff’s                complaints which may include filing a cross claim. In addition, Statmon                believes that the action was improperly filed in Colorado and plans                to                move to transfer the case to Illinois or California based on lack                of                personal jurisdiction, improper venue and the legal doctrine of forum                non                convenience (inconvenient forum).  |   |
| **ITEM                2.** |   | **Unregistered                Sale of Equity Securities and Use of Proceeds** |   |
|                       |   |                                                                          |   |
|                       |   |                                                                          |   | Between                April 1 and December 31, 2007, the Company sold Units to investors                as                follows: •         (i)                $50,000 principal amount promissory note bearing interest at 10%                per annum                and due 90 days from the date of issuance, (ii) 30,000 shares of                common                stock and (iii) warrants to purchase 30,000 shares of common stock                exercisable at a price of $1.00 per share for a term of five years.                This                note matured on July 2, 2007. Per the default terms of the note,                the                Company issued an additional 30,000 shares of common stock and warrants                to                purchase 30,000 shares of its common stock at an exercise price of                $1.00                per share with a term of five years as consideration for an extension                of                the due date of the note to July 2, 2008.•         (i)                $25,000 principal amount promissory note bearing interest at 10%                per annum                and due 90 days from the date of issuance, (ii) 15,000 shares of                common                stock and (iii) warrants to purchase 15,000 shares of common stock                exercisable at a price of $1.00 per share for a term of five years.                This                note matured on July 8, 2007. Per the default terms of the note,                the                Company issued an additional 15,000 shares of common stock and warrants                to                purchase 15,000 shares of its common stock at an exercise price of                $1.00                per share with a term of five years as consideration for an extension                of                the due date of the note to July 8, 2008.•                        (i)                $20,000 principal amount promissory note bearing interest at 10%                per annum                and due one year from the date of issuance, (ii) 20,000 shares of                common                stock and (iii) warrants to purchase 20,000 shares of common stock                exercisable at a price of $1.25 per share for a term of five years.                This                note matures on April 16, 2008 after which interest will increase                to 15%                per annum until the note is repaid.•                        (i)                $200,000 principal amount secured promissory note bearing interest                at 10%                per annum and due 180 days from the date of issuance, (ii) 150,000                shares                of common stock and (iii) warrants to purchase 150,000 shares of                common                stock exercisable at a price of $1.00 per share for a term of five                years.                This note matured on October 24, 2007. Per the default terms of the                note,                if the Company does not repay the note by the maturity date, it will                issue                an additional 100,000 shares of common stock and warrants to purchase                100,000 shares of its common stock at an exercise price of $1.00                per share                with a term of five years as consideration for an extension of the                due                date of the note to October 24, 2008. The Company is currently negotiating                a short term extension which would supersede such extension                agreement.•         (i)                $50,000 principal amount promissory note bearing interest at 10%                per annum                and due 180 days from the date of issuance, (ii) 30,000 shares of                common                stock and (iii) warrants to purchase 30,000 shares of common stock                exercisable at a price of $1.50 per share for a term of five years.                This                note matured on November 19, 2007. Per the default terms of the note,                the                Company has recorded an additional 30,000 shares of common stock                and                warrants to purchase 30,000 shares of its common stock at an exercise                price of $1.50 per share with a term of five years as consideration                for an                extension of the due date of the note to November 19,                2008. |   |

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|   |   |   |   | •                          (i)                  $25,000 principal amount promissory note bearing interest at 10%                  per annum                  and due 180 days from the date of issuance, (ii) 15,000 shares                  of common                  stock and (iii) warrants to purchase 15,000 shares of common stock                  exercisable at a price of $1.50 per share for a term of five years.                  This                  note matured on November 26, 2007. Per the default terms of the                  note, the                  Company has recorded an additional 15,000 shares of common stock                  and                  warrants to purchase 15,000 shares of its common stock at an exercise                  price of $1.50 per share with a term of five years as consideration                  for an                  extension of the due date of the note to November 26, 2008.•                          (i)                  $17,000 principal amount promissory note bearing interest at 10%                  per annum                  and due 180 days from the date of issuance, (ii) 10,200 shares                  of common                  stock and (iii) warrants to purchase 10,200 shares of common stock                  exercisable at a price of $1.50 per share for a term of five years.                  This                  note matured on December 2, 2007. Per the default terms of the                  note, the                  Company has recorded an additional 10,200 shares of common stock                  and                  warrants to purchase 10,200 shares of its common stock at an exercise                  price of $1.50 per share with a term of five years as consideration                  for an                  extension of the due date of the note to December 2, 2008.•                          (i)                  $10,000 principal amount promissory note bearing interest at 10%                  per annum                  and due 180 days from the date of issuance, (ii) 6,000 shares of                  common                  stock and (iii) warrants to purchase 6,000 shares of common stock                  exercisable at a price of $1.50 per share for a term of five years.                  This                  note matured on December 19, 2007. Per the default terms of the                  note, the                  Company has recorded an additional 6,000 shares of common stock                  and                  warrants to purchase 6,000 shares of its common stock at an exercise                  price                  of $1.50 per share with a term of five years as consideration for                  an                  extension of the due date of the note to December 19, 2008.•                          (i)                  $150,000 principal amount promissory note bearing interest at 15%                  per                  annum and due 365 days from the date of issuance, (ii) 150,000                  shares of                  common stock and (iii) warrants to purchase 150,000 shares of common                  stock                  exercisable at a price of $1.25 per share for a term of five years.                  This                  note matures on October 4, 2008. The terms of this note require                  the                  payment of monthly interest in advance. The Company reimbursed                  the note                  holder for fees of $7,500 related to this note.•                          (i)                  $25,000 principal amount promissory note bearing interest at 10%                  per annum                  and due 365 days from the date of issuance, (ii) 25,000 shares                  of common                  stock and (iii) warrants to purchase 25,000 shares of common stock                  exercisable at a price of $1.20 per share for a term of five years.                  This                  note matures on October 22, 2008. |   |
|--------|--------|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|

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| **ITEM                3.** |   | **Defaults                Upon Senior Securities** |   |
|----------------------------|--------|----------------------------------------------------|--------|
|                       |   |                                               |   | The                Company continued to be in default on $250,000 of Senior Notes during                the                three months ended September 30, 2007. The Senior Notes accrue interest                at                a penalty rate of 15% per annum. Under the penalty provisions of                the loan                agreements, the Company continues to issue 25,000 shares of common                stock                per month until full repayment of the Senior Notes. The accrued interest                on the Senior Notes at December 31, 2007 is $224,856. The                Company also continues to be in default on: ·                     A                $50,000 principal amount promissory note issued in June 2002, accruing                15%                penalty interest per annum and earning 2,500 penalty warrants per                month                since January 10, 2003;·                     A                $50,000 principal amount promissory note issued in September 2003,                accruing 15% penalty interest per annum and earning 2,500 penalty                warrants                per month since April 19, 2004;·                     A                $100,000 principal amount promissory note issued in November 2003                originally due in May 2004, extended to November 2004, accruing 15%                penalty rate per annum and earning 20,000 penalty warrants per month                since                May 22, 2004;·                     A                $60,000 principal amount promissory note issued in January 2004,                accruing                15% penalty interest per annum and earning 3,000 penalty warrants                per                month since August 2, 2004;·                     A                $100,000 principal amount promissory note issued in March 2004, accruing                15% penalty interest per annum and earning 5,000 penalty warrants                per                month since October 14, 2004;·                     A                $250,000 promissory note issued in August 2004, accruing 15% penalty                interest per annum and earning 50,000 penalty warrants per month                since                March 25, 2005;·                     A                $100,000 promissory note issued in October 2004, accruing 15% penalty                interest per annum and earning 10,000 penalty warrants per month                since                November 8, 2005;·                     A                $100,000 promissory note issued in December 2004, accruing 15% penalty                interest per annum and earning 10,000 penalty warrants per month                since                January 29, 2006;·                     A                $225,000 promissory note issued in March 2005, accruing 15% penalty                interest per annum and earning 22,500 penalty warrants per month                since                April 17, 2006;·                     A                $100,000 promissory note issued in April 2005, accruing 15% penalty                interest per annum and earning 10,000 penalty warrants per month                since May                29, 2006;·                     A                $75,000 promissory note issued in May 2005, accruing 15% penalty                interest                per annum and earning 7,500 penalty warrants per month since June                30,                2006;·                     A                $50,000 promissory note issued in June 2005, accruing 15% penalty                interest                per annum and earning 5,000 penalty warrants per month since July                15,                2006;·                     A                $100,000 promissory note issued in September 2005, accruing 15% penalty                interest per annum and earning 4,545 penalty warrants per month since                October 30, 2005;·                     A                $100,000 promissory note issued on September 1, 2005, accruing 15%                penalty                interest per annum and earning 10,000 penalty warrants per month                since                October 1, 2006;·                     A                $75,000 promissory note issued in July 2005, accruing 15% penalty                interest                per annum and earning 7,500 penalty warrants per month since August                14,                2006;·                     A                $132,000 promissory note issued in August 2005, accruing 25% penalty                interest per annum;·                     A                $50,000 promissory note issued in September 2006, accruing 15% penalty                interest per annum since December 1, 2007.·                     A                $200,000 promissory note issued in April 2007, accruing 15% penalty                interest per annum since October 25, 2007. The                accrued interest on the notes in default at December 31, 2007 is                $1,548,668. In                total, at December 31, 2007, $3,396,700 principal amount of the $3,893,700                principal amount of promissory notes are in default and $1,616,801                of                interest had accrued on all outstanding notes as of such date. |   |
|                       |   |                                               |   |   |   |

| **ITEM                6.** |   |   | **Exhibits** |                                                                                                                                              |
|----------------------------|--------|--------|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------|
|                       |   |   |         |                                                                                                                                              |
| (a)                        |   |   | Exhibits     |                                                                                                                                              |
|                       |   |   | 31.1         | Certificate                of pursuant to Rule 13a-14(a) under the Securities and Exchange Act                of                1934, as amended. |   |
|                       |   |   | 31.2         | Certificate                of pursuant to Rule 13a-14(a) under the Securities and Exchange Act                of                1934, as amended. |   |
|                       |   |   | 32.1         | Certificate                of pursuant to Rule 13a-14(b) under the Securities and Exchange Act                of                1934, as amended. |   |
|                       |   |   | 32.2         | Certificate                of pursuant to Rule 13a-14(b) under the Securities and Exchange Act                of                1934, as amended. |   |

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**SIGNATURES**

| Date:                February 19, 2008 | /s/                Geoffrey P. Talbot              |
|----------------------------------------|----------------------------------------------------|
|                                   | Name:                Geoffrey P. Talbot            |
|                                   | Title: Chief                Financial Officer |

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**EXHIBIT      INDEX**

| **Exhibit** |   | **Description**                                                                                                                                                     |
|-------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.1        |   | Certificate                of Geoffrey P. Talbot, Chief Executive Officer, pursuant to                Section 302 of the Sarbanes-Oxley Act of 2002.           |
| 31.2        |   | Certificate                of Geoffrey P. Talbot, Chief Financial Officer, pursuant to                Section 302 of the Sarbanes-Oxley Act of 2002.           |
| 32.1        |   | Certificate                of Geoffrey P. Talbot, Chief Executive Officer, pursuant to                Section 906 of the Sarbanes-Oxley Act of 2002.           |
| 32.2        |   | Certificate                of Geoffrey P. Talbot, Chief Financial Officer, pursuant to Section                906 of                the Sarbanes-Oxley Act of 2002. |

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