**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 September 30, 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)                                   |   | (I.R.S.                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 November 1, 2007** |
|---------------------------------------------|--------|----------------------------------------------------|
| Common                Stock, $.01 par value |   | 15,929,037                                         |

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**FORM      10-QSB**

**STATMON      TECHNOLOGIES CORP.**

**September      30, 2007**

**TABLE      OF CONTENTS **

|                                                                                                                                                | Page(s) |
|-----------------------------------------------------------------------------------------------------------------------------------------------------|---------|
| PART                1 - FINANCIAL INFORMATION                                                                                                       |    |
| Item                1. Financial Statements (unaudited).                                                                                            |    |
| Condensed                Consolidated Balance Sheet at September 30, 2007                                                                           | 3       |
| Condensed                Consolidated Statements of Operations for the Three Months Ended                September                30, 2007 and 2006 | 4       |
| Condensed                Consolidated Statements of Operations for the Six Months Ended September                30, 2007 and 2006                  | 5       |
| Condensed                Consolidated Statements of Cash Flows for the Six Months Ended September                30, 2007 and 2006                  | 6       |
| Notes                to Condensed Consolidated Financial Statements                                                                                 | 7       |
| Item                2. Management’s Discussion and Analysis or Plan of                Operations.                                             | 16      |
| Item                3. Controls and Procedures.                                                                                                     | 23      |
| PART                II - OTHER INFORMATION                                                                                                          |    |
| Item                1. Legal Proceedings.                                                                                                           | 24      |
| Item                2. Unregistered Sales of Equity Securities and Use of                Proceeds.                                                  | 24      |
| Item                3. Defaults Upon Senior Securities.                                                                                             | 25      |
| Item                6. Exhibits.                                                                                                                    | 25      |
| SIGNATURES                                                                                                                                          | 26      |
| Exhibits                                                                                                                                            |    |
| Certifications                                                                                                                                      |    |

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**ITEM      I — FINANCIAL STATEMENTS**

**STATMON      TECHNOLOGIES CORP. AND SUBSIDIARIES**

**CONDENSED      CONSOLIDATED BALANCE SHEET**

**SEPTEMBER      30, 2007**

**(UNAUDITED)**

| **ASSETS**                                                                                                                                                                   |   |    |        |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|-------------|
| Current                  Assets:                                                                                                                                        |   |    |        |
| Cash                                                                                                                                                                    |   | $            | 34,628      |   |
| Accounts                  receivable                                                                                                                                    |   |         | 387,237     |   |
| Inventories                                                                                                                                                             |   |         | 49,938      |   |
| Prepaid                  expense and other current assets                                                                                                               |   |         | 38,951      |   |
| Total                  Current Assets                                                                                                                                   |   |         | 510,754     |   |
| Property                  and Equipment, net                                                                                                                            |   |         | 36,212      |   |
| Deferred                  Financing Costs                                                                                                                               |   |         | 309,224     |   |
| Security                  Deposits                                                                                                                                      |   |         | 225,540     |   |
| Total                  Assets                                                                                                                                           |   | $            | 1,081,730   |   |
| **LIABILITIES                  AND STOCKHOLDERS' DEFICIENCY**                                                                                                                |   |         |        |   |
| Current                  Liabilities:                                                                                                                                   |   |         |             |   |
| Notes                  payable (including $1,462,700 due to related parties), net of                  debt                   discount                  of $36,961  |   | $            | 3,681,739   |   |
| Accounts                  payable                                                                                                                                       |   |         | 817,866     |   |
| Accrued                  expenses                                                                                                                                       |   |         | 471,910     |   |
| Accrued                  compensation                                                                                                                                   |   |         | 480,293     |   |
| Interest                  payable (including $603,965 due to related parties)                                                                                           |   |         | 1,483,963   |   |
| Deferred                  revenue                                                                                                                                       |   |         | 201,999     |   |
| Total                  Liabilities                                                                                                                                      |   |         | 7,137,770   |   |
| 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,                   15,724,492                  issued and outstanding                 |   |         | 157,245     |   |
| Additional                  paid-in capital                                                                                                                             |   |         | 10,274,167  |   |
| Accumulated                  deficit                                                                                                                                    |   |         | (16,487,452 | ) |
| Total                  Stockholders' Deficiency                                                                                                                         |   |         | (6,056,040  | ) |
| Total                  Liabilities and Stockholders' Deficiency                                                                                                         |   | $            | 1,081,730   |   |

----

**STATMON      TECHNOLOGIES CORP. AND SUBSIDIARIES**

**CONDENSED      CONSOLIDATED STATEMENTS OF OPERATIONS**

**(UNAUDITED)**

|                                                                                                                                                                                                            |   | For                  the Three Months Ended                  September 30, |       |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------|------------|
|                                                                                                                                                                                                            |   | 2007                                                                       |       | 2006 |   |
| Revenues                                                                                                                                                                                                   |   | $                                                                          | 937,161    |   | $ | 646,709 |   |
| Cost                  of Sales                                                                                                                                                                             |   |                                                                       | 117,365    |   |   | 144,111 |   |
| Gross                  Profit                                                                                                                                                                              |   |                                                                       | 819,796    |   |   | 502,598 |   |
| Selling,                  General and Administrative Expenses                                                                                                                                              |   |                                                                       | 1,218,665  |   |   | 693,976 |   |
| Operating                  Loss                                                                                                                                                                            |   |                                                                       | (398,869   | ) |   | (191,378 | ) |
| Other                  Expense:                                                                                                                                                                            |   |                                                                       |            |   |   |  |   |
| Interest                  (including $52,782 and $65,785 to related parties for 2007 and                  2006                  periods, respectively)                                                     |   |                                                                       | 127,467    |   |   | 154,734 |   |
| Common                  stock and warrants issued in association with debt (including $368,636                  and                  $152,379 to related parties for 2007 and 2006 periods, respectively)  |   |                                                                       | 812,883    |   |   | 441,065 |   |
| Amortization                  of debt discount                                                                                                                                                             |   |                                                                       | 102,133    |   |   | 178,034 |   |
| Amortization                  of deferred financing costs                                                                                                                                                  |   |                                                                       | 243,923    |   |   | 38,249 |   |
| Total                  Other Expense                                                                                                                                                                       |   |                                                                       | 1,286,406  |   |   | 812,082 |   |
| NET                  LOSS                                                                                                                                                                                  |   | $                                                                          | (1,685,275 | ) | $ | (1,003,460 | ) |
| NET                  LOSS PER COMMON SHARE - Basic and Diluted                                                                                                                                             |   | $                                                                          | (0.11      | ) | $ | (0.07 | ) |
| Weighted                  Average Number of Common Shares Outstanding -Basic                  and Diluted                                                                                                  |   |                                                                       | 15,601,212 |   |   | 14,291,831 |   |

----

**STATMON      TECHNOLOGIES CORP. AND SUBSIDIARIES**

**CONDENSED      CONSOLIDATED STATEMENTS OF OPERATIONS**

**(UNAUDITED)**

|                                                                                                                                                                                 |   | For                  the Six Months Ended September 30,  |       |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------|------------|
|                                                                                                                                                                                 |   | 2007                                                          |       | 2006 |   |
|                                                                                                                                                                                 |   |                                                          |       |    |   |
| Revenues                                                                                                                                                                        |   | $                                                             | 1,641,230  |   | $ | 899,442 |   |
| Cost                  of Sales                                                                                                                                                  |   |                                                          | 240,706    |   |   | 211,261 |   |
| Gross                  Profit                                                                                                                                                   |   |                                                          | 1,400,524  |   |   | 688,181 |   |
| Selling,                  General and Administrative Expenses                                                                                                                   |   |                                                          | 2,345,513  |   |   | 1,287,538 |   |
| Operating                  Loss                                                                                                                                                 |   |                                                          | (944,989   | ) |   | (599,357 | ) |
| Other                  Expense:                                                                                                                                                 |   |                                                          |            |   |   |  |   |
| Interest                  (including $103,510 and $117,574 to related parties  2007 and 2006                  periods, respectively)                                       |   |                                                          | 257,233    |   |   | 271,490 |   |
| Common                  stock and warrants issued in association with debt  (including                  $851,643 and $353,553 to related parties for  2007 and 2006)  |   |                                                          | 1,751,674  |   |   | 689,245 |   |
| Amortization                  of debt discount                                                                                                                                  |   |                                                          | 251,997    |   |   | 321,415 |   |
| Amortization                  of deferred financing costs                                                                                                                       |   |                                                          | 321,396    |   |   | 103,147 |   |
| Total                  Other Expense                                                                                                                                            |   |                                                          | 2,582,300  |   |   | 1,385,297 |   |
| NET                  LOSS                                                                                                                                                       |   | $                                                             | (3,527,289 | ) | $ | (1,984,654 | ) |
| NET                  LOSS PER COMMON SHARE - Basic and Diluted                                                                                                                  |   | $                                                             | (0.23      | ) | $ | (0.14 | ) |
|                                                                                                                                                                                 |   |                                                          |            |   |   |  |   |
| Weighted                  Average Number of Common Shares Outstanding -Basic                  and Diluted                                                                       |   |                                                          | 15,436,674 |   |   | 14,031,404 |   |

----

**STATMON      TECHNOLOGIES CORP. AND SUBSIDIARIES**

**CONDENSED      CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(UNAUDITED)**

|                                                                                               |   | For                  the Six Months Ended September 30,  |       |
|----------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------|------------|
|                                                                                               |   | 2007                                                          |       | 2006 |   |
| CASH                  FLOWS FROM OPERATING ACTIVITIES:                                        |   |                                                     |       |   |   |
| Net                  loss                                                                     |   | $                                                             | (3,527,289 | ) | $ | (1,984,654 | ) |
| Adjustments                  to reconcile net loss to net cash used in operating activities:  |   |                                                          |            |   |   |  |   |
| Depreciation                                                                                  |   |                                                          | 5,119      |   |   | 6,337 |   |
| Common                  stock and warrants issued in association with debt                    |   |                                                          | 1,751,674  |   |   | 689,245 |   |
| Amortization                  of debt discount                                                |   |                                                          | 251,997    |   |   | 321,415 |   |
| Amortization                  of deferred financing costs                                     |   |                                                          | 321,396    |   |   | 103,147 |   |
| Non-cash                  stock based compensation charge                                     |   |                                                          | 326,400    |   |   | 48,000 |   |
| Changes                  in operating assets and liabilities:                                 |   |                                                          |            |   |   |  |   |
| Accounts                  receivable                                                          |   |                                                          | (158,185   | ) |   | (138,738 | ) |
| Inventories                                                                                   |   |                                                          | 10,810     |   |   | (6,932 | ) |
| Prepaid                  expense and other current assets                                     |   |                                                          | 23,270     |   |   | (9,427 | ) |
| Security                  deposits                                                            |   |                                                          | (8,475     | ) |   | - |   |
| Accounts                  payable                                                             |   |                                                          | 242,777    |   |   | 62,061 |   |
| Accrued                  expenses                                                             |   |                                                          | 54,352     |   |   | 34,967 |   |
| Accrued                  compensation                                                         |   |                                                          | 62,657     |   |   | 68,737 |   |
| Interest                  payable                                                             |   |                                                          | 256,157    |   |   | 246,807 |   |
| Deferred                  revenue                                                             |   |                                                          | (6,507     | ) |   | 15,223 |   |
|                                                                                               |   |                                                          |            |   |   |  |   |
| NET                  CASH USED IN OPERATING ACTIVITIES                                        |   |                                                          | (393,847   | ) |   | (543,812 | ) |
|                                                                                               |   |                                                          |            |   |   |  |   |
| CASH                  FLOWS USED IN INVESTING ACTIVITIES:                                     |   |                                                          |            |   |   |  |   |
| Purchase                  of property and equipment                                           |   |                                                          | -          |   |   | (10,366 | ) |
| CASH                  FLOWS FROM FINANCING ACTIVITIES*:*                                      |   |                                                          |            |   |   |  |   |
| Proceeds                  from notes payable                                                  |   |                                                          | 397,000    |   |   | 530,000 |   |
| Deferred                  financing costs                                                     |   |                                                          | (55,583    | ) |   | (6,306 | ) |
| NET                  CASH PROVIDED BY FINANCING ACTIVITIES                                    |   |                                                          | 341,417    |   |   | 523,694 |   |
| NET                  DECREASE IN CASH                                                         |   |                                                          | (52,430    | ) |   | (30,484 | ) |
| CASH,                  BEGINNING OF PERIOD                                                    |   |                                                          | 87,058     |   |   | 66,335 |   |
| CASH,                  END OF PERIOD                                                          |   | $                                                             | 34,628     |   | $ | 35,851 |   |
| SUPPLEMENTAL                  DISCLOSURE OF CASH FLOW INFORMATION:                            |   |                                                          |            |   |   |  |   |
| Cash                  paid for:                                                               |   |                                                          |            |   |   |  |   |
| Interest                                                                                      |   | $                                                             | 8,548      |   | $ | 21,758 |   |
| Income                  Taxes                                                                 |   | $                                                             | -          |   | $ | - |   |
| NON-CASH                  INVESTING AND FINANCING ACTIVITIES:                                 |   |                                                          |            |   |   |  |   |
| Value                  of common stock and warrants issued related to new debt                |   | $                                                             | 608,626    |   | $ | 292,517 |   |
| Value                  of warrants issued to placement agent                                  |   | $                                                             | 48,098     |   | $ | 20,300 |   |
| Placement                  agent commissions accrued and not yet paid                         |   | $                                                             | 20,000     |   | $ | 30,000 |   |
| Value                  of common stock and warrants related to note payable                   |   | $                                                             | 329,400    |   | $ | - |   |
| Value                  of common stock and warrants issued to Placement                       |   |                                                          |            |   |   |  |   |
| Agent                  for Investor relation services                                         |   | $                                                             | 20,880     |   | $ | 54,750 |   |

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

**Company      Overview**

**Going      Concern**

**Management      Plans**

----

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

**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. |
|------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *c.  * | Research                and Development -                Research and development expenditures are charged to operations as                incurred. Research and development expenditures were approximately                $329,000 and $150,000 for the six months ended September 30, 2007                and                2006, respectively. Research and development expenditures were                approximately $637,000 and $333,000 for the six months ended September                30,                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 10,850,778 and                9,020,170                shares of common stock as of September 30, 2007 and 2006,                respectively. |
|------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| *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.” |
|------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

|                                   |   | Six                Months Ended  |                        |
|----------------------------------------|--------|----------------------------------|-----------------------------|
|                                   |   | September                30,2007 |                        | September                30,2006 |   |
| Assumptions:                           |   |                             |                        |   |   |   |   |
| Risk-free                interest rate |   |                             | 4.71                to 5.28 | % |   | 5.25 | % |
| Expected                life, in years |   |                             | 3.0                to 5.0   |   |   | 3.0 |   |
| Expected              volatility       |   |                             | 108                to 111   | % |   | 105 | % |

|                                           |   |   |     | Weighted                  |   |
|------------------------------------------------|--------|--------|----------|---------------------------|--------|
|                                           |   |   |     | Average                   |   |
|                                           |   |   |     | Grant                Date |   |
| Nonvested                Shares                |   | Shares |     | Fair                Value |   |
| Nonvested                at April 1, 2007      |   |   | 275,000  |                      | $      | 0.46 |   |
| Granted                                        |   |   | 670,000  |                      | $      | 1.13 |   |
| Vested                                         |   |   | (445,000 | )                         | $      | 0.78 |   |
| Expired                                        |   |   | —  |                      | $      | — |   |
| Nonvested                at September 30, 2007 |   |   | 500,000  |                      | $      | 1.11 |   |

| *i.  * | New                Accounting Pronouncements* *-                Effective April 1, 2007, the Company adopted the provisions of FASB                Interpretation No. 48, "Accounting for Uncertainty in Income Taxes                - an                interpretation of FASB Statement No. 109" ("FIN 48"). FIN 48 prescribes                a                recognition threshold and a measurement attribute for the financial                statement recognition and measurement of tax positions taken or expected                to be taken in a tax return. For those benefits to be recognized,                a tax                position must be more-likely-than-not to be sustained upon examination                by                taxing authorities. Differences between tax positions taken or expected                to                be taken in a tax return and the benefit recognized and measured                pursuant                to the interpretation are referred to as "unrecognized benefits".                A                liability is recognized (or amount of net operating loss carry forward                or                amount of tax refundable is reduced) for an unrecognized tax benefit                because it represents an enterprise's potential future obligation                to the                taxing authority for a tax position that was not recognized as a                result of                applying the provisions of FIN 48. |
|------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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**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. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| ·   | (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 will supersede the above described 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 matures on November 19, 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 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 matures on November 26, 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 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 matures on December 2, 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 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 matures on December 19, 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 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. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

**4.  **
**EQUITY      TRANSACTIONS**

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**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 action is being defended and negotiations continue                  to be                  ongoing to resolve this case. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| [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 |
|-----------------|---------------------------------------------|

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**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 September 30, 2007 and 2006 **

**Results      From Operations **

***Revenues***

***Cost      of Sales***

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

***Other      Expense***

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

**For      the Six Months Ended September 30, 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. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | (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. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | (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 matures on November 19, 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 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 matures on November 26, 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 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 matures on December 2, 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 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 matures on December 19, 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 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. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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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**

**ITEM        2.****Unregistered        Sale of Equity Securities and Use of Proceeds**

|  | · | (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 will supersede the above described                    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 matures on November 19, 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 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 matures on November 26, 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 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 matures on December 2, 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 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 matures on December 19, 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 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. |
|--|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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**ITEM        3. Defaults Upon Senior Securities **

|  | · | 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; |
|--|--------|------------------------------------------------------------------------------------------------------------------------------|

**ITEM        6. Exhibits**

 

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**SIGNATURES**

|                                      |                                             |                                |
|-------------------------------------------|--------------------------------------------------|-------------------------------------|
|                                      |                                             |
|                                 |                                        |                           |
| Date: November              14, 2007 | By:                                    | /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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