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 QUARTERLY PERIOD ENDED DECEMBER 31, 2004

                                       OR

            [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

           FOR THE TRANSITION PERIOD FROM ____________ TO ____________

                          Commission File No. 000-09751

                           STATMON TECHNOLOGIES CORP.
        (Exact name of small business issuer as specified in its charter)


                   NEVADA                                  83-0242652
      (State or other jurisdiction of                  (I.R.S. Employer
       incorporation or organization)                 Identification No.)

            345 NORTH MAPLE DRIVE, SUITE 120, BEVERLY HILLS, CA 90210
                    (Address of principal executive offices)

          Registrant's phone number, including area code: (310) 288-4580


   Former name, former address and former fiscal year, if changed since last
                                     report:

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
                                                             YES  [ ]    NO [x]

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

                    CLASS                       OUTSTANDING AT JANUARY 31, 2004
                    -----                       -------------------------------
         Common Stock, $.01 par value                      11,711,057


Transitional Small Business Disclosure Format (Check one):  YES [ ]    NO  [x]

<PAGE>

FORM 10-QSB
STATMON TECHNOLOGIES CORP.
DECEMBER 31, 2004

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                              Page(s)
                                                                                              -------
<S>                                                                                             <C>
Part I -  Financial Information

             Item 1.  Financial Statements (unaudited):
                 Condensed Consolidated Balance Sheet at December 31, 2004                       3
                 Condensed Consolidated Statements of Operations for the Three Months Ended      4
                   December 31, 2004 and 2003
                 Condensed Consolidated Statements of Operations for the Nine Months Ended       5
                   December 31, 2004 and 2003
                 Condensed Consolidated Statements of Cash Flows for the Nine Months Ended       6
                   December 31, 2004 and 2003
                 Notes to Condensed Consolidated Financial Statements                            7
             Item 2.  Management's Discussion and Analysis of Financial Condition               13
                          and Results of Operations
             Item 3.  Controls and Procedures                                                   17

Part II - Other Information

             Item 1.  Legal Proceedings                                                         18
             Item 2.  Changes in Securities and Use of Proceeds                                 18
             Item 3.  Defaults Upon Senior Securities                                           18
Signatures                                                                                      19
Exhibits                                                                                        20
</TABLE>




                                       2
<PAGE>

ITEM I -- FINANCIAL STATEMENTS


                   STATMON TECHNOLOGIES CORP. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 2004
                                   (UNAUDITED)


                                     ASSETS
Current Assets:
       Cash                                                         $   127,154
       Accounts receivable                                              188,971
       Inventories                                                       52,235
       Prepaid expense and other current assets                          30,778
                                                                    -----------
                   Total Current Assets                                 399,138
                                                                    -----------

Property and Equipment, net of accumulated depreciation of $38,769       20,742

Other assets                                                              7,315
                                                                    -----------

                   Total Assets                                     $   427,195
                                                                    ===========

                   LIABILITIES AND STOCKHOLDERS' DEFICIENCY

Current Liabilities:
       Notes payable (including $280,000 due to related parties)    $ 1,786,739
       Accounts payable                                                 354,868
       Accrued expenses                                                 147,011
       Accrued compensation                                              69,692
       Interest payable (including $118,644 due to related parties)     313,983
                                                                    -----------
                   Total Current Liabilities                          2,672,293
                                                                    -----------
Commitments

Stockholders' Deficiency:
       Preferred stock, $.01 par value, 5,000,000 share authorized,
          none issued and outstanding -
       Common stock, $.01 par value, 25,000,000 shares authorized,
          11,686,057 issued and outstanding                             116,861
       Additional paid-in capital                                     3,235,345
       Accumulated deficit                                           (5,597,304)
                                                                    -----------
                   Total Stockholders' Deficiency                    (2,245,098)
                                                                    -----------

                   Total Liabilities and Stockholders' Deficiency   $   427,195
                                                                    ===========


           See notes to condensed consolidated financial statements.

                                       3
<PAGE>

                   STATMON TECHNOLOGIES CORP. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                        For the Three Months
                                                                         Ended December 31,
                                                                   -----------------------------
                                                                       2004             2003
                                                                   ------------     ------------
<S>                                                                <C>              <C>
Revenues                                                           $    344,786     $    589,935

Cost of Sales                                                           126,763          172,550
                                                                   ------------     ------------

Gross Profit                                                            218,023          417,385

Selling, General and Administrative Expenses                            500,851          335,477
                                                                   ------------     ------------

Operating (Loss)/Income                                                (282,828)          81,908
                                                                   ------------     ------------
Other (Income)/Expense:
      Interest income                                                      (103)              --
      Interest expense                                                   64,697           26,026
      Common stock and warrants issued in association with debt         252,768          132,135
      Amortization of debt discount                                      94,854           68,378
      Amortization of deferred financing costs                           14,001            4,908
                                                                   ------------     ------------
             Total Other Expense                                        426,217          231,447
                                                                   ------------     ------------

NET LOSS                                                           $   (709,045)    $   (149,539)
                                                                   ============     ============

NET LOSS PER COMMON SHARE - Basic and Diluted                      $      (0.06)    $      (0.01)
                                                                   ============     ============
Weighted Average Number of Common Shares Outstanding -
      Basic and Diluted                                              11,525,840       10,406,259
                                                                   ============     ============
</TABLE>


            See notes to condensed consolidated financial statements.

                                        4
<PAGE>

                   STATMON TECHNOLOGIES CORP. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                        For the Nine Months
                                                                         Ended December 31,
                                                                   -----------------------------
                                                                       2004             2003
                                                                   ------------     ------------
<S>                                                                <C>              <C>
Revenues                                                           $  1,153,606     $  1,977,517

Cost of Sales (including $0 and $99,727 to related parties in
      2004 and 2003, respectively)                                      310,920          580,785
                                                                   ------------     ------------

Gross Profit                                                            842,686        1,396,732

Selling, General and Administrative Expenses                          1,424,668        1,043,492
                                                                   ------------     ------------

Operating (Loss)/Income                                                (581,982)         353,240
                                                                   ------------     ------------
Other (Income)/Expense:
      Interest income                                                      (321)            (184)
      Interest expense                                                  172,493           71,985
      Common stock and warrants issued in association with debt         608,127          456,055
      Amortization of debt discount                                     544,327          108,644
      Amortization of deferred financing costs                           83,184            4,908
                                                                   ------------     ------------
             Total Other Expense                                      1,407,810          641,408
                                                                   ------------     ------------

NET LOSS                                                           $ (1,989,792)    $   (288,168)
                                                                   ============     ============

NET LOSS PER COMMON SHARE - Basic and Diluted                      $      (0.17)    $      (0.03)
                                                                   ============     ============

Weighted Average Number of Common Shares Outstanding -
      Basic and Diluted                                              11,738,470       10,433,879
                                                                   ============     ============
</TABLE>


            See notes to condensed consolidated financial statements.

                                        5
<PAGE>

                   STATMON TECHNOLOGIES CORP. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                               For the Nine Months
                                                                                Ended December 31,
                                                                          ----------------------------
                                                                              2004            2003
                                                                          ------------    ------------
<S>                                                                       <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
        Net loss                                                          $(1,989,792)    $  (288,168)
        Adjustments to reconcile net loss to net cash
          used in operating activities:
             Depreciation and amortization                                      8,409           7,577
             Common stock and warrants issued in association with debt        608,127         456,055
             Amortization of debt discount                                    544,327         108,644
             Amortization of deferred financing costs                          83,184           4,908
             Changes in operating assets and liabilities:
                Accounts receivable                                           591,860         (45,904)
                Inventories                                                   (52,235)             --
                Prepaid expense and other current assets                       95,819         (76,966)
                Other assets                                                     (850)             --
                Interest payable                                              159,424           1,255
                Deferred revenue                                             (135,319)       (369,159)
                Accounts payable                                              (88,942)        153,370
                Accrued expenses                                               69,119        (172,648)
                Accrued compensation                                         (117,129)        (40,000)
                                                                          -----------     -----------
NET CASH USED IN OPERATING ACTIVITIES                                        (223,998)       (261,036)
                                                                          -----------     -----------

CASH FLOWS USED IN INVESTING ACTIVITIES:
        Purchase of property and equipment                                     (6,375)             --
                                                                          -----------     -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
        Proceeds from borrowings                                              470,000         535,000
        Repayment of borrowings                                              (205,000)       (157,675)
                                                                          -----------     -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES                                     265,000         377,325
                                                                          -----------     -----------

NET INCREASE IN CASH                                                           34,627         116,289

CASH, BEGINNING OF PERIOD                                                      92,527           8,442
                                                                          -----------     -----------

CASH, END OF PERIOD                                                       $   127,154     $   124,731
                                                                          ===========     ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
        Cash paid for:
             Interest                                                     $    25,253     $    70,731
                                                                          ===========     ===========
             Income Taxes                                                 $        --     $        --
                                                                          ===========     ===========
</TABLE>

            See notes to condensed consolidated financial statements.

                                        6
<PAGE>

1.     BUSINESS DESCRIPTION, GOING CONCERN AND MANAGEMENT PLANS

       COMPANY OVERVIEW

       Statmon Technologies Corp. develops, markets and licenses remote control
       and monitoring application software and hardware integration products.
       Our proprietary software products include the "Axess" and "Neuro"
       applications which interface with our "EIF", "UIF" and "UVM" hardware
       products. Pursuant to a three-year OEM distribution agreement dated
       February 25, 2003 Harris Broadcast re-branded our "Axess" software
       product as "ReCon" for licensing to Harris clients. End users license our
       products to automate and optimize their systems and operations at the
       device and network level where automatic control, monitoring, alarms and
       response is required in real time. We have launched our new EIF hardware
       product, which has our software embedded, into broadcast and other
       markets. We are positioning the EIF product as a cost effective offering
       at all levels of the broadcast industry as well as for new vertical
       markets where there is a need for wide-scale convergence solutions for
       monitoring and remote control of multiple sites, many types of devices
       and networks on a fully-scalable basis. The EIF can function
       independently or on a networked enterprise basis in conjunction with
       "Axess". We also provide specialized systems integration services to a
       variety of customers through our wholly-owned subsidiary, Statmon - eBI
       Solutions LLC ("SeBI").

       The accompanying unaudited condensed consolidated financial statements
       have been prepared in accordance with accounting principles generally
       accepted in the Unites States of America ("US GAAP"). In the opinion of
       management, the accompanying unaudited financial statements contain all
       adjustments, consisting only of those of a normal recurring nature,
       necessary to make the Company's financial position, results of operations
       and cash flows not misleading at the dates and for the periods indicated.
       These financial statements should be read in conjunction with the
       financial statements and notes related thereto included in the Annual
       Report on Form 10-KSB for the year ended March 31, 2004.

       The results for three and nine months ended December 31, 2004 are not
       necessarily indicative of the results to be expected for the full fiscal
       year. The preparation of the consolidated 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.

       GOING CONCERN

       The accompanying condensed consolidated financial statements have been
       prepared in accordance with accounting principles generally accepted in
       the United States of America and assume that the Company will continue as
       a going concern. The Company has incurred net losses of approximately
       $5,597,000 since inception, a substantial portion of which relates to the
       amortization of debt discount and other debt related charges.
       Additionally, the Company had a net working capital deficiency of
       approximately $2,273,000 at December 31, 2004. The Company has limited
       capital resources and requires additional funding in order to sustain its
       operations, accomplish its growth objectives and market its planned
       products and services. There is no assurance that the Company can reverse
       its operating losses, or that it can raise additional capital to allow it
       to maintain operations or expand its planned operations. Those conditions
       raise substantial doubt about the Company's ability to continue as a
       going concern. The accompanying condensed consolidated financial
       statements do not include any adjustments that might be necessary should
       the Company be unable to continue as a going concern.

       MANAGEMENT PLANS

       The Company expects that the growth and expansion of operations will
       require capital infusions to repay short-term debt and fund the Company's
       working capital needs. The Company is seeking to raise sufficient capital
       through a private placement of its equity or long-term debt securities in
       early 2005. The application for re-listing on the Over the Counter
       Bulletin Board market ("OTC-BB") was approved by the NASD on December 23,
       2004. The Company's symbol on the OTC-BB is STCA.OB.


                                       7
<PAGE>

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

       There can be no assurance that the Company will be able to raise the
       capital it requires in this time frame or at all or that it will be able
       to raise the capital in terms acceptable to it. In addition, there can be
       no assurances that the Company will be successful in obtaining extensions
       of its notes, if required. If it is not successful, the Company would
       seek to negotiate other terms for the issuance of debt, pursue bridge
       financing, negotiate with suppliers for a reduction of debt through
       issuance of stock, and/or seek to raise equity through the sale of its
       common stock. Management cannot assess the likelihood of achieving these
       objectives. If the Company is unable to achieve these objectives, the
       Company may be forced to cease its business operations, sell its assets
       and/or seek further protection under applicable bankruptcy laws.

2.     CERTAIN SIGNIFICANT ACCOUNTING POLICIES

       a.   Basis of Consolidation - The consolidated financial statements
            include the accounts of the Company's wholly-owned subsidiaries,
            including Statmon-eBI Solutions, LLC. Through February 15, 2004, the
            Company owned 51% of the Statmon-eBI Solutions, LLC subsidiary,
            after which time it became wholly-owned. All inter-company accounts
            and transactions have been eliminated.

       b.   Use of Estimates - The preparation of financial statements in
            conformity with accounting principles generally accepted in the
            United States of America 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 $105,000 and $60,000 for the three
            months ended December 31, 2004 and 2003, respectively, and $283,000
            and $175,000 for the nine months ended December 31, 2004 and 2003,
            respectively.

       d.   Inventories - Inventories consist of purchased parts, components and
            supplies, and are stated at the lower of cost or market.

       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 3,928,474 and 2,141,698 shares of common stock
            as of December 31, 2004 and 2003, respectively.

       f.   Stock-Based Compensation - As permitted under Statement of Financial
            Accounting Standards ("SFAS") No. 148, "Accounting for Stock-Based
            Compensation - Transition and Disclosure", which amended SFAS No.
            123 "Accounting for Stock-Based Compensation," the Company has
            elected to continue to follow the intrinsic value method in
            accounting for its stock-based employee compensation arrangements as
            defined by Accounting Principles Board Opinion ("APB") No. 25,
            "Accounting for Stock Issued to Employees", and related
            interpretations including Financial Accounting Standards Board
            ("FASB") Interpretation No. 44, "Accounting for Certain Transactions
            Involving Stock Compensation", an interpretation of APB No. 25. No
            stock-based employee compensation cost is reflected in net loss, as
            no options are outstanding.

            For the three and nine months ended December 31, 2004 and 2003, the
            Company did not issue any stock-based compensation to its employees.


                                       8
<PAGE>

2.     CERTAIN SIGNIFICANT ACCOUNTING POLICIES, continued

       g.   Revenue Recognition - Statement of Position 97-2, Software Revenue
            Recognition ("SOP 97-2"), was issued in October 1997 by the American
            Institute of Certified Public Accountants ("AICPA") and was amended
            by Statement of Position 98-4 ("SOP 98-4"). SOP 97-2 provides
            revised and expanded guidance of software revenue recognition and
            applies to all entities that earn revenue from licensing, selling,
            or otherwise marketing computer software. Based on its
            interpretation of SOP 97-2 and SOP 98-4, the Company believes its
            current revenue recognition policies and practices are consistent
            with SOP 97-2 and SOP 98-4. Additionally, the AICPA issued SOP 98-9
            in December 1998, which provides certain amendments to SOP 97-2, and
            is effective for transactions, entered into commencing the year
            ended December 31, 2000.

            Product revenues from the sale of software licenses are recognized
            when evidence of a license agreement exists, the fees are fixed and
            determinable, collectibility is probable and vendor specific
            objective evidence exists to allocate the total fee to elements of
            the arrangements. The Company's software license agreement entitles
            the licensee limited rights for upgrades and enhancements for the
            version they have licensed.

       h.   New Accounting Pronouncements - In December 2004, the FASB issued
            SFAS No. 123 (revised 2004), "Shared-Based Payment." SFAS 123(R)
            addresses the accounting for share-based payment transactions in
            which an enterprise receives employee services in exchange for (a)
            equity instruments of the enterprise or (b) liabilities that are
            based on the fair value of the enterprise's equity instruments or
            that may be settled by the issuance of such equity instruments. SFAS
            123(R) requires an entity to recognize the grant-date fair-value of
            stock options and other equity-based compensation issued to
            employees in the income statement. The revised statement generally
            requires that an entity account for those transactions using the
            fair-value-based method, and eliminates the intrinsic value method
            of accounting in APB 25, which was permitted under SFAS No. 123, as
            originally issued.

            The revised statement requires entities to disclose information
            about the nature of the share-based payment transactions and the
            effects of those transactions on the financial statements.

            SFAS No. 123(R) is effective for small business issuers financial
            statements for the first interim or annual reporting period that
            begins after December 15, 2005, with early adoption encouraged.

            The Company is currently evaluating the impact that this statement
            will have on its financial condition or results of operations.

3.     NOTES PAYABLE

       Notes payable consists of the following:

<TABLE>
<CAPTION>
<S>                                                                             <C>
         Notes Payable - Thieme Consulting, Inc. - related party           [a]  $  250,000

         Notes Payable - various (including $30,000 from related parties)  [b]   1,687,000
                                                                              --------------
                                                                                 1,937,000

         Less: Debt discount                                                      (150,261)
                                                                              --------------

           Notes Payable, net of debt discount                                 $ 1,786,739
                                                                              ==============
</TABLE>

       [a] In October 2001, the Company issued three secured Promissory Notes to
       three related lenders (collectively, the "Senior Notes") for a total of
       $250,000, accruing interest at 10% per annum. The three Senior Notes
       matured on


                                       9
<PAGE>

3.     NOTES PAYABLE, continued

       April 16, 2002, May 6, 2002, and May 18, 2002, respectively, and have
       since accrued interest at a penalty rate of 15% per annum. At December
       31, 2004, $112,356 of interest had accrued on the Senior Notes. Pursuant
       to the loan agreements' penalty provisions, the Company has issued and
       continues to issue 25,000 shares of common stock per month until full
       repayment of the Senior Notes. The Company's obligations under the Senior
       Notes are secured by a lien on the assets of the Company, plus certain
       priority rights over first new equity capital coming into the Company,
       effective until the Senior Notes are fully repaid.

       On February 7, 2003, the Company entered into a Promissory Note Extension
       Agreement and Subrogation Agreement pursuant to the Harris OEM Agreement
       with the holders of the Senior Notes. Pursuant to that agreement the
       Company extended the maturity of the Second Notes until June 30, 2003 and
       is currently in default. The extension consideration was 200,000 shares
       of common stock, with the 15% penalty interest rate continuing to accrue,
       plus, the Company will continue to issue the holders of the Senior Notes
       25,000 shares per month pro rata until repayment in full of all principal
       and interest.

       [b] Between April 5, 2002 and September 30, 2004, the Company issued
       Units, consisting of (i) $1,692,000 principal amount of promissory notes
       bearing interest at 10% per annum and due 180 days from the date of
       issuance; (ii) 1,692,000 shares of the Company's common stock; and (iii)
       three-year warrants to purchase 1,692,000 shares of common stock,
       exercisable at $1.00 per share, to approximately 60 investors. These
       notes had or have maturity dates between October 5, 2002 and February 27,
       2005. The notes in default bear interest at 15% per annum and the holders
       have been issued/or are accruing additional three-year common stock
       purchase warrants exercisable at $1.00 per share, allocated on a monthly
       basis, at approximately 10% of the face value of the notes per month,
       until the repayment of the notes and accrued interest. As of December 31,
       2004, eleven notes totaling $205,000 in principal have been repaid plus
       interest in the amount of $25,253. Additionally, as of December 31, 2004,
       notes in the amount of $1,077,000 are in default and accrued interest on
       these notes is $170,599.

       Between October 1, 2004 and December 31, 2004, the Company sold Units
       composed of (i) $200,000 principal amount of promissory notes bearing
       interest at 10% per annum and due 365 days from the date of issuance,
       (ii) 200,000 shares of common stock and (iii) warrants to purchase
       200,000 shares of common stock exercisable at a price of $2.00 per share
       for a term of three years. The proceeds were used to pay certain
       short-term debt obligations and to provide working capital.

       In October 2004, the Company sold a Unit composed of (i) a $20,000
       principal amount of promissory note bearing interest at 10% per annum and
       due 180 days from the date of issuance; (ii) 20,000 shares of the
       Company's common stock; and (iii) a three-year warrant to purchase 20,000
       shares of common stock, exercisable at $1.00 per share to one investor.
       This Unit relates to an investor that was part of the prior offering that
       occurred between October 2003 and September 2004.

4.     RELATED PARTY TRANSACTIONS

       In connection with an agreement in June 2001 with Blue Skies, LLC, an
       affiliate of John Hoff, a principal shareholder of the Company, the
       Company paid Blue Skies, LLC for its system integration services $99,727
       for the nine months ended December 31, 2003.


                                       10
<PAGE>




5.       EQUITY TRANSACTIONS


       [a] Common Stock

       During the nine months ended December 31, 2004, the Company issued
       225,000 shares of common stock valued at $210,125 associated with secured
       Senior notes that are in default. Additionally, the Company issued
       490,000 shares of common stock valued at $151,552 related to new debt in
       the same period.

       During the nine months ended December 31, 2004, the Company received
       1,120,000 shares that were returned to the Company as a result of the
       settlement of the SDS litigation. Additionally, 373,396 restricted and
       unregistered shares, of the 1,120,000 shares of the Company's common
       stock received, were transferred directly to the Company's litigation
       attorney in connection with the settlement, under the exemption provided
       by Section 4(2) of the Securities Act of 1933 (the "Securities Act"). The
       remaining 746,604 shares were cancelled.

       In January 2005, the Company issued 25,000 shares of common stock in
       connection with secured Senior Notes that are in default.

       [b] Stock Options and Warrants

       During the nine months ended December 31, 2004, the Company granted
       942,668 warrants to note holders, of which 490,000 warrants were valued
       at $134,088 related to new debt in the period and 452,668 warrants were
       valued at $332,681 related to notes in default. The weighted average
       exercise price of the warrants granted during the period was $1.19. The
       vesting period on these warrants is immediate and the exercise period is
       for three years from the date of respective issuance.

       On October 19, 2004, the Company issued warrants to purchase 103,700
       shares of common stock exercisable at a price of $1.00 per share for a
       term of three years in connection with a contract dated May 27, 2003
       between the Company and Berwyn Capital & Advisory, LLC for their services
       as the Company's non-exclusive placement agent in connection with the
       private placement of $1,037,000 worth of Units.

       [c] Preferred Stock

       On November 5, 2004 the Company amended and restated its Articles of
       Incorporation to authorize 5,000,000 shares of preferred stock with a par
       value of $.01 per share. At the time of this filing there are no shares
       of preferred stock outstanding.

6.     LEGAL SETTLEMENT

       On February 25, 2003 the Company entered into a Work Out Agreement with
       Michael Hurst and Chad Kalebic individually and their affiliates,
       including "SDS LLC" (the "Plaintiffs"), pertaining to the termination of
       their commission-based sales arrangement with the Company. From mid-2000
       to February 2003, the Plaintiffs had acted in various capacities with the
       Company, including functioning as its sales force. In mid-2003, a dispute
       developed between the parties over alleged unpaid commissions and the
       release of common stock issued to them.

       On November 6, 2003, the Plaintiffs filed a lawsuit with the Superior
       Court of the State of California (Case No. BC305584) alleging breach of
       contract of the Work Out Agreement, requesting specific performance and
       making an application for writ of attachment of the Company's assets. On
       December 1, 2003, the Company consented to the entry of an attachment
       order for $184,275, effective January 30, 2004, which was the amount of
       the Plaintiffs' claims for unpaid commissions and accrued compensation.
       The Plaintiffs also sought the delivery of 1,120,300 restricted shares of
       common stock issued them but being held by the Company. On December 30,
       2003, the Company paid the Plaintiffs $40,000 under protest, to be offset
       against the $184,275 claimed by the Plaintiffs, and on January 30, 2004,
       the Company made a cash deposit into a special purpose levy bank account
       for $144,275, which was attached by the Plaintiffs.


                                       11
<PAGE>

6.     LEGAL SETTLEMENT, continued

       Effective June 14, 2004, the parties settled the lawsuit. Under the
       settlement the Company paid $164,275 in cash of which $18,650 was
       expensed during the period ended June 30, 2004, including $144,275 from
       the release of the attached funds, and the Plaintiffs assigned their
       rights to receive 1,120,000 shares of common stock back to the Company
       for cancellation on September 15, 2004. The Company incurred
       approximately $8,000 of filing and third party costs in connection with
       the settlement and reissued 373,396 restricted and unregistered shares of
       the 1,120,000 shares of common stock, pursuant to the exemption provided
       by Section 4(2) of the Securities Act, to its legal counsel in connection
       with the settlement.

7.     COMMITMENTS AND CONTINGENCIES

       a.   Leases

            As of October 1, 2004, the Company entered into a new office lease
            at its current location. The new lease is for a term of five years,
            cancelable after three years at the Company's option, and increases
            the leased space from 2,351 to 3,953 rentable square feet. In order
            to accommodate the vacating tenant in the new space, the Company
            agreed to delay its occupation and the associated lease term start
            date to February 1, 2005. The lease includes rent abatement in month
            one and thirteen of the term as well as tenant improvement dollars
            that can be applied against lease payments if unused. Non-cancelable
            lease expense related to this new lease by fiscal year is:

                           2005 ....................  $ 21,204
                           2006 ....................   127,222
                           2007 ....................   127,222
                           2008 ....................   106,018
                                                      --------
                           Total ...................  $381,666
                                                      ========

       b.   Major Customers

            During the three months ended December 31, 2004, two customers
            comprised 37% and 20% of the Company's sales. The accounts
            receivable balances for these customers at December 31, 2004 were
            $62,870 and $55,026, respectively. During the three months ended
            December 31, 2003, the same two customers comprised 0% and 58% of
            the Company's sales.

            During the nine months ended December 31, 2004, two customers
            comprised 45% and 22% of the Company's sales. The accounts
            receivable balances for these customers at December 31, 2004 were
            $55,026 and $11,780, respectively. During the nine months ended
            December 31, 2003, the same two customers comprised 61% and 13% of
            the Company's sales.

       c.   Concentration of Credit Risk

            The Company maintains cash balances in one financial institution.
            The balances are insured by the Federal Deposit Insurance
            Corporation up to $100,000 per institution. From time to time, the
            Company's balances may exceed these limits. The Company believes it
            is not exposed to any significant credit risk for cash.



                                       12
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

This Report contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. The words "believe," "expect," "anticipate," "intend," "estimate,"
"may," "should," "could," "will," "plan," "future," "continue," and other
expressions that are predictions of or indicate future events and trends and
that do not relate to historical matters identify forward-looking statements.
These forward-looking statements are based largely on our expectations or
forecasts of future events, can be affected by inaccurate assumptions, and are
subject to various business risks and known and unknown uncertainties, a number
of which are beyond our control. Therefore, actual results could differ
materially from the forward-looking statements contained in this document, and
readers are cautioned not to place undue reliance on such forward-looking
statements. We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. A wide variety of factors could cause or contribute to such
differences and could adversely impact revenues, profitability, cash flows and
capital needs. There can be no assurance that the forward-looking statements
contained in this document will, in fact, transpire or prove to be accurate.

Factors that could cause or contributed to our actual results differing
materially from those discussed herein or for our stock price to be adversely
affected include, but are not limited to: (i) our limited operating history;
(ii) our history of net losses and inability to achieve or maintain
profitability; (iii) our auditors have expressed a going concern opinion; (iv)
our dependence on Harris Corporation ("Harris") for a substantial portion of our
revenues and our ability to develop revenues in the broadcast industry
independent of Harris; (v) our need for additional capital and the uncertainty
of obtaining it; (vi) our ability to refinance or renegotiate short-term
promissory notes that have come due or are coming due; (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) the future growth and sustainability
of our early stage products; (xxii) obsolescence of our technologies; (xxiii)
our ability to attract customers who will embrace our new products and
technologies; (xxiv) our stock price is likely to be highly volatile; (xxv) our
ability to expand into new market verticals; (xxvi) our common stock is
considered a penny stock and is considered to be a high-risk investment and
subject to restrictions on marketability; and (xxvi) control by certain
stockholders. 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, 2004 filed with the Securities and
Exchange Commission.

RECENT DEVELOPMENTS FOR THE COMPANY

OVERVIEW

Statmon Technologies Corp. develops, markets and licenses remote control and
monitoring application software and hardware integration products. Our
proprietary software products include the "Axess" and "Neuro" applications which
interface with our "EIF", "UIF" and "UVM" hardware products. Pursuant to a
three-year OEM distribution agreement dated February 25, 2003 Harris Broadcast
re-branded our "Axess" software product as "ReCon" for licensing to Harris
broadcast clients. End users license our products to automate and optimize their
systems and operations at the device and network level where automatic control,
monitoring, alarms and response is required in real time. We have launched our
new EIF hardware product, which has our software embedded, into broadcast and
other markets. We are positioning the EIF product as a cost effective offering
at all levels of the broadcast industry as well new vertical markets where there
is a need for wide-scale solutions for monitoring and remote control of multiple
sites, many types of devices and networks on a fully-scalable enterprise basis.
The EIF can function independently or on a networked basis in conjunction with
"Axess". We also provide specialized systems integration services to a variety
of customers through our wholly-owned subsidiary, Statmon - eBI Solutions LLC
("SeBI").

Our next stage of development, given sufficient capital, is to expand beyond our
traditional broadcast industry activities into new vertical markets, including
power and energy management, telecom, wireless, homeland security, environmental


                                       13
<PAGE>

compliance and infrastructure management. The current versions of our
proprietary application software and integration technologies are industry and
market universal. We believe that the architectural design and functionality
development curve of our products specifically address the needs and emerging
demand for economical pre-packaged solutions facilitating improved operating
efficiencies through device convergence and network automation, powerful remote
control and monitoring capabilities in real time. We are in the process of
identifying qualified strategic partners and distributors who already have
established customer installation bases where our products can readily be
employed as a middleware and/or provide stand alone end-to-end solutions.


FOR THE QUARTER ENDED DECEMBER 31, 2004 AND 2003

RESULTS FROM OPERATIONS

REVENUES - Revenues were $344,786 and $589,935 for the three months ended
December 31, 2004 and 2003, respectively. Revenues consisted of $181,333 of
product revenues and $163,453 of integration services revenues for the three
months ended December 31, 2004. Revenues consisted of $371,904 of product
revenues and $218,031 of integration services revenues for the three months
ended December 31, 2003. The decrease in product revenues of approximately
$190,000 is due to weak broadcast sales as we realign the broadcast sales
channel with our broadcast industry partner, "Harris Broadcast", a division of
Harris Corp. (NYSE symbol - HRS), on a non-exclusive basis. Harris Broadcast
recently implemented an internal restructuring which impacted its inventory
levels and product purchases from the Company. The Statmon distribution
agreement with Harris reverted to a non-exclusive basis on July 18, 2004, when
Harris failed to make the minimum purchases as required under its OEM agreement
with the Company. Such agreement expires on February 24, 2006. Harris indicates
that it remains highly committed to the long-term success of its ReCon branded
version of the Statmon-owned Axess software application and suite of hardware
integration products. While the Company continues to have confidence in the
future of the Harris relationship, it is positioning itself to return to
previous levels of revenue in the broadcast industry independent of the Harris
relationship. The decrease in integration services revenues of approximately
$57,000 is due to the timing of completion of several large projects in the
previous year.

COST OF SALES - Cost of sales were $126,763 and $172,550 for the quarters ended
December 31, 2004 and 2003, respectively. Cost of sales consisted of $54,859
related to product revenues and $71,904 related to integration services revenues
for the three months ended December 31, 2004. Cost of sales consisted of $84,017
related to product revenues and $98,533 related to integration services revenues
for the three months ended December 31, 2003. Overall gross profit percentage
decreased to 63% in the three months ended December 31, 2004 compared to 71% in
the comparable prior year period. The decrease in overall gross profit
percentage is attributable to the increase in sales of the Company's new
hardware product, the "EIF-32", which has a lower gross profit margin than a
typical software sale. Gross profit percentage for integration services was
consistent with the prior period.

RESEARCH AND DEVELOPMENT - Research and development expenses were approximately
$105,000 and $60,000 for the three months ended December 31, 2004 and 2003,
respectively. This increase represents increased research and development in the
period related to our new EIF product and development activities focused on
vertical market penetration.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES - Selling, general and
administrative expenses were $500,851 and $335,477 for the three months ended
December 31, 2004 and 2003, respectively, an increase of approximately $165,000.
The increase in selling, general and administrative expenses is principally
attributed to an increase in audit and legal expense during the December 31,
2004 period due to the recent audit of the Company's financial statements for
fiscal years ended March 31, 2004 and 2003 and the three months ended March 31,
2002, the quarterly review for June and September 2004 and the costs associated
with the preparation of the Company's corporate tax returns.

OTHER (INCOME)/EXPENSE - Other (Income)/Expense was $426,217 and $231,447 for
the three months ended December 31, 2004 and 2003, respectively. The increase of
approximately $195,000 can be attributed to an increase in interest expense of
approximately $39,000 related to increased outstanding debt in the period, an
increase in common stock and warrants issued in association with debt of
approximately $121,000 related to the issuance of penalty warrants associated
with delinquent notes and contractual warrants issued to the Company's placement
agent, an increase in amortization of debt discount of approximately $26,000
related to new debt issued during the previous six month period and an increase
in amortization of deferred financing costs related to such new debt.


                                       14
<PAGE>

NET LOSS - As a result of the above, for the three months ended December 31,
2004 the Company recorded a net loss of $709,045, compared to a net loss of
$149,539 for the same period the previous year.

FOR THE NINE MONTHS ENDED DECEMBER 31, 2004 AND 2003

RESULTS FROM OPERATIONS

REVENUES - Revenues were $1,153,606 and $1,977,517 for the nine months ended
December 31, 2004 and 2003, respectively. Revenues consisted of $686,738 of
product revenues and $466,868 of integration services revenues for the nine
months ended December 31, 2004. Revenues consisted of $1,408,288 of product
revenues and $569,229 of integration services revenues for the nine months ended
September 30, 2003. The decrease in product revenues of approximately $720,000
is due to weak broadcast sales as we realign the broadcast sales channel with
our broadcast industry partner, "Harris Broadcast", a division of Harris Corp.,
on a non-exclusive basis. Harris Broadcast recently implemented an internal
restructuring which impacted its inventory levels and product purchases from the
Company. The Company's distribution agreement with Harris reverted to a
non-exclusive basis on July 18, 2004 when Harris failed to make the minimum
purchases as required under its OEM agreement with the Company. Such agreement
expires on February 24, 2006. Harris indicates that it remains highly committed
to the long-term success of its ReCon branded version of the Statmon-owned Axess
software application and suite of hardware integration products. While the
Company continues to have confidence in the future of the Harris relationship it
is positioning itself to return to previous levels of revenue in the broadcast
industry independent of the Harris relationship. The decrease in integration
services revenues of approximately $102,000 is due to the timing of completion
on several large projects in the previous year period and lower integration
services revenues from Statmon PSO, which contributed approximately $100,000 of
additional integration services revenue to the nine months ended December 31,
2003.

COST OF SALES - Cost of sales were $310,920 and $580,785 for the nine months
ended December 31, 2004 and 2003, respectively. Cost of sales consisted of
$105,828 related to product revenues and $205,092 related to integration
services revenues for the nine months ended December 31, 2004. Cost of sales
consisted of $363,183 related to product revenues and $217,602 related to
integration services revenues for the nine months ended December 31, 2003.
Overall gross profit percentage increased to 73% for the nine months ended
December 31, 2004 compared to 71% in the comparable prior year period. The
increase in overall gross profit percentage is attributable to greater gross
margins for product revenues for the nine months as a percentage of overall
revenue for the nine months, as the gross profit percentage for product revenues
is typically significantly greater than the gross profit percentage related to
integration services revenue.

RESEARCH AND DEVELOPMENT - Research and development expenses were approximately
$283,000 and $175,000 for the nine months ended December 31, 2004 and 2003,
respectively. This increase represents increased research and development in the
period related to the Company's new EIF product and development activities
focused on wide-scale vertical market penetration.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES - Selling, general and
administrative expenses were $1,424,668 and $1,043,492 for the nine months ended
December 31, 2004 and 2003, respectively, an increase of approximately $381,000.
The increase in selling, general and administrative expenses is principally
attributed to an increase in audit and legal expenses during the nine month
period ended December 31, 2004 due to our recent audit of the Company's
financial statements for the fiscal years ended March 31, 2004 and 2003 and the
three months ended March 31, 2002, the Quarterly reviews for June and September
2004 and the costs associated with the preparation of the Company's corporate
tax returns.

OTHER (INCOME)/EXPENSE - Other (Income)/Expense was $1,407,810 and $641,408 for
the nine months ended December 31, 2004 and 2003, respectively. The increase of
approximately $766,000 can be attributed to an increase in interest expense of
approximately $100,000 related to increased debt in the period, an increase in
amortization of debt discount of approximately $436,000 related to a substantial
amount of new debt issued at the end of the March 31, 2004 period and new debt
issued in the period, an increase in the cost associated with common stock and
warrants issued in association with debt of approximately $152,000 and an
increase in amortization of deferred financing costs related to that same new
debt.


                                       15
<PAGE>

NET LOSS - As a result of the above, for the nine months ended December 31, 2004
the Company recorded a net loss of $1,989,792 compared to a net loss of $288,168
for the same period the previous year.

LIQUIDITY AND CAPITAL RESOURCES

The Company has financed its cash requirements primarily through operations and
short-term borrowings. During the three months ended December 31, 2004, the
Company issued Units to two investors consisting of (i) $200,000 principal
amount promissory notes bearing interest at 10% per annum and due 365 days from
the date of issuance, (ii) 200,000 shares of the Company's common stock, and
(iii) three-year warrants to purchase 200,000 shares of common stock, at $2.00
per share. Additionally, the Company issued a Unit to one investor that was
involved with the prior period's offering, consisting of (i) a $20,000 principal
amount promissory note bearing interest at 10% per annum and due 180 days from
the date of issuance, (ii) 20,000 shares of the Company's common stock, and
(iii) a three-year warrant to purchase 20,000 shares of common stock,
exercisable at $1.00 per share. During the previous quarter, the Company issued
a Unit consisting of (i) a $250,000 principal amount promissory note bearing
interest at 10% per annum and due 180 days from the date of issuance, (ii)
250,000 shares of the Company's common stock, and (iii) a three-year warrant to
purchase 250,000 shares of common stock, exercisable at $1.00 per share.

Net cash used in operating activities was $223,998 and $261,036 for the nine
months ended December 31, 2004 and 2003, respectively. The use of cash in 2004
is the result of a net loss of approximately $1,990,000, partially offset by
non-cash charges of approximately $1,161,000 and a net change in operating
assets and liabilities of approximately $605,000. The use of cash in 2003 is the
result of a net loss of approximately $288,000, partially offset by non-cash
charges of approximately $572,000 and a net decrease in operating assets and
liabilities of approximately $545,000.

Cash used in investing activities was $6,375 and $0 for the nine months ended
December 31, 2004 and 2003, respectively.

Cash provided by financing activities was $265,000 and $377,325 for the nine
months ended December 31, 2004 and 2003, respectively. Borrowings in the nine
months ended December 31, 2004 were $470,000 as compared to $535,000 for the
same period last year. These borrowings were offset by repayments of $205,000
and $157,675 for the 2004 and 2003 periods, respectively.

As of December 31, 2004, the Company had a working capital deficiency of
approximately $2,273,000, including notes payable and accrued interest totaling
approximately $2,101,000, net of applicable debt discount. The Company has no
long-term debt.

The Company has incurred net losses of approximately $5,597,000 since inception,
a substantial portion of which relates to the amortization of debt discount and
other debt related charges. Primarily as a result of our recurring losses and
our lack of liquidity, the Company has received a report from its independent
auditors, included with our annual report on Form 10-KSB for the year ended
March 31, 2004, that includes an explanatory paragraph describing the
uncertainty as to our ability to continue as a going concern. These conditions
raise substantial doubt about the Company's ability to continue as a going
concern. The accompanying financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

In order to continue our operations beyond March 2005, the Company will need to
attain its revenue and profit margin goals, repay or obtain extensions on its
existing debt and raise additional working capital through a private placement
of equity or long-term debt. The Company intends to use the proceeds of such
offering to repay short-term debt, fund new market verticals and provide working
capital. If the Company raises additional funds through the issuance of equity
securities, the percentage ownership of its stockholders would be reduced. In
addition, these equity securities might have rights, preferences or privileges
senior to the outstanding common stock.

There can be no assurance that the Company will be able to raise the capital it
requires in this time frame or at all or that it will be able to raise the
capital in terms acceptable to it. In addition, there can be no assurances that
the Company will be successful in obtaining extensions of its notes, if
required. If it is not successful, the Company would seek to negotiate other
terms for the issuance of debt, pursue bridge financing, negotiate with


                                       16
<PAGE>

suppliers for a reduction of debt through issuance of stock, and/or seek to
raise equity through the sale of its common stock. Management cannot assess the
likelihood of achieving these objectives. If the Company is unable to achieve
these objectives, the Company may be forced to cease its business operations,
sell its assets and/or seek further protection under applicable bankruptcy laws.

Except as provided above, the Company has no present commitment that is likely
to result in its liquidity increasing or decreasing in any material way. In
addition, except as noted above, the Company knows of no trend, additional
demand, event or uncertainty that will result in, or that is reasonably likely
to result in, the Company's liquidity increasing or decreasing in any material
way. The Company has no material commitments for capital expenditures. The
Company knows of no material trends, favorable or unfavorable, in its capital
resources.

INFLATION AND SEASONALITY

Inflation has not materially affected the Company during the past fiscal year.
The Company's business is not seasonal in nature.


ITEM 3 - CONTROLS AND PROCEDURES

The Company's Chief Executive Officer and Chief Financial Officer, with the
participation of its management, carried out an evaluation of the effectiveness
of the Company's disclosure control and procedures pursuant to Exchange Act Rule
13a-15(e). Based upon that evaluation, the Chief Executive Officer/Chief
Financial Officer believe that, as of the end of the period covered by this
report, the Company's disclosure controls and procedures are effective in making
known to them, recording, processing, summarizing and reporting on a timely
basis, material information relating to the Company (including its consolidated
subsidiaries) required to be included in this report.

A control system, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system
are met. Because of the inherent limitations in all control systems no
evaluation of controls can provide absolute assurance that all control issues,
if any, within a company have been detected.



                                       17
<PAGE>
PART II - OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

          On February 25, 2003 the Company entered into a Work Out Agreement
          with Michael Hurst and Chad Kalebic individually and their affiliates,
          including "SDS LLC" (the "Plaintiffs"), pertaining to the termination
          of their commission-based sales arrangement with the Company. From
          mid-2000 to February 2003, the Plaintiffs had acted in various
          capacities with the Company, including functioning as its sales force.
          In mid-2003, a dispute developed between the parties over unpaid
          commissions and the release of common stock issued to them. On
          November 6, 2003, the Plaintiffs filed a lawsuit with the Superior
          Court of the State of California (Case No. BC305584) alleging breach
          of contract of the Work Out Agreement, requesting specific performance
          and making an application for writ of attachment of the Company's
          assets. On December 1, 2003, the Company consented to the entry of an
          attachment order for $184,275, effective January 30, 2004, which was
          the amount of the Plaintiffs' claims for unpaid commissions and
          accrued compensation. The Plaintiffs also sought the delivery of
          1,120,300 restricted shares of common stock issued them but being held
          by the Company. On December 30, 2003, the Company paid the Plaintiffs
          $40,000 under protest, to be offset against the $184,275 claimed by
          the Plaintiffs and on January 30, 2004, the Company made a cash
          deposit into a special purpose levy bank account for $144,275, which
          was attached by the Plaintiffs.

          Effective June 14, 2004, the parties settled the lawsuit. Under the
          settlement the Company paid $164,275 in cash of which $18,650 was
          expensed during the period ended June 30, 2004, including $144,275
          from the release of the attached funds, and the Plaintiffs assigned
          1,120,000 shares of common stock issued to them back to the Company
          for cancellation on September 15, 2004. The Company incurred
          approximately $8,000 of filing and third party costs in connection
          with the settlement and reissued 373,396 restricted and unregistered
          shares of the 1,120,000 shares of common stock, pursuant to the
          exemption provided by Section 4(2) of the Securities Act, to its legal
          counsel in connection with the settlement.

ITEM 2.   CHANGES IN SECURITIES AND USE OF PROCEEDS

          During the three-months ended December 31, 2004, the Company issued
          Units to two investors consisting of (i) $200,000 principal amount
          promissory notes bearing interest at 10% per annum and due 365 days
          from the date of issuance; (ii) 200,000 shares of the Company's common
          stock; and (iii) three-year warrants to purchase 200,000 shares of
          common stock, exercisable at $2.00 per share.

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

          The Company continued to be in default on $250,000 of Senior Notes
          during the three months ended December 31, 2004. The Senior Notes
          accrue interest at a penalty rate of 15% per annum. Under the penalty
          provisions of the loan agreements, the Company continues to issue
          25,000 shares of common stock per month until full repayment of the
          Senior Notes. The accrued interest on the Senior Notes at December 31,
          2004 is $112,356.

          The Company also continues to be in default on a $50,000 principal
          amount promissory note issued in May 2002, a $50,000 principal amount
          promissory note issued in September 2003, a $60,000 principal amount
          promissory note issued in January 2004 and a $100,000 principal amount
          promissory note issued in March 2004. The Notes continue to accrue
          interest at 15% per annum and 2,500 penalty warrants per month have
          begun to accrue on the first $50,000 note since January 10, 2003,
          2,500 penalty warrants per month have begun to accrue on the second
          $50,000 note since April 19, 2004, 3,000 penalty warrants per month
          have begun to accrue on the $60,000 note since August 2, 2004 and
          5,000 penalty warrants per month have begun to accrue on the $100,000
          note since October 14, 2004. The accrued interest on these Notes at
          December 31, 2004 is $36,507.

          In total, at December 31, 2004, $1,327,000 principal amount of the
          $1,937,000 principal amount of promissory notes are in default and
          $313,982 of interest had accrued on these outstanding notes as of such
          date.

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

(a)       Exhibits

            31.1  Certificate of pursuant to Rule 13a-14(a) under the Securities
                  and Exchange Act of 1934, as amended.

            31.2  Certificate of pursuant to Rule 13a-14(a) under the Securities
                  and Exchange Act of 1934, as amended.

            32.1  Certificate of pursuant to Rule 13a-14(b) under the Securities
                  and Exchange Act of 1934, as amended.

            32.2  Certificate of pursuant to Rule 13a-14(b) under the Securities
                  and Exchange Act of 1934, as amended.

(b)       The Company filed no reports on Form 8-K during the quarterly period
          ended December 31, 2004.

                                       18
<PAGE>

                                   SIGNATURES

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


Date: February 14, 2005                          /s/ Geoffrey P. Talbot
                                                 ------------------------------
                                                 Name:  Geoffrey P. Talbot
                                                 Title: Chief Financial Officer




                                       19
<PAGE>

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.





                                       20