**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 June 30, 2005 **

**or      **

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

**THE      SECURITIES EXCHANGE ACT OF 1934 **

**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.) |
|                                                                                                                    |
| **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:         |

| **Class**                                   | **Outstanding                at August 10, 2005** |
|---------------------------------------------|---------------------------------------------------|
| Common                Stock, $.01 par value | 13,012,757                                        |

----

**FORM      10-QSB**

**STATMON      TECHNOLOGIES CORP.**

**June      30, 2005**

**TABLE      OF CONTENTS **

|                                                                                                                                            | Page(s) |
|-------------------------------------------------------------------------------------------------------------------------------------------------|---------|
| Part                I - Financial                Information                                                                               |    |
| Item                1. Financial Statements (unaudited):                                                                                        |    |
| Condensed                Consolidated Balance Sheet at June 30, 2005                                                                            | 3       |
| Condensed                Consolidated Statement of Operations for the Three Months Ended June                30,                2005 and 2004   | 4       |
| Condensed                Consolidated Statements of Cash Flows for the Three Months Ended                June 30,                2005 and 2004  | 5       |
| Notes                to Condensed Consolidated Financial Statements                                                                             | 6       |
| Item                2. Management’s Discussion and Analysis of Financial                Conditionand                Results of Operations | 11      |
| Item                3. Controls and Procedures                                                                                                  | 15      |
| Part                II - Other                Information                                                                                  |    |
| Item                1. Legal Proceedings                                                                                                        | 16      |
| Item                2. Changes in Securities and Use of Proceeds                                                                                | 16      |
| Item                3. Defaults Upon Senior Securities                                                                                          | 16      |
| Item                6. Exhibits and Reports on Form 8-K                                                                                         | 16      |
| Signatures                                                                                                                                      | 17      |
| Exhibits                                                                                                                                        | 18      |

----

**ITEM      I — FINANCIAL STATEMENTS**

**STATMON      TECHNOLOGIES CORP. AND SUBSIDIARIES**

**CONDENSED      CONSOLIDATED BALANCE SHEET**

**JUNE      30, 2005**

**(UNAUDITED)**

|                                                                                                            |   |   |       |   |
|-----------------------------------------------------------------------------------------------------------------|--------|--------|------------|--------|
|  **ASSETS**                                                                                                |   |   |       |   |
| Current                    Assets:                                                                              |   |   |       |   |
| Cash                                                                                                            |   | $      | 55,127     |   |
| Accounts                    receivable                                                                          |   |   | 175,024    |   |
| Inventories                                                                                                     |   |   | 79,293     |   |
| Prepaid                    expense and other current assets                                                     |   |   | 20,557     |   |
| Total                    Current Assets                                                                         |   |   | 330,001    |   |
|                                                                                                            |   |   |       |   |
| Property                    and Equipment, net                                                                  |   |   | 26,156     |   |
|                                                                                                            |   |   |       |   |
| Other                    Assets                                                                                 |   |   | 11,315     |   |
|                                                                                                            |   |   |       |   |
|                                                                                                            |   |   |       |   |
| Total                    Assets                                                                                 |   | $      | 367,472    |   |
|                                                                                                            |   |   |       |   |
| **LIABILITIES                    AND STOCKHOLDERS' DEFICIENCY**                                                 |   |   |       |   |
| Current                    Liabilities:                                                                         |   |   |       |   |
| Notes                    payable (including $280,000 due to related parties), net of debt                       |   |   |       |   |
| discount                    of $283,517                                                                         |   | $      | 2,158,483  |   |
| Accounts                    payable                                                                             |   |   | 375,479    |   |
| Accrued                    expenses                                                                             |   |   | 168,446    |   |
| Accrued                    compensation                                                                         |   |   | 228,355    |   |
| Interest                    payable (including $139,000 due to related parties)                                 |   |   | 458,439    |   |
| Deferred                    revenue                                                                             |   |   | 11,993     |   |
| Total                    Liabilities                                                                            |   |   | 3,401,195  |   |
|                                                                                                            |   |   |       |   |
| Commitments                    and Contingencies                                                                |   |   |       |   |
|                                                                                                            |   |   |       |   |
| Stockholders'                    Deficiency:                                                                    |   |   |       |   |
| Preferred                    stock, $.01 par value, 5,000,000 shares authorized, none                    issued |   |   |       |   |
| and                    outstanding                                                                              |   |   | -          |   |
| Common                    stock, $.01 par value, 25,000,000 shares authorized,                                  |   |   |       |   |
| 12,761,057                    issued and outstanding                                                            |   |   | 127,611    |   |
| Additional                    paid-in capital                                                                   |   |   | 4,224,990  |   |
| Accumulated                    deficit                                                                          |   |   | (7,386,324 | )      |
| Total                    Stockholders' Deficiency                                                               |   |   | (3,033,723 | )      |
|                                                                                                            |   |   |       |   |
| Total                    Liabilities and Stockholders' Deficiency                                               |   | $      | 367,472    |   |
|                                                                                                            |   |   |       |   |

----

**STATMON      TECHNOLOGIES CORP. AND SUBSIDIARIES**

**CONDENSED      CONSOLIDATED STATEMENTS OF OPERATIONS**

**(UNAUDITED)**

|                                                                           |   | For                  the Three Months Ended June 30, |       |
|--------------------------------------------------------------------------------|--------|------------------------------------------------------|------------|
|                                                                           |   | 2005                                                 |       | 2004 |   |
|                                                                           |   |                                                 |       |   |   |
| Revenues                                                                       |   | $                                                    | 415,128    |   | $ | 626,250 |   |
|                                                                           |   |                                                 |       |   |   |   |   |
| Cost                  of Sales (including $0 and $99,727 to related parties in |   |                                                 |       |   |   |   |   |
| 2005                  and 2004, respectively)                                  |   |                                                 | 129,311    |   |   | 125,560 |   |
|                                                                           |   |                                                 |       |   |   |   |   |
| Gross                  Profit                                                  |   |                                                 | 285,817    |   |   | 500,690 |   |
|                                                                           |   |                                                 |       |   |   |   |   |
| Selling,                  General and Administrative Expenses                  |   |                                                 | 645,155    |   |   | 431,089 |   |
|                                                                           |   |                                                 |       |   |   |   |   |
| Operating                  (Loss)/Income                                       |   |                                                 | (359,338   | ) |   | 69,601 |   |
|                                                                           |   |                                                 |       |   |   |   |   |
| Other                  Expense:                                                |   |                                                 |       |   |   |   |   |
| Interest                                                                       |   |                                                 | 79,067     |   |   | 50,332 |   |
| Common                  stock and warrants issued in association with debt     |   |                                                 | 187,523    |   |   | 181,979 |   |
| Amortization                  of debt discount                                 |   |                                                 | 82,987     |   |   | 309,693 |   |
| Amortization                  of deferred financing costs                      |   |                                                 | 7,500      |   |   | 47,373 |   |
| Total                  Other Expense                                           |   |                                                 | 357,077    |   |   | 589,377 |   |
|                                                                           |   |                                                 |       |   |   |   |   |
| NET                  LOSS                                                      |   | $                                                    | (716,415   | ) | $ | (519,776 | ) |
|                                                                           |   |                                                 |       |   |   |   |   |
| NET                  LOSS PER COMMON SHARE - Basic and Diluted                 |   | $                                                    | (0.06      | ) | $ | (0.04 | ) |
|                                                                           |   |                                                 |       |   |   |   |   |
| Weighted                  Average Number of Common Shares Outstanding -        |   |                                                 |       |   |   |   |   |
| Basic                  and Diluted                                             |   |                                                 | 12,573,694 |   |   | 11,759,749 |   |

----

**STATMON      TECHNOLOGIES CORP. AND SUBSIDIARIES**

**CONDENSED      CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(UNAUDITED)**

|                                                                             |   | For                  the Three Months Ended June 30,   |     |
|----------------------------------------------------------------------------------|--------|------------------------------------------------------------------|----------|
|                                                                             |   | 2005                                                             |     |  2004 |   |
| CASH                  FLOWS FROM OPERATING ACTIVITIES:                           |   |                                                             |     |   |   |   |   |
| Net                  loss                                                        |   | $                                                                | (716,415 | ) | $ | (519,776 | ) |
| Adjustments                  to reconcile net loss to net cash                   |   |                                                             |     |   |   |   |   |
| (used                  in)/provided by operating activities:                     |   |                                                             |     |   |   |   |   |
| Depreciation                  and amortization                              |   |                                                             | 4,751    |   |   | 2,657 |   |
| Common                  stock and warrants issued in association with debt  |   |                                                             | 187,523  |   |   | 181,979 |   |
| Amortization                  of debt discount                              |   |                                                             | 82,987   |   |   | 309,693 |   |
| Amortization                  of deferred financing costs                   |   |                                                             | 7,500    |   |   | 47,373 |   |
| Changes                  in operating assets and liabilities:               |   |                                                             |     |   |   |   |   |
|  Accounts                  receivable                                       |   |                                                             | (43,841  | ) |   | 640,752 |   |
|  Inventories                                                                |   |                                                             | (10,771  | ) |   | (28,675 | ) |
|  Prepaid                  expense and other current assets                  |   |                                                             | (2,072   | ) |   | 144,599 |   |
|  Other                  assets                                              |   |                                                             | (4,000   | ) |   | - |   |
|  Accounts                  payable                                          |   |                                                             | (29,949  | ) |   | (219,906 | ) |
|  Accrued                  expenses                                          |   |                                                             | 40,519   |   |   | (44,689 | ) |
|  Accrued                  compensation                                      |   |                                                             | 50,869   |   |   | (115,129 | ) |
|  Interest                  payable                                          |   |                                                             | 78,530   |   |   | 50,020 |   |
|  Deferred                  revenue                                          |   |                                                             | (32,478  | ) |   | (135,319 | ) |
| NET                  CASH (USED IN)/PROVIDED BY OPERATING ACTIVITIES             |   |                                                             | (386,847 | ) |   | 313,579 |   |
|                                                                             |   |                                                             |     |   |   |   |   |
| CASH                  FLOWS FROM FINANCING ACTIVITIES*:*                         |   |                                                             |     |   |   |   |   |
| Proceeds                  from borrowings                                        |   |                                                             | 250,000  |   |   | 20,000 |   |
| Repayment                  of borrowings                                         |   |                                                             | -        |   |   | (35,000 | ) |
| NET                  CASH PROVIDED BY/(USED IN) FINANCING ACTIVITIES             |   |                                                             | 250,000  |   |   | (15,000 | ) |
|                                                                             |   |                                                             |     |   |   |   |   |
| NET                  (DECREASE)/INCREASE IN CASH                                 |   |                                                             | (136,847 | ) |   | 298,579 |   |
|                                                                             |   |                                                             |     |   |   |   |   |
| CASH,                  BEGINNING OF PERIOD                                       |   |                                                             | 191,974  |   |   | 92,527 |   |
|                                                                             |   |                                                             |     |   |   |   |   |
| CASH,                  END OF PERIOD                                             |   | $                                                                | 55,127   |   | $ | 391,106 |   |
|                                                                             |   |                                                             |     |   |   |   |   |
| SUPPLEMENTAL                  DISCLOSURE OF CASH FLOW INFORMATION:               |   |                                                             |     |   |   |   |   |
| Cash                  paid for:                                                  |   |                                                             |     |   |   |   |   |
| Interest                                                                    |   | $                                                                | 536      |   | $ | 12,611 |   |
|                                                                             |   |                                                             |     |   |   |   |   |
| Income                  taxes                                               |   | $                                                                | -        |   | $ | - |   |
|                                                                             |   |                                                             |     |   |   |   |   |

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

**Company      Overview**

**Going      Concern**

**Management      Plans**

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

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

|   | *a.* | Basis                of Consolidation                -                The consolidated financial statements include the accounts of the                Company's wholly-owned subsidiary, Statmon-eBI Solutions, LLC. 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                $148,000 and $67,000 for the three months ended June 30, 2005 and                2004,                respectively. |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | *d.* | Inventories -                Inventories are priced at the lower of cost (first-in, first-out)                or                market and consists of purchased parts, components and                supplies. |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | *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 5,152,305 and                2,986,555                shares of common stock as of June 30, 2005 and 2004,                respectively. |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | *f.* | Revenue                Recognition -                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.                The Company believes its current revenue recognition policies and                practices are consistent with SOP                97-2. |
|--------|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 2. | CERTAIN                SIGNIFICANT ACCOUNTING POLICIES,                continued |
|----|----------------------------------------------------------------------------------|

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

|  | *h.* | New                  Accounting Pronouncements                  -                  In                  October 2004, the FASB ratified the consensus reached                  in Emerging Issues                  Task Force ("EITF") Issue No. 04-8, “The Effect of Contingently                  Convertible Debt on Diluted Earnings                  Per Share.”                  The EITF states that contingently convertible instruments, such                  as                  contingently convertible debt, contingently convertible preferred                  stock,                  and other such securities should be included in diluted earnings                  per share                  (if dilutive) regardless of whether the market price trigger has                  been met.                  The consensus became effective for reporting periods ending after                  December                  15, 2004.  The adoption of this pronouncement did                  not                  have a material effect on the Company's financial                  statements. |
|--|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

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

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

|   | a. | Legal                Proceedings |
|--------|----|----------------------------------|

|   | b. | Other |
|--------|----|-------|

----

| 6. | MAJOR                CUSTOMERS AND CONCENTRATION OF CREDIT                RISK |
|----|--------------------------------------------------------------------------------|

|   | a. | Major                Customers |
|--------|----|--------------------------------|

|   | b. | Concentration                of Credit Risk |
|--------|----|---------------------------------------------|

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

;      (ii)      our history of net losses and inability to achieve or maintain profitability;      (iii) our auditors have expressed a going concern opinion; (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 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;      and      (xxv) 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, 2005 filed with      the Securities and Exchange Commission.

**Recent      Developments for the Company **

**Overview      **

----

**For      the Quarter Ended June 30, 2005 and 2004 **

**Results      From Operations **

***Revenues***

***Cost      of Sales***

----

***Research      and Development***

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

***Other      Expense***

***Net      Loss***

**Liquidity      and Capital Resources **

----

**Inflation      and Seasonality **

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**ITEM      3 - CONTROLS AND PROCEDURES **

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**PART      II - OTHER INFORMATION **

| **ITEM                  1.** | **Legal                  Proceedings**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                         | On                  June 16, 2005 the Company filed an action in the Superior Court                  of the                  State of California, County of Los Angeles, Central District against                  Application Science and Technology LLC, Chad Kalebic, Michael Hurst,                  Anthony Briede and others. The Company initiated the litigation                  after                  ongoing and reoccurring feedback from the marketplace that the                  Defendants                  were actively interfering with the Company’s business relationships and                  violating contractual agreements despite formal warnings to cease                  and                  desist. The case includes allegations of: Unfair Competition; Violations                  of California Business Code, Sections 17.200 ET SEQ and 17.000                  ET SEQ;                  Intentional Interference with Plaintiffs Business Relationships,                  Negligent                  Interference with Plaintiff’s Business Relationships; Slander and                  Injunction. The Company has retained litigation counsel on a 1/3                  contingency basis of the net benefit to the Company. The Company                  will                  advance and pay the costs and expenses of the litigation. The Company                  expects to prevail in the proceedings. However, in the event of                  an adverse                  decision, the Company may be liable for costs, expenses and/or                  attorney’s                  fees of the Defendants.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| **ITEM                  2.** | **Changes                  in Securities and Use of Proceeds**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                         | During                  the three-months ended June 30, 2005, the Company issued Units                  to three                  investors consisting of (i) $250,000 principal amount promissory                  notes                  bearing interest at 10% per annum and due 365 days from the date                  of                  issuance; (ii) 250,000 shares of the Company’s common stock; and (iii)                  three-year warrants to purchase 250,000 shares of common stock,                  exercisable at $1.50 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 June 30, 2005. 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 June 30, 2005 is $130,952. 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, a $100,000 principal amount promissory                  note issued                  in March 2004 and a $250,000 promissory note issued in August 2004.                  The                  Notes continue to accrue interest at 15% per annum and 2,500 penalty                  warrants per month continue to be granted on the first $50,000                  note since                  January 10, 2003, 2,500 penalty warrants per month continue to                  be granted                  on the second $50,000 note since April 19, 2004, 3,000 penalty                  warrants                  per month continue to be granted on the $60,000 note since August                  2, 2004,                  5,000 penalty warrants per month continue to be granted on the                  $100,000                  note since October 14, 2004 and 12,500 penalty warrants per month                  have                  begun to be granted on the $250,000 note since March 23, 2005.                  The accrued                  interest on these Notes at June 30, 2005 is $87,741. In                  total, at June 30, 2005, $1,717,000 principal amount of the $2,442,000                  principal amount of promissory notes are in default and $458,439                  of                  interest had accrued on all 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                      June 30, 2005. |

----

**SIGNATURES**

|                                 |                                               |                                  |
|--------------------------------------|----------------------------------------------------|---------------------------------------|
|                                 |                                               |
|                            |                                          |                             |
| Date:                August 15, 2005 | By:                                      | /s/                Geoffrey P. Talbot |
|                                 | Name:                Geoffrey P. Talbot            |
|                                 | Title: Chief                Financial Officer |

----

**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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