**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, 2006**





**or**





**o    TRANSITION
      REPORT UNDER 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 incorporation or organization)
            
            (I.R.S.
                Employer Identification No.)**345
                North Maple Drive, Suite 120, Beverly Hills, CA
                90210**(Address
                of principal executive offices)**(310)
                288-4580**(Issuer’s
                telephone numer)Former
                name, former address and former fiscal year, if changed since last
                report:




Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or 15(d) of the Exchange Act during the past 12 months (or for such shorter
      period that the registrant was required to file such reports), and (2) has
      been
      subject to such filing requirements for the past 90 days.


Yes
x No  ̈




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act)


Yes  ̈ No x





State
      the
      number of shares outstanding of each of the issuer’s classes of common equity,
      as of the latest practicable date.




**Class**
            
            **Outstanding
                at February 9, 2007**Common
                Stock, $.01 par value
            
            14,886,932




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










**FORM
      10-QSB**


**STATMON
      TECHNOLOGIES CORP.**


**December
      31, 2006**





**TABLE
      OF CONTENTS**





Page(s)PART
                1 - FINANCIAL INFORMATIONItem
                1. Financial Statements (unaudited):Condensed
                Consolidated Balance Sheet at December 31, 2006
            3Condensed
                Consolidated Statements of Operations for the Three Months Ended
                December
                31, 2006 and 2005
            4Condensed
                Consolidated Statements of Operations for the Nine Months Ended December
                31, 2006 and 2005
            5Condensed
                Consolidated Statements of Cash Flows for the Nine Months Ended December
                31, 2006 and 2005
            6Notes
                to Condensed Consolidated Financial Statements
            7Item
                2. Management’s Discussion and Analysis or Plan of
                Operations
            15Item
                3. Controls and Procedures
            21PART
                II - OTHER INFORMATIONItem
                1. Legal Proceedings
            22Item
                2. Unregistered Sales of Equity Securities and Use of
                Proceeds
            22Item
                3. Defaults Upon Senior Securities
            23Item
                6. Exhibits
            23SIGNATURES
            24Exhibits
            25Certifications
            26


2





**ITEM
      I — FINANCIAL STATEMENTS**





**STATMON
      TECHNOLOGIES CORP. AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED BALANCE SHEET**


**DECEMBER
      31, 2006**


**(UNAUDITED)**


**ASSETS**Current
                  Assets:Cash
              
              $
              477,543Accounts
                  receivable
              
              
              444,747Inventories
              
              
              42,497Prepaid
                  expense and other current assets
              
              
              65,764Total
                  Current Assets
              
              
              1,030,551Property
                  and Equipment, net
              
              
              18,617Deferred
                  Financing Costs
              
              
              239,459Other
                  Assets
              
              
              13,465Total
                  Assets
              
              $
              1,302,092**LIABILITIES
                  AND STOCKHOLDERS' DEFICIENCY**Current
                  Liabilities:Notes
                  payable (including $1,352,700 due to related parties), net of debtdiscount
                  of $5,005
              
              $
              3,281,695Accounts
                  payable
              
              
              495,456Accrued
                  expenses
              
              
              432,629Accrued
                  compensation
              
              
              445,149Interest
                  payable (including $461,785 due to related parties)
              
              
              1,107,676Deferred
                  revenue
              
              
              167,391Total
                  Liabilities
              
              
              5,929,996Commitments
                  and ContingenciesStockholders'
                  Deficiency:Preferred
                  stock, $.01 par value, 10,000,000 shares authorized, none
                  issuedand
                  outstanding
              
              
              -Common
                  stock, $.01 par value, 100,000,000 shares authorized,14,857,387
                  issued and outstanding
              
              
              148,574Additional
                  paid-in capital
              
              
              6,789,840Accumulated
                  deficit
              
              
              (11,566,318
              )Total
                  Stockholders' Deficiency
              
              
              (4,627,904
              )Total
                  Liabilities and Stockholders' Deficiency
              
              $
              1,302,092




See
      notes
      to condensed consolidated financial statements.


3


**STATMON
      TECHNOLOGIES CORP. AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS**


**(UNAUDITED)**


For
                    the Three Months Ended December 31,2006
                
                2005Revenues
                
                $
                2,260,860
                
                $
                289,223Cost
                    of Revenues
                
                
                489,205
                
                
                43,243Gross
                    Profit
                
                
                1,771,655
                
                
                245,980Selling,
                    General and Administrative Expenses
                
                
                796,400
                
                
                485,543Operating
                    Income/(Loss)
                
                
                975,255
                
                
                (239,563
                )Other
                    Expense:Interest
                    (including $61,596 and $40,025 to related parties for2006
                    and 2005 periods, respectively)
                
                
                134,372
                
                
                100,256Common
                    stock and warrants issued in association withdebt
                    (including $262,351 and $49,502 to related partiesfor
                    2006 and 2005 periods, respectively)
                
                
                504,029
                
                
                162,909Amortization
                    of debt discount
                
                
                73,217
                
                
                172,139Amortization
                    of deferred financing costs
                
                
                137,392
                
                
                35,959Total
                    Other Expense
                
                
                849,010
                
                
                471,263NET
                    INCOME/(LOSS)
                
                $
                126,245
                
                $
                (710,826
                )NET
                    INCOME/(LOSS) PER COMMON SHARE - Basic and Diluted
                
                $
                0.01
                
                $
                (0.05
                )Weighted
                    Average Number of Common Shares Outstanding -Basic
                    and Diluted
                
                
                14,674,868
                
                
                13,271,625


See
      notes
      to condensed consolidated financial statements.


4


**STATMON
      TECHNOLOGIES CORP. AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS**


**(UNAUDITED)**


For
                    the Nine Months Ended December 31,2006
                
                2005Revenues
                
                $
                3,160,302
                
                $
                1,015,334Cost
                    of Revenues
                
                
                700,466
                
                
                295,257Gross
                    Profit
                
                
                2,459,836
                
                
                720,077Selling,
                    General and Administrative Expenses
                
                
                2,083,938
                
                
                1,763,016Operating
                    Income/(Loss)
                
                
                375,898
                
                
                (1,042,939
                )Other
                    Expense:Interest
                    (including $179,169 and $80,513 to related parties for2006
                    and 2005 periods, respectively)
                
                
                405,862
                
                
                269,661Common
                    stock and warrants issued in association withdebt
                    (including $654,404 and $294,925 to related parties for
                    2006)for
                    2006 and 2005 periods, respectively)
                
                
                1,193,274
                
                
                483,984Amortization
                    of debt discount
                
                
                394,632
                
                
                379,042Amortization
                    of deferred financing costs
                
                
                240,539
                
                
                78,586Total
                    Other Expense
                
                
                2,234,307
                
                
                1,211,273NET
                    LOSS
                
                $
                (1,858,409
                )
                $
                (2,254,212
                )NET
                    LOSS PER COMMON SHARE - Basic and Diluted
                
                $
                (0.13
                )
                $
                (0.17
                )Weighted
                    Average Number of Common Shares Outstanding -Basic
                    and Diluted
                
                
                14,246,672
                
                
                12,941,441


See
        notes
        to condensed consolidated financial statements.





5




**STATMON
      TECHNOLOGIES CORP. AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


**(UNAUDITED)**


For
                  the Nine Months Ended December 31,2006
              
              2005CASH
                  FLOWS FROM OPERATING ACTIVITIES:Net
                  loss
              
              $
              (1,858,409
              )
              $
              (2,254,212
              )Adjustments
                  to reconcile net loss to net cash provided by/(used
                  in) operating activities:Depreciation
                  and amortization
              
              
              8,582
              
              
              13,363Common
                  stock and warrants issued in association with debt
              
              
              1,241,274
              
              
              483,984Amortization
                  of debt discount
              
              
              394,632
              
              
              379,042Amortization
                  of deferred financing costs
              
              
              240,539
              
              
              78,586Changes
                  in operating assets and liabilities:Accounts
                  receivable
              
              
              (262,309
              )
              
              32,617Inventories
              
              
              2,892
              
              
              2,277Prepaid
                  expense and other current assets
              
              
              (41,181
              )
              
              (42,593
              )Other
                  assets
              
              
              (3,000
              )
              
              (3,150
              )Accounts
                  payable
              
              
              40,913
              
              
              (84,249
              )Accrued
                  expenses
              
              
              (20,263
              )
              
              159,936Accrued
                  compensation
              
              
              110,189
              
              
              131,742Interest
                  payable
              
              
              380,628
              
              
              267,588Deferred
                  revenue
              
              
              104,436
              
              
              10,320NET
                  CASH PROVIDED BY/(USED IN) OPERATING ACTIVITIES
              
              
              338,923
              
              
              (824,749
              )CASH
                  FLOWS USED IN INVESTING ACTIVITIES:Purchase
                  of property and equipment
              
              
              (11,909
              )
              
              (1,184
              )CASH
                  FLOWS FROM FINANCING ACTIVITIES*:*Proceeds
                  from notes payable
              
              
              605,000
              
              
              768,700Repayment
                  of notes payable
              
              
              (507,000
              )
              
              (50,000
              )Deferred
                  financing costs
              
              
              (13,806
              )
              
              (79,248
              )NET
                  CASH PROVIDED BY FINANCING ACTIVITIES
              
              
              84,194
              
              
              639,452NET
                  INCREASE/(DECREASE) IN CASH
              
              
              411,208
              
              
              (186,481
              )CASH,
                  BEGINNING OF PERIOD
              
              
              66,335
              
              
              191,974CASH,
                  END OF PERIOD
              
              $
              477,543
              
              $
              5,493SUPPLEMENTAL
                  DISCLOSURE OF CASH FLOW INFORMATION:Cash
                  paid for:Interest
              
              $
              25,078
              
              $
              2,072Income
                  Taxes
              
              $
              -
              
              $
              917NON-CASH
                  INVESTING AND FINANCING ACTIVITIES:Value
                  of Common Stock and Warrants issued related to new debt
              
              $
              295,647
              
              $
              364,443Value
                  of warrants issued to Placement Agent
              
              $
              20,300
              
              $
              21,750Value
                  of common stock issued to Placement Agent for Investorrelation
                  services
              
              $
              54,750
              
              $
              -Placement
                  Agent commissions accrued and not yet paid
              
              $
              50,000
              
              $
              75,000Value
                  of Common Stock and Warrants related to extension ofnotes
                  payable
              
              $
              261,400
              
              $
              -Accrued
                  interest reclassified as notes payable
              
              $
              22,000
              
              $
              -




See
      notes
      to condensed consolidated financial statements.




6


Statmon
        Technologies Corp. and Subsidiaries
 Notes
        to
        Condensed Consolidated Financial Statements
 (Unaudited)


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




**Company
      Overview**




Statmon
      Technologies Corp. (the “Company” or “we”) develops, markets and licenses
      software and remote site infrastructure management products. Our proprietary
      products control all different types of devices and technologies from network
      operation centers (“NOC’s”) to remote facilities, with access from any network
      or internet connection. The capabilities include a single point of control,
      “dashboard” style screen, system and platform used to connect, automate and
      optimize networked operations and remote sites. The Company’s proprietary
      flagship software application product is called "Axess". Our hardware products
      are designed to integrate the Axess platform into varying types of device
      control situations for infrastructure and diverse networks. Our products have
      application across different industries where there is a need for real time
      automation, remote control and monitoring. The distribution of our products
      is
      primarily facilitated by third party sales channels and strategic OEM
      collaborations and partnerships which are supported by our business development
      team and direct sales force.




On
      September 13, 2006 we entered into a System Purchase and Maintenance Agreement
      (the "Agreement") with MediaFLO USA, Inc. ("MediaFLO"), a wholly owned
      subsidiary of Qualcomm Incorporated. Pursuant to Agreement we are licensing
      our
      "Axess" software and supplying hardware interface components for the national
      rollout of 300+ high-powered wireless transmission sites and MediaFLO’s San
      Diego Network Operation Center. Pursuant to Agreement Qualcomm and/or MediaFLO
      issue purchase orders periodically to the Company. As of January 31, 2007,
      Qualcomm and/or MediaFLO had issued us purchase orders totaling $2,492,578.
      As
      of December 31, 2006, we have recorded $2,436,533 of the $2,492,578 of purchase
      orders as revenue. The MediaFLO agreement specifies no minimum or maximum number
      of purchase orders, and is for a term of three years. We also provide support
      and maintenance to MediaFLO renewable on an annual basis.




**Going
      Concern**




The
      accompanying condensed interim consolidated financial statements have been
      prepared in accordance with accounting principles generally accepted in the
      Unites States of America ("US GAAP") and assume that the Company will continue
      as a going concern. The Company has incurred net losses of approximately
      $11,566,000 since inception. Additionally, the Company had a net working capital
      deficiency of approximately $4,899,000 at December 31, 2006. In addition, as
      more fully detailed in Note 6[b], the Company has not been current in the
      payment of its Federal, State and Local payroll taxes. 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.




**Management
      Plans**




The
      Company had positive cash flow from operations during the nine months ended
      December 31, 2006 in addition to net proceeds to the Company of $98,000 from
      the
      sale of promissory notes, common stock and warrants to purchase shares of common
      stock (“Units”). This trend is expected to continue into 2007 based on purchase
      orders in hand and qualified sales’ pipelines. At the filing of this report, the
      Company has a backlog of unfilled orders that have not been invoiced of
      approximately $320,000 and accounts receivable of approximately
      $225,000.




In
      order
      to reduce debt and simultaneously maximize growth and expansion of operations,
      we will require capital infusions to fund our total capital needs. The Company
      anticipates positive cash flow from operations for the foreseeable future.
      We
      and our sales channel partners have developed a sales pipeline of qualified
      opportunities in excess of $4,000,000. The revenue and operating margins from
      the respective sales pipelines are expected to grow on a quarterly basis in
      2007
      as the existing and new sales channel partner relationships develop.




7





Statmon
        Technologies Corp. and Subsidiaries
 Notes
        to
        Condensed Consolidated Financial Statements
 (Unaudited)


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




In
      addition, we are seeking to raise capital through a private placement of equity
      or long-term debt securities early in the first half of the 2007 calendar year.
      In August 2005, we entered into a letter of intent with a NASD broker-dealer
      to
      act as placement agent in selling a minimum of $5.0 million and a maximum of
      $8.0 million of units consisting of convertible preferred stock and warrants
      to
      purchase common stock. Although no funds have been received to date, the Company
      continues to negotiate the terms of such potential offering. In addition,
      certain of the Company’s promissory note holders have been approached to convert
      a portion of the principal amount of their notes into the above-mentioned units,
      subject to completion of the minimum offering.




There
      can
      be no assurances that we will be successful in obtaining the aforementioned
      operating results, financing or refinancing, converting and/or extending our
      notes payable. If we are not successful, we would seek to negotiate other terms
      for the issuance of debt, and/or pursue bridge financing, negotiate with
      suppliers for a reduction of debt through issuance of stock, and seek to raise
      equity through the sale of our common stock. At this time, management cannot
      assess the likelihood of achieving these objectives. If we are unable to achieve
      these objectives, we may be forced to cease our business operations, sell our
      assets and/or seek further protection under applicable bankruptcy
      laws.







**2.**  **CERTAIN
      SIGNIFICANT ACCOUNTING POLICIES**





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




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





*c.*
            Research
                and Development-
                Research and development expenditures are charged to operations as
                incurred. Research and development expenditures were approximately
                $206,000 and $133,000 for the three months ended December 31, 2006
                and
                2005, respectively. Research and development expenditures were
                approximately $538,000 and $415,000 for the nine months ended December
                31,
                2006 and 2005, respectively.





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




*e.*
            Net
                Loss Per Share-Basic
                net loss per share is computed using the weighted average number
                of shares
                of outstanding common stock***.***For
                all periods presented, diluted net loss per share was the same as
                basic
                net loss per share since the inclusion of the warrants would have
                been
                anti-dilutive. Securities that could potentially dilute basic earnings
                per
                share (“EPS”) in the future and that were not included in the computation
                of diluted EPS because to do so would have been anti-dilutive for
                the
                periods presented consist of warrants to purchase 9,035,640 and 6,585,180
                shares of common stock as of December 31, 2006 and 2005,
                respectively.





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








8





Statmon
        Technologies Corp. and Subsidiaries
 Notes
        to
        Condensed Consolidated Financial Statements
 (Unaudited)


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




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





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 licensees limited rights for upgrades and enhancements for the version
      they have licensed.





Deferred
      revenue represents revenue billed for products and or/services not yet shipped
      or rendered.





*h.*
            Stock-Based
                Compensation-
                On April 1, 2006, the Company adopted Statement of Financial Accounting
                Standard ("SFAS") No. 123R, "Share Based Payment." This statement
                is a
                revision of SFAS Statement No. 123, "Accounting for Stock-Based
                Compensation" and supersedes APB Opinion No. 25, Accounting for Stock
                Issued to Employees, and its related implementation guidance. SFAS
                123R
                addresses all forms of share based payment ("SBP") awards including
                shares
                issued under employee stock purchase plans, stock options, restricted
                stock and stock appreciation rights. Under SFAS 123R, SBP awards
                result in
                a cost that will be measured at fair value on the awards' grant date,
                based on the estimated number of awards that are expected to vest.




The
      Company is using the modified prospective method. The impact of SFAS 123R
      required the Company to record a charge for the fair value of stock options
      granted on a prospective basis over the vesting period in the consolidated
      financial statements.




As
      of
      March 31, 2006, the Company had no unvested options and did not grant any
      options to employees during the nine months ended December 31, 2006. The
      adoption of SFAS 123R did not affect the Company’s financial position, results
      of operations or cash flows, but may have a material impact if options are
      granted in the future.





*i.*  New
      Accounting Pronouncements ** -
      In July
      2006, FASB Interpretation No. 48 - Accounting for Uncertainty in Income Taxes,
      or FIN 48, was issued. FIN 48 clarifies the accounting for uncertainty in income
      taxes recognized in an enterprise's financial statements in accordance with
      FASB
      Statement No. 109 - Accounting for Income Taxes. FIN 48 is effective for fiscal
      years beginning after December 15, 2006. We expect to implement FIN 48 beginning
      on April 1, 2007. We are evaluating the impact that adopting FIN 48 will have
      on
      our financial position and results of operations.





In
      September 2006, the SEC issued Staff Accounting Bulletin No. 108, “Considering
      the Effects of Prior Year Misstatements when Quantifying Misstatements in
      Current Year Financial Statements” (“SAB 108”). SAB 108 provides guidance on how
      prior year misstatements should be considered when quantifying misstatements
      in
      the current year financial statements. The SAB requires registrants to quantify
      misstatements using both a balance sheet and an income statement approach and
      evaluate whether either approach results in quantifying a misstatement that,
      when all relevant quantitative and qualitative factors are considered, is
      material. SAB 108 does not change the guidance in SAB 99, “Materiality”, when
      evaluating the materiality of misstatements. SAB 108 is effective for fiscal
      years ending after November 15, 2006. Upon initial application, SAB 108 permits
      a one-time cumulative effect adjustment to beginning retained earnings. We
      are
      currently evaluating the potential impact, if any, that the adoption of SAB
      108
      will have on our consolidated financial statements.





9





Statmon
        Technologies Corp. and Subsidiaries
 Notes
        to
        Condensed Consolidated Financial Statements
 (Unaudited)





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





On
      September 15, 2006, the FASB issued SFAS Statement No. 157, Fair Value
      Measurements (“SFAS 157”), which addresses how companies should measure fair
      value when required to use fair value measures for recognition or disclosure
      purposes under GAAP. SFAS 157 adopted an “exit price” approach to determining
      fair value and established a fair value hierarchy to prioritize the inputs
      used
      in valuation techniques into three levels. Level 1 is the highest priority
      and
      is defined as observable inputs that reflect quoted prices (unadjusted) for
      identical assets or liabilities in active markets. Level 2 is defined as inputs
      other than quoted prices included in Level 1 that are observable for the asset
      or liability through corroboration with observable market data. Level 3 is
      the
      lowest priority and is defined as unobservable inputs such as a company’s own
      data. Prioritization of inputs, as well as other considerations, determine
      the
      level of disclosure required. SFAS 157 is applicable to financial statements
      issued for fiscal years beginning after November 15, 2007 and for interim
      periods within those fiscal years. The Company is in the process of evaluating
      the impact of SFAS 157 on its financial statements.





In
      October 2005, the FASB issued FSP FAS 123(R)-2, “Practical Accommodation to the
      Application of Grant Date as Defined in FASB Statement No. 123(R)”, which
      provides clarification of the concept of mutual understanding between employer
      and employee with respect to the grant date of a share-based payment award.
      This
      FSP provides that a mutual understanding of the key terms and conditions of
      an
      award shall be presumed to exist on the date the award is approved by management
      if the recipient does not have the ability to negotiate the key terms and
      conditions of the award and those key terms and conditions will be communicated
      to the individual recipient within a relatively short time period after the
      date
      of approval. This guidance was applicable upon the initial adoption of SFAS
      123(R). The adoption of this pronouncement did not have an impact on the
      Company's consolidated financial position, results of operations, or cash
      flows.





**3.****NOTES
      PAYABLE**





During
      the nine months ended December 31, 2006, the Company sold Units to investors
      as
      follows:




·
            (i)
                $25,000 principal amount promissory note bearing interest at 10%
                per annum
                and due 365 days from the date of issuance, (ii) 30,000 shares of
                common
                stock and (iii) warrants to purchase 25,000 shares of common stock
                exercisable at a price of $1.00 per share for a term of five years.
                This
                note matures on May 9, 2007 and will accrue interest at an increased
                rate
                of 15% per annum until the note is
                repaid.




·
            (i) $100,000
                principal amount promissory note bearing interest at 10% per annum
                and due
                60 days from the date of issuance, (ii) 100,000 shares of common
                stock and
                (iii) warrants to purchase 340,000 shares of common stock exercisable
                at a
                price of $1.25 per share for a term of five years. The principal
                balance
                of this note was repaid on November 16,
                2006.




·
            (i) $10,000
                principal amount promissory note bearing interest at 10% per annum
                and due
                180 days from the date of issuance, (ii) 10,000 shares of common
                stock and
                (iii) warrants to purchase 10,000 shares of common stock exercisable
                at a
                price of $1.25 per share for a term of three years. This note matured
                on
                December 3, 2006 and will accrue interest at 15% per annum until
                the note
                is repaid.




·
            (i)
                $100,000 principal amount promissory note bearing interest at 10%
                per
                annum and due 60 days from the date of issuance, (ii) 100,000 shares
                of
                common stock and (iii) warrants to purchase 100,000 shares of common
                stock
                exercisable at a price of $1.25 per share for a term of five years.
                The
                principal balance of this note was repaid partially on November 16,
                2006
                and completely on December 14,
                2006.




·
            (i) $100,000
                principal amount promissory note bearing interest at 10% per annum
                and due
                60 days from the date of issuance, (ii) 100,000 shares of common
                stock and
                (iii) warrants to purchase 100,000 shares of common stock exercisable
                at a
                price of $1.25 per share for a term of five years. The principal
                balance
                of this note was repaid partially on December 14, 2006 and completely
                on
                January 11, 2007.





10


Statmon
        Technologies Corp. and Subsidiaries
 Notes
        to
        Condensed Consolidated Financial Statements
 (Unaudited)


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





·
            (i)
                 $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
                common stock and (iii) warrants to purchase 20,000 shares of common
                stock
                exercisable at a price of $1.25 per share for a term of three years.
                This
                note matured on January 3, 2007 and will accrue interest at 15% per
                annum
                until the note is repaid.




·
            (i) $50,000
                principal amount promissory note bearing interest at 10% per annum
                and due
                60 days from the date of issuance, (ii) 50,000 shares of common stock
                and
                (iii) warrants to purchase 50,000 shares of common stock exercisable
                at a
                price of $1.25 per share for a term of five years. The principal
                balance
                of this note was repaid on January 11,
                2007.




·
            (i) $200,000
                principal amount promissory notes bearing interest at 10% per annum
                and
                due November 30, 2006, (ii) 120,000 shares of common stock and (iii)
                warrants to purchase 120,000 shares of common stock exercisable at
                a price
                of $1.00 per share for a term of five years. These notes were extended
                per
                the original terms on December 21, 2006 and will mature on November
                30,
                2007. Per the terms of the extension, the Company has granted an
                additional 120,000 shares of common stock and warrants to purchase
                120,000
                shares of common stock exercisable at a price of $1.00 per share
                for a
                term of five years.




In
      total,
      at December 31, 2006, $3,093,700 principal amount of the $3,286,700 principal
      amount of outstanding loans and promissory notes are in default and $1,107,676
      of interest has accrued on all outstanding notes as of such date.




The
      Company continues to be in default on $250,000 of Senior Notes as of December
      31, 2006 which are included in notes payable. 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, 2006 is $187,356.


The
        Company has committed to secure the obligation to two noteholders in second
        position behind the Senior Notes for a remaining total of $980,000 as of
        December 31, 2006. In addition to the $500,000 repaid during the three months
        ended December 31, 2006, an additional $90,000 of this balance was repaid
        on
        January 11, 2007. Additionally, the Company has committed to secure the
        obligation to one noteholder in third position behind the Senior Notes for
        a
        total of $250,000. These notes are collectively referred to as the Senior
        Subordinated Notes.




During
      the nine months ended December 31, 2006, the Company granted three-year warrants
      to purchase 1,017,900 shares of common stock at $1.00 per share, three-year
      warrants to purchase 243,114 shares of common stock at $1.50 per share,
      five-year warrants to purchase 252,000 shares of common stock at $1.00 per
      share
      and five-year warrants to purchase 457,770 shares of common stock at $1.50
      per
      share, according to the penalty provisions of the various loan agreements for
      notes in default.




In
      October 2006, the Company agreed to an extension for a $110,000 note that
      expired on August 8, 2006 to the earlier of February 8, 2007 or the completion
      of a financing transaction that results in gross proceeds of at least $500,000
      to the Company. The Company has issued 100,000 shares of restricted common
      stock
      valued at $73,000 as a fee for the holder to extend the term of the note and
      has
      converted $22,000 of interest into principal for a new principal note balance
      of
      $132,000 as of August 9, 2006. The Company recorded this charge as deferred
      financing costs and is amortizing over the life of the
      extension.





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





[a]
      Common Stock




During
      the three months ended June 30, 2006, the Company issued 75,000 shares of Common
      Stock valued at $34,750 associated with the secured Senior Notes that are in
      default, 133,635 shares of Common Stock valued at $63,918 associated with the
      secured Senior Subordinated Notes that are in default and 8,000 shares of Common
      Stock valued at $3,840 associated with an unsecured note that is in default.
      Additionally, the Company issued 340,000 shares of Common Stock valued at
      $79,958 associated with new debt during the same period.




11


Statmon
        Technologies Corp. and Subsidiaries
 Notes
        to
        Condensed Consolidated Financial Statements
 (Unaudited)




**4.**  **EQUITY
      TRANSACTIONS, continued**





During
      the three months ended September 30, 2006, the Company issued 75,000 shares
      of
      Common Stock valued at $51,000 associated with the secured Senior Notes that
      are
      in default, 13,635 shares of Common Stock valued at $9,272 associated with
      the
      secured Senior Subordinated Notes that are in default and 75,000 shares of
      Common Stock valued at $54,750 as compensation to a consultant for investor
      relation services. Additionally, the Company issued 195,000 shares of Common
      Stock valued at $54,750 associated with new debt during the same period.




During
      the three months ended December 31, 2006, the Company issued 75,000 shares
      of
      Common Stock valued at $57,500 associated with the secured Senior Notes that
      are
      in default, 13,635 shares of Common Stock valued at $10,454 associated with
      the
      secured Senior Subordinated Notes that are in default, 100,000 shares of Common
      Stock valued at $73,000 related to a note extension to February 8, 2007 and
      120,000 shares of common stock valued at $105,600 to extend a group of notes
      to
      November 30, 2007. Additionally, the Company issued 45,000 shares of Common
      Stock valued at $31,650 associated with new debt during the same
      period.





[b]
      Stock
      Options and Warrants




During
      the three months ended June 30, 2006, the Company granted 1,183,473 warrants
      to
      note holders, of which 575,000 warrants were valued at $119,513 related to
      new
      debt in the period, 575,973 warrants were valued at $145,672 related to notes
      in
      default and 32,500 warrants valued at $10,075 as commission to placement agents
      for placing $325,000 of new debt during the period.  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
      to
      five years from the date of the respective issuance.




During
      the three months ended September 30, 2006, the Company granted 982,449 warrants
      to note holders, of which 195,000 warrants were valued at $38,296 related to
      new
      debt in the period, 669,949 warrants were valued at $342,293 related to notes
      in
      default, 17,500 warrants valued at $10,225 as commission to placement agents
      for
      placing $175,000 of new debt during the period and 100,000 warrants valued
      at
      $48,000 to an employee as compensation.  The weighted average exercise
      price of the warrants granted during the period was $1.16. The vesting period
      on
      these warrants is immediate and the exercise period is for three to five years
      from the date of the respective issuance.




During
      the three months ended December 31, 2006, the Company granted 889,862 warrants
      to note holders, of which 45,000 warrants were valued at $24,150 related to
      new
      debt in the period, 724,862 warrants were valued at $436,076 related to notes
      in
      default and 120,000 warrants valued at $82,800 related to a group of notes
      that
      have had their maturity dates extended to November 30, 2007.  The weighted
      average exercise price of the warrants granted during the period was $1.17.
      The
      vesting period on these warrants is immediate and the exercise period is for
      three to five years from the date of the respective issuance.




During
      the nine months ended December 31, 2006, a total of 1,077,442 warrants to
      purchase common stock expired.





**5.**  **RELATED
      PARTY TRANSACTIONS**





On
      July
      19, 2006, the Company documented a loan of $50,000 from Kevin Harris, the Chief
      Operating Officer (“COO”) of the Company, in the form of a note bearing no
      interest and due 180 days. This note represents the funds advanced by Mr. Harris
      primarily for the 2006 National Association of Broadcasters tradeshow and for
      reimbursement of other expenses. As consideration for the loan, the Company
      granted Mr. Harris 50,000 shares of common stock and warrants to purchase 50,000
      shares of common stock exercisable at a price of $1.25 per share for a term
      of
      five years. The loan was repaid in full on October 16, 2006.





12


Statmon
        Technologies Corp. and Subsidiaries
 Notes
        to
        Condensed Consolidated Financial Statements
 (Unaudited)





**6.**  **COMMITMENTS
      AND CONTINGENCIES**




[a]  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, case No. BC335098, against
      Application Science and Technology LLC, Chad Kalebic, Michael Hurst, Anthony
      Briede and others (the “Defendants”). 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 one-third contingency basis of the net benefit to the
      Company. The Company will advance and pay the Court filing and third party
      costs
      and expenses of the litigation. The Company expects to prevail in the
      proceedings; however, there can be no assurances in this regard and in the
      event
      of an adverse decision, the Company may be liable for costs, expenses and/or
      attorney’s fees of the Defendants. On December 6, 2005, after losing a demurrer
      which they filed against the Statmon complaint, the Defendants in case No.
      BC335098 filed a Cross Complaint in the Superior Court of California against
      Statmon Technologies Corp. and employees Mr. Geoffrey Talbot and Mr. Ken Dillard
      as Cross Defendants/Plaintiffs claiming Breach of Settlement Agreement,
      Intentional Interference with Contractual Relationships, Intentional
      Interference with Prospective Business Relationships, Defamation, Trade Libel,
      Violation of California Business and Professional Code, Negligent Interference
      with Prospective Business Relationships and Negligent Interference with
      Contractual relationships. The Company believes that the Cross Complaint lacks
      merit and will be defended vigorously, in this regard a defense to the
      cross-complaint is being furnished by an insurance carrier of Statmon. In
      addition, the Defendants in case No. BC335098 filed a Complaint For Declaratory
      Relief in the United States district Court For The Northern District of
      Illinois, Eastern Division seeking to secure a judicial determination and
      declaration that they had independently developed their own software without
      impermissibly copying Statmon’s software and that the Defendant’s software does
      not infringe upon any Statmon copyright. The California state case has been
      stayed (temporarily stopped) by the court pending resolution of the declaratory
      relief action filed in the United States District Court in Illinois. It is
      anticipated that the California state litigation will resume thereafter unless
      a
      settlement is reached. Settlement efforts have proceeded to the point where
      the
      parties are working on settlement documentation and overall resolution of the
      litigation is expected in the near future, although no assurances can be offered
      in this regard.





[b]  Other - At
      December 31, 2006, the Company has accrued approximately $223,000 of past due
      payroll taxes payable. During the previous fiscal year, the Company received
      two
      notices from the federal tax authority related to the accrued amount due
      totaling approximately $114,000 and on July 6, 2006, the Company paid such
      amount. The Company has yet to file certain delinquent Federal, State and Local
      compensation-related filings, which may subject the Company to additional
      payroll related liabilities, the amount of which cannot be determined at this
      time. Management of the Company has indicated that it anticipates such
      delinquent filings will be filed and related past due payroll taxes will be
      paid
out
      of available cash flows from operations orupon completion of the
      Company's potential financing. (See Note 1)




13




Statmon
        Technologies Corp. and Subsidiaries
 Notes
        to
        Condensed Consolidated Financial Statements
 (Unaudited)


**7.**  **MAJOR
      CUSTOMERS, FOREIGN REVENUE AND CONCENTRATION OF CREDIT
      RISK**





[a]  Major
      Customers




During
      the three months ended December 31, 2006, one customer comprised 89% of the
      Company’s sales. The accounts receivable balance for this customer at December
      31, 2006 was $119,723. During the three months ended December 31, 2005, three
      customers comprised 23%, 12% and 11% of the Company’s sales.




During
      the nine months ended December 31, 2006, one customer comprised 77% of the
      Company’s sales. The accounts receivable balances for this customer at December
      31, 2006 was $119,723. During the nine months ended December 31, 2005, three
      customers comprised 17%, 15% and 11% of the Company’s sales.





[b]
            Foreign
                Revenue




The
      Company generated approximately $183,000 and $162,000 of revenue from the sale
      of its products and services to foreign customers during the nine months ended
      December 31, 2006 and 2005, respectively. The Company generated approximately
      $50,000 and $103,000 of revenue from the sale of its products and services
      to
      foreign customers during the three months ended December 31, 2006 and 2005,
      respectively.





[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 its
      cash balances.




**8.**
            **SUBSEQUENT
                EVENTS**





On
      January 11, 2007, the Company repaid $90,000 principal balance amount related
      to
      the short-term portion of the Senior Subordinated Notes in default.





The
      Company entered into a triple net office lease agreement for approximately
      10,000 square feet of office space beginning February 1, 2007 for a term of
      66
      months located at 3000 Lakeside Drive, Suite 300S, Bannockburn, Illinois 60015.
      Pursuant to the lease agreement, the Company put up a $200,000 security deposit
      on January 23, 2007, which is reducible to $100,000 after 12 months and
      approximately $25,000 after 24 months. The security deposit is designed to
      cover
      six months rent abatement, $150,000 in tenant improvement expenditures to be
      paid for by the landlord and the overall performance of the lease. As part
      of
      its move to the Chicago area, the Company plans to vacate its current office
      space in Beverly Hills, CA no later than April 1, 2007 and is currently seeking
      a sub-tenant for the remaining term of the lease.




14


**ITEM
      2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN 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 contribute 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’ expression of a substantial doubt about our ability to
      continue as a going concern; (iv) our need for additional capital and the
      uncertainty of obtaining it; (v) our ability to refinance or renegotiate
      short-term promissory notes that have come due or are coming due; (vi) our
      failure to timely make certain regulatory filings; (vii) the possibility of
      undetected errors or failures in our software; (viii) the risk of products
      liability claims; (ix) industry resistance to change; (x) fluctuations in our
      quarterly operating results; (xi) failure to manage growth; (xii) dependence
      on
      Microsoft Windows platform; (xiii) our ability to keep pace with rapidly
      changing technologies; (xiv) our ability to compete effectively; (xv)
      difficulties in integrating businesses, products and technologies that we may
      acquire; (xvi) loss of key personnel; (xvii) enactment of new laws or changes
      in
      government regulations could adversely affect our business; (xviii) our products
      could infringe on the intellectual property rights of others; (xviv) our
      inability to obtain patent and copyright protection for our technology or
      misappropriation of our software and intellectual property; (xx) our failure
      to
      successfully introduce new products; (xxi) obsolescence of our technologies;
      (xxii) our ability to attract customers who will embrace our new products and
      technologies; (xxiii) our stock price which is likely to be highly volatile;
      (xxiv) our common stock is considered a penny stock and is considered to be
      a
      high-risk investment and subject to restrictions on marketability; (xxv) control
      by certain stockholders; and (xxvi) our increasing dependence on a single
      customer. For a more detailed description of these and other cautionary factors
      that may affect our future results, please refer to our Report on Form 10-KSB
      for the fiscal year ended March 31, 2006 filed with the Securities and Exchange
      Commission.





**Recent
      Developments for the Company**





**Overview**





Statmon
      Technologies Corp. (“Statmon”, the “Company” or “we”) is a proprietary software
      development and integration technology products solution provider. Our
      proprietary flagship software application "Axess" and supporting integration
      products are used by major corporate, institutional and government customers
      to
      optimize, manage and control their network operations centers (“NOC’s”),
      infrastructure for remote sites, satellite ground stations, facilities and
      devices. Architecturally designed as a “manager of managers” platform, wide
      scale network operations down to individual devices, regardless of the equipment
      brand or technology, can be monitored and controlled in real time from a single
      point of control “dashboard” style screen and system wide proactive alarm
      system. Our products have application in a wide variety of situations where
      a
      need exists for system wide infrastructure management, alarmed monitoring,
      remote control and automation, all in real time. Our products help to facilitate
      the meaningful reduction of operational costs, the aggregation of data and
      compliance reporting, all at low cost.




Our
      significant clients include: Qualcomm Incorporated - MediaFLO USA, Inc., General
      Electric - NBC Universal & Telemundo Television Networks, CBS Corporation
      Television and Radio Networks, The Walt Disney Company - ABC Television and
      Radio Networks, Home Shopping Network, Belo Corp. Television, Tribune Company
      Television and Univision Communications Television and Radio Network. Harris
      Broadcast is a Non Exclusive Reseller of our products in the worldwide radio
      and
      television markets. A formal Non-Exclusive Reseller Agreement between Harris
      Broadcast and Statmon was executed and became effective on May 26, 2006 and
      expires on May 25, 2009. On November 3, 2005, we entered into a formal OEM
      distribution agreement with the Singapore based Pixelmetrix Corporation Pte
      Ltd.
      (”Pixelmetrix”), a leading digital test and measurement technology company
      focused on the broadcast and telecommunications industries. Our Axess
      application empowers the Pixelmetrix branded “Consolidator Plus” management and
      test measurement solution for digital television. The first Consolidator Plus
      installations using Axess are currently taking place with a major government
      owned European television network. The digital radio transmitter market
      continues to gain traction around the world as radio broadcasters move to
      compete with competitive satellite content providers. On March 17, 2006, the
      Company entered into an OEM agreement with Burst Communications, Inc., a
      US-based supplier of integration and installation services to the broadcast
      and
      wireless telecommunications market.






15




The
      relationship between Statmon and US Energy Systems focuses on the
      telecommunications, DC Power/stored energy and infrastructure markets and
      continues to build a solid foundation although we are behind schedule primarily
      due to our lack of adequate resources and working capital, which has protracted
      the development of certain opportunities in the US Energy sales
      channel.




On
      September 13, 2006, we entered into a System Purchase and Maintenance Agreement
      (the "Agreement") with MediaFLO USA, Inc. ("MediaFLO"), a wholly owned
      subsidiary of Qualcomm Incorporated. Pursuant to Agreement, we are licensing
      our
      "Axess" software and supplying hardware interface components incorporated in
      the
      national rollout of MediaFLO's 300+ high-powered wireless transmission sites
      and
      San Diego Network Operation Center. Under the Agreement, MediaFLO issues
      purchase orders periodically to us to meet its rollout schedule. As of January
      31, 2007, Qualcomm and/or MediaFLO had issued us purchase orders totaling
      $2,492,578. As of the date of this filing, we have delivered 100% of the product
      pursuant to these purchase orders. The overall Agreement specifies no minimum
      or
      maximum number of purchase orders, and is for a term of three years. We also
      provide support and maintenance to MediaFLO on an annual basis.




We
      believe, given adequate financing, that we are well positioned to continue
      our
      expansion beyond our traditional broadcast industry activities into the
      identified new vertical markets, including wireless Telco, broadband
      transmission, media multicasting and mobile TV, military and federal agencies
      including homeland security, power and energy management, telecommunications,
      embedded and wireless remote site networking, environmental 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, network operations, automation and powerful remote control
      and monitoring capabilities in real time. The ongoing 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 continues and will
      increase when we have additional working capital.




**Off-Balance
      Sheet Arrangements**




We
      do not
      have any off-balance sheet debt nor did we have any transactions, arrangements,
      obligations (including contingent obligations) or other relationships with
      any
      unconsolidated entities or other persons that may have material current or
      future effect on financial conditions, changes in the financial conditions,
      result of operations, liquidity, capital expenditures, capital resources, or
      significant components of revenue or expenses.




**For
      the Three Months Ended December 31, 2006 and 2005**





**Results
      From Operations**





***Revenues*** -
      Revenues were $2,260,860 and $289,223 for the three months ended December 31,
      2006 and 2005, respectively.  Revenues consisted of entirely product
      revenues for the three months ended December 31, 2006 and 2005.  The
      increase in product revenues of approximately $1,972,000 is primarily due to
      revenues associated with the fulfillment of the purchase orders received from
      MediaFLO related to the national rollout of MediaFLO's 300+ high-powered
      wireless transmission sites and San Diego Network Operation Center.




16




***Cost
      of Sales*** - Cost
      of sales were $489,205 and $43,243 for the three months ended December 31,
      2006
      and 2005, respectively. Overall gross profit percentage decreased to 78% in
      the three months ended December 31, 2006 compared to 85% in the comparable
      prior
      year period. The decrease of approximately 7% in overall gross profit percentage
      is primarily attributable to an increase in  third
      party sales commissions related to the MediaFLO revenue in the current
      period.





***Selling,
      General and Administrative Expenses*** -
      Selling, general and administrative expenses were $796,400 and $485,543 for
      the
      three months ended December 31, 2006 and 2005, respectively, an increase of
      approximately $311,000.  The increase in selling, general and
      administrative expenses is attributed to increases in professional services
      billed in the period of $18,000, increases in personnel related expenses of
      approximately $76,000, increases in outside consulting charges of $103,000,
      increases in insurance costs of $5,000 associated with the Company obtaining
      an
      errors and omission insurance policy, increases of $61,000 related to office
      relocation costs incurred and increases in general overhead items including
      marketing, travel and entertainment and facilities costs of approximately
      $48,000.





***Other
      Expense*** - Other
      Expense was $849,010 and $471,263 for the three months ended December 31, 2006
      and 2005, respectively. The increase of approximately $378,000 can be attributed
      to a decrease in the amortization of debt discount of approximately $99,000
      due
      to a decrease in the relative amount of new shorter-term debt during the most
      recent period and prior period, offset by an increase in common stock and
      warrants issued in association with debt of approximately $342,000 related
      to
      the issuance of penalty warrants and penalty shares associated with an increased
      number of delinquent notes and an increased valuation due to a higher common
      stock price in the current period, an increase in amortization of deferred
      financing costs of approximately $101,000 related to such new debt and an
      increase in interest expense of approximately $34,000 related to increased
      outstanding debt and the default rate of interest on the debt.





***Net
      Income/(Loss)*** - As a
      result of the above, for the three months ended December 31, 2006, the Company
      recorded a net income of $126,245, compared to a net loss of $710,826 for the
      same period the previous year.





**For
      the Nine Months Ended December 31, 2006 and 2005**





**Results
      From Operations**





***Revenues*** -
      Revenues were $3,160,302 and $1,015,334 for the nine months ended December
      31,
      2006 and 2005, respectively.  Revenues consisted entirely of product
      revenues for the nine months ended December 31, 2006. Revenues consisted of
      $624,897 of product revenues and $390,437 of integration services revenues
      for
      the nine months ended December 31, 2005.  The increase in product revenues
      of approximately $2,535,000 is primarily due to revenues associated with the
      fulfillment of the purchase orders received from MediaFLO related to the
      national rollout of MediaFLO's 300+ high-powered wireless transmission sites
      and
      San Diego Network Operation Center. Additional increases relate to an increase
      in our direct sales activities to third-party customers and our expanded
      reseller/OEM arrangements. The decrease of approximately $390,000 in integration
      services revenues is the result of the Company’s re-focused efforts to expand
      its core software business and the temporary suspension of its integration
      services activities as of September 30, 2005.





***Cost
      of Sales*** - Cost
      of sales were $700,466 and $295,257 for the nine months ended December 31,
      2006
      and 2005, respectively. Cost of sales was entirely related to product revenues
      for the nine months ended December 31, 2006. Cost of sales consisted of $123,465
      related to product revenues and $171,792 related to integration services
      revenues for the nine months ended December 31, 2005. Overall gross profit
      percentage increased to 78% in the nine months ended December 31, 2006 compared
      to 71% in the comparable prior year period. The increase in overall gross profit
      percentage is attributable to a decrease in integration services revenues and
      an
      increase in product sales of software only solutions during the period. The
      shift in the overall mix of revenues and an increase in the sales of software
      products have caused an overall increase in the gross profit percentage of
      approximately 7% from the prior year period due to higher margins attributable
      to the software products.





***Selling,
      General and Administrative Expenses*** -
      Selling, general and administrative expenses were $2,083,938 and $1,763,016
      for
      the nine months ended December 31, 2006 and 2005, respectively, an increase
      of
      approximately $321,000. The increase in selling, general and administrative
      expenses is principally attributed to a decrease of approximately $218,000
      related to integration services offset by increases of approximately $61,000
      related to general overhead items, including marketing, travel and entertainment
      and facilities costs, in insurance costs of $5,000 associated with the Company
      obtaining an errors and omission insurance policy, in professional fees billed
      in the period of approximately $28,000, in personnel related expenses of
      approximately $172,000, in outside consulting charges of $163,000 and $61,000
      related to office relocation costs plus a one-time charge of $49,000 associated
      with warrants granted to an employee.





17




***Other
      Expense*** - Other
      expense was $2,234,307 and $1,211,273 for the nine months ended December 31,
      2006 and 2005, respectively. The increase of approximately $1,023,000 can be
      attributed to an increase in the amortization of debt discount of approximately
      $16,000 due to an increase in the value of equity associated with new
      shorter-term debt during the most recent period and prior period, an increase
      in
      common stock and warrants issued in association with debt of approximately
      $709,000 related to the issuance of penalty warrants and penalty shares
      associated with an increased number of delinquent notes and an increased
      valuation due to a higher common stock price in the current period, an increase
      in amortization of deferred financing costs of approximately $162,000 related
      to
      such new debt and an increase in interest expense of approximately $136,000
      related to increased outstanding debt and the default rate of interest on the
      debt.





***Net
      Loss*** - As a
      result of the above, for the nine months ended December 31, 2006, the Company
      recorded a net loss of $1,858,409, compared to a net loss of $2,254,212 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 nine months ended December 31, 2006, the
      Company issued Units to investors which consisted of:




·
            (i)
                $25,000 principal amount promissory note bearing interest at 10%
                per annum
                and due 365 days from the date of issuance, (ii) 30,000 shares of
                common
                stock and (iii) warrants to purchase 25,000 shares of common stock
                exercisable at a price of $1.00 per share for a term of five years.
                This
                note matures on May 9, 2007 and will accrue interest at an increased
                rate
                of 15% per annum until the note is
                repaid.


·
            (i)
                $100,000 principal amount promissory note bearing interest at 10%
                per
                annum and due 60 days from the date of issuance, (ii) 100,000 shares
                of
                common stock and (iii) warrants to purchase 340,000 shares of common
                stock
                exercisable at a price of $1.25 per share for a term of five years.
                The
                principal balance of this note was repaid on November 16,
                2006.


·
            (i)
                $10,000 principal amount promissory note bearing interest at 10%
                per annum
                and due 180 days from the date of issuance, (ii) 10,000 shares of
                common
                stock and (iii) warrants to purchase 10,000 shares of common stock
                exercisable at a price of $1.25 per share for a term of three years.
                This
                note matured on December 3, 2006 and will accrue interest at 15%
                per annum
                until the note is repaid.


·
            (i)
                $100,000 principal amount promissory note bearing interest at 10%
                per
                annum and due 60 days from the date of issuance, (ii) 100,000 shares
                of
                common stock and (iii) warrants to purchase 100,000 shares of common
                stock
                exercisable at a price of $1.25 per share for a term of five years.
                The
                principal balance of this note was repaid partially on November 16,
                2006
                and completely on December 14, 2006.


·
            (i)
                $100,000 principal amount promissory note bearing interest at 10%
                per
                annum and due 60 days from the date of issuance, (ii) 100,000 shares
                of
                common stock and (iii) warrants to purchase 100,000 shares of common
                stock
                exercisable at a price of $1.25 per share for a term of five years.
                The
                principal balance of this note was repaid partially on December 14,
                2006
                and completely on January 11, 2007.


·
            (i)
                $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
                common
                stock and (iii) warrants to purchase 20,000 shares of common stock
                exercisable at a price of $1.25 per share for a term of three years.
                This
                note matured on January 3, 2007 and will accrue interest at 15% per
                annum
                until the note is repaid.


·
            (i)
                $50,000 principal amount promissory note bearing interest at 10%
                per annum
                and due 60 days from the date of issuance, (ii) 50,000 shares of
                common
                stock and (iii) warrants to purchase 50,000 shares of common stock
                exercisable at a price of $1.25 per share for a term of five years.
                The
                principal balance of this note was repaid on January 11,
                2007.


·
            (i)
                $200,000 principal amount promissory notes bearing interest at 10%
                per
                annum and due November 30, 2006, (ii) 75,000 shares of common stock
                and
                (iii) warrants to purchase 75,000 shares of common stock exercisable
                at a
                price of $1.00 per share for a term of five years. These notes were
                extended per the original terms on December 21, 2006 and will mature
                on
                November 30, 2007. Per the terms of the extension, the Company has
                granted
                an additional 120,000 shares of common stock and warrants to purchase
                120,000 shares of common stock exercisable at a price of $1.00 per
                share
                for a term of five years.






18




The
      Company continues to be in default on $250,000 of Senior Notes during the nine
      months ended December 31, 2006. 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, 2006 was $187,356. Additionally, the Company issued 4,545 shares
      of
      Common Stock per month related to a $100,000 Senior Subordinated Note per the
      default provisions of the promissory note.




In
      October 2006, the Company agreed to extend the term of a $110,000 note that
      expired on August 8, 2006 to February 8, 2007. The Company issued 100,000 shares
      of restricted common stock as a fee for the holder to extend the term of the
      note.




According
      to the penalty provisions of the loan agreements, the Company granted three-year
      warrants to purchase 1,017,900 shares of common stock at $1.00 per share,
      three-year warrants to purchase 243,114 shares of common stock at $1.50 per
      share, five-year warrants to purchase 252,000 shares of common stock at $1.00
      per share and five-year warrants to purchase 457,770 shares of common stock
      at
      $1.50 per share, according to the penalty provisions of the various loan
      agreements for notes in default.




Net
      cash
      provided by/(used in) operating activities was $338,923 and ($824,749) for
      the
      nine months ended December 31, 2006 and 2005, respectively.  The cash
      provided in 2006 is the result of a net loss of approximately $1,858,000,
      partially offset by non-cash charges of approximately $1,885,000 and a net
      change in operating assets and liabilities of approximately $290,000. The cash
      used in operating activities in 2005 is the result of a net loss of
      approximately $2,254,000, partially offset by non-cash charges of approximately
      $955,000 and a net change in operating assets and liabilities of approximately
      $474,000.





Cash
      used
      in investing activities was $11,909 and $1,184 for the nine months ended
      December 31, 2006 and 2005, respectively.





Cash
      provided by financing activities was $84,194 and $639,452 for the nine months
      ended December 31, 2006 and 2005, respectively. Net borrowings in the nine
      months ended December 31, 2006 were $98,000 as compared to $718,700 for the
      same
      period last year. These borrowings were offset by a decrease in financing costs
      incurred in the current period of $65,442. The decrease in borrowings can be
      directly attributed to an increase in cash flow from operations related to
      the
      MediaFLO contract, internal sales efforts and expansion into new vertical
      markets.





As
      of
      December 31, 2006, the Company had a working capital deficiency of approximately
      $4,899,000, including notes payable and accrued interest totaling approximately
      $4,389,000, net of applicable debt discount of approximately $5,000. The Company
      has no long-term debt.




At
      December 31, 2006, the Company had accrued approximately $223,000 of past due
      payroll taxes payable. During the previous fiscal year, the Company received
      two
      notices from the federal tax authority related to the accrued amount due
      totaling approximately $114,000 and on July 6, 2006, the Company paid such
      amount. The Company has yet to file certain delinquent Federal, State and Local
      compensation related filings, which may subject the Company to additional
      payroll related liabilities, the amount of which cannot be determined at this
      time. Management of the Company has indicated that it anticipates such
      delinquent filings will be filed and related past due payroll taxes will be
      paid
out
      of available cash flows from operations orupon completion of the
      Company's potential financing. (See Note 1 and discussion below)




In
      order
      to minimize debt and simultaneously maximize growth and expansion of operations
      the Company will require capital infusions to fund its total capital needs.
      The
      Company anticipates positive cash flow from operations for 2007. The Company
      and
      its sales channel partners have developed a sales pipeline of qualified
      opportunities in excess of $4,000,000 that are expect ed to close
      between January 2007 and December 2007 which are expected to improve the
      Company’s future quarterly operating results. The revenue and operating margins
      from the respective sales pipelines are expected to grow on a quarterly basis
      in
      2007 as the existing and new sales channel partner relationships develop. In
      addition, the Company is seeking to raise capital through a private placement
      of
      its equity or long-term debt securities in the first half of the 2007 calendar
      year. In August 2005, the Company entered into a letter of intent with a NASD
      broker-dealer to act as placement agent in selling a minimum of $5.0 million and
      a maximum of $8.0 million of units consisting of convertible preferred stock
      and
      warrants to purchase common stock. Management believes it is possible that
      at
      least the minimum offering, which is being conducted on a best efforts basis,
      will be made to institutions and accredited investors in the first half of
      2007,
      although no assurances can be offered in this regards. Certain of the Company’s
      promissory note holders have been approached to convert a portion of the
      principal amount of their notes into the above-mentioned units, subject to
      the
      sale of the minimum offering. The Company intends to use the proceeds of this
      or
      any other offering to repay short-term debt, fund its growth and new vertical
      markets and provide working capital. If the Company raises additional funds
      through the issuance of equity securities, the percentage ownership of its
      current stockholders would be reduced. In addition, these equity securities
      might have rights, preferences or privileges senior to the outstanding Common
      Stock.




19




The
      Company has incurred net losses of approximately $11,566,000 since inception,
      a
      substantial portion of which relates to the amortization of debt discount and
      other debt related charges. As indicated above, the Company has a working
      capital deficiency of approximately $4,899,000, and these conditions raise
      substantial doubt about the Company’s ability to continue as a going concern.
      Primarily as a result of its recurring losses and its lack of liquidity, the
      Company has received a report from its independent registered public
      accountants, included with its annual report on Form 10-KSB for the year ended
      March 31, 2006, that included an explanatory paragraph describing the conditions
      that 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.




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. At this time, 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.




In
      addition, operating margins and cash flow from operations have progressively
      improved in the quarter ended December 31, 2006. This trend is expected to
      continue into 2007 based on purchase orders in hand and sales’ pipelines. At the
      time of filing this report the Company has purchase order backlog of unfilled
      orders that have not been invoiced of approximately $320,000 and accounts
      receivable of $225,000.




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.


20


**ITEM
      3 - CONTROLS AND PROCEDURES**





The
      Company, under the supervision and with the participation of the Company's
      management, including the Company's Chief Executive Officer and Chief Financial
      Officer, has evaluated the effectiveness of the design and operation of the
      Company's "disclosure controls and procedures," as such term is defined in
      Rules
      13a-15e promulgated under the Exchange Act, as of this report. Based upon that
      evaluation, the Chief Executive Officer and Chief Financial Officer has
      concluded that the Company's disclosure controls and procedures were effective
      as of the end of the period covered by this report to provide reasonable
      assurance that material information required to be disclosed by the Company
      in
      reports that it files or submits under the Exchange Act is recorded, processed,
      summarized and reported within the time periods specified in SEC rules and
      forms.




Management
      is aware that there is a lack of segregation of duties at the Company due to
      the
      small number of employees dealing with general administrative and financial
      matters. This constitutes a significant deficiency in financial reporting.
      Nevertheless, at this time, management has decided that, considering the
      employees involved and the control procedures in place, the risks associated
      with such lack of segregation of duties are insignificant and the potential
      benefits of adding additional employees to clearly segregate duties do not
      justify the expenses associated with such increases. Management will
      periodically reevaluate this situation. If the volume of the business increases
      and sufficient capital is secured, it is the Company's intention to further
      increase staffing to mitigate the current lack of segregation of duties within
      the general, administrative and financial functions.




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. Such limitations include the fact that human
      judgment in decision-making can be faulty and that breakdowns in internal
      control can occur because of human failures, such as simple errors or mistakes
      or intentional circumvention of the established process.


21


**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, case No. BC335098, against
      Application Science and Technology LLC, Chad Kalebic, Michael Hurst, Anthony
      Briede and others (the “Defendants”). 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 one-third contingency basis of the net benefit to the
      Company. The Company will advance and pay the Court filing and third party
      costs
      and expenses of the litigation. The Company expects to prevail in the
      proceedings; however, there can be no assurances in this regard and in the
      event
      of an adverse decision, the Company may be liable for costs, expenses and/or
      attorney’s fees of the Defendants. On December 6, 2005, after losing a demurrer
      which they filed against the Statmon complaint, the Defendants in case No.
      BC335098 filed a Cross Complaint in the Superior Court of California against
      Statmon Technologies Corp. and employees Mr. Geoffrey Talbot and Mr. Ken Dillard
      as Cross Defendants/Plaintiffs claiming Breach of Settlement Agreement,
      Intentional Interference with Contractual Relationships, Intentional
      Interference with Prospective Business Relationships, Defamation, Trade Libel,
      Violation of California Business and Professional Code, Negligent Interference
      with Prospective Business Relationships and Negligent Interference with
      Contractual relationships. The Company believes that the Cross Complaint lacks
      merit and will be defended vigorously, in this regard a defense to the
      cross-complaint is being furnished by an insurance carrier of Statmon. In
      addition, the Defendants in case No. BC335098 filed a Complaint For Declaratory
      Relief in the United States district Court For The Northern District of
      Illinois, Eastern Division seeking to secure a judicial determination and
      declaration that they had independently developed their own software without
      impermissibly copying Statmon’s software and that the Defendant’s software does
      not infringe upon any Statmon copyright. The California state case has been
      stayed (temporarily stopped) by the court pending resolution of the declaratory
      relief action filed in the United States District Court in Illinois. It is
      anticipated that the California state litigation will resume thereafter unless
      a
      settlement is reached. Settlement efforts have proceeded to the point where
      the
      parties are working on settlement documentation and overall resolution of the
      litigation is expected in the near future, although no assurances can be offered
      in this regard.




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





Between
      October 1 and December 31, 2006, the Company sold Units to investors as
      follows:


·  (i)
      $75,000 principal amount promissory notes bearing interest at 10% per annum
      and
      due November 30, 2006, (ii) 45,000 shares of common stock and (iii) warrants
      to
      purchase 45,000 shares of common stock exercisable at a price of $1.00 per
      share
      for a term of five years. These notes were extended per the original terms
      on
      December 21, 2006 and will expire on November 30, 2007. Per the terms of the
      extension, the Company has granted an additional 45,000 shares of common stock
      and warrants to purchase 45,000 shares of common stock exercisable at a price
      of
      $1.00 per share for a term of five years.


22





**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, 2006. 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, 2006 is $187,356.





The
      Company also continues to be in default or defaulted on:





·
            A
                $50,000 principal amount promissory note issued in June 2002, accruing
                15%
                penalty interest per annum and earning 2,500 penalty warrants per
                month
                since January 10, 2003;


·
            A
                $50,000 principal amount promissory note issued in September 2003,
                accruing 15% penalty interest per annum and earning 2,500 penalty
                warrants
                per month since April 19, 2004;


·
            A
                $100,000 principal amount promissory note issued in November 2003
                originally due in May 2004, extended to November 2004, accruing 15%
                penalty rate per annum and earning 20,000 penalty warrants per month
                since
                May 22, 2004;


·
            A
                $60,000 principal amount promissory note issued in January 2004,
                accruing
                15% penalty interest per annum and earning 3,000 penalty warrants
                per
                month since August 2, 2004;


·
            A
                $100,000 principal amount promissory note issued in March 2004, accruing
                15% penalty interest per annum and earning 5,000 penalty warrants
                per
                month since October 14, 2004;


·
            A
                $250,000 promissory note issued in August 2004, accruing 15% penalty
                interest per annum and earning 50,000 penalty warrants per month
                since
                March 25, 2005;


·
            A
                $100,000 promissory note issued in October 2004, accruing 15% penalty
                interest per annum and earning 10,000 penalty warrants per month
                since
                November 8, 2005;


·
            A
                $100,000 promissory note issued in December 2004, accruing 15% penalty
                interest per annum and earning 10,000 penalty warrants per month
                since
                January 29, 2006;


·
            A
                $225,000 promissory note issued in March 2005, accruing 15% penalty
                interest per annum and earning 22,500 penalty warrants per month
                since
                April 17, 2006;


·
            A
                $100,000 promissory note issued in April 2005, accruing 15% penalty
                interest per annum and earning 10,000 penalty warrants per month
                since May
                29, 2006;


·
            A
                $75,000 promissory note issued in May 2005, accruing 15% penalty
                interest
                per annum and earning 7,500 penalty warrants per month since June
                30,
                2006;


·
            A
                $50,000 promissory note issued in June 2005, accruing 15% penalty
                interest
                per annum and earning 5,000 penalty warrants per month since July
                15,
                2006;


·
            A
                $100,000 promissory note issued in September 2005, accruing 15% penalty
                interest per annum and earning 4,545 penalty warrants per month since
                October 30, 2005;


·
            A
                $100,000 promissory note issued on September 1, 2005, accruing 15%
                penalty
                interest per annum and earning 10,000 penalty warrants per month
                since
                October 1, 2006;


·
            A
                $75,000 promissory note issued in July 2005, accruing 15% penalty
                interest
                per annum and earning 7,500 penalty warrants per month since August
                14,
                2006;





The
      accrued interest on these Notes in default at December 31, 2006 is
      $438,843.





In
      total,
      at December 31, 2006, $3,093,700 principal amount of the $3,286,700 principal
      amount of promissory notes are in default and $1,107,676 of interest had accrued
      on all outstanding notes as of such date.




**ITEM
      6. Exhibits**





(a)
            Exhibits31.1
            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.


23




**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, 2007
            
            /s/ Geoffrey
              P. TalbotName:
                Geoffrey P. Talbot
              Title: Chief
                  Financial Officer


24





**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.




25