**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      DC 20549**










**FORM
      10 – Q**







x QU **ARTERLY
      REPORT UNDER SECTION 13 OR 15(d) OF**  **THE
      SECURITIES EXCHANGE ACT OF 1934**





**For
      the quarterly period ended June 30, 2008**





OR





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




*Commission
      File Number: 0-21284*





**STATSURE
      DIAGNOSTIC SYSTEMS, INC.**


*(Exact
      name of registrant as specified in its charter)*




DELAWARE
            
            91-1549305(State
                or other jurisdiction)
            
            (IRS
                Employer Identification No.)of
                incorporation or organization)





1222
      Avenue M, Brooklyn, NY 11230


(Address
      of principal executive offices and zip code) ****


(347)
      394-3641


( *Registrant’s
      telephone number, including area code)*





1881
      Worcester Rd. #200, Framingham, MA. 01701


( *Former
      Name or Former Address, if Changed Since Last Report)*





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days.


Yes x No  ̈





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
      one):





Large
                accelerated filer ̈
            Accelerated
                filer ̈Non-accelerated
                filer ̈
            Smaller
                reporting companyx





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


Yes  ̈ No x





Transitional
      Small Business Disclosure Format (check one): Yes  ̈ No x





Indicate
      by check mark whether the registrant is an accelerated filer (as defined in
      Rule
      12b-2 of the Exchange Act).


Yes  ̈ No x





The
      number of shares outstanding of the Registrant's Common Stock as of June 30,
      2008 was 39,651,096.








**STATSURE
      DIAGNOSTIC SYSTEMS, INC.**


**FORM
      10-Q**


**INDEX**





PART
                I FINANCIAL INFORMATIONItem
                1.
            Condensed
                Financial StatementsBalance
                Sheets as of June 30, 2008 (unaudited) and December 31,
                2007(audited)
            3Statements
                of Operations -Three Months and Six Months Ended June 30, 2008 and
                June
                30, 2007 (unaudited)
            4Statements
                of Cash Flows - Six Months Ended June 30, 2008 and 2007
                (unaudited)
            5Notes
                to Financial Statements (unaudited)
            6-14Item
                2.
            Management's
                Discussion and Analysis of Financial Condition And Results of
                Operations
            15Item
                3.
            Quantitative
                and Qualitative Disclosures about Market Risk
            19Item
                4T.
            Controls
                and Procedures
            19PART
                II OTHER INFORMATIONItem
                1.
            Legal
                Proceedings
            20Item
                1A.
            Risk
                Factors.Item
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            20Item
                3.
            Defaults
                upon Senior Securities
            20Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            20Item
                5.
            Other
                Information
            20Item
                6.
            Exhibits
            21Signatures.
            22


2


**PART
      I FINANCIAL INFORMATION**


**Item
      1. CONDENSED FINANCIAL STATEMENTS**




**STATSURE
      DIAGNOSTIC SYSTEMS, INC.**


**CONDENSED
      BALANCE SHEETS**




**June 30, 2008**
            
            **December 31, 2007****(unaudited)**ASSETSCURRENT
                ASSETS:Cash
                and cash equivalents
            
            $
            —
            
            $
            43,516Accounts
                receivable, net of allowance for doubtful accounts of $3,585 (2008)
                and
                $2,015 (2007)
            
            
            152,757
            
            
            152,049Inventories
            
            
            15,591
            
            
            48,256Prepaid
                expenses
            
            
            —
            
            
            9,795Total
                current assets
            
            
            168,348
            
            
            253,616Property
                and equipment, net of accumulated depreciation of $582,058 (2008)
                and
                $573,765 (2007)
            
            
            38,865
            
            
            47,158OTHER
                ASSETSPatents
                and trademarks, net of accumulated depreciation of $170,875 (2008)
                and
                $163,138 (2007)
            
            
            108,390
            
            
            105,527Deferred
                loan costs
            
            
            —
            
            
            2,006Deposits
            
            
            2,500
            
            
            2,500Total
                other assets
            
            
            110,890
            
            
            110,033TOTAL
                ASSETS
            
            $
            318,103
            
            $
            410,807LIABILITIES
                AND SHAREHOLDERS' DEFICITCURRENT
                LIABILITIES:Notes
                payable-shareholders
            
            $
            1,290,067
            
            $
            1,476,317Debentures
                payable, net of discount
            
            
            206,752
            
            
            139,194Accounts
                payable
            
            
            190,104
            
            
            123,516Accrued
                expenses
            
            
            194,329
            
            
            187,309Accrued
                interest
            
            
            29,280
            
            
            17,451Accrued
                interest-due to shareholder
            
            
            510,238
            
            
            428,775Accrued
                payroll expense to officers
            
            
            124,999
            
            
            124,999Payroll
                and payroll taxes payable
            
            
            20,086
            
            
            20,086Cash
                dividends payable to preferred shareholders
            
            
            198,000
            
            
            118,800Total
                current liabilities
            
            
            2,763,855
            
            
            2,636,447LONG-TERM
                LIABILITIESDerivative
                instrument
            
            
            151,721
            
            
            1,010,390TOTAL
                LIABILITIES
            
            
            2,915,576
            
            
            3,646,837COMMITMENTS
                AND CONTINGENCIESSeries
                    2006-A Convertible Preferred Stock: 2,500 shares authorized, $.001
                    par value, 1,980 issued and outstanding
            
            
            2
            
            
            2SHAREHOLDERS'
                DEFICITSeries
                1998-B Convertible Preferred Stock: 1,645 shares authorized, none
                issued
                and outstanding
            
            
            —
            
            
            —Common
                    stock, $.001 par value, 50,000,000 shares authorized, issued and
                    outstanding: 39,651,096 (2008 and 2007)
            
            
            39,651
            
            
            39,651Additional
                paid-in capital
            
            
            47,795,045
            
            
            47,771,801Accumulated
                deficit
            
            
            (50,432,171
            )
            
            (51,047,484
            )Total
                shareholders' deficit
            
            
            (2,597,475
            )
            
            (3,236,032
            )TOTAL
                LIABILITIES AND SHAREHOLDERS' DEFICIT
            
            $
            318,103
            
            $
            410,807





The
      accompanying notes are an integral part of these financial
      statements.


3


**STATSURE
      DIAGNOSTIC SYSTEMS, INC.**


**STATEMENTS
      OF OPERATIONS**


**(Unaudited)**





**Three Months Ended June 30,**
            
            **Six Months Ended June 30,****2008**
            
            2007
            
            **2008**
            
            **2007**REVENUES:Product
                sales
            
            $
            320,871
            
            $
            224,004
            
            $
            545,241
            
            $
            366,866Royalty
                and other income
            
            
            —
            
            
            176,759
            
            
            35,800
            
            
            187,745TOTAL
                REVENUE
            
            
            320,871
            
            
            400,763
            
            
            581,041
            
            
            554,611Cost
                of products sold
            
            
            73,642
            
            
            74,173
            
            
            122,051
            
            
            95,902GROSS
                PROFIT
            
            
            247,229
            
            
            326,590
            
            
            458,990
            
            
            458,709OPERATING
                EXPENSES:Research
                and development
            
            
            3,005
            
            
            13,543
            
            
            8,005
            
            
            34,591Selling,
                general and administrative
            
            
            209,585
            
            
            275,784
            
            
            454,164
            
            
            706,888212,590
            
            
            289,327
            
            
            462,169
            
            
            741,479INCOME
                (LOSS) FROM OPERATIONS
            
            
            34,639
            
            
            37,263
            
            
            (3,179
            )
            
            (282,770
            )OTHER
                INCOME (EXPENSES):Interest
                expense-net
            
            
            (45,384
            )
            
            (57,432
            )
            
            (93,419
            )
            
            (112,466
            )Interest
                expense on beneficial conversion feature
            
            
            (33,022
            )
            
            (36,132
            )
            
            (67,558
            )
            
            (72,442
            )Derivative
                income
            
            
            164,185
            
            
            644,435
            
            
            858,669
            
            
            2,040,696Penalties
                on preferred shares
            
            
            —
            
            
            (29,129
            )
            
            —
            
            
            (93,629
            )Contract
                termination costs
            
            
            —
            
            
            (291,499
            )
            
            —
            
            
            (291,499
            )Total
                other income (expenses):
            
            
            85,779
            
            
            230,243
            
            
            697,692
            
            
            1,470,660Income
                before provision for income taxes
            
            
            120,418
            
            
            267,506
            
            
            694,513
            
            
            1,187,890Provision
                for income taxes
            
            
            —
            
            
            —
            
            
            —
            
            
            —NET
                INCOME
            
            
            120,418
            
            
            267,506
            
            
            694,513
            
            
            1,187,890Dividends
                - Preferred stock series 2006-A
            
            
            39,600
            
            
            39,600
            
            
            79,200
            
            
            89,100NET
                INCOME TO COMMON SHAREHOLDERS
            
            $
            80,818
            
            $
            227,906
            
            $
            615,313
            
            $
            1,098,790BASIC
                EARNINGS PER SHARE
            
            $
            0.00
            
            $
            0.01
            
            $
            0.02
            
            $
            0.03DILUTED
                EARNINGS (LOSS) PER SHARE
            
            $
            (0.00
            )
            $
            (0.01
            )
            $
            (0.00
            )
            $
            (0.02
            )WEIGHTED
                AVERAGE NUMBER OF SHARES:BASIC
                EARNINGS PER SHARE
            
            
            39,651,096
            
            
            37,926,153
            
            
            39,651,096
            
            
            37,609,244DILUTED
                EARNINGS PER SHARE
            
            
            43,948,596
            
            
            46,652,612
            
            
            43,948,596
            
            
            46,335,703





The
      accompanying notes are an integral part of these financial
      statements.


4


**STATSURE
      DIAGNOSTIC SYSTEMS, INC.**


**CONDENSED
      STATEMENTS OF CASH FLOWS**


**(Unaudited)**





**Six
                  Months Ended June 30,****2008**
              
              **2007**CASH
                  FLOWS FROM OPERATING ACTIVITIES:Net
                  income
              
              $
              694,513
              
              $
              1,187,890Adjustments
                  to reconcile net income to net cash provided (used) in operating
                  activities:Depreciation
                  and amortization
              
              
              16,030
              
              
              14,749Amortization
                  of deferred loan costs
              
              
              2,006
              
              
              9,511Bad
                  debt expense
              
              
              1,570
              
              
              —Options
                  granted to employees as compensation
              
              
              —
              
              
              122,604Non-employee
                  share based expense
              
              
              23,244
              
              
              23,244Beneficial
                  conversion features of convertible debts
              
              
              67,558
              
              
              72,442Stocks
                  and warrants issued for termination penalty
              
              
              
              
              
              291,499Mark-to-market
                  gain on derivative instruments
              
              
              (858,669
              )
              
              (2,040,696
              )Changes
                  in current assets and liabilities:Accounts
                  receivable
              
              
              (2,278
              )
              
              (53,546
              )Inventories
              
              
              32,665
              
              
              7,692Prepaid
                  expenses
              
              
              9,795
              
              
              (5,064
              )Deposits
              
              
              —
              
              
              11,850Accounts
                  payable, accrued payroll expense to officers and accrued
                  expenses
              
              
              166,900
              
              
              218,881Deferred
                  rent
              
              
              —
              
              
              (6,287
              )Net
                  cash provided (used) in operating activities
              
              
              153,334
              
              
              (145,231
              )CASH
                  FLOWS FROM INVESTING ACTIVITIES:Acquisition
                  of property and equipment
              
              
              —
              
              
              (7,231
              )Acquisitions
                  of patents and trademarks
              
              
              (10,600
              )
              
              (7,608
              )Net
                  cash (used) in investing activities
              
              
              (10,600
              )
              
              (14,839)
              )CASH
                  FLOWS FROM FINANCING ACTIVITIES:Proceeds
                  from shareholder loans
              
              
              175,100
              
              
              165,000Advances
                  from officer
              
              
              0
              
              
              25,000Repayment
                  of debentures
              
              
              0
              
              
              (37,500
              )Repayments
                  of shareholder loans
              
              
              (361,350
              )
              
              (93,687
              )Net
                  cash (used) provided by financing activities
              
              
              (186,250
              )
              
              58,813NET
                  DECREASE IN CASH AND CASH EQUIVALENTS
              
              
              (43,516
              )
              
              (101,257
              )CASH
                  AND CASH EQUIVALENTS, BEGINNING OF PERIOD
              
              
              43,516
              
              
              109,332CASH
                  AND CASH EQUIVALENTS, END OF PERIOD
              
              $
              —
              
              $
              8,075SUPPLEMENTAL
                  DISCLOSURE OF CASH FLOW INFORMATION:Cash
                  paid for interest
              
              $
              45,257
              
              $
              22,689Cash
                  paid for taxes
              
              $
              3,286
              
              $
              —SUPPLEMENTAL
                  DISCLOSURE OF NON-CASH INFORMATION:Common
                  stock issued in lieu of cash dividend payments
              
              $
              —
              
              $
              99,000Preferred
                  stock dividends accrued and not paid
              
              $
              79,200
              
              $
              39,600





The
      accompanying notes are an integral part of these financial statements.


5


**STATSURE
      DIAGNOSTIC SYSTEMS, INC.**





**NOTES
      TO CONDENSED FINANCIAL STATEMENTS**


**June
      30, 2008**


**(unaudited)**





**NOTE
      1** . **DESCRIPTION
      OF BUSINESS:**




StatSure
      Diagnostic Systems, Inc., a Delaware corporation ("the Company"), is primarily
      engaged in the development, manufacture and marketing of rapid in-vitro assays
      for use in the detection of infectious diseases and other conditions, and
      medical specimen collection devices. The Company is currently marketing its
      medical specimen collection devices both in the U.S. and overseas.




The
      Company has signed several agreements relating to its patented barrel technology
      for use in screening antibodies to HIV (Human Immunodeficiency Virus, the virus
      that causes AIDS). As part of a three-way alliance with Inverness Medical
      Innovations (AMEX:IMA) Chembio Diagnostics (CEMI.OB) (“Chembio”), the Company
      signed a worldwide exclusive distribution deal for a rapid, point-of-care HIV
      test with Inverness. In a two-way deal with Chembio, the Company granted an
      exclusive license to Chembio solely to manufacture the recently FDA approved
      HIV
      barrel product for Inverness. This product is being marketed under the IMA
      brand. In this two-way agreement (“Joint HIV Barrel Commercialization
      Agreement”), a long- term strategic “partnership” was established, wherein both
      companies equally split the margin dollars of the HIV barrel product once the
      actual cost of manufacturing is reimbursed. The Company announced on November
      5,
      2007, that the HIV 1/2 Rapid Test employing the Company's patented "barrel"
      technology marketed and distributed worldwide by Inverness Medical Innovations
      under its Clearview® brand as "Clearview COMPLETE HIV 1 /2, received an FDA
      waiver of the Clinical Laboratory Improvement Amendments of 1988(CLIA). This
      CLIA waiver will allow sales of this product to a large number of markets that
      do not operate under the standards of the CLIA (e.g. doctors' offices, public
      health clinics). Until this waiver was obtained, marketing and sales of the
      product was restricted to those laboratory settings with CLIA certification.





In
      May
      2008, Mr. Steve M. Peltzman, Chairman of the Board and Chief Executive Officer,
      and Mr. D. Bruce Pattison, President, Chief Operating Officer and Director,
      have
      resigned. Messrs Peltzman and Pattison have indicated that they will enter
      into
      Consulting Agreements with the Company. In addition, Mr. Richard Woodrich has
      resigned as Director. Concurrently, the Board elected Mr. Moshe Bodner,
      currently Vice President of the Company, as Chief Executive Officer and
      Director, and Mr. Leo Ehrlich, the current Chief Financial Officer and Director,
      was elected as the President, Chief Operating Officer effective July 1,
      2008.





**NOTE
      2. SUBSTANTIAL DOUBT REGARDING ABILITY TO CONTINUE AS A GOING
      CONCERN**




Other
      than sales of the Company's collection devices, the Company has not yet
      commenced any significant product commercialization. The Company incurred
      significant operating losses since its inception, resulting in an accumulated
      deficit of $50,432,171 at June 30, 2008. Such losses are expected to continue
      for the foreseeable future and until such time, if ever, as the Company is
      able
      to attain revenue levels sufficient to support its operations. There can be
      no
      assurance that the Company will achieve or maintain profitability in the future.
      In addition, the Company is in default on certain debt obligations. Despite
      the
      Company's financings in 2006 and October 2007, substantial additional financing
      will be required in future periods.




The
      Company's capital requirements have been and will continue to be significant.
      The Company is dependent upon its effort to raise capital to finance its future
      operations, including the cost of development, manufacturing and marketing
      of
      its products, to conduct clinical trials and submissions for FDA approval of
      its
      products and to continue the design and development of its new products.
      Marketing, manufacturing and clinical testing may require capital resources
      substantially greater than the resources available to the Company. The Company
      intends to continue to seek public or private placement of its equity securities
      in order to provide the funds necessary to meet its obligations. In addition,
      Management believes that the agreements it entered into with Inverness Medical
      Innovations in September 2006 (See Note 1), could enable the Company to increase
      its revenues significantly during the next few years.




The
      accompanying financial statements have been prepared assuming that the Company
      will continue as a going concern. The Company's significant operating losses
      and
      significant capital requirements, however, raise substantial doubt about the
      Company's ability to continue as a going concern. The financial statements
      do
      not include any adjustments that might result from the outcome of this
      uncertainty.


6


**NOTE
      3.**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES**




***Basis
      of Presentation:***


The
      accompanying unaudited financial statements as of, and for the three and six
      month periods ended June 30, 2008 and 2007, have been prepared in conformity
      with accounting principles generally accepted in the United States of America.
      The financial information as of December 31, 2007 is derived from StatSure
      Diagnostic Systems, Inc. financial statements included in the Company’s Annual
      Report on Form 10-KSB for the year ended December 31, 2007. Certain information
      or footnote disclosures in this filing that are normally included in financial
      statements prepared in accordance with accounting principles generally accepted
      in the United States of America have been condensed or omitted, pursuant to
      the
      rules and regulations of the Securities and Exchange Commission for interim
      filings. In the opinion of management, the accompanying financial statements
      include all adjustments necessary (which are of a normal and recurring nature)
      for a fair presentation of the results of the interim periods presented. The
      accompanying financial statements should be read in conjunction with the
      Company’s audited financial statements for the year ended December 31, 2007, as
      included in the Company’s Annual Report on Form 10-KSB for the year ended
      December 31, 2007. Operating results for the three and six month period ended
      June 30, 2008, are not necessarily indicative of the results that may be
      expected for the entire year ending December 31, 2008, or any other portion
      thereof.




***Inventories*** ****


Inventory
      consists of the following at:


**June 30, 2008**
            
            **December 31, 2007**Raw
                Materials
            
            $
            17,993
            
            $
            28,884Finished
                Goods
            
            
            6,225
            
            
            27,99924,218
            
            
            56,883Allowance
                for obsolete inventory
            
            
            (8,627
            )
            
            (8,627
            )$
            15,591
            
            $
            48,256





***Recent
      Accounting Pronouncements:***




In
      September 2006, the FASB issued SFAS No. 157, *Fair
      Value Measurements* ,
      which
      defines fair value, establishes a framework for measuring fair value in
      generally accepted accounting principles, and expands disclosures about fair
      value measurements. This statement does not require any new fair value
      measurements, but provides guidance on how to measure fair value by providing
      a
      fair value hierarchy used to classify the source of the information. SFAS No.
      157 is effective for fiscal years beginning after November 15, 2007, and all
      interim periods within those fiscal years. In February 2008, the FASB released
      FASB Staff Position (FSP FAS 157-2 - *Effective Date of FASB Statement No. 157* )
      which
      delays the effective date of SFAS No. 157 for all nonfinancial assets and
      nonfinancial liabilities, except those that are recognized or disclosed at
      fair
      value in the financial statements on a recurring basis (at least annually),
      to
      fiscal years beginning after November 15, 2008 and interim periods within those
      fiscal years. The implementation of SFAS No. 157 for financial assets and
      liabilities, effective January 1, 2008, did not have an impact on the Company’s
      financial position and results of operations. The Company is currently
      evaluating the impact of adoption of this statement on its non-financial assets
      and liabilities in the first quarter of fiscal 2009.




In
      December 2007, the Financial Accounting Standards Board (“FASB”) issued
      Statement of Financial Accounting Standards (“SFAS”) No. 141 (revised 2007),
      Business Combinations, which replaces SFAS No 141. The statement retains the
      purchase method of accounting for acquisitions, but requires a number of
      changes, including changes in the way assets and liabilities are recognized
      in
      the purchase accounting. It also changes the recognition of assets acquired
      and
      liabilities assumed arising from contingencies, requires the capitalization
      of
      in-process research and development at fair value, and requires the expensing
      of
      acquisition-related costs as incurred. SFAS No. 141R is effective for business
      combinations for which the acquisition date is on or after the beginning of
      the
      first annual reporting period beginning on or after December 15,
      2008.





In
      December 2007, the FASB issued SFAS No. 160. “Noncontrolling Interests in
      Consolidated Financial Statements-and Amendment of ARB No. 51.” SFAS 160
      establishes accounting and reporting standards pertaining to ownership interests
      in subsidiaries held by parties other than the parent, the amount of net income
      attributable to the parent and to the noncontrolling interest, changes in a
      parent’s ownership interest, and the valuation of any retained noncontrolling
      equity investment when a subsidiary is deconsolidated. This statement also
      establishes disclosure requirements that clearly identify and distinguish
      between the interests of the parent and the interests of the noncontrolling
      owners. SFAS 160 is effective for fiscal years beginning on or after December
      15, 2008. The adoption of SFAS 160 is not currently expected to have a material
      effect on the Company’s consolidated financial position, results of operations,
      or cash flows.


7





In
      March
      2008, the Financial Accounting Standards Board (FASB) issued FASB Statement
      No.
      161, *Disclosures
      about Derivative Instruments and Hedging Activities.* The new
      standard is intended to improve financial reporting about derivative instruments
      and hedging activities by requiring enhanced disclosures to enable investors
      to
      better understand their effects on an entity’s financial position, financial
      performance, and cash flows. It is effective for financial statements issued
      for
      fiscal years and interim periods beginning after November 15, 2008, with early
      application encouraged. The company is currently evaluating the impact of
      adopting SFAS. No. 161 on its financial statements.




***Stock
      Based Compensation*** ***:***




Effective
      January 1, 2006, the Company’s 2004 Stock Plan and options granted outside of
      the Plan are accounted for in accordance with the recognition and measurement
      provisions of Statement of Financial Accounting Standards ("FAS") No. 123
      (revised 2004), Share-Based Payment ("FAS 123(R)"), which replaces FAS No.
      123,
      Accounting for Stock-Based Compensation, and supersedes Accounting Principles
      Board Opinion ("APB") No. 25, Accounting for Stock Issued to Employees, and
      related interpretations. FAS 123 (R) requires compensation costs related to
      share-based payment transactions, including employee stock options, to be
      recognized in the financial statements. In addition, the Company adheres to
      the
      guidance set forth within Securities and Exchange Commission ("SEC") Staff
      Accounting Bulletin ("SAB") No. 107, which provides the Staff's views regarding
      the interaction between SFAS No. 123(R) and certain SEC rules and regulations
      and provides interpretations with respect to the valuation of share-based
      payments for public companies.




In
      adopting FAS 123(R), the Company applied the modified prospective approach
      to
      transition. Under the modified prospective approach, the provisions of FAS
      123(R) are to be applied to new awards and to outstanding awards modified,
      repurchased, or cancelled after the required effective date. Additionally,
      compensation cost for the portion of awards for which the requisite service
      has
      not been rendered that are outstanding as of the required effective date shall
      be recognized as the requisite service is rendered on or after the required
      effective date. The compensation cost for that portion of awards shall be based
      on the grant-date fair value of those awards as calculated for either
      recognition or pro-forma disclosures under FAS 123.





While
      FAS
      No. 123 encouraged recognition of the fair value of all stock-based awards
      on
      the date of grant as expense over the vesting period, companies were permitted
      to continue to apply the intrinsic value-based method of accounting prescribed
      by APB No. 25 and disclose certain pro-forma amounts as if the fair value
      approach of FAS No. 123 had been applied. In December 2002, FAS No. 148,
      Accounting for Stock-Based Compensation-Transition and Disclosure, an amendment
      of FAS No. 123, was issued, which, in addition to providing alternative methods
      of transition for a voluntary change to the fair value method of accounting
      for
      stock-based employee compensation, required more prominent pro-forma disclosures
      in both the annual and interim financial statements. The Company complied with
      these disclosure requirements for all applicable periods prior to January 1,
      2006.




As
      a
      result of the adoption of FAS 123(R), the Company's results for the three and
      six months ended June 30, 2008 and 2007 include employee share-based
      compensation expense of $0, $0 and $61,680 and $122,604, respectively, recorded
      in the selling, general and administrative expenses. There was no income tax
      benefit recognized in the income statement for share-based compensation
      arrangements as the Company has provided a 100% valuation allowance on its’
deferred tax asset





Prior
      to
      January 1, 2006, the Company accounted for similar transactions in accordance
      with APB No. 25 which employed the intrinsic value method of measuring
      compensation cost. Accordingly, compensation expense was not recognized for
      fixed stock options if the exercise price of the option equaled or exceeded
      the
      fair value of the underlying stock at the grant date.




***Earnings
      per Share:***




Basic
      and
      diluted earnings per common share were calculated for all periods in accordance
      with the requirements of Statement of Financial Accounting Standards No. 128,
      “Earnings per Share”. The following table sets forth the computation of the
      diluted loss per share for the six month periods ended June 30, 2008 and 2007,
      respectively:





Three Months Ended
              June 30
            
            Six Months Ended
              June 30Numerator:
            
            
            2008
            
            
            2007
            
            
            2008
            
            
            2007Net
                income to commonshareholders
            
            $
            80,818
            
            $
            227,906
            
            $
            615,313
            
            $
            1,098,790(Deduct)/Add:Mark-to-market
                gain (loss)-derivative liability
            
            
            (164,185
            )
            
            (644,435
            )
            
            (858,669
            )
            
            (2,040,696
            )Interest
                on convertible debt
            
            
            5,890
            
            
            7,268
            
            
            11,830
            
            
            14,708Dividends
                on preferredstock
                payable in shares
            
            
            39,600
            
            
            39,600
            
            
            79,200
            
            
            89,100Net
                loss to common shareholders and assumed conversion
            
            $
            (37,877
            )
            $
            (369,661
            )
            $
            (152,326
            )
            $
            (838,098
            )Denominator:Share
                reconciliation:Shares
                used for basic income (loss) per share
            
            
            39,651,096
            
            
            37,926,153
            
            
            39,651,096
            
            
            37,609,244Effect
                of dilutive items:Stock
                options
            
            
            75,000
            
            
            202,857
            
            
            75,000
            
            
            202,857Convertible
                debentures
            
            
            262,500
            
            
            337,500
            
            
            262,500
            
            
            337,500Convertible
                securities
            
            
            3,960,000
            
            
            8,186,102
            
            
            3,960,000
            
            
            8,186,102Shares
                used for diluted (loss) per share
            
            
            43,948,596
            
            
            46,652,612
            
            
            43,948,596
            
            
            46,335,703(Loss)
                per share:Diluted:
            
            $
            (0.00
            )
            $
            (0.01
            )
            $
            (0.00
            )
            $
            (0.02
            )


8





***Reclassifications:***





Certain
      reclassifications have been made to the June 30, 2007 financial statements
      in
      order to conform to the current fiscal year presentation.




**NOTE
      4. FINANCING FROM SHAREHOLDERS**




Per
      a
      promissory note dated February 2003, Jules Nordlicht, a shareholder, agreed
      to
      advance in total or in installments, up to the amount of $1,000,000 to the
      Company. In November 2003 and August 2004, agreements were executed with this
      shareholder to cause additional advances in total or in installments up to
      the
      amount of $2,500,000 to advance the process of the FDA approval. In
      consideration for the financing, the Company agreed to repay such borrowed
      funds
      with accrued interest at 12% per annum and the shareholder reserved the right
      to
      demand payment in full or in part at any time after December 31, 2006. On May
      8,
      2006 the shareholder agreed to extend the maturity date to December 31, 2008
      provided that (i) a partial payment of $350,000 will be made by the Company
      on
      or prior to July 31, 2006 and (ii) accrued interest will be paid quarterly
      thereafter, commencing September 30, 2006. The agreement was amended on
      September 4, 2006 so that the Company need no longer pay the quarterly accrued
      interest but an amount of $60,000 quarterly as a principal reduction. If the
      Company should default in these payments, the promissory note reverts to the
      original maturity date of December 31, 2006. As of June 30, 2008, the loan
      balance to this shareholder aggregated $1,290,067. An additional amount of
      $81,462 and $97,758 of interest on this note has been expensed during the six
      months ended June 30, 2008 and 2007, respectively, and a total of $510,238
      in
      accrued interest remains owed as of June 30, 2008. The lender has filed a
      Uniform Commercial Code (UCC) Lien on the Company's equipment and patents as
      security for this loan. The Company was unable to make its quarterly principal
      payment of $60,000 in the previous year, and therefore, the remaining principal
      balance is being classified as a current liability due on demand. Since December
      31, 2007, the Company has reduced the principal balance on this note by $186,250
      net of advances of $175,100 received in 2008 from the shareholder. The
      shareholder has not demanded payment nor has the lender taken any action to
      enforce the liens associated with this note.





**NOTE
      5. DEBENTURE PAYABLE**





On
      January 19, 2005, the Company's board of directors authorized the issuance
      and
      sale of up to three million dollars of convertible debentures. These debentures
      mature March 31, 2009, and carry an interest rate of 9% per year and are
      convertible into common stock at the lower of 66.6% of the valuation of the
      Company's next raise of equity or $1 per share. In accordance with EITF Issue
      98-5 "Accounting for Convertible Securities with Beneficial Conversion Features
      or Contingently Adjustable Conversion Ratios", the Company had evaluated that
      the convertible debt had a beneficial conversion feature as the conversion
      price
      was less than the fair value of the Company's common stock on the measurement
      date. Under EITF 98-5, the discount related to the beneficial conversion feature
      would be calculated based on its intrinsic value which was $2,614,400, and
      is
      limited to the amount of the proceeds of $1,510,000 allocated to the convertible
      debt instrument. Accordingly, the beneficial conversion feature is being
      amortized using the effective interest method of accounting, resulting in a
      charge to interest expense of $67,558 and $72,442 for the six months ended
      June
      30, 2008 and 2007, respectively and $33,022 and $36,132 for the three months
      ended June 30, 2008 and 2007, respectively. In September 2005, a debenture
      in
      the amount of $60,000 was converted into 60,000 shares of common stock. In
      May
      2006, the Company issued 796,056 and 701,754 shares of common stock at $0.90
      and
      $0.57 per share, respectively, for the induced conversion of $1,109,607 in
      convertible debentures including interest of $109,608. The debenture holders
      accepted these shares as full consideration for the outstanding convertible
      debentures. The Company recognized an additional expense of $403,872 in 2006
      because of the induced conversion to the debenture holders pursuant to the
      accounting requirements of SFAS No. 84, Induced Conversions of Convertible
      Debt.
      The original terms of the debentures called for them to be converted at $1.00
      per share. The Company induced the debenture holders to convert at $0.90 and
      $0.57 per share.


9




As
      of
      June 30, 2008, there is outstanding $262,500 of 9% Convertible Debentures due
      in
      January 2009. Holders of the 9% Convertible Debentures are entitled to convert
      principal amounts into shares of common stock at a conversion price of $1.00.
      The debentures payable balance of $206,752 at June 30, 2008, represents the
      net
      amount of debenture payable of $262,500 reduced by the unamortized debt discount
      of $55,748.





The
      Company is in default to the debenture holders for not making payments on a
      timely basis. As a result, in accordance with the debenture agreements, these
      debentures became payable on demand unless the default is waived by the
      investors. The Company has not received any notice of default from any of the
      holders of the outstanding debentures.





**NOTE
      6. EQUITY TRANSACTIONS**





On
      June
      8, 2006, the Company completed a private placement of $2,150,000 with 10
      institutional and accredited investors pursuant to the 2006 Series A Convertible
      Preferred Stock Agreement dated June 7, 2006. Net proceeds from the placement
      were approximately $1,969,000. The Company issued 2,150 shares of Series 2006-A
      Convertible Preferred Stock, par value $0.001 per share (the “Convertible
      Preferred Stock”), at a purchase price of $1,000 per share. Each investor also
      received a Series A Warrant (a “Warrant”) to purchase up to 75% of the number of
      shares of common stock issuable to him upon conversion of his Convertible
      Preferred Stock. If all of the Warrants are exercised, the Company will issue
      a
      total of 2,015,625 shares of common stock. In addition, the Company issued
      to
      the placement agent 631,562 warrants valued at $645,881 and paid fees of
      $181,000. All the warrants have a term of 5 years and the initial exercise
      price
      of $1.50 per share has been adjusted to $1.00 per share as the contingent event
      stated in the agreement failed to materialize. This $1.00 exercise price is
      subject to adjustments for certain corporate events such as merger,
      reorganization or future sale of securities at a price below the exercise price.
      As the fair value of warrants and conversion option exceeded the net proceeds
      of
      $2,150,000 from preferred stock, the Company deemed the fair value of the
      preferred stock to be $0 at inception. The $2 reflects the minimum par value
      of
      the stock.





The
      Convertible Preferred Stock is convertible to shares of common stock at an
      initial conversion price of $0.80 per share, which has been since adjusted
      to
      $0.50 per share, as the contingent event stated in the agreement failed to
      materialize. The conversion price of $0.50 per share is subject to adjustment
      in
      the event of certain corporate events such as merger, reorganization or future
      sale of securities at a price below the conversion rate. Cash dividends accrue
      on the Convertible Preferred Stock at the rate of 8% per annum, payable
      quarterly beginning in October 2006; or, at the Company's option, dividends
      are
      payable in shares of the Company’s common stock, accruing at the rate of 10% per
      annum based on the volume-weighted average market price for shares of common
      stock for the 10 trading days preceding payment.




The
      Company is required to keep the Registration Statement continuously effective
      until such date as is the earlier of (x) the date when all Registerable Shares
      covered by the registration statement have been sold or (y) the date on which
      the Registerable Shares may be sold without any restriction pursuant to Rule
      144
      as determined by Counsel to the Company. The registration statement was timely
      filed and declared effective. On October 13, 2006, the Company announced its
      intention to restate financial statements, and suspended use of its Registration
      Statement declared effective by the SEC October 4, 2006. For such time as the
      Registration Statement is not effective, the Company is obligated, pursuant
      to
      Company’s Registration Rights Agreement with holders of the Company’s
      Convertible Preferred Stock, to pay such holders an amount equal to one percent
      per month of the original purchase price of the Convertible Preferred Stock
      until the earlier of the date the Registration Statement is again declared
      effective by the SEC, or June 2008. As of June 30, 2008, the maximum penalty
      liability of $129,329 pursuant to the Registration Rights Agreement was
      accrued.





The
      Company has accounted for the conversion option in the preferred stock as an
      embedded derivative under the provisions of FAS 133 “Accounting for Derivative
      Instruments and Hedging Activities.” EITF 00-19: “Accounting for Derivative
      Financial Instruments Indexed to, and Potentially Settled in, a Company's Own
      Stock” (“EITF 00-19”). The Company has initially recorded the value of the
      warrants and conversion option at $2,095,930 and $3,698,316, respectively which
      are reflected as derivative liabilities on the balance sheet. As the proceeds
      from the issuance of preferred shares of $2,150,000 were less than the combined
      fair value of the warrants and the conversion option, the difference of
      $3,644,246 was charged in fiscal 2006 to financing costs in the statements
      of
      operations.


10





As
      of
      June 30, 2008, the Company believed that none of the events that trigger
      redemption upon major corporate events were probable of occurring. The Company
      believes that many of these events are within its control and accordingly the
      probability of occurrence of any of such events is small. Other events that
      are
      not within Company’s control and which trigger redemption are lapse of
      registration or unavailability of registration and suspension of listing. The
      Company believes that although these events are not in its control, as of June
      30, 2008, redemption was not likely and that the Company could cure within
      any
      cure period after receipt of a Notice of Redemption. As such, in accordance
      with
      paragraphs 15 of EITF Topic D-98: Classification and Measurement of Redeemable
      Securities, the Preferred Stock is not currently accreted to its redemption
      value, **** there
      is
      no likelihood that it will become redeemable; accordingly, no accretion is
      being
      made to bring the carrying value up to its redemption value.





As
      of
      June 30, 2008, the liability for the value of the warrants and conversion option
      was “marked to market” and the difference of $275,747 and $582,922,
      respectively, totaling $858,669, has been accounted for as a decrease to the
      derivative expense initially recognized in the statements of operations for
      the
      six months ended June 30, 2006. The liability for the value of the conversion
      option and warrants will be “marked to market” in future accounting periods
      until such time as the preferred shares are converted and the warrants are
      exercised or they meet the criteria for equity classification. At June 30,
      2008,
      the derivative liability was $151,721. As of June 30, 2008, the Company used
      the
      Black-Scholes option pricing model to revalue the fair value of warrants and
      conversion options with the following assumptions:





Stock
                price
            
            $
            0.10Exercise
                price
            
            $
            0.50-1.00Expected
                life in years
            
            
            2.92
                yearsRisk
                free interest rate
            
            
            2.91
            %Expected
                volatility
            
            
            96.40
            %Dividend
                yield
            
            
            0
            %




On
      January 7, 2007 the Company issued 81,068 shares of common stock for payment
      of
      accrued dividends in the amount of $49,500. Dividends
      declared to the holders of the 2006 Series A Convertible Preferred Stock for
      the
      six months ended June 30, 2008 were $79,200 and cumulative dividends through
      June 30, 2008 amounted to $247,500. Approximately $49,500 of the dividend
      obligations was settled through the issuance of 138,306 shares of the Company’s
      common stock and $198,000 recorded as a liabilty as of June 30, 2008
      to be settled in cash.





**NOTE
      7. STOCK-BASED COMPENSATION PLANS**




*Plan
      Options*


The
      Company has two stock option plans, a "1992 Plan", under which 350,000 shares
      of
      its common stock have been reserved for issuance, and a "1994 Plan", under
      which
      an additional 350,000 shares of its common stock have been reserved for
      issuance. Under both plans, the Company's Board of Directors may grant either
      incentive stock options with an exercise price of not less than the fair market
      value of the common stock at the date of grant or non-qualified stock options
      with an exercise price of not less than 85% of the fair market value of the
      common stock at the date of grant. The Board of Directors shall determine the
      period of each option and the time or times at which options may be exercised
      and any restrictions on the transfer of stock issued upon exercise of any
      options. Both plans also provide for certain automatic grants to each
      non-employee director at a price of 100% of fair market value of the common
      stock at the time of grant. Options generally vest over a period of six months
      and are exercisable over a period of five years.





*Non-Plan
      Options*




On
      March
      25, 2005, 550,000 stock options were granted to one officer/employee and on
      May
      2, 2005, another 550,000 stock options were granted to a second officer/employee
      in accordance with their employment agreements. Both employment agreements
      provided for immediate vesting of 100,000 stock options at an exercise price
      of
      $0.10 on date of grant and then vesting of the remaining 450,000 stock options
      in three equal tranches of 150,000 stock options on October 1, 2005, October
      1,
      2006 and October 1, 2007, at an exercise price of $1.00 per share. These options
      are exercisable until June 1, 2015 and had a fair value at the date of grant
      of
      $2,265,050. Stock option compensation for non-plan option grants recognized
      during the six months ended June 30, 2008 and 2007 amounted to $0 and $60,924,
      respectively.




The
      Company recognized $23,244 of share based expense for both the six months ended
      June 30, 2008 and 2007 for options granted to non-employees.


11




In
      January 2006, the Company granted options to its two outside directors, Richard
      Woodrich and Joseph Levi, to purchase in the aggregate 100,000 shares of the
      Company's common stock. The options vest quarterly in equal amounts over a
      period of three years, and are exercisable for seven years from the vesting
      date
      at an exercise price equal to $1.00.




The
      following table summarizes all stock option activity during the six months
      ended
      June 30, 2008 and 2007:





Number of
              Options
            
            Weighted
              Average
              Exercise PriceOutstanding
                at December 31, 2007
            
            
            1,200,000
            
            $
            0.85Granted
            
            
            —
            
            
            —Exercised
            
            
            —
            
            
            —Forfeited/expired
            
            
            —
            
            
            —Outstanding
                at June 30, 2008
            
            
            1,200,000
            
            $
            0.85Exercisable
                at June 30, 2008
            
            
            1,183,335
            
            $
            0.85





As
      of
      June 30, 2008, there was $23,244 of unrecognized compensation cost related
      to
      non-vested awards granted, which is expected to be recognized over a
      weighted-average period of less than a year. The following table summarizes
      the
      information about stock options outstanding at June 30, 2008:




Options Outstanding
            
            Options ExercisableRange of Exercise Price
              Per Share
            
            Number
              Outstanding at
              June 30, 2008
            
            Weighted Average
              Remaining
              Contractual Life
              (Years)
            
            Weighted
              Average Exercise
              Price Per Share
            
            Number
              Exercisable at
              June 30, 2008
            
            Weighted
              Average Exercise
              Price Per Share$0.
                10-$1.00
            
            
            1,200,000
            
            
            6.68
            
            $
            0.85
            
            
            1,183,335
            
            $
            0.85




The
      following table summarizes the information about warrants outstanding at June
      30, 2008:





Number
                of
              Warrants
            
            Weighted
              Average
              Exercise
                PriceOutstanding
                at December 31, 2007
            
            
            3,968,615
            
            $
            0.90Granted
            
            
            —Exercised
            
            
            —Forfeited/expired
            
            
            —Outstanding
                at June 30, 2008
            
            
            3,968,615
            
            $
            0.90




Of
      the
      above warrants, 2,647,187 expire in 2011 and 1,321,428 expire in
      2012.




**NOTE
      8. COMMITMENTS AND CONTINGENCIES**




***Economic
      Dependency***





**2008**


For
      the
      six months ended June 30, 2008, sales to three customers were in excess of
      10%
      of the Company's total sales. Sales to these customers were approximately
      $230,000, $125,000 and $119,000 and accounts receivable from these customers
      as
      of June 30, 2008, were $135,000, $0, and $0, respectively. Royalties earned
      from
      Inverness Medical and Chembio Diagnostic Systems for the six months ended June
      30, 2008 (See Note 1- **** Description
      of Business) aggregated approximately $36,000 and $0, respectively.





During
      the second quarter of 2008, the Company had sales to two customers that were
      in
      excess of 10% of the Company's total sales. Sales to these customers were
      approximately $230,000 and $59,500. The Company lost its largest customer at
      the
      beginning of the second quarter, but this customer was immediately replaced
      by
      selling directly to the end user. The loss of this customer could have a
      material adverse effect on the Company. There were no royalties earned from
      Inverness Medical and Chembio Diagnostic Systems for the three months ended
      June
      30, 2008 (See Note 1- **** Description
      of Business).


12


For
      the
      six months ended June 30, 2008, purchases from three suppliers were in excess
      of
      10% of the Company's total purchases. The purchases from these suppliers for
      the
      six months ended June 30, 2008 ranged from $14,000 to $40,000. The corresponding
      accounts payable at June 30, 2007, to these suppliers, aggregated
      $56,247.





**2007**


For
      the
      six months ended June 30, 2007, sales to two customers were in excess of 10%
      of
      the Company's total sales. Sales to these customers were approximately $271,000
      and $52,000 and accounts receivable from these customers as of June 30, 2007,
      aggregated $193,000 and $0, respectively. Royalties earned from Inverness
      Medical and Chembio Diagnostic Systems for the six months ended June 30, 2007
      (See Note 1- **** Description
      of Business) aggregated approximately $118,000 and $37,000, respectively.





During
      the second quarter of 2007, the Company had sales to one customer that was
      in
      excess of 10% of the Company's total sales. Sales to this customer were
      approximately $201,000. The loss of this customer could have a material adverse
      effect on the Company. Royalties earned from Inverness Medical and Chembio
      Diagnostic Systems for the three months ended June 30, 2007 (See Note
      1- **** Description
      of Business) aggregated approximately $80,000 and $13,000,
      respectively.





For
      the
      six months ended June 30, 2007, purchases from four suppliers were in excess
      of
      10% of the Company's total purchases. The purchases from these suppliers for
      the
      six months ended June 30, 2007 ranged from $11,000 to $44,000. The corresponding
      accounts payable at June 30, 2007, to these suppliers, aggregated
      $44,452.





**SEGMENT
      INFORMATION**




Under
      the
      disclosure requirements of SFAS No. 131, "Segment Disclosures and Related
      Information," we operate within one segment. Our products are sold principally
      in the United States and the United Kingdom. Segmentation of operating income
      and identifiable assets is not applicable since all of our revenues outside
      the
      United States are export sales. Foreign sales during the three and six month
      periods ended June 30, 2008 and 2007 were approximately $163,760 and $90,220,
      respectively. The following table represents total product sales revenue by
      geographic area:





**For the three months**
              **ended June 30,**
            
            **For the six months**
              **ended June 30,****2008**
            
            2007
            
            **2008**
            
            2007United
                States
            
            **$**
            **59,410**
            
            $
            **95**
            
            **$**
            **120,020**
            
            $
            **52,737**Europe
            
            
            **253,861**
            
            
            **201,009**
            
            
            **393,721**
            
            
            **271,879**Other
            
            
            **7,600**
            
            
            **22,900**
            
            
            **31,500**
            
            
            **42,250****$**
            **320,871**
            
            $
            **224,004**
            
            **$**
            **545,241**
            
            $
            **366,866**





All
      of
      the Company's long lived assets are located in the United States.




***Employment
      Contracts***





In
      March
      and May of 2005, the Company entered into employment agreements respectively
      with Steve Peltzman, Chief Executive Officer and Chairman of the Board, and
      Bruce Pattison, President. Both agreements provide a minimum annual base salary
      of $120,000 for a term of two years and renewable annually. The current annual
      renewal period ends in May 2008 and continues to provide for a base salary
      of
      $120,000. Either party can terminate the agreement upon 90 days notice. The
      Company is also obligated to pay health and life insurance benefits and
      reimburse expenses incurred by the officers on behalf of the Company. Each
      executive, if terminated by the Company without cause, would be entitled to
      six
      months’ severance. On May 16 th ,
      2008,
      the Company announced that effective July 1, 2008, Steve Peltzman, Chief
      Executive Officer and Chairman of the Board, and Bruce Pattison, President,
      Chief Operating Officer and Director, had resigned. Messrs Peltzman and Pattison
      have indicated that they will enter into Consulting Agreements with the Company.


13





***Related
      Party Agreement***




On
      October 17, 2007 the Company received a $500,000 financing from Inverness
      Medical Innovations, Inc. The financing consists of a purchase of 1,428,572
      common shares at a price of $0.35 per share. Additionally, Inverness received
      5
      year warrants to purchase up to an additional 1,071,428 million shares of the
      Company's stock at a price of $0.75 per share. In connection with this
      financing, the Company and Inverness signed two additional agreements. First,
      the two companies signed an agreement whereby Inverness acquired an option
      to
      the exclusive, worldwide marketing and distribution rights to certain infectious
      disease diagnostic tests developed by StatSure that may utilize specified
      Inverness and/or StatSure intellectual property. If exercised by Inverness,
      the
      option provides for StatSure and Inverness to equally share development expenses
      and profits. StatSure and Inverness also entered into a license agreement
      whereby Inverness granted to StatSure a license to certain Inverness lateral
      flow patents for use in a rapid test to detect HIV antibodies in point-of-care
      markets subject to payment of royalties to Inverness. This license pertains
      to
      HIV tests using formats other than the Statsure's "barrel format" which is
      already being sold by Inverness. During the six month periods ended June 30,
      2008 and 2007, the Company earned approximately $36,000 and $80,000
      respectively, in royalty income under this license agreement.





**NOTE
      9. FAIR VALUE MEASUREMENTS**





Effective
      January 1, 2008, we adopted SFAS 157, Fair Value Measurements (SFAS 157). SFAS
      157 clarifies the definition of fair value, prescribes methods for measuring
      fair value, and establishes a fair value hierarchy to classify the inputs used
      in measuring fair value as follows:





Level
      1-Inputs are unadjusted quoted prices in active markets for identical assets
      or
      liabilities available at the measurement date.


Level
      2-Inputs are unadjusted quoted prices for similar assets and liabilities in
      active markets, quoted prices for identical or similar assets and liabilities
      in
      markets that are not active, inputs other then quoted prices that are
      observable, and inputs derived from or corroborated by observable market
      data.


Level
      3-Inputs are unobservable inputs which reflect the reporting entity’s own
      assumptions on what assumptions the market participants would use in pricing
      the
      asset or liability based on the best available information.





The
      adoption of SFAS No. 157 did not have a material impact on our fair value
      measurements.





The
      following tables present our assets and liabilities that are measured at fair
      value on a recurring basis and are categorized using the fair value hierarchy.
      The fair value hierarchy has three levels based on the reliability of the inputs
      used to determine fair value.





Fair Value Measurements at Reporting Date UsingDescription
            
            June 30, 2008
            
            Quoted Prices in
              Active Markets for
              Identical Assets
              (Level 1)
            
            Significant Other
              Observable Inputs
              (Level 2)
            
            Significant
              Unobservable
              Inputs
              (Level 3)**Assets:**
            
            $
            —
            
            $
            -
            
            $
            —
            
            $
            -**Total
                Assets**
            
            $
            —
            
            $
            -
            
            $
            —
            
            $
            -**Liabilities**Derivative
                Instrument ( See Note 6 )
            
            $
            151,721
            
            $
            -
            
            $
            -
            
            $
            151,721**Total
                Liabilities**
            
            $
            151,721
            
            $
            -
            
            $
            -
            
            $
            151,721





Fair Value Measurements Using
              Significant Unobservable Inputs
              (Level 3)Long-term investments available
              for sale**Beginning
                Balance**
            
            $
            1,010,390Total
                gains or (losses) (realized/unrealized)Included
                in earnings
            
            
            (858,669
            )Included
                in other comprehensive income
            
            
            -Purchases,
                issuances and settlements
            
            
            -Transfer
                in and/or out of Level 3
            
            
            -**Ending
                Balance**
            
            $
            151,721The
                amount of total gains or (losses) for the period included in earnings
                (or
                changes in net assets) attributable to the change in unrealized gains
                or
                losses relating to assets still held at the reporting date
            
            $
            -




14






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





The
      following discussion of the Company's financial condition and the results of
      operations should be read in conjunction with the Financial Statements and
      Notes
      thereto appearing elsewhere in this document.





The
      Private Securities Litigation Reform Act of 1995 provides a safe harbor for
      forward-looking statements. In order to comply with the terms of the safe
      harbor, the Company notes that in addition to the description of historical
      facts contained herein, this report contains certain forward-looking statements
      that involve risks and uncertainties as detailed herein and from time to time
      in
      the Company's other filings with the Securities and Exchange Commission and
      elsewhere. Such statements are based on management's current expectations and
      are subject to a number of factors and uncertainties, which could cause actual
      results to differ materially from those, described in the forward-looking
      statements. These factors include, among others: (a) the Company's fluctuations
      in sales and operating results; (b) risks associated with international
      operations; (c) regulatory, competitive and contractual risks; (d) product
      development risks; (e) the ability to achieve strategic initiatives, including
      but not limited to the ability to achieve sales growth across the business
      segments through a combination of enhanced sales force, new products, and
      customer service; and (f) pending litigation.





**GENERAL**





StatSure
      Diagnostic Systems, Inc., (“SDS”), a Delaware corporation (the “Company” or
“StatSure”), is primarily engaged in commercializing two product platforms:
      first, the development, manufacturing and marketing of oral-fluid collection
      devices to provide physiologic samples to screen for the presence of
      drugs-of-abuse or infectious diseases; second, the development of point-of-care
      (POC), rapid, immunoassays for use in the detection of infectious diseases.
      These immunoassays incorporate SDS’ patented “barrel” technology, designed to
      provide speed, safety and convenience which are considered critical factors
      in
      point-of-care markets. In the oral fluid collection market, the Company’s
      platform has a patented internal quality control that indicates sufficient
      volume of the oral fluid sample (“volume adequacy indicator”).




The
      Company's principal executive offices are located at 1222 Ave M, Brooklyn,
      NY
      11230.





On
      September 29, 2006, the Company announced it had signed several agreements
      relating to its patented barrel technology for use in screening antibodies
      to
      HIV (Human Immunodeficiency Virus, the virus that causes AIDS). As part of
      a
      three-way alliance with Inverness Medical Innovations (AMEX:IMA) and Chembio
      Diagnostics (CEMI.OB) (“Chembio”), StatSure signed a worldwide, exclusive
      distribution deal for a rapid, point-of-care HIV test with Inverness. In a
      two-way deal with Chembio, the Company granted an exclusive license to Chembio
      solely to manufacture their recently FDA approved HIV barrel product for
      Inverness Medical Innovations (“IMA” or “Inverness”). This product is being
      marketed under the IMA brand. In this two-way agreement (“Joint HIV Barrel
      Commercialization Agreement”), a long- term strategic “partnership” was
      established, wherein both companies equally split the margin dollars of the
      HIV
      barrel product once the actual cost of manufacturing is reimbursed.





On
      November 5, 2007 the Company announced that the U.S. Food and Drug
      Administration ("FDA"), through its Center for Devices and Radiological Health,
      had approved a waiver under the Clinical Laboratory Improvements Amendments
      of
      1988 ("CLIA") for the HIV **** 1/2
      Rapid
      Test marketed by Inverness, as per the aforementioned agreement.





On
      October 17, 2007 the Company received a $500,000 financing from Inverness
      Medical Innovations, Inc. The financing consisted of a sale of 1,428,571 common
      shares at a price of $0.35 per share. Additionally, Inverness received 5 year
      warrants to purchase up to an additional 1,071,428 shares of the Company's
      stock
      at a price of $0.75 per share.





In
      connection with this financing, the Company and Inverness signed two additional
      agreements. First, the two companies signed an agreement whereby Inverness
      acquired an option to the exclusive, worldwide marketing and distribution rights
      to certain infectious disease diagnostic tests that may be developed by StatSure
      that may utilize specified Inverness and/or StatSure intellectual property.
      If
      exercised by Inverness, the option provides for StatSure and Inverness to
      equally share development expenses and profits. StatSure and Inverness also
      entered into a license agreement whereby Inverness granted to StatSure a license
      to certain Inverness lateral flow patents for use in a rapid test to detect
      HIV
      antibodies in point-of-care markets subject to payment of royalties to
      Inverness. This license pertains to HIV tests using formats other than the
      Statsure's "barrel format" which is already being sold by
      Inverness.





The
      Company announced that effective July 1, 2008, Mr. Steve M. Peltzman, Chairman
      of the Board and Chief Executive Officer, and Mr. D. Bruce Pattison, President,
      Chief Operating Officer and Director, have resigned. Messrs Peltzman and
      Pattison have indicated that they will enter into Consulting Agreements with
      StatSure. In addition, Mr. Richard Woodrich has resigned as
      Director. Concurrently, the Board elected Mr. Moishe Bodner, currently Vice
      President of the Company, as Chief Executive Officer and Director, and Mr.
      Leo
      Ehrlich, the current Chief Financial Officer and Director, was elected as the
      President, Chief Operating Officer effective July 1, 2008.




15





The
      Company has incurred significant operating losses since its inception, resulting
      in an accumulated deficit of $50,432,171at June 30, 2008. Such losses are
      expected to continue for the foreseeable future and until such time, if ever,
      as
      the Company is able to attain sales levels sufficient to support its operations.
      The Company's independent certified public accountants have included an
      explanatory paragraph in their report on the December 31, 2007 financial
      statements, stating that the Company's significant operating losses and
      significant capital requirements raise substantial doubt about the Company's
      ability to continue as a going concern. There can be no assurance that the
      Company will be able to obtain the additional capital resources necessary to
      continue its business, or that such financing will be available on commercially
      reasonable terms or at all. (See note 2 of notes to financial
      statements.)





**CRITICAL
      ACCOUNTING POLICIES AND ESTIMATES**





The
      preparation of financial statements and related disclosures in conformity with
      accounting principles generally accepted in the United States requires
      management to make estimates and assumptions that affect the amounts reported
      in
      the unaudited Financial Statements and accompanying notes. Estimates are used
      for, but not limited to, the accounting for the allowance for doubtful accounts,
      inventories, income taxes and loss contingencies. Management bases its estimates
      on historical experience and on various other assumptions that are believed
      to
      be reasonable under the circumstances. Actual results could differ from these
      estimates under different assumptions or conditions.





**RESULTS
      OF OPERATIONS**





Second
      Quarter and First Six Months of 2008 Compared to Second Quarter and First Six
      Months of 2007





**Revenues.** The
      Company's revenues consist of product sales and royalties. Revenues decreased
      to
      $320,871 in the second quarter of 2008 from revenues of $400,763 in the second
      quarter of 2007. Revenues increased to $581,041 in the first six months of
      2008
      from $554,611 in the first six months of 2007. The decrease in revenues in
      the
      second quarter of 2008, from revenues in the second quarter of 2007, is due
      to
      the decrease in royalties and equipment rental income from Inverness Medical
      and
      Chembio Diagnostic Systems. In 2007 Inverness overstocked when launching its
      Complete HIV test for which the Company receives royalties. In 2008, Inverness
      was working through their excess inventory which resulted in a decrease in
      royalties and equipment rental income. The Company expects to realize royalty
      revenues throughout the remainder of 2008.





The
      increase in revenue for the first six months of 2008 from the first six months
      of 2007 was due to increased orders from new clients in 2008. Royalties and
      equipment rental income earned from Inverness Medical and Chembio Diagnostic
      Systems for the six months ended June 30, 2008 and 2007 aggregated approximately
      $35,800 and $188,000, respectively. In 2007 Inverness overstocked when launching
      its Complete HIV test for which the Company receives royalties. In 2008,
      Inverness was working through their excess inventory which resulted in a
      decrease in royalties and equipment rental income. The Company expects to
      realize royalty revenues throughout the remainder of 2008.





The
      Company's revenues are primarily generated from sales of its patented saliva
      collection devices. Specimens collected with the device are sent to and
      processed at laboratories. For the six months ended June 30, 2008, sales to
      three customers were in excess of 10% of the Company's total sales. Sales to
      these customers were approximately $230,000, $125,000 and $119,000,
      respectively. During this period the Company lost its largest customer for
      the
      past several years. The Company was able to replace lost sales with another
      customer but is uncertain at this time if these orders will continue. The loss
      of this customer will have a material adverse effect on the
      Company.





**Cost
      of products sold** :
      Costs
      of products sold decreased to $73,642 (23% of product sales) in the second
      quarter of 2008 from $74,173 (33% of product sales) in the second quarter of
      2007, and increased to $122,051 (23% of product sales) in the first six months
      of 2008 from $95,902 (26% of product sales) in the first six months of 2007.
      The
      cost of products sold percentage (%) will vary depending on our selling price
      and product mix.





**Research
      and development expenses:** Research
      and development expenses decreased to $3,005 **** in
      the
      second quarter of 2008 from $13,543 **** in
      the
      second quarter of 2007 and decreased to $8,005 in the first six months of 2008
      from $34,591 in the first six months of 2007. The decrease in 2008 is due to
      the
      completion of projects during 2007 calendar year. The expenses for research
      and
      development are expected to continue at current levels until such time as the
      Company has sufficient funds to implement a new research and development
      program.




16





**Selling,
      general and administrative expenses** :
      Selling, general and administrative expenses decreased to $209,585 in the second
      quarter of 2008 from $275,784 in the second quarter of 2007, and decreased
      to
      $454,164 in the first six months of 2008 from $706,888 in the first six months
      of 2007. For the second quarter 2008, the Company’s decrease in selling, general
      and administrative expenses was primarily the result of the decrease in payroll
      expense and payroll related expense of approximately $61,400, a decrease in
      directors fees of approximately $18,600, a decrease in legal and accounting
      fees
      of approximately $5,500, net of increases in consulting expenses of
      approximately $11,600 and freight expense of approximately $7,400. The decrease
      in the first six months was mainly due to the decreases in director’s fees of
      approximately $37,000, legal and accounting of approximately $93,000, rent
      of
      approximately $8,000 and payroll and payroll related expenses of approximately
      $124,000.





**Interest
      expense:** Interest
      expense decreased to $45,384 in the second quarter of 2008 from $57,432 in
      the
      second quarter of 2007, and decreased to $93,419 in the first six months of
      2008
      from $112,466 in the first six months of 2007. The decrease in interest expense
      for both periods was due to lower principal balances on debentures and notes
      payables to shareholders which resulted in lower interest expense.





**Interest
      expense on beneficial conversion feature:** Interest expense on beneficial conversion feature decreased to $33,022 in the
      second quarter of 2008 from $36,132 in the first quarter of 2007 and decreased
      to $67,558 in the first six months of 2008 from $72,442 in the first six months
      of 2007. The decrease of this non-cash expense was due to the conversion of
      $400,000 of debentures and a reduction in the beneficial conversion
      feature.





**Derivative
      income:** **** Derivative
      income of $164,185 was recorded in the second quarter of 2008 from derivative
      income of $644,435 which was recorded in the second quarter of 2007, and
      derivative income of $858,669 was recorded in the first six months of 2008
      as
      compared to $2,040,696 in the first six months of 2007. The fluctuation was
      due
      to the mark-to market adjustment on embedded derivatives principally driven
      by
      the decrease in our common stock price from $0.249 to $0.10.





**LIQUIDITY
      AND CAPITAL RESOURCES**





June 30, 2008
            
            December 31, 2007Cash
                and cash equivalents
            
            $
            0
            
            $
            43,516Working
                capital deficit
            
            $
            (2,595,507
            )
            $
            (2,382,831
            )





Net
      cash
      provided by operating activities in the first six months of 2008 was $153,334
      compared to $145,231 used during the same period 2007. In 2008, the increase
      in
      cash provided by operations was primarily due to net income, a decrease in
      inventories and prepaid expenses, combined with the increase in accounts
      payable, accrued payroll and accrued expenses.





Cash
      used
      in investing activities in the six months ended June 30, 2008 was $10,600 as
      compared to $14,839 during the six months ended June 30, 2007. The Company
      incurred no patent and trademark costs in 2008.





Cash
      used
      in financing activities for the six months ended June 30, 2008 was $186,250
      compared to cash provided of $58,813 for the same period in 2007. During 2008
      the Company repaid shareholder loans of $361,350 compared to $93,687 of
      repayments for the same period in 2007.




As
      of
      June 30, 2008, there is outstanding $262,500 of 9% Convertible Debentures due
      in
      January 2009. Holders of the 9% Convertible Debentures are entitled to convert
      principal amounts into shares of common stock at a conversion price of $1.00.
      The Company is in default to these debenture holders for not making payments
      on
      a timely basis. As a result, in accordance with the debenture agreements, these
      debentures became payable on demand unless the default is waived by the
      investors. The amount of debentures at June 30, 2008 of $262,500 plus accrued
      interest of $29,280 has therefore been reflected as a current liability.
      Accordingly, debentures payable-net of discount in the amount of $206,752,
      is
      the net of amount of debenture payables of $262,500 reduced by unamortized
      debt discount of $55,748 and is shown on the balance sheet as a current
      liability. The Company has not received any notice of default from any of the
      holders of the outstanding debentures.




The
      following table lists the future cash payments required on debt and any other
      contractual obligations of the Company as of June 30, 2008.





Obligations
            
            Total
            
            Less
                than 1
              year
            
            1-3
                yearsDebt
            
            $
            1,496,819
            
            $
            1,496,819
            
            $
            0Operating
                leases
            
            
            14,166
            
            
            14,166
            
            
            0




In
      June
      2007, the Company decided to move its offices to nearby premises also in
      Framingham, MA. The Company is leasing its new premises on a month to month
      basis at a rent of $1,800 per month. The Company also occupies premises in
      Brooklyn, New York. The lease has a three-year term ending August 30, 2008
      and a
      base annual rental rate through maturity of approximately $16,000 per
      annum.


17




Since
      inception, the Company has financed its capital requirements through the
      proceeds from its public offering of common stock in March 1993 and the exercise
      of common stock purchase warrants pursuant to such offering, proceeds from
      sales
      of convertible debentures, proceeds from private placements of common stock
      and
      preferred stock, the exercise of common stock purchase warrants and stock
      options and loans.





There
      can
      be no assurance that the Company will be able to obtain the additional capital
      resources necessary to implement or continue its programs, or that such
      financing will be available on commercially reasonable terms or at all. The
      Company will continue to seek public or private placement of its equity
      securities and corporate partners to develop products. There can be no assurance
      that the Company will be able to sell its securities on commercially reasonable
      terms or to enter into agreements with corporate partners on favorable terms
      or
      at all. The Company's future capital needs will depend upon numerous factors,
      including the progress of the approval for sale of the Company's products in
      various countries, including the U.S., the extent and timing of the acceptance
      of the Company's products, the cost of marketing and manufacturing activities
      and the amount of revenues generated from operations, none of which can be
      predicted with certainty. The Company's significant operating losses and capital
      requirements raise substantial doubt about the Company's ability to continue
      as
      a going concern.




*Recent
      Accounting Pronouncements*




See
      Note 3 "Recent Accounting Standards Affecting the Company” in the Notes to
      Condensed Consolidated Financial Statements in Item 1 for a full
      description of recent accounting pronouncements, including the expected dates
      of
      adoption and estimated effects on results of operations and financial condition,
      which is incorporated herein.





OFF-BALANCE
      SHEET ARRANGEMENTS. The Company does not have any off-balance sheet
      arrangements, as defined in Item 304(a) (4) (ii) of Regulation S-K under the
      Securities Exchange Act of 1934, as amended.


18


**ITEM
      3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK**





Not
      applicable





**ITEM
      4T. CONTROLS AND PROCEDURES**




*Disclosure
        Controls and Procedures*
 
 As
        of
        June 30, 2008, the Company’s management, including our Chief Executive Officer
        (CEO) and Chief Financial Officer (CFO), have conducted an evaluation of
        the
        effectiveness of our disclosure controls and procedures pursuant to Rule
        13a-15(b) of the Exchange Act. Based on the evaluation, our CEO and CFO
        concluded that our disclosure controls and procedures are not effective as
        a
        result of an unremediated material weakness associated with a lack of
        segregation of duties, resulting from the Company’s continued lack of
        resources.
 
 *Changes
        in Internal Control Over Financial Reporting*
 
 There
        were no changes in the Company’s internal control over financial reporting
        during the first six months ended June 30, 2008 or subsequent to the date
        the
        Company completed its evaluation, that have materially affected or reasonably
        likely to materially affect, the Company’s internal control over financial
        reporting.




19





**PART
      II. OTHER INFORMATION**




**Item
      1** **.
      LEGAL PROCEEDINGS**





**Item
      2.** **UNREGISTERED
      SALES OF EQUITY SECURITIES**





**None**





**ITEM
      3.** **DEFAULTS
      UPON SENIOR SECURITIES**




The
      Company is in default on a total of $291,780 of convertible debentures. The
      amount of principal payments in arrears was $262,500, with an additional amount
      of $29,280 of interest due at June 30, 2008. These defaults are the result
      of a
      failure to pay in accordance with the terms agreed. No notice of default has
      been received.





The
      Company is in default on a total of $1,800,305 of shareholder loans. The amount
      of principal payments in arrears was $1,290,067, with an additional amount
      of
      $510,238 of interest due at June 30, 2008. The default is  the
      result of a failure to pay in accordance with the agreed upon terms. On
      September 22, 2007, the Company advised the shareholder, Mr. Nordlicht, that
      in
      consideration of his forbearing from calling the Company in default on the
      loan
      outstanding of principal and all accrued interest, the Company agrees to pay
      him
      no later than December 31, 2008, an amount totaling $2,600,000 as full payment
      of the loan (principal and interest). Any payments made during the interim
      period between January 1, 2007 and December 31, 2008 will be deducted from
      this
      total amount. As of the date of this filing, Mr. Nordlicht has not sent the
      Company a default notice.





**ITEM
      4.** **SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS**





None





**ITEM
      5.** **OTHER
      INFORMATION**





None




20


**ITEM
      6. EXHIBITS**





(a) **** Exhibit
      index




**Exhibit**31.1
            
            Certification
                of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a)
                under the Securities Exchange Act of 1934, as amended.31.2
            
            Certification
                of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a)
                under the Securities Exchange Act of 1934, as amended.32.1
            
            Certification
                of Chief Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b)
                under the Securities Exchange Act of 1934, as amended, and 18 U.S.C.
                Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley
                Act
                of 2002.32.2
            
            Certification
                of Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b)
                under the Securities Exchange Act of 1934, as amended, and 18 U.S.C.
                Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley
                Act
                of 2002.




(b)  Reports
      on Form 8-K





Date
            Items
                Reported5/16/07
            5.02




21


**SIGNATURES**




Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, the Registrant has duly caused this report to be signed on its behalf
      by
      the undersigned, thereunto duly authorized.




Dated:
      August 14, 2008




**STATSURE
      DIAGNOSTIC SYSTEMS, INC.**


/s/
                  Moshe BodnerMoshe
                  BodnerChief
                  Executive Officer(principal
                  executive officer)/s/
                  Leo EhrlichLeo
                  EhrlichChief
                  Financial Officer(principal
                  financial officer)




22