**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**


_______________________________





**FORM
      10 – QSB**


_______________________________





**QUARTERLY
      REPORT UNDER SECTION 13 OR 15(d) OF**


**THE
      SECURITIES EXCHANGE ACT OF 1934.**




**For
      the quarterly period ended June 30, 2007**




*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)
              of
                incorporation or organization)
            
            (IRS
                Employer Identification No.)





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


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


(508)
      872-2625


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





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Exchange Act 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
      o





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes
o
      No x





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





Indicate
      by check mark whether the registrant is an accelerated filer (as defined in
      Rule
      12b-2 of the Exchange Act). Yes
o
      No x





The
      number of shares outstanding of the Registrant's Common Stock as of July 31,
      2007 was 38,182,525 shares.








STATSURE
      DIAGNOSTIC SYSTEMS, INC.


FORM
      10-QSB


INDEX





PART
                I FINANCIAL INFORMATIONItem
                1.
            Financial
                StatementsCondensed
                Balance sheets –
                June 30,
                2007 (unaudited) and December 31, 2006
            3Condensed
                Statements of Operations – Three Months and Six Months Ended June 30, 2007
                and 2006 (unaudited)
            4Condensed
                Statements of Cash Flows– Six Months Ended June 30, 2007 and 2006
                (unaudited)
            5Notes
                to Condensed Financial Statements (unaudited)
            6Item
                2.
            Management's
                Discussion and Analysis of Financial Condition And Plan of
                Operation
            16Item
                3.
            Controls
                and Procedures
            20PART
                II OTHER INFORMATIONItem
                1.
            Legal
                Proceedings
            20Item
                2.
            Changes
                in Securities
            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.
            22Certifications




2


**PART
      I FINANCIAL INFORMATION**


**Item
      1. FINANCIAL STATEMENTS**





**STATSURE
      DIAGNOSTIC SYSTEMS, INC.**


**CONDENSED
      BALANCE SHEETS**




**June
                30, 2007**
              **(Unaudited)**
            
            **December 31,**
              **2006****ASSETS**CURRENT
                ASSETS:Cash
                and cash equivalents
            
            $
            8,075
            
            $
            109,332Accounts
                receivable, net of allowance for doubtful accounts
            
            
            229,681
            
            
            176,135Inventories
            
            
            32,549
            
            
            40,241Prepaid
                expenses
            
            
            11,921
            
            
            6,857Total
                current assets
            
            
            282,226
            
            
            332,565Property
                and equipment, net of accumulated depreciation of $565,067 (2007)
                and
                $557,613 (2006)
            
            
            41,926
            
            
            42,149OTHER
                ASSETS:Patents
                and trademarks, net of accumulated amortization of $155,723(2007)and
                $148,428 (2006)
            
            
            108,421
            
            
            108,108Deferred
                costs, less accumulated amortization of $465,014(2007)and
                $455,503(2006)
            
            
            6,986
            
            
            16,497Deposits
            
            
            2,500
            
            
            14,350Total
                other assets
            
            
            117,907
            
            
            138,955TOTAL
              ASSETS
            
            $
            442,059
            
            $
            513,669**LIABILITIES
                AND SHAREHOLDERS’ DEFICIT**CURRENT
                LIABILITIES:Notes
                payable –
                shareholders
            
            $
            1,672,817
            
            $
            240,000Debentures
                payable-net of discount
            
            
            105,510
            
            
            70,568Accounts
                payable
            
            
            164,633
            
            
            100,758Customer
                advances
            
            
            —
            
            
            31,792Accrued
                expenses
            
            
            529,964
            
            
            360,665Accrued
                payroll expense to officers
            
            
            144,999
            
            
            127,499Advance
                from officer
            
            
            25,000
            
            
            —Payroll
                and payroll taxes payable
            
            
            11,300
            
            
            11,300Dividends
                payable to preferred stockholders
            
            
            39,600
            
            
            49,500Total
                current liabilities
            
            
            2,693,823
            
            
            992,082LONG-TERM
                DEBTDeferred
                rent payable
            
            
            458
            
            
            6,745Note
                payable – shareholder
            
            
            —
            
            
            1,361,504Derivative
                instruments
            
            
            1,198,082
            
            
            3,238,778TOTAL
                LIABILITIES
            
            
            3,892,366
            
            
            5,599,109COMMITMENTS
                AND CONTINGENCIESSeries
                2006-A Convertible Preferred Stock: 2,500 shares authorized, $.001
                par
                value, 2,150 issued and
                outstanding
            
            
            2
            
            
            2SHAREHOLDERS’
                DEFICIT:Series
                1998-B Convertible Preferred Stock: 1,645 shares authorized, none
                issued
                and outstanding
            
            
            —
            
            
            —Common
                stock, $.001 par value, 50,000,000 shares authorized, 38,182,525
                (2007) and 37,213,151 (2006) shares issued and outstanding
            
            
            38,182
            
            
            37,213Additional
                paid-in capital
            
            
            47,178,748
            
            
            46,643,371Accumulated
                deficit
            
            
            (50,667,236
            )
            
            (51,766,026
            )TOTAL
                SHAREHOLDERS’ DEFICIT
            
            
            (3,450,306
            )
            
            (5,085,442
            )TOTAL
                LIABILITIES ANDSHAREHOLDERS’
                DEFICIT
            
            $
            442,059
            
            $
            513,669




The
      accompanying notes are an integral part of these statements.


3


**STATSURE
      DIAGNOSTIC SYSTEMS, INC.**


**CONDENSED
      STATEMENTS OF OPERATIONS**


**(Unaudited)**




**Three
                Months Ended June 30,**
            
            
            **Six
                Months Ended June 30,****2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006**REVENUES:Product
                sales
            
            $
            224,004
            
            $
            231,007
            
            $
            366,866
            
            $
            444,066Royalty
                and other income
            
            
            176,759
            
            
            -
            
            
            187,745
            
            
            -TOTAL
                REVENUE
            
            
            400,763
            
            
            231,007
            
            
            554,611
            
            
            444,066Cost
                of products sold
            
            
            74,173
            
            
            99,707
            
            
            95,902
            
            
            146,097GROSS
                PROFIT
            
            
            326,590
            
            
            131,300
            
            
            458,709
            
            
            297,969OPERATING
                EXPENSES:Research
                and development
            
            
            13,543
            
            
            73,466
            
            
            34,591
            
            
            142,615Selling,
                general and administrative
            
            
            275,784
            
            
            624,317
            
            
            706,888
            
            
            1,285,657289,327
            
            
            697,783
            
            
            741,479
            
            
            1,428,272INCOME
                (LOSS) FROM OPERATIONS
            
            
            37,263
            
            
            (566,483
            )
            
            (282,770
            )
            
            (1,130,303
            )OTHER
                INCOME (EXPENSES):Interest
                expense-net
            
            
            (57,432
            )
            
            (85,777
            )
            
            (112,466
            )
            
            (188,439
            )Interest
                expense on beneficial conversion feature
            
            
            (36,132
            )
            
            (866,230
            )
            
            (72,442
            )
            
            (983,842
            )Financing
                costs
            
            
            -
            
            
            (3,622,948
            )
            
            -
            
            
            (3,644,248
            )Derivative
                income (expense)
            
            
            644,435
            
            
            (2,346,192
            )
            
            2,040,696
            
            
            (2,346,192
            )Debt
                conversion expense
            
            
            -
            
            
            (403,872
            )
            
            -
            
            
            (403,872
            )Penalties
                on preferred shares
            
            
            (29,129
            )
            
            -
            
            
            (93,629
            )
            
            -Contract
                termination costs
            
            
            (291,499
            )
            
            -
            
            
            (291,499
            )
            
            -Total
                other income (expenses):
            
            
            230,243
            
            
            (7,325,019
            )
            
            1,470,660
            
            
            (7,566,593
            )Income
                (loss) before provision for income taxes
            
            
            267,506
            
            
            (7,891,502
            )
            
            1,187,890
            
            
            (8,696,896
            )Provision
                for income taxes
            
            
            -
            
            
            -
            
            
            -
            
            
            -NET
                INCOME (LOSS)
            
            
            267,506
            
            
            (7,891,502
            )
            
            1,187,890
            
            
            (8,696,896
            )Dividends
                - Preferred stock series 2006-A
            
            
            39,600
            
            
            -
            
            
            89,100
            
            
            -NET
                INCOME (LOSS) TO COMMON SHAREHOLDERS
            
            $
            227,906
            
            $
            (7,891,502
            )
            $
            1,098,790
            
            $
            (8,696,896
            )BASIC
                AND DILUTED INCOME (LOSS) PER SHARE
            
            $
            0.01
            
            $
            (0.22
            )
            $
            0.03
            
            $
            (0.26
            )WEIGHTED
                AVERAGE NUMBER OF SHARES USED IN BASIC AND DILUTED PER SHARE CALCULATIONS
            
            
            37,926,153
            
            
            35,296,871
            
            
            37,609,244
            
            
            33,531,300




The
      accompanying notes are an integral part of these statements.


4





**STATSURE
      DIAGNOSTIC SYSTEMS, INC.**


**CONDENSED
      STATEMENTS OF CASH FLOWS**


**(Unaudited)**





**Six
                 Months Ended  June 30,****2007**
            
            
            **2006**OPERATING
                ACTIVITIES:Net
                income (loss)
            
            $
            1,187,890
            
            $
            (8,696,896
            )Adjustments
                to reconcile net income (loss) to net cash used in operating
                activities:Depreciation
                and amortization
            
            
            14,749
            
            
            27,930Amortization
                of deferred costs
            
            
            9,511
            
            
            144,140Options
                granted to non-employee
            
            
            23,244
            
            
            11,621Beneficial
                conversion feature of convertible debentures
            
            
            72,442
            
            
            983,842Stock
                issued for consulting services
            
            
            —
            
            
            175,350Stock
                and warrants issued for termination penalty
            
            
            291,499
            
            
            —Options
                granted to employees as compensation
            
            
            122,604
            
            
            331,057Induced
                conversion expense on debentures
            
            
            —
            
            
            403,872Interest
                expense on derivative instruments
            
            
            —
            
            
            5,990,440Mark-to-Market
                (gain) loss on derivative instruments
            
            
            (2,040,696
            )
            
            —Changes
                in assets and liabilities:Accounts
                receivable
            
            
            (53,546
            )
            
            (128,399
            )Inventories
            
            
            7,692
            
            
            639Prepaid
                expenses
            
            
            (5,064
            )
            
            4,608Deposits
            
            
            11,850
            
            
            —Accounts
                payable, accrued payroll expense to officers, accrued expenses and
                customer advances
            
            
            218,881
            
            
            49,676Deferred
                rent
            
            
            (6,287
            )
            
            —Net
                cash used in operating activities
            
            
            (145,231
            )
            
            (702,120
            )CASH
                FLOWS FROM INVESTING ACTIVITIES:Acquisition
                of property and equipment
            
            
            (7,231
            )
            
            —Acquisitions
                of patents and trademarks
            
            
            (7,608
            )
            
            (50,857
            )Net
                cash used in investing activities
            
            
            (14,839
            )
            
            (50,857
            )CASH
                FLOWS FROM FINANCING ACTIVITIES:Proceeds
                from shareholder loans
            
            
            165,000
            
            
            289,722Repayments
                of shareholder loans
            
            
            (93,687
            )
            
            (502,512
            )Repayment
                of debentures
            
            
            (37,500
            )
            
            (37,500
            )Advances
                from officer
            
            
            25,000
            
            
            —Gross
                proceeds from issuance of Series 2006-A preferred shares
            
            
            —
            
            
            2,150,000Payment
                for financing costs
            
            
            —
            
            
            (181,000
            )Proceeds
                from issuance of common stock
            
            
            —
            
            
            32,500Net
                cash provided by financing activities
            
            
            58,813
            
            
            1,751,210NET
                (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
            
            
            (101,257
            )
            
            998,233CASH
                AND CASH EQUIVALENTS, BEGINNING OF PERIOD
            
            
            109,332
            
            
            76,321CASH
                AND CASH EQUIVALENTS, END OF PERIOD
            
            $
            8,075
            
            $
            1,074,554SUPPLEMENTAL
                DISCLOSURE OF CASH FLOW INFORMATIONCash
                paid for interest
            
            $
            22,689
            
            $
            —SUPPLEMENTAL
                DISCLOSURE OF NON-CASH FLOW FINANCING ACTIVITIES:Reclassification
                of accrued interest to loan principal
            
            $
            —
            
            $
            239,404Conversion
                of debenture and interest payable into common stock
            
            $
            —
            
            $
            1,109,608Issuance
                of 470,312 warrants to a placement agent and recorded as additional
                paid
                in capital and warrant liability
            
            $
            —
            
            $
            489,050Common
                stock issued in lieu of cash dividend payments
            
            $
            99,000
            
            $
            —Preferred
                stock dividends accrued and not paid
            
            $
            39,600
            
            $
            —





The
      accompanying notes are an integral part of these statements.


5


**STATSURE
        DIAGNOSTIC SYSTEMS, INC.**
 **NOTES
        TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)**
 **JUNE
        30, 2007**


**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.





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) Chembio Diagnostics (CEMI.OB) (“Chembio”), and
      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.




At
      the
      beginning of business on January 24, 2006, the Company effected a name change
      from Saliva Diagnostic Systems, Inc. to StatSure Diagnostic Systems, Inc.





**2.** **Substantial
      Doubt Regarding Ability To Continue As A Going Concern**




Since
      July 1990, the Company has been engaged almost exclusively in research and
      development activities focused on developing proprietary saliva based collection
      devices and rapid assays for infectious diseases. 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, except for the three month period ended June 30,
      2007, resulting in an accumulated deficit of $ 50,667,236 at
      June
      30, 2007. Such losses are expected to continue for the foreseeable future and
      until such time, if ever, as the Company is able to attain revenues 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 (See Notes 6 and 7), substantial additional financing will be required
      in
      future periods.




The
      Company's capital requirements have been and will continue to be significant.
      The Company's capital base is smaller than that of many of its competitors,
      and
      there can be no assurance that the Company's cash resources will be able to
      sustain its business. 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 in September 2006 (See Note 1), could enable the Company to
      increase its revenues significantly in the second half of this fiscal year
      should Chembio (See Note 1), who is in the process of filing for a waiver of
      the
      Clinical Laboratory Improvement Amendments of 1988(CLIA) for the licensed barrel
      HIV product, receive this waiver. The 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
      is
      obtained, marketing and sales of the product will be restricted to those
      laboratory settings with CLIA certification, which will seriously restrict
      the
      revenues derived from the product. The submission of an application to the
      FDA
      or other regulatory authority for these or other claims does not guarantee
      that
      an approval or clearance to market the product will be received.




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 United States, 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 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




STATSURE
        DIAGNOSTIC SYSTEMS, INC.
 NOTES
        TO CONDENSED FINANCIAL STATEMENTS
        (UNAUDITED)
 JUNE
        30, 2007


**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, 2007 and 2006, have been prepared in conformity
      with accounting principles generally accepted in the United States of America.
      The financial information as of December 31, 2006, is derived from StatSure
      Diagnostic Systems, Inc. (the "Company") financial statements included in the
      Company's Annual Report on Form 10-KSB for the year ended December 31, 2006.
      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, 2006, as included in the Company's Annual Report on Form
      10-KSB for the year ended December 31, 2006. Operating results for the three
      and
      six month period ended June 30, 2007 are not necessarily indicative of the
      results that may be expected for the entire year ending December 31, 2007,
      or
      any other portion thereof.





***Inventories***


****


Inventory
      consists of the following at:





**June
                30, 2007**
            
            **December
                31, 2006**Raw
                Materials
            
            $
            34,613
            
            $
            32,494Finished
                Goods
            
            
            6,563
            
            
            16,37441,176
            
            
            48,868Allowance
                for obsolete inventory
            
            
            (8,627
            )
            
            (8,627
            )$
            32,549
            
            $
            40,241





***Earnings
      (Loss) Per Common Share***





Basic
      and
      diluted earnings (loss) per common share was 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 three and six months ended June 30, 2007
      and
      2006, respectively:





**Three
                Months Ended**
              **June
                30**
            
            **Six
                Months Ended**
              **June
                30**Numerator:
            
            
            2007
            
            2006
            
            2007
            
            2006Net
                income (loss) to commonshareholders
            
            
            $
            227,906
            
            $
            (7,891,502
            )
            $
            1,098,790
            
            $
            (8,696,896
            )(Deduct)/Add:Mark-to-market
                (gain) loss from change in derivative liability
            
            
            
            (644,435
            )
            
            2,346,192
            
            
            (2,040,696
            )
            
            2,346,192Interest
                on convertible debt
            
            
            
            7,268
            
            
            10,125
            
            
            14,708
            
            
            20,139Dividends
                on preferredstock
                payable in shares
            
            
            
            39,600
            
            
            -
            
            
            89,100
            
            
            -Net
                loss to common shareholders and assumed conversion
            
            
            $
            (369,661
            )
            $
            (5,535,185
            )
            $
            (838,098
            )
            $
            (6,330,565
            )Denominator:Share
                reconciliation:Shares
                used for basic income (loss) per share
            
            
            
            37,926,153
            
            
            35,296,871
            
            
            37,609,244
            
            
            33,531,300Effect
                of dilutive items:Stock
                options
            
            
            
            -
            
            
            -
            
            
            -
            
            
            -Convertible
                securities
            
            
            
            -
            
            
            -
            
            
            -
            
            
            -Shares
                used for diluted income (loss) per share
            
            
            
            37,926,153
            
            
            35,296,871
            
            
            37,609,244
            
            
            33,531,300Income
                (loss) per share:Basic
                and diluted:
            
            
            $
            0.01
            
            $
            (0.22
            )
            $
            0.03
            
            $
            (0.26
            )





7


**STATSURE
        DIAGNOSTIC SYSTEMS, INC.**
 **NOTES
        TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)**
 **JUNE
        30, 2007**


The
      numerator has been adjusted for the change in fair value of derivative liability
      related to the convertible notes and warrants. The diluted income (loss) per
      share for the three and six months ended June 30, 2007 excludes from the
      calculation 180,000 shares issuable upon the exercise of stock options and
      warrants and 4,260,000 shares issuable upon the conversion of convertible
      securities. These shares are excluded due to their anti-dilutive effect as
      a
      result of the Company’s net loss after adjusting for the change in fair value of
      derivative income effect during these periods. The calculation for the three
      and
      six months ended June 30, 2006 excludes 1,354,729 shares issuable upon exercise
      of stock options and warrants and 4,712,500 shares issuable upon the conversion
      of convertible securities. For all periods presented diluted income (loss)
      per
      share is the same as basic income (loss) per share.





***Recent
      Accounting Pronouncement:***





In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities” (SFAS No. 159). SFAS No. 159 permits
      entities to choose to measure, on an item-by-item basis, specified financial
      instruments and certain other items at fair value. Unrealized gains and losses
      on items for which the fair value has been elected are required to be reported
      in earnings at each reporting date. SFAS No. 159 is effective for fiscal years
      beginning after November 15, 2007, the provisions of which are required to
      be
      applied prospectively. The Company expects to adopt SFAS No. 159 in the first
      quarter of fiscal 2008.





**4.
      Geographic Area 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 Europe. Segmentation of identifiable assets is not
      applicable since all of our assets are in the United States.




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,****2007**
            
            **2006**
            
            **2007**
            
            **2006**United
                States
            
            **$**
            **95**
            
            $
            **25,350**
            
            **$**
            **52,737**
            
            $
            **76,414**United
                Kingdom
            
            
            **201,009**
            
            
            **186,202**
            
            
            **271,879**
            
            
            **345,138**Africa
            
            
            **-**
            
            
            **-**
            
            
            **-**
            
            
            **588**Other
            
            
            **22,900**
            
            
            **19,455**
            
            
            **42,250**
            
            
            **21,926****$**
            **224,004**
            
            $
            **231,007**
            
            **$**
            **366,866**
            
            $
            **444,066**





**5.** **Advance
      From Officer**





On
      April
      5, 2007, Steve M. Peltzman, CEO loaned the Company $25,000 for the purpose
      of
      paying one of our vendors. The loan is not interest bearing and is not
      collateralized. The Company expects to repay this loan during the 2007 fiscal
      year.





8




**STATSURE
        DIAGNOSTIC SYSTEMS, INC.**
 **NOTES
        TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)**
 **JUNE
        30, 2007**


**6.** **Debentures
      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 paragraph 6 of 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 interest method of accounting, resulting
      in
      a charge to interest expense of $36,132 and 72,442 for the three and six months
      ended June 30, 2007. The Company had sold an aggregate of $1,510,000 in
      convertible debentures. 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 $1,109,60 8 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 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. During the year ended December 31, 2006, the Company repaid $112,500
      of the debentures in cash. During the three months ended June 30, 2007, the
      Company repaid an additional $37,500 of the debentures in cash.





As
      of
      June 30, 2007 there are outstanding $300,000 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 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 amount of debentures at June 30, 2007 of $300,000 plus accrued
      interest of $12,790 has therefore been reflected as a current liability. The
      Company has not received any notice of default from any of the holders of the
      outstanding debentures.





Accordingly,
      debentures payable-net of discount in the amount of $105,510, is the net of
      gross amount of debenture payables of $300,000 reduced by unamortized debt
      discount of $194,490, and is shown on the balance sheet as a current
      liability.





**7.** **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 anytime 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, 2007, the loan
      balance to this shareholder aggregated $1,672,817. An additional amount of
      $332,070 of interest on this note has been accrued during 2007 and remains
      owed
      as of June 30, 2007. The lender has filed a Uniform Commercial Code (UCC) Lien
      on the Company's equipment and patents as security for this loan. Minimum
      payments due under the promissory note as of June 30, 2007 through maturity
      in
      2008 are $156,313 in 2007 and $1,516,504 in 2008. The Company was unable to
      make
      its quarterly principal payment of $60,000 for the three months ended June
      30,
      2007 and therefore, the remaining principal balance is being classified as
      a
      current liability due on demand.





**8.** **Series
      2006-A Convertible Preferred Stock** ****




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 on the balance sheet.





9


**STATSURE
        DIAGNOSTIC SYSTEMS, INC.**
 **NOTES
        TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)**
 **JUNE
        30, 2007**


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. In January 2007, a dividend
      was
      paid on the Company’s 2006
      Series A Convertible Preferred Stock with 81,068 shares of the Company’s common
      stock valued at $49,500. The Company also paid a dividend in April 2007 with
      138,306 shares of the Company’s common stock valued at $49,500.





As
      of
      June 30, 2007, the Company has accrued $39,600 in dividends at the rate of
      8%
      per annum for the dividend declared in July 2007, subsequent to the balance
      sheet date. This dividend is to be paid in cash.




The
      Company may mandate conversion of the Convertible Preferred Stock if the closing
      bid price of the common stock exceeds $2.50 for twenty (20) consecutive trading
      days. In the event of a merger or sale of more than 50% of the assets of the
      Company, or in the event shares of common stock issuable upon the conversion
      of
      Convertible Preferred Stock or exercise of warrants fail or cease to be
      registered as contemplated by the terms of the Certificate of Designation of
      the
      Relative Rights and Preferences of Series 2006 A Convertible Preferred Stock,
      the Convertible Preferred Stock is redeemable at a price of $1,000 per share,
      plus any accrued and unpaid dividends payable thereon, payable at the option
      of
      the Company in cash or in shares of the Company’s common stock.




In
      connection with the issuance of the Preferred Stock and Warrants pursuant to
      the
      June 8, 2006 private placement described above, we agreed to file a registration
      statement with the Securities and Exchange Commission to register for sale
      the
      shares of common stock issuable upon conversion of Convertible Preferred Stock
      and the exercise of Warrants. The Company was required to file a registration
      statement on or before August 4, 2006, which was timely filed. If the
      registration statement is not timely declared effective or is suspended for
      a
      certain length of time, the Company is required to pay 1% of the purchase price
      of the Convertible Preferred Stock for each 30 day period or portion thereof
      after such effective date until the registration statement is declared effective
      or reinstated.




There
      is
      no stated limit on the maximum penalty that could be incurred. However, the
      maximum penalty is effectively capped as the period or periods for which
      payments are due for events of default and limited under the registration rights
      agreement to 24 months. Accordingly, the penalty is capped at 24%.





The
      Company is required to keep the Registration Statement continuously effective
      until such date as is the earlier of (x) the date when all Registrable Shares
      covered by the registration statement have been sold or (y) the date on which
      the Registrable 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
      the 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, 2007, a penalty of $93,629
      was accrued for the six months ending June 30, 2007 and $129,329 in cumulative
      penalties has been accrued since the registration was suspended. The Company’s
      Registration Statement became effective again on May 11, 2007.





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. Pursuant to the provisions
      of
      Statement of Financial Accounting Standards No. 133, and 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 recorded initially the
      value of the warrants and conversion option at $2,095,930 and $3,698,316,
      respectively which are reflected as derivative instruments 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 initial difference of $3,644,246 was charged to financing costs,
      a
      non-operating expense, in the statements of operations.





10


**STATSURE
        DIAGNOSTIC SYSTEMS, INC.**
 **NOTES
        TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)**
 **JUNE
        30, 2007**


At
      inception, the Warrants and Conversion Options had a reset provision for the
      exercise price based on the same contingent event. Management assigned an equal
      probability of 50% to each of the conditions at inception to weight the fair
      value. The Company computed the weighted fair value at June 8, 2006 of the
      Series A Warrants and Conversion Options using the Black-Scholes pricing model
      with the following weighted average assumptions:




Stock price
            $1.10Exercise price
            $0.50-$1.50Expected life in years
            4.5
                yearsRisk free interest rate
            5.04%Expected volatility
            179%Dividend yield
            0%




As
      of
      June 30, 2007, 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 the 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 2007, 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 paragraph 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, 2007, the liability for the value of the warrants and
      conversion option was “marked to market” and the difference of $816,418 and
      $1,224,278, respectively, totaling $2,040,696, has been accounted for as a
      decrease to the derivative expense initially recognized in the statements
      of operations. 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.  As of June 30, 2007, 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
            $0.25Exercise price
            $0.50-$1.00Expected life in years
            3.92
                yearsRisk free interest rate
            4.89%Expected volatility
            264%Dividend yield
            0%





**9.** **Shareholders’
      Equity Transactions**





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, 2007, resulted in $49,500 in dividend obligations
      (for
      the first quarterly dividend) at the rate of 10% per annum paid with 138,306
      shares of the Company’s common stock; and $39,600 in dividend obligations (for
      the second quarterly dividend, at the rate of 8% per annum) to be paid in
      cash.





On
      May 1,
      2007, the Company issued 750,000 shares of common stock and 250,000 warrants
      to
      former distributors. Subsequent
      to the signing of an exclusive worldwide distribution agreement with Inverness
      Medical (IMA) for the Company's patented HIV test in a barrel format,
      the Company was contacted by two of its distributors claiming that they
      continue to have certain distribution rights. The Company settled the claim
      by issuing these equities to cancel all their distribution rights and
      settle all potential claims by these former distributors. Based
      upon the fair market value of the 750,000 shares of common stock on May 1,
      2007,
      the Company recorded a termination expense of $225,000. The warrants granted
      allow for the purchase of 250,000 shares of common stock at $.50 per share.
      These warrants, if not exercised will expire in May 2012. The fair value of
      these warrants in the amount of $66,499 was recorded as a termination
      expense.






11


**STATSURE
        DIAGNOSTIC SYSTEMS, INC.**
 **NOTES
        TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)**
 **JUNE
        30, 2007**


The
      fair
      value of the Company’s option-based awards granted was estimated using the
      Black-Scholes option-pricing model with the following assumptions.





Expected
                term (in years)
            
            
            4.83Expected
                stock price volatility
            
            
            150.47
            %Risk-free
                interest rate
            
            
            4.54
            %Expected
                dividend yield
            
            
            0
            %Estimated
                fair value per option granted
            
            $
            0.27





**10.** **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***




Method
      of
      Accounting





On
      March
      25, 2005, 550,000 stock options were granted to one employee and on May 2,
      2005,
      another 550,000 stock options were granted to a second 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.





Effective
      January 1, 2006, the Company’s 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 FAS 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.





12




**STATSURE
        DIAGNOSTIC SYSTEMS, INC.**
 **NOTES
        TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)**
 **JUNE
        30, 2007**


As
      a
      result of the adoption of FAS 123(R), the Company's results for the three and
      six months ended June 30, 2007 include share-based compensation expense of
      $11,622 and $23,244, respectively, recorded in the selling, general and
      administrative expenses.  No
      income
      tax benefit has been recognized in the income statement for share-based
      compensation arrangements as the Company has provided a 100% valuation allowance
      on its’ net deferred tax asset





Stock
      option compensation expense in fiscal 2006 is the estimated fair value of
      options granted amortized on a straight-line basis over the requisite service
      period for the entire portion of the award. The Company has not adjusted the
      expense by estimated forfeitures, as required by FAS 123(R) for employee
      options, since the forfeiture rate based upon historical data was determined
      to
      be immaterial.





The
      fair
      value for stock awards was estimated using the Black-Scholes option pricing
      model with the following weighted average assumptions:


Expected
                term (in years)
            5Expected
                stock price volatility
            182%Risk-free
                interest rate
            4.35%Expected
                dividend yield
            0%Estimated
                fair value per option granted
            1.395





The
      following table summarizes all stock option activity for options granted under
      the 1992 Plan, the 1994 Plan and non-plan options during the six months ended
      June 30, 2007:





Number
                of Options
            
            Weighted
                Average
              Exercise
                PriceOutstanding
                at January 1, 2007
            
            
            1,200,000
            
            $
            0.85Granted
            
            
            —Exercised
            
            
            —Forfeited/expired
            
            
            —Outstanding
                at June 30, 2007
            
            
            1,200,000
            
            $
            0.85Exercisable
                at June 30, 2007
            
            
            833,333
            
            $
            0.79





As
      of
      June 30, 2007, there was $64,478 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, 2007:





Options
                Outstanding
            
            Options
                ExercisableRange
                of
              Exercise
                Price
              Per
                Share
            
            Number
                Outstanding
              at
                June 30
              2007
            
            Weighted Average
                Remaining Contractual Life (Years)
            
            Weighted
                Average
              Exercise
              Price
                Per
              Share
            
            Number
                Exercisable
              at
                June 30,
              2007
            
            Weighted
                Average
              Exercise
              PricePer
              Share$0.
                10-$1.00
            
            
            1,200,000
            
            
            7.68
            
            $
            0.85
            
            
            833,333
            
            $
            0.79




13


**STATSURE
        DIAGNOSTIC SYSTEMS, INC.**
 **NOTES
        TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)**
 **JUNE
        30, 2007**


During
      the six months ended June 30, 2007, the Company issued 250,000 warrants valued
      at $66,499, to former distributors. The Company has recorded this amount as
      contract termination costs in the accompanying Statements of
      Operations.




The
      fair
      value for these warrants was estimated using the Black-Scholes option pricing
      model with the following weighted average assumptions:





Expected
                term (in years)
            
            
            4.83Expected
                stock price volatility
            
            
            150.47
            %Risk-free
                interest rate
            
            
            4.54
            %Expected
                dividend yield
            
            
            0
            %Estimated
                fair value per option granted
            
            $
            0.27





The
      following table summarizes the information about warrants outstanding at June
      30, 2007:





Number
                of
              Warrants
            
            Weighted
                Average Exercise PriceOutstanding
                at January 1, 2007
            
            
            2,707,187
            
            $
            0.98Granted
            
            
            250,000
            
            $
            0.50Exercised
            
            
            -Forfeited/expired
            
            
            -Outstanding
                at June 30, 2007
            
            
            2,957,187
            
            $
            0.94




Of
      the
      above warrants, 60,000 expire in 2007, 2,647,187 expire in 2011, and 250,000
      expire in 2012.




**11.
      Operating Leases**





During
      the second quarter 2007, the Company’s lease in Framingham, MA. was terminated.
      The Company incurred a lease termination cost of $6,000. The Company continues
      to occupy premises in Brooklyn, New York. This lease has a three-year term
      ending August 30, 2008 and a base annual rental rate starting at $15,000 and
      increasing to $15,913 per year.




Aggregated
      minimum future lease payments required under the operating lease for the
      Brooklyn office is as follows:




Twelve
        month period ending June 30,





2008
            
            $
            15,8362009
            
            
            2,652Total
            
            $
            18,488




**12.** **Contingencies** ****


*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. Either party
        can
        terminate the agreement upon 90 days notice. This base salary will increase
        to
        $180,000 per year upon closing of a financing to the Company with minimum
        gross
        proceeds of $3,000,000. 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.




14


**STATSURE
        DIAGNOSTIC SYSTEMS, INC.**
 **NOTES
        TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)**
 **JUNE
        30, 2007**




*Economic
      Dependency:*





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.


15


**ITEM
      2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN 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
      use
      to screen for the presence of drugs-of-abuse or infectious diseases; and 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 new principal executive offices are located at 1881 Worcester
      Rd.  #200, Framingham, MA. 01701.





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 will be 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 and Chembio also entered into a Settlement Agreement pursuant to which
      all matters in their litigation regarding StatSure’s barrel patent and other
      matters were settled. As previously stated, under the terms of this agreement,
      the parties will equally share in the profits relating to CLEARVIEW COMPLETE
      HIV1/2 (the IMA brand-name for the HIV barrel-based) product after reimbursement
      of the manufacturing and related costs, as defined, and the parties will act
      jointly in the HIV barrel field. The Settlement combines each company’s HIV
      barrel intellectual property, including an exclusive manufacturing license
      from
      StatSure to Chembio of its barrel patent for all HIV applications, thereby
      ensuring their exclusive right to manufacture, as well as Inverness’ right to
      market and distribute though the marketing license that StatSure granted
      Inverness under the three way agreement.




On
      February 14, 2007, Inverness introduced the licensed HIV barrel-based product
      (CLEARVIEW® Complete HIV 1/2) to its U.S. Sales force. Inverness/Chembio is in
      the process of filing for a waiver of CLIA for the licensed barrel HIV product,
      which if received, 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 is obtained, marketing and sales
      of
      the product will be restricted to those laboratory settings with CLIA
      certification, which will seriously restrict the revenues derived from the
      product. The submission of an application to the FDA or other regulatory
      authority for these or other claims does not guarantee that an approval or
      clearance to market the product will be received.




The
      Company has incurred significant operating losses since its inception, resulting
      in an accumulated deficit of $ 50,667,236 at
      June
      30, 2007. Such losses are expected to continue for the foreseeable future and
      until such time, if ever, as the Company is able to attain revenues sufficient
      to support its operations. The Company's independent certified public
      accountants have included an explanatory paragraph in their report on our
      December 31, 2006 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.)





16




**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 2007 Compared to Second Quarter and First Six
      Months of 2006





**Revenues.** The
      Company's revenues consist of product sales and royalties. Revenues increased
      to
      $400,763 in the second quarter of 2007 from revenues of $231,007 in the second
      quarter of 2006. Revenues increased to $ 554,611 in
      the
      first six months of 2007 from $ 444,066 in
      the
      first six months of 2006. The increase in revenues is due to royalties earned
      pursuant to an agreement the Company signed with Inverness Medical and Chembio
      Diagnostic Systems in September 2006. Royalties earned from Inverness Medical
      and Chembio Diagnostic Systems for the six months ended June 30, 2007 aggregated
      approximately $118,000 and $37,000, respectively. Royalties earned from
      Inverness Medical and Chembio Diagnostic Systems for the three months ended
      June
      30, 2007 aggregated approximately $118,000 and $37,000, respectively. The
      Company is continuing to seek new markets and sales opportunities for its
      products. The Company also has a rental agreement with Chembio for 2007 which
      resulted in income of approximately $21,000 and $32,000, respectively for the
      three and six months ended June 30, 2007.




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, 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, respectively.





**Cost
      of products sold** :
      Costs
      of products sold decreased to $74,173 (33% of product sales) in the second
      quarter of 2007 from $99,707 (43% of product sales)in the second quarter of
      2006, and decreased to $95,902 (26% of product sales) in the first six months
      of
      2006 from $146,097 (33% of product sales) in the first six months of 2006.
      The
      Company has upgraded its tooling in order to have its products manufactured
      with
      greater efficiency. This has partially offset increased costs charged by our
      suppliers.





**Research
      and development expenses:** Research
      and development expenses decreased to $13,543 **** in
      the
      second quarter of 2007 from $73,466 **** in
      the
      second quarter of 2006 and decreased to $34,591 in the first six months of
      2007
      from $142,615 in the first six months of 2006. The decrease in 2007 is due
      to
      the abandonment of the StatSure(TM) HIV test clinical trials in the fourth
      quarter of 2006 as well as development of new applications for its barrel
      technology. The expenses for research and development are expected to continue
      decreasing until such time as the Company has sufficient funds to implement
      a
      new R&D program.





**Selling,
      general and administrative expenses** :
      Selling, general and administrative expenses decreased to $275,784 in the second
      quarter of 2007 from $624,317 in the second quarter of 2006 and decreased to
      $706,888 in the first six months of 2007 from $1,285,657 in the first six months
      of 2006. During the three and six month periods of 2007, the Company’s decrease
      in selling, general and administrative expenses was primarily the result of
      the
      decrease in non cash equity compensation of approximately $372,200.





**Interest
      expense:** Interest
      expense decreased to $57,432 in the second quarter of 2007 from $85,777 in
      the
      second quarter of 2006 and decreased to $112,466 in the first six months of
      2007
      from $188,439 in the first six months of 2006. The decrease in 2007 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 $36,132 in the
      second quarter of 2007 from $866,230 in the second quarter of 2006 and decreased
      to $72,442 in the first six months of 2007 from $983,842 in the first six months
      of 2006. 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.





17




**Financing
      costs:** In the
      first six months of 2006, the Company incurred financing costs of $3,644,248.
      The financing costs were due to the series 2006-A convertible preferred stock
      financing and the application of derivative accounting. No similar costs were
      incurred during the first six months of 2007.




**Derivative
      income (expense** ) **:** **** Derivative
      income of $644,435 was recorded in the second quarter of 2007 from a derivative
      expense of $( 2,346,192 )
      recorded in the second quarter of 2006, and derivative income of $2,040,696
      was
      recorded in the first six months of 2007 from a derivative expense of
      $(2,346,192) in the first six months of 2006. The fluctuation was due to the
      mark-to market adjustment on embedded derivatives principally driven by the
      decrease in our common stock price $0.55 to $0.249.





**Debt
      conversion expense:** Debt
      conversion expense consists of an induced conversion expense in 2006 of
      $403,872, incurred to convert the 9% convertible debentures as
      required under SFAS 84. The
      Company did not incur similar expenses in the first six months of
      2007.





**Penalties:** As a
      result of the withdrawal of the registration statement filed in 2006, the
      Company has accrued penalties to the holders of the 2006 Series A Convertible
      Preferred Stock of $29,129 and $93,629 for the three and six months ended June
      30, 2007, respectively.




**Contract
      termination costs:** The Company incurred non cash costs of $291,499 during the second quarter of
      2007 when it terminated its agreements with former distributors. 
Subsequent to the signing of  an exclusive worldwide distribution agreement
      with Inverness Medical (IMA) for the Company's patented HIV test in a
      barrel format, the Company was contacted by two  of its distributors
      claiming they continue to have certain distribution rights.   The
      Company settled the matter by issuing equities valued at $291,499 to
      cancel all distribution rights and settle all potential claims by these former
      distributors.




**LIQUIDITY
      AND CAPITAL RESOURCES** ****


June
                30, 2007
            
            December
                31, 2006Cash
                and cash equivalents
            
            $
            8,075
            
            $
            109,332Working
                capital deficit
            
            
            (2,411,597
            )
            
            (659,517
            )





Net
      cash
      used by operating activities in the first six months of 2007 was $145,231
      compared to $702,120 used during the same period 2006. In 2007, the decrease
      in
      cash used by operations was primarily due to the net effect of net income of
      $1,187,890 in 2007, and a net loss of ($8,696,896) in 2006 combined with the
      mark-to-market gain on derivative instruments of ($2,040,696) and an increase
      in
      accounts payable, accrued payroll and accrued expenses of $218,881.





Cash
      used
      in investing activities in the six months ended June 30, 2007 was $14,839 as
      compared to $50,857 during the six months ended June 30, 2006. The 2006 amount
      includes $50,857 additions to patents and trademarks. The Company incurred
      less
      costs in 2007.





Cash
      provided by financing activities for the six months ended June 30, 2007 was
      $58,813 compared to $1,751,210 for the same period in 2006. During 2006 the
      Company received $2,150,000 of gross proceeds from the issuance of Series 2006-A
      preferred shares.




As
      of
      June 30, 2007, there is outstanding $300,000 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, 2007 of $300,000 plus accrued
      interest of $12,790 has therefore been reflected as a current liability.
      Accordingly, debentures payable-net of discount in the amount of $105,510,
      is
      the net of gross amount of debenture payables of $300,000 reduced by
      unamortized debt discount of $194,490 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.


18


The
      following table lists the future payments required on debt and any other
      contractual obligations of the Company as of June 30, 2007.


Obligations
              
              Total
              
              Less
                  than 1 year
              
              1-3
                  yearsLong-term
                  debt
              
              $
              1,778,327
              
              $
              1,778,327
              
              $
              0Operating
                  leases
              
              
              18,488
              
              
              15,836
              
              
              2,652




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 is seeking to enter into
      a one
      year renewable lease with the landlord. 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.




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.




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.


19


**ITEM
      3. CONTROLS AND PROCEDURES**





**EVALUATION
      OF DISCLOSURE CONTROLS AND PROCEDURES**





As
      of the
      end of the period covered by this report, we evaluated, under the supervision
      and with the participation of our management, including our chief executive
      officer and chief financial officer, the effectiveness of the design and
      operation of our "disclosure controls and procedures" [as defined in the
      Securities Exchange Act of 1934, Rules 13a - 15(e) and 15d - 15(e)]. It is
      noted
      that the Company had amended its original 2006 Form 10-QSB filing with the
      SEC.
      The reason for the amended filing was due to complex financial transactions
      which resulted in accounting restatements in response to a recent SEC routine
      inquiry. As a result, our chief executive officer and chief financial officer
      have concluded that as of the date of the evaluation our disclosure controls
      and
      procedures were not effective to ensure that all material information required
      to be filed in this report has been made known to them. Accordingly, we have
      engaged an accounting firm other than our auditors to assist in the accounting
      for these complex transactions. Management believes that these measures will
      ensure the proper recording of all transactions in future periods.





**CHANGE
      IN INTERNAL CONTROLS**





There
      have been no changes in internal controls over financial reporting that occurred
      during the most recent fiscal quarter that have materially affected, or are
      reasonably likely to materially affect, our internal controls over financial
      reporting.





**PART
      II. OTHER INFORMATION**





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





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





On
      January 9, 2007, as payment of dividends on the **Company’s Series 2006-A Convertible Preferred Stock** ,
      the
      Company issued 81,068 shares of common stock to holders of the **Series
      2006-A** preferred stock. No cash was exchanged in this issuance. The Company relied
      on
      Section 4(2) of the Securities Act of 1933 as the basis for its exemption from
      registration of this issuance. The investors in the issuance were accredited
      investors of the Company.





On
      April
      9, 2007, as payment of dividends on the **Company’s Series 2006-A Convertible Preferred Stock** ,
      the
      Company issued 138,306 shares of common stock to holders of the **Series
      2006-A** preferred stock. No cash was exchanged in this issuance. The Company relied
      on
      Section 4(2) of the Securities Act of 1933 as the basis for its exemption from
      registration of this issuance. The investors in the issuance were accredited
      investors of the Company.





During
      the six months ended June 30, 2007, the Company issued 750,000 shares of common
      stock and 250,000 warrants value at $225,000 and $66,499, respectively, when
      it
      terminated its agreements with former distributors.





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




The
      Company has defaulted on a total of $3 12,790
      of
      convertible debentures. The amount of principal payments in arrears was
      $300,000, with an additional amount of $12,790 of interest due at June 30,
      2007.
      These defaults are the result of a failure to pay in accordance with the terms
      agreed.







The
      Company has defaulted on a total of $ 2,004,887
      of shareholder loans. The amount of principal payments in arrears was
      $1,672,817, with an additional amount of $332,070 of interest due at June 30,
      2007. The default is the result of a failure to pay in accordance with the
      agreed upon terms.





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





None





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





None


20





**ITEM
      6. EXHIBITS AND REPORTS ON FORM 8-K**





(a) **** Exhibit
      index




**Exhibit**31.1
            
            Certification
                ofChief
                Executive Officerrequired by Rule 13a-14(a) or Rule 15d-14(a) under the Securities
                Exchange
                Act of 1934, as amended.31.2
            
            Certification
                ofChief
                Financial Officerrequired by Rule 13a-14(a) or Rule 15d-14(a) under the Securities
                Exchange
                Act of 1934, as amended.32.1
            
            Certification
                ofChief
                Executive Officerrequired 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
                ofChief
                Financial Officerrequired 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
                Reported4/12/07
            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 12, 2007









**STATSURE
              DIAGNOSTIC SYSTEMS, INC.**/s/
                Steve M. PeltzmanSteve
                M. PeltzmanChief
                Executive Officer(principal
                executive officer)/s/
                Leo EhrlichLeo
                EhrlichChief
                Financial Officer(principal
                financial officer)


22