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 March 31, 2006


                         Commission File Number: 0-21284


                        STATSURE DIAGNOSTIC SYSTEMS, INC.
             (Exact name of registrant as specified in its charter)

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

                     1 Clarks Hill Rd. Framingham, MA. 01702
                     ---------------------------------------
              (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 |_|

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


Transitional Small Business Disclosure Format (check one): Yes |_|  No |X|


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

The number of shares outstanding of the Registrant's  Common Stock as of May 13,
2006 was 33,394,491 shares.


                                       1
<PAGE>


                        STATSURE DIAGNOSTIC SYSTEMS, INC.
                                   FORM 10-QSB
                                      INDEX


                                                                            PAGE
    PART I FINANCIAL INFORMATION

    Item 1.    Financial Statements

               Balance sheets - March 31, 2006 (unaudited) and
               December 31, 2005...............................................3

               Statements of Operations - Three Months Ended
               March 31, 2006 and 2005 (unaudited).............................4

               Statements of Cash Flows - Three Months Ended
               March 31, 2006 and 2005 (unaudited).............................5

               Notes to Financial Statements (unaudited).......................6

    Item 2.    Management's Discussion and Analysis of Financial Condition
               And Plan of Operation..........................................14

    Item 3.    Controls and Procedures........................................22


    PART II OTHER INFORMATION

    Item 1.    Legal Proceedings..............................................23

    Item 2.    Changes in Securities..........................................23

    Item 3.    Defaults Upon Senior Securities................................23

    Item 4.    Submission of Matters to a Vote of Security Holders............23

    Item 5.    Other Information..............................................23

    Item 6.    Exhibits and Reports on Form 8-K...............................24

    Signatures .............................................................. 25

    Certifications .......................................................... 26


                                       2
<PAGE>


PART I FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS

                        STATSURE DIAGNOSTIC SYSTEMS, INC.
                                 BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                           March 31, 2006
                                                                            (Unaudited)        December 31, 2005
                                                                          -----------------    -----------------
<S>                                                                       <C>                  <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents                                                 $           9,607    $          76,321
Accounts receivable, net of allowance for doubtful
   accounts of $107,477 for both 2006 and 2005                                        3,950               69,741
Inventories                                                                          82,183               56,150
Prepaids                                                                              7,061               11,669
                                                                          -----------------    -----------------
Total current assets                                                                102,801              213,881
Property and equipment, net of accumulated depreciation of
   $564,178 (2006) and $558,076 (2005)                                               89,206               95,308
Equipment under construction                                                        664,401              664,401
Patents and trademarks, net of accumulated amortization of
   $128,846(2006) and $125,876 (2005)                                               105,067               73,223
Deferred costs, less accumulated amortization of
   $317,469(2006) and $260,739 (2005)                                               154,531              211,261
Deposits                                                                             13,500               13,500
                                                                          -----------------    -----------------
   TOTAL ASSETS                                                           $       1,129,506    $       1,271,574
                                                                          =================    =================
LIABILITIES AND SHAREHOLDERS' DEFICIT

CURRENT LIABILITIES:
Note payable - shareholders                                               $       2,384,928    $         172,055
Debentures payable                                                                1,450,000            1,450,000
Accounts payable                                                                    145,115               82,080
Customer advances                                                                       588                2,000
Accrued expenses                                                                    370,164
Accrued payroll  expense to officers                                                257,250              234,750
Payroll and payroll taxes payable                                                   114,340              102,441
                                                                          -----------------    -----------------
Total current liabilities                                                         4,585,346            2,413,490

LONG-TERM DEBT
Deferred rent payable                                                                 8,912                6,190
Note payable - shareholder                                                             --              1,932,099
                                                                          -----------------    -----------------
TOTAL LIABILITIES                                                                 4,594,258            4,351,779
                                                                          -----------------    -----------------
COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' 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,
   issued and outstanding:
   33,394,491 (2006) and 31,769,491 (2005)                                           31,769
Additional paid-in capital                                                       45,828,779           45,530,096
Less: deferred compensation                                                            --                 (2,927)
Accumulated deficit                                                             (49,326,925)         (48,639,143)
                                                                          -----------------    -----------------
TOTAL SHAREHOLDERS' DEFICIT                                                      (3,464,752)          (3,080,205)
                                                                          -----------------    -----------------
   TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT                            $       1,129,506    $       1,271,574
                                                                          =================    =================
</TABLE>



        The accompanying notes are an integral part of these statements.


                                       3
<PAGE>

                        STATSURE DIAGNOSTIC SYSTEMS, INC.
                            STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                            Three Months Ended March 31,
                                                                            ----------------------------
                                                                                2006            2005
                                                                                             (Restated)
                                                                            ------------    ------------
<S>                                                                         <C>             <C>
REVENUES:
Product Sales                                                               $    213,059    $    264,473
Royalty Income                                                                      --               546
                                                                            ------------    ------------
   Total revenues                                                                213,059         265,019

COSTS OF PRODUCTS SOLD                                                            46,390          94,346
                                                                            ------------    ------------
Gross profit                                                                     166,669         170,673
                                                                            ------------    ------------
OPERATING EXPENSES:
Research and development expenses                                                 69,149          77,000
Selling, general and administrative expense                                      373,104         355,762
Stock based compensation and employment recruiting expense - non cash            288,236         508,371
                                                                            ------------    ------------
   Total costs and expenses                                                      730,489         941,133
                                                                            ------------    ------------
Loss from operations                                                            (563,820)       (770,460)

Interest expense - net                                                          (123,962)     (1,886,285)
                                                                            ------------    ------------
NET LOSS TO COMMON STOCKHOLDERS                                             $   (687,782)   $ (2,656,745)
                                                                            ============    ============
BASIC AND DILUTED LOSS PER SHARE                                            $      (0.02)   $      (0.09)
                                                                            ============    ============
WEIGHTED AVERAGE NUMBER OF SHARES USED IN BASIC AND
   DILUTED PER SHARE CALCULATIONS                                             32,192,408      30,565,256
                                                                            ------------    ------------
</TABLE>


        The accompanying notes are an integral part of these statements.


                                       4
<PAGE>


                        STATSURE DIAGNOSTIC SYSTEMS, INC.
                            STATEMENTS OF CASH FLOWS
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                                          Three Months Ended March 31,
                                                                                      ---------------------------------
                                                                                           2006              2005
                                                                                                          (Restated)
                                                                                      --------------    --------------
<S>                                                                                   <C>               <C>
OPERATING ACTIVITIES:
Net loss                                                                              $     (687,782)   $   (2,656,745)
Adjustments to reconcile net loss to net cash  used in operating activities:
Depreciation and amortization                                                                 12,499
Amortization of deferred costs                                                                56,730            26,148
Warrants issued for recruiting services                                                         --             280,000
Stock issued for consulting services                                                         112,000
Options granted to employees                                                                 228,371
Beneficial conversion feature of convertible debentures                                         --           1,785,000
Changes in assets and liabilities:
Accounts receivable                                                                           65,791           (38,643)
Inventories                                                                                  (26,033)           18,017
Prepaids                                                                                       4,608              --
Accounts payable, accrued payroll expense to officers  and accrued expenses                   (3,249)
                                                                                      --------------    --------------
Net cash used in operating activities                                                        (88,270)         (348,602)
                                                                                      --------------    --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of property and equipment                                                          --            (111,475)
Acquisitions of patents and trademarks                                                       (34,814)             --
Deferred finance cost                                                                           --            (160,000)
                                                                                      --------------    --------------
Net cash used in investing activities                                                        (34,814)         (271,475)
                                                                                      --------------    --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash overdraft                                                                                  --             (26,953)
Proceeds from shareholder loans                                                              146,222            30,000
Proceeds from issuance of debentures                                                            --           1,100,000
Repayments of shareholder loans                                                             (104,852)         (612,690)
Proceeds from issuance of common stock                                                        15,000             2,000
                                                                                      --------------    --------------
Net cash provided by financing activities                                                     56,370           492,357
                                                                                      --------------    --------------
NET DECREASE IN CASH AND CASH EQUIVALENTS                                                    (66,714)         (127,720

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                                76,321           148,630
                                                                                      --------------    --------------
CASH AND CASH EQUIVALENTS, END OF PERIOD                                              $        9,607    $       20,910
                                                                                      ==============    ==============
SUPPLEMENTAL DISCLOSURE OF NON-CASH FLOW FINANCING ACTIVITIES:
During the three month periods ended March 31, 2006 and 2005, the previous years
balance of accrued interest of $239,404 and $228,773, respectively, for a
shareholder's loan was added to the loan balance as principal.                        $      239,404    $      228,773

During the three month period ended March 31, 2005, 1,000,000 shares of common
stock were issued for a warrant conversion at $.01 per share. Payment due of
$10,000 was offset to a note payable to this stockholder.                             $         --              10,000
</TABLE>


        The accompanying notes are an integral part of these statements.

                                       5
<PAGE>

                        STATSURE DIAGNOSTIC SYSTEMS, INC.
                    NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
                                 March 31, 2006

1.  Description of Business

StatSure   Diagnostic  Systems,   Inc.,  (SDS),  a  Delaware   corporation  (the
"Company"),  is primarily engaged in the development and marketing of oral fluid
collection devices for the drugs of abuse market, and rapid immunoassays for use
in the detection of infectious diseases.  The Company believes that its patented
platform for rapid testing of infectious diseases offers significant  advantages
over the competition,  including  ease-of-use,  lower costs,  and  significantly
reduced risk of infection from  collecting and handling  specimens.  In the oral
fluid collection  market, the Company's platform has a patented internal quality
control that indicates  sufficient  volume of the oral fluid  ("volume  adequacy
indicator").

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.. The shares of the Company have been trading under the StatSure name,  with
the new symbol SSUR,  since March 22, 2006.  Coinciding  with our corporate name
change,  the  Company  has  changed  the  name  of its  Hema-Strip  HIV  test to
StatSure(TM) HIV.

In May 2002, the Company  received its  Investigational  Device  Exemption (IDE)
from the U.S. Food and Drug Administration (FDA) for its Rapid Stat-Sure(TM) HIV
Test [THE PRODUCT BRAND NAME WAS FORMERLY KNOWN AS HEMA-STRIP  HIV; THIS PRODUCT
LINE WILL  HEREAFTER  BE REFERRED TO AS THE  STATSURE(TM)  PRODUCT LINE AND THIS
PRODUCT WILL BE KNOWN AS  STATSURE(TM)  HIV].  Upon  termination of all business
relationships with its then contract  manufacturer,  Chembio Diagnostic Systems,
(CEMI.OB) the Company signed a Manufacturing / Research & Development  Agreement
with  American Bio Medica  Corporation,  Nasdaq SC (ABMC),  of  Kinderhook,  NY.
Responsibilities  of ABMC include the manufacture of the Company's  StatSure(TM)
HIV test  and  other  products  under  appropriate  and  applicable  regulatory,
compliance  standards.  The Company  filed a new IDE with the FDA naming ABMC as
its contract  manufacturer.  This IDE  submission to the FDA was made in October
2003.  Thereafter,  the Company  conducted its clinical trials and submitted the
modules of the Pre-Market  Approval (PMA) to the FDA. The FDA requested  certain
additional testing and the Company completed this work in the summer of 2005 and
a  Supplemental  Study to the PMA was  submitted in October 2005 to satisfy this
request.  During the past year, the Company has received  regulatory approval to
markets its StatSure(TM),  HIV product in South Africa, Jordan and Guatemala and
expects to receive  similar  approvals in several  other  countries in 2006.  In
March 2006, the Company  received  correspondence  from the FDA stating that our
Pre-Market  Approval  (PMA)  submission is deficient and therefore  will require
additional clinical studies to amend the PMA.


SDS is committed to and focused on the completion of the necessary  requirements
towards  obtaining U.S. Food and Drug  Administration  (FDA), and other relevant
regulatory  approvals of our rapid HIV  diagnostic  tests  technology.  Although
there is no assurance  that we will receive such  approval,  we believe that the
StatSure(TM)   format,  if  approved  for  detecting   antibodies  to  HIV-1  in
fingerstick and venipuncture  whole blood,  serum and plasma samples,  will have
certain  competitive  advantages in the market for rapid HIV testing both in the
United States and internationally.


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

Significant operating losses - accumulated deficit:
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 revenues  derived
from  private  label  and OEM sales of the  Company's  collection  devices,  the
Company has not yet commenced any  significant  product  commercialization.  The
Company has incurred significant operating losses since its inception, resulting
in an  accumulated  deficit of  $49,326,925  at March 31, 2006.  Such losses are
expected to continue for the foreseeable future and until such time, if ever, as
the  Company  is able  to  attain  revenue  levels  sufficient  to  support  its
operations.  There can be no assurance that the Company will achieve or maintain
profitability in the future.  Substantial  additional financing will be required
in future periods.

                                       6
<PAGE>

                        STATSURE DIAGNOSTIC SYSTEMS, INC.
                    NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
                                 March 31, 2006

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 will continue to seek public or
private placement of its equity securities as well as corporate  partnerships to
develop  products.  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 much 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.

3.  Summary of Significant Accounting Policies

Basis of Presentation:

The accompanying  unaudited financial  statements as of, and for the three month
periods ended March 31, 2006 and 2005,  have been  prepared in  conformity  with
accounting  principles  generally accepted in the United States of America.  The
financial  information  as of  December  31,  2005,  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, 2005.
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, 2005,  as included in the  Company's  Annual  Report on Form
10-KSB for the year ended  December  31, 2005.  Operating  results for the three
month period ended March 31, 2006 are not necessarily  indicative of the results
that may be expected for the entire year ending  December 31, 2006, or any other
portion thereof.


New Accounting Principles Adopted:

Stock-based Compensation:
Effective  January 1, 2006,  the  Company's  Stock  Options 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)"). See Note 9 for further details.

Significant Accounting Principles:

For a summary of significant  accounting principles (which have not changed from
December 31, 2005) and additional  financial  information,  see Company's Annual
Report on Form 10-KSB filed April 17, 2006 with SEC.


                                       7
<PAGE>

                        STATSURE DIAGNOSTIC SYSTEMS, INC.
                    NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
                                 March 31, 2006

4. Restatement

Prior to the filing of Form 10-KSB for December 31, 2005, the Company determined
that its prior 2005  quarterly  filings did not reflect a beneficial  conversion
feature on 9% convertible  debentures issued in 2005 as required under EITF 98-5
"Accounting for Convertible  Securities With Beneficial  Conversion  Features or
Contingently   Adjustable   Conversion   Ratios",   as  amended  by  EITF  00-27
"Application of Issue No. 98-5 to Certain Convertible Instruments".

Further,  the Company also revalued  options  granted to an employee  using FASB
Interpretation  No.  28,  Accounting  for Stock  Appreciation  Rights  and Other
Variable Stock Option or Award Plans, an  interpretation  of APB Opinions No. 15
and  No.  25  ("FIN  28").  The  Interpretation  clarifies  the  accounting  for
compensation  related to variable stock options and specifies that  compensation
should be  measured  at the end of each period as the amount by which the quoted
market value of the shares of the  Company's  common  stock  covered by a grant,
exceeds the option price or value specified under the plan and should be accrued
as a charge to expense  over the  periods  the  employee  performs  the  related
services.  Changes  in  the  quoted  market  value  should  be  reflected  as an
adjustment of accrued  compensation and  compensation  expense in the periods in
which the changes occur until the date the number of shares and purchase  price,
if any, are both known.

The  Company  has  corrected  the  accounting  for the  above  two  errors  on a
period-to-date basis in the 2005 annual financial  statements.  The Statement of
Operations for the three-month period ended March 31, 2005 is now being restated
in this Form  10-QSB  filing to give  effect to these  two  errors  and  certain
resulting reclassification adjustments, as further discussed below.

The Company raised a total of $1,510,000 from issue of convertible debentures in
2005. Refer to Note 6 for more information on terms of these debentures.  During
the three  months  ended  March 31,  2005,  the  Company  had  issued a total of
$1,100,000 convertible debentures. On the date of issue, a beneficial conversion
feature of $1,785,000  was computed being the number of shares the debenture was
convertible  into multiplied by the difference  between the conversion  price of
$1.00  and the fair  value of the  shares of the  Company's  common  stock.  The
beneficial conversion amount had not been recorded earlier.

The Company had issued 550,000 options to one employee in the three months ended
March 31, 2005. The exercise price was not determinable at the date of the grant
and the options should have been accounted under FIN 28 as variable options.  As
a result,  the  compensation  charge  for these  options  has been  restated  to
$228,371 from $8,910.

The Company has also  reclassified  non-cash  amortization of options granted to
employees of $8,910 and non-cash charge of warrants issued to non-employees  for
recruiting  services of $280,000 for a total amount of $288,910,  from "selling,
general and  administrative  expense" line item to "Stock based compensation and
employment recruiting expense- non cash" line item.

As a result,  the  Statements of Operations  and Cash Flows for the  three-month
period ended March 31, 2005 were  restated to reflect these  changes.  The table
below details the items affected by the restatement:

<TABLE>
<CAPTION>
                                                            Three months ended March 31, 2005
                                                            As reported          As restated
<S>                                                          <C>                <C>
   STATEMENTS OF OPERATIONS:
   Selling, general and administrative expenses              $ 644,672          $   355,762
   Stock based compensation and employment recruiting
   expense-non cash                                              --                 508,371
   Loss from operations                                      (550,999)             (941,133)
   Interest expense                                          (101,285)           (1,886,285)
   Net loss to common shareholders                           (652,284)           (2,656,745)
   Basic and diluted net loss per share                        (0.02)               (0.09)
</TABLE>


                                       8
<PAGE>

                        STATSURE DIAGNOSTIC SYSTEMS, INC.
                    NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
                                 March 31, 2006

<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS:                                   Three months ended March 31, 2005
                                                            As reported         As restated
<S>                                                          <C>                <C>
Net loss                                                      (652,284)          (2,656,745)
Adjustments to reconcile net loss to net
  cash used in operating activities:
  Options granted to employees                                   8,910              228,371
  Beneficial conversion feature of convertible
    Debentures                                                       0            1,785,000
</TABLE>

The restatement had no impact on the cash used in operating activities.

5. 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 revenues outside the United States are export
sales.

The following table represents total product sales revenue by geographic area:

                        Three months ended March 31,
                          2006               2005
   United States        $ 51,064           $147,608
   United Kingdom        158,936             80,948
   Africa                    588             26,490
   Others                  2,471               9,877
                        --------           ---------
                        $213,059           $264,473
                        ========           ========


6.  Debenture Payable

On January 19, 2005,  the Company's  board of directors  authorized the issuance
and sale 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.  Accordingly,  the Company  recognized  this  beneficial
conversion  feature by charging an interest  expense of $2,614,400  for the year
ended  December 31,  2005;  and a  corresponding  credit to  additional  paid-in
capital  account.  As of March 31,  2006;  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, resulting in
the balance of outstanding  debentures payables to be reduced to $1,450,000.  As
of March 31,  2006,  the  Company  was in default on payment of  interest on the
debentures.  As a result,  in accordance  with the debenture  agreements,  these
debentures  become  payable  on  demand  unless  the  default  is  waived by the
investors. The amount of debentures at March 31, 2006 of $1,450,000 plus accrued
interest of $144,922 has therefore been reflected as a current liability.


                                       9
<PAGE>

7.  Financing From Shareholders

As of March 31, 2006, the Company owes a shareholder,  Helenka Bodner, $213,425.
This shareholder loan is due on December 31, 2006 but may be repaid earlier. The
Company agreed to pay interest at 12% per annum on this loan.

Per a promissory note dated February 2003, Jules Nordlicht, another 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 reserves the right to
demand  payment in full or in part at anytime  after  December 31,  2006.  As of
March 31, 2006, the loan balance to this shareholder aggregated $2,171,503 which
is  reflected  as a short term  liability.  An  additional  amount of $64,253 of
interest on this note has been accrued  during 2006 and remains owed as of March
31,  2006.The  lender (J.  Nordlicht) has filed a Uniform  Commercial Code (UCC)
Lien on the Company's equipment and patents as security for this loan.


8. Shareholders' Equity Transactions

In January  2006,  the Company  granted  options to its two  outside  directors,
Richard Woodrich and Joseph Levi, to purchase in the aggregate 100,000 shares of
the Company's  common stock.  The options vest quarterly in equal amounts over a
period of three years, and are exercisable for seven years from the vesting date
at an exercise  price equal to the lower of $1.00 or  two-thirds of the price of
common stock  established in any offering and sale occurring  prior to April 30,
2006.

In February  2006,  the Company  engaged  Chardan  Capital  Markets  LLC. as its
investment bankers. The agreement is for a period of 12 months. For the advisory
services,  the  Company  has  agreed to issue a total of  300,000  shares of its
common stock of which 100,000 shares were issued on signing of the agreement and
the remaining  200,000  shares are to be issued in eight equal  installments  of
25,000 shares on 1st day of each month  following the date of the agreement.  As
of March 31,  2006,  the first  installment  has been earned.  In addition,  the
advisor is entitled to a cash fee of 9% of total gross  proceeds  for any equity
financing  introduced  by them and  accepted  by the  Company  and  warrants  to
purchase  shares of common  stock as shall  equal 9% of the shares of the Common
Stock so issued,  of which the shares of common  stock are to be  calculated  as
specified  in  the   agreement.   All  fees  due  for   advisory   services  are
non-refundable and non-cancelable.

In March 2006, previously issued warrants,  exercisable into 1,500,000 shares at
$.01 per share for total  proceeds of $15,000 were  converted into common stock,
resulting in the issuance of 1,500,000 common shares.


9. Stock Options

Accounting for Employee Awards:
On January 1, 2006,  the  Company  adopted  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.

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


                                       10
<PAGE>

                        STATSURE DIAGNOSTIC SYSTEMS, INC.
                    NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
                                 March 31, 2006

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

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 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.

As a result of the adoption of FAS 123 (R), the Company's  results for the three
month  period  ended March 31, 2006  include  share-based  compensation  expense
totaling  approximately   $276,615  which  pertains  to  selling,   general  and
administrative  expenses and has been  presented as a separate  line item in the
Statement of Operations. No income tax benefit has been recognized in the income
statement for share-based compensation  arrangements as the Company has provided
100% valuation  allowance on net deferred tax asset. Stock compensation  expense
for employee  options  recorded  under APB No. 25 in the Statement of Operations
for the three months ended March 31, 2005 totaled 228,371.

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..

Accounting for Non-employee Awards:
The  Company  previously  accounted  for  options  granted  to its  non-employee
consultants  using the fair value cost in  accordance  with FAS 123 and EITF No.
96-18.  The  adoption  of FAS 123(R ) and SAB 107 as of January 1, 2006,  had no
material impact on the accounting for non-employee awards. The Company continues
to  consider  the  additional  guidance  set  forth  in EITF  Issue  No.  96-18,
"Accounting  for Equity  Instruments  That Are  Issued to Other Than  Employees"
("EITF 96-18").

Stock  compensation  expense related to non-employee  options was  approximately
$11,621  and $0 for the three  month  periods  ended  March  31,  2006 and 2005,
respectively.  These  amounts are  included in Statement  of  Operations  within
"Stock based compensation and employment recruiting expense-non cash" line item.

Pro Forma Information under SFAS No. 123 for Periods Prior to Adoption of FAS
123 ( R):

The following table  illustrates the effect on net income and earnings per share
as if the fair value  recognition  provisions of FAS No. 123 had been applied to
all outstanding and unvested awards in the prior year comparable period.


                                       11
<PAGE>

                        STATSURE DIAGNOSTIC SYSTEMS, INC.
                    NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
                                 March 31, 2006

<TABLE>
<CAPTION>
                                                                      Three Month Period
                                                                     Ended March 31, 2005
                                                                         (Pro forma)
                                                                     --------------------
   <S>                                                                     <C>
   Net loss as reported                                                    $(2,656,745)
   Add:  Stock-based  employee  compensation  expense  included in
   reported  net loss,  net of related  tax affects
                                                                               228,371
   Deduct: Total stock-based  employee  compensation expense
   determined under fair value based method for all
   awards, net of related tax affects
                                                                              (245,958)
   Pro forma net loss                                                      $(2,674,332)
                                                                           ===========
   Basic and diluted net loss per share:
   As reported                                                                   (0.09)
   Pro forma                                                                     (0.09)
</TABLE>


The fair value for stock awards was  estimated  using the  Black-Scholes  option
pricing  model with the following  weighted  average  assumptions  for the three
months ended March 31, 2006 and 2005, respectively:

                                              Three Month Periods Ended March 31

                                               2006                 2005
                                                                (Pro forma)
                                               ----             -----------
   Expected term (in years)                       5                    5
   Expected stock price volatility              182%                 206%
   Risk-free interest rate                     4.35%                4.27%
   Expected dividend yield                        0%                   0%
   Estimated fair value per option granted     1.395                2.25


The Company  granted  100,000 and 550,000  employee  stock  options in the three
months ended March 31, 2006 and 2005. The following  table  represents our stock
options granted, exercised, and forfeited during the first quarter of 2006.

<TABLE>
<CAPTION>
                                                          Weighted Average        Weighted Average         Aggregate
                                                         Exercise Price per     Remaining Contractual      Intrinsic
         Stock Options               Number of Shares         Share ($)            Term (years)           Value ($)

<S>                                      <C>                    <C>                     <C>                  <C>
Outstanding at January 1, 2006           1,151,000              1.65                    8.88                 664,000
Granted                                    100,000              1.00                     --                      --
Exercised                                     --                --                       --                      --
Forfeited/expired                          (51,000)            19.23                     --                      --
                                         ---------
Outstanding at March 31, 2006            1,200,000              0.85                    8.85                 660,000
                                         =========
Exercisable at March 31, 2006              508,333              0.65                    9.00                 383,333
                                         ========
</TABLE>

As of March 31, 2006, there was $ 713,598 of unrecognized compensation cost, net
of estimated forfeitures, related to non-vested stock options, which is expected
to be recognized over a weighted average period of approximately 1 year.


                                       12
<PAGE>

                        STATSURE DIAGNOSTIC SYSTEMS, INC.
                    NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
                                 March 31, 2006

10.  Contingencies

Legal Matters:

In March 2004, Chembio Diagnostic  Systems,  Inc. (the Company's former contract
manufacturer)  commenced  an action in Federal  Court,  Eastern  District of New
York,  seeking a  declaration  that the  Company's US Patent No.  5,935,864  was
invalid  and did not  infringe  the  Company's  Patent.  The  Company  had filed
counterclaims for patent  infringement  seeking an injunction and damages.  Some
initial  discovery  took place,  and the  remainder of discovery had been stayed
pending the Court's ruling interpreting the patent claims.

On September 27, 2005 the Hon.  Joanna  Seybert,  issued her Claim  Construction
Ruling on the  interpretation  of the patent claims in the suit. The Court ruled
that the Company's broader  interpretation of its patent claims was correct, and
rejected  Chembio's  arguments  seeking  to  narrow  coverage  afforded  by  the
Company's '864 patent.

With the broad scope of the '864 patent now  established,  the Company will seek
an expedited Court schedule for remaining  proceedings to recover damages and to
enjoin  Chembio from selling or offering for sale the Chembio Sure Check device.
Other than that set forth above, to the best knowledge of the Company,  no other
material legal proceedings are pending.

Economic Dependency:

For the three months ended March 31, 2006, sales to two customers were in excess
of 10% of the Company's total sales. Sales to these customers were approximately
$159,000 and $51,000 and accounts  receivable  from these  customers as of March
31,  2006,  aggregated  $0 and $0,  respectively.  The loss of  either  of these
customers  could have a material  adverse effect on the Company.  The Company is
continuing to seek new markets and sales opportunities for its products.

For the three months ended March 31, 2006, purchases from five suppliers were in
excess  of 10% of the  Company's  total  purchases.  The  purchases  from  these
suppliers  for the  first  quarter  2006  ranged  from  $6,000 to  $13,000.  The
corresponding accounts payable at March 31, 2006, to these suppliers, was $0.


                                       13
<PAGE>

                        STATSURE DIAGNOSTIC SYSTEMS, INC.
                                 March 31, 2006

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

Since July 1990, the Company has been engaged almost exclusively in research and
development  activities  focused  on  developing  proprietary  rapid  assays for
infectious  diseases and to a lesser  degree  saliva based  collection  devices.
During the years 2005 and 2004,  the Company's  products have been  purchased by
foreign governments, distributors,  laboratories, as well as the U.S. Center for
Disease Control (CDC), an agency of the United States government.

In July of 2003,  the  Company  signed a  Manufacturing/Research  &  Development
Agreement  with  American  Bio  Medica  Corporation  (ABMC) of  Kinderhook,  NY.
Responsibilities of ABMC include  manufacturing and regulatory compliance of the
Company's HIV test devices.  The Company is seeking a PMA for its HIV rapid test
from the FDA and submitted  all modules of the PMA by the end of November  2004.
At the request of the FDA, the Company has completed a small  supplemental study
of 249 samples and its submission to the FDA, in October of 2005. In March 2006,
the Company  received  correspondence  from the FDA stating that our  Pre-Market
Approval  (PMA)  submission is deficient and therefore  will require  additional
clinical studies to amend the PMA. The FDA is requesting additional data.

In addition to the US, the Company intends to submit the appropriate  regulatory
submissions,  import/export documentation and any other requirement for a number
of countries,  including but not limited to, Russia,  Brazil,  Canada,  Vietnam,
India,  Mexico,  Australia,  Philippines,  Thailand,  and a  number  of  African
countries.

Finally,  if and  when  the  Company  receives  a PMA  from  the FDA for its HIV
product,  the Company will file for a waiver of CLIA,  which if  received,  will
allow sales of this product to a large number of markets (e.g. doctors' offices,
public health clinics) that do not operate under the standards of the CLIA.

The IDE, clinical trials,  and application  modules are only part of a difficult
and financially costly process to receive U.S. marketing  approval.  There is no
assurance  that the Company will have the  financial  resources,  expertise,  or
ability to complete the approval process.

A Certificate  of  Exportability  was issued by the FDA in October 2003 allowing
the resumption of the Company's HIV diagnostics export sales.

In November 2002, the U.S. Food and Drug Administration approved the sale in the
United  States of the  Oraquick  Rapid  HIV test,  a  competing  product  to the
Company's  StatSure(TM) HIV test. Subsequent to receiving FDA approval,  Orasure
received a CLIA waiver for their product.

During  2003,  the U.S.  Food and Drug  Administration  approved for sale in the
United  States of the Med Mira HIV test and the  Uni-Gold  Recombigen  HIV test,
competing products to the Company's StatSure(TM) HIV test.


                                       14
<PAGE>

                        STATSURE DIAGNOSTIC SYSTEMS, INC.
                                 March 31, 2006

ITEM 2.  Management's Discussion and Analysis or Plan of Operation (Continued)

General (Continued)

We believe that the  potential  market for rapid tests in the United  States and
foreign  countries  will  continue to grow as the benefits of rapid  testing are
better understood by the appropriate government agencies, by practitioners,  and
by the  general  population.  The need for and  availability  of rapid  tests to
screen large populations for HIV has been the subject of the medical, scientific
and lay  press,  including  the New York  Times and the New  England  Journal of
Medicine's Editorial pages. Recently, the FDA has decided to conduct hearings to
discuss the potential need,  requirements,  and issues of Over The Counter (OTC)
marketing of HIV tests.  The first of these  hearings was held in November  2005
and the second was held in March 2006.

We are committed to and focused on the completion of the necessary  requirements
towards  obtaining  U.S. Food and Drug  Administration  (FDA) and other relevant
regulatory  approvals  for our rapid  StatSure(TM)  HIV  diagnostic  technology.
Although there is no assurance  that we will receive such  approval,  we believe
that the StatSure(TM) HIV device format, if approved for detecting antibodies to
HIV-1  in  fingerstick,  serum  and  plasma  samples,  will  have a  significant
competitive  advantage in the market for rapid HIV testing in the United  States
and internationally.  However, there can be no assurance that we will achieve or
sustain significant revenues from sales of HIV diagnostic tests, internationally
or domestically, or from other new products we may develop or introduce.

The Company has limited marketing,  sales and distribution resources.  Achieving
market  acceptance will require  substantial  efforts and  capabilities in these
areas.  The Company relies in large part on forming  partnerships for marketing,
sales and distribution of its products. The Company has entered into a number of
agreements with  distributors  who are now in breech of the  contractual  terms.
However the Company is continuing to work with certain of these distributors who
commit time and resources towards obtaining regulatory approvals.

Concerning  long-term growth of the StatSure(TM)  HIV test,  industry  observers
believe  that sales of HIV rapid  tests will  eventually  be approved in certain
markets for  over-the-counter  (OTC) sales, and that self-testing will become as
easy to purchase as home pregnancy  tests. If this were to occur, we believe the
Company's  HIV  product's  performance,  design,  and ease of use  could  have a
competitive  advantage  over many of the existing  technologies  and  platforms.
There can be no assurance that any of the Company's products not yet approved or
cleared,  will  be  approved  or  cleared  for  marketing  by the FDA or that if
approved it would be allowed for sale as an OTC  product.  We believe  growth of
revenues from our Saliva  Sampler(R)oral  fluid collectors could result from our
two major  customers  who have both  indicated a positive  outlook for 2006.  In
addition,  the company is beginning to explore new  commercial  applications  of
these collectors.

We continue to distribute our StatSure(TM)  HIV test and Saliva  Sampler(R) oral
fluid collection product through our current distribution networks. We will also
seek new distribution relationships for our current and future test products.

The Company has discontinued selling its FDA approved  Stat-Simple(TM) H. pylori
test since 2000 but may elect to resume sales if market conditions so warrant.

The Company  believes  that its current cash  position will not be sufficient to
maintain the Company's  operations  through 2006. The Company will need to raise
additional  capital to fund its aggressive  growth and marketing  efforts and to
capitalize  on its IP  portfolio  to  design,  develop,  test,  gain  regulatory
approval  and  launch  new  products  as well as to meet its  debt  obligations.
Development,  marketing,  manufacturing and clinical testing may require capital
resources


                                       15
<PAGE>
                        STATSURE DIAGNOSTIC SYSTEMS, INC.
                                 March 31, 2006

ITEM 2.  Management's Discussion and Analysis or Plan of Operation (Continued)

General (Continued)

substantially greater than the resources, which may be available to the Company.
The Company is reviewing  its options,  including the selling of common stock or
considering  other  strategic  alternatives,  as a means to fund  the  Company's
future  growth  plans.  (See Item 6-  Management's  Discussion  And  Analysis Of
Financial  Condition And Results Of Operations;  Subsequent Events) There can be
no  assurance  that the Company  will be able to obtain the  additional  capital
resources  necessary to fund its growth plans,  or that such  financing  will be
available on commercially reasonable terms.

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.

The Company has adopted Statement of Financial  Accounting Standards ("FAS") No.
123 (Revised  2004),  Share-Based  Payment ["FAS 123(R)],  effective  January 1,
2006, to account for its employee options. Other than this adoption, the Company
believes  there have been no other  significant  changes,  during the  quarterly
period  ended March 31,  2006,  to the items  disclosed  as critical  accounting
policies and  estimates  in  Management's  Discussion  and Analysis of Financial
Condition  and Results of  Operations  in the  Company's  Annual  Report on Form
10-KSB for the year ended December 31, 2005.

Restatement
Prior to the filing of Form 10-KSB for December 31, 2005, the Company determined
that its prior 2005  quarterly  filings did not reflect a beneficial  conversion
feature on 9% convertible  debentures issued in 2005 as required under EITF 98-5
"Accounting for Convertible  Securities With Beneficial  Conversion  Features or
Contingently   Adjustable   Conversion   Ratios",   as  amended  by  EITF  00-27
"Application of Issue No. 98-5 to Certain Convertible Instruments".

Further,  the Company also revalued  options  granted to an employee  using FASB
Interpretation  No.  28,  Accounting  for Stock  Appreciation  Rights  and Other
Variable Stock Option or Award Plans, an  interpretation  of APB Opinions No. 15
and  No.  25  ("FIN  28").  The  Interpretation  clarifies  the  accounting  for
compensation  related to variable stock options and specifies that  compensation
should be  measured  at the end of each period as the amount by which the quoted
market value of the shares of the  Company's  common  stock  covered by a grant,
exceeds the option price or value specified under the plan and should be accrued
as a charge to expense  over the  periods  the  employee  performs  the  related
services.  Changes  in  the  quoted  market  value  should  be  reflected  as an
adjustment of accrued  compensation and  compensation  expense in the periods in
which the changes occur until the date the number of shares and purchase  price,
if any, are both known.

The  Company  has  corrected  the  accounting  for the  above  two  errors  on a
period-to-date basis in the 2005 annual financial  statements.  The Statement of
Operations for the three-month period ended March 31, 2005 is now being restated
in this Form  10-QSB  filing to give  effect to these  two  errors  and  certain
resulting reclassification adjustments, as further discussed below.

The Company raised a total of $1,510,000 from issue of convertible debentures in
2005. Refer to Note 6 for more information on terms of these debentures.  During
the three  months  ended  March 31,  2005,  the  Company  had  issued a total of
$1,100,000 convertible debentures. On the date of issue, a beneficial conversion
feature of $1,785,000  was computed being the number of shares the debenture was
convertible  into multiplied by the difference  between the conversion  price of
$1.00  and the fair  value of the  shares of the  Company's  common  stock.  The
beneficial conversion amount had not been recorded earlier.


                                       16
<PAGE>

                        STATSURE DIAGNOSTIC SYSTEMS, INC.
                                 March 31, 2006

ITEM 2.  Management's Discussion and Analysis or Plan of Operation (Continued)

Restatement (Continued)

The Company had issued 550,000 options to one employee in the three months ended
March 31, 2005. The exercise price was not determinable at the date of the grant
and the options should have been accounted under FIN 28 as variable options.  As
a result,  the  compensation  charge  for these  options  has been  restated  to
$228,371 from $8,910.

The Company has also  reclassified  non-cash  amortization of options granted to
employees of $8,910 and non-cash charge of warrants issued to non-employees  for
recruiting  services of $280,000 for a total amount of $288,910,  from "selling,
general and  administrative  expense" line item to "Stock based compensation and
employment recruiting expense- non cash" line item.

As a result,  the  Statements of Operations  and Cash Flows for the  three-month
period ended March 31, 2005 were  restated to reflect these  changes.  The table
below details the items affected by the restatement:

<TABLE>
<CAPTION>
                                                           Three months ended March 31, 2005
                                                           As reported         As restated
<S>                                                        <C>                 <C>
   STATEMENTS OF OPERATIONS:
   Selling, general and administrative expenses            $ 644,672           $   355,762
   Stock based compensation and employment recruiting
   expense-non cash                                             --                 508,371
   Loss from operations                                     (550,999)             (941,133)
   Interest expense                                         (101,285)           (1,886,285)
   Net loss to common shareholders                          (652,284)           (2,656,745)
   Basic and diluted net loss per share                        (0.02)                (0.09)
</TABLE>


<TABLE>
<CAPTION>
   STATEMENTS OF CASH FLOWS:                               Three months ended March 31, 2005
                                                           As reported         As restated
<S>                                                        <C>                 <C>
   Net loss                                                 (652,284)          (2,656,745)
   Adjustments to reconcile net loss to net
  cash used in operating activities:
  Options granted to employees                                 8,910                228,371
  Beneficial conversion feature of convertible
    Debentures                                                     0              1,785,000
</TABLE>

The restatement had no impact on the cash used in operating activities.

RESULTS OF OPERATIONS

First Quarter of 2006 Compared to First Quarter of 2005

REVENUES.  The  Company's  revenues  consist  of  product  sales and  royalties.
Revenues decreased 20% to $213,059 in the first quarter of 2006 yielding a gross
margin of  $166,669  or 78% from the  revenues  of the first  quarter of 2005 of
$265,019,  yielding a gross  margin of $170,673 or 64%. In the  previous  fiscal
year (2005) the Company had high scrap rates due to validating  new machinery in
conformity  with Good  Manufacturing  Practices  (GMP).  This  involved  running
machinery while  consuming  materials as if it were a normal  production  cycle.
However the product  produced was used only for  evaluation  and was  thereafter
scrapped.  The margins achieved during the first quarter of 2006, are consistent
with with the Company's present financial objectives.


                                       17
<PAGE>

                        STATSURE DIAGNOSTIC SYSTEMS, INC.
                                 March 31, 2006

ITEM 2.  Management's Discussion and Analysis or Plan of Operation (Continued)

Results Of Operations (Continued)

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 first quarter of 2006, sales to two customers
were in excess of 10% of the  Company's  total sales.  Sales to these  customers
were approximately  $159,000 and $51,000.  The Company is continuing to seek new
markets and sales opportunities for its products.

COST OF PRODUCTS SOLD. Costs of products sold decreased to $ 46,390 (22% of
product sales) in the first quarter of 2006 from $ 94,346 (36% of product sales)
in the first quarter of 2005. SEE REVENUES FOR EXPLANATION

RESEARCH AND DEVELOPMENT  EXPENSES.  Research and development expenses decreased
to $69,149 in the first  quarter  of 2006 from  $77,000 in the first  quarter of
2005.  The decrease is due to fewer  consulting  expenses  incurred with our HIV
test.  R&D costs for our HIV test are  expected  to  continue in 2006 until such
time that we receive FDA approval to market the test in the U.S.

SELLING,   GENERAL   AND   ADMINISTRATIVE   EXPENSES.   Selling,   general   and
administrative  expenses  increased 5% to $373,104 in the first quarter of 2006,
versus the first  quarter of 2005.  In the first  quarter of 2006,  the  Company
incurred greater expenses for legal and accounting fees approximating  $124,000.
During the first quarter of 2005 these fees were $84,000.

STOCK BASED  COMPENSATION  AND EMPLOYMENT  RECRUITING  EXPENSE- NON CASH.  Stock
based  compensation  and employment  recruiting  expense- non cash decreased 43%
from $508,371 to $288,236 in the first quarter of 2006, versus the first quarter
of 2005.  The amount for 2005 has been  restated  from  $288,910  to $508,371 to
account for variable  options  granted to an employee in accordance with APB 25.
The 2005  restatement  also  included a reclass of $288,910  of  non-cash  stock
compensation and recruiting  expenses from selling,  general and  administrative
expense  line  item to this  separate  line  item.  See note 4 to the  financial
statements  for more details.  The stock based  compensation  for 2006 comprises
amortization  charges for  employee  and director  options  accounted  under FAS
123(R)  of  $276,615  and  for  non-employee  options  accounted  under  $11,621
accounted under FAS 123 ( R ) and EITF 96-18.

LOSS FROM OPERATIONS.  The loss from operations for the first quarter of 2006 of
$563,820  reflects a 27% decrease  from the $770,460 loss reported for the first
quarter of 2005.  Improved gross margins and a reduction of non cash expenses in
the first  quarter of 2006,  despite lower sales,  contributed  to the Company's
decreased loss.

INTEREST  EXPENSE.  Net interest expense for the first quarter of 2006 decreased
to  $123,962  from  $1,886,285  in the first  quarter of 2005.  The 2005  amount
includes the  expensing of a beneficial  conversion  feature of the  convertible
debentures  issued  during the first  quarter of 2005.  The 2005 amount has been
restated. See discussion under "restatement" for further details.

INCOME  TAXES.  The  Company is in a net  deferred  tax asset  position  and has
generated net operating  losses to date. No provision for or benefit from income
taxes has been  recorded  in the  accompanying  statements  of  operations.  The
Company  will  continue to provide a valuation  allowance  for its  deferred tax
assets until it becomes more likely than not, in management's  assessment,  that
the  Company's  deferred  tax assets  will be  realized.  The  Company has a net
operating loss carryforward of approximately $49 million,  which is available to
offset future taxable income, if any, expiring in various years through the year
2025.  The Internal  Revenue Code rules under Section 382 could limit the future
use of these losses based on  ownership  changes and the value of the  Company's
stock.


                                       18
<PAGE>

                        STATSURE DIAGNOSTIC SYSTEMS, INC.
                                 March 31, 2006

ITEM 2.  Management's Discussion and Analysis or Plan of Operation (Continued)

LIQUIDITY AND CAPITAL RESOURCES
                                            March 31, 2006   December 31, 2005
                                            --------------   -----------------
Cash and cash equivalents                      $     9,607       $    76,321
Working capital deficit                         (4,482,545)       (2,199,609)


Net cash used by operating activities in the first quarter 2006 was $88,270. Net
cash used in the first quarter 2005 was $348,602.  In 2006, the decrease in cash
used by operations was primarily due to the decrease of the net loss of $687,782
(2005) and $2,656,745 (2005). The following expenses showed significant  changes
between the first quarter of 2006 when compared to the first quarter of 2005:


o     Legal and accounting costs (increased in 2006)
o     Expenses recorded for beneficial conversion features of convertible debt,
      and stock and warrant issuance costs(decreased in 2006)
o     Consulting expenses (decreased in 2006)

Net cash used in operating activities was not impacted by the restatement.

Cash used in  investing  activities  in the first  quarter  2005 was  $34,814 as
compared  to  $271,475  in the first  quarter  2005.  The 2005  amount  includes
equipment  costs and deferred  finance costs.  The Company did not incur similar
costs in 2006

Cash provided by financing  activities in the first quarter 2006 was $56,370 and
in the  first  quarter  2005 was  $492,357.  During  2005 the  Company  received
$1,100,000 from the sale of debentures.  This amount was offset by approximately
$580,000 in net repayments of shareholder  loans.  In 2006 cash increased due to
net shareholder  loans which was  approximately  $40,000 and issuances of common
stock which resulted in $15,000.

Our cash requirements depend on numerous factors,  including product development
activities,  penetration  of the direct sales market,  market  acceptance of our
products,  and effective management of accounts receivable.  We expect to devote
capital  resources  to improve our sales and  marketing  efforts,  continue  our
product  development,  expand  manufacturing  capacity and continue research and
development  activities.  We will examine other growth opportunities,  including
strategic alliances, and we expect any such activities will be funded from funds
provided by debenture offerings and or stock subscription sales in 2006.

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.

Per a promissory note dated February 2003, Jules Nordlicht, another 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 reserves the right to
demand  payment in full or in part at anytime  after  December 31,  2006.  As of
March 31, 2006, the loan balance to this shareholder aggregated $2,171,503 which
is  reflected  as a short term  liability.  An  additional  amount of $64,253 of
interest on this note has been accrued  during 2006 and remains owed as of March
31,  2006.The  lender (J.  Nordlicht) has filed a Uniform  Commercial Code (UCC)
Lien on the Company's equipment and patents as security for this loan.


                                       19
<PAGE>

                        STATSURE DIAGNOSTIC SYSTEMS, INC.
                                 March 31, 2006

ITEM 2.  Management's Discussion and Analysis or Plan of Operation (Continued)

Liquidity And Capital Resources (Continued)

On January 19, 2005,  the Company's  Board of Directors  authorized the issuance
and sale 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.  Accordingly,  the Company  recognized  this  beneficial
conversion  feature by charging an interest  expense of $2,614,400  for the year
ended  December 31,  2005;  and a  corresponding  credit to  additional  paid-in
capital  account.  As of December 31, 2005; the Company had sold an aggregate of
$1,510,000 in convertible debentures.  During September 2005, a debenture in the
amount of $60,000 was converted into 60,000 shares of common stock, resulting in
the balance of outstanding  debentures payables to be reduced to $1,450,000.  As
of March 31,  2006,  the  Company  was in default on payment of  interest on the
debentures.  As a result,  in accordance  with the debenture  agreements,  these
debentures  become  payable  on  demand  unless  the  default  is  waived by the
investors.  The  amount  of  debentures  at March  31,  2006 of  $1,450,000  has
therefore been reflected as a current liability.

In January  2006,  the Company  granted  options to its two  outside  directors,
Richard Woodrich and Joseph Levi, to purchase in the aggregate 100,000 shares of
the Company's  common stock.  The options vest quarterly in equal amounts over a
period of three years, and are exercisable for seven years from the vesting date
at an exercise  price equal to the lower of $1.00 or  two-thirds of the price of
common stock  established in any offering and sale occurring  prior to April 30,
2006.

In February  2006,  the Company  engaged  Chardan  Capital  Markets  LLC. as its
investment bankers. The agreement is for a period of 12 months. For the advisory
services,  the  Company  has  agreed to issue a total of  300,000  shares of its
common stock of which 100,000 shares were issued on signing of the agreement and
the remaining  200,000  shares are to be issued in eight equal  installments  of
25,000 shares on 1st day of each month  following the date of the agreement.  As
of March 31,  2006,  the first  installment  has been earned.  In addition,  the
advisor is entitled to a cash fee of 9% of total gross  proceeds  for any equity
financing  introduced  by them and  accepted  by the  Company  and  warrants  to
purchase  shares of common  stock as shall  equal 9% of the shares of the Common
Stock so issued,  of which the shares of common  stock are to be  calculated  as
specified  in  the   agreement.   All  fees  due  for   advisory   services  are
non-refundable and non-cancelable.

In March 2006, previously issued warrants,  exercisable into 1,500,000 shares at
$.01 per share for total  proceeds of $15,000 were  converted into common stock,
resulting in the issuance of 1,500,000 common shares.

As of March 31, 2006, the Company owed a shareholder,  Helenka Bodner, $213,425.
This shareholder loan is due on December 31, 2006 but may be repaid earlier. The
Company agreed to pay interest at 12% per annum on this loan.

To conserve cash and to obtain goods and  services,  the Company may continue to
issue  options and warrants at discounts to market or issue direct stock grants.
In the event that the Company  issues  additional  options and  warrants,  it is
anticipated that the securities will contain cost-free registration rights which
will be granted to holders of the  options and  warrants,  and that there may be
dilution to the Company's existing stockholders.

The  Company's   capital   requirements  have  been  and  will  continue  to  be
significant. The Company currently has an accumulated deficit due to its history
of losses. The Company is dependent upon its efforts to raise capital to finance
its future operations,  including the cost of 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.


                                       20

<PAGE>

                        STATSURE DIAGNOSTIC SYSTEMS, INC.
                                 March 31, 2006

ITEM 2.  Management's Discussion and Analysis or Plan of Operation (Continued)

Liquidity And Capital Resources (Continued)

The Company  occupies  premises in  Framingham,  MA. The lease has a  three-year
initial  term ending  March 31, 2008 and a base annual  rental rate  starting at
approximately $26,350 and increasing to approximately $40,500 per year over that
initial  term.  The lease also has a one-year  renewal  option at an annual base
rental rate of  approximately  $40,500.  The Company also  occupies  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.

The  following  table lists the future  payments  required on debt and any other
contractual obligations of the Company as of March 31, 2006.

    Obligations            Total           Less than 1 year         1-3 years
   ----------------       -----------      ----------------     ----------------
   Long-term debt         $ 3,834,928      $      3,834,928     $           --
   Operating leases           119,700                55,700               64,000


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.


                                       21
<PAGE>

                        STATSURE DIAGNOSTIC SYSTEMS, INC.
                                 March 31, 2006

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
president  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)].  Based on
this evaluation, our president and chief financial officer has concluded that as
of the  date of the  evaluation  our  disclosure  controls  and  procedures  are
effective to ensure that all material  information  required to be filed in this
report has been made known to them.

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.


                                       22
<PAGE>

                        STATSURE DIAGNOSTIC SYSTEMS, INC.
                                 March 31, 2006

PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

In March 2004, Chembio Diagnostic  Systems,  Inc. (the Company's former contract
manufacturer)  commenced  an action in Federal  Court,  Eastern  District of New
York,  seeking a  declaration  that the  Company's US Patent No.  5,935,864  was
invalid  and did not  infringe  the  Company's  Patent.  The  Company  had filed
counterclaims for patent  infringement  seeking an injunction and damages.  Some
initial  discovery  took place,  and the  remainder of discovery had been stayed
pending the Court's ruling interpreting the patent claims.

In January 2000, the Company  received  notice from the United States Patent and
Trademark  Office  that Bayer  Corporation  has filed a  petition  to cancel the
Company's  trademark,  HemaStrip(TM).  The petition  alleged that the  Company's
trademark  HemaStrip(TM),  would  likely be  confused  with  Bayer's  trademark,
HEMASTICK. The Company did not respond to the Petition and in December 2000, the
Company received notice that the trademark was cancelled.  In November 2003, the
Company filed to re-register  the trademark in the U.S., and in April 2004 filed
in Europe. Bayer has filed opposition to the Company's trademark and the Company
has settled this matter with Bayer. Other than that set forth above, to the best
knowledge of the Company, no other material legal proceedings are pending.

Item 2. CHANGES IN SECURITIES

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

On January 19, 2005,  the Company's  board of directors  authorized the issuance
and sale 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.  Accordingly,  the Company  recognized  this  beneficial
conversion  feature by charging an interest  expense of $2,614,400  for the year
ended  December 31,  2005;  and a  corresponding  credit to  additional  paid-in
capital  account.  As of March 31,  2006;  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, resulting in
the balance of outstanding  debentures payables to be reduced to $1,450,000.  As
of March 31,  2006,  the  Company  was in default on payment of  interest on the
debentures.  As a result,  in accordance  with the debenture  agreements,  these
debentures  become  payable  on  demand  unless  the  default  is  waived by the
investors.

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

None

ITEM 5.  OTHER INFORMATION

None

                                       23
<PAGE>

                        STATSURE DIAGNOSTIC SYSTEMS, INC.
                                 March 31, 2006

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibit index

Exhibit
-------
     11  Earnings per share

   31.1  Certification of Chief Executive Officer required by Rule 13a-14(a)
         or Rule 15d-14(a) under the Securities Exchange Act of 1934, as
         amended.

   31.2  Certification of Chief Financial Officer required by Rule 13a-14(a)
         or Rule 15d-14(a) under the Securities Exchange Act of 1934, as
         amended.

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

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


(b)      Reports on Form 8-K :

         Date                           Items Reported

         3/29/06                        5.03


                                       24
<PAGE>

                        STATSURE DIAGNOSTIC SYSTEMS, INC.
                                 March 31, 2006

                                   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: May 18, 2006

                                         STATSURE DIAGNOSTIC SYSTEMS, INC.

                                         /s/
                                         --------------------------------------
                                         Steve M. Peltzman
                                         Chief Executive Officer


                                         /s/
                                         --------------------------------------
                                         Leo Ehrlich
                                         Chief Financial Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual
Report on Form 10-K has been signed below by the following  persons on behalf of
the Registrant and in the capacities indicated on May 13, 2006.

            /s/
            -----------------------------   Chief Operating Officer and Director
            D. Bruce Pattison

            /s/
            -----------------------------   Director
            Richard Woodrich

            /s/
            -----------------------------   Director
            Joseph Levi


                                       25