*Table
        of Contents*







**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      DC 20549**


_______________________________





**FORM
      10 - Q**


_______________________________





x
                **QUARTERLY
                    REPORT UNDER SECTION 13 OR 15(d) OFTHE
                    SECURITIES EXCHANGE ACT OF
                    1934**




**For
      the quarterly period ended March 31, 2008**





OR




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




*Commission
      File Number: 0-21284*




**STATSURE
      DIAGNOSTIC SYSTEMS, INC.**


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




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





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 Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days.


Yes x No  ̈





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





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





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


Yes  ̈ No x





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





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


Yes  ̈ No x





The
      number of shares outstanding of the Registrant's Common Stock as of March 31,
      2008 was 39,651,096.












*Table
        of Contents*




**STATSURE
      DIAGNOSTIC SYSTEMS, INC.**


**FORM
      10-Q**


**INDEX**





PART
                I FINANCIAL INFORMATIONItem
                1.
            Financial
                Statements
            6Balance
                Sheets as of March 31, 2008 (unaudited) and December
                31, 2007
            3Statements
                  of Operations -Three Months Ended March 31, 2008 and March 31,
                  2007 (unaudited)
            4Statements
                  of Cash Flows -Three Months Ended March 31, 2008 and 2007
                  (unaudited)
            5Notes
                to Financial Statements
                (unaudited)
            6Item
                2.
            Management's
                Discussion and Analysis of Financial Condition
                And
                Results of Operations
            15Item
                3.
            Quantitative
                and Qualitative Disclosures About Market
                Risk
            18Item
                4T.
            Controls
                and Procedures
            18PART
                II OTHER INFORMATIONItem
                1.
            Legal
                Proceedings
            19Item
                1A.
            Risk
                Factors.Item
                2.
            Unregistered
                Sales of Equity Securities and Use of
                Proceeds
            19Item
                3.
            Defaults
                Upon Senior Securities
            19Item
                4.
            Submission
                of Matters to a Vote of Security
                Holders
            19Item
                5.
            Other
                Information
            19Item
                6.
            Exhibits
            20Signatures.
            
            21






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          of Contents*




**PART
      I.  NANCIAL INFORMATION**


**Item
      1. FINANCIAL STATEMENTS**




**STATSURE
      DIAGNOSTIC SYSTEMS, INC.**


**BALANCE
      SHEETS**




**March
                31, 2008**
            
            **December
                31, 2007****(unaudited)**ASSETSCURRENT
                ASSETS:Cash
                and cash equivalents
            
            $
            —
            
            $
            43,516Accounts
                receivable, net of allowance for doubtful accounts of $3,585 (2008)
                and
                $2,015 (2007)
            
            
            47,897
            
            
            152,049Inventories
            
            
            26,245
            
            
            48,256Prepaid
                expenses
            
            
            12,236
            
            
            9,795Total
                current assets
            
            
            86,378
            
            
            253,616Property
                and equipment, net of accumulated depreciation of $576,387 (2008)
                and
                $573,765 (2007)
            
            
            44,536
            
            
            47,158OTHER
                ASSETSPatents
                and trademarks, net of accumulated depreciation of $165,317 (2008)
                and
                $163,138 (2007)
            
            
            112,381
            
            
            105,527Deferred
                loan costs
            
            
            —
            
            
            2,006Deposits
            
            
            2,500
            
            
            2,500Total
                other assets
            
            
            114,881
            
            
            110,033TOTAL
                ASSETS
            
            $
            245,795
            
            $
            410,807LIABILITIES
                AND SHAREHOLDERS' DEFICITCURRENT
                LIABILITIES:Notes
                payable-shareholders
            
            $
            1,339,317
            
            $
            1,476,317Debentures
                payable, net of discount
            
            
            173,730
            
            
            139,194Accounts
                payable
            
            
            123,680
            
            
            123,516Accrued
                expenses
            
            
            185,329
            
            
            187,309Accrued
                interest
            
            
            23,390
            
            
            17,451Accrued
                interest-due to shareholder
            
            
            470,871
            
            
            428,775Accrued
                payroll expense to officers
            
            
            124,999
            
            
            124,999Payroll
                and payroll taxes payable
            
            
            20,086
            
            
            20,086Cash
                dividends payable to preferred shareholders
            
            
            158,400
            
            
            118,800Total
                current liabilities
            
            
            2,619,802
            
            
            2,636,447LONG-TERM
                LIABILITIESDerivative
                instrument
            
            
            315,906
            
            
            1,010,390Total
                liabilities
            
            
            2,935,708
            
            
            3,646,837COMMITMENTS
                AND CONTINGENCIESSeries
                2006-A Convertible Preferred Stock: 2,500 sharesauthorized,
                $.001 par value, 1,980 issued and outstanding
            
            
            2
            
            
            2SHAREHOLDERS'
                DEFICITSeries
                1998-B Convertible Preferred Stock: 1,645 shares authorized, none
                issued
                and outstanding
            
            
            —
            
            
            —Common
                stock, $.001 par value, 50,000,000 shares authorized,issued
                and outstanding: 39,651,096 (2008 and 2007)
            
            
            39,651
            
            
            39,651Additional
                paid-in capital
            
            
            47,783,423
            
            
            47,771,801Accumulated
                deficit
            
            
            (50,512,989
            )
            
            (51,047,484
            )Total
                shareholders' deficit
            
            
            (2,689,915
            )
            
            (3,236,032
            )TOTAL
                LIABILITIES AND SHAREHOLDERS' DEFICIT
            
            $
            245,795
            
            $
            410,807


The
      accompanying notes are an integral part of these statements.


-
          3
          -
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          of Contents*


**STATSURE
      DIAGNOSTIC SYSTEMS, INC.**


**STATEMENTS
      OF OPERATIONS**


**(Unaudited)**




Three
                Months Ended March 31,2008
            
            2007REVENUES:Product
                Sales
            
            $
            224,370
            
            $
            142,862Royalty
                and Other Income
            
            
            35,800
            
            
            10,986260,170
            
            
            153,848Cost
                of products sold
            
            
            48,409
            
            
            21,729Gross
                profit
            
            
            211,761
            
            
            132,119OPERATING
                EXPENSES:Research
                and development
            
            
            5,000
            
            
            21,048Selling,
                general and administrative
            
            
            244,579
            
            
            495,604249,579
            
            
            516,652LOSS
                FROM OPERATIONS
            
            
            (37,818
            )
            
            (384,533
            )OTHER
                INCOME (EXPENSES):Interest
                expense, net
            
            
            (48,035
            )
            
            (55,034
            )Interest
                expense on beneficial conversion features
            
            
            (34,536
            )
            
            (36,310
            )Derivative
                income
            
            
            694,484
            
            
            1,396,261Total
                other income (expenses)
            
            
            611,913
            
            
            1,304,917Income
                before provision for income taxes
            
            
            574,095
            
            
            920,384Provision
                for income taxes
            
            
            —
            
            
            —NET
                INCOME
            
            
            574,095
            
            
            920,384Dividends
                - Preferred stock series 2006-A
            
            
            39,600
            
            
            49,500NET
                INCOME TO COMMON SHAREHOLDERS
            
            $
            534,495
            
            $
            870,884BASIC
                EARNINGS PER SHARE
            
            $
            0.01
            
            $
            0.02DILUTED
                EARNINGS PER SHARE
            
            $
            0.01
            
            $
            0.02WEIGHTED
                AVERAGE NUMBER OF SHARES:BASIC
                EARNINGS PER SHARE
            
            
            39,651,096
            
            
            37,262,277DILUTED
                EARNINGS PER SHARE
            
            
            43,948,596
            
            
            45,988,736


The
      accompanying notes are an integral part of these statements.


-
          4
          -
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          of Contents*




**STATSURE
      DIAGNOSTIC SYSTEMS, INC.**


**STATEMENTS
      OF CASH FLOWS**


**(Unaudited)**





**Three
                Months Ended March 31,****2008**
            
            **2007**CASH
                FLOWS FROM OPERATING ACTIVITIES:Net
                income
            
            $
            574,095
            
            $
            920,384Adjustments
                to reconcile net income to net cash provided (used) in operating
                activities:Depreciation
                and amortization
            
            
            4,801
            
            
            7,258Amortization
                of deferred loan costs
            
            
            2,006
            
            
            5,059Options
                granted to employees as compensation
            
            
            —
            
            
            60,924Non-employee
                share based expense
            
            
            11,622
            
            
            11,622Beneficial
                conversion features of convertible debts
            
            
            34,536
            
            
            36,310Mark-to-market
                gain on derivative instruments
            
            
            (694,484
            )
            
            (1,396,261
            )Changes
                in current assets and liabilities:Accounts
                receivable
            
            
            104,152
            
            
            68,471Inventories
            
            
            22,011
            
            
            (3,696
            )Prepaid
                expenses
            
            
            (2,441
            )
            
            (1,650
            )Accounts
                payable, accrued payroll expense to officers and accrued
                expenses
            
            
            46,219
            
            
            142,274Deferred
                rent
            
            
            —
            
            
            (393
            )Net
                cash provided (used) in operating activities
            
            
            102,517
            
            
            (149,698
            )CASH
                FLOWS FROM INVESTING ACTIVITIES:Capitalized
                patents and trademark costs
            
            
            (9,033
            )
            
            (6,110
            )Net
                cash (used) in investing activities
            
            
            (9,033
            )
            
            (6,110
            )CASH
                FLOWS FROM FINANCING ACTIVITIES:Proceeds
                from shareholder loans
            
            
            105,600
            
            
            155,000Repayments
                of shareholder loans
            
            
            (242,600
            )
            
            (83,687
            )Net
                cash (used) provided by financing activities
            
            
            (137,000
            )
            
            71,313NET
                DECREASE IN CASH AND CASH EQUIVALENTS
            
            
            (43,516
            )
            
            (84,495
            )CASH
                AND CASH EQUIVALENTS, BEGINNING OF PERIOD
            
            
            43,516
            
            
            109,332CASH
                AND CASH EQUIVALENTS, END OF PERIOD
            
            $
            —
            
            $
            24,837




SUPPLEMENTAL
                DISCLOSURE OF CASH FLOW INFORMATION:Cash
                paid for interest
            
            $
            —
            
            $
            2,441Cash
                paid for taxes
            
            
            —
            
            
            —SUPPLEMENTAL
                DISCLOSURE OF NON-CASH INFORMATION:Common
                stock issued in lieu of cash dividend payments
            
            
            —
            
            
            49,500Preferred
                stock dividends accrued and not paid
            
            
            39,600
            
            
            —


The
      accompanying notes are an integral part of these statements.




-
          5
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 *Table
          of Contents*




**STATSURE
      DIAGNOSTIC SYSTEMS, INC.**




**NOTES
      TO CONDENSED FINANCIAL STATEMENTS**


**March
      31, 2008**


**(unaudited)**




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




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




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. The
      Company announced on November 5, 2007, that the HIV 1/2 Rapid Test employing
      the
      Company's patented "barrel" technology marketed and distributed worldwide by
      Inverness Medical Innovations under its Clearview® brand as "Clearview COMPLETE
      HIV 1 /2, received an FDA waiver of the Clinical Laboratory Improvement
      Amendments of 1988(CLIA). This CLIA waiver will allow sales of this product
      to a
      large number of markets that do not operate under the standards of the CLIA
      (e.g. doctors' offices, public health clinics). Until this waiver was obtained,
      marketing and sales of the product was restricted to those laboratory settings
      with CLIA certification.




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




Other
      than sales of the Company's collection devices, the Company has not yet
      commenced any significant product commercialization. The Company incurred
      significant operating losses since its inception, resulting in an accumulated
      deficit of $ 50,512,989 at
      March
      31, 2008. 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 and October 2007, substantial additional financing will be required in
      future periods.




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




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





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




***Basis
      of Presentation:***




The
      accompanying unaudited financial statements as of, and for the three months
      ended March 31, 2008 and 2007, have been prepared in conformity with accounting
      principles generally accepted in the United States of America. The financial
      information as of December 31, 2007 is derived from StatSure Diagnostic Systems,
      Inc. (the “Company”) financial statements included in the


-
          6
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          of Contents*


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




***Inventories***




Inventory
      consists of the following at:




**March
                31, 2008**
            
            **December
                31, 2007**Raw
                Materials
            
            $
            31,460
            
            $
            28,884Finished
                Goods
            
            
            3,412
            
            
            27,99934,872
            
            
            56,883Allowance
                for obsolete inventory
            
            
            (8,627
            )
            
            (8,627
            )$
            26,245
            
            $
            48,256


***Recent
      Accounting Pronouncements:***




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




In
      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
      option 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 adopted this Statement as of January 1, 2008 and
      has
      elected not to apply the fair value option to any of its financial
      instruments.





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





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


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          of Contents*


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




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




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




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





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




As
      a
      result of the adoption of FAS 123(R), the Company's results for the three months
      ended March 31, 2008 and 2007 include share-based compensation expense of $0
      and
      $60,924, respectively, recorded in the selling, general and administrative
      expenses.  There
      was
      no income tax benefit recognized in the income statement for share-based
      compensation arrangements as the Company has provided a 100% valuation allowance
      on its’ deferred tax asset





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




***Earnings
      Per Share:***




Basic
      and
      diluted earnings per common share 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 month periods ended March 31, 2008 and
      2007, respectively:




For
                the Three Months Ended
              March
                31,2008
            
            2007Numerator:Net
                income to common shareholders
            
            $
            534,495
            
            $
            870,884(Deduct)/Add:Mark-to-market
                gain-derivative liability
            
            
            (694,484
            )
            
            (1,396,261
            )Interest
                on convertible debt
            
            
            5,940
            
            
            7,490Dividends
                on preferred stock
            
            
            39,600
            
            
            49,500




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          8
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For
                  the Three Months Ended
                March
                  31,2008
              
              2007Net
                  loss to common shareholders and assumed conversion
              
              $
              (114,449
              )
              $
              (468,387
              )Denominator:Share
                  reconciliation:Shares
                  used for basic earnings per share
              
              
              39,651,096
              
              
              37,262,277Effect
                  of dilutive items:Convertible
                  debentures
              
              
              262,500
              
              
              337,500Stock
                  options
              
              
              75,000
              
              
              202,857Convertible
                  securities
              
              
              3,960,000
              
              
              8,186,102Shares
                  used for diluted loss per share
              
              
              43,948,596
              
              
              45,988,736Net
                  loss per share:Diluted:
              
              $
              (0.01
              )
              $
              (0.01
              )
  ***Reclassifications:***





Certain
      reclassifications have been made to the March 31, 2007 financial statements
      in
      order to conform to the current fiscal year presentation.




**NOTE
      4. FINANCING FROM SHAREHOLDERS**




Per
      a
      promissory note dated February 2003, Jules Nordlicht, a shareholder, agreed
      to
      advance in total or in installments, up to the amount of $1,000,000 to the
      Company. In November 2003 and August 2004, agreements were executed with this
      shareholder to cause additional advances in total or in installments up to
      the
      amount of $2,500,000 to advance the process of the FDA approval. In
      consideration for the financing, the Company agreed to repay such borrowed
      funds
      with accrued interest at 12% per annum and the shareholder reserved the right
      to
      demand payment in full or in part at any time after December 31, 2006. On May
      8,
      2006 the shareholder agreed to extend the maturity date to December 31, 2008
      provided that (i) a partial payment of $350,000 will be made by the Company
      on
      or prior to July 31, 2006 and (ii) accrued interest will be paid quarterly
      thereafter, commencing September 30, 2006. The agreement was amended on
      September 4, 2006 so that the Company need no longer pay the quarterly accrued
      interest but an amount of $60,000 quarterly as a principal reduction. If the
      Company should default in these payments, the promissory note reverts to the
      original maturity date of December 31, 2006. As of March 31, 2008, the loan
      balance to this shareholder aggregated $1,339,317. An additional amount of
      $42,096 of interest on this note has been accrued during 2008 and a total of
      $470,871 in accrued interest remains owed as of March 31, 2008. The lender
      has
      filed a Uniform Commercial Code (UCC) Lien on the Company's equipment and
      patents as security for this loan. The Company was unable to make its quarterly
      principal payment of $60,000 in the previous year, and therefore, the remaining
      principal balance is being classified as a current liability due on demand.
      Since December 31, 2007, the Company has reduced the principal on this note
      by
      $137,000 net of advances of $105,600 received in 2008 from the lender. The
      lender has not demanded payment nor has the lender taken any action to enforce
      the liens associated with this note.




**NOTE
      5. DEBENTURE PAYABLE**





On
      January 19, 2005, the Company's board of directors authorized the issuance
      and
      sale of up to three million dollars of convertible debentures. These debentures
      mature March 31, 2009, and carry an interest rate of 9% per year and are
      convertible into common stock at the lower of 66.6% of the valuation of the
      Company's next raise of equity or $1 per share. In accordance with EITF Issue
      98-5 "Accounting for Convertible Securities with Beneficial Conversion Features
      or Contingently Adjustable Conversion Ratios", the Company had evaluated that
      the convertible debt had a beneficial conversion feature as the conversion
      price
      was less than the fair value of the Company's common stock on the measurement
      date. Under EITF 98-5, the discount related to the beneficial conversion feature
      would be calculated based on its intrinsic value which was $2,614,400, and
      is
      limited to the amount of the proceeds of $1,510,000 allocated to the convertible
      debt instrument. Accordingly, the beneficial conversion feature is being
      amortized using the interest method of accounting, resulting in a charge to
      interest expense of $34,536 and $36,310, respectively, for the three months
      ended March 31, 2008 and 2007, respectively. In September 2005, a debenture
      in
      the amount of $60,000 was converted into 60,000 shares of common stock. In
      May
      2006, the Company issued 796,056 and 701,754 shares of common stock at $0.90
      and
      $0.57 per share, respectively, for the induced conversion of $1,109,607 in
      convertible debentures including interest of $109,608. The debenture holders
      accepted these shares as full consideration for the outstanding convertible
      debentures. The Company recognized an additional expense of $403,872 in 2006
      because of the induced conversion to the debenture holders pursuant to the
      accounting requirements of SFAS No. 84, Induced Conversions of Convertible
      Debt.
      The original terms of the debentures called for them to be converted at $1.00
      per share. The Company induced the debenture holders to convert at $0.90 and
      $0.57 per share.




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As
      of
      March 31, 2008, there are outstanding $262,500 of 9% Convertible Debentures
      due
      in January 2009. Holders of the 9% Convertible Debentures are entitled to
      convert principal amounts into shares of common stock at a conversion price
      of
      $1.00. Debentures payable-net of discount in the amount of $173,730, represents
      the net of gross amount of debenture payables of $262,500 reduced by
      unamortized debt discount of $88,770.





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





**NOTE
      6. EQUITY TRANSACTIONS**





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





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




The
      Company is required to keep the Registration Statement continuously effective
      until such date as is the earlier of the date when all Registerable Shares
      covered by the registration statement have been sold or the date on which the
      Registerable Shares may be sold without any restriction pursuant to Rule 144
      as
      determined by Counsel to the Company. The registration statement was timely
      filed and declared effective. On October 13, 2006, the Company announced its
      intention to restate financial statements, and suspended use of its Registration
      Statement declared effective by the SEC October 4, 2006. For such time as the
      Registration Statement is not effective, the Company is obligated, pursuant
      to
      Company’s Registration Rights Agreement with holders of the Company’s
      Convertible Preferred Stock, to pay such holders an amount equal to one percent
      per month of the original purchase price of the Convertible Preferred Stock
      until the earlier of the date the Registration Statement is again declared
      effective by the SEC, or June 2008. As of March 31, 2008, the maximum penalty
      liability of $129,329 pursuant to the Registration Rights Agreement was
      accrued.





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




As
      of
      March 31, 2008, the Company believed that none of the events that trigger
      redemption upon major corporate events were probable of occurring. The Company
      believes that many of these events are within its control and accordingly the
      probability of occurrence of any of such events is small. Other events that
      are
      not within Company’s control and which trigger redemption are lapse of
      registration or unavailability of registration and suspension of listing. The
      Company believes that although these events are not in its control, as of March
      31, 2008, redemption was not likely and that the Company could cure
      within any cure period after receipt of a Notice of Redemption.  As such,
      in accordance with paragraphs 15 of EITF Topic D-98: Classification and
      Measurement of Redeemable Securities, the Preferred Stock is not currently
      accreted to its redemption value, **** there
      is
      no likelihood that it will become redeemable; accordingly, no accretion is
      being
      made to bring the carrying value up to its redemption value.


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          10
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As
      of March 31, 2008, the liability for the value of the warrants and
      conversion option was “marked to market” and the difference of $225,277 and
      $469,207, respectively, totaling $694,484, 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.  At March 31, 2008, the derivative
      liability was $315,906. As of March 31, 2008, the Company used the Black-Scholes
      option pricing model to revalue the fair value of warrants and conversion
      options with the following assumptions:


Stock
                price
            
            $
            0.16Exercise
                price
            
            $
            0.50-1.00Expected
                life in years
            
            
            3.17
                yearsRisk
                free interest rate
            
            
            1.79
            %Expected
                volatility
            
            
            162
            %Dividend
                yield
            
            
            0
            %




On
      January 7, 2007 the Company issued 81,068 shares of common stock for payment
      of
      accrued dividends in the amount of $49,500. Dividends
      declared to the holders of the 2006 Series A Convertible Preferred Stock
      amounted to $207,900, for the period through March 31, 2008. Approximately
      $49,500 of the dividend obligations was settled through the issuance of 138,306
      shares of the Company’s common stock and $158,400 to be paid in
      cash.




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




*Plan
      Options*


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





*Non-Plan
      Options*


On
      March
      25, 2005, 550,000 stock options were granted to one officer/employee and on
      May
      2, 2005, another 550,000 stock options were granted to a second officer/employee
      in accordance with their employment agreements. Both employment agreements
      provided for immediate vesting of 100,000 stock options at an exercise price
      of
      $0.10 on date of grant and then vesting of the remaining 450,000 stock options
      in three equal tranches of 150,000 stock options on October 1, 2005, October
      1,
      2006 and October 1, 2007, at an exercise price of $1.00 per share. These options
      are exercisable until June 1, 2015 and had a fair value at the date of grant
      of
      $2,265,050. Stock option compensation for non-plan option grants recognized
      during the three months ended March 31, 2008 and 2007 amounted to $0 and
      $60,924, respectively.




The
      Company recognized $11,622 of share based expense for both the three months
      ended March 31, 2008 and 2007 for options granted to non-employees.




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




The
      following table summarizes all stock option activity during the three months
      ended March 31, 2008 and 2007:





Number
                of Options
            
            Weighted
                Average
              Exercise
                PriceOutstanding
                at December 31, 2007
            
            
            1,200,000
            
            $
            0.85Granted
            
            
            —
            
            
            —Exercised
            
            
            —
            
            
            —Forfeited/expired
            
            
            —
            
            
            —Outstanding
                at March 31, 2008
            
            
            1,200,000
            
            $
            0.85Exercisable
                at March 31, 2008
            
            
            1,175,001
            
            $
            0.85




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          11
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As
      of
      March 31, 2008, there was $34,866 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 March 31, 2008:




Options
                Outstanding
            
            Options
                ExercisableRange
                of Exercise Price Per Share
            
            Number
                Outstanding at March 31, 2008
            
            Weighted
                Average Remaining Contractual Life (Years)
            
            Weighted
                Average Exercise Price Per Share
            
            Number
                Exercisable at March 31, 2008
            
            Weighted
                Average Exercise Price Per Share$0.
                10-$1.00
            
            
            1,200,000
            
            
            6.93
            
            $
            0.85
            
            
            1,175,001
            
            $
            0.85




The
      following table summarizes the information about warrants outstanding at March
      31, 2008:





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




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




**NOTE
      8. COMMITMENTS AND CONTINGENCIES**




***Economic
      Dependency***




For
      the
      three months ended March 31, 2008, sales to two customers were in excess of
      10%
      of the Company's total sales. Sales to these customers were approximately
      $134,000 and $60,000 and accounts receivable from these customers as of March
      31, 2008, aggregated $0 and $30,000, 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, 2007, sales to two customers were in excess of
      10%
      of the Company's total sales. Sales to these customers were approximately
      $70,000 and $52,000 and accounts receivable from these customers as of March
      31,
      2007, aggregated $81,000 and $0, respectively.




For
      the
      three months ended March 31, 2008, purchases from five suppliers were in excess
      of 10% of the Company's total purchases. The range of purchases from these
      suppliers through March 31, 2008 were from approximately $5,000 to $13,000.
      The
      corresponding accounts payable at March 31, 2008, to these suppliers, aggregated
      approximately $23,000. For the three months ended March 31, 2007, purchases
      from
      three suppliers were in excess of 10% of the Company's total purchases. The
      purchases from these suppliers through March 31, 2007 were approximately $7,000,
      $9,000 and $11,000. The corresponding accounts payable at March 31, 2007, to
      these suppliers, aggregated approximately $16,000.





**SEGMENT
      INFORMATION**




Under
      the
      disclosure requirements of SFAS No. 131, "Segment Disclosures and Related
      Information," we operate within one segment. Our products are sold principally
      in the United States and the United Kingdom. Segmentation of operating income
      and identifiable


-
          12
          -
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          of Contents*


assets
      is
      not applicable since all of our revenues outside the United States are export
      sales. Foreign sales during the three months ended March 31, 2008 and 2007
      were
      approximately $163,760 and $90,220, respectively. The following table represents
      total product sales revenue by geographic area:





Three
                Months Ended
              March
                31,2008
            
            2007United
                States
            
            $
            60,610
            
            $
            52,642Europe
            
            
            139,860
            
            
            70,870Canada,
                Americas, and Asia
            
            
            23,900
            
            
            19,350$
            224,370
            
            $
            142,862




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




***Employment
      Contracts***





In
      March
      and May of 2005, the Company entered into employment agreements respectively
      with Steve Peltzman, Chief Executive Officer and Chairman of the Board, and
      Bruce Pattison, President. Both agreements provide a minimum annual base salary
      of $120,000 for a term of two years and renewable annually. The current annual
      renewal period ends in May 2008 and continues to provide for a base salary
      of
      $120,000. Either party can terminate the agreement upon 90 days notice. 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.




***Related
      Party Agreement***




On
      October 17, 2007 the Company received a $500,000 financing from Inverness
      Medical Innovations, Inc. The financing consists of a purchase of 1,428,572
      common shares at a price of $0.35 per share. Additionally, Inverness received
      5
      year warrants to purchase up to an additional 1,071,428 million shares of the
      Company's stock at a price of $0.75 per share. In connection with this
      financing, the Company and Inverness signed two additional agreements. First,
      the two companies signed an agreement whereby Inverness acquired an option
      to
      the exclusive, worldwide marketing and distribution rights to certain infectious
      disease diagnostic tests developed by StatSure that may utilize specified
      Inverness and/or StatSure intellectual property. If exercised by Inverness,
      the
      option provides for StatSure and Inverness to equally share development expenses
      and profits. StatSure and Inverness also entered into a license agreement
      whereby Inverness granted to StatSure a license to certain Inverness lateral
      flow patents for use in a rapid test to detect HIV antibodies in point-of-care
      markets subject to payment of royalties to Inverness. This license pertains
      to
      HIV tests using formats other than the StatSure's "barrel format" which is
      already being sold by Inverness. During the three months ended March 31, 2008,
      the Company earned $35,800 in royalty income under this license
      agreement.





**NOTE
      9. FAIR VALUE MEASUREMENTS**





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





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


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


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





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


-
          13
          -
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          of Contents*


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




Fair
                Value Measurements at Reporting Date UsingDescription
            
            March
                31, 2008
            
            Quoted
                Prices in Active Markets for Identical Assets
              (Level
                1)
            
            Significant
                Other Observable Inputs
              (Level
                2)
            
            Significant
                Unobservable Inputs
              (Level
                3)Assets:
            
            $
            --
            
            $
            -
            
            $
            --
            
            $
            -**Total
                Assets**
            
            $
            --
            
            $
            -
            
            $
            --
            
            $
            -**Liabilities**Derivative
                Instrument ( See Note 6 )
            
            $
            315,906
            
            $
            -
            
            $
            -
            
            $
            315,906**Total
                Liabilities**
            
            $
            315,906
            
            $
            -
            
            $
            -
            
            $
            315,906






Fair
                Value Measurements Using Significant Unobservable Inputs
              (Level
                3)**Beginning
                Balance**
            
            $
                1,010,390Total
                gains or (losses) (realized/unrealized)Included
                in earnings
            
            
            694,484Included
                in other comprehensive income
            
            
            -Purchases,
                issuances and settlements
            
            
            -Transfer
                in and/or out of Level 3
            
            
            -**Ending
                Balance**
            
            $
            315,906




-
          14
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          of Contents*


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





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





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





**GENERAL**





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




The
      Company's principal executive offices are located at 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 is being marketed under the IMA brand. In
      this two-way agreement (“Joint HIV Barrel Commercialization Agreement”), a long-
      term strategic “partnership” was established, wherein both companies equally
      split the margin dollars of the HIV barrel product once the actual cost of
      manufacturing is reimbursed.





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





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





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




The
      Company has incurred significant operating losses since its inception, resulting
      in an accumulated deficit of $ 50,512,989 at
      March
      31, 2008. Such losses are expected to continue for the foreseeable future and
      until such time, if ever, as the Company is able to attain sales levels
      sufficient to support its operations. 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.)


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**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**





First
      Quarter of 2008 Compared to First Quarter of 2007





**Revenues.** The
      Company's revenues consist of product sales and royalties. Revenues increased
      to
      $224,370 in the first quarter of 2008 from revenues of $142,862 in the first
      quarter of 2007. The increase in revenues in the first quarter of 2008, from
      revenues in the first quarter of 2007, is due to increased orders from existing
      clients and the addition of new clients in 2008. Royalties and equipment rental
      income earned from Inverness Medical and Chembio Diagnostic Systems for the
      three months ended March 31, 2008 and 2007 aggregated approximately $35,800
      and
      $10,986, respectively. The increase in royalties and equipment rental income
      is
      due to the addition of a new client in the fourth quarter 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 three months ended March 31, 2008, sales
      to
      two customers were in excess of 10% of the Company's total sales. Sales to
      these
      customers were approximately $134,000 and $60,000, respectively.





**Cost
      of products sold** :
      Costs
      of products sold increased to $48,409 (22% of product sales) in the first
      quarter of 2008 from $21,729 (15% of product sales) in the first quarter of
      2007. The cost of products sold percentage (%) will vary depending on our
      selling price and product mix.





**Research
      and development expenses:** Research
      and development expenses decreased to $5,000 **** in
      the
      first quarter of 2008 from $21,048 **** in
      the
      first quarter of 2007. The decrease in 2008 is due to the completion of projects
      during 2007 calendar year. The expenses for research and development are
      expected to continue at current levels until such time as the Company has
      sufficient funds to implement a new research and development program.





**Selling,
      general and administrative expenses** :
      Selling, general and administrative expenses decreased to $244,579 in the first
      quarter of 2008 from $495,604 in the first quarter of 2007, the Company’s
      decrease in selling, general and administrative expenses was primarily the
      result of the decrease in payroll and payroll related expense of approximately
      $64,200, a decrease in legal and accounting fees of approximately $87,300,
      a
      decrease of director fees of approximately $18,700, a decrease in rent expenses
      of approximately $6,600 and a decrease of approximately $17,300 in travel
      expenses. The remainder of the decrease was due to an overall decrease in
      general and administrative expenses in an effort to reduce costs.





**Interest
      expense:** Interest
      expense decreased to $48,035 in the first quarter of 2008 from $55,034 in the
      first quarter of 2007. The decrease in 2008 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 $34,536 in the
      first quarter of 2008 from $36,310 in the first quarter of 2007. The decrease
      of
      this non-cash expense was due to the conversion of $400,000 of debentures and
      a
      reduction in the beneficial conversion feature.





**Derivative
      income:** **** Derivative
      income of $694,484 was recorded in the first quarter of 2008 from a derivative
      income of $1,396,261 recorded in the first quarter of 2007. The fluctuation
      was
      due to the mark-to market adjustment on embedded derivatives principally driven
      by the decrease in our common stock price $0.34 to $0.16.





**LIQUIDITY
      AND CAPITAL RESOURCES**




March
                31, 2008
            
            December
                31, 2007Cash
                and cash equivalents
            
            $
            —
            
            $
            43,516Working
                capital deficit
            
            
            2,533,424
            
            
            2,382,831





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Net
      cash
      provided by operating activities in the first three months of 2008 was $102,517
      compared to $149,698 used during the same period 2007. In 2008, the increase
      in
      cash provided by operations was primarily due to an increase in accounts
      receivable $104,152 and an increase in inventory $22,011.





Cash
      used
      in investing activities in the three months ended March 31, 2008 was $9,033
      as
      compared to $6,110 during the three months ended March 31, 2007. The Company
      incurred more patent and trademark costs in 2008.





Cash
      provided by financing activities for the three months ended March 31, 2008
      was
      ($137,000) compared to $71,313 for the same period in 2007. During 2008 the
      Company repaid shareholder loans of $242,600.




As
      of
      March 31, 2008, there is outstanding $262,500 of 9% Convertible Debentures
      due
      in January 2009. Holders of the 9% Convertible Debentures are entitled to
      convert principal amounts into shares of common stock at a conversion price
      of
      $1.00. The Company is in default to these debenture holders for not making
      payments on a timely basis. As a result, in accordance with the debenture
      agreements, these debentures became payable on demand unless the default is
      waived by the investors. The amount of debentures at March 31, 2008 of $262,500
      plus accrued interest of $23,390 has therefore been reflected as a current
      liability. Accordingly, debentures payable-net of discount in the amount of
      $173,730, is the net of gross amount of debenture payables of
      $262,500 reduced by unamortized debt discount of $88,770 and is shown on
      the balance sheet as a current liability. The Company has not received any
      notice of default from any of the holders of the outstanding debentures.




The
      following table lists the future payments required on debt and any other
      contractual obligations of the Company as of March 31, 2008.





Obligations
            
            Total
            
            Less
                than 1 year
            
            1-3
                yearsDebt
            
            $
            1,513,047
            
            $
            1,513,047
            
            $
            0Operating
                leases
            
            
            14,166
            
            
            14,166
            
            
            0




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




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.


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





Not
      applicable




**ITEM
      4T. CONTROLS AND PROCEDURES**




Evaluation
      of disclosure controls and procedures .




The
      Company’s Chief Financial Officer and Chief Financial Officer has evaluated the
      effectiveness of the Company’s disclosure controls and procedures (as defined in
      Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the three month
      period ending March 31, 2008 covered by this Quarterly Report on Form 10-Q.
      Based upon such evaluation, the Chief Executive Officer and Chief Financial
      Officer has concluded that, as of the end of such period, the Company’s
      disclosure controls and procedures were effective as required under Rules
      13a-15(e) and 15d-15(e) under the Exchange Act. This conclusion by the Company’s
      Chief Executive Officer and Chief Financial Officer does not relate to reporting
      periods after March 31, 2008.




Management’s
      Report on Internal Control Over Financial Reporting




Management
      is responsible for establishing and maintaining adequate internal control over
      financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange
      Act) of the Company. Internal control over financial reporting is a process
      designed to provide reasonable assurance regarding the reliability of financial
      reporting and the preparation of financial statements for external purposes
      in
      accordance with accounting principles generally accepted in the United States
      of
      America.




The
      Company’s internal control over financial reporting includes those policies and
      procedures that (i) pertain to the maintenance of records that, in reasonable
      detail, accurately and fairly reflect the transactions and dispositions of
      the
      assets of the company; (ii) provide reasonable assurance that transactions
      are
      recorded as necessary to permit preparation of financial statements in
      accordance with accounting principles generally accepted in the United States
      of
      America, and that receipts and expenditures of the Company are being made only
      in accordance with authorizations of management and directors of the Company;
      and (iii) provide reasonable assurance regarding prevention or timely detection
      of unauthorized acquisition, use or disposition of the Company’s assets that
      could have a material effect on the financial statements.




Because
      of its inherent limitations, internal control over financial reporting may
      not
      prevent or detect misstatements. Also, projections of any evaluation of
      effectiveness to future periods are subject to the risk that controls may become
      inadequate because of changes in conditions, or that the degree of compliance
      with the policies and procedures may deteriorate.




Management,
      under the supervision of the Company’s Chief Executive Officer and Chief
      Financial Officer, conducted an evaluation of the effectiveness of internal
      control over financial reporting based on the framework in *Internal
      Control—Integrated Framework* issued
      by the Committee of Sponsoring Organizations of the Treadway Commission. Based
      on this evaluation, management concluded that the Company’s internal control
      over financial reporting was effective as of March 31, 2008 under the
      criteria set forth in the *Internal
      Control—Integrated Framework* .




A
      material weakness is a deficiency, or combination of deficiencies, in internal
      control over financial reporting such that there is a reasonable possibility
      that a material misstatement of the Company’s annual or interim financial
      statements will not be prevented or detected on a timely basis. Management
      has
      determined that material weaknesses exist due to the lack of segregation of
      duties, resulting from the Company’s limited resources.




Commencing
      with its annual report for the fiscal year ending After December 15, 2009,
      the
      Company will be required to include a report of management on its internal
      control over financial reporting. The internal control report must include
      a
      statement of management's responsibility for establishing and maintaining
      adequate internal control over its financial reporting of management's
      assessment of the effectiveness of its internal control over financial reporting
      as of year end, and of the framework used by management to evaluate the
      effectiveness of the Company's internal control over financial reporting.
      Furthermore, in the following fiscal year, it is required to file the auditor's
      attestation report separately on the Company's internal control over financial
      reporting on whether it believes that the Company has maintained in all material
      respects effective internal control over financial reporting.




Changes
      in Internal Control Over Financial Reporting




No
      change
      in the Company’s internal control over financial reporting occurred during the
      quarter ended March 31, 2008, that materially affected, or is reasonably likely
      to materially affect, the Company’s internal control over financial reporting.





**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.





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**PART
      II. OTHER INFORMATION**





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





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





**None**





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




The
      Company is in default on a total of $285,890 of convertible debentures. The
      amount of principal payments in arrears was $262,500, with an additional amount
      of $23,390 of interest due at March 31, 2008. These defaults are the result
      of a
      failure to pay in accordance with the terms agreed. No notice of default has
      been received.





The
      Company is in default on a total of $1,810,188 of shareholder loans. The amount
      of principal payments in arrears was $1,339,317, with an additional amount
      of
      $470,871 of interest due at March 31, 2008. The default is  the
      result of a failure to pay in accordance with the agreed upon terms. On
      September 22, 2007, the Company advised Mr. Nordlicht that in consideration
      of
      his forebearing from calling the Company in default on the loan outstanding
      of
      principal and all accrued interest, the Company agrees to pay him no later
      than
      December 31, 2008, an amount totaling $2,600,000 as full payment of the loan
      (principal and interest). Any payments made during the interim period between
      January 1, 2007 and December 31, 2008 will be deducted from this total amount.
      As of the date of this filing, Mr. Nordlicht has not sent the Company a default
      notice.





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





None





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





None





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**ITEM
      6. EXHIBITS**





(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




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**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 15, 2008




**STATSURE
      DIAGNOSTIC SYSTEMS, INC.**




/s/
      Steve
      M. Peltzman


Steve
      M.
      Peltzman


Chief
      Executive Officer


(principal
      executive officer)






/s/
      Leo
      Ehrlich


Leo
      Ehrlich


Chief
      Financial Officer


(principal
      financial officer)






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