As filed with the Securities and Exchange Commission on October 9, 2008

Registration No. 333-148309

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

AMENDMENT NO. 3

FORM S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

VISUAL MANAGEMENT SYSTEMS, INC.

(Name of Small Business Issuer in Its Charter)

Nevada	3669	68-0634458
State of Jurisdiction or Organization	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification No.)

1000 Industrial Way North, Suite C

Toms River, New Jersey 08755

(732) 281-1355

(Address and Telephone Number of Principal Executive Offices and Principal Place of Business)

Jason Gonzalez

Chief Executive Officer

Visual Management Systems, Inc.

1000 Industrial Way North, Suite C

Toms River, New Jersey 08755

(732) 281-1355

(Name, Address and Telephone Number of Agent for Service)

Copies of all communications to:

Philip D. Forlenza, Esq.

Giordano, Halleran & Ciesla, P.C.

125 Half Mile Road, P.O. Box 190

Middletown, New Jersey 07748

(732) 741-3900

As soon as practicable after the effective date of this Registration Statement

(Approximate Date of Proposed Sale to the Public)

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 (“Securities Act”), check the following box. x

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering . ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

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

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	x

(Do not check if a smaller reporting company)

Calculation of Registration Fee
Title of Each Class of Securities to be Registered	Amount to be Registered ⁽¹⁾		Proposed Maximum Offering Price Per Share ⁽²⁾		Proposed Maximum Aggregate Offering Price⁽²⁾		Amount of Registration Fee
Common Stock		246,600	$	0.98		241,668	$	10
Common Stock		677,000	$	0.65		440,050		18
Common Stock underlying Warrants (3)		616,000	$	0.98	$	603,680	$	24
Common Stock underlying Options		36,000	$	0.75	$	27,000	$	2
Total		1,350,453			$	1,312,398	$	54	(4)

(1)

Pursuant to Rule 416 of the Securities Act, the shares of Common Stock offered hereby also include an indeterminate number of additional shares of Common Stock as may from time to time become issuable by reason of stock splits, stock dividends, recapitalizations or other similar transactions. For purposes of estimating the number of shares of common stock to be included in this registration statement, we calculated the number of shares of our common stock issuable upon conversion of the debentures and exercise of the warrants under their initial conversion price or exercise prices. Should a change in the conversion ratio for the Series A preferred stock or debentures result in our having insufficient shares, we will not rely on Rule 416, but will file a new registration statement to cover the resale of such additional shares should that become necessary. In addition, should a decrease in the exercise price of our warrants as a result of an issuance or sale of shares below the then current exercise price result in our having insufficient shares, we will not rely upon Rule 416, but will file a new registration statement to cover the resale of such additional shares should that become necessary.

(2)

The proposed maximum offering price per share and the proposed maximum aggregate offering price in the table above are estimated solely for the purpose of calculating the registration fee pursuant to Rule 457 under the Securities Act of 1933, as amended. Pursuant to Rule 457(c), the fee calculation is based on $0.98 which is the average of the high and low sales prices of the Registrant’s common stock on the OTC Bulletin Board on December 19, 2007, except with respect to 36,000 shares underlying options which were registered pursuant to Amendment No. 2 to the Registration Statement and for which the fee calculation was based on $.75 per share (the average of the high and low sales prices of the Registrant’s common stock on the OTC Bulletin Board on July 17, 2008), and 677,000 shares of common stock issued in the third quarter 2008, which are being registered pursuant to this Amendment No. 3 and with respect to which the fee calculation is based upon $0.65, which is the average of the high and low sales prices of the Registrant’s common stock on the OTC Bulletin Board on October 8, 2008.

(3)	Represents 616,000 shares issuable upon the exercise of warrants having an exercise price of $.40 per share.

(4)	Previously paid.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. These securities may not be sold (except pursuant to a transaction exempt from the registration requirements of the Securities Act) until this registration statement filed with the Securities and Exchange Commission is declared effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Subject to completion, dated October 9, 2008

PROSPECTUS

VISUAL MANAGEMENT SYSTEMS, INC.

1,350,453 Shares of Common Stock

This prospectus relates to the sale by the selling stockholders of Visual Management Systems, Inc. of up to an aggregate of 1,350,453 shares of our common stock. The shares offered by this prospectus include:

698,453 issued and outstanding shares of common stock, including 71,600 shares that were issued to the placement agent for our private offerings completed in March and October 2007;

616,000 shares of common stock issuable upon the exercise of warrants issued to purchasers in our private offering completed in October 2007;

36,000 shares of common stock issuable upon exercise of options.

All of such shares of common stock are being offered for resale by the selling stockholders.

We will not receive any of the proceeds from the sale of the shares of common stock that are subject to this prospectus by the selling stockholders.

Our common stock is quoted on the regulated quotation service of the OTC Bulletin Board under the symbol “VMSY.OB.’’ The last sales price of our common stock on October 8, 2008 as reported by the OTC Bulletin Board was $0.65 per share.

Investing in our common stock involves a high degree of risk. You should read this entire prospectus carefully, including the section entitled “Risk Factors” beginning on Page 5 which describes certain material risk factors you should consider before investing.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal defense.

The date of this prospectus is October 9, 2008.

TABLE OF CONTENTS

	PAGE
PROSPECTUS SUMMARY	1

RISK FACTORS	5

CAUTIONARY LANGUAGE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA	13

USE OF PROCEEDS	14

MARKET FOR OUR COMMON STOCK AND RELATED STOCKHOLDER MATTERS	14

MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION	16

BUSINESS	26

DIRECTORS AND EXECUTIVE OFFICERS	34

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT	45

SELLING STOCKHOLDERS	47

DESCRIPTION OF SECURITIES	56

PLAN OF DISTRIBUTION	59

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	61

WHERE YOU CAN FIND MORE INFORMATION	61

LEGAL MATTERS	61

EXPERTS	62

DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES	62

INDEX TO FINANCIAL STATEMENTS	63

You should rely only on the information contained in this prospectus and in any prospectus supplement we may file after the date of this prospectus. We have not authorized anyone to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. The selling stockholders will not make an offer to sell these securities in any jurisdiction where an offer or sale is not permitted. You should assume that the information appearing in this prospectus or any supplement is accurate as of the date on the front cover of this prospectus or any supplement only, regardless of the time of delivery of this prospectus or any supplement or of any sale of our common Stock. Our business, financial condition, results of operations and prospects may have changed since that date.

PROSPECTUS SUMMARY

The following summary highlights aspects of the offering. This prospectus does not contain all of the information that may be important to you. You should read this entire prospectus carefully, including the “Risk Factors” section and the financial statements, related notes and the other more detailed information appearing elsewhere in this prospectus before making an investment decision. Unless otherwise indicated, all references to “we”, “us”, “our”, the “Company” and similar terms, as well as references to the “Registrant” in this prospectus, refer to Visual Management Systems, Inc. and not to the Selling Stockholders.

Our Company

We provide loss prevention management solutions to businesses through the design, sale and installation of digital surveillance systems called “Virtual Managers” that enable clients to proactively manage their businesses with easy data retrieval and live viewing from anywhere in the world. We believe that there is a lucrative and underserved market for loss prevention technology through the use of digital recording and video transmission to remote locations and corporate offices.

Visual Management Systems, Inc. was incorporated in the State of Nevada in March, 2004. Our company was originally named Wildon Productions Inc. We changed our name to Visual Management Systems, Inc. and effected a 1-for-7 reverse stock split of our common stock in connection with our acquisition of Visual Management Systems Holding, Inc. described below. From incorporation until our acquisition of Visual Management Systems Holding, Inc., we were an exploration stage company primarily engaged in the acquisition and exploration of mineral properties. Upon the completion of the acquisition, we succeeded to the business of Visual Management Systems Holding, Inc. and relocated our principal executive offices to those of Visual Management Systems Holding, Inc. at 1000 Industrial Way West, Suite C, Toms River, New Jersey 08755. The telephone number at our principal executive offices is (732) 281-1355.

Recent Transactions

Merger and Private Placement. On July 17, 2007, we acquired all of the outstanding capital stock of Visual Management Systems Holding, Inc., a New Jersey corporation, in connection with the merger of our wholly owned subsidiary with and into Visual Management Systems Holding, Inc. Pursuant to the agreement and plan of merger and reorganization, the former stockholders of Visual Management Systems Holding, Inc. received shares of our common stock representing approximately 76.5% of our outstanding common stock after giving effect to the merger and the cancellation of 476,429 shares of common stock surrendered by one of our principal stockholders. In addition, our board of directors was reconstituted at the effective time of the merger with designees of Visual Management Systems Holding, Inc. replacing our then current board of directors. Further, at the effective time of the merger, we abandoned our prior business plan and the operations of Visual Management Systems Holding, Inc. acquired as a result of the merger became our sole line of business. When we refer in this prospectus to our business and financial information relating to periods prior to the merger, we are referring to the business and financial information of Visual Management Systems Holding, Inc., unless the context otherwise requires.

Contemporaneous with the closing of the merger, we sold to subscribers 481 investment units pursuant to a confidential private placement memorandum dated March 30, 2007, with each unit consisting of one share of Series A convertible preferred stock and a warrant to purchase 1,000 shares of common stock at an initial exercise price of $3.50 per share. Each share of Series A convertible preferred stock has a $2,500 liquidation preference and was initially convertible into shares of common stock at a conversion price of $2.50 per share, subject to adjustment to protect against dilution under certain circumstances. As a result of a private placement of 5% secured convertible debentures and warrants that took place in November 2007 as described below, the conversion price of the Series A convertible preferred stock and the exercise price of the warrants has been adjusted to $.40 per share. Additional closings of the private placement took place in July and August and a final closing occurred in October 2007. We issued a total of 616 investment units representing a total of 616 shares of Series A convertible preferred stock and warrants to acquire 616,000 shares of common stock to our investors. The net proceeds of the private placement after deducting $123,091 of commissions and $112,436 of expenses paid to our placement agent, Brookshire Securities Corporation, were approximately $1,286,000. As additional consideration for placement agent services, we also issued to Brookshire Securities Corporation 61,600 shares of our common stock and warrants to purchase 61,600 shares of our common stock which had an original exercise price of $1.75 per share that was adjusted, pursuant to anti-dilution provisions, to $.40 per share as a result of the November 2007 private placement.

In connection with the private placement of the investment units, we agreed to file a registration statement covering the resale of shares of common stock that may be issued to the holders of the Series A convertible preferred stock and the warrants. This prospectus is part of such registration statement. We are obligated to maintain the effectiveness of the resale registration statement from its effective date through and until the earlier of 48 months after the effective date or the date upon which all shares may be sold under Rule 144(k) of the Securities Act of 1933. Because the registration statement was not declared effective by February 25, 2008, the number of shares of common stock issuable upon conversion of the Series A convertible preferred stock will be increased, subject to the limit described below, by two percent for each month (or portion thereof) that the resale registration statement is effective.

We are required to use our best efforts to respond to any SEC comments on the resale registration statement on or prior to the date which is twenty (20) business days from the date such comments are received. In the event that we fail to respond to such comments within twenty (20) business days, the number of shares of common stock issuable upon conversion of the Series A convertible preferred stock will be increased, subject to the limit described below, by two percent (2%) for each month (or portion thereof) that a response to the comments to such shelf registration statement has not been submitted to the SEC.

The aggregate increase in the number of shares issuable upon the conversion of the Series A convertible preferred stock by reason of our failure to respond to SEC comments or have the resale registration statement declared effective shall in no event exceed twenty percent (20%). As of March 31, 2007, management expected that the registration statement would be declared effective by late April 2008. As a result, a contingent liability representing two months of accrued penalties of $205,436 was recorded as of December 31, 2007. Since March 31, 2008, we have concluded that as a result of the policies of the Securities and Exchange Commission, we are precluded at this time from registering all the shares that we are required to register on behalf of the investors who participated in our October 2007 Private Placement and have elected to register only the shares issuable upon the exercise of the warrants issued to such investors. As a result, we may be subject to the full amount of the penalties that may be imposed, which would require us to issue an additional 770,000 shares of common stock upon the conversion of the Series A Preferred stock. We are currently seeking a waiver to eliminate the penalties from the investors who participated in the private placement of investment units. No assurance can be given that such a waiver will be obtained.

November 2007 Private Placement. On November 30, 2007, we entered into a securities purchase agreement with three affiliated institutional investors for the sale of original issue discount 5% secured convertible debentures and common stock purchase warrants. We refer to this transaction as our November 2007 Private Placement. In this transaction, we issued an aggregate of $3.75 million principal amount of debentures at an original issue discount of 20% and warrants to purchase an aggregate of 11,250,000 shares of our common stock. The warrants expire in November 2014 and originally had an exercise price of $1.15 per share, subject to adjustment, including full ratchet anti-dilution protection. The terms of the debentures are summarized in Management’s Discussion and Analysis or Plan of Operation – Financing Transactions” which appears elsewhere in this prospectus. This transaction resulted in net proceeds to us of $2,676,674, after deducting fees and expenses of $320,000, $300,000 of which was paid to Kuhns Brothers, Inc., in exchange for their services as placement agent in connection with the transaction and $20,000 of which was paid to cover the investors’ legal fees. Kuhns Brothers, Inc. also received warrants to acquire 1,200,000 shares of common stock at an exercise price of $0.50 per share in consideration of its services.

In connection with our November 2007 Private Placement, we also entered into a registration rights agreement dated November 29, 2007, with the institutional investors, pursuant to which we agreed to file a registration statement covering the resale of the shares of common stock that may be issued to such investors upon the conversion of the debentures, payment in kind, and the exercise of the related warrants. We also agreed to maintain the effectiveness of the registration statement (subject to certain limitations) for a period of time until the holders can sell the underlying common stock without volume restrictions under Rule 144(k) of the Securities Act of 1933, or the “Securities Act.” If the registration statement was not declared effective by the SEC by March 30, 2008, or if we fail to maintain the effectiveness of the registration statement or fail to respond to SEC comments within 15 calendar days after receipt of those comments, we are required to pay to each investor, as partial liquidated damages, cash equal to 2% of the aggregate purchase price paid by such investor for any securities purchased in our November 2007 Private Placement and then held by such investor, and shall pay to such investor such amount for each subsequent 30-day period, up to a maximum aggregate liquidated damages amount of 20% of the aggregate purchase price paid by such investor in our November 2007 Private Placement. Our registration statement was not declared effective by March 30, 2008 and we did not respond to SEC comments regarding the registration statement within 15 days after receipt. Since March 31, 2008, we have concluded that as a result of the policies of the Securities and Exchange Commission, we are precluded at this time from registering all the shares that are issuable to investors who participated in our November 2007 Private Placement.

The investors have a right to participate in up to 100% of any debt or equity financing we propose to undertake through the date that is the 12-month anniversary of the effectiveness of a registration statement that we file on their behalf.

On August 28, 2008, we entered into an Amendment and Waiver Agreement with each of the investors in our November 2007 Private Place, pursuant to which the exercise price of the warrants has been adjusted to $.40 per share and the investors have:

waived our compliance with the provisions of the debentures which require us to have a registration statement covering the shares issuable upon the conversion of the debentures declared effective under the Securities Act of 1933 and maintain the effectiveness of such registration statement;

waived the anti-dilution provisions of the debentures which, as a result of prior transactions, would have otherwise resulted in an adjustment to the conversion price of the debentures to $.40 per share;

waived certain provisions of the agreement pursuant to which the debentures were issued which restrict the our ability to issue common stock and securities convertible into or exercisable for common stock;

waived all registration rights previously granted to the investors with respect to the shares issuable upon the conversion of the debentures and exercise of the warrants issued to the investors, provided that we do not fail to satisfy the current public information requirements under Rule 144(c) of the Securities Act of 1933 for a period of three (3) consecutive trading days or more.

In the event of a failure to satisfy the current public information requirements under Rule 144© of the Securities Act of 1933 for a period of three (3) consecutive tading days or more we will be required to file a registration statement covering the shares issuable upon the debentures and warrants and will be subject to monetary penalties if it fails to obtain and maintain the effectiveness of the registration statement.

In consideration of the waivers and in lieu of (i) $250,000 of liquidated damages that the investors alleged were owed as a result of our failure to register the shares underlying the debentures and warrants for public resale and (ii) $46,875 of accrued and unpaid interest owed to the investors, we have agreed to issue shares of our common stock valued at $296,875 (based upon a per share price equal to 80% of the average of the value weighted average price of the common stock for the 20 trading days prior to the date of the Amendment and Waiver) to the investors pro-rata according to their percentage ownership of the debentures. We have agreed to register the new shares for resale under the Securities Act of 1933, as amended. Failure to file and have the registration statement declared effective within a specified time frame will subject its to liquidated damages.

Acquisition of Intelligent Data Systems, LLC. On April 3, 2008, we purchased substantially all the assets of Intelligent Digital Systems. Intelligent Digital Systems is the developer and manufacturer of the TechEye Digital Video (DVR) Recording Technology. In exchange for the Intelligent Digital Systems assets we issued to Intelligent Digital Systems an unsecured convertible note in the principal amount of $1.5 million, bearing no interest until, April 3, 2011, its maturity date, and cash totaling $42,000 payable over a period of seven months. If not converted, or paid within 30 days of maturity, then from and after the maturity date, the convertible note will bear annual interest at 12%. The convertible note is convertible at the discretion of Intelligent Digital Systems into shares of our common stock after May 31, 2010, or upon the approval of a majority in interest of the holders of our then outstanding 5% secured convertible debentures, or any securities issued on conversion thereof, at an initial conversion price of $1.15 per share, subject to anti-dilution protection. As a result of issuances we have made since April 3, 2008 we have adjusted the conversion price of the note to $1.08 per share. We have agreed to register the shares issuable upon the conversion of the note for public resale.

In connection with the transaction, we entered into a joint venture with IDS to obtain approval of certain patent applications formerly held by IDS that are relevant to our industry which have been assigned to the joint venture. The joint venture has granted us an exclusive license to use the technology which is the subject of the patent applications in the manufacture, distribution, integration and installation of digital video surveillance devices for the security industry. If the patents are ultimately issued, the joint venture will seek to promote and market the technology underlying the patent applications, and will pursue claims against any parties potentially infringing on the protected technology. Each of IDS and us has a 50% interest in the joint venture.

We have entered into a four year consulting agreement with Jay Edmond Russ, the principal shareholder of Intelligent Digital Systems, which requires us to pay Mr. Russ $75,000 per year for consulting services.

The Offering

Common stock outstanding		10,012,392 shares as of October 8, 2008.

Common stock that may be offered by selling stockholders		Up to 1,350,453 shares, representing 698,453 shares of our common stock that were issued to the selling stockholders, 616,000 shares of our common stock underlying warrants that were issued to the selling stockholders and 36,000 shares of our common stock underlying stock options.

Total proceeds raised by offering		We will not receive any proceeds from the resale or other disposition of the common stock covered by this prospectus by any selling stockholder. We may receive proceeds from the exercise of the warrants whose underlying shares of common stock are covered by this prospectus.

The total dollar value of the shares of our common stock underlying our warrants issued in our October 2007 Private Placement registered for resale		$689,920¹

1. Determined by multiplying the number of shares of common underlying that warrants issued in our October 2007 Private Placement that are being registered under the registration statement of which this prospectus forms a part by the market price for such shares of common stock on the date the exercise prices of the warrants were adjusted to $.40 per share pursuant to anti-dilution provisions which were triggered as a result of the issuance of our convertible debentures.

RISK FACTORS

An investment in shares of our common stock is highly speculative and involves a high degree of risk. Only those investors who can bear the risk of loss of their entire investment should participate. Prospective investors should carefully consider the following risk factors in evaluating whether to invest in our company.

We have a limited operating history, which limits the information available to you to evaluate our business, and we continue to experience operating losses.

We began our operations in June 2003. We incurred net losses of approximately $9,784,645 and $1,926,000 during the years ended December 31, 2007 and 2006, respectively, and $3,662,943 during the six months ended June 30, 2008. The losses were attributable, in part, to an expansion of our installation capacity to handle projected increases in revenues and sales in 2007 and non-cash charges attributable to conversions of debt to equity. There is limited operating and financial information to evaluate our historical performance and our future prospects. We face the risks and difficulties of an early-stage company including the uncertainties of market acceptance, competition, cost increases and delays in achieving business objectives. There can be no assurance that we will succeed in addressing any or all of these risks or that we will achieve future profitability, and the failure to do so would have a material adverse effect on our business, financial condition and operating results.

A general economic downturn could result in customers not purchasing our services.

Any decline in the general economy or concern about an imminent decline could delay decisions by prospective customers to make initial evaluations of, or investments in, our products. Any reduction of or delays in expenditures would harm our business.

Our future growth will be harmed if we are unsuccessful in developing and maintaining good relationships with manufacturers and suppliers.

We rely on third party manufacturers and suppliers for certain components of our products and systems. Risks associated with our dependence upon third party manufacturing relationships include: (i) reduced control over delivery schedules; (ii) lack of quality assurance; (iii) poor manufacturing yields and high costs; (iv) potential lack of adequate capacity during periods of excess demand; and (v) potential misappropriation of our intellectual property.

We do not know if we will be able to maintain third party manufacturing and supply contracts on favorable terms, if at all, or that our current or future third party manufacturers and suppliers will meet our requirements for quality, quantity or timeliness. Our failure to identify, establish, expand and maintain good relationships with quality marketing and distribution entities could have a material and adverse effect on our business.

Our operating results will be harmed if we are unable to manage and sustain our growth.

Our success will depend on the expansion of our operations and the effective management of growth, which will place a significant strain on our management, operations and financial resources. To achieve our plan, we must cost-effectively hire and train additional marketing, sales, finance, planning, administrative and management personnel, and buy additional equipment, facilities, information technology and other infrastructure. We must also continue to develop our management, operational and financial systems, procedures and controls. We do not know if we will be able to expand our business rapidly enough or adequately manage this growth. If we do not accurately predict demand for our services, we may have too much or too little delivery capacity. If we overestimate demand, we may incur fixed production expenses that are excessive, which would have a material and adverse effect on our operating results.

Our future growth is largely dependent upon our ability to develop new technologies that achieve market acceptance with acceptable margins.

Our future growth rate depends upon a number of factors, including our ability to: identify emerging technological trends in our target end-markets; develop and maintain competitive products; enhance existing products by adding innovative features that differentiate our products from those of our competitors; and develop, manufacture and bring products to market quickly and cost-effectively. Our ability to develop new products based on technological innovation can affect our competitive position and requires the investment of significant resources. These development efforts divert resources from other potential investments in our businesses, and they may not lead to the development of new technologies or products on a timely basis or that meet the needs of our customers as fully as competitive offerings. In addition, the markets for our products may not develop or grow as management anticipates. The failure of our technologies or products to gain market acceptance or their obsolescence due to more attractive offerings by competitors could significantly reduce our revenues and adversely affect our business, operations and financial results.

We face intense competition from other providers of similar services.

We face intense competition in the markets in which we operate. Companies competing with us may introduce products that are competitively priced, that have increased performance or functionality or that incorporate technological advances not yet developed or implemented by us. Certain present and potential competitors have financial, marketing, research, and manufacturing resources substantially greater than ours.

In order to compete effectively in this environment, we must continually develop and market new and enhanced products at competitive prices and must have the resources available to invest in significant research and development activities. The failure to do so could have a material adverse effect on our business operations and financial results.

The market value of our common stock may be adversely affected if we are not able to fund our expansion

If we are unable to generate on our own the necessary funds for the further development and growth of our business, we may be required to seek additional capital. In addition, if our plans or assumptions with respect to our business change or prove to be inaccurate, we may be required to use part or all of the net proceeds of our recent private placements to fund such expenses and/or seek additional capital. This will depend on a number of factors, including, but not limited to: (i) our ability to successfully market our products and services; (ii) the growth and size of the security industry; (iii) the market acceptance of our products and services; and (iv) our ability to manage and sustain the growth of our business. If we need to raise additional capital, it may not be available on acceptable terms, or at all. Our failure to obtain required capital would have a material adverse effect on our business. If we issue additional equity securities in the future, you could experience dilution or a reduction in priority of your securities.

Changes in legislation or governmental regulations or policies can have a significant impact on our financial condition, results of operations and cash flows.

We operate in regulated industries. Our operations are subject to regulation by a number of federal agencies with respect to safety of operations and equipment and financial responsibility. Intrastate operations in the United States are subject to regulation by state regulatory authorities. Our Company and our employees are subject to various U.S. federal, state and local laws and regulations, including many related to consumer protection. Most states in which we operate have licensing laws covering the monitored security services industry. Our business relies heavily upon wireline telephone service to communicate signals, and wireline telephone companies are regulated by both the federal and state governments. Changes in laws or regulations could require us to change the way we operate, which could increase costs or otherwise disrupt operations. In addition, failure to comply with any applicable laws or regulations could result in substantial fines or revocation of our operating permits and licenses. If laws and regulations changed or we failed to comply, our financial condition, results of operations and cash flows could be materially and adversely affected.

We could face product liability claims relating to products we manufacture or install. These claims could result in significant costs and liabilities and reduce our profitability.

We face exposure to product liability claims in the event that any of our products results in personal injury or property damage. In the event that any of our products prove to be defective, we may be required to recall or redesign such products, which could result in significant unexpected costs. Any insurance we maintain may not be available on terms acceptable to us or such coverage may not be adequate for liabilities actually incurred. Any claim or product recall could result in adverse publicity against us, which could adversely affect our financial condition, results of operations and cash flows.

We depend on our manufacturers, some of which are our sole source for specific products, and our business and reputation would be seriously harmed if these manufacturers fail to supply us with the products we require and alternative sources are not available.

We have relationships with a number of manufacturers for a supply of certain of our products. Our success depends in part on whether our manufacturers are able to fill the orders we place with them and in a timely manner. If any of our manufacturers fail to satisfactorily perform their contractual obligations or fill purchase orders we place with them, we may be required to pursue replacement manufacturer relationships. If we are unable to find replacements on a timely basis, or at all, we may be forced to either temporarily or permanently discontinue the sale of certain products and associated services, which could expose us to legal liability, loss of reputation and risk of loss or reduced profit. Although we continually evaluate our relationships with manufacturers and plan for contingencies if a problem should arise with a manufacturer, finding new manufacturers that offer a similar type of product would be a complicated and time consuming process and we cannot assure you that if we ever need to find a new manufacturer for certain of our products we would be able to do so on a completely seamless basis, or at all. Our business, results of operation and reputation would be adversely impacted if we are unable to provide our products to our customers in a timely manner.

The failure of our systems could result in a material adverse effect.

Our operations are dependent upon our ability to support a complex network infrastructure and avoid damage from fires, earthquakes, floods, hurricanes, power losses, war, terrorist acts, telecommunications failures and similar natural or manmade events. The occurrence of a natural disaster, intentional or unintentional human error or actions, or other unanticipated problem could cause interruptions in the services provided by us. Any damage or failure that causes interruptions in the service provided by us could have a material adverse effect on our business, operating results and financial condition.

Our product offerings involve a lengthy sales cycle and we may not anticipate sales levels appropriately, which could impair our profitability.

Some of our products and services are designed for medium to large commercial facilities desiring to protect valuable assets and/or prevent intrusion. Given the nature of our products and the customers that purchase them, sales cycles can be lengthy as customers conduct intensive investigations and deliberate between competing technologies and providers. For these and other reasons, the sales cycle associated with some of our products and services is typically lengthy and subject to a number of significant risks over which we have little or no control.

If we do not protect our proprietary technology and intellectual property rights against infringement or misappropriation and defend against third parties assertions that we have infringed on their intellectual property rights, we may lose our competitive advantage, which could impair our ability to grow our revenues.

We do not have patent protection with respect to any of our products or systems. As a result, other parties may attempt to copy aspects of our systems or to obtain or use information that is proprietary. The scope of any intellectual property rights that we have is uncertain and is not sufficient to prevent infringement claims against us or claims that we have violated the intellectual property rights of third parties. While we know of no basis for any claims of this type, the existence of and ownership of intellectual property can be difficult to verify and we have not made an exhaustive search of all patent filings. If any of our proprietary rights are misappropriated or we are forced to defend our intellectual property rights, we will have to incur substantial costs. We may not have the financial resources to prosecute any infringement claims that we may have or defend against any infringement claims that are brought against us, or choose to defend such claims. Even if we do, defending or prosecuting our intellectual property rights will divert valuable working capital and management’s attention from business and operational issues.

If we infringe the rights of others we could be prevented from selling products or forced to pay damages.

If our products, methods, processes, and other technologies are found to infringe the proprietary rights of other parties, we could be required to pay damages, or we may be required to cease using the technology or to license rights from the prevailing party. Any prevailing party may be unwilling to offer us a license on commercially acceptable terms.

If we are unable to retain key personnel it will have an adverse effect on our business.

Our operations have been and will continue be dependent on the efforts of Mr. Jason Gonzalez, our Chief Executive Officer, Caroline Gonzalez, our Chief Operating Officer, and J.D. Gardner our Chief Financial Officer. The commercialization of our products and the development of improvements to our products and systems, as well as the development of new products is dependent on retaining the services of Mr. Gonzalez and certain technical personnel who were involved in the development of VMS’s products and services. The loss of key management, the inability to secure or retain such key legacy personnel with unique knowledge of our products and services and the technology and programming employed as part of products and services, the failure to transfer knowledge from legacy personnel to current personnel, or an inability to attract and retain sufficient numbers of other qualified management personnel would adversely delay and affect our business, products and services and could have a material adverse effect on our business, operating results and financial condition.

We do not maintain ‘‘key man’’ life insurance policies on our key personnel.

We do not have ‘‘key man’’ life insurance policies for Mr. Gonzalez or any other member of our management team. Even if we were to obtain ‘‘key man’’ insurance for any of such individuals, of which there can be no assurance, the amount of such policies may not be sufficient to cover losses experienced by us as a result of the loss of any member of our management team. Each of Mr. Gonzalez, Ms. Gonzalez, Mr. Sangirardi and Jonathan Bergman, VMS’ Vice President-Marketing and Sales, is a party to an employment agreement with us.

Our business may subject us to risks related to nationwide or international operations.

If we offer our products and services on a national, or even international, basis, distribution would be subject to a variety of associated risks, any of which could seriously harm our business, financial condition and results of operations.

These risks include:

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greater difficulty in collecting accounts receivable;

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satisfying import or export licensing and product certification requirements;

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taxes, tariffs, duties, price controls or other restrictions on out-of-state companies, foreign currencies or trade barriers imposed by states or foreign countries;

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potential adverse tax consequences, including restrictions on repatriation of earnings;

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fluctuations in currency exchange rates;

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seasonal reductions in business activity in some parts of the country or the world;

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unexpected changes in local, state, federal or international regulatory requirements;

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burdens of complying with a wide variety of state and foreign laws;

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difficulties and costs of staffing and managing national and foreign operations;

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different regulatory and political climates and/or political instability;

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the impact of economic recessions in and outside of the United States; and

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limited ability to enforce agreements, intellectual property and other rights in foreign territories.

The market price of our common stock may fluctuate significantly in response to factors, some of which are beyond our control, such as product liability claims or other litigation; the announcement of new products or product enhancements by us or our competitors; developments concerning intellectual property rights and regulatory approvals; quarterly variations in our competitors’ results of operations; changes in earnings estimates or recommendations by securities analysts; developments in our industry; and general market conditions and other factors, including factors unrelated to our own operating performance.

As a public company, we will incur substantial expenses.

We are publicly-traded and, accordingly, subject to the information and reporting requirements of the U.S. securities laws. The U.S. securities laws require, among other things, review, audit, and public reporting of our financial results, business activities, and other matters. Recent SEC regulation, including regulation enacted as a result of the Sarbanes-Oxley Act of 2002, has also substantially increased the accounting, legal, and other costs related to becoming and remaining an SEC reporting company. The public company costs of preparing and filing annual and quarterly reports, and other information with the SEC and furnishing audited reports to stockholders will cause our expenses to be higher than they would be if we were privately-held. In addition, we will incur substantial expenses in connection with the preparation of the Registration Statement and related documents with respect to the registration of the shares issued in this offering. These increased costs may be material and may include the hiring of additional employees and/or the retention of additional advisors and professionals. Our failure to comply with the federal securities laws could result in private or governmental legal action against us and/or our officers and directors, which could have a detrimental effect on our business and finances, the value of our stock, and the ability of stockholders to resell their stock.

We have identified material weaknesses in our internal control over financial reporting, which could adversely affect our ability to report or financial condition and results of operations accurately or on a timely basis. As a result, current and potential stockholders could lose confidence in our financing reporting, which could harm our business and the trading price of our stock.

As required by Section 404 of the Sarbanes-Oxley Act of 2002, our management has conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2007. We previously restated our financial statements contained in our quarterly reports on Form 10-QSB for the fiscal quarters ended August 31 and September 30, 2007. We have identified a number of material weaknesses in our internal control over financial reporting and have concluded that, as of December 31, 2007, we did not maintain effective control over financial reporting. Specifically, the control deficiencies that contributed to our material weaknesses included, among other things, misunderstandings of certain applications of Generally Accepted Accounting Principles, poor oversight and management of accounting staff and technology by our former Chief Financial Officer, deficiencies in our information technology and the lack of certain formal processes. For a more detailed discussion of our internal control over financial reporting and a description of the identified material weaknesses, see “Item 4. Controls and Procedures” of our Form 10-Q/A for the quarterly period ended June 30, 2008, filed with the Securities and Exchange Commission on August 27, 2008.

Each of our material weaknesses results in more than a remote likelihood that a material misstatement of the annual or interim financial statements that we prepare will not be prevented or detected. As a result, we must perform extensive additional work to obtain reasonable assurance regarding the reliability of our financial statements. Even with this additional work, there is a risk of additional errors not being prevented or detected, which could result in additional restatements. Moreover, other material weaknesses may be identified.

Material weaknesses in our internal control over financial reporting could adversely impact our ability to provide timely and accurate financial information. It we are unsuccessful in implementing or following our remediation plan, or fail to update our internal control over financial reporting as our business evolves, we may be unable to report financial information timely and accurately or to maintain effective disclosure controls and procedures. Any such failure in the future could also adversely affect the results of periodic management evaluations and annual auditor attestation reports regarding disclosure controls and the effectiveness of our internal control over financial reporting required under the Section 404 of Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder. If we are unable to report financial information in a timely and accurate manner or to maintain effective disclosure controls and procedures, we could be subject to, among other things, regulatory or enforcement actions by the SEC, securities litigation, and a general loss of investor confidence, any one of which could adversely affect our business prospects and the valuation of our common stock.

We also have extensive work remaining to remedy the identified material weaknesses in our internal control over financial reporting and this work will continue through the balance of 2008 and perhaps beyond. There can be no assurance as to when all the material weaknesses will be remedied. Until our remedial efforts are completed, management will continue to devote significant time and attention to these efforts, and we will continue to incur expenses associated with the additional procedures and resources required to prepare our financial statements. Certain of our remedial actions, such as hiring additional qualified personnel and upgrading our software systems, will be ongoing and will result in our incurring additional costs even after our material weaknesses are remedied.

Our management team does not have extensive experience in public company matters.

Our management team has had limited public company management experience or responsibilities, which could impair our ability to comply with legal and regulatory requirements such as the Sarbanes-Oxley Act of 2002 and applicable federal securities laws including filing required reports and other information required on a timely basis. We cannot give assurance that our management will be able to implement and affect programs and policies in an effective and timely manner that adequately respond to increased legal, regulatory compliance and reporting requirements imposed by such laws and regulations. Our failure to comply with such laws and regulations could lead to the imposition of fines and penalties and further result in the deterioration of our business.

Our compliance with the Sarbanes-Oxley Act and SEC rules concerning internal controls may be time consuming, difficult and costly.

It may be time consuming, difficult and costly for us to develop and implement the internal controls and reporting procedures required by the adoption of the Sarbanes-Oxley Act of 2002. We may need to hire additional financial reporting, internal controls and other finance staff in order to develop and implement appropriate internal controls and reporting procedures. If we are delayed in complying or unable to comply with Sarbanes-Oxley’s internal control requirements, we may experience delay in obtaining the independent accountant certifications that the Sarbanes-Oxley Act requires publicly traded companies commencing after December 12, 2008 to obtain or may not be able to obtain those certifications at all.

Our common stock may be considered a “penny stock” and may be difficult to sell.

The SEC has adopted regulations which generally define “penny stock” to be an equity security that has a market or exercise price of less than $5.00 per share, subject to specific exemptions. The market price of our common stock has been below $5.00 per share and therefore may be designated as a “penny stock” according to SEC rules. This designation requires any broker or dealer selling these securities to disclose certain information concerning the transaction, obtain a written agreement from the purchaser and determine that the purchaser is reasonably suitable to purchase the securities. These rules may restrict the ability of brokers or dealers to sell the common stock and may affect the ability of investors to sell their shares.

Our common stock is thinly traded on the OTC Bulletin Board, and we cannot give assurance that our common stock will become liquid or that it will be listed on a securities exchange.

Our common stock is quoted on the OTC Bulletin Board, which provides significantly less liquidity than a securities exchange (such as the American or New York Stock Exchange) or an automated quotation system (such as the NASDAQ National Market or NASDAQ Capital Market). We cannot give assurance that we will be able to meet the listing standards of any stock exchange, such as the American Stock Exchange or the Nasdaq National Market, or that we will be able to maintain any such listing. Such exchanges require companies to meet certain initial listing criteria including certain minimum bid prices per share. We may not be able to achieve or maintain such minimum bid prices or may be required to effect a reverse stock split to achieve such minimum bid prices. Our common stock is currently quoted on the OTC Bulletin Board. Until our common stock is listed on an exchange, we expect that it will continue to be quoted on the OTC Bulletin Board. In this venue, however, an investor may find it difficult to obtain accurate quotations of our common stock and may experience a lack of buyers to purchase such stock or a lack of market makers to support the stock price. In addition, if we failed to meet the criteria set forth in SEC regulations, various requirements would be imposed by law on broker-dealers who sell our common stock to persons other than established customers and accredited investors. Consequently, such regulations may deter broker-dealers from recommending or selling our common stock, which may further affect its liquidity. This would make it more difficult for us to raise additional capital.

A significant number of the shares of our common stock are eligible for sale, and their sale could depress the market price of our common stock.

Sales of a significant number of shares of our common stock in the public market following this Offering could harm the market price of our common stock. As additional shares of our common stock become available for resale in the public market as a result of issuances of the common stock upon the conversion of our Series A convertible preferred stock and 5% secured debentures, and the exercise of our warrants and placement agent warrants, as well as issued and outstanding shares of our common stock, the supply of our common stock will increase, which could decrease its price. A minimum of 3,080,000 shares of our common stock are issuable upon the conversion of our Series A convertible preferred stock, 5% secured debentures and outstanding warrants. Additionally, we issued 5,218,000 shares of our common stock in connection with our acquisition of Visual Management Systems Holding, Inc. Some or all of the shares of our common stock may be offered from time to time in the open market pursuant to Rule 144, and these sales may have a depressive effect on the market for the shares of common stock. In general, a non-affiliate who has held restricted shares for a period of six months may sell such shares into the market without restriction.

Our Company’s officers and directors have significant voting power and may take actions that may not be in the best interests of other stockholders.

Our Company’s officers and directors currently control in excess of 33% of our voting securities. If these stockholders act together, they will be able to exert significant control over our Company’s management and affairs requiring stockholder approval, including approval of significant corporate transactions. This concentration of ownership may have the effect of delaying or preventing a change in control and might adversely affect the market price of our common stock. This concentration of ownership may not be in the best interests of all our stockholders.

The offering price of the Series A convertible preferred stock, 5% secured debentures and warrants were not determined by traditional criteria of value.

The offering price of the shares of our Series A convertible preferred stock, 5% secured debentures and the exercise price of the warrants issued and issuable in our recent private placements were arbitrarily established and were not determined by reference to any traditional criteria of value, such as book value, earnings or assets.

We do not anticipate paying dividends in the foreseeable future, and the lack of dividends may have a negative effect on the stock price.

We currently intend to retain our future earnings to support operations and to finance expansion and, therefore, do not anticipate paying any cash dividends on our capital stock in the foreseeable future.

CAUTIONARY LANGUAGE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA

This prospectus contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties, many of which are beyond our control. Our actual results could differ materially and adversely from those anticipated in such forward-looking statements as a result of certain factors, including those set forth below and elsewhere in this prospectus. Important factors that may cause actual results to differ from projections include, but are not limited to, for example:

adverse economic conditions,

inability to raise sufficient additional capital to operate our business,

unexpected costs, lower than expected sales and revenues, and operating defects,

adverse results of any legal proceedings,

the volatility of our operating results and financial condition,

inability to attract or retain qualified senior management personnel, including sales and marketing, and technical personnel, and

other specific risks that may be referred to in this prospectus.

All statements, other than statements of historical facts, included in this prospectus regarding our strategy, future operations, financial position, estimated revenue or losses, projected costs, prospects and plans and objectives of management are forward-looking statements. When used in this prospectus, the words “will,” “may,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project,” “plan” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. All forward-looking statements speak only as of the date of this prospectus. We undertake no obligation to update any forward-looking statements or other information contained herein. Potential investors should not place undue reliance on these forward-looking statements. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements in this prospectus are reasonable, we cannot assure potential investors that these plans, intentions or expectations will be achieved. We disclose important factors that could cause our actual results to differ materially from its expectations under “Cautionary Statements” and elsewhere in this prospectus. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on its behalf.

Information regarding market and industry statistics contained in this prospectus is included based on information available to us that we believe is accurate. It is generally based on academic and other publications that are not produced for purposes of securities offerings or economic analysis. We have not reviewed or included data from all sources, and we cannot assure potential investors of the accuracy or completeness of the data included in this prospectus. Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and the additional uncertainties accompanying any estimates of future market size, revenue and market acceptance of products and services. We have no obligation to update forward-looking information to reflect actual results or changes in assumptions or other factors that could affect those statements. See “Risk Factors” for a more detailed discussion of uncertainties and risks that may have an impact on future results.

USE OF PROCEEDS

The selling stockholders will receive all of the proceeds from the sale of the shares of our common stock offered for sale by them under this prospectus. We will not receive any proceeds from the resale of shares of our common stock by the selling stockholders covered by this prospectus; however we will receive proceeds from cash payments made in connection with the exercise of warrants held by selling shareholders. We intend to use these proceeds, if any, for general working capital purposes. .

MARKET FOR OUR COMMON STOCK AND RELATED STOCKHOLDER MATTERS

Our common stock is quoted on the OTC Bulletin Board under the symbol VMSY.OB. Prior to July 17, 2007, there was no trading in our common stock. The last sale price of our common stock on October 8, 2008 was $0.60. As of October 8, 2008, there were approximately 125 holders of record of our common stock.

We have not paid any dividends on our common stock and do not anticipate paying dividends in the foreseeable future. The terms of our 5% secured convertible debentures prohibit the payment of dividends.

The following table sets forth information with respect to the trading price of our common stock as reported by the OTC Bulletin Board:

Fiscal Year Ended December 31, 2007	Low		High

First Quarter		—		—
Second Quarter		—		—
Third Quarter	$	2.10	$	4.00
Fourth Quarter	$	0.55	$	3.50

Fiscal Year Ending December 31, 2008

First Quarter	$	0.65	$	1.47
Second Quarter	$	0.30	$	1.30
Third Quarter	$	0.30	$	5.00
Fourth Quarter (through October 8, 2008)	$	0.34	$	0.69

Management’s Discussion and Analysis of Financial Condition and Results and Operations

Overview

On July 17, 2007, we acquired all of the outstanding capital stock of Visual Management Systems Holding, Inc., a New Jersey corporation, in connection with the merger of our wholly owned subsidiary with and into Visual Management Systems Holding, Inc. In connection with the merger, we changed our corporate name from Wildon Productions, Inc. to Visual Management Systems, Inc. and the former stockholders of Visual Management Systems Holding, Inc. received an aggregate of 5,218,000 shares of our common stock representing approximately 76.5% of our outstanding common stock after giving effect to the merger. In addition, our board of directors was reconstituted at the effective time of the merger with designees of Visual Management Systems Holding, Inc. replacing our then current board of directors. Further, at the effective time of the merger, we abandoned our prior business plan and the operations of Visual Management Systems Holding, Inc. acquired as a result of the merger became our sole line of business. The merger transaction was therefore accounted for as a reverse acquisition with Visual Management Systems Holding, Inc. as the acquiring party and Visual Management Systems, Inc. (formerly Wildon Productions, Inc. ) as the acquired party. Accordingly, when we refer to our business and financial information relating to periods prior to the merger, we are referring to the business and financial information of Visual Management Systems Holding, Inc., unless the context otherwise requires.

Simultaneously with the merger, we completed the initial closing of a private placement of investment units consisting of shares of Series A Convertible Preferred Stock and common stock purchase warrants, which we sometimes refer to in this Report as our July 2007 Private Placement. We issued a total of 616 investment units representing a total of 616 shares of Series A convertible preferred stock and warrants to acquire 616,000 shares of our common stock in the July 2007 Private Placement, which was completed on October 25, 2007. On November 30, 2007, we completed a private placement of $3.75 million aggregate principal amount of 5% secured convertible debentures and warrants to acquire 11,250,000 shares of our common stock to three affiliated institutional investors.

Results of Operations for the Three Months Ended June 30, 2008 and 2007

The following discussion and analysis should be read in conjunction with the financial statements, including the notes thereto and other information presented in this prospectus.

Net Revenues

Net revenues increased $197,244, or 14% to $1,635,516 during the three months ended June 30, 2008 from $1,438,272 during the three months ended June 30, 2007. The increase in revenues reflects the Company’s success in completing larger sales in 2008 as compared to the same period in 2007.

Cost of Goods Sold

Total cost of goods sold increased $24,858, or 3% to $810,383 for the three months ended June 30, 2008, from approximately $785,525 during the three months ended June 30, 2007. This increase was primarily due to increased revenues.

As a result of the changes described above in revenues and cost of goods sold, gross profit for the three months ended June 30, 2008 increased to $825,133 from $652,747 for the three months ended June 30, 2007, and gross profit as a percentage increased to 50.5% for the three months ended June 30, 2008 compared with 45.4% for the three months ended June 30, 2007. The increase in gross profit margin for the three months ended June 30, 2008 is a result of increased sales of the Company’s DVR’s, increased revenue on higher margin service business, pricing changes, reductions in overtime, and improvements to the company’s utilization of operational resources.

Operating Expenses

Operating expenses increased $588,275 to $2,195,571 for the three months ended June 30, 2008, from $1,607,296 for the three months ended June 30, 2007.

This increase was primarily attributable to an increase in an increase in the accrual for late filing penalties of $343,000 and an increase in the amortization of deferred financing costs of approximately $194,000 and an increase in professional fees of approximately $85,000.

Interest Expense

Interest expense for the three months ended June 30, 2008 increased to $157,031, from $42,455 in the three months ended June 30, 2007. The increase was primarily the result of (i) higher original issue discount amortization, totaling approximately $75,000 and (ii) interest on convertible debt of $46,875.

Net Income (Loss)

As a result of the items discussed above there was a net loss of $1,527,469 for the three months ended June 30, 2008 compared with a net loss of $970,988 for the three months ended June 30, 2007.

Results of Operations for the Six Months Ended June 30, 2008 and 2007

The following discussion and analysis should be read in conjunction with the financial statements, including the notes thereto and other information presented in this prospectus.

Net Revenues

Net revenues increased $614,116, or 24% to $3,212,825 during the six months ended June 30, 2008 from $2,598,709 during the six months ended June 30, 2007. The increase in revenues reflects increased sales efforts, primarily through success in completing several large sales during 2008.

Cost of Goods Sold

Total cost of goods sold increased $303,756, or 23% to $1,653,496 for the six months ended June 30, 2008, from approximately $1,349,740 during the six months ended June 30, 2007. This increase was primarily due to increased revenues.

As a result of the changes described above in revenues and cost of goods sold, gross profit for the six months ended June 30, 2008 increased to $1,559,329 from $1,248,969 for the six months ended June 30, 2007, and gross profit as a percentage of revenues increased to 48.5% for the six months ended June 30, 2008 compared with 48.1% for the six months ended June 30, 2007.

Operating Expenses

Operating expenses increased $1,774,559 to $4,924,933 for the six months ended June 30, 2008, from $3,150,374 for the six months ended June 30, 2007.

This increase was primarily attributable to an increase in the following expense items: issuance of stock for investor relations services with a fair value of $690,000, an accrual for liquidated damages for a late filing of a registration statement of $477,000 , amortization of deferred financing costs associated with debt financing $386,000 and an increase in other general and administrative costs (professional fees, travel, insurance and rent) of approximately $240,000.

Debt Conversion Expense

Debt conversion expense for the six months ended June 30, 2008 decreased to zero, from approximately $590,000 for the six months ended June 30, 2007, as no indebtedness was converted in 2008.

Interest Expense

Interest expense for the six months ended June 30, 2008 increased to $297,034, from $171,626 in the six months ended June 30, 2007. The increase was primarily the result of (i) higher original issue discount amortization, totaling approximately $150,000 and (ii) interest on bridge loans and convertible debt of approximately $94,000 offset by $125,000 of interest expense in the six months ended June 30, 2007 associated with a beneficial conversion feature on convertible debt.

Net Income (Loss)

As a result of the items discussed above there was a net loss of $3,662,943 for the six months ended June 30, 2008 compared with a net loss of approximately $2,663,023 for the six months ended June 30, 2007.

Liquidity and Capital Resources

Our financial statements are prepared on a going concern basis, which assumes that we will realize our assets and discharge our liabilities in the normal course of business. At June 30, 2008, we had cash of $26,870, a working capital deficit of $4,148,041, stockholders’ deficit of $3,887,804, and an outstanding balance of long term debt of $284,380 net of current maturities, plus $3,262,334 of convertible debt net of current maturities and an unamortized original issue discount of $573,333, and obligations under capital leases net of current maturities of $83,768. In comparison, at December 31, 2007, we had cash and equivalents of approximately $707,025, a working capital deficit of approximately $587,279, $2,818,334 of convertible debt net of current maturities, and an outstanding balance of long term debt of $346,509, net of current maturities. Our financial condition as of June 30, 2008 raises doubt as to our ability to continue our normal business operations as a going concern. If we are unable to put into effect certain plans, we may be required to restructure, file for bankruptcy or cease operations.

Cash Flows from Operating Activities.

Net cash used by operating activities was $702,197 for the six months ended June 30, 2008 and $704,734 for the six months ended June 30, 2007. Cash used during the six months ended June 30, 2008 was primarily the result of the operating loss described above offset by decreases in receivables of $91,582 and inventory of $69,538and increases in accounts payable and accrued expenses totaling $1,045,184. For the six months ended June 30, 2007, cash used in operations was primarily a result of the operating loss incurred during the quarter plus increases in inventory of $119,185 and security bonds of $48,458 for larger customer jobs offset by decreases in receivables of $159,535 increases in accounts payable of $502,382 and increased customer deposits of $159,837.

Cash Flows from Investing Activities.

Net cash used in investing activities was $111,900 in the six months ended June 30, 2008 representing capitalization of costs relating to implementation of a new accounting software package and capitalization of software development costs net of proceeds received from an asset disposition, as compared to $53,885 of equipment purchases for the corresponding period in 2007.

Cash Flows from Financing Activities.

Net cash provided by financing activities was $133,942 for the six months ended June 30, 2008 and $757,656 for the six month period ended June 30, 2007. The cash from financing activities was a result of proceeds of $288,800 from short term notes payable offset by repayment of short term notes of $68,000 and principal payments on capital leases of $24,885, long term debt of $61,973 during the six months ended June 30, 2008. For the six months ended June 30, 2007, the cash provided by financing activities was primarily the result of $871,230 from the issuance of common stock and $112,500 net proceeds from convertible debt offset by $150,000 for the repurchase of stock into treasury.

Cash decreased from $707,025 at December 31, 2007 to $26,870 at June 30, 2008.

Commitments and Contingencies.

We are a party to a $50,000 term loan agreement with JPMorgan Chase Bank, N.A. which provides for interest at a rate of 8.61% per annum and which is payable in equal monthly installments through October 2013. As of June 30, 2008, $40,663 was outstanding under the loan agreement.

We are a party to a $50,000 line of credit with JPMorgan Chase Bank, N.A. which as of December 31, 2007 provided for interest at a rate of 8.75% per annum and which is payable in variable monthly installments. As of June 30, 2008, the outstanding balance on the line of credit was $49,981, which automatically renews every year until paid in full.

We had $343,231 in principal balance on auto loans outstanding as of June 30, 2008. These loans, which bear interest at rates ranging from 3.9% to 8.69%, mature at various dates through November 2012.

We enter into operating leases in the ordinary course of business for office and warehouse space and equipment. The current outstanding value of leased equipment is $141,658 at June 30, 2008.

In September 2007 we issued a promissory note with a principal value of $250,000, at an annual interest rate of 8% and a maturity date of January 4, 2008 to an individual lender. In June 2008, the holder of the note assigned it to a pension plan formed for the benefit of a member of our Board of Directors which agreed to exchange the note for a new note in the principal amount of $267,192, which bears interest at a rate of ten percent per annum and becomes due on December 10, 2008 and options to acquire 20,000 shares of our common stock at a price of $0.40 per share.

Since January 1, 2008, we have been required to make quarterly payments of interest under the convertible debentures issued in our November 2007 Private Placement. Monthly principal payments in the aggregate of $208,333 begin in November 2008. We have the right to pay interest and monthly principal payments in cash, or upon notice to the holders and compliance with certain equity conditions, including having a currently effective registration statement covering the shares of common stock issuable upon conversion of the debentures, we can pay all or a portion of any such payment in common stock valued at a price equal to the lesser of the then effective conversion price (initially $0.50) or 85% of the average of the volume weighted average price, or VWAP, per share as reported by Bloomberg L.P. for our common stock for the 10 consecutive trading days immediately prior to the applicable payment date. If the holders of the debentures voluntarily elect to convert all or a portion of the debentures into common stock, the conversion price will be $.50, subject to adjustment including full-ratchet anti-dilution protection. This could result in substantial dilution to our existing stockholders.

Our ability to make payments of principal and interest required under the terms of the debentures will depend on our financial condition and resources available at the time that the payments become due. We did not timely pay the $15,625 and $46,875 of interest payments due to the debenture holders on January 1, 2008 and April 1, 2008, respectively; however, all such amounts were paid in May 2008. We expect to make future payments in the form of common stock when the resale registration statement we filed to register the shares issuable under the debentures becomes effective. It is likely that the other payments required under the debentures will be in the form of common stock until we achieve profitability.

Recent Financing Activity

SBA Insured Loan with Commerce Bank. On December 4, 2007 we paid $103,305 in satisfaction of an outstanding Small Business Administration insured term loan agreement with Commerce Bank. This represented the total outstanding amount owed under the loan agreement and after final payment was received the loan agreement was terminated.

November 2007 Private Placement. In our November 2007 Private Placement we issued $3.75 million in aggregate principal amount of 5% secured convertible debentures at an original issue discount of 20%, and warrants to purchase an aggregate of 11,250,000 shares of common stock with an original exercise price of $1.15 per share, now reduced to $0.40 due to anti-dilution provisions of our agreements with the investors. The following summarizes the terms of the debentures issued in our November 2007 Private Placement and is qualified by reference to the form of debenture filed as an exhibit to the Form 8-K we filed with the SEC on December 3, 2007.

Term. The debentures are due and payable on May 31, 2010.

Interest. Interest accrues at the rate of 5% per annum and is payable quarterly on April 1, July 1, October 1 and December 1, commencing on January 1, 2008.

Monthly Principal Payments. Monthly principal payments equal to 1/18^th of the principal amount due under each debenture begin November 1, 2008 and continue through May 31, 2010.

Payments of Principal and Interest. We have the right to pay interest and monthly principal payments in cash, or upon notice to the holders and compliance with certain equity conditions, including having a currently effective registration statement covering the shares of common stock issuable upon conversion of the debentures, we can pay all or a portion of any such payment in common stock valued at a price equal to the lesser of the then effective conversion price (initially $0.50) or 85% of the average of the volume weighted average price, or VWAP, per share as reported by Bloomberg L.P. for our common stock for the 10 consecutive trading days immediately prior to the applicable payment date.

Early Redemption. We have the option to redeem the debentures before their maturity by payment in cash of 120% of the then outstanding principal amount plus accrued interest and other charges. To redeem the debentures we must meet certain equity conditions, including having a currently effective registration statement covering the shares of common stock issuable upon conversion of the debentures. The payment of the debentures would occur on the 10^th day following the date we gave the holders notice of our intent to redeem the debentures. We agreed to honor any notices of conversion that we receive from a holder before the date we pay off the debentures.

Voluntary Conversion by Holder. The debentures are convertible at any time at the discretion of the holder at a conversion price per share of $.50, subject to adjustment including full-ratchet, anti-dilution protection, and subject to a 9.99% cap on the beneficial ownership of our shares of common stock by the holder and its affiliates following such conversion. The number of shares issuable upon conversion of the debentures is determined by dividing the stated principal amount being converted by the conversion price then in effect. As a result, if the holders of the debentures had elected to convert the entire $3,750,000 aggregate principal amount of the debentures in full on November 30, 2007, they would have received 7,500,000 shares of our common stock. Inasmuch as the amount paid for the debentures was $3,000,000, the actual cost per share would have been $.40. On November 30, 2007, the closing price of our common stock on the OTC Bulletin Board was $1.12 per share. As a result, the aggregate dollar value of the shares issuable upon conversion as of the date of the issuance of the debentures was $8,400,000.

Forced Conversion. Subject to compliance with certain equity conditions, including having a currently effective registration statement covering the shares of common stock issuable upon conversion of the debentures and subject to a 9.99% cap on the beneficial ownership of our shares of common stock by the holder and its affiliates following such conversion, we also have the right to force conversion if the average of the VWAP for our common stock exceeds $2.88 for 20 trading days out of a consecutive 30 trading day period.

The debentures impose certain covenants on us, including restrictions against incurring additional indebtedness, creating any liens on our property, amending our certificate of incorporation or bylaws, redeeming or paying dividends on shares of our outstanding common stock, and entering into certain related party transactions. The debentures define certain events of default, including without limitation failure to make a payment obligation, failure to observe other covenants of the debenture or related agreements (subject to applicable cure periods), breach of representation or warranty, bankruptcy, default under another significant contract or credit obligation, our common stock ceases to be eligible for listing or quotation on a trading market, a change in control, failure to secure and maintain an effective registration statement covering the resale of the common stock underlying the debentures and the warrants, or failure to deliver share certificates in a timely manner. In the event of default, the holders of the debentures have the right to accelerate all amounts outstanding under the debenture and demand payment of a mandatory default amount equal to 130% of the amount outstanding, plus accrued interest and expenses. Our obligations under the debentures are secured by substantially all of our assets.

In addition, the holders of the debentures have a right to participate in up to 100% of any debt or equity financing we propose to undertake through the date that is the 12-month anniversary of the effectiveness of the registration statement that we were required to file.

In connection with our November 2007 Private Placement, we also entered into a registration rights agreement dated November 29, 2007, with the institutional investors, pursuant to which we agreed to file a registration statement covering the resale of the shares of common stock that may be issued to such investors upon the conversion of the debentures, payment in kind, and the exercise of the related warrants. We also agreed to maintain the effectiveness of the registration statement (subject to certain limitations) for a period of time until the holders can sell the underlying common stock without volume restrictions under Rule 144(k) of the Securities Act of 1933, or the “Securities Act.” If the registration statement was not declared effective by March 30, 2008, or if we fail to maintain the effectiveness of the registration statement, or if we fail to respond in writing to comments made by the Commission in respect of the resale registration statement within 15 calendar days after receipt of those comments, we are required to pay to each investor, as partial liquidated damages, cash equal to 2% of the aggregate purchase price paid by such investor for any securities purchased in our November 2007 Private Placement and then held by such investor, and will be required to pay to such investor such amount for each subsequent 30-day period, up to a maximum aggregate liquidated damages amount of 20% of the aggregate purchase price paid by such investor in our November 2007 Private Placement. Our registration statement was not declared effective by March 30, 2008 and we did not respond to Commission comments regarding the registration statement within 15 days after receipt.

waived all registration rights previously granted to the invesotrs with respect to the shares issuable upon the conversion of the debentures and exercise of the warrants issued to the investors, provided that we do not fail to satisfy the current public information requirements under Rule 144(c) of the Securities Act of 1933 for a period of three (3) consecutive trading days or more.

In consideration of the waivers and in lieu of (i) $250,000 of liquidated damages that the investors alleged were owed as a result of our failure to register the shares underlying the debentures and warrants for public resale and (ii) $46,875 of accrued and unpaid interest owed to the investors, we have agreed to issue shares of our common stock valued at $296,875 (based upon a per share price equal to 80% of the average of the value weighted average price of the common stock for the 20 trading days prior to the date of the Amendment and Waiver) to the investors pro-rata according to their percentage ownership of the Debentures. The Company has agreed to register the new shares for resale under the Securities Act of 1933, as amended. Failure to file and have the registration statement declared effective within a specified time frame will subject the Company to liquidated damages.

The following table provides information with respect to the gross and net proceeds of our November 2007 Private Placement and the combined total possible profit to the investors who participated in the November 2007 Private Placement

Gross Proceeds Paid to Company from November 2007 Private Placement		Net Proceeds to Company from November 2007 Private Placement			Combined Total Possible Profit to Investors in November 2007 Private Placement from Payments and Conversion and Exercise Price Discounts
$3,000,000		$	2,680,000		$	17,773,736

A summary of the payments made in connection with the November 2007 Private Placement is included in the following table.

Payee	Cash Payments		Securities (# of shares underlying warrants)		Date
Kuhns Brothers Securities ¹	$	300,000		1,200,000		11/30/2007
Feldman, Weinstein & Smith, LLP²	$	20,000		—		11/20/2007

1. Placement agent for our November 2007 Private Placement. Warrants were issued to its designees and have an exercise price of $.50 per share.

2. Counsel to the investors who participated in our November 2007 Private Placement.

Interest on the debentures accrues at the rate of 5% per annum and has been payable quarterly in the amount of $46,875 A principal payment of $208,333.33 is due on December 1, 2008 and an interest payment of $46,006.94 is due on December 31, 2008. As a result, the total payments that we will be required to make to the debenture holders in 2008 is $394,965.27.

Assuming that we pay all principal and interest payments due under the debentures in cash, the total principal and interest payments under the debentures will aggregate $4,087,506 over the 30 month term of the debentures. The total possible discount to the market price of the shares of common stock issuable upon conversion of our debentures equals $5,586,230. We received net proceeds from the November Private placement of $2,680,000. The ratio of (i) the total amount of payments over the entire 30 month term of the debentures plus the possible discount to the market price of the shares of common stock issuable upon conversion of the debentures to (ii) the net proceeds from the sale of the debentures is approximately 361%, or 144% per year during the term of the of the debentures.

Pursuant to the terms of the debentures, if we make all payments of principal and interest required under the debentures in shares of common stock, the shares will be valued at a price equal to the lesser of the then effective conversion price (initially $0.50) or 85% of the average of the volume weighted average price, or VWAP, per share of the common stock as reported by Bloomberg L.P. for the 10 consecutive trading days immediately prior to the applicable payment date. This could result in a substantially higher cost to us for this transaction. For example, if the VWAP price per share declined to $.20 per share, and we made all payments of principal and interest to holders of the debentures in shares of common stock, the combined total potential discount to the market price of our common stock as of the date of the closing of the November 2007 Private Placement would be $23,592,950. Under this scenario, the ratio of (i) the total amount of payments over the entire 30 month term of the debentures plus the possible discount to the market price of the shares of common stock issuable upon conversion of the debentures to (ii) the net proceeds from the sale of the debentures is approximately 1,033%, or 413% per year during the term of the of the debentures.

Issuance of Original Issue Discount Promissory Notes. In November 2007 we issued a series of original issue discount promissory notes in the aggregate principal amount of $500,000, secured by executed but incomplete contracts for installation of our products, which yielded $395,200 of aggregate net proceeds to us. Among the recipients of these notes was Michael Ryan, a member of our board of directors who was issued a note which yielded $79,800 of net proceeds to us, with a principal amount due at maturity of $100,000. These original issue discount promissory notes were all paid in full in December 2007.

Promissory Note Due January 4, 2008. In October 2007 we issued a promissory note in the principal amount of $250,000 which provided for interest at a rate of 8% per annum and a maturity date of January 4, 2008 to an individual lender. As of December 31, 2007 the combined principal and interest due on the note was $256,040. In June 2008, the holder of the note assigned it to a pension plan for the benefit of a member of our Board of Directors which agreed to exchange the note for a new note in the principal amount of $267,192 which bears interest at a rate of ten percent per annum and becomes due on December 10, 2008 and options to acquire 20,000 shares of our common stock at a price of $.040 per share.

October 2007 Private Placement. Contemporaneous with our acquisition of Visual Management Systems Holdings, Inc., we issued 481 units, with each unit consisting of one share of Series A convertible preferred stock and a warrant to purchase 1,000 shares of common stock at an initial exercise price of $3.50 per share. Each share of Series A convertible preferred stock has a $2,500 liquidation preference and was initially convertible into shares of common stock at a conversion price of $2.50 per share, subject to adjustment to protect against dilution under certain circumstances. As a result of the November 2007 Private Placement, the conversion price of the Series A convertible preferred stock and the exercise price of the warrants has been adjusted to $.40 per share.

Additional closings of the private placement took place through October 2007 and, we issued a total of 616 shares of Series A convertible preferred stock and warrants to acquire 616,000 shares of common stock to investors. The net proceeds of the October 2007 Private Placement, after deducting $123,091 of commission and $112,436 of expenses paid to our placement agent, were approximately $1,286,000.

In connection with the October 2007 Private Placement, we agreed to file a registration statement covering the resale of shares of common stock that may be issued to the holders of the Series A convertible preferred stock and the warrants. We are obligated to maintain the effectiveness of the resale registration statement from its effective date through and until the earlier of 48 months after the effective date or the date upon which all shares may be sold under Rule 144(k) of the Securities Act of 1933. Because the registration statement we filed in December 2007 was not declared effective by February 25, 2008, the number of shares of common stock issuable upon conversion of the Series A convertible preferred stock will be increased, subject to the limit described below, by two percent for each month (or portion thereof) that the resale registration statement is not effective.

As of March 31, 2008, management expected that the registration statement would be declared effective by late May 2008. As a result, we accrued an expense in the amount of $73,150 to reflect the additional expense we expect to incur as a result of this provision. Since March 31, 2008, we have concluded that as a result of the policies of the Securities and Exchange Commission, we are precluded at this time from registering all the shares that we are required to register on behalf of the investors who participated in our October 2007 Private Placement and have elected to register only the shares issuable upon the exercise of the warrants issued to such investors. As a result, we may be subject to the full amount of the penalties that may be imposed.

The following table provides information with respect to the gross and net proceeds of our October 2007 Private Placement and the combined total possible profit to the investors who participated in the October 2007 Private Placement from conversion and exercise price discounts, as calculated as of November 30, 2007, the date upon which the exercise price of the Series A preferred stock and warrants issued in the October 30,2007 Private placement were adjusted to $.40 per share as a result of the issuance of our debentures.

Gross Proceeds Paid to Company from October 2007 Private Placement		Net Proceeds to Company from October 2007 Private Placement			Combined Total Possible Profit to Investors in October 2007 Private Placement from Conversion and Exercise Price Discounts
$1,540,000		$	1,286,000		$	3,215,320

A summary of the payments made in connection with the October 2007 Private Placement is included in the following table.

Payee		Cash Payments			Securities			Date
Brookshire Securities Corporation ¹		$	254,000			61,600 shares² 61,600 warrants³			07/17/07 to 10/25/07

1. Placement agent for our October 2007 Private Placement.

2. Dollar value of shares of common stock at time of initial issuance was $154,000 based on conversion price of Series A convertible preferred stock in October 2007 Private Placement.

3. Each warrant is exercisable for one (1) share of common stock. The initial exercise price of $1.75 per share has been adjusted to $.40 per share pursuant to anti-dilution provisions.

Private Placement of Convertible Notes.

In March 2007, Visual Management Systems Holding, Inc. issued $125,000 aggregate principal amount of notes and warrants to acquire an aggregate 200,000 shares of common stock at an exercise price of $1.25 per share to three investors in a private offering. The notes were convertible into common stock of Visual Management Systems Holding, Inc. at a conversion price of $.625 per share and provided for a maturity date of September 26, 2007. As a result of our acquisition of Visual Management Systems Holding, Inc. pursuant to the merger transaction completed in July 2007, the convertible notes became convertible into shares of our common stock at a conversion price of $1.25 per share and the warrants become exercisable for an aggregate 100,000 shares of common stock at an exercise price of $2.50 per share.

In September 2007, the holders of the convertible notes exchanged the convertible notes for new convertible notes in the aggregate principal amount of $150,000. As a result of the November 2007 Private Placement, the exercise price of the new convertible notes and the exercise price for the warrants issued to the holders of the convertible notes was adjusted to $.40 per share pursuant to the anti-dilution provisions of those securities.

In December 2007, principal payments of $30,000 were made to a holder of a convertible note and $120,000 principal amount of the convertible notes was converted into 300,000 shares of our common stock.

BUSINESS

Overview

We provide loss prevention management solutions to businesses through the design, sale and installation of digital surveillance systems called “Virtual Managers” that enable clients to proactively manage their businesses with easy data retrieval and live viewing from anywhere in the world. Our management believes that there is a lucrative and underserved market for loss prevention technology through the use of digital recording and video transmission to remote locations and corporate offices. Our products and services include:

Protective technology solutions and loss prevention surveillance capability through the design and installation of closed circuit television (“CCTV”) systems designed to provide safety and security and/or eliminate internal theft and corporate loss;

Access control systems which are frequently integrated with CCTV installations and designed to exclude unauthorized personnel from specified and monitor entry and exit activity;

Point of sale system interfaces designed to prevent internal theft through video recording of cash register activity.

Through on-site consultations, we provide loss prevention analysis, liability assessments and custom tailored CCTV camera layouts designed by a system design consultant to its prospective customers.

We design, manufacture, sell, install, upgrade and service the digital video recording devices (“DVRs”) used in our surveillance systems. In addition, we sell our DVRs to outside dealers. We currently manufacture and sell several lines of our “Virtual Manager” DVR products, import and resell DVRs and camera products from other manufacturers and have additional product lines under development through our Research and Development staff and under alliance and joint venture agreements with third parties.

We currently conduct our operations through three subsidiary entities, Visual Management Systems, LLC, which provides our protective technology solutions and remote management surveillance systems, Visual Management Systems PDG, LLC, which designs, manufactures and sells our DVRs, and VMS Financial Services, LLC, which has been formed to provide equipment leasing services to our customers.

Video Surveillance Systems

Our primary business is the design, sale and installation of CCTV surveillance systems. Through on-site consultations, we provide loss prevention analyses, liability assessments and custom-tailored CCTV camera layouts designed by professional system consultants to prospective customers. Our surveillance systems enable clients to manage their business through data retrieval and view their businesses live from anywhere in the world. The primary components that we use in our video surveillance systems include:

Digital Video Recorders: Our product line is comprised of custom configurations of surveillance hardware and software systems based on the capture and compression technology of Inet.Secuvic, Inc., a Korean company. Each of the DVRs included in our “Virtual Manager” product line can manage between 4 and 64 cameras and offer individually addressable recording schedules and frame rates. The DVR is the heart of our video surveillance systems.

Surveillance Cameras: We use only high-resolution, low-light cameras in our video surveillance systems. There are numerous camera options available to customers, and camera selections are typically made on-site by the customer with the assistance of a Loss Prevention Consultant or a System Design Specialist that we provide who creates and sells a “shot-layout” to ensure that the customer is satisfied with each camera shot. Cameras frequently used in our systems include:

Smoked or Mirrored Dome Cameras which present an image of “high-end” security and provide deterrence against common forms of small business fraud, such as shoplifting, vandalism, credit card and ID fraud and employee theft. These cameras are popular due to the wide variety of potential configurations and applications and their “stealth” properties.

Bullet Cameras, which are small, discrete and reliable. Bullet cameras have few moving parts, thereby limiting preventive maintenance to occasional cleaning. They are environmentally sealed for indoor and outdoor service.

Covert Specialty Cameras, which are cameras concealed within other apparatuses, such as radios, clocks, exit signs and smoke detectors. These cameras permit a business owner to monitor a location without the knowledge of those present at the location

Box Cameras are the most widely recognized CCTV cameras and are the best choice for many applications. They offer great flexibility in resolution, light requirements and local length. A 24-volt AC current typically powers box cameras, which gives them the ability to carry images over greater distances than other cameras. As a result, they are often used for perimeter protection in smaller, self-contained 12-volt cameras.

Our video surveillance systems also include monitors, power supplies, battery backup power, wire and connectors. We are a value-added reseller for several product lines, including the IDS Tech-Eye and Sony, Panasonic and General Electric platforms.

Digital Video Recorders

We manufacture our line of “Virtual Manager” DVRs, which are custom configurations of surveillance hardware and software systems based on the capture and compression technology of Inet.Secuvic, Inc., a Korean company. We currently manufacture several types of DVRs as part of our “Virtual Manager” product line. Each of our DVRs is a Microsoft Windows® PC based product, and the product line ranges from four channel systems to enterprise grade, unlimited source systems that can be expanded into virtually unlimited network based, engineered systems.

Since their introduction in 1995, DVRs have been overtaking time-lapsed VCRs as the primary recording mechanism in commercial surveillance.

DVR systems have historically been available as software systems or hardware systems. Software based DVRs are simply software programs which run on personal computers. They are cost effective and operate on readily available, easily serviced PC-platform computers; however, image quality often suffers and digital video recording places a significant strain on a computers resources. This strain cause premature failure of primary computer components and can cause other parts of the computer to function slowly or cease functioning. Software DVRs are generally not suitable for business class security applications.

“Firmware” or “solid state” systems are also computer based but are essentially multiplexers with hard disk drives built in for recording. Generally, these hardware based DVRs are built for the sole purpose of providing video surveillance and are effective; however, hardware based systems generally have two significant short-comings: inflexibility and service. Generally, there is little or no room for modifying or expanding the system. As for serviceability, hardware based systems, like a stereo or television set, have no user serviceable parts. For repair, the equipment must be returned to the manufacturer. Inasmuch as a significant amount of DVR manufacturing takes place in Asia, repairs frequently result in several weeks of “down-time” for users.

Given the relative strengths and weaknesses of software based and hardware based DVRs, we believe that the best choice for consumers is a DVR which incorporates both types of technologies. We use hardware-based video capture cards in our “Virtual Manager” DVR which process the video and remove the heat and strain from the computer’s motherboard. The hardware based video capture card resides in a software driven PC environment. The result is a dedicated security computer. The use of removable hard disk drives for storage flexibility and components that are readily available, inexpensive and easy to service provides a PC-based security system that can grow with a business.

We build our DVRs to very specific standards. Each DVR is built from tested, proven components and is driven by Microsoft Windows® software and is customized to perform optimally based on a system designed by a VMS Loss Prevention Specialist. All of our custom-built DVRs offer record-on-motion capabilities as well as continuous, alarm-triggered or combination settings. Data is easy to retrieve by date and time and can be reviewed at user-controlled speeds and in one, four, nine or sixteen camera formats.

Standard features of our Virtual Manager DVRs include:

● Live remote viewing

● Motion and frames per camera are addressable per camera

● Access to recorded data by date and hour

● Alarm notification by e-mail, phone or IP-alert

● All functions are username and password protected

● Video motion sensor and built-in motion detector mode

● Uninterrupted recording

● Access control.

Other features that we made available include:

● High resolution digital color cameras per system design

● Flat panel LCD monitors for on-site viewing

●Unlimited Access RMS software licenses

Remote Management Software used with DVRs offers the ability to view a location live from anywhere, at any time via telephone lines or high-speed internet access. In addition to selling DVRs as part of systems that we designed and installed, we sell our DVRs through twelve unaffiliated dealers. During the fiscal year ended December 31, 2006, dealer sales represented approximately 10% of our revenues.

Sales and Marketing

We market and sell our video surveillance and other security systems through a dedicated sales force currently comprised of approximately 24 sales representatives. Our DVRs are also sold through independent dealers. We currently plan to expand both our employee sales force and dealer network in 2008 and 2009.

We use various methods to market and sell our products and services, including direct sales efforts, personal consultations, sponsorships, attendance at exhibitions and trade shows, advertisements in industry journals, public relations and direct mail solicitation. Business is also obtained through competitive bid processes and referrals.

Our pricing strategies are based upon an estimate of labor hours multiplied by standard rates and the estimated cost of system components, including subcontractors, plus a profit margin.

Service

A strong service and maintenance capability is an important element in maintaining good customer relations and low attrition, and is an important revenue generating activity for us. We offer one and three year service contracts as well as paid extensions of existing service contracts and takeover programs for equipment formerly serviced by other companies which no longer provide services to a particular client. Parts are typically covered by warranty for a period at least as long as the warranty provided by the manufacturers. Service is provided by our staff or subcontracted through partner companies such as dealers of our DVR products or structured cabling companies such as Speedwire, Inc.

In addition to providing revenue and gross profit, our service contracts allow our sales personnel to generate new revenue streams.

Suppliers

We acquire the components for our video surveillance systems and DVRs through various suppliers, including Windy City Wire, Northern Video, American Dynamics, B-Tron and others. We choose not to align our self with any one supplier so that we can recommend the best solutions for our customers. Substantially all of the components that we use are readily available from multiple sources.

Properties

Our corporate headquarters are located in Toms River, New Jersey under a lease for approximately 4,500 square feet of office space expiring in September, 2009. We also maintain a 3,200 square foot communications and training facility in Toms River, New Jersey under a lease which expires in April 2010. We maintain the 3,700 square foot PDG assembly and technical facility in Dayton, Ohio under a lease expiring in September 2008 and approximately 2,000 square feet of office space in Nesconsset, New York under a lease expiring at the end of 2008. We also operate small warehousing offices in Massachusetts, Virginia and Maryland under a month to month lease for 100 square feet.

We believe that our facilities are adequate and suitable for our current operations. To the extent that other space is required, we believe that such space is readily available.

Market

We believe that the multi-billion market for video surveillance systems and other protective technologies is growing rapidly due to a number of factors, including:

many existing security and surveillance systems are becoming technologically obsolete and inadequate;

insurance providers and governing bodies began mandating surveillance in certain environments and situations;

since the tragic events of September 11, 2001, security is among the highest concerns of Americans at home and work;

widespread coverage of kidnappings, robberies and other crimes appear daily on television, in newspapers and in all types of news media;

technological advancements provide the opportunity to increase the scope and efficacy of many routine security tasks.

We believe that the market for video surveillance systems is highly fragmented among a small number of larger providers and a broad array of small companies. We believe that the mid-size business market is underserved and plan to exploit opportunities in this sector.

Competition

The security industry is highly competitive. We compete on a local, regional and national level with a small number of major firms and many smaller companies. We compete primarily on the quality and design of our products. Certain of our competitors have greater name recognition and financial resources than us. We may also face competition from potential new entrants into the security industry or increased competition from existing competitors that may attempt to develop the ability to offer the full range of services that we offer. We believe that competition is based primarily on the ability to deliver solutions that meet a client’s requirements and, to a lesser extent, on price. Our competitors include Vector Security, American Sentry Guard, GVI Security Solutions, Inc., ADT Security Services, Ltd. (a division of Tyco International) and Sonitrol, Inc. There can be no assurance that we will be able to compete successfully in the future against existing or potential competitors.

Product Development

Product development are ongoing processes for our Company. We continuously attempt to develop new product lines, learn different disciplines and integrate products and programs into our offerings to add new value for our customers.

We experiment with new hardware and software technologies regularly. We sample systems to integrate with our existing products as well as new stand-alone technologies. Our newest DVR ventures include fully integrated POS translators that are software based, immersive-moving video integration, mobile DVRs for law enforcement and fleet vehicle use and hybrid DVRs that can use traditional, hardwired camera inputs as well as IP-based camera solutions. We believe that our Company is breaking new ground with remote communication and actuator systems that allow central monitoring stations to become useful, effective profit generators.

Our near-term future plans include the development of a central video monitoring service and any associated support contracts. With the implementation and use of the products and services that we provide there are multitude of supporting services available for sale. These include, but are not limited to virtual guard tours, mystery shoppers, loss prevention observation reporting, risk management and mitigation, facilities insurance programs, two-way access patrols, video alarm verification, off-hours facility monitoring, etc.

To further our research and development efforts, we are actively seeking companies, technologies and patents we can acquire and adopt to strengthen our offerings and complete our product suites. Acquisition efforts are focused on installation capacity, product lines, software development and copyrighted or patented technology that can have an immediate impact on revenues and profit growth.

Customers

We have a wide range of customers. They include small, medium and large-sized businesses, residences, office buildings, manufacturing, warehousing and other classes of commercial operations. Our customers are individuals, private and public companies and government entities. We typically classify customers as corporations, individuals or government.

Corporate Clients

We serve several corporate clients. Corporate clients are departmentalized and usually represent much larger contracts based on a large number of smaller jobs, or a single or a few larger facilities. We receive a majority of our revenues from medium sized corporate clients.

As this middle level client is the core for our business model, we continue to enhance marketing programs in this sector. We offer incentives for referrals to other businesses in the group and plan to remain innovative as we proceed. Our corporate clients include:

El Rancho Foods (Taco Bell franchisee with VMS systems installed at 80+ locations)

NAPA (retail automotive parts)

Briad Group (TGI Friday restaurants)

Apple American (Applebee’s restaurants)

Penn State University

Best Western Hotels

Clearview Cinemas

Hollywood Tans

FISCA (New York/New Jersey Cashiers Trade Association)

KCP Foods (Sarku Japan Restaurants)

Individuals

We service many types of “individual” customers. Some individuals request residential service, but most own a single location or a small business. To date, we have experienced limited demand for our systems in residential applications.

We believe that successful development of the embedded systems being developed by us will allow us to further penetrate this market. Investigation of the viability of a residential line is underway as well.

Government

Until recently, we had not aggressively marketed our products and services to government agencies. New Homeland Security initiatives (DHS) and aggressive payment programs based on discounts for early payment have made the government a more attractive customer. Successful bids include school districts in New Jersey and Delaware, municipal projects for police departments in New Jersey and several DHS projects in the New York/New Jersey Waterfront Security District.

We have completed work in various government office spaces. We presently obtain less than 10% of our business from government work.

Because there are grants, mandates and numerous other moratoriums on the subject, we plan to launch an enterprise sales group to ensure our affiliation with the government and prime contractors. We believe that this is an area that offers tremendous revenue potential for our Company.

Legal Proceedings

We are not currently a party to any pending or threatened litigation which, if adversely decided, would have a material adverse impact on our financial condition, results of operations or business.

Employees

As of October 8, 2008 we employed approximately 90 employees. We believe that our relationship with our employees is satisfactory and we have not suffered any labor problems since our inception.

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth information regarding the members of our Board of Directors and our executive officers. The directors listed below will serve until the next annual meeting of the Company’s stockholders.

Name	Age	Position

Jason Gonzalez	36	President, Chief Executive Office and Director
Michael Ryan	49	Director
Colonel Jack Jacobs	62	Director
Martin McFeely	52	Director
Robert Moe	57	Director
Kevin Sangirardi	36	Director of Operations
Caroline Gonzalez	34	Chief Operating Officer
Jonathan Bergman	49	Vice President Marketing and Sales
W. Geoffrey Martin	32	General Counsel
James D. Gardner	56	Chief Financial Officer

Jason Gonzalez is the founder of Visual Management Systems Holding, Inc. and has been involved in the security industry for five years. Prior to launching Visual Management Systems Holding, Inc., he served as Chief Operating Officer for Infinite Sales, Inc., a wholly owned subsidiary a of Freedom Systems, Inc., a leading distributor of DVRs in the United States. Mr. Jason Gonzalez was at Freedom Systems, Inc. from February 2002 until August 2003. Before his appointment to Chief Operating Officer, Mr. Gonzalez served in various capacities for Freedom Systems, Inc. in sales and sales management. Prior thereto he was employed by Merrill Lynch as a vetting manager in ML Direct technology banking. He also worked for Olde, and William R. Hough & Co. as a registered representative, general and municipal securities principal. Mr. Gonzalez graduated from Embry-Riddle Aeronautical University where he earned a BS in Aviation Business Administration. He completed an additional 20 credits in Aeronautical Science and Aerospace Engineering. Mr. Gonzalez is a graduate of the SIA Securities Industry Institute. Mr. Gonzalez and Caroline Gonzalez are husband and wife.

Michael Ryan joined our Board of Directors in July 2007 and has spent over 20 years in the security industry. He owns and operates Fire Code Services, a New Jersey based fire protection systems and services business. Fire Code Services provides fire safety equipment to skyscrapers throughout New York City and New Jersey. Mr. Ryan also owns a successful Jersey City Restaurant, PJ Ryan’s, and is a VMS customer through this business.

Colonel Jack Jacobs U.S. Army (Retired), who joined our Board of Directors in July 2007, earned the Medal of Honor for exceptional heroism on the battlefields of Vietnam. He also holds three Bronze Stars and two Silver Stars. Colonel Jacobs served on the faculty of the U.S. Military Academy at West Point and the National War College in Washington, D.C. After retirement, he founded and was chief operating officer of Auto Finance Group. He has served as a managing director of Bankers Trust Co. and later co-founded an investment management business for Lehman Brothers. He is a member of the Council on Foreign Relations and is a director of the Medal of Honor Foundation. Colonel Jacobs currently serves as a military analyst for NBC/MSNBC.

Martin McFeely, who joined our Board of Directors in July 2007, has served as Chief Financial Officer of Quick Service Management, the parent company of El Rancho Foods, which operates approximately 89 Taco Bell and other franchises, since 1997.

Robert Moe, who joined our Board of Directors in July 2007, is the founder and chief executive officer of RAM Capital Corp., an investment banking firm specializing in providing industry specific financial and operational advisory services to companies seeking to implement and finance high growth strategies.

James (J.D.) Gardner was appointed as our Chief Financial Officer in June 2008. From April 2008 until his appointment as Chief Financial Officer, he served as a consultant to our finance and accounting department. From May 2005 to February 2008, Mr. Gardner served as Chief Financial Officer and Chief Operating Officer of Amedia Networks, Inc., a publicly held company engaged in developing next generation ultra broadband switched Ethernet home gateways and home networking solutions for voice video and data services. From January 2005 through May 2005, Mr. Gardner served as Chief Operating Officer of dotPhoto, a private company engaged in on-line photo processing and wireless application development for cellular telephones. From January 2002 through April 2004, Mr. Gardner served as Chief Executive Officer of Comstar Interactive, a private company engaged in the wireless credit card processing field. He has also held the position of Chief Financial Officer of BellSouth Wireless Data (renamed Cingular Interactive (May 1999 through November 2001), and as chief financial officer of BellSouth Mobile Data (November 1995 through May 1999) and chief financial officer of RAM/BSE Communications L.P. from 1991 through 1995, with all companies involved in the provision of wireless packet data networks and services, principally in the US and Europe. Mr. Gardner also held several other senior executive positions at BellSouth and AT&T in the areas of Financial Management, Domestic and International corporate finance, issuing debt and equity and the related rating agency and investment banking interfaces, shareholder relations and a number of other treasury, accounting and finance positions.

Kevin Sangirardi joined Visual Management Systems Holding, Inc. in January 2004. Mr. Sangirardi has over fifteen years of experience in Security Installation and Management. From 1999 until 2004, Mr. Sangirardi was employed by Freedom Systems, Inc, as Director of Operations. Prior to joining Freedom Systems, Inc., he served in various capacities for Slomins International and World Wide Security Services. Mr. Sangirardi graduated from Delhi University, New York with an A.O.S. in Electrical Engineering. He carries licenses and certifications from NICET and National Alarm Association of America Certificate of Training. He also holds a New York State Burglar and Fire Alarm License, Commonwealth of Virginia Department of Criminal Justice Compliance Agent License, Connecticut L5 Low Voltage Electrical License, Massachusetts Class D Low Voltage Electrical License and a New Jersey Fire and Burglar Alarm License.

Caroline Gonzalez joined Visual Management Systems Holding, Inc. in 2004 and currently serves as our Chief Operating Officer. In this capacity she manages vendor and key client relationships, assists the CFO in daily financial management, oversees manufacturing operations and develops training programs. From inception until August 2006, Ms Gonzalez co-managed Visual Management Systems Holding, Inc.’s financial operations as controller. Ms. Gonzalez brings franchise operations experience to our Company, having served from 1997 until 2001 as Director of Education and General Manager for two different franchisees of Sylvan Learning Centers where she was responsible for four different centers in multiple states. Mr. Gonzalez also worked in public education from 1997 until 1999 and for the 2001 and 2002 school years. She graduated from the University of Central Florida with a BS in Elementary Education and is the wife of Jason Gonzalez.

Jonathan Bergman joined Visual Management Systems Holding, Inc. in September 2003 as Vice President-Marketing and Sales. From 2001 to August 2003, he served in various capacities for Freedom Systems, Inc, including Loss Prevention Consultant, Area Manager and Regional Manager. From 1996 to 2001, Mr. Bergman served as a General Manager and the Director of Food and Beverage Operations for Inn America Hospitality. Prior thereto he owned and operated Advantage Building Maintenance, a general building services contractor. Mr. Bergman attended NY City Technical College and Florida International University and earned his AS in Business Management and his BS in Hospitality/Business Management.

W. Geoffrey Martin was hired to serve as our General Counsel in November 2007. Mr. Martin is admitted to the bar of the State of Illinois and as in-house counsel in the State of New Jersey, and from January 2006 until his hiring, was engaged in the private practice of law as a sole practitioner. Mr. Martin received his Juris Doctorate from the University of Illinois in 2005, and graduated from the University of Illinois in May 1999. Mr. Martin has extensive financial services experience and served as a financial product designer for US Bancorp from January to September 2002 and as both a project manager for financial software development and as an Assistant Vice President for business development and marketing for Merrill Lynch from June 1999 until September 2001.

Director Compensation

We did not pay any of our directors any cash compensation for serving as directors during 2007. During 2007, Visual Management Systems Holding, Inc. awarded options with respect to an aggregate of 80,000 shares of Common Stock to members of its Advisory Board who were subsequently appointed to our Board of Directors. These options were exchanged for options with respect to 40,000 shares of our common stock upon the completion of our acquisition of Visual Management Systems Holding, Inc. The following table sets forth information with respect to compensation paid to members of our Board for services rendered as directors in 2007 (including services provided as members of the Visual Management Systems Holding, Inc. Advisory Board).

Name	Fees Earned or Paid in Cash ($)		Stock Awards ($)		Option Awards ($)			Non-Equity Incentive Plan Compensation ($)		Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)		All Other Compensation ($)		Total ($)
Jason Gonzalez	$	—	$	—	$	—		$	—	$	—	$	—	$	—
Jack Jacobs	$	—	$	—	$	11,925	(1)	$	—	$	—	$	—	$	11,925	(1)
Martin McFeely	$	—	$	—	$	11,925	(1)	$	—	$	—	$	—	$	11,925	(1)
Robert Moe	$	—	$	—	$	11,925	(1)	$	—	$	—	$	—	$	11,925	(1)
Michael Ryan	$	—	$	—	$	27,825	(2)	$	—	$	—	$	—	$	27,825	(2)

(1)

Includes compensation expense recorded with respect to the grant of an option with respect to 15,000 shares of Visual Management Systems Holding, Inc. common stock made in March 2007 that was subsequently exchanged for an option to acquire 7,500 shares of our common stock that is fully exercisable. The fair value of the option was estimated using the Black-Scholes option-pricing model with the following assumptions: dividend yield of 0%; expected volatility of 150%; risk free rate of return of 5% and expected life of 10 years. The weighted average fair value of this option was $1.59 per share.

(2)

Represents compensation expense recorded with respect to the grant of an option with respect to 35,000 shares of Visual Management Systems Holding, Inc. common stock in March 2007 that was subsequently exchanged for an option to acquire 17,500 shares of our common stock that is fully exercisable. The fair value of the option was estimated using the Black-Scholes option-pricing model with the following assumptions: dividend yield of 0%; expected volatility of 150%; risk free rate of return of 5% and expected life of 10 years. The weighted average fair value of this option was $1.59 per share.

Directors are reimbursed for travel expenses incurred in connection with attendance at Board and committee meetings.

Executive Officer Employment Agreements

We are a party to employment agreements with each of our executive officers. Our agreement with Jason Gonzalez provides for base salary of $180,000 per annum, subject to an increase to (i) $200,000 per annum if our monthly gross sales reach $833,334 for three consecutive months, (ii) $250,000 if our monthly gross sales reach $1,666,667 for three consecutive months, and (iii) $300,000 if our monthly gross sales reach $2,000,000 for three consecutive months. If our annual gross sales reach $25,000,000 or more during any calendar year, Mr. Gonzalez’s base salary will be increased to $360,000 per annum and will be subject to annual increases of at least twenty-five percent thereafter or as otherwise determined appropriate by our Board of Directors or the Compensation Committee of the Board. Mr. Gonzalez is entitled to bonus compensation as determined by our Board of Directors. Among other perquisites, Mr. Gonzalez is entitled to a $1,000 per month automobile allowance.

Mr. Gonzalez earned a bonus of $85,000 in 2007 pursuant to his employment agreement as a result of our annual net revenues exceeding $5,000,000. He will be entitled to a $50,000 bonus if annual net revenues exceed $7,500,000 and an additional $50,000 bonus if annual net revenues exceed $10,000,000. Bonus payments are due within ten business days after the applicable net revenue level is exceeded and are structured on a plateau basis. In years subsequent to years during which these revenue levels are exceeded, no revenue based bonuses will be required to be made under the employment agreement.

Mr. Gonzalez’s employment agreement has a two year term which expires in April 2010 and provides for automatic successive one year renewal terms unless either party provides a notice of termination 60 days prior to the expiration of the agreement. If we terminate Mr. Gonzalez for “cause” (as defined in the employment agreement) or if he terminates the agreement without cause he will be prohibited from engaging in a competing business with us for 12 months following the termination. If we terminate Mr. Gonzalez without cause or if he terminates the agreement for cause, he is entitled to a single cash payment in an amount equal to the greater of Executive’s prior year’s total earnings attributable to the company or one millions dollars (“$1,000,000”), plus payment of his pro rated bonus compensation and any accrued and payment for any unused vacation for the year of termination, as well as the cost of COBRA and group life insurance benefits for the 18 month period following termination.

Our employment agreement with Caroline Gonzalez provides for an annual base salary of $150,000, subject to an increase to $165,000 if annual gross sales reach $10,000,000 or more, and $181,500 if annual gross sales reach $20,000,000 or more. If our annual gross sales reach $25,000,000 or more, Ms. Gonzalez’s salary will increase to $200,000 per annum and will be subject to annual increases of at least ten percent thereafter or as otherwise determined appropriate by our Board of Directors or the Compensation Committee of the Board. Ms. Gonzalez earned a bonus of $62,500 in 2007 pursuant to her employment agreement as a result of our annual net revenues exceeding $5,000,000. She will be entitled to an additional $50,000 bonus for the initial instance of annual net revenues exceeding $10,000,000 (50% of which is payable in cash and 50% of which must be applied to the exercise of options to acquire our Company stock). Each bonus payment is due within ten business days after the applicable net revenue level is exceeded.