FORM 10-QSB

UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

(X)                    QUARTERLY REPORT
UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF                1934

For the quarterly period ended September 30, 2005

OR

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

Commission file number:
 0-50019

A4S SECURITY, INC.
(Exact name of registrant as specified in its charter)

|                                                                |                                     
|--------------------------------------------------------------- | ------------------------------------
|Colorado                                                        | 20-1978398                          
|(State or other jurisdiction of
 incorporation or organization) | (I.R.S. Employer Identification No.)

489 North Denver Avenue,
Loveland, Colorado 80537
(Address of principal executive offices) (Zip Code)

(970) 461-0071(Registrants
telephone number, including area code)

Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.    Yes  [X]   No  [   ]

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

The number of shares of no par value
common stock outstanding as of November 11, 2005, was 3,961,446.

Transitional Small Business
Disclosure Format (Check one):    Yes   [   ]   No  [X]

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A4S SECURITY, INC.

|                                                   |  | Page
|-------------------------------------------------- |  | ----
|
|PART 1-- Financial Information                     |  |     
|                                                   |  |     
|Item 1.   Condensed Unaudited Finanical Statements |  |     
|                                                   |  |     
|Balance Sheet as of September 30, 2005             |  |     
|                                                   |  |     
|Statements of Operations For the Three and Nine    |  |     
|Month Periods Ended September 30, 2005             |  |     
|and 2004                                           |  |     
|                                                   |  |     
|                                                   |  |     
|Statements of Cash Flows For the Nine              |  |     
|Month Periods Ended September 30, 2005 and 2004    |  |     
|                                                   |  |     
|                                                   |  |     
|Notes to Condensed Unaudited Financial Statements  |  |     
|                                                   |  |     
|Item 2.   Management's Discussion and Analysis     |  |     
|                                                   |  |     
|Item 3.   Controls and Procedures                  |  |     
|                                                   |  |     
|                                                   |  |     
|PART II - Other Information                        |  |     
|                                                   |  |     
|Item 6.   Exhibits                                 |  |     
|                                                   |  |     
|                                                   |  |     
|Signatures                                         |  |     

2

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PART I  FINANCIAL
INFORMATION

A4S Security, Inc.
                                  Balance Sheet                                September
30, 2005                                    (Unaudited)

|                                                            | 
|----------------------------------------------------------- | 
|ASSETS                                                      | 
|Current assets:                                             | 
|Cash and cash equivalents                                   | 
|Accounts receivable                                         | 
|Inventories                                                 | 
|Prepaid expenses                                            | 
|                                                            | 
|Total current assets                                        | 
|                                                            | 
|Property and equipment, net                                 | 
|                                                            | 
|Intangible and other assets                                 | 
|                                                            | 
|Total assets                                                | 
|                                                            | 
|LIABILITIES AND STOCKHOLDERS' EQUITY                        | 
|Current liabilities:                                        | 
|Accounts payable                                            | 
|Accrued compensation                                        | 
|Other accrued expenses                                      | 
|Installment obligations                                     | 
|                                                            | 
|Total current liabilities                                   | 
|                                                            | 
|Commitments and contingencies                               | 
|Stockholders' equity (Notes 1, 2 and 3):                    | 
|Preferred stock, no par value, 5,000,000 shares authorized; | 
|no shares issued or outstanding                             | 
|Common stock, no par value, 30,000,000 shares authorized;   | 
|3,961,446 shares issued and outstanding                     | 
|Accumulated deficit                                         | 
|                                                            | 
|Total stockholders' equity                                  | 
|                                                            | 
|Total liabilities and stockholders' equity                  | 
|                                                            | 

See
Accompanying Notes to Unaudited Condensed Financial Statements.

3

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A4S Security, Inc.
                                             Statements of Operations
                                        Periods Ended September 30, (Unaudited)

|                                                  | Three Months Ended |  | Nine Months Ended |           
|------------------------------------------------- | ------------------ |  | ----------------- | ----------
|
|Net sales (returns)(Note 4)                       |                    |  | $                 | (12,500   
|Cost of sales (returns)                           |                    |  |                   | (6,875    
|                                                  |                    |  |                   |           
|Gross profit (loss)                               |                    |  |                   | (5,625    
|                                                  |                    |  |                   |           
|Operating expenses:                               |                    | 
|Selling, general and                              |                    | 
|administrative                                    |                    |  |                   | 775,866   
|Research and development                          |                    |  |                   | 197,387   
|                                                  |                    |  |                   |           
|Total operating expenses                          |                    |  |                   | 973,253   
|                                                  |                    |  |                   |           
|Operating loss                                    |                    |  |                   | (978,878  
|                                                  |                    | 
|Interest expense, net                             |                    |  |                   | 119,965   
|Interest expense, non-cash -                      |                    | 
|contingent beneficial conversion feature (Note 1) |                    |  |                   | 758,907   
|Other (income) expense, net                       |                    |  |                   | 2,713     
|                                                  |                    |  |                   |           
|Net loss                                          |                    |  | $                 | (1,860,463
|                                                  |                    |  |                   |           
|Basic and diluted net loss per                    |                    | 
|share                                             |                    |  | $                 | (.54      
|                                                  |                    |  |                   |           
|Basic and diluted weighted                        |                    | 
|average number of common shares                   |                    | 
|outstanding                                       |                    |  |                   | 3,434,612 
|                                                  |                    |  |                   |           

See Accompanying
Notes to Unaudited Condensed Financial Statements.

4

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A4S Security, Inc.
                            Statements of Cash Flows                   Nine Months Ended
September 30, (Unaudited)

|                                                           | 2005 |  | 2004 |           
|---------------------------------------------------------- | ---- |  | ---- | ----------
|Cash flows from operating activities                       |      |  |      |           
|Net loss                                                   |      |  | $    | (3,268,559
|Adjustments to reconcile net loss to                       |      | 
|net cash used by operating activities:                     |      | 
|Amortization of interest on convertible debt allocation    |      |  |      | 1,057,165 
|Depreciation and amortization                              |      |  |      | 36,731    
|Recovery of doubtful accounts receivable                   |      |  |      | (5,000    
|(Increase) decrease in:                                    |      | 
|Accounts receivable                                        |      |  |      | 7,703     
|Inventories                                                |      |  |      | (78,089   
|Prepaid expenses                                           |      |  |      | (72,431   
|Other assets                                               |      |  |      | (2,896    
|Increase (decrease) in:                                    |      | 
|Accounts payable                                           |      |  |      | 46,477    
|Accrued liabilities                                        |      |  |      | 884       
|                                                           |      |  |      |           
|Net cash used by operating activities                      |      |  |      | (2,278,015
|                                                           |      |  |      |           
|Cash flows from investing activities:                      |      | 
|Purchases of property and equipment                        |      |  |      | (161,306  
|Purchase of intangibles                                    |      |  |      | (10,133   
|                                                           |      |  |      |           
|Net cash used by investing activities                      |      |  |      | (171,439  
|                                                           |      |  |      |           
|Cash flows from financing activities:                      |      | 
|Proceeds from issuance of notes payable                    |      |  |      | 1,760,750 
|Net proceeds from line of credit                           |      |  |      |          
|Payment of deferred financing costs                        |      |  |      | (206,012  
|Repayment of bridge loans                                  |      |  |      | (930,000  
|Repayment of installment obligations                       |      |  |      | (6,307    
|Proceeds from issuance of common stock and warrants        |      |  |      | 7,144,938 
|                                                           |      |  |      |           
|Net cash provided by financing activities                  |      |  |      | 7,763,369 
|                                                           |      |  |      |           
|Net increase  in cash                                      |      |  |      | 5,313,915 
|                                                           |      |  |      |           
|Cash at beginning of period                                |      |  |      | 597,659   
|                                                           |      |  |      |           
|Cash at end of period                                      |      |  | $    | 5,911,574 
|                                                           |      |  |      |           
|Supplemental disclosure of cash flow information           |      | 
|Cash paid during the period for interest                   |      |  | $    | 1,600     
|Schedule of non-cash investing and financing transactions: |      | 
|Conversion of debt into shares of common stock             |      |  | $    | 3,343,674 

See
Accompanying Notes to Unaudited Condensed Financial Statements.

5

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A4S Security, Inc.Notes to Condensed
Financial Statements (Unaudited)

INTERIM
FINANCIAL STATEMENTS

The accompanying financial statements of A4S Security, Inc. (the "Company" or "A4S") have been prepared in accordance with the
instructions to quarterly reports on Form 10-QSB. In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position, results of operations and changes in financial position
at September 30, 2005, and for all periods presented have been made. Certain information and footnote data necessary for a fair
presentation of financial position and results of operations in conformity with accounting principles generally accepted in the
United States of America have been condensed or omitted. It is therefore suggested that these financial statements be read in
conjunction with the summary of significant accounting policies and notes to financial statements included in the Company's Form
SB-2, Amendment 2, filed with the SEC on June 22, 2005. The results of operations for the period ended September 30, 2005 are not
necessarily an indication of operating results for the full year.

|1. | Initial
public offering:
|-- | ------------------------

| | In July 2005 the Company
completed an initial public offering (IPO) of securities. The offering,
including the over-allotment option exercised by the underwriter, resulted in the sale of
a total of 1,380,000 units at $6.00 each for total gross proceeds of $8,280,000. Each unit
consisted of one share of common stock and one warrant to purchase one share of common
stock at $9.00 per share, expiring in 2010. The offering generated net proceeds to the
Company of approximately $6,967,000, after underwriting discounts and non-accountable
expense allowance to the underwriters and offering expenses payable by the Company.
Concurrent with the IPO, the Companys convertible notes payable and related
accrued interest were converted into shares of common stock (Note 2).
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The Emerging Issues Task Force
(EITF) of the Financial Accounting Standards Board (FASB) has
issued EITF 98-5 discussing among other topics, accounting for Convertible
Securities with Beneficial Conversion Features (BCF). The EITF requires that
convertible instruments issued with a conversion option that is in-the-money at the date
of such offering generally be accounted for with a portion of the offering proceeds
allocated to equity for the BCF and such amount be accreted back to the face amount of the
debt as additional interest expense.  Such difference between the prior conversion amount
and the IPO value is a contingent BCF and therefore not recognized until the IPO is
completed. In July 2005, the Company recorded a contingent BCF as
non-cash interest expense upon the completion of the IPO. This non-cash charge amount was
computed to be $758,907 and is included in the three months ended September 30, 2005. A
corresponding credit has been recorded as additional paid-in capital, so the charge has no
effect on total stockholders equity. No further entries will be required for
this contingent BCF item in future periods.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | As
a result of the impact of the IPO combined with the conversion of the convertible notes
payable and related accrued interest, the Companys outstanding common shares
increased from 147,389 outstanding prior to these transactions to a total of 3,961,446
outstanding afterwards. This increased number of additional shares outstanding will have a
significant impact on the computation of earnings (loss) per share in future periods.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

6

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|2. | Convertible
notes payable and bridge loans:
|-- | -------------------------------------------

| | Notes
payable:
| | --------------

| | The
Company completed a series of convertible debt offerings, under which a total of
$3,512,233 plus accrued interest of $241,588 was outstanding as of July 18, 2005, just
prior to the completion of the IPO. The unsecured notes bore interest at 6%
to 8%, and all convertible notes payable were due December 31, 2006. Substantially all of
the 6% notes, totaling approximately $1.8 million were sold to related parties consisting
of directors, officers and stockholders.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Upon
the successful completion of our IPO in July 2005 these notes and related accrued
interest, by their terms, were automatically converted into a total of approximately
2,434,000 common shares. These debt agreements contained restrictive covenants, including
restrictions on the Companys ability to declare dividends.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
proceeds of the note offerings were allocated between the estimated value of the notes and
any warrants based upon their relative estimated fair values and allocated to beneficial
conversion features, based upon their relative estimated intrinsic values. In 2003,
$181,000 of the convertible notes were allocated to the warrants and beneficial conversion
features. In 2004, an additional $204,000 was allocated, and during the nine months ended
September 30, 2005, an additional $121,000 was allocated based upon the offerings. The
amounts so allocated were being recorded as additional interest expense over the terms of
the loans, giving rise to an effective interest rate on the loans of approximately 15%.
Such amounts were
expensed upon the conversion of the notes with $67,328 recorded as additional interest
expense during the three months ended September 30, 2005.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Bridge
loans:
| | -------------

| | During
November and December 2004, the Company borrowed a total of $105,000 from three
stockholders under unsecured demand notes, bearing interest at 8%. The bridge loans were
repaid in January 2005, including interest.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
April 2005, the Company borrowed $825,000 under short-term notes with interest at 8% per annum,
which were repaid in July 2005 upon the completion of our IPO. The
notes included warrant rights, which based upon the IPO, gave rise to
a total of 137,500 warrants being issued, exercisable at $6.00 per share and expiring in
July 2010. The proceeds of the notes were allocated between the notes and the warrants
based upon their estimated relative fair values, with $53,600 being allocated to the value
of the warrants. This amount was being accreted back to the balance of the notes, over
their terms as additional interest expense.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | As
discussed in Note 1, a non-cash interest expense charge of $758,907 related to the
contingent BCF was recorded during the three months ended September 30, 2005.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. | Stockholders equity:
|-- | ---------------------

| | Common
stock transactions:
| | --------------------------

| | During the nine months ended September 30, 2004, $505 was received from the sale of warrants, and an additional $107,042 was
allocated to the value of warrants sold as part of the debt offerings in 2004. During 2004 the holders of warrants to acquire
18,807 shares of common stock at $.64 per share, exercised their warrants generating $12,616 in proceeds to the Company. During
the nine months ended September 30, 2005, $3,283 was received from the sale of warrants and an additional $174,600 was allocated
to the value of warrants sold as part of the debt offerings in 2005.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

7

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| | Stock
options:
| | --------------

| | In
2004, the Board of Directors of the Company adopted the 2004 Stock Incentive Plan, as
amended, for the benefit of certain employees and consultants. The Company has reserved a
total of 1,000,000 shares of its common stock for issuance pursuant to the exercise of
options to be granted. The Plan is administered by the Board of Directors. The exercise
prices of the options granted are determined by the Board and are established at the
estimated fair value of the Companys common stock at the date of grant. The fair
market value of the Companys common stock as determined by the Board prior to the IPO was based upon
contemporaneous transactions at or near the time stock options were granted. The
Companys Board determines the term of each option, the number of shares for which
each option is granted and the rate at which each option is exercisable. Options are
granted with terms not to exceed 10 years. In October 2004 the Company granted options to
purchase 353,261 shares of common stock, and in December 2004, an additional 27,174
options were granted, all at an exercise price of $3.50 per share. Of the 380,435 options
granted in 2004, 353,261 vest 25% annually in arrears and 27,174 vest 33.3% annually in
advance. At the date of grant, these options have a ten-year life except 119,565 options,
which have a five year life. The weighted average fair value of options granted in 2004
was $3.50.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During the nine months ended September 30, 2005, options to purchase 254,748 shares of common stock were
 granted under the Company's 2004 Stock Incentive Plan to employees, officers and directors, including
 54,348 options granted during that period to the Company's newly hired CEO. Options to purchase 212,596
 common shares, subject to vesting provisions will be exercisable at $3.50 per share and expire in ten
 years. Options to purchase 8,152 common shares, subject to vesting provisions will be exercisable at
 $3.85 per share and expire in five years, options to purchase 7,000 common shares are exercisable at
 $6.70 per share, 7,000 are exercisable at $5.38 per share and 20,000 are exercisable at $5.79 per share.
 Of the 254,748 options granted in 2005, 121,130 vest 25% annually in advance, 126,618 vest 33.3%
 annually in arrears and 7,000 were 100% vested at the date of grant.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Stock-based
compensation:
| | -------------------------

| | Statement
of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock Based Compensation,
defines a fair-value-based method of accounting for stock-based employee compensation
plans and transactions in which an entity issues its equity instruments to acquire goods
or services from non-employees, and encourages but does not require companies to record
compensation cost for stock-based employee compensation plans at fair value. The Company
has chosen to account for employee stock-based compensation using the intrinsic value
method prescribed in Accounting Principles Board Opinion No. 25 (APB No. 25),
Accounting for Stock Issued to Employees, and related interpretations. Accordingly,
employee compensation cost for stock options is measured as the excess, if any, of the
estimated fair value of the Companys stock at the date of the grant over the amount
an employee must pay to acquire the stock. The Company has provided pro forma disclosures
of net  loss as if the fair value based method of accounting for stock-based
compensation, as prescribed by SFAS No. 123, had been applied. Options issued to
non-employees for services are accounted for in accordance with SFAS No. 123.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
following table illustrates the effect on net loss and net loss per share as if the Company
had applied the fair value recognition provisions of SFAS 123, to its stock-based employee
plans.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

8

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|                                   | Three months ended
September 30, |  | Nine months ended
September 30, |           
|---------------------------------- | -------------------------------- |  | ------------------------------- | ----------
|
|Net loss, as reported              |                                  |  | $                               | (1,860,000
|Deduct: Total stock-based employee |                                  | 
|compensation expense determined    |                                  | 
|under fair value based method      |                                  | 
|for awards granted, modified       |                                  | 
|or settled                         |                                  |  |                                 | (130,000  
|                                   |                                  |  |                                 |           
|Pro forma net loss                 |                                  |  | $                               | (1,990,000
|                                   |                                  |  |                                 |           
|Net loss per share:                |                                  | 
|Basic and diluted - as reported    |                                  |  | $                               | (.54      
|                                   |                                  |  |                                 |           
|Basic and diluted - pro forma      |                                  |  | $                               | (.58      
|                                   |                                  |  |                                 |           

| | The
fair value of the options granted was estimated on the dates of grant using the
Black-Scholes option pricing model with the following assumptions used: expected dividend
yield, 0%; expected stock price volatility 51%; risk free interest rate 4.3% in 2005 and
2004 and 4.2% in 2003, expected life of options 9.5 years in 2005 and 2004 and 5 years in
2003.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No.
123(R) Share-Based Payment, which addresses the accounting for share-based payment
transactions. SFAS No. 123(R) eliminates the ability to account for share-based
compensation transactions using APB No. 25, and generally requires instead that such
transactions be accounted and recognized in the statement of operations based on their
fair value. SFAS No. 123(R) will be effective for public companies that file as small
business issuers as of the beginning of the next  annual reporting period that begins after
December 15, 2005. The Company is evaluating the provisions of the standard. Depending
upon the amount of and terms for options that are granted in future periods and the impact
of previous issues that will vest subsequent to January 1, 2006, the implementation of
this standard could have a significant non-cash impact on results of operations in future
periods.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4. | Customer
Concentration
|-- | ----------------------

| | For
the nine-month periods ended September 30, 2005 and 2004, one customer accounted for 95%
and 100%, respectively, of net sales. For the three-month period ended September 30, 2004,
this customer accounted for 100% of net sales.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

9

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ITEM 2.

MANAGEMENTS
DISCUSSION AND ANALYSIS

Overview

We
market high resolution mobile digital video recording systems for security and
surveillance. Our products were designed originally for use in the law enforcement market.
In early 2004, as a result of significant lead times being encountered in the buying
decisions of law enforcement customers and the completion of a second product, we began
marketing products to mass transit customers. We have one principal customer, Kansas City
Area Transit Authority (KCATA), which accounted for approximately 95% of our
sales in the nine months ended September 30, 2005. Our primary near term focus is the mass
transit market, and we are currently engaged in active discussions with over 70
metropolitan transportation authorities. Our plan is to present our products to these
potential customers. Subsequent to September 30, 2005 we were awarded a contract by the
San Joaquin Regional Rail Commission (SJRRC) to install 31 ShiftWatch® Transportation
Video Systems in SJRRCs Altamont Commuter Express rail system. The SJRRC contract
includes specified options for additional units to be acquired by SJRRC or its assignees,
with our approval.

We
also believe that the law enforcement market represents a significant long-term
opportunity, and we plan to be active in this market by attending trade shows and
monitoring and publicizing use of our products by the Loveland, Colorado Police
Department and participating in panels and committees of the International Association of
Chiefs of Police (IACP).

The
IACP has taken the initiative in developing a working specification for digital video
standards for law enforcement agencies. In 2000 the IACP conducted an in-car video survey
that began the understanding of participation and need for video evidence in field
operations. A study regarding the effect and operational guidelines for digital video was
conducted and published in 2004, titled Police In-Car Video Camera Evaluation.

Funded
by the National Institute of Justice, the IACP Research and Technology Branch,
commissioned an Advisory Panel to establish minimum performance specifications for
digital recording systems to enhance officer safety and to scientifically measure
appropriate minimum performance levels for use by law enforcement agencies.

Michael
Siemens, President of A4S, was invited to participate on the Advisory Panel due to his
unique experience as a vendor of digital video recording systems combined with his
experience as a retired police officer. Initially, Mr. Siemens sat as a member of several
Advisory Panel internal committees and recently was asked to additionally participate as
chair of the task group on Interoperability, a committee helping establish operational
effectiveness in the field for law enforcement officers.

In
July 2005, A4S completed its initial public offering (IPO) of securities,
resulting in the sale of 1,380,000 units, each consisting of one common share and one
warrant to purchase a common share, exercisable at $9.00 per share. The IPO raised
approximately $8.3 million in gross proceeds for the Company. Under provisions contained
in their terms, approximately $3.5 million in convertible notes and accrued interest were
automatically converted into approximately 2,434,000 shares of common stock upon the
completion of the IPO.

Results of Operations

The
Independent Registered Public Accounting Firms report on the Companys
financial statements as of December 31, 2004, and for each of the years in the two-year
period then ended, includes a going concern explanatory paragraph, that
describes substantial doubt about the Companys ability to continue as a going
concern. The auditors' report was issued prior to the completion of our IPO.

10

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Comparison of the nine-month periods
ended September 30, 2005 to 2004

Net
sales for the nine months ended September 30, 2005 totaled $108,000, which is $17,000
lower than the level of our 2004 sales. Net sales for the 2005 and 2004 periods were
comprised almost entirely from products sold into the mass transit market to KCATA, which
was obtained as a customer during mid-2004.

Cost
of sales for the nine months ended September 30, 2005 totaled $80,000, which was in line
with the 2004 period.

Selling,
general and administrative expenses in the nine months ended September 30, 2005, totaled
$1,746,000, which is a $1,163,000 or a 199% increase as compared to the 2004 period. The
increase is primarily attributable to approximately a $590,000 increase in payroll costs
from additions to sales, development and management personnel, a $121,000 increase in
professional fees as the Company grew and also prepared for its IPO, and the balance
represented additional costs associated primarily with sales and marketing costs.

Research
and development expenses in the nine months ended September 30, 2005 totaled $335,000,
which is a $164,000 or 96% increase as compared to the 2004 period. The increase is due to
additional research and development personnel costs of approximately $54,000 in the nine
months ended September 30, 2005 as compared to the 2004 period and expanded product
development activities in 2005 following fund raising activities that closed in April
2005.

Interest
expense for the nine months ended September 30, 2005, totaled $1,215,000, (including the
$759,000 contingent beneficial conversion feature expense) which is a $1,011,000 or 497%
increase as compared to the 2004 period. The increase was directly attributable to higher
debt levels to fund the operating losses and development activities and the amortization
of the additional interest expense associated with the amount allocated to the warrants
and the beneficial conversion features from the convertible debt offerings. Interest
expense in 2005 was net of approximately $36,000 in earnings from invested cash funds.

No
income tax benefit was recorded on the loss for the nine months ended September 30, 2005,
as our management was unable to determine that it was more likely than not that such
benefit would be realized.

Comparison of the three-month periods
ended September 30, 2005 to 2004

Net
sales for the three months ended September 30, 2005 totaled a refund amount of $(12,500),
which arose from the return of two units previously sold to Powell, WY. We agreed to allow
the product return from this law enforcement customer due to the customers request
and in view of the continued delays in law enforcement standards setting. Net sales for
the three months ended September 30, 2004 totaled $3,150, for sales to KCATA. Net sales
for the 2005 and 2004 periods were comprised almost entirely from products sold into the
mass transit market to KCATA, which was obtained as a customer during mid-2004.

Cost
of sales for the nine months ended September 30, 2005 were a credit of $(7,000), which was
associated with the product return.

Selling,
general and administrative expenses in the three months ended September 30, 2005, totaled
$776,000, which is a $521,000 or 205% increase as compared to the 2004 period. The
increase is primarily attributable to approximately a $297,000 increase in payroll costs
from additions to sales, development and management personnel, a $18,000 increase in
professional fees as the Company grew and also prepared for a public offering and the
balance additional costs associated primarily with sales and marketing costs.

11

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Research
and development expenses in the three months ended September 30, 2005 totaled $197,000,
which is a $132,000 or 202% increase as compared to the 2004 period. The increase is due
to a number of factors primarily additional development personnel and outsourced research
and development activities being incurred. Such amounts can vary quarter to quarter.

Interest
expense for the three months ended September 30, 2005, totaled $879,000, (including the
$759,000 contingent beneficial conversion feature expense) which is a $789,000 or 873%
increase as compared to the 2004 period. The increase was directly attributable to the
amortization of the additional interest expense associated with the amount allocated to
the warrants and the beneficial conversion features from the convertible debt offerings,
net of the reduction in interest bearing debt following the completion of the public
offering in July 2005 and the $36,000 in earnings during the three months ended September 30, 2005,
 from invested cash funds.

No
income tax benefit was recorded on the loss for the three months ended September 30, 2005,
as our management was unable to determine that it was more likely than not that such
benefit would be realized.

Liquidity and Capital
Resources

We
had a net loss of $3,269,000 for the nine months ended September 30, 2005. We expect our
expenses in the three months ending December 31, 2005 to be at or somewhat above the
level incurred for the three months ended September 30, 2005. Following the completion of
our IPO in July 2005 we have increased our staffing and product development and marketing
efforts to attempt to increase sales. We are currently engaged in active sales
communications with over 70 metropolitan transit authorities. Because of our lack of
backlog and the uncertainty regarding the authorities purchasing decisions, we are
not estimating expected revenues for 2005. It is likely that a loss will be incurred for
the three months ending December 31, 2005. Subsequent to September 30, 2005 we were
awarded a contract by the San Joaquin Regional Rail Commission (SJRRC) to install 31
ShiftWatch® Transportation Video Systems in SJRRCs Altamont Commuter Express
rail system. The SJRRC contract includes specified options for additional units to be
acquired by SJRRC or its assignees, with our approval.

At
September 30, 2005, we had working capital of $5.8 million, of which $5.9
million was cash or cash equivalents. During July 2005, we completed an IPO of
our securities. The offering, including the over-allotment option exercised by
the underwriter, sold a total of 1,380,000 units at $6.00 each for total gross
proceeds of $8,280,000. Each unit consisted of one share of common stock and one
warrant to purchase one share of common stock at $9.00 per share expiring in
2010. The offering generated net proceeds to the Company of approximately $7.0
million after underwriting discounts, non-accountable expense allowance to the
underwriters and offering expenses paid by the Company.

Capital
expenditures, primarily for development, testing equipment, office equipment and
facility improvement costs for the balance of the fiscal year ending December
31, 2005 are anticipated to total approximately $30,000 to $70,000.

We
anticipate that spending for research and development for the fiscal year ending December
31, 2005, will increase appreciably from those incurred for the year ended December 31,
2004 and for the interim period ended September 30, 2005. The primary expenditures will be
focused on product refinement and enhancements to respond to customer requests. Additional
development costs will also be required to achieve the product standards, once they are
finalized for the law enforcement industry. Additionally, new applications will also
require additional development expenses.

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We
have a line of credit arrangement for up to $395,000 with First Interstate Bank of
Kalispell, Montana pursuant to which we have been able to draw against 100% of eligible
purchase orders we receive from customers. The line of credit relationship is based upon
an understanding with the bank, and advances are made and subject to, individual note
agreements executed as purchase orders are submitted for funding. Advances under such note
agreements, when made, are collateralized by inventories, receivables, equipment and
intangibles of A4S. The interest rate on advances is established at the time of advance
and notes in 2004 were generally at a rate of 11.5%. The notes have a maturity date of
ninety days following the advance. During 2004, $205,000 was advanced and repaid under two
purchase orders. During the nine months ended and as of September 30, 2005, no amounts
were outstanding under the arrangement. As the line of credit arrangement is not subject
to a written agreement, the bank may withdraw at any time; however, the bank has not given
any indication to us that they will not continue to provide the facility.

During
2003 and 2004 we raised $1,020,000 and $1,556,000, respectively,  through the sale of
convertible notes payable. During the nine months ended September 30, 2005 an additional
$936,000 was raised from the sale of convertible notes payable. The notes bore interest
at rates ranging from 6% to 8% and were due December 31, 2006. Proceeds from the
convertible notes were allocated between the estimated fair value for the warrants and
the beneficial conversion feature based upon the relative fair values of each component.
In 2003 $181,000 of the convertible notes was allocated to these components and in 2004,
an additional $204,000 was allocated based upon the 2004 offerings. During the nine
months ended September 30, 2005, an additional $121,000 was allocated to such components
for convertible notes sold in that period. The amounts so allocated were being recorded
as additional interest expense over the lives of the loans, giving rise to an effective
interest rate on the loans of 15%. The proceeds from the notes were used for operating
and development expenses. Upon the completion of our initial public offering in July
2005, under their terms, the notes and accrued interest were converted into approximately
2,434,000 common shares.

During
2004 the holders of warrants to acquire 60,332 shares of common stock, exercised their
warrants, generating $39,000 proceeds to us.

During
November and December 2004, Gregory Pusey, E. Jeffrey Peierls and Brian Peierls,
shareholders of the Company, loaned an aggregate of $105,000 to us for working capital.
The notes, including interest at 8.0%, were repaid in January 2005.

In
April 2005, we borrowed $825,000 under short-term notes with interest at 8% per annum,
which was repaid in July 2005 upon the completion of our initial public offering. The
notes included warrant rights, which based upon the initial public offering, gave rise to
a total of 137,500 warrants exercisable at $6.00 per share and expire in July 2010.

Operating Activities

Net
cash consumed by operating activities was $2,278,000 during the nine months ended
September 30, 2005. Cash was consumed by the loss of $3,269,000, less non-cash expenses of
$1,094,000 for depreciation, amortization and interest. Increases in inventories and
prepaid expenses totaled $151,000 during the period following the increased level of
funding with the 2005 fund raising activities. A net increase of $47,000 in accounts
payable and accruals during the period provided cash.

Net
cash consumed by operating activities was $756,000 during the nine months ended September
30, 2004. Cash was consumed by the loss of $921,000, offset by non-cash expenses of
$231,000 in total depreciation, amortization and interest expenses. Cash was also consumed
by a $69,000 increase in inventories in the period.

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Investing Activities

Net
cash outflows from investing activities consumed $171,000 during the nine months ended
September 30, 2005. The outflow was primarily attributable to purchases of equipment. Net
cash outflows from investing activities consumed $15,000 during the nine months ended
September 30, 2004 for purchases of equipment.

Financing Activities

Net
cash inflows from financing activities generated $7,763,000 during the nine months ended
September 30, 2005. The public offering generated approximately $7.0 million, and notes
payable were increased by $1,761,000 and we paid costs associated with debt issuances of
$206,000 during the 2005 period. During this period $930,000 in bridge loans were repaid,
including $825,000 in bridge loans that had been borrowed in 2005. We also received net
proceeds from the sale of common stock purchase warrants totaling $178,000 during the 2005
period.

Net
cash inflows from financing activities generated $869,000 during the nine months ended
September 30, 2004, with $660,000 from the sale of convertible notes payable, a $96,000
draw on our line of credit and net proceeds of $120,000 from the sale of common stock
purchase warrants during the period.

| | Recently
issued accounting pronouncement:
| | -----------------------------------------

| | In
December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No.
123(R) Share-Based Payment, which addresses the accounting for share-based payment
transactions. SFAS No. 123(R) eliminates the ability to account for share-based
compensation transactions using APB No. 25, and generally requires instead that such
transactions be accounted and recognized in the statement of operations based on their
fair value. SFAS No. 123(R) will be effective for public companies that file as small
business issuers as of the beginning of the next annual reporting period that begins after
December 15, 2005. The Company is evaluating the provisions of the standard. Depending
upon the amount of and terms for options that are granted in future periods and the impact
of previous issues that will vest subsequent to January 1, 2006, the implementation of
this standard could have a significant non-cash impact on results of operations in future
periods.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

CAUTIONARY STATEMENT
REGARDING FORWARD-LOOKING INFORMATION AND STATEMENTS

Certain statements in
Managements Discussion and Analysis and other portions of this report are
forward-looking statements within the meaning of Section 21E of the Securities Exchange
Act of 1934, as amended, and are subject to the safe harbor created thereby. These
statements relate to future events or the Companys future financial performance and
involve known and unknown risks, uncertainties and other factors that may cause the actual
results, levels of activity, performance or achievements of the Company or its industry to
be materially different from those expressed or implied by any forward-looking statements.
In some cases, forward-looking statements can be identified by terminology such as
may, will, could, would,
should, expect, plan, anticipate,
intend, believe, estimate, predict,
potential or other comparable terminology. Please see the Cautionary
Note Regarding Forward-Looking Statements in the Companys Form SB-2, including
amendments thereto, for a discussion of certain important factors that relate to
forward-looking statements contained in this report. Although the Company believes that
the expectations reflected in these forward-looking statements are reasonable, it can give
no assurance that such expectations will prove to be correct. Unless otherwise required by
applicable securities laws, the Company disclaims any intention or obligation to update or
revise any forward-looking statements, whether as a result of new information, future
events or otherwise.

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Item 3.   Controls and
Procedures

(a)  
Evaluation of Disclosure Controls and Procedures

Management of the Company, including
the Chief Executive Officer and the Chief Financial Officer, has conducted an evaluation
of the effectiveness of the Companys disclosure controls and procedures (as defined
in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of the last day
of the period of the accompanying financial statements (the Evaluation Date). Based
on that review and evaluation, the President and Chief Financial Officer have concluded
that, as of the Evaluation Date, the Companys disclosure controls and procedures
were adequate and effective to ensure that material information relating to the Company
would be made known to them by others within those entities in a timely manner,
particularly during the period in which this quarterly report on Form 10-QSB was being
prepared, and that no changes are required at this time.

PART II   OTHER
INFORMATION

Item 6.   Exhibits

(a)
  Exhibits

|EXHIBIT | DESCRIPTION
|------- | -----------

---

|31.1 | Rule
13a-14(a)/15d-14(a) - Certification of Chief Executive Officer.           Filed herewith.
|---- | ----------------------------------------------------------------------------------------------

|31.2 | Rule
13a-14(a)/15d-14(a) - Certification of Chief Financial Officer.           Filed herewith.
|---- | ----------------------------------------------------------------------------------------------

|32 | Section
1350 Certification Pursuant to 18 U.S.C. Section 1350, as           Adopted Pursuant to
Section 906 of the SARBANES-OXLEY ACT of 2002.           Filed herewith.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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SIGNATURES

In accordance with the requirements
of the Securities Exchange Act of 1934, the registrant caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.

|                         |                                                                                                                            
|------------------------ | ---------------------------------------------------------------------------------------------------------------------------
|Dated: November 14, 2005 | A4S Security, Inc.
      (Registrant)
 By: /s/ Jeffrey G. McGonegal
     Jeffrey G. McGonegal,
     Chief Financial Officer

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