**UNITED STATES        SECURITIES AND EXCHANGE COMMISSION        Washington, D.C. 20549**

**FORM        10-QSB**

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

For the quarterly        period ended September 30, 2007

OR

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

Commission file        number: 001-32566

**SECURITY WITH        ADVANCED TECHNOLOGY, INC.**        (Exact Name of Small Business Issuer as Specified in Its Charter)

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

**10855 Dover        Street, Suite 1000, Westminster, Colorado 80021-3936**        (Address of principal executive offices) (Zip Code)

**(303)        439-0372**        (Issuer’s telephone number, including area code)

Check whether the issuer (1) filed        all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past        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 16, 2007 was 6,746,422.

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

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**SECURITY WITH ADVANCED        TECHNOLOGY, INC**.

|                                                                                                                                                                                             | Page   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| PART 1— Financial                Information                                                                                                                                          |   |   |   |  |   |
|                                                                                                                                                                                             |        |
| Item                1.   Condensed Consolidated Unaudited Financial Statements                                                                                                    |   |   |
|                                                                                                                                                                                        |        |
|                Consolidated                Balance Sheet as of September 30, 2007 (Unaudited)                    |   |   |   | 3 |   |
|                                                                                                                                                                                        |        |
|                Consolidated                Statements of Operations For the Three and Nine                       |   |   |
|                     Months                Ended September 30, 2007 and 2006 (Unaudited) |   |   |   | 4 |   |
|                                                                                                                                                                                        |        |
|                Consolidated                Statements of Cash Flows For the Nine                                 |   |   |
|                     Months                Ended September 30, 2007 and 2006 (Unaudited) |   |   |   | 5 |   |
|                                                                                                                                                                                        |        |
|                Notes                to Condensed Consolidated Financial Statements Unaudited                     |   |   |   | 6 |   |
|                                                                                                                                                                                        |        |
| Item                2.   Management's Discussion and Analysis                                                                                                                     |   |   |   | 17 |   |
|                                                                                                                                                                                        |        |
| Item                3.   Controls and Procedures                                                                                                                                  |   |   |   | 22 |   |
|                                                                                                                                                                                        |        |
| PART II -                Other Information                                                                                                                                                  |   |   |
|                                                                                                                                                                                        |        |
| Item 1.                   Legal Proceedings                                                                                                                                       |   |   |   | 23 |   |
|                                                                                                                                                                                        |        |
| Item 2.                   Unregistered Sales of Equity Securities and Use of                Proceeds                                                                              |   |   |   | 23 |   |
|                                                                                                                                                                                        |        |
| Item 3.                   Defaults Upon Senior Securities                                                                                                                         |   |   |   | 23 |   |
|                                                                                                                                                                                        |        |
| Item 4.                  Submission of Matters to a Vote of Security Holders                                                                                                      |   |   |   | 23 |   |
|                                                                                                                                                                                        |        |
| Item 5.                  Other Information                                                                                                                                        |   |   |   | 24 |   |
|                                                                                                                                                                                        |        |
| Item 6.                   Exhibits                                                                                                                                                |   |   |   | 24 |   |
|                                                                                                                                                                                        |        |
|                Signatures                                                                                        |   |   |   | 24 |   |

2

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PART I —        FINANCIAL INFORMATION

Item 1.          Condensed Consolidated Unaudited Financial Statements

# Security With        Advanced Technology, Inc.        Consolidated Balance Sheet        September 30, 2007        (Unaudited)

|                                                                                                                                   |        |
|-----------------------------------------------------------------------------------------------------------------------------------|--------|
| ASSETS                                                                                                                            |   |   |   |  |   |
| Current assets:                                                                                                                   |   |   |
|      Cash                                                                                                |   |   | $ | 620,070 |   |
|      Short-term                investments                                                               |   |   |   | 2,853,998 |   |
|      Trade accounts                receivable, net of a $56,413 allowance                                |   |   |   | 279,921 |   |
|      Inventories                (Note 2)                                                                 |   |   |   | 1,472,488 |   |
|      Prepaid                expenses and other current assets                                            |   |   |   | 602,682 |   |
|                                                                                                                                   |        |  |
|          Total                current assets                                         |   |   |   | 5,829,159 |   |
|                                                                                                                              |        |
| Property and equipment, net                (Note 3)                                                                               |   |   |   | 594,166 |   |
|                                                                                                                              |        |
| Intangible and other assets                (Note 4)                                                                               |   |   |   | 7,685,321 |   |
|                                                                                                                                   |        |  |
| Total assets                                                                                                                      |   |   | $ | 14,108,646 |   |
|                                                                                                                                   |        |  |
| LIABILITIES AND                SHAREHOLDERS' EQUITY                                                                               |   |   |
| Current                liabilities:                                                                                               |   |   |
|      Accounts                payable                                                                     |   |   | $ | 852,568 |   |
|      Accrued                expenses                                                                     |   |   |   | 673,404 |   |
|      Deferred                revenues                                                                    |   |   |   | 503,844 |   |
|      Current portion                of long-term debt and capital lease                                  |   |   |   | 70,884 |   |
|      Current portion                of minimum royalty payments                                          |   |   |   | 118,000 |   |
|                                                                                                                                   |        |  |
|          Total                current liabilities                                    |   |   |   | 2,218,700 |   |
|                                                                                                                                   |        |
| Long-term debt and capital                lease, net of current portion                                                           |   |   |   | 7,762 |   |
| Minimum royalty payments,                net of current portion and unamortized discount                                          |   |   |   | 666,159 |   |
|                                                                                                                                   |        |  |
|          Total                liabilities                                            |   |   |   | 2,892,621 |   |
|                                                                                                                                   |        |  |
| Commitments and                contingencies (Note 8)                                                                             |   |   |
|                                                                                                                                   |        |
| Shareholders' equity (Note                6):                                                                                     |   |   |
|      Preferred                stock, no par value, 5,000,000 shares authorized;                          |   |   |
|            3,198,505                Series A shares issued and outstanding |   |   |   | 9,727,319 |   |
|      Common Stock,                no par value, 30,000,000 shares authorized;                            |   |   |
|            6,441,343                shares issued and outstanding          |   |   |   | 33,700,747 |   |
|      Accumulated                deficit                                                                  |   |   |   | (32,212,041 | ) |
|                                                                                                                                   |        |  |
|          Total                shareholders' equity                                   |   |   |   | 11,216,025 |   |
|                                                                                                                                   |        |  |
| Total liabilities and                shareholders' equity                                                                         |   |   | $ | 14,108,646 |   |
|                                                                                                                                   |        |  |

See accompanying        Notes to Unaudited Condensed Consolidated Financial Statements.

3

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# Security With        Advanced Technology, Inc.        Consolidated Statements of Operations        Periods ended September 30        (Unaudited)

|                                                                                                  | Three Months Ended |        | Nine Months Ended |            |
|--------------------------------------------------------------------------------------------------|--------------------|--------|-------------------|------------|
||
| Net sales (Note                7)                                                                |               |   | $                 | 421,601    |   | $ | 18,629 |   | $ | 912,594 |   | $ | 247,840 |   |
| Cost of sales                                                                                    |               |   |              | 746,425    |   |   | 240,554 |   |   | 1,428,553 |   |   | 733,155 |   |
|                                                                                                  |                    |        |                   |            |  |  |  |  |
|     Gross profit                (loss)                                       |               |   |              | (324,824   | ) |   | (221,925 | ) |   | (515,959 | ) |   | (485,315 | ) |
|                                                                                                  |                    |        |                   |            |  |  |  |  |
| Operating                expenses:                                                               |               |   |
|   Selling, general                and administrative (includes                         |               |   |
|     non-cash compensation                of $381,404, $187,631,              |               |   |
|     $1,883,271 and                $482,676)                                  |               |   |              | 2,530,951  |   |   | 1,095,402 |   |   | 7,027,337 |   |   | 3,114,939 |   |
|   Research and                development                                              |               |   |              | 214,528    |   |   | 325,215 |   |   | 952,931 |   |   | 803,806 |   |
|                                                                                                  |                    |        |                   |            |  |  |  |  |
|   Total operating                expenses                                              |               |   |              | 2,745,479  |   |   | 1,420,617 |   |   | 7,980,268 |   |   | 3,918,745 |   |
|                                                                                                  |                    |        |                   |            |  |  |  |  |
|   Operating                loss                                                        |               |   |              | (3,070,303 | ) |   | (1,642,542 | ) |   | (8,496,227 | ) |   | (4,404,060 | ) |
|                                                                                                  |                    |        |                   |            |  |  |  |  |
| Other income                (expense):                                                           |               |   |
|     Interest                expense                                          |               |   |              | (18,209    | ) |   | (2,373 | ) |   | (109,257 | ) |   | (2,768 | ) |
|     Interest expense,                non-cash                                |               |   |
|          contingent                beneficial       |               |   |
|          conversion                feature (Note 5) |               |   |              | (3,053,340 | ) |   | — |   |   | (6,159,901 | ) |   | — |   |
|     Interest                income                                           |               |   |              | 22,622     |   |   | 12,897 |   |   | 97,567 |   |   | 77,323 |   |
|     Other income                (expense), net                               |               |   |              | 22,954     |   |   | (657 | ) |   | 8,780 |   |   | (1,588 | ) |
|                                                                                                  |                    |        |                   |            |  |  |  |  |
|      Total other                income (expense)                        |               |   |              | (3,025,973 | ) |   | 9,867 |   |   | (6,162,811 | ) |   | 72,967 |   |
|                                                                                                  |                    |        |                   |            |  |  |  |  |
|      Net                loss                                            |               |   |              | (6,096,276 | ) |   | (1,632,675 | ) |   | (14,659,038 | ) |   | (4,331,093 | ) |
|                                                                                                  |                    |        |                   |            |
| Deemed dividend arising                from                                                      |               |   |
|    warrant                conversion repricing (Note 6)                      |               |   |              | (2,030,744 | ) |   | — |   |   | (2,030,744 | ) |   | — |   |
|                                                                                                  |                    |        |                   |            |  |  |  |  |
|     Net                loss attributable to Common                           |               |   |
|           Stock                shareholders    |               |   | $                 | (8,127,020 | ) | $ | (1,632,675 | ) | $ | (16,689,782 | ) | $ | (4,331,093 | ) |
|                                                                                                  |                    |        |                   |            |  |  |  |  |
|                                                                                                  |                    |        |                   |            |
| Basic and diluted net loss                per share                                              |               |   | $                 | (1.31      | ) | $ | (0.41 | ) | $ | (2.84 | ) | $ | (1.09 | ) |
|                                                                                                  |                    |        |                   |            |  |  |  |  |
| Basic and diluted                weighted                                                        |               |   |
|  average number of                common shares                                             |               |   |
|  outstanding                                                                                |               |   |              | 6,224,514  |   |   | 3,965,858 |   |   | 5,883,069 |   |   | 3,962,948 |   |
|                                                                                                  |                    |        |                   |            |  |  |  |  |
|                                                                                                  |                    |        |                   |            |

See accompanying        Notes to Unaudited Condensed Consolidated Financial Statements.

4

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# Security With        Advanced Technology, Inc.        Consolidated Statements of Cash Flows        Nine Month Periods Ended September 30 (Unaudited)

|                                                                                                                                                        | 2007   |        | 2006   |             |
|--------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|-------------|
| Cash flows from                operating activities:                                                                                                   |   |   |   |             |   |   |  |   |
|      Net                loss                                                                                                  |   |   | $      | (14,659,038 | ) | $ | (4,331,093 | ) |
|      Adjustments to                reconcile net loss to                                                                      |   |   |
|          net                cash used by operating activities:                                            |   |   |
|               Non-cash                stock based compensation                   |   |   |   | 1,883,271   |   |   | 482,676 |   |
|               Depreciation                and amortization                       |   |   |   | 133,511     |   |   | 63,716 |   |
|               Amortization                of discount on convertible debt   |   |   |   | 6,159,901   |   |   | — |   |
|         (Increase)                decrease in:                                                                 |   |   |
|               Accounts                receivable                                 |   |   |   | (174,241    | ) |   | (143,938 | ) |
|               Inventories                                                        |   |   |   | (660,488    | ) |   | (534,247 | ) |
|               Prepaid                expenses and other assets                   |   |   |   | (513,572    | ) |   | 26,146 |   |
|          Increase                (decrease) in:                                                           |   |   |
|               Accounts                payable                                    |   |   |   | 181,707     |   |   | 261,951 |   |
|               Accrued                liabilities                                 |   |   |   | 490,958     |   |   | 116,060 |   |
|               Deferred                revenue                                    |   |   |   | 294,647     |   |   | 203,033 |   |
|                                                                                                                                                        |        |        |        |             |
|      Net cash (used                by) operating activities                                                                   |   |   |   | (6,863,344  | ) |   | (3,855,696 | ) |
|                                                                                                                                                        |        |        |        |             |
| Cash flows from investing                activities:                                                                                                   |   |   |
|      Purchases of                short term investments                                                                       |   |   |   | (853,998    | ) |   | — |   |
|      Investment                in PCP (Note 9)                                                                           |   |   |   | (1,000,000  | ) |   | — |   |
|      Purchases of                property and equipment                                                                       |   |   |   | (449,893    | ) |   | (54,830 | ) |
|      Purchase of                intangibles and other assets                                                                  |   |   |   | (142,093    | ) |   | (85,402 | ) |
|      Advances under                note receivable                                                                            |   |   |   | —     |   |   | (450,000 | ) |
|                                                                                                                                                        |        |        |        |             |
|      Net cash (used)                by investing activities                                                                   |   |   |   | (2,445,984  | ) |   | (590,432 | ) |
|                                                                                                                                                        |        |        |        |             |
| Cash flows from financing                activities:                                                                                                   |   |   |
|      Proceeds from                issuance of convertible notes payable                                                       |   |   |   | 5,999,901   |   |   | — |   |
|      Proceeds from                issuance of preferred and common stock from warrant conversion, net of                costs |   |   |   | 3,208,063   |   |   | — |   |
|      Proceeds from                issuance of note payable                                                                    |   |   |   | —     |   |   | 200,000 |   |
|      Payment of                deferred financing costs                                                                       |   |   |   | (160,000    | ) |   | — |   |
|      Repayment of                line of credit and installment obligations                                                   |   |   |   | (75,416     | ) |   | (4,434 | ) |
|      Proceeds from                issuance of Common Stock                                                                    |   |   |   | 22,200      |   |   | 10,826 |   |
|                                                                                                                                                        |        |        |        |             |
|      Net cash                provided by financing activities                                                                 |   |   |   | 8,994,748   |   |   | 206,392 |   |
|                                                                                                                                                        |        |        |        |             |
| Net (decrease) in cash and                cash equivalents                                                                                             |   |   |   | (314,580    | ) |   | (4,239,736 | ) |
|                                                                                                                                                   |        |        |
| Cash and cash equivalents at                beginning of period                                                                                        |   |   |   | 934,650     |   |   | 4,665,955 |   |
|                                                                                                                                                        |        |        |        |             |
| Cash and cash equivalents at                end of period                                                                                              |   |   | $      | 620,070     |   | $ | 426,219 |   |
|                                                                                                                                                        |        |        |        |             |
| Supplemental disclosure of                cash flow information                                                                                        |   |   |
|      Cash paid                during the period for interest                                                                  |   |   | $      | 12,500      |   | $ | 1,800 |   |
|                                                                                                                                                        |        |        |        |             |
| Schedule of non-cash                investing and financing transactions                                                                               |   |   |
|      Conversion of                preferred stock into common stock                                                           |   |   | $      | 1,472,041   |   | $ | — |   |
|      Conversion of                debt into shares of preferred stock                                                         |   |   | $      | 6,095,723   |   | $ | — |   |
|      Conversion of                debt into shares of common stock                                                            |   |   | $      | —     |   | $ | 3,343,674 |   |
|      Common shares                issued in acquisition of PCP                                                                |   |   | $      | 1,015,041   |   | $ | — |   |
|      Minimum royalty                obligation issued in acquisition of PCP                                                   |   |   | $      | 802,921     |   | $ | — |   |
|                                                                                                                                                        |        |        |        |             |
|                                                                                                                                                        |        |        |

See accompanying        Notes to Unaudited Condensed Consolidated Financial Statements.

5

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# Security With        Advanced Technology, Inc.        Notes to Condensed Consolidated Financial Statements        (Unaudited)

                **INTERIM FINANCIAL STATEMENTS**

The accompanying financial        statements of Security With Advanced Technology, Inc. (the “Company” or        “SWAT”) 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, 2007, 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 annual report on Form 10-KSB filed with the Securities and        Exchange Commission (“SEC”) for the year ended December 31, 2006. The results        of operations for the period ended September 30, 2007 are not necessarily an indication of        operating results for the full year.

| **1.** | **Going                concern, management’s plans, accounting policy and recent accounting                pronouncements:** |
|--------|------------------------------------------------------------------------------------------------------------------------------------|

                      In the Company’s annual report on Form 10-KSB for        the fiscal year ended December 31, 2006, the Report of the Independent Registered Public        Accounting Firm includes an explanatory paragraph that describes substantial doubt about        the Company’s ability to continue as a going concern. The Company’s interim        consolidated financial statements for the nine months ended September 30, 2007 have been        prepared on a going concern basis, which contemplates the realization of assets and the        settlement of liabilities and commitments in the normal course of business. The Company        incurred a net loss and utilized net cash in operating activities of $14,659,000 and        $6,863,000, respectively, for the nine months ended September 30, 2007. The net loss        included $8,176,700 in non–cash expenses relating to $1,883,300 in stock based        compensation, $6,159,900 in interest accretion on the convertible note offering and        $133,500 for depreciation and amortization.

                      These conditions raise substantial doubt about the        Company’s ability to continue as a going concern. Management’s plans with        regard to these matters are discussed below. The accompanying consolidated financial        statements do not include any adjustments that might result from the outcome of this        uncertainty. We expect to continue to incur losses from operations through 2007.        However, the Company received approximately $6.0 million in a March and April 2007        convertible debt offering and an additional $3.7 million in a September and October 2007        warrant exercise. While we expect that recent acquisitions and new product developments        will help increase revenues, such increases for the near term may only provide limited        additional cash flow from such sales. The Company’s ability to continue as a going        concern depends on the success of management’s plans to bridge cash shortfalls in        2007 and 2008 including the following:

                      1.               Continue to advance development of the Company’s new products, particularly the        non-lethal Avurt and Veritas launchers, projectiles and other peripheral products and to        begin selling these products in late 2007, thereby generating cash flow from these        sales;

                      2.       Aggressively        implement cost control measures to reduce overhead and conserve cash;

                      3.               Continue to support and expand our wholly-owned        subsidiary Vizer Group Inc.‘s ("Vizer") contract opportunities in both fixed        facilities and mobile environments as well as the CommandGrid product, a unique technology        which enables easy access and use to maintaining facilities access and surveillance through        an online hosted service. The business model for this product is similar to the security        alarm business;

                      4.               Work to capitalize on the supplier relationships        we have developed to reduce product development costs and lower product costs while        providing high quality warranted products to meet customer demands in both the non-lethal        and security segments;

6

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                      5.               Work to complete the re-design of the        ShiftWatchTM TVS DVR product to complete the in-process installations and open orders        thereby recognizing revenues and generating cash flow from these sales; and

                      6.               Contingent upon the Company’s ability to        re-design the ShiftWatchTM TVS DVR products and the level of sales of these products        in 2007, if any, explore alternative revenue sources from licensing or partnering        opportunities for the ShiftWatchTM TVS DVR product line.

                      7.        Continue        to monitor and implement cost control initiatives to conserve cash.

                       Should we be unable to successfully complete        development of the products currently in process additional losses would be recorded from        the write-off of any costs recorded from inventory, tooling, etc., associated with such        products. Additionally, if we are not able to generate additional near term revenues from        such products or other products we would need to consider funding alternatives including        raising additional funds which would cause additional dilution to the stock held by our        current shareholders.

                      **Recently issued accounting pronouncement         **

                       In July 2006, the FASB issued FASB Interpretation        No.48, “*Accounting for Uncertainty in Income Taxes, an Interpretation of FASB        Statement 109*"(“FIN 48”) which clarifies the accounting for uncertainty in        income taxes recognized in accordance with SFAS No. 109, *“Accounting for Income        Taxes*.” FIN 48 is a comprehensive model for how a company should recognize,        measure, present, and disclose in its financial statements uncertain tax positions that the        company has taken or expects to take on a tax return. If an income tax position exceeds a        more likely than not (greater than 50%) probability of success upon tax audit, the company        will recognize an income tax benefit in its financial statements. Additionally, companies        are required to accrue interest and related penalties, if applicable, on all tax exposures        consistent with jurisdictional tax laws. We adopted FIN 48 for the fiscal year beginning        January 1, 2007. We did not have any unrecognized tax benefits and there was no effect on        our financial condition or results of operations as a result of implementing FIN 48. We        file income tax returns in the U.S. federal jurisdiction and various state jurisdictions.        The Company is no longer subject to U.S. federal tax examinations for years before 2003,        and state tax examinations for years before 2002. Management does not believe that there        will be any material changes in our unrecognized tax positions over the next 12 months. Our        policy is that we recognize interest and penalties accrued on any unrecognized tax benefits        as a component of income tax expense. As of the date of adoption of FIN 48, we did not have        any accrued interest or penalties associated with any unrecognized tax benefits, nor was        any interest expense recognized during the quarter. Our effective tax rate differs from the        federal statutory rate primarily due to non-deductible expenses and is offset somewhat by        state tax credits.

                      **Loss per share**

                       SFAS No. 128, “*Earnings Per Share,”*        requires dual presentation of basic and diluted earnings per share (“EPS”) with        a reconciliation of the numerator and denominator of the basic EPS computation to the        numerator and denominator of the diluted EPS computation. Basic EPS excludes dilution.        Diluted EPS reflects the potential dilution that could occur if securities or other        contracts to issue Common Stock were exercised or converted into Common Stock or resulted        in the issuance of Common Stock that then shared in the earnings of the Company.

                       Loss per share of Common Stock is computed based on the        weighted average number of common shares outstanding during the period. Convertible notes,        preferred shares, stock options and warrants are not considered in the calculation, as the        impact of the potential common shares issuance (totaling approximately 12,967,000 shares at        September 30, 2007 and approximately 3,051,000 shares at September 30, 2006) would be to        decrease loss per share. Therefore, diluted loss per share is equivalent to basic loss per        share.

| **2.** | **Inventories:** |
|--------|------------------|

|                                                                                                         |        |
|---------------------------------------------------------------------------------------------------------|--------|
| As of September                30, 2007, total inventories consisted of:                                |   |   |   |  |   |
|           Finished                products for resale |   |   | $ | 430,532 |   |
|           Work-in-process                             |   |   |   | 652,233 |   |
|           Raw                materials and components |   |   |   | 389,723 |   |
|                                                                                                         |        |  |
| Total                inventories                                                                        |   |   | $ | 1,472,488 |   |
|                                                                                                         |        |  |

7

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| **3.** | **Property and                equipment:** |
|--------|--------------------------------------------|

|                                                                                                              |        |
|--------------------------------------------------------------------------------------------------------------|--------|
| Property and                equipment at September 30, 2007, consisted of the following:                     |   |   |   |  |   |
|           Computer                equipment and software   |   |   | $ | 289,325 |   |
|           Office                equipment and improvements |   |   |   | 170,815 |   |
|           Production                equipment and tooling  |   |   |   | 310,392 |   |
|           Demonstration                vehicles            |   |   |   | 61,919 |   |
|                                                                                                              |        |  |
|                                                                                                         |   |   |   | 832,451 |   |
| Less accumulated                depreciation                                                                 |   |   |   | 238,285 |   |
|                                                                                                              |        |  |
| Property and equipment,                net                                                                   |   |   | $ | 594,166 |   |
|                                                                                                              |        |  |

| **4.** | **Intangible                and other assets:** |
|--------|-------------------------------------------------|

|                                                                                              |        |
|----------------------------------------------------------------------------------------------|--------|
| Intangible and                other assets consisted of the following at September 30, 2007: |   |   |   |  |   |
| Intangible assets acquired                in acquisitions                                    |   |   | $ | 7,401,418 |   |
| Patents and patent and                trademark applications                                 |   |   |   | 274,005 |   |
| Deposits and                other                                                            |   |   |   | 9,898 |   |
|                                                                                              |        |  |
|                                                                                         |   |   | $ | 7,685,321 |   |
|                                                                                              |        |  |

                       The Company is in the process of allocating the fair        value of the intangible assets acquired in the acquisitions of Vizer and its wholly-owned        subsidiary Avurt International, Inc. (“Avurt”) that was effective as of        December 31, 2006 and also those acquired in the acquisition of Perfect Circle Projectiles,        LLC (“PCP”) on July 10, 2007. Management estimates that the final determination        and allocation of fair value will be completed prior to the first anniversary of each of        the acquisitions.

                       The Company obtained certain patents in the acquisition        of PCP. In addition, the Company capitalizes legal costs and filing fees associated with        obtaining patents on its new discoveries. Once the patents have been issued, the Company        will amortize these costs over the shorter of the legal life of the patent or its estimated        economic life.

| **5.** | **Convertible                notes payable and credit arrangements:** |
|--------|-----------------------------------------------------------------------|

                       **Convertible notes payable**

                       On March 26, 2007 and April 12, 2007 the Company completed a $5,999,901 total private        placement of unregistered securities consisting of 1,999,967 convertible promissory note        units (“Note Units”) at $3.00 per unit with each Note Unit consisting of a 5.1%        per annum Convertible Promissory Note (“Note”) due September 30, 2007, unless        earlier converted, and warrants (“Investor Warrants”). The Company ascribed a        value of $3,756,912 to the Investor Warrants, which was recorded as a discount to notes        payable.  The fair value ascribed to the Investor Warrants was estimated on the        commitment date using the Black-Scholes pricing model with the following assumptions:         risk-free interest rate of 4.66% to 4.8%; expected life being the life of the Investor        Warrants; expected volatility of 74.3% to 81.1%; and expected dividend yield of        0%.   In addition to the fair value ascribed to the Investor Warrants, the        Company ascribed $2,242,989 to the beneficial conversion feature in the Notes, which was        recorded as a discount to notes payable.  The values ascribed to the Investor Warrants        and beneficial conversion feature follow the guidance of EITF Issue No.        98-5,“Accounting for Convertible Securities with Beneficial Conversion Features or        Contingently Adjustment Conversion Ratios,” and EITF Issue No. 00-27,        “Application of Issue No. 98-5 to Certain Convertible Instrument” of the        FASB’s Emerging Issues Task Force.  The Company also incurred approximately        $160,000 in offering costs related to the offering of the Note Units. The fair value of the        Investor Warrants and beneficial conversion feature and the deferred offering costs were        amortized to expense over the term of the Notes, which based upon the July 2007 shareholder        meeting approval, ended as of July 19, 2007, using the effective interest method.         During the three and nine month periods ended September 30, 2007, the Company amortized to        interest expense $3,053,340 and $6,159,901, respectively, which amount included the        $160,000 in offering costs.  In addition, the Company recognized $95,822 in related        interest expense based on the terms of the Note, of which $16,150 was recognized in the        3rd quarter of 2007. Each $3.00 of principal (plus interest) due under the Notes        was automatically converted into one share of Series A Convertible Preferred Stock (the        “Series A Preferred Stock”), or 2,031,907 shares, upon shareholder approval of        such conversion, which occurred at the July 19, 2007 SWAT 2007 Annual Meeting of        Shareholders. The Series A Preferred Stock is non-voting, pays no dividends, contains no        liquidation preference and is convertible for no additional consideration into one share of        Common Stock for each share of Series A Preferred Stock owned.

8

----

                      The Investor Warrants issued in connection with the Note Units offering consist of a total        of 1,999,967 of Warrant “A,” 866,650 of Warrant “B” and 1,999,967        of Warrant “SWATW”. Warrant “A” is exercisable at $4.75 per share        and expires four years from closing; Warrant “B” is exercisable at $5.00 per        share and expires four years from closing; and Warrant “SWATW”‘s terms        mirror exactly SWAT’s current publicly-traded warrants, trading under the symbol:        SWATW. Generally, the SWATW Warrants are exercisable at $9.00 per share, expire in July        2010 and are redeemable by SWAT beginning on July 18, 2008 for $0.10 each, under defined        conditions, including a minimum trading price of the Common Stock of $13.50 per share. All        warrants are exercisable in cash, commencing six months after the closing and contain        anti-dilution rights for stock splits and stock dividends. Substantially all of the        proceeds received in the offering were allocated to the value of the Investor Warrants and        the beneficial conversion feature of the Notes.

                       The Company agreed to file a registration statement with the United States Securities and        Exchange Commission (the “SEC) for the resale of the shares of Common Stock issuable        upon conversion of the Series A Preferred Stock underlying the Notes issued in the March        and April 2007 private placement, the shares of Common Stock issuable upon exercise of the        Warrants “A,” the Warrants “B” and the Warrants “SWATW”        issued in the March and April 2007 private placement, and the Warrants “SWATW”        issued in the March and April 2007 private placement.  Certain failures to file the        registration statement or to obtain registration statement effectiveness under the terms of        the registration rights agreement would require the Company to pay each investor a penalty        fee equal to 2% per month up to a maximum of 10% of such investor’s investment. The        Company filed such registration statement on August 27, 2007 which is pending SEC approval        for effectiveness. Based upon the Company’s evaluation of the provisions of EITF        00-19-2, “Accounting for Registration Payment Arrangements,” no accrual for        penalty fees was deemed necessary at September 30, 2007.

                       The purpose of the private placement was to raise funds        to support the acquisitions of Vizer and Avurt, for ongoing product development and for        working capital and general corporate purposes.

9

----

                       **Line of Credit and Term Loan**

                        Vizer, the Company's wholly-owned subsidiary, has a        line of credit totaling $50,000 of which $0 is currently outstanding. In addition, Vizer        has a term loan outstanding with the same lender. Advances under the line of credit are        made based on the available balance of the line, which matures in May 2011 and bears        interest at the prime rate plus 3.25%. The term loan bears interest at 11.50% and is        payable in monthly installments of $1,285, including principal and interest. The loan        matures in May 2013 and has an outstanding principal balance of $67,819, at September 30,        2007. Both the line of credit and term loan are collateralized by business assets and        personally guaranteed by the Company's president.

                      On August 31, 2007 the Company was notified by the        lender that they deemed the December 2006 acquisition by the Company of Vizer to be a        violation and default under the provisions of the agreements. The Company has accordingly        classified the remaining balance under the note as a current liability as of September 30,        2007.

# Letter of        Credit

                       In connection with the Company’s entering into a        supply agreement, the Company’s bank issued a $100,000 letter of credit on behalf of        the Company to the supplier, against future purchases. In August, 2007, the Company ceased        doing business with this supplier. As a result, the letter of credit has been        cancelled.

| **6.** | **Shareholders’                equity:** |
|--------|------------------------------------------------|

                       **Common stock transactions**

                       Between September 17, 2007 and September 27, 2007, holders of 1,153,750 “B”        Warrants entered into Warrant Conversion Agreements (the “Warrant Conversion        Agreements”) with the Company pursuant to which such holders agreed to exercise their        “B” Warrants for an aggregate of approximately 294,250 shares of the        Company’s Common Stock and an aggregate of 860,000 shares of the Company’s        Series A Preferred Stock at $3.20 per share each. The closing of the Warrant Conversion        Agreements was effective September 28, 2007 and generated gross proceeds to the Company of        approximately $3,692,000 of which $3,367,773, representing 860,000 shares of Series A        Preferred Stock and 192,429 shares of Common Stock, had been received by the Company on or        before September 30, 2007. The remaining funds were received in October 2007. The Series A        Preferred Stock is non-voting, pays no dividends, contains no liquidation preference and        each share of Series A Preferred Stock is convertible for no additional consideration into        one share of Common Stock. The change in the value of the warrants as a result of the        repricing was determined to be, in substance,  a deemed dividend applicable to those        warrant holders (presented as an increase in net loss attributable to common        shareholders).  The deemed dividend was computed based upon the Black-Scholes        valuation model.

                       Additionally, each holder of “B” Warrants that exercised their “B”        Warrants pursuant to the terms of the Warrant Conversion Agreement received “B”        Replacement Warrants (“‘B’ Replacement Warrants’”) equal to        the number of “B” Warrants exercised at $3.20 per share. Accordingly, an        aggregate of approximately 1,165,500 “B” Replacement Warrants were issued by        the Company to such holders. The “B” Replacement Warrants are exercisable for        shares of the Company’s Common Stock at $4.30 per share commencing six months from        the date of issuance of the “B” Replacement Warrants and ending on the three        year anniversary of such date. The “B” Replacement Warrants may be exercised on        a cashless basis beginning one year following the date of issuance of the “B”        Replacement Warrants. The terms of the “B” Replacement Warrants contain        conventional adjustments for stock splits and similar events as contained in the        “B” Warrants and, except as otherwise set forth in the “B”        Replacement Warrants and the Warrant Conversion Agreement, the terms of the “B”        Replacement Warrants are substantially identical to the terms of the “B”        Warrants.

                      The Company is in discussions with certain consultants for the payment of consulting fees        for services rendered in connection with the exercise of the “B” Warrants. The        Company may agree to pay the consultants a cash fee of up to 4% plus a warrant equal to 4%        of the gross proceeds to the Company.

                      The purpose of the offering was to raise funds for        product sales, marketing, promotion, inventory purchases and tooling and for working        capital and general corporate purposes.

10

----

                      The exercise of the “B” Warrants and the        issuance of the “B” Replacement Warrants were exempt from registration under        Section 4(2) of the Securities Act, and Regulation D promulgated thereunder, based        upon the Company’s compliance with such rules and regulations. The Company received        representations and warranties from all participating holders that they are        “accredited investors” (as such term is defined in Rule 501 of Regulation D)        and no form of general solicitation or general advertising was conducted in connection with        the offering. The securities contain restrictions on transfer in accordance with the rules        and regulations of the Securities Act and Regulation D.

                       During the nine months ended September 30, 2007, the        holders of a total of 402,586 shares of Series A Preferred Stock elected to convert such        shares into 402,586 shares of the Company’s Common Stock on a one-for-one basis as        provided for under the terms of the Series A Preferred Stock. As a result of this        conversion a total of $1,409,051 has been reclassified from Preferred Stock to Common Stock        on the accompanying consolidated balance sheet as of September 30, 2007.

                       On March 26, 2007, the holders of 12,229 warrants to        acquire a like number of shares of the Company’s Common Stock, elected to exercise        the warrants at the exercise price of $1.66 per share. This generated proceeds to the        Company of $20,299.

                       During the nine months ended September 30, 2007, the        holder of options to acquire 544 shares of Common Stock under the Company's 2004 Stock        Incentive Plan (the "Plan") exercised the options to receive 544 shares of Common Stock,        generating cash proceeds of $1,901 to the Company.

                       **Stock-based compensation:**

                       SWAT currently provides stock-based compensation to        employees and directors under the Plan that has been approved by the Company’s        shareholders. On July 19, 2007, the Company’s shareholders approved an amendment to        the Plan to increase the number of shares reserved for issuance under the Plan from        1,500,000 to 2,000,000. Stock options granted under the Plan generally vest over two to        four years from the date of grant, as specified in the Plan or by the compensation        committee of the Company’s board of directors, and are exercisable for a period of up        to ten years from the date of grant. During the three and nine month periods ended        September 30, 2007 and 2006, SWAT recorded share-based compensation expense related to        stock options resulting in non-cash expenses of $381,404, $1,846,012, $187,631 and        $481,453, respectively. Additionally during the three and nine months ended September 30,        2007, a non-cash expense of $37,259 was recorded based upon the value of non-qualified        options to acquire 15,000 shares of Common Stock issued to a consultant.

                       The Company estimated the fair value of each stock        option at the grant date by using the Black-Scholes option pricing model with the following        weighted average assumptions used for grants during the nine months ended September 30,        2007 and 2006:

|                                        | 2007   |        | 2006   |          |
|----------------------------------------|--------|--------|--------|----------|
| Expected term                          |   |   |   | 10 years |   |   | 5-10 years |  |   |   |   |
| Volatility                             |   |   |   | 76-81    | % |   | 116 | % |
| Risk-free                interest rate |   |   |   | 4.5-4.9  | % |   | 4.2 | % |
| Dividend                yield          |   |   |   | 0        | % |   | 0 | % |
| Forfeitures                            |   |   |   | 5        | % |   | 5 | % |

                       The expected term of stock options represents the        period of time that the stock options granted are expected to be outstanding based on        historical exercise trends. The expected volatility is based on the historical price        volatility of SWAT’s Common Stock. The risk-free interest rate represents the U.S.        Treasury bill rate for the expected life of the related stock options. The dividend yield        represents SWAT’s anticipated cash dividend over the expected life of the stock        options. Forfeitures represent the weighted average estimate of future options to be        cancelled primarily due to employee terminations.

11

----

                 A summary of stock option activity of options to employees and directors for the nine        months ended September 30, 2007, is presented below:

|                                                  | Shares                    Under                    Option |        | Weighted                    Average                    Exercise                    Price |           | Weighted                    Average                    Remaining                    Contractual                    Life (Years) |        | Aggregate                    Intrinsic Value |        |
|--------------------------------------------------|-----------------------------------------------------------|--------|------------------------------------------------------------------------------------------|-----------|---------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------|--------|
| Outstanding at January 1,                2007    |                                                      |   |                                                                                     | 837,869   |                                                                                                                            | $      | 4.53                                         |   |  |   |   | $ |   |   |
|      Granted            |                                                      |   |                                                                                     | 1,091,000 |                                                                                                                                 |        | 4.44                                         |   |  |   |   |   |   |   |
|      Exercised          |                                                      |   |                                                                                     | (544      | )                                                                                                                               |   | 3.50                                         |   |   |   |   |   |   |   |
|      Forfeited          |                                                      |   |                                                                                     | (183,483  | )                                                                                                                               |   | 5.08                                         |   |   |   |   |   |   |   |
|                                                  |                                                           |        |                                                                                          |           |                                                                                                                                 |        |                                              |        |
| Outstanding at                September 30, 2007 |                                                      |   |                                                                                     | 1,744,842 |                                                                                                                            | $      | 4.46                                         |   |  | 8.3 |   | $ | Nil |   |
|                                                  |                                                           |        |                                                                                          |           |                                                                                                                                 |        |                                              |        |
| Exercisable at                September 30, 2007 |                                                      |   |                                                                                     | 579,055   |                                                                                                                            | $      | 4.68                                         |   |  | 7.4 |   | $ | Nil |   |
|                                                  |                                                           |        |                                                                                          |           |                                                                                                                                 |        |                                              |        |

                       Based upon the Company’s experience,        approximately 95% of the above stock options are expected to vest in the future, under        their terms.

                       During the nine months ended September 30, 2007,        options to purchase 1,091,000 shares of Common Stock were granted under the Plan to        employees, officers and directors. The options are subject to vesting provisions, are        exercisable at a weighted average of $4.44 per share, and expire in ten years. During the        nine months ended September 30, 2007, 544 options to acquire shares of Common Stock were        exercised at $3.50 each and 183,483 options to acquire shares of Common Stock were        cancelled due to forfeitures. During the nine months ended September 30, 2006, no employee        stock options were exercised.

                       The weighted average grant-date fair value of options        granted during the nine months ended September 30, 2007 and 2006 was $3.65 and $3.20,        respectively. The total fair value of stock options granted to employees that vested during        the nine months ended September 30, 2007 and 2006 was $3,978,706 and $949,925,        respectively.

                       The aggregate intrinsic value in the table above        represents the total intrinsic value (the difference between our closing stock price on        September 30, 2007 and the exercise price, multiplied by the number of in-the-money        options) that would have been received by the option holders had all option holders been        able to exercise and in fact had exercised their options on September 30, 2007.

                       A summary of the status of the Company’s        non-vested options to acquire Common Stock granted to employees, officers and directors and        changes during the nine month period ended September 30, 2007 is presented        below.

| Nonvested Shares                               |        | Nonvested                    Shares                    Under                    Option |        | Weighted                    Average                    Exercise                    Price |        | Weighted                    Average                    Grant Date                    Fair Value |      |
|------------------------------------------------|--------|----------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------|------|
| Nonvested at January 1,                2007    |   |                                                                                   |   | 582,901                                                                                  |   | $                                                                                               | 4.39 |   | $ | 2.98 |   |
|      Granted          |   |                                                                                   |   | 1,091,000                                                                                |   |                                                                                                 | 4.44 |   |  | 3.65 |   |
|      Vested           |   |                                                                                   |   | (361,964                                                                                 | )      |                                                                                            | 4.62 |   |  | 3.57 |   |
|      Forfeited        |   |                                                                                   |   | (146,150                                                                                 | )      |                                                                                            | 5.08 |   |  | 3.72 |   |
|                                                |        |                                                                                        |        |                                                                                          |        |                                                                                                 |
|                                                |        |                                                                                        |
| Nonvested at                September 30, 2007 |   |                                                                                   |   | 1,165,787                                                                                |   | $                                                                                               | 4.28 |   | $ | 3.33 |   |
|                                                |        |                                                                                        |        |                                                                                          |        |                                                                                                 |
|                                                |        |                                                                                        |

12

----

                       As of September 30, 2007, the Company had approximately        $2,805,000 of unrecognized non-cash compensation cost related to stock options that will be        recorded over a weighted average period of approximately two years.

                      On August 6, 2007, a total of 15,000 non-qualified stock purchase warrants were        granted to a consultant for services. The warrants are exercisable at the then fair market        value of $3.83 per share, vested at the time of grant and expire five years from the date        of grant.

| **7.** | **Industry                segments and customer concentration:** |
|--------|------------------------------------------------------------------|

                        **Industry segments**

                       As a result of the Vizer merger that was completed as        of December 31, 2006, the Company now operates in business segments that are divided into        three distinct business reporting units. The first business unit, called        “Avurt,” includes the operations of Avurt and our “Veritas        Tactical,” which distributes and produces non-lethal personal protection devices and        compliance products and creates innovative training systems and tools to increase the        quality of training worldwide for law enforcement, militaries, both private and government,        and civilians. Avurt also includes the results of the recently acquired Perfect Circle        operations. The second business unit operates within the “Technology Division”        and includes the operations of Vizer, which specializes in product design, system design,        engineering, installation, and integration of facility security systems including access        control, video surveillance, intrusion detection, and wireless mesh network systems. The        third business unit operates within the “Technology Division” and includes the        operations of ShiftWatch which is a product line of mobile digital video surveillance        solutions for public transportation. All of the industry segments are located at the        Company’s headquarters in Westminster, Colorado. The Company determines its segment        results consistent with its management reporting and consolidated accounting policies. No        industry segment information is reported prior to the December 31, 2006 Vizer merger as        previously the Company operated in one business the ShiftWatch unit. Selected financial        information from the Company’s business segments is as follows:

| Nine months ended                    September 30, 2007 |        | Avurt  |        | Vizer      |        | ShiftWatch |          | Corporate                    Overhead /                    Elimination |        | Totals     |        |
|---------------------------------------------------------|--------|--------|--------|------------|--------|------------|----------|------------------------------------------------------------------------|--------|------------|--------|
| Net                sales                                |   |   | $      | 151,100    |   | $          | 536,100  |                                                                   | $      | 301,800    |   | $ | (76,400 | ) | $ | 912,600 |   |
| Gross profit                (loss)                      |   |   |   | (159,200   | )      |       | 72,100   |                                                                   |   | (428,900   | )      |   | — |   |   | (516,000 | ) |
| Operating loss                                          |   |   |   | (2,015,200 | )      |       | (594,500 | )                                                                      |   | (1,925,900 | )      |   | (3,960,600 | ) |   | (8,496,200 | ) |
| Interest expense                                        |   |   |   | 6,400      |   |       | 6,000    |                                                                   |   | 96,900     |   |   | 6,159,900 |   |   | 6,269,200 |   |
| Net loss                                                |   |   |   | (2,029,800 | )      |       | (564,900 | )                                                                      |   | (1,943,800 | )      |   | (10,120,500 | ) |   | (14,659,000 | ) |
| Depreciation                                            |   |   |   | 4,900      |   |       | 16,900   |                                                                   |   | 64,500     |   |   | — |   |   | 86,300 |   |
| Capital                expenditures                     |   |   |   | 390,400    |   |       | 50,700   |                                                                   |   | 8,800      |   |   | — |   |   | 449,900 |   |
| Identifiable                assets                      |   |   |   | 2,917,700  |   |       | 414,300  |                                                                   |   | 4,414,600  |   |   | 6,362,000 |   |   | 14,108,600 |   |

| Three months ended                    September 30, 2007 |        | Avurt  |        | Vizer    |        | ShiftWatch |          | Corporate                    Overhead /                    Elimination |        | Totals   |        |
|----------------------------------------------------------|--------|--------|--------|----------|--------|------------|----------|------------------------------------------------------------------------|--------|----------|--------|
| Net                sales                                 |   |   | $      | 136,800  |   | $          | 188,800  |                                                                   | $      | 96,000   |   | $ | — |   | $ | 421,600 |   |
| Gross profit                (loss)                       |   |   |   | (139,500 | )      |       | 42,400   |                                                                   |   | (227,700 | )      |   | — |   |   | (324,800 | ) |
| Operating loss                                           |   |   |   | (799,400 | )      |       | (227,800 | )                                                                      |   | (655,100 | )      |   | (1,388,000 | ) |   | (3,070,300 | ) |
| Interest expense                                         |   |   |   | 3,200    |   |       | —  |                                                                   |   | 96,900   |   |   | 2,971,400 |   |   | 3,071,500 |   |
| Net loss                                                 |   |   |   | (810,300 | )      |       | (192,200 | )                                                                      |   | (670,600 | )      |   | (4,423,200 | ) |   | (6,096,300 | ) |
| Depreciation                                             |   |   |   | 4,000    |   |       | 8,900    |                                                                   |   | 8,000    |   |   | — |   |   | 20,900 |   |

13

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                       **Customer concentration**

                       As of September 30, 2007, two customers comprised 23%        and 14%, respectively, of the outstanding total accounts receivable balance. For the        nine-month period ended September 30, 2007, two customers accounted for 24% and 10%,        respectively, of net sales and for the three-month period ended September 30, 2007, five        customers accounted for 16%, 14%, 13%, 12% and 11%, respectively, of net sales. For the        nine-month period ended September 30, 2006, three customers accounted for 44%, 26% and 11%,        respectively, of net sales and for the three-month period ended September 30, 2006, one        customer accounted for 100% of net sales.

| **8.** | **Commitments                and contingencies:** |
|--------|---------------------------------------------------|

                       **Facility lease**

                       On August 23, 2007, the Company entered into a facility        lease agreement for 19,941 square feet of new office space to replace the current office        space. The facility lease is for a period of five years and six months beginning November        2007.

                      The future minimum lease payments required under the        non-cancelable operating lease total approximately $31,600 for the remainder of 2007;        $190,400 for 2008; $196,100 for 2009; $202,000 for 2010; $208,000 for 2011, $183,000        for 2012 and $95,000 for 2013.

                       **Supply agreement**

                       On May 30, 2007, the Company’s wholly owned        subsidiary, PCP Acquisition, Inc., entered into a Supply Agreement with PCP for the supply        of projectile products. The agreement provided for an initial term of up to four years and        the Company agreed to certain conditions, including the Company’s providing specified        product liability insurance and handling import and export permits and licenses.        Additionally, the Company placed $1,000,000 into an escrow account to secure a portion of        anticipated future purchases. During July 2007, the Company acquired certain assets and        rights owned by PCP as described in Note 9 – Asset Acquisition, and under its terms        the Supply Agreement automatically terminated. In connection with the PCP acquisition, the        $1,000,000 held in escrow was applied at closing to the purchase price.

                       **Legal action**

                       On April 13, 2007, a complaint was filed in United        States District Court, Southern District of California, Case No. ‘07CV 0672 JAH POR,        by Pepperball Technologies, Inc. (“PTI”) against the Company, Vizer and Avurt.        PTI alleges in the civil action that the prospective manufacture and distribution of the        Company’s non-lethal projectile launchers infringed certain of PTI’s patents        and breached a Reseller Agreement and Non-Disclosure Agreement between Vizer and PTI. PTI        is seeking (a) unspecified damages for the alleged patent infringement and breach of        contract, (b) an injunction to prohibit further alleged patent infringement and (c) other        relief and costs.

14

----

                      In connection with the Company’s defense of this        lawsuit, on June 28, 2007, the Company filed documentation with the United States Patent        and Trademark Office (“USPTO”) requesting that the USPTO re-examine two patents        issued to PTI (US Patent Nos. 6,393,992 and 7,194,960) that are the subject of the alleged        patent infringement claims in the lawsuit. The Company’s filing with the USPTO sought        re-examination of the patents based upon 13 substantial new questions of        patentability relating to the validity of the patents. On September 28, 2007, the USPTO        notified the Company that the USPTO has granted the Company’s requests to        re-examine these two patents based upon 12 of the 13 substantial new questions of        patentability presented by the Company. The Company has filed a motion requesting a        stay in the lawsuit, pending the outcome of the examination of the USPTO and is awaiting a        decision on this motion.

| **9.** | **Asset                acquisition:** |
|--------|---------------------------------------|

               On        July 10, 2007, the Company acquired certain assets and rights owned by PCP.

                      The assets acquired by the Subsidiary in the        acquisition consist of PCP’s spherical projectile business for tactical and related        uses including PCP’s and one of its affiliate’s domestic and international        patent portfolio, trade secrets, machinery, tooling and associated assets and rights.        Consideration paid consisted of $1.0 million in cash, the issuance of 262,964 restricted        shares of the Company’s Common Stock and a six year Royalty Agreement with PCP.        Pursuant to the terms of the Royalty Agreement, the Subsidiary will make a quarterly        royalty payment to PCP for all live round and inert round spherical projectiles produced by        the Subsidiary during the term of the Royalty Agreement. In addition, the Subsidiary will        make annual minimum royalty payments to PCP during the term of the Royalty Agreement which        obligation is secured by a first priority lien in favor of PCP on all assets acquired by        Subsidiary in the acquisition. The annual minimum royalty payments may be prepaid by the        Subsidiary at any time without premium or penalty. The Royalty Agreement requires minimum        gross payments of $105,000 the first year, $157,000 in year two and $215,000 annually in        years three to six.

                       In connection with the Asset Purchase Agreement, the        Company also entered into a Registration Rights Agreement with the equity owners of PCP, a        Consulting Agreement with Gibson and PCP, a Patent License Agreement with PCP, a Facilities        Agreement with PCP and a Confidentiality and Non-Competition Agreement with PCP and certain        key employees of PCP. Pursuant to the terms of the Registration Rights Agreement, the        shareholders party thereto holding a majority of the registrable securities may, on one        occasion (subject to certain exceptions) at any time after six months following the closing        of the Asset Purchase Agreement, demand registration of all or a part of their registrable        securities. In addition, each shareholder who is a party to the Registration Rights        Agreement has one right (subject to certain exceptions) to require the Company to register        such shareholder’s registrable securities in connection with the Company’s        filing of a registration for its own securities or securities of other shareholders.        Registrable securities include all shares of Common Stock of the Company issued in        connection with the Asset Purchase Agreement and are subject to the approval of and cutback        or elimination by the Company (based upon market conditions).

15

----

Following is a summary of the        computation and allocation of the purchase price for the acquired business:

|                                                                                        |        |
|----------------------------------------------------------------------------------------|--------|
| Consideration                paid in acquisition:                                      |   |   |   |  |   |
| Cash paid to                seller                                                     |   |   | $ | 1,000,000 |   |
| Common stock issued to                seller (a)                                       |   |   |   | 1,015,041 |   |
| Minimum future royalty                payment obligation (discounted at estimated SWAT |   |   |
|  effective borrowing                rate) (b)                                     |   |   |   | 802,921 |   |
| Closing costs and                expenses                                              |   |   |   | 50,320 |   |
|                                                                                        |        |  |
| Total purchase price to be                allocated                                    |   |   | $ | 2,868,282 |   |
|                                                                                        |        |  |
| Allocation to acquired                assets:                                          |   |   |
| Tooling and                machinery                                                   |   |   | $ | 65,000 |   |
| Patents                                                                                |   |   |   | 17,000 |   |
| Intangible assets (excess                consideration over identifiable assets) (c)   |   |   |   | 2,786,282 |   |
|                                                                                        |        |  |
| Total purchase price to be                allocated                                    |   |   | $ | 2,868,282 |   |
|                                                                                        |        |  |

Notes:

    (a)               The 262,964 restricted the Common Stock issued at        closing were valued at the estimated fair market value based upon the ten day average        closing price prior to closing.

    (b)               Minimum royalty amount recorded as purchase        liability at closing, discounted at an assumed interest rate of 9%. Additional royalties        payable over the royalty term above the minimum will be recorded as known. Interest expense        totaling approximately $299,000 will be recognized over the term of the royalty agreement        on a straight-line basis.

    (c)               Intangible assets allocation consists of patents,        trade secrets, product rights, customer list. Average weighted life is estimated at nine        years, which will result in additional annual amortization expense of approximately        $318,000 per year ($77,000 per quarter).

| **10.** | **Subsequent                events:** |
|---------|---------------------------------------|

                      Subsequent to September 30, 2007, the holder of 203,258        Series A Preferred Shares elected to convert their shares into Common Shares on a        one-for-one basis as provided under their terms and the $609,774 cost basis of such shares        was therefore transferred to Common Stock.

                      Additionally as disclosed in Note 6 the Company        received $324,227 in proceeds from the final 101,821 shares arising from the warrant        conversion.

16

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# 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 our future financial performance and involve known        and unknown risks, uncertainties and other factors that may cause our actual results,        levels of activity, performance or achievements or those of our 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 our Form 10-KSB for the year ended        December 31, 2006 for a discussion of certain important factors that relate to        forward-looking statements contained in this quarterly report on Form 10-QSB. Although we        believe that the expectations reflected in these forward-looking statements are reasonable,        we can give no assurance that such expectations will prove to be correct. Unless otherwise        required by applicable securities laws, we disclaim any intention or obligation to update        or revise any forward-looking statements, whether as a result of new information, future        events or otherwise.

**ITEM 2.**

# MANAGEMENT’S        DISCUSSION AND ANALYSIS

# Overview

        Effective        as of December 31, 2006, we completed the acquisition of Vizer Group, Inc.        (“Vizer”) and Vizer’s wholly-owned subsidiary, Avurt International, Inc.        (“Avurt”). As consideration, we issued Vizer’s shareholders 754,380        shares of SWAT newly-issued, restricted Common Ctock. Up to an additional 533,333 shares of        our restricted Common Ctock are issuable subject to the terms of an earn-out provision        contingent upon the achievement of specified future revenue and operating thresholds. Since        the acquisition was completed effective as of December 31, 2006, our consolidated financial        statements reflect the acquisition on the consolidated balance sheet and our statements of        operations and cash flows for the three and nine months ended September 30, 2007, while the        statements of operations and cash flows for the three and nine months ended September 30,        2006 do not include any results of the acquired companies.

        On        July 10, 2007, we acquired the spherical projectile business of Perfect Circle Projectiles,        LLC, (“Perfect Circle” or “PCP”) the industry’s leading        producer of non-lethal spherical projectiles, for tactical and related uses in our new        launchers. The acquisition included Perfect Circle’s and one of its affiliate’s        domestic and international patent portfolio, trade secrets, machinery, tooling and        associated assets and rights. Perfect Circle has been producing high quality, reliable        projectiles since 1991 and is believed to be one of the only companies in the world        producing effective powder filled projectiles for use in non-lethal markets. As        consideration, we paid $1.0 million in cash, issued 262,964 shares of the Company’s        restricted Common Stock and executed a six-year Royalty Agreement with PCP. The $1.0        million cash portion of the consideration had been previously funded into an escrow account        under a supply agreement with Perfect Circle. Our consolidated financial statements reflect        the acquisition and the results of operations on the consolidated balance sheet as of        September 30, 2007 and our statements of operations and cash flows include the operating        results of the assets acquired from PCP for the period July 11 through September 30,        2007.

        Prior        to the late 2006 acquisition of Vizer and the 2007 acquisition of the spherical projectile        business PCP, we marketed 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 we began marketing products to mass        transit customers.

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# Results of        Operations

        In        the Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31,        2006, the Report of the Independent Registered Public Accounting Firm includes an        explanatory paragraph that describes substantial doubt about the Company’s ability to        continue as a going concern. The Company’s interim consolidated financial statements        for the nine months ended September 30, 2007 have been prepared on a going concern basis,        which contemplates the realization of assets and the settlement of liabilities and        commitments in the normal course of business. The Company incurred a net loss and utilized        net cash in operating activities of $14,659,000 and $6,863,000, respectively, for the nine        months ended September 30, 2007. The net loss included $8,176,700 in non-cash expenses        relating to $1,883,300 in stock based compensation, $6,159,900 in interest accretion on the        convertible note offering and $133,500 for depreciation and amortization.

        These        conditions raise substantial doubt about the Company’s ability to continue as a going        concern. Management’s plans with regard to these matters are discussed below. The        accompanying consolidated financial statements do not include any adjustments that might        result from the outcome of this uncertainty. We expect to continue to incur losses from        operations during 2007; however, the Company received approximately $6.0 million in a March        and April 2007 convertible debt offering and an additional $3.7 million in a September and        October 2007 warrant exercise. While we expect that recent acquisitions and new product        developments will help increase revenues, such increases for the near term may only provide        limited additional cash flow from such sales. The Company’s ability to continue as a        going concern depends on the success of management’s plans to bridge such cash        shortfalls in 2007 and 2008 including the following:

    1.               Continue to advance development of the        Company’s new products, particularly the non-lethal Avurt and Veritas launchers,        projectiles and other peripheral products and to begin selling these products in late 2007,        thereby generating cash flow from these sales;

    2.               Aggressively implement cost control measures to        reduce overhead and conserve cash;

    3.               Continue to support and expand our wholly-owned        subsidiary Vizer Group Inc.‘s ("Vizer") contract opportunities in both fixed        facilities and mobile environments as well as the CommandGrid product, a unique technology        which enables easy access and use to maintaining facilities access and surveillance through        an online hosted service. The business model for this product is similar to the security        alarm business;

    4.               Work to capitalize on the supplier relationships        we have developed to a reduce product development costs and lower product costs while        providing high quality warranted products to meet customer demands in both the non-lethal        and security segments;

    5.               Work to complete the re-design of the        ShiftWatchTM TVS DVR products to complete the in-process installations and open orders        thereby recognizing revenues and generating cash flow from these sales; and

    6.               Contingent upon the Company’s ability to        re-design the ShiftWatchTM TVS DVR products and the level of sales of these products        in 2007, if any, explore alternative revenue sources from licensing or partnering        opportunities for the ShiftWatchTM TVS DVR product line.

     7.               Continue to monitor and implement cost control        initiatives to conserve cash.

        Due        to performance problems and product failures primarily associated with the late 2006        release of the ShiftWatchTM TVS 300 product, significant 2006 and interim 2007 product        and installation revenues from ongoing contracts have been deferred as of September 30,        2007 pending successful reconfiguration and installation of the product. Approximately        $504,000 relating to amounts appropriately billed or collected under the terms of        installation contracts has been recorded as deferred revenue as of September 30, 2007. Such        deferred revenues will not be recognizable until the products are working correctly and        accepted by our customers. Product handling and installation costs in early 2007 are also        running higher. This is due to efforts and costs of not only work done to determine the        causes of the failures, but also the additional on-site processes to remove, repair and        replace the units. We are currently in contact with our contract hardware supplier to        determine the level, if any, of product failure cost relief they could be responsible for        and agree to cover. We are also aggressively proceeding with a new hardware source for the        re-designed units.

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# Comparison of the nine        months ended September 30, 2007 to 2006

        Net        sales for the nine months ended September 30, 2007 totaled $912,600, which is a $664,800 or        268% increase from net sales of $247,800 for the nine months ended September 30, 2006. The        change in sales between 2007 and 2006 is attributable to a $53,900 increase in the revenues        from the ShiftWatch division to a total of $301,800 in 2007, in addition to the sales        $459,700 in sales from Vizer and $151,100 in sales from Avurt, both acquired in 2007. The        Company had previously determined that the ShiftWatchTM TVS DVR units were not        performing as anticipated. Accordingly, installations in process where slowed down and in        some cases suspended. This condition combined with pending warranty work on other units,        resulted in approximately $504,000 of cumulative revenues for in-process contracts being        deferred and not recognized in revenue as of September 30, 2007.

        Cost        of sales for the nine months ended September 30, 2007 totaled $1,428,600, which is a        $695,400 increase as compared to the 2006 period. Cost of sales related to the        ShiftWatchTM TVS DVR unit business totaled $730,700, primarily resulting from the        additional costs associated with the issues related to the ShiftWatchTM TVS DVR unit        installation, testing and re-work costs that were incurred in 2007. It is expected that the        higher level of cost of sales will continue during 2007 as the retrofit work on the        hardware configuration and re-installation of the ShiftWatchTM TCS DVR units        continues. The remaining increase is associated with the acquired Vizer and Avurt        businesses.

        Selling,        general and administrative expenses in the nine months ended September 30, 2007 totaled        $7,027,300, which is a $3,912,400 or 126% increase as compared to the 2006 period. The        increase is primarily attributable to an increase of $1,366,300 in non-cash stock-based        compensation resulting from option issuances in 2007. In addition, the Vizer merger that        closed as of December 31, 2006 resulted in additional overhead costs and also increased        marketing expenses and personnel additions in anticipation of Avurt launcher and other        non-lethal products. The Company also incurred significant legal fees associated with        defending the Pepperball lawsuit.

        Research        and development expenses in the nine months ended September 30, 2007 totaled $952,900,        which is a $149,100 or 19% increase as compared to the 2006 period. The increase        is the net result of a decrease of approximately $510,000 in research and development        expense related to the ShiftWatchTM TCS DVR business which was more than offset by the        research and development costs associated with Avurt launcher and other non-lethal        products.

        Interest        expense for the nine months ended September 30, 2007 totaled $6,269,200, as compared being        virtually nil during the 2006 period. The increase was virtually all attributable to the        non-cash amortization of the $6,159,900 additional interest expense associated with the        amount allocated to the warrants and the beneficial conversion features of the convertible        debt offering completed in March and April 2007.

        No        income tax benefit was recorded on the loss for the nine months ended September 30, 2007,        as our management was unable to determine that it was more likely than not that such        benefit would be realized. At September 30, 2007, we had a net operating loss carry forward        for income tax purposes of approximately $20 million, expiring through 2026.

# Comparison of the        three months ended September 30, 2007 to 2006

        Net        sales for the three months ended September 30, 2007 totaled $421,600, which is a $403,000        increase from net sales of $18,600 for the three months ended September 30, 2006. The        increase in sales between 2007 and 2006 is attributable to an increase in the revenues from        the ShiftWatch division in 2007 of approximately $96,000, in addition to sales from Vizer        and Avurt, acquired in 2007, that totaled approximately $307,100, for the three months        ended September 30, 2007.

        Cost        of sales for the three months ended September 30, 2007 totaled $746,400, which is a        $505,900 increase as compared to the 2006 period. The change in cost of sales primarily        resulted from $325,600 of additional costs associated with the issues related to the        ShiftWatchTM TVS DVR unit installation, testing and re-work costs that where incurred        in 2007. It is expected that the higher level of cost of sales will during 2007 as the        retrofit work on the hardware configuration and re-installation of the ShiftWatchTMTVS        DVR units continues. The remaining increase is associated with the acquired Vizer and Avurt        businesses.

        Selling,        general and administrative expenses in the three months ended September 30, 2007 totaled        $2,531,000, which is an $1,435,500 or 131% increase as compared to the 2006 period. The        increase is primarily attributable to an increase of $193,800 in non-cash stock based        compensation resulting from option issuances in 2007 combined with additional marketing,        legal and overhead costs being incurred following the Vizer merger that closed as of        December 31, 2006 and as a result of the PepperBall litigation.

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        Research        and development expenses in the three months ended September 30, 2007 totaled $214,500,        which is a $110,700 decrease as compared to the 2006 period. The change is primarily due to        the slowdown in development costs associated with the ShiftWatchTM TVS DVR product        line which is partially offset by research and development costs associated with the Avurt        launcher and other non-lethal products.

        Interest        expense for the three months ended September 30, 2007 totaled $3,071,500, as compared to        being virtually nil during the 2006 period. The increase was virtually all attributable to        the non-cash amortization of the $3,053,300 additional interest expense associated with the        amount allocated to the warrants and the beneficial conversion features from the        convertible debt offering completed in March and April 2007.

# Issuances of Stock        Options

        Our        board of directors has reserved a total of 2,000,000 shares of our Common Stock for        issuance pursuant to our 2004 Stock Incentive Plan, as amended. Our board of directors        administers the plan. On July 19, 2007, the Company’s shareholders approved an        amendment to the Plan to increase the number of shares reserved under the Plan from        1,500,000 to 2,000,000. During the nine month periods ended September 30, 2007 and 2006,        the Company issued options to employees and directors to acquire 1,091,000 shares of Common        Stock exercisable at an average price of $4.44 and 308,500 shares of Common Stock,        exercisable at an average price of $5.07, respectively.

# Liquidity and Capital        Resources

         For        the nine months ended September 30, 2007, we incurred a net loss of $14,659,000 including        $8,176,700 in non–cash expenses relating to $1,883,300 in employee and consultant        stock based compensation, $6,159,900 in interest accretion on the convertible note offering        including deferred financing costs and $133,500 for depreciation and amortization. We        expect our overhead expenses for the remainder of 2007 to generally reduce from the levels        incurred for the three months ended September 30, 2007, based upon the recent        implementation of staff and overhead reductions. We are currently engaged in product        development activities for the products being developed by Avurt and Vizer as well as the        ShiftWatchTM TVS DVR product line. Because of the hardware and performance issues        associated with the ShiftWatchTM TVS DVR product completion and the development status        of the Avurt and Vizer products combined with the uncertainty regarding the        authorities’ purchasing decisions, we are making no estimates of expected revenues        for 2007. We expect, however, that a loss will be incurred for 2007.

        At        September 30, 2007, we had working capital of $3,610,500. Vizer, the Company’s        wholly-owned subsidiary ,had a line of credit totaling $50,000 which has been terminated.        In addition, Vizer has a term loan outstanding with the same lender. Advances under the        line of credit are made based on the available balance of the line, which matures in May        2011 and bears interest at the prime rate plus 3.25%. The term loan bears interest at        11.50% and is payable in monthly installments of $1,285, including principal and interest.        The loan matures in May 2013 and has an outstanding principal balance of $67,819, at        September 30, 2007. Both the line of credit and term loan are collateralized by business        assets and personally guaranteed by the Company’s President. On August 31, 2007 the        Company was notified by the lender that they deemed the December 2006 acquisition by the        Company of Vizer to be a violation and default under the provisions of the agreements. The        Company has accordingly classified the remaining balance under the note as a current        liability as of September 30, 2007.

        During        May 2007 we entered into a supply agreement with PCP and deposited $1.0 million into an        escrow account under the terms of the supply agreement. In July 2007 we completed the        acquisition the spherical projectile business of PCP, which automatically terminated the        supply agreement and utilized the $1.0 million in the escrow account to fund the cash        portion of the purchase price.

        Capital        expenditures, primarily for tooling, development and testing equipment, office equipment        and facility improvement costs for the remainder of the fiscal year ending December 31,        2007 are anticipated to total approximately $50,000 to 100,000.

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        We        anticipate that spending for research and development for the remainder of the fiscal year        ending December 31, 2007, will remain generally consistent with the level of those incurred        for the three months ended September 30, 2007. The primary expenditures will be focused on        completing new products for the launcher business following the December 2006 acquisitions.        We expect that new products and applications and product enhancements will also require        additional development expenses.

                Should we be unable to successfully complete development of the products currently in        process additional losses would be recorded from the write-off of any costs recorded from        inventory, tooling, etc., associated with those products. Additionally, if we are not able        to generate additional near term revenues from those or other products we would need to        consider funding alternatives including raising additional funds which would cause        additional dilution to the stock held by our current shareholders.

# Operating        Activities

                Net cash consumed by operating activities was $6,863,300 during the nine months ended        September 30, 2007. Cash was consumed by the loss of $14,659,000, less non-cash expenses of        $8,176,700 in non-cash expenses relating to $1,883,300 in employee and consultant stock        based compensation, $6,159,900 in interest accretion on the convertible note offering        including deferred financing costs and $133,500 for depreciation and amortization.        Increases in inventories and prepaid expenses and other current assets totaled $1,334,000        during the period due to increases primarily associated with the upcoming launch of the        Avurt launcher. Accounts payable, accrued expenses and deferred revenue increased by        $967,300 during the period reflecting the associated inventory build-up as well as the        deferred revenues associated with the delays in the ShiftWatchTM TVS DVR product        installations, reduced the cash consumed in operating activities.

        Net        cash consumed by operating activities was $3,855,700 during the nine months ended September        30, 2006. Cash was consumed by the loss of $4,331,100, less non-cash expenses of $546,400        for depreciation, amortization and non-cash equity compensation. Increases in accounts        receivable totaled $143,900 as a result of 2006 sales increases and inventories totaled        $534,200 during the period as a result of increases and anticipated increases in sales        levels. Accounts payable, accrued expenses and deferred revenues increased by $581,000        during the period which provided cash.

# Investing        Activities

        Net        cash outflows from investing activities consumed $2,446,000 during the nine months ended        September 30, 2007. The outflow was primarily attributable to the funding of $1.0 million        into the PCP supply agreement escrow account plus $592,000 invested in equipment and        patents net plus $854,000 invested in short term investments.

        Net        cash outflows from investing activities consumed $590,400 during the nine months ended        September 30, 2006. The outflow was primarily attributable to advances made on the note        receivable under the merger agreement with Vizer and Avurt of $450,000, purchases of        equipment totaling $54,800 and additions to patents and deposits totaling        $85,600.

# Financing        Activities

        Net        cash inflows from financing activities generated $8,994,700 during the nine months ended        September 30, 2007, primarily from the $6.0 million private placement in 2007, net of        $160,000 in financing expenses paid plus $3,208,000 generated from the September 2007        warrant conversion, net of costs and $75,400 consumed in repayments under debt        agreements.

        Net        cash outflows from financing activities generated $206,400 during the nine months ended        September 30, 2006, primarily from the $200,000 advance drawn under the credit        arrangement.

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# Recent accounting        pronouncement

        In        July 2006, the FASB issued FASB Interpretation No.48, “*Accounting for Uncertainty        in Income Taxes, an interpretation of FASB Statement 109*"(“FIN 48”) which        clarifies the accounting for uncertainty in income taxes recognized in accordance with SFAS        No. 109, “*Accounting for Income Taxes*.” FIN 48 is a comprehensive model        for how a company should recognize, measure, present, and disclose in its financial        statements uncertain tax positions that the company has taken or expects to take on a tax        return. If an income tax position exceeds a more likely than not (greater than 50%)        probability of success upon tax audit, the company will recognize an income tax benefit in        its financial statements. Additionally, companies are required to accrue interest and        related penalties, if applicable, on all tax exposures consistent with jurisdictional tax        laws. We adopted FIN 48 for the fiscal year beginning January 1, 2007. We did not have any        unrecognized tax benefits and there was no effect on our financial condition or results of        operations as a result of implementing FIN 48. We file income tax returns in the U.S.        federal jurisdiction and various state jurisdictions. The Company is no longer subject to        U.S. federal tax examinations for years before 2003, and state tax examinations for years        before 2002. We do not believe that there will be any material changes in our unrecognized        tax positions over the next 12 months. Our policy is that we recognize interest and        penalties accrued on any unrecognized tax benefits as a component of income tax expense. As        of the date of adoption of FIN 48, we did not have any accrued interest or penalties        associated with any unrecognized tax benefits, nor was any interest expense recognized        during the quarter. Our effective tax rate differs from the federal statutory rate        primarily due to non-deductible expenses and is offset somewhat by state tax        credits.

# Item 3.          Controls and Procedures

(a)            Evaluation of Disclosure Controls and Procedures.

        Our        management, including our Chief Executive Officer and our Chief Financial Officer, has        conducted an evaluation of the effectiveness of our 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, our Chief Executive Officer and Chief        Financial Officer has concluded that, as of the Evaluation Date, our disclosure controls        and procedures were adequate and effective to ensure that material information relating to        us and our subsidiaries 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, in each case at this time except as        described below.

        In        connection with the December 31, 2006 year end closing and independent audit process,        certain material adjustments were made to the 2006 financial statements. These adjustments        related to the previous 2006 revenue recognized, costs of goods sold, certain related        inventory carrying amounts and costs and computations of amounts allocated to the        beneficial conversion feature from the October 2006 offering. As a result of these year end        adjustments, our management is currently re-evaluating certain accounting processes and        controls to determine the level of changes that may be needed to ensure that material        information is made known in a timely manner.

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# PART II          OTHER INFORMATION

# Item 1.          Legal Proceedings

        On        April 13, 2007, a complaint was filed in United States District Court, Southern District of        California, Case No. ‘07CV 0672 JAH POR, by Pepperball Technologies, Inc.        (“PTI”) against the Company, Vizer and Avurt. PTI alleges in the civil action        that the prospective manufacture and distribution of our non-lethal projectile launchers        infringed certain of PTI’s patents and breached a Reseller Agreement and        Non-Disclosure Agreement between Vizer and PTI.  PTI is seeking (a) unspecified        damages for the alleged patent infringement and breach of contract, (b) an injunction to        prohibit further alleged patent infringement and (c) other relief and costs. The        Company is vigorously defending this matter, including exploring all legal rights and        remedies available to it to protect the Company’s products, technology and brand,        such as counterclaims against PTI, if appropriate.

        In        connection with the Company’s defense of this lawsuit, on June 28, 2007, the Company        filed documentation with the United States Patent and Trademark Office        (“USPTO”) requesting that the USPTO re-examine two patents issued to PTI (US        Patent Nos. 6,393,992 and 7,194,960) that are the subject of the alleged patent        infringement claims in the lawsuit. The Company’s filing with the USPTO sought        re-examination of the patents based upon 13 substantial new questions of        patentability relating to the validity of the patents. On September 28, 2007, the USPTO        notified the Company that the USPTO has granted the Company’s requests to        re-examine these two patents based upon 12 of the 13 substantial new questions of        patentability presented by the Company. The Company has filed a motion requesting a        stay in the lawsuit, pending the outcome of the examination of the USPTO and is awaiting a        decision on this motion.

        We        are not a party to any other legal proceedings, the adverse outcome of which would, in        management’s opinion, have a material adverse effect on our business, financial        condition and results of operations.

# Item 2.          Unregistered Sales of Equity Securities and Use of Proceeds

        No        unregistered equity securities were sold during the period covered by this report, not        previously reported on Forms 10-QSB or 8-K.

# Item 3.          Defaults Upon Senior Securities

None.

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

        On        July 19, 2007, the Company held its 2007 Annual Meeting of Shareholders. At the meeting,        the following directors were elected to serve until the next annual meeting or until their        successors are elected and qualified:

| Name                               |        | Shares FOR |        | WITHHOLD Authority                    To Vote |        |
|------------------------------------|--------|------------|--------|-----------------------------------------------|--------|
| Thomas R.                Marinelli |   |       |   | 4,342,484                                     |   |   | 158,781 |   |
| Gregory Pusey                      |   |       |   | 4,342,863                                     |   |   | 158,766 |   |
| Scott G. Sutton                    |   |       |   | 4,347,005                                     |   |   | 154,624 |   |
| Barry C. Loder                     |   |       |   | 4,343,229                                     |   |   | 158,400 |   |
| Gail S.                Schoettler  |   |       |   | 4,342,845                                     |   |   | 158,784 |   |
| David E. Welch                     |   |       |   | 4,343,203                                     |   |   | 158,426 |   |
| Robert J.                Williams  |   |       |   | 4,343,208                                     |   |   | 158,421 |   |

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In addition, the shareholders        approved the conversion of $5,999,901 principal amount of our convertible promissory notes        into shares of our Series A Preferred Stock. The number of votes cast for and against, and        abstaining are reflected in the table below.

|  | Shares FOR | Shares AGAINST | ABSTAIN |  |
|--|------------|----------------|---------|--|
|  | 2,655,392  | 15,160         | 1,080   |  |

The shareholders also authorized an        increase the number of shares available for issuance under our 2004 Stock Incentive Plan to        2,000,000 from 1,500,000. The number of votes cast for and against, and abstaining are        reflected in the table below.

|  | Shares FOR | Shares AGAINST | ABSTAIN |  |
|--|------------|----------------|---------|--|
|  | 2,611,558  | 58,288         | 1,786   |  |

# Item 5.          Other Information

None

# Item 6.          Exhibits

|   | (a) | Exhibits. |
|--------|-----|-----------|

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

| 31.1 | Rule                13a-14(a)/15d-14(a) - Certifications of Chief Executive Officer and Chief Financial                Officer. |
|------|---------------------------------------------------------------------------------------------------------------------------------|

| 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. |
|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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 19, 2007 | **Security With Advanced                Technology, Inc.**                (Registrant)                By: /s/ Jeffrey G. McGonegal                Jeffrey G. McGonegal,                Chief Executive Officer |  |

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