UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


WASHINGTON,
      D.C. 20549




**FORM
      10-Q/A**


**(Amendment
      No. 2)**




x
            Quarterly
                Report pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934For
                the quarterly period ended June 30, 2008. ̈
            Transition
                Report pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934For
                the transition period _____________ to
                ______________.





Commission
      File Number **333-133936**





**VISUAL
      MANAGEMENT SYSTEMS, INC.**


(Exact
      name of small business issuer as specified in its charter)




**Nevada**
            
            **68-0634458**(State or other jurisdiction of
              incorporation or organization)
            
            (IRS Employer Identification Number)





**1000
      Industrial Way North, Suite C**


**Toms
      River, New Jersey 08755**


(Address
      of principal executive offices)




**(732)
      281-1355**


(Issuer’s
      telephone number)






(Former
      name, former address and former fiscal year, if changed since last
      report)





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 large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller reporting company.
      See
      definition of “accelerated filer, large accelerated filer”, and “smaller
      reporting company” in Rule 12b-2 of the Exchange Act. (Check one):





Large
      accelerated filer  ̈


Accelerated
      filer  ̈


Non-accelerated
      filer  ̈ (Do not
      check if a smaller reporting company)


Smaller
      reporting company x




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


Yes  ̈ No x




As
      of
      August 14, 2008, there were 8,255,500 shares of the registrant’s common stock
      outstanding.









**VISUAL
      MANAGEMENT SYSTEMS**  **,
      INC. AND SUBSIDIARIES**





**Explanatory
      Note**




This
      Amendment on Form 10-Q/A amends our Quarterly Report on Form 10-Q for the three
      months ended June 30, 2008 (the “Original Form 10-Q”) as initially filed with
      the Securities and Exchange Commission on August 14, 2008 to (i) expand certain
      disclosures in the notes to our consolidated financial statements and (ii)
      revise the disclosure set forth in Item 4 – Controls and Procedures as a
      result of comments received from the Staff of the Division of Corporation
      Finance of the Securities and Exchange Commission.





This
      Amendment does not affect any other section of the Original Form 10-Q not
      otherwise discussed herein and continues to speak as of the date of original
      filing


2


PART
      I -
      FINANCIAL INFORMATION


Item
      1.
  FINANCIAL STATEMENTS





**Visual
      Management Systems, Inc. and Subsidiaries**


**Condensed
      Consolidated Balance Sheets**










**June 30, 2008**
            
            **December 31, 2007**(unaudited)
            
            (audited)**Assets**Current
                assetsCash
            
            $
            26,870
            
            $
            707,025Accounts
                receivable, net
            
            
            204,865
            
            
            296,447Inventory
            
            
            595,299
            
            
            605,724Prepaid
                expenses
            
            
            15,885
            
            
            23,931Total current assets
            
            
            842,919
            
            
            1,633,127Property
                and equipment - net
            
            
            690,996
            
            
            682,285Capitalized
                software
            
            
            64,000
            
            
            -Deposits
                and other assets
            
            
            88,426
            
            
            102,308Investment
                in joint venture
            
            
            5,000
            
            
            -Software
                assets-net
            
            
            1,555,553
            
            
            -Deferred
                financing costs-net
            
            
            1,486,744
            
            
            1,851,091**Total
                Assets**
            
            $
            4,733,638
            
            $
            4,268,811**Liabilities
                and Stockholders' Deficit**Current
                liabilitiesAccounts
                payable
            
            $
            1,112,702
            
            $
            780,521Accrued
                expenses and other current liabilities
            
            
            1,340,448
            
            
            627,445Customer
                deposits
            
            
            234,130
            
            
            137,160Sales
                tax payable
            
            
            87,161
            
            
            38,727Bank
                line of credit
            
            
            49,981
            
            
            49,981Short
                term notes payable
            
            
            555,892
            
            
            -Current
                portion of long-term debt
            
            
            97,696
            
            
            347,539Current
                portion of obligations under capital leases
            
            
            54,617
            
            
            30,700Current
                portion of convertible notes payable
            
            
            1,458,333
            
            
            208,333Total current liabilities
            
            
            4,990,960
            
            
            2,220,406Convertible
                notes payable - net of current portion
            
            
            3,262,334
            
            
            2,818,334Long-term
                debt - net of current portion
            
            
            284,380
            
            
            346,509Obligations
                under capital leases - net of current portion
            
            
            83,768
            
            
            37,179Commitments
                and contingenciesStockholders'
                deficitPreferred
                stock
            
            
            1
            
            
            1Common
                stock
            
            
            8,039
            
            
            7,379Additional
                paid-in-capital
            
            
            12,958,251
            
            
            12,030,155Accumulated
                deficit
            
            
            (16,704,095
            )
            
            (13,041,152
            )Treasury
                stock, at cost
            
            
            (150,000
            )
            
            (150,000
            )Total stockholders' deficit
            
            
            (3,887,804
            )
            
            (1,153,617
            )**Total
                Liabilities and Stockholder's Deficit**
            
            $
            4,733,638
            
            $
            4,268,811





The
      accompanying notes to the Condensed Consolidated Financial Statements are an
      integral part of these statements.


3





**Visual
      Management Systems, Inc. and Subsidiaries**


**Condensed
      Consolidated Statements of Operations**


**For
      the Six and Three Months Ended June 30, 2008 and 2007**


**(Unaudited)**









**Six Months Ended June 30**
                
                **Three Months Ended June 30****2008**
                
                **2007**
                
                **2008**
                
                **2007**Revenues
                    - net
                
                $
                3,212,825
                
                $
                2,598,709
                
                $
                1,635,516
                
                $
                1,438,272Cost
                    of revenues
                
                
                1,653,496
                
                
                1,349,740
                
                
                810,383
                
                
                785,525Gross
                    profit
                
                
                1,559,329
                
                
                1,248,969
                
                
                825,133
                
                
                652,747Operating
                    expenses
                
                
                4,924,933
                
                
                3,150,374
                
                
                2,195,571
                
                
                1,607,296Loss
                    from operations
                
                
                (3,365,604
                )
                
                (1,901,405
                )
                
                (1,370,438
                )
                
                (954,549
                )Other
                    (income) expensesDebt
                    conversion expense
                
                
                -
                
                
                590,044
                
                
                -
                
                
                -Interest
                    income
                
                
                -
                
                
                (52
                )
                
                -
                
                
                (3
                )Interest
                    expense
                
                
                297,034
                
                
                171,626
                
                
                157,031
                
                
                42,455Miscellaneous
                    loss (income)
                
                
                305
                
                
                -
                
                
                -
                
                
                (26,013
                )Net
                    loss
                
                $
                (3,662,943
                )
                $
                (2,663,023
                )
                $
                (1,527,469
                )
                $
                (970,988
                )Per
                    share data - basic and fully diluted
                
                $
                (0.47
                )
                $
                (0.43
                )
                $
                (0.19
                )
                $
                (0.15
                )Weighted
                    average number of commonshares
                    outstanding
                
                
                7,732,971
                
                
                6,163,191
                
                
                8,023,575
                
                
                6,389,292




The
      accompanying notes to the Condensed Consolidated Financial Statements are an
      integral part of these statements.


4


**Visual
      Management Systems, Inc. and Subsidiaries**


**Condensed
      Consolidated Statements of Cash Flows**


**For
      the Six Months Ended June 30, 2008 and 2007**


**(Unaudited)**












**2008**
            
            **2007****Cash
                flows from operating activities**Net
                loss
            
            $
            (3,662,943
            )
            $
            (2,663,023
            )Adjustments
                to reconcile net loss to net cash used by operating
                activitiesDepreciation
                and amortization
            
            
            484,597
            
            
            50,251Non-cash
                interest expense
            
            
            173,451
            
            
            142,724Payment
                of stock for services
            
            
            721,425
            
            
            -Stock-based
                compensation
            
            
            207,331
            
            
            467,552Debt
                conversion expense
            
            
            -
            
            
            590,044Loss
                on disposition of assets
            
            
            305
            
            
            -(Increase)
                decrease in operating assetsAccounts
                receivable
            
            
            91,582
            
            
            159,535Inventory
            
            
            69,538
            
            
            (119,185
            )Prepaid
                expenses and other assets
            
            
            8,046
            
            
            14,257Deposits
                and other assets
            
            
            13,883
            
            
            (48,458
            )Increase
                (decrease) in operating liabilitiesBank
                Overdraft
            
            
            -
            
            
            9,689Accounts
                payable
            
            
            332,181
            
            
            502,382Accrued
                expenses and other current liabilities
            
            
            713,003
            
            
            3,005Sales
                tax payable
            
            
            48,434
            
            
            26,656Customer
                deposits
            
            
            96,970
            
            
            159,837Net
                cash used by operating activities
            
            
            (702,197
            )
            
            (704,734
            )**Cash
                flows from investing activities**Purchases
                of property and equipment
            
            
            (54,043
            )
            
            (53,885
            )Capitalized
                software
            
            
            (64,000
            )
            
            -Proceeds
                from disposition of assets
            
            
            11,143
            
            
            -Investment
                in joint venture
            
            
            (5,000
            )
            
            -Net
                cash used by investing activities
            
            
            (111,900
            )
            
            (53,885
            )**Cash
                flows from financing activities**Repayment
                of capital leases
            
            
            (24,885
            )
            
            (5,764
            )Repayment
                of short term notes
            
            
            (68,000
            )
            
            -Proceeds
                from convertible notes payable (net of $12,500 issuance
                costs)
            
            
            -
            
            
            112,500Proceeds
                from the sale of common stock
            
            
            -
            
            
            871,230Proceeds
                from short term notes payable (net of $15,200 of issuance
                costs)
            
            
            288,800
            
            
            -Repurchase
                of stock into treasury
            
            
            -
            
            
            (150,000
            )Principal
                repayments of long-term debt
            
            
            (61,973
            )
            
            (63,989
            )Repayment
                of loans payable - stockholders
            
            
            -
            
            
            (6,321
            )Net
                cash provided by financing activities
            
            
            133,942
            
            
            757,656Change
                in cash
            
            
            (680,155
            )
            
            (963
            )**Cash**Beginning
                of period
            
            
            707,025
            
            
            963End
                of period
            
            $
            26,870
            
            $
            -**Supplemental
                Disclosure of Cash Flow Information**Issuance
                of a short term note to refinance existing long term note
            
            
            267,192
            
            
            -Issuance
                of convertible note for IDS Acquisition
            
            
            1,544,000
            
            
            -for
                acquisition of software assets and net working capitalIssuance
                of note payable for IDS Acquisition
            
            
            42,000
            
            
            -Increase
                in inventory due to IDS asset acquisition
            
            
            20,123
            
            
            -Increase
                in assets under capitalized leases
            
            
            95,391
            
            
            -Cash
                paid for interest
            
            
            89,921
            
            
            29,002Increase
                in inventory for reclassification from fixed assets
            
            
            38,990
            
            
            -




The
      accompanying notes to the Condensed Consolidated Financial Statements are an
      integral part of these statements.


5




**Visual
      Management Systems, Inc. and Subsidiaries**


**Notes
      to Condensed Consolidated Financial Statements**


**March
      31, 2008**












**1.** **Basis
      of Presentation and Nature of Business Operations**





The
      accompanying unaudited condensed consolidated financial statements have been
      prepared in accordance with the requirements of Form 10-Q and Item 310 of
      Regulation S-B of the Securities and Exchange Commission (the “Commission”) and
      include the results of Visual Management Systems, Inc., formerly known as Wildon
      Productions, and Visual Management Systems Holding, Inc., Visual Management
      Systems LLC and Intelligent Product Development Group, LLC formerly known as
      Visual Management Systems PDG, LLC, its wholly-owned subsidiaries (the
“Subsidiaries”), which are collectively referred to as the “Company”.
      Accordingly, certain information and footnote disclosures required in the
      unaudited consolidated financial statements prepared in accordance with
      accounting principles generally accepted in the United States of America have
      been condensed or omitted. In the opinion of the Company’s management, the
      accompanying unaudited condensed consolidated financial statements contain
      all
      adjustments (consisting only of normal recurring adjustments) which the Company
      considers necessary for the fair presentation of the Company’s consolidated
      financial position as of June 30, 2008 and the results of its operations for
      the
      three and six month periods ended June 30, 2008 and 2007, and are not
      necessarily indicative of results that may be expected for the entire year.
      These unaudited condensed financial statements should be read in conjunction
      with the audited financial statements and related notes included in the
      Company’s Annual Report for the year ended December 31, 2007 on Form
      10-K.





The
      Company delivers protective technology solutions and remote management loss
      prevention surveillance systems and provides on-site consultations regarding
      its
      products. The Company also sells, installs, upgrades and services Digital Video
      Recording Systems. The Company is New Jersey-based and began operations in
      June
      2003.





**Summary
      of significant accounting policies**




**Debt
      instruments and the features/instruments contained
      therein:**





Deferred
      financing costs are amortized over the term of the associated debt instrument.
      The Company evaluates the terms of the debt instruments to determine if any
      embedded derivatives or beneficial conversion features exist. The Company
      allocates the aggregate proceeds of the notes payable between the warrants
      and
      the notes based on their relative fair values. The fair value of the warrants
      issued to note holders or placement agents are calculated utilizing the
      Black-Scholes option-pricing model.





**Intangible
      assets.**





Intangible
      assets acquired by the Company have been valued using the income method, based
      on future economic benefits expected on a net present value basis. Values
      assigned to intangible assets are being amortized over the estimated useful
      lives of the respective intangible assets. Values assigned to intangible assets
      acquired and their useful lives will be reviewed no less frequently then on
      an annual basis to determine if there has been any impairment to the then
      carrying value of the assets or if a change in amortization period is required,
      as prescribed by SFAS 142. Values assigned to goodwill will not be amortized,
      however periodic reviews will be conducted to determine if the carrying value
      of
      the goodwill exceeds its then measured fair value in order to determine if
      a
      goodwill impairment loss needs to be recognized.





**Capitalized
      Software Development Costs**





Capitalization
      of computer software development costs begins upon the establishment of
      technological feasibility, as defined in SFAS 86. The establishment of
      technological feasibility and the ongoing assessment of recoverability of
      capitalized computer software development costs require considerable judgment
      by
      management with respect to certain external factors, including, but not limited
      to, technological feasibility, anticipated future gross revenue, estimated
      economic life and changes in software and hardware technology. At June 30,
      2008,
      the Company has capitalized approximately $64,000 of software development costs
      relating to new products. There was no software development cost capitalized
      during the same period in 2007.


6




Amortization
      is provided on a product-by-product basis. The annual amortization is the
      greater of the amount computed using (a) the ratio that current gross revenue
      for a product bears to the total of current and anticipated future gross revenue
      for that product, or (b) the straight-line method over the remaining estimated
      economic life of the product. Amortization will start when (a) the product
      is
      available for general release to customers and (b) all research and development
      activities relating to the other components of the product are completed. At
      June 30, 2008, the Hybrid DVR software products under development were not
      yet
      generally available to customers and as a result, there were no amortization
      charges for the three or six months ending June 30, 2008 for those products.





The
      Company performs reviews of the recoverability of such capitalized software
      development costs at each balance sheet date. At the time a determination is
      made that capitalized amounts are not recoverable based on the estimated cash
      flows to be generated from the applicable software, the capitalized cost of
      each
      software product is then valued at the lower of its remaining unamortized costs
      or net realizable value.




**2.**  **Going
      Concern**




The
      accompanying financial statements have been prepared assuming the Company is
      a
      going concern, which assumption contemplates the realization of assets and
      satisfaction of liabilities in the normal course of business. The Company
      suffered recurring losses from operations, a recurring deficiency of cash from
      operations, including a cash deficiency of $702,197 from operations for the
      six
      months ended June 30, 2008 as compared to a cash deficiency from operations
      of
      $704,734 for the same period in 2007.




These
      factors raise substantial doubt about the Company’s ability to continue as a
      going concern. The financial statements do not include any adjustments relating
      to the recoverability and classification of recorded asset amounts or the amount
      of liabilities that might be necessary should the Company be unable to continue
      in existence. Continuation of the Company as a going concern is dependent upon
      achieving profitable operations in the long-term and raising additional capital
      to support existing operations for at least the next twelve months. Management
      is currently considering a number of means for raising additional capital,
      including a private offering of securities and other strategic alternatives
      to
      raise funds.




Without
      the money to fund its business plan the Company’s competitive position may never
      mature to a point where its business plan will be attainable, including its
      plan
      as it relates to the Company’s investment in the assets of Intelligent Digital
      Systems, LLC, and a substantial retrenchment of management’s plans may be
      necessary. If the Company is unsuccessful in raising funds or curtailing
      expenses, the Company may be required to cease operations or file for
      bankruptcy.





**3.** **Inventory**





Inventory,
      which consists of digital video recorders and related components, security
      cameras and related installation materials, is stated at the lower of cost
      or
      market value. Cost is computed on the first-in, first-out method. The Company
      reviews inventory for slow moving and obsolete inventory during each reporting
      period to determine if a reserve is required. Based on the review conducted
      as
      of June 30, 2008, management does not believe any reserve is
      required.




Our
      inventory consisted of a total of $595,299, ($83,548 of raw materials, $20,180
      work-in-process and $491,881 of finished goods) at June 30, 2008 as compared
      to
      inventory of $605,724 (approximately $66,000 of raw materials and $540,000
      of
      finished goods) at December 31, 2007.





**4.** **Acquisition
      of IDS Assets**





On
      April
      3, 2008, the Company purchased substantially all the assets of Intelligent
      Digital Systems, LLC. (“IDS”). The assets consist of the current TechEye
      software (“DVR Software”) and computer software in development relating to the
      TrueHybrid hybrid NVR/DVR technology (“Hybrid DVR Software”). The Company is
      currently investigating patent protection for a number of the processes included
      in the DVR software and Hybrid DVR Software. The assets purchased included
      three
      trademarks, which the Company does not currently plan to use and therefore
      assigned no value to them. The Company has included the results of the IDS
      operations that were purchased by the Company since the date of acquisition.
      These results have not been material.





Under
      the
      terms of the agreement, the Company purchased accounts receivable of $3,185
      and
      inventory of $20,123 as well as the DVR Software and Hybrid DVR
      Software.


7





The
      amount of $1,562,692 was assigned to intangible assets. The intangible assets
      consist of the DVR Software and Hybrid DVR Software and are being amortized
      over
      their estimated useful lives of 1 and 5 years respectively.





The
      following table summarizes the estimated fair values of the assets acquired
      at
      the date of acquisition:




Accounts
                Receivable
            
            $
            3,185Inventory
            
            
            20,123DVR
                Software
            
            
            28,555Hybrid
                DVR Software
            
            
            1,534,137Total
            
            $
            1,586,000





The
      intangible software assets were valued using the income method, using the
      company's best estimates of future cash flows from the sales of the products
      including the software, a 40% tax rate and discount rates between 15 and
      20%.





Amortization
      of $7,139 was charged to cost of good sold during the quarter ending June 30,
      2008 for the DVR Software. The balance of $21,416 will be amortized in equal
      amounts over the next three quarters.





Amortization
      associated with the Hybrid DVR Software is not expected to begin until the
      fourth quarter of 2008, when products containing the software are commercially
      available. As a result, future amortization is expected to be:




Quarter
                ending September 30, 2008
            
            $
            7,139Quarter
                ending December 31, 2008
            
            $
            83,8462009
            
            $
            313,9662010
            
            $
            306,8272011
            
            $
            306,8272012
            
            $
            306,8272013
            
            $
            230,121Total
            
            $
            1,555,553





In
      exchange for IDS’ assets the Company issued to IDS an unsecured convertible note
      in the principal amount of $1.544 million, bearing no interest until April
      3,
      2011, its maturity date, and cash totaling $42,000 payable over a total of
      seven
      months. If not converted, or paid within 30 days of maturity, then from and
      after the maturity date, the convertible note will bear annual interest at
      12%.
      The convertible note is convertible at the discretion of IDS into shares of
      common stock after May 31, 2010, or upon the approval of a majority in interest
      of the holders of the then outstanding 5% secured convertible debentures, or
      any
      securities issued on conversion thereof, at a conversion price of $1.15 per
      share. The Company has agreed to provide its best efforts towards registering
      the shares issuable upon the conversion of the note for public
      resale.





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





The
      Company owns 50% of the joint venture and does not have operating control over
      the venture. As a result, the Company has recorded it's investment in the joint
      venture at $5,000 using the equity method.





**5.** **Equity
      Based Compensation, Common Stock**





**Issuance
      of Equity Compensation to Mercom Capital Group, LLC.**




In
      April
      2008 the Company issued 22,500 shares of common stock to Mercom Capital Group,
      LLC. (“Mercom”), with a fair market value of $22,725 as compensation in
      connection with the October 2007 agreement wherein Mercom would provide investor
      relations services to the Company. Per the terms of that agreement Mercom shall
      be issued 120,000 shares. 30,000 shares were issued in 2007 and the remaining
      90,000 shares will be vested monthly and issued quarterly through October 2008.
      In June 2008, The Company accrued an additional $8,700 for the issuance of
      15,000 shares to reflect the costs of this agreement through June 30, 2008.
      Excluding these shares the Company has issued a total of 45,000 shares to Mercom
      in 2008.


8




**6.** **Commitments
      and Contingencies**




**Commitments
      and Contingencies.**




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




In
      connection with the Company’s July 2007 Private Placement, the Company agreed to
      use its best efforts to file a shelf registration statement (the “Resale
      Registration Statement”) with the SEC covering the resale of all shares issuable
      upon the conversion of the Series A Convertible Preferred Stock and the exercise
      of the warrants issued in connection with the private placement on or before
      the
      date which is sixty (60) days after the date of the final closing of the private
      placement. The Company is obligated to maintain the effectiveness of the Resale
      Registration Statement from its effective date through and until forty-eight
      (48) months after the effective date. In the event the Resale Registration
      Statement was not filed with the SEC on or prior to the date which is sixty
      (60)
      days after the date of the final closing of the private placement or declared
      effective within 120 days after the date of the final closing of the private
      placement, the number of shares of common stock issuable upon conversion of
      the
      Series A Convertible Preferred Stock will be increased, subject to the limit
      described below, by two percent (2%) for each month (or portion thereof) that
      the Resale Registration Statement is not so filed or effective.





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




The
      aggregate increase in the number of shares issuable upon the conversion of
      the
      Series A Convertible Preferred Stock by reason of the failure to timely file
      the
      Resale Registration Statement, respond to SEC comments or have the Resale
      Registration Statement declared effective shall in no event exceed twenty
      percent (20%).




As
      of
      June 30, 2008, the Company’s management concluded that as a result of the
      policies of the Securities and Exchange Commission, the Company is precluded
      at
      this time from registering all the shares that are issuable to investors who
      participated in its July Private Placement, and as of June 30, 2008 the
      Company’s estimate was that it was likely its registration statement would not
      be declared effective prior to August 8, 2008, the date on which the shares
      of
      Company common stock underlying the Series A Convertible Preferred Stock may
      be
      sold without registration pursuant to the provisions of SEC Rule 144. As such
      the Company elected to file its registration statement only as to those shares
      underlying the warrants issued to investors in connection with the July Private
      Placement, and on June 30, 2008 the Company accrued an expense in the amount
      of
      $223,993 to reflect the remaining expense it expects to incur as a result of
      this provision, and its termination as of August 8, 2008 due to the effects
      of
      SEC Rule 144.




On
      November 30, 2007, the Company entered into a securities purchase agreement
      with
      three affiliated institutional investors for the sale of original issue discount
      5% secured convertible debentures and common stock purchase warrants. This
      transaction is referred to as the Company’s November 2007 Private Placement. In
      this transaction, the Company issued an aggregate of $3.75 million principal
      amount of debentures at an original issue discount of 20% and warrants to
      purchase an aggregate of 11,250,000 shares of its common stock. The warrants
      expire in November 2014 and had an initial exercise price of $1.15 per share,
      subject to adjustment, including full ratchet anti-dilution protection. In
      consideration of amendments to and waivers of certain terms of the existing
      agreements governing the investment in the Company by the institutional
      investors, the Company has agreed in principle to modify the exercise price
      of the warrants to $0.40 per share.




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


9




The
      Company’s ability to make payments of principal and interest required under the
      terms of the debentures will depend on the Company’s financial condition and
      resources available at the time that the payments become due. The Company did
      not timely pay the $15,625 and $46,875 of interest payments due under the
      Company’s convertible debentures on January 1, 2008 and April 1, 2008,
      respectively; however, all such amounts were paid in May 2008. The Company
      has
      with the approval of its institutional investors elected to pay the $46,875
      in
      interest due on July 1, 2008 in restricted stock to be issued to the
      institutional investors, at a per share purchase price equal to 80% of the
      average of the VWAPs for the 20 Trading Days immediately prior to the date
      of
      issuance. The date of this issuance and the number of shares to be distributed
      have not yet been determined.





In
      connection with the Company’s November 2007 Private Placement, the Company also
      entered into a registration rights agreement dated November 29, 2007, with
      the
      institutional investors, pursuant to which it agreed to file a registration
      statement covering the resale of the shares of common stock that may be issued
      to such investors upon the conversion of the debentures, payment in kind, and
      the exercise of the related warrants. The Company also agreed to maintain the
      effectiveness of the registration statement (subject to certain limitations)
      for
      a period of time until the holders can sell the underlying common stock without
      volume restrictions under Rule 144(k) of the Securities Act of 1933, or the
      “Securities Act.” If the registration statement was not declared effective by
      the SEC by March 30, 2008, or if the Company fails to maintain the effectiveness
      of the registration statement or fails to respond to SEC comments within 15
      calendar days after receipt of those comments, the Company is required to pay
      to
      each investor, as partial liquidated damages, cash equal to 2% of the aggregate
      purchase price paid by such investor for any securities purchased in the
      Company’s November 2007 Private Placement and then held by such investor, and
      shall pay to such investor such amount for each subsequent 30-day period, up
      to
      a maximum aggregate liquidated damages amount of 20% of the aggregate purchase
      price paid by such investor in the Company’s November 2007 Private Placement.
      The registration statement was not declared effective by March 30, 2008 and
      the
      Company did not respond to SEC comments regarding the registration statement
      within 15 days after receipt, and the Company is therefore in violation of
      this
      term of the registration rights agreement, and the liquidated damages described
      above are currently accruing. As of June 30, 2008, the Company had accrued
      an
      expense in the amount of $240,000 to reflect the additional expense it expects
      to incur as a result of this provision. Since June 30, 2008, management has
      concluded that as a result of the policies of the Securities and Exchange
      Commission, the Company is precluded at this time from registering all the
      shares that are issuable to investors who participated in the Company’s November
      2007 Private Placement. After discussions with such investors, and in accordance
      with the terms of the registration rights agreement, the Company has registered
      none of the shares issuable to such investors . The Company has with the
      approval of its institutional investors elected to pay the $240,000 in principal
      and $10,000 in interest due as a result of these provisions as of the date
      of
      this filing in restricted stock to be issued to the institutional investors,
      at
      a per share purchase price equal to 80% of the average of the VWAPs for the
      20
      Trading Days immediately prior to the date of issuance. The date of this
      issuance and the number of shares to be distributed have not yet been
      determined.




**7.** **Issuance
      and Repricing of Stock Options**




In
      January 2008, the Company issued to an investor relations firm, options to
      purchase 18,000 shares of the Company’s common stock with an exercise price of
      $3.00 and a five year life and the options vest over a 6 month period. These
      options were issued pursuant to an agreement executed during 2007.




In
      June
      2008, the Company issued to employees, options to purchase 458,500 shares of
      the
      Company’s common stock with an exercise price of $0.40, a ten year life and
      these options vest 50% after one year and the balance after two
      years.





In
      June
      2008, the Company issued to each member of its Board of Directors, options
      to
      purchase 5,000 shares (a cumulative total of 25,000 shares) of the Company’s
      common stock with an exercise price of $0.40 and a ten year life. These options
      vest 50% after one year and the balance after two years.


10




In
      June
      2008, the Company issued to a member of the Board of Directors, options to
      purchase 20,000 shares of the Company’s common stock in exchange for refinancing
      a $250,000 note. These options have an exercise price of $0.40, a ten year
      life
      and vested upon issuance.




In
      June
      2008, the compensation committee of the Company’s board of directors determined
      that the existing employee options should be repriced to current market values
      in order to be provide appropriate incentives to employees. As a result, the
      existing employee options were repriced from $2.50 to $0.40, which was the
      closing price of the Company’s common stock on the day preceding the committee’s
      action. A total of 880,000 options were repriced. In connection with the
      repricing, the Company recorded an additional $37,292 of stock based
      compensation.




**8.****Subsequent
      Events**




**Exercise
      of Warrants**




In
      August
      2008, Brooksghire Securities Inc., (“Brookshire”) the Company’s placement agent
      for the July Private Placement, exercised warrants to acquire 52,280 shares
      of
      the Company’s common stock pursuant to the warrants cashless exercise provisions
      which resulted in a total of 34,095 shares being issued to Brookshire, with
      no
      net proceeds to the Company




**Execution
      of Strategic Alliance Agreement**




In
      July
      2008, the Company entered into a Strategic Alliance Agreement with Glenwood
      Capital, Inc. (“Glenwood”) for their provision of investor relations services.
      On August 5, 2008, the Company issued 100,000 restricted shares of its common
      stock as compensation to Glenwood. The Company relied upon the exemption
      provided by Section 4(2) of the Securities Act of 1933, as amended, in making
      such issuance. The Company’s agreement with Glenwood contemplates a payment of
      $25,000 to be made to Glenwood by the Company upon the first anniversary of
      execution of the agreement, as additional compensation for their
      services.


11




**Item
      4.**  **Controls
      and Procedures**




*Evaluation
      of Disclosure Controls and Procedures.* Our
      management, including our Chief Executive Officer and Chief Financial Officer,
      carried out an evaluation of the effectiveness of the design and operation
      of
      our disclosure controls and procedures as of the end of the period covered
      by
      this report and concluded that due to inadequate implementation of disclosure
      controls and procedures and deficiencies in our information technology systems,
      our controls and procedures were not effective as of the date of the evaluation.
      Disclosure controls and procedures are controls and other procedures that are
      designed to provide reasonable assurance that information required to be
      disclosed in our reports filed or submitted under the Securities Exchange Act
      of
      1934 is recorded, processed, summarized and reported, within the time periods
      specified in the Securities and Exchange Commission’s rules and forms.
      Disclosure controls and procedures include, without limitation, controls and
      procedures designed to provide reasonable assurance that information required
      to
      be disclosed in our reports filed under the Exchange Act is accumulated and
      communicated to management, including our Chief Executive Officer and Interim
      Chief Financial Officer, as appropriate to allow timely decisions regarding
      required disclosure.




Since
      March 31, 2008, we have taken steps to improve our disclosure controls and
      procedures, including the implementation of more formal written policies and
      procedures with respect to disclosure matters, including the circulation of
      written disclosure checklists to members of management that are designed to
      ensure that information required to be disclosed in our reports filed under
      the
      Exchange Act is accumulated and communicated to those responsible for preparing
      the reports. We expect to have these policies, procedures and checklists fully
      implemented during the quarter ending September 30, 2008.




*Internal
      Control over Financial Reporting* After
      assessing our internal control over financial reporting as of December 31,
      2007,
      our management identified a number of material weaknesses in our internal
      control over financial reporting and concluded that as a result of these
      material weaknesses, our internal control over financial reporting was not
      effective as of such date. These material weaknesses included:




•
            misunderstandings
                of certain applications of Generally Accepted Accounting Principles
                (GAAP)
                and poor oversight and management of accounting staff and technology
                by
                our former Chief Financial Officer;•
            deficiencies
                in our information technology relating to inventory control, revenue
                recognition, financial forecasting and the management of inter-company
                transactions;•
            a
                lack of uniformity in accounting policies across subsidiaries which
                allowed and increased the number of undetected discrepancies in
                inter-company transactions;•
            the
                lack of a formal documented closing process for period ends; and•
            the
                lack of a formal process for developing comparisons to recent period
                results or forward looking financial forecasts.







Since
      December 31, 2007, we have taken the following steps to remediate our material
      weaknesses:




·
            In
                April 2008, we engaged an independent consultant to assist management
                in
                the preparation of our financial statements and periodic reports.
                We
                incurred an expense of approximately $82,000 in connection with this
                engagement.




·
            In
                February 2008, we replaced our Chief Financial Officer with an Interim
                Chief Financial Officer and reorganized our accounting
                department.




·
            During
                the quarter ended March 31, 2008, we developed and implemented processes
                for the entry and maintenance of financial records and taking more
                frequent physical inventory.




·
            We
                have utilized the services of Withum, Smith & Brown Global Assurance
                to evaluate our internal controls over financial reporting and assist
                us
                with developing effective internal controls over financial reporting.
                The
                total cost for these services is expected to be approximately
                $80,000.


12


·
            We
                have utilized the services of Withum, Smith & Brown, P.C. to assist us
                in the preparation of our financial statements. Our utilization of
                outside
                firms has been curtailed due to financial reasons. Total expense
                incurred
                for these services was approximately $51,000 for the six months ended
                June
                30, 2008.




·
            We
                have continued to train and educate staff as to applicable accounting
                policies.




·
            We
                have identified the accounting software package which we plan to
                obtain
                and implement to improve our financial reporting
                system.




·
            In
                June 2008, we hired J.D Gardner as our Chief Financial Officer in
                replacement of our Interim Chief Financial
                Officer.




As
      a
      result of the steps described above, we believe that we have remediated the
      material weaknesses in our internal control over financial reporting identified
      above other than the deficiencies in our information technology and inventory
      control. To remediate these material weaknesses, we plan to obtain and implement
      the accounting software package discussed above during the quarter ending March
      31, 2009, to the extent that financial resources are available at that time.
      The
      estimated cost of obtaining and implementing this software is approximately
      $200,000.




*Changes
      in Internal Control over Financial Reporting* .
      During
      the quarter ended June 30, 2008, the changes in our internal control over
      financial reporting that have materially affected, or are reasonably likely
      to
      affect, our internal control over financial reporting are as
      follows:




·
            During
                the quarter ended June 30, 2008, we implemented a formal closing
                process
                for period ends and developed comparisons to recent period results
                and
                forward looking forecasts




·
            We
                engaged an independent consultant to assist management in the preparation
                of our financial statements and periodic reports;
                and




·
            We
                hired J.D. Gardner as our Chief Financial Officer in replacement
                of our
                Interim Chief Financial Officer.




Management
      will continue to scrutinize the steps we have detailed above to ensure that
      information required to be disclosed by us in the reports that we file or submit
      under the Securities Exchange Act of 1934 is recorded, processed, summarized
      and
      reported within the time periods specified in the SEC rules and forms. If upon
      further evaluation the steps detailed above prove too slow or insufficient
      in
      their totality to meet that goal, we will develop a new plan which includes
      changes necessary to ensure that we comply with all relevant Commission rules
      and forms.




Our
      management does not expect that our disclosure controls or our internal controls
      over financial reporting will prevent all error and fraud. A control system,
      no
      matter how well conceived and operated, can provide only reasonable, but not
      absolute, assurance that the objectives of a control system are met. Further,
      any control system reflects limitations on resources, and the benefits of a
      control system must be considered relative to its costs. These limitations
      also
      include the realities that judgments in decision-making can be faulty and that
      breakdowns can occur because of simple error or mistake. In addition, controls
      can be circumvented by the individual acts of some persons, by collusion of
      two
      or more people or by management override of a control. A design of a control
      system is also based upon certain assumptions about potential future conditions;
      over time, controls may become inadequate because of changes in conditions,
      or
      the degree of compliance with the policies or procedures may deteriorate.
      Because of the inherent limitations in a cost-effective control system,
      misstatements due to error or fraud may occur and may not be detected.


13




**PART
      II – OTHER INFORMATION**


14





**Item
      6.**  **Exhibits**





Exhibit No.
            
            Exhibits2.2
            
            Asset
                Purchase Agreement dated as of April 3, 2008 among Visual Management
                Systems, Inc., Intelligent Digital Systems, LLC, IDS Patent Holdings,
                LC
                and Jay Edmond Russ (1)4.4
            
            Unsecured
                Convertible Promissory Note dated April 3, 2008 issued to Intelligent
                Digital Systems, LLC (1)10.14
            
            Consulting
                Agreement dated as of April 3, 208 between Visual Management Systems,
                LLC
                and Jay Edmond Russ (1)10.15
            
            Operating
                Agreement of IDS Patent Holding LLC as of April 2, 2008 (1)10.16
            
            Exclusive
                Patent and Trade Secret License Agreement effective as of April 2,
                2008
                between Visual Management Systems, Inc. and IDS Patent Holding Company,
                LLC (1)10.17
            
            Registration
                Rights Agreement dated as of April 2, 2008 between Visual Management
                Systems, Inc. and Intelligent Digital Systems, LLC (1)10.18
            
            Promissory
                Note in the Principal Amount of $267,191.78 dated June 20, 2008 issued
                to
                the Russ and Russ Defined Benefit Pension Plan (2)10.19
            
            Employment
                Agreement dated as of June 10, 2008 betwene Visual Management Systems,
                Inc. and James D. Gardner (2)10.20
            
            Deferred
                Compensation Plan of Registrant (2)31.1
            
            Certification
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                302 of
                the Sarbanes-Oxley Act of 2002 (refiled herewith)31.2
            
            Certification
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                302 of
                the Sarbanes-Oxley Act of 2002 (refiled herewith)32.1
            
            Certification
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002 (refiled herewith)32.2
            
            Certification
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002 (refiled herewith)99.2
            
            Pro
                forma condensed financial statements giving effect to the acquisition
                by
                Visual Management Systems, Inc. of substantially all of the assets
                of
                Intelligent Digital Systems, LLC(3)




(1)
            Incorporated
                by reference to similarly numbered exhibit to the Company’s Report on Form
                8-K filed with the Securities and Exchange Commission on April 8,
                2008




(2)
            Incorporated
                by reference to similarly numbered exhibit to Amendment Number 2
                to the
                Company’s Registratuion Statement on Form S-1 filed with the Securities
                and Exchange Commission on July 18,
                2008




(3)
            Incorporated
                by reference to similarly numbered exhibit to the Company’s Report on Form
                8-K/A filed with the Securities and Exchange Commission on August
                27,
                2008


15


**SIGNATURES**




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




Visual
                Management Systems, Inc.(Registrant)By:
            /s/
                Jason GonzalezJason
                GonzalezPresident
                and Chief Executive OfficerDated:
                August 27, 2008By:
            /s/
                J.D. GardnerJ.D.
                GardnerChief
                Financial OfficerDated:
                August 27, 2008


16




**EXHIBIT
      INDEX**





Exhibit No.
            
            Exhibits2.2
            
            Asset
                Purchase Agreement dated as of April 3, 2008 among Visual Management
                Systems, Inc., Intelligent Digital Systems, LLC, IDS Patent Holdings,
                LC
                and Jay Edmond Russ (1)4.4
            
            Unsecured
                Convertible Promissory Note dated April 3, 2008 issued to Intelligent
                Digital Systems, LLC (1)10.14
            
            Consulting
                Agreement dated as of April 3, 208 between Visual Management Systems,
                LLC
                and Jay Edmond Russ (1)10.15
            
            Operating
                Agreement of IDS Patent Holding LLC as of April 2, 2008 (1)10.16
            
            Exclusive
                Patent and Trade Secret License Agreement effective as of April 2,
                2008
                between Visual Management Systems, Inc. and IDS Patent Holding Company,
                LLC10.17
            
            Registration
                Rights Agreement dated as of April 2, 2008 between Visual Management
                Systems, Inc. and Intelligent Digital Systems, LLC (1)10.18
            
            Promissory
                Note in the Principal Amount of $267,191.78 dated June 20, 2008 issued
                to
                the Russ and Russ Defined Benefit Pension Plan (2)10.19
            
            Employmnt
                Agreement dated as of June 10, 2008 betwene Visual Management Systems,
                Inc. and James D. Gardner (2)10.20
            
            Deferred
                Compensation Plan of Registrant (2)10.21
            
            Registration
                Rights Agreement issued to purchasers of shares of common stock issued
                to
                affiliates of Kuhns Brothers Securities pursuant to warrants to purchase
                common stock issued by the Company.31.1
            
            Certification
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                302 of
                the Sarbanes-Oxley Act of 2002 (refiled herewith)31.2
            
            Certification
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                302 of
                the Sarbanes-Oxley Act of 2002 (refiled herewith)32.1
            
            Certification
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002 (refiled herewith)32.2
            
            Certification
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002 (refiled herewith)99.2
            
            Pro
                forma condensed financial statements giving effect to the acquisition
                by
                Visual Management Systems, Inc. of substantially all of the assets
                of
                Intelligent Digital Systems, LLC(3)




(1)
            Incorporated
                by reference to similarly numbered exhibit to the Company’s Report on Form
                8-K filed with the Securities and Exchange Commission on April 8,
                2008





(2)
            Incorporated
                by reference to similarly numbered exhibit to Amendment Number 2
                to the
                Company’s Registration Statement on Form S-1 filed with the Securities and
                Exchange Commission on July 18,
                2008




(3)
            Incorporated
                by reference to similarly numbered exhibit to the Company’s Report on Form
                8-K/A filed with the Securities and Exchange Commission on August
                27,
                2008


17