**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 **Washington,
        D.C. 20549**
 
 **FORM
        10-QSB**
  (Mark
        One)
 
 x
              QUARTERLY
                  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                  OF
                  1934
  For
        the
        quarterly period ended  September
        30, 2005
  o
              TRANSITION
                  REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
                  ACT
 
 For
        the
        transition period from _________ to _________
 
 Commission
        file number 002-98748-D
 
 VSUS
        TECHNOLOGIES INCORPORATED
 (Exact
        name of small business issuer as specified in its charter
 
 Delaware
              43-2033337(State
                  or other jurisdiction of incorporation or organization)
              (IRS
                  Employer Identification No.)
 
 902
        Clint
        Moore Road, Suite 138, Boca Raton, Florida 33487
 (Address
        of principal executive offices)
 
 (561)
        994-0800
 (Issuer’s
        telephone number)
 
 444
        Madison Avenue, 24th Floor, New York, New York 10022
 (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 o
 
 Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act).
 Yes
o
        No x
 
 State
        the
        number of shares outstanding of each of the issuer’s classes of common equity,
        as of the latest practicable date: As of
        December 9, 2005, the issuer had 40,023,908 shares of Common Stock issued
        and
        outstanding.
 
 Transitional
        Small Business Disclosure Format (Check one): Yes o No x
  
  **VSUS
        TECHNOLOGIES INCORPORATED**
 
 **QUARTERLY
        REPORT ON FORM 10-QSB**
 **FOR
        THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2005**
 
 
 **INDEX**
 
 **Page
        No.**
 
 PART
                  I.
              
              FINANCIAL
                  INFORMATIONItem.1
              
              Financial
                  Statements
              3Condensed
                  Consolidated Balance Sheet as of September 30, 2005
                  (unaudited)
              4Condensed
                  Consolidated Statement of Operations for the three and nine months
                  ended September 30, 2005 and 2004 (unaudited) and for the
                  period from
                  inception (September 21, 2000) (unaudited)
              5Condensed
                  Consolidated Statement of Cash Flows for the nine months ended
                  September 30, 2005 and 2004 (unaudited)
              6Condensed
                  Consolidated Statement of Changes in Stockholders’ Deficiencyfor the
                  nine months ended September 30, 2005 (unaudited)
              8Notes
                  to the Condensed Consolidated Financial Statements
                  (unaudited)
              9Item
                  2.
              
              Management’s
                  Discussion and Analysis or Plan of Operation
              32Item
                  3.
              
              Controls
                  and Procedures
              37PART
                  II.
              
              OTHER
                INFORMATIONItem
                  1.
              
              Legal
                  Proceedings
              38Item
                  2.
              
              Unregistered
                  Sales of Equity Securities and Use of Proceeds
              38Item
                  3.
              
              Defaults
                  Upon Senior Securities
              39Item
                  4.
              
              Submission
                  of Matters to a Vote of Securityholders
              39Item
                  5.
              
              Other
                  Information
              39Item
                  6.
              
              Exhibits
                  and Reports on Form 8-K
              40SIGNATURES
              41
  2
  **PART
        I - FINANCIAL INFORMATION**
  **Item
        1. Financial Statements.**
  
 **VSUS
        TECHNOLOGIES INCORPORATED**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 
 **CONDENSED
        CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
        OF SEPTEMBER 30, 2005**
 **(UNAUDITED)**
 
 **INDEX
        TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 
 **Page**CONDENSED
                  CONSOLIDATED FINANCIAL STATEMENTS:Condensed
                  Consolidated Balance Sheet
              4Condensed
                  Consolidated Statement of Operations
              5Condensed
                  Consolidated Statement of Cash Flows
              6Condensed
                  Consolidated Statement of Changes in Stockholders’
                  Deficiency
              7-8Notes
                  to the Condensed Consolidated Financial Statements
              9
                  -
                  36
 
 3
  VSUS
          TECHNOLOGIES, INCORPORATED
 (A
          DEVELOPMENT STAGE COMPANY)
 CONDENSED
          CONSOLIDATED BALANCE SHEET
 (IN
          THOUSANDS)
 (except
          share data)
 
 September
                    30,2005(Unaudited)ASSETS:CURRENT
                    ASSETSCash
                    and cash equivalents
                
                $
                —Other
                    receivables
                
                
                4444Acquired
                    technology, net of accumulated amortization of $339
                
                
                4,183Goodwill
                
                
                4,522Property
                    and equipment, net
                
                
                629Other
                    assets
                
                
                50$
                9,428LIABILITIES
                    AND STOCKHOLDERS' DEFICIENCY:CURRENT
                    LIABILITIESShort-term
                    bank credit
                
                
                16Accrued
                    expenses
                
                
                1,046Convertible
                    debentures (net of debt discount of $67)
                
                
                148Accrued
                    interest
                
                
                687Other
                    payables
                
                
                233Related
                    parties
                
                
                126Other
                    liabilities
                
                
                417Series
                    A Preferred Stock, including accrued dividends of $138 (350 shares
                    issued,
                    318 outstanding) stated at liquidation preference
                
                
                1,730Warrant
                    and conversion options
                
                
                63Promissory
                    notes
                
                
                1,1655,631LONG-TERM
                    LIABILITIESRelated
                    Party
                
                
                175Convertible
                    debenture
                
                
                3,400Total
                    liabilities
                
                
                9,206CONTINENCIES
                    AND COMMITMENTSSTOCKHOLDERS'
                    EQUITYCommon
                    Stock $0.001 par value (Authorized-100,000,000 shares issued
                    and
                    outstanding- 39,939,009 at September 30, 2005)
                
                
                39Additional
                    paid-in-capital
                
                
                11,870Deferred
                    stock based compensation
                
                
                (1,984
                )Accumulated
                    deficit
                
                
                (9,703
                )222$
                9,428
 
 The
          accompanying notes to these condensed consolidated financial statements
          form an
          integral part thereof.
  4
  VSUS
          TECHNOLOGIES INCORPORATED
 (A
          DEVELOPMENT STAGE COMPANY)
 CONDENSED
          INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
 (IN
          THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
  CUMULATIVE
                      FROM(SEPTEMBER
                      21, 2000)For
                      the Three Months Ended
                  
                  For
                      the Nine Months Ended
                  
                  (INCEPTION)
                      TOSeptember
                      30,
                  
                  September
                      30,
                  
                  SEPTEMBER
                      30,2005
                  
                  2004
                  
                  2005
                  
                  2004
                  
                  2005(UNAUDITED)
                  
                  (UNAUDITED)
                  
                  (UNAUDITED)
                  
                  (UNAUDITED)
                  
                  (UNAUDITED)Revenue
                  
                  $
                  —
                  
                  $
                  162
                  
                  $
                  —
                  
                  $
                  265
                  
                  $
                  1,728Cost
                      of revenues
                  
                  
                  —
                  
                  
                  12
                  
                  
                  —
                  
                  
                  36
                  
                  
                  232Gross
                      profit
                  
                  
                  —
                  
                  
                  150
                  
                  
                  —
                  
                  
                  229
                  
                  
                  1,496Research
                      and development expense
                  
                  
                  375
                  
                  
                  58
                  
                  
                  775
                  
                  
                  166
                  
                  
                  2,195Sales
                      and marketing
                  
                  
                  —
                  
                  
                  85
                  
                  
                  —
                  
                  
                  343
                  
                  
                  944General
                      and administrative expense *
                  
                  
                  813
                  
                  
                  163
                  
                  
                  3,359
                  
                  
                  526
                  
                  
                  5,612Acquired
                      in process technology
                  
                  
                  —
                  
                  
                  
                  
                  
                  —
                  
                  
                  
                  
                  
                  —Merger
                      expenses
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  219
                  
                  
                  409Operating
                      loss
                  
                  
                  (1,188
                  )
                  
                  (156
                  )
                  
                  (4,134
                  )
                  
                  (1,025
                  )
                  
                  (7,664
                  )Financing
                      expenses, net
                  
                  
                  (606
                  )
                  
                  (60
                  )
                  
                  (1,943
                  )
                  
                  (168
                  )
                  
                  (2,191
                  )Gain
                      on derivatives
                  
                  
                  152
                  
                  
                  —
                  
                  
                  152
                  
                  
                  —
                  
                  
                  152Net
                      loss
                  
                  $
                  (1,642
                  )
                  $
                  (216
                  )
                  $
                  (5,925
                  )
                  $
                  (1,193
                  )
                  $
                  (9,703
                  )Basic
                      and diluted loss per share
                  
                  $
                  (0.06
                  )
                  $
                  (0.01
                  )
                  $
                  (0.26
                  )
                  $
                  (0.08
                  )Weighted
                      average number of shares outstanding
                  
                  
                  29,827,688
                  
                  
                  15,182,182
                  
                  
                  22,703,602
                  
                  
                  14,526,020
 
 *Including
          stock based compensation of $379 and $215, $2,332, $49, for the three months
          ended September 30, 2005 and 2004, and for the nine months ended September
          30,
          2005 and September 20, 2004, respectively.
 
 The
          accompanying notes to these condensed consolidated financial statements
          form an
          integral part thereof.
  5
  VSUS
          TECHNOLOGIES INCORPORATED
 (A
          DEVELOPMENT STAGE COMPANY)
 CONSOLIDATED
          STATEMENT OF CASH FLOWS
 (IN
          THOUSANDS)
 
 CUMULATIVE
                      FROMSEPTEMBER
                    20, 2000FOR
                    THE NINE MONTHS ENDED
                  SEPTEMBER
                    30,
                
                (INCEPTION)
                    TO
                  SEPTEMBER
                    30,2005
                
                2004
                
                2005(UNAUDITED)
                
                (UNAUDITED)CASH
                    FLOWS-OPERATING ACTIVITIESNet
                    loss for the period
                
                
                ($5,925
                )
                
                ($1,193
                )
                
                ($9,703
                )Adjustments
                    to reconcile net loss to net cash used in operating
                    actvities:Depreciation
                    and amortization
                
                
                436
                
                
                8
                
                
                469Amortization
                    of deferred stock-based compensation
                
                
                2,333
                
                
                215
                
                
                3,609Increase
                    in accrued severance pay, net
                
                
                —
                
                
                22
                
                
                —Gain
                    on derivatives
                
                
                (152
                )
                
                —
                
                
                (152
                )Compensatory
                    elements of stock issuances
                
                
                791
                
                
                —
                
                
                791Amortization
                    of debt discount
                
                
                525
                
                
                —
                
                
                525Accrued
                    interest-preferred stock
                
                
                138
                
                
                —
                
                
                138Transfer
                    of assets to former officer
                
                
                49
                
                
                —
                
                
                49Interest
                    to related party
                
                
                14
                
                
                10
                
                
                50Accrued
                    liquidated damages
                
                
                208
                
                
                
                
                
                208Accrued
                    interest on convertible loan
                
                
                —
                
                
                153
                
                
                171Decrease
                    (increase) in accounts receivable and other current assets
                
                
                —
                
                
                (137
                )
                
                (6
                )Increase
                    in accounts payable and accrued expenses
                
                
                570
                
                
                134
                
                
                1,155Net
                    cash (used in) operating activities
                
                
                (1,013
                )
                
                (788
                )
                
                (2,696
                )CASH
                    FLOWS-INVESTING ACTIVITIESReverse
                    merger
                
                
                —
                
                
                (200
                )
                
                (200
                )Cash
                    advance to supplier
                
                
                (50
                )
                
                —
                
                
                (50
                )Purchase
                    of fixed assets
                
                
                (22
                )
                
                (38
                )
                
                (104
                )Net
                    cash provided by (used in) operating activities
                
                
                (72
                )
                
                (238
                )
                
                (354
                )CASH
                    FLOWS-FINANCING ACTIVITIESShort
                    term bank credit
                
                
                10
                
                
                4
                
                
                16Proceeds
                    from notes payable
                
                
                644
                
                
                
                
                
                644Exercise
                    of stock options
                
                
                17
                
                
                —
                
                
                17Receipt
                    of convertible loan
                
                
                215
                
                
                675
                
                
                1,690Related
                    parties
                
                
                179
                
                
                (106
                )
                
                358Issuance
                    of share capital
                
                
                —
                
                
                —
                
                
                325Net
                    cash provided by financing activities
                
                
                1,065
                
                
                573
                
                
                3,050INCREASE
                    (DECREASE) IN CASH AND CASH EQUIVALENTS
                
                
                (20
                )
                
                (453
                )
                
                —CASH
                    AND CASH EQUIVALENTS-BEGINNING
                    OF PERIOD
                
                
                20
                
                
                661
                
                
                —CASH
                    AND CASH EQUIVALENTS-END
                    OF PERIOD
                
                $
                —
                
                $
                208
                
                $
                —
 
 The
          accompanying notes to these condensed consolidated financial statements
          form an
          integral part thereof.
  6
 
 VSUS
          TECHNOLOGIES INCORPORATED
 (A
          DEVELOPMENT STAGE COMPANY)
 CONSOLIDATED
          STATEMENT OF CASH FLOWS
 (IN
          THOUSANDS)
  CUMULATIVE
                      FROMSEPTEMBER
                    20, 2000FOR
                    THE NINE MONTHS ENDED
                  SEPTEMBER
                    30,
                
                (INCEPTION)
                    TO
                  SEPTEMBER
                    30,2005
                
                2004
                
                2005(UNAUDITED)
                
                (UNAUDITED)
 Supplementary
                    disclosure of Cash Flows Information:Interest
                    paid
                
                $
                —
                
                $
                —
                
                $
                —Income
                    taxes paid
                
                $
                —
                
                $
                —
                
                $
                —Non-Cash
                    Investing and Financing Transactions:Common
                    stock issued for payment of accrued interest
                
                $
                177
                
                $
                —
                
                $
                177Value
                    assigned to beneficial conversion inconnection
                    with the 12% convertible debenture
                
                $
                154
                
                $
                —
                
                $
                154Value
                    assigned to warrants issued to purchasersof
                    convertible debentures
                
                $
                61
                
                $
                —
                
                $
                611stAlerts
                    Merger:Loan
                    Receivable
                
                $
                228
                
                $
                —
                
                $
                228Secuirty
                    Deposit
                
                
                27
                
                
                —
                
                
                27Property
                    and Equipment
                
                
                704
                
                
                —
                
                
                704Acquired
                    Technology
                
                
                4,522
                
                
                —
                
                
                4,522Goodwill
                
                
                4,522
                
                
                —
                
                
                4,522Accrued
                    Liabilities
                
                
                (628
                )
                
                —
                
                
                (628
                )Notes
                    Payable (less debt discount of $377)
                
                
                (788
                )
                
                —
                
                
                (788
                )Convertible
                    Notes Payable
                
                
                (3,400
                )
                
                —
                
                
                (3,400
                )Common
                    Stock and Warrants Issued
                
                
                (5,187
                )
                
                —
                
                
                (5,187
                )$
                —
                
                $
                —
                
                $
                —Value
                    assigned to warrants issued to purchasersof
                    convertible debentures
                
                $
                61
                
                $
                —
                
                $
                61
  In
          addition, see Note 3 for details related to the acquisition of
          1stAlerts.
 
 The
          accompanying notes to these financial statements form an integral part
          thereof.
  7
  
 VSUS
          TECHNOLOGIES, INCORPORATED
 CONDENSED
          CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIENCY
 (IN
          THOUSAND, EXCEPT NUMBER OF SHARES)
 (UNAUDITED)
 
 COMMON
                    STOCKSHARES
                
                AMOUNT
                
                ADDITIONAL
                  PAID-IN
                  CAPITAL
                
                DEFERRED
                    STOCK COMPENSATION
                
                ACCUMULATED
                    DEFICIT
                
                TOTALBalance
                    at Janauary 1, 2005
                
                
                12,392,896
                
                $
                12
                
                $
                1,436
                
                $
                (51
                )
                $
                (3,778
                )
                $
                (2,381
                )Value
                    assigned to stock options for services
                
                
                —
                
                
                —
                
                
                5
                
                
                —
                
                
                —
                
                
                5Value
                    assigned to buy back of shares from former officer
                
                
                —
                
                
                —
                
                
                1,694
                
                
                (1,694
                )
                
                —
                
                
                —Excericise
                    of stock options
                
                
                4,102,000
                
                
                4
                
                
                13
                
                
                
                
                
                
                
                
                17Common
                    stock issued as consideration for extending the terms of a
                    loan
                
                
                124,750
                
                
                —
                
                
                46
                
                
                
                
                
                
                
                
                46Common
                    stock issued in connection with the merger with 1stAlerts,
                    Inc.
                
                
                13,000,000
                
                
                13
                
                
                4,797
                
                
                
                
                
                
                
                
                4,810Common
                    stock issued as payment of accrued interest
                
                
                708,263
                
                
                1
                
                
                176
                
                
                
                
                
                
                
                
                177Value
                    assigned to warrants in connection with 1stAlerts, Inc.
                    merger
                
                
                —
                
                
                —
                
                
                377
                
                
                
                
                
                
                
                
                377Stock
                    options for services rendered
                
                
                —
                
                
                
                
                
                740
                
                
                
                
                
                
                
                
                740Stock
                    options for services rendered
                
                
                —
                
                
                —
                
                
                900
                
                
                (900
                )
                
                
                
                
                —Stock
                    issued for consulting services
                
                
                65,000
                
                
                —
                
                
                24
                
                
                
                
                
                
                
                
                24Stock
                    issued for consulting services
                
                
                10,000,000
                
                
                10
                
                
                890
                
                
                (900
                )
                
                
                
                
                —Shares
                    returned by former officer and director
                
                
                (453,000
                )
                
                (1
                )
                
                1
                
                
                
                
                
                
                
                
                —Stock
                    options for services
                
                
                —
                
                
                —
                
                
                771
                
                
                (771
                )
                
                —
                
                
                —Amortization
                    of deferred compensation
                
                
                —
                
                
                —
                
                
                —
                
                
                2,332
                
                
                —
                
                
                2,332Net
                    loss-Nine Months ended September 30, 2005
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                (5,925
                )
                
                (5,925
                )Balance
                    at September 30, 2005
                
                
                39,939,909
                
                $
                39
                
                $
                11,870
                
                $
                (1,984
                )
                $
                (9,703
                )
                $
                222
 
 The
          accompanying notes to these condensed consolidated financial statements
          form an
          integral part thereof.
 
 8
  VSUS
        TECHNOLOGIES INCORPO RATED
 (A
        DEVELOPMENT STAGE COMPANY)
 NOTES
        TO
        THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 **NOTE
        1 - BUSINESS AND ACQUISITION**
 
 ACQUISITION
 
 VSUS
        Technologies Incorporated (“the Company”) was incorporated in Delaware on
        September 20, 2000. Following its establishment, the Company organized, at
        the
        end of 2000, two wholly-owned subsidiaries: Safe Mail International Ltd.,
        a
        company registered in the British Virgin Islands and Safe Mail Development
        Ltd.,
        a company registered in Israel. As of August 31, 2004, the Company established
        two additional wholly-owned subsidiaries: VSUS Secured Services, Inc., a
        Delaware corporation and First Info Network, Inc., a Delaware corporation.
        Since
        inception, and until a recent shift in the focus of its business operations,
        the
        Company had been a developer and marketer of highly secure communications
        systems for use over the Internet.
 
 Effective
        as of April 13, 2005, the Company reorganized its business by transferring
        substantially all of its business assets into VSUS Secured Services, Inc.,
        its
        wholly-owned subsidiary. Consequently, its two subsidiaries, Safe Mail
        Development Ltd. and Safe Mail International Ltd., became subsidiaries of
        VSUS
        Secured Services, Inc.
 
 On
        April
        14, 2005, VSUS Technologies Incorporated acquired 1stAlerts, Inc., a Delaware
        corporation (“1stAlerts”), a company that develops, markets and sells software
        applications, when 1stAlerts merged with and into the Company’s wholly-owned
        Delaware subsidiary, First Info Network, Inc., hereinafter referred to as
        the
“1stAlerts Acquisition”. At the time of the 1stAlerts Acquisition, among other
        things: (i) the Company exchanged 13,000,000 shares of its Common Stock,
        and 200
        shares of its Series B Participating Preferred Stock, for all of the issued
        and
        outstanding shares of capital stock of 1stAlerts, (ii) the Company issued
        1,861,841 of its Class A Warrants in exchange for warrants to purchase shares
        of
        Common Stock of 1stAlerts, (iii) the Company assumed $4,565,000 of promissory
        and convertible notes from 1stAlerts, and (iv) certain officers and directors
        of
        1stAlerts became officers and directors of the Company.
 
 Each
        of
        the 1,861,841 Class A Warrants the Company issued in connection with the
        1stAlerts Acquisition have a term of a term of two years from the effective
        date
        of a registration statement the Company’s obligated to file to register, among
        other of its securities, the shares of the Company’s Common Stock underlying
        these warrants, and an exercise price of $0.19.
  The
        pre-acquisition stockholders of 1stAlerts have been granted the option to
        purchase up to 95% of the shares of First Info Network, Inc. from the Company
        under certain circumstances, pursuant to a Call Option Agreement the Company
        entered into with them.
 
 Since,
        at
        the effective time of the 1stAlerts Acquisition, the Company maintained (i)
        a
        majority of the outstanding shares of Common Stock of the combined company,
        (ii)
        officers who ranked higher than the incoming pre-acquisition 1stAlerts officers,
        and (iii) the ability to elect and appoint a voting majority of the governing
        board, the acquisition was treated as a forward merger with the Company as
        the
        accounting acquirer.
  9
  VSUS
        TECHNOLOGIES INCORPORATED
 (A
        DEVELOPMENT STAGE COMPANY)
 NOTES
        TO
        THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 **NOTE
        1 - BUSINESS AND ACQUISITION (Continued)**
 
 The
        transaction was accounted for using the purchase method of accounting. The
        results of 1stAlerts for the period April 14, 2005 through September 30,
        2005
        are included in the condensed consolidated statement of operations for the
        three
        and nine months ended September 30, 2005.
 
 Following
        its acquisition of 1stAlerts, the Company shifted its business operations
        to
        primarily focus on the 1stAlerts business model. In connection with this
        change,
        the Company terminated its business operations in Israel.
 
 BASIS
        OF
        PRESENTATION
 
 The
        accompanying unaudited condensed consolidated financial statements have been
        prepared by the Company in accordance with accounting principles generally
        accepted in the United States of America. These financial statements reflect
        all
        adjustments, consisting of normal recurring adjustments and accruals, which
        are,
        in the opinion of management, necessary for a fair presentation of the financial
        position of the Company as of September 30, 2005, and the results of operations
        and cash flows for the interim periods indicated in conformity with generally
        accepted accounting principles applicable to interim periods. These financial
        statements should be read in conjunction with the financial statements and
        notes
        related thereto included the Annual Report on Form 10-KSB for year ended
        December 31, 2004.
 
 These
        results for the three and nine months ended September 30, 2005, are not
        necessarily indicative of the results to be expected for the full fiscal
        year.
        The preparation of the unaudited condensed consolidated financial statements
        in
        conformity with US GAAP requires management to make estimates and assumptions
        that affect reported amounts of assets and liabilities and disclosure of
        contingent assets and liabilities at the date of the financial statements
        and
        reported amounts of revenues and expenses during the reporting period. Actual
        results could differ from those estimates.
 
 GOING-CONCERN
        AND MANAGEMENT’S PLAN
 
 The
        accompanying unaudited condensed consolidated financial statements have been
        prepared in conformity with accounting principles generally accepted in the
        United States of America, which contemplate continuation of the Company as
        a
        going concern. However, as shown in the accompanying unaudited condensed
        consolidated financial statements, the Company has incurred losses from
        operations since inception. Management anticipates incurring additional losses
        in 2005. Further, the Company may incur additional losses thereafter, depending
        on its ability to generate revenues from the licensing or sale of its
        technologies and products. The Company’s technologies and products have never
        been utilized on a large-scale commercial basis and there is no assurance
        that
        any of its technologies or products will receive market acceptance. As reflected
        in the accompanying condensed consolidated financial statements, the Company’s
        operations for the three months ended September 30, 2005 and 2004, resulted
        in a
        net loss of $1,642,000 and $216,000, respectively and for the nine months
        ended
        September 30, 2005 and 2004, resulted in a net loss of $5,925,000 and $1,193,000
        respectively. In addition the Company (i) was delinquent in paying its payroll
        taxes at September 30, 2005 in the amount of approximately $87,000, (ii)
        has a
        working capital deficiency of $5,587,000 and (iii) is in default of its
        promissory notes (Note 8) and its 12% convertible debentures (Note
        9).
  10
  VSUS
        TECHNOLOGIES INCORPORATED
 (A
        DEVELOPMENT STAGE COMPANY)
 NOTES
        TO
        THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 **NOTE
        1 - BUSINESS AND ACQUISITION (Continued)**
 
 Management’s
        plans in this regard include raising additional cash from current and potential
        stockholders and lenders, making strategic acquisitions and increasing the
        marketing of its products and services. As a result of the Company’s acquisition
        of 1stAlerts, and the anticipated cash flow from the combined company’s
        operations, the Company believes that it will have sufficient capital to
        fund
        its operations. However, until such time as the Company generates sufficient
        revenues from the sale of its products, the Company will continue to be
        dependent on raising substantial amounts of additional capital through any
        one
        of a combination of debt offerings or equity offerings. The Company has no
        current arrangements with respect to any additional financing. Consequently,
        there can be no assurance that any future financing will be available to
        the
        Company when needed, and on commercially reasonable terms. The Company’s
        inability to derive sufficient revenues from the sale of its products, or
        obtain
        additional financing when needed, would have a material adverse effect on
        the
        company, requiring the Company to curtail or cease operations. In addition,
        any
        equity financing may involve substantial dilution to the Company’s then current
        stockholders.
 
 Being
        a
        development stage company, the Company is subject to all the risks inherent
        in
        the establishment of a new enterprise and the marketing and manufacturing
        of a
        new product, many of which risks are beyond the control of the Company. All
        of
        these factors raise substantial doubt as to the ability of the Company to
        continue as a going concern.
 
 These
        unaudited condensed consolidated financial statements do not include any
        adjustments relating to the recoverability of recorded asset amounts that
        might
        be necessary as a result of the above uncertainty.
 
 **NOTE
        2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**
 
 PRINCIPLES
        OF CONSOLIDATION
 
 The
        consolidated financial statements include the financial statements of the
        Company and its subsidiaries including the operations of 1stAlerts commencing
        on
        April 14, 2005. All significant inter-company transactions and balances have
        been eliminated in consolidation.
  11
  VSUS
        TECHNOLOGIES INCORPORATED
 (A
        DEVELOPMENT STAGE COMPANY)
 NOTES
        TO
        THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 **NOTE
        2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**
 
 USE
        OF
        ESTIMATES
 
 The
        preparation of financial statements, in conformity with accounting principles
        generally accepted in the United States of America, requires management to
        make
        estimates and assumptions that affect the reported amounts of assets and
        liabilities and disclosure of contingent assets and liabilities at the date
        of
        the unaudited condensed consolidated financial statements and the reported
        amounts of revenues and expenses during the reporting period. Actual results
        could differ from those estimates.
 
 LOSS
        PER
        COMMON SHARE
 
 Basic
        loss per common share is computed based upon weighted-average shares outstanding
        and excludes any potential dilution. Diluted loss per share reflects the
        potential dilution from the exercise or conversion of all dilutive securities
        into Common Stock based upon the average market price of common shares
        outstanding during the period. For the nine months and three months ended
        September 30, 2005 and 2004, no effect has been given to outstanding options,
        warrants, convertible debentures and convertible preferred stock in the diluted
        computation, as their effect would be anti-dilutive.
 
 Securities
        that could potentially dilute basic earnings per share (EPS) in the future,
        that
        were not included in the computation of diluted EPS because to do so would
        have
        been anti-dilutive for the periods presented, consist of the
        following:
 
 Options
                  to purchase Common Stock
              
              
              13,426,008Warrants
                  to purchase Common Stock
              
              
              7,756,841Convertible
                  preferred stock (1)
              
              
              7,708,269Convertible
                  Notes (1)
              
              
              860,000Total
                  as of September 30, 2005
              
              
              29,751,118
 (1)
                Based
                    on conversion rate of $.25.
 
 Substantial
        and potential issuances after September 30, 2005:
  Stock
                  options issued for services
              2,400,000
 
 In
        addition, in connection with the 1stAlert Acquisition,
        the shares of Series B Participating Preferred Stock Issued are potentially
        convertible into common shares based on a formula described in Note
        9.
 
 RESEARCH
        AND DEVELOPMENT
 
 In
        accordance with SFAS No. 2 "Accounting for Research and Development Costs,"
        all
        research and development ("R&D") costs are expensed when they are incurred,
        unless they are reimbursed under specific contracts. Assets used in R&D
        activity, such as machinery, equipment, facilities and patents that have
        alternative future use either in R&D activities or otherwise are
        capitalized.
  12
  
 VSUS
        TECHNOLOGIES INCORPORATED
 (A
        DEVELOPMENT STAGE COMPANY)
 NOTES
        TO
        THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 **NOTE
        2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**
 
 STOCK-BASED
        COMPENSATION
 
 The
        Company accounts for employee stock-based compensation in accordance with
        Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to
        Employees” (“APB No. 25”), and in accordance with FASB Interpretation No. 44.
        Pursuant to these accounting pronouncements, the Company records compensation
        for stock options granted to employees over the vesting period of the options
        based on the difference, if any, between the exercise price of the options
        and
        the market price of the underlying shares at that date.
 
 Deferred
        compensation is amortized to compensation expense over the vesting period
        of the
        options. Had
        compensation cost for the Company’s option plans been determined on the basis of
        the fair value at the grant dates in accordance with the provisions of SFAS
        No.
        123 “Accounting for Stock-Based Compensation” (“SFAS No. 123”), as amended by
        SFAS No. 148 “Accounting for Stock-Based Compensation” (“SFAS No. 148”), the
        Company’s net loss and basic net loss per share would not have
        changed.
 
 For
        purposes of estimating fair value in accordance with SFAS 123, the Company
        utilized the Black - Scholes option-pricing model. The following assumptions
        were utilized in such calculations for the nine-months ended September 30,
        2005
        (all in weighted averages):
  2004Risk-free
                    interest rate
                3.6%Expected
                    life of options
                5Expected
                    dividend yield
                NoneVolatility
                0%
 
 Based
        on
        these assumptions there are no differences in the amount of stock-based
        compensation according to FASB 123 compared to the amount measured according
        to
        APB 25.
 
 IMPACT
        OF
        RECENTLY ISSUED ACCOUNTING STANDARDS
 
 In
        April
        2005, the Securities and Exchange Commission issued release number 33-8568,
        Amendment To Rule 4-01(A) Of Regulation S-X Regarding The Compliance Date
        For
        Statement Of Financial Accounting Standards No. 123 (Revised 2004), Share
        Based
        Payment. This release delays the date for compliance with Statement of Financial
        Accounting Standards No. 123 (Revised 2004), Share Based Payment ("Statement
        123R") to the registrant's first interim or annual reporting period beginning
        on
        or after December 15, 2005. Statement 123R requires public entities to measure
        the cost of employee
  13
  SUS
        TECHNOLOGIES INCORPORATED
 (A
        DEVELOPMENT STAGE COMPANY)
 NOTES
        TO
        THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 **NOTE
        2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**
 
 services
        received in exchange for an award of equity instruments based on the grant-date
        fair value of the award, and no longer allows companies to apply the intrinsic
        value based method of accounting for stock compensation described in Accounting
        Principles Board Opinion No. 25, Accounting For Stock Issued To Employees.
        In
        accordance with this amendment, the Company will adopt SFAS No. 123R as of
        the
        beginning of the Company's interim reporting period that begins on January
        1,
        2006. The transitional provisions of SFAS 123R are not expected to have a
        material effect on the Company's consolidated financial position or results
        of
        operations as substantially all outstanding equity instruments are expected
        to
        vest on or prior to December 31, 2005. The Company will utilize the fair
        value
        method for any future instruments after the implementation date.
 
 In
        June
        2005, the Financial Accounting Standards Board published Statement of Financial
        Accounting Standards No. 154, Accounting Changes And Error Corrections. SFAS
        154
        establishes new standards on accounting for changes in accounting principles.
        Pursuant to the new rules, all such changes must be accounted for by
        retrospective application to the financial statements of prior periods unless
        it
        is impracticable to do so. SFAS 154 completely replaces Accounting Principles
        Bulletin No. 20 and SFAS 3, though it carries forward the guidance in those
        pronouncements with respect to accounting for changes in estimates, changes
        in
        the reporting entity, and the correction of errors. The requirements in SFAS
        154
        are effective for accounting changes made in fiscal years beginning after
        December 15, 2005. The Company will apply these requirements to any accounting
        changes after the implementation date.




Emerging
          Issues Task Force (EITF) Issue No. 00-19, "Accounting for Derivative Financial
          Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock,"
          provides guidance when evaluating whether embedded derivatives should be
          bifurcated under FASB Statement No. 133, Accounting for Derivative Instruments
          and Hedging Activities. However, Issue No. 00-19 does not apply if the
          hybrid
          contract is a conventional convertible debt instrument in which the holder
          may
          only realize the value of the conversion option by exercising the option
          and
          receiving the entire proceeds in a fixed number of shares or the equivalent
          amount of cash (at the discretion of the issuer). Since the time that Issue
          No.
          00-19 was issued, complex structures have arisen such that the term
          "conventional convertible debt instrument" is no longer adequately defined.
 
 In
          Issue
          No. 05-2, "The Meaning of 'Conventional Convertible Debt Instrument' in
          EITF
          Issue No. 00-19," the EITF concluded that an instrument with the following
          characteristics should be considered "conventional" for purposes of applying
          Issue No. 00-19:
  ·
                  The
                      holder has an option to convert the instrument into a fixed
                      number of
                      shares (or a corresponding amount of cash at the issuer’s discretion);
                      and
  ·
                  The
                      holder's ability to exercise the option is based on either
                      the passage of
                      time or a contingent event.
 Further,
          the EITF concluded that mandatory redeemable convertible preferred stock
          may
          qualify for the same exception as conventional convertible debt instruments
          if
          the economic characteristics indicate that the instrument is more akin
          to debt
          than to equity.
 
 The
          effect of EITF Issue No. 05-2 did not have a material effect on our consolidated
          financial position or results of operations.
  In
          September 2005, the FASB ratified the EITF Issue No. 05-7, "Accounting
          for
          Modifications to Conversion Options Embedded in Debt Instruments and Related
          Issues", which addresses whether a modification to a conversion option
          that
          changes its fair value affects the recognition of interest expense for
          the
          associated debt instrument after the modification, and whether a borrower
          should
          recognize a beneficial conversion feature, not a debt extinguishment, if
          a debt
          modification increases the intrinsic value of the debt (for example, the
          modification reduces the conversion price of the debt). In September 2005,
          the
          FASB also ratified the EITF’s Issue No. 05-8, “Income Tax consequences of
          Issuing Convertible Debt with a Beneficial Conversion Feature”, which discusses
          whether the issuance of convertible debt with a beneficial conversion feature
          results in a basis difference arising from the intrinsic value of the beneficial
          conversion feature on the commitment date (which is treated recorded I
          shareholder’s equity for book purposes, but as a liability for income tax
          purposes) and, if so, whether that basis difference is a temporary difference
          under FASB Statement No. 109, Accounting for Income Taxes. The Company
          is
          currently evaluating the effect that the implementation of these issues
          will
          have on our consolidated financial position or results of
          operations.
 14
  VSUS
        TECHNOLOGIES INCORPORATED
 (A
        DEVELOPMENT STAGE COMPANY)
 NOTES
        TO
        THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 **NOTE
        3 - ACQUISITION**
 
 On
        April
        14, 2005, the Company consummated the acquisition of all of the issued and
        outstanding shares of Common Stock of 1stAlerts. **** At
        the
        time of the acquisition, among other things: (i) the Company exchanged
        13,000,000 shares of its Common Stock, and 200 shares of its Series B
        Participating Preferred Stock, for all of the issued and outstanding shares
        of
        capital stock of 1stAlerts, (ii) the Company issued 1,861,841 of its Class
        A
        Warrants in exchange for warrants to purchase shares of Common Stock of
        1stAlerts, (iii) the Company assumed $4,565,000 of promissory and convertible
        notes from 1stAlerts, and (iv) certain officers and directors of 1stAlerts
        became officers and directors of the Company.
 
 Each
        of
        the 1,861,841 Class A Warrants the Company issued in connection with the
        1stAlerts Acquisition have a term of a term of two years from the effective
        date
        of a registration statement the Company’s obligated to file to register, among
        other of its securities, the shares of the Company’s Common Stock underlying
        these warrants, and an exercise price of $0.19.
 
 The
        pre-acquisition stockholders of 1stAlerts have been granted the option to
        purchase up to 95% of the shares of First Info Network, Inc. from the Company
        under certain circumstances, pursuant to a Call Option Agreement the Company
        entered into with them.
 
 The
        Company concludes that since, at the effective time of the 1stAlerts Acquisition,
        the Company maintained (i) a majority of the outstanding shares of Common
        Stock
        of the combined company, (ii) officers who ranked higher than the incoming
        pre-acquisition 1stAlerts officers, and (iii) the ability to elect and appoint
        a
        voting majority of the governing board, the acquisition will be treated as
        a
        forward merger with the Company as the accounting acquirer. The transaction
        was
        accounted for using the purchase method of accounting.
 
 The
        following table sets forth the calculation of the purchase price:
 
 Value
        of
        VSUS stock issued in connection with the acquisition with
        1stAlerts.
 Estimated
                    Fair
                  Values
                
                Equity
                    Value
                  per
                    Share
                
                ConsiderationCommon
                    Stock
                
                
                13,000,000
                
                $
                .37
                
                $
                4,810,000Warrants
                    (as determined under Black Scholes)
                
                
                1,861,841
                
                $
                .20
                
                $
                376,399Series
                    B Preferred Stock
                
                
                200
                
                
                Not
                    DeterminableTotal
                    Consideration
                
                
                
                
                
                
                
                $
                5,186,399Total
                    liabilities assumed, net of debt discount of $376,399
                
                
                
                
                
                
                
                $
                4,816,955Total
                    Consideration, Net
                
                
                
                
                
                
                
                $
                10,003,354
  15
  VSUS
        TECHNOLOGIES INCORPORATED
 (A
        DEVELOPMENT STAGE COMPANY)
 NOTES
        TO
        THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
  **NOTE
        3** **-
        ACQUISITION-(Continued)**
 
 As
        required by paragraph 74 of APB No. 16, “APB 16: Business Combinations”, “The
        fair value of securities traded in the market is normally more clearly evident
        than the fair value of an acquired company (paragraph 67). Thus, the quoted
        market price of an equity security issued to effect a business combination
        may
        usually be used to approximate the fair value of an acquired company after
        recognizing possible effects of price fluctuations, quantities traded, issue
        costs, and the like (paragraph 23). The market price for a reasonable period
        before and after the date the terms of the acquisition are agreed to and
        announced should be considered in determining the fair value of securities
        issued.”
 
 APB
        16
        continues to state under paragraph, 75, “If the quoted market price is not the
        fair value of stock, either preferred or common, the consideration received
        should be estimated even though measuring directly the fair values of assets
        received is difficult. Both the consideration received, including goodwill,
        and
        the extent of the adjustment of the quoted market price of the stock issued
        should be weighed to determine the amount to be recorded. All aspects of
        the
        acquisition, including the negotiations, should be studied, and independent
        appraisals may be used as an aid in determining the fair value of securities
        issued. Consideration other than stock distributed to effect an acquisition
        may
        provide evidence of the total fair value received”.
  16
  VSUS
        TECHNOLOGIES INCORPORATED
 (A
        DEVELOPMENT STAGE COMPANY)
 NOTES
        TO
        THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 **NOTE
        3 - ACQUISITION (Continued)**
 
 In
        reviewing the transaction, the Company has determined that quoted market
        price
        at April 14, 2005, is not indicative of the fair value of the stock. This
        is
        because at the time of the 1stAlerts Acquisition, the Company’s Common Stock was
        thinly traded. It was not until August of 2005 that a reasonable volume of
        shares began to be traded. Since the beginning of August the price ranged
        from
        about $0.30 to $0.54. From the date of the 1stAlerts Acquisition to the date
        that a more active volume of shares began to trade, the Company had no
        significant announcements or developments in their business.
 
 Based
        on
        the above facts, the initial fair value of the Company’s Common Stock for the
        purposes determining the purchase price of the 1stAlerts acquisition was
        $0.37
        per share. The Company intends to have its Common Stock and Series B Preferred
        Stock valued by a qualified appraiser by March 31, 2006.
 
 The
        fair
        value of the 1stAlerts warrants was determined using the Black-Scholes valuation
        model. To determine the fair value of these warrants, the following assumptions
        were used: expected volatility of 50.0%, risk-free interest rate of 2.0%,
        and
        expected life of two years.
 
 Since,
        the Series B Participating Preferred Stock has no voting rights, cannot be
        converted for a period of 3 years from the date of the 1stAlerts Acquisition
        (other than a liquidity event defined above), and the number of shares of
        Common
        Stock which could be issued upon conversion is not estimatable as of the
        acquisition date, the value of the Series B Preferred Stock is not determinable
        at this time and therefore has not been valued.
 
 The
        transaction is being accounted for using the purchase method of accounting
        as
        required by Statement of Financial Accounting Standards (“SFAS”) Statement No.
        141, “Business Combinations,” with the Company’s as the accounting acquirer.
        Accordingly, the purchase price has been allocated to tangible and identifiable
        intangible assets acquired and liabilities assumed based on their estimated
        fair
        values at the date of the acquisition. The excess of the purchase price over
        the
        fair value of net assets acquired was recorded as goodwill. The results of
        1stAlerts for the period April 14, 2005 through September 30, 2005, are included
        in the condensed consolidated statement of operations for the three and nine
        months ended September 30, 2005. Goodwill and acquired technology recorded
        in
        the acquisition will be tested periodically for impairment as required by
        SFAS
        Statement No. 142, “Goodwill and Other Intangible Assets”. The allocation of the
        purchase price to specific assets and liabilities is based, in part, upon
        internal estimates of assets and liabilities. The Company is in the process
        of
        beginning the independent appraisal for certain assets, and refining its
        internal fair value estimates. Therefore, the allocation of the purchase
        price
        is preliminary and the final allocation will likely differ. Based on the
        preliminary purchase price allocation, the following table summarizes estimated
        fair values of the assets acquired:
 
 Loan
                  Receivable
              
              $
              228,207Security
                  deposit
              
              
              26,612Property
                  and equipment
              
              
              703,743Acquired
                  technology
              
              
              4,522,396Goodwill
              
              
              4,522,396Total
              
              $
              10,003,354
 
  17
  VSUS
        TECHNOLOGIES INCORPORATED
 (A
        DEVELOPMENT STAGE COMPANY)
 NOTES
        TO
        THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
  **NOTE
        3 -** **ACQUISITION
        (Continued)**
 
 Based
        on
        this initial allocation of the purchase price, $4,522,396 was allocated to
        amortizable intangible assets. The future amortization for this assets using
        the
        initial valuation and assuming a five-year economic life would be approximately
        $905,000 per year.
 
 The
        following unaudited pro forma information has been prepared assuming that
        the
        acquisition of 1stAlerts had taken place at the beginning of the respective
        periods presented. The unaudited pro forma information presented in the table
        below represents the combined net loss and loss per share. The pro forma
        financial information is not necessarily indicative of the combined results
        that
        may occur in the future.
 
 THREE
                  MONTHS ENDED
                SEPTEMBER
                  30,
              
              
              NINE
                  MONTHS ENDED
                SEPTEMBER
                  30,2005
              
              
              2004
              
              
              2005
              
              
              2004(UNAUDITED)
                (IN
                  THOUSANDS, EXCEPT PER SHARE DATA)Net
                  revenues
              
              $
              —
              
              $
              162
              
              $
              —
              
              $
              265Net
                  loss
              
              $
              (1,642
              )
              $
              (293
              )
              $
              (5,925
              )
              $
              (1,270
              )Net
                  loss available to common stockholders
              
              $
              (1,642
              )
              $
              (293
              )
              $
              (5,925
              )
              $
              (1,270
              )Basic
                  and diluted loss per common share:Continuing
                  operations
              
              $
              (.06
              )
              $
              (.02
              )
              $
              (.26
              )
              $
              (.09
              )Net
                  loss available to common stockholders
              
              $
              (.06
              )
              $
              (.02
              )
              $
              (.26
              )
              $
              (.09
              )Weighted
                  average number of shares outstanding
              
              
              29,827,688
              
              
              15,182,182
              
              
              22,703,602
              
              
              14,526,020
 
 **NOTE
        4 - GOODWILL AND OTHER INTANGIBLE ASSETS**
 
 In
        connection with the acquisition of 1stAlerts on April 14, 2005, the Company
        recorded goodwill and other intangible assets in accordance with SFAS No.
        141,
“Business Combinations”. The $9. 0
        million
        of goodwill and other intangible assets was recorded as the excess of the
        purchase price of $10.0 million over the fair value of the net amounts assigned
        to assets acquired and liabilities assumed. In accordance with SFAS No. 142,
        “Accounting for Goodwill and Other Intangible Assets”, the Company will continue
        to assess on an annual basis whether goodwill and other intangible assets
        acquired in the acquisition of 1stAlerts’s are impaired. Additional impairment
        assessments may be performed on an interim basis if the Company deems it
        necessary. Finite-lived intangible assets will be amortized over their useful
        lives, if determinable, and periodically reviewed for impairment. No amounts
        assigned to any intangible assets are deductible for tax purposes.
  Goodwill
        and other intangible assets at
        September 30, 2005 consisted of the following (in thousands):
  Goodwill
              
              $
              4,522Acquired
                  technology
              
              
              4,5229,044Less:
                  Accumulated Amortization
              
              
              339$
              8,705
  18
  VSUS
        TECHNOLOGIES INCORPORATED
 (A
        DEVELOPMENT STAGE COMPANY)
 NOTES
        TO
        THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 **NOTE
        4 - GOODWILL AND OTHER INTANGIBLE ASSETS-(Continued)**
 
 Amortization expense
        for the three and nine months ended September 30, 2005 and 2004, amounted
        to
        approximately $339,000 and $339,000, respectively for 2005 and $-0-,
        respectively for 2004. Acquired technology is being depreciated over a useful
        life of five years.
 
 **NOTE
        5 - PROPERTY AND EQUIPMENT**
 
 Property
        and equipment at September 30, 2005 consisted of the following (in
        thousands):
 
 Computer
                  hardware
              
              $
              22Assets
                  acquired in acquisition
              
              
              704$
              726Less:
                  Accumulated depreciation
              
              
              97$
              629
 
 Depreciation
        expense for the three and nine months ended September 30, 2005 and 2004,
        amounted to $ 49,000
        and $97,000, respectively for 2005 and $5,000 and $8,000, respectively for
        2004.
        Computer hardware is being depreciated over a useful life of three
        years.
 
 **NOTE
        6 - TRANSACTIONS WITH RELATED PARTIES**
 
 Effective
        as of January 28, 2005, the Company entered into a settlement agreement (the
        “Settlement Agreement”) with a former officer and director.
 
 Pursuant
        to the Settlement Agreement, among other things, (i) the former officer and
        director resigned from his duties with the Company and sold all of the Company’s
        Common Stock held by him; (ii) the Company granted to the former officer
        and
        director a worldwide, perpetual license to use and market certain of its
        intellectual property; (iii) the former officer and director agreed to provide
        the Company with certain customer service and support, and development services;
        (iv) the Company agreed to reimburse the former officer and director for
        certain
        amounts paid by him on behalf of the Company, and sell him, or a company
        founded
        by him, certain assets with a carrying value of $49,000 without additional
        consideration; (v) the former officer and director agreed to forfeit certain
        amounts due to him from the Company; and (vi) the Company canceled an aggregate
        of 1,183,750 options to purchase shares of its Common Stock, at exercise
        prices
        ranging between $0.001 and $0.01 per share, which the Company previously
        granted
        to him under its 2003 Stock Option Plan, and replaced them with an aggregate
        of
        1,183,750 non-plan options to purchase shares of the Company’s Common Stock, at
        exercise prices ranging between $0.001 and $0.01 per share.
  19
  VSUS
        TECHNOLOGIES INCORPORATED
 (A
        DEVELOPMENT STAGE COMPANY)
 NOTES
        TO
        THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 **NOTE
        6 - TRANSACTIONS WITH RELATED PARTIES - (Continued)**
 
 Pursuant
        to the Settlement Agreement (described above), among other things, 5,038,000
        shares of the Company’s Common Stock held and controlled by the former officer
        and director were sold to the Company’s newly appointed President and director,
        for an aggregate purchase price of $170,000. The purchase price was negotiated
        as part of the Company's settlement with the former officer and director,
        and,
        therefore, does not necessarily represent the fair market value of our Common
        Stock on the date of the transaction. As a result of this transaction and
        an
        employment agreement with the Company’s newly appointed President dated April
        28, 2005, the Company recorded a charge of $1,694,000 to reflect the excess
        of
        the fair value of the shares purchased over the $170,000 during the quarter
        ended June 30, 2005. As of September 2, 2005, the Company’s President and
        director resigned, and in connection therewith, returned 453,000 of these
        shares
        to the Company’s treasury.
 
 Effective
        January 28, 2005, the Company signed a promissory note of $62,384 with a
        former
        officer of the Company to reimburse him for expenses paid by him on behalf
        of
        the Company. Principal and accrued interest are payable on or prior to the
        one
        year anniversary of the date of this Note. The loan bears an interest rate
        of
        12% per annum.
 
 **NOTE
        7 - CONVERTIBLE LOAN AND SERIES A CONVERTIBLE PREFERRED
        STOCK**
 
 In
        November 2003, the Company signed two loan agreements. Pursuant to the first
        loan agreement, the Company was to receive loans from several lenders in
        the
        total amount of $1,500,000. The Company issued promissory notes in this amount.
        Principal and accrued interest at the rate of 12% per annum were payable
        in full
        after one year. As of December 31, 2003, a total of $900,000 was received,
        and
        an aggregate amount of $475,000 was received during 2004. Pursuant to the
        second
        loan agreement, the Company was to receive a loan from a lender in the total
        amount of $200,000. Th is
        loan
        amount bears interest at the non-negotiable rate of 24% per annum. During
        2004,
        the Company received $100,000, and, during 2005, the Company has received
        an
        additional $66,334, The Company expects to pay accrued and unpaid interest
        on
        the Loan to the lenders in cash, with the exception of $50,000 in interest,
        which was added to the amount of the Loans.
 
 Pursuant
        to those two loan agreements, the loans, (the “Loan”), are convertible into
        units of the Company’s securities (the “Units”), at a purchase price of $5,000
        per Unit (the “Original Purchase Price”). Each Unit will consist of: (i) one
        share of the Company’s Series A Convertible Preferred Stock (the “ Series A
        Preferred Stock”); (ii) 5,000 Class A Warrants; (iii) 5,000 Class B Warrants;
        and (iv) 5,000 Class C Warrants (the Class A Warrants, Class B Warrants and
        Class C Warrants are hereinafter sometimes referred to collectively as the
        “Warrants”).
 
 On
        November 3, 2004 (the “Closing Date”), the outstanding balance of the Loan of
        $1,591,334 was converted into 318 Units, at a purchase price of $5,000 per
        Unit.
 
 Due
        to
        the immaterial value of the Warrants as of November 3, 2004, no value was
        allocated to the Warrants.
  20
  
 VSUS
        TECHNOLOGIES INCORPORATED
 (A
        DEVELOPMENT STAGE COMPANY)
 NOTES
        TO
        THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 **NOTE
        7 - CONVERTIBLE LOAN-(Continued)**
 
 The
        Series A Preferred Stock agreement provides for restrictions and limitations
        on
        defined managements actions.
 
 The
        holders of the Series A Preferred Stock (the “Holders”) have certain
        preferential dividend and liquidation rights including cumulative preferred
        dividends of 12% per annum. In addition, the Convertible Preferred Stock
        is
        redeemable: (i) at the election of any Holder after thirteen months following
        the Closing Date, subject to the Holder’s option to have the Company redeem the
        Series A Preferred Stock from the proceeds of any offering of the Company’s
        securities resulting in gross proceeds of $5,000,000 or more (a “Qualified
        Offering”), at a purchase price equal to the Original Purchase Price, plus any
        accrued and unpaid dividends; or (ii) at the Company’s election after sixteen
        months following the Closing Date, at a purchase price equal to 130% of the
        Series A Preferred Stock’s Original Purchase Price, plus any accrued and unpaid
        dividends. Also, each of the shares of Series A Preferred Stock outstanding
        is
        convertible into such number of shares of the Company’s Common Stock as is
        determined by dividing $5,000, by $0.51 (Amended in April, 2005). At September
        30, 2005, the Company had recorded approximately $138,000 of preferred stock
        dividends. Since the Series A Preferred Stock was classified as a liability,
        the
        preferred stock dividends are included in financing expenses in the accompanying
        consolidated statements of operations.
 
 Each
        of
        the Class A Warrants the Company issued in connection with this transaction
        have
        a term of one year from the effective date of issuance, and an exercise price
        of
        $0.38 (Amended
        in April 2005). Each of the 1,750,000 Class B Warrants the Company issued
        in
        connection with this transaction have a term of three years from the date
        of
        issuance, and an exercise price of $0.68. Each of the 1,750,000 Class C Warrants
        the Company issued in connection with this transaction have a term of five
        years
        from the date of issuance, and an exercise price of $0.93 (Amended in April
        2005).
 
 As
        a
        result of the sale of convertible debentures in April 2005, pursuant to
        antidilution provisions in the Series A Preferred Stock and the Class A
        Warrants, Class B Warrants, and Class C Warrants, the company: (i) reduced
        the
        conversion price of the Series A Preferred Stock, so that each share of Series
        A
        Preferred Stock is convertible into such number of shares of the Company’s
        Common Stock as is determined by dividing $5,000, by $0.25; (ii) reduced
        the
        exercise price of the Class A Warrants to $0.19 per share, and extend the
        term
        to two years from the effective date of the Registration Statement; (iii)
        reduced the exercise price of the Class B Warrants to $0.34 per share, and
        extend the term to five years from the effective date of the Registration
        Statement; and (iv) reduced the exercise price of the Class C Warrants to
        $0.47
        per share.
 
 The
        Company agreed to file a registration statement (the “Registration Statement”)
        to register the shares of Common Stock underlying the Series A Preferred
        Stock,
        Class A Warrants, Class B Warrants and Class C Warrants no later than 45
        days
        after the Closing Date (the “Required Filing Date”). For various reasons, the
        Company was not able to satisfy its requirement to file the Registration
        Statement on or prior to the Required Filing Date. Subsequently, the Holders
        waived their rights to any penalties through May 31, 2005 related to the
        company’s failure to file the registration statement. Liquidating damages are
        uncapped and accrue at the rate of 3% per month or $47,740 for each month
        that
        the Company fails to
  21
  
 VSUS
        TECHNOLOGIES INCORPORATED
 (A
        DEVELOPMENT STAGE COMPANY)
 NOTES
        TO
        THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 **NOTE
        7 - CONVERTIBLE LOAN-(Continued)**
 
 register
        the underlying common shares. The Company accrued $190,960 at September 30,
        2005
        in connection with the liquidating damages.
 
 As
        a
        result of the uncapped liquidating damages provision related to a failure
        to
        register the common shares contained in the registration rights agreement,
        the
        conversion option and the Class A, Class B and Class C warrants do not qualify
        as equity and have been recorded as a derivative liability. The derivative
        liability is adjusted to its fair value at each reporting period. Any increase
        or decrease to such liability is recognized as a loss or gain in the Company’s
        consolidated statement of operations. At September 30, 2005, the fair value
        of
        these derivative instruments was $55,000 which resulted in a loss of $55,000
        for
        the nine months ended September 30, 2005.
 
 Contemporaneously
        with its acquisition of 1stAlerts, Inc., the Company converted the accrued
        interest on the convertible loans of $177,066 into 708,263 shares of its
        Common
        Stock, as full and complete payment thereof.
 
 As
        of
        December 3, 2005, the Series A Preferred Stock became redeemable as the election
        of the Holders. As of the date of this filing, none of the Holders have
        exercised their right.
  22
  VSUS
        TECHNOLOGIES INCORPORATED
 (A
        DEVELOPMENT STAGE COMPANY)
 NOTES
        TO
        THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 **NOTE
        8 - PROMISSORY NOTES**
 
 As
        of
        April 14, 2005, the Company acquired 1stAlerts and, in connection therewith,
        assumed convertible debentures totaling $3,400,000 discussed in Note 9 and
        promissory notes in the aggregate amount of $1,165,000.
 
 The
        loans
        are evidenced by a promissory note (the “1stAlerts Notes””) issued by 1stAlerts
        to the lenders. Interest on the principal amount of the loan outstanding
        accrues
        at the annual rate of 12% and is payable on the maturity of the loan. Prior
        to
        the acquisition, 1stAlerts had defaulted on the 1stAlert Notes. The Company
        is
        currently negotiating a resolution with the holders of the 1stAlerts Notes;
        however the loan remains in default.
 
 Pursuant
        to the acquisition with 1stAlerts, the Company exchanged warrants to purchase
        1,861,841 shares of 1stAlerts Common Stock for 1,861,841 of its Class A
        Warrants.
 
 Each
        of
        the 1,861,841 Class A Warrants the Company issued in connection with the
        1stAlerts Acquisition have a term of two years from the effective date of
        the
        Registration Statement, and is exercisable at $.19 per share. The value assigned
        to these warrants was $376,399 and was recorded as a debt discount at the
        date
        of 1stAlerts Acquisition. The debt discount of $376,399 was charged to financing
        expenses during the quarter ended June 30, 2005.
 
 **NOTE
        9 - CONVERTIBLE DEBENTURES**
 
 FORMER
        SHAREHOLDERS OF 1STALERTS
 
 Pursuant
        to the 1stAlerts Acquisition, First Info Network, Inc. assumed the promissory
        notes in the aggregate principal amount of $3,400,000 which 1stAlerts had
        issued
        to two of the pre-acquisition 1stAlerts stockholders (the “Notes”). The Notes
        bear interest at the rate of one percentage point per annum above the prime
        rate
        and is due December 31, 2009. Pursuant to the Notes, concurrently with any
        public sale, spin-off or other similar disposition of the shares of First
        Info
        Network, Inc., the Notes are convertible into shares of Common Stock of First
        Info Network, Inc at 70% of the “Market Price” (as determined at the time of
        such transaction). As security for the repayment of the Notes, the Company
        pledged all of the Company’s shares of First Info Network, Inc. No value has
        been currently assigned to this contingent beneficial conversion
        feature.
  23
  VSUS
        TECHNOLOGIES INCORPORATED
 (A
        DEVELOPMENT STAGE COMPANY)
 NOTES
        TO
        THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 **NOTE
        9 - CONVERTIBLE DEBENTURES-(Continued)**
 
 SALE
        OF
        12% CONVERTIBLE DEBENTURES AND WARRANTS
 
 As
        of
        April 14, 2005, contemporaneously with the 1stAlerts Acquisition,
        the Company sold an aggregate of: (i) $215,000 of its 12% Convertible Debentures
        (the “Debentures”), (ii) 215,000 Class A Warrants, (iii) 215,000 Class B
        Warrants, and (iv) 215,000 Class C Warrants to four lenders.
 
 The
        Debentures, which have a maturity date of December 3, 2005, are convertible
        into
        such number of shares of the Company’s Common Stock as is determined by dividing
        the amount of the Debentures, by $0.25. Each of the Class A Warrants has
        a term
        of two years from the effective date of the Registration Statement, and an
        exercise price of $0.19. Each of the Class B Warrants has a term of five
        years
        from the effective date of the Registration Statement, and an exercise price
        of
        $0.34. Each of the Class C Warrants has a term of five years from the date
        of
        issuance, and an exercise price of $0.47.
 
 The
        fair
        value of $215,000 Debentures were allocated 71% or $153,741 to the Debenture
        and
        29% or $61,259 to the Debenture warrants. The value of the conversion option
        was
        limited to $153,741. The combined value of the warrants and conversion option
        totaled $215,000 and was accounted for as the debt discount of $215,000 and
        a
        derivative liability of $215,000.
 
 Pursuant
        to a registration rights agreement, the Company agreed to use its best efforts
        to register the common shares underlying the convertible debenture and warrants.
        The agreements provides for uncapped liquidating damages at the rate of 2%
        per
        month or $4,300 for each month after May 31, 2005 that it fails to register
        the
        common shares. Accrued liquidity damages at September 30, 2005 approximated
        $17,200.
 
 As
        a
        result of the uncapped liquidating damages provision related to a failure
        to
        register the common shares contained in the registration rights agreement,
        the
        conversion option and the Class A, Class B and Class C warrants do not qualify
        as equity and have been recorded as a derivative liability. The derivative
        liability is adjusted to its fair value at each reporting period. Any increase
        or decrease to such liability is adjusted to its fair value at each reporting
        period. Any increase or decrease to such liability is recognized as a loss
        or
        gain in the Company’s consolidated statement of operations. At September 30,
        2005, the fair value of these derivative instruments was $8,000 which resulted
        in a gain of $207,000 for the nine months ended September 30, 2005.
 
 The
        debt
        discount of $215,000 is being charged to financing costs over the period
        ended
        December 31, 2005. The Company is in default under these debentures as of
        December 3, 2005. The Company is currently negotiating a resolution with
        the
        holders of these debentures.
  24
  
 VSUS
        TECHNOLOGIES INCORPORATED
 (A
        DEVELOPMENT STAGE COMPANY)
 NOTES
        TO
        THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 **NOTE
        10- SHAREHOLDERS' EQUITY**
  STOCK
        OPTION GRANTS AND EXERCISES
 
 In
        March
        2005, the Company granted to a consultant for professional services stock
        options to purchase 80,000 shares of its Common Stock at an exercise price
        of
        $.01 per share. The options vest on January 31, 2006. Since the Company's
        stock
        has had a historically limited "public market", the fair value of the stock
        options estimated on the date of grant was determined using the value of
        the
        services of $60,000. The $60,000 and has been recorded as Deferred Compensation
        and is being amortized over the period of service.
  In
        March
        2005, the Company granted to a consultant stock options for professional
        services rendered to purchase 8,258 shares of its Common Stock at an exercise
        price of $1.70 per share. The options vest on July 14, 2005. Since the Company's
        stock has had a historically limited "public market", the fair value of the
        stock options estimated on the date of grant was determined using the value
        of
        the services rendered. The value of services was determined to be $5,000
        and has
        been recorded as a compensatory stock element expense in the accompanying
        condensed consolidated statement of operations for the quarter ended March
        31,
        2005.
 
 Effective
        as of January 6, 2005, a former officer, director and consultant of the Company
        was removed as an officer and director of the Company, and his Consulting
        Agreement was terminated As a result of such removal, 341,250 of his options
        to
        purchase shares of Common Stock of the Company, which had not already vested,
        automatically expired on the date thereof.
 
 Simultaneously
        with the 1stAlerts Acquisition, the former officer, director and consultant
        was
        reinstated as a director of the Company, and, the Company entered into a
        new
        Consulting Agreement with him. In consideration for his services as a director,
        the Company reissued 341,250 stock options, which had automatically expired
        at
        the time of his removal. Also, in connection with the new Consulting Agreement,
        the consultant was issued options to purchase an additional 1,000,000 shares
        of
        the Company's Common Stock, at an exercise price of $.001 per share.. Since
        the
        company's stock has had a historically limited "public market", the fair
        value
        of $.37 per share or $433,131. The $433,131 had been originally recorded
        as
        Deferred Compensation and was being amortized over the term of the agreement.
        As
        of September 2, 2005, the date thereof, the former officer, director and
        consultant resigned as a director of the Company, and the new Consultant
        Agreement was terminated. As a result of the termination of the new Consulting
        Agreement, the Company recognized the remaining unearned compensation of
        $277,500 in the accompanying condensed consolidated statement of operations
        for
        the three and nine months ended September 30, 2005.
 
 During
        the nine months ended September 30, 2005, the former officer exercised all
        of
        the 1,952,000 options.
  25
  VSUS
        TECHNOLOGIES INCORPORATED
 (A
        DEVELOPMENT STAGE COMPANY)
 NOTES
        TO
        THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 **NOTE
        10- SHAREHOLDERS' EQUITY-(Continued)**
 
 ADDITIONAL
        ISSUANCES OF STOCK OPTIONS PURSUANT TO THE COMPANY'S 2003 STOCK OPTION
        PLAN
 
 Contemporaneously
        with the Company’s acquisition of 1stAlerts, as of April 14, 2005, the Company
        granted options to purchase an aggregate of 4,000,000 shares of its Common
        Stock, at an exercise price of $0.001 per share, to two service providers..
        These options vested 100% upon their grant and have a term of five (5) years
        from their date of grant. As of September 20, 2005, options to purchase
        2,000,000 of these shares were rescinded by one of the grantees. Since the
        Company's stock has had a historically limited "public market", the fair
        vale of
        the stock options estimated on the date of grant was determined using the
        value
        of $.37 per share or $740,000. The $740,000 has been recorded as compensatory
        stock element expense in the accompanying condensed consolidated statement
        of
        operations for the nine months ended September 30, 2005.
 
 In
        May
        2005, the Company granted to a consultant stock options for professional
        services rendered to purchase 50,000 shares of its Common Stock at an exercise
        price of $0.01 per share. The options were exercised in June 2005. Since
        the
        Company's stock has had a historically limited "public market", the fair
        vale of
        the stock options estimated on the date of grant was determined using the
        value
        of $.37 per share or $18,500. The $18,500 has been recorded as Deferred
        Compensation and is being amortized over the period of service of one
        year.
 
 In
        May
        2005, the Company granted to a consultant stock options for professional
        services rendered to purchase 100,000 shares of its Common Stock at an exercise
        price of $0.01 per share. The options were exercised in May 2005. Since the
        Company's stock has had a historically limited "public market", the fair
        vale of
        the stock options estimated on the date of grant was determined using the
        value
        of the services rendered. Since the Company's stock has had a historically
        limited "public market", the fair vale of the stock options estimated on
        the
        date of grant was determined using the value of $.37 per share or $37,000.
        The
        $37,000 has been recorded as Deferred Compensation and is being amortized
        over
        the period of service of one year.
  26
  VSUS
        TECHNOLOGIES INCORPORATED
 (A
        DEVELOPMENT STAGE COMPANY)
 NOTES
        TO
        THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 **NOTE
        10- SHAREHOLDERS' EQUITY-(Continued)**
 
 In
        May
        2005, the Company granted to a consultant stock options for professional
        services rendered to purchase 500,000 shares of its Common Stock at an exercise
        price of $0.01 per share. The options were exercised in May 2005. Since the
        Company's stock has had a historically limited "public market", the fair
        vale of
        the stock options estimated on the date of grant was determined using the
        value
        of $.37 per share or $185,000. The $185,000 has been recorded as Deferred
        Compensation and is being amortized over the period of service of one
        year.
 
 In
        May
        2005, the Company granted to a consultant stock options for professional
        services rendered to purchase 100,000 shares of its Common Stock at an exercise
        price of $0.01 per share. The options were exercised in May 2005. Since the
        Company's stock has had a historically limited "public market", the fair
        value
        of the stock options estimated on the date of grant was determined using
        the
        value of $.37 per share or $37,000. The $37,000 has been recorded as Deferred
        Compensation and is being amortized over the period of service of one
        year.
 
 In
        July
        2005, the Company entered into a Consulting Agreement. In consideration for
        the
        consulting services to be provided to the Company by the consultant, the
        Company
        agreed to, among other things (i) issue 50,000 shares of its Common Stock
        to the
        consultant upon execution of the Consulting Agreement, and (ii) issue an
        additional 15,000 shares of the Company’s Common Stock to the consultant per
        month thereafter, for each month in which consulting services are to be
        provided. As of September 30, 2005, approximately 65,000 shares have been
        issued
        under the agreement. Since, the Company's stock has had a historically limited
        "public market", the fair vale of the stock options estimated on the date
        of
        grant was determined using the value of $.37 per share or $24,050. The $24,050
        has been recorded as compensatory stock element expense in the accompanying
        condensed consolidated statement of operations for the three and nine months
        ended September 30, 2005.
 
 In
        September 2005, the Company entered into a consulting agreement pursuant
        to
        which a consultant shall provide strategic consulting services to the company,
        through September 20, 2007. As consideration for the consulting services
        to be
        provided to the Company by the consultant, the Company agreed to issue to
        the
        consultant (i) 10,000,000 restricted shares of the Company’s Common Stock (the
        "Shares"), and (ii) stock options to purchase an additional 10,000,000 shares
        of
        the Company’s Common Stock, at an exercise price of $0.01 per share (the
        "Options"). The market value of the Shares and Options issued was $0.09 per
        share or $1,800,000. The $1,800,000 has been recorded as Deferred Compensation
        and is being amortized over the period of service of two years. As of November
        30, 2005, the consultant has not received any of the Shares, and has been
        granted 5,600,000 of the Options, all of which have been exercised.
  27
  
 VSUS
        TECHNOLOGIES INCORPORATED
 (A
        DEVELOPMENT STAGE COMPANY)
 NOTES
        TO
        THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 **NOTE
        10- SHAREHOLDERS' EQUITY-(Continued)**
  ISSUANCE
        OF SHARES TO A FORMER STOCKHOLDER
 
 The
        Company and a former stockholder of Formula Footwear, Inc. (“Formula”), the
        Company’s former parent, and the predecessor filer, agreed to revise the terms
        of a Promissory Note in the amount of $100,000 which was issued to the former
        stockholder of Formula in consideration of its cancellation of shares of
        Formula’s Common Stock held by it. According to the revised terms, the maturity
        date of the note is extended so that one-third of the amount is payable on
        April
        14, 2005, one-third is payable thirty days thereafter, and the one-third
        is
        payable sixty days thereafter. As of September 30, 2005, there remains an
        outstanding balance of $33,666. In addition, in consideration for the
        stockholder’s agreement to extend the maturity date of the note, the Company
        issued it, and certain of its affiliates, an aggregate of 124,750 shares
        of the
        Company’s Common. Since the Company’s stock has had a historically limited
“public market”, the fair vale of the stock issued estimated on the date of
        issuance was determined using the value of $.37 per share or approximately
        $46,000. The $46,000 has been recorded as interest expense in the accompanying
        condensed consolidated statement of operations for the nine months ended
        September 30, 2005.
 
 PREFERRED
        STOCK
 
 As
        part
        of the 1stAlerts Acquisition,
        the Company issued 1stAlerts, 200 shares of its Series B Participating Preferred
        Stock. As set forth in the Certificate of Designation of Series B Participating
        Preferred Stock that the Company filed, the holders of the Company’s Series B
        Participating Preferred Stock: (i) are entitled to participate, on an “as if
        converted” basis, in any and all dividends paid with respect to our Common
        Stock, (ii) have a liquidation preference, which provides that, upon certain
        “liquidity events,” they will be paid out of the Company’s assets prior to the
        holders of the Company’s Common Stock, in parity with the holders of the
        Company’s other series of preferred stock, and (iii) have no voting
        rights.
 
 Shares
        of
        the Company’s Series B Participating Preferred Stock will be automatically
        converted into shares of the Company’s Common Stock upon the occurrence of: (i)
        the liquidation, dissolution, or winding up of the Company, (ii) the
        consolidation, merger or reorganization of the company, which results in
        a
        change of control, or (iii) the sale of all or substantially all of the
        Company’s assets, or the Company’s issued and outstanding shares of Common
        Stock. In such event, the Company’s outstanding shares of Series B Participating
        Preferred Stock will be converted into shares of the Company’s Common Stock, so
        that after such issuance, the holders of shares of the Company’s Series B
        Participating Preferred Stock will hold, in the aggregate, a number of shares
        of
        the Company’s Common Stock equal to the percentage of the total “Fair Market
        Value” of the Company represented by the “Fair Market Value” of First Info
        Network, Inc., the Company’s wholly-owned subsidiary, determined by a mutually
        agreed upon independent appraiser.
 
  28
  VSUS
        TECHNOLOGIES INCORPORATED
 (A
        DEVELOPMENT STAGE COMPANY)
 NOTES
        TO
        THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 **NOTE
        10- SHAREHOLDERS' EQUITY-(Continued)**
 
 In
        addition, any time on or after the third anniversary of the effective date
        of
        the 1stAlerts Acquisition, any holder of shares of the Company’s Series B
        Participating Preferred Stock may convert such shares into the number of
        shares
        of the Company’s Common Stock as is determined by the following
        formula:
 
 x
                  =
                  y ((A/B) x (C/D))
 
 A
        =
        Number of shares of Series B Participating Preferred Stock owned by the
        holder.
 B
        = Total
        number of issued and outstanding shares of Series B Participating Preferred
        Stock.
 C
        = Fair
        Market Value of First Info Network, Inc. on the conversion date.
 D
        = Fair
        Market Value of the Company on the conversion date.
 y
        = Total
        number of shares of the Company’s Common Stock issued and outstanding on the
        conversion date.
 x
        =
        Number of shares of the Company’s Common Stock into which the holder of shares
        of Series B Participating Preferred Stock is entitled to convert.
 
  29
  VSUS
        TECHNOLOGIES INCORPORATED
 (A
        DEVELOPMENT STAGE COMPANY)
 NOTES
        TO
        THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 **NOTE
        11 - COMMITMENTS AND CONTINGENCIES**
 
 ROYALTY
        AND LOAN AGREEMENT
 
 As
        of
        September 9, 2005, the Company amended its Memorandum of Understanding (the
        "MOU"), dated June 9, 2005, with NetCurrents Information Services, Inc.,
        a
        Delaware corporation ("NetCurrents"), so that, as amended, the MOU provides
        that
        NetCurrents will grant the Company a 50-year license (the "License") to,
        at the
        Company's sole cost and expense, (i) in consultation with NetCurrents, modify
        and integrate NetCurrent's patented Internet search technology (the "NetCurrents
        Intellectual Property") into certain software applications the company currently
        markets, licenses, sells and distributes to customers (the "VSUS Intellectual
        Property") to create bundled products therefrom (the "Bundled Applications");
        and (ii) develop and create modified versions and derivative works from the
        NetCurrents Intellectual Property, which the Company intends to market, license,
        sell and distribute to third parties ("Additional Applications").
 
 As
        consideration for such License, the Company will (i) within one hundred eighty
        (180) days after the Effective Date, loan to NetCurrents an aggregate of
        $200,000 (the "Initial Loan Amount"), in such increments as are to be agreed
        to
        by the parties; (ii) if requested by NetCurrents, use its best efforts to
        thereafter loan to NetCurrents an additional $50,000 (the "Additional Loan
        Amount," and together with the Initial Loan Amount, the "Loan"); (iii) issue
        to
        NetCurrents 500,000 shares of its Common Stock; and (iv) pay to NetCurrents,
        on
        a quarterly basis, royalties (the "Royalties") equal to fifteen (15%) of
        the
        gross revenues the Company receives from the sale, license, or other
        distribution of the Bundled Applications and/or any Additional Applications
        (the
        "Revenues").
 
 The
        Loan
        shall be (i) provided by the Company to NetCurrents without interest; (ii)
        secured against the NetCurrents Intellectual Property; and (iii) repayable
        to
        the Company by NetCurrents only from fifty (50%) percent of any Royalties
        otherwise payable to NetCurrents pursuant to the MOU. In consideration for
        providing NetCurrents the Loan, NetCurrents shall issue to the Company 500,000
        shares of its Common Stock, within thirty (30) days of their receipt of the
        Initial Loan Amount.
 
 In
        order
        for the Company to maintain the License, the Company must meet (i) certain
        milestones set forth in a timetable for the modification and integration
        of the
        NetCurrents Intellectual Property into the Bundled Applications, and the
        commercialization thereof, to be mutually agreed to by the parties; and (ii)
        certain minimum Revenue amounts, to be mutually agreed to by the
        parties.
 
 NetCurrents
        shall continue to own all rights, title and interest in and to the NetCurrents
        Intellectual Property. The Company shall continue to own all rights, title
        and
        interest in and to the VSUS Intellectual Property. The parties shall each
        own
        fifty (50%) percent of the rights, title and interest in and to any Additional
        Applications the Company develops in accordance with the terms and conditions
        of
        the MOU.
 
 As
        of
        September 30, 2005, the Company loaned NetCurrents $50,000. The Company has
        not
        issued any shares of its Common Stock to NetCurrents. No shares have been
        issued
        to NetCurrents and NetCurrents has not issued shares of its Common Stock
        to the
        Company.
  30
  
 VSUS
        TECHNOLOGIES INCORPORATED
 (A
        DEVELOPMENT STAGE COMPANY)
 NOTES
        TO
        THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 **NOTE
        12-SUBSEQUENT EVENTS**
 
 SUBSEQUENT
        SHARE ISSUANCES
 
 In
        October 2005, the Company granted to consultants stock options for professional
        services rendered to purchase 2,400,000 shares of its common stock at an
        exercise price of $0.01 per share. The options were exercised in October
        2005.
 
 RESIGNATION
        OF CAMERON MCCORMICK
 
 Effective
        as of November 21, 2005, Cameron McCormick resigned as member of the Company’s
        board of directors.
  31
  **Item
        2. Management’s Discussion and Analysis or Plan of
        Operation.**
 
 The
        financial and business analysis below provides information which we believe
        is
        relevant to an assessment and understanding of our financial condition and
        results of operations. You should read the following discussion of our financial
        condition and results of operations in conjunction with the Notes to the
        Financial Statements in Item 1 of this Quarterly Report on Form 10-QSB and
        our
        Annual Report on Form 10-KSB for the year ended December 31, 2004. In addition
        to historical information, this discussion contains forward-looking statements
        and involves risks, uncertainties and assumptions, including, but not limited
        to, those described in the Company’s Annual Report on Form 10-KSB under the
        heading of “Risk Factors.” Actual results may differ materially from those
        contained in any forward-looking statement. Factors that could cause differences
        include, but are not limited to, expected market demand for our products,
        as
        well as general conditions of our industry.
 
 **Overview
        and Recent Developments**
 
 We
        were
        incorporated in Delaware as Safe Mail Limited, on September 20, 2000. On
        May 15,
        2001, we changed our name to VSUS Technologies Incorporated. Since inception,
        and until a recent shift in focus of our primary business operations, we
        had
        been a developer and marketer of highly secure communication systems for
        use
        over the Internet.
 
 Effective
        as of April 15, 2004, we became a wholly-owned subsidiary of Formula Footwear,
        Inc., a Utah corporation, when we merged with Formula Acquisition Corp.,
        its
        wholly-owned Delaware subsidiary. Upon consummation of this merger, our business
        became the primary business of Formula Footwear, Inc., which had no substantial
        business operations prior to acquiring our company. Subsequently, effective
        as
        of June 9, 2004, Formula Footwear, Inc., merged with and into our company.
        After
        the merger, we continued as the surviving company and successor
        filer.
 
 Effective
        as of April 13, 2005, we reorganized our business by transferring substantially
        all of our assets to VSUS Secured Services, Inc., a Delaware corporation,
        and
        wholly-owned subsidiary of ours. In addition, effective as of April 14, 2005,
        we
        acquired 1stAlerts, Inc. (“1stAlerts”), a company that enables the provision of
        up-to-the-minute information over a secure, private intranet, through a
        combination of push and pull technologies, when it merged with and into our
        wholly-owned Delaware subsidiary, First Info
        Network, Inc. Since, at the effective time of this acquisition, we maintained
        (i) a majority of the outstanding shares of common stock of the combined
        company, (ii) officers who ranked higher than the incoming pre-acquisition
        1stAlerts officers, and (iii) the ability to elect and appoint a voting majority
        of the governing board, the acquisition was treated as a forward acquisition
        with our company as the accounting acquirer.
 
 32
 Following
        our acquisition of 1stAlerts, we shifted our business operations to primarily
        focus on the 1stAlerts business model. In connection with this change, we
        have
        terminated our operations in Israel.
 
 On
        June
        9, 2005, we entered into a strategic relationship with NetCurrents Information
        Services, Inc. ("NetCurrents"), pursuant to which NetCurrents granted us
        a
        50-year license to modify and integrate NetCurrent's patented FIRST (Fast
        Internet Real-Time Search Technology) Internet search technology (the
        "NetCurrents Technology") into our products. We believe this relationship
        will
        enable us to significantly enhance the software applications we market, license,
        sell and distribute to our customers.
 
 We
        are a
        development stage enterprise. To date we have incurred significant losses
        from
        operations and, at September 30, 2005, had an accumulated deficit of $9,349,000.
        At September 30, 2005, we had $-0- of cash and cash equivalents. As a result
        of
        the consummation of our recent acquisition of 1stAlerts, and the anticipated
        cash flow from the combined company’s operations, we believe that we will have
        sufficient capital to fund our operations. However, until such time as we
        generate sufficient revenues from operations, we will continue to be dependent
        on raising substantial amounts of additional capital through any one of a
        combination of debt offerings or equity offerings. There is no assurance
        that we
        will be able to raise additional capital when necessary. **** The
        Company’s inability to derive sufficient revenues from the sale of its products,
        or obtain additional financing when needed, would have a material adverse
        effect
        on the company, requiring the Company to curtail or cease operations. In
        addition, any equity financing may involve substantial dilution to the Company’s
        then current stockholders.
 
 **Results
        Of Operations**
 
 ***Three
        Months ended September 30, 2005 Compared to the Three Months ended September
        30,
        2004***
 
 ***Revenue*** **:** Revenue
        decreased $162,000, or 100%, to $-0- in the three-month period ended September
        30, 2005, as compared to $162,000 in the three-month period ended September
        30,
        2004. This decrease was primarily due to the termination of our operations
        in
        Israel in connection with the shift of our primary business operations to
        1stAlerts’ business.
 
 ***Research
        and Development Expenses*** **:** Research
        and development expenses consist primarily of personnel costs and consulting
        expenses directly associated with the development of our software applications
        and other technology. During the three-month period ended September 30, 2005,
        we
        incurred expenses of $375,000 developing our technology, an increase of
        $317,000, or 547%, over the $58,000 we incurred during the three-month period
        ended September 30, 2004. The primary reason for this increase in research
        and
        development expenses was the result in shift of our primary business operations
        to 1stAlerts’ business and our efforts to modify and integrate the NetCurrents
        Technology into our software applications.
 
 ***Sales
        and Marketing Expenses*** **:** Sales
        and marketing expenses consist primarily of personnel costs, professional
        fees,
        communications expenses and other miscellaneous costs associated with supporting
        our sales and marketing activities. During the three-month period ended
        September 30, 2005, we incurred expenses of $-0- selling and marketing our
        products, as compared to $85,000 during the three- month
        period ended September 30, 2004. This decrease of $85,000, or 100%, is primarily
        a result of the resignation of our existing sales and marketing personnel
        in
        connection with the termination of our operations in Israel and corresponding
        shift of our primary business operations to 1stAlerts’ business.
 
 33
 ***General
        and Administrative Expenses*** **:** General
        and administrative expenses consist primarily of personnel costs, occupancy
        costs and other miscellaneous costs associated with supporting our operations.
        During the three-month period ended September 30, 2005, we incurred $813,000
        in
        general and administrative expenses, as compared to $163,000 during the
        three-month period ended September 30, 2004. This increase of $650,000 is
        primarily a result of an increase in legal and other professional fees we
        paid
        in connection with the integration of 1stAlerts into our company and the
        consummation of our strategic relationship with NetCurrents.
 
 ***Financing
        Expenses*** **:** Financing expenses consist primarily of interest and other costs of our
        financing activities. During the three-month period ended September 30, 2005,
        we
        incurred $606,000 in financing expenses, an increase of $546,000 over the
        $60,000 incurred during the three-month period ended September 30,
        2004.
 ***Gain
            on Derivatives:***As
            a result of the uncapped liquidating damages provision related to a failure
            to
            register the common shares contained in the registration rights agreement,
            the
            conversion option and the Class A, Class B and Class C warrants do not
            qualify
            as equity and have been recorded as a derivative liability. The derivative
            liability is adjusted to its fair value at each reporting period. Any
            increase
            or decrease to such liability is recognized as a loss or gain in the
            Company’s
            consolidated statement of operations. At September 30, 2005, the fair
            value of
            these derivative instruments was $152,000 which resulted in a gain of
            $152,000
            for the three months ended September 30, 2005.
 ***Net
        Loss*** **:** We
        incurred a net loss of $1,642,000 ($0.06 per share) for the three-month period
        ended September 30, 2005, compared to $216,000 ($0.01 per share) for the
        three-month period ended September 30, 2004. Our revenues and future
        profitability are substantially dependent on our ability to:
  ·
                successfully shift to 1stAlerts’ business as our primary
                  business operations;
 ·
                integrate the NetCurrents Technology into our
                  software
                  applications;
 ·
                continue the development of products based on
                  our
                  technology;
 ·
                identify and obtain clients to purchase our
                  products;
 ·
                modify
                    our software applications, over time, to provide enhanced benefits
                    to
                    then-existing users;
 ·
              raise
                  substantial amounts of additional capital through any one of a
                  combination
                  of debt offerings or equity offerings, if necessary;
                  and
 ·
              continue
                  to grow our business through additional acquisitions and strategic
                  relationships.
 
 ***Nine
        Months ended September 30, 2005 Compared to the Nine Months ended September
        30,
        2004***
 
 ***Revenue*** **:** Revenue
        decreased $265,000, or 100%, to $-0- in the nine-month period ended September
        30, 2005, as compared to $265,000 in the nine-month period ended September
        30,
        2004. This decrease was primarily due to the termination of our operations
        in
        Israel in connection with the shift of our primary business operations to
        1stAlerts’ business.
 
 ***Research
        and Development Expenses*** **:** Research
        and development expenses consist primarily of personnel costs and consulting
        expenses directly associated with the development of our software applications
        and other technology. During the nine-month period ended September 30, 2005,
        we
        incurred expenses of $775,000 developing our technology, an increase of
        $609,000, or 367%, over the $166,000 we incurred during the nine-month period
        ended September 30, 2004. The primary reason for this increase in research
        and
        development expenses was the result in shift of our primary business operations
        to 1stAlerts’ business and our efforts to modify and integrate the NetCurrents
        Technology into our software applications.
  34
  ***Sales
        and Marketing Expenses*** **:** Sales
        and marketing expenses consist primarily of personnel costs, professional
        fees,
        communications expenses and other miscellaneous costs associated with supporting
        our sales and marketing activities. During the nine-month period ended September
        30, 2005, we incurred expenses of $-0- selling and marketing our products,
        as
        compared to $343,000 during the nine-month period ended September 30, 2004.
        This
        decrease of $343,000, or 100%, is primarily a result of the resignation of
        our
        existing sales and marketing personnel in connection with the termination
        of our
        operations in Israel and corresponding shift of our primary business operations
        to 1stAlerts’ business.
 
 ***General
        and Administrative Expenses*** **:** General
        and administrative expenses consist primarily of personnel costs, occupancy
        costs and other miscellaneous costs associated with supporting our operations.
        During the nine-month period ended September 30, 2005, we incurred $3,359,000
        in
        general and administrative expenses, as compared to $526,000 during the
        nine-month period ended September 30, 2004. This increase of $2,833,000 is
        primarily a result of an increase in legal and other professional fees we
        paid
        in connection with the integration of 1stAlerts into our company and the
        consummation of our strategic relationship with NetCurrents.
 
 ***Financing
        Expenses*** **:** Financing expenses consist primarily of interest and other costs of our
        financing activities. During the nine-month period ended September 30, 2005,
        we
        incurred $1,943,000 in financing expenses, an increase of $1,775,000 over
        the
        $168,000 incurred during the nine-month period ended September 30,
        2004.
  ***Gain
        on Derivatives:***As
        a result of the uncapped liquidating damages provision related to a failure
        to
        register the common shares contained in the registration rights agreement,
        the
        conversion option and the Class A, Class B and Class C warrants do not qualify
        as equity and have been recorded as a derivative liability. The derivative
        liability is adjusted to its fair value at each reporting period. Any increase
        or decrease to such liability is recognized as a loss or gain in the Company’s
        consolidated statement of operations. At September 30, 2005, the fair value
        of
        these derivative instruments was $152,000 which resulted in a gain of $152,000
        for the nine months ended September 30, 2005.
 
 ***Merger
        Expenses*** **:** During
        the nine-month period ended September 30, 2004, we incurred expenses of $219,000
        in connection our merger with our former parent, Formula Footwear, Inc.,
        the
        predecessor filer.
 
 ***Net
        Loss*** **:** We
        incurred a net loss of $5,925,000 ($0.26 per share) for the nine-month period
        ended September 30, 2005, compared to $1,193,000 ($0.08 per share) for the
        nine-month period ended September 30, 2004. Our revenues and future
        profitability are substantially dependent on our ability to:
  ·
                successfully shift to 1stAlerts’ business as our primary
                  business operations;
 ·
                integrate the NetCurrents Technology into our
                  software
                  applications;
 ·
                continue the development of products based on
                  our
                  technology;
 ·
                identify and obtain clients to purchase our
                  products;
 ·
                modify
                    our software applications, over time, to provide enhanced benefits
                    to
                    then-existing users;
 ·
              raise
                  substantial amounts of additional capital through any one of a
                  combination
                  of debt offerings or equity offerings, if necessary;
                  and
 ·
              continue
                  to grow our business through additional acquisitions and strategic
                  relationships.
  35
  **Liquidity
        And Capital Resources**
 
 ***General*** **:** We are a
        development stage enterprise. As such, our historical results of operations
        are
        unlikely to provide a meaningful understanding of the activities expected
        to
        take place over the next twelve months. Our major initiatives through that
        period are:
  ·
                shifting to 1stAlerts’ business as our primary business
                  operations;
 ·
                integrating the NetCurrents Technology into
                  our software
                  applications;
 ·
                furthering the development of our
                  products;
 ·
                obtaining
                    commercial sales of our products;
                    and
 ·
              seeking
                  acquisitions of additional businesses and assets that will be beneficial
                  to our company and its
                  stockholders.
 
 Since
        inception, we have primarily funded our operations from private placements
        of
        debt and equity. Until such time as we are able to generate adequate revenues
        from the sale of our software applications and services, we cannot assure
        that
        cash from the issuance of debt securities, the exercise of existing warrants
        and
        the placements of additional equity securities will be sufficient to fund
        our
        long-term research and development and general and administrative
        expenses.
 
 At
        September 30, 2005, we had negative working capital of $5,587,000, compared
        to
        negative working capital of $744,000 at December 31, 2004.
 We
        had
        $-0- of cash and cash equivalents on hand at September 30, 2005, compared
        to
        $20,000 at December 31, 2004. As a result of our acquisition of 1stAlerts,
        and
        the anticipated cash flow from the combined company’s operations, we believe
        that we will have sufficient capital to fund our operations. However, until
        such
        time as we generate sufficient revenues from the sale of our products, we
        will
        continue to be dependent on raising substantial amounts of additional capital
        through any one of a combination of debt offerings or equity offerings. We
        have
        no current arrangements with respect to any additional financing. Consequently,
        there can be no assurance that any future financing will be available to
        us when
        needed, and on commercially reasonable terms. Our inability to derive sufficient
        revenues from the sale of our products, or obtain additional financing when
        needed, would have a material adverse effect on our company, requiring us
        to
        curtail or cease operations. In addition, any equity financing may involve
        substantial dilution to our then current stockholders.
 
 ***Uses
        Of Capital*** **:** Since
        inception we have directed our efforts towards the development and marketing
        of
        our software applications. Our objective is to gain market recognition for
        our
        company and our products, in order to generate future commercial sales of
        our
        products in the earliest time-frame possible.
 
 **Off-Balance
        Sheet Arrangements**
 
 None.
 
 **Recently
        Issued Accounting Standards**
 
 We
        have
        reviewed recently issued accounting pronouncements and do not believe that
        the
        adoption of such pronouncements will have a material impact on our financial
        statements.
  36
  
 **Forward-Looking
        Statements**
 
 This
        Quarterly Report on Form 10-QSB contains certain forward-looking statements.
        Additional written and oral forward-looking statements may be made by us
        from
        time to time in Securities and Exchange Commission filings and otherwise.
        The
        Private Securities Litigation Reform Act of 1995 provides a safe-harbor for
        forward-looking statements. These statements may be identified by the use
        of
        forward-looking words or phrases including, but not limited to, “anticipate”,
“believe”, “expect”, “intend”, “may”, “planned”, “potential”, “should”, “will”,
        or “would”. We caution readers that results predicted by forward-looking
        statements, including, without limitation, those relating to our future business
        prospects, revenues, working capital, liquidity, capital needs, interest
        costs
        and income are subject to certain risks and uncertainties that would cause
        actual results to differ materially from those indicated in the forward-looking
        statements.
 
 **Item
        3. Controls and Procedures.**
 
 The
        term
“disclosure controls and procedures” is defined in Rules 13a-15(e) and 15d-15(e)
        of the Securities Exchange Act of 1934. This term refers to the controls
        and
        procedures of a company that are designed to ensure that information required
        to
        be disclosed by a company in the reports that it files or submits under the
        Exchange Act is recorded, processed, summarized and reported within the time
        periods specified by the Securities and Exchange Commission. Our management,
        including our principal executive officer and principal financial officer,
        has
        evaluated the effectiveness of disclosure controls and procedures as of the
        end
        of the period covered by this quarterly report. Based upon that evaluation,
        our
        principal executive officer and principal financial officer have concluded
        that
        our disclosure controls and procedures were effective as of the end of the
        period covered by this quarterly report.
 
 There
        were no changes to our internal controls over financial reporting during
        our
        last fiscal quarter that have materially affected, or are reasonably likely
        to
        materially affect, our internal control over financial reporting.
 
 
  37
  **PART
        II - OTHER INFORMATION**
  **Item
        1. Legal Proceedings.**
 
 We
        are
        not a party to any pending legal proceedings. To the knowledge of management,
        no
        federal, state or local governmental agency is presently contemplating any
        proceeding against us. No director, executive officer or affiliate of ours,
        or
        owner of record of more than 5% of our common stock is a party adverse to
        us, or
        has a material interest adverse to us in any legal proceeding.
 
 **Item
        2. Unregistered Sales of Equity Securities and Use of
        Proceeds.**
 
 In
        the
        three-month period ended September 30, 2005, and subsequent period through
        the
        date hereof, we issued unregistered securities, as follows:
 
 ***Issuance
        of Shares to Newport Capital Consultants Inc.***
 
 On
        July
        13, 2005, we entered into a consulting agreement with Newport Capital
        Consultants Inc. (“Newport”). In consideration for the consulting services to be
        provided to us by Newport, we agreed to, among other things (i) issue 50,000
        shares of our Common Stock to Newport upon execution of the consulting
        agreement, and (ii) issue an additional 15,000 shares of our Common Stock
        to
        Newport per month thereafter, for each month in which consulting services
        are to
        be provided. To date, we have issued an aggregate of 65,000 shares to
        Newport.
 
 We
        believe that this transaction is exempt from registration under the Securities
        Act of 1933, as amended, pursuant to Section 4(2), or Regulation D promulgated
        thereunder, as a transaction by an issuer not involving a public
        offering.
 
 ***Issuance
        of Shares to NetCurrents Information Services, Inc.***
 
 As
        reported in our Current Report on Form 8-K, dated September 9, 2005, as of
        that
        date we amended our Memorandum of Understanding (the "MOU") with NetCurrents
        Information Services, Inc. ("NetCurrents"), pursuant to which, as partial
        consideration for NetCurrents' grant to us of a 50-year license to modify
        and
        integrate its patented Internet search technology into the software applications
        we currently market, license, sell and distribute to our customers, we agreed
        to
        issue to NetCurrents 500,000 shares of our Common Stock. To date, none of
        these
        shares have been issued to NetCurrents.
 
 We
        believe that this transaction is exempt from registration under the Securities
        Act of 1933, as amended, pursuant to Section 4(2), or Regulation D promulgated
        thereunder, as a transaction by an issuer not involving a public
        offering.
  ***Issuance
        of Shares to Eastern Consulting***
 
 As
        further described in Part II, Item 5 hereof, effective as of September 21,
        2005,
        we entered into a consulting agreement with Eastern Consulting ("Eastern").
        As
        partial consideration for the consulting services to be provided to us by
        Eastern, we agreed to issue 10,000,000 restricted shares of our Common Stock
        to
        Eastern. To date, none of these shares have been issued to Eastern.
 
 We
        believe that this transaction is exempt from registration under the Securities
        Act of 1933, as amended, pursuant to Section 4(2), or Regulation D promulgated
        thereunder, as a transaction by an issuer not involving a public
        offering.
 
 38
 Except
        as
        set forth above, we did not issue or sell any unregistered securities during
        the
        third quarter of 2005, or subsequent period through the date hereof. In
        addition, we did not repurchase any of our equity securities during the third
        quarter of 2005, or subsequent period through the date hereof.
 
 **Item
        3. Defaults Upon Senior Securities.**
 
 ***Promissory
        Note of Jenson Services***
 
 On
        February 24, 2004, we entered into an Agreement and Plan of Reorganization
        with
        Formula Footwear, Inc. (the “Merger Agreement”). At that time, Jenson Services,
        Inc. ("Jenson"), Formula Footwear’s majority shareholder, agreed to cancel
        1,768,785 shares of the Common Stock it owned in Formula Footwear. In
        consideration for its cancellation of such shares, and its entering into
        an
        Indemnity Agreement with us, Jenson received, among other things, a promissory
        note in the principal amount of $100,000 (the “Promissory Note”), payable on the
        earlier of six months from the effective date of a registration statement
        we
        were required to file (the “Registration Statement”), or nine months from the
        date of the Merger Agreement.
 
 As
        a
        result of: (i) our failure to timely file the Registration Statement; (ii)
        our
        failure to pay the principal amount of the Promissory Note, and interest
        thereon, when due; (iii) Jenson's agreement not to pursue any claims against
        us
        in connection with our failure to file the Registration Statement on a timely
        basis; and (iv) Jenson's agreement to amend the Promissory Note (the “Amended
        Note”) to, among other things, extend the maturity date of the Promissory Note
        to June 13, 2005, we agreed to issue to Jenson, and its affiliates, an aggregate
        of 124,750 shares of our Common Stock, as of April 14, 2005. As of the date
        hereof, $33,666 is still owed to Jenson under the Amended Note.
 
 ***Notes
        Assumed Upon Consummation of 1stAlerts Acquisition***
 
 As
        of
        April 14, 2005, we acquired 1stAlerts, Inc., a Delaware corporation
        (“1stAlerts”), when it merged with and into our wholly-owned Delaware
        subsidiary, First Info Network, Inc. (“First Info”). At the time of this
        acquisition, among other things, First Info assumed promissory notes in the
        aggregate amount of $1,165,000 (the “1stAlerts Notes”), on which 1stAlerts had
        defaulted. We are currently negotiating a resolution with the holders of
        the
        1stAlerts Notes.
 
 **Item
        4. Submission of Matters to a Vote of Security Holders.**
 
 No
        matters were submitted to a vote of our security holders during the third
        quarter of 2005, or subsequent period through the date hereof.
 
 **Item
        5. Other Information.**
 
 ***Consulting
        Agreement with Eastern Consulting.***
 
 Effective
        as of September 21, 2005, we entered into a consulting agreement with Eastern
        Consulting ("Eastern"), pursuant to which Eastern shall provide strategic
        consulting services to our company, through September 20, 2007 (the "Eastern
        Consulting Agreement"). As consideration for the consulting services to be
        provided to us by Eastern, we agreed to issue to Eastern (i) 10,000,000
        restricted shares of our Common Stock (the "Eastern Shares"), and (ii) stock
        options to purchase an additional 10,000,000 shares of our Common Stock,
        at an
        exercise price of $0.01 per share, under our 2003 Stock Option Plan (the
        "Eastern Options"). To date, Eastern has not received any of the Eastern
        Shares,
        and has been granted 5,600,000 of the Eastern Options, all of which have
        been
        exercised as of the date hereof.
 
 39
 A
        copy of
        the Eastern Consulting Agreement is annexed hereto as Exhibit 10.2 and is
        incorporated herein by reference.
 
 ***Resignation
        of Cameron McCormick***
 
 Effective
        as of November 21, 2005, Cameron McCormick resigned as member of our board
        of
        directors. Mr. McCormick did not hold any positions on any committee of our
        board of directors at the time of his resignation. Mr. McCormick did not
        give
        any reasons for his resignation.
 
 A
        copy of
        Mr. McCormick's letter of resignation is annexed hereto as Exhibit 17.1,
        and is
        incorporated herein by reference.
 
 **Item
        6. Exhibits and Reports on Form 8-K.**
 
 **Exhibit**
                **Number**
              
              **Description
                  of Exhibit**2.1
              
              Agreement
                  and Plan of Merger by and among the Company, First Info Network,
                  Inc. and
                  1stAlerts, Inc.(1)2.2
              
              Certificate
                  of Merger of 1stAlerts, Inc. with and into First Info Network,
                  Inc.(1)4.1
              
              Form
                  of Class A Warrant(2)4.2
              
              Form
                  of 1stAlerts Convertible Promissory Note(1)4.3
              
              Amended
                  Promissory Note of Jenson Services, Inc.(1)10.1
              
              Memorandum
                  of Understanding between the Company and NetCurrents Information
                  Services,
                  Inc.(3)10.2
              
              Consulting
                  Agreement, dated September 21, 2005, between the Company and Eastern
                  Consulting(4)17.1
              
              Letter
                  of Resignation of Cameron McCormick(4)31.1
              
              Certification
                  of Steven Goldberg pursuant to Section 13a-14(a)(4)32.1
              
              Certification
                  of Steven Goldberg pursuant to Section 1350(4)
 _____________________
 (1)
              Incorporated
                  by reference from the Company’s Annual Report on Form 10-KSB, for the year
                  ended December 31, 2004(2)
              Incorporated
                  by reference from the Company’s Current Report on Form 8-K, dated November
                  3, 2004(3)
              Incorporated
                  by reference from the Company’s Current Report on Form 8-K, dated
                  September 9, 2005(4)
              Filed
                  herewith
  40
  **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.
  **VSUS
                  TECHNOLOGIES INCORPORATED**Date: December
                  9, 2005
                By:
                /s/ Steven GoldbergSteven Goldberg
                  Chief Financial Officer and Director
                  (Principal Executive, Financial and
                  Accounting Officer and Authorized
                  Signatory)
 
 
  41
  **EXHIBIT
        INDEX**
  **Exhibit**
                  **Number**
                
                **Description
                    of Exhibit**2.1
                
                Agreement
                    and Plan of Merger by and among the Company, First Info Network,
                    Inc. and
                    1stAlerts, Inc.(1)2.2
                
                Certificate
                    of Merger of 1stAlerts, Inc. with and into First Info Network,
                    Inc.(1)4.1
                
                Form
                    of Class A Warrant(2)4.2
                
                Form
                    of 1stAlerts Convertible Promissory Note(1)4.3
                
                Amended
                    Promissory Note of Jenson Services, Inc.(1)10.1
                
                Memorandum
                    of Understanding between the Company and NetCurrents Information
                    Services,
                    Inc.(3)10.2
                
                Consulting
                    Agreement, dated September 21, 2005, between the Company and
                    Eastern
                    Consulting(4)17.1
                
                Letter
                    of Resignation of Cameron McCormick(4)31.1
                
                Certification
                    of Steven Goldberg pursuant to Section 13a-14(a)(4)32.1
                
                Certification
                    of Steven Goldberg pursuant to Section 1350(4)
 _____________________
 (1)
                Incorporated
                    by reference from the Company’s Annual Report on Form 10-KSB, for the year
                    ended December 31, 2004(2)
                Incorporated
                    by reference from the Company’s Current Report on Form 8-K, dated November
                    3, 2004(3)
                Incorporated
                    by reference from the Company’s Current Report on Form 8-K, dated
                    September 9, 2005(4)
                Filed
                    herewith






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