UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended ~~September~~March 3031, ~~2009~~2010

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

For the transition period from to

Commission file number 0-21384

Allied Security Innovations Inc.

(Exact name of registrant as specified in its charter)

Delaware	23-2770048
(State or other jurisdiction of organization)	(I.R.S. employer Identification no.)

1709 Route 34

Farmingdale, New Jersey 07727

Telephone Number (732) 751-1115

Indicate by ~~checkmark~~check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the ~~registrant~~ registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x þ No o ¨

Indicate by check mark whether the ~~Registrant~~registrant ishas asubmitted ~~large~~electronically ~~accelerated~~and ~~filer,~~posted anon ~~accelerated~~its ~~filer~~corporate Web site, orif aany, ~~non-accelerated~~every ~~filer.~~Interactive ~~See~~Data ~~definition~~File ofrequired ~~“accelerated~~to be ~~filer~~submitted and ~~large~~posted ~~accelerated~~pursuant ~~filer”~~to in Rule 405 ~~12b~~of Regulation S-2T ofduring the preceding ~~Exchange~~12 months ~~Act.~~ (~~Check~~or for such shorter period that the registrant was ~~one~~required to submit and post such files):.

~~Large~~Yes ~~accelerated filer~~ o ~~Accelerated filer o Non-accelerated filer o Smaller reporting company x~~ No ¨

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

~~Yes o No x~~Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer Smaller reporting company þ (Do not check if a smaller reporting company)

Indicate ~~the~~by ~~number~~check ofmark ~~shares~~whether ~~outstanding~~the ofregistrant ~~each~~is ofa ~~the~~shell ~~issuer’s~~company ~~classes~~(as ofdefined ~~common~~in ~~stock,~~Rule 12b-2 as of the ~~latest~~Exchange ~~practicable date~~Act).

Class		Outstanding at October 19, 2009
Common stock, $.001 par value per share		9,981,998 shares

Yes ¨ No þ

~~Allied~~As of ~~Security~~May 10, ~~Innovations~~2010 there were outstanding 117,775,914 ~~Inc~~shares of the Registrant’s common stock, par value $0.01 ~~and~~per ~~Subsidiary~~share.

~~Condensed~~Allied ~~Consolidated~~Security ~~Financial~~Innovations, ~~Statements (Unaudited)~~Inc.

~~September 30, 2009~~INDEX

Condensed Consolidated Financial Statements (Unaudited):
		Page No.
Condensed Consolidated Balance Sheets at September 30, 2009 and December 31, 2008	3
PART I. FINANCIAL INFORMATION
Condensed Consolidated Statements of Operations for theThree Months and Nine Months Ended September 30, 2009 and 2008	4
Item 1	Condensed Financial Statements:
Condensed Consolidated Statements of Cash Flows for theNine Months Ended September 30, 2009 and 2008	5
	Consolidated Balance Sheets
Notes to Condensed Consolidated Financial Statements (Unaudited)	6
	March 31, 2010 (unaudited) and December 31, 2009	3
	Consolidated Statements of Income
	(unaudited) for the three months ended March 31, 2010 and 2009	4
	Consolidated Statements of Cash Flows
	(unaudited) for the three months ended March 31, 2010 and 2009	5
	Notes to Condensed Consolidated Financial Statements (Unaudited)	7
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3	Quantitative and Qualitative Disclosures about Market Risk	19
Item 4	Controls and Procedures	19
PART II. OTHER INFORMATION
Item 1	Legal Proceedings	20
Item 1A	Risk Factors	20
Item 3	Defaults Upon Senior Securities	20
Item 4.	Submission of Matters to a Vote of Security Holders	20
Item 5	Other Information	20
Item 6	Exhibits	20
	Signatures and Certifications	21

ALLIED SECURITY INNOVATIONS, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	March 31,			December 31,
	2010			2009
	(Unaudited)
ASSETS

Current Assets:
Cash and cash equivalents	$	69,848		$	52,667
Accounts receivable, net		418,866			292,453
Inventory		104,381			117,621
Other Current Assets		1,500			3,375

Total Current Assets		594,595			466,116

Property and equipment, net		197,231			209,485

Other Assets:
Deposits		11,914			9,421
Intangible assets, net		31,999			33,541

Total Other Assets		43,913			42,962

TOTAL ASSETS	$	835,739		$	718,563

LIABILITIES AND STOCKHOLDERS' DEFICIT

LIABILITIES
Current Liabilities:
Accounts payable	$	415,681		$	319,651
Accrued expenses		-			160,312
Accrued payroll		19,681			61,748
Accrued interest		1,730,867			1,552,590
Deferred income		63,247			52,182
Convertible debentures current portion		6,554,471			25,279
Notes payable		4,100,000			5,000
Derivative liabilities		17,582,072			18,888,603

Total Current Liabilities		30,466,019			21,065,365

Long Term Liabilities:

Note payable		-			4,000,000
Convertible debentures, net of current portion		-			13,997,780
Total Long Term Liabilities		-			17,997,780

Total Liabilities		30,466,019			39,063,145

STOCKHOLDERS' DEFICIT
Preferred stock, $.001 par value: 1,000,000 shares
authorized ; 20,000 issued and outstanding shares		-			-
Common stock, par value $.001; authorized 9,999,000,000 shares;
82,910,275 and 23,176,249 issued and outstanding at
March 31, 2010 and December 31, 2010, respectively		82,910			23,176
Additional paid in capital		19,977,943			20,007,629
Accumulated deficit		(49,691,133	)		(58,375,387	)

Total Stockholders' Deficit		(29,630,280	)		(38,344,582	)

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	835,739		$	718,563

	September 30,			December 31,
	2009			2008
ASSETS
Current Assets:
Cash and cash equivalents	$	54,619		$	213,513
Accounts receivable, net of allowance		380,243			537,223
Inventory		256,786			238,123
Other Current Assets		5,016			9,346
Total Current Assets		696,664			998,205
Property and equipment, net		224,012			267,594
Other Assets:
Deposits		11,914			12,896
Goodwill		2,054,998			2,054,998
Intangible assets, net		126,593			137,969
Total Other Assets		2,193,505			2,205,863
TOTAL ASSETS	$	3,114,181		$	3,471,662
LIABILITIES AND STOCKHOLDERS' DEFICIT
LIABILITIES
Current Liabilities:
Accounts payable	$	279,765		$	142,865
Accrued expenses		347,070			339,079
Accrued payroll		29,584			114,923
Accrued interest		1,340,502			711,684
Deferred income		35,054			10,098
Convertible debentures, net of debt discount		27,214			39,078
Derivative liabilities		33,204,916			17,356,901
Total Current Liabilities		35,264,105			18,714,628
Long Term Liabilities:
Note payable		4,000,000			4,000,000
Convertible debentures, net of debt discount		14,007,678			14,028,077
Total Long Term Liabilities		18,007,678			18,028,077
Total Liabilities		53,271,783			36,742,705
STOCKHOLDERS' DEFICIT
Preferred stock, $.001 par value:1,000,000 shares authorized:		-			-
20,000 and -0- shares issued and outstanding shares at September 30, 2009 and December 31, 2008, respectively
Common stock, par value $.001; 9,999,000,000 shares authorized:
7,904,161 and 2,970,592 issued and outstanding at September 30, 2009 and December 31, 2008, respectively		7,904			2,971
Additional paid in capital		19,989,785			19,883,663
Accumulated deficit		(70,155,292	)		(53,157,677	)
Total Stockholders' Deficit		(50,157,602	)		(33,271,043	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	3,114,181		$	3,471,662

The accompanying notes are an integral part of the condensed consolidated financial statements.

ALLIED SECURITY INNOVATIONS, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE ~~AND NINE~~ MONTHS ENDED ~~SEPTEMBER~~MARCH 3031, ~~2009~~2010 AND ~~2008~~2009

(UNAUDITED)

	Three Months			Three Months			Nine Months			Nine Months
	2010			2009
	Ended			Ended			Ended			Ended
REVENUE
	9/30/2009			9/30/2008			9/30/2009			9/30/2008
Product revenue		820,130		$	1,103,944
INCOME
Service revenue		179,553			34,938
Net Sales	$	770,906		$	1,528,479		$	2,888,718		$	3,657,487
Total revenue		999,683			1,138,882
		327,136			521,410			1,013,630			1,193,267
Cost of Revenue		232,007			411,329
Gross Profit		~~443~~767,~~770~~676			1727,~~007,069~~553			~~1,875,088~~			~~2,464,220~~
OPERATING EXPENSES
General and administrative		~~502~~465,~~680~~759			~~534~~552,~~508~~539			~~1,549,003~~			~~1,700,083~~
Sales and marketing		~~126~~91,~~836~~515			~~156,~~130,028			~~483,855~~			~~447,537~~
Research and development		1922,~~709~~941			2321,~~910~~471			~~69,261~~			~~68,812~~
Total Operating Expenses		~~649~~580,~~225~~215			~~714~~704,~~548~~038			~~2,102,119~~			~~2,216,432~~
INCOME (LOSS) BEFORE OTHER INCOME (EXPENSE)		(205,455	)		292,521			(227,031	)		247,788
INCOME BEFORE OTHER INCOME (EXPENSE)		187,461			23,515
OTHER INCOME (EXPENSE)
Loss on extinguishment of debt		-			-			-			(7,237,883	)
Gain on extinuishment of debt		9,073,666			-
Interest expense		(~~284~~255,~~354~~398	)		(~~457~~280,~~386~~183	)		~~(847,061~~	)		~~(923,261~~	)
Beneficial interest from conversion of debt		(49,050	)		(79,651	)		(58,472	)		(170,673	)
Beneficial interest from conversion		-			(8,922	)
Amortization of debt discount		(4,167	)		-(3,744	)		~~(12,078~~	)		~~(91,346~~	)
Change in fair value of derivative liability		(15317,~~828,601~~309	)		~~389~~19,~~969~~378			~~(15,798,016~~	)		~~5,592,222~~
Depreciation and Amortization		(18,320	)		(17,286	)		(54,957	)		(63,134	)
Total Other Income (Expense)		8,496,792			(273,471	)
Total Other Income (Expense)		(16,184,492	)		(164,354	)		(16,770,584	)		(2,894,075	)
NET INCOME (LOSS) APPLICABLE TO COMMON SHARES	$	8,684,253		$	(249,956	)
Income (Loss) before provision for income taxes	$	(16,389,947	)	$	128,167		$	(16,997,615	)	$	(2,646,287	)
NET INCOME (LOSS) PER SHARE - BASIC AND DILUTED	$	-		$	-
Provision for income taxes		-			-			-			-
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-BASIC		55,345,966			3,106,474
NET INCOME ( LOSS) APPLICABLE TO COMMON SHARES	$	(16,389,947	)	$	128,167		$	(16,997,615	)	$	(2,646,287	)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-DILUTED		9,999,000,000			9,999,000,000
NET INCOME (LOSS) PER BASIC SHARES	$	(0.00	)	$	0.00		$	(0.00	)	$	(0.00	)
NET INCOME (LOSS) PER DILUTED SHARES	$	(0.00	)	$	0.00		$	(0.00	)	$	(0.00	)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-BASIC		5,136,920			2,040,337			3,833,755			1,525,344
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-FULLY DILUTED		-			9,999,000,000			-			-

The accompanying notes are an integral part of the condensed consolidated financial statements.

ALLIED SECURITY INNOVATIONS, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE ~~NINE~~THREE MONTHS ENDED ~~SEPTEMBER~~MARCH 3031, ~~2009~~2010 AND ~~2008~~2009

(UNAUDITED)

	2009			2008
	2010			2009
Cash Flows from Operating Activities:
Net Loss	$	(16,997,615	)	$	(2,646,287	)
Net Income (Loss)	$	8,684,253		$	(249,956	)
Adjustments to reconcile net loss to net cash
Adjustments to reconcile net income (loss) to net cash
(used in) operating activities:
(used in) provided by operating activities:
Depreciation and amortization		5413,~~957~~796			6318,~~134~~319
Amortization of debt discount		124,~~078~~167			913,~~346~~744
Beneficial interest		~~58,472~~-			~~170~~8,~~673~~922
Loss on extinguishment		-			7,237,883
Gain on extinuishment of debt		(9,073,666	)		-
Change in fair value of derivative liability		15317,~~798,016~~309			(519,~~592,222~~378	)
Bad debt expense		(264,~~308~~037	)		52(32,~~500~~468	)
Changes in operating assets and liabilities:
Accounts receivable		~~183~~(122,~~288~~376	)		~~(405~~98,~~456~~582	)
Inventory		~~(18~~13,~~663~~240	)		2238,~~165~~055
Prepaid expenses, deposits and other assets		~~4,330~~(617	)		(41,~~632~~236	)
Accounts payable		136,900			267,891
Accounts payable and accrued expenses		79,047			183,656
Accrued expenses		(77,347	)		4,523
Deferred Income		11,065			1,186
Accrued interest		688,042			671,398
Net Cash Provided by (Used In) Operating Activities		(77,819	)		51,898
Deferred Income		24,956			(54,193	)
Net Cash Used In Operating Activities		(158,894	)		(121,277	)
Cash Flows from Investing Activities:
Purchase of equipment		-			(10,526	)
Net Cash Used in Investing Activities		-			(10,526	)
Cash Flows from Financing Activities:
Increase in Note Payable		-			510,000
Proceeds from notes payable		95,000			50,000
Decrease in Convertible debentures		-			(500,000	)
Net Cash provided by Financing Activities		95,000			50,000
Net Cash Provided by Financing Activities		-			10,000
Net Increase in Cash		17,181			101,898
Net (Decrease) in Cash		(158,894	)		(121,803	)
Cash at Beginning of Period		52,667			213,513
Cash at Beginning of Period		213,513			386,628
Cash at End of Period	$	69,848		$	315,411
Cash at End of Period	$	54,619		$	264,825

The accompanying notes are an integral part of the condensed consolidated financial statements.

ALLIED SECURITY INNOVATIONS, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ~~(CONTINUED)~~

FOR THE ~~NINE~~THREE MONTHS ENDED ~~SEPTEMBER~~MARCH 3031, ~~2009~~2010 AND ~~2008~~2009

(UNAUDITED)

	2009		2008
	2010		2009
Supplemental Disclosure of Cash Flow Information:
Cash Paid For:
Interest Expense	$	-	$	-
Income Taxes	$	-	$	-
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Common stock issued in conversion of convertible debentures	$	4422,~~341~~927	$	2291,~~288,993~~061
Beneficial interest in conjunction with issuance of convertible debentures	$	~~58,472~~-	$	~~170~~8,~~673~~922
Common stock issued in conversion of accrued interest	$	87,~~244~~121	$	43,~~682~~170

The accompanying notes are an integral part of the condensed consolidated financial statements.

Allied Security Innovations, Inc. and Subsidiary

Notes to ~~the~~to Condensed Consolidated Financial Statements ~~(Unaudited)~~

~~September~~Note ~~30,~~1 ~~2009~~- ~~and~~Description ~~2008~~of Business

Note 1 - Organization and Basis of Presentation

The unaudited condensed interim financial information included has been prepared by Allied Security Innovations, Inc. (the “Company” or “ASII”) without audit, pursuant to the rules and regulations of the Security and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted as allowed by such rules and regulations, and the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed consolidated financial statements be read in conjunction with the December 31, 2008 audited consolidated financial statements and the accompanying notes thereto. While management believes the procedures followed in preparing these condensed consolidated financial statements are reasonable, the accuracy of the amounts are in some respects dependent upon the facts that will exist, and procedures that will be accomplished by the Company later in the year.

The management of the Company believes that the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly the operations for the periods presented.

Note 2 - Description of Business and Recent Developments

CGM-AST is a manufacturer and distributor of indicative and barrier security seals, security tapes and related packaging security systems, protective security products for palletized cargo, physical security systems for tractors, trailers and containers as well as a number of highly specialized authentication products. Focused primarily on “deterrent technologies,” CGM-AST designs and develops customized tamper evident devices which when integrated into a security protocol; provide chain of custody and/or proof of tampering for targeted assets.

The primary factors behind the need for CGM-AST’s products are: (i) the escalation of cargo theft and tampering, (ii) the need for enhanced cargo security because of the fear of terrorism, (iii) damage control of freight and cargo, (iv) the need for security products, (v) brand protection and authentication requirements and (vi) governmental and regulatory requirements.

CGM-AST products are certified by the Customs-Trade Partnership Against Terrorism ("C-TPAT"), a joint initiative between government and business designed to protect the security of cargo entering the United States while improving the flow of trade. C-TPAT requires importers to take steps to assess, evolve and communicate new practices that ensure tighter security of cargo and enhanced security throughout the entire supply chain. In return, their goods and conveyances will receive expedited processing into the United States. Many of our products are also ISO 17712 compliant, which is a standard for international shipping and container security.

It is estimated that losses from cargo theft each year reach 30-50 billion dollars globally and 12 billion dollars in the US, and that these numbers will continue to rise. Figures taken from L.H. Gray entitled Facing the Growing Problem of Loss and Theft ~~in 2004.~~

Note 32 - Summary of Significant Accounting Policies

Significant accounting policies followed by the Company in the preparation of the accompanying ~~condensed~~ consolidated financial statements are summarized below:

Use of Estimates

The preparation of the ~~condensed~~ consolidated financial statements in conformity ~~with~~ with generally accepted accounting principles requires management to make ~~estimates~~ estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the ~~condensed~~ consolidated financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates.

Revenue Recognition

The Company derives revenue from the sale of hardware, software, post customer support, and other related services. Post customer support includes telephone support, ~~bug~~virus fixes, and rights to upgrades. Other related services include ~~basic~~ basic training. ~~The~~ CGM~~-AST~~ ~~subsidiary~~ derives its’ revenue from the sale of its ~~tape~~tapes, labels and other security devices. Revenue is recognized when products are shipped or services are rendered, evidence of a contract exists, the price is fixed or reasonably determinable, and collectability is reasonably assured.

The Company recognizes revenue upon delivery of the product to the end-user, when the fee is determinable and collectability is probable. Revenue allocable to post customer support is recognized on a straight-line basis over the period which the service is to be provided.7

Deferred Income

Revenue allocable to post customer support is recognized on a straight-line basis over the period which the service is to be provided. Revenue collected for future services is recorded as deferred income. Deferred revenue at ~~September~~March 3031, ~~2009 was~~2010 was $3563,~~054~~247 and at December 31, ~~2008~~2009 was $1052,~~098~~182.. Revenue allocable to other services is recognized as the services are provided. The CGM-AST subsidiary recognizes it revenue upon shipment of the product to the customer.

Software Development Costs

All costs incurred in the research and development of new software products and costs incurred prior to the establishment of a technologically feasible product are expensed as incurred. Research and development of software costs were $6922,~~261~~941 and $6821,~~812~~471, ~~respectively,~~ for the ~~nine~~three months ended ~~September~~March 3031, ~~2009~~2010 and ~~2008,~~ ~~respectively~~2009.

Cash and Cash Equivalents

~~For~~The Company ~~the~~considers all highly liquid investments purchased with original ~~purpose~~maturities of ~~the~~three ~~statement~~months ofor ~~cash~~less ~~flows,~~to be cash ~~and~~equivalents. The Company had no cash equivalents ~~include~~at ~~time deposits~~March 31, ~~certificates~~2010. ofThe ~~deposits,~~Company ~~restricted~~maintains cash, ~~and~~balances ~~all~~at financial ~~highly~~institutions ~~liquid~~that ~~debt~~are insured by the Federal Deposit Insurance ~~instruments~~Corporation ~~with~~(“FDIC”) ~~original~~up ~~maturities~~to orfederally ~~three~~insured ~~months~~limits. orAt ~~less~~times balances may exceed FDIC insured limits. The Company has not experienced any losses in such accounts.

Accounts Receivable

Accounts receivable are uncollateralized customer obligations due under normal trade terms requiring payment within 30 days from the invoice date. No interest is charged on any past due accounts. Accounts receivable are stated at the amount billed to the customer. ~~Accounts receivable, net of allowance was $380,243 on September 30, 2009 and $537,223 at December 31, 2008.~~

The carrying amount of accounts receivable is reduced by a valuation allowance that reflects management's best estimate of the amount that will not be collected. Management reviews all accounts receivable balances that exceed 90 days from invoice date and based on assessment of current creditworthiness, estimates the portion, if any that will not be collected. The allowance for doubtful accounts is $~~122~~134,~~198~~590 onat ~~September 30~~March31, ~~2009~~2010 and $~~148~~138,~~506~~027 at December 31, ~~2008~~ 2009.

~~Fixed~~Property ~~Assets~~and Equipment

~~Fixed~~Property ~~assets~~and equipment are stated at cost. Depreciation is computed primarily using the straight-line method over the estimated useful life of the assets.

Machinery and equipment	7 years
Furniture and fixtures	7 years
Computers	3 years
Leasehold improvements	39 years

Income Taxes

The Company provides for income taxes under the liability method. Deferred income taxes reflect the net tax effects of temporary differences between carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Such differences result from differences in the timing of recognition by the Company of net operating loss carry forwards, certain expenses, and differences in the depreciable lives and depreciation methods for certain assets.

Accounting for Stock Options

The Company ~~determines~~has adopted Accounting Standards Codification ASC 718-10, “Accounting for Stock-Based Compensation”, which establishes financial accounting and reporting standards for stock-based employee compensation ~~expense~~plans. This pronouncement ~~under~~also ~~Financial~~applies ~~Accounting~~to transactions in which an entity issues its equity ~~Standards~~instruments ~~Board~~to acquire goods or services from non-employees. Those transactions must be accounted for based on the fair value of the consideration received or the fair value of the equity instruments issued, ~~Statement~~whichever Nois more reliably measurable. For ~~123R~~stock ~~(SFAS~~options, ~~123R)~~fair value is determined using an option-pricing model that takes into account the stock price at the grant date, the ~~"Accounting~~exercise ~~for~~price, the expected life of the option, the volatility of the ~~Stock~~underlying stock and the expected dividends on it, and the risk-~~Based~~free ~~Compensation~~interest rate over the expected life of the option."

Net Loss Per Common Share

Basic loss per share is calculated by dividing the net loss by the weighted average common shares outstanding for the period. Diluted loss per share is calculated by dividing the net loss by the weighted average common shares outstanding of the period plus the dilutive effect of common stock equivalents. Common stock equivalents were not included in the computation of diluted earnings per share ~~for~~when the ~~nine~~Company ~~months~~reported ~~ended~~a ~~September~~loss ~~30, 2009 and 2008~~ because to do so would be antidilutive for the years ~~period~~ presented.

Concentration of Credit Risk

Financial instruments which potentially subject the Company to a concentration of credit risk principally consist of cash and accounts receivable. ~~Concentration of credit risk, with respect to accounts receivable, is limited due to the Company's credit evaluation process.~~ The Company does not require collateral from its customers. The Company sells its principal products to end users and distributors principally in the United States. ASII has no major customer as of March 31, 2010.

The Company maintains cash and cash equivalents in various financial institutions that, in the aggregate, exceed the limit insured by the Federal Deposit Insurance Corporation (FDIC). The FDIC insures cash deposits up to $250,000 per bank. Any amounts over $250,000 represent an uninsured risk to the Company.

Principles of Consolidation and Basis of Presentation

The ~~condensed~~ consolidated financial statements include the accounts of the Company and its wholly owned subsidiary CGM~~-AST~~. All inter-company accounts have been eliminated.

Inventory

Inventories consist principally of inks, adhesives, film and finished goods held in the Company’s warehouse. Inventory is stated at the lower of cost or market, utilizing the first-in, first-out method. The cost of finished goods includes the cost of raw materials, packaging supplies, direct and indirect labor and other indirect manufacturing costs. On a quarterly basis, management reviews inventory for unsalable or obsolete inventory. Obsolete or unsalable inventory write-offs have been immaterial to the financial statements.

Advertising

The Company’s policy is to expense the costs of advertising as incurred. The Company had advertising expenses of $~~100,921~~90 and $9312,~~285~~625 for the ~~nine~~three months ended ~~September~~ 30March 31, 2010 ~~2009~~ and ~~2008~~2009, respectively.

Fair Value of Financial Instruments

The carrying amount reported in the ~~condensed~~ consolidated balance sheet for cash and cash equivalents, accounts payable and accrued expenses approximates fair ~~value~~ value because of the immediate or short-term maturity of these financial instruments. The ~~carrying amount reported for the convertible debentures and notes payable approximates~~ fair value ~~because,~~of inlong-term ~~general,~~debt ~~the~~is ~~interest~~discussed ~~on the~~in ~~underlying~~Note ~~instruments fluctuates with market rates~~13.

Goodwill and Other Intangible Assets

In June 2001, the Financial Accounting Standards Board (“FASB”) issued ~~Statement~~ASC ~~No.~~350 ~~142~~ “Goodwill and Other Intangible Assets.” . This statement addresses financial accounting and reporting for acquired goodwill and other intangible assets and supersedes APB Opinion No. 17, “Intangible Assets.” It addresses how intangible assets that are acquired individually or with a group of other assets (but not those acquired in a business combination) should be accounted for in financial statements upon their acquisition. This Statement also addresses how goodwill and other intangible assets should be accounted for after they have been initially recognized in the financial statements. Goodwill was acquired upon the purchase of its wholly-owned subsidiary of CGM ~~Security Solutions, Inc.~~ totaling $4,054,998 ~~(see footnote 11)~~.

In addition, the Company has acquired licenses, which are included as other intangible assets. The licenses are being amortized over a period of 15 years based on the expected benefits to be consumed or otherwise used up. Goodwill and other intangible assets are tested annually for impairment in the fourth quarter, and are tested for impairment more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount exceeds the asset’s fair value. The Company assesses the recoverability of its goodwill and other intangible assets by comparing the projected undiscounted net cash flows associated with the related asset, over their remaining lives, in comparison to their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets.

In December of 2008 the Company decreased the value of goodwill from $4,054,998 to $2,054,998.

Derivative Instruments

The Company has an outstanding convertible debt instrument that contains free-standing and embedded derivative features. The Company accounts for these derivatives in accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” and EITF Issue No. 00-19, “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock.” In accordance with the provisions of SFAS No. 133 and EITF Issue No. 00-19, the embedded derivatives are required to be bifurcated from the debt instrument and recorded as a liability at fair value on the condensed consolidated balance sheet. Changes in the fair value of the derivatives are recorded at each reporting period and recorded in net gain (loss) on derivative, a separate component of the other income (expense). As of September 30, 2009, the fair value of derivatives was $33,204,916, an increase of $15,848,015 from December 31, 2008. This increase consists of the addition of $50,000 to the derivatives from the debentures issued January 8, 2009 (see note 7) and a decrease in fair market value of the derivatives in the amount of $15,798,015 as of September 30, 2009.

~~Limitations~~In December of 2008 the Company determined its’ goodwill was impaired and recorded a loss of $2,000,000 and in December 2009 the Company wrote off the balance of the goodwill to $0.

~~Fair~~Derivative value estimates are made at a specific point in time, based on relevant market information and information about the financial statement. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.Instruments

~~Note~~The 4Company has an outstanding convertible debt instrument that contains free-standing ~~Recent~~and embedded derivative features. The Company accounts for these derivatives in accordance with ASC 815, “Accounting ~~Pronouncements~~for Derivative Instruments and Hedging Activities,” including “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock.” In accordance with the provisions of ASC 815, the embedded derivatives are required to be bifurcated from the debt instrument and recorded as a liability at fair value on the consolidated balance sheet. Changes in the fair value of the derivatives are recorded at each reporting period and recorded in change in fair market value of derivative liability, a separate component of the other income (expense).

~~In May 2009,~~Earnings ~~the~~(Loss) ~~FASB~~Per ~~issued~~Share ~~ASC 855, Subsequent Events. This standard establishes general standards~~ of ~~accounting for and disclosure of events that~~Common occur after the balance sheet date, but before financial statements are issued or available to be issued. Specifically, this standard codifies in authoritative GAAP standards the subsequent event guidance that was previously located in auditing standards. ASC 855 is effective for fiscal years and interim periods ended after June 15, 2009 and is applied prospectively. We adopted ASC 855 in our fiscal quarter ended JuneStock ~~30, 2009. The adoption of SFAS 165 did not have a material impact on our financial position, results of operation or cash flows.~~

~~In June~~ ~~2009,~~Historical net ~~the~~income ~~FASB~~(loss) ~~issued~~per ~~ASC~~common ~~105,~~share ~~Generally~~is ~~Accepted~~computed ~~Accounting Principles.~~using ~~This section designates~~ the ~~FASB~~weighted ~~Accounting~~average ~~Standards Codification~~number ~~(FASC) as the source~~ of ~~authoritative~~common ~~U.S.~~shares ~~GAAP~~outstanding. ~~ASC~~Diluted ~~105~~earnings isper ~~effective~~share ~~for~~(EPS) include ~~interim~~additional ordilution ~~fiscal~~from ~~periods~~common ~~ending~~stock ~~after September 15~~equivalents, ~~2009.~~such Weas ~~have~~stock ~~used the~~issuable ~~new~~pursuant ~~guidelines~~to ~~and~~the ~~numbering~~exercise ~~system~~of ~~prescribed~~stock byoptions ~~the~~and ~~FASC~~warrants. ~~when~~Common ~~referring~~stock toequivalents ~~GAAP~~were not included in ~~our~~the ~~fiscal~~computation ~~quarter~~of ~~ending~~diluted ~~September 30,~~earnings ~~2009.~~per ~~The~~share ~~adoption~~at ofMarch ~~ASC~~31, ~~105~~2010 ~~did~~and ~~not~~2009 ~~have~~when athe ~~material~~Company ~~impact~~reported ona ~~our~~loss ~~financial~~because ~~position,~~to ~~results~~do ofso would be ~~operation~~anti-dilutive orfor ~~cash~~years ~~flows~~presented.

~~In June 2009, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 168,~~ The ~~FASB~~following ~~Accounting Standards~~is ~~Codification~~a ~~and~~reconciliation ~~the Hierarchy~~ of ~~Generally Accepted Accounting~~ ~~Principles (“SFAS 168”). SFAS 168 will become~~ the ~~single~~computation ~~source~~for ofbasic authoritative nongovernmental U.S. generally accepted accounting principles (“GAAP”), superseding existing FASB, American Institute of Certified Public Accountants (“AICPA”), Emerging Issues Task Force (“EITF”), and ~~related~~diluted accounting literature. SFAS 168 reorganizes the thousands of GAAP pronouncements into roughly 90 accounting topics and displays them using a consistent structure. Also included is relevant Securities and Exchange Commission guidance organized using the same topical structure in separate sections. SFAS 168 will be effective for financial statements issued for reporting periods that end after SeptemberEPS: 15, 2009. All future references to authoritative accounting literature in our financial statements issued for reporting periods that end after September 15, 2009 will be referenced in accordance with SFAS 168.

In May 2009, the FASB issued Statement of Financial Accounting Standards No. 165, Subsequent Events (“SFAS 165”). SFAS 165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. SFAS 165 applies prospectively to both interim and annual financial periods ending after June 15, 2009. The adoption of SFAS 165 did not result in any material change to our policies.

	March 31, 2010		March 31, 2009

Net Income (Loss)	$	8,684,253	$	(249,956	)

Weighted-average common shares outstanding (Basic)		55,345,966		3,106,474

Weighted-average common stock Equivalents:
Stock options		-		-
Warrants		-		-

Weighted-average common shares outstanding (Diluted)		55,345,966		3,106,474

InOptions ~~April 2009, the FASB issued FSP No. 107-1~~ and ~~APB~~warrants ~~28-1,~~outstanding ~~Interim Disclosures~~to ~~about~~purchase ~~Fair~~stock ~~Value~~were ofnot ~~Financial~~included ~~Instruments~~in ~~(“FSP~~the ~~107-1”). FSP 107-1~~computation ~~amends~~of ~~FASB~~diluted ~~Statement~~EPS ~~No. 107,~~on ~~Disclosures~~March ~~about Fair Value of Financial Instruments~~31, 2010 and ~~Accounting~~December ~~Principles Board Opinion No. 28~~31, ~~Interim Financial~~2009 ~~Reporting,~~because toinclusion ~~require disclosures about fair value of financial~~would ~~instruments~~have ~~for~~been ~~interim periods of publicly traded companies as well as in annual financial statements~~anti-dilutive. ~~FSP~~There ~~107-1~~were isno ~~effective~~options ~~for~~and ~~interim~~warrants ~~reporting periods~~available ~~ending after June~~at March 1531, ~~2009.~~2010 ~~The~~and ~~adoption of FSP 107-1 had no material effect on our disclosures in our financial statements~~2009.

~~From~~Going time to time, new accounting pronouncements are issued by the FASB or other standards setting bodies that we adopt as of the specified effective date. Unless otherwise discussed in these financial statements and notes or in our financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2008, we believe the impact of any other recently issued standards that are not yet effective are either not applicable to us at this time or will not have a material impact on our consolidated financial statements upon adoption.Concern

InThe ~~June 2008,~~accompanying ~~the~~consolidated ~~FASB issued~~financial ~~FASB~~statements ~~Staff~~have ~~Position~~been ~~(“FSP”)~~prepared ~~Emerging~~in ~~Issues~~accordance ~~Task~~with ~~Force~~accounting ~~(“EITF”) No. 03-6-1~~principles ~~“Determining~~generally ~~Whether~~accepted ~~Instruments Granted~~ in ~~Share-Based Payment Transactions Are Participating Securities.” Under~~ the ~~FSP,~~United ~~unvested~~States ~~share-based~~of ~~payment awards that contain rights to receive non forfeitable dividends (whether paid or unpaid) are participating securities~~America, ~~and~~ ~~should~~which becontemplate ~~included~~continuation inof the ~~two-class~~Company ~~method~~as ofa ~~computing~~going ~~EPS~~concern. The ~~FSP is~~Company ~~effective~~has ~~for~~sustained ~~fiscal~~operating ~~years~~losses ~~beginning~~and ~~after~~has ~~December 15,~~accumulated ~~2008~~large ~~and~~deficits for ~~interim~~ ~~periods~~the ~~within~~period ended ~~those~~March ~~years~~31, 2010. ~~The~~ ~~implementation~~These offactors ~~this standard~~raise ~~did~~substantial ~~not~~doubt ~~have~~about aits ~~material~~ability ~~impact~~to continue onas ~~the~~a ~~Company's~~going ~~condensed consolidated financial statements~~concern.

~~In May~~Management ~~2008,~~has ~~the~~formulated ~~FASB~~and ~~issued~~is ~~SFAS~~in ~~No.~~the ~~162~~process ~~“The Hierarchy~~ of ~~Generally~~implementing ~~Accepted Accounting~~its ~~Principles”~~business ~~(SFAS~~plan ~~No.~~intended to ~~162).~~develop ~~SFAS~~steady ~~No.~~revenues ~~162 identifies the sources of accounting principles~~ and ~~the~~income, ~~framework~~as ~~for~~well ~~selecting~~as ~~principles~~reducing ~~used~~expenses in the ~~preparation~~ areas of ~~financial statements~~operations. ~~SFAS~~ ~~No.~~This ~~162~~plan isincludes ~~effective~~the ~~60 days~~ following ~~the SEC’s approval of the Public Company Accounting Oversight~~management Board amendments to AU Section 411 “The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles.” The implementation of this standard will not have a material impact on Consolidated Financial Statements.objectives:

· Soliciting new customers in the U.S.

· Expanding sales in the international market

· Expanding sales through E-commerce

· Adding new distributors both in the U.S and internationally

· The introduction of new products into the market

· Seeking out possible merger candidates

Presently, the Company cannot ascertain the eventual success of management’s plan with any degree of certainty. Each objective is contingent upon a number of factors and the Company does not represent that any or all of these objectives will occur. The accompanying consolidated financial statements do not include any adjustments that might result from the eventual outcome of the risks and uncertainties described above.

InNote ~~March~~3 ~~2008,~~- ~~the~~Impact ~~FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities: an amendment~~ of ~~FASB~~Recent ~~Statement~~Accounting No. 133" ("SFAS No. 161"). SFAS No. 161 changes the disclosure requirements for derivative instruments and hedging activities. The provisions of SFAS No. 161, is effective the first quarter of fiscal 2009. The implementation of this standard did not have a material impact on the Condensed Consolidated Financial Statements.Pronouncements

~~In February 2008,~~ASU ~~FASB Staff Position ("FSP") FAS No. 157~~2010-206, ~~"Effective~~Fair Value ~~Date~~Measurements ofand ~~FASB~~Disclosures ~~Statement No. 157"~~ (~~"FSP~~Topic ~~No. 157-2"~~820): ~~was issued. FSP~~Improving ~~No. 157-2~~Disclosures ~~defers~~about ~~the~~Fair ~~effective~~Value ~~date~~Measurements ofThis ~~SFAS~~ASU ~~No. 157~~amends toFASB ~~fiscal~~ASC ~~years~~Topic ~~beginning after December 15~~820, ~~2008,~~Fair ~~and~~Value ~~interim periods within those fiscal~~Measurements ~~years~~and Disclosures, ~~for~~to ~~all~~require ~~nonfinancial~~reporting ~~assets~~entities ~~and~~to ~~liabilities,~~make ~~except~~new ~~those that are~~disclosures ~~recognized~~about recurring or ~~disclosed~~nonrecurring at fair -value inmeasurements ~~the~~including ~~financial statements on a recurring~~significant ~~basis~~transfers ~~(at~~into ~~least~~and ~~annually).~~out ~~Examples~~ of ~~items~~Level ~~within~~1 ~~the~~and ~~scope~~Level of2 ~~FSP No. 157~~fair-2value ~~are~~measurements ~~nonfinancial assets~~ and information ~~nonfinancial~~about ~~liabilities~~purchases, ~~initially measured~~sales, atissuances, ~~fair~~and ~~value~~settlements inon a ~~business~~gross ~~combination (but not measured at fair value~~basis in ~~subsequent~~the ~~periods),~~reconciliation ~~and~~of ~~long-lived~~Level ~~assets,~~3 ~~such~~fair-value asmeasurements. ~~property,~~The ~~plant~~ASU ~~and~~also clarifies ~~equipment~~existing ~~and~~fair-value ~~intangible~~measurement ~~assets~~disclosure ~~measured~~guidance atabout ~~fair~~the ~~value~~level ~~for an impairment~~of ~~assessment~~disaggregation, ~~under~~inputs, ~~SFAS~~and Novaluation techniques. ~~144.~~

~~The~~Except ~~partial~~for ~~adoption~~the ofdetailed ~~SFAS~~Level ~~No. 157~~3 onroll ~~January 1~~forward disclosures, ~~2008~~the ~~with~~guidance ~~respect~~in ~~to financial~~the ~~assets~~ASU ~~and financial liabilities recognized or disclosed at fair value~~was inadopted by the ~~financial~~Company ~~statements~~ on aJanuary 1, ~~recurring~~2010 ~~basis~~with ~~did~~no ~~not have a~~ material impact on ~~the Company's condensed~~ its financial statements. ~~See~~The ~~Note 10~~new ~~for~~disclosures ~~the~~about ~~fair value~~purchases, ~~measurement~~sales, ~~disclosures~~issuances, ~~for~~and settlements ~~these~~in ~~assets~~the ~~and~~roll ~~liabilities.~~forward ~~The~~activity ~~Company adopted~~for ~~SFAS~~Level ~~No. 157~~3 onfair-value measurements are effective January 1, ~~2009~~2011.

OnFrom time ~~January~~to 1time, ~~2008~~new ~~(the~~accounting ~~first~~pronouncements ~~day~~are ofissued ~~fiscal~~by ~~2008),~~ the ~~Company adopted SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities, Including an amendment of~~ FASB ~~Statement~~or ~~No. 115" ("SFAS No. 159"). SFAS No. 159 permits entities to choose to measure many financial instruments and certain~~ other ~~items at fair value, which are not~~standards ~~otherwise~~setting ~~currently~~bodies ~~required~~that towe beadopt ~~measured~~as atof ~~fair value. Under SFAS No. 159,~~ the ~~decision to measure items at fair value is made at~~ specified ~~election~~ ~~dates~~effective ~~on an instrument-by-instrument basis and is irrevocable~~date. ~~Entities~~Unless ~~electing~~otherwise ~~the~~discussed ~~fair~~in ~~value~~these ~~option~~financial ~~are~~statements ~~required~~and tonotes ~~recognize~~or ~~changes~~ in ~~fair~~our ~~value~~financial instatements ~~earnings~~ and tonotes ~~expense~~included ~~upfront~~in ~~costs~~our ~~and~~Annual ~~fees~~Report ~~associated~~on ~~with~~Form ~~the~~10-K ~~item~~ for ~~which~~ the ~~fair~~year ended ~~value~~December 31, ~~option~~2009, iswe ~~elected.~~believe ~~The~~the ~~new~~impact ~~standard~~of ~~did~~any ~~not~~other ~~impact~~recently ~~the~~issued ~~Company's~~standards ~~Condensed~~that ~~Consolidated~~are ~~Financial~~not ~~Statements~~yet aseffective ~~the~~are ~~Company~~either ~~did~~ not ~~elect~~ ~~the~~applicable ~~fair~~to ~~value~~us ~~option~~at ~~for any instruments existing as of the adoption~~this ~~date.~~time ~~However,~~or ~~the Company~~ will ~~evaluate~~not ~~the~~have ~~fair~~a ~~value~~material ~~measurement~~impact ~~election with~~on ~~respect~~our toconsolidated financial ~~instruments the Company enters into in the~~statements ~~future~~upon adoption.

Note 54 – Intangible Assets

Intangible assets consist of the following at ~~September~~March 3031, ~~2009~~2010 and December 31, ~~2008.~~2009:

	September 30, 2009		December 31, 2008
	2010		2009
Licenses	$	~~222~~87,076	$	~~222~~87,076
Accumulated amortization		9555,~~483~~077		8453,~~107~~535
Total	$	~~126~~31,~~593~~999	$	~~137~~33,~~969~~541

Licenses are being amortized over ~~their~~its estimated useful ~~lives~~life of 15 years. ~~Amortization~~The Licenses are ~~expense~~amortized ~~for~~using the ~~nine~~straight-line ~~months~~method ~~ended~~over ~~September~~the ~~30,~~useful ~~2009~~life ~~and~~of ~~2008 was $11,376 and~~15 ~~$11,376, respectively~~years.

Based on the results of its most recent annual impairment tests, the Company determined that there would be no future value on the Brake Lock License. Therefore, management recorded an impairment of $89, 260 in 2009. There was no impairment determined for the other licenses that exist. However, future impairment tests could result in a charge to earnings.

The following is a listing of the estimated amortization expense for the next five years:

Year ended December 31,

2009	$	15,168
2011	$	6,168
2010	$	15,168
2012		6,168
2011	$	15,168
2013		6,168
2012	$	15,168
2014		6,168
2013	$	15,168
2015		6,168

Note 5- Property and Equipment

Property and Equipment consist of the following at March 31, 2010 and December 31, 2009.

	2010			2009

Furniture and Fixtures $ 75,613	$	75,613
Leasehold Improvements		159,607			159,607
Computers		219,301			219,301
Machinery and Equipment 762,987		762,987
		1,217,508			1,217,508
Less: Accumulated depreciation		(1,020,277	)		(1,008,023	)
Net	$	197,231		$	209,485

Note 6 - ~~Property~~Convertible ~~and Equipment~~Debentures

~~Fixed~~Based on ~~assets~~the ~~consist~~guidance ofASC 815, the ~~following~~Company atconcluded ~~September~~that ~~30,~~its ~~2009~~convertible debentures were required to be accounted for as derivatives. The imbedded conversion features were bi-furcated and ~~December~~the ~~31,~~fair market value was determined using a convertible ~~2008:~~bond valuation model. The derivative instruments are recorded at fair market value with changes in value recognized during the period of change.

	September 30, 2009			December 31, 2008
Furniture and Fixtures	$	75,615		$	75,615
Leasehold Improvements		159,607			159,607
Computers		219,300			219,300
Machinery and Equipment		762,987			762,987
		1,217,509			1,217,509
Less: Accumulated depreciation		(993,497	)		(949,915	)
Net	$	224,012		$	267,594

Depreciation expense for the nine months ended September 30, 2009 and 2008 was $43,582 and $51,758, respectively.

Note 7 - Convertible Debentures

Based on the guidance in SFAS133 and EITF00-19, the Company concluded that the conversion features of its convertible debentures were required to be accounted for as derivatives. The imbedded derivative feature was bi-furcated and the fair market value was determined using a convertible bond valuation model. The derivative instruments are recorded at fair market value with changes in value recognized during the period of change.

On May 16, 2008 convertible debentures in the net amount of $5,832,483 were satisfied.

On May 16, 2008, the Company issued ~~sixteen~~ convertible notes for an aggregate amount of of $14,165,899. The debentures are collateralized by substantially all of the Company's assets. The debentures accrue interest at the rate of 6% per annum.

~~The~~During ~~holders~~January ~~have~~2009, the ~~right~~Company toissued ~~convert~~5 ~~the~~convertible ~~principal~~notes ~~amount~~for ~~plus~~an ~~accrued~~aggregate ~~interest into~~amount ~~shares~~ of ~~the Company's common stock~~ $50,000. The ~~conversion~~debentures ~~price~~are incollateralized ~~effect~~by onsubstantially ~~any Conversion~~all ~~Date shall be an amount equal to 26%~~ of the ~~mean~~Company's assets. ~~average~~The ~~price~~debentures ofaccrue ~~the common~~interest ~~stock~~at ~~for~~ the ~~ten~~rate ~~trading~~of ~~days~~6% ~~prior~~per toannum ~~notice~~with terms of ~~conversion~~three years.

WeThe Company recorded a derivative liability related to ~~this~~these convertible ~~debenture. The~~debentures ~~initial~~at their fair market value ~~of the conversion option in the amount of $10,000 was recorded as a debt discount~~ and ~~was~~adjusts ~~expensed in 2008. The fair market value of~~ the ~~conversion feature is also shown as a derivative liability on the Company’s~~ balance ~~sheet and is being adjusted~~ to fair market value each reporting period with the change being reported as “other income and expenses” in the statement of income.

On ~~January~~ 8March 2, ~~2009~~2010, the Company ~~issued~~entered ~~five~~into ~~convertible~~a ~~notes~~rescission ~~for~~agreement an(the ~~aggregate~~“Rescission ~~amount~~Agreement”) with each of ~~$50~~AJW Partners,~~000~~ LLC, AJW Master Fund, Ltd., ~~The~~New Millennium ~~debentures~~Capital ~~are~~Partners ~~collateralized~~II, byLLC ~~substantially~~and ~~all~~AJW ofOffshore, Ltd. as holders (the “Holders”) of the Company'’s ~~assets.~~Callable ~~The~~Secured ~~debentures~~Convertible ~~accrue~~Notes ~~interest~~(the at“New Notes”). Under the ~~rate~~terms of ~~12%~~the ~~per~~Rescission Agreement, the parties agreed to ~~annum~~rescind a recapitalization agreement dated May 16, 2008 among the Company and the Holders (the “Recapitalization Agreement”). Under the Recapitalization Agreement, certain convertible debt securities previously held by the Holders (the “Old Notes”) were exchanged for the New Notes.

~~The~~Under the ~~holders~~Rescission ~~have~~Agreement, the ~~right~~New toNotes ~~convert~~are ~~the~~deemed ~~principal~~void ~~amount~~as ~~plus~~if ~~accrued~~they ~~interest into~~were ~~shares~~never ofissued by the Company's ~~common~~to ~~stock.~~the ~~The~~Holders ~~conversion~~and ~~price~~the inOld ~~effect~~Notes onwere ~~any Conversion~~returned ~~Date~~to ~~shall~~the beHolders anas if ~~amount~~they ~~equal~~had tonever ~~26%~~been ofexchanged for the ~~mean~~New ~~average~~Notes ~~price~~pursuant ofto the ~~common~~Recapitalization ~~stock~~Agreement. ~~for~~On ~~the~~March ~~ten~~2, ~~trading~~2010 ~~days~~$13,458,796 ~~prior~~convertible todebt principal ~~notice~~was extinguished and $6,008,968 of principal was reinstated for a net ~~conversion~~decrease of $7,449,828. See Note 10.

~~We recorded a derivative liability related to this convertible debenture.~~ The fair market value of the conversion feature ~~in the amount of $55,538~~ is shown as a derivative liability on the Company’s balance sheet and is being adjusted to fair market value each reporting period with the change being reported as “other income and expenses” in the statement of ~~income~~operations. ~~The initial fair market value of the conversion option in the amount of $50,000 was recorded as a debt discount and a loss is recognized in the amount of $5,538..~~

Note 87 -– ~~Commitments~~Derivative ~~and Contingencies~~Liability

~~CGM-AST~~In ~~leases~~accordance ~~one~~with ~~facility~~ASC 815, the conversion feature associated with the Secured Convertible Debentures represents embedded derivatives. As such, the Company had recognized embedded derivatives as a liability in ~~Staten~~the ~~Island~~accompanying consolidated balance sheet, ~~New~~and ~~York~~it ~~under~~was ~~non-cancelable~~measured ~~lease~~at its estimated fair value of $17,582,072 ~~agreements~~and ~~that~~$18,888,603 ~~ended~~as inof March 31, 2010 and December ~~2008~~31, 2009. The ~~Company~~estimated ~~still~~fair value ~~occupies~~of the ~~space~~embedded derivative has been calculated based on a ~~month~~Black-Scholes pricing tomodel ~~month~~using ~~basis.~~the following assumptions:

On June 1, 2007 the offices of Allied Security Innovations, Inc. and the Somerset office of CGM-AST Applied Security Technologies, Inc. were combined into a new office located in Farmingdale, NJ in a 6,000 square foot combination warehouse /office space. The reason for this was cost savings and improved operational efficiencies. The lease is a 5 year lease ending May 12, 2012 with a 5 year renewal option. The company is required to pay utilities, insurance and other costs relating to the lease facility. The following is a schedule by years of future minimum rental payments required under operating leases that have initial or remaining non-cancelable lease terms in excess of one year as of December 31, 2008:

	2010			2009
	$	0.0012		$	0.0001
Exercise price	$	0.0003 to 0 .0009		$	0.0003 to 0 0009
Dividend yield		0.00	%		0.00	%
Risk free interest rate	0.81% to 2.03		%	0.81% to 2.03		%
Expected volatility	254% to 356		%	254% to 356		%
Expected life	1 to 30 Years			1 to 2 Years

Note 8 - Commitments

Operating Leases

CGM-AST leases one facility in Staten Island, New York on a month to month basis. In addition, the Company’s Farmingdale, NJ location is a 6,000 square foot combination warehouse /office. The lease is a 5 year lease ending May 12, 2012 with a 5 year renewal option. The Company is required to pay utilities, insurance and other costs relating to the lease facility. The following is a schedule of future minimum rental payments required under operating leases that have initial or remaining non-cancelable lease terms in excess of one year as of March 31, 2010:

	Per Year
2009	$	56,824
2010	$	43,897
2010		58,529
2011		60,285
2012		30,588
Thereafter		-0-
Total Minimum Payment required	$	134,770

Employment Agreements

~~Anthony R.~~On ~~Shupin, Chairman, President and Chief Executive Officer. Mr. Shupin was~~July ~~re-appointed~~18 ~~as Chairman~~2008, ~~President and Chief Executive Officer effective February,~~ 2005~~. On February 25~~, ~~2005,~~ ASII entered into a five-year employment agreement with MrAnthony R. Shupin, Chairman, President and Chief Executive Officer, which entitled him to a base salary of $227,900 per year,. The ~~which may at the~~ Board of Directors ~~discretion~~ may adjust his base salary (at their discretion but it may not ~~below~~be adjusted below $~~215~~225,000 per year). Mr. Shupin is also entitled to participate in the ~~Annual~~ Annual Management Bonus Plan. As a participant in the Annual Management Bonus Plan, Mr. Shupin will be eligible to receive bonuses, based on performance, in any amount from 10% to 200% of the Base Salary. In addition, Mr. Shupin shall ~~participate~~ participate in the Management Equity Incentive Plan. As a participant in the ~~Management~~ the Management Equity Incentive Plan, Mr. Shupin will be eligible to receive options, which vest over a period of time from the date of the option's issue, to purchase common shares of ASII. The Company may grant Mr. Shupin, following the first anniversary of the date hereof and at the sole discretion of the Board of Directors, options to purchase common shares of the Company (subject to the vesting and the satisfaction of the other terms and conditions of such options). Mr. Shupin will be entitled to 25 vacations days per year at such times as may be mutually agreed with the Board of Directors. ASII will provide Mr. Shupin a monthly car allowance of One Thousand Dollars ($1,000) along with related car expenses.

13On July 18, 2008, ASII entered into a five-year employment agreement with Michael J. Pellegrino, Senior Vice President and Chief Financial Officer, which entitled him to a base salary of $185,500 per year. The Board of Directors may adjust his base salary at their discretion but it may not be adjusted below $175,000 per year. Mr. Pellegrino is also entitled to participate in the Annual Management Bonus Plan. As a participant in the Annual Management Bonus Plan, Mr. Pellegrino will be eligible to receive bonuses, based on performance, in any amount from 10% to 200% of the Base Salary. In addition, Mr. Pellegrino shall participate in the Management Equity Incentive Plan. As a participant in the Management Equity Incentive Plan, Mr. Pellegrino will be eligible to receive options, which vest over a period of time from the date of the option's issue, to purchase common shares of ASII. ASII may also grant to the Employee, following the first anniversary of the date of the Agreement and at the sole discretion of the Board of Directors, options to purchase common shares of the Company (subject to the vesting and the satisfaction of the other terms and conditions of such options). Mr. Pellegrino will be entitled to 30 vacation days per year at such times as may be mutually agreed with the Board of Directors. ASII shall also furnish Mr. Pellegrino with monthly car allowance of One Thousand Dollars ($1,000) and related car expenses.

Michael J. Pellegrino, Senior Vice President and Chief Financial Officer. Mr. Pellegrino was appointed as Senior Vice President and Chief Financial Officer effective February 25, 2005. On February 25, 2005, ASII entered into a five-year employment agreement with Mr. Pellegrino, which entitled him to a base salary of $185,500 per year which may at the Board of Directors discretion adjust his base salary (but not below $175,000 per year). Mr. Pellegrino is also entitled to participate in the Annual Management Bonus Plan. As a participant in the Annual Management Bonus Plan, Mr. Pellegrino will be eligible to receive bonuses, based on performance, in any amount from 10% to 200% of the Base Salary. In addition, Mr. Pellegrino shall participate in the Management Equity Incentive Plan. As a participant in the Management Equity Incentive Plan, Mr. Pellegrino will be eligible to receive options, which vest over a period of time from the date of the option's issue, to purchase common shares of ASII. ASII may also grant to the Employee, following the first anniversary of the date of the Agreement and at the sole discretion of the Board of Directors, options to purchase common shares of the Company (subject to the vesting and the satisfaction of the other terms and conditions of such options). Mr. Pellegrino will be entitled to 25 vacation days per year at such times as may be mutually agreed with the Board of Directors. ASII shall also furnish Mr. Pellegrino with monthly car allowance of One Thousand Dollars ($1,000) and related car expenses.

Note 9 - Stock Option and Other Plans

Effective November 13, 2006, ~~Allied~~the ~~Security~~Company ~~Innovations, Inc. ("ASII")~~ granted to each of ~~Anthony~~ ~~Shupin,~~the ~~its~~executives ~~President~~discussed ~~and Chief Executive Officer and Michael~~in ~~Pellegrino,~~Note ~~its Chief Financial Officer~~8, 10,000 shares of newly created Series A Preferred Stock ("A Preferred") as recognition for services. On May 11, 2009 the Series A Preferred Stock was cancelled and replaced with 10,000 shares each of newly created Series B Preferred Stock.

~~Effective~~ Each ~~May~~share ~~11,~~of ~~2009~~B ~~the~~Preferred ~~above~~stock ~~Series~~is Aconvertible ~~Preferred~~into ~~Stock~~200,000 ~~were~~shares ~~cancelled~~of incommon ~~partial~~stock of ~~consideration~~the ~~for~~Company starting three years from the ~~issuance~~date of 10issuance,~~000~~ ~~shares~~provided ~~each~~that the closing bid price of ~~Series~~the BCompany's ~~Preferred~~common ~~Stock~~stock is $2.00 per share. The shares (“of B Preferred may be voted with the Company's common stock on an “as converted”) basis on any matters that common stock is entitled to vote on. The shares are not exercisable unless common stock is $2.00 per share and asonly ~~recognition~~after these preferred shares have been outstanding for ~~services~~2 years. After 1 more year they would become exercisable. Currently, a zero-value contingency is reported and a value will be assigned only if the $2.00 target is achieved within the allotted time frame and the shares become exercisable.

The shares of B Preferred will vest in five equal monthly installments and will be issued at the discretion of Mr. Shupin and Mr. Pellegrino. Each share of B Preferred is convertible into 200,000 shares of common stock of the Company starting three years from the date of issuance, provided that the closing bid price of the Company's common stock is then $2.00 per share. The shares of B Preferred may be voted with the Company's common stock on an as converted basis on any matters that the common stock is entitled to vote on as a class.

Unconverted shares of B Preferred will automatically cease to exist, and all rights associated therewith will be terminated upon the earlier of (i) that person's termination of employment with the Company for any reason, or (ii) five years from the date of issuance.

On May 11, 2009, the Company filed with the Secretary of State of Delaware a ~~Certificate~~ Certificate of Designation of Preferences, Rights and Limitations of Series B ~~Preferred~~ Preferred Stock.

The Company maintains the 1994 Restated Stock Option Plan (the 1994 Plan) pursuant to which the Company reserved 5,000,000 shares of common stock. The options granted have a term of ten years and are issued at or above the fair market value of the underlying shares on the grant date., The Company also maintains the 1996 Director Option Plan (the Director Plan) pursuant to which the Company reserved 200,000 shares of common stock. Options granted under the Director Plan are issued at or above the fair market value of the underlying shares on the grant date. A portion of the first option vests at the six-month anniversary of the date of the grant and continues over a four-year period. Subsequent options vest on the first anniversary of the grant date. The options expire ten years from the date of the grant or 90 days after termination of employment, whichever comes first.

The following is a summary of option activity under all plans:

	1994 Plan		1996 Director Plan		Nonqualified		Total Number of Options		Weighted Average Exercise Price
Outstanding at December 31, 2008		0		—		—		00		0
Outstanding at March 31, 2010		0						0		0

Note 10 -– ~~Fair~~Extinguishment ~~Value~~of ~~Measurements~~debt

OnThe ~~January 1,~~accompanying ~~2008,~~condensed ~~the~~consolidated ~~Company~~Statement ~~adopted~~of ~~SFAS~~Operations ~~No. 157~~for ~~“Fair~~the ~~Value~~three months ~~Measurements”~~ended ~~(“SFAS~~March ~~157”).~~31, ~~SFAS 157 defines fair value~~2010, reports ~~provides~~ a ~~consistent framework~~gain ~~for~~on ~~measuring~~extinguishment ~~fair~~of ~~value~~debt ~~under~~in ~~Generally Accepted Accounting~~the ~~Principles~~amount ~~and~~of ~~expands fair value financial statement disclosure requirements~~$9,073,666. As ~~SFAS~~required ~~157’s~~by ~~valuation~~the ~~techniques~~Troubled ~~are~~Debt ~~based~~Restructurings onby ~~observable~~Debtors ~~and~~Topic ~~unobservable~~discussed ~~inputs.~~in Note ~~Observable~~6, ~~inputs~~the ~~reflect~~transaction ~~readily~~was ~~obtainable~~accounted ~~data~~for ~~from~~as ~~independent~~a ~~sources, while~~troubled ~~unobservable~~debt ~~inputs~~restructurings ~~reflect~~under ~~our market assumptions. SFAS 157 classifies~~ASC ~~these~~470-60 ~~inputs~~as ~~into the following hierarchy~~follows:

Level 1 Inputs– Quoted prices for identical instruments in active markets.

Convertible debentures rescinded March 2, 2010	$	13,458,796
Convertible debentures reinstated March 2, 2010		6,008,969
Gain on extinguishment- notes		7,449,827

Derivative liability rescinded March 2, 2010		16,696,175
Derivative liability reinstated March 2, 2010		15,072,336
Gain on extinguishment- derivatives		1,623,839

Total Gain on Extinguishment of Debt	$	9,073,666

~~Level 2~~The ~~Inputs–~~Company ~~Quoted~~has ~~prices~~determined ~~for~~it ~~similar~~received ~~instruments~~a concession from the creditor through a reduction in ~~active~~principal ~~markets~~balance; ~~quoted~~the ~~prices~~Rescission Agreement meets the definition of ~~for~~a ~~identical~~troubled ordebt ~~similar~~restructuring. Paragraph ~~instruments~~35-6 inof ~~markets~~ASC 47-60 notes that if ~~are~~total ~~not~~future ~~active;~~cash payments specified by new terms, including face amount and ~~model-derived~~interest, ~~valuations~~is ~~whose~~less ~~inputs~~than ~~are~~the ~~observable~~current orcarrying ~~whose~~amount, ~~significant~~then ~~value~~the debtor shall reduce ~~drivers~~the carrying amount equal to the total future cash payments specified by the new terms and shall recognize a gain on restructuring. The Company has determined that the future cash payments are ~~observable~~less than the current carrying amount due to the conversion feature.

~~Level 3~~Note ~~Inputs–~~11 ~~Instruments~~- ~~with primarily unobservable value drivers.~~Contingency

~~The~~There ~~following~~were ~~table~~two ~~represents~~holders ~~the~~of ~~fair~~convertible ~~value~~notes ~~hierarchy~~dated ~~for~~December ~~those~~31, ~~financial~~2001 ~~assets~~who could ~~and~~potentially ~~liabilities~~seek ~~measured~~damages atfrom ~~fair~~the ~~value~~Company. onShould athey ~~recurring~~seek ~~basis~~these asdamages, the Company could incur an additional expense of ~~September~~$71,668. 30Management feels however, ~~2009~~that the likelihood that the other holders will seek the damages is remote, and therefore, no provision for this expense has been made in the accompanying consolidated financial statements.

~~Fair Value~~Note ~~Measurements~~12 on– aAcquisitions ~~Recurring~~and ~~Basis as of September 30, 2009~~Note Payable

Assets	Level I		Level II		Level III		Total
Assets	$	-		-	$	-	$	-
Total Assets	$	-	$	-	$	-	$	-
Liabilities		-	$	47,239,808		-	$	47,239,808
Total Liabilities	$	-	$	47,239,808	$	-	$	47,239,808

Note 11 – Acquisitions and Note Payable

On March 1, 2005, the Company acquired substantially all of the assets of CGM Security Solutions, Inc., a Florida corporation ("CGM"), for (i) $1,500,000 in cash and (ii) a 2.86% promissory note (the "Note") in the principal amount of $3,500,000, subject to adjustment (the "Acquisition"). The assets of CGM Security Solutions, Inc. were acquired pursuant to an Asset Purchase Agreement among the Company and CGM Security Solutions, Inc. dated as of February 25, 2005. In connection with the acquisition, the Company and CGM-AST each entered into an employment agreement with Erik Hoffer (the "Employment Agreement"). CGM Security Solutions, Inc is a manufacturer and distributor of barrier security seals, security tapes and related packaging security systems, protective security products for palletized cargo, physical security systems for tractors, trailers and containers.

The principal amount of the three year Note is subject to adjustment based upon the average of (i) the gross revenues of CGM-AST for the fiscal year ending December 31, ~~2008~~2009 and (ii) an independent valuation of CGM-AST Sub based upon the audited consolidated financial statements of the Company and CGM-AST Sub for the fiscal years ending December 31, ~~2006~~2007 and ~~2007~~2008. In addition, the Company has granted CGM-AST a secondary security interest in substantially all of its assets and intellectual property. If the Company is unable to fulfill its ~~obligations~~ obligations pursuant to the Asset Purchase Agreement and the Note, there is a ~~likelihood~~ likelihood that CGM Security Solutions, Inc. can declare default and attempt to take back the asset. ~~As of March 31, 2008 the Company did not secure sufficient funding but was in negotiations with private investors in an attempt to obtain same.~~

In connection with the Acquisition, the Company entered into a letter agreement with certain of its investors (the "Investors") which extended the maturity date of debt instruments issued on November 30, 2004 until September 1, 2008, and amended the conversion price of the debt that is held by the Investors to the lower of (i) $0.0005 or (ii) 40% of the average of the three lowest intraday trading prices for the Company's common stock during the 20 trading days before, but not including, the conversion date. In addition, the exercise price of the warrants held by the Investors was amended to $.001 per share.

Whereas the Company did not have sufficient funds to satisfy this obligation and was not able to raise the required payment when due the Company came to an agreement to pay CGM Security Solutions, Inc. and ~~it’s~~its owner Mr. Erik Hoffer Five Hundred Thousand Dollars ($500,000) and signed a new note with him raising the purchase price by One Million Dollars ($1,000,000). The new note for Four Million Dollars is a three year note due on May 15, 2011 carrying an annual interest rate of 7% of which the interest is due quarterly.

~~Note~~On March 2, 2010 the Company signed a six month promissory note in the amount of Seventy Thousand Dollars ($70,000) which carries and interest rate of 12% -and ~~Going~~is ~~Concern~~due in 5 monthly installments of $7,000 with a balloon payment in the sixth month of $38,242.

~~The accompanying~~As ~~condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States~~ of ~~America~~March 31, ~~which~~2010 ~~contemplates~~there ~~continuation~~are oftwo ~~the~~note ~~Company~~payables astotaling ~~a going concern. The Company has sustained recurring losses and has accumulated a significant deficit as of September~~ $30,000 ~~2009.~~owed ~~These~~to ~~factors raise substantial doubt about its~~corporate ~~ability~~officers towith ~~continue~~no ~~as a going concern~~terms.

~~Management~~Note ~~has~~13 ~~formulated~~-Fair ~~and~~Value is in the process of implementing its business plan intended to develop steady revenues and income, as well as reducing expenses in the areas of operations. This plan includes the following management objectives:Measurements

· On ~~Soliciting~~January 1, ~~new~~2008, ~~customers~~the inCompany ~~the~~adopted UASC 820 “Fair Value Measurements”.S ASC 820 defines fair value, provides a consistent framework for measuring fair value and expands fair value financial statement disclosure requirements. ASC 820’s valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions. ASC 820 classifies these inputs into the following hierarchy:

· Level 1 ~~Expanding~~Inputs– ~~sales~~Quoted inprices ~~the~~for ~~international~~identical ~~market~~instruments in active markets.

· Level 2 ~~Expanding~~Inputs– ~~sales~~Quoted ~~through~~prices Efor similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-~~commerce~~derived valuations whose inputs are observable or whose significant value drivers are observable.

~~· Adding~~Level 3 ~~new~~Inputs– ~~distributor~~Instruments ~~both~~with inprimarily ~~the~~unobservable ~~U.S~~value ~~and internationally~~drivers.

· The ~~introduction~~following oftable ~~new~~represents ~~products~~the ~~into~~fair ~~the~~value ~~market~~hierarchy for those financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2010.

· Fair ~~Seeking~~Value ~~out~~Measurements ~~possible~~on ~~merger~~a ~~candidates~~Recurring Basis as of March 31, 2010

Presently, the Company cannot ascertain the eventual success of management’s plan with any degree of certainty. Each objective is contingent upon a number of factors and the Company does not represent that any or all of these objectives will occur. The accompanying condensed consolidated financial statements do not include any adjustments that might result from the eventual outcome of the risks and uncertainties described above.

	Level I		Level II		Level III		Total

Assets	$	-		-	$	-	$	-

Total Assets	$	-	$	-	$	-	$	-

Convertible debentures				6,554,471				6,554,471

Derivative liability				17,582,072				17,582,072

Notes payable		-	$	4,100,000		-	$	4,100,000

Total Liabilities	$	-	$	28,236,543	$	-	$	28,236,543

Note 13 – Recent Events

On July 10, 2009, the Company was notified by FINRA, the body governing the OTC Bulletin Board that its request for a 1 for 1,000 reverse split of its issued and outstanding stock (the “Reverse Split”) had been processed and that it had assigned ADSV to be the new trading symbol for the Company’s common stock. The assignment was effective as of the open of business on July 13, 2009. The Reverse Split had been implemented through a filing with the Delaware Secretary of State.

Note 14 - Subsequent Events

Within the last twelve months, many of the Company’s customers have changed their terms from 30 days to 45 to 90 days. To insure a level cash flow the Company entered into a factoring agreement with Universal Funding Corporation in April 2010 for one year with advances not to exceed 80% of accounts receivable up to a $450,000 limit. Interest is calculated and charged at .4375% per month.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

The information in this report contains forward-looking statements. All statements other than statements of historical fact made in report are forward looking. In particular, the statements herein regarding industry prospects and future results of operations or financial position are forward-looking statements. These forward-looking statements can be identified by the use of words such as “believes,” “estimates,” “could,” “possibly,” “probably,” anticipates,” “projects,” “expects,” “may,” “will,” or “should” or other variations or similar words. No assurances can be given that the future results anticipated by the forward-looking statements will be achieved. Forward-looking statements reflect management’s current expectations and are inherently uncertain. Our actual results may differ significantly from management’s expectations.

The following discussion and analysis should be read in conjunction with our financial statements, included herewith. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of our management.

RESULTS OF OPERATIONS

THREE MONTHS ENDED ~~SEPTEMBER~~MARCH 3031, ~~2009~~2010 COMPARED TO THREE MONTHS ENDED ~~SEPTEMBER~~MARCH 3031, ~~2008~~2009

Revenues for the three months ended ~~September~~March 3031, ~~2009~~2010 were $~~770~~999,~~906~~683 compared to $1,~~528~~138,~~479~~ 882 for the three months ended ~~September~~March 3031, ~~2008~~2009, a decrease of $~~757~~139,~~573.~~199 or 12,2%. ASII generates its revenues through software licenses, hardware, post customer support arrangements and other services. The revenue from ASII service was $179,553 and $34,938 for the three months ended March 31, 2010 and 2009. CGM-AST generates its revenue through the manufacture and distribution of indicative and barrier security seals, security tapes and related packaging security systems, protective security products for palletized cargo, physical security systems for tractors, trailers and containers as well as a number of highly specialized authentication products. ~~CGM~~The isrevenue ~~experiencing a slow down in sales due to the current economic~~from ~~conditions.~~these ~~CGM~~products iswas ~~tied~~$820,130 toand ~~the~~$1,103,944 ~~transportation~~for ~~security sector. Sales industry wide across~~ the ~~country~~three ~~are~~months ~~down~~ended inMarch ~~almost every sector~~31,~~; with sales down there~~ is2010 ~~less transporting of product~~ and ~~therefore, less need for security products~~2009.

Cost of revenue for the three months ended ~~September~~March 3031, ~~2009~~2010 was $~~327~~232,~~136~~007 compared to $~~521~~411,~~410~~329 for the three months ended ~~September~~March 3031, ~~2008~~2009 a decrease of $~~194~~179,~~274~~322 or 3743.6%. Cost of revenue sold as a percentage of revenue for the three months ~~ended~~ ~~September~~ended 30March 31, ~~2009~~2010 was 4223.2% of total revenues. ~~The decrease in cost of revenue is directly related to the decrease in sales.~~

Operating expenses for the three months ended ~~September~~March 3031, ~~2009~~2010 were $~~649~~580,~~225~~215 compared to $~~714~~704,~~548~~038 for the three months ended ~~September~~March 3031, ~~2008~~2009, a decrease of $65123,~~323~~823 or 917.6%. ~~The~~This decrease inwas ~~expenses~~mainly isattributable ~~due~~ to ~~implementation~~a ofdecrease ~~tighter~~in payroll. Management also put tight cost controls in place in 2010.

General and Administrative expenses for the three months ended ~~September~~March 3031, ~~2009~~2010 were $~~502~~465,~~680~~759 compared to $~~534~~552,~~508~~539 for the three months ended ~~September~~March 3031, ~~2008~~2009 for a a decrease of $3186,~~828~~780 or 615.7%. This decrease was mainly attributable to tighter controls on spending.

Sales and Marketing expenses for the three months ended ~~September~~March 3031, ~~2009~~2010 were $~~126~~91,~~836~~515 compared $~~156,~~130,028 for the three months ended ~~September~~March 3031, ~~2008~~2009 for a decrease of of $2938,~~294~~513 or 1929.6%. This decrease was mainly attributable to a decrease in payroll.

Research and development expenses for the three months ended ~~September~~March 3031, ~~2009~~2010 were $1922,~~709~~ 941 compared to $2321,~~910~~471 for the three months ended ~~September~~March 3031, ~~2008~~2009 for ~~a decrease~~an ofincrease of $41,~~201 or 18%~~470.

~~NINE~~ASII had ~~MONTHS~~a ~~ENDED~~net ~~SEPTEMBER~~income 30for the three months ended March 31, 2010 of $8,684,253 and a net (loss) for the three months ended March 31, 2009 ~~COMPARED~~of TO$(249,956). ~~NINE~~This ~~MONTHS~~is ~~ENDED~~an increase ~~SEPTEMBER~~in 30net income of $8,934,209. This was primarily due to the ~~2008~~rescission agreement of March 2, 2010.

~~Revenues~~Net cash ~~for~~provided ~~the~~by ~~nine~~(used ~~months~~in) ~~ended~~operating ~~September~~activities ~~30, 2009 were $2,888,718 compared to $3,657,487~~ for the ~~nine~~three months ended ~~September~~March 3031, ~~2008, a decrease of $768,769.~~ ~~ASII~~2010 ~~generates its revenues through software licenses, hardware, post customer support arrangements~~ and ~~other services. CGM-AST generates its revenue through~~ the ~~manufacture~~three ~~and~~months ~~distribution~~ended ofMarch ~~indicative~~31, ~~and~~2009 ~~barrier~~was ~~security seals~~$(77, ~~security~~819) ~~tapes~~ and ~~related packaging security systems~~$51,898. ~~protective security~~The ~~products~~decrease ~~for~~in ~~palletized~~cash ~~cargo,~~provided ~~physical~~by ~~security~~operating ~~systems~~activities for ~~tractors,~~the ~~trailers and~~three ~~containers~~months asended March ~~well~~31, as2010 awas ~~number of highly specialized authentication products~~$129,717.

~~Cost~~Net ofcash ~~revenue~~provided ~~for~~by ~~the~~financing ~~nine~~activities ~~months ended September 30, 2009~~ was $195,~~013,630~~000 ~~compared~~and to $150,~~193,267~~000 for the ~~nine~~three months ended ~~September~~March 3031, ~~2008~~2010 aand ~~decrease of $179,637 or 15%. Cost of revenue sold as a percentage of revenue for~~ the ~~nine~~three months ended ~~September~~March 3031, 2009 ~~was 35% of total revenues~~.

Operating expenses for the nine months ended September 30, 2009 were $2,102,119 compared to $2,216,432 for the nine months ended September 30, 2008, a decrease of $114,313 or 5%.

General and Administrative expenses for the nine months ended September 30, 2009 were $1,549,003 compared to $1,700,083 for the nine months ended September 30, 2008 for a decrease of $151,080 or 9%.

Sales and Marketing expenses for the nine months ended September 30, 2009 were $483,855 compared to $447,537 for the nine months ended September 30, 2008 for an increase of $36,318 or 8%.

Research and development expenses for the nine months ended September 30, 2009 were $69,261 compared to $68,812 for the nine months ended September 30, 2008 for an increase of $449 or less than 1%.

ASII had a net loss for the nine months ended September 30, 2009 of $16,997,615 and a net loss for the nine months ended September 30, 2008 of $2,646,287. This is a increase in net loss of $14,351,328.

Net cash used in operating activities for the nine months ended September 30, 2009 was $158,894 and the nine months ended September 30, 2008 was $121,277. The increase in cash used in operating activities for the nine months ended September 30, 2009 compared to September 30, 2008 was $37,617.

Net cash used in investing activities was $0 and $10,526 for the nine months ended September 30, 2009 and the nine months ended September 30, 2008 respectively..

Net cash provided by financing activities was $0 and $10,000 for the nine months ended September 30, 2009 and the nine months ended September 30, 2008, respectively.

LIQUIDITY AND CAPITAL RESOURCES

The Company's ~~had~~revenues ~~net~~have ~~(loss)~~been insufficient to cover the cost of ~~($16,997,615)~~revenues and operating ~~($2~~expenses. Therefore,~~646,287)~~ ~~during~~ the ~~nine~~Company ~~months~~has been dependent on private ~~ended~~placements ~~September~~of ~~30,~~its ~~2009~~Common Stock and ~~2008,~~issuance ~~respectively.~~of Asconvertible ofnotes ~~September~~in ~~30,~~order ~~2009~~to sustain operations. In addition, ~~we had~~there acan ~~cash~~be ~~balance~~no inassurances that the ~~amount~~proceeds from ofprivate ~~$54,619~~placements ~~and~~or ~~current~~other ~~liabilities~~capital ~~of $35~~will continue to be available,~~264,105.~~ ~~The~~or ~~total~~that revenues ~~amount~~will ofincrease ~~notes~~to ~~payable~~meet ~~and~~the ~~debentures~~Company's ~~is $18~~cash needs,~~034,892. We~~ ~~may~~or ~~not~~that ~~have~~a sufficient amount ~~cash~~of the Company's Common Stock or other ~~assets~~securities tocan ~~meet our~~or ~~current~~will ~~liabilities.~~be Insold ~~order~~or that toany ~~meet~~Common ~~these~~Stock ~~obligations,~~purchase weoptions/warrants ~~may~~will ~~need~~be exercised to ~~raise~~ ~~cash~~fund ~~from~~ the operating ~~sale~~needs of ~~securities~~the ~~or from borrowings~~Company.

Over the next twelve months, management is hopeful that sufficient working capital may be obtained from operations and external financing to meet ASII's liabilities and commitments as they become payable. ASII has in the past relied on private placements of common stock securities, and loans from private investors to sustain operations. However, if ASII is unable to obtain additional funding in the future, it may be forced to curtail or terminate operations. At ~~September~~March 3031, ~~2009~~2010, ASII had assets of of $3835,~~114,181compared~~739 compared to $3718,~~471,662~~563 on December 31, ~~2008~~2009 aan ~~decrease~~increase of $~~357~~117,~~481 and~~176 ~~accumulated~~and shareholder (deficit) of $ (7029,~~155~~630,~~292~~280) on ~~September~~March 3031, ~~2009~~2010 compared to ~~accumulated~~shareholder (deficit) of $(5338,~~157~~344,~~677~~582) on December 31, ~~2008~~2009, ana ~~increase~~decrease of $168,~~997~~714,~~615~~302. This ~~increase~~decrease in ~~accumulated~~shareholder (deficit) for the ~~nine~~three months ended ~~September~~March 3031, ~~2009~~2010 resulted from the net ~~loss~~income for the ~~nine~~three months ended ~~September~~ ~~30,~~March ~~2009~~31, 2010.

The Company's ~~revenues~~had ~~have~~net ~~been~~income ~~insufficient~~of to$8,684,253 ~~cover~~and ~~the~~net ~~cost~~(loss) of ~~revenues~~($249,956) ~~and~~during the ~~operating~~three ~~expenses.~~months ~~Therefore,~~ended ~~the~~March ~~Company~~31, ~~has~~2010 ~~been~~and ~~dependent~~2009. onAs ~~private placements~~ of ~~its~~March ~~Common~~31, ~~Stock~~2010, ~~and~~we ~~issuance~~had ofa ~~convertible~~cash balance ~~notes~~ in ~~order~~the ~~to sustain~~amount ~~operations.~~of ~~Tthere~~$69,848 ~~can~~and becurrent noliabilities ~~assurances~~of ~~that~~$30,466,019. ~~the proceeds from private~~The ~~placements~~total oramount ~~other~~of ~~capital~~notes ~~will~~payable ~~continue~~and todebentures beis ~~available~~$10,654,471. We ~~or that revenues will~~may ~~increase~~not tohave ~~meet~~sufficient ~~the Company's~~ cash ~~needs,~~ or ~~that a sufficient amount of the Company's Common Stock or~~ other ~~securities~~assets ~~can~~to ormeet ~~will~~our becurrent ~~sold~~liabilities. ~~or that any~~In ~~Common~~order ~~Stock~~to ~~purchase~~meet ~~options/warrants~~these ~~will~~obligations, bewe ~~exercised~~may need to ~~fund~~raise cash from the ~~operating needs~~sale of securities ~~the~~or ~~Company~~from borrowings.

~~Our~~The ~~ability~~Company's torevenues ~~survive~~have ~~current~~been ~~financial~~insufficient ~~difficulties resulting from our cash flow deficit is dependent on our capacity~~ to ~~generate~~cover ~~revenues from~~ the ~~sale~~cost of ~~our~~revenues and ~~products~~operating expenses. ~~Alternatively~~ Therefore, wethe ~~may~~Company ~~have~~has tobeen ~~raise~~dependent ~~additional~~on ~~financing through~~private ~~the~~placements ~~issuance~~ of ~~our~~its ~~equity~~Common orStock ~~debt~~and ~~securities~~issuance ~~Even~~of ifconvertible wenotes ~~are~~in ~~able~~order to sustain ~~raise~~operations. ~~the funds~~In ~~required~~addition, itthere iscan ~~possible~~be ~~that~~no weassurances ~~could~~that ~~incur~~the ~~unexpected costs and~~proceeds ~~expenses,~~from ~~fail~~private toplacements ~~collect~~or ~~significant~~other ~~amounts~~capital ~~owed~~will continue to usbe available, or ~~experience~~that ~~unexpected~~revenues ~~cash~~will ~~requirements~~increase ~~that~~to ~~would~~meet ~~force~~the usCompany's tocash ~~seek alternative financing. Further~~needs, ~~if we issue additional equity~~ or ~~debt~~that ~~securities,~~a ~~our stockholders may~~sufficient ~~experience~~amount ~~additional~~of ~~dilution or~~ the ~~new~~Company's ~~equity~~Common ~~securities~~Stock ~~may have rights, preferences~~ or ~~privileges~~other ~~senior~~securities tocan ~~those~~or ofwill ~~existing~~be ~~holders~~sold ~~of our common~~or ~~stock.~~that ~~If additional~~any ~~financing~~Common isStock ~~not~~purchase ~~available~~options/warrants orwill isbe ~~not~~exercised ~~available~~to onfund ~~acceptable terms,~~the weoperating ~~may~~needs ~~have~~of tothe ~~curtail our operations~~Company.

The Company has contractual obligations of $1912,~~655~~820,~~159~~800 as of ~~September~~March 3031, ~~2009~~2010. ~~These~~ These contractual obligations, along with the dates on which such payments are due are described below:

Contractual Obligations

Total

One Year or Less

More Than One Year

Due to Related Parties

Accounts Payable and Accrued Expenses

~~279~~435,~~765~~362

Accrued interest on loans

1,~~340~~730,~~502~~867

Note payable

4,~~000~~100,000

04,100,000

~~4,000,000~~0

Convertible Debentures

146,~~034~~554,~~892~~571

06,554,571

~~14,034,892~~0

Total Contractual Obligations

1912,~~655~~820,~~159~~800

112,~~620~~820,~~267~~800

~~18,034,892~~0

The Company is currently in default on several of the convertible debentures that are included in current liabilities.

Off Balance Sheet Arrangements

We do not have any off balance sheet arrangements as of ~~September~~March 3031, ~~2009~~2010 or as of the ~~date~~ date of this report.

Plan of Operations

The short-term objective of ASII is the following:

o The short-term objective of ASII is to increase the market penetration of the product line of its CGM-AST subsidiary as the Company believes this is the area where the greatest revenue growth exists.

o Additionally, ASII plans to execute an acquisition strategy based upon fund availability.

ASII's long-term objective is as follows:

o To seek additional products to sell into its basic business market - Criminal Justice - so that ASII can generate sales adequate enough to allow for profits.

ASII believes that it will not reach profitability in the foreseeable future. Over the next twelve months, management is of the opinion that sufficient working capital will be obtained from operations and external financing to meet ASII's liabilities and commitments as they become payable. ASII has in the past successfully relied on private placements of common stock securities, bank debt, loans from private investors and the exercise of common stock warrants in order to sustain operations. If ASII is unable to obtain additional funding in the future, it may be forced to curtail or terminate operations.

ASII is doing the following in its effort to reach profitability:

o Cut costs in areas that add the least value to ASII.

o Concentrate on increasing the sales of the CGM-AST product line.

o Derive funds through investigating business alliances with other companies.

o Acquire and effectively add management support to profitable companies complementary to its broadened target markets

Item 4T3. ~~Control~~Quantitative and ~~Procedures~~Qualitative Disclosures about Market Risk

~~(a) Evaluation of Disclosure Controls and Procedures~~None

~~The Securities~~Item and Exchange Commission defines the term “disclosure controls and procedures” to mean a company’s controls and other procedures that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms4. ~~Based~~Control ~~on the evaluation of the effectiveness of our disclosure controls~~ and procedures by our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, as of the end of the period covered by this report, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures at the end of the period covered by this report were effective to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms, and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure.Procedures

Management of the Company has evaluated, with the participation of the Chief Executive Officer and Chief Financial Officer of the Company, the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) promulgated by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this interim Report on Form 10-Q. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer of the Company had concluded that the Company's disclosure controls and procedures as of the period covered by this Interim Report on Form 10-Q were not effective for the following reasons:

a) The deficiency was identified as the Company's limited segregation of duties among the Company's employees with respect to the Company's control activities. This deficiency is the result of the Company's limited number of employees. This deficiency may affect management's ability to determine if errors or inappropriate actions have taken place. Management is required to apply its judgment in evaluating the cost-benefit relationship of possible changes in our disclosure controls and procedures.

b) The deficiency was identified in respect to the Company's Board of Directors. This deficiency is the result of the Company's limited number of external board members. This deficiency may give the impression to the investors that the board is not independent from management. Management and the Board of Directors are required to apply their judgment in evaluating the cost-benefit relationship of possible changes in the organization of the Board of Directors.

Changes in internal controls.

Management of the Company has also evaluated, with the participation of the Chief Executive Officer and Chief Financial Officer of the Company, any change in the Company's internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter covered by this Quarterly Report on Form 10-Q. There was no change in the Company's internal control over financial reporting identified in that evaluation that occurred during the fiscal quarter covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

2019

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

None

Item 1A. Risk Factors

None

Item 2. Changes in Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities:

~~None~~none

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

None.

Item 5. Other Information

~~On October 9, 2007 the companies stock trading moved from the Pink Sheets to NASDAQ Bulletin Board~~None.

Item 6. Exhibits

No.
31.1		Certification of Chief Executive Officer pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes- Oxley Act of 2002

2120

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	ALLIED SECURITY INNOVATIONS, INC. (Registrant)
	ALLIED SECURITY INNOVATIONS, INC.
Date: November 12, 2009	By:	/s/ ANTHONY SHUPIN
	(Registrant)
Date: May 21, 2010	By:	/s/ ANTHONY SHUPIN
		Anthony Shupin
		(President, Chief Executive Officer) (Chairman)
		(President, Chief Executive Officer)
		(Chairman)
Date: May 21, 2010	By:	/s/ MICHAEL J. PELLEGRINO
		Michael J. Pellegrino
		Senior Vice President & CFO
		(Principal Financial and Accounting Officer)

Date: November 12, 2009	By:	/s/ MICHAEL J. PELLEGRINO
		Michael J. Pellegrino
		Senior Vice President & CFO (Principal Financial and Accounting Officer)

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