UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2003
| | TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-30178
VIEW SYSTEMS, INC.
(Exact name of small business issuer as specified in its charter)
Florida 59-2928366
(State of incorporation) (I.R.S. Employer Identification No.)
7717 West 6th Avenue, Suite A & B
Lakewood, Colorado 80205
(Address of principal executive offices)
(303) 237-8439
(Issuer's telephone number)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes [X]
No [ ]
As of May 15, 2003, the issuer had 45,620,619 shares of common stock
outstanding.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
TABLE OF CONTENTS
PART I: FINANCIAL INFORMATION
Item 1: Financial Statements...............................................3
Item 2: Management's Discussion and Analysis..............................11
Item 3: Controls and Procedures...........................................13
PART II: OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K .................................13
Signatures and Certifications..............................................15
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The financial information set forth below with respect to our statements
of operations for the three month periods ended March 31, 2003 and 2002 are
unaudited. This financial information, in the opinion of management, includes
all adjustments consisting of normal recurring entries necessary for the fair
presentation of such data. The results of operations for the three months
ended March 31, 2003, are not necessarily indicative of results to be expected
for any subsequent period.
2
VIEW SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2003 AND DECEMBER 31, 2002
ASSETS
March 31, December 31,
2003 2002
------------- -------------
(Unaudited)
CURRENT ASSETS:
Cash $ 13,531 $ 3,229
Accounts receivable (net of allowance
for uncollectible accounts of $10,000
at March 31, 2003 and December 31, 2002
respectively.) 35,055 62,711
Inventory 157,048 171,326
------------- -------------
Total current assets 205,634 237,266
------------- -------------
PROPERTY AND EQUIPMENT:
Equipment 348,385 348,385
Leasehold improvements 17,940 17,940
Software tools 34,571 34,571
Vehicles 46,832 46,832
------------- -------------
447,728 447,728
Less accumulated depreciation 219,967 204,247
------------- -------------
Net value of property and equipment 227,761 243,481
------------- -------------
OTHER ASSETS:
Goodwill 781,248 781,248
Licenses and patents 1,582,890 1,626,855
Due from affiliated entities 118,827 123,327
Deposits 2,532 2,532
------------- -------------
Total other assets 2,485,497 2,533,962
------------- -------------
TOTAL ASSETS $ 2,918,892 $ 3,014,709
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 429,878 $ 445,623
Accrued interest 75,593 72,843
Notes payable 724,450 599,450
------------- -------------
Total current liabilities 1,229,921 1,117,916
------------- -------------
STOCKHOLDERS' EQUITY:
Common stock-par value $0.001
50,000,000 shares authorized,
45,275,619 shares issued and outstanding 45,275 -
44,598,620 shares issued and outstanding - 44,598
Additional paid-in capital 13,896,751 13,810,878
Accumulated deficit (12,253,055) (11,958,683)
------------- -------------
Total stockholders' equity 1,688,971 1,896,793
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,918,892 $ 3,014,709
============= =============
See Accompanying Notes
4
VIEW SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(UNAUDITED)
Three Months Ended
---------------------------
March 31, March 31,
2003 2002
------------- -------------
REVENUE:
Sales of security systems $ 46,190 $ 60,084
Sales of weapons detection portals 19,500 -
------------- -------------
Total sales 65,690 60,084
Cost of goods sold 27,536 32,776
------------- -------------
GROSS PROFIT ON SALES 38,154 27,308
------------- -------------
OPERATING EXPENSES:
Advertising and promotion - 7,971
Amortization - licenses and patents 43,965 -
Business development - 42,494
Depreciation 15,720 15,189
Dues and subscriptions 122 -
Insurance 2,708 9,349
Interest 3,009 4,776
Investor relations - 34,822
Miscellaneous expense - 2,800
Office expense 10,456 46,209
Professional fees 77,064 63,540
Rent 20,587 11,055
Repairs and maintenance - 2,306
Research and development 10,090 53,482
Salaries and benefits 131,045 171,445
Taxes-other 150 2,130
Travel 11,348 18,447
Utilities 6,262 5,688
------------- -------------
Total operating expenses 332,526 491,703
------------- -------------
NET LOSS FOR THE PERIODS $ (294,372) $ (464,395)
============= =============
LOSS PER SHARE:
Basic $ (0.01) $ (0.02)
============= =============
Diluted $ (0.01) $ (0.02)
============= =============
WEIGHTED AVERAGE SHARES OUTSTANDING 44,937,195 22,713,031
============= =============
See Accompanying Notes
4
VIEW SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
March 31, March 31,
2003 2002
------------- -------------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (294,372) $ (464,395)
Adjustments to reconcile net loss to net cash
provided by operating activates:
Depreciation and amortization 59,685 15,189
Changes in operating assets and liabilities:
Accounts receivable 27,656 (9,376)
Inventory 14,278 (51,905)
Accounts payable (15,745) (31,574)
Accrued interest 2,750 2,750
------------- -------------
Net cash used in operating activities (205,748) (539,311)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment - (18,280)
Funds received from/(advanced to)
affiliated entities 4,500 (16,000)
Cash element in Milestone Acquisition - 2,449
------------- -------------
Net cash provided by (used in)
investing activities 4,500 (31,831)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Funds received from/(advanced to) stockholders 125,000 (45,000)
Repayment of note payable-bank - (6,052)
Proceeds from sales of stock 86,550 595,000
------------- -------------
Net cash provided by financing activities 211,550 543,948
------------- -------------
NET INCREASE (DECREASE) IN CASH 10,302 (27,194)
CASH AT BEGINNING OF PERIOD 3,229 73,344
------------- -------------
CASH AT END OF PERIOD $ 13,531 $ 46,150
============= =============
SIGNIFICANT NON-CASH INVESTING ACTIVITIES:
Common stock issued in exchange for net assets
of Milestone Technology, Inc. as follows:
Accounts receivable - 28,132
Inventory - 359,647
Fixed assets - 188
Patents - 1,228,254
Accounts payable - (6,470)
Notes payable - (314,200)
See Accompanying Notes
5
VIEW SYSTEMS, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD ENDED JANUARY 1, 2002 TO MARCH 31, 2003
Additional Total
Common Paid-in Accumulated Stockholders'
Stock Capital Deficit Equity
----------- ------------- ------------- -------------
Balances at
January 1, 2002 $ 20,193 $ 10,119,024 $ (8,035,214) $ 2,104,003
Sales of common stock 1,740 593,260 - 595,000
Issuance of common
stock in exchange for
interest in Milestone
Technology, Inc. 3,300 1,019,700 - 1,023,000
Net loss for the three
months ended March 31,
2002 - - (464,395) (464,395)
----------- ------------- ------------- -------------
Balances at March 31,
2002 (Unaudited) 25,233 11,731,984 (8,499,609) 3,257,608
Sales of common stock 6,810 690,390 - 697,200
Issuance of common
stock (employee and
other compensation) 11,820 1,195,239 - 1,207,059
Issuance of common
stock in payment
of a note payable 735 193,265 - 194,000
Net loss for the period
of April 1, 2002 to
December 31, 2002 - - (3,459,074) (3,459,074)
----------- ------------- ------------- -------------
Balances at
December 31, 2002 44,598 13,810,878 (11,958,683) 1,896,793
Sales of common stock 677 85,873 - 86,550
Net loss for the three
months ended March
31, 2003 - - (294,372) (294,372)
----------- ------------- ------------- -------------
Balances at March 31,
2003 (Unaudited) $ 45,275 $ 13,896,751 $(12,253,055) $ 1,688,971
=========== ============= ============= =============
See Accompanying Notes
6
VIEW SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2003
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
--------------------
View Systems, Inc. (the "Company") designs and develops computer software
and hardware used in conjunction with surveillance capabilities. The
technology utilizes the compression and decompression of digital inputs. In
March 2002, the Company acquired Milestone Technology, Inc. which has
developed a concealed weapons detection portal.
Basis of Presentation
---------------------
The accompanying unaudited interim consolidated financial statements have
been prepared in accordance with accounting principles generally accepted in
the United States of America and the rules and regulations of the Securities
and Exchange Commission for interim financial information. Accordingly, they
do not include all the information and footnotes necessary for a comprehensive
presentation of financial position and results of operations. It is
management's opinion, however, that all adjustments (consisting of normal
recurring adjustments) have been made which are necessary for a fair financial
statement presentation. The results for the interim period are not
necessarily indicative of the results to be expected for the year.
Basis of Consolidation
----------------------
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary, Milestone Technology, Inc. ("Milestone").
All significant intercompany accounts and transactions have been eliminated in
consolidation.
Use of Estimates
----------------
Management uses estimates and assumptions in preparing financial
statements in accordance with accounting principles generally accepted in the
United States of America. Those estimates and assumptions affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities, and the reported revenues and expenses. Actual results could
differ from the estimates that were used.
Revenue Recognition
-------------------
The Company and its subsidiaries recognize revenue and the related cost of
goods sold upon shipment of the product, the price of the product is fixed or
determinable and collectibility is reasonably assured.
Inventories
-----------
Inventories are stated at the lower of cost or market. Cost is determined
by the last-in-first-out method (LIFO). The inventory at March 31, 2003 and
December 31, 2002 consists entirely of weapons detection portals.
7
VIEW SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2003
Property and Equipment
----------------------
Property and equipment is recorded at cost and depreciated over their
estimated useful lives, using the straight-line and accelerated depreciation
methods. Upon sale or retirement, the cost and related accumulated
depreciation are eliminated from the respective accounts, and the resulting
gain or loss is included in the results of operations. The useful lives of
property and equipment for purposes or computing depreciation are as follows:
Equipment 5-7 years
Software tools 3 years
Repairs and maintenance charges, which do not increase the useful lives of
assets, are charged to operations as incurred. Depreciation expense for the
three months ended March 31, 2003 and 2002 amounted to $15,720 and $15,189
respectively.
Income Taxes
------------
Deferred income taxes are recorded under the asset and liability method
whereby deferred tax assets and liabilities are recognized for the future tax
consequences, measured by enacted tax rates, attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss carryforwards.
The effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period the rate change becomes effective.
Valuation allowances are recorded for deferred tax assets when it is more
likely than not that such deferred tax assets will not be realized.
Research and Development
------------------------
Research and development costs are expensed as incurred. Equipment and
facilities acquired for research and development activities that have
alternative future uses are capitalized and charged to expense over the
estimated useful lives.
Advertising
-----------
Advertising costs are charged to operations as incurred. Advertising
costs for the three months ended March 31, 2003 and 2002 were $0, and $7,971
respectively.
Nonmonetary Transactions
------------------------
Nonmonetary transactions are accounted for in accordance with Accounting
Principles Board Opinion No. 29 Accounting for Nonmonetary Transactions which
requires the transfer or distribution of a nonmonetary asset or liability to
be based, generally, on the fair value of the asset or liability that is
received or surrendered, whichever is more clearly evident.
Financial Instruments
---------------------
For most financial instruments, including cash, accounts receivable,
accounts payable and accruals, management believes that the carrying amount
approximates fair value, as the majority of these instruments are short-term
in nature.
Goodwill
---------
Goodwill represents the excess of the cost of assets acquired in business
combinations accounted for under the purchase method of accounting over the
fair value of the net assets acquired at the dates of acquisition. Effective
January 1, 2002 goodwill will no longer be amortized but rather tested for
impairment on an annual basis.
8
VIEW SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2003
Licenses and Patents
---------------------
The Company has assigned a value to licenses and patents acquired in its
acquisition of Milestone which are being amortized on a straight-line basis
over a ten-year period.
Net Loss Per Common Share
-------------------------
Basic net loss per common share ("Basic EPS") is computed by dividing net
loss available to common stockholders by the weighted average number of common
shares outstanding. Diluted net loss per common share
("Diluted EPS") is computed by dividing net loss available to common
stockholders by the weighted average number of common shares and dilutive
potential common share equivalents then outstanding. Potential common shares
consist of shares issuable upon the exercise of stock options and warrants.
The calculation of the net loss per share available to common stockholders for
the three months ended March 31, 2003 and 2002 does not include potential
shares of common stock equivalents, as their impact would be antidilutive.
Segment Reporting
-----------------
The company has determined that it does not have any separately reportable
operating segments as of March 31, 2003.
New Accounting Pronouncements
-----------------------------
In December 2002, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 148, Accounting for
Stock-Based Compensation - Transition and Disclosure ("SFAS 148"). This
Statement provides alternative methods of transition for a voluntary change to
the fair value based method of accounting for stock-based employees
compensation from the intrinsic method. SFAS 148 also amends the disclosure
provisions of SFAS 123 and APB Opinion No. 28, Interim Financial Reporting, to
require disclosure in the summary of significant accounting policies of the
effects of an entity's accounting policy with respect to stock-based employee
compensation on reported net income and earnings per share in annual and
interim financial statements. While SFAS 148 does not amend SFAS 123 to
require companies to account for employee stock options using the fair value
method, the disclosure provisions of SFAS 148 are applicable to all companies
with stock-based employee compensation, regardless of whether they account for
that compensation using the fair value method of SFAS 123 or the intrinsic
value method of APB 25. SFAS 148's amendment of the transition and annual
disclosure requirements of SFAS 123 are effective for fiscal years ending
after December 15, 2002. The Company has adopted the disclosures provision of
SFAS 148 as of December 31, 2002, and will continue to use the intrinsic value
method of APB 25.
2. FINANCIAL CONDITION
Since its inception, the Company has incurred significant losses and as of
March 31, 2003 had an accumulated deficit of $12 million. The Company
believes that it will incur operating losses for the foreseeable future.
There can be no assurance that the Company will be able to generate sufficient
revenues to achieve or sustain profitability in the future. However, the
Company believes that its projected sales revenue and anticipated equity
infusions will be sufficient to sustain operations through March 31, 2004.
9
VIEW SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2003
3. GOODWILL AND OTHER INTANGIBLE ASSETS
Intangible assets consist of the following:
March 31, 2003 December 31, 2002
-------------------------- ------------------------
Average Gross Gross
Life Carrying Accumulated Carrying Accumulated
(Years) Amount Amortization Amount Amortization
-------- ------------ ------------- ------------ ------------
Amortized
intangible
assets:
Licenses
and patents 10.0 $ 1,758,594 $ 175,704 $ 1,758,594 $ 131,739
============ ============= ============= ============
Intangible
assets not
subject to
amortization:
Goodwill $ 1,346,972 $ 565,724 $ 1,346,972 $ 565,724
============ ============= ============= ============
Amortization expense for the three months ended March 31, 2003 was
$43,965.
Estimated amortization expense for each of the following years ending on
December 31, is as follows (in thousands):
2003 $ 175,860
2004 175,860
2005 175,860
2006 175,860
2007 175,860
10
In this report references to "View Systems," "we," "us," and "our" refer
to View Systems, Inc.
FORWARD LOOKING STATEMENTS
This quarterly report contains certain forward-looking statements that
involve risks and uncertainties, such as statements of the View System's plans
and expectations. Any statements contained in this report that are not
statements of historical fact may be deemed to be forward-looking statements.
Without limiting the foregoing, words such as "may," "will," "expect,"
"believe," "anticipate," "estimate" or "continue" or comparable terminology
are intended to identify forward-looking statements. These statements by
their nature involve substantial risks and uncertainties, and actual results
may differ materially depending on a variety of factors, many of which are not
within View Systems's control. These factors include but are not limited to
economic conditions generally and in the market which View Systems may
participate; competition within View Systems's chosen market and failure by
View Systems to successfully develop business relationships.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Since start-up of operations in September 1998, we have devoted most of
our resources to the development of digital video surveillance products. We
have generated limited revenues from our digital video products to date, but
are expanding our sales and distribution network. We have incurred losses for
the past two fiscal years and have an accumulated deficit of $12,253,055 at
the three month period ended March 31, 2003. Management believes we will
incur operating losses for the foreseeable future. However, management
expects projected sales revenues and anticipated equity infusions to be
sufficient to sustain operations through March 31, 2004.
We have worked diligently to make engineering design changes to the CWD
product to accommodate the price points required by competitive pressures.
The engineering design changes required locating new sources for components
and limited field testing. Demonstration of the product involves the shipping
of a large bulky archway and a highly trained technical staff, consequently
sales cycle times are lengthy.
Acquisition Treatment
In December of 2001 we entered into a joint venture agreement with
Milestone Technology, Inc., an Idaho corporation, to develop its concealed
weapons detection portal. As part of the agreement we issued 500,000 shares
of View Systems common stock for a 6% interest in Milestone Technology and the
rights to the concealed weapons detection technology. Then on March 25, 2003,
View Systems acquired the remaining 94% interest of Milestone Technology in
exchange for 3,300,000 common shares. This acquisition was valued at
approximately $1,298,000 and was accounted for under the purchase method of
accounting. Accordingly, Milestone Technology's results of operation have
been included with View Systems from the closing date in March 2003 and its
consolidated assets and liabilities have been recorded at their fair values on
the same date.
Results Of Operations
The following discussion and analysis should be read in conjunction with
our unaudited financial statements and the accompanying notes for the three
month period ended March 31, 2003 and 2002, which are included in this report.
Revenue -- For the three months ended March 31, 2003, our first quarter,
revenues from sales of our products increased $5,606, or 9%, to $65,690 from
$60,084 in the same period last year. This is largely due to our shift in
focus from purely digital video storage recorders to the introduction of our
SecureScan Concealed Weapons Detection system. Due to this shift in focus, we
don't believe revenue comparisons of the quarters is relevant nor indicative
of future SecureScan sales. The sales cycles in the new market we are
addressing are long and require the approval of highly bureaucratic decision
makers. In contrast, the price points and margins are many multiples larger.
11
Costs Of Goods Sold -- Cost of products and services sold consist
principally of the costs of hardware components and supplies. We generally
operate through resellers who install and service the units. These hardware
costs were $27,536 for the 2003 first quarter and represented 42% of revenue
for the period, compared to $32,776 for the 2002 first quarter which
represents 55% of revenues for that period. Because of our low sales volume
during the 2003 first quarter, we do not consider the costs of goods sold in
the 2002 first quarter to be a good measure of our true costs of goods sold.
As our product sales increase and account for a larger percentage of our
overall sales, we expect that our costs of goods and services sold will
decline and stabilize as a percentage of total revenue. We have been working
on engineering changes in our SecureScan products that we expect will lower
component costs for these products. We do not determine our inventory on a
quarterly basis, instead we do it on an annual basis. Therefore, our cost of
goods sold calculations are based on estimates of inventory used in products
sold.
Gross profit -- Gross profit on sales for the 2003 first quarter
increased $10,846, or 40%, to $38,154 compared with $27,308 in the 2002 first
quarter. Gross profit margin for 2003 first quarter was 58% compared with 45%
in the 2002 first quarter. Because of low net sales we achieved in 2003 first
quarter, for reasons explained in the previous paragraph under "Revenue", we
do not believe gross profit margin comparisons are meaningful at this state of
our operations.
Total Operating Expense -- Operating expenses for the 2003 first quarter
decreased to $332,526, compared with $491,703 for the comparable 2002 quarter.
The decrease is principally due to a general scale back of expenses primarily
in business development expenses and salaries. Amortization expense
associated with the value of licenses and patents amounted to $43,965 for the
2003 first quarter compared to no amortization expense in the same period last
year. Salaries and benefits were $131,045 in the 2003 first quarter compared
to $171,445 in the 2002 first quarter.
We spent $10,090 on research and development for 2003 first quarter as
compared with $53,482 in the same quarter last year. The design changes in
the production facility will allow our margins to double and possibly triple.
Currently, we purchase the Concealed Weapons Detection portal for about 60% of
our selling price.
Net Loss -- As a result of the foregoing, our net loss was $294,372 for
the 2003 first quarter compared to a net loss of $464,395 for 2002 first
quarter. We incurred approximately $294,372 of net operating loss carry
forwards for the 2003 first quarter, which may be used to offset taxable
income and income taxes in future years. Our net loss per weighted average
outstanding share was $0.007 for the 2003 first quarter compared to $0.02 for
the 2002 first quarter.
Liquidity and Capital Resources
Historically, we have funded our cash requirements primarily through
equity transactions. We received $13,896,751 since inception through the
issuance of our common stock. We are not currently generating sufficient cash
from our operations to finance our business and will continue to need to raise
capital from other sources. At March 31, 2003, we had total assets of
$2,918,892 compared to total assets of $3,014,709 at December 31, 2002. Total
current liabilities were $1,229,921 at March 31, 2003 compared to $1,117,916
at December 31, 2002. This resulted in stockholders' equity of $1,688,971
compared to $1,896,793 at December 31, 2002.
During the three months ended March 31, 2003, our cash increased from
$3,229 at December 31, 2002, to $13,531 at March 31, 2003. Net cash used in
operating activities was $205,748 for 2003 first quarter, including decreases
in accounts receivable of $27,656, decreases in inventory of $14,278, and
decreases in accounts payable of $15,745.
Net cash generated from financing activities during the 2003 first
quarter was $211,550, consisting of proceeds received from sales of stock of
$86,550 and loans from a shareholder of $125,000. During the 2002 first
12
quarter net cash generated from financing was $543,945 and was primarily the
result of proceeds from sales of our common stock.
As a result of the foregoing, at March 31, 2003 we had negative working
capital of $1,024,287, including $35,055 in net trade accounts receivable and
$157,048 in inventory. We have provided and may continue to provide payment
term extensions to certain customers from time to time. As of March 31, 2003
we have not granted material payment term extensions.
Commitments and Contingent Liabilities
Our commitments include operating leases and accounts payable. At
December 31, 2002, future minimum payments for operating leases were $183,069
through 2006. Notes payable of $724,450 are outstanding at March 31, 2003.
Also, our accounts payable at March 31, 2003 were $429,878.
Financing
We operate in a very competitive industry that requires continued large
amounts of capital to develop and promote our products. We believe that it
will be essential to continue to raise additional capital, both internally and
externally, to compete in this industry. In addition to accessing the public
and private equity markets, we will pursue bank credit lines and equipment
lease lines for certain capital expenditures. We currently estimate we will
need between $1 million and $2 million to fully develop all of our products
and launch our expanded business operations in accordance with our current
business plan.
Management intends to finance our 2003 operations through additional
equity financing expected to be completed by the second quarter of 2003. Any
proceeds we may receive from these equity transactions will be used for
business operations. We cannot assure that this financing will be successful
and we may be required to further reduce expenses and scale back our
operations.
ITEM 3: CONTROLS AND PROCEDURES
We rely internal controls and procedures to ensure that material
information regarding our company and its operations is provided to the public
in a timely manner. On May 5, 2003, our CEO and principal financial officer,
Gunther Than, evaluated the effectiveness of these disclosure controls and
procedures and determined that there were no significant deficiencies in these
procedures.
Also, Mr. Than did not identify any deficiencies or material weaknesses
in our internal controls, nor did he identify fraud that involved management
or other employees who had a significant role in our internal controls. He
did not find any deficiencies or weaknesses which would require changes to be
made or corrective actions to be taken related to our internal controls.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORT ON FORM 8-K
Part II Exhibits
3.1 Articles of Incorporation and all Articles of Amendment
of View Systems, Inc. (Incorporated by reference to registration
statement on Form SB-2, filed January 11, 2000)
3.2 By-Laws of View Systems, Inc. (Incorporated by reference to
registration statement on Form SB-2, filed January 11, 2000)
10.1 View Systems, Inc. 2000 Restricted Share Plan (Incorporated by
reference to definitive proxy statement on Schedule 14a, dated
May 3, 2000)
13
10.2 View Systems, Inc. Employment Agreement with Gunther Than.
(Incorporated by reference to registration statement on Form
SB-2, filed January 11, 2000)
21.1 Subsidiaries of Registrant (Incorporated by reference to Form
10-KSB, filed March 31, 2003 3)
99.1 Section 1350 certification
Reports on Form 8-K
On March 28, 2003, we filed an current report on Form 8-K, dated March
21, 2003, under Item 5 we announced the resignation of directors and officers.
14
SIGNATURES
In accordance with the requirements of the Securities Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
VIEW SYSTEMS, INC.
Date: May 13, 2003 /s/ Gunther Than
By:_______________________________________________
Gunther Than
CEO, Principal Financial Officer, Treasurer and
Director
CHIEF EXECUTIVE OFFICER CERTIFICATION
I, Gunther Than, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of View Systems,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statement made, in light of the circumstances under which statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report.
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
15
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls;
and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
/s/ Gunther Than
Date: May 13, 2003 ____________________________________
Gunther Than, Chief Executive Officer
PRINCIPAL FINANCIAL OFFICER CERTIFICATION
I, Gunther Than, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of View Systems,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statement made, in light of the circumstances under which statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report.
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls;
and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
/s/ Gunther Than
Date: May 13, 2003 ____________________________________
Gunther Than, Principal Financial Officer
17