Edgar Filing: VIEW SYSTEMS INC

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FORM 10-Q/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Amendment No. 1

þ QUARTERLY REPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2010

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

Commission file number 000-30178

VIEW SYSTEMS, INC.

(Exact name of registrant as specified in its charter)



Nevada		59-2928366
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1550 Caton Center Drive, Suite E, Baltimore, Maryland 21227

(Address of principal executive offices) (Zip Code)

(410) 242-8439

(Registrant's telephone number, including area code)

Indicate by 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 was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes R No £

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes £ No £

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class		Outstanding at September 10, 2010
Common Stock, $.001 par value per share		93,343,369

Purpose of This Amendment

We are amending our Form 10-Q for the period ended June 30, 2010 to correct our balance sheet’s description of our authorized shares. We reported in error that there were 100,000,000 shares of common stock authorized while the correct number of authorized shares is 950,000,000.

VIEW SYSTEMS, INC.

FORM 10-Q

FOR THE PERIOD ENDED JUNE 30, 2010

As Amended

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

Information included in this Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). This information may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of View Systems, Inc. (the “Company”), to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that these projections included in these forward-looking statements will come to pass. Actual results of the Company could differ materially from those expressed or implied by the forward-looking statements as a result of various factors. Except as required by applicable laws, the Company has no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


View Systems, Inc. and Subsidiaries
Consolidated Balance Sheets
	JUN 30,	DEC 31,
	2010	2009
ASSETS	(Unaudited)
Current Assets
Cash	$ 27,158	$ 70,804
Accounts Receivable (Net of Allowance of $1,000)	118,267	251,561
Inventory	7,792	7,792
Total Current Assets	153,217	330,157

Property & Equipment (Net)	79,175	95,948

Other Assets
Licenses	839,664	892,144
Due from Affiliates	147,507	147,507
Investment	67,500	67,500
Deposits	7,528	7,528
Total Other Assets	1,062,199	1,114,679

Total Assets	$ 1,294,591	$ 1,540,784

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable	$ 495,913	$ 486,979
Accrued Expenses	94,985	71,912
Accrued Interest	122,604	170,518
Accrued Royalties	225,000	225,000
Loans from Shareholder	185,978	193,027
Notes Payable	555,899	637,719
Deferred Revenue	42,153	129,553
Total Current Liabilities	1,722,532	1,914,708

Long-term Debt
Note payable	37,384	39,872
Total Liabilities	1,759,916	1,954,580

Stockholders' Equity (Deficit):
Preferred Stock, Authorized 10,000,000 Shares, $.01 Par Value, Issued and outstanding 89,647	896	896
Common Stock, Authorized 950,000,000 Shares, as of December 31,
2009 and 100,000,000 as of December 31, 2008, $.001 Par Value
Issued and Outstanding 83,903,369	83,903	--
Issued and Outstanding 79,442,369	--	79,442
Additional Paid in Capital	22,032,912	21,830,320
Retained Earnings (Deficit)	(22,583,036)	(22,324,434)
Total Stockholders' Equity (Deficit)	(465,325)	(413,776)

Total Liabilities and Stockholders' Equity	$ 1,294,591	$ 1,540,804

The accompanying notes are an integral part of these consolidated financial statements


View Systems, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)

	THREE MONTHS ENDED JUN 30, 2010	THREE MONTHS ENDED JUN 30, 2009	SIX MONTHS ENDED JUN 30, 2010	SIX MONTHS ENDED JUN 30, 2009

Revenues, Net	$ 214,956	$ 63,690	$ 478,947	$ 175,052

Cost of Sales	52,516	30,527	160,926	71,871

Gross Profit	162,440	33,163	318,021	103,181

Operating Expenses
Business Development	21,752	16,415	53,978	42,753
General & Administrative	136,707	239,286	243,377	340,875
Professional Fees	24,770	109,640	126,750	276,825
Salaries & Benefits	(239,324)	63,178	120,611	300,301
Total Operating Expenses	(56,095)	428,519	544,716	960,754

Net Operating Income (Loss)	218,535	(395,356)	(226,695)	(857,573)

Other Income (Expense)
Interest Expense	(18,832)	(17,294)	(31,907)	(36,999)
Total Other Income (Expense)	(18,832)	(17,294)	(31,907)	(36,999)

Net Income (Loss)	$ 199,703	$ (412,650)	$ (258,602)	$ (894,572)

Net Income (Loss) Per Share	0.00	(0.01)	(0.00)	(0.02)

Weighted Average Shares Outstanding	83,903,369	46,261,222	77,788,119	46,638,222

The accompanying notes are an integral part of these consolidated financial statements


View Systems, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity (Deficit)

								Additional		Retained
	Preferred			Common				Paid-in		Earnings
	Shares		Amount	Shares		Amount		Capital		(Deficit)

Balance, December 31, 2008	89,647	$	896	17,175,222	$	17,175	$	20,460,829	$	(20,764,422)

January - March 2009 - shares issued for services,
accounts payable and notes payable	-		-	13,536,000		13,536		527,489		-

April - June 2009 - shares issued for services,
accounts payable and notes payable	-		-	18,100,000		18,100		327,500		-

April - June 2009 - shares issued as an investment
in stock of another company (non subsidiary)	-		-	5,000,000		5,000		327,500		-

July-September 2009 – shares issued for services,
Interest expense and notes payable	-		-	5,631,147		5,631		72,002		-

October - December 2009 - shares issued for services	-		-	20,000,000		20,000		380,000		-

Net loss for the year ended December 31, 2009	-		-	-		-		-		(1,560,012)

Balance, December 31, 2009	89,647		896	79,442,369		79,442		21,830,320		(22,324,434)

January – March 2010 – shares issued for services,
notes payable and accrued interest	-		-	14,461,000		14,461		492,592		-

April – June 2010 – reversal of shares issued for
services in error	-		-	(10,000,000)		(10,000)		(290,000)		-

Net loss for the period ended June 30, 2010	-		-	-		-		-		(258,602)

Balance, June 30, 2010	89,647	$	896	83,903,369	$	83,903	$	22,032,912	$	(22,583,036)

The accompanying notes are an integral part of these consolidated financial statements


View Systems, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)

	SIX MONTHS ENDED JUN 30, 2010	SIX MONTHS ENDED JUN 30, 2009
Cash Flows from Operating Activities:
Net Income (Loss)	$ (258,602)	$ (894,572)
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided (Used) by Operations:
Depreciation & Amortization	62,480	58,380
Common stock issued in payment of services	30,695	548,881
Loss from sale of fixed assets	4,996	--
Proceeds from sale of fixed assets	2,036	--
Change in Operating Assets and Liabilities:
(Increase) Decrease in:
Accounts Receivable	133,294	3,619
Inventories	--	(42,082)
Increase (Decrease) in:
Accounts Payable	8,955	46,943
Accrued Expenses	23,073	(12,645)
Accrued Interest	28,444	35,220
Deferred Revenue	(87,400)	--
Accrued Royalties	-	37,500
Net Cash Provided (Used) by Operating Activities	(52,029)	(218,756)

Cash Flows from Investing Activities:
Purchases of equipment	(259)	(50,853)
Net Cash Used In Investing Activities	(259)	(50,853)

Cash Flows from Financing Activities:
Loans received (repaid) under a line of credit	(29,559)	198,566
Principal payments on notes payable	(4,749)	--
Loans received under notes payable	50,000	--
Loans from Shareholders	(7,050)	70,889
Net Cash Provided by Financing Activities	8,642	269,455

Increase (decrease) in Cash	(43,646)	(154)

Cash and Cash Equivalents at Beginning of Period	70,804	1,768

Cash and Cash Equivalents at End of Period	$ 27,158	$ 1,614

The accompanying notes are an integral part of these consolidated financial statements


View Systems, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (Continued)

	SIX MONTHS ENDED JUN 30, 2010	SIX MONTHS ENDED JUN 30, 2009
Non Cash Investing and Financing Activities:
Notes payable paid down with common stock	100,000	181,000
Accrued interest paid with common stock	76,538	-
Vehicle purchase financed with note payable	-	54,041
Loans from shareholders repaid with common stock	-	16,656
Accounts payables paid with common stock	-	132,250
Vehicle purchased with common stock	-	7,813
Investment made with common stock	-	67,500

Cash Paid For:
Interest	$ 5,260	$ 1,226
Income Taxes	$ -	$ -

VIEW SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2010 AND DECEMBER 31, 2009

NATURE OF OPERATIONS AND 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. (“Milestone”), which has developed a concealed weapons detection portal.

Basis of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Milestone Technology, Inc. All significant intercompany accounts and transactions have been eliminated in consolidation.

Cash and Cash Equivalents

The Company considers all highly liquid investments with maturities of three months or less to be cash equivalents.

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.

Accounts Receivable

Accounts receivable consists of amounts due from customers. Management periodically reviews the open accounts and makes a determination as to the ultimate collectibility of each account. Once it is determined that collection is in doubt the account is written off as a bad debt. In order to provide for accounts that may become uncollectible in the future, the Company has established an allowance for doubtful accounts. The balance of the allowance for doubtful accounts is based on management’s judgment and the Company’s prior experience with managing accounts receivable.

VIEW SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2010 AND DECEMBER 31, 2009

NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Revenue Recognition

The Company has three main products, namely the concealed weapons detection system, the visual first responder system and the Viewmaxx digital video system. In all cases revenue is considered earned when the product is shipped to the customer. The concealed weapons system and the digital video system each require installation and training. The customer can engage us for installation and training, which is a revenue source separate and apart from the sale of the product. In those cases revenue is recognized at the completion of the installation and training. However, the customer can also self install or can engage another firm to provide installation and training. Each product has an unconditional 30 day warranty, during which time the product can be returned for a complete refund. Prior to the issuance of financial statements management reviews any returns subsequent to the end of the accounting period which are from sales recognized during the accounting period, and makes appropriate adjustments as necessary. Product prices are fixed or determinable and products are only shipped when 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). All inventory as of June 30, 2010 and December 31, 2009 consisted of unassembled parts of products.

Property and Equipment

Property and equipment is recorded at cost and depreciated over their 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 of 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 periods ended June 30, 2010 and December 31, 2009 amounted to $10,000 and $11,985, respectively.

VIEW SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2010 AND DECEMBER 31, 2009

NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Licenses

In connection with the acquisition of Milestone, the Company received various licenses to products developed by INEEL (Idaho National Engineering and Environmental Laboratory). Milestone transferred the licenses to View Systems, Inc., and in November 2003, two separate licenses were signed in the name of View Systems with Bechtel BWXT Idaho, LLC (BBWI).

BBWI is the management and operating contractor of the INEEL under its Contract No. DE-AC07-99ID13727 (“M&O Contract”) and has the authorization, right and ability to grant the license of the Agreement. The licenses allow View Systems to commercially develop, manufacture, use, sell and distribute processes and products embodying the U.S. Patent No. 6.150.810 “Method for Detecting the Presence of a Ferromagnetic Object Using Maximum and Minimum Magnetic Field Data”, and U.S. Patent Application S/N 10/623,372, “Communication Systems, Camera Devices, and Communication Methods”.

The valuation of these licenses consist of the cost of acquiring Milestone, that is, the difference of the cost paid for the entity vs. the value of the underlying assets and liabilities which was determined to be $1,626,854. The cost of the licenses is being amortized on a straight line basis over the remaining useful lives of the underlying patents, which at the date of the purchase was 15.5 years. Amortization expense for the periods ended June 30, 2010 and December 31, 2009 was $52,480 and $104,958, respectively. Consistent with SFAS No. 142, the license was also analyzed to determine if any impairment existed at June 30, 2010 and December 31, 2009. It was determined not to be impaired. The Company has fundamentally advanced the technology under which these licenses operate but never sought its own patent protection.

Income Taxes

Deferred income taxes are recorded under the assets 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.

Advertising

Advertising costs are charged to operations as incurred. Advertising costs for the periods ended June 30, 2010 and December 31, 2009 were $8,000 and $19,737.

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.

VIEW SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2010 AND DECEMBER 31, 2009

NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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.

Reverse Stock Split

During 2008 the Board of Directors approved a 1 for 80 reverse stock split of the issued and outstanding common and preferred stock. The reverse split did not change the authorized shares or the par value for either class of stock.

Net Loss Per Common Share

Basic net loss per common share is computed by dividing net loss available to common stockholder by the weighted average number of common shares outstanding. Diluted net loss per common share 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 in addition to shares that may be issued in the event that convertible debt is exchanged for shares of common stock. The calculation of the net loss per share available to common stockholders for the periods ended June 30, 2010 and December 31, 2009 does not include potential shares of common stock equivalents, as their impact would be antidilutive. The following reconciles amounts reported in the financial statements:


		Income	Shares		Per-share
		(Numerator)	(Denominator)		Amount

Six months ended June 30, 2010

Income (loss) from continuing operations which is the
amount that is available to common stockholders	$	(258,602)	77,788,119	$	(0.00)

Year ended December 31, 2009

Income (loss) from continuing operations which is the
amount that is available to common stockholders	$	(1,560,012)	40,285,009	$	(0.09)

VIEW SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2010 AND DECEMBER 31, 2009

GOING CONCERN

The Company has incurred, and continues to incur, losses from operations. For the periods ended June 30, 2010 and December 31, 2009, the Company incurred net losses of $258,602 and $1,560,012, respectively. In addition, certain notes payable have come due and the note holders are demanding payment.

Management is very actively working to cure these situations. It has implemented major plans for the future growth and development of the Company. Management is in the process of renegotiating more favorable repayment terms on the notes payable, and the Company anticipates that these negotiations will result in extended payment plans. In addition, during 2009 and 2008, the Company implemented marketing and information strategies to increase public awareness of its products and thereby enhance its sales. It has established new international markets which it believes will be the source for sales growth in the very near future. It also was able to reduce the per unit cost of manufacturing its products. Additionally, the Company has increased the efficiency of its processes and focused its development efforts on products that appear to have greater sales potential.

Historically, the Company has financed its operations primarily through private financing; however, sales revenue during 2010 and 2009 and decreases in expenses during 2010 made a significant contribution to working capital. It is management’s intention to finance operations during the remainder of 2010 primarily through increased sales although there will still be a need for additional equity financing. In addition, management is actively seeking out mergers and acquisitions which would be beneficial to the future growth of the Company. There can be no assurance, however, that this financing will be successful, and the Company may be required to further reduce expenses and scale back operations.

VIEW SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2010 AND DECEMBER 31, 2009

NEW ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board (“FASB”) periodically issues new accounting standards in a continuing effort to improve standards of financial accounting and reporting. The Company has reviewed the recently issued pronouncements and concluded that there are no new accounting standards are applicable to the Company.

BUSINESS COMBINATION

The Company purchased 100% of the common stock of Milestone Technology, Inc., effective March 25, 2002. The purchase was accomplished in two transactions. The Company acquired 6% of Milestone in December 2001 in exchange for 500,000 shares of the Company’s common stock. In March 2002, the Company acquired the remaining 94% of Milestone for 3,300,000 share of the Company’s common stock. Based on the market value of the Company’s common stock ($0.55 per share in December 2001 and $0.31 per share in March 2002) the total cost of the acquisition was $1,298,000.

Milestone Technology, Inc., is a developer of concealed weapons detections systems. Its primary product is a walk-through detector that uses advanced magnetic technology to accurately pinpoint the location, size, and number of concealed weapons.

DUE FROM AFFILIATED ENTITIES

The Company has advanced non-interest bearing funds of $147,507 as of June 30, 2010 and $147,587 as of December 31, 2009 to a related corporation, The Fight Zone, Inc., (formerly Geoscopix, Inc.), which until approximately March 2008 was controlled by the Chief Executive Officer of the Company. There are no formal repayment terms associated with this advance, but the Fight Zone, Inc.’s viability is no longer certain, and Management is exploring its collection options.

VIEW SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2010 AND DECEMBER 31, 2009

NOTES PAYABLE

Notes payable as of June 30, 2010 and December 31, 2009 consists of the following:


	JUN 30 2010	DEC 31, 2009
Investor/stockholder Group During 2006 the Company negotiated a loan arrangement with a group of investors to loan a specific amount to the Company which, once the total amounts loaned reached a certain amount, the loans would be converted into shares of common stock. Since the threshold was never achieved, the conversion option was terminated and the loans became due on demand with interest at 8% per annum. After the reporting period, the balance due was settled for the issuance of 4,500,000 shares of Company common stock.	$ 162,092	$ 162,092

Stockholder An unsecured loan from a stockholder which is payable on demand with interest at 12%.	116,000	116,000

Stockholder An unsecured loan from a stockholder which was due in full on November 1, 2007 with interest at 15%. The note is convertible into shares of common stock at the option of lender at the rate of $6.00 per share of common stock. If converted in full this amounts to 16,667 shares. This debt was settled in 2010 for 3,500,000 shares of common stock.	0	100,000

Lafayette Community Bank A short term line of credit loan secured by a stockholder, payable in five monthly installments of $6,175 that commenced in December 2009 with a balloon payment in the amount $175,630 due in May 2010. Interest accrues monthly at 7% per annum. We have continued to make monthly payments, and the balloon provision has not been exercised.	170,441	200,000

Investor Demand loan payable with interest at 5% per month. The loan is secured by the Company’s accounts receivable.	50,000	50,000

Investor Convertible promissory note payable on December 31, 2010 with interest at 8% per annum. Upon meeting certain provisions the note can be converted to 5,005,562 shares of common	50,000	0

Chase Equipment loans to finance the purchases of two trucks, payable monthly in installments of $1,003, which include interest at 5.34% per annum	44,750	49,497

TOTAL	$ 593,283	$ 677,589

Principal payments for the next five years are as follows:
2010	$ 555,899
2011	10,151
2012	10,708
2013	11,294
2014	5,231
TOTAL	$ 593,283

VIEW SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2010 AND DECEMBER 31, 2009

INCOME TAXES

For income tax purposes the Company has net operating loss carryforwards of $21,342,673 as of December 31, 2009 that may be used to offset future taxable income. In the instance of future corporate acquisitions, the net operating losses may be used to offset the future taxable income of a qualifying subsidiary corporation which meets IRS regulations governing such situations. The losses have accumulated since 1998 and they will start to expire in 2018.


The components of the net deferred tax asset as of December 31, 2009 are as follows:
Effect of net operating loss carryforward	$	8,963,923
Less evaluation allowance		(8,963,923)
Net deferred tax asset	$	-

The components of income tax expense (benefit) are as follows:


		Period ended
		June 30,		December 31,
		2010		2009
Net loss per financial statements which approximates
net loss per income tax returns	$	(258,602)	$	(1,560,012)
Income tax expense (benefit) applying prevailing
Federal and state income tax rates		(108,613)		(655,205)
Less valuation allowance		108,613		655,205

Net income tax expense (benefit)	$	-	$	-

Net income tax benefit is not recognized at this time because there is no reasonable expectation that the benefit will be realized in the future.

PREFERRED STOCK

In July 2005 the Company issued 7,171,725 shares of Series A Preferred Stock in payment of services. The issuance had been previously authorized by the Board of Directors. Each share of Series A Preferred Stock has a liquidation preference in the event of liquidation of the corporation of $0.01 per share before any payment or distribution is made to the holders of common stock. Effective in 2010 the Series A Preferred can be converted into common stock in the ratio of 15:1. See note 13 below. Each Series A Preferred share is entitled to fifteen votes of common stock and shall be entitled to vote on any matters brought to a vote by the common stockholders.

During 2008 the Board of Directors approved a reverse split of the stock in which one new share of preferred stock was issued in exchange for each 80 shares of preferred stock outstanding. Accordingly, the total issued of preferred stock was adjusted from 7,171,725 shares to 89,647 shares. The par value and the total authorized preferred shares did not change.

OPERATING LEASE

The Company leases office and warehouse space in Baltimore, MD under a three-year non-cancellable operating lease which expired in October 2008 and which was subsequently extended to August 2010. The base rent is $3,047 per month with an annual rent escalator of 3%. Rent expense was $26,436 and $47,461 for the periods ended June 30, 2010 and December 31, 2009, respectively.

VIEW SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2010 AND DECEMBER 31, 2009

10.

STOCK BASED COMPENSATION

During the periods ended June 30, 2010 and December 31, 2009 the Company granted restricted stock to independent contractors and consultants as payment for services rendered.

Restricted Stock Grants

Our 1999 Restricted Share Plan terminated automatically pursuant to the terms of its agreement on March 1, 2009.

Our 2000 Restricted Share Plan terminated automatically pursuant to the terms of its agreement on March 15, 2010.

On April 2, 2010, the Company adopted its 2010 Equity Incentive Plan. Reserved for equity issuances under the Equity Incentive Plan are 50,000,000 shares of our common stock. No equity issuances have been made from the 2010 Equity Incentive Plan.

On June 1, 2010, the Company adopted its 2010 Service Provider Stock Compensation Plan. Reserved for equity issuances under the Service Provider Stock Compensation Plan are 50,000,000 shares of our common stock. No equity issuances were made during the reporting period from the 2010 Service Provider Stock Compensation Plan.

During 2010 and 2009, the Company issued the following compensatory shares outside of its existing Stock Option and Restricted Share Plans at the discretion of the Board of Directors:


	2010		2009
	Number of	Expense	Number of	Expense
	Of shares	Recognized	Of shares	Recognized
Officers and employees	500,000	$ 15,000	35,305,500	744,681

Independent contractors and consultants	0	0	9,230,000	270,100

Total	500,000	$ 15,000	44,535,500	$ 1,014,781

Independent contractors and consultants’ expense was based on the estimated value of services rendered.

Stock Option Awards

Our 1999 Stock Option Plan terminated automatically pursuant to the terms of its agreement on March 1, 2009. Footnote 10 in our Form 10-K for the year ended December 31, 2009 should have reported that 1,346 stock options (adjusted for stock split in 2008) were expired as of March 1, 2009. Instead, the stock option table in footnote 10 incorrectly reported these options as being outstanding at December 31, 2009.

On April 2, 2010, the Company adopted its 2010 Equity Incentive Plan, which authorized, among other forms of incentives, the issuance of stock options. Reserved for equity issuances under the 2010 Equity Incentive Plan are 50,000,000 shares of our common stock. No equity issuances have been made from the 2010 Equity Incentive Plan. Stock options, which may be tax qualified and non-qualified, are exercisable for a period of up to ten years at prices at or above market price as established on the date of the grant.

VIEW SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2010 AND DECEMBER 31, 2009

11.

RELATED PARTY TRANSACTIONS

During the periods reflected on this report certain shareholders made cash advances to the Company to help with short-term working capital needs. The total additions to loans from shareholders with unstructured payment plans amounted to $68,630 during 2009 and none during the six months ended June 30, 2010. The total balance due on unstructured loans from shareholders amount to $185,978 at June 30, 2010 and $193,027 at December 31, 2009. Loans from stockholders made with repayment terms are described in Note 6 above.

12.

CORRECTION FOR DUPLICATIVE STOCK ISSUANCE

On January 13, 2010, we inadvertently issued a total of 10,000,000 shares of common stock to two of our directors who had previously been issued a total of 10,000,000 shares of common stock in December 2009. The duplicative issuance did not affect our directors’ reporting of their actual stock holdings. However, the duplicative stock issuance was recorded in our financial statements and reported on Form 10-Q for the period ending March 31, 2010. We have reversed the expense item attributed to the duplicative stock issuance which results in a decrease in our expenses of $300,000 and a corresponding increase in revenue for the six months ended June 30, 2010.

PART II - OTHER INFORMATION

ITEM 6. EXHIBITS

The following exhibits are filed herewith:

31.1 Rule 13a-15(e)/15d-15(e) Certification by the Chief Executive Officer and Chief Financial Officer

32.1 Certification by the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

SIGNATURES

Pursuant to the requirements 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.




	VIEW SYSTEMS, INC.

Date: September 13, 2010	By:	/s/ Gunther Than
		Gunther Than
		Chief Executive Officer (Principal executive officer, principal financial officer, and principal accounting officer)