VIEW SYSTEMS, INC. The following analysis of our consolidated financial condition and results of operations for the years endedDecember 31, 2019 and 2020 should be read in conjunction with the Consolidated Financial Statements and other information presented elsewhere in this annual report. OVERVIEW We have decided to include in our sales efforts other products aside the concealed weapons detection system. Currently, customers can purchase extended warranties, which provide for replacement or repair of the unit beyond the period provided by the unconditional warranty. Warranties can be purchased for various periods but generally they are for a one-year period that begins after any other warranties expire. In the short term, management plans to self-fund through friends and family investment of time and money. Then the next phase of our business plan will be to raise additional funds through common stock offerings to provide working capital to finance several acquisitions. In the past, when possible, we have conserved our cash by paying employees, consultants, and independent contractors with our common stock. OnJune 1, 2010 , by majority shareholder consent, we adopted our 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. OnJuly 21, 2010 , we registered the common stock issuable under the 2010 Equity Incentive Plan and the 2010 Service Provider Stock Compensation Plan. A total of 100,000,000 shares are reserved for issuances under the two plans.
Merger or Acquisitions other Significant events in 2020
OnJuly 30, 2020 ,Charles Davis , the Company's longtime accountant, received a letter from theIRS indicating under$ 10,000 owed in payroll taxes for several pay periods between 2012-2015. AlthoughMr. Davis died onNovember 24, 2021 , the Company will continue to make efforts to resolve this issue and enter into a payment plan if necessary, once the amount owed is agreed upon.View Systems, Inc. has not had significant revenue and has a significant loss carry forward, therefore tax returns for recent years have not been filed. The Company plans on filing necessary tax returns in the future.View Systems has received a box of accounting records from the lateMr. Davis' office that is being reviewed. Subsequent Events OnJanuary 5, 2021 , the Company entered into a 12% SENIOR SECURED PROMISSORY NOTE with an Accredited Investor for$ 60,000 . Payment of the full amount of this Note is secured by the "Collateral" identified and described as security therefor in the Security Agreement between the parties datedJanuary 5, 2021 . OnJanuary 13, 2021 , the Company issued 195,889,500 shares of common stock to convert a convertible debenture and accrued interest from a note datedOctober 8, 2019 . 19 OnJanuary 19, 2021 , theSEC temporarily suspended trading inView Systems, Inc. ,"because of questions regarding the accuracy and adequacy of information in the marketplace about the Company and its securities. Those questions relate to statements made on the Company's website, on Twitter, and in press releases, including a press release datedNovember 20, 2020 , concerning, among other things, the Company's introduction of a security scan product that has the ability to provide real-time temperature results to detect COVID-19, and orders that the Company has received for its security scan product." A copy of the suspension order is available at, https://www.sec.gov/litigation/suspensions/2021/34-90940-o.pdf A copy of the press release cited in the suspension order datedNovember 20, 2020 is available at, https://www.globenewswire.com/news-release/2020/11/20/2130999/0/en/View-Systems-Inc-VSYM-Announces-International-Pre-Orders-for-ViewScan-and-Launches-New-Website-to-Begin-Marketing-ViewScan-II-with-Real-Time-Thermal-Imaging-Temperature-Results-and.html
The Company has complied to the best of their ability with the SEC Matter.
View Systems, Inc. has provided security products for over 20 years to private companies and government agencies around the World. In 2019, we entered into an MOU to acquire a cannabis and hemp operation inColombia . The Company had planned to spin out the security business into a wholly owned subsidiary,View Systems International, Inc. (VSII), offering a dividend of VSII shares to shareholders of record onFebruary 19, 2021 . Due to delays caused by the unexpected suspension, the Company is reassessing the dividend distribution, and exploring alternatives to capitalize theirColombia cannabis interest. OnJune 2, 2021 , the Company received a resignation letter from their independent auditor,Boyle CPA, LLC . To the Company's knowledge, relative to their two most recent fiscal years and any subsequent interim period before such dismissal, there were no substantial disagreements with Boyle CPA on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, remain unresolved.
On
On
On
On
As of this date, there are no pending acquisitions at the time of this filing.
Although we have agreed in a Memorandum of Understanding that the investments made into Sannabis & New Columbia Resources giveView Systems a First Right of Refusal to acquire both companies at an discounted value for the investment. Please find attachment of the MOU in this filing. Manufacturing We no longer manufacture the ViewScan (original) since we have licensed it to a company calledIP-Video Corporation since we have determined a new and enhanced wider opening model is needed to continue in continue in the walk through portal security market. Until we patent the new enhanced unit we are quiescent in our manufacturing activities. 20
RESULTS OF OPERATIONS FOR FISCAL YEARS ENDED
The following discussions are based on the consolidated financial statements ofView Systems and its subsidiaries. These charts and discussions summarize our financial statements for the years endedDecember 31, 2019 and 2018 and should be read in conjunction with the financial statements, and notes thereto, included with this Annual Report. SUMMARY COMPARISON OF OPERATING RESULTS Years ended December 31, 2020 2019 Revenues, net$ 1,400 $ 2,904 Cost of sales - - Gross profit (loss) 1,400 1,400 Total operating expenses (407,931 ) 715,179
Loss from continuing operations (405,027 ) (713,779 ) Total other income (expense) (707,775 ) (525,197 Net income (loss)
(1,112,802 ) (1,238,976
Net loss per share $ (0.00 ) $ (0.00 ) The following chart provides a breakdown of our sales in 2019 and 2018.
2019 2018
ViewScan $ - $ -
Warranty 0 -
Service, installation, training, etc 2,904 0
Total $ 2,904 $ 1,400 Our sales backlog at
Fiscal Year Ended
Our net loss for fiscal year ended
We generated revenues of
We have experienced a cessation of sales of our products as a result of giving an exclusive license to manufacture our previous version to a large distributer of security products. We incurred an operating loss of ($713,779 ) during fiscal year endedDecember 31, 2019 as compared to an operating loss of ($405,027 ) in fiscal year ended inDecember 31, 2020 . Our expenses increased primarily due to a significant increase in professional fees, salaries and benefits, professional fees and administrative driven by our investment in then afore mentioned entities with the intent of adding other revenue streams to our core business. Thus, our net loss f of ($1,238,976 ) during fiscal year endedDecember 31, 2019 included a ($383,010 ) derivative, interest and loss on stock conversion expense. The net loss during fiscal year endedDecember 31, 2020 was ($1,112,802 ) and was primarily due to stock conversion expense. The total number of shares outstanding was 3,925,641,882 for fiscal year endedDecember 31, 2020 compared to 560,915,727 for fiscal year endedDecember 31, 2019 .
LIQUIDITY, CAPITAL RESOURCES AND GOING CONCERN
Fiscal Year Ended
As ofDecember 31, 2020 , our current assets were$21,220 and our current liabilities were$2,114,854 . As ofDecember 31, 2020 , current liabilities were comprised of: (i)$110,664 in accounts payable and accrued expenses; (ii)$732,119 in accrued and deferred compensation; (iii)$134,237 in accrued and withheld payroll taxes payable; (iv)$23,018 in accrued interest payable; (v)$-0 - in accrued royalties payable; (vi)$263,512 in loans from stockholders; (vii)$215,270 in notes payable; (viii) deferred revenue of$0 and (ix) derivative liability of$636,014 ;. 21
The increase in total assets during fiscal year ended
As ofDecember 31, 2020 , our total liabilities were$2,114,854 and was comprised of current liabilities. The increase in liabilities during fiscal year endedDecember 31, 2019 from fiscal year endedDecember 31, 2020 was primarily due to the increase in convertible loans and accrued derivative liability.
Stockholders' deficit increased to (
Cash Flows from Operating Activities
We have not generated positive cash flows from operating activities.
Cash Flows from Investing Activities
For fiscal year ended
Cash Flows from Financing Activities
For the fiscal year ended
PLAN OF OPERATION AND FUNDING We have incurred losses from operations for the past three fiscal years and had a net operating loss of ($405,027 ) at fiscal year endedDecember 31, 2020 . Our revenues from product sales have ceased and are not sufficient to cover all of our operating expenses. Our auditors have expressed substantial doubt that we can continue as a going concern. We are continuing to push acquiring other income streams. Management intends to finance our 2020 operations primarily with loans and any cash short falls will be addressed through equity or debt financing, if available. Management expects revenues will continue to be non-existent in the short term but will increase in the long term as additional products are brought on-line moving forward. We will need to continue to raise additional capital, both internally and externally, to cover cash shortfalls and to compete in our markets. At our current revenue levels management believes we will require an additional$600,000 in equity financing during the next 12 months to satisfy our cash requirements of approximately$50,000 per month for operations and to facilitate our new business plans both in these bio-resource markets and the development of an advanced Detection Portal. These operating costs include cost of sales, general and administrative expenses, salaries and benefits and professional fees related to contracting engineers. We have insufficient financing commitments in place to meet our expected cash requirements for 2020 and we cannot assure the company we will be able to obtain financing on favorable terms. If we cannot obtain financing to fund our operations in 2020, then we will be required to reduce our expenses and scale back our operations. 22 Going Concern The market price of our common stock has fallen below the fixed price of our registered stock offering, as in prior years we may again have insufficient financing commitments in place to meet our expected cash requirements for 2020. We cannot assure you that we will be able to obtain financing on favorable terms. If we cannot obtain financing to fund our operations in 2022 and beyond., then we may be required to further reduce our expenses and scale back our operations. These factors raise substantial doubt of our ability to continue as a going concern. Footnote 2 to our financial statements provides additional explanation of Management's views on our status as a going concern. The audited financial statements contained in this Annual Report do not include any adjustments to reflect the possible future effects on the recoverability of assets or the amounts of liabilities that may result should we be unable to continue as a going concern. Our independent registered accounting firm included an explanatory paragraph in their reports on the accompanying financial statements forDecember 31, 2020 regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.
COMMITMENTS AND CONTINGENT LIABILITIES
We shared an office at
Our total current liabilities increased from ($1,594,693 ) in fiscal year endedDecember 31, 2019 compared to ($2,114,854 ) at fiscal year endedDecember 31, 2020 . As ofDecember 31, 2020 , our short and long term notes payable consist of the following: Stockholder
Demand loan payable with interest at 5% per month
dated
50,000
Convertible promissory note with interest at 12% per year datedJanuary 24, 2018 , convertible into the Company's common stock 50% discount to the lowest trading price during the 25 trading days immediately preceding conversion. The note was dueOctober 24, 2018 and is currently in default 16,831
53,000
Convertible promissory note with interest at 12% per year datedJuly 2, 2018 , convertible into the Company's common stock 50% discount to the lowest trading price during the 25 trading days immediately preceding conversion. The note was dueJuly 2, 2019 and is currently in default 40,000
40,000
Convertible promissory note with interest at 12% per year datedAugust 19, 2019 , convertible into the Company's common stock 58% discount to the lowest trading price during the 25 trading days immediately preceding conversion. The note is dueAugust 19, 2020 38,000
-
Convertible promissory note with interest at 12% per year datedOctober 8, 2019 , convertible into the Company's common stock 50% discount to the lowest trading price during the 25 trading days immediately preceding conversion. The note is dueOctober 20, 2020 50,000
-
Convertible promissory note with interest at 12% per year datedOctober 22, 2019 , convertible into the Company's common stock 50% discount to the lowest trading price during the 25 trading days immediately preceding conversion. The note is due October 22, 2020 53,000 - 23
OFF BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors. CONTRACTUAL OBLIGATIONS
As a "smaller reporting company" as defined by Item 10 of Regulation S-K, we are not required to provide this information.
CRITICAL ACCOUNTING POLICIES We have one main products, namely the concealed weapons detection system. In all cases revenue is considered earned when the product is shipped to the customer, installed (if necessary) and accepted by the customer as a completed sale. Each product has an unconditional 30 day warranty, during which time the product can be returned for a complete refund. Customers can purchase extended warranties, which provide for replacement or repair of the unit beyond the period provided by the unconditional warranty. Warranties can be purchased for various periods but generally they are for one year period that begins after any other warranties expire. The revenue from warranties is recognized on a straight line bases over the period covered by the warranty. 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 collectability is reasonably assured. Stock Based Compensation We account for share-based compensation at fair value. Stock based compensation cost for stock options granted to employees, board members and service providers is determined at the grant date using an option pricing model. The value of the award that is ultimately expected to vest is recognized as expensed on a straight-line basis over the requisite service period.
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