View Systems Inc (VSYM) SEC Quarterly Report (10-Q) for Q1 2018

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☑ QUARTERLY REPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2018

☐ 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)

6 Park Center Court, Owings Mills, Baltimore, Maryland  21117

(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 ☑

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

VIEW SYSTEMS, INC.

FORM 10-Q

FOR THE PERIOD ENDED March 31, 2018

INDEX

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.

Insert financials

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

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

The accompanying notes are an integral part of these consolidated financial statem ents

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

4. NOTES PAYABLE

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

EXECUTIVE OVERVIEW

The following analysis of our consolidated financial condition and results of operations for the three-month period ended March 31, 2018 and March 31, 2017 should be read in conjunction with the Consolidated Financial Statements and other information presented elsewhere in this quarterly report.

Overview

View Systems, Inc. has developed, produced and marketed computer software and hardware systems for security and surveillance applications. In 1998 digital video recorder technology was our first developed product and we enhanced this product line by developing interfaces with other various technologies, such as facial recognition, access control cards and control devices such as magnetic locks, alarms and other common security devices.

We expanded our product line in 2002 to include a concealed weapons detection system we call ViewScan. In 2003 we added a hazardous material first response wireless video transmitting system to our product line we refer to as Visual First Responder.   Unfortunately, the rising costs of manufacturing equipment and the large quantities required to become cost competitive has forced us to quit manufacturing our own products.

Our strategy for 2018 for ViewScan is to continue our extended warranty offerings and service provisions to the various installations we have.  In the short term, management continues to raise funds by providing parts and repair service work to our current installations.

Then, the next phase of our business plan will be to raise additional funds through common stock offerings to provide working capital to finance new types of businesses. We also intend to continue to strengthen our balance sheet by paying off debt either through exchange of equity for cancellation of debt obligations or the payment of debt obligations with cash.  

Products and Services

Our current products and services include:

ViewScan Concealed Weapons Detection System

ViewScan, which has also been sold under the name "Secure Scan", is a walk-through concealed weapons detector which uses data sensing technology to accurately pinpoint the location, size and number of concealed weapons. This walk-through portal is controlled by a master processing board and a personal computer based unit which receives magnetic and video information and combines it in a manner that allows the suspected locations of the concealed weapon(s) to be displayed and stored electronically.

Medical Services Including Men's Health and Physiological Quality of Life

The company has opened and is operating a medical clinic including physical examinations, medical advice and prescriptions.  The company has determined that there is a large demand by male consumers to extend their sexual ability and activities into later years.  Many maladies including cardiovascular inadequacies, high blood pressure, diabetes, smoking and obesity are inhibiting aging males from enjoying sexual activity with their mates.  Early results are stimulating the company to open more clinics, specifically in Pittsburg, Chicago and Philadelphia.

RESULTS OF OPERATIONS

The following discussions are based on our consolidated financial statements, including our subsidiaries.  These charts and discussions summarize our financial statements for the three months ended March 31, 2018 and March 31, 2017 and should be read in conjunction with the financial statements, and notes thereto, included with our most recent Form 10-K for fiscal year ended December 31, 2017.

Three Month Period Ended March 31, 2018 Compared to Three Month Period Ended March 31, 2017.

Our net loss for the three-month period ended March 31, 2018 was ($125,727) compared to a net loss of ($30,703) during the three month period ended March 31, 2018 (an increase in net loss of $95,024). We generated net revenues of $73,628 during the three month period ended March 31, 2018 compared to $8,764 during the three month period ended March 31, 2017 (an increase in net revenue of $64,864). Revenue is considered earned when service is provided and in addition when the product is shipped to the customer.

We have experienced an increase in sales of our services and products which resulted in increase revenues for the three month period ended March 31, 2018 compared to the three month period ended March 31, 2017. We believe the increased revenue is the result of the ramp up of services and the increase of sales of product.  We also continue service our install base of security products and we continue to receive purchase orders for the View Scan.

Cost of service provided and the goods sold increased during the three month period ended March 31, 2018 to $6,176 from $0 incurred during the three month period ended March 31, 2017, resulting in a gross profit of $67,452 for the three month period ended March 31, 2018 compared to a gross profit of $8,764 for the three month period ended March 31, 2017. During the three month period ended March 31, 2018, the increase of cost of goods sold and service provided was due to our growth of the new venture into men's health.

During the three month period ended March 31, 2018, we incurred operating expenses of $ 135,295 compared to $30,311 incurred during the three month period ended March 31, 2017 (an increase of $104,984).

Operating expenses incurred during the three month period ended March 31, 2018 compared to the three month period ended March 31, 2017 increased primarily due to the increase in professional fees and general and administrative expenses.

Our net operating loss during the three-month period ended March 31, 2018 was ($125,727) compared to a net operating loss of ($30,703) during the three-month period ended March 31, 2017.

During the three-month period ended March 31, 2018, interest expense in the amount of ($10,184) (2017: ($9,156) was incurred. The increase in interest expense was due to continued interest paid on a loan from stockholder.

During the three-month period ended March 31, 2018, derivative expense in the amount of ($47,700) (2017: -0-) was incurred. The increase in derivative expense was due to due to a loan from a lending institution.

After deducting other expense, we realized a net loss of ($125,727) for the three month period ended March 31, 2018 compared to a net loss of ($30,703) for the three month period ended March 31, 2017.

The weighted average number of shares outstanding was 326,705,526 for the three month period ended March 31, 2018 compared to 326,705,526 for the three month period ended March 31, 2017.

LIQUIDITY AND CAPITAL RESOURCES

Three Month Period Ended March 31, 2018

As of March 31, 2018, our current assets were $40,421 and our current liabilities were $2,188,212, which resulted in a working capital deficit of $2,100,091. As at the three month period ended March 31, 2018, current assets were comprised of: (i) $40,421 in cash; (ii) $31,195 in accounts receivable (net of allowance of $1,000); and (iii) $1,197 in inventory.

As of March 31, 2018, current liabilities were comprised of: (i) $451,897 in accounts payable and accrued expenses; (ii) $319,579 in deferred compensation; (iii) $195,310 in accrued and withheld payroll taxes payable; (iv) $164,153 in accrued interest payable; (v) $225,000 in accrued royalties payable; (vi) $625,633 in loans from stockholders; (vii) $103,000 in notes payable; (viii) deferred revenue of $55,940; and derivative liability of $100,700.

As of March 31, 2018 our total assets were $41,618 comprised of: (i) $40,421 in current assets; (ii) property and equipment (net) of $1,197; and (iii) $9,226 in deposits. The increase in total assets during the three month period from fiscal year ended December 31, 2017 was primarily due to the increase in accounts receivable.

As of March 31, 2018 our total liabilities were $2,188,212 comprised of: (i) $2,087,512 in current liabilities; and (ii) $100,700 in derivative liability.

Stockholders' deficit increased from ($2,020,867) for fiscal year ended December 31, 2017 to ($2,146,594) for the three month period ended March 31, 2018.

Cash Flows from Operating Activities

For the three month period ended March 31, 2018, net cash flows provided by operating activities was $32,455 compared to net cash flows used in operating activities of ($45) for the three month period ended March 31, 2017.

Cash Flows from Investing Activities

For the three month periods ended March 31, 2017 and March 31, 2016, net cash flows used in investing activities was $-0-.

Cash Flows from Financing Activities

We have financed our operations primarily from debt or the issuance of equity instruments. For the three month period ended March 31, 2018, net cash flows provided from financing activities was $11,401 compared to $60 for the three-month period ended March 31, 2017. Cash flows from financing activities for the three month period ended March 31, 2018 consisted of: (i) $0 in proceeds from sales of common stock; and (ii) $0 in loans received from stockholders; and (iii) $53,000 in notes payable which was offset by ($0) in principal payment on notes payable.

PLAN OF OPERATION AND FUNDING

We have incurred losses for the past two fiscal years and had a net loss of $125,727 at March 31, 2018 and $30,703 at March 31, 2017. Our revenues from service and product sales have been insufficient to cover our operating expenses. Our auditors have expressed substantial doubt that we can continue as a going concern. We have continued to push warranty sales, service contracts and control costs but the large overwhelming marketing budgets of our competitors in spite of our superior technology has diminished our ability to compete.

Our Board of Directors has decided to broaden our perspective and add additional business related or unrelated to the current security product market.  Two of our directors are physicians and both have investigated the Erectile Dysfunction market.  Our Board of Directors has decided to pursue the Erectile Dysfunction Medical market.

According to Pew Research, 10,000 Baby Boomers turn 65 every day, of which 49% are men. This ensures that we will have an expanding pool of prospective clients, and thus make possible the exponential growth of patients each year until 2030. The current US market estimates for erectile dysfunction therapies is upwards of $6 Billion.

We have established one working medical clinic and are in process of opening others in selected cities.  The business strategy will be to establish multiple concierge , all-inclusive medical practices, providing a "one-stop shop" for most issues relating to male sexual dysfunction, including erectile dysfunction, testosterone replacement therapy, and premature ejaculation. By establishing or acquiring "men's clinics" in select geographic areas, View's business strategy is to capitalize on two irrefutable trends that are currently at play in the marketplace: an aging population and the rising prevalence of certain medical conditions cause erectile dysfunction such as diabetes, high blood pressure, smoking, obesity prostate issues etc.  One particular attractive procedure will be hair rejuvenation and restoration using platelet rich plasma injections.

Going Concern

If the market price of our common stock falls 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 2018. 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 2018, then we may be required to 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 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

Our total current liabilities increased to $2,188,212 at the three month period ended March 31, 2018 compared to $2,022,346 at fiscal year ended December 31, 2017. As of March 31, 2018, our short and long term notes payable consist of the following:

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, the Company is not required to provide this information.

CRITICAL ACCOUNTING POLICIES

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.. 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.

Going Concern Opinion

You should carefully consider the risks, uncertainties and other factors identified below because they could materially and adversely affect our business, financial condition, operating results and prospects and could negatively affect the market price of our Common Stock. Also, you should be aware that the risks and uncertainties described below are not the only ones facing us. Additional risks and uncertainties that we do not yet know of, or that we currently believe are immaterial, may also impair our business operations and financial results. Our business, financial condition or results of operations could be harmed by any of these risks. The trading price of our Common Stock could decline due to any of these risks, and you may lose all or part of your investment.   In assessing these risks you should also refer to the information contained in or incorporated by reference to our Form 10-K for the year ended December 31, 2016, including our financial statements and the related notes thereto.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a "smaller reporting company" as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We have carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer/Principal Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of March 31, 2018. Based on such evaluation, we have concluded that, as of such date, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in applicable SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer/Principal Financial Officer, as appropriate, to allow timely discussions regarding required disclosure.

Management's Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining internal control over our financial reporting. Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over our financial reporting includes those policies and procedures that:

All internal control systems, no matter how well designed, have inherent limitations, including the possibility of human error or circumvention through collusion of improper overriding of controls. Therefore, even those internal control systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation. Further, because of changes in conditions, the effectiveness of internal control may vary over time.

Our management assessed the effectiveness of our internal control over financial reporting as of March 31, 2018. In making its assessment of internal control over financial reporting, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSD) in Internal-Control-Integrated Framework and implemented a process to monitor and assess both the design and operating effectiveness of our internal controls. Based on this assessment, management believes that as of March 31, 2018, our internal control over financial reporting was effective.

This quarterly report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management's report in this quarterly report .

Changes in Internal Control Over Financial Reporting

Our management has evaluated, with the participation of our Chief Executive Officer/Chief Financial Officer, changes in our internal controls over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the period ended March 31, 2018. In connection with such evaluation, there have been no changes to our internal control over financial reporting that occurred since the beginning of our three month period ended March 31, 2017 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.  [REMOVED AND RESERVED]

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

The following exhibits are filed as part of this Form 10-Q:

The following exhibits are filed as part of this Form 10-K:

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.