UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
(Mark
One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For
the fiscal year ended December 31, 2020
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
VIEW SYSTEMS, INC.
(Exact
name of registrant as specified in its charter)
Colorado |
|
59-2928366 |
(State
or other jurisdiction of
incorporation
or organization)
|
|
(I.R.S.
Employer
Identification
No.)
|
|
|
|
7833
Walker Drive, Suite 520
Greenbelt,
MD, 20770
|
|
20770 |
(Address
of principal executive offices) |
|
(Zip
Code) |
Registrant’s
telephone number, including area code: (410) 236-8200
Securities
registered pursuant to Section 12(b) of the Act:
None
Securities
registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 Par Value
(Title
of class)
Indicate
by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. ☐ YES ☒ NO
Indicate
by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. ☐ YES ☒
NO
Note
– Checking the box above will not relieve any registrant required
to file reports pursuant to Section 13 or 15(d) of the Exchange Act
from their obligations under those Sections.
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 ☐ 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 if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (§ 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant’s
knowledge, in a definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ☐ 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.
☐ |
Large
accelerated filer |
☐ |
Accelerated
filer |
|
|
|
|
☐ |
Non-accelerated
filer |
☒ |
Smaller
reporting company |
|
|
|
|
|
|
☐ |
Emerging
growth company |
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Act). ☐ YES ☒ NO
State
the aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the price at
which the common equity was last sold, or the average bid and asked
price of such common equity, as of the last business day of the
registrant’s most recently completed second fiscal
quarter.
Note.
If a determination as to whether a particular person or entity is
an affiliate cannot be made without involving unreasonable effort
and expense, the aggregate market value of the common stock held by
non-affiliates may be calculated on the basis of assumptions
reasonable under the circumstances, provided that the assumptions
are set forth in this Form.
The
aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which
the common equity as of the
last business day of the most recently completed second fiscal
quarter, was $707,585.
APPLICABLE
ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Indicate
by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court. ☐ YES ☐ NO
(APPLICABLE
ONLY TO CORPORATE REGISTRANTS)
Indicate
the number of shares outstanding of each of the registrant’s
classes of common stock, as of the latest practicable date.
3,925,641,882 shares as of December 31, 2020.
DOCUMENTS
INCORPORATED BY REFERENCE
List
hereunder the following documents if incorporated by reference and
the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which
the document is incorporated: (1) Any annual report to security
holders; (2) Any proxy or information statement; and (3) Any
prospectus filed pursuant to Rule 424(b) or (c) under the
Securities Act of 1933. The listed documents should be clearly
described for identification purposes (e.g., annual report to
security holders for fiscal year ended December 24, 1980).
None
TABLE
OF CONTENTS
Safe
Harbor Statement Under the Private Securities Litigation Reform Act
of 1995
Information
included in this Form 10-K 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
ITEM 1. BUSINESS.
In
this report, unless the context requires otherwise, references to
the “Company”, “View Systems”, “we”, “us” and “our” are to View
Systems, Inc.
CORPORATE
HISTORY
View
Systems was incorporated in Florida on January 25, 1989, as
Beneficial Investment Group, Inc. and became active in September
1998 when we began development of our digital video product line
and changed the company’s name to View Systems, Inc. Starting in
1999 we expanded our business operations through a series of
acquisitions of technologies we use in our digital video recorder
technology products and in our concealed weapons
technology.
On
July 25, 2003, View Systems incorporated View Systems, Inc. as a
wholly owned Nevada corporation for the sole purpose of changing
the domicile of the company from Florida to Nevada. On July 31,
2003, articles of merger were filed with the states of Florida and
Nevada to complete the domicile change. In 2009 we domiciled to
Colorado.
OUR
BUSINESS
View
Systems, Inc. develops, produces and markets 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. We have penetrated four major
market segments for this product: correctional facilities, judicial
facilities, probation offices and federal facilities in the
Mid-Atlantic States, the West Coast and the South. In 2003 we added
a hazardous material first response wireless video transmitting
system to our product line we refer to as Visual First Responder.
The markets for these units are first responder units for agencies
such as the National Guard, Coast Guard, Army, state law
enforcement agencies, and fire departments. Both of these
technologies were licensed initially from the U.S. Department of
Energy’s Idaho National Engineering Laboratory (“INEL”). Until 2005
we assembled all of our products in-house.
PRODUCTS
AND SERVICES
We
currently have the concealed weapons detection system product. We
no longer manufacture the “first responder” system for competition
reasons. Our current principal products and services
include:
ViewScan
Concealed Weapons Detection System
ViewScan,
which is also 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. Today we no longer sell these units except for special
orders paid in advance for an average retail price of approximately
$9,500 with a one year extended warranty. We have licensed the
manufacturing and selling of the initial ViewScan to a company
called IP Video that has built 25 units and is selling them and
paying a $300 Royalty payment per unit sold.
Medical
Services Including Men’s Health and Physiological Quality of
Life
The
Company sold its Medical Services division, which is comprised of
Men’s Health clinic interests, to Ultimate Sports, Inc. in exchange
for 122,500 shares of Ultimate Sports, Inc. and Ultimate Sports,
Inc. As part of the divesting of unrelated services and markets we
are also divesting of the Sanabis business.
OUR
REMAINING MARKET
A
primary market for our ViewScan portal has been federal and state
government courthouses, county and municipal buildings, and
correctional facilities. We have installed our ViewScan weapons
detection products in a variety of courthouse, federal government
and correctional facility situations including the Security and
Exchange Commission.
MANUFACTURING
We no
longer manufacture the current version of the View Scan product. We
have learned from the past 20 years of and have made an enhanced
version of the first ViewScan. We are in process of filing for a
patent. We are in process of changing our provisional patent into a
permanent patent. We are capable of building a wide archway to
facilitate current commercial class (up to 42 inches opening)
doors.
SALES
AND DISTRIBUTION
Even
though we get the occasional new order, we no longer solicit sales
of the current View Scans but instead capitalize on the demand for
parts and service. Until we a have our new and improved model in
production we will service, fix and repair field operating units.
The inquires we get we forward to A+Video, the company we licensed
the Original ViewScan technology to.
MAJOR
CUSTOMERS
Domestic
United States.
COMPETITION
The
markets for our products are extremely competitive. Competitors
include a broad range of companies that develop and market products
for the identification and video surveillance markets. In the
weapons detection market, we compete with Ranger Security Scanners,
Inc. and Garrett Electronics, Inc. in the United States, and an
Italian company, CEIA SpA, which has the most sophisticated
electromagnetic induction product. CIEA apparently believes we have
good ideas as they have copied various methods and enhancements
from our products.
TRADEMARK,
LICENSES AND INTELLECTUAL PROPERTY
Certain
features of our products and documentation are proprietary, and we
rely on a combination of patent, contract, copyright, trademark and
trade secret laws and other measures to protect our proprietary
information. We limit access to, and distribution of, our software,
documentation and other proprietary information. As part of our
confidentiality procedures, we generally enter into confidentiality
and invention assignment agreements with our employees and mutual
non-disclosure agreements with our manufacturing representatives,
dealers and systems integrators. Notwithstanding such actions, a
court considering these provisions may determine not to enforce
such provisions or only partially enforce such
provisions.
The
ViewScan concealed weapons detection technology involves sensing
technology and data acquisition/analysis software subsystems that
have patents pending or issued to the U.S. Department of Energy. We
have not renewed our license, with the INEL to since none of the
software from INEEL is used.
Because
the software and firmware (software imbedded in hardware) are in a
state of continuous development, we have not filed applications to
register the copyrights for these items. However, under law,
copyright vests upon creation of our software and firmware.
Registration is not a prerequisite for the acquisition of copyright
rights. We take steps to insure that notices are placed on these
items to indicate that they are copyright protected. The copyright
protection for our software extends for the 20-year statutory
period from the date of first “publication,” distribution of copies
to the general public, or from the date of creation, whichever
occurs first.
We
have also obtained licenses for certain software from third parties
for incorporation into our products.
RESEARCH
AND DEVELOPMENT
We
outsource improvements or changes when requested by customers and
warranted financially.
REGULATORY
ENVIRONMENT
We
are not subject to government approval or regulation in the
manufacture of our products or the components in our products.
However, our products are subject to certain government
restrictions on sales to “unfriendly” countries and countries
designated as adversarial, which may limit our sales to the
international market. In addition, our resellers and end users may
be subject to numerous regulations that stem from surveillance
activities. We also benefit from the recent “made in America” trade
laws where non-United States manufactures must secure waivers in
order to sell security and surveillance products to United States
domestic end-users.
Cost
and effect of compliance with environmental laws
The
Company has not determined any recognizable cost related to
compliance with environmental laws.
EMPLOYEES
As of
the date of this Annual Report, we have four persons, including two
customer service engineers and two office personnel, which
administration. Two persons are part-time and we also contract with
two independent contractors who devote a majority of their work to
a variety of our projects. Our employees are not presently covered
by any collective bargaining agreement. Our relations with our
employees are good, and we have not experienced any work stoppages
by our employees.
ITEM 1A. RISK FACTORS.
RISK
FACTORS
You
should carefully consider the risks, uncertainties and other
factors described 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 other
information contained in or incorporated by reference to this
Annual Report on Form 10-K, including our financial statements and
the related notes.
WE
HAVE EXPERIENCED HISTORICAL LOSSES AND A SUBSTANTIAL ACCUMULATED
DEFICIT. IF WE ARE UNABLE TO REVERSE THIS TREND, WE WILL LIKELY BE
FORCED TO CEASE OPERATIONS.
Even
though we posted net profit for 2018 due to the conversion of some
payables to equity and expiration of some other debts, we incurred
operating losses for the past two fiscal years, which consist of
$405,027 for 2020 and $713,779 for 2019. In addition, we had an
accumulated deficit of $31,143,679 at December 31, 2020 as compared
with $30,030,877 at December 31, 2019. Further, we do not expect
positive cash flow from operations in the near term. There is no
assurance that actual cash requirements will not exceed our
estimates. In particular, additional capital will be required for
future periods for: (i) new product development expenses; (ii)
potential marketing costs and professional fees; or (iii) we
encounter greater costs associated with general and administrative
expenses or offering costs. As a result, we are unable to predict
whether we will achieve profitability in the future, or at
all.
The
uncertainty and factors described throughout this section may
impede our ability to economically develop, produce, and market our
products effectively. As a result, we may not be able to achieve or
sustain profitability or positive cash flows from operating
activities in the future.
WE
HAVE A WORKING CAPITAL DEFICIT AND SIGNIFICANT CAPITAL
REQUIREMENTS. SINCE WE WILL CONTINUE TO INCUR LOSSES UNTIL WE ARE
ABLE TO GENERATE SUFFICIENT REVENUES TO OFFSET OUR EXPENSES,
INVESTORS MAY BE UNABLE TO SELL OUR SHARES AT A PROFIT OR AT
ALL.
We
had a net loss of 1,238,976 for fiscal year ended December 31, 2019
and net cash used in operations of $120,417for the fiscal year
ended December 31, 2020. Because we have not yet achieved or
acquired sufficient operating capital and given these financial
results along with our expected cash requirements in 2021,
additional capital investment will be necessary to develop and
sustain our operations.
OUR
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM HAS RAISED DOUBT OVER
OUR ABILITY TO CONTINUE AS A GOING CONCERN.
The
independent registered public accounting firm’s report accompanying
our December 31, 2020 audited financial statements contains an
explanatory paragraph expressing substantial doubt about our
ability to continue as a going concern. The financial statements
have been prepared “assuming that the Company will continue as a
going concern” for a period of one year from the issuance of the
financial statements. Our ability to continue as a going concern is
dependent on raising additional capital to fund our operations and
ultimately on generating future profitable operations. There can be
no assurance that we will be able to raise sufficient additional
capital or eventually have positive cash flow from operations to
address all of our cash flow needs. If we are not able to find
alternative sources of cash or generate positive cash flow from
operations, our business and shareholders will be materially and
adversely affected
We
have incurred substantial operating and net losses, as well as
negative operating cash flow and do not have financing commitments
in place to meet expected cash requirements for the next twelve
months. Our net operating loss for continuing operations for the
year ended December 31, 2020 was $405,027 and our net loss for the
year ended December 31, 2019 was $713,779. Our accumulated deficit
was $31,143,679 at December 31, 2020. We are unable to fund our
day-to-day operations through revenues alone, and management
believes we will incur operating losses for the near future while
we develop our enhanced technology. We have had to rely on debt
financing to cover cash shortfalls. As a result, we continue to
have significant working capital and stockholders’ deficits
including a substantial accumulated deficit at December 31, 2020.
Our independent registered public accounting firms have included an
explanatory paragraph in their respective reports on our
consolidated financial statements for the fiscal years ended
December 31, 2019, and December 31, 2020 that expressed substantial
doubt regarding our ability to continue as a going
concern.
WE
NEED ADDITIONAL EXTERNAL CAPITAL AND IF WE ARE UNABLE TO RAISE
SUFFICIENT CAPITAL TO FUND OUR PLANS, WE MAY BE FORCED TO DELAY OR
CEASE OPERATIONS.
Based
on our current growth plan we believe we may require approximately
$150,000 in additional financing within the next twelve months to
develop our enhanced technology. Furthermore, if the cost of our
development, production and marketing programs are greater than
anticipated, we may have to seek additional funds through public or
private share offerings or arrangements with corporate partners.
There can be no assurance that we will be successful in our efforts
to raise these required funds, or on terms satisfactory to us. Our
success will depend upon our ability to access equity capital
markets and borrow on terms that are financially advantageous to
us. However, we may not be able to obtain additional funds on
acceptable terms. If we fail to obtain funds on acceptable terms,
then we might be forced to delay or abandon some or all of our
business plans or may not have sufficient working capital to
develop products, finance acquisitions, or pursue business
opportunities. If we borrow funds, then we could be forced to use a
large portion of our cash reserves, if any, to repay principal and
interest on those loans. If we issue our securities for capital,
then the interests of investors and stockholders will be diluted.
We are attempting to raise at least $300,000 through an offering of
securities.
WE
MUST SUCCESSFULLY INTRODUCE NEW OR ENHANCED PRODUCTS AND MANAGE THE
COSTS ASSOCIATED WITH PRODUCING SEVERAL PRODUCT LINES TO BE
SUCCESSFUL. WE OPERATE IN A MARKET WHICH IS SUBJECT TO RAPID
TECHNOLOGICAL AND OTHER CHANGES AND INCREASING COMPETITION COULD
LEAD TO PRICING PRESSURES, REDUCED OPERATING MARGINS, LOSS OF
MARKET SHARE AND INCREASED CAPITAL EXPENDITURES.
Our
future success depends on our ability to continue to improve our
existing products. For example, our short-term success will depend
on improvement of the ViewScan portal product line. We cannot be
certain that we will be successful at producing multiple product
lines and we may find that the cost of production of multiple
product lines inhibits our ability to maintain or improve our gross
profit margins. In addition, the failure of our products to gain or
maintain market acceptance or our failure to successfully manage
our cost of production could adversely affect our financial
condition.
The
markets for our ViewScan product is highly competitive and we
expect increased competition in the future that could adversely
affect our revenue and market share. Larger established companies
with high brand recognition may develop products and services that
are competitive with our core products and services. These
competitors may be able to devote greater resources than us to the
development, promotion and sale of their products and services and
respond more quickly than we can to new technologies or changes. We
may not be able to compete effectively with current or future
competitors, especially those with significantly greater resources
or more established customer bases, which may materially adversely
affect our sales and our business.
PROTECTION
OF OUR INTELLECTUAL PROPERTY IS LIMITED AND ANY MISUSE OF OUR
INTELLECTUAL PROPERTY BY OTHERS COULD HARM OUR BUSINESS, REPUTATION
AND COMPETITIVE POSITION.
Our
trademarks, copyrights, trade secrets, trade dress and designs are
valuable and integral to our success and competitive position.
However, we cannot assure you that we will be able to adequately
protect our proprietary rights through reliance on a combination of
copyrights, trademarks, trade secrets, confidentiality procedures,
contractual provisions and technical measures from outside
influences.
Protection
of trade secrets and other intellectual property rights in the
markets in which we operate and compete is highly uncertain and may
involve complex legal questions. We cannot completely prevent the
unauthorized use or infringement of our intellectual property
rights, as such prevention is inherently difficult.
We
also expect that the more successful we are, the more likely that
competitors will try to illegally use our proprietary information
and develop products that are similar to ours, which may infringe
on our proprietary rights. In addition, we could potentially lose
future trade secret protection for our source code if any
unauthorized disclosure of such code occurs. The loss of future
trade secret protection could make it easier for third parties to
compete with our products by copying functionality. Any changes in,
or unexpected interpretations of, the trade secret and other
intellectual property laws in any country in which we operate may
compromise our ability to enforce our trade secret and intellectual
property rights. Costly and time-consuming litigation could be
necessary to enforce and determine the scope of our confidential
information and trade secret protection. If we are unable to
protect our proprietary rights or if third parties independently
develop or gain access to our or similar technologies, our
business, service revenue, reputation and competitive position
could be materially adversely affected.
THE
CONFIDENTIALITY, NON-DISCLOSURE AND OTHER AGREEMENTS WE USE TO
PROTECT OUR PRODUCTS, TRADE SECRETS AND PROPRIETARY INFORMATION MAY
PROVE UNENFORCEABLE OR INADEQUATE.
We
protect our products, trade secrets and proprietary information, in
part, by requiring all of our employees and consultants to enter
into agreements providing for the maintenance of confidentiality.
We also enter into non-disclosure agreements with our technical
consultants to protect our confidential and proprietary
information. We cannot assure you that our confidentiality
agreements with our employees, consultants and other third parties
will not be breached, that we will be able to effectively enforce
these agreements, that we will have adequate remedies for any
breach, or that our trade secrets and other proprietary information
will not be disclosed or will otherwise be protected.
WE
HAVE NOT REGISTERED COPYRIGHTS FOR OUR VIEWSCAN PRODUCTS, WHICH MAY
LIMIT OUR ABILITY TO ENFORCE THEM.
We
have not registered our copyrights in all of our materials, website
information, designs or other copyrightable works. The United
States Copyright Act automatically protects all of our
copyrightable works, but without registration we cannot enforce
those copyrights against infringers or seek certain statutory
remedies for any such infringement. Preventing others from copying
our products, written materials and other copyrightable works is
important to our overall success in the marketplace. In the event
we decide to enforce any of our copyrights against infringers, we
will first be required to register the relevant copyrights, and we
cannot be sure that all of the material for which we seek copyright
registration would be registrable in whole or in part, or that once
registered, we would be successful in bringing a copyright claim
against any such infringers.
THE
SUCCESS OF OUR BUSINESS DEPENDS UPON THE CONTINUING CONTRIBUTION OF
OUR KEY PERSONNEL, INCLUDING MR. JOHN CAMPO, OUR CHIEF EXECUTIVE
OFFICER AND MR> GUNTHER THAN, OUR FORMER CHIEF EXECUTIVE
OFFICER, WHOSE KNOWLEDGE OF OUR BUSINESS WOULD BE DIFFICULT TO
REPLACE IN THE EVENT WE LOSE HIS SERVICES.
We
are dependent on the services of John Campo and Gunther Than, our
Chief Executive Officer and former Chief Executive Officer, and
members of our Board and our other executive officers and members
of our senior management team. For example, the loss of Mr. Campo
or Mr. Than could damage customer relations and could restrict our
ability to raise additional working capital if and when needed.
There can be no assurance that Mr. Than will continue in his
present capacity for any particular period of time. Other than
non-compete provisions of limited duration included in employment
agreements that we may or will have with certain executives, we do
not generally seek non-compete agreements with key personnel, and
they may leave and subsequently compete against us. The loss of
service of any of our senior management team, particularly those
who are not party to employment agreements with us, or our failure
to attract and retain other qualified and experienced personnel on
acceptable terms, could have a material adverse effect on our
business.
WE
MAY BE UNABLE TO ATTRACT AND RETAIN THE SKILLED EMPLOYEES NEEDED TO
SUSTAIN AND GROW OUR BUSINESS.
Our
success to date has largely depended on, and will continue to
depend on, the skills, efforts and motivations of our executive
team and employees, who generally have significant experience with
our Company. Our success also depends largely on our ability to
attract and retain highly qualified persons. We may experience
difficulties in locating and hiring qualified personnel and in
retaining such personnel once hired, which may materially and
adversely affect our business.
OUR
DIRECTORS AND OFFICERS ARE ABLE TO EXERCISE SIGNIFICANT INFLUENCE
OVER MATTERS REQUIRING STOCKHOLDER APPROVAL.
As of
the date of this Annual Report, we have 329,705,526 shares of
common stock issued and outstanding and 5,000,000 shares of
preferred stock issued and outstanding. As of May 29, 2020, our
directors and executive officers collectively hold approximately 5%
of the voting power of our common and 91% of the preferred stock
entitled to vote on any matter brought to a vote of the
stockholders. Including the effects of Gunther Than’s, our Chief
Executive Officer’s voting preferred stock, our directors and
officers have the power to vote approximately 5% of common shares
(based on the assumed effects of conversion of all of Mr. Than’s
preferred stock) as of the date of this Annual Report. Pursuant to
Colorado law and our bylaws, the holders of a majority of our
voting stock may authorize or take corporate action with only a
notice provided to our stockholders. A stockholder vote may not be
made available to our minority stockholders, and in any event, a
stockholder vote would be controlled by the majority
stockholders.
OUR
OFFICERS AND DIRECTORS MAY BE SUBJECT TO CONFLICTS OF
INTEREST.
Some
of our officers and directors serve only part time and can become
subject to conflicts of interest. Some devote part of their working
time to other business endeavors, including consulting
relationships with other entities, and have responsibilities to
these other entities. Such conflicts include deciding how much time
to devote to our affairs, as well as what business opportunities
should be presented to us. Because of these relationships, our
officers and directors could be subject to conflicts of interest.
Currently, we have no policy in place to address such conflicts of
interest.
COLORADO
LAW AND OUR ARTICLES OF INCORPORATION MAY PROTECT OUR DIRECTORS
FROM CERTAIN TYPES OF LAWSUITS.
Nevada
law provides that our officers and directors will not be liable to
us or our stockholders for monetary damages for all but certain
types of conduct as officers and directors. Our Bylaws permit us
broad indemnification powers to all persons against all damages
incurred in connection with our business to the fullest extent
provided or allowed by law. The exculpation provisions may have the
effect of preventing stockholders from recovering damages against
our officers and directors caused by their negligence, poor
judgment or other circumstances. The indemnification provisions may
require us to use our limited assets to defend our officers and
directors against claims, including claims arising out of their
negligence, poor judgment, or other circumstances.
FAILURE
TO MAINTAIN EFFECTIVE INTERNAL CONTROLS IN ACCORDANCE WITH SECTION
404 OF THE SARBANES-OXLEY ACT WOULD LEAD TO LOSS OF INVESTOR
CONFIDENCE IN OUR REPORTED FINANCIAL INFORMATION.
Pursuant
to proposals related to Section 404 of the Sarbanes-Oxley Act of
2002, beginning with our Annual Report on Amendment No. 2 to Form
10-K for the fiscal year ending December 31, 2008, we have been
required to furnish a report by our management on our internal
control over financial reporting. If we cannot provide reliable
financial reports or prevent fraud, then our business and operating
results could be harmed, investors could lose confidence in our
reported financial information, and the trading price of our stock
could drop significantly.
To
maintain compliance with Section 404 of the Act, we engage in a
process to document and evaluate our internal control over
financial reporting, which is both costly and challenging and
requires management to dedicate scarce internal resources and to
retain outside consultants.
During
the course of our testing, we may identify deficiencies which we
may not be able to remediate in time for securities disclosure
reporting deadlines. In addition, if we fail to maintain the
adequacy of our internal controls, as such standards are modified,
supplemented or amended from time to time, we may not be able to
ensure that we can conclude on an ongoing basis that we have
effective internal controls over financial reporting in accordance
with Section 404 of the Sarbanes-Oxley Act. Moreover, effective
internal controls, particularly those related to revenue
recognition, are necessary for us to produce reliable financial
reports and are important to helping prevent financial
fraud.
THERE
IS NO SIGNIFICANT ACTIVE TRADING MARKET FOR OUR SHARES, AND IF AN
ACTIVE TRADING MARKET DOES NOT DEVELOP, PURCHASERS OF OUR SHARES
MAY BE UNABLE TO SELL THEM PUBLICLY.
There
is no significant active trading market for our shares, and we do
not know if an active trading market will develop. An active market
will not develop unless broker-dealers develop interest in trading
our shares, and we may be unable to generate interest in our shares
among broker-dealers until we generate meaningful revenues and
profits from operations. Until that time occurs, if it does at all,
purchasers of our shares may be unable to sell them publicly. In
the absence of an active trading market:
● |
Investors
may have difficulty buying and selling our shares or obtaining
market quotations; |
|
|
● |
Market
visibility for our common stock may be limited; and |
Moreover,
the market price for our shares is likely to be highly volatile and
subject to wide fluctuations in response to various factors,
including the following: (i) actual or anticipated fluctuations in
our quarterly operating results and revisions to our expected
results; (ii) changes in financial estimates by securities research
analysts; (iii) conditions in the market for our products; (iv)
changes in the economic performance or market valuations of
companies specializing in the defense industries; (v) announcements
by us or our competitors of new services, strategic relationships,
joint ventures or capital commitments; (vi) addition or departure
of key personnel; (vii) litigation related to any intellectual
property; and (viii) sales or perceived potential sales of our
shares.
In
addition, the securities market has from time to time, and to an
even greater degree since the last quarter of 2007, experienced
significant price and volume fluctuations that are not related to
the operating performance of particular companies. These market
fluctuations may also have a material adverse effect on the market
price of our ordinary shares. Furthermore, in the past, following
periods of volatility in the market price of a public company’s
securities, shareholders have frequently instituted securities
class action litigation against that company. Litigation of this
kind could result in substantial costs and a diversion of our
management’s attention and resources.
OUR
COMMON STOCK IS CONSIDERED TO BE “PENNY STOCK.”
Our
common stock is considered to be a “penny stock” because it meets
one or more of the definitions in Rules 15g-2 through 15g-6
promulgated under Section 15(g) of the Securities Exchange Act of
1934, as amended. These include but are not limited to, the
following: (i) the stock trades at a price less than $5.00 per
share; (ii) it is not traded on a “recognized” national exchange;
(iii) it is not quoted on The NASDAQ Stock Market, or even if
quoted, has a price less than $5.00 per share; or (iv) is issued by
a company with net tangible assets less than $2.0 million, if in
business more than a continuous three years, or with average
revenues of less than $6.0 million for the past three years. The
principal result or effect of being designated a “penny stock” is
that securities broker-dealers cannot recommend the stock but must
trade it on an unsolicited basis.
The
SEC has adopted rules that regulate broker-dealer practices in
connection with transactions in “penny stocks.” Penny stocks
generally are equity securities with a price of less than $5.00
(other than securities registered on certain national securities
exchanges or quoted on the NASDAQ system, provided that current
price and volume information with respect to transactions in such
securities is provided by the exchange or system). Penny stock
rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from those rules, to deliver a
standardized risk disclosure document prepared by the SEC, which
specifies information about penny stocks and the nature and
significance of risks of the penny stock market. A broker-dealer
must also provide the customer with bid and offer quotations for
the penny stock, the compensation of the broker-dealer, and sales
person in the transaction, and monthly account statements
indicating the market value of each penny stock held in the
customer’s account. In addition, the penny stock rules require
that, prior to a transaction in a penny stock not otherwise exempt
from those rules, the broker-dealer must make a special written
determination that the penny stock is a suitable investment for the
purchaser and receive the purchaser’s written agreement to the
transaction. These disclosure requirements may have the effect of
reducing the trading activity in the secondary market for stock
that becomes subject to those penny stock rules. If a trading
market for our common stock develops, our common stock will
probably become subject to the penny stock rules, and shareholders
may have difficulty in selling their shares.
BROKER-DEALER
REQUIREMENTS MAY AFFECT TRADING AND LIQUIDITY.
Section
15(g) of the Securities Exchange Act of 1934, as amended, and Rule
15g-2 promulgated thereunder by the SEC require broker-dealers
dealing in penny stocks to provide potential investors with a
document disclosing the risks of penny stocks and to obtain a
manually signed and dated written receipt of the document before
effecting any transaction in a penny stock for the investor’s
account. Potential investors in our common stock are urged to
obtain and read such disclosure carefully before purchasing any
shares that are deemed to be “penny stocks.” Moreover, Rule 15g-9
requires broker-dealers in penny stocks to approve the account of
any investor for transactions in such stocks before selling any
penny stock to that investor. This procedure requires the
broker-dealer to (i) obtain from the investor information
concerning his or her financial situation, investment experience
and investment objectives; (ii) reasonably determine, based on that
information, that transactions in penny stocks are suitable for the
investor and that the investor has sufficient knowledge and
experience as to be reasonably capable of evaluating the risks of
penny stock transactions; (iii) provide the investor with a written
statement setting forth the basis on which the broker-dealer made
the determination in (ii) above; and (iv) receive a signed and
dated copy of such statement from the investor, confirming that it
accurately reflects the investor’s financial situation, investment
experience and investment objectives. Compliance with these
requirements may make it more difficult for holders of our common
stock to resell their shares to third parties or to otherwise
dispose of them in the market or otherwise.
OUR
COMMON STOCK MAY BE VOLATILE, WHICH SUBSTANTIALLY INCREASES THE
RISK THAT YOU MAY NOT BE ABLE TO SELL YOUR SHARES AT OR ABOVE THE
PRICE THAT YOU MAY PAY FOR THE SHARES.
Because
of the limited trading market for our common stock, and because of
the possible price volatility, you may not be able to sell your
shares of common stock when you desire to do so. The inability to
sell your shares in a rapidly declining market may substantially
increase your risk of loss because of such illiquidity and because
the price for our common stock may suffer greater declines because
of its price volatility.
The
market price of our common stock may be higher or lower than the
price you may pay for your shares. Certain factors, some of which
are beyond our control, that may cause our share price to fluctuate
significantly include, but are not limited to, the
following:
● |
variations
in our quarterly operating results; |
|
|
● |
loss
of a key relationship or failure to complete significant
transactions; |
|
|
● |
additions
or departures of key personnel; and |
|
|
● |
fluctuations
in stock market price and volume. |
Additionally,
in recent years the stock market in general, and the
over-the-counter markets in particular, have experienced extreme
price and volume fluctuations. In some cases, these fluctuations
are unrelated or disproportionate to the operating performance of
the underlying company. These market and industry factors may
materially and adversely affect our stock price, regardless of our
operating performance.
In
the past, class action litigation often has been brought against
companies following periods of volatility in the market price of
those companies’ common stock. If we become involved in this type
of litigation in the future, it could result in substantial costs
and diversion of management attention and resources, which could
have a further negative effect on your investment in our
stock.
WE
HAVE NOT PAID, AND DO NOT INTEND TO PAY, CASH DIVIDENDS IN THE
FORESEEABLE FUTURE.
We
have not paid any cash dividends on our common stock and do not
intend to pay cash dividends in the foreseeable future. We intend
to retain future earnings, if any, for reinvestment in the
development and expansion of our business. Dividend payments in the
future may also be limited by other loan agreements or covenants
contained in other securities which we may issue. Any future
determination to pay cash dividends will be at the discretion of
our board of directors and depend on our financial condition,
results of operations, capital and legal requirements and such
other factors as our board of directors deems relevant.
SALES
OF OUR COMMON STOCK RELYING UPON RULE 144 MAY DEPRESS PRICES IN THE
MARKET FOR OUR COMMON STOCK BY A MATERIAL AMOUNT.
As of
the date of this Annual Report, all of our common stock held by
non-affiliates that was issued before December 31, 2015 and was
either issued in a registered offer for sale or exchange or has
been issued and outstanding beyond applicable holding periods
imposed by Rule 144 under the Securities Act of 1933, as amended.
Thus, with 100% of our common stock issued prior to December 31,
2013 to non-affiliates being freely tradeable, there is a
significant risk that sales under Rule 144 or under any other
exemption from the Securities Act, if available, or pursuant to
registration of shares of Common Stock of present stockholders, may
have a depressive effect upon the price of our common stock in the
over-the-counter market, especially in situations where a large
volume of shares is offered for sale at the same time.
Securities
saleable pursuant to the Rule 144 exemption from registration may
only be resold, however, if all of the requirements of Rule 144
have been met, including, but not limited to, the requirement that
the issuer of the securities have made available all required
public information. However, there is no limit on the amount of
restricted securities that may be sold by a non-affiliate (i.e., a
stockholder who has not been an officer, director or control person
for at least 90 consecutive days) after the restricted securities
have been held by the owner for a period of at least six months and
the other requirements of Rule 144 have been satisfied. Presently
shares of restricted Common Stock held by non-affiliates of the
Company may be sold, subject to compliance with Rule 144, six
months after issuance, provided that our Exchange Act registration
remains in effect and we are current in our disclosure reporting
obligations.
ITEM 1B. UNRESOLVED STAFF
COMMENTS.
As of
the date of this Annual Report, there are no unresolved SEC Staff
comments.
ITEM 2. DESCRIPTION OF
PROPERTY
Mr.Than
is supplying office space for administration and are refurbishing a
workshop which will be used for assembly of the new enhanced
units.
ITEM 3. LEGAL
PROCEEDINGS.
As of
the date of this Annual Report, management is not aware of any
legal proceedings contemplated by any governmental authority or any
other party involving us or our properties. As of the date of this
Annual Report, no director, officer or affiliate is (i) a party
adverse to us in any legal proceeding, or (ii) has an adverse
interest to us in any legal proceedings. Management is not aware of
any other legal proceedings pending or that have been threatened
against us or our properties.
ITEM 4. MINE SAFETY
DISCLOSURES.
Not
Applicable.
PART II
ITEM 5. MARKET FOR COMMON EQUITY,
RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASERS OF
EQUITY SECURITIES.
MARKET
INFORMATION
Our
common stock has been quoted on the OTC Bulletin Board under the
symbol “VYST.OB” up to October 2008 and from October 17, 2008 under
the symbol “VSYM.OB” and is traded over the counter. The following
table sets forth the high and low price information of the
Company’s common stock for the periods indicated.
OTC
Bulletin Board (1) (2)
FISCAL YEAR ENDED
DECEMBER 31, 2020: |
|
High |
|
|
Low |
|
Fourth Quarter |
|
$ |
0.00002 |
|
|
$ |
0.00001 |
|
Third Quarter |
|
$ |
0.00002 |
|
|
$ |
0.00001 |
|
Second Quarter |
|
$ |
0.002 |
|
|
$ |
0.0010 |
|
First Quarter |
|
$ |
0.001 |
|
|
$ |
0.002 |
|
|
|
|
|
|
|
|
|
|
FISCAL YEAR ENDED DECEMBER 31, 2019: |
|
|
|
|
|
|
|
|
Fourth Quarter |
|
$ |
0.002 |
|
|
|
0.002 |
|
Third Quarter |
|
$ |
0.003 |
|
|
$ |
0.003 |
|
Second Quarter |
|
$ |
0.002 |
|
|
$ |
0.002 |
|
First Quarter |
|
$ |
0.001 |
|
|
$ |
0.002 |
|
(1) |
Over-the-counter
market quotations reflect inter-dealer prices without retail
mark-up, mark-down or commission, and may not represent actual
transactions. |
(2) |
Source:
www.nasdaq.com |
SHAREHOLDERS
OF RECORD
As of
July 12, 2022, there were approximately 407 holders of record of
our common stock, not including holders who hold their shares in
street name.
DIVIDENDS
We
have never declared or paid a cash dividend. At this time, we do
not anticipate paying dividends in the future. We are under no
legal or contractual obligation to declare or to pay dividends, and
the timing and amount of any future cash dividends and
distributions is at the discretion of our Board of Directors and
will depend, among other things, on our future after-tax earnings,
operations, capital requirements, borrowing capacity, financial
condition and general business conditions. We plan to retain any
earnings for use in the operation of our business and to fund
future growth. You should not purchase our Shares on the
expectation of future dividends.
SECURITIES
AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION
PLANS
Equity
Compensation Plan Information
Plan Category |
|
Number
of
securities
to be issued
upon
exercise
of
outstanding
options,
warrants
and rights
|
|
|
Weighted-
average
exercise
price
of
outstanding
options,
warrants
and
rights
|
|
|
Number
of securities
remaining
available
for
future
issuance under equity compensation plans
(excluding
securities
reflected
in column (a))
|
|
Equity compensation plans
approved by security holders |
|
|
5,000,000 |
(1) |
|
|
- |
|
|
|
36,340,900 |
(2) |
Equity compensation plans not approved
by security holders |
|
|
- |
|
|
|
- |
|
|
|
- |
|
Total |
|
|
5,000,000 |
|
|
|
- |
|
|
|
36,340,900 |
|
|
(1) |
Represents
shares reserved for the Company’s 2010 Equity Incentive
Plan. |
|
(2) |
Represents
shares reserved for the Company’s 2010 Service Provider Stock
Compensation Plan. |
2010
EQUITY INCENTIVE PLAN
The
2010 Equity Incentive Plan (“EIP”) is intended to attract,
motivate, and retain employees of the Company, consultants who
provide significant services to the Company, and members of the
Board of Directors of the Company who are not employees of the
Company. The EIP is designed to further the growth and financial
success of the Company by aligning the interests of the
participants, through the ownership of stock and through other
incentives, with the interests of the Company’s
stockholders.
Benefits
under the 2010 EIP. As defined under the 2010 EIP, the
Board may grant any one or a combination of Incentive Stock Options
(within meaning of the Code), Non-Qualified Stock Options,
Restricted Stock, as well as Performance Awards (collectively,
“Awards”).
Administration
of the 2010 Equity Incentive Plan. The EIP will be administered
by the Board of Directors. If it chooses, the Board may delegate
its authority to a Compensation Committee to be appointed by the
Board (the “Committee”), which Committee may be comprised of two or
more “outside directors” as described in Section 162(m) of the
Internal Revenue Code of 1986, as amended (the “Code”). Subject to
certain limitations in the 2010 EIP, the Board establishes the
terms and conditions of awards granted under the 2010 EIP,
interprets the 2010 EIP and all awards under the 2010 EIP, and
administers the 2010 EIP.
Eligible
Participants under the 2010 EIP. Except for Incentive Stock
Options which may only be granted to Employees of the Company,
Awards under the 2010 EIP may be granted to Employees, Directors,
and Consultants of the Company (as such terms are defined in the
2010 EIP) who are designated by the Board. No employee may receive
Awards under this 2010 EIP in any given year which, singly or in
the aggregate, cover more than 150,000 shares of the Company’s
Common Stock.
Shares
Available under the 2010 EIP. The aggregate number of shares of
Common Stock that may be issued or transferred to grantees under
the 2010 EIP shall not exceed 50,000,000 shares. If there is a
stock split, stock dividend or other relevant change affecting the
Company’s shares, appropriate adjustments will be made in the
number of shares that may be issued or transferred in the future
and in the number of shares and price of all outstanding Awards
made before such event. If shares under an Award are not issued or
transferred, those shares would again be available for inclusion in
future Award grants.
Awards
Under the 2010 EIP
Stock
Options. The Board may grant options qualifying as incentive
stock options under the Code and nonqualified stock options. The
term of an option shall be fixed by the Board, but shall not exceed
ten years. In the case of death of the holder of the option or upon
the termination, removal or resignation of the option holder for
any reason other than for cause within one year of the occurrence
of a Change of Control (as that term is defined in the 2010 EIP),
an option may be extended for up to 12 months depending on the
circumstances. The option price shall not be less than the fair
market value of the Common Stock on the date of grant. In the case
of an award of Incentive Options to an employee possessing more
than 10% of the total combined voting power of all classes of stock
of the Company or any parent corporation or subsidiary corporation
as those terms are defined in the Code, the option price shall not
be less than 110% of the fair market value of the Common Stock on
the date of grant and the option term shall not exceed five years
from date of grant. Payment of the option price may be by cash or,
with the consent of the Board, by tender of shares of Common Stock
having an equivalent fair market value or delivery of shares of
Common Stock for which the option is being exercised to a broker
for sale on behalf of the option holder. With respect to Incentive
Options, the aggregate fair market value of shares of Common Stock
for which one or more options granted may for the first time become
exercisable during any calendar year shall not exceed
$100,000.
Restricted
Stock. The Board may also award shares of Restricted Stock. The
shares will be issued as restricted stock within the meaning of
Rule 144 of the Securities Act of 1933, as amended. Such grant
would set forth the terms and conditions of the award, including
the imposition of a vesting schedule during which the grantee must
remain in the employ of the Company in order to retain the shares
under grant. If the grantee’s employment terminates during the
period, the grant would terminate and the grantee would be required
to return any unvested shares to the Company. However, the Board
may provide complete or partial exceptions to this requirement as
it deems equitable. Unless an Award specifically provides
otherwise, any shares not otherwise vested shall vest upon the
death, disability, termination, removal or resignation of the
grantee for any reason other than for cause within one year of the
occurrence of a Change of Control (as that term is defined in the
2010 EIP). The grantee cannot dispose of the shares prior to the
expiration of forfeiture restrictions set forth in the grant.
During this period, however, the grantee would be entitled to vote
the shares and, at the discretion of the Board, receive dividends.
Each certificate would bear a legend giving notice of the
restrictions in the grant.
Performance
Awards. The Board may grant Performance Units or Performance
Shares in consideration of services performed or to be performed,
under which payment may be made in shares of the Common Stock, a
combination of shares and cash, or cash if the performance of the
Company or any subsidiary or affiliate of the Company selected by
the Board meets certain goals established by the Board during an
award period. The Board would determine the goals, the length of an
award period and the minimum performance required before a payment
would be made. In order to receive payment, a grantee must remain
in the employ of the Company until the completion of, and
settlement under, the award period, except that the Board may
provide complete or partial exceptions to that requirement as it
deems equitable.
Other
Stock or Performance-Based Awards. The Board also may
grant shares of common stock or performance based Awards on the
terms and conditions it determines in its discretion, as well as
other rights not an Award otherwise described in the 2010 EIP but
is denominated or payable in, valued in whole or in part by
reference to, or otherwise based on or related to, shares of common
stock or cash as are deemed by the Board to be consistent with the
purposes of the 2010 EIP. Such other stock or performance-based
Awards may be in addition to, or in lieu of, cash or other
compensation due the grantee.
Other
Information about the 2010 EIP
The
2010 EIP will terminate in 2020 unless terminated earlier by our
Board or extended by our Board with the approval of the
stockholders.
Our
Board may amend, suspend or terminate the 2010 EIP at any time, but
such amendment, suspension or termination shall not adversely
affect any Award then outstanding without the participant’s
consent. Any amendment that would constitute a “material amendment”
of the 2010 EIP (as determined by the Board, in its sole
discretion, subject to the rules and regulations of the OTCBB, if
any, governing the use of such term in the context of an employee
benefit plan), as amended, shall be subject to stockholder
approval. Likewise, if the Exchange Act requires the Company to
obtain stockholder approval, then such approval will be
sought.
Unless
approved by stockholders or as specifically otherwise required by
the 2010 EIP (for example, in the case of a stock split), no
adjustments or reduction of the exercise price of any outstanding
incentive may be made in the event of a decline in stock price,
either by reducing the exercise price of outstanding incentives or
by canceling outstanding incentives in connection with re-granting
incentives at a lower price to the same individual.
Awards
may be exercised only by the Employee, Director, or Consultant to
whom they are granted and are generally not assignable or
transferable except for limited circumstances upon a grantee’s
death, or pursuant to rules that may be adopted by the Board. The
Board may establish rules and procedures to permit a grantee to
defer recognition of income or gain for incentives under the 2010
EIP.
It is
anticipated that all members of the Board of Directors will
participate in the 2010 EIP. Although the 2010 EIP has been
approved, the Board of Directors has not contracted with the
Company to implement the 2010 EIP into effect.
Amendments,
Termination, Alteration or Suspension of the plan will impair the
rights of any participant, only if mutually agreed to, in writing
and signed by the participant and the Company.
General
Information about the 2010 Service Provider Stock Compensation
Plan
The
Company’s 2010 Service Provider Stock Compensation Plan (“SCP”) is
intended to promote the interests of the Company and its
subsidiaries by offering those officers, directors, employees and
consultants or advisors of the Company or any subsidiary who assist
in the development and success of the business of the Company or
any subsidiary, the opportunity to be compensated for their
services in the form of Company stock in lieu of payment in
cash.
Benefits
of the 2010 SCP. The 2010 SCP is registered with the SEC
pursuant to the Securities Act. Therefore, all eligible recipients
accepting awards of stock for services under the SCP will receive
registered stock. Payment for services in the form of registered
stock is beneficial to the Company because it enables the Company
to preserve its cash while enabling it the possibility of receiving
valuable services from service providers. Not all service providers
are expected to accept payment in Company stock. Those service
providers that accept payment for services in Company Common Stock
may liquidate the stock at any time at market price provided there
is sufficient volume in the stock at time of sale. The usual
investment risks in our Common Stock would apply to the stock
issued pursuant to the SCP.
Administration
of the 2010 SCP. The 2010 SCP initially will be administered by
the Board of Directors. If it chooses, the Board may delegate its
authority to a Board-appointed committee comprised of two or more
“outside directors” as described in Section 162(m) of the Internal
Revenue Code of 1986, as amended, for general administration of the
SCP. The Board may also delegate its authority to a committee
comprised of inside directors to administrate the SCP for
non-executive officers and other service providers. The Board or
the respective committees establish the terms and conditions of
awards granted under the 2010 SCP, interpret the 2010 SCP and all
awards under the 2010 SCP, and administer the 2010 SCP.
Eligible
Participants under the 2010 SCP. Awards under the 2010 SCP may
be granted to employees, officers, or directors of the Company or
its affiliates, and/or to consultants or advisers currently
providing bona fide services to the Company or its affiliates
(“Service Providers”). Awards may be made under the SCP only if, at
the time of grant, a Form S-8 Registration Statement under the
Securities Act (“Form S-8”) is available to register either the
offer or the sale of the Company’s securities to such Service
Provider because the nature of the services that the Service
Provider is providing to the Company is consistent with the
instructions governing the use of Form S-8, including the SEC
interpretive Releases pertaining to Form S-8, then in effect. No
Award under the Plan may be made for services provided in
connection with the offer or sale of securities in a
capital-raising transaction or for services that directly or
indirectly promote or maintain a market for the Company’s
securities.
Shares
Available under the 2010 SCP. The aggregate number of shares of
Common Stock that may be issued or transferred to grantees under
the 2010 SCP shall not exceed 50,000,000 shares. The number of
shares of Stock reserved for the SCP shall be adjusted
proportionally to reflect, subject to any required action by
stockholders, any stock dividend or split, recapitalization,
merger, consolidation, spin-off, reorganization, combination or
exchange of shares or other similar corporate change. Available
shares under a stockholder approved plan of an acquired company (as
appropriately adjusted to reflect the transaction) may be used for
Awards under the SCP and will not reduce the number of shares
available under the SCP, subject to applicable stock exchange
requirements. The conversion of any convertible securities of the
Company shall not be treated as an increase in shares effected
without receipt of consideration. If shares covered by an Award are
forfeited or expire, or terminates without delivery of any stock
subject thereto, those shares would again be available for
inclusion in future Award grants.
Other
Information about the 2010 SCP. The 2010 SCP will terminate
automatically in 2020 unless terminated earlier by our Board or
extended by our Board with the approval of the
stockholders.
Our
Board may amend, suspend or terminate the 2010 SCP at any time as
to any shares of Common Stock as to which awards have not been
made. An amendment shall be contingent on approval of the Company’s
stockholders to the extent stated by the Board, required by
applicable law or required by applicable stock exchange
requirements.
Grant
of Options under the 2010 SCP. During fiscal year ended
December 31, 2019, we did not grant any stock options. During
fiscal year ended December 31, 2013, we granted an aggregate of
10,000,000 stock options to one of our directors. The stock options
are exercisable into shares of common stock at $0.03 per share for
a period of ten years. As of the date of this Annual Report, none
of the stock options have been exercised. See “Item 11. Executive
Compensation”.
INFORMATION
RELATING TO OUTSTANDING SHARES
As of
December 31, 2019 there were 548,915,727 shares of our common stock
issued and outstanding and 5,589,647 shares of our preferred stock
issued and outstanding. Except for 50,000,000 shares reserved under
our 2010 Equity Incentive Plan, we have not reserved any other
shares for issuance upon exercise of common stock purchase warrants
or stock options.
All
of our issued and outstanding common shares (of which 45,507,132
shares are owned by officers, directors and principal stock
holders) were issued in a registered transaction or otherwise have
been held for a period in excess of six months and are eligible to
be resold pursuant to Rule 144 promulgated under the Securities
Act.
The
resale of our shares of common stock owned by officers, directors
and affiliates is subject to the volume limitations of Rule 144. In
general, Rule 144 permits our affiliate shareholders who have
beneficially-owned restricted shares of common stock for at least
six months to sell without registration, within a three-month
period, a number of shares not exceeding one percent of the then
outstanding shares of common stock. Furthermore, if such shares are
held for at least six months by a person not affiliated with the
company (in general, a person who is not one of our executive
officers, directors or principal shareholders during the three
month period prior to resale), such restricted shares can be sold
without any volume limitation, provided all of the other
requirements for resale under Rule 144 are applicable.
RECENT
SALES OF UNREGISTERED SECURITIES
During
fiscal year ended December 31, 2019 we issued an aggregate of
231,210,201 shares of common stock to convert principal and accrued
interest on convertible debentures.
USE
OF PROCEEDS FROM REGISTERED SECURITIES
2014
Registration Statement
On
March 10, 2014, we filed a registration statement with the
Securities and Exchange Commission Form S-1 to register 100,000,000
shares of our common stock at a per share price of $0.04 to raise
up to $4,000,000.00 in proceeds and to register 6,000,000 shares on
behalf of two selling shareholders. The SEC file number of the
registration statement is 333-169804. The Form S-1 was declared
effective by the SEC on August 14, 2014. The stated primary
purposes of the offering are to obtain additional capital to: (1)
facilitate product fulfillment (manufacturing, packaging and
shipment), which we anticipate will enable future orders to be self
funding; (2) provide working capital to finance corporate
acquisitions and the integration of new technologies; and (3)
retire debt through cash payment or the exchange of debt
obligations with payment in registered common stock. The offering
price for our shares registered in the offering is $0.04 per share
for an aggregate offering price of $4,000,000.00.
As of
the date of this Annual Report, we have not sold or exchanged
common stock registered in the registration statement for cash,
services, or in exchange for forgiveness of any debt obligation.
The offering at all times has been self-underwritten, meaning we
have been offering the registered shares ourselves, and we have not
entered into an agreement for an underwriter to acquire some or all
of the shares registered. We have not incurred a material amount of
expenses in offering the shares for sale because the market price
of our common stock was below the fixed offering price provided in
the prospectus. Also, we understand that the selling shareholders
named in the prospectus have not sold their respective shares
registered in the registration statement.
ISSUER
PURCHASE OF SECURITIES
None.
ITEM 6. SELECTED FINANCIAL
DATA.
Not
Applicable.
ITEM 7. MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
The
following analysis of our consolidated financial condition and
results of operations for the years ended December 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. On June 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.
On July 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
On
July 30, 2020, Charles Davis, the Company’s longtime accountant,
received a letter from the IRS indicating under $ 10,000 owed in
payroll taxes for several pay periods between 2012-2015. Although
Mr. Davis died on November 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 late Mr. Davis’ office that is being reviewed.
Subsequent
Events
On
January 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 dated January 5, 2021.
On
January 13, 2021, the Company issued 195,889,500 shares of common
stock to convert a convertible debenture and accrued interest from
a note dated October 8, 2019.
On
January 19, 2021, the SEC temporarily suspended trading in View
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 dated November 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 dated
November 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 in Colombia. 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 on February 19, 2021. Due to delays caused
by the unexpected suspension, the Company is reassessing the
dividend distribution, and exploring alternatives to capitalize
their Colombia cannabis interest.
On
June 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
July 1, 2021, the Company entered into a Stock Purchase Agreement
with an accredited investor for 75,000,000 restricted
shares.
On
August 6, 2021, the Company entered into a Stock Purchase Agreement
with an unaffiliated investor for 150,000,000 restricted
shares.
On
August 6, 2021, the Company entered into a Stock Purchase Agreement
with an unaffiliated investor for 150,000,000 restricted
shares.
On
August 9, 2021, the Company’s Board of Directors made the decision
to engage independent registered public accounting firm Yusufali
& Associates, LLC to become its new independent registered
public accounting firm.
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 give
View 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 called IP-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.
RESULTS
OF OPERATIONS FOR FISCAL YEARS ENDED DECEMBER 31, 2019 AND DECEMBER
31, 2018
The
following discussions are based on the consolidated financial
statements of View Systems and its subsidiaries. These charts and
discussions summarize our financial statements for the years ended
December 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 December 31, 2020 was $-0-.
Fiscal
Year Ended December 31, 2020 Compared to Fiscal Year Ended December
31, 2019.
Our
net loss for fiscal year ended December 31, 2019 was $(1,238,976)
compared to a net loss of $(1,112,802) for fiscal year ended
December 31, 2020.
We
generated revenues of $2,904 during fiscal year ended December 31,
2020 compared to revenues of $1,400 during fiscal year ended
December 31, 2019.
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 ended
December 31, 2019 as compared to an operating loss of ($405,027) in
fiscal year ended in December 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 ended December
31, 2019 included a ($383,010) derivative, interest and loss on
stock conversion expense. The net loss during fiscal year ended
December 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 ended December 31, 2020 compared to 560,915,727 for fiscal
year ended December 31, 2019.
LIQUIDITY,
CAPITAL RESOURCES AND GOING CONCERN
Fiscal
Year Ended December 31, 2020
As of
December 31, 2020, our current assets were $21,220 and our current
liabilities were $2,114,854. As of December 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;.
The
increase in total assets during fiscal year ended December 31, 2020
from fiscal year ended December 31, 2018 was primarily due to an
investment in a related party.
As of
December 31, 2020, our total liabilities were $2,114,854 and was
comprised of current liabilities. The increase in liabilities
during fiscal year ended December 31, 2019 from fiscal year ended
December 31, 2020 was primarily due to the increase in convertible
loans and accrued derivative liability.
Stockholders’
deficit increased to ($1,573,858) for fiscal year ended December
31, 2019 from ($2,074,.526) for fiscal year ended December 31,
2020.
Cash
Flows from Operating Activities
We
have not generated positive cash flows from operating
activities.
Cash
Flows from Investing Activities
For
fiscal year ended December 31, 2020, net cash flows used in
investing activities was $0 compared to $0 for fiscal year ended
December 31, 2019.
Cash
Flows from Financing Activities
For
the fiscal year ended December 31, 2019, net cash flows provided
from financing activities was $210,427 compared to $120,802 for
fiscal year ended December 31, 2020, which primarily consisted of
proceeds from convertible notes.
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
ended December 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.
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
for December 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 7833 Walker Dr., Greenbelt, Maryland 20770,
during 2020 & 2021.We rented on a quarter to quarter
basis.
Our
total current liabilities increased from ($1,594,693) in fiscal
year ended December 31, 2019 compared to ($2,114,854) at fiscal
year ended December 31, 2020. As of December 31, 2020, our short
and long term notes payable consist of the following:
Stockholder |
|
|
|
|
|
|
Demand loan payable
with interest at 5% per month dated September 18, 2009. The loan is
secured by the Company’s accounts receivable. The note was payable
in full on December 17, 2009 and is currently in default. |
|
|
50,000 |
|
|
|
50,000 |
|
|
|
|
|
|
|
|
|
|
Convertible promissory note with
interest at 12% per year dated January 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 due October 24, 2018 and is currently in default |
|
|
16,831 |
|
|
|
53,000 |
|
|
|
|
|
|
|
|
|
|
Convertible promissory note with
interest at 12% per year dated July 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 due July 2, 2019 and is currently in default |
|
|
40,000 |
|
|
|
40,000 |
|
|
|
|
|
|
|
|
|
|
Convertible promissory note with
interest at 12% per year dated August 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 due August 19, 2020 |
|
|
38,000 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Convertible promissory note with
interest at 12% per year dated October 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 due October 20, 2020 |
|
|
50,000 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Convertible promissory note with
interest at 12% per year dated October 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 |
|
|
|
- |
|
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.
ITEM 7A. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK.
As a
“smaller reporting company”, the Company is not required to provide
this information.
ITEM 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA.
VIEW
SYSTEMS, INC.
CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER
31, 2020 AND 2019
C
O N T E N T S
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
The
Board of Directors and
Stockholders
of view Systems, Inc. and Subsidiaries
Opinion
on the Consolidated Financial Statements
We
have audited the accompanying consolidated balance sheets of View
Systems, Inc. (the “Company”) as of December 31, 2020, the related
consolidated statements of operations, stockholders’ deficit, and
cash flows for the year in the period ended December 31, 2020, and
the related notes (collectively referred to as the “consolidated
financial statements”). In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial
position of the Company as of December 31, 2020, and the results of
its operations and its cash flows for each of the year in the
period ended December 31, 2020, in conformity with accounting
principles generally accepted in the United States of
America.
Basis
of Opinion
These
consolidated financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion
on the Company’s consolidated financial statements based on our
audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (“PCAOB”) and
are required to be independent with respect to the Company in
accordance with U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and
the PCAOB.
We
conducted our audits in accordance with standards of the Public
Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of
material misstatement, whether due to fraud or error. The Company
is not required to have, nor were we engaged to perform, an audit
of its internal control over financial reporting. As part of our
audits we are required to obtain an understanding of internal
control over financial reporting but not for the purpose of
expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express
no such opinion.
Our
audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis
for our opinion.
Substantial
Doubt About the Company’s Ability to Continue as a Going
Concern
As
discussed in Note 2 to the consolidated financial statements, the
Company’s continuing operating losses raise substantial doubt about
its ability to continue as a going concern for a period of one year
from the issuance of the consolidated financial statements.
Management’s plans are also described in Note 2. The consolidated
financial statements do not include adjustments that might result
from the outcome of this uncertainty.
View Systems, Inc. and
Subsidiaries
Consolidated Balance Sheets
December
31 , 2020 and 2019
|
|
2020 |
|
|
2019 |
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
1,220 |
|
|
$ |
835 |
|
Investment in related party |
|
|
20,000 |
|
|
|
20,000 |
|
Total current assets |
|
|
21,220 |
|
|
|
20,835 |
|
Other Assets |
|
|
|
|
|
|
|
|
Intangible asset - net |
|
|
19,108 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
40,328 |
|
|
$ |
20,835 |
|
|
|
|
|
|
|
|
|
|
LIABILITES AND STOCKHOLDERS’ (DEFICIT) |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable & accrued expenses |
|
$ |
110,684 |
|
|
$ |
161,715 |
|
Accrued and withheld payroll taxes payable |
|
|
134,237 |
|
|
|
134,237 |
|
Accrued compensation |
|
|
732,119 |
|
|
|
492,115 |
|
Accrued interest payable |
|
|
23,018 |
|
|
|
13,841 |
|
Loan
from stockholders |
|
|
263,512 |
|
|
|
266,512 |
|
Notes
payable |
|
|
215,270 |
|
|
|
142,421 |
|
Derivative liability |
|
|
636,014 |
|
|
|
383,852 |
|
Total current liabilities |
|
|
2,114,854 |
|
|
|
1,594,693 |
|
|
|
|
|
|
|
|
|
|
Stockholders’s Deficit |
|
|
|
|
|
|
|
|
Convertable prefered stock, authorized 10,000,000 shares,$0.001 par
value, issued and outstanding 5,589,647 |
|
|
5,590 |
|
|
|
5,590 |
|
Common
stock , authorized 5,000,000,000 shares,$0.001 par value, shares
issued and outstanding of 3,925,641,882 and 560,915,727,
respectively |
|
|
3,925,641 |
|
|
|
560,915 |
|
Common
stock issuable |
|
|
42,500 |
|
|
|
20,500 |
|
Additional paid -in- capital |
|
|
25,095,422 |
|
|
|
27,870,014 |
|
(Deficit) |
|
|
(31,143,679 |
) |
|
|
(30,030,877 |
) |
Total stockholders’ deficit |
|
|
(2,074,526 |
) |
|
|
(1,573,858 |
) |
Total liabilities and stockholders’ deficit |
|
$ |
40,328 |
|
|
$ |
20,835 |
|
See notes to the Consolidated Financal
Statements
View Systems, Inc. and
Subsidiaries
Consolidated
Statements of Operations
|
|
For the years ended |
|
|
|
December 31, |
|
|
|
|
2020 |
|
|
|
2019 |
|
Revenues: |
|
|
|
|
|
|
|
|
Royality Income |
|
$ |
2,904 |
|
|
$ |
- |
|
Extended warranties |
|
|
- |
|
|
|
1,400 |
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
2,904 |
|
|
|
1,400 |
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
General and administrative |
|
|
119,032 |
|
|
|
86,721 |
|
Depreciation and amortization |
|
|
4,607 |
|
|
|
- |
|
Professional fees |
|
|
44,292 |
|
|
|
62,159 |
|
Salaries and benefits |
|
|
240,000 |
|
|
|
566,299 |
|
Total operating expenses |
|
|
407,931 |
|
|
|
715,179 |
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
|
(405,027 |
) |
|
|
(713,779 |
) |
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
Derivative expense |
|
|
(474,846 |
) |
|
|
(383,010 |
) |
Interest expense |
|
|
(232,929 |
) |
|
|
(142,187 |
) |
Total other (expense) |
|
|
(707,775 |
) |
|
|
(525,197 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) |
|
$ |
(1,112,802.20 |
) |
|
$ |
(1,238,976.00 |
) |
|
|
|
|
|
|
|
|
|
Net (loss) per share (basic and diluted) |
|
$ |
0.00 |
|
|
$ |
0.00 |
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding (basic and diluted) |
|
|
1,693,086,344 |
|
|
|
390,579,210 |
|
See notes to the Consolidated Financal
Statements
View Systems, Inc. and
Subsidiaries
Consolidated
Statements of Changes In Stockholders’ (Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
|
|
|
Preferred |
|
|
Common |
|
|
Stock |
|
|
Paid-in |
|
|
|
|
|
|
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Issuable |
|
|
Capital |
|
|
Deficit |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2018 |
|
|
5,589,647 |
|
|
$ |
5,590 |
|
|
|
329,705,526 |
|
|
$ |
329,705 |
|
|
$ |
16,000 |
|
|
|
27,486,721 |
|
|
|
(28,791,901 |
) |
|
|
(953,885 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of convertible debt |
|
|
- |
|
|
|
- |
|
|
|
231,210,201 |
|
|
|
231,210 |
|
|
|
- |
|
|
|
177,293 |
|
|
|
- |
|
|
|
408,503 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial conversion features |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
206,000 |
|
|
|
- |
|
|
|
206,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
subscribed in private |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
placement |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
4,500 |
|
|
|
- |
|
|
|
- |
|
|
|
4,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year ended December 31, 2019 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,238,976 |
) |
|
|
(1,238,976 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2019 |
|
|
5,589,647 |
|
|
$ |
5,590 |
|
|
|
560,915,727 |
|
|
$ |
560,915 |
|
|
$ |
20,500 |
|
|
$ |
27,870,014 |
|
|
$ |
(30,030,877 |
) |
|
$ |
(1,573,858 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of convertible debt |
|
|
- |
|
|
|
- |
|
|
|
3,364,726,155 |
|
|
|
3,364,726 |
|
|
|
- |
|
|
|
(2,932,252 |
) |
|
|
- |
|
|
|
432,474 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial conversion features |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
157,660 |
|
|
|
- |
|
|
|
157,660 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
subscribed in private |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
placement |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
22,000 |
|
|
|
- |
|
|
|
- |
|
|
|
22,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year ended December 31, 2020 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,112,802 |
) |
|
|
(1,112,802 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2020 |
|
|
5,589,647 |
|
|
$ |
5,590 |
|
|
|
3,925,641,882 |
|
|
$ |
3,925,641 |
|
|
$ |
42,500 |
|
|
$ |
25,095,422 |
|
|
$ |
(31,143,679 |
) |
|
|
(2,074,526 |
) |
See notes to the Consolidated Financal
Statements
View Systems, Inc. and
Subsidiaries
Consolidated
Statements of Cash Flows
|
|
For the Years Ended |
|
|
|
December 31, |
|
|
|
|
2020 |
|
|
|
2019 |
|
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities: |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(1,112,802 |
) |
|
$ |
(1,238,976 |
) |
|
|
|
|
|
|
|
|
|
Accretion of debt discount |
|
|
226,387 |
|
|
|
113,923 |
|
Change
in value of derivative liability |
|
|
474,846 |
|
|
|
383,010 |
|
Depreciation and amortization |
|
|
4,607 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Change
in operating assets and liabilities: |
|
|
|
|
|
|
|
|
(Increase) decrease in cash from: |
|
|
|
|
|
|
|
|
Investment in related parties |
|
|
- |
|
|
|
(20,000 |
) |
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash from: |
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
|
37,364 |
|
|
|
33,472 |
|
Deferred compensation |
|
|
240,004 |
|
|
|
492,115 |
|
Accrued interest payable |
|
|
9,177 |
|
|
|
28,264 |
|
Deferred revenue |
|
|
- |
|
|
|
(1,400 |
) |
Net cash used in operating activities |
|
|
(120,417 |
) |
|
|
(209,592 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities: |
|
|
|
|
|
|
|
|
Bank
overdraft |
|
|
- |
|
|
|
(73 |
) |
Repayments of stockholders loans |
|
|
(3,000 |
) |
|
|
- |
|
Proceeds from stock subscriptions |
|
|
22,000 |
|
|
|
4,500 |
|
Repayment of notes payable |
|
|
(55,858 |
) |
|
|
- |
|
Proceeds from notes payable |
|
|
157,660 |
|
|
|
206,000 |
|
Net cash provided by financing activities |
|
|
120,802 |
|
|
|
210,427 |
|
|
|
|
|
|
|
|
|
|
Increase in cash |
|
|
385 |
|
|
|
835 |
|
|
|
|
|
|
|
|
|
|
Cash
at beginning of the year |
|
|
835 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Cash at end of the year |
|
|
1,220 |
|
|
|
835 |
|
See notes to the Consolidated Financal
Statements
VIEW SYSTEMS, INC. and
SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2020 AND 2019
1.
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Nature
of Operations
View
Systems, Inc. and Subsidiaries (the “Company”) designs, develops
and sells 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. In July 2009, the Company
acquired FibreXpress, Inc., which is a company that specializes in
developing and selling equipment and components for the fiber optic
and communication cable industries.
During
the second quarter of 2018, the Company established a new business
line in the erectile dysfunction medical market by opening one
clinic within its’ Medical Therapeutics subsidiary. In the fourth
quarter of 2018, the Company sold its Medical Therapeutics division
to another company called Ultimate Sports, Inc. (USPS.pk). It is
intended for Dr. Massen to spent significant time continuing that
business for USPS.
Basis
of Consolidation
The
consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries, Milestone Technology,
Inc. and FibreXpress, Inc. 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.
Cash
and Cash Equivalents
Cash
and cash equivalents include all highly liquid investments with
original maturities of three months or less.
VIEW
SYSTEMS, INC. and SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2020 AND 2019
1.
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Revenue
Recognition”)
Effective
January 1, 2018, the Company adopted the Financial Accounting
Standards Board (“FASB”) Accounting Standards Update (“ASU”) No.
2014-9, “Revenue from Contracts with Customers” and the related
amendments (“Topic 606”) using the modified retrospective
method. Topic 606 was applied to all uncompleted contracts by
recognizing the cumulative effect of initially applying Topics an
adjustment to the opening balancer of equity at January 1,
2018.
Revenue
is recognized in accordance with the Accounting Standards
Codification (“ASC”) Topic 606. The Company performs the following
five steps: (i) identify the contract(s) with a customer, (ii)
identify the performance obligations in the contract, (iii)
determine the transaction price, (iv) allocate the transaction
price to the performance obligations in the contract, and (v)
recognize revenue when (or as) the entity satisfies a performance
obligation. The Company applies the five-step model to arrangements
that meet the definition of a contract under Topic 606, including
when it is probable that the entity will collect the consideration
it is entitled to in exchange for the goods or services it
transfers to the customer. At contract inception, once the contract
is determined to be within the scope of Topic 606, the Company
evaluates the goods or services promised within each contract
related performance obligation and assesses whether each promised
good or service is distinct. The Company recognizes as revenue the
amount of the transaction price that is allocated to the respective
performance obligation when (or as) the performance obligation is
satisfied.
The
Company has three main products, namely the concealed weapons
detection system, the visual first responder system and the
Viewmaxx digital video system. The concealed weapons detection
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.
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.
|
|
Year
Ended December 31, |
|
|
|
2020 |
|
|
2019 |
|
Royalty Income |
|
$ |
2,904 |
|
|
|
|
|
Extended Warranty |
|
|
|
|
|
$ |
1,400 |
|
During
2020, the Company did not sell its’ products or installation and
training, but rather only fulfilled extended warranties on its’
existing installed units. .During 2019, sales consisted of the sale
of one demonstration unit and the fulfillment of extended
warranties. Under the new guidance, there is no change in our
revenue recognition for extended warranties as compared to revenue
recognition for these transactions under the prior revenue
standards. The Company recognizes revenue from extended warranty
contracts ratably over the warranty period.
Property
and Equipment
Property
and equipment is recorded at cost and depreciated over their useful
lives, using the straight-line method. 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 December 31, 2020 and 2019 $0.
VIEW
SYSTEMS, INC. and SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2020 AND 2019
1.
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Income
Taxes
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 carry forwards. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in
operations in the period the rate change becomes effective.
A valuation allowance
is recorded for the net deferred tax asset when it is more likely
than not that such net
deferred tax asset will not be realized.
The
Company files income tax returns in the U.S. federal jurisdictions,
and in various state jurisdictions. The Company policy is to
recognize interest and
penalties related to unrecognized tax benefits as income tax
expense. The Company believes that it has appropriate support for
the income tax positions it takes and expects to take on its tax
returns, and that its accruals for tax liabilities are adequate for
all open years based on an assessment of many factors including
past experience and interpretations of tax law applied to the facts
of each matter.
Research
and Development
Research and development costs
are expensed as incurred, as at December 31, 2019 and December 31,
2020 the Company have no Research and development cost.
Advertising
Advertising
costs are charged to operations as incurred. Advertising costs for
the years ended December 31, 2020 and 2019 were $992 and $0,
respectively.
Nonmonetary
Transactions
Nonmonetary
transactions are accounted for in accordance with ASC 845
“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.
Stock-Based
Compensation
The
Company accounts for share-based compensation at fair value 9in
accordance with FASB ASC Topic 718. Share-based compensation cost
for stock options granted to employees, board members and service
providers is determined at the grant date using Black – Scholes
model was used for fair value estimates. The value of the award
that is ultimately expected to vest is recognized as expense on a
straight-line basis over the required vesting period.
VIEW
SYSTEMS, INC. and SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2020 AND 2019
1.
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Income
(Loss) Per
Common Share
Basic
income (loss) per common share is computed by dividing net income
(loss) available to common stockholders by the weighted average
number of common shares outstanding during the period. Diluted
income per common share is computed by dividing net income
available to common stockholders by the weighted average number of
common shares outstanding during the period plus 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 does not include potential shares of common stock
equivalents, as their impact would be antidilutive. The following
reconciles amounts reported in the financial statements:
|
|
(Numerator) |
|
|
(Denominator) |
|
|
Amount |
|
|
|
|
|
|
|
|
|
|
|
Period ended December 31,
2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations which is the amount that is available to
common stockholders |
|
$ |
(1,112,802 |
) |
|
|
1,693,086,344 |
|
|
$ |
(0.00 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Period ended December 31,
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
operations which is the amount that is available to common
stockholders |
|
$ |
(1,238,976 |
) |
|
|
390,579,210 |
|
|
$ |
(0.00 |
) |
VIEW
SYSTEMS, INC. and SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2020 AND 2019
2.
GOING CONCERN
The
Company has incurred and continues to incur, losses from
operations. For the years ended December 31, 2020 and 2019, the
Company incurred net losses of approximately $1,113,000 and
$1,239,000, respectively. The Company also has a working capital
deficiency of approximately $ __________ and a deficit of
approximately $ 31,144,000 at December 31, 2020. In addition,
certain notes payable have come due and the note holders are
demanding payment. In addition, as described in Note 4, the Company
is currently in default on a $50,000 loan from a stockholder. These
factors raise substantial doubt about the Company’s ability to
continue as a going concern.
Management
is very actively working to cure these situations. It has
implemented major plans to 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 anticipates that
these negotiations will result in extended payment
terms.
Historically,
the Company has financed its operations primarily through private
financing. It is management’s intention to finance operations
during 2021 primarily through the sold of additional equity to
finance additional work needed for compliance and operational
needs. 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 additional
financing will be available or that any potential mergers or
acquisitions would be successful and the Company may be required to
further reduce expenses and scale back operations.
The
consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and
discharge of liabilities in the normal course of business for the
foreseeable future, and does not include any adjustments to reflect
possible future effects on the recoverability and classification of
assets, or the amounts and classification of liabilities that may
result from the outcome of this uncertainty of the Company’s
ability to continue as a going concern.
3.
NEW ACCOUNTING PRONOUNCEMENTS
In
February 2016, the FASB issued new guidance on the accounting for
leases, which supersedes previous lease guidance. Under this
guidance, for all leases with terms in excess of one year,
including operating leases, the Company will be required to
recognize on its balance sheet a lease liability and a right-of-
use asset representing its right to use the underlying asset for
the lease term. The new guidance retains a distinction between
finance leases and operating leases and the classification criteria
is substantially similar to previous guidance. Additionally, the
recognition, measurement, and presentation of expenses and cash
flows arising from a lease by a lessee have not significantly
changed. The Company is currently evaluating the impact of this
guidance on its consolidated balance sheets. This guidance is
effective for interim and annual reporting periods beginning after
December 15, 2018 with early adoption permitted. The adoption of
this standard did not have a material impact on the Company’s
financial position or results of operations as the Company did not
have any leases as the Company uses shared office.
VIEW
SYSTEMS, INC. and SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2020 AND 2019
4.
NOTES PAYABLE
Notes
payable as of December 31, 2020 and 2019 consists of the
following:
|
|
2020 |
|
|
2019 |
|
|
|
|
|
|
|
|
Loan
payable
with interest at 5% per month dated September 18, 2009. The loan is
secured by the Company’s accounts receivable. The note was payable
in full on December 17, 2009 and is currently in
default. |
|
$ |
50,000 |
|
|
$ |
50,000 |
|
|
|
|
|
|
|
|
|
|
Convertible
promissory note with interest as 12% per year dated January 24,
2018, convertible into the Company’s common stock at a 50% discount
to the lowest trading price during 25 trading days immediately
preceding conversion. The note was due October 24, 2018 and is
currently in default |
|
|
- |
|
|
|
16,831 |
|
|
|
|
|
|
|
|
|
|
Convertible
promissory note with interest as 12% per year dated July 2, 2018,
convertible into the Company’s common stock 50% discount to the
lowest trading price during 25 trading days immediately preceding
conversion. The note was due July 2, 2019 and is currently in
default |
|
|
9,110 |
|
|
|
40,000 |
|
|
|
|
|
|
|
|
|
|
Convertible
promissory note with interest as 12% per year dated August 19,
2019, convertible into the Company’s common stock at a 58% discount
to the lowest trading price during 25 trading days immediately
preceding conversion. The note was due August 19, 2020 |
|
|
- |
|
|
|
38,000 |
|
|
|
|
|
|
|
|
|
|
Convertible
promissory note with interest as 12% per year dated October 8,
2019, convertible into the Company’s common stock at a 50% discount
to the lowest trading price during 25 trading days immediately
preceding conversion. The note was due October 20,
2020. |
|
|
- |
|
|
|
50,000 |
|
|
|
|
|
|
|
|
|
|
Convertible
promissory note with interest as 12% per year dated October 22,
2019, convertible into the Company’s common stock 50% discount to
the lowest trading price during 25 trading days immediately
preceding conversion. The note was due October 22, 2020 |
|
|
- |
|
|
|
53,000 |
|
|
|
|
|
|
|
|
|
|
Convertible
promissory note with interest as 12% per year dated January 08,
2020, convertible into the Company’s common stock at a 50% discount to the lowest
trading price during 25 trading days immediately preceding
conversion. The note is due January 08, 2021 |
|
|
112,750 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Convertible
promissory note with interest as 12% per year dated November
12,2020 convertible into the Company’s common stock at a 50% discount to the lowest
trading price during 25 trading days immediately preceding
conversion. The note is due November 12,2021 |
|
|
50,000 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Convertible
promissory note with interest as 12% per year dated June 05, 2020
convertible into the Company’s common stock at a 50% discount to the lowest
trading price during 10 trading days immediately preceding
conversion. The note is due June 05,2021 |
|
|
15,000 |
|
|
|
|
|
|
|
|
236,860 |
|
|
|
|
|
Discount
on convertible notes |
|
|
(21,590 |
) |
|
|
|
|
|
|
|
215,270 |
|
|
|
|
|
VIEW
SYSTEMS, INC. and SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2020 AND 2019
5.
INCOME TAXES
The
Company uses the Liability method in the computation of the income
tax expense and the Current and Deferred income taxes payable
(deferred tax liability) or benefit (deferred tax asset). Valuation
allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized.
The
components of income tax expense (benefit) are as
follows:
|
|
Year Ended December 31, |
|
|
|
2020 |
|
|
2019 |
|
Current taxes
(benefit) |
|
|
|
|
|
|
|
|
Federal |
|
$ |
233,700 |
|
|
$ |
259,200 |
|
State |
|
|
89,000 |
|
|
|
98,700 |
|
Total taxes
(benefit) |
|
$ |
(322,700 |
) |
|
$ |
(357,900 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Year
Ended December 31, |
|
|
|
2020 |
|
|
2019 |
|
Loss before income taxes |
|
$ |
(1,112,802 |
) |
|
$ |
(1,234,476 |
) |
The
U.S. Federal statutory rate is reconciled to the effective tax rate
as follows:
|
|
Year Ended December 31, |
|
|
|
2020 |
|
|
2019 |
|
U.S. Federal Statutory
Rate |
|
|
21 |
% |
|
|
21 |
% |
State income taxes |
|
|
8 |
% |
|
|
8 |
% |
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.
The
Company has adopted accounting rules that prescribe when to
recognize and how to measure the financial statement effects, if
any, of income tax positions taken or expected on its income tax
returns. These new rules require management to evaluate the
likelihood that, upon examination by relevant taxing jurisdictions,
those income tax positions would be sustained.
Based
on that evaluation, if it were more than fifty percent (50%)
probable that a material amount of income tax would be imposed at
the entity level upon examination by the relevant taxing
authorities, a liability would be recognized in the accompanying
balance sheet along with any interest and penalties that would
result from that assessment. Should any such penalties and interest
be incurred, the Company’s policy would be to recognize them as
operating expenses.
The
following is a reconciliation of the expected statutory federal
income tax provision to the actual income tax benefit for the
fiscal years ended
December
31, 2020 and December 31, 2019:
|
|
December 31, 2020 |
|
|
December 31, 2019 |
|
Federal Statutory
Rate |
|
$ |
(234,000 |
) |
|
$ |
(260,000 |
) |
Valuation
Allowance |
|
|
234,000 |
|
|
|
260,000 |
|
|
|
|
- |
|
|
|
- |
|
For
the year ended December 31, 2020 and December 31, 2019, the
expected tax benefit is calculated at statutory rate of
21%.
Significant
components of the Company’s deferred tax assets and liabilities
were as follows for the fiscal year December 31, 2020 and December
31, 2019:
|
|
December 31, 2020 |
|
|
December 31, 2019 |
|
Deferred Tax Asset: |
|
|
|
|
|
|
|
|
Net Operating Loss Carry
Forwards |
|
$ |
8,534,000 |
|
|
$ |
8,300,000 |
|
Total Deferred Tax Assets |
|
|
8,534,000 |
|
|
|
8,300,000 |
|
|
|
|
|
|
|
|
|
|
Deferred Tax Liabilities: |
|
|
|
|
|
|
|
|
Depreciation |
|
|
- |
|
|
|
- |
|
Deferred
Revenue |
|
|
- |
|
|
|
- |
|
Total Deferred Tax Liabilities |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Net Deferred Tax Assets: |
|
|
8,534,000 |
|
|
|
8,300,000 |
|
Less Valuation
Allowance |
|
|
(8,534,000 |
) |
|
|
(8,300,000 |
) |
Net Deferred
Tax Assets (Liabilities) |
|
$ |
- |
|
|
$ |
- |
|
Due
to continuous losses from operations the Company has assigned a
full valuation allowance against its deferred tax
assets.
VIEW
SYSTEMS, INC. and SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2020 AND 2019
6.
CONVERTIBLE PREFERRED STOCK
At
December 31, 2020 and 2019, the Company has 5,589,647 shares of
Series a Preferred Stock outstanding. Each share of Series A
Preferred Stock has a liquidation preference in the event of
liquidation of the Company of $0.001 per share before any payment
of distribution is made to the holders of common stock. Each Series
A Preferred share can be converted into common stock in the ration
of 15:1.
7.
COMMON STOCK
At
December 31, 2020 and 2019, the Company has 3,925,641,882 and
560,915,727 shares of Common Stock outstanding. During the year
ended December 31, 2020, 3,364,726,155 shares of common stock were
issued for the conversion of $432,474 in convertible debentures and
accrued interest. During the year ended December 31, 2019,
232,210,201 shares of common stock were issued for the conversion
of $408,503 in convertible debentures and accrued
interest.
8.
OPERATING LEASE
The
Company has terminated all leases for office space as of December
31, 2019. Now the Company handles all its executive functions from
a shared space.
9.
STOCK BASED COMPENSATION
On
April 2, 2010 the Company adopted its 2010 Equity Incentive Plan
and reserved 50,000,000 shares of our common stock for issuance.
During 2011 14,116,433 shares of common stock were issued under the
provisions of the 2010 Equity Incentive Plan for which $92,065 of
expenses were recognized.
The
2010 EIP will be terminated in 2020 unless terminated earlier by
the Board with the approval of Shareholders.
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. During the year ended December 31,2020 and December
31,2019 no stock options granted. No equity issuances were made
during the reporting period from the 2010 Service Provider Stock
Compensation Plan. The 2010 SCP will be terminated in 2020 unless
terminated earlier by the Board with the approval of
Shareholders.
VIEW
SYSTEMS, INC. and SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2020 AND 2019
10.
RELATED PARTY TRANSACTIONS
Certain
stockholders have made cash advances to the Company to help with
short-term working capital needs. These are interest free advances
and term and conditions are not settled. The net payments to
stockholders with unstructured payment plans amounted to $3,000 and
$0 for the periods ended December 31, 2020 and 2019, respectively.
The total balance due on unstructured loans from stockholders
amounted to $263,512 at December 31, 2020 and $ 266,512 at December
31, 2019, respectively. Loans from stockholders made with repayment
terms are described in Note 4 above.
11.
ISSUABLE COMMON STOCK
As of
December 31, 2019 45,740,000 shares of the authorized shares,
amounting to $20,500 had not been issued. During the year ended
December 31, 2020, an additional subscription was issued
authorizing another 60,000,000 for $10,000. On June 05, 2020, the
Company subscribed 10,000,000 shares of common stock and issued
options to purchase 25,000,000 shares of the Company’s common stock
in order to acquire a domain name and toll free numbers to
distribute CBD based products. The Company recorded the acquisition
at the fair value of the shares to be issued and options issued of
$23,715, amortized in three years.
12.
CONTINGENT LIABILITY
Effective
January 1, 2015 the Board of Directors authorized a new employment
contract with Gunther Than, CEO of View Systems, Inc. The contract
provides that in the event of a change in control of the Board of
Directors or a buyout or takeover or substantial change of
management structure, Mr. Than will receive a minimum of three
year’s salary plus 4.8 million shares of unrestricted stock or the
equivalent in cash at Mr. Than’s direction. With the change in
Management in 2019, $376,800 in additional compensation to Mr. Than
was accrued. Mr. Than’s current base salary is $120,000 per
annum.
Effective
July 1, 2019 the Board of Directors entered into a new employment
contract with John Campo to become CEO of View Systems, Inc. Mr.
Campo’s current base salary is $120,000 per annum.
13.
DERIVATIVE INSTRUMENTS
The
Company has convertible notes payable (See note 4) with elements
that qualify as a derivative instrument. The notes payable are
convertible at the lowest trading price during the previous 10 to
25 days ending on the last trading day prior to the notice of
conversion. This variable conversion feature requires bifurcation
from the convertible notes and measurement at fair
value.
The
derivative liability, as it relates to the instrument, is shown in
the following table:
Beginning
balance, January 1, 2019 |
|
$ |
244,004 |
|
|
|
|
|
|
Change
in value of derivative liability |
|
|
139,848 |
|
|
|
|
|
|
Fair
Value, December 31, 2019 |
|
|
383,852 |
|
|
|
|
|
|
Change
in value of derivative liability |
|
|
252,162 |
|
|
|
|
|
|
Fair
Value, December 31, 2020 |
|
$ |
636,014 |
|
VIEW
SYSTEMS, INC. and SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2020 AND 2019
The
derivative liability was valued using the Black-Scholes method with
the following inputs:
Expected
life |
|
|
9
months |
|
Stock
price volatility |
|
|
199.33 |
% |
Annual
risk-free interest rate |
|
|
2.63 |
% |
Expected
dividends |
|
|
None |
|
14. FAIR VALUE MEASUREMENTS
ASC
820, “Fair Value Measurements” and ASC 825, “Financial
Instruments”, requires an entity to maximize the use of observable
inputs and minimize the use of unobservable inputs when measuring
fair value. It establishes a fair value hierarchy based on the
level of independent, objective evidence surrounding the inputs
used to measure fair value. A financial instrument is categorized
within the fair value hierarchy is based upon the lowest level of
input that is significant to the fair value measurement. It
prioritizes the inputs into three levels that may be used to
measure fair value:
Level
1
Level
1 applies to assets or liabilities for which there are quoted
prices in active markets for identical assets or
liabilities.
Level
2
Level
2 applies to assets or liabilities for which there are inputs other
than quoted prices that are observable for the asset or liability
such as quoted prices for similar assets or liabilities in active
markets; quoted prices for identical assets or liabilities in
markets with insufficient volume or infrequent transactions (less
active markets); or model-derived valuations in which significant
inputs are observable or can be derived principally from, or
corroborated by, observable market data.
Level
3
Level
3 applies to assets or liabilities for which there are unobservable
inputs to the valuation methodology that are significant to the
measurement of the fair value of the assets or
liabilities.
Assets
and liabilities measured at fair value on a recurring basis were
presented on the Company’s consolidated balance sheet as of
December 31, 2020 and 2019 as follows:
|
|
Fair
Value Measurements at December 31, 2020
Using
Fair Value Hierarchy
|
|
Description |
|
Total |
|
|
Level
1 |
|
|
Level
2 |
|
|
Level
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
liability |
|
$ |
636,014 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
636,014 |
|
Total |
|
$ |
636,014 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
636,014 |
|
|
|
Fair
Value Measurements at December 31, 2019
Using
Fair Value Hierarchy
|
Description |
|
Total |
|
|
Level
1 |
|
|
Level
2 |
|
|
Level
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
liability |
|
$ |
383,852 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
383,852 |
|
Total |
|
$ |
383,852 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
383,852 |
|
VIEW
SYSTEMS, INC. and SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2020 AND 2019
15.
LICENSE AGREEMENT
In
August 2018, the Company executed a license agreement with IPVideo
Corporation (“IPVideo”) where the Company licensed the View Scan
Concealed Weapons Detection System and all related hardware,
software, documentation and manufacturing details to IPVideo.
IPVideo is required to pay $300 to the Company per View Scan unit
sold by IPVideo. The contract
is exclusive manufacturing without cancelation clause for the
current View Scan model. Units were sold by IPVideo during 2020
amounting to $2,904 and none in 2019 under this
license.
16.
MEMORANDUM OF UNDERSTANDING WITH SANNABIS
During
2019, the Company entered into a Memorandum of Understanding to
acquire Sannabis S.A.S. and New Columbia Resources, Inc. This
agreement gives the Company a First Right of Refusal to acquire
both companies upon satisfaction of certain conditions. The
conditions have not been met to date and the acquisitions have thus
not been consummated. During the year ended December 31, 2019, the
Company invested $58,660 in developing this agreement, of which
$38,660 for operating expenses and $20,000 was to acquire equipment
and supplies for use in this venture.
17.
SUBSEQUENT EVENTS
Subsequent
to December 31, 2019, the Company issued 1,349,010,754 shares of
common stock to convert convertible debentures and accrued
interest.
ITEM 9. CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None
ITEM 9A. 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 December 31, 2019. Based on such
evaluation, we have concluded that, as of such date, our disclosure
controls and procedures were not 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 financial reporting for 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:
(1) |
pertain
to the maintenance of records that in reasonable detail accurately
and fairy reflect our transactions . |
(2) |
provide
reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with
generally accepted accounting principles, and that our receipts and
expenditures are being made only in accordance with authorization
of our management and directors; and |
(3) |
provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of our assets that
could have a material effect on our financial
statements. |
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 December 31, 2019. 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 (“COSO 2013”) 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 December 31, 2019, our internal
control over financial reporting was not effective.
We
have instituted a remediation plan which involves reeducating our
management, the accounting staff, and the administrative staff as
to the elements of a completed sale. We increased the oversight of
the process by increasing the frequency of involvement of outside
accounting consultants. Internal systems are being put into place
to track and document significant dates, such as delivery,
installation and customer acceptance. In addition, the bookkeeping
system has been modified so that all sales of extended warranties
are automatically recorded as deferred revenue and that the amount
of revenue that is ultimately recognized as warranty revenue is as
the result of an analysis of the significant aspects of the
warranty such as coverage and period.
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 fourth quarter of 2019. In connection
with such evaluation, there have been no changes to our internal
control over financial reporting that occurred since the beginning
of our fourth quarter of 2018 that have materially affected, or are
reasonably likely to materially affect our internal control over
financial reporting. While there have been no changes, we have
assessed our internal controls as being deficient and have taken
steps beginning in 2020 to remedy such deficiencies.
ITEM 9B. OTHER
INFORMATION.
There
are no further disclosures.
PART III
ITEM 10. DIRECTORS, EXECUTIVE
OFFICERS AND CORPORATE GOVERNANCE.
Directors
and Executive Officers
The
following table includes the names and positions held of our
executive officers and directors who served during the years ended
December 31, 2018 and/or December 31, 2019 and their current
ages:
NAME |
|
AGE |
|
POSITION |
|
DIRECTOR
SINCE |
Gunther
Than |
|
72 |
|
Director and
Consultant to the Board |
|
1998 |
John
Campo |
|
51 |
|
President
and Chairman |
|
2019 |
Martin
Maassen |
|
76 |
|
Outside
Independent Director |
|
1999 |
Gunther
Than , Director, Treasurer and Chief Executive Officer. Gunther
Than was appointed Treasurer in July 2003 and has served as our
Chief Executive Officer since September 1998. He served as our
President from September 1998 to May 2003 and had served
intermittently as Chairman of the Board from September 1998 to
September 2003. Mr. Than was the founder, President and CEO of Real
View Systems, Inc., a company that developed compression
technology. Real View Systems was acquired by View Systems in 1998.
Mr. Than is a graduate of the University of Wisconsin.
Martin
Maassen , Director. Mr. Maassen became a Director in May 1999.
He formerly served as our Chairman of the Board from April 2000 to
September 2002. From September 1995 to the present he was a staff
physician at Lafayette Emergency Care, P.C. located in Lafayette,
Indiana. He is board-certified in internal medicine and emergency
medicine and has served as a staff physician in the emergency
departments of Jackson County, Deaconess, Union and St. Elizabeth
hospitals located in Indiana. In addition to practicing medicine,
he maintains an expertise in computer technologies and their
medical applications.
John
Campo , The current acting CEO, President & Chairman: Is
also, President of New Colombia Resources, Inc., has been
involved in public companies for over 20 years. He began his career
as a registered representative with a boutique firm in Baltimore,
MD. He was President of Elite Equity Marketing, a public relations
firm catering to emerging growth companies, from 2001-2008 with
offices in Towson, MD and North Miami Beach, FL. He later began
Wall Street International focusing on creating awareness for
international companies trading in the U.S. In 2009, he introduced
Mr. Erasmo Almanza, a Colombian national with coal mining
concessions, to VSUS Technologies Inc. n/k/a New Colombia
Resources, Inc. to roll up coal mining concessions and get them
into production. Mr. Campo is a Colombian American who resides in
Sunny Isles Beach, FL and Barranquilla, Colombia.
INVOLVEMENT
IN CERTAIN LEGAL PROCEEDINGS
None
of our directors, executive officers or control persons has been
involved in any of the legal proceedings required to be disclosed
in Item 401 of Regulation S- K, during the past five
years.
CORPORATE
GOVERNANCE MATTERS
Audit
Committee
The
board of directors has established an audit committee, and the
functions of the audit committee are currently performed by our
Corporate Secretary, with assistance by expert independent
accounting personnel and oversight by the entire board of
directors. We are not currently subject to any law, rule or
regulation requiring that we establish or maintain an audit
committee.
Board
of Directors Independence . Our board of directors currently
consists of two members. We are not currently subject to any law,
rule or regulation requiring that all or any portion of our board
of directors include “independent” directors.
Audit
Committee Financial Expert . Our board of directors has
determined that we do not have an audit committee financial expert
serving on our audit committee within the meaning of Item 407(d)(5)
of Regulation S-K. In general, an “audit committee financial
expert” is an individual member of the audit committee who (a)
understands generally accepted accounting principles and financial
statements, (b) is able to assess the general application of such
principles in connection with accounting for estimates, accruals
and reserves, (c) has experience preparing, auditing, analyzing or
evaluating financial statements comparable to the breadth and
complexity to the Company’s financial statements, (d) understands
internal controls over financial reporting and (e) understands
audit committee functions.
We
have not yet replaced our former audit committee financial expert,
but we are engaged in finding a suitable replacement.
Code
of Ethics
We
have not adopted a code of ethics for our executive officers,
directors and employees. However, our management intends to promote
honest and ethical conduct, full and fair disclosure in our reports
to the SEC, and compliance with applicable governmental laws and
regulations.
Nominating
Committee
We
have not yet established a nominating committee. Our board of
directors, sitting as a board, performs the role of a nominating
committee. We are not currently subject to any law, rule or
regulation requiring that we establish a nominating
committee.
Compensation
Committee
We
have not established a compensation committee. Our board of
directors, sitting as a board, performs the role of a compensation
committee. We are not currently subject to any law, rule or
regulation requiring that we establish a compensation committee.
During the last fiscal year, Mr. Gunther Than, an executive
officer, participated in our board of directors’ deliberations
concerning executive officer compensation.
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section
16(a) of the Securities Exchange Act of 1934 requires officers and
directors, and persons who own more than ten percent of a
registered class of our equity securities, to file reports of
ownership and changes in ownership with the Commission. Officers,
directors and greater than ten percent beneficial owners are
required by Commission regulations to furnish us with copies of all
forms they file pursuant to Section 16(a). Based solely on our
review of the copies of such forms received and written
representations from reporting persons required to file reports
under Section 16(a), all of the Section 16(a) filing requirements
applicable to such persons, with respect to fiscal year 2014,
appear not to have been complied with to the best of our
knowledge.
ITEM 11. EXECUTIVE
COMPENSATION.
Management
has been compensated entirely in accrued salary, common stock, and
reimbursement of fuel expense during the fiscal years ended
December 31, 2018 and 2019. The cash value of Mr. Gunther Than’s
compensation was determined in negotiations with directors Drs.
Maassen and Bagnoli (former director) and was determined based upon
an informal survey of human resource firms as to the compensation
awarded to chief executives in companies with similar revenues. Our
limited revenues have prevented our Chief Executive Officer, Mr.
Than, from receiving payment in cash for compensation for services.
Mr. Than received $-0- and $0 in cash for salary for 2019 and 2020,
respectively.
We
paid compensation to each of the directors and executive officers
in the following amounts during fiscal year 2018:
Name |
|
Salary |
|
|
Position |
Gunther
Than (1) |
|
$ |
0 |
|
|
As
employee to the
Board, and Director |
John
Campo |
|
$ |
0 |
|
|
As
President and Chairman |
Martin
Maassen |
|
$ |
0 |
|
|
As
Independent Director |
(1)
Mr. Than is reimbursed for his living expenses while out of town
from his home. Mr. Than earns an executive salary of $120,000,
which is more fully discussed below in the Summary Compensation
Table.
SUMMARY
COMPENSATION TABLE ‡
Name and Principal Position |
|
Fiscal
Year |
|
|
Salary
($) |
|
|
Bonus
($) |
|
|
Stock
Awards
($) |
|
|
Option
Awards
($)
|
|
|
Nonequity
Incentive Plan
Compen-
sation ($) |
|
|
Non- Qualified Deferred
Compen- sation
Earnings
($) |
|
|
All
Other
Compen-
sation ($) |
|
|
Total ($) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gunther Than |
|
2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
120,000 |
|
Gunther Than |
|
2019 |
|
|
$ |
- |
|
|
$ |
-0- |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
- |
|
(Principal Chief Executive Officer, President and Director) |
|
2018 |
|
|
|
120,000 |
(1) |
|
|
-0- |
|
|
|
-0- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
120,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Martin
Maassen |
|
2019 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
(Director) |
|
2018 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
(1) |
Of
the $120,000 salary, $-0- was paid in cash, therefore, the entire
amount accrued. |
EMPLOYMENT
CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
John
Campo - Executive Employment Agreement
On
January 1, 2019, our Board of Directors authorized the execution of
an executive employment agreement with our President and Chief
Executive Officer, John Campo. In accordance with the terms and
provisions of the agreement: (i) the Executive shall provide
services and perform all duties typical of the offices held by the
Executive; (ii) we shall pay to the Executive a base salary of
$10,000 per month, payable in form of cash or shares of our common
stock as agreed upon, (ii) we shall pay to the Executive an
incentive bonus to be determined by the Board of Directors based
upon our performance and the results achieved by the Executive in
his job performance; (iii) and we shall issue stock options to the
Executive to purchase shares of our common stock, such stock
options to accrue and vest in accordance with a set schedule to be
decided by the Board of Directors.
Gunther
Than - Executive Employment Agreement
On
January 1, 2014, our Board of Directors authorized the execution of
that certain executive employment agreement (the “Executive
Agreement”) with our President/Chief Executive Officer, Secretary,
Treasurer/Chief Financial Officer, Gunther Than (the “Executive”).
In accordance with the terms and provisions of the Executive
Agreement: (i) the Executive shall provide services and perform all
duties typical of the offices held by the Executive; (ii) we shall
pay to the Executive a base salary of $10,000 per month, payable in
form of cash or shares of our common stock as agreed upon, (ii) we
shall pay to the Executive an incentive bonus to be determined by
the Board of Directors based upon our performance and the results
achieved by the Executive in his job performance; (iii) we shall
issue stock options to the Executive to purchase shares of our
common stock, such stock options to accrue and vest in accordance
with a set schedule to be decided by the Board of Directors; (iv)
we shall pay to the Executive a per annum payment of at least
1,600,000 shares of common stock and additionally whatever the
Board of Directors may give as a bonus at their discretion in
exchange for the non-compete provisions contained therein; and (v)
in the event of a change in control of the Board of Directors or a
buyout or a takeover or substantial change of management, we shall
pay to the Executive a minimum of three years salary plus 4,800,000
shares of S-8 common stock or the equivalent in cash at the
Executive’s discretion.
In
further accordance with the terms and provisions of the Executive
Agreement, in consideration of the payment specified above in
subparagraph (iv), and for so long as the Executive is employed by
us, and for one calendar year following termination of this
Executive Agreement, the Executive shall not directly or indirectly
own an interest in, manage, operate, join, control, lend money or
render financial or other assistance to or participate in or be
connected with as an officer, employee, partner, stockholder,
consultant or otherwise, any individual, partnership, firm,
corporation or other business entity that materially competes with
us.
The
term of the Executive Agreement shall commence January 1, 2014 and
continue in effect unless terminated by either party upon ninety
days written notice. However, in the event the Executive’s
employment is terminated by us at our discretion and is without
cause, for a period of three years following such termination, the
Executive shall be paid his base salary and a bonus for each of the
three years equivalent in value to the bonus received in the year
prior to his termination. In the event the Executive terminates his
employment, we shall pay the Executive the compensation the
Executive has earned to the termination date. Lastly, in the event
we are acquired or the non-surviving party in a merger or sell all
or substantially all of our assets, this Executive Agreement shall
not be deemed terminated as a result thereof. This agreement was
not renewed at January 1, 2018, but has remained in
place.
Directors
Compensation
No
director received compensation for services rendered in any
capacity to us during the fiscal years ended December 31, 2018 and
December 31, 2019.
Indemnification
of Directors and Officers
Our
Articles of Incorporation, as amended and restated, and our Bylaws
provide for mandatory indemnification of our officers and
directors, except where such person has been adjudicated liable by
reason of his negligence or willful misconduct toward the Company
or such other corporation in the performance of his duties as such
officer or director. Our Bylaws also authorize the purchase of
director and officer liability insurance to insure them against any
liability asserted against or incurred by such person in that
capacity or arising from such person’s status as a director,
officer, employee, fiduciary, or agent, whether or not the
corporation would have the power to indemnify such person under the
applicable law.
Compensation
Committee Interlocks and Insider Participation
We
have not established a compensation committee. We are not currently
subject to any law, rule or regulation requiring that we establish
a compensation committee. During the last fiscal year, Mr. Gunther
Than, an executive officer, participated in our board of directors’
deliberations concerning executive officer compensation.
ITEM 12. SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS.
The
following tables set forth information as of June 17, 2019
regarding the beneficial ownership of our common and preferred
stock (Series A), (a) each stockholder who is known by the Company
to own beneficially in excess of 5% of our outstanding common
stock; (b) each director known to hold common or preferred stock;
(c) the Company’s chief executive officer; and (d) the executive
officers and directors as a group. Except as otherwise indicated,
all persons listed below have (i) sole voting power and investment
power with respect to their shares of stock, except to the extent
that authority is shared by spouses under applicable law, and (ii)
record and beneficial ownership with respect to their shares of
stock. The percentage of beneficial ownership of common stock is
based upon 548,915,727 shares of common stock outstanding as of
December 31, 2019. The percentage of beneficial ownership of
preferred stock is based upon 5,589,647 shares of preferred stock
outstanding as of December 31, 2019
NAME
AND ADDRESS OF
BENEFICIAL OWNER |
|
TITLE
OF CLASS |
|
|
NUMBER
OF
SHARES
BENEFICIALLY
OWNED
|
|
|
PERCENT
OF
SHARES
BENEFICIALLY
OWNED
|
|
Martin
Maassen |
|
Common |
|
|
|
10,829,624 |
(1) |
|
|
.1 |
% |
1340
Fawn Ridge Drive |
|
|
|
|
|
|
|
|
|
|
|
West
Lafayette, Indiana 47906 |
|
|
|
|
|
|
|
|
|
|
|
Gunther
Than |
|
Common |
|
|
|
20,812,200 |
(2) |
|
|
.3 |
% |
4300
Lighthouse Drive, |
|
Preferred |
|
|
|
5,089,647 |
|
|
|
91.1 |
% |
Wind
Point, WI 5340 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
Directors and officers as a group (3 members) |
|
Common |
|
|
|
31,641,824 |
|
|
|
.4 |
% |
|
|
Preferred |
|
|
|
5,089,647 |
% |
|
|
91.1 |
% |
(1) |
Represents
10,000,249 common shares held by Mr. Maassen and his spouse and
829,375 common shares held by his spouse. |
(2) |
Represents
20,812,200 common shares held by Mr. Than and 350,625 common shares
held by his spouse. |
The
above table reflects share ownership as of the most recent date.
Each share of common stock has one vote per share on all matters
submitted to a vote of our shareholders. We have one class of
preferred stock, which we named “Series A.” Each share of Series A
preferred stock has the equivalent of fifteen votes per share of
common stock and is entitled to vote on all matters. Accordingly,
Mr. Than’s preferred stock has the voting rights of, and is
convertible into, 61,344,705 common shares in addition to his
ownership and voting rights to 22,168,383 common shares.
ITEM 13. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
We do
not have a specific policy or procedure for the review, approval,
or ratification of any transaction involving related persons. We
historically have sought and obtained funding from officers,
directors, and family members as these categories of persons are
familiar with our management and often provide better terms and
conditions than we can obtain from unassociated sources. Also, we
are so small that having specific policies or procedures of this
type would be unworkable.
ITEM 14. PRINCIPAL ACCOUNTANT FEES
AND SERVICES.
The
following table shows the fees paid or accrued for the audit and
other services provided by our independent registered public
accounting firm.
|
|
2020 |
|
|
2019 |
|
Audit
fees |
|
$ |
10,000 |
|
|
$ |
10,000 |
|
Audit
related fees |
|
|
0 |
|
|
|
0 |
|
Tax
fees |
|
|
0 |
|
|
|
0 |
|
All
other fees |
|
|
0 |
|
|
|
0 |
|
Audit
Fees
Audit
fees represent the professional services rendered for the audit of
our annual financial statements and the review of our financial
statements included in quarterly reports, along with services
normally provided by the accountant in connection with statutory
and regulatory filings or engagements.
Audit
Related Fees
Audit-related
fees represent professional services rendered for assurance and
related services by the principal accountant that are reasonably
related to the performance of the audit or review of our financial
statements that are not reported under audit fees.
Tax
Fees
Tax
fees represent professional services rendered by the principal
accountant for tax compliance, tax advice, and tax
planning.
All
Other Fees
All
other fees represent fees billed for products and services provided
by the principal accountant, other than the services reported for
the other categories.
PRE-APPROVAL
POLICIES
Our
audit committee does not rely on pre-approval policies and
procedures. Typically, Management has sought out audit firm
candidates and presented them to the audit committee. Before the
auditor renders audit and non-audit services our board of directors
approves the engagement.
PART IV
ITEM 15. EXHIBITS, FINANCIAL
STATEMENT SCHEDULES.
The
following exhibits are filed as part of this Form 10-K:
10.1 |
|
View
Systems, Inc. 2010 Equity Incentive Plan (Incorporated by reference
to exhibit 10.1 to Form 10-Q filed May 14, 2010) |
|
|
|
10.2 |
|
View
Systems, Inc. 2010 Service Provider Stock Compensation Plan
(Incorporated by reference to exhibit 10.4 to Form 10-Q filed
August 19, 2010) |
|
|
|
10.3 |
|
Employment
agreement between View Systems and Gunther Than, dated December 1,
2009 (Incorporated by reference to exhibit 10.1 to Form 8-K, filed
January 11, 2010) |
|
|
|
10.4 |
|
Subcontractor
Agreement dated March 9, 2009 between MasTec North America, Inc.
and View Systems, Inc. (Incorporated by reference to exhibit 10.3
for Form 10-Q, Amendment No. 1, for the period ended March 31,
2009) |
|
|
|
10.5 |
|
Purchase
Agreement, dated June 1, 2012 (Incorporated by reference to exhibit
10.1 to Form 8-K, filed July 3, 2012) |
|
|
|
10.6 |
|
Amendment
to Purchase Agreement, dated June 28, 2012 (Incorporated by
reference to exhibit 10.2 to Form 8-K, filed July 3,
2012) |
|
|
|
10.7 |
|
Memorandum
of Understanding with Sannabis S.A.S. |
|
|
|
21.1 |
|
List
of Subsidiaries* |
|
|
|
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 * |
*Filed
herewith
SIGNATURES
In
accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized on July 13, 2022.
|
View
Systems, Inc. |
|
|
|
By: |
/s/
John Campo |
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