PROSPECTUS


                               VIEW SYSTEMS, INC.
                              a Florida corporation
                                    6,250,000
                     shares of common stock, par value $.001
                              --------------------

     Trading Symbol                    This prospectus  covers  6,250,000 shares
        on the                         of our  common  stock for sale by certain
NASDAQ Over-The-Counter                selling  stockholders.  2,000,000  shares
   Bulletin Board is                   will  be  acquired  from  us  by  certain
      "VYST.OB"                        selling  stockholders  in a private  sale
                                       after   the   effective   date   of   the
                                       registration   statement  of  which  this
                                       prospectus  is a part at a price  of $.50
The last reported sale price for       per "Unit"  (which  consists of one share
our common stock as of December 6,     of stock and a warrant  to  purchase  one
2001 was $.63.                         share  of  stock),   and  an   additional
                                       2,000,000 shares will be acquired from us
                                       through the exercise of the warrants at a
                                       price of $.70  per  share.  In  addition,
                                       1,750,000 shares will be acquired from us
                                       by  a  selling  stockholder  pursuant  to
                                       warrants  held  by it at exercise  prices
                                       of  $.20 per share for 750,000 shares and
                                       $.30  per share for 1,000,000 shares, and
                                       500,000   shares will be acquired from us
                                       by a   selling  stockholder  in  a  share
                                       exchange  with  us  after  the  effective
                                       date  of the  registration  statement  of
                                       which  this prospectus is a part. We will
                                       receive   $1,000,000 in proceeds from the
                                       sale  of  the  Units  and  $1,850,000  in
                                       proceeds   from   the   exercise  of  the
                                       3,750,000      warrants,      aggregating
                                       $2,850,000.   The   selling  stockholders
                                       are identified in this prospectus.


          Investing in the common stock involves a high degree of risk.
                     See "Risk Factors" beginning on page 2.

                                -----------------

Neither  the  Securities  and  Exchange  Commission  nor  any  state  securities
commission has approved or disapproved these  securities,  or determined if this
prospectus  is truthful or  complete.  Any  representation  to the contrary is a
criminal offense.

                                -----------------

                        Prospectus dated December 21, 2001








         We have not authorized any dealer,  salesperson or other person to give
any  information or to make any  representations  other than those  contained or
incorporated  by  reference  in this  prospectus  in  connection  with the offer
contained in this  prospectus and, if given or made, you should not rely on such
unauthorized  information  or  representations.   Neither  we  nor  the  selling
stockholders  are making an offer to sell or a solicitation  of any offer to buy
securities in any jurisdiction to any person to whom it is unlawful to make such
offer or  solicitation.  You should not assume that the information  provided in
this  prospectus  is accurate as of any date other than the date on the front of
this prospectus.



                                TABLE OF CONTENTS


                                                                            Page

PROSPECTUS SUMMARY............................................................1
RISK FACTORS..................................................................2
CAUTIONARY NOTE CONCERNING FORWARD LOOKING STATEMENTS........................10
USE OF PROCEEDS..............................................................10
SELLING STOCKHOLDERS.........................................................11
PLAN OF DISTRIBUTION.........................................................12
LEGAL PROCEEDINGS............................................................13
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.................14
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...............15
DESCRIPTION OF SECURITIES....................................................16
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITY.................................................17
DESCRIPTION OF OUR BUSINESS..................................................18
MANAGEMENT'S DISCUSSION AND ANALYSIS.........................................25
DESCRIPTION OF PROPERTY......................................................30
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...............................30
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.....................31
EXECUTIVE COMPENSATION.......................................................32
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.....................................................32
AVAILABLE INFORMATION........................................................33
ADDITIONAL INFORMATION.......................................................33







                                      - i -



                               PROSPECTUS SUMMARY

         This summary only  highlights the more detailed  information  appearing
elsewhere in this prospectus or incorporated in this prospectus by reference. As
this is a summary, it may not contain all information that is important to you.

Our Company

          We develop, produce and market digital video systems and products used
for security  and  surveillance.  We also offer  contract  electronic  component
assembly  services.  Our  systems  and  products  are  used  by the  commercial,
residential and law enforcement  markets. We distribute and support our products
through a network of value-added domestic and international resellers.

         We have executive  offices,  engineering  and production  facilities at
1100 Wilso Drive,  Baltimore,  Maryland 21223 and our telephone  number is (410)
646-3000. Our World Wide Web address is www.viewsystems.com.

The Offering

         The selling stockholders are offering 6,250,000 shares of common stock.
The 6,250,000 shares of common stock include  2,000,000 shares to be acquired by
certain selling  stockholders in a private  purchase of 2,000,000  "Units" (each
unit consisting of one share of stock and a 90 day warrant to purchase one share
of stock),  2,000,000 shares to be acquired by those selling  stockholders  upon
the  exercise of their  warrants,  1,750,000  shares to be acquired by a selling
stockholder  upon the exercise of warrants held by it, and 500,000  shares to be
acquired  by a selling  stockholder  upon a share  exchange  with us.  After the
offering and assuming all warrants are exercised, we will have 25,472,620 shares
outstanding,  and will have realized $2,850,000 from the sale of 2,000,000 Units
and the exercise of 3,750,000 warrants.

         There are 19,225,620  shares of common stock outstanding as of the date
of this prospectus.  This excludes (1) the 2,000,000 shares that will be sold to
certain Selling  Stockholders in the private  purchase of Units, (2) the 500,000
shares  that  will be  issued  to a  Selling  Stockholders  pursuant  to a share
exchanges with us, and (3) the 3,750,000 shares underlying outstanding warrants,
all of which shares are covered by this  prospectus,  and also excludes  980,000
shares of common  stock that are  currently  due  certain  directors,  officers,
consultants and employees, but that have not yet been issued.

         As used in this  prospectus,  the terms  "we,"  "us,"  "our," and "View
Systems" means View Systems,  Inc., and the term "common stock" means our common
stock, par value $.001 per share.

                                      -1-




                                  RISK FACTORS

         An investment in our common stock  involves a high degree of risk.  You
should  carefully  consider the following risk factors  before  investing in our
common stock.

Risks Relating to Our Business

We have a limited  operating  history with our  products  and we may  experience
difficulties in development, assembly and production of our products.

         We may not be able to successfully  develop all of our products because
of their complex engineering, assemble them because of our lack of experience or
profitably  make them because of our  inability to buy  components at discounted
prices.

         It will be  difficult  for our  engineers to develop  enhancements  and
upgrades that we anticipate  will be needed for  PlateView and  SecureView  (see
"Description of Business - Our  Products").  New products and  enhancements  and
upgrades  for our  existing  products  require the design of complex  electronic
circuitry and the development of long and complex software code instruction sets
to power our computer  hardware.  Our  engineers  may discover that they can not
economically  design the new products we have  conceived in our business plan or
make  enhancements  and  upgrades  to  our  products  in  response  to  problems
discovered  from  field  installations,   technological  advances  in  competing
products or components,  or new  functionality  required by the marketplace.  In
that  event,  we may be forced to abandon  products  that are  currently  in our
business  plan,  either  because  they are no  longer  feasible  or would not be
profitable to manufacture and sell.

         To profitably produce our products, we must obtain components assembled
into our  products at prices that are  discounted  by our  suppliers  because of
large quantity orders and there is no assurance we will be able to do that.

We have experienced development stage losses.

         We commenced  operations  in September  1998.  Although our company was
incorporated in 1989, we remained a shell company until the fall of 1998. We had
operating  losses  of  $3,670,896  for the  year  ended  December  31,  1999 and
$2,204,282  for the year ended  December 31, 2000.  We had  operating  losses of
$882,294 for the nine months ended September 30, 2001. We expect these operating
losses to continue to continue through at least the first quarter of 2002.

         Sales of our products have been limited since we commenced  operations.
As a result of the  expenses we have  incurred  for  research  and  development,
marketing,  and hiring and  retaining key  personnel,  our expenses have greatly
exceeded our revenues.  The tragic  events of September 11, 2001 have,  however,
generated an increased  interest in our products and services.  While we believe
that we will  incur  operating  losses  for at least the next two  quarters,  we
anticipate  that  increased  sales  resulting  from the  heightened  interest in
security  products will have a significantly  positive effect on our earnings by
the middle of 2002.  However,  there can be no assurance that we will be able to
generate sufficient revenues to achieve or sustain profitability in the future.

         Our  profitability is dependent on our ability to increase sales of our
security and  surveillance  products.  In order to increase such sales,  we will
need to significantly increase our spending on items such as:

         o    development   of   enhancements   and  upgrades  to  our  existing
              SecureView line of products;

                                     - 2 -


         o    marketing and business development expenses; and

         o    employment  related  expenses for the hiring and  retention of key
              personnel.

         If  these  expenses  do not  help us  generate  increased  sales of our
security and surveillance products, we will not become profitable and we will be
forced to reevaluate our business plan.

Our capital is limited and we will need  additional  financing to implement  our
business plan and continue operations.

         We require substantial working capital to fund our business.  We expect
that  additional  funds  will be  necessary  for our  company to  implement  our
business  plan.  We have  developed  a business  plan to grow our  company  that
assumes that we will have additional capital available to us. Our business model
encompasses:

         o    the engagement of additional marketing and sales personnel;
         o    product development;
         o    software development; and
         o    the acquisition of laboratory and testing equipment.

         Our ability to continue  operations  will depend on our  positive  cash
flow,  if any,  from future  operations  and on our ability to raise  additional
funds through equity or debt financing. We believe that the additional cash that
will be generated from the sales to the Selling  Stockholders of the shares that
are  being  registered  in this  prospectus,  as well as the cash  that  will be
generated if the warrant holders that have shares  registered in this prospectus
exercise their warrants, together with our revenues, will sustain our operations
and allow  for  anticipated  growth in  operations  and  strategic  acquisitions
through September 30, 2002.

         Going forward,  we will continue to seek additional funds through sales
of  equity  and/or  debt,  or  other  external  financing  in  order to fund our
operations  and to  achieve  our  business  plan.  If we are  unable  to  obtain
financing in the amounts  desired and on acceptable  terms, or at all, we may be
required  to  reduce  significantly  the  scope  of  our  presently  anticipated
expenditures, which could have a material adverse effect on our growth prospects
and the  market  price of our  common  stock.  If we raise  additional  funds by
issuing equity securities, our stockholders will be further diluted.

The successful operation of our business depends upon the supply of hardware and
software from third parties.

         Our  operations  depend on a number of third  parties for  hardware and
software  components.  We have  limited  control  over these third  parties.  We
assemble our systems by combining  commercially  available hardware and software
together with our proprietary  software. We license software components that are
integrated into our proprietary  software and installed on our systems.  We have
license agreements for compression software  components,  facial recognition and
database search software components and optical character  recognition  software
components.  Any  breaches of these  agreements  by such third  parties,  or any
errors, failures,  interruptions, or delays experienced in connection with these
third party technologies could negatively impact our relationship with users and
adversely affect our brand and our business,  and could expose us to liabilities
to third parties.

Our services and  reputation  may be  adversely  affected by product  defects or
inadequate performance.

         We believe that we offer  state-of-the  art products  that are reliable
and  competitively  priced.  In the event that our  products  do not  perform to
specifications  or are  defective in any way, our  reputation  may be materially
adversely affected and we may suffer a loss of business and a corresponding loss
in revenues.


                                      -3-




We may face risks associated with potential acquisitions, investments, strategic
partnerships  or other  ventures,  including  whether such  transactions  can be
located, completed and the other party integrated with our business on favorable
terms.

         As part of our  long-term  growth  strategy,  we may seek to acquire or
make investments in complementary businesses, technologies, services or products
or enter into  strategic  relationships  with parties who can provide  access to
those assets,  if  appropriate  opportunities  arise.  From time to time, we may
enter into discussions and negotiations with companies  regarding our acquiring,
investing  in, or  partnering  with  their  businesses,  products,  services  or
technologies. We may not identify suitable acquisition,  investment or strategic
partnership  candidates,  or if we do identify suitable  candidates,  we may not
complete  those  transactions  on  commercially  acceptable  terms  or  at  all.
Acquisitions often involve a number of special risks, including the following:


         o    we may  experience  difficulty  integrating  acquired  operations,
              products, services and personnel;

         o    the acquisition may disrupt our ongoing business;

         o    we may not be able to successfully incorporate acquired technology
              and  rights  into  our  service  offerings  and  maintain  uniform
              standards, controls, procedures, and policies;

         o    we may not be able to retain  the key  personnel  of the  acquired
              company;

         o    the  businesses  we acquire may fail to achieve the  revenues  and
              earnings we anticipated; and

         o    we may ultimately be liable for contingent and other  liabilities,
              not previously disclosed to us, of the companies that we acquire.

         We may not  successfully  overcome  problems  encountered in connection
with potential future acquisitions. In addition, an acquisition could materially
adversely affect our operating results by:

         o    diluting your ownership interest;
         o    causing us to incur additional debt; and
         o    forcing us to  amortize  expenses  related to  goodwill  and other
              intangible assets.

         Any of these  factors  could  have a  material  adverse  effect  on our
business.  These difficulties  could disrupt our ongoing business,  distract our
management  and employees and increase our expenses.  Furthermore,  we may incur
indebtedness or issue equity securities to pay for any future acquisitions.

There are certain  provisions of our Articles of  Incorporation  and Bylaws that
could have anti-takeover effects.

         Certain  provisions of our Articles of Incorporation,  as amended,  and
our bylaws could make more difficult our acquisition by means of a tender offer,
a proxy  contest or  otherwise  and the removal of our  incumbent  officers  and
directors.  Our  Articles  of  Incorporation  and  bylaws  do  not  provide  for
cumulative  voting in the election of directors.  Our bylaws permit the board of
directors to implement staggered terms for board members.

         Our  Articles  of  Incorporation  exempt us from the  Florida  statutes
governing control-share  acquisitions.  If we were not exempt from the statutes,
then a person  intending to acquire 20% or more of our shares would have to give
us notice of such intent and request approval of the acquisition by our board of
directors. If the board of directors failed to approve the acquisition then such
persons could request a meeting of the stockholders at which  stockholders would
be given an  opportunity  to vote on whether such shares would be accorded  full
voting rights.  Refusal by the  stockholders  to accord full voting rights would
result in the proposed acquirer  obtaining shares that could not be voted on any
matters to come before the  stockholders.  Certain  acquisitions are exempt from
the effects of the  statute,  such as mergers,  business  combinations  or other
acquisitions  that have been  approved  by the  board of  directors,  as well as


                                      -4-




acquisitions  of shares  issued  by a company  in its  original  offering  or in
subsequent offerings approved by its board.

Our success is dependent upon the protection of our intellectual property.

         Certain features of our products and  documentation are proprietary and
we rely on a combination of contract, copyright, trademark and trade secret laws
and other measures to protect our proprietary information.  Our technology could
fall into our competitors'  hands. We rely on keeping our technology secret from
our  competitors.  We do not  have  any  patents  for  our  product  designs  or
innovations.  Further,  we have not applied  for  copyright  protection  for our
computer  schematic  designs or software  source code. At the same time, we have
entered into and expect to enter into business  arrangements  where we share our
proprietary technology with business partners and employees.  These arrangements
are  necessary to develop and sell our  products.  We require that these parties
sign  agreements that they will keep our  proprietary  technology  confidential.
There can be no  assurance  that  these  parties  will honor  their  contractual
commitments.

         As part of our  confidentiality  procedures,  we  generally  enter into
confidentiality  and  invention  assignment  agreements  with our  employees and
consultants  and  mutual   non-disclosure   agreements  with  our  manufacturing
representatives,  dealers and systems  integrators.  We also limit access to and
distribution of our software,  documentation and other proprietary  information.
We  cannot  offer   assurances  that  the  steps  we  have  taken  will  prevent
misappropriation  of our  technology  or that  agreements  entered into for that
purpose will be enforceable.  Notwithstanding  the precautions we have taken, it
might be  possible  for a third  party to copy or  otherwise  obtain and use our
proprietary information without authorization.

         Our  products  are  marketed   under  various  trade  names,   such  as
SecureView,  PlateView  and  CareView.  We have  not  yet  applied  for  federal
trademark protection for the trademarks associated with our products. We may not
be able to register these  trademarks with the US Patent and Trademark Office or
we may be  forced  to  abandon  these  trademarks  because  other  persons  have
established  proprietary  rights in them. We may have to chose other trade names
for our products, resulting in a loss of investment in these trade names

         We also rely on a variety of  technologies  that we license  from third
parties.  We  cannot  make any  assurances  that  these  third-party  technology
licenses will continue to be available to the company on commercially reasonable
terms.  Our inability to maintain or obtain upgrades to any of these  technology
licenses  could  result in  delays  in  completing  our  proprietary  technology
enhancements  and  new  developments   until  equivalent   technology  could  be
identified,  licensed  or  developed  and  integrated.  Any  such  delays  would
materially  adversely  affect our business,  results of operations and financial
condition.

Intellectual property infringement claims would harm our business.

         Although  we do not believe  that we are  infringing  the  intellectual
property  rights of others,  claims of  infringement  are becoming  increasingly
common  as the  software  industry  develops  and legal  protections,  including
patents,  are applied to  software  products.  Litigation  may be  necessary  to
protect our proprietary  technology,  and third parties may assert  infringement
claims against us with respect to their proprietary rights. Any future claims or
litigation  can be  time-consuming  and  expensive  regardless  of their  merit.
Infringement  claims against us can cause product release delays,  require us to
redesign our products or require us to enter into royalty or license agreements,
which  agreements  may not be available on terms  acceptable to us or at all. In
the  future,  we may also need to file  lawsuits  to  enforce  our  intellectual
property rights, to protect our trade secrets,  or to determine the validity and
scope of the proprietary rights of others.  Such litigation,  whether successful
or unsuccessful,  could result in substantial  costs and diversion of resources,
which  could  have a  material  adverse  effect  on  our  business,  results  of
operations and financial condition.


                                      -5-



Gunther  Than's  services  are  critical to the success of our company and if he
were to leave View Systems, it would have a detrimental effect on our company.

         We believe that the  management  and other  experience of Gunther Than,
our President and Chief  Executive  Officer,  is critical to our success and the
loss of his services would have a detrimental  impact on our business.  Although
Mr.  Than has signed an  employment  agreement  with us, this  agreement  may be
terminated  by Mr. Than on not less than 60 days  notice,  subject to a one year
covenant not to materially  compete with us. Our success will also depend on our
ability to hire and retain other  qualified  management,  including  trained and
competent research, technical, marketing and sales personnel.

We may  not be  able to keep up with  market  demands  for  product  design  and
development.

         The market for our products is characterized  by ongoing  technological
development and evolving  industry  standards.  Our success will depend upon our
ability to enhance our current  products  and to  introduce  new  products  that
address  technological  and market  developments  and satisfy  the  increasingly
sophisticated  needs of customers.  There also can be no assurance  that our new
products will gain satisfactory market acceptance.

We may be subject to product  liability  claims  and,  at this time,  we have no
product liability insurance.

         If an intrusion or other event that our products are designed to detect
occurs in a setting where our products have been installed, we may be subject to
a claim  that an  error  or  omission  on our part  contributed  to the  damages
resulting  from such event,  which  damages could be  substantial.  Such a claim
could  be  made  whether  or  not  our  product  performed  properly  under  the
circumstances.  We do not carry product liability insurance. A product liability
judgment or  settlement  could have a material  adverse  effect on our financial
condition  and results of operations  and any adverse claim or settlement  could
have an adverse effect on the availability  and cost to us of product  liability
insurance in the event that we decide to purchase product liability insurance.

Our efforts to expand into international markets may be unsuccessful.

         In order to compete in our  industry,  we intend to  continue to expand
our operations  outside of the United States and enter additional  international
markets,   primarily   through  the   establishment   of   additional   reseller
arrangements.  We expect to commit additional time and development  resources to
customizing our products and services for selected  international markets and to
developing  international sales and support channels. We cannot assure that such
efforts will be successful.

         We face  certain  difficulties  and risks  inherent  in doing  business
internationally, including, but not limited to:

         o    costs of  customizing  products  and  services  for  international
              markets;

         o    dependence on independent resellers;
         o    multiple and conflicting regulations;
         o    exchange controls;
         o    longer payment cycles or inability to collect our receivables;
         o    unexpected changes in regulatory requirements;
         o    import and export restrictions and tariffs;
         o    difficulties in staffing and managing international operations;
         o    greater difficulty or delay in accounts receivable collection;
         o    foreign exchange gains and losses
         o    potentially adverse tax consequences;
         o    the burden of complying  with a variety of laws outside the United
              States;

                                      -6-



         o    the impact of  possible  recessionary  environments  in  economies
              outside the United States; and

         o    political and economic instability.

         Our successful expansion into certain countries will require additional
modification  of our  products,  particularly  national  language  support.  Our
current  export sales are  denominated  in either United  States  dollars or the
currency  of the export  country.  To the extent  that  international  sales are
denominated  in U.S.  dollars,  an  increase  in the value of the United  States
dollar  relative to other  currencies  could make our products and services more
expensive and, therefore, potentially less competitive in international markets.
To the extent that  international  sales are denominated in a foreign  currency,
our  operating  results are subject to risks  associated  with foreign  currency
fluctuation.  We may  consider  entering  into  forward  exchange  contracts  or
otherwise engaging in hedging activities in order to reduce this risk,  although
to date we have not entered into any such contracts or hedging activities. As we
increase our international  sales,  seasonal  fluctuations  resulting from lower
sales that typically occur during the summer months in Europe and other parts of
the world may also affect our total revenues.

Risks Relating to Our Industry

Because we are  subject to intense  competition,  primarily  from  larger,  more
established  companies,  we may not have the financial resources to increase our
market share.

         The market for video surveillance and  identification  products is very
competitive  and  subject  to  rapid  technological  advances  and the  frequent
introduction of new and enhanced products.  The industry in which we operate has
become even more  competitive over the last several years as security issues and
concerns have become a primary  consideration  worldwide.  With respect to close
circuit  television (CCTV) system  components and access control systems,  there
are  numerous  companies  that  market  directly  or through  distributors  such
equipment to both retail and non-retail  customers.  We compete in marketing our
systems and products principally on the basis of product  performance,  multiple
technologies, service and price.

         To  compete  successfully,   we  must  continue  to  design,   develop,
manufacture  and sell new and  enhanced  products  that will respond to customer
requirements  and allow us to  capture  market  share from our  competitors.  We
expect  the  intensity  of  competition  to  continue  to  put  pressure  on our
engineering research and development departments as existing competitors enhance
and expand their  products.  Any failure of our  engineering  department to keep
pace with  technological  advances could adversely affect our ability to capture
market  share.  Increased  competition  also may result in price  reductions  or
reduced  gross  margins as more  companies  compete with one another by lowering
prices.  We must  be able to keep  our  production  costs  low  relative  to our
competition.

         Many  of  our  competitors   have  advantages   including   established
positions,  brand  name  recognition,   greater  assets,  personnel,  sales  and
financial  resources and established  distribution  networks.  These larger more
established  competitors  include  Polaroid  Corporation,   Loronix  Information
Systems, Ademco, Sensormatic Corporation and NICE Systems, Ltd. The distribution
networks of these larger more established competitors gives them an advantage in
achieving higher sales volumes.  If they can achieve higher sales volumes,  they
can spread their costs over larger numbers of units,  thereby reducing their per
unit production costs and increasing their profitability.

         Competitors with greater financial resources may be able to offer lower
prices  or  other  incentives  that  we  cannot  match  or  offer.  Some  of our
competitors  produce  a more  comprehensive  product  line that may give them an
advantage in selling products  competitive to ours. We cannot be certain that we
will be able to compete  successfully  against existing or other  competition in
the future.
                                      -7-



Our inability to keep up with technological changes in our industry and identify
emerging markets may render our products obsolete.

         The industry in which we operate is characterized by unpredictable  and
rapid  technological  changes  and  evolving  industry  standards.  We  will  be
substantially  dependent on our ability to identify emerging markets and develop
products  that satisfy such  markets.  We cannot  assure that we will be able to
accurately  identify  emerging  markets  or that  any  products  we have or will
develop will not be rendered obsolete as a result of technological developments.
We believe that  competition  in our business  will  intensify as  technological
advances in the field are made and become more widely known. Many companies with
substantially  greater  resources  than ours are engaged in the  development  of
products  similar to those we sell.  Commercial  availability  of such  products
could render our products  obsolete,  which would have a material adverse effect
on our company.

We may be subject to increased government regulation.

         We are not subject to government regulation in the manufacture and sale
of our products or in the components in our products. However, our resellers and
end users  will be  subject  to  numerous  federal,  state,  local  and  foreign
regulations  that stem from proposed  activities in  surveillance.  Security and
surveillance  systems,  including  cameras,  raise privacy issues.  Our products
involve both video and audio.  The  regulations  regarding the  recordation  and
storage of this data are uncertain and evolving.  For example, under the Federal
wiretapping  statute,  the audio  portion of our  surveillance  systems  may not
record people's  conversations without their consent.  Further,  there are state
and federal laws associated with recording video in non-public places. Shipments
of our products  internationally  may be regulated as to certain  countries that
raise national  security  concerns.  All of these  regulations may be amended in
response to new scientific evidence or political or economic considerations. Any
significant change in regulations could adversely affect demand for our products
in regulated markets.

Risks Relating to our Common Stock and the Offering

Our stock price has been and may continue to be very volatile.

         The market  price of the shares of our  common  stock has been,  and is
likely to be,  highly  volatile  and could be  subject to wide  fluctuations  in
response to factors such as:

         o    actual or anticipated variations in our results of operations;
         o    announcements of new products or  technological  innovations by us
              or our competitors; and
         o    general conditions in the digital imaging and computer industries.

         Further,  the stock markets have  experienced  extreme price and volume
fluctuations  that  have  particularly  affected  the  market  prices  of equity
securities of many  technology  companies and that often have been  unrelated or
disproportionate  to the operating  performance of such  companies.  These broad
market  fluctuations may significantly and negatively affect the market price of
our common stock.

The  warrants we have  issued as well as our  obligations  under the  employment
agreement of Gunther Than,  and our obligation to issue shares earned by certain
employees,  consultants  and  directors  could  have a  dilutive  effect  on our
stockholders.

         We have issued numerous warrants to acquire our common stock that, upon
exercise,  could have a dilutive effect on our  stockholders.  As of the date of
this prospectus,  there are warrants outstanding to purchase 3,750,000 shares of

                                      -8-



our common stock, exercisable at prices ranging from $.20 to $.70 per share with
a  weighted  average  exercise  price  of  $.49  per  share.  All of the  shares
underlying these warrants are covered under this prospectus.  In addition to the
warrants outstanding, there are currently 980,000 shares that are due to certain
of our directors,  officers,  employees and  consultants  that have not yet been
issued,  including  440,000 shares due to our CEO, Gunther Than,  180,000 shares
due to  certain  other  employees,  240,000  shares  due to our two  independent
directors,  and 120,000 shares due to a consultant.  These shares were earned as
compensation  for  services  rendered.  If all of the shares  due to  directors,
officers,  employees and consultants were issued,  and if all of the outstanding
warrants were exercised,  the amount of shares  outstanding would be 26,455,620,
an increase  of 37% over the current  shares  outstanding,  and a  corresponding
decrease in the  percentage  ownership of our common stock by the  purchasers of
our common stock.

Since we are  subject to the penny  stock  rules,  we are  subject to  extensive
government  regulation,  which makes it more  difficult  and  expensive to raise
necessary capital and could impact the market for the shares.

         Our common stock is subject to the "penny stock" rules.  As long as the
price of our shares remains below $5.00 and we are unable to obtain a listing of
our stock on the NASDAQ  System or other  national  stock  exchange,  we will be
subject to the "penny  stock"  rules.  In general,  the penny stock rules impose
requirements  on  securities  brokers who sell such  securities to persons other
than established customers and accredited investors (generally those with assets
in excess of  $1,000,000,  or annual  incomes  exceeding  $200,000  or  $300,000
together with their spouse),  which tend to reduce the level of trading activity
in a stock. Among other things, these rules require that securities brokers:

         o    make a special  suitability  determination  before  recommending a
              penny stock;
         o    deliver a risk disclosure document prior to purchase;
         o    disclose the commissions payable to both the broker-dealer and the
              registered  representative,  current quotations for the securities
              and,  if  the   broker-dealer  is  the  sole   market-maker,   the
              broker-dealer  must  disclose  this  fact and the  broker-dealer's
              presumed control over the market; and
         o    provide customers with monthly statements  containing recent price
              information.

Consequently, the "penny stock" rules may restrict the ability of broker-dealers
to sell our common  stock and may affect the ability to sell our common stock in
the secondary market.

         In  addition,  we may decide to  register  additional  shares of common
stock under the  Securities Act after the closing of this offering for use by us
as consideration for future  acquisitions or for additional working capital.  If
we so decide,  upon  registration  and issuance  these shares  generally will be
freely tradable unless the resale thereof is contractually  restricted or unless
the holders thereof are subject to the restrictions on resale provided under the
Securities Act.

Future sales of our common stock in the public  market may depress our stock and
could limit our ability to raise capital.

         The  introduction  of the shares offered under this prospectus into the
public market could depress the market price for our shares. In addition,  as of
November 30, 2001 we have 4,039,316 shares that are not registered, but could be
sold in limited  amounts  and with  certain  restrictions  in the public  market
pursuant to Rule 144 under the Securities Act. If the stockholders holding these
shares sell them in the public market,  it could depress the price of our stock.
Such sales, or even the potential for such sales,  could also effect our ability
to raise capital through the sale of equity securities.


                                      -9-



The market for our company's securities is limited and may not provide adequate
liquidity.

         Our common  stock is  currently  traded on the NASDAQ  Over-The-Counter
Bulletin  Board (the  "OTCBB").  As of November 30,  2001,  there were 16 active
market makers of our common stock. In order to trade shares of our common stock,
you must use one of these 16 market  makers,  unless you trade your  shares in a
private transaction.  The average daily trading volume, as reported by the OTCBB
over the past 12 months  ending on November  30, 2001 was 260,332  shares.  This
trading  volume  means there is limited  liquidity in our shares of common stock
which result in a limited  trading market for our common stock.  However,  while
the trading volume of our stock remains volatile, it has increased substantially
over the past three months.  During the three month period  ending  November 30,
2001,  the  trading  volume  ranged  from a low of  13,600  shares  to a high of
4,825,700  shares,  with an average daily trading volume of 784,720 shares.  The
price of our  common  stock as traded on the OTCBB is also  extremely  volatile.
During the three month period ended  November  30, 2001,  the closing  price per
share of our common  stock as traded on the OTCBB  ranged from a low of $.16 per
share to a high of $1.02 per share. The variance in our share price occurring on
a daily basis makes it extremely  difficult to forecast  with any  certainty the
stock  price at which you might be able to buy or sell your shares of our common
stock.

              CAUTIONARY NOTE CONCERNING FORWARD LOOKING STATEMENTS

         This prospectus contains "forward-looking statements" under the federal
securities  laws.  We  caution  you to be aware  of the  speculative  nature  of
forward-looking  statements. We intend to identify forward-looking statements in
this prospectus  using words such as "believes,"  "intends,"  "expects,"  "may,"
"will," "should," "plan," "projected," "contemplates," "anticipates," or similar
statements.  These  statements  are based on our good  faith  beliefs as well as
assumptions we made using information  currently  available to us. Because these
statements reflect our current views concerning future events,  these statements
involve known and unknown risks,  uncertainties and assumptions that could cause
actual future results to differ  significantly from the results discussed in the
forward-looking  statements.  Some,  but not all, of the factors  that may cause
these  differences  include those  discussed in the Risk Factors section of this
prospectus.  You  should  not  place  undue  reliance  on these  forward-looking
statements,  which apply only as of the date of this prospectus. In making these
cautionary  statements,  we are not  committed to  addressing  or updating  each
factor in future filings or communications regarding our business or results, or
addressing  how any of these  factors  may have  caused  results to differ  from
discussions or information contained in previous filings or communications.

                                 USE OF PROCEEDS

         We  are   registering  the  shares  for  the  benefit  of  the  selling
stockholders  and they  will  sell  the  shares  from  time to time  under  this
prospectus.  We will receive  $1,000,000  in proceeds from the sale of 2,000,000
"units"  (consisting  of one share and one  warrant  to  purchase  one share) to
Liberty  Partners,  LLC and Empire  Fund  Managers,  LLC after the  Registration
Statement,  of which this  prospectus is a part, is declared  effective.  We may
receive up to  $1,400,00 in proceeds  from the sale of 2,000,000  shares at $.70
per share upon the  exercise of the warrants  held by each of Liberty  Partners,
LLC and Empire Fund  Managers,  LLC, and  $450,000 in proceeds  from the sale of
750,000 shares at $.20 per share and 1,000,000 shares at $.30 per share upon the
exercise  of the  warrants  held  by  Columbia  Financial  Group.  See  "Selling
Stockholders"  below. None of the Selling Stockholders are obligated to exercise
their warrants, and there can be no assurance that they will exercise all or any
of them. We intend to use the proceeds to be received by us for working capital,
which may include payment of salaries, rent, research and development,  purchase
of  inventory  and  marketing   expenses,   and  as  consideration   for  future
acquisitions.  We will pay all the costs of this offering, with the exception of

                                      -10-



the costs incurred by the Selling  Stockholders  for their legal counsel and the
costs they may incur for brokerage commissions on the sale of their shares.

                              SELLING STOCKHOLDERS

         In  September,  2001,  we  entered  into a  consulting  agreement  with
Columbia  Financial  Group  ("Columbia") in which we agreed to issue to Columbia
warrants for 1,000,000  shares of common stock at an exercise  price of $.30 per
share and 750,000  shares of common stock at an exercise price of $.20 per share
in consideration for certain investor and public relations  consulting services.
We agreed to  register  for resale at our  expense  the  shares of common  stock
underlying the warrants.  The  consulting  agreement is for a term of 12 months,
with  either  party able to cancel the  agreement  upon 60 days  notice.  If the
agreement  is  cancelled  within the first six  months,  we are  entitled to the
return of two-thirds of the warrants, and, if the agreement is cancelled between
the seventh and tenth month of the  agreement,  we are entitled to the return of
one half of the warrants.  This  prospectus covers  all of the shares underlying
the warrants issued to  Columbia  pursuant to the agreement.  Before  September,
2001, Columbia had previously provided investor and public relations  consulting
services to us under consulting agreements dated September, 2000 and July, 1999,
pursuant to which we issued  shares and warrants to Columbia,  as  consideration
for its consulting  services.  All warrants  previously  issued to Columbia have
been  exercised  by it, and all shares of our common  stock  previously  owed by
Columbia have been disposed of by it.

         In October,  2001, we agreed to sell to each of Liberty  Partners,  LLC
("Liberty") and Empire Fund Managers,  LLC ("Empire"),  in a private  placement,
1,000,000  Units at a price of $.50 per Unit or  $500,000  from each.  Each Unit
consists of one share of common  stock and a three month  warrant to purchase an
additional share of common stock at an exercise price of $.70 per share. As part
of the  agreement,  we  agreed to  register  all of the  shares  sold to each of
Liberty and Empire, as well as all of the shares underlying the warrants sold to
each of them. This prospectus covers all such shares.  Closing of this sale will
take place  after the  registration  statement  filed by us with the SEC on Form
SB-2 which includes all such shares, becomes effective.

         In December,  2001 we entered into a Joint  Development  Agreement with
Milestone  Technology  Inc.  ("Milestone"),  in which we agreed to issue 500,000
shares of our common stock in exchange for six percent of the outstanding common
stock of Milestone.  Milestone is a privately held company that has obtained and
developed a proprietary  "Concealed Weapons and Metal Detector"  product.  Under
the Joint Development Agreement,  Milestone and we will combine our technologies
to  develop  and  market a more  comprehensive  product.  Under  the  agreement,
Milestone  will  sell the  shares  of our  stock it is  issued in order to raise
working capital for the joint development project. As part of the agreement,  we
agreed to register all of the shares issued to Milestone. This prospectus covers
all such shares.





                                      -11-












         Except as noted above, none of the Selling  Stockholders  currently has
or has in the past three  years had a material  relationship  with us. The table
below lists all of the above described Selling Stockholders.



                                                            Common Stock                              Common Stock
                                                       Beneficially Owned Prior   Number of      Beneficially Owned After
                                                            to Offering(1)        Shares Being       Offering(1)(2)
  Name of Selling Stockholder                           Shares        Percent     Registered     Shares         Percent

                                                                                                   
  Columbia Financial Group                            1,750,000         8.3%       1,750,000       0              0%
  Liberty Partners, LLC                               2,000,000         9.4%       2,000,000       0              0%
  Empire Fund Managers, LLC                           2,000,000         9.4%       2,000,000       0              0%
  Milestone Technology Inc.                             500,000         2.5%         500,000       0              0%




------------------------------

  (1) Shares  beneficially  owned  include  any  shares  that would be issued by
  contract or upon  exercise of warrants  or options  currently  exercisable  or
  exercisable within 60 days of the date of this prospectus.
  (2) Assumes the sale of all shares currently held by the Selling Stockholders,
  as well as the exercise of all warrants held by the Selling Stockholders,  and
  the subsequent sale of the underlying shares.



PLAN OF DISTRIBUTION

         This  prospectus   relates  to  the  offer  and  sale  by  the  Selling
Stockholders  of up to  6,250,000  shares  of common  stock par value  $.001 per
share, assuming the exercise of their warrants.

         The shares covered by this prospectus may be offered and sold from time
to  time  by  the  Selling  Stockholders.  The  Selling  Stockholders  will  act
independently of us in making  decisions with respect to the timing,  manner and
size of each sale.  The Selling  Stockholders  may sell the shares being offered
hereby on the Over-The-Counter Bulletin Board, or otherwise, at prices and under
terms then prevailing, at prices related to the then current market price, or at
negotiated prices. Registration of the shares does not necessarily mean that any
of the shares will be offered by the Selling Stockholders.

         Shares  may  be  sold  by  one  or  more  of  the  following  means  of
distribution:

         o    block trades in which the broker-dealer so engaged will attempt to
              sell such shares as agent,  but may  position and resell a portion
              of the block as principal to facilitate the transaction;
         o    purchases  by a  broker-dealer  as  principal  and  resale by such
              broker-dealer for its own account pursuant to this prospectus;
         o    over-the-counter distributions in accordance with the rules of the
              NASD;
         o    ordinary  brokerage  transactions  and  transactions  in which the
              broker solicits purchasers; and
         o    privately negotiated transactions.


                                      -12-



         The Selling Stockholders and any persons who participate in the sale of
the  securities  offered  in this  registration  statement  may be  deemed to be
"underwriters" within the meaning of the Securities Act and any commissions paid
or discounts or  concessions  allowed to any person and any profits  received on
resale of the securities  offered may be deemed to be underwriting  compensation
under the Securities Act.

         We will not receive any of the proceeds  from the sale of shares by the
Selling Stockholder.  We will bear all expenses of the offering, except that the
Selling Stockholders will pay all underwriting  commissions,  brokerage fees and
transfer taxes as well as fees of their counsel.

         In effecting sales,  brokers,  dealers or agents engaged by the Selling
Stockholders  may arrange for other brokers or dealers to participate.  Brokers,
dealers or agents may receive  commissions,  discounts or  concessions  from the
Selling Stockholders in amounts to be negotiated prior to the sale. Such brokers
or  dealers  may be  deemed  to be  "underwriters"  within  the  meaning  of the
Securities  Act in  connection  with  such  sales,  and  any  such  commissions,
discounts  or  concessions  may  be  deemed  to  be  underwriting  discounts  or
commissions under the Securities Act.

         In order to comply  with the  securities  laws of certain  states,  the
shares must be sold in such states only through  registered or licensed  brokers
or dealers.  In addition,  in certain  states shares may not be sold unless they
have  been  registered  or  qualified  for  sale in the  applicable  state or an
exemption from the registration or  qualification  requirements is available and
has been complied with.

         The rules and  regulations  in  Regulation  M under  the  Exchange  Act
provide  that during the period  that any person is engaged in the  distribution
(as defined therein) of our common stock, such person generally may not purchase
shares of our  common  stock.  The  Selling  Stockholders  are  subject  to such
regulation  which may limit the timing of its  purchases  and sales of shares of
our common stock.

         At the time a  particular  offer of  shares  is made,  if  required,  a
prospectus  supplement  will be  distributed  that will set forth the  number of
shares being  offered and the terms of the  offering,  including the name of any
underwriter,  dealer or agent, the purchase price paid by any  underwriter,  any
discount,  commission and other item  constituting  compensation,  any discount,
commission  or  concession  allowed or reallowed or paid to any dealer,  and the
proposed selling price to the public.

                                LEGAL PROCEEDINGS

         We are not a party to any pending legal  proceedings  that would have a
material effect on our operations.

                                      -13-




                    DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
                               AND CONTROL PERSONS

         Our directors,  executive officers and key employees,  their respective
ages and positions, and biographical information on them is set forth below.

Name                     Age  Position Held
Gunther Than             54   President, CEO and Director since September 1998

Dr. Martin Maassen       59   Director  since  May, 1999;  Chairman of the Board
                              since April 2000

Dr. Michael L. Bagnoli   45   Director since May 1999, Secretary since July 2000

         All directors hold office until the next annual stockholders meeting or
until their death,  resignation,  retirement or until their successors have been
elected and qualified.  Vacancies in the existing board are filled by a majority
vote of the remaining directors.

         Our  executive  officers are chosen by our Board of Directors and serve
at its discretion.  There are no existing family relationships  between or among
any of our directors or executive officers.

         Gunther Than, President, Director and CEO

         Gunther Than has served as our  President and Chief  Executive  Officer
since  September  1998.  He also served as Chairman of the Board from  September
1998 to April 2000,  and as a director  since April 2000.  From 1994 - 1998, Mr.
Than was the  founder,  President  and CEO of RealView  Systems,  Inc.  and View
Technology,  Inc., software developers. Mr. Than continues as President, CEO and
director of View Technology,  Inc. Prior to founding RealView Systems, Inc., Mr.
Than held a variety of executive business  management  positions.  Mr. Than is a
graduate of the  University  of  Wisconsin,  with a dual  degree in  engineering
physics and applied mathematics.

         Martin Maassen, M.D., Chairman of the Board

         Dr.  Maassen  became a Director in May 1999.  He became our Chairman of
the Board in  April,  2000.  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 in
Indiana  since  1977.  In addition  to  practicing  medicine,  he  maintains  an
expertise in computer technologies and their medical  applications.  Dr. Maassen
also currently sits on the board of directors of NetUniversity.com  and Ultimate
Sports, Inc.

         Michael L. Bagnoli, D.D.S., M.D., Director and Secretary

         Dr.  Bagnoli  became a  Director  in May 1999.  He holds  degrees  as a
medical doctor and a dental specialist. Since 1988 he has practiced dentistry in
the  specialty  area of oral and  masiofacial  surgery for a physician  group in
Lafayette, Indiana. He introduced in his practice arthroscopy surgery along with
the full scope of arthroplastic and total joint reconstruction.  Dr. Bagnoli was
founder,  CEO and president of a successful  medical products  company,  Biotek,
Inc., which was sold in 1994.

                                      -14-


                           Compensation of Directors

         We compensate our independent  directors,  Messrs. Maassen and Bagnoli,
with 5,000  shares of our common  stock for each month of service.  Although the
independent directors accrue 5,000 shares per month, these shares are not issued
on a monthly basis. As of the date of this prospectus, 120,000 shares are due to
each of Messrs.  Maassen and Bagnoli but which have not yet been  issued.  We do
not have any arrangement for compensating our directors in cash for the services
they provide in their  capacity as directors,  including  services for committee
participation or for special assignments.



                    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
                              OWNERS AND MANAGEMENT

         The following tables and the accompanying  text list as of November 30,
2001,  the  beneficial  ownership  of  our  outstanding  common  stock  by:  (1)
beneficial  owners of five percent or more of our outstanding  common stock, and
(2) our executive officer, each of our directors,  and our executive officer and
directors as a group.  To our  knowledge,  except as specified in the tables and
the text below,  there is no person who presently owns beneficially five percent
or more of our outstanding common stock.

         Beneficial  ownership of the Selling  Stockholders  after this offering
will depend on the number of shares actually sold by each of them, the number of
shares purchased pursuant to warrants owned by them and whether these shares are
subsequently sold by them. Beneficial ownership is determined in accordance with
the rules of the SEC and generally  depends on voting or  investment  power with
respect to the shares.  For purposes of calculating the percentages shown in the
chart,  each person  listed is also deemed to  beneficially  own any shares that
would be issued by  contract or upon  exercise of warrants or options  currently
exercisable or exercisable  within 60 days of the date of this  prospectus.  The
persons  named below have sole voting and  investment  power with respect to all
shares of common stock shown as beneficially owned by them. The inclusion of any
shares as  beneficially  owned does not  constitute  an admission of  beneficial
ownership of those shares.

Beneficial Owners of Five Percent or More of Our Outstanding Common Stock


Name and Address of Beneficial Owner               Shares             Percent
Columbia Financial Group                        1,750,000 (1)           8.3%
1301 York Road, Ste 400
Lutherville, Maryland 21093
---------------------------------------
(1)Includes  1,750,000  shares  issuable upon exercise of warrants that Columbia
Financial Group is currently entitled to.

         As of November 30, 2001,  Liberty  Partners,  LLC (8665  Flamingo Road,
Suite 2000, Las Vegas,  Nevada 89147) ("Liberty") and Empire Fund Managers,  LLC
(525 South 300 East, Salt Lake City, Utah,  84111) ("Empire") were each entitled
to 1,000,000  shares of our common stock and warrants to purchase an  additional
1,000,000 shares, pursuant to a Unit Purchase Agreement between Liberty, Empire,
and us. If these shares are considered beneficially owned by Liberty and Empire,
their corresponding  ownership  percentage of our outstanding common stock would
be 9.4% for  each of  Liberty  and  Empire.  However,  under  the Unit  Purchase
Agreement,  both Liberty and Empire are prohibited from acquiring  shares of our
stock if the amount of shares  acquired,  together  with all other shares of our
stock owned at the time of the  acquisition,  would  result in Liberty or Empire
(as the case may be) owning  more than 4.99% of our then  outstanding  shares of
common stock.

                                      -15-



Executive Officer and Directors


Name of Beneficial Owner(1)                     Shares              Percent
---------------------------                     ------              -------

Gunther Than                                 2,675,940 (2)           12.2%
Martin J. Maassen                              404,500 (3)            2.1%
Michael Bagnoli                                150,000 (4)              *
All Executive Officers and Directors         3,230,440               14.4%
as a Group (3 persons)
---------------------------------------
* Indicates  beneficial  ownership of less than 1% of the outstanding  shares of
  our common stock.
(1)The  address of each  person  named  below is the  address  of our  principal
   executive office.
(2)Includes 440,000 shares of common stock due to Mr. Than, but not issued.
(3)Includes 120,000 shares of common stock due to Mr. Maassen, but not issued.
(4)Includes 120,000 shares of common stock due to Mr. Bagnoli, but not issued.


                            DESCRIPTION OF SECURITIES

         The summary of the terms of our capital  stock set forth below does not
purport to be complete.  For a detailed,  complete  description,  please see our
Articles of  Incorporation  and our Bylaws,  copies of which were filed with the
SEC as exhibits to our registration  statement on Form SB-2 filed on January 11,
2000.

General

         Our authorized  capital consists of 50,000,000  shares of common stock,
$0.001 par value. As of the date of this prospectus, there are 19,225,620 shares
of common stock issued and  outstanding.  An additional  2,000,000 shares wil be
issued to Selling  Stockholders  in a private sale,  and 500,000  shares will be
issued to a Selling  Stockholder in a share exchange after the effective date of
the  registration  statement of which this prospectus  is a part.  In  addition,
3,750,000  shares  of  common  stock,  all  of  which  are  covered  under  this
prospectus,  are subject to issuance upon the exercise of outstanding  warrants,
and there are 980,000  shares of common  stock due to certain of our  directors,
officers,  employees and consultants that have not been issued as of the date of
this prospectus.

         The  transfer  agent for the common stock is  Interwest  Transfer  Co.,
Inc., 1981 East 4800 South, Suite 100, Salt Lake City, Utah 84117.

Common Stock

         Each  share of our  common  stock has the same  relative  rights and is
identical in all respects with every other share of common stock.

Voting

         The holders of the common stock are entitled to one vote for each share
they hold of record on all matters submitted to a vote of our stockholders.

Preemptive Rights

         Holder of our common stock do not have  preemptive  rights with respect
to the issuance of shares. The common stock is not entitled to cumulative voting
rights with respect to the election of directors.

                                      -16-



Dividends

         The  holders of common  stock are  entitled to pro rata  dividends  and
other  distributions,  if and when  declared,  by the board of directors  out of
assets legally available for the payment of dividends. The payment of dividends,
if any, in the future rests within the discretion of the board of directors.

Liquidation and Redemption

         Upon our  liquidation,  dissolution  or winding  up, the holder of each
share of common stock is entitled to share  equally in the  distribution  of our
assets  after the payment of  liabilities.  The holders of common  stock are not
entitled to the benefit of any sinking fund provision.

         The  shares  of  common  stock  are  not  subject  to  any   redemption
provisions,  nor are they convertible  into any other security or property.  All
shares of common stock outstanding are fully paid and non-assessable.

              DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
                          FOR SECURITIES ACT LIABILITY

         Florida  corporations are authorized to indemnify against liability any
person who is a party to any legal proceeding  because such person is a director
or officer of the  corporation.  The officer or director  must act in good faith
and  in a  manner  reasonably  believed  to be in  the  best  interests  of  the
corporation  and,  with respect to any criminal  action or  proceeding,  have no
reasonable cause to believe the conduct was unlawful. Florida law does not allow
indemnification for an act or omission that involves intentional misconduct or a
knowing  violation  of a law.  In the case of an  action  by or on  behalf  of a
corporation,   indemnification   may  not  be  made   if  the   person   seeking
indemnification  is found  liable,  unless  the court in which  such  action was
brought   determines   such  person  is  fairly  and   reasonably   entitled  to
indemnification.  Indemnification  is required if a director or officer has been
successful on the merits.

         The  indemnification  authorized under Florida law is not exclusive and
is in  addition  to any other  rights  granted  to  officers  and  directors.  A
corporation may purchase and maintain insurance or furnish similar protection on
behalf of any officer or director.

         Our  articles  of  incorporation  provide  for the  indemnification  of
directors and executive officers to the maximum extent permitted by Florida law.
Insofar as indemnification  for liabilities arising under the Securities Act may
be permitted to our directors,  officers or controlling  persons pursuant to the
foregoing  provisions or otherwise,  we have been advised that in the opinion of
the Securities and Exchange  Commission such  indemnification  is against public
policy as expressed in the Securities Act and is therefore unenforceable.

         There is no  pending  litigation  or  proceeding  involving  any of our
directors, officers, employees or agents where indemnification would be required
or permitted.  We are not aware of any threatened  litigation or proceeding that
would result in a claim for such indemnification.




                                      -17-



                           DESCRIPTION OF OUR BUSINESS

History

         We incorporated  in Florida in January,  1989 but did not become active
until September,  1998 when Gunther Than joined us as our president and we began
development of our product line. In October 1998, we acquired Real View Systems,
Inc. a company  controlled  by Gunther  Than and his family by which we acquired
compression  technology  and computer  equipment.  In February 1999, we acquired
Xyros  Systems,  Inc.  by  which  we  acquired  remote  monitoring  and  storage
engineering,  a qualified employee staff and computer hardware and software.  In
May, 1999, we acquired ETMC, a contract  manufacturer of electronic hardware and
assemblies with 15 years of manufacturing  experience which we have absorbed and
whose equipment we use to manufacture our products.  In March, 1999, we made our
first sales of our security and surveillance  products. The potential market for
security and surveillance products and services throughout the world is huge and
has been enhanced by digital  technology,  greater  storage  capacity at a lower
cost and advanced software techniques including facial and character recognition
abilities.

Overview

         Surveillance  devices are common today and are used as a proven  method
for  protection  and risk  management.  We develop,  produce and market  digital
security and surveillance systems and products utilizing video based cameras and
microphones.  Our  security  systems,  which are  marketed  under the trade name
SecureView, record video images digitally and permit their viewing remotely over
the  customer's  existing CCTV systems  together with audio output over ordinary
telephone lines.  Digital recording  connects data to a computer readable format
rather than on a conventional  video tape. We store the video output on computer
hard disks rather than VCR tapes which  significantly  improves access to stored
data.  In  addition,  our  systems  are  programmable  and are  capable of being
customized to satisfy each customer's special requirements, be it coverage which
is  continuous  or when events are  detected.  Our digital  systems  also employ
digital video data compression which saves space and time for transmissions.

         In addition to SecureView, our products include the following:

              o     ViewStorage which is a competitively priced programmable VCR
                    replacement  device that records video output  digitally for
                    use with existing CCTV systems and which will not degrade as
                    tapes do;
              o     PlateView which is a license plate  recognition  system that
                    uses optical character recognition  technology to provide an
                    additional   means   of   identifying   individuals   in   a
                    surveillance area for commercial or law enforcement use;
              o     CareView which is a system for monitoring loved ones such as
                    children  at a day care center or at home with a baby sitter
                    or adult relatives at a nursing home or hospice;
              o     FaceView   which   is  a   system   for   analyzing   facial
                    characteristics  to  identify  individuals  and  persons for
                    access control and tracking; and
              o     WebView which is a low-priced  retail  product that allows a
                    user to  capture  and view  remotely  camera  output  from a
                    limited number of cameras via a connection to a server which
                    in  turn is  connected  to the  world-wide  web for use by a
                    customer  desiring a low cost way to monitor  remote  assets

                                      -18-



                    such  as a home  or  boat.  We are  marketing  this  product
                    through a separate web site, www.secureviewsystems.com.

         We currently  market our products  principally to commercial  users for
monitoring  facilities  for the  protection of  employees,  customers and assets
which leads to both the curtailment of crime and loss prevention. We also market
our products to residential  users and law  enforcement  agencies.  We currently
distribute and support our products  through a network of  value-added  domestic
and international resellers which we intend to expand.

Industry Background

          The increased  functionality  that digital  technology  brings to CCTV
systems has made this a dynamic and rapidly growing market.  Video  transmission
is just  beginning  to  transform  from  what was  "closed-circuit"  to a mix of
methods that will widen into hard-wired,  phone line, TV cable and wireless link
systems.  It is expected  that this will expand user demand,  create new product
opportunities  and  channels of  distribution  and expand the way in which other
communication  services  are  used.  The  tragic  events  of  September  11 have
generated an increased  interest in  surveillance  and security  products.  This
heightened interest is expected to continue for the foreseeable future.

Business Strategy

         We distribute our SecureView line of products, with add-on features, to
the  market  through  a  network  of  value-added  resellers.  We  are  also  in
discussions with security companies and law enforcement agencies with respect to
distribution agreements.

         We have  ongoing  reseller  arrangements  with small and  medium  sized
domestic  and  international   resellers.   Our  reseller   agreements  grant  a
non-exclusive  right to sell our products.  The reseller  purchases from us at a
discount from list price and on other terms and conditions in effect at the time
of order. The agreements are generally for a term of one year and  automatically
renew for successive one year terms unless  terminated by notice or in the event
of breach.

         We intend to market  WebView  through  different  channels.  We plan to
offer WebView for direct retail sale on the world wide web and wholesale through
retail  distributors.  We do not have any agreements with any  distributors  and
will not seek any until we complete  development  of the  product.  This product
will be priced at a level to be attractive to retail consumers.

         In addition to these  products,  through our  acquisition  of ETMC,  we
acquired  an  ongoing  business  operation  of  providing  contract   electronic
component  assembly and test  services.  ETMC had been in operation  for over 15
years and had an established base of clients. ETMC had done approximately 60% of
its  business  for  the  commercial  sector  and  40% of its  business  for  the
government sector. ETMC's diverse clients have included Hewlett-Packard,  Martin
Marietta,  Maryland  Government  Procurement  Office,  Lockheed Martin, and John
Hopkins's  Applied  Physics Labs under contract to NASA. We have absorbed ETMC's
business  line  into  our  business  line  while  converting  a  portion  of its
manufacturing  capability  to the  production  of our security and  surveillance
products.

         Our core strategy is to continue to build products and deliver services
that  are  marketable  while  at the  same  time  developing  new  products  and
applications to anticipate and meet the expanding needs of our customers. We are
also attempting to create alliances with various specialty markets which require
the use of security systems such as:

                                      -19-



         o    installers  of pools  in  certain  states  that  require  that all
              residential pools have an alarm system;

         o    credit card  companies  that control their own ATM machines  which
              have surveillance systems; and

         o    gas stations  and car washes  which rely  heavily on  surveillance
              systems.

         We will also continue to offer  upgrades and  enhancements  to existing
customers  as a method  of  retaining  customers.  Every  customer  who does not
participate  in the upgrade  program is targeted by one of our sales persons one
year after the date of original purchase, at which time our warranty expires, to
offer our newest upgrades to existing systems.

Our Products

         We manufacture  several of the hardware  components in our systems.  We
assemble our systems by combining additional commercially available hardware and
software together with our proprietary  software. We license software components
that are integrated into our proprietary  software and installed in our systems.
We  believe  that we can  continue  to  obtain  components  for our  systems  at
reasonable prices from a variety of sources.  Although we have developed certain
proprietary  hardware  components  for use in our  products and  purchased  some
components from single source  suppliers,  we believe similar  components can be
obtained from alternative suppliers without significant delay.

         We have software  licensing  agreements  for (i)  compression  software
components,   (ii)  for  facial  recognition  to  possibly  integrate  into  our
proprietary  software,  and (iii)  license to integrate  commercially  available
operating  systems software into our proprietary  software for installation into
our products.

SecureView

         SecureView is a line of digital CCTV  recording  and remote  monitoring
systems. Our digital CCTV SecureView system:

         o    takes video images captured by cameras;
         o    digitizes the video;
         o    stores the video  according to times or criteria  specified by the
              customer;
         o    retrieves  the  visual  data  selectively  in a  manner  that  the
              customer considers valuable or desirable;
         o    transmits  the video across  computer  networks or ordinary  phone
              lines;
         o    has two way audio ability that can use real-time to communicate to
              the location being monitored;  and o triggers programmed responses
              to events detected in the  surveillance  area such as break-ins or
              other unauthorized breaches of the secured area.

         Our system stores video output on computer hard discs,  rather than VCR
tapes.  Storage on computer hard discs allows  selective  access to stored data.
With a VCR, a user must search an entire tape to review a critical event,  often
fast  forwarding  and  rewinding.  With  computer  hard  disc,  a user  can gain
immediate  access to stored  data by doing a  controlled  search for the desired
data. Our systems come standard with up to 28 days storage.

         Our systems  are  programmable  -- they can be pre-set to take  actions
when events are detected in the  surveillance  area.  For  example,  they can be
programmed to begin recording when motion is detected in a surveillance  area or
to notify the user if the  system is not  functioning  properly.  Because of the
programmable  recording  features,  our systems can  eliminate  the  unnecessary

                                      -20-



storage of  non-critical  image and audio data. This capacity allows the user to
utilize the hard disk storage more efficiently.

         Our digital systems employ video data compression. This saves space for
storage and time for transmission  especially on low bandwidth  channels such as
plain telephone wiring.

         Our SecureView line of products include the following features:

         o    users can remotely monitor multiple locations from a remote PC;
         o    connects to existing CCTV systems allowing  retrofit  enhancements
              using our systems;
         o    uses any and all  forms of  telecommunications,  such as  standard
              telephone lines;
         o    video can be  monitored  24 hours a day by a  security  monitoring
              center;
         o    allows  uninterrupted  "2-way" audio transmission while switching,
              controlling and monitoring up to 16 cameras per unit;
         o    local and remote  recording,  storage  and  playback  for up to 28
              days, with optional additional storage capability;
         o    cameras can be concealed in ordinary home devices such as in smoke
              detectors;
         o    monitors itself to insure system functionality with alert messages
              in the event of covert or natural interruption;
         o    modular expansion system configuration allows user to purchase add
              on components at a later date; and
         o    allows the user to set the system to automatically  review an area
              in desired camera sequence.

ViewStorage

         ViewStorage is currently in development and is expected to reach market
later in 2001.  ViewStorage is a competitively  priced video storage system that
will  archive the video from our  systems.  This storage  device  records  video
output digitally, and can be configured to house almost any amount of storage of
video output from cameras.

         Video recording can be programmed for continuous recording, timed Guard
Tour recording, or event driven recording.  Unlike images stored on tape, images
stored on this VCR replacement device do not degrade over time. It also does not
require  the  on-going  and  expensive  maintenance  required  by VCR  recording
devices.

         ViewStorage  is modular in nature and can be expanded to add additional
storage,  up to an  amount  that  meets  the  requirements  of  each  particular
customer.  This product has a unique  "camera and date/time  filtering"  feature
which allows the user to immediately  locate the video recorded on a camera at a
given time and date.

PlateView

         PlateView  is a license  plate  recognition  system  that uses  optical
character  recognition  technology to provide an additional means of identifying
individuals in a surveillance  area. The system can be integrated into an access
control  mechanism  that  can open  gates or call an  attendant  to  compare  an
identification  made from  other  data,  such as a  driver's  license,  with the
identification  made with the license plate.  Law enforcement  personnel can use
this  system  in  traffic  enforcement.  In  addition  to plate  identification,
officers can receive early warnings as to a number of items,  including  whether
the owner of a car being stopped has outstanding  arrest warrants or whether the
license  plate  matches the  vehicle's  registration.  PlateView  was brought to
market in the first quarter of 2000.


                                      -21-



CareView

         Parent's  rising  concerns  about the safety of their  children at home
with a baby sitter or nanny or in a day care  center - as well as the  treatment
of a loved one in a nursing home - have created the need for a way of monitoring
activities in these  facilities.  We are  developing  the CareView  system as an
option for the care facility.  Users of the CareView  system access the Internet
to scan the day care  center's  web site and  immediately  view the video output
produced by cameras installed at the care facility.

         For nursing and hospice care  facilities,  the CareView  system  allows
family  and  friends to view loved ones when they are not able to be at the care
facility -- just by accessing the facilities' web sites.

         The  core of  CareView  is a  proprietary  personal  computer  board or
component  that we have designed.  CareView  requires our  proprietary  software
capable for use on the Internet.  We have  developed a prototype of CareView and
have successfully tested it at our Maryland facility.

WebView

         We are developing  WebView,  a low-priced  retail product that allows a
user to capture  camera  output  from a limited  number of cameras and view that
output remotely via a connection to a server connected to the World Wide Web. It
consists of a proprietary  personal  computer card or component and  proprietary
software  that is  compatible  with use on the world wide web.  This  product is
ideal for the consumer who would like a low cost way to monitor  his/her  assets
remotely.  We have developed a prototype of WebView and have successfully tested
it.

Markets

         Our family of products offers government and law enforcement  agencies,
commercial security professionals,  private businesses and residential consumers
a dramatically enhanced  surveillance  capacity. It also offers a more efficient
and economical method to store, search and retrieve historically stored data.

         Residential

         The  residential  home  security  user will  purchase our products from
either  commercial  companies  installing  either  self-contained  or  centrally
monitored systems, or directly from retail distribution centers.

         Utilizing our  technology,  individuals can run their own perimeter and
interior surveillance systems from their own home computer. Real time action can
be monitored  remotely at homes through a modem and the Internet.  There is also
the capability to make real-time  monitors  wireless.  In turn, this reduces the
expense and time of the home installation and makes installation  affordable for
a majority of homeowners.

         An  additional  advantage of our  technology  is that it allows for the
storage of information on the home computer and does not require a VCR.

         Commercial

         Commercial business users represent the greatest potential users of our
surveillance products.  Commercial businesses have already realized the need for
using surveillance  devices for protection.  Our products provide observation of
facilities for protection of employees,  customers,  and assets. This can result
in the  curtailment  of crime and loss  prevention by employees and others.  The
market for this  technology  is the same as the  current  market for analog CCTV

                                      -22-



systems,  including hospitals,  schools, museums, and retail,  manufacturing and
warehousing facilities.

         Our system  reduces the  requirements  for a guard force.  In addition,
lesser number of security personnel are needed to monitor, verify and respond to
tripped alarms.

         Our  products  and  technology  can be used where  there is a temporary
requirement  for real-time  surveillance in areas where an analog CCTV system is
impractical or impossible.  Examples of this are special events,  concerts,  and
conventions.  Our  systems  reduce the need for a large  guard force and provide
unobtrusive monitoring of these events.

         Law Enforcement

         The  gathering  of  video  and  data  images  is   commonplace  in  law
enforcement.  The data is used to protect both the law  enforcement  officer and
the suspect.  It is also used as a historical  record for  prosecution and event
verification.

         Because our technology can be used for stakeouts and remote  monitoring
of areas, we believe there is a market potential with law enforcement  agencies.
We have been asked to submit  proposals  for license plate  recognition  systems
that help law enforcement identify people entering a surveillance area.

         Law enforcement  agencies are also frequently  using robotic systems to
investigate  and disarm  explosive  devices.  The robotic  systems are  severely
limited in flexibility by the need to utilize CCTV systems with a VCR, which can
be overcome by the use of our digital technology.

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. Competitors in the market for our
identification  product,  PlateView,   include  Polaroid  Corporation,   Loronix
Information  Systems,  Data  Card  Corporation,   Dactek   International,   Inc.
Competitors in the video surveillance  market include numerous VCR suppliers and
digital  recording  suppliers  including,  Loronix  Information  Systems,  Inc.,
Sensormatic Corporation and NICE Systems, Ltd.

         We believe the introduction of digital technology to video surveillance
and  security  systems is our market  opportunity.  We believe  that many of the
established  CCTV  companies  have  approached  the design of their digital CCTV
products from the standpoint of integrating  their digital  products to existing
security and  surveillance  product  offerings.  These  systems are closed,  not
easily  integratable  with  other  equipment  and not  capable  of  upgrades  as
technology  improves.  We have  designed  our  systems  so that  they are  open,
compatible  with other  digital  and analog  systems,  and easily  adaptable  to
technological advances that will inevitably occur with digital technology.

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.  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

                                      -23-



may determine  not to enforce such  provisions  or only  partially  enforce such
provisions.   We  also  limit  access  to  and  distribution  of  our  software,
documentation and other proprietary information.

         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 in these items. However, under law, copyright vests upon creation
of our software and firmware,  and  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 statutory  period from the date of
first  "publication"  (distribution of copies to the general public) or from the
date of creation, whichever expires first.

         We are in the  process of  applying  to the U.S.  Patent and  Trademark
Office for patent protection of important components of our products. We plan to
prepare and file  applications to register the trademarks  SecureView,  CareView
and WebView.

         We provide  software to  end-users  under  non-exclusive  "shrink-wrap"
licenses  (or  automatic  license  executed  once the  package is opened)  which
generally  are  nontransferable  and have a perpetual  term.  Although we do not
generally  make source code  available to end-users,  we may, from time to time,
enter into source code escrow  agreements with certain  customers.  We have also
licensed  certain  software  from  third  parties  for  incorporation  into  our
products.

Government Regulation

         We are not subject to Government regulation in the manufacture and sale
of our products, and the components in our products.  However, our resellers and
end users  will be  subject  to  numerous  regulations  that stem from  proposed
activities  in  surveillance.   Security  and  surveillance  systems,  including
cameras,  raise privacy issues.  Our products  involve both video and audio, and
added  features  for  facial  identification.   The  regulations  regarding  the
recordation  and storage of this data are uncertain  and evolving.  For example,
under the Federal  wiretapping  statute,  the audio portion of our  surveillance
systems may not record people's  conversations  without their consent.  Further,
there are state and federal laws  associated  with recording video in non-public
places. Shipments of our products internationally may be regulated as to certain
countries that raise national security concerns. These laws are evolving.

Employees

         We employ 18 persons including three persons in part-time positions. We
also employ four 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.

                                      -24-



                      MANAGEMENT'S DISCUSSION AND ANALYSIS

         The following  discussion  and analysis  should be read in  conjunction
with our  financial  statements  and the  accompanying  notes.  In  addition  to
historical  information,  this Form 10-KSB contains  forward-looking  statements
that involve risks and uncertainties,  such as statements of the Company's plans
and  expectations.  The Company's  actual results could differ  materially  from
management's expectations.

         In the first several years of operation  since  September 1998, we have
devoted most of our resources to the research and  development  of digital video
surveillance and security products.  We have generated limited revenues from our
security  products to date, but are rapidly expanding our sales and distribution
network. During the last year we have been working on delivering new products to
market and enhancing and upgrading our product line. Until we more fully develop
our sales and distribution  network, we expect our operating losses to continue.
Although  our  revenue  from  contract   manufacturing  services  has  decreased
significantly,  we still provide  contract  manufacturing  services,  and remain
ready to take advantage of potential increases in this market. ETMC had provided
such services for more than 15 years and had an established customer base. While
we have  continued the contract  manufacturing  business line, we have increased
ETMC's manufacturing capacity to permit production of our products.

         The tragic events of September 11, 2001  generated a larger than normal
interest in our products and  services.  This trend has  continued and inquiries
regarding  our  products  have  increased  substantially.  On-line  and web site
inquires more than  quadrupled  and phone  inquires have more than tripled since
September  11,  2001.  We have added two more  inbound  telephone  lines and are
staffing  to meet  the  increased  demand.  As of  September  30,  2001,  we had
$2,800,000 of purchase orders, some which are backed by letters of credit.

NINE MONTHS  ENDED  SEPTEMBER  30,  2001  COMPARED  WITH THE NINE  MONTHS  ENDED
SEPTEMBER 30, 2000

Results of Operations

Revenue

         For the nine months ended  September  30, 2001,  revenues from sales of
our products  increased  $597,863 or 407% to $744,842  from $146,979 in the same
period last year, and revenues from sales of our services  decreased $251,568 or
96% to $9,512 from  $261,080 in the same  period last year.  Of the  $754,354 in
total revenue during the nine month period ended September 30, 2001, $744,842 or
99% was  derived  from sales of systems  and $9,512 or 1% from sales of contract
manufacturing services. While the percentage of revenues generated from sales of
our contract manufacturing services has decreased to only 1% of our revenues, we
will continue to offer contract manufacturing services, and remain ready to take
advantage of potential increases in this market.


Gross Profit

         Gross  profit on sales for the nine months  ended  September  30, 2001,
increased $196,888 or approximately  100%, to $393,779 compared with $196,891 in
the same  period  last  year.  Gross  profit  margin for the nine  months  ended
September  30,  2001,  was 52%  compared  with 48% in the same period last year.
Because of low net sales we achieved in the period last year ended September 30,
2000, we do not believe gross profit margin  comparisons  are meaningful at this
stage of our operations.

                                      -25-



Costs and Expenses

         Operating  expenses  for the nine  months  ended  September  30,  2001,
decreased to $1,276,073 from  $1,376,264 for the comparable  period in 2000. The
decrease is principally due to decreased expenditures in sales promotions.

         Costs of Products and Services  Sold. The cost of products and services
sold was $360,575 for the nine months ended  September  30, 2001 and  represents
48% of revenue for the period,  compared to $211,168  for the nine months  ended
September 30, 2000 which represents 52% of revenues for that period.  Because of
our low sales volume in the same period last year,  we do not consider the costs
of goods sold in the same period last year to be a good measure of our true cost
of goods  sold.  We  anticipate  that our profit  margins  on sales of  security
systems will exceed our profit margins on sales of services.

         We are  continually  working on  engineering  changes  in our  security
products that we expect will lower component costs for these products. We do not
determine  our  inventory  on a quarterly  basis,  instead we do it on an annual
basis. Therefore, our cost of goods sold is based on estimates of inventory used
in products sold.

         Research and Development Expense. No expenditures were made on research
and  development  for the nine months ended September 30, 2001, as compared with
$143,840 in the same period last year.

         Salaries and Benefits.  We spent  $422,178 on salaries and benefits for
the nine months ended September 30, 2001, as compared with $420,032 for the same
period  last  year.  Going  forward,  we  plan  to  significantly  increase  our
expenditures in salaries and benefits to address the additional  staffing needed
in the aftermath of the events of September 11.

Net Operating Loss.

         Net loss was $(882,294)  for the nine months ended  September 30, 2001,
compared to a net loss of  $(1,179,373)  for the nine months ended September 30,
2000.  The basic and fully  diluted loss per share is $.02 for the third quarter
2001,  compared  to $.05 for the same  period  last  year.  The  basic and fully
diluted  loss per share for the nine  months  ended  September  30, 2001 is $.07
compared to $.15 for the same period last year.


Changes in Financial Condition

         As of September 30, 2001, we had total assets of $2,451,389 an increase
of $563,965 over the December 31, 2000 balance of $1,887,424.  Total liabilities
were  $541,630,  at September  30, 2001,  resulting in  stockholders'  equity of
$1,909,759,  an increase  of  $631,706  from the  December  31, 2000  balance of
$1,278,053.

         During the nine months ended  September  30, 2001,  our cash  increased
from $265,245 at December 31, 2000, to $366,207 at September 30, 2001.  Net cash
used in operating  activities was $1,257,231 for the nine months ended September
30, 2001,  including increases in accounts receivable of $407,471,  increases in
inventory of $78,103, and decreases in accounts payable of $8,077.

         Net cash  generated from  financing  activities  during the nine months
ended  September 30, 2001 was $1,392,448,  consisting of proceeds  received from
sales of stock of  $1,489,000,  less  $61,189  advanced  to  stockholders,  less
payments  of  $35,363  made  on a  promissory  note  to  Columbia  Bank  with an
outstanding principal balance of $6,720 at September 30, 2001.


                                      -26-



         As a result of the  foregoing,  at  September  30,  2001 we had working
capital of $560,507,  $562,488 of net trade accounts receivable, and $173,442 in
inventory.  We have provided and may continue to provide payment term extensions
to certain of our  customers  from time to time.  As of September 30, 2001 there
were not material payment term extensions in effect.

         Our  inventory  balance at  September  30,  2001,  was  estimated to be
$173,442.  We do not take inventory on a quarterly  basis, and we made inventory
estimates  based on annual  inventory  determinations.  With expected  increased
product sales, we will need to make increased inventory  expenditures.  However,
the terms of our product  sales  frequently  require a twenty five percent (25%)
deposit on order.  In  addition,  we  endeavor  to keep  inventory  levels  low.
Therefore,  we do not believe that increased  product  sales,  and the resulting
materials purchases and inventory increases,  will adversely affect liquidity in
any material respect.

YEAR ENDED DECEMBER 31, 2000, COMPARED TO YEAR ENDED DECEMBER 31, 1999

Results of Operations

Revenue

         In 1999,  our revenues  totaled  $303,711 of which  $65,954 was derived
from sales of security systems and $237,757 from sales of contract manufacturing
and test services.  In 2000, our revenues  totaled  $661,789,  or an increase of
118% over the prior year.

         In 2000, we derived $319,376, or 48% of revenues from sales of security
systems and  $342,413,  or 52%,  from sales of contract  manufacturing  and test
services.  This  represents  a major  change from the prior year in which 78% of
revenue derived from contract  manufacturing and only 22% of revenue was derived
from sales of security  systems.  In the last  quarter of 2000,  only 32% of the
revenues  were derived from  contract  manufacturing  in the face of  increasing
revenues.

Gross Profit And Operating Expenses

         Gross profit on sales for the year ended December 31, 1999, was $45,333
compared to $225,479 for the year ended December 31, 2000, a fivefold  increase.
Gross profit margin was 15% in 1999 and 34% in 2000.

         Operating   expenses  for  the  year  ended  December  31,  1999,  were
$3,716,229,  compared with $2,429,761 in 2000. Approximately,  $2,147,000 of our
operating  expenses in 1999 were  attributable  to the issuance of shares of our
common stock as compensation and incentive, and as a means to attract and retain
qualified  personnel.  As a result  cash  operating  expenses  in 1999 were only
$1,569,229.  Approximately  $345,000  of our  operating  expenses  in 2000  were
attributable  to the  issuance  of shares of our  common  stock as  compensation
resulting in cash expenses of $2,084,761 for that year.

Costs And Expenses

         Costs Of Products And Services  Sold. The cost of products and services
sold,  consisting  principally  of the  costs  of  labor,  hardware  components,
supplies and software amortization, was $436,310 in 2000 as compared to $258,378
in 1999,  and  represented  85% of revenue in 1999 and 66% of revenue in 2000, a
decrease  of  approximately  20%. As product  sales in the future  account for a
larger  percentage  of  overall  sales,  we  expect  that our costs of goods and
services sold will decline as a percentage of total revenue and stabilize in the
mid 70% range.  Our profit  margins on sales of  security  systems  exceeds  our
profit  margins on sales of services.  We are currently  working on  engineering
changes in our security  products  that we expect will further  lower  component
costs for these products.

                                      -27-



         Salaries And Benefits.  We spent $2,045,531 in salaries and benefits in
1999.  We  organized  and  staffed  up  in  1999,  converting  many  independent
contractors  to  employees.   In  2000,  we  spent  $794,166  for  salaries  and
professional  fees. We incurred  expenses  associated with issuing shares of our
common stock to employees of $2,045,531 in 1999 and $344,802 in 2000. We believe
these  expenses were  necessary in the past and will continue to be necessary in
the future in order to attract qualified  personnel and conserve cash during our
early years of operation.

         Research And Development Expense. We spent $210,143 in 1999 on research
and  development and $132,300 in 2000. We expect to continue to fund new product
development in 2001 at or above the dollar levels expended in 2000.

         Investor Relations Expenses. Investor relations expenses increased from
$212,086 in 1999 to $392,136 in 2000.  Included in this expense  category is the
issuance of shares of our common  stock to  Columbia  Financial  Group,  LLC and
Magnum Financial in California in partial payment of their services in providing
investor relations support.

         Professional Fees. Professional fees increased from to $317,100 in 1999
to $359,131 in 2000. These fees include attorneys,  accountants, and programming
contractors.

Write-Off Of Goodwill And Other Intangible Assets.

         Following  the  consummation  of the purchase of ETMC it  experienced a
significant  decrease  in sales  volume.  For the  seven  months  following  the
purchase  through  December 31, 1999, ETMC sales to unrelated  entities  totaled
$231,970 which, if annualized,  amount to approximately $400,000, less than half
of the previous years sales of $820,000.  Additionally,  ETMC's sales volume for
the  year  2000  was  $342,413.   In  accordance  with   applicable   accounting
requirements,  we determined  that the following  changes in  circumstances  had
occurred which required a review for possible  impairment:  a significant change
in the manner in which the asset was used,  current  period  operating  and cash
flow losses, and a forecast of continuing losses.

         Our  impairment  review  consisted  of an analysis of the future  sales
prospects of ETMC's  manufacturing  business and an evaluation of the cash flows
to be realized  hereafter.  Our review  indicated  that sales  volume  would not
increase  significantly  from the current levels for the foreseeable  future. At
these significantly  decreased sales levels, cash flows to be realized from this
business line would be negative due to fixed operating  expenses exceeding gross
profit on sales.  We also  considered  the fact that ETMC continues to provide a
skilled employee force and a captive manufacturing resource that was used in the
original  valuation  of the  combination.  As a  result  of  this  analysis,  we
determined the remaining value of the goodwill to be associated with the captive
manufacturing  capabilities  and  skill  set of ETMC to be more than half of the
book value, and our related  write-off of 40% of the goodwill is consistent with
that valuation.

Net Operating Loss

         Net loss was $3,670,896 for 1999, or $.63 per share,  compared to a net
loss of $2,204,282 or $.18 per share for the year 2000. We have  accumulated  an
aggregate of approximately $1.7 million of net operating loss  carry-forwards as
of December  31,  2000,  which may be offset  against  taxable  income in future
years.  The use of these  losses  to  reduce  income  taxes  will  depend on the
generation of sufficient  taxable  income prior to their  expiration in the year
2018.  In the event of  certain  changes  in  control,  there  will be an annual
limitation on the amount of net operating loss carry-forwards which can be used.
No tax  benefit for these  carry-forwards  has been  reported  in the  financial
statements for the years ended December 31, 1999 or 2000.

                                      -28-



Changes in Financial Condition

         As of  December  31,  2000,  we had  total  assets of $  1,887,424,  an
increase of approximately $55,000 over last year's $1,831,860. Total liabilities
were $609,371,  resulting in stockholders' equity of $1,278,053, a decrease from
last year's $1,447,861 of $169,808.

         During  the year ended  December  31,  2000,  our cash  increased  from
$89,150 at December 31, 1999, to $265,245 at December 31, 2000. Net cash used in
operating  activities  was  $1,222,519  for the year ended  December  31,  2000,
including increases in accounts receivable of $61,739, decreases in inventory of
$45,874,  increases  in accounts  payable of $227,141  and  increases in accrued
interest of $11,000.

         Net cash  generated  from  financing  activities  during the year ended
December 31, 2000, was $1,480,727, consisting of proceeds received from the sale
of stock,  plus $56,452  advanced  from  stockholders,  less  payments made on a
promissory note with an outstanding  principal balance of $42,083,  plus accrued
and unpaid interest,  which note accrues interest at a rate of 2% plus prime, to
Columbia Bank. View Systems pays $5,000 per month to Columbia Bank.

         As a result of the foregoing,  as of December 31, 2000, we had negative
net  working  capital of  $93,770,  $155,017 of trade  accounts  receivable  and
$95,339 in inventory.  We have provided and may continue to provide payment term
extensions  to certain of our  customers  from time to time.  As of December 31,
2000, we have not granted material payment term extensions.

         Our  inventory  balance at  December  31,  2000,  was  estimated  to be
$95,339.  We do not take inventory on a quarterly  basis,  and we made inventory
estimates  based on annual  inventory  determinations.  With expected  increased
product sales, we will need to make increased inventory  expenditures.  However,
the terms of our product  sales  requires a twenty five percent (25%) deposit on
order. In addition,  we endeavor to keep inventory levels low. Therefore,  we do
not believe that increased  product sales,  associated  materials  purchases and
inventory increases, will adversely affect liquidity.


LIQUIDITY AND CAPITAL RESOURCES

         Since the start-up of our  operations  in 1998, we have funded our cash
requirements primarily through equity transactions. We received $8,276,259 since
inception  through the issuance of our common  stock.  We used the proceeds from
these  sales  of  equity  to  fund  operating  activities,   including,  product
development,   sales  and  marketing,  and  to  invest  in  the  acquisition  of
technology,  assets and business.  We are not currently generating cash from our
operations  in  sufficient  amounts to finance our business and will continue to
need to raise capital from other sources.

         We believe that cash from operations, funds available, and the proceeds
received  from the sales to the  Selling  Stockholders  of the  shares  that are
covered by this  prospectus,  as well as the cash that will be  generated if the
warrant  holders that have shares covered under this  prospectus  exercise their
warrants,  will  sustain  our  operations  and allow for  anticipated  growth in
operations and strategic acquisitions through September 30, 2002.

PLAN OF OPERATION

         The  amount of  capital  that we need to raise  will  depend  upon many
factors primarily including:

         o    the rate of sales  growth and  market  acceptance  of our  product
              lines;
         o    the  amount  and  timing of  necessary  research  and  development
              expenditures;
         o    the amount and timing of expenditures  to sufficiently  market and
              promote our products; and
         o    the amount and timing of any accessory product introductions.

                                      -29-



         We intend to use the cash  raised from the exercise of warrants held by
the Selling Stockholders to the following:

         o    bring our  FaceView,  PlateView  and Access  Control  products  to
              market;
         o    continue our product development efforts;
         o    expand our sales,  marketing and  promotional  activities  for the
              SecureView line of products; and
         o    increase our sales and marketing and customer support staff.

         We operate in a very competitive industry that requires continued large
amounts of capital to develop and promote our products.  We believe that it will
be  essential  to continue to raise  additional  capital,  both  internally  and
externally, to compete in this industry.

         In addition to accessing the public and private equity markets, we will
pursue  bank  credit  lines  and  equipment  lease  lines  for  certain  capital
expenditures.  We  currently  estimate  we will need  between $2 million  and $3
million  to launch our  expanded  business  operations  in  accordance  with our
current business plan.


                             DESCRIPTION OF PROPERTY

         We lease  6,000  square  feet of space used for  executive  offices and
engineering  design and  manufacturing  facilities in Baltimore,  Maryland.  The
lease term commenced on May 1, 2001 and ends on April 30, 2003.  During the term
of the lease, the rent is $2,200 per month.

                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The following information summarizes certain transactions we engaged in
during the past two years,  or we propose to engage in,  involving our executive
officers,  directors,  5%  stockholders  or  immediate  family  members of those
persons:

         View Technology,  Inc. is a privately held Colorado corporation founded
in 1994 by Gunther Than,  our President and CEO. Mr. Than is also  President and
CEO of View Technology. We advanced monies from time to time during 1999 to View
Technology to provide it with working  capital in order to complete  development
of certain  products  which we  manufacture  and market.  As of this date,  View
Technology  is indebted  to us in the amount of  $90,990.  We also had a license
agreement with View Technology for use of compression software. We no longer use
View  Technology  to  assist  us in  the  development  of  our  products  or its
compression software. It is not likely that we will collect in the future any of
View Technology's indebtedness to us.

         From time to time during 1999, we advanced  non-interest  bearing loans
to Gunther Than and his wife, who was our employee.  All of such loans have been
repaid.  In addition  during 1999, we also redeemed  59,860 shares of our common
stock  owned by Mr.  Than at a price  of $2.00  per  share  or  $119,720  in the
aggregate,  consisting  of $52,000 cash and the  cancellation  of $67,719 of his
indebtedness  due to us.  Mr.  Than was  granted  the option for a period of two
years  after the  redemption  to  repurchase  the shares at a price per share of
$2.00 plus interest on the cancelled  debt at the rate of 10% per year. Mr. Than
has not taken a salary from us during  2001.  Consequently,  as of November  30,
2001, we owe Mr. Than compensation in the amount of $110,000.

         See  "Executive  Compensation"  for a description of warrants and stock
issued to our directors and officers.

                                      -30-




                            MARKET FOR COMMON EQUITY
                         AND RELATED STOCKHOLDER MATTERS

         Our shares are traded on the Over-The-Counter  Bulletin Board under the
symbol "VYST.OB." The high and low bids for the periods indicated,  according to
information from the National Quotation Bureau, were:

         2001                                        High              Low
         Quarter ended March 31, 2001                1.09              .47
         Quarter ended June 30, 2001                  .71              .41
         Quarter ended September 30, 2001             .71              .16

         2000                                        High              Low
         Quarter ended March 31, 2000                4.19             2.06
         Quarter ended June 30, 2000                 3.19             1.13
         Quarter ended September 30, 2000            1.60              .44
         Quarter ended December 31, 2000              .88              .38

         1999                                        High              Low
         Quarter ended September 30, 1999            5.00             2.25
         Quarter ended December 31, 1999             6.35             2.00

         As of November 30, 2001, we had 252 stockholders of record.

         These quotations reflect inter-dealer  prices,  without retail mark-up,
mark-down or commission and may not represent actual transactions.

Dividend Policy

         We have not declared or paid cash  dividends or made  distributions  in
the  past,  and we do not  anticipate  that we will pay cash  dividends  or make
distributions in the foreseeable  future.  We intend to retain and invest future
earnings to finance our operations.



                                      -31-



                             EXECUTIVE COMPENSATION

         No  compensation  was payable to any  executive  officer for any fiscal
year until the fiscal  year ending  December  31,  1999.  No officer or director
received  compensation  in any  fiscal  year in  excess  of  $100,000  with  the
exemption of Gunther Than,  currently our only executive officer.  The following
table sets forth certain  information  concerning his compensation for the years
ending December 31, 1999 and December 31, 2000.



                                              Annual Compensation                          Long-Term Compensation
                                              -------------------                          ----------------------
                                                                               Awards                    Payouts
                                                                               ------                    -------
                                                                                    Securities
                                                                                      Under-
                                                           Other       Restricted     lying
                                                           Annual        Stock       Options/         LTIP        All Other
      Name and            Year    Salary     Bonus      Compensation    Award(s)       SARs         Payouts     Compensation
  Principal Position                ($)       ($)           ($)           ($)          (#)            ($)
  ------------------                ---       ---           ---           ---          ---            ---

                                                                                                       
   Gunther Than,          1999    $72,000  $337,500(1)      ---                      60,000(2)        ---             0
   President and CEO      2000    $96,000                $110,400(3)                                  ---             0



(1) The bonus amount  represents  300,000 shares awarded to Gunther Than in 1999
for bringing about the acquisition of ETMC,  150,000 of which vested in 1999 and
150,000 of which  vested in 2000.  The 300,000  shares were valued at a price of
$1.35 per share  which was market  value less a  discount  based on the  trading
restrictions on the shares.

(2) These  options were granted to Mr. Than as  non-qualified  options under our
stock options plan to acquire 60,000 shares at an option price of $.01 per share
which vest at the rate of 5,000 shares per month commencing July 1999.

(3) This amount represents 480,000 shares of our common stock valued at $.23 per
share which was market value less a discount  based on the trading  restrictions
on the date of  issuance.  The shares were  granted to Mr. Than  pursuant to his
employment agreement.



Employment Agreements

         Mr. Than has an Executive  Employment Agreement with us to serve as our
President and Chief Executive  Officer,  effective June 1, 1999,  without a term
but  terminable  by either  party on 60 days written  notice.  He is entitled to
compensation  in the amount of $10,000 per month for the calendar year 2001, and
an accrual  payment of 480,000  shares of our common  stock per year in exchange
for his  covenants  not to  compete  with us for a period of one year  after any
termination of the Agreement. If we terminate the employment of Mr. Than without
cause or  because  of  merger,  acquisition  or  change in  control,  we will be
obligated to pay him approximately  $350,000 in severance  payments over a three
year period.

         Certain  employees are eligible to receive up to 2,000 shares per month
as part of their  compensation  from us. As of November 30, 2001,  the number of
shares due to such employees was 180,000.

                  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
                     ON ACCOUNTING AND FINANCIAL DISCLOSURE

         Prior to becoming a reporting company under the Exchange Act on October
6, 1998, we acquired RealView Systems, Inc. ("Real View"). RealView was acquired
by us through a share exchange, as a result of which, RealView became our wholly
owned subsidiary. Due to the immateriality of this transaction, we accounted for
it as a pooling of interest.  As a result,  all of our financial  statements and
financial  information  were  restated  to include  the  amounts  and results of
operations of RealView.

         Following  the  acquisition,  we  decided  to become a fully  reporting
company  under the  Exchange  Act.  To become a  reporting  company,  we filed a

                                      -32-



registration  statement on Form 10SB to register our common stock under  Section
12(g) of the  Exchange Act on August 13,  1999.  We were  required to include in
this registration statement audited statements of income, cash flows and changes
in  stockholders'  equity for 1997 and 1998.  This  required  us to include  the
financial information for RealView for 1997 and 1998.

         RealView had engaged the accounting firm of Katz,  Abosch,  Windesheim,
Gershman & Freedman,  P.A. (Katz,  Abosch) to provide audit accounting  services
and to render an independent audit report,  dated June 1, 1998, of the financial
statements  of RealView as of December 31, 1997,  and the related  statements of
operations,  stockholders' equity and cash flows for the year then ended and for
the period from September 15, 1993 (inception) to December 31, 1997.

         We requested and received Katz,  Abosch's  authorization to include the
results  of their  audit in our  financial  reports  in our Form 10SB and in our
registration  statement  on Form  SB-2,  which  we filed on  January  11,  2000.
However,  as a matter of its own internal policy,  Katz, Abosch does not provide
audit accounting  services to public companies.  Therefore,  it did not offer to
provide audit accounting services to us and we engaged another company,  Stegman
& Company to provide such services.

         Katz, Abosch did not render an adverse opinion or disclaimer of opinion
with regard to its audit of the financial  statements  of RealView,  nor was its
audit work for RealView  modified as to uncertainty,  audit scope, or accounting
principles.  The  decision  to  engage  Stegman & Company  as our  auditors  was
approved by both our board of directors  and  stockholders.  We did not have any
disagreements  with  Katz,  Abosch on any  matter of  accounting  principles  or
practices, financial statement disclosure, or auditing scope or procedure.

                              AVAILABLE INFORMATION

         We  are  subject  to  the  information  reporting  requirements  of the
Securities  Exchange Act and,  accordingly,  file reports and other  information
with the  Commission.  Such  reports and other  information  are  available  for
inspection  and copying at the public  reference  facilities  maintained  by the
Commission at Room 1026, 450 Fifth Street N.W., Washington,  D.C. 20549, and the
public may obtain  information on the operation of the public  reference room by
calling the SEC at  1-800-SEC-0330.  The  information  is also  available at the
Commission's  regional  offices  located at 7 World Trade Center in New York, NY
10007, at the Klucynski  Building,  230 Fourth Dearborn Street,  in Chicago,  IL
60604 and at 5757  Wilshire  Boulevard,  Los Angeles,  CA 90024.  Copies of such
material  also  may  be  obtained  from  the  Public  Reference  Section  of the
Commission,  450 Fifth Street N.W., Judiciary Plaza,  Washington,  D.C. 20549 at
prescribed  rates  and  are  also  available  on the  Commission's  web  site at
www.sec.gov

                             ADDITIONAL INFORMATION

         We  filed a  registration  statement  with  the  Commission  under  the
Securities Act with regard to the securities  offered  hereby.  This  prospectus
does not contain all of the information set forth in the registration  statement
and in the exhibits and schedules thereto, certain parts of which are omitted in
accordance  with the  rules  and  regulations  of the  Commission.  For  further
information  reference is made to such  registration  statement and the exhibits
and schedules thereto. The registration statement and any amendments,  including
exhibits are available for inspection and copying as set forth above.  We intend
to distribute  annual reports  containing  audited  financial  statements to our
stockholders.

                                      -33-


                          Index To Financial Statements
                                View Systems, Inc


                                                                        Page No.
                                                                        --------

Independent Auditors' Report                                                 F-1

Consolidated Balance Sheet at December 31, 2000                              F-2

Consolidated Statements of Operations for the                                F-3
Years Ended December 31, 2000 and 1999

Consolidated Statements of Changes in Stockholders'
Equity for the years ended December 31, 2000 and 1999                        F-4

Statements of Cash Flows for the
years ended December 31, 2000 and 1999                                       F-5

Notes to Consolidated Financial Statements                                   F-7

Consolidated Balance Sheet at September 30, 2001                            F-16

Consolidated Statements of Operations for the Nine Months and               F-17
Quarter ended September 30, 2001 and 2000

Consolidated Statements of Changes in Stockholders' Equity
for the Period from January 1, 2000 to September 30, 2001                   F-18

Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 2001 and 2000                                           F-19

Notes to Consolidated Financial Statements                                  F-20






The Board of Directors and Stockholders

View Systems Inc.
Columbia, Maryland

          We have audited the  accompanying  consolidated  balance sheet of View
Systems  Inc.  and  Subsidiaries  (the  Company) as of December 3l, 2000 and the
related consolidated  statements of operations,  changes in stockholders' equity
and  cash  flows  for  the  years  ended  December  3l,  2000  and  1999.  These
consolidated  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audits.

          We  conducted  our  audits  in  accordance  with  auditing   standards
generally  accepted in the United States.  Those standards  require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

          In our opinion,  the  accompanying  consolidated  balance  sheet as of
December 31, 2000 and the related consolidated statements of operations, changes
in stockholders' equity and cash flows for the years ended December 3l, 2000 and
1999 present fairly,  in all material  respects,  the financial  position of the
Company as of December 31, 2000 and the results of its operations and cash flows
for the years then ended in  conformity  with  accounting  principles  generally
accepted in the United States.


                                                               Stegman & Company

Baltimore, Maryland
March 15, 2001


                                      F-1




                               VIEW SYSTEMS, INC.

                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 2000

                                     ASSETS
                                                                                       
CURRENT ASSETS:
    Cash                                                                                  $ 265,245
    Accounts receivable (net of allowance for doubtful accounts of $10,000)                 155,017
    Inventory                                                                                95,339
                                                                                          ---------
           Total current assets                                                             515,601
                                                                                          ---------

PROPERTY AND EQUIPMENT:
    Equipment                                                                               323,766
    Leasehold improvements                                                                   20,261
    Software tools                                                                           15,071
    Vehicles                                                                                 43,772
                                                                                          ---------
                                                                                            402,870
           Less accumulated depreciation                                                     79,814
                                                                                          ---------
              Net value of property and equipment                                           323,056
                                                                                          ---------

OTHER ASSETS:
    Goodwill                                                                                894,383
    Investments                                                                              28,000
    Due from affiliated entities                                                            105,552
    Due from affiliate                                                                       20,000
    Deposits                                                                                    832
                                                                                          ---------
           Total other assets                                                             1,048,767
                                                                                          ---------
           TOTAL ASSETS                                                                  $1,887,424
                                                                                          =========

                      LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
    Accounts payable                                                                     $  401,247
    Note payable - bank                                                                      42,083
    Accrued interest                                                                         22,000
    Notes payable - other                                                                   110,000
    Due to stockholder                                                                        2,090
    Payroll  tax liabilities                                                                 31,951
                                                                                         ----------
           Total current liabilities                                                        609,371
                                                                                         ----------
STOCKHOLDERS' EQUITY:
    Common stock - par value $.01,  50,000,000 shares authorized,
      Issued and outstanding - 11,481,031 shares                                             11,481
    Additional paid-in capital                                                            7,364,502
    Accumulated deficit                                                                  (6,097,930)
                                                                                         ----------
           Total stockholders' equity                                                     1,278,053
                                                                                         ----------
           TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                    $1,887,424
                                                                                         ==========

See accompanying notes


                                      F-2





                               VIEW SYSTEMS, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999

                                                                           2000                      1999
                                                                           ----                      ----

                                                                                           
REVENUE:
    Sales of contract assembly services                                $  319,376                $   65,954
    Sales of assembled electronic components                              342,413                   237,757
                                                                      -----------               -----------
           Total sales                                                    661,789                   303,711

    Cost of goods sold                                                    436,310                   258,378
                                                                      -----------               -----------
GROSS PROFIT ON SALES                                                     225,479                    45,333
                                                                      -----------               -----------

OPERATING EXPENSES:
    Advertising and promotion                                              20,931                    23,256
    Amortization                                                          113,135                    95,299
    Bad debts                                                              14,010                       -
    Business development expense                                          133,393                   140,000
    Contributions                                                          10,347                     2,500
    Depreciation                                                           44,765                    29,856
    Dues and subscriptions                                                  2,573                     3,379
    Employee compensation and benefits                                    794,166                 2,045,531
    Impairment loss of goodwill and other intangible assets                   -                     244,155
    Insurance                                                              21,088                    17,038
    Interest                                                               23,338                    51,262
    Investor relations                                                    392,136                   212,086
    Miscellaneous expenses                                                 13,692                    19,445
    Office expenses                                                        94,846                    69,989
    Professional fees                                                     359,131                   317,100
    Rent                                                                  121,951                    74,228
    Repairs and maintenance                                                 9,148                    10,167
    Research and development                                              132,300                   210,143
    Taxes (other than income)                                               5,249                     3,201
    Telephone                                                              35,807                    28,398
    Travel                                                                 72,851                   105,813
    Utilities                                                              14,904                    13,383
                                                                      -----------               -----------
           Total operating expenses                                     2,429,761                 3,716,229
                                                                      -----------               -----------

NET LOSS FOR THE YEAR                                                 $(2,204,282)              $(3,670,896)
                                                                      ===========               ===========

LOSS PER SHARE:
    Basic                                                             $(     0.19)              $(     0.63)
                                                                      ===========               ===========

    Diluted                                                           $(     0.19)              $(     0.63)
                                                                      ===========               ===========


See accompanying notes

                                      F-3




                               VIEW SYSTEMS, INC.

            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999

                                                          Additional                            Total
                                            Common         Paid-In         Accumulated       Stockholders'
                                             Stock         Capital            Deficit           Equity
                                            ------        ----------       -----------       ------------
                                                                                
Balances at January 1, 1999                $ 4,167        $  406,253       $(  222,752)     $   187,668

    Sale of common stock                       952         1,425,377              -           1,426,329
    Redemption of common stock              (  191)       (  396,590)             -          (  396,781)
    Issuance of common stock (employee
      and other compensation)                1,469         2,145,864              -           2,147,333
    Issuance of common stock
      (Xyros acquisitions)                     150           562,350              -             562,500
    Issuance of common stock
      (ETMC acquisitions)                      250           787,250              -             787,500
    Issuance of common stock (debt
      conversion)                              370           403,838              -             404,208
    Net loss for the year ended
      December 31, 1999                         -                -          (3,670,896)      (3,670,896)
                                           -------         ---------         ---------        ---------

Balances at December 31, 1999                7,167         5,334,342        (3,893,648)       1,447,861
    Sales of common stock                    2,843         1,448,097               -          1,450,940
    Stock options exercised                     88               894               -                982
    Issuance of common stock (employee
      and other compensation)                1,383           581,169               -            582,552
    Net loss for the year ended
      December 31, 2000                        -                 -          (2,204,282)      (2,204,282)
                                           -------         ---------         ---------        ---------


Balances at December 31, 2000              $11,481        $7,364,502       $(6,097,930)      $1,278,053
                                           =======         =========        ==========        =========



See accompanying notes.

                                      F-4





                               VIEW SYSTEMS, INC.

                            STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999

                                                                             2000                   1999
                                                                             ----                   ----
                                                                                          
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss                                                          $(2,204,282)              $( 3,670,896)
    Adjustments to reconcile net income to net cash
      provided by operating activities:
    Depreciation and amortization                                        157 ,900                    125,155
    Impairment loss of goodwill and other intangible assets                  -                       244,155
    Employee and other compensation paid through
      the issuance of common stock                                        582,552                  2,147,333
    Employee compensation related to stock
      options granted                                                          -                      87,420
    Interest paid through issuance of common stock                             -                      33,000
    Changes in operating assets and liabilities:
      Accounts receivable                                              (   61,739)               (    93,278)
      Inventory                                                            45,874                (   141,213)
      Other assets                                                          6,175                (     6,571)
      Accounts payable                                                    227,141                    150,333
      Accrued interest                                                     11,000                     11,000
      Payroll taxes payable                                                12,788                     19,163
                                                                      -----------                 ----------

        Net cash used by operating activities                          (1,222,591)               ( 1,094,399)
                                                                      -----------                 ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchase of property and equipment                                 (   67,479)               (    50,354)
    Funds advanced to affiliated entities                              (   14,562)               (   459,180)
    Investment in MediaComm Broadcasting Systems, Inc.                 (      -  )               (    28,000)
                                                                      -----------                 ----------

        Net cash used in investing activities                          (   82,041)               (   537,534)
                                                                      -----------                 ----------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from loans provided by stockholders                           56,452                    132,071
    Repayment of note payable-bank                                     (   27,647)               (     5,270)
    Proceeds from sales of stock                                        1,451,922                  1,426,329
                                                                      -----------                 ----------

        Net cash provided by financing activities                       1,480,727                  1,553,130
                                                                      -----------                 ----------

NET INCREASE( DECREASE) IN CASH                                           176,095                (    78,803)

CASH AT BEGINNING OF YEAR                                                  89,150                    167,953
                                                                      -----------                 ----------

CASH AT END OF YEAR                                                   $   265,245                $    89,150
                                                                      ===========                 ==========


See accompanying notes

                                      F-5


                               VIEW SYSTEMS, INC.

                            STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999

(Continued)




                                                                             2000                     1999
                                                                             ----                     ----
Schedule of noncash investing and financing transactions:

                                                                                                
    Common stock issued to effect purchase of
      Eastern Tech Manufacturing, Inc.                                   $     -                      $ 787,500
                                                                           ======                       =======

    Debt issued to effect purchase of
      Eastern Tech Manufacturing, Inc.                                   $     -                      $ 148,184
                                                                           ======                       =======

    Common stock issued for to effect purchase
      of Xyros Systems, Inc.                                             $     -                      $ 562,500
                                                                           ======                       =======

    Common stock issued for conversion of debt                           $     -                      $ 404,208
                                                                           ======                       =======

    Common stock redeemed in exchange for receivable                     $     -                      $ 396,781
                                                                           ======                       =======



Cash paid during the period for:

    Interest                                                             $ 12,338                     $  45,379
                                                                           ======                        ======


    Income taxes                                                         $     -                      $     -
                                                                           =======                       ======


See accompanying notes


                                      F-6



                               VIEW SYSTEMS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999

1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

          Nature of Operations

          View  Systems,  Inc.  (the  "Company")  designs and develops  computer
software and hardware used in conjunction with  surveillance  capabilities.  The
technology  utilizes  the  compression  and  decompression  of  digital  inputs.
Operations,  from formation to June 30, 1999, were devoted  primarily to raising
capital, developing the technology,  promotion, and administrative functions. As
of July 1, 1999 the Company was no longer  considered  to be in the  development
stage.

          Basis of Consolidation

          The  consolidated  financial  statements  include the  accounts of the
Company  and its wholly  owned  subsidiaries,  Real View  Systems,  Inc.  ("Real
View"),  Xyros  Systems,  Inc.  ("Xyros") and Eastern Tech  Manufacturing,  Inc.
("ETMC").  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.  Those estimates and assumptions  affect the reported  amounts of
assets and liabilities, the disclosure of contingent assets and liabilities, and
the  reported  revenues  and  expenses.  Actual  results  could  differ from the
estimates that were used.

          Revenue Recognition

          The Company  and its  subsidiaries  recognize  revenue and the related
cost of goods sold upon shipment of the product.

          In December  1999,  the  Securities  and Exchange  Commission  ("SEC")
issued Staff Accounting  Bulletin No. 101 ("SAB 101"),  "Revenue  Recognition in
Financial Statements". SAB 101 summarizes certain of the SEC's views in applying
accounting  principles  generally  accepted  in the  United  States  to  revenue
recognition in financial  statements.  The Company adopted SAB 101 in the fourth
quarter  of  2000.  The  adoption  of SAB 101  had no  impact  on the  Company's
financial condition or results of operations.

          Inventories

          Inventories  are  stated  at the  lower  of  cost or  market.  Cost is
determined by the last-in-first-out method (LIFO).

                                      F-7


                               VIEW SYSTEMS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999

          Property and Equipment

          Property and equipment is recorded at cost and depreciated  over their
estimated useful lives,  using the  straight-line  and accelerated  depreciation
methods. Upon sale or retirement,  the cost and related accumulated depreciation
are eliminated from the respective  accounts,  and the resulting gain or loss is
included  in the  results  of  operations.  The  useful  lives of  property  and
equipment for purposes or computing  depreciation are as follows:

                        Equipment               5-7 years
                        Software tools          3 years

          Repairs and maintenance charges which do not increase the useful lives
of assets are charged to  operations as incurred.  Depreciation  expense for the
years  ended  December  31,  2000 and  1999  amounted  to  $44,765  and  $29,856
respectively.

          Impairment of Long-Lived Assets

          Long-lived assets and identifiable intangibles (including goodwill) to
be held and used are  reviewed  for  impairment  whenever  events or  changes in
circumstances indicate that the carrying amount should be addressed.  Impairment
is measured by comparing the carrying value to the estimated undiscounted future
cash  flows  expected  to  result  from use of the  assets  and  their  eventual
disposition.

          Income Taxes

          Deferred  income  taxes are  recorded  under  the asset and  liability
method whereby deferred tax assets and liabilities are recognized for the future
tax  consequences,  measured by enacted tax rates,  attributable  to differences
between  the  financial  statement  carrying  amounts  of  existing  assets  and
liabilities and their respective tax bases and operating loss carryforwards. The
effect  on  deferred  tax  assets  and  liabilities  of a change in tax rates is
recognized in income in the period the rate change becomes effective.  Valuation
allowances  are recorded for deferred tax assets when it is more likely than not
that such deferred tax assets will not be realized.

          Research and Development

          Research and development costs are expensed as incurred. Equipment and
facilities   acquired  for  research  and   development   activities  that  have
alternative  future  uses  are  capitalized  and  charged  to  expense  over the
estimated useful lives.

          Advertising

          Advertising  costs are charged to operations as incurred.  Advertising
costs for the years ended  December  31, 2000 and 1999 were $20,931 and $23,256,
respectively.


                                      F-8


                               VIEW SYSTEMS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999

          Nonmonetary Transactions

          Nonmonetary   transactions   are  accounted  for  in  accordance  with
Accounting   Principles   Board  Opinion  No.  29  Accounting  for   Nonmonetary
Transactions  which requires the transfer or distribution of a nonmonetary asset
or liability to be based, generally, on the fair value of the asset or liability
that is received or surrendered, whichever is more clearly evident.

          Financial Instruments

          For most financial  instruments,  including cash, accounts receivable,
accounts  payable and accruals,  management  believes  that the carrying  amount
approximates  fair value, as the majority of these instruments are short-term in
nature.

          Net Loss Per Common Share

          Basic net loss per common share  ("Basic EPS") is computed by dividing
net loss  available to common  stockholders  by the weighted  average  number of
common shares outstanding.  Diluted net loss per common share ("Diluted EPS") is
computed by dividing net loss available to common  stockholders  by the weighted
average number of common shares and dilutive  potential common share equivalents
then  outstanding.  Potential  common shares consist of shares issuable upon the
exercise of stock  options and  warrants.  The  calculation  of the net loss per
share available to common stockholders for the years ended December 31, 2000 and
1999 does not include  potential  shares of common stock  equivalents,  as their
impact would be antidilutive.

          Segment Reporting

          The  company  has  determined  that it does not  have  any  separately
reportable operating segments for the years ended December 31, 2000 and 1999.

2. FINANCIAL CONDITION AND MANAGEMENT'S PLAN

          The accompanying financial statements have been prepared in conformity
with  accounting  principles  generally  accepted  in the United  States,  which
contemplates  continuation  of the  Company  as a  going-concern.  However,  the
Company has sustained  significant  operating  losses in the past two years.  In
addition,  the Company has used  substantial  amounts of working  capital in its
operations. As of December 31, 2000 and for the year then ended, the Company had
an accumulated deficit of $6.1 million and a net loss of $2.2 million.  Further,
as of December 31, 2000 current  liabilities  exceed  current assets by $93,770.
There can be no assurance  that the Company will be able to generate  sufficient
revenues to achieve or sustain profitability in the future.

          In view of these matters, realization of a major portion of the assets
in the accompanying  balance sheet is dependent upon continued operations of the
Company,  which in turn is  dependent  upon  the  ability  to meet it  financing
requirements,  and  the  success  of  its  future  operations.   Management  has
undertaken  a


                                      F-9


vigorous  effort to reduce  both  cost of sales  and other  operating  expenses.
Additionally,  the Company will be dependent  upon the ability to raise  capital
through equity  offerings and the exercise of common stock options and warrants.
The Company  anticipates that upon  registration of shares in the second quarter
of 2001 that  2,000,000  common stock  warrants  will be exercised at a price of
$.40 per share thereby raising $800,000.  Management also anticipates additional
equity  offerings  and the  exercise  of  additional  common  stock  options and
warrants later in 2001.  There can be no assurance  that these equity  offerings
will be successful.  Management  believes the actions  presently  being taken to
revise  the  Company's   operating  and  financial   requirements   provide  the
opportunity for the Company to continue as a going concern.

3. BUSINESS COMBINATIONS

          On February  25,  1999,  the Company  acquired  Xyros  Systems Inc. of
Columbia,  Maryland,  a developer of computer  based systems and equipment  that
captures  video and  audio  data and  transmits  and  stores it within  standard
personal computer systems. Under the terms of the merger agreement,  each of the
100  shares of  Xyros's  common  stock  was  exchanged  for 1,500  shares of the
Company's common stock. This acquisition was accounted for as a purchase.

          In May of 1999,  the Company  completed  its  acquisition  of ETMC,  a
computer  parts and  accessories  manufacturer.  The  business  combination  was
accounted for as a purchase in which each outstanding share of ETMC common stock
was converted into the right to receive shares of the Company.  At closing,  the
purchase  price (as defined in the agreement and plan of merger) of $935,684 was
paid by the  issuance of 250,000  shares of common stock and the  assumption  of
liabilities for both legal fees and a non-compete  clause.  The excess cost over
net liabilities acquired of $495,344 was recorded as goodwill.

4. INVENTORY

          Inventories at December 31, 2000 consisted of the following:

                   Work in process                                  43,835
                   Raw materials                                    51,504
                                                                    ------

                                                                  $ 95,339
                                                                    ======

5. DUE FROM AFFILIATED ENTITY

          The Company has advanced  non-interest bearing funds of $105,552 as of
December 31, 2000 to a related  corporation,  View  Technologies,  Inc. which is
controlled by the Chief  Executive  Officer of the Company.  There are no formal
repayment  terms  associated  with this advance.  The two  companies  enter into
various  transactions  throughout  the year to  provide  working  capital to one
another when necessary.

6. DUE FROM AFFILIATE

          The  Company  has  advanced  non-interest  bearing  funds to its Chief
Executive Officer in the amount of $20,000 as of December 31, 2000. There are no
repayment terms associated with this advance.



                                      F-10


                               VIEW SYSTEMS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999

7. INVESTMENTS

          The Company owns  approximately 14% of the common stock of a privately
held  entity  known  as  MediaComm   Broadcasting  Systems,  Inc.,  which  is  a
development  stage company formed to generate  revenue  through  internet retail
sales.  There  is  no  market  for  the  entity's  common  shares,  and  it  was
impracticable to estimate fair value of the Company's investment. The investment
is carried on the balance sheet at original cost of $28,000 or $.03 a share.

8. INTANGIBLE ASSETS

          In relation to the business  combination with ETMC accounted for under
the purchase method of accounting,  the Company recorded  goodwill in the amount
of  $495,344.  This amount was based on the  difference  between the fair market
value of the  Company's  stock  at the  acquisition  date and the fair  value of
ETMC's net assets.  During the fourth  quarter of 1999,  management  conducted a
thorough  review  of  ETMC's   operations,   including  customer  base,  current
production  capacity,  and job order backlog.  Based on this review, the Company
recognized an impairment loss in the amount of $199,009.  The remaining goodwill
is being amortized over a 10 year period, beginning at the acquisition date.

          In relation to the business combination with Xyros accounted for under
the purchase method of accounting,  the Company recorded  goodwill in the amount
$802,069.  This amount was based on the difference between the fair market value
of the  Company's  stock at the  acquisition  date and the fair market  value of
Xyros's net assets and is being  amortized on a  straight-line  basis over a ten
year period.

          Software  development  costs of $47,146  relating  to  internal  costs
associated  with a software  product  that the Company will not market were also
written-off to expense during 1999.

9. NOTE PAYABLE - BANK

          One of the  Company's  subsidiaries  has a  note  payable  with a bank
having an outstanding balance of $42,083 as of December 31, 2000. The note bears
interest  equivalent to the prime rate plus 2% per annum payable  monthly and is
personally  guaranteed by three stockholders and former officers of the Company.
The Company is obligated to make monthly principal payments of $5,000.

10. NOTE PAYABLE - OTHERS

          In  connection  with the  acquisition  of Xyros,  the Company  assumed
liabilities  evidenced by notes payable to the  stockholders of Xyros. The notes
carry an annual interest rate of 10% with interest paid monthly.  The notes were
originally due December 31, 1999, but the Company has  renegotiated the terms of
the loan to allow for repayment as cash flow permits.

                                      F-11

                               VIEW SYSTEMS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999

11. INCOME TAXES

          The  components  of the net  deferred  tax asset and  liability  as of
December 31, 2000 are as follows:

        Effect of net operating  loss  carryforward     $ 2,090,000
        Less valuation allowance                        $(2,090,000)
                                                          ---------
              Net deferred tax asset (liability)        $     -
                                                          =========

12. STOCK-BASED COMPENSATION

          During the years ended December 31, 2000 and 1999 the Company  granted
restricted  stock,  incentive stock options,  non-qualified  stock options,  and
warrants to employees, officers, independent consultants and investors.

          Restricted Stock Grants
          -----------------------

          The  Company's  Board of Directors  and  stockholders  have approved a
restricted  share plan under which shares of the Company's  common stock will be
granted to employees,  officers, and directors at the discretion of the Board of
Directors.  During 2000 and 1999 the Company  issued the following  shares under
this Plan and additional shares at the direction of the Board of Directors:

                                    2000                         1999
                          ------------------------     ------------------------
                            Number        Expense       Number         Expense
                          of Shares     Recognized     of Shares     Recognized
                          ---------     ----------     ---------     ----------

Officers and employees      580,000     $ 266,927      1,100,000     $1,755,000
Consultants                 803,000       156,125        369,000        392,333
                            -------     ---------      ---------     ----------

                          1,383,000     $ 423,052      1,469,000     $2,147,333
                          =========     =========      =========     ==========

          The  recognition  of expense was based on the fair market value of the
common stock issued on the date of the grant.

          Stock Options and Warrants
          --------------------------

          The Company  adopted the 1999 Stock Option Plan during 1999.  The Plan
reserves  4,500,000  shares of the Company's  unissued common stock for options.
Options,  which may be tax qualified and  non-qualified,  are  exercisable for a
period of up to ten years at prices at or above market price as  established  on
the date of grant.

                                      F-12



                               VIEW SYSTEMS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999

          A  summary  of  the  Company's   stock  option  activity  and  related
information for the years ended December 31, 2000 and 1999 is as follows:

                                                         2000
                                       -----------------------------------------

                                        Common      Weighted
                                        Stock       Average        Range of
                                       Options   Exercise Price  Exercise Prices
                                       -------   --------------  ---------------

   Outstanding at beginning of year    504,860      $  1.56        $0.01-$2.07

   Granted                                -             -                -
   Exercised                           (87,250)         .01             .01
   Expired/cancelled                  (309,920)        2.00            2.00
                                       -------
   Outstanding at end of year          107,690        $1.63        $0.01-$2.07
                                       =======

                                                         1999
                                       -----------------------------------------

                                        Common      Weighted
                                        Stock       Average        Range of
                                       Options   Exercise Price  Exercise Prices
                                       -------   --------------  ---------------


   Outstanding at beginning of year       -         $ -            $     -
   Granted                             504,860       l.56           0.01-2.07
   Exercised                              -           -                  -
   Expired/cancelled
                                       -------

   Outstanding at end of year          504,860      $1.56          $0.01-$2.07
                                       =======

                             All options issued are immediately exercisable.

                             The  Company  has  issued  warrants to purchase the
                             Company's common stock as follows:

                                                         2000
                                       -----------------------------------------

                                        Common      Weighted
                                        Stock       Average        Range of
                                       Warrants  Exercise Price  Exercise Prices
                                       --------  --------------  ---------------

   Outstanding at beginning of year     454,000       $2.00           $2.00

   Granted                            3,200,000        1.85          .50-2.25
   Exercised                           (665,000)        .50             .50
   Expired/cancelled                      -              -               -
                                      ---------
   Outstanding at end of year         2,989,000       $1.97         1.25-2.25
                                      =========


                                      F-13



                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999

                                                         2000
                                       -----------------------------------------

                                        Common      Weighted
                                        Stock       Average        Range of
                                       Warrants  Exercise Price  Exercise Prices
                                       --------  --------------  ---------------


   Outstanding at beginning of year       -          $  -            $  -

   Granted                              454,000        2.00            2.00
   Exercised                              -             -               -
   Expired/cancelled                      -             -               -
                                       --------

   Outstanding at end of year           454,000      $ 2.00          $ 2.00
                                       ========

          During January,  2001 the company cancelled 2,235,000 warrants with an
exercise price of $2.00 per share due to non-performance of the warrant holder.

          The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123; Accounting for Stock-Based  Compensation
(SFAS No.  123),  but  applies  Accounting  Principle  Board  Opinion No. 25 and
related interpretations.  The fair value of these equity awards was estimated at
the date of grant using a Black-Scholes  option pricing model with the following
weighted average assumptions for 1999: risk-free interest rate of 5.97% - 6.09%;
expected  volatility of 70.0%;  expected option life of 2 years from vesting and
an expected dividend yield of 0.0%. If the Company had elected to recognize cost
based on the fair value at the grant dates consistent with the method prescribed
by SFAS No.  123,  net loss and loss share  would  have been  changed to the pro
forma amounts for the year ended December 31, 1999 as follows:

        Net income - as reported                           $ (3,670,896)
        Net income - pro forma                               (3,937,524)

        Net income per share - as reported                 $      (0.63)
        Net income per share - pro forma                          (0.68)

          There were no stock options granted during the year ended December 31,
2000.

13. RELATED PARTY TRANSACTIONS

          During the year ended  December 31, 1999 the Company  redeemed  59,860
shares  owed  by the  Chief  Executive  Officer  for  $50,000  in  cash  and the
elimination  of  $67,719  due  to  the  Chief  Executive  Officer  for  a  total
consideration for $117,719

                                      F-14



                               VIEW SYSTEMS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999

          During the year ended  December 31, 1999 the Company  converted a note
payable and related  accrued  interest to a family member of the Chief Executive
Officer  in the amount of  $200,000  to 200,000  share of the  Company's  common
stock.

14. CONCENTRATION OF CREDIT RISK

          The Company maintains a checking account in a commercial bank. Cash in
this  checking  account at times  exceeded  $100,000.  The  checking  account is
insured by the Federal Deposit Insurance Corporation up to $100,000.


                                      F-15





                                               VIEW SYSTEMS, INC.

                                          CONSOLIDATED BALANCE SHEET

                                                     ASSETS

                                                                       September 30,      December 31,
                                                                            2001               2000
                                                                       -------------      ------------
                                                                        (Unaudited)
                                                                                   
CURRENT ASSETS:
    Cash                                                               $   366,207       $   265,245
    Accounts receivable (net)                                              562,488           155,017
    Inventory                                                              173,442            95,339
                                                                       -----------       -----------
             Total current assets                                        1,102,137           515,601
                                                                       -----------       -----------

PROPERTY AND EQUIPMENT:
    Equipment                                                              416,864           382,609
    Leasehold improvements                                                  20,261            20,261
                                                                       -----------       -----------
                                                                           437,125           402,870
        Less accumulated depreciation                                      113,387            79,814
                                                                       -----------       -----------
             Net value of property and equipment                           323,738           323,056
                                                                       -----------       -----------

OTHER ASSETS:
    Goodwill                                                               809,531           894,383
    Investments                                                             28,000            28,000
    Due from affiliated entity                                             105,552           105,552
    Due from stockholders                                                   79,099            20,000
    Deposits                                                                 3,332               832
                                                                       -----------       -----------
             Total other assets                                          1,025,514         1,048,767
                                                                       -----------       -----------
             TOTAL ASSETS                                              $ 2,451,389       $ 1,887,424
                                                                       ===========       ===========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
    Accounts payable                                                   $   393,170       $   401,247
    Note payable bank                                                        6,720            42,083
    Notes payable                                                          110,000           110,000
    Accrued interest payable                                                30,250            22,000
    Other accrued liabilities                                                1,490            31,951
    Due to stockholder                                                         -               2,090
                                                                       -----------       -----------
                  Total current liabilities                                541,630           609,371
                                                                       -----------       -----------
STOCKHOLDERS' EQUITY:
    Common stock  par value $0.001
      50,000,000 shares authorized,
      14,305,000 shares issued and outstanding                              14,305              -
      11,481,031 shares issued and outstanding                                 -              11,481
    Additional paid-in capital                                           8,875,678         7,364,502
    Accumulated deficit                                                 (6,980,224)       (6,097,930)
                                                                       -----------       -----------
                  Total stockholders' equity                             1,909,759         1,278,053
                                                                       -----------       -----------
         TOTAL LIABILITIES AND
            STOCKHOLDERS' EQUITY                                       $ 2,451,389       $ 1,887,424
                                                                       ===========       ===========


See accompanying notes
                                      F-16





                                         VIEW SYSTEMS, INC.

                               CONSOLIDATED STATEMENTS OF OPERATIONS
                                           (Unaudited)


                                                            Three Months Ended                  Nine months Ended
                                                            ------------------                  -----------------
                                                                September 30,                     September 30,
                                                           2001              2000           2001            2000
                                                     --------------    ------------     -------------   -----------

REVENUE:
                                                                                             
         Sales of security systems                    $   312,353       $   31,719       $    744,842    $   146,979
         Sales of assembled electronic components            -              34,848              9,512        261,080
                                                      -----------       ----------       ------------    -----------

              Total sales                                 312,353           66,567            754,354        408,059

              Cost of goods sold                          161,675           20,412            360,575        211,168
                                                      -----------       ----------       ------------    -----------

GROSS PROFIT ON SALES                                     150,678           46,155            393,779        196,891
                                                      -----------       ----------       ------------    -----------

OPERATING EXPENSES:
         Advertising and promotion                         31,168            1,283             32,294         12,663
         Amortization                                      28,284           27,281             84,852         81,843
         Depreciation                                      11,191           11,293             33,573         33,404
         Dues and subscriptions                               885              495              2,795          2,741
         Insurance                                         11,443            5,694             28,138         13,174
         Interest                                           3,202            4,022             11,800         15,570
         Investor relations                                22,525           15,488             73,575         49,353
         Miscellaneous expense                                249           11,338              9,741         13,777
         Office expenses                                   18,751           26,102             82,208         92,311
         Professional fees                                 75,362          110,757            302,936        282,013
         Rent                                               7,779           26,746             88,752         81,590
         Repairs and maintenance                              820            1,158              8,560          8,165
         Research and development                            -              34,538              -            143,840
         Salaries and benefits                            116,961          137,103            422,178        420,032
         Sales promotions                                  11,618           25,796             35,723         74,050
         Taxes - other                                       -                 362              9,151          4,667
              Travel                                       11,618            4,882             35,723         34,412
         Utilities                                          2,348            4,875             14,074         12,659
                                                      -----------        ---------       ------------    -----------

                  Total operating expenses                354,204          449,213         1,276, 073      1,376,264
                                                      -----------        ---------       ------------    -----------

NET LOSS FOR THE PERIODS                              $(  203,526)       $(403,058)       $(  882,294)   $(1,179,373)
                                                      ===========        =========        ===========    ===========


LOSS PER SHARE:

     Basic                                            $     (0.02)       $   (0.05)       $     (0.07)   $     (0.15)
                                                      ===========        =========        ===========    ===========

     Diluted                                          $     (0.02)       $   (0.05)       $     (0.07)   $     (0.15)
                                                      ===========        =========        ===========    ===========


See accompanying notes

                                      F-17






                                                          VIEW SYSTEMS, INC.

                                        CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                                         FOR THE PERIOD JANUARY 1, 2000 TO SEPTEMBER 30, 2001

                                                              Additional                                 Total
                                                 Common        Paid-In               Accumulated      Stockholders'
                                                 Stock         Capital                 Deficit           Equity
                                               ---------     ------------            ------------    --------------

                                                                                       
 Balances at January 1, 2000                   $  7,167      $  5,334,342            $( 3,893,648)    $ 1,447,861

    Sale of common stock                          1,285           863,991                    -            865,276

    Stock options  exercised                        100               978                    -              1,078

    Net loss for the nine months
      ended September  30, 2000                     -                -                ( 1,179,373)     (1,179,373)
                                              ---------      ------------            ------------     -----------

Balances at September 30, 2000 (Unaudited)        8,552         6,199,311             ( 5,073,021)      1,134,842

    Sale of common stock                          1,446           583,044                    -            584,490

    Stock options exercised                         100               978                    -              1,078

    Issuance of common stock
      (employee and other compensation)           1,383           581,169                    -            582,552

    Net loss for the period of October 1, 2000
      to December 31, 2000                          -                -                ( 1,024,909)     (1,024,909)
                                              ---------      ------------            ------------     -----------

Balances at December 31, 2000                    11,481         7,364,502             ( 6,097,930)      1,278,053

    Sale of common stock                          2,764         1,486,236                    -          1,489,000

    Issuance of common stock
          for services                               60            24,940                    -             25,000

    Net loss for the nine months
        ended September 30, 2001                    -                -                (   882,294)     (  882,294)
                                              ---------      ------------            ------------     -----------

Balances at September 30, 2001 (Unaudited)    $  14,305      $  8,875,678            $( 6,980,224)    $ 1,909,759
                                              =========      ============            ============     ===========


See accompanying notes

                                      F-18





                                          VIEW SYSTEMS, INC.

                              CONSOLIDATED STATEMENTS OF CASH FLOWS
                                     FOR THE NINE MONTHS ENDED


                                                             September 30,    September 30,
                                                                 2001             2000
                                                             -------------   ---------------
                                                              (Unaudited)      (Unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES:
                                                                        
    Net loss                                                 $(  882,294)     $( 1,179,373)
    Adjustments to reconcile net income to net cash
       provided by operating activities:
       Depreciation and amortization                             118,425           115,247
       Stock issued for services                                  25,000              -
       Changes in operating assets and liabilities:
         Accounts receivable                                  (  407,471)           51,051
         Inventory                                            (   78,103)      (    76,839)
         Deposit                                              (    2,500)      (     1,653)
         Accounts payable                                     (    8,077)          162,489
         Accrued interest                                          8,250             8,250
         Other accrued liabilities                            (   30,461)           19,910
                                                              ----------      ------------

         Net cash used in operating activities                (1,257,231)      (   900,918)
                                                              ----------      ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
          Purchase of property and equipment                  (   34,255)      (    34,972)
          Funds advanced to affiliated entities                     -          (    12,443)
                                                              ----------      -------------

        Net cash used in investing activities                 (   34,255)      (    47,415)
                                                              ----------      ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
         Funds advanced (to) from shareholders                (   61,189)           60,038
         Repayment of note payable - bank                     (   35,363)      (    23,166)
         Proceeds from sales of stock                          1,489,000           866,354
                                                              ----------      -------------

       Net cash provided by financing activities               1,392,448           903,226
                                                              ----------      -------------

NET INCREASE/(DECREASE) IN CASH                                  100,962       (    45,107)

CASH AT BEGINNING OF PERIOD                                      265,245            89,150
                                                              ----------      ------------

CASH AT END OF PERIOD                                         $  366,207      $     44,043
                                                              ==========      ============



See accompanying notes

                                      F-19



                               VIEW SYSTEMS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

          Nature of Operations
          --------------------

          View  Systems,  Inc.  (the  "Company")  designs and develops  computer
software and hardware used in conjunction with  surveillance  capabilities.  The
technology  utilizes  the  compression  and  decompression  of  digital  inputs.
Operations, from formation to September 30, 1999, have been devoted primarily to
raising  capital,  developing  the  technology,  promotion,  and  administrative
function.

          Basis of Consolidation
          ----------------------

          The  consolidated  financial  statements  include the  accounts of the
Company  and its wholly  owned  subsidiaries,  Real View  Systems,  Inc.  ("Real
View"),  Xyros  Systems,  Inc.  ("Xyros") and Eastern Tech  Manufacturing,  Inc.
("ETMC").  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.  Those estimates and assumptions  affect the reported  amounts of
assets and liabilities, the disclosure of contingent assets and liabilities, and
the  reported  revenues  and  expenses.  Actual  results  could  differ from the
estimates that were used.

          Revenue Recognition
          -------------------

          The Company  and its  subsidiaries  recognize  revenue and the related
cost of goods sold upon shipment of the product.

          In December  1999,  the  Securities  and Exchange  Commission  ("SEC")
issued Staff Accounting  Bulletin No. 101 ("SAB 101"),  "Revenue  Recognition in
Financial  Statements"  . SAB 101  summarizes  certain  of the  SEC's  views  in
applying  accounting  principles  generally  accepted  in the  United  States to
revenue recognition in financial statements.  The Company adopted SAB 101 in the
fourth  quarter of 2000.  The adoption of SAB 101 had no impact on the Company's
financial position or results of operations.

          Inventories
          -----------

          Inventories  are  stated  at the  lower  of  cost or  market.  Cost is
determined by the last-in-first-out method (LIFO).

          Property and Equipment
          ----------------------

          Property and equipment is recorded at cost and depreciated  over their
estimated useful lives,  using the  straight-line  and accelerated  depreciation
methods. Upon sale or retirement,  the cost and related accumulated depreciation
are eliminated from the respective  accounts,  and the resulting gain or loss is
VIEW SYSTEMS, INC.

                                      F-20


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000


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
nine months ended  September  30, 2001 and 2000  amounted to $33,573 and $33,404
respectively.

          Impairment of Long-Lived Assets
          -------------------------------

          Long-lived assets and identifiable intangibles (including goodwill) to
be held and used are  reviewed  for  impairment  whenever  events or  changes in
circumstances indicate that the carrying amount should be addressed.  Impairment
is measured by comparing the carrying value to the estimated undiscounted future
cash  flows  expected  to  result  from use of the  assets  and  their  eventual
disposition.

          Income Taxes
          ------------

          Deferred  income  taxes are  recorded  under  the asset and  liability
method whereby deferred tax assets and liabilities are recognized for the future
tax  consequences,  measured by enacted tax rates,  attributable  to differences
between  the  financial  statement  carrying  amounts  of  existing  assets  and
liabilities and their respective tax bases and operating loss carryforwards. The
effect  on  deferred  tax  assets  and  liabilities  of a change in tax rates is
recognized in income in the period the rate change becomes effective.  Valuation
allowances  are recorded for deferred tax assets when it is more likely than not
that such deferred tax assets will not be realized.

          Research and Development
          ------------------------

          Research and development costs are expensed as incurred. Equipment and
facilities   acquired  for  research  and   development   activities  that  have
alternative  future  uses  are  capitalized  and  charged  to  expense  over the
estimated useful lives.

          Advertising
          -----------

          Advertising  costs are charged to operations as incurred.  Advertising
costs for the nine months  ended  September  30, 2001 and 2000 were  $32,294 and
$12,668, respectively.

          Nonmonetary Transactions
          ------------------------

          Nonmonetary   transactions   are  accounted  for  in  accordance  with
Accounting   Principles   Board  Opinion  No.  29  Accounting  for   Nonmonetary
Transactions which requires the transfer or distribution of a

                                      F-21


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000


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.

          Net Loss Per Common Share
          -------------------------

          Basic net loss per common share  ("Basic EPS") is computed by dividing
net loss  available to common  stockholders  by the weighted  average  number of
common shares outstanding.  Diluted net loss per common share ("Diluted EPS") is
computed by dividing net loss available to common  stockholders  by the weighted
average number of common shares and dilutive  potential common share equivalents
then  outstanding.  Potential  common shares consist of shares issuable upon the
exercise of stock  options and  warrants.  The  calculation  of the net loss per
share available to common  stockholders  for the nine months ended September 30,
2001 does not include  potential  shares of common stock  equivalents,  as their
impact would be antidilutive.

          Segment Reporting
          -----------------

          The  company  has  determined  that it does not  have  any  separately
reportable operating segments as of September 30, 2001.

2.  FINANCIAL CONDITION

          Since its inception,  the Company has incurred  significant losses and
as of September 30, 2001 had an accumulated deficit of $7.0 million.  The tragic
events of September 11, 2001 have,  however,  generated an increased interest in
the  Company's  products and services.  While the Company  believes that it will
incur operating  losses in the near term, it is anticipated that increased sales
resulting  from  the  heightened  interest  in  security  products  will  have a
significantly  positive effect on the Company's earnings.  However, there can be
no assurance  that the Company will be able to generate  sufficient  revenues to
achieve or sustain  profitability  in the future.  The Company believes that its
current  cash and cash  equivalents,  along with sales  revenue and  anticipated
equity infusions, will be sufficient to sustain operations through September 30,
2002.

3.  NEW ACCOUNTING PRONOUNCEMENTS

          In  July  2001,  the  Financial   Accounting  Standards  Board  issued
Statement  of  Financial   Accounting   Standards  ("SFAS")  No.  141,  Business
Combinations,  and SFAS No. 142, Goodwill and Other Intangible Assets.  SFAS No.
141 requires  that the purchase  method of  accounting  be used for all business
combinations  initiated  after June 30, 2001.  SFAS No. 141 also  specifies  the
criteria for intangible

                                      F-22


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000


assets acquired in a purchase  method business  combination to be recognized and
reported apart from goodwill.  SFAS No. 142 will require goodwill and intangible
assets  with  indefinite  useful  lives to no longer be  amortized,  but instead
tested for impairment at least annually in accordance with the provisions of the
statement. SFAS No. 142 will also require intangible assets with definite useful
lives to be  amortized  over their  respective  estimated  useful lives to their
estimated  residual values,  and reviewed for impairment in accordance with SFAS
No. 121,  Accounting for the Impairment of Long-Lived  Assets and for Long-Lived
Assets to be Disposed of.

          The  Company  is  required  to adopt  the  provision  of SFAS No.  141
immediately  and SFAS No.  142  effective  January 1, 2002.  Further  more,  any
goodwill and any intangible  assets determined to have an indefinite useful life
that are acquired in a purchase  business  combination  completed after June 30,
2001, will not be amortized, but will continue to be evaluated for impairment in
accordance with the appropriate pre-SFAS No. 142 accounting literature. Goodwill
and intangible assets acquired in business combinations completed before July 1,
2001, will continue to be amortized prior to the adoption of SFAS No. 142.

          SFAS No. 141 will  require,  upon  adoption of SFAS No. 142,  that the
Company evaluate its existing  intangible assets and goodwill that were acquired
in   prior   purchase   business   combinations,    and   make   any   necessary
reclassifications  in order to conform with the new criteria in SFAS No. 141 for
recognition apart from goodwill. Upon adoption of SFAS No. 142, the Company will
be required to reassess the useful lives and residual  values for all intangible
assets  acquired  in  purchase  business  combinations,  and make any  necessary
changes to the amortization  period by the end of the first interim period after
adoption. In addition, to the extent an intangible asset is identified as having
an indefinite  useful life,  the Company will be required to test the intangible
asset for  impairment in accordance  with the  provisions of SFAS No. 142 within
the first interim period. Any impairment loss will be measured as of the date of
adoption  and  recognized  as the  cumulative  effect of a change in  accounting
principle in the first interim  period.  The Company is assessing the effects of
the adoption of these standards and these potential effects cannot be determined
at this time.

                                      F-23