Summary of VISUAL MANAGEMENT SYSTEMS INC

Management's Discussion and Analysis of Financial Condition and Results and Operations

Overview

On July 17, 2007, we acquired all of the outstanding capital stock of Visual Management Systems Holding, Inc., a New Jersey corporation, in connection with the merger of our wholly owned subsidiary with and into Visual Management Systems Holding, Inc. In connection with the merger, we changed our corporate name from Wildon Productions, Inc. to Visual Management Systems, Inc. and the former stockholders of Visual Management Systems Holding, Inc. received an aggregate of 5,218,000 shares of our common stock representing approximately 76.5% of our outstanding common stock after giving effect to the merger. In addition, our board of directors was reconstituted at the effective time of the merger with designees of Visual Management Systems Holding, Inc. replacing our then current board of directors. Further, at the effective time of the merger, we abandoned our prior business plan and the operations of Visual Management Systems Holding, Inc. acquired as a result of the merger became our sole line of business. The merger transaction was therefore accounted for as a reverse acquisition with Visual Management Systems Holding, Inc. as the acquiring party and Visual Management Systems, Inc. (formerly Wildon Productions, Inc. ) as the acquired party. Accordingly, when we refer to our business and financial information relating to periods prior to the merger, we are referring to the business and financial information of Visual Management Systems Holding, Inc., unless the context otherwise requires.

Simultaneously with the merger, we completed the initial closing of a private placement of investment units consisting of shares of Series A Convertible Preferred Stock and common stock purchase warrants, which we sometimes refer to in this Report as our July 2007 Private Placement. We issued a total of 616 investment units representing a total of 616 shares of Series A convertible preferred stock and warrants to acquire 616,000 shares of our common stock in the July 2007 Private Placement, which was completed on October 25, 2007. On November 30, 2007, we completed a private placement of $3.75 million aggregate principal amount of 5% secured convertible debentures and warrants to acquire 11,250,000 shares of our common stock to three affiliated institutional investors.

Results of Operations for the Three Months Ended June 30, 2008 and 2007

The following discussion and analysis should be read in conjunction with the financial statements, including the notes thereto and other information presented in this report.

Net Revenues

Net revenues increased $197,244, or 14% to $1,635,516 during the three months ended June 30, 2008 from $1,438,272 during the three months ended June 30, 2007. The increase in revenues reflects the Company's success in completing larger sales in 2008 as compared to the same period in 2007.

Cost of Goods Sold

Total cost of goods sold increased $24,858, or 3% to $810,383 for the three months ended June 30, 2008, from approximately $785,525 during the three months ended June 30, 2007. This increase was primarily due to increased revenues.

As a result of the changes described above in revenues and cost of goods sold, gross profit for the three months ended June 30, 2008 increased to $825,133 from $652,747 for the three months ended June 30, 2007, and gross profit as a percentage increased to 50.5% for the three months ended June 30, 2008 compared with 45.4% for the three months ended June 30, 2007. The increase in gross profit margin for the three months ended June 30, 2008 is a result of increased sales of the Company's DVR's, increased revenue on higher margin service business, pricing changes, reductions in overtime, and improvements to the company's utilization of operational resources.

Operating Expenses

Operating expenses increased $588,275 to $2,195,571 for the three months ended June 30, 2008, from $1,607,296 for the three months ended June 30, 2007.

This increase was primarily attributable to an increase in an increase in the accrual for late filing penalties of $343,000 and an increase in the amortization of deferred financing costs of approximately $194,000 and an increase in professional fees of approximately $85,000.

Interest Expense

Interest expense for the three months ended June 30, 2008 increased to $157,031, from $42,455 in the three months ended June 30, 2007. The increase was primarily the result of (i) higher original issue discount amortization, totaling approximately $75,000 and (ii) interest on convertible debt of $46,875.

Net Income (Loss)

As a result of the items discussed above there was a net loss of $1,527,469 for the three months ended June 30, 2008 compared with a net loss of $970,988 for the three months ended June 30, 2007.

Results of Operations for the Six Months Ended June 30, 2008 and 2007

The following discussion and analysis should be read in conjunction with the financial statements, including the notes thereto and other information presented in this report.

Net Revenues

Net revenues increased $614,116, or 24% to $3,212,825 during the six months ended June 30, 2008 from $2,598,709 during the six months ended June 30, 2007. The increase in revenues reflects increased sales efforts, primarily through success in completing several large sales during 2008.

Cost of Goods Sold

Total cost of goods sold increased $303,756, or 23% to $1,653,496 for the six months ended June 30, 2008, from approximately $1,349,740 during the six months ended June 30, 2007. This increase was primarily due to increased revenues.

As a result of the changes described above in revenues and cost of goods sold, gross profit for the six months ended June 30, 2008 increased to $1,559,329 from $1,248,969 for the six months ended June 30, 2007, and gross profit as a percentage of revenues increased to 48.5% for the six months ended June 30, 2008 compared with 48.1% for the six months ended June 30, 2007.

Operating Expenses

Operating expenses increased $1,774,559 to $4,924,933 for the six months ended June 30, 2008, from $3,150,374 for the six months ended June 30, 2007.

This increase was primarily attributable to an increase in the following expense items: issuance of stock for investor relations services with a fair value of $690,000, an accrual for liquidated damages for a late filing of a registration statement of $477,000 , amortization of deferred financing costs associated with debt financing $386,000 and an increase in other general and administrative costs (professional fees, travel, insurance and rent) of approximately $240,000.

Debt Conversion Expense

Debt conversion expense for the six months ended June 30, 2008 decreased to zero, from approximately $590,000 for the six months ended June 30, 2007, as no indebtedness was converted in 2008.

Interest Expense

Interest expense for the six months ended June 30, 2008 increased to $297,034, from $171,626 in the six months ended June 30, 2007. The increase was primarily the result of (i) higher original issue discount amortization, totaling approximately $150,000 and (ii) interest on bridge loans and convertible debt of approximately $94,000 offset by $125,000 of interest expense in the six months ended June 30, 2007 associated with a beneficial conversion feature on convertible debt.

Net Income (Loss)

As a result of the items discussed above there was a net loss of $3,662,943 for the six months ended June 30, 2008 compared with a net loss of approximately $2,663,023 for the six months ended June 30, 2007.

Liquidity and Capital Resources

Our financial statements are prepared on a going concern basis, which assumes that we will realize our assets and discharge our liabilities in the normal course of business. At June 30, 2008, we had cash of $26,870, a working capital deficit of $4,148,041, stockholders' deficit of $3,887,804, and an outstanding balance of long term debt of $284,380 net of current maturities, plus $3,262,334 of convertible debt net of current maturities and an unamortized original issue discount of $573,333, and obligations under capital leases net of current maturities of $83,768. In comparison, at December 31, 2007, we had cash and equivalents of approximately $707,025, a working capital deficit of approximately $587,279, $2,818,334 of convertible debt net of current maturities, and an outstanding balance of long term debt of $346,509, net of current maturities. Our financial condition as of June 30, 2008 raises doubt as to our ability to continue our normal business operations as a going concern. If we are unable to put into effect certain plans, we may be required to restructure, file for bankruptcy or cease operations.

Cash Flows from Operating Activities.

Net cash used by operating activities was $702,197 for the six months ended June 30, 2008 and $704,734 for the six months ended June 30, 2007. Cash used during the six months ended June 30, 2008 was primarily the result of the operating loss described above offset by decreases in receivables of $91,582 and inventory of $69,538and increases in accounts payable and accrued expenses totaling $1,045,184. For the six months ended June 30, 2007, cash used in operations was primarily a result of the operating loss incurred during the quarter plus increases in inventory of $119,185 and security bonds of $48,458 for larger customer jobs offset by decreases in receivables of $159,535 increases in accounts payable of $502,382 and increased customer deposits of $159,837.

Cash Flows from Investing Activities.

Net cash used in investing activities was $111,900 in the six months ended June 30, 2008 representing capitalization of costs relating to implementation of a new accounting software package and capitalization of software development costs net of proceeds received from an asset disposition, as compared to $53,885 of equipment purchases for the corresponding period in 2007.

Cash Flows from Financing Activities.

Net cash provided by financing activities was $133,942 for the six months ended June 30, 2008 and $757,656 for the six month period ended June 30, 2007. The cash from financing activities was a result of proceeds of $288,800 from short term notes payable offset by repayment of short term notes of $68,000 and principal payments on capital leases of $24,885, long term debt of $61,973 during the six months ended June 30, 2008. For the six months ended June 30, 2007, the cash provided by financing activities was primarily the result of $871,230 from the issuance of common stock and $112,500 net proceeds from convertible debt offset by $150,000 for the repurchase of stock into treasury.

Cash decreased from $707,025 at December 31, 2007 to $26,870 at June 30, 2008.