Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Mar. 31, 2014 | Apr. 22, 2014 | |
Document And Entity Information | ' | ' |
Entity Registrant Name | 'Brekford Corp. | ' |
Entity Central Index Key | '0001357115 | ' |
Document Type | '10-Q | ' |
Document Period End Date | 31-Mar-14 | ' |
Amendment Flag | 'false | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Is Entity a Well-known Seasoned Issuer? | 'No | ' |
Is Entity a Voluntary Filer? | 'No | ' |
Is Entity's Reporting Status Current? | 'Yes | ' |
Entity Filer Category | 'Smaller Reporting Company | ' |
Entity Common Stock, Shares Outstanding | ' | 44,500,569 |
Document Fiscal Period Focus | 'Q1 | ' |
Document Fiscal Year Focus | '2014 | ' |
Condensed_Consolidated_Balance
Condensed Consolidated Balance Sheet (Unaudited) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
CURRENT ASSETS | ' | ' |
Cash | $1,180,479 | $2,052,306 |
Accounts receivable, net of allowance $0 at March 31, 2014 and December 31, 2013, respectively | 3,309,808 | 1,390,300 |
Unbilled receivables | 177,600 | 125,831 |
Prepaid expenses | 128,610 | 47,148 |
Inventory | 506,603 | 1,264,099 |
Total current assets | 5,303,100 | 4,879,684 |
Property and equipment, net | 1,297,317 | 1,593,202 |
Other non-current assets | 74,632 | 187,132 |
TOTAL ASSETS | 6,675,049 | 6,660,018 |
CURRENT LIABILITIES | ' | ' |
Accounts payable and accrued expenses | 2,981,042 | 1,731,706 |
Accrued payroll and related expenses | 64,698 | 104,100 |
Line of credit | 1,026,955 | 1,470,533 |
Other liabilities | 49,361 | 49,922 |
Deferred revenue | 586,239 | 677,622 |
Customer deposits | 124,026 | 27,640 |
Obligations under capital leases - current portion | 625,762 | 616,115 |
Obligations under other notes payable - current portion | 31,262 | 32,763 |
Deferred rent - current portion | 42,316 | 48,632 |
Total current liabilities | 5,531,661 | 4,759,033 |
LONG - TERM LIABILITIES | ' | ' |
Convertible notes payable - stockholders | 500,000 | 500,000 |
Obligations under capital lease, net of current portion | 14,923 | 197,832 |
Other notes payable, net of current portion | 71,210 | 78,514 |
Deferred rent, net of current portion | ' | 9,895 |
Total long-term liabilities | 586,133 | 786,241 |
TOTAL LIABILITIES | 6,117,794 | 5,545,274 |
STOCKHOLDERS' EQUITY | ' | ' |
Preferred stock, par value $0.0001 per share; 20,000,000 shares authorized; none issued and outstanding | ' | ' |
Common stock, par value $0.0001 per share; 150,000,000 shares authorized; 44,500,569 issued and outstanding, at March 31, 2014 and 44,450,569 issued and outstanding at December 31, 2013 | 4,451 | 4,445 |
Additional paid-in capital | 10,198,869 | 10,184,751 |
Treasury Stock, at cost 10,600 shares at March 31, 2014 and December 31, 2013 | -5,890 | -5,890 |
Accumulated deficit | -9,640,175 | -9,068,562 |
TOTAL STOCKHOLDERS' EQUITY | 557,255 | 1,114,744 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $6,675,049 | $6,660,018 |
Condensed_Consolidated_Balance1
Condensed Consolidated Balance Sheet (Unaudited) (Parenthetical) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Assets | ' | ' |
Allowance for Receivables | $0 | $0 |
Stockholders Equity | ' | ' |
Preferred Stock par value | $0.00 | $0.00 |
Preferred Stock Authorized | 20,000,000 | 20,000,000 |
Preferred Stock Issued | 0 | 0 |
Preferred Stock Outstanding | 0 | 0 |
Common Stock par value | $0.00 | $0.00 |
Common Stock Authorized | 150,000,000 | 150,000,000 |
Common Stock Issued | 44,500,569 | 44,450,569 |
Common Stock Outstanding | 44,500,569 | 44,450,569 |
Condensed_Consolidated_Stateme
Condensed Consolidated Statements of Operations (Unaudited) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Income Statement [Abstract] | ' | ' |
NET REVENUE | $4,662,287 | $4,394,839 |
COST OF REVENUE | 4,074,128 | 3,131,486 |
GROSS PROFIT | 588,159 | 1,263,353 |
OPERATING EXPENSES | ' | ' |
Salaries and related expenses | 487,629 | 448,088 |
Selling, general and administrative expenses | 636,284 | 702,464 |
TOTAL OPERATING EXPENSES | 1,123,913 | 1,150,552 |
(LOSS) INCOME FROM OPERATIONS | -535,754 | 112,801 |
OTHER INCOME (EXPENSE) | ' | ' |
Interest expense | -35,859 | -37,361 |
Interest income | ' | 159 |
TOTAL OTHER INCOME (EXPENSE) | -35,859 | -37,202 |
NET (LOSS) INCOME | ($571,613) | $75,599 |
(LOSS) EARNINGS PER SHARE - BASIC | ($0.01) | $0 |
(LOSS) EARNINGS PER SHARE - DILUTED | ($0.01) | $0 |
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC | 44,496,680 | 44,257,180 |
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - DILUTED | 44,496,680 | 47,265,133 |
Condensed_Consolidated_Stateme1
Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ' | ' |
Net (Loss) Income | ($571,613) | $75,599 |
Adjustments to reconcile net income to net cash used in operating activities: | ' | ' |
Depreciation and amortization | 295,885 | 329,533 |
Share-based compensation | 14,123 | 17,750 |
Deferred rent | -16,211 | -16,326 |
Bad debt expense | 19,051 | 64,160 |
Changes in operating assets and liabilities: | ' | ' |
Accounts receivables | -1,938,578 | 400,856 |
Unbilled Receivables | -51,769 | 34,242 |
Prepaid expenses and other non-current assets | 31,038 | -5,113 |
Inventory | 757,496 | -702,920 |
Customer deposits | 96,406 | 41,352 |
Accounts payable and accrued expenses | 1,249,335 | -1,739,193 |
Accrued payroll and related expenses | -39,402 | -5,113 |
Deferred revenue | -91,384 | -22,944 |
Other liabilities | -561 | -130 |
NET CASH USED IN OPERATING ACTIVITIES | -246,184 | -1,528,247 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ' | ' |
Purchases of property and equipment | ' | -245,452 |
NET CASH USED IN INVESTING ACTIVITIES | ' | -245,452 |
CASH FLOWS FROM FINANCING ACTIVITIES: | ' | ' |
Net change in line of credit | -443,578 | -2,000,000 |
Payments on other notes payable | -173,262 | -9,917 |
Principal payments on capital lease obligations | -8,803 | -164,126 |
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES | -625,643 | 1,825,957 |
NET CHANGE IN CASH | -871,827 | 52,258 |
CASH - Beginning of period | 2,052,306 | 1,415,252 |
CASH - End of period | 1,180,479 | 1,467,510 |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ' | ' |
Cash paid for interest | 35,859 | 37,361 |
Cash paid for income taxes | 561 | 130 |
Property and equipment acquisitions | ' | 320,862 |
Cash paid for property and equipment acquisitions | ' | -245,452 |
Property and equipment acquisitions financed | ' | $75,410 |
1_DESCRIPTION_OF_THE_BUSINESS
1. DESCRIPTION OF THE BUSINESS | 3 Months Ended |
Mar. 31, 2014 | |
Notes to Financial Statements | ' |
NOTE 1 - DESCRIPTION OF THE BUSINESS | ' |
Brekford Corp. (OTCBB; OTCQB: BFDI) headquartered in Hanover, Maryland is a leading public safety technology service provider of fully integrated traffic safety solutions, parking enforcement citation collections and integrator of mobile technology equipment for public safety vehicle services to State and Local municipalities, the U.S. Military and various Federal public safety agencies throughout the United States. Brekford’s combination of upfitting services, cutting edge technology, and automated traffic enforcement services offers a unique 360º solution for law enforcement agencies and municipalities. Our core values of integrity, accountability, respect, and teamwork drive our employees to achieve excellence and deliver industry leading technology and services, thereby enabling a superior level of safety solutions to our clients. | |
As used in these notes, the terms “Brekford”, “the Company”, “we”, “our”, and “us” refer to Brekford Corp. and, unless the context clearly indicates otherwise, its consolidated subsidiary. |
2_SUMMARY_OF_SIGNIFICANT_ACCOU
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2014 | |
Notes to Financial Statements | ' |
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' |
Basis of Presentation and Principles of Consolidation | |
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). In our opinion, the accompanying unaudited interim condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, which are necessary to present fairly our financial position, results of operations and cash flows. The condensed consolidated balance sheet at December 31, 2013, has been derived from audited financial statements of that date. The interim condensed consolidated results of operations are not necessarily indicative of the results that may occur for the full fiscal year. Certain information and footnote disclosure normally included in financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to instructions, rules and regulations prescribed by the United States Securities and Exchange Commission. We believe that the disclosures provided herein are adequate to make the information presented not misleading when these unaudited interim condensed consolidated financial statements are read in conjunction with the audited financial statements and notes previously distributed in our annual report on Form 10-K for the year ended December 31, 2013. Certain prior period information has been reclassified to conform to the current period presentation. | |
The consolidated financial statements of Brekford include accounts of the Company and its wholly-owned subsidiary, Municipal Recovery Agency, LLC. Intercompany transactions and balances are eliminated in consolidation. | |
Use of Estimates | |
The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. In the accompanying unaudited condensed consolidated financial statements, estimates are used for, but not limited to, stock-based compensation, allowance for doubtful accounts, sales returns, allowance for inventory obsolescence, fair value of long-lived assets, deferred taxes and valuation allowance, and the depreciable lives of fixed assets. Actual results could differ from those estimates. | |
Concentration of Credit Risk | |
The Company maintains cash accounts with major financial institutions. From time to time, amounts deposited may exceed the FDIC insured limits. | |
Accounts Receivable | |
Accounts receivable are carried at estimated net realizable value. The Company has a policy of reserving for uncollectable accounts based on its best estimate of the amount of probable credit losses in its existing accounts receivable. The Company calculates the allowance based on a specific analysis of past due balances. Past due status for a particular customer is based on how recently payments have been received from that customer. Historically, the Company’s actual collection experience has not differed significantly from its estimates, due primarily to credit and collections practices and the financial strength of its customers. | |
Inventory | |
Inventory principally consists of hardware and third-party packaged software that is modified to conform to customer specifications and held temporarily until the completion of a contract. Inventory is valued at the lower of cost or market value. The cost is determined by the lower of first-in, first-out (“FIFO”) method, while market value is determined by replacement cost for raw materials and parts and net realizable value for work-in- process. | |
Property and Equipment | |
Property and equipment is stated at cost. Depreciation of furniture, vehicles, computer equipment and software and phone equipment is calculated using the straight-line method over the estimated useful lives (two to ten years), and leasehold improvements are amortized on a straight-line basis over the shorter of their estimated useful lives or the lease term (which is three to five years). | |
Management reviews property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of the long-lived asset is measured by a comparison of the carrying amount of the asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets. | |
Revenue Recognition | |
The Company recognizes revenue relating to its vehicle upfitting solutions when all of the following criteria have been satisfied: (i) persuasive evidence of an arrangement exists; (ii) delivery or installation has been completed; (iii) the customer accepts and verifies receipt; and (iv) collectability is reasonably assured. The Company considers delivery to its customers to have occurred at the time at which products are delivered and/or installation work is completed and the customer acknowledges its acceptance of the work. | |
The Company provides its customers with a warranty against defects in the installation of its vehicle upfitting solutions for one year from the date of installation. Warranty claims were $8,674 for the three months ended March 31, 2014 and insignificant for the three months ended March 31, 2013. The Company also performs warranty repair services on behalf of the manufacturers of the equipment it sells. | |
The Company also offers separately-priced extended warranty and product maintenance contracts to its customers on the equipment sold by the Company. Revenues from extended warranty services are apportioned over the period of the extended warranty service contracts and the warranty costs are expensed as incurred. Revenue from extended warranties for the three months ended March 31, 2014 and 2013 amounted to $112,904 and $61,792, respectively. | |
For automated traffic safety enforcement revenue, the Company recognizes the revenue when the required collection efforts are completed and the respective municipality is billed depending on the terms of the respective contract. The Company records revenue related to automated traffic violations for the Company’s share of the violation amount. | |
Share-Based Compensation | |
The Company complies with the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, Compensation-Stock Compensation, in measuring and disclosing stock based compensation cost. The measurement objective in ASC Paragraph 718-10-30-6 requires public companies to measure the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award. The cost is recognized in expense over the period in which an employee is required to provide service in exchange for the award (the vesting period). Performance-based awards are expensed ratably from the date that the likelihood of meeting the performance measures is probable through the end of the vesting period. | |
Treasury Stock | |
The Company accounts for treasury stock using the cost method. As of March 31, 2014, 10,600 shares of Brekford Corp. common stock were held in treasury at an aggregate cost of $5,890. | |
Income Taxes | |
The Company uses the liability method to account for income taxes. Income tax expense includes income taxes currently payable and deferred taxes arising from temporary differences between financial reporting and income tax bases of assets and liabilities. Deferred income taxes are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense, if any, consists of the taxes payable for the current period. Valuation allowances are established when the realization of deferred tax assets are not considered more likely than not. | |
The Company files income tax returns with the U.S. Internal Revenue Service and with the revenue services of various states. The Company is no longer subject to U.S. federal, state and local examinations by tax authorities for years prior to 2010. The Company’s policy is to recognize interest related to unrecognized tax benefits as income tax expense. The Company believes that it has appropriate support for the income tax positions it takes and expects to take on its tax returns, and that its accruals for tax liabilities are adequate for all open years based on an assessment of many factors including past experience and interpretations of tax law applied to the facts of each matter. | |
(Loss) Earnings per Share | |
Basic (loss) earnings per share is calculated by dividing net (loss) income available to common stockholders by the weighted-average number of common shares outstanding and does not include the effect of any potentially dilutive common stock equivalents. Diluted (loss) earnings per share is calculated by dividing net (loss) income by the weighted-average number of shares outstanding, adjusted for the effect of any potentially dilutive common stock equivalents. There is no dilutive effect on the loss per share during loss periods. See Note 10 for the calculation of basic and diluted (loss) earnings per share. | |
Fair Value of Financial Instruments | |
The carrying amounts reported in the balance sheets for cash, accounts receivable, accounts payable and accrued expenses approximate their fair values based on the short-term maturity of these instruments. The carrying amount of the Company’s note obligations approximate fair value, as the terms of these notes are consistent with terms available in the market for instruments with similar risk. | |
Segment Reporting | |
FASB ASC Topic 280, Segment Reporting, requires that an enterprise report selected information about operating segments in its financial reports issued to its stockholders. Based on its current analysis, management has determined that the Company has only one operating segment, which is Traffic Safety Solutions. The chief operating decision-makers use combined results to make operating and strategic decisions, and, therefore, the Company believes its entire operation is covered under a single segment. | |
Newly Issued Accounting Pronouncements | |
Management does not believe that any recently issued but not yet effective accounting pronouncements, if adopted, would have a material effect on our financial statements. |
3_LINE_OF_CREDIT_AND_OTHER_NOT
3. LINE OF CREDIT AND OTHER NOTES PAYABLE | 3 Months Ended |
Mar. 31, 2014 | |
Notes to Financial Statements | ' |
NOTE 3 - LINE OF CREDIT AND NOTES PAYABLE - AUTO | ' |
On July 12, 2012, the Company closed on an aggregate $3.5 million credit facility (the “Credit Facility”) with PNC Bank, National Association (“PNC”) as lender consisting of $3.0 million in revolving loans (the "Revolving Facility") and $500,000 in a committed non-revolving line of credit loan for the purpose of financing up to 90% of the cost of certain equipment (the “Equipment Loan”). The terms and conditions of the Credit Facility are set forth in a Loan Agreement between the Company and PNC dated June 28, 2012 (the “Loan Agreement”), and the Revolving Facility is evidenced by a Committed Line of Credit Note issued by the Company to the order of PNC (the “Revolving Note”). As part of the financing transaction, each of C.B. Brechin and Scott Rutherford, who serve as directors of the Company and as Chief Executive Officer/Chief Financial Officer and as President of the Company, respectively, entered into a Subordination Agreement dated June 28, 2012 with PNC (each, a “Subordination Agreement”) pursuant to which they agreed that all indebtedness owed to them by the Company (the “Subordinated Debt”) is subordinate to the indebtedness owed to PNC by the Company. The Subordination Agreements permit the Company to make regular loan payments to Messrs. Brechin and Rutherford so long as the Company is not in default under its loan agreements with PNC. The terms of the Equipment Loan will be evidenced by a separate promissory note if the Company requests that loan. | |
The loan agreement was amended on July 18, 2013 to extend the loan’s maturity date to September 28, 2013. On July 18, 2013, the Company executed a Waiver and Second Amendment [sic] to Loan Documents with PNC which its maturity date was extended to September 28, 2013 and certain financial and other covenants were modified. On September 27, 2013, the Company executed a Second Amendment to Loan Documents, effective as of September 28, 2013 (the “Third Modification Agreement”), to extend the maturity date of the Credit Facility to March 31, 2014. The Third Modification Agreement also amended the Credit Facility as follows: (i) the Company is now required to submit financial statements to PNC on a monthly basis rather than on a quarterly basis; (ii) the maximum ratio of total indebtedness (excluding Subordinated Debt) to EBITDA that the Company may maintain, to be tested on a quarterly basis, was increased to 3.5 to 1.0 (from 3.0 to 1.0); and (iii) the minimum rolling four-quarter Debt Service Coverage Ratio that the Company is required to maintain as of the end of each fiscal quarter was reduced to 1.0 to 1.0 (from 1.30 to 1.00). In connection with the Third Modification Agreement, the Company and PNC also executed a Borrowing Base Rider, effective September 28, 2013, which limits the aggregate principal amount of indebtedness that may be outstanding under the Credit Facility at any one time to a Borrowing Base and conditions the Company’s request for an advance under the Credit Facility on the Company’s submission of a Borrowing Base Certificate to the Bank on or before the 15th day of each month. As defined in the Borrowing Base Rider, the “Borrowing Base” is defined as the lesser of (i) $3.0 million and (ii) the sum of (a) 80% of Qualified Accounts (as defined in the Borrowing Base Rider) and (b) 50% of Qualified Inventory (as defined in the Borrowing Base Rider), provided, however, that the total amount of advances allocable to Qualified Inventory may not exceed $500,000. In the event that the outstanding principal amount of indebtedness under the Credit Facility exceeds the Borrowing Base, the Company must immediately repay the amount of such excess. As of March 31, 2014, amounts outstanding under the line of credit were $1,026,955. The weighted average interest rate was 2.65% at March 31, 2014 and 2.66% at December 31, 2013. | |
On March 21, 2014, the Company executed a Fourth Amendment to Loan Documents with PNC pursuant to which (i) the revolving line of credit was reduced to $2.0 million, (ii) the maturity date of the Credit Facility was extended to August 31, 2014, (iii) the interest rate applicable to outstanding principal was changed to the daily LIBOR rate plus 3.0% (from the daily LIBOR rate plus 2.5%), (iv) the existing financial covenants were eliminated, (v) an Interest Coverage Ratio, defined as current quarter EBITDA to current quarter interest, was added and specified to be (a) 1.0 to 1.0 for the quarter ending March 31, 2014 and (b) 1.5 to 1.0 for the quarter ending June 30, 2014, and (vi) a waiver of covenants was granted for the quarter ending December 31, 2013. All other terms and conditions of the Credit Facility remain unchanged. As of March 31, 2014, we were out of compliance with a financial covenant contained in our credit facility with PNC as a result of the loss recorded for the first quarter of 2014. We have reported this non-compliance to PNC and believe that PNC will waive it. | |
The Company financed certain vehicles and equipment under finance agreements. The agreements mature in September 2014, March 2017 and May 2017. The agreements require various monthly payments of principal and interest until maturity. As of March 31, 2014 and 2013, financed assets of $110,254 and $154,740, respectively, net of accumulated amortization of $58,709 and $38,266 respectively, are included in property and equipment on the balance sheets. The weighted average interest rate was 3.75% at March 31, 2014 and March 31, 2013. | |
4_NOTES_PAYABLE_STOCKHOLDERS
4. NOTES PAYABLE - STOCKHOLDERS | 3 Months Ended | |||
Mar. 31, 2014 | ||||
Notes to Financial Statements | ' | |||
NOTE 4 - NOTES PAYABLE - STOCKHOLDERS | ' | |||
Brekford Corp. financed the repurchase of shares of its common stock and warrants from the proceeds of convertible promissory notes that were issued by Brekford Corp. on November 9, 2009 in favor of a lender group that included two of its directors, Messrs. C.B. Brechin and Scott Rutherford, in the principal amounts of $250,000 each (each, a “Promissory Note” and together, the “Promissory Notes”). Each Promissory Note bears interest at the rate of 12% per annum and at the time of issuance was to be convertible into shares of Brekford Corp. common stock, at the option of the holder, at an original conversion price of $.07 per share. At the time of issuance, Brekford agreed to pay the unpaid principal balance of the Promissory Notes and all accrued but unpaid interest on the date that was the earlier of (i) two years from the issuance date or (ii) 10 business days after the date on which Brekford Corp. closes an equity financing that generates gross proceeds in the aggregate amount of not less than $5,000,000. | ||||
On April 1, 2010, Brekford Corp. and each member of the lender group executed a First Amendment to the Unsecured Promissory Note, which amended the Promissory Notes as follows: | ||||
● | Revise the conversion price in the provision that allows the holder of the Promissory Note to elect to convert any outstanding and unpaid principal portion of the Promissory Note and any accrued but unpaid interest into shares of the common stock at a price of fourteen cents ($0.14) per share, and | |||
● | Each Promissory Note’s maturity date was extended to the earlier of (i) four years from the issuance date or (ii) 10 business days after the date on which Brekford closes an equity financing that generates gross proceeds in the aggregate amount of not less than $5,000,000. | |||
On November 8, 2013, Brekford Corp. and each member of the lender group agreed to further extend the maturity dates of the Promissory Notes to the earlier of (i) November 9, 2014 or (ii) 10 business days after the date on which Brekford Corp. closes an equity financing that generates gross proceeds in the aggregate amount of not less than $5,000,000. | ||||
As of March 31, 2014 and December 31, 2013, the amounts outstanding under the Promissory Notes totaled $500,000. |
5_LEASES
5. LEASES | 3 Months Ended |
Mar. 31, 2014 | |
Notes to Financial Statements | ' |
NOTE 5 - LEASES | ' |
Capital Leases | |
The Company financed certain equipment under separate non-cancelable equipment loan and security agreements. The agreements mature in March 2015 and April 2015. The agreements require various monthly payments and are secured by the assets under lease. As of March 31, 2014 and 2013, capital lease assets of $752,074 and $1,470,759, respectively, net of accumulated amortization of $1,481,926 and $763,241, respectively, are included in property and equipment on the balance sheets. Our weighted average interest rate was 5.28% at March 31, 2014 and March 31, 2013. | |
Operating Leases | |
The Company records rent expense under a non-cancelable operating leases expiring January 2015. Rent expense under this lease amounted to $36,973 and $42,036 for the three months ended March 31, 2014 and 2013, respectively. | |
The Company leases approximately 2,500 square feet of office space from a related party under a non-cancelable operating leases expiring June 2015. Rent expense under this lease amounted to $11,700 and $10,733 for the three months ended March 31, 2014 and 2013, respectively. | |
6_MAJOR_CUSTOMERS_AND_VENDORS
6. MAJOR CUSTOMERS AND VENDORS | 3 Months Ended |
Mar. 31, 2014 | |
Notes to Financial Statements | ' |
NOTE 6 - MAJOR CUSTOMERS AND VENDORS | ' |
Major Customers | |
The Company has several contracts with government agencies, of which net revenue from two major customers during the three months ended March 31, 2014 represented 41% of the total net revenue for the period. Accounts receivable due from three customers at March 31, 2014 amounted to 62% of total accounts receivable. | |
For the quarter ended March 31, 2013, the Company had several contracts with government agencies, of which net revenue from one major customer represented 49% of the total net revenue for the period. Accounts receivable due from two customers at March 31, 2013 amounted to 74% of total accounts receivable. Accounts receivable due from customers at December 31, 2013 amounted to 25% of total accounts receivable at that date. | |
Major Vendors | |
The Company purchased substantially all hardware products that it resold during the periods presented from one major distributor. Revenues from hardware products amounted to 57% and 50% of total revenues for the three months ended March 31, 2014 and 2013, respectively. As of March 31, 2014 and 2013, accounts payable due to this distributor amounted to 70% and 51% of total accounts payable, respectively. Accounts payable due to this distributor at December 31, 2013, amounted to 56% of total accounts payable at that date. | |
7_STOCKHOLDERS_EQUITY
7. STOCKHOLDERS' EQUITY | 3 Months Ended |
Mar. 31, 2014 | |
Notes to Financial Statements | ' |
NOTE 7 - STOCKHOLDERS' EQUITY | ' |
Purchases of Equity Securities by the Issuer and Affiliated Purchasers | |
On September 7, 2010, Brekford Corp. issued a press release announcing that its board of directors authorized a stock repurchase program permitting the Company to repurchase up to $500,000 in outstanding shares of its common stock from time to time over a period of 12 months in open market transactions or in privately negotiated transactions at the Company's discretion. The stock repurchase program was subsequently extended for an additional 12 months until September 7, 2012. On September 28, 2012, the Company adopted a new stock repurchase program which permits the Company to repurchase the $363,280 in shares that remained available for repurchase under the old program, with the same terms and conditions except that the term of the new stock repurchase program is 24 months. No shares were repurchased during the first quarter of 2014. | |
8_SHAREBASED_COMPENSATION
8. SHARE-BASED COMPENSATION | 3 Months Ended | ||||||||||||
Mar. 31, 2014 | |||||||||||||
Notes to Financial Statements | ' | ||||||||||||
NOTE 8 - SHARE-BASED COMPENSATION | ' | ||||||||||||
The Company has issued shares of restricted common stock and warrants to purchase shares of common stock and has granted non-qualified stock options to certain employees and non-employees. On April 25, 2008, the Company’s stockholders approved the 2008 Stock Incentive Plan (the “2008 Incentive Plan”). During the first quarter, Brekford Corp. granted stock options under the 2008 Incentive Plan to its non-employee directors. These options have exercise prices equal to the fair market value of a share of common stock as of the date of grant and have terms of ten years. | |||||||||||||
Stock Options | |||||||||||||
Option grants during the three months ended March 31, 2014 were primarily made to non-employee directors who elected to receive options during the annual equity grant period in the first quarter of each fiscal year. The options had a grant date fair value of $0.10 per share and will vest and become exercisable with respect to option shares over a three year period commencing from the date of grant at a rate of 33.33% per year. The Company recorded $623 in stock option compensation expense during in the period ending March 31, 2014 related to the stock option grants. The assumptions used to value option grants during the three months ended March 31, 2014 were as follows: | |||||||||||||
Three Months Ended March 31, 2014 | |||||||||||||
Expected life (in years) | 3.5 | ||||||||||||
Volatility | 70.81 | ||||||||||||
Risk free interest rate | 0.72 | ||||||||||||
Expected Dividend Rate | 0 | ||||||||||||
Summary of the option activity for three months ended March 31, 2014 is as follows: | |||||||||||||
Number of Options | Weighted Average | Weighted Average | Aggregate | ||||||||||
Exercise Price | Remaining | Intrinsic Value | |||||||||||
Contractual Life (Years) | |||||||||||||
Outstanding at January 1, 2014 | — | $ | 0 | — | $ | 0 | |||||||
Granted | 225,000 | 0.2 | — | 0.00 | |||||||||
Forfeited or expired | — | — | — | 0 | |||||||||
Exercised | — | — | — | ||||||||||
Outstanding at March 31, 2014 | 225,000 | 0.2 | 4.9 | 0 | |||||||||
Exercisable at March 31, 2014 | — | 0 | — | 0 | |||||||||
Vested and expected to vest | 225,000 | 0.2 | 4.9 | 0 | |||||||||
The unrecognized compensation cost for unvested stock option awards outstanding at March 31, 2014 was approximately $21,814 to be recognized over approximately 2.90 years. | |||||||||||||
Restricted Stock Grants | |||||||||||||
For the three months ended March 31, 2014, the Company granted an aggregate of 50,000 shares of restricted stock to the directors as part of the agreement and in consideration of services rendered. The weighted average value of the shares amounted to $0.27 per share based upon the closing price of shares of common stock on the date of the grant. These shares were fully vested on the date of the grant. The Company recorded $13,500 in share-based compensation expense during the period ending March 31, 2014 related to restricted stock grants. For the three months ended March 31, 2013, the Company recorded $17,750, in share-based compensation expense related to restricted stock grants. | |||||||||||||
Restricted Stock | Weighted Average | ||||||||||||
Shares | Value | ||||||||||||
Nonvested restricted stock at January 1, 2014 | — | $ | — | ||||||||||
Granted | 50,000 | 0.27 | |||||||||||
Vested | -50,000 | 0.27 | |||||||||||
Forfeited or expired | — | — | |||||||||||
Nonvested restricted stock at March 31, 2014 | — | $ | — | ||||||||||
9_INVENTORY
9. INVENTORY | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Notes to Financial Statements | ' | ||||||||
NOTE 9 - INVENTORY | ' | ||||||||
As of March 31, 2014 and December 31, 2013, inventory consisted of the following: | |||||||||
March 31, | December 31, | ||||||||
2014 | 2013 | ||||||||
Raw Materials | $ | 506,603 | $ | 1,250,141 | |||||
Work in Process | — | 13,958 | |||||||
Total Inventory | $ | 506,603 | $ | 1,264,099 | |||||
10_LOSS_EARNINGS_PER_SHARE
10. (LOSS) EARNINGS PER SHARE | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Notes to Financial Statements | ' | ||||||||
10. (LOSS) EARNINGS PER SHARE | ' | ||||||||
The following table provides information relating to the calculation of (loss) earnings per common share. | |||||||||
Three Months Ended March 31 | |||||||||
Basic (loss) earnings per share | 2014 | 2013 | |||||||
Net (loss) income | $ | (571,613 | ) | $ | 75,599 | ||||
Weighted average common shares outstanding | 44,496,680 | 44,257,180 | |||||||
Basic (loss) earnings per share | $ | (0.01 | ) | $ | 0 | ||||
Diluted (loss) earnings per share : | |||||||||
Net (loss) income | $ | (571,613 | ) | $ | 75,599 | ||||
Weighted average common shares outstanding | 44,496,680 | 44,257,180 | |||||||
Potential dilutive securities | — | 3,007,953 | |||||||
Weighted average common shares outstanding – diluted | 44,496,680 | 47,265,133 | |||||||
Diluted (loss) earnings per share | $ | (0.01 | ) | $ | 0 | ||||
Common stock equivalents excluded due to anti-dilutive effect | 3,796,429 | — | |||||||
2_SUMMARY_OF_SIGNIFICANT_ACCOU1
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2014 | |
Notes to Financial Statements | ' |
Principles of Consolidation and Basis of Presentation | ' |
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). In our opinion, the accompanying unaudited interim condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, which are necessary to present fairly our financial position, results of operations and cash flows. The condensed consolidated balance sheet at December 31, 2013, has been derived from audited financial statements of that date. The interim condensed consolidated results of operations are not necessarily indicative of the results that may occur for the full fiscal year. Certain information and footnote disclosure normally included in financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to instructions, rules and regulations prescribed by the United States Securities and Exchange Commission. We believe that the disclosures provided herein are adequate to make the information presented not misleading when these unaudited interim condensed consolidated financial statements are read in conjunction with the audited financial statements and notes previously distributed in our annual report on Form 10-K for the year ended December 31, 2013. Certain prior period information has been reclassified to conform to the current period presentation. | |
The consolidated financial statements of Brekford include accounts of the Company and its wholly-owned subsidiary, Municipal Recovery Agency, LLC. Intercompany transactions and balances are eliminated in consolidation. | |
Use of Estimates | ' |
The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. In the accompanying unaudited condensed consolidated financial statements, estimates are used for, but not limited to, stock-based compensation, allowance for doubtful accounts, sales returns, allowance for inventory obsolescence, fair value of long-lived assets, deferred taxes and valuation allowance, and the depreciable lives of fixed assets. Actual results could differ from those estimates. | |
Concentration of Credit Risk | ' |
The Company maintains cash accounts with major financial institutions. From time to time, amounts deposited may exceed the FDIC insured limits. | |
Accounts Receivables | ' |
Accounts receivable are carried at estimated net realizable value. The Company has a policy of reserving for uncollectable accounts based on its best estimate of the amount of probable credit losses in its existing accounts receivable. The Company calculates the allowance based on a specific analysis of past due balances. Past due status for a particular customer is based on how recently payments have been received from that customer. Historically, the Company’s actual collection experience has not differed significantly from its estimates, due primarily to credit and collections practices and the financial strength of its customers. | |
Inventory | ' |
Inventory principally consists of hardware and third-party packaged software that is modified to conform to customer specifications and held temporarily until the completion of a contract. Inventory is valued at the lower of cost or market value. The cost is determined by the lower of first-in, first-out (“FIFO”) method, while market value is determined by replacement cost for raw materials and parts and net realizable value for work-in- process. | |
Property and Equipment | ' |
Property and equipment is stated at cost. Depreciation of furniture, vehicles, computer equipment and software and phone equipment is calculated using the straight-line method over the estimated useful lives (two to ten years), and leasehold improvements are amortized on a straight-line basis over the shorter of their estimated useful lives or the lease term (which is three to five years). | |
Management reviews property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of the long-lived asset is measured by a comparison of the carrying amount of the asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets. | |
Revenue Recognition | ' |
The Company recognizes revenue relating to its vehicle upfitting solutions when all of the following criteria have been satisfied: (i) persuasive evidence of an arrangement exists; (ii) delivery or installation has been completed; (iii) the customer accepts and verifies receipt; and (iv) collectability is reasonably assured. The Company considers delivery to its customers to have occurred at the time at which products are delivered and/or installation work is completed and the customer acknowledges its acceptance of the work. | |
The Company provides its customers with a warranty against defects in the installation of its vehicle upfitting solutions for one year from the date of installation. Warranty claims were $8,674 for the three months ended March 31, 2014 and insignificant for the three months ended March 31, 2013. The Company also performs warranty repair services on behalf of the manufacturers of the equipment it sells. | |
The Company also offers separately-priced extended warranty and product maintenance contracts to its customers on the equipment sold by the Company. Revenues from extended warranty services are apportioned over the period of the extended warranty service contracts and the warranty costs are expensed as incurred. Revenue from extended warranties for the three months ended March 31, 2014 and 2013 amounted to $112,904 and $61,792, respectively. | |
For automated traffic safety enforcement revenue, the Company recognizes the revenue when the required collection efforts are completed and the respective municipality is billed depending on the terms of the respective contract. The Company records revenue related to automated traffic violations for the Company’s share of the violation amount. | |
Share-Based Compensation | ' |
The Company complies with the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, Compensation-Stock Compensation, in measuring and disclosing stock based compensation cost. The measurement objective in ASC Paragraph 718-10-30-6 requires public companies to measure the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award. The cost is recognized in expense over the period in which an employee is required to provide service in exchange for the award (the vesting period). Performance-based awards are expensed ratably from the date that the likelihood of meeting the performance measures is probable through the end of the vesting period. | |
Treasury Stock | ' |
The Company accounts for treasury stock using the cost method. As of March 31, 2014, 10,600 shares of Brekford Corp. common stock were held in treasury at an aggregate cost of $5,890. | |
Income Taxes | ' |
The Company uses the liability method to account for income taxes. Income tax expense includes income taxes currently payable and deferred taxes arising from temporary differences between financial reporting and income tax bases of assets and liabilities. Deferred income taxes are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense, if any, consists of the taxes payable for the current period. Valuation allowances are established when the realization of deferred tax assets are not considered more likely than not. | |
The Company files income tax returns with the U.S. Internal Revenue Service and with the revenue services of various states. The Company is no longer subject to U.S. federal, state and local examinations by tax authorities for years prior to 2010. The Company’s policy is to recognize interest related to unrecognized tax benefits as income tax expense. The Company believes that it has appropriate support for the income tax positions it takes and expects to take on its tax returns, and that its accruals for tax liabilities are adequate for all open years based on an assessment of many factors including past experience and interpretations of tax law applied to the facts of each matter. | |
(Loss) Earnings per Share | ' |
Basic (loss) earnings per share is calculated by dividing net (loss) income available to common stockholders by the weighted-average number of common shares outstanding and does not include the effect of any potentially dilutive common stock equivalents. Diluted (loss) earnings per share is calculated by dividing net (loss) income by the weighted-average number of shares outstanding, adjusted for the effect of any potentially dilutive common stock equivalents. There is no dilutive effect on the loss per share during loss periods. See Note 10 for the calculation of basic and diluted (loss) earnings per share. | |
Fair Value of Financial Instruments | ' |
The carrying amounts reported in the balance sheets for cash, accounts receivable, accounts payable and accrued expenses approximate their fair values based on the short-term maturity of these instruments. The carrying amount of the Company’s note obligations approximate fair value, as the terms of these notes are consistent with terms available in the market for instruments with similar risk. | |
Segment Reporting | ' |
FASB ASC Topic 280, Segment Reporting, requires that an enterprise report selected information about operating segments in its financial reports issued to its stockholders. Based on its current analysis, management has determined that the Company has only one operating segment, which is Traffic Safety Solutions. The chief operating decision-makers use combined results to make operating and strategic decisions, and, therefore, the Company believes its entire operation is covered under a single segment. | |
Newly Issued Accounting Pronouncements | ' |
Management does not believe that any recently issued but not yet effective accounting pronouncements, if adopted, would have a material effect on our financial statements. | |
8_SHAREBASED_COMPENSATION_Tabl
8. SHARE-BASED COMPENSATION (Tables) | 3 Months Ended | ||||||||||||
Mar. 31, 2014 | |||||||||||||
Notes to Financial Statements | ' | ||||||||||||
Assumptions used to value option grants | ' | ||||||||||||
The assumptions used to value option grants during the three months ended March 31, 2014 were as follows: | |||||||||||||
Three Months Ended March 31, 2014 | |||||||||||||
Expected life (in years) | 3.5 | ||||||||||||
Volatility | 70.81 | ||||||||||||
Risk free interest rate | 0.72 | ||||||||||||
Expected Dividend Rate | 0 | ||||||||||||
Summary of the option activity | ' | ||||||||||||
Summary of the option activity for three months ended March 31, 2014 is as follows: | |||||||||||||
Number of Options | Weighted Average | Weighted Average | Aggregate | ||||||||||
Exercise Price | Remaining | Intrinsic Value | |||||||||||
Contractual Life (Years) | |||||||||||||
Outstanding at January 1, 2014 | — | $ | 0 | — | $ | 0 | |||||||
Granted | 225,000 | 0.2 | — | 0.00 | |||||||||
Forfeited or expired | — | — | — | 0 | |||||||||
Exercised | — | — | — | ||||||||||
Outstanding at March 31, 2014 | 225,000 | 0.2 | 4.9 | 0 | |||||||||
Exercisable at March 31, 2014 | — | 0 | — | 0 | |||||||||
Vested and expected to vest | 225,000 | 0.2 | 4.9 | 0 | |||||||||
Share-based compensation expense related to restricted stock grants | ' | ||||||||||||
Restricted Stock | Weighted Average | ||||||||||||
Shares | Value | ||||||||||||
Nonvested restricted stock at January 1, 2014 | — | $ | — | ||||||||||
Granted | 50,000 | 0.27 | |||||||||||
Vested | -50,000 | 0.27 | |||||||||||
Forfeited or expired | — | — | |||||||||||
Nonvested restricted stock at March 31, 2014 | — | $ | — | ||||||||||
9_INVENTORY_Tables
9. INVENTORY (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Notes to Financial Statements | ' | ||||||||
Schedule of Inventory | ' | ||||||||
As of March 31, 2014 and December 31, 2013, inventory consisted of the following: | |||||||||
March 31, | December 31, | ||||||||
2014 | 2013 | ||||||||
Raw Materials | $ | 506,603 | $ | 1,250,141 | |||||
Work in Process | — | 13,958 | |||||||
Total Inventory | $ | 506,603 | $ | 1,264,099 | |||||
10_LOSS_EARNINGS_PER_SHARE_Tab
10. (LOSS) EARNINGS PER SHARE (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Notes to Financial Statements | ' | ||||||||
Calculation of basic and diluted (loss) earnings per common share | ' | ||||||||
The following table provides information relating to the calculation of (loss) earnings per common share. | |||||||||
Three Months Ended March 31 | |||||||||
Basic (loss) earnings per share | 2014 | 2013 | |||||||
Net (loss) income | $ | (571,613 | ) | $ | 75,599 | ||||
Weighted average common shares outstanding | 44,496,680 | 44,257,180 | |||||||
Basic (loss) earnings per share | $ | (0.01 | ) | $ | 0 | ||||
Diluted (loss) earnings per share : | |||||||||
Net (loss) income | $ | (571,613 | ) | $ | 75,599 | ||||
Weighted average common shares outstanding | 44,496,680 | 44,257,180 | |||||||
Potential dilutive securities | — | 3,007,953 | |||||||
Weighted average common shares outstanding – diluted | 44,496,680 | 47,265,133 | |||||||
Diluted (loss) earnings per share | $ | (0.01 | ) | $ | 0 | ||||
Common stock equivalents excluded due to anti-dilutive effect | 3,796,429 | — | |||||||
2_SUMMARY_OF_SIGNIFICANT_POLIC
2. SUMMARY OF SIGNIFICANT POLICIES (Details Narrative) (USD $) | 3 Months Ended | ||
Mar. 31, 2014 | Mar. 31, 2013 | Dec. 31, 2013 | |
Warranty claims | $8,674 | ' | ' |
Revenue from extended warranties | 112,904 | 61,792 | ' |
Common Stock held in treasury amount | 5,890 | ' | 5,890 |
TreasuryStockMember | ' | ' | ' |
Common Stock held in treasury shares | 10,600 | ' | ' |
Common Stock held in treasury amount | $5,890 | ' | ' |
3_LINE_OF_CREDIT_AND_OTHER_NOT1
3. LINE OF CREDIT AND OTHER NOTES PAYABLE (Details Narrative) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2013 |
Short-term Debt [Line Items] | ' | ' | ' |
Line of credit amount outstanding | $1,026,955 | ' | ' |
Weighted average interest rate | 2.65% | 2.66% | ' |
Financed assets | 110,254 | ' | 154,740 |
Accumulated amortization | $58,709 | ' | $38,266 |
Financed Assets | ' | ' | ' |
Short-term Debt [Line Items] | ' | ' | ' |
Weighted average interest rate | 3.75% | ' | 3.75% |
4_NOTES_PAYABLE_STOCKHOLDERS_D
4. NOTES PAYABLE - STOCKHOLDERS (Details Narrative) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Notes Payable - Stockholders Details Narrative | ' | ' |
Amounts outstanding under Promissory Notes, total | $500,000 | $500,000 |
5_LEASES_Details_Narrative
5. LEASES (Details Narrative) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Leases Details Narrative | ' | ' |
Capital Lease Assets, net of amortization | $752,074 | $1,470,759 |
Capital Lease Assets Amortization | 1,481,926 | 763,241 |
Weighted average interest rate | 5.28% | 5.28% |
Rent expense under a non-cancelable operating leases | 36,973 | 42,036 |
Rent expense amount | $11,700 | $10,733 |
6_MAJOR_CUSTOMERS_AND_VENDORS_
6. MAJOR CUSTOMERS AND VENDORS (Details Narrative) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Hardware products Vendor | ' | ' |
Revenues from hardware products | 57.00% | 50.00% |
Accounts payable due to distributor | 70.00% | 51.00% |
Two Major Customers | ' | ' |
Net sales | 41.00% | ' |
Accounts receivable | 62.00% | ' |
One Major Customers | ' | ' |
Net sales | ' | 49.00% |
Accounts receivable | ' | 74.00% |
8_SHAREBASED_COMPENSATION_Deta
8. SHARE-BASED COMPENSATION (Details) | 3 Months Ended |
Mar. 31, 2014 | |
Notes to Financial Statements | ' |
Expected life (in years) | '3 years 6 months |
Volatility | 70.81% |
Risk free interest rate | 0.72% |
Expected Dividend Rate | 0.00% |
8_SHAREBASED_COMPENSATION_Deta1
8. SHARE-BASED COMPENSATION (Details 1) (USD $) | 3 Months Ended |
Mar. 31, 2014 | |
Number of Options | ' |
Outstanding at January 1, 2014 | ' |
Granted | 225,000 |
Forfeited or expired | ' |
Exercised | ' |
Outstanding at March 31, 2014 | 225,000 |
Exercisable at March 31, 2014 | ' |
Vested and expected to vest | 225,000 |
Weighted Average Exercise Price | ' |
Outstanding at January 1, 2014 | $0 |
Granted | $0.20 |
Forfeited or expired | ' |
Exercised | ' |
Outstanding at March 31, 2014 | $0.20 |
Exercisable at March 31, 2014 | $0 |
Vested and expected to vest | $0.20 |
Weighted Average Remaining Contractual Term (in years) | ' |
Outstanding at January 1, 2014 | '0 years |
Granted | '0 years |
Forfeited or expired | '0 years |
Exercised | '0 years |
Outstanding at March 31, 2014 | '4 years 10 months 24 days |
Exercisable at March 31, 2014 | '0 years |
Vested and expected to vest | '4 years 10 months 24 days |
Aggregate Intrinsic Value | ' |
Outstanding at January 1, 2014 | $0 |
Granted | 0 |
Forfeited or expired | 0 |
Exercised | 0 |
Outstanding at March 31, 2014 | 0 |
Exercisable at March 31, 2014 | ' |
Vested and expected to vest | $0 |
8_SHAREBASED_COMPENSATION_Deta2
8. SHARE-BASED COMPENSATION (Details 2) (USD $) | 3 Months Ended |
Mar. 31, 2014 | |
Weighted Average Value | ' |
Forfeited or expired | ' |
Restricted Stock [Member] | ' |
Restricted Stock Shares | ' |
Nonvested restricted stock at January 1, 2014 | ' |
Granted | 50,000 |
Vested | -50,000 |
Forfeited or expired | ' |
Nonvested restricted stock at March 31, 2014 | ' |
Weighted Average Value | ' |
Nonvested restricted stock at January 1, 2014 | ' |
Granted | $0.27 |
Vested | $0.27 |
Forfeited or expired | ' |
Nonvested restricted stock at March 31, 2014 | ' |
8_SHAREBASED_COMPENSATION_Deta3
8. SHARE-BASED COMPENSATION (Detail Narrative) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Financial Instruments Subject to Mandatory Redemption by Settlement Terms [Line Items] | ' | ' |
Option grant date fair value | $0.10 | ' |
Stock option compensation expense | $623 | ' |
Unrecognized compensation cost for unvested stock option awards | 21,814 | ' |
Unrecognized compensation cost for unvested stock option awards, Period | '2 years 10 months 24 days | ' |
Share - based compensation expense under restricted stock grants | 14,123 | 17,750 |
RestrictedStockGrantsMember | ' | ' |
Financial Instruments Subject to Mandatory Redemption by Settlement Terms [Line Items] | ' | ' |
Shares of restricted stock | 50,000 | ' |
Share - based compensation expense under restricted stock grants | $13,500 | $17,750 |
9_INVENTORY_Details
9. INVENTORY (Details) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Notes to Financial Statements | ' | ' |
Raw Materials | $506,603 | $1,250,141 |
Work in Process | ' | 13,958 |
Total Inventory | $506,603 | $1,264,099 |
10_LOSS_EARNINGS_PER_SHARE_Det
10. (LOSS) EARNINGS PER SHARE (Details) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Basic (loss) earnings per share : | ' | ' |
Net (loss) income | ($571,613) | $75,599 |
Weighted average common shares outstanding | 44,496,680 | 44,257,180 |
Basic (loss) earnings per share | ($0.01) | $0 |
Diluted (loss) earnings per share : | ' | ' |
Net (loss) income | ($571,613) | $75,599 |
Weighted average common shares outstanding | 44,496,680 | 44,257,180 |
Potential dilutive securities | ' | 3,007,953 |
Weighted average common shares outstanding b diluted | 44,496,680 | 47,265,133 |
Diluted (loss) earnings per share | ($0.01) | $0 |
Common stock equivalents excluded due to anti-dilutive effect | 3,796,429 | ' |