Document_and_Entity_Informatio
Document and Entity Information (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Mar. 20, 2015 | Jun. 30, 2014 | |
Document And Entity Information | |||
Entity Registrant Name | Brekford Corp. | ||
Entity Central Index Key | 1357115 | ||
Document Type | 10-K | ||
Document Period End Date | 31-Dec-14 | ||
Amendment Flag | FALSE | ||
Current Fiscal Year End Date | -19 | ||
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 Public Float | $3,592,980 | ||
Entity Common Stock, Shares Outstanding | 44,632,569 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2014 |
Condensed_Consolidated_Balance
Condensed Consolidated Balance Sheet (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
CURRENT ASSETS | ||
Cash, unrestricted | $1,112,881 | $2,052,306 |
Accounts receivable, net of allowance $0 at December 31, 2014 and 2013, respectively | 1,706,704 | 1,390,300 |
Unbilled receivables | 198,725 | 125,831 |
Prepaid expenses | 146,569 | 47,148 |
Inventory | 681,948 | 1,264,099 |
Total current assets | 3,846,827 | 4,879,684 |
Property and equipment, net | 284,322 | 1,593,202 |
Cash, restricted | 21,795 | 0 |
Other non-current assets | 112,132 | 187,132 |
TOTAL ASSETS | 4,265,076 | 6,660,018 |
CURRENT LIABILITIES | ||
Accounts payable and accrued expenses | 1,842,892 | 1,731,706 |
Accrued payroll and related expenses | 23,252 | 104,100 |
Line of credit | 1,191,353 | 1,470,533 |
Term loan - current portion | 250,000 | 0 |
Other liabilities | 48,669 | 49,922 |
Deferred revenue | 255,405 | 677,622 |
Customer deposits | 137,826 | 27,640 |
Obligations under capital lease - current portion | 140,209 | 616,115 |
Obligations under other notes payable - current portion | 28,602 | 32,763 |
Deferred rent - current portion | 0 | 48,632 |
Total current liabilities | 3,918,208 | 4,759,033 |
LONG - TERM LIABILITIES | ||
Notes payable - stockholders | 500,000 | 500,000 |
Obligations under capital lease, net of current portion | 0 | 197,832 |
Other notes payable - net of current portion | 48,371 | 78,514 |
Deferred rent, net of current portion | 0 | 9,895 |
Term notes payable, net of current portion | 166,667 | 0 |
Total long-term liabilities | 715,038 | 786,241 |
TOTAL LIABILITIES | 4,633,246 | 5,545,274 |
STOCKHOLDERS' (DEFICIT) EQUITY | ||
Preferred stock, par value $0.0001 per share; 20,000,000 shares authorized; none issued and outstanding | 0 | 0 |
Common stock, par value $0.0001 per share; 150,000,000 shares authorized; 44,500,569 issued and outstanding, at December 31, 2014 and 44,450,569 issued and outstanding at December 31, 2013 | 4,450 | 4,445 |
Additional paid-in capital | 10,204,479 | 10,184,751 |
Treasury Stock, at cost 10,600 shares at December 31, 2014 and 2013 respectively | -5,890 | -5,890 |
Accumulated deficit | -10,571,209 | -9,068,562 |
TOTAL STOCKHOLDERS' (DEFICIT) EQUITY | -368,170 | 1,114,744 |
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY | $4,265,076 | $6,660,018 |
Condensed_Consolidated_Balance1
Condensed Consolidated Balance Sheet (Parenthetical) (USD $) | Dec. 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 |
Treasury Stock | 10,600 | 10,600 |
Condensed_Consolidated_Stateme
Condensed Consolidated Statements of Operations (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Income Statement [Abstract] | ||
Net Revenue | $17,659,533 | $13,619,306 |
Cost of Revenue | 14,527,646 | 10,183,078 |
Gross profit | 3,131,887 | 3,436,228 |
Operating expenses: | ||
Salaries and related expenses | 1,878,671 | 1,956,640 |
Selling, general and administrative expenses | 2,585,302 | 2,721,650 |
Total operating expenses | 4,463,973 | 4,678,290 |
Loss from operations | -1,332,086 | -1,242,062 |
Other (expense) income: | ||
Interest expense | -170,561 | -181,030 |
Interest income | 0 | 174 |
Other income (expense) | 0 | 3,332 |
Total other (expense)income | -170,561 | -177,524 |
Loss before income taxes | -1,502,647 | -1,419,586 |
Income tax expense | 0 | 0 |
Net loss | ($1,502,647) | ($1,419,586) |
Loss per share - basic and diluted | ($0.03) | ($0.03) |
Weighted average shares outstanding used in computing per share amounts: | ||
Basic | 44,499,610 | 44,283,364 |
Diluted | 44,499,610 | 44,283,364 |
Consolidated_Statements_of_Cha
Consolidated Statements of Changes in Stockholders' Equity (USD $) | Common Stock | Treasury Stock [Member] | Additional Paid-In Capital | Accumulated Deficit | Total |
Beginning Balance - Amount at Dec. 31, 2012 | $4,425 | ($5,890) | $10,127,461 | ($7,648,976) | $2,477,020 |
Beginning Balance - Shares at Dec. 31, 2012 | 44,248,569 | -10,600 | |||
Restricted shares issues to employee- Shares | 152,000 | ||||
Restricted shares issues to employee - Amount | 15 | 28,545 | 28,560 | ||
Restricted shares issues to non-employees - Shares | 50,000 | ||||
Restricted shares issues to non-employees - Amount | 5 | 28,745 | 28,750 | ||
Repurchase of common stock, Shares | |||||
Repurchase of common stock, Amount | |||||
Net loss | -1,419,586 | -1,419,586 | |||
Ending Balance - Amount at Dec. 31, 2013 | 4,445 | -5,890 | 10,184,751 | -9,068,562 | 1,114,744 |
Ending Balance - Shares at Dec. 31, 2013 | 44,450,569 | -10,600 | |||
Restricted shares issues to non-employees - Shares | 50,000 | ||||
Restricted shares issues to non-employees - Amount | 5 | 13,495 | 13,500 | ||
Stock options to non-employees - Shares | |||||
Stock options to non-employees - Amount | 6,233 | 6,233 | |||
Net loss | -1,502,647 | -1,502,647 | |||
Ending Balance - Amount at Dec. 31, 2014 | $4,450 | ($5,890) | $10,204,479 | ($10,571,209) | ($368,170) |
Ending Balance - Shares at Dec. 31, 2014 | 44,500,569 | -10,600 |
Condensed_Consolidated_Stateme1
Condensed Consolidated Statements of Cash Flows (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Cash flows from operating activities: | ||
Net loss | ($1,502,647) | ($1,419,586) |
Adjustments to reconcile net loss to net cash from operating activities: | ||
Depreciation and amortization | 777,434 | 1,264,643 |
Share-based compensation and payments to consultants | 19,733 | 57,310 |
Bad debt expense | 51,178 | 249,268 |
Loss on disposal of property and equipment | 319,739 | 0 |
Changes in operating assets and liabilities: | ||
Accounts receivable | -367,581 | 2,596,451 |
Unbilled receivables | -72,894 | 82,221 |
Prepaid expenses and other non-current assets | -24,421 | 101,996 |
Inventory | 582,151 | -591,225 |
Accounts payable and accrued expenses | 363,184 | -2,361,650 |
Accrued payroll and related expenses | -80,848 | 25,798 |
Other liabilities | -1,253 | -154 |
Customer deposits | 110,186 | -43,559 |
Deferred rent | -58,527 | -63,005 |
Deferred revenue | -422,217 | 193,838 |
Net cash (used in) provided by operating activities | -306,783 | 92,346 |
Cash flows from investing activities: | ||
Purchases of property and equipment | -40,293 | -304,792 |
Restricted Cash | -21,795 | 0 |
Net cash used in investing activities | -62,088 | -304,792 |
Cash flows from financing activities: | ||
Net change in line of credit | -279,180 | 1,470,533 |
Principal payments on lease obligation | -673,738 | -583,976 |
Payments on other notes payable | -34,303 | -37,057 |
Borrowings on term notes | 500,000 | 0 |
Payments on term notes | -83,333 | 0 |
Net cash (used in) provided by financing activities | -570,554 | 849,500 |
Net change in cash | -939,425 | 637,054 |
Cash - beginning of year | 2,052,306 | 1,415,252 |
Cash - end of year | 1,112,881 | 2,052,306 |
Supplemental disclosures of cash flow information: | ||
Cash paid for interest | 170,561 | 181,030 |
Cash paid for income taxes | 1,253 | 154 |
Property and equipment acquisitions | 40,293 | 380,202 |
Cash paid for property and equipment acquisitions | -40,293 | -304,792 |
Property and equipment acquisitions financed | 0 | 75,410 |
Liabilities settled in exchange for equipment | $260,000 | $0 |
1_DESCRIPTION_OF_THE_BUSINESS
1. DESCRIPTION OF THE BUSINESS | 12 Months Ended |
Dec. 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. Brekford has one wholly-owned subsidiary, Municipal Recovery Agency, LLC, a Maryland limited liability company, that was formed in 2012 for the purpose of providing collection systems and services for unpaid citations and parking fines. |
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_LIQUIDITY
2. LIQUIDITY | 12 Months Ended |
Dec. 31, 2014 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
NOTE 2 - LIQUIDITY | For the year ended December 31, 2014 the company incurred a net loss of $1.5 million, and used $300 thousand of cash for operations. Additionally, at December 31, 2014 the company has cash available of $1.1 million but a working capital deficit of $70 thousand. During 2014, the Company established a credit facility (see Note 5) that has approximately $1.3 million available at December 31, 2014. The Company expects to begin operations on its Saltillo Mexico contract in the second quarter of 2015. A $650 thousand note was entered into March 2015 (see Note 14) to provide the necessary startup capital for this contract and any other operational needs. The Company expects this contract, as well as the overall Company, to generate positive cash flow for the period ending December 31, 2015. |
Management believes that the Company’s current level of cash combined with cash that it expects to generate in its operations during the next 12 months and funds available from the credit facility and the note will be sufficient to sustain the Company’s business initiatives through at least December 31, 2015, but there can be no assurance that these measures will be successful or adequate. In the event that the Saltillo project is delayed or if projected cash flow does not meet expectations, the Company is prepared to take immediate action with respect to cost reductions to align future expenditures with existing revenue streams. |
3_SUMMARY_OF_SIGNIFICANT_ACCOU
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2014 | |
Notes to Financial Statements | |
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Principles of Consolidation and Basis of Presentation |
The Company’s consolidated financial statements include the accounts of Brekford Corp. 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. generally accepted accounting principles (“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 $10,111 for the year ended December 31, 2014 and $4,029 for the year ended December 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 years ended December 31, 2014 and 2013 amounted to $443,737 and $375,756, 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. | |
Shipping and Handling Costs | |
All amounts billed to customers related to shipping and handling are included in products revenues and all costs of shipping and handling are included in cost of sales in the accompanying consolidated statements of operations. The Company incurred shipping and handling costs of $57,843 and $75,134 for the years ended December 31, 2014 and 2013, respectively. | |
Advertising Costs | |
The Company expenses advertising costs as incurred. These expenses are included in selling, general and administrative expenses in the accompanying statements of operations. Advertising expense amounted to $30,412 and $16,500 for the years ended December 31, 2014 and 2013, respectively. | |
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 December 31, 2014, 10,600 shares of our 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 2011. 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 per Share | |
Basic loss per share is calculated by dividing net loss 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 per share is calculated by dividing net loss 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 8 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 promissory note obligations approximate fair value, as the terms of these notes are consistent with terms available in the market for instruments with similar risk. | |
Restricted Cash | |
Restricted cash represents temporarily restricted deposits held as compensating balances against outstanding balances due under our Credit Facility (as defined in Note 5). As of December 31, 2014, the Company had restricted cash of approximately $21,795. | |
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. | |
Recent Accounting Pronouncements | |
In May 2014, the FASB amended the ASC and created Topic 606, Revenue from Contracts with Customers, to clarify the principles for recognizing revenue. This guidance will be effective for the Company beginning January 1, 2017 and must be adopted using either a full retrospective approach for all periods presented in the period of adoption or a modified retrospective approach. We have not yet determined the effects of this new guidance on our financial statements. | |
In August 2014, the FASB issued a new U.S. GAAP accounting standard that provides guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The new accounting standard requires management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. The new accounting standard is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company does not expect the adoption of this standard to have a material impact on the consolidated financial statements. |
4_PROPERTY_AND_EQUIPMENT
4. PROPERTY AND EQUIPMENT | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Property, Plant and Equipment [Abstract] | |||||||||
NOTE 4 - PROPERTY AND EQUIPMENT | Property and equipment consists of the following: | ||||||||
December 31, | |||||||||
2014 | 2013 | ||||||||
Leasehold improvements | $ | 502,092 | $ | 502,092 | |||||
Computer equipment and software | 519,368 | 509,368 | |||||||
Vehicles | 333,531 | 333,531 | |||||||
Furniture | 100,089 | 100,089 | |||||||
Cameras | 574,753 | 2,808,753 | |||||||
Phone equipment | 48,817 | 48,817 | |||||||
Handheld ticketing system | 30,293 | — | |||||||
2,108,943 | 4,302,650 | ||||||||
Accumulated depreciation and amortization | (1,824,621 | ) | (2,709,448 | ) | |||||
$ | 284,322 | $ | 1,593,202 | ||||||
Depreciation and amortization of property and equipment for the years ended December 31, 2014 and 2013 was $777,434 and $1,264,643, respectively. The decrease in the property and equipment was the result of the disposal of certain obsolete ATSE equipment as reported in the second quarter of 2014. |
5_LINE_OF_CREDIT_AND_OTHER_NOT
5. LINE OF CREDIT AND OTHER NOTES PAYABLE | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
Notes to Financial Statements | |||||
NOTE 5 - LINE OF CREDIT AND OTHER NOTES PAYABLE | On May 27, 2014, Brekford Corp. closed (the “Closing”) on an aggregate $3.0 million credit facility (the “Credit Facility”) with Rosenthal & Rosenthal, Inc. (“Rosenthal”) as lender consisting of $2.5 million in revolving loans (the “Revolving Facility”) and a $500,000 non-revolving term loan (the “Term Loan”). The terms and conditions of the Credit Facility are set forth in a Financing Agreement between the Company and Rosenthal dated May 27, 2014 (the “Financing Agreement”). The Term Loan is additionally evidenced by a Term Note issued by the Company in favor of Rosenthal. The maximum amount that the Company may borrow from time to time under the Revolving Facility will be the lesser of $2.5 million or the “Loan Availability” (as defined in the Financing Agreement), which is tied to the amount of the Company’s “Eligible Receivables” (as defined in the Financing Agreement) and the amount of its “Eligible Inventory” (as defined in the Financing Agreement). Interest on the unpaid principal balances due under the Credit Facility will be payable monthly in arrears. Amounts borrowed under the Revolving Facility that do not exceed the “Receivable Availability” (as defined in the Financing Agreement) will bear interest at an annual rate equal to the prime rate from time to time publicly announced in New York City by JPMorgan Chase Bank (the “Prime Rate”) plus 2.5%; amounts borrowed under the Revolving Facility that relate to the “Inventory Availability” (as defined in the Financing Agreement) will bear interest at an annual rate equal to the Prime Rate plus 3.0% (the “Inventory Rate”); and any amounts that, on any day, exceed the Loan Availability will bear interest at an annual rate equal to the Inventory Rate plus 4.0%; provided, however, that the Prime Rate will never be deemed to be less than 4.0%. The Company agreed to pay a minimum of $3,000 in monthly interest under the Revolving Facility, as well as a $1,000 monthly loan administration fee. In addition, the Company agreed to pay Rosenthal a facility fee at the Closing in the amount of $30,000. At each annual renewal of the Financing Agreement, the Company will pay Rosenthal a facility fee in the amount of $18,750. | ||||
The Company’s obligations under the Financing Agreement and related documents are secured by a continuing lien on and security interest in substantially all of the Company’s assets. The Company’s repayment obligations under the Revolving Facility are due on demand by Rosenthal or, at Rosenthal’s option, upon the expiration of the Financing Agreement and/or the occurrence of an event of default thereunder. The original term of the Financing Agreement will expire on May 31, 2016 but will automatically renew for successive one-year terms unless the Company elects not to renew the Financing Agreement by providing at least 60 days’ prior written notice thereof to Rosenthal. Rosenthal may terminate the Financing Agreement at any time upon 60 days’ prior written notice to the Company. At December 31, 2014, the Company had $1.2 million in outstanding indebtedness under the Revolving Facility and $416,667 in outstanding indebtedness under the Term Loan, and the Company could have borrowed up to an additional $1.3 million under the Revolving Facility. As of December 31, 2014, we were out of compliance with one of the financial covenants contained in the Credit Facility as a result of the loss recorded for the year ended 2014. We reported this non-compliance to Rosenthal, and Rosenthal granted a waiver for the year ended December 31, 2014. | |||||
The Credit Facility replaced the Company’s $2.0 million credit facility with PNC Bank, National Association (“PNC”), under that certain Loan Agreement, dated as of June 28, 2012, as amended (the “PNC Facility”), and refinanced the amounts that were due under the PNC Facility. At the Closing, the Company paid approximately $1,030,707 to PNC in satisfaction of its obligations under the PNC Facility. In addition, the Company used proceeds from the Credit Facility, totaling approximately $310,649, to satisfy its obligations to Bank of America, N.A., under its Master Lease Agreement, dated as of December 13, 2011. | |||||
The Company financed certain vehicles and equipment under finance agreements. The agreements mature at various dates through December 2017. The agreements require various monthly payments of principal and interest until maturity. As of December 31, 2014 and 2013, financed assets of $75,988 and $118,671, respectively, net of accumulated amortization of $65,927 and $50,293, respectively, are included in property and equipment on the balance sheets. The weighted average interest rate was 3.29% at December 31, 2014 and 3.75% at December 31, 2013. Future maturities of notes payable are as follows as of December 31, 2014: | |||||
2015 | $ | 28,602 | |||
2016 | 29,391 | ||||
2017 | 18,980 | ||||
Total | $ | 76,973 |
6_NOTES_PAYABLE_STOCKHOLDERS
6. NOTES PAYABLE - STOCKHOLDERS | 12 Months Ended | |
Dec. 31, 2014 | ||
Notes to Financial Statements | ||
NOTE 6 - NOTES PAYABLE - STOCKHOLDERS | Brekford financed the repurchase of shares of its common stock and warrants from the proceeds of convertible promissory notes that were issued by Brekford 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 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. | ||
On November 4, 2014, 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, 2015 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 | ||
At December 31, 2014 and December 31, 2013, the amounts outstanding under the Promissory Notes totaled $500,000. |
7_LEASES
7. LEASES | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
Notes to Financial Statements | |||||
NOTE 7 - LEASES | Capital Leases | ||||
The Company financed certain equipment under separate non-cancelable equipment loan and security agreements. The agreements mature in April 2015. The agreements require various monthly payments of principal and interest through maturity and are secured by the assets under lease. As part of the liability settlement to the vendor, certain leased obsolete ATSE equipment was disposed and upgraded with the Brekford’s latest integrated technology. As of December 31, 2014 and 2013, capital lease assets of $0 and $932,407, respectively, net of accumulated amortization of $0 and $1,301,593, respectively, are included in property and equipment on the consolidated balance sheets. Our weighted average interest rate was 5.84% and 5.28% at December 31, 2014 and December 31, 2013, respectively | |||||
Future minimum lease payments under these lease agreements at December 31, 2014 are as follows: | |||||
2015 | $ | 142,607 | |||
Less: amounts representing interest | -2,398 | ||||
Present value of net minimum lease payments | $ | 140,209 | |||
Operating Leases | |||||
The Company rents office space under separate non-cancelable operating leases expiring in June 2015 and January 2015. The Company amended the lease expiring in January 2015 to extend for a 63-month term expiring on April 30, 2020. | |||||
Future minimum lease payments under these lease agreements, exclusive of the Company’s share of operating costs at December 31, 2014 are as follows: | |||||
2015 | 154,378 | ||||
2016 | 172,697 | ||||
2017 | 177,878 | ||||
2018 | 183,214 | ||||
2019 | 188,711 | ||||
2020 | 64,475 | ||||
Total | $ | 941,353 | |||
In addition, the lessor provided the Company with a $221,400 leasehold improvement incentive that was recorded as a component of property and equipment and is included in deferred rent and is being amortized over the lease term. The lease agreement requires the Company to reimburse the lessor for the cost of the improvements on a pro rata basis over the term of the lease in the event of the Company's default or termination of the lease agreement prior to the expiration of the term of the lease in 2015. | |||||
The Company records rent expense over the term of the lease on a straight-line basis, less amounts received under any sub-lease arrangements. Total rent expense amounted to $212,736 and $238,319 for the years ended December 31, 2014 and 2013, respectively. | |||||
The Company also leases approximately 2,500 square feet of office space from Peppermill Properties, LLC, a Maryland limited liability company (“Peppermill”). Peppermill is owned and managed by Chandra (C.B.) Brechin and Scott Rutherford, who are officers, directors and principal stockholders of the Company. On June 1, 2010, the Company entered into a three-year lease with Peppermill, which was amended to extend the lease expiration date to June 30, 2015. Total rent expense under this lease amounted to $46,800 and $50,674 for the years ended December 31, 2014 and 2013, respectively. |
8_INVENTORY
8. INVENTORY | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Notes to Financial Statements | |||||||||
NOTE 8 - INVENTORY | As of December 31, 2014 and December 31, 2013 inventory consisted of the following: | ||||||||
2014 | 2013 | ||||||||
Raw Materials | $ | 579,279 | $ | 1,250,141 | |||||
Work in Process | 102,669 | 13,958 | |||||||
Total Inventory | $ | 681,948 | $ | 1,264,099 |
9_LOSS_PER_SHARE
9. LOSS PER SHARE | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Notes to Financial Statements | |||||||||
NOTE 9 - LOSS PER SHARE | The following table provides information relating to the calculation of (loss) earnings per common share. | ||||||||
Years Ended December 31, | |||||||||
2014 | 2013 | ||||||||
Basic loss earnings per share | |||||||||
Net loss | $ | (1,502,647 | ) | $ | (1,419,586 | ) | |||
Weighted average common shares outstanding - basic | 44,499,610 | 44,283,364 | |||||||
Basic loss per share | $ | (0.03 | ) | $ | (0.03 | ) | |||
Diluted loss per share | |||||||||
Net loss | $ | (1,502,647 | ) | $ | (1,419,586 | ) | |||
Weighted average common shares outstanding | 44,499,610 | 44,283,364 | |||||||
Potential dilutive securities | — | — | |||||||
Weighted average common shares outstanding – diluted | 44,499,610 | 44,283,364 | |||||||
Diluted loss per share | $ | (0.03 | ) | $ | (0.03 | ) | |||
Common stock equivalents excluded due to anti-dilutive effect | 3,796,429 | 3,571,429 |
10_SHAREBASED_COMPENSATION
10. SHARE-BASED COMPENSATION | 12 Months Ended | ||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||
Notes to Financial Statements | |||||||||||||||||
NOTE 10 - 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”). | ||||||||||||||||
Stock Options | |||||||||||||||||
Option grants during the year ended December 31, 2014 were 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 $6,233 in stock option compensation expense during the period ended December 31, 2014 related to the stock option grants. | |||||||||||||||||
The Company uses the Black-Scholes option pricing model to determine the fair value of stock options granted to employees and recognizes the compensation cost of employee share-based awards in its statement of operations using the straight-line method over the vesting period of the award, net of estimated forfeitures. | |||||||||||||||||
The use of the Black-Scholes option pricing model to estimate the fair value of share-based awards requires that the Company make certain assumptions and estimates for required inputs to the model, including (1) the fair value of the Company’s common stock at each grant date, (ii) the expected volatility of the Company’s common stock value based on industry comparisons, (iii) the expected life of the share-based award, (iv) the risk-free interest rate, and (v) the dividend yield. | |||||||||||||||||
The following are the assumptions made in computing the fair value of share-based awards granted in the year ended December 31, 2014: | |||||||||||||||||
Risk-free interest rate – 0.72% | |||||||||||||||||
Dividend yield – 0% | |||||||||||||||||
Expected life – 3.5 years | |||||||||||||||||
Expected volatility – 70.8% | |||||||||||||||||
Summary of the option activity for the period ended December 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 | |||||||||||||
Forfeited or expired | — | — | — | 0 | |||||||||||||
Exercised | — | — | — | ||||||||||||||
Outstanding at December 31, 2014 | 225,000 | $ | 0.2 | 4.1 | 0 | ||||||||||||
Exercisable at December 31, 2014 | — | — | 0 | ||||||||||||||
Vested and expected to vest | 225,000 | $ | 0.2 | 4.1 | 0 | ||||||||||||
The unrecognized compensation cost for unvested stock option awards outstanding at December 31, 2014 was approximately $16,205 to be recognized over approximately 2.14 years. | |||||||||||||||||
Restricted Stock Grants | |||||||||||||||||
During the period ended December 31, 2013, Company issued an aggregate of 202,000 shares of restricted common stock to the non-employees and to its key employees in consideration of services rendered and part of employment agreement. The weighted average value of the shares amounted to $0.28 per share based upon the closing price of shares of the Company’s Common Stock on the date of the grant. These shares were fully vested on the date of the grant. The Company recorded $57,310 in share-based compensation expense for the year ending December 31, 2013 related to restricted stock grants. | |||||||||||||||||
During the period ended December 31, 2014, the Company granted an aggregate of 50,000 shares of restricted stock to the directors as part of our director compensation program 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 for the year ending December 31, 2014 related to restricted stock grants. | |||||||||||||||||
Restricted Stock Shares | Weighted Average Value | ||||||||||||||||
Nonvested restricted stock at January 1, 2013 | — | $ | — | ||||||||||||||
Granted | 202,000 | 0.28 | |||||||||||||||
Vested | (202,000 | ) | 0.28 | ||||||||||||||
Forfeited or expired | — | — | |||||||||||||||
Nonvested restricted stock at December 31, 2013 | — | $ | — | ||||||||||||||
Granted | 50,000 | 0.27 | |||||||||||||||
Vested | (50,000 | ) | 0.27 | ||||||||||||||
Forfeited or expired | — | — | |||||||||||||||
Nonvested restricted stock at December 31, 2014 | — | $ | — | ||||||||||||||
Common Stock Purchase Warrants | |||||||||||||||||
For the year ended December 31, 2014 and 2013, there was no share-based compensation expense for common stock purchase warrants. As of December 31, 2014, there are no unvested common stock purchase warrants. | |||||||||||||||||
A summary of warrant activity is as follows: | |||||||||||||||||
Shares Underlying | Weighted Average | Weighted Average | |||||||||||||||
Warrants | Exercise Price | Remaining | |||||||||||||||
Contractual Life (Years) | |||||||||||||||||
Outstanding at January 1, 2013 | 375,000 | $ | 0.3 | 0.37 | |||||||||||||
Granted | — | — | — | ||||||||||||||
Forfeited or expired | (375,000 | ) | 0.3 | — | |||||||||||||
Exercised | — | — | — | ||||||||||||||
Outstanding at December 31, 2013 | — | — | — | ||||||||||||||
Granted | — | — | — | ||||||||||||||
Forfeited or expired | — | — | — | ||||||||||||||
Exercised | — | — | — | ||||||||||||||
Outstanding at December 31, 2014 | — | ||||||||||||||||
2008 Stock Incentive Plan | |||||||||||||||||
The 2008 Incentive Plan is designed to provide an additional incentive to executives, employees, directors and key consultants, aligning the long term interests of participants in the 2008 Incentive Plan with those of the Company and the Company’s stockholders. The 2008 Incentive Plan provides that up to 8 million shares of the Company’s common stock may be issued pursuant to awards granted under the 2008 Incentive Plan. As of December 31, 2014, 6,680,000 shares of common stock remained available for future issuance under the 2008 Incentive Plan. | |||||||||||||||||
2008 Employee Stock Purchase Plan | |||||||||||||||||
On February 19, 2008, the Board of Directors authorized the adoption of the 2008 Employee Stock Purchase Plan (the “Purchase Plan”), subsequently approved by the stockholders on April 25, 2008, which is designed to encourage and enable eligible employees to acquire a proprietary interest in the Company’s common stock. The Purchase Plan provides that up to 2 million shares of the Company’s common stock may be issued under the Plan. No shares have been issued under the Plan. |
11_EMPLOYEE_BENEFIT_PLANS
11. EMPLOYEE BENEFIT PLANS | 12 Months Ended |
Dec. 31, 2014 | |
Compensation and Retirement Disclosure [Abstract] | |
NOTE 11 - EMPLOYEE BENEFIT PLANS | The Company has a defined contribution savings plan under Section 401(k) of the Internal Revenue Code. The 401(k) Plan is a defined contribution plan, which covers substantially all U.S.-based employees of the Company and its wholly-owned subsidiaries who have completed three months of service. The 401(k) Plan provides that the Company will match 50% of the participant salary deferrals up to 3% of a participant’s compensation for all participants. The Company contributed $11,833 and $21,766 during the years ended December 31, 2014 and December 31, 2013, respectively. |
12_MAJOR_CUSTOMERS_AND_VENDORS
12. MAJOR CUSTOMERS AND VENDORS | 12 Months Ended |
Dec. 31, 2014 | |
Notes to Financial Statements | |
NOTE 12 - MAJOR CUSTOMERS AND VENDORS | Major Customers |
The Company has several contracts with government agencies, of which net revenue from one customer during the year ended December 31, 2014 represented 10% of the total net revenue for such year. Accounts receivable due from customers at December 31, 2014 amounted to 53% of total accounts receivable at that date. | |
The Company has several contracts with government agencies, of which net revenue from two customers during the year ended December 31, 2013 represented 34% of the total net revenue for such year. 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 rugged IT products that it resold during the periods presented from a single distributor. Revenues from rugged IT products amounted to 53% and 27% of total revenues for the years ended December 31, 2014 and 2013, respectively. As of December 31, 2014 and 2013, accounts payable due to this distributor amounted to 53% and 27% of total accounts payable, respectively. |
13_INCOME_TAXES
13. INCOME TAXES | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Income Tax Disclosure [Abstract] | |||||||||
NOTE 13 - INCOME TAXES | As of December 31, 2014, the Company has approximately $6.56 million of federal and state net operating loss carryforwards available to offset future taxable income, if any, through 2033. These net operating losses begin to expire in 2028. If, however, there is an ownership change in the Company, Section 382 of the Internal Revenue Code may restrict the Company’s ability to utilize these loss carryforwards to a percentage of the market value of the Company at the time of the ownership change. Therefore, these operating loss carryforwards could become limited in future years if ownership changes were to occur as defined in the Internal Revenue Code and similar state income tax provisions. 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 income tax examinations by tax authorities for years before 2010. | ||||||||
The Company’s deferred tax assets and liabilities are as follows for each of the periods presented: | |||||||||
December 31, | |||||||||
2014 | 2013 | ||||||||
Net operating loss carry forwards | $ | 2,640,000 | $ | 1,748,000 | |||||
Property and Equipment | -513,000 | (224,000 | ) | ||||||
Other | 3,000 | 10,000 | |||||||
2,130,000 | 1,534,000 | ||||||||
Valuation allowance | -2,130,000 | (1,534,000 | ) | ||||||
Net deferred tax asset | $ | — | $ | — | |||||
The Company’s recorded income tax, net of the change in the valuation allowance for each of the periods presented, is as follows: | |||||||||
Years Ended December 31, | |||||||||
2014 | 2013 | ||||||||
Current | |||||||||
Federal | $ | — | $ | — | |||||
State | — | — | |||||||
— | — | ||||||||
Deferred | |||||||||
Federal | -486,000 | (442,000 | ) | ||||||
State | -110,000 | (116,000 | ) | ||||||
-596,000 | (558,000 | ) | |||||||
Change in valuation allowance | 596,000 | 558,000 | |||||||
Income tax expense | $ | — | $ | — | |||||
Management has evaluated the recoverability of the deferred income tax assets and the level of the valuation allowance required with respect to such deferred income tax assets. After considering all available facts, the Company fully reserved for its deferred tax assets because management believes that it is more likely than not that their benefits will not be realized in future periods. The Company will continue to evaluate its deferred tax assets to determine whether any changes in circumstances could affect the realization of their future benefit. If it is determined in future periods that portions of the Company’s deferred income tax assets satisfies the realization standard, the valuation allowance will be reduced accordingly. | |||||||||
A reconciliation of the expected Federal statutory rate of 34% to the Company’s actual rate as reported for each of the periods presented is as follows: | |||||||||
Years Ended December 31, | |||||||||
2014 | 2013 | ||||||||
Expected statutory rate | -34 | % | (34.0) | % | |||||
State income tax rate, net of Federal benefit | -5.4 | % | (5.4 | )% | |||||
Permanent differences | |||||||||
Other | 0.1 | % | 0.1 | % | |||||
39.3 | % | 39.3 | % | ||||||
Valuation allowance | -39.3 | % | -39.3 | % | |||||
— | % | — | % |
14_SUBSEQUENT_EVENTS
14. SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2014 | |
Subsequent Events | |
NOTE 14 - SUBSEQUENT EVENTS | On February 12, 2015, the Company was selected by the City of New Rochelle, New York to provide a turnkey system for capturing and managing red light violations. Brekford will be responsible for issuing citations and collecting fines on behalf of the City and is currently negotiating a contract. The Company expects to have the initial cameras installed and operating by the third quarter of 2015. |
On February 25, 2015, the Company agreed, along with its Mexican distributor, Grupo Canviso, to temporarily supply a speed camera to another large city in Mexico for the purposes of evaluating speeding statistics at various locations within the City. Upon completion of the study, Grupo Canviso will present the data to the City as well as a proposal for a turnkey ATSE program. If selected, Brekford and Grupo Canviso, would negotiate a contract to implement the new project beginning in July 2015. Additionally, we are discussing the program with several other cities for 2015 implementation. | |
On March 11, 2015, the Company and its Mexican distributor, Grupo Canviso, received confirmation from the City of Saltillo, Mexico that live program operations and citation issuance would begin in the second quarter of 2015, for the previously executed contract to provide turnkey ATSE services for the City. | |
On March 17, 2015 (the “Effective Date”), the Company entered into a note and warrant purchase agreement (the “Agreement”) with an accredited investor (the “Investor”) pursuant to which the Investor purchased an aggregate principal amount of $715,000 of a 6% convertible promissory note issued by the Company for an aggregate purchase price of $650,000 (the “Note”). The Note bears interest at a rate of 6% per annum and the principal amount is due on March 17, 2017. Any interest that accrues under the Note is payable either upon maturity or upon any principal being converted on any voluntary conversion date (as to that principal amount then being converted). The Note is convertible at the option of the Investor at any time into shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”) at a conversion price equal to the lesser of (i) $0.25 per share and (ii) 70% of the average of the lowest three volume weighted average prices for the twelve (12) trading days prior to such conversion (the “Conversion Price”). In no event shall the Conversion Price go below a price per share that is less than $0.10 provided, however, that if on or after the date of the Agreement the Company sells any Common Stock or Common Stock Equivalents (as defined in the Agreement) at an effective price per share that is less than $0.10 per share, then the Conversion Price shall be equal to the par value of the Company’s Common Stock then in effect. In connection with the Agreement, the Investor received a warrant to purchase seven hundred and eighty thousand (780,000) shares of Common Stock (the “Warrant”). The Warrant is exercisable for a period of five years from the date of issuance at exercise price of $0.50, subject to adjustment (the “Exercise Price”). The Investor may exercise the Warrant on a cashless basis at any time after the date of issuance. In the event the Investor exercises the Warrant on a cashless basis, we will not receive any proceeds. . The Agreement is filed as Exhibit 10.24 to this Annual Report. |
3_SUMMARY_OF_SIGNIFICANT_ACCOU1
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2014 | |
Notes to Financial Statements | |
Principles of Consolidation and Basis of Presentation | The Company’s consolidated financial statements include the accounts of Brekford Corp. 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. generally accepted accounting principles (“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 $10,111 for the year ended December 31, 2014 and $4,029 for the year ended December 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 years ended December 31, 2014 and 2013 amounted to $443,737 and $375,756, 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. | |
Shipping and Handling Costs | All amounts billed to customers related to shipping and handling are included in products revenues and all costs of shipping and handling are included in cost of sales in the accompanying consolidated statements of operations. The Company incurred shipping and handling costs of $57,843 and $75,134 for the years ended December 31, 2014 and 2013, respectively. |
Advertising Costs | The Company expenses advertising costs as incurred. These expenses are included in selling, general and administrative expenses in the accompanying statements of operations. Advertising expense amounted to $30,412 and $16,500 for the years ended December 31, 2014 and 2013, respectively. |
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 December 31, 2014, 10,600 shares of our 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 2011. 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 per Share | Basic loss per share is calculated by dividing net loss 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 per share is calculated by dividing net loss 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 8 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 promissory note obligations approximate fair value, as the terms of these notes are consistent with terms available in the market for instruments with similar risk. |
Restricted Cash | Restricted cash represents temporarily restricted deposits held as compensating balances against outstanding balances due under our Credit Facility (as defined in Note 5). As of December 31, 2014, the Company had restricted cash of approximately $21,795. |
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. |
Recent Accounting Pronouncements | In May 2014, the FASB amended the ASC and created Topic 606, Revenue from Contracts with Customers, to clarify the principles for recognizing revenue. This guidance will be effective for the Company beginning January 1, 2017 and must be adopted using either a full retrospective approach for all periods presented in the period of adoption or a modified retrospective approach. We have not yet determined the effects of this new guidance on our financial statements. |
In August 2014, the FASB issued a new U.S. GAAP accounting standard that provides guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The new accounting standard requires management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. The new accounting standard is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company does not expect the adoption of this standard to have a material impact on the consolidated financial statements. |
4_PROPERTY_AND_EQUIPMENT_Table
4. PROPERTY AND EQUIPMENT (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Property, Plant and Equipment [Abstract] | |||||||||
Schedule of Property and equipment | December 31, | ||||||||
2014 | 2013 | ||||||||
Leasehold improvements | $ | 502,092 | $ | 502,092 | |||||
Computer equipment and software | 519,368 | 509,368 | |||||||
Vehicles | 333,531 | 333,531 | |||||||
Furniture | 100,089 | 100,089 | |||||||
Cameras | 574,753 | 2,808,753 | |||||||
Phone equipment | 48,817 | 48,817 | |||||||
Handheld ticketing system | 30,293 | — | |||||||
2,108,943 | 4,302,650 | ||||||||
Accumulated depreciation and amortization | (1,824,621 | ) | (2,709,448 | ) | |||||
$ | 284,322 | $ | 1,593,202 |
5_LINE_OF_CREDIT_AND_OTHER_NOT1
5. LINE OF CREDIT AND OTHER NOTES PAYABLE (Tables) | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
Line Of Credit And Other Notes Payable Tables | |||||
Future maturities of notes payable | 2015 | $ | 28,602 | ||
2016 | 29,391 | ||||
2017 | 18,980 | ||||
Total | $ | 76,973 |
7_LEASES_Tables
7. LEASES (Tables) | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
Leases Tables | |||||
Future minimum lease payments under capital lease agreements | 2015 | $ | 142,607 | ||
Less: amounts representing interest | -2,398 | ||||
Present value of net minimum lease payments | $ | 140,209 | |||
Future minimum lease payments under operating lease agreements | 2015 | 154,378 | |||
2016 | 172,697 | ||||
2017 | 177,878 | ||||
2018 | 183,214 | ||||
2019 | 188,711 | ||||
2020 | 64,475 | ||||
Total | $ | 941,353 |
8_INVENTORY_Tables
8. INVENTORY (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Inventory Tables | |||||||||
Schedule of Inventory | 2014 | 2013 | |||||||
Raw Materials | $ | 579,279 | $ | 1,250,141 | |||||
Work in Process | 102,669 | 13,958 | |||||||
Total Inventory | $ | 681,948 | $ | 1,264,099 |
9_LOSS_PER_SHARE_Tables
9. LOSS PER SHARE (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Notes to Financial Statements | |||||||||
Calculation of basic and diluted (loss) earnings per common share | Years Ended December 31, | ||||||||
2014 | 2013 | ||||||||
Basic loss earnings per share | |||||||||
Net loss | $ | (1,502,647 | ) | $ | (1,419,586 | ) | |||
Weighted average common shares outstanding - basic | 44,499,610 | 44,283,364 | |||||||
Basic loss per share | $ | (0.03 | ) | $ | (0.03 | ) | |||
Diluted loss per share | |||||||||
Net loss | $ | (1,502,647 | ) | $ | (1,419,586 | ) | |||
Weighted average common shares outstanding | 44,499,610 | 44,283,364 | |||||||
Potential dilutive securities | — | — | |||||||
Weighted average common shares outstanding – diluted | 44,499,610 | 44,283,364 | |||||||
Diluted loss per share | $ | (0.03 | ) | $ | (0.03 | ) | |||
Common stock equivalents excluded due to anti-dilutive effect | 3,796,429 | 3,571,429 |
10_SHAREBASED_COMPENSATION_Tab
10. SHARE-BASED COMPENSATION (Tables) | 12 Months Ended | ||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||
Notes to Financial Statements | |||||||||||||||||
Summary of the option activity for the period | 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 | |||||||||||||
Forfeited or expired | — | — | — | 0 | |||||||||||||
Exercised | — | — | — | ||||||||||||||
Outstanding at December 31, 2014 | 225,000 | $ | 0.2 | 4.1 | 0 | ||||||||||||
Exercisable at December 31, 2014 | — | — | 0 | ||||||||||||||
Vested and expected to vest | 225,000 | $ | 0.2 | 4.1 | 0 | ||||||||||||
Share-based compensation expense related to restricted stock grants | Restricted Stock Shares | Weighted Average Value | |||||||||||||||
Nonvested restricted stock at January 1, 2013 | — | $ | — | ||||||||||||||
Granted | 202,000 | 0.28 | |||||||||||||||
Vested | (202,000 | ) | 0.28 | ||||||||||||||
Forfeited or expired | — | — | |||||||||||||||
Nonvested restricted stock at December 31, 2013 | — | $ | — | ||||||||||||||
Granted | 50,000 | 0.27 | |||||||||||||||
Vested | (50,000 | ) | 0.27 | ||||||||||||||
Forfeited or expired | — | — | |||||||||||||||
Nonvested restricted stock at December 31, 2014 | — | $ | — | ||||||||||||||
Summary of Warrant Activity | Shares Underlying | Weighted Average | Weighted Average | ||||||||||||||
Warrants | Exercise Price | Remaining | |||||||||||||||
Contractual Life (Years) | |||||||||||||||||
Outstanding at January 1, 2013 | 375,000 | $ | 0.3 | 0.37 | |||||||||||||
Granted | — | — | — | ||||||||||||||
Forfeited or expired | (375,000 | ) | 0.3 | — | |||||||||||||
Exercised | — | — | — | ||||||||||||||
Outstanding at December 31, 2013 | — | — | — | ||||||||||||||
Granted | — | — | — | ||||||||||||||
Forfeited or expired | — | — | — | ||||||||||||||
Exercised | — | — | — | ||||||||||||||
Outstanding at December 31, 2014 | — |
13_INCOME_TAXES_Tables
13. INCOME TAXES (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Income Tax Disclosure [Abstract] | |||||||||
Deferred tax assets and liabilities | December 31, | ||||||||
2014 | 2013 | ||||||||
Net operating loss carry forwards | $ | 2,640,000 | $ | 1,748,000 | |||||
Property and Equipment | -513,000 | (224,000 | ) | ||||||
Other | 3,000 | 10,000 | |||||||
2,130,000 | 1,534,000 | ||||||||
Valuation allowance | -2,130,000 | (1,534,000 | ) | ||||||
Net deferred tax asset | $ | — | $ | — | |||||
Schedule of Components of Income Tax Expense (Benefit) | Years Ended December 31, | ||||||||
2014 | 2013 | ||||||||
Current | |||||||||
Federal | $ | — | $ | — | |||||
State | — | — | |||||||
— | — | ||||||||
Deferred | |||||||||
Federal | -486,000 | (442,000 | ) | ||||||
State | -110,000 | (116,000 | ) | ||||||
-596,000 | (558,000 | ) | |||||||
Change in valuation allowance | 596,000 | 558,000 | |||||||
Income tax expense | $ | — | $ | — | |||||
Schedule of Effective Income Tax Rate Reconciliation | Years Ended December 31, | ||||||||
2014 | 2013 | ||||||||
Expected statutory rate | -34 | % | (34.0) | % | |||||
State income tax rate, net of Federal benefit | -5.4 | % | (5.4 | )% | |||||
Permanent differences | |||||||||
Other | 0.1 | % | 0.1 | % | |||||
39.3 | % | 39.3 | % | ||||||
Valuation allowance | -39.3 | % | -39.3 | % | |||||
— | % | — | % |
3_SUMMARY_OF_SIGNIFICANT_ACCOU2
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Warranty claims | $10,111 | $4,029 |
Revenue from extended warranties | 443,737 | 375,756 |
Shipping and Handling Costs | 57,843 | 75,134 |
Advertising Costs | 30,412 | 16,500 |
Common Stock held in treasury amount | 5,890 | 5,890 |
Restricted cash | 21,795 | 0 |
Treasury Stock [Member] | ||
Common Stock held in treasury shares | 10,600 | |
Common Stock held in treasury amount | $5,890 |
4_PROPERTY_AND_EQUIPMENT_Detai
4. PROPERTY AND EQUIPMENT (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Property And Equipment Details | ||
Leasehold improvements | $502,092 | $502,092 |
Computer equipment and software | 519,368 | 509,368 |
Vehicles | 333,531 | 333,531 |
Furniture | 100,089 | 100,089 |
Cameras | 574,753 | 2,808,753 |
Phone equipment | 48,817 | 48,817 |
Handheld ticketing system | 30,293 | |
Property and equipment, gross | 2,108,943 | 4,302,650 |
Accumulated depreciation and amortization | -1,824,621 | -2,709,448 |
Property and equipment, net | $284,322 | $1,593,202 |
4_PROPERTY_AND_EQUIPMENT_Detai1
4. PROPERTY AND EQUIPMENT (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Property And Equipment Details Narrative | ||
Depreciation and amortization | $777,434 | $1,264,643 |
5_LINE_OF_CREDIT_AND_OTHER_NOT2
5. LINE OF CREDIT AND OTHER NOTES PAYABLE (Details) (USD $) | Dec. 31, 2014 |
Line Of Credit And Other Notes Payable Details | |
2015 | $28,602 |
2016 | 29,391 |
2017 | 18,980 |
Total | $76,973 |
5_LINE_OF_CREDIT_AND_OTHER_NOT3
5. LINE OF CREDIT AND OTHER NOTES PAYABLE (Details Narrative) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Short-term Debt [Line Items] | ||
Financed assets | $75,988 | $118,671 |
Accumulated amortization | 65,927 | 50,293 |
Weighted average interest rate | 3.29% | 3.75% |
Revolving Credit Facility [Member] | ||
Short-term Debt [Line Items] | ||
Outstanding indebtedness | 1,200,000 | |
Additional Borrowed | 1,300,000 | |
Term Loan [Member] | ||
Short-term Debt [Line Items] | ||
Outstanding indebtedness | $416,667 |
6_NOTES_PAYABLE_STOCKHOLDERS_D
6. NOTES PAYABLE - STOCKHOLDERS (Details Narrative) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Notes Payable - Stockholders Details Narrative | ||
Amounts outstanding under Promissory Notes, total | $500,000 | $500,000 |
7_LEASES_Details
7. LEASES (Details) (USD $) | Dec. 31, 2014 |
Leases Details | |
2015 | $142,607 |
Less: amounts representing interest | -2,398 |
Present value of net minimum lease payments | $140,209 |
7_LEASES_Details_1
7. LEASES (Details 1) (USD $) | Dec. 31, 2014 |
Leases Details 1 | |
2015 | $154,378 |
2016 | 172,697 |
2017 | 177,878 |
2018 | 183,214 |
2019 | 188,711 |
2020 | 64,475 |
Total | $941,353 |
7_LEASES_Details_Narrative
7. LEASES (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Leases Details Narrative | ||
Capital Lease Assets, net of amortization | $0 | $932,407 |
Capital Lease Assets Amortization | 0 | 1,301,593 |
Weighted average interest rate | 5.84% | 5.28% |
Rent expense over term of lease on straight-line basis | 212,736 | 238,319 |
Lease payments amount | $46,800 | $50,674 |
8_INVENTORY_Details
8. INVENTORY (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Inventory | ||
Raw Materials | $579,279 | $1,250,141 |
Work in Process | 102,669 | 13,958 |
Total Inventory | $681,948 | $1,264,099 |
9_LOSS_PER_SHARE_Details
9. LOSS PER SHARE (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Basic loss earnings per share: | ||
Net loss | ($1,502,647) | ($1,419,586) |
Weighted average common shares outstanding - basic | 44,499,610 | 44,283,364 |
Basic loss per share | ($0.03) | ($0.03) |
Diluted loss per share | ||
Net loss | ($1,502,647) | ($1,419,586) |
Weighted average common shares outstanding | 44,499,610 | 44,283,364 |
Potential dilutive securities | 0 | 0 |
Weighted average common shares outstanding - diluted | 44,499,610 | 44,283,364 |
Diluted loss per share | ($0.03) | ($0.03) |
Common Stock Equivalents excluded due to anti-dilutive effect | 3,796,429 | 3,571,429 |
10_SHAREBASED_COMPENSATION_Det
10. SHARE-BASED COMPENSATION (Details) (Stock Options [Member], USD $) | 12 Months Ended |
Dec. 31, 2014 | |
Stock Options [Member] | |
Shares Underlying Warrants | |
Outstanding, Beginning | 0 |
Granted | 225,000 |
Forfeited or expired | 0 |
Exercised | 0 |
Outstanding Ending | 225,000 |
Exercisable at December 31, 2014 | 0 |
Vested and expected to vest | 225,000 |
Weighted Average Exercise Price | |
Outstanding, Beginning | $0 |
Granted | $0.20 |
Forfeited or expired | $0 |
Exercised | $0 |
Outstanding Ending | $0.20 |
Exercisable at December 31, 2014 | $0 |
Vested and expected to vest | $0.20 |
Weighted Average Remaining Contractual Term (in years) | |
Outstanding, Beginning | 0 years |
Granted | 0 years |
Forfeited or expired | 0 years |
Exercised | 0 years |
Outstanding Ending | 2 years 1 month 21 days |
Exercisable at December 31, 2014 | 0 years |
Vested and expected to vest | 2 years 1 month 21 days |
Aggregate Intrinsic Value | |
Outstanding Beginning | $0 |
Granted | 0 |
Forfeited or expired | 0 |
Exercised | 0 |
Outstanding Ending | 0 |
Exercisable at December 31, 2014 | 0 |
Vested and expected to vest | $0 |
10_SHAREBASED_COMPENSATION_Det1
10. SHARE-BASED COMPENSATION (Details 1) (Restricted Stock [Member], USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Restricted Stock [Member] | ||
Restricted Stock Shares | ||
Nonvested restricted stock, beginning | 0 | 0 |
Granted | 50,000 | 202,000 |
Vested | -50,000 | -202,000 |
Forfeited or expired | 0 | 0 |
Nonvested restricted stock, Ending | 0 | 0 |
Weighted Average Value | ||
Nonvested restricted stock beginning | $0 | $0 |
Granted | $0.27 | $0.28 |
Vested | $0.27 | $0.28 |
Forfeited or expired | $0 | $0 |
Nonvested restricted stock ending | $0 | $0 |
10_SHAREBASED_COMPENSATION_Det2
10. SHARE-BASED COMPENSATION (Details 2) (Warrant [Member], USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Warrant [Member] | ||
Shares Underlying Warrants | ||
Outstanding, Beginning | 0 | 375,000 |
Granted | 0 | 0 |
Forfeited or expired | 0 | -375,000 |
Exercised | 0 | 0 |
Outstanding Ending | 0 | 0 |
Weighted Average Exercise Price | ||
Outstanding, Beginning | $0 | $0.30 |
Granted | $0 | $0 |
Forfeited or expired | $0 | $0.30 |
Exercised | $0 | $0 |
Outstanding Ending | $0 | $0 |
Weighted Average Remaining Contractual Term (in years) | ||
Outstanding, Beginning | 4 months 13 days | 0 years |
Granted | 0 years | 0 years |
Forfeited or expired | 0 years | 0 years |
Exercised | 0 years | 0 years |
Outstanding Ending | 0 years | 0 years |
10_SHAREBASED_COMPENSATION_Det3
10. SHARE-BASED COMPENSATION (Detail Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Share - based compensation expense | $19,733 | $57,310 |
2008 Incentive Plan [Member] | ||
Common stock remained available for future issuance | 6,680,000 | |
RestrictedStockGrantsMember | ||
Share - based compensation expense | 13,500 | 57,310 |
Stock Options [Member] | ||
Share - based compensation expense | 6,233 | |
Unrecognized compensation cost for unvested stock option | $16,205 | |
Recognized period | 2 years 1 month 21 days |
11_EMPLOYEE_BENEFIT_PLANS_Deta
11. EMPLOYEE BENEFIT PLANS (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Employee Benefit Plans Details Narrative | ||
Company contribution | $11,833 | $21,766 |
12_MAJOR_CUSTOMERS_AND_VENDORS1
12. MAJOR CUSTOMERS AND VENDORS (Details Narrative) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Hardware products Vendor | ||
Revenues from hardware products | 53.00% | 27.00% |
Accounts payable due to distributor | 53.00% | 27.00% |
Major Customers | ||
Net sales | 10.00% | 34.00% |
Accounts receivable | 53.00% | 25.00% |
13_INCOME_TAXES_Details
13. INCOME TAXES (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Income Taxes Details | ||
Net operating loss carry forwards | $2,640,000 | $1,748,000 |
Property and Equipment | -513,000 | -224,000 |
Other | 3,000 | 10,000 |
Net deferred tax asset, Gross | 2,130,000 | 1,534,000 |
Valuation allowance | -2,130,000 | -1,534,000 |
Net deferred tax asset | $0 | $0 |
13_INCOME_TAXES_Details_1
13. INCOME TAXES (Details 1) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Current | ||
Federal | $0 | $0 |
State | 0 | 0 |
Current | 0 | 0 |
Deferred | ||
Federal | -486,000 | -442,000 |
State | -110,000 | -116,000 |
Deferred | -596,000 | -558,000 |
Change in valuation allowance | 596,000 | 558,000 |
Income tax expense | $0 | $0 |
13_INCOME_TAXES_Details_2
13. INCOME TAXES (Details 2) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Income Taxes Details 2 | ||
Expected statutory rate | -34.00% | -34.00% |
State income tax rate, net of Federal benefit | -5.40% | -5.40% |
Permanent differences | ||
Other | 0.10% | 0.10% |
Statutory rate | 39.30% | 39.30% |
Valuation allowance | -39.30% | -39.30% |
Effective tax rate | 0.00% | 0.00% |
13_INCOME_TAXES_Details_Narrat
13. INCOME TAXES (Details Narrative) (USD $) | Dec. 31, 2014 |
Income Taxes Details Narrative | |
Federal and state net operating loss carryforwards available to offset future taxable income (approximately) | $6,560,000 |