Brekford (TTSR) 10-Q 14 May 15 2015 Q1 Quarterly report Financial data

Document_and_Entity_Informatio

Document and Entity Information	3 Months Ended
	Mar. 31, 2015	11-May-15
Document And Entity Information
Entity Registrant Name	Brekford Corp.
Entity Central Index Key	1357115
Document Type	10-Q
Document Period End Date	31-Mar-15
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 Common Stock, Shares Outstanding		44,632,569
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2015

Condensed_Consolidated_Balance

Condensed Consolidated Balance Sheet (Unaudited) (USD $)	Mar. 31, 2015	Dec. 31, 2014
CURRENT ASSETS
Cash, unrestricted	$634,243	$1,112,881
Accounts receivable, net of allowance $0 at June 30, 2014 and December 31, 2013, respectively	3,895,114	1,706,704
Unbilled receivables	204,213	198,725
Prepaid expenses	159,944	146,569
Inventory	747,600	681,948
Total current assets	5,641,114	3,846,827
Property and equipment, net	221,909	284,322
Other non-current assets	99,137	112,132
TOTAL ASSETS	5,962,160	4,243,281
CURRENT LIABILITIES
Accounts payable and accrued expenses	2,204,511	1,842,892
Accrued payroll and related expenses	102,013	23,252
Line of credit	1,988,110	1,169,558
Term loan - current portion	250,000	250,000
Other liabilities	48,669	48,669
Deferred revenue	174,061	255,405
Customer deposits	177,778	137,826
Obligations under capital leases - current portion	117,124	140,209
Obligations under other notes payable - current portion	28,602	28,602
Derivative liability	67,032	0
Deferred rent - current portion	16,334	0
Total current liabilities	5,174,234	3,896,413
LONG - TERM LIABILITIES
Notes payable - stockholders	500,000	500,000
Other notes payable, net of current portion	43,859	48,371
Deferred rent, net of current portion	12,207	0
Term notes payable, net of current portion	104,167	166,667
Convertible promissory notes, net of debt discounts of $696,700 and $0 at March 31, 2015 and December 31, 2014, respectively	18,300	0
Total long-term liabilities	678,533	715,038
TOTAL LIABILITIES	5,852,767	4,611,451
STOCKHOLDERS' 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; 44,632,569 issued and outstanding, at March 31, 2015 and 44,500,569 issued and outstanding at December 31, 2014	4,464	4,450
Additional paid-in capital	10,809,136	10,204,479
Treasury Stock, at cost 10,600 shares at September 30, 2014 and December 31, 2013	-5,890	-5,890
Accumulated deficit	-10,698,317	-10,571,209
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)	109,393	-368,170
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	$5,962,160	$4,243,281

Condensed_Consolidated_Balance1

Condensed Consolidated Balance Sheet (Unaudited) (Parenthetical) (USD $)	Mar. 31, 2015	Dec. 31, 2014
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	44,632,569	44,500,569
Common Stock Outstanding	44,632,569	44,500,569

Condensed_Consolidated_Stateme

Condensed Consolidated Statements of Operations (Unaudited) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Income Statement [Abstract]
NET REVENUE	$5,146,179	$4,662,287
COST OF REVENUE	4,220,587	4,074,128
GROSS PROFIT	925,592	588,159
OPERATING EXPENSES
Salaries and related expenses	540,221	487,629
Selling, general and administrative expenses	461,385	636,284
TOTAL OPERATING EXPENSES	1,001,606	1,123,913
LOSS FROM OPERATIONS	-76,014	-535,754
OTHER (EXPENSE) INCOME
Interest expense	-49,609	-35,859
Change in fair value in derivative liability	46,788	0
Other expense	-48,273	0
TOTAL OTHER INCOME (EXPENSE)	-51,094	-35,859
NET LOSS	($127,108)	($571,613)
LOSS PER SHARE - BASIC	$0	($0.01)
LOSS PER SHARE - DILUTED	$0	($0.01)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC	44,625,236	44,496,680
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - DILUTED	44,625,236	44,496,680

Condensed_Consolidated_Stateme1

Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	($127,108)	($571,613)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization	62,413	295,885
Share-based compensation	46,750	14,123
Deferred rent	28,540	-16,211
Amortization of debt discount	18,300	0
Amortization of finance cost	22,799	0
Change in fair value of warrant liability	-46,788	0
Bad debt expense	0	19,051
Loss on disposal of property and equipment	-2,188,411	-1,938,578
Changes in operating assets and liabilities:
Accounts receivables	-5,488	-51,769
Unbilled Receivables	92,303	31,038
Prepaid expenses and other non-current assets	-65,652	757,496
Inventory	39,952	96,406
Customer deposits	361,621	1,249,335
Accounts payable and accrued expenses	78,761	-39,402
Accrued payroll and related expenses	-81,344	-91,384
Deferred revenue	0	-561
NET CASH PROVIDED BY OPERATING ACTIVITIES	-1,763,352	-246,184
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in line of credit	818,552	-443,578
Principal payments on capital lease obligations	-23,085	-173,262
Payments on other notes payable	-4,512	-8,803
Borrowings on term notes	650,000	0
Payments on term notes	-62,500	0
Deferred financing cost	-93,741	0
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES	1,284,714	-625,643
NET CHANGE IN CASH	-478,638	-871,827
CASH - Beginning of period	1,112,881	2,052,306
CASH - End of period	634,243	1,180,479
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest	49,609	35,859
Cash paid for income taxes	0	561
SUPPLEMENTAL DISCLOSURES OF NON-CASH INFORMATION
Discount on notes payable	$63,336	$0

1_DESCRIPTION_OF_THE_BUSINESS

1. DESCRIPTION OF THE BUSINESS	3 Months Ended
	Mar. 31, 2015
Notes to Financial Statements
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	3 Months Ended
	Mar. 31, 2015
Liquidity
Liquidity	For the three months ended March 31, 2015 the Company incurred a net loss of approximately $0.13 million, and used $1.8 million of cash for operations and working capital. Additionally, at March 31, 2015 the Company had cash available of approximately $0.6 million and a working capital surplus of $0.47 million. As of March 31, 2015, the Company could have borrowed approximately $80 thousand under its Credit Facility (see Note 4). The Company began operations on its Saltillo Mexico contract in April 2015 and issued a $650 thousand Convertible Note on March 17, 2015 (see Note 6) 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 March 31, 2016 but there can be no assurance that these measures will be successful or adequate.  In the event that projected cash flow does not meet expectations, the Company believes it will have the ability 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	3 Months Ended
	Mar. 31, 2015
Notes to Financial Statements
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, 2014 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 any future interim period or 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, 2014. Certain prior period information has been reclassified to conform to the current period 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. 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, debt beneficial conversion features, deferred taxes and valuation allowance, and the depreciable lives of fixed assets. Actual results could differ materially 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 $1,516 for the three months ended March 31, 2015 and $8,674 for the three months ended March 31, 2014.  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, 2015 and 2014 amounted to $174,061 and $112,904, 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, 2015, 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 attributable to common stockholders by the weighted-average number of shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), outstanding and does not include the effect of any potentially dilutive common stock equivalents.  Diluted loss per share is calculated by dividing net loss attributable to common stockholders by the weighted-average number of shares of Common Stock 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 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.
	We account for our derivative financial instruments, consisting solely of certain stock purchase warrants that contain non-standard anti-dilutions provisions and/or cash settlement features, and certain conversion options embedded in our convertible instruments, at fair value using level 3 inputs. We determine the fair value of these derivative liabilities using the Black-Scholes option pricing model when appropriate, and in certain circumstances using binomial lattice models or other accepted valuation practices.
	When determining the fair value of our financial assets and liabilities using the Black-Scholes option pricing model, we are required to use various estimates and unobservable inputs, including, among other things, contractual terms of the instruments, expected volatility of our stock price, expected dividends, and the risk-free interest rate. Changes in any of the assumptions related to the unobservable inputs identified above may change the fair value of the instrument. Increases in expected term, anticipated volatility and expected dividends generally result in increases in fair value, while decreases in the unobservable inputs generally result in decreases in fair value.
	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.
	ASU No. 2015-03, Interest – Imputation of Interest (Subtopic 835-30) – Simplifying the Presentation of Debt Issuance Costs. The amendments in this update require the debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this update. The amendments in this update are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal periods. Early adoption of the amendments in this update is permitted for financial statements that have not been previously issued. The Company intends to adopt this requirement in 2016, and currently anticipates that the impact of adoption will solely be a reclassification of its deferred financing costs from asset classification to contra-liability classification.

4_LINE_OF_CREDIT_AND_OTHER_NOT

4. LINE OF CREDIT AND OTHER NOTES PAYABLE	3 Months Ended
	Mar. 31, 2015
Notes to Financial Statements
LINE OF CREDIT AND NOTES PAYABLE - AUTO	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 March 31, 2015, the Company had $1.99 million in outstanding indebtedness under the Revolving Facility and $354,168 in outstanding indebtedness under the Term Loan, and the Company could have borrowed up to an additional $511 thousand under the Revolving Facility. As of March 31, 2015, we were out of compliance with one of the financial covenants contained in the Credit Facility as a result of the net loss recorded for the three months ended March 31, 2015. We have reported this non-compliance to Rosenthal and Rosenthal granted a waiver for the period ended March 31, 2015.
	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. At March 31, 2015 and December 31, 2014, financed assets of $68,924 and $75,988, respectively, net of accumulated amortization of $72,991 and $65,927, respectively, were included in property and equipment on the balance sheets. The weighted average interest rate was 2.96% at March 31, 2014 and 3.75% at December 31, 2014.

5_CONVERTIBLE_NOTES_PAYABLE_ST

5. CONVERTIBLE NOTES PAYABLE - STOCKHOLDERS	3 Months Ended
	Mar. 31, 2015
Notes to Financial Statements
NOTES PAYABLE - STOCKHOLDERS	Brekford financed the repurchase of shares of its Common Stock and warrants to purchase Common Stock 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 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 March 31, 2015 and December 31, 2014, the amounts outstanding under the Promissory Notes totaled $500,000.

6_CONVERTIBLE_PROMISSORY_NOTES

6. CONVERTIBLE PROMISSORY NOTES PAYABLE	3 Months Ended
	Mar. 31, 2015
Convertible Promissory Notes Payable
Convertible Promissory Notes Payable	Convertible promissory note at March 31, 2015 are as follows:
		2015
	Convertible promissory note payable	$	715,000
	Original issuance discount, net of amortization of $1,664 as of March 31, 2015		-63,336
	Beneficial conversion feature, net of amortization of $14,280 as of March 31, 2015		-543,641
	Warrant feature, net of amortization of the $2,356 as of March 31, 2015		-89,723
	Convertible promissory note payable, net	$	18,300
	On March 17, 2015, 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 (the “Convertible Note”) for an aggregate purchase price of $650,000. The Convertible 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 Convertible 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 Convertible Note is convertible at the option of the Investor at any time into shares of 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 Common Stock then in effect (currently $0.0001 per share). In connection with the Agreement, the Investor received a warrant to purchase seven hundred and eighty thousand (780,000) shares of Common Stock (the “Investor Warrant”). The Investor 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”).
	We evaluated the financing transactions in accordance with ASC Topic 470, Debt with Conversion and Other Options, and determined that the conversion feature of the Convertible Note was afforded the exemption for conventional convertible instruments due to its fixed conversion rate. The Convertible Note has an explicit limit on the number of shares issuable so they did meet the conditions set forth in current accounting standards for equity classification. The debt was issued with non-detachable conversion options that are beneficial to the investors at inception, because the conversion option has an effective strike price that is less than the market price of the underlying Common Stock at the commitment date. The accounting for the beneficial conversion feature requires that the beneficial conversion feature be recognized by allocating the intrinsic value of the conversion option to additional paid-in-capital, resulting in a discount on the Convertible Note, which will be amortized and recognized as interest expense.
	Accordingly, a portion of the proceeds were allocated to the Investor Warrant based on their relative fair value, which totaled $92,079 using the Black Scholes option pricing model. Further, the Company attributed a beneficial conversion feature of $557,921 to the shares of Common Stock issuable upon conversion of the Convertible Note based upon the difference between the effective conversion price of those shares and the closing price of the Common Stock on the date of issuance. The assumptions used in the Black-Scholes model are as follows:  (i) dividend yield of 0%; (ii) expected volatility of 80.5%, (iii) weighted average risk-free interest rate of 1.56%, (iv) expected life of 5 years, and (v) estimated fair value of the Common Stock of $0.26 per share. The expected term of the Investor Warrants represents the estimated period of time until exercise and is based on historical experience of similar awards and giving consideration to the contractual terms. The Company recorded amortization of the beneficial conversion feature of the Convertible Note and the warrant feature of the Investor Warrant as interest expense in the amount of $14,280 and $2,356, respectively, during the three months ended March 31, 2015.
	The Company recorded an original issue discount of $65,000 to be amortized over the term of the Agreement as interest expense. The Company recognized $1,664 of interest expense as a result of the amortization during the three months ended March 31, 2015.

7_WARRANT_DERIVATIVE_LIABILITY

7. WARRANT DERIVATIVE LIABILITY	3 Months Ended
	Mar. 31, 2015
Warrant Derivative Liability
Warrant Derivative Liability	On March 17, 2015, in conjunction with the issuance of the Convertible Note (see Note 6), the Company issued the Investor warrants to purchase 840,000 shares of Common Stock, including 60,000 related to the financing costs, with an exercise price of $0.50 per share and a life of five years.
	The Investor Warrant is subject to anti-dilution adjustments that allow for the reduction in the conversion price in the event the Company subsequently issues equity securities, including shares of Common Stock or any security convertible or exchangeable for shares of Common Stock, for no consideration or for consideration less than $0.50 a share. The Company accounted for the conversion option in accordance with ASC Topic 815. Accordingly, the conversion option is not considered to be solely indexed to the Company’s Common Stock and, as such, is recorded as a liability. The derivative liability of the Investor Warrant has been measured at fair value at March 17, 2015 and March 31, 2015 using a Black Scholes option pricing model. The assumptions used in the Black-Scholes model are as follows:  (i) dividend yield of 0%; (ii) expected volatility of 80.5%, (iii) weighted average risk-free interest rate of 1.37-1.56%, (iv) expected life of 5 years, and (v) estimated fair value of the Common Stock of $0.26-$0.18 per share.
	At March 31, 2015, the outstanding fair value of the derivative liabilities amounted to $67,032.

8_LEASES

8. LEASES	3 Months Ended
	Mar. 31, 2015
Leases [Abstract]
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 and are secured by the assets under lease. As of March 31, 2015 and December 31, 2014, no capital lease was included in property and equipment on the consolidated balance sheets. Our weighted average interest rate was 5.84% at March 31, 2015 and December 31, 2015.
	Operating Leases
	The Company rents office space under separate non-cancelable operating leases expiring in January 2015. The Company amended the lease expiring in January 2015 to extend for a 63-month term expiring on April 30, 2020. Rent expense under this lease amounted to $40,865 and $36,973 for the three months ended March 31, 2015 and 2014, 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 $12,300 and $11,700 for the three months ended March 31, 2015 and 2014, respectively.

10_STOCKHOLDERS_EQUITY

10. STOCKHOLDERS' EQUITY	3 Months Ended
	Mar. 31, 2015
Notes to Financial Statements
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. The repurchase plan expired in September 2014.

11_SHAREBASED_COMPENSATION

11. SHARE-BASED COMPENSATION	3 Months Ended
	Mar. 31, 2015
Notes to Financial Statements
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 of 2014, 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, 2015 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 $1,870 and $623 in stock option compensation expense during in the period ending March 31, 2015 and 2014, respectively, related to the stock option grants. There were no options granted during the three months ended March 31, 2015.
			Three Months Ended March 31,
			2015
	Expected life (in years)			3.5
	Volatility			70.8	%
	Risk free interest rate			0.72	%
	Expected Dividend Rate			0	%
	Summary of the option activity for three months ended March 31, 2015 is as follows:
			Number of Options				Weighted Average				Weighted Average				Aggregate
							Exercise Price				Remaining				Intrinsic Value
											Contractual Life (Years)
	Outstanding at January 1, 2015			225,000			$	0.2				4.1			$	0
	Granted			—				—				—				—
	Forfeited or expired			—				—				—				0
	Exercised			—				—				—
	Outstanding at March 31, 2015			225,000				0.2				3.9				0
	Exercisable at March 31, 2015			—				0				—				0
	Vested and expected to vest			225,000				0.2				3.9				0
	The unrecognized compensation cost for unvested stock option awards outstanding at March 31, 2015 was approximately $14,335 to be recognized over approximately 1.90 years.
	Restricted Stock Grants
	For the three months ended March 31, 2015, the Company granted an aggregate of 132,000 shares of restricted Common Stock to the key employees in consideration of services rendered and part of an employment agreement. The weighted average value of the shares amounted to $0.34 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 $44,880 in share-based compensation expense during the period ending March 31, 2015 related to restricted stock grants. For the three months ended March 31, 2014, the Company recorded $13,500, in share-based compensation expense related to restricted stock grants.
			Restricted Stock Shares				Weighted Average
							Value
	Nonvested restricted stock at January 1, 2015			—			$	—
	Granted			132,000				0.34
	Vested			(132,000	)			0.34
	Forfeited or expired			—				—
	Nonvested restricted stock at March 31, 2015			—			$	—
	Warrants
	The assumptions used to value warrant grants during the three months ended March 31, 2015 were as follows:
			Three Months Ended
			March 31,
			2015
	Expected life (in years)			5
	Volatility			80.50%
	Risk free interest rate			1.56%
	Expected Dividend Rate			0
	Summary of the warrant activity for three months ended March 31, 2015 is as follows:
			Number of Options				Weighted Average				Weighted Average				Aggregate
							Exercise Price				Remaining				Intrinsic Value
											Contractual Life (Years)
	Outstanding at January 1, 2015			—			$	—				—			$	0
	Granted			840,000				0.5				4.9				0
	Forfeited or expired			—				—				—				0
	Exercised			—				—				—
	Outstanding at March 31, 2015			840,000				0.5				4.9				0
	Exercisable at March 31, 2015			840,000				0.5				—				0
	The weighted average remaining contractual life of warrants outstanding as of March 31, 2015 was as follows:
	Exercisable Prices				Stock Options Outstanding				Stock Options Exercisable				Weighted Average Remaining Contractual Life (years)
	$	0.5				840,000				840,000				5
	Total					840,000				840,000

12_INVENTORY

12. INVENTORY	3 Months Ended
	Mar. 31, 2015
Notes to Financial Statements
INVENTORY	As of March 31, 2015 and December 31, 2014, inventory consisted of the following:
		March 31,		December 31,
		2015		2014
	Raw Materials	$	747,600	$	579,279
	Work in Process		—		102,669
	Total Inventory	$	747,600	$	681,948

13_LOSS_PER_SHARE

13. LOSS PER SHARE	3 Months Ended
	Mar. 31, 2015
Notes to Financial Statements
LOSS PER SHARE	The following table provides information relating to the calculation of loss per common share.
		Three Months Ended March 31,
		2015			2014
	Basic loss per share :
	Net loss	$	(127,108	)	$	(571,613	)
	Weighted average common shares outstanding		44,625,236			44,496,680
	Basic loss per share	$	0		$	(0.01	)
	Diluted loss per share :
	Net loss	$	(127,108	)	$	(571,613	)
	Weighted average common shares outstanding		44,625,236			44,496,680
	Potential dilutive securities		—			—
	Weighted average common shares outstanding – diluted		44,625,236			44,496,680
	Diluted loss per share	$	0		$	(0.01	)
	Common stock equivalents excluded due to anti-dilutive effect		8,842,311			3,796,429

14_FAIR_VALUE_OF_FINANCIAL_INS

14. FAIR VALUE OF FINANCIAL INSTRUMENTS	3 Months Ended
	Mar. 31, 2015
Fair Value Disclosures [Abstract]
FAIR VALUE OF FINANCIAL INSTRUMENTS	Disclosures about fair value of financial instruments requires disclosure of the fair value information, whether or not recognized in the balance sheet, where it is practicable to estimate that value. As of March 31, 2015, the amounts reported for cash, accrued interest and other expenses, notes payables, and derivative liability approximate their fair values because of their short maturities.
	Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 established a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include:
		●	Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;
		●	Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and
		●	Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
	We measure certain financial instruments at fair value on a recurring basis. Assets and liabilities measured at fair value on a recurring basis are as follows at March 31, 2015:
			Total			(Level 1)		(Level 2)		(Level 3)
	Liabilities
	Derivative liability			67,032			-		-		67,032
	Total liabilities measured at fair value		$	67,032		$	-	$	-	$	67,032
	The following is a reconciliation of the derivative liability for which Level 3 inputs were used in determining the approximate fair value:
	Beginning balance as of December 31, 2014		$	-
	Fair value of derivative liabilities issued			113,820
	Gain on change in derivative liability			(46,788	)
	Ending balance as of March 31, 2015		$	67,032

3_SUMMARY_OF_SIGNIFICANT_ACCOU1

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)	3 Months Ended
	Mar. 31, 2015
Notes to Financial Statements
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, 2014 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 any future interim period or 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, 2014. Certain prior period information has been reclassified to conform to the current period 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. 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, debt beneficial conversion features, deferred taxes and valuation allowance, and the depreciable lives of fixed assets. Actual results could differ materially 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 $1,516 for the three months ended March 31, 2015 and $8,674 for the three months ended March 31, 2014.  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, 2015 and 2014 amounted to $174,061 and $112,904, 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, 2015, 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 attributable to common stockholders by the weighted-average number of shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), outstanding and does not include the effect of any potentially dilutive common stock equivalents.  Diluted loss per share is calculated by dividing net loss attributable to common stockholders by the weighted-average number of shares of Common Stock 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 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.
	We account for our derivative financial instruments, consisting solely of certain stock purchase warrants that contain non-standard anti-dilutions provisions and/or cash settlement features, and certain conversion options embedded in our convertible instruments, at fair value using level 3 inputs. We determine the fair value of these derivative liabilities using the Black-Scholes option pricing model when appropriate, and in certain circumstances using binomial lattice models or other accepted valuation practices.
	When determining the fair value of our financial assets and liabilities using the Black-Scholes option pricing model, we are required to use various estimates and unobservable inputs, including, among other things, contractual terms of the instruments, expected volatility of our stock price, expected dividends, and the risk-free interest rate. Changes in any of the assumptions related to the unobservable inputs identified above may change the fair value of the instrument. Increases in expected term, anticipated volatility and expected dividends generally result in increases in fair value, while decreases in the unobservable inputs generally result in decreases in fair value.
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.
	ASU No. 2015-03, Interest – Imputation of Interest (Subtopic 835-30) – Simplifying the Presentation of Debt Issuance Costs. The amendments in this update require the debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this update. The amendments in this update are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal periods. Early adoption of the amendments in this update is permitted for financial statements that have not been previously issued. The Company intends to adopt this requirement in 2016, and currently anticipates that the impact of adoption will solely be a reclassification of its deferred financing costs from asset classification to contra-liability classification.

6_CONVERTIBLE_PROMISSORY_NOTES1

6. CONVERTIBLE PROMISSORY NOTES PAYABLE (Tables)	3 Months Ended
	Mar. 31, 2015
Convertible Promissory Notes Payable Tables
Convertible promissory note		2015
	Convertible promissory note payable	$	715,000
	Original issuance discount, net of amortization of $1,664 as of March 31, 2015		-63,336
	Beneficial conversion feature, net of amortization of $14,280 as of March 31, 2015		-543,641
	Warrant feature, net of amortization of the $2,356 as of March 31, 2015		-89,723
	Convertible promissory note payable, net	$	18,300

11_SHAREBASED_COMPENSATION_Tab

11. SHARE-BASED COMPENSATION (Tables)	3 Months Ended
	Mar. 31, 2015
Notes to Financial Statements
Assumptions for option valuation			Three Months Ended March 31,
			2015
	Expected life (in years)			3.5
	Volatility			70.8	%
	Risk free interest rate			0.72	%
	Expected Dividend Rate			0	%
Summary of the option activity			Number of Options				Weighted Average				Weighted Average				Aggregate
							Exercise Price				Remaining				Intrinsic Value
											Contractual Life (Years)
	Outstanding at January 1, 2015			225,000			$	0.2				4.1			$	0
	Granted			—				—				—				—
	Forfeited or expired			—				—				—				0
	Exercised			—				—				—
	Outstanding at March 31, 2015			225,000				0.2				3.9				0
	Exercisable at March 31, 2015			—				0				—				0
	Vested and expected to vest			225,000				0.2				3.9				0
Share-based compensation expense related to restricted stock grants			Restricted Stock Shares				Weighted Average
							Value
	Nonvested restricted stock at January 1, 2015			—			$	—
	Granted			132,000				0.34
	Vested			(132,000	)			0.34
	Forfeited or expired			—				—
	Nonvested restricted stock at March 31, 2015			—			$	—
Assumptions for warrant valuation			Three Months Ended
			March 31,
			2015
	Expected life (in years)			5
	Volatility			80.50%
	Risk free interest rate			1.56%
	Expected Dividend Rate			0
Summary of warrant activity			Number of Options				Weighted Average				Weighted Average				Aggregate
							Exercise Price				Remaining				Intrinsic Value
											Contractual Life (Years)
	Outstanding at January 1, 2015			—			$	—				—			$	0
	Granted			840,000				0.5				4.9				0
	Forfeited or expired			—				—				—				0
	Exercised			—				—				—
	Outstanding at March 31, 2015			840,000				0.5				4.9				0
	Exercisable at March 31, 2015			840,000				0.5				—				0
Weighted Average Remaining Contractual Life of Warrants	Exercisable Prices				Stock Options Outstanding				Stock Options Exercisable				Weighted Average Remaining Contractual Life (years)
	$	0.5				840,000				840,000				5
	Total					840,000				840,000

12_INVENTORY_Tables

12. INVENTORY (Tables)	3 Months Ended
	Mar. 31, 2015
Notes to Financial Statements
Schedule of Inventory		March 31,		December 31,
		2015		2014
	Raw Materials	$	747,600	$	579,279
	Work in Process		—		102,669
	Total Inventory	$	747,600	$	681,948

13_LOSS_PER_SHARE_Tables

13. LOSS PER SHARE (Tables)	3 Months Ended
	Mar. 31, 2015
Notes to Financial Statements
Calculation of basic and diluted (loss) earnings per common share		Three Months Ended March 31,
		2015			2014
	Basic loss per share :
	Net loss	$	(127,108	)	$	(571,613	)
	Weighted average common shares outstanding		44,625,236			44,496,680
	Basic loss per share	$	0		$	(0.01	)
	Diluted loss per share :
	Net loss	$	(127,108	)	$	(571,613	)
	Weighted average common shares outstanding		44,625,236			44,496,680
	Potential dilutive securities		—			—
	Weighted average common shares outstanding – diluted		44,625,236			44,496,680
	Diluted loss per share	$	0		$	(0.01	)
	Common stock equivalents excluded due to anti-dilutive effect		8,842,311			3,796,429

14_FAIR_VALUE_OF_FINANCIAL_INS1

14. FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)	3 Months Ended
	Mar. 31, 2015
Fair Value Disclosures [Abstract]
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis		Total			(Level 1)		(Level 2)		(Level 3)
	Liabilities
	Derivative liability		67,032			-		-		67,032
	Total liabilities measured at fair value	$	67,032		$	-	$	-	$	67,032
Reconciliation of the derivative liability	Beginning balance as of December 31, 2014	$	-
	Fair value of derivative liabilities issued		113,820
	Gain on change in derivative liability		(46,788	)
	Ending balance as of March 31, 2015	$	67,032

5_CONVERTIBLE_NOTES_PAYABLE_ST1

5. CONVERTIBLE NOTES PAYABLE - STOCKHOLDERS (Details Narrative) (USD $)	Mar. 31, 2015	Dec. 31, 2014
Convertible Notes Payable - Stockholders Details Narrative
Amounts outstanding under Promissory Notes, total	$500,000	$500,000

6_CONVERTIBLE_PROMISSORY_NOTES2

6. CONVERTIBLE PROMISSORY NOTES PAYABLE (Details) (USD $)	Mar. 31, 2015
Convertible Promissory Notes Payable Details
Convertible promissory note payable	$715,000
Original issuance discount, net of amortization of $1,664 as of March 31, 2015	-63,336
Beneficial conversion feature, net of amortization of $14,280 as of March 31, 2015	-543,641
Warrant feature, net of amortization of the $2,356 as of March 31, 2015	-89,723
Convertible promissory note payable, net	$18,300

11_SHAREBASED_COMPENSATION_Det

11. SHARE-BASED COMPENSATION (Details)	3 Months Ended
	Mar. 31, 2015
Share-based Compensation Details
Expected life (in years)	3 years 6 months
Volatility	70.80%
Risk free interest rate	0.72%
Expected Dividend Rate	0.00%

11_SHAREBASED_COMPENSATION_Det1

11. SHARE-BASED COMPENSATION (Details 1) (USD $)	3 Months Ended
	Mar. 31, 2015
Number of Options
Outstanding beginning	225,000
Granted	0
Forfeited or expired	0
Exercised	0
Outstanding end	225,000
Exercisable end	0
Vested and expected to vest	225,000
Weighted Average Exercise Price
Outstanding beginning	$0.20
Granted	$0
Forfeited or expired	$0
Exercised	$0
Outstanding end	$0.20
Exercisable end	$0
Vested and expected to vest	$0.20
Outstanding beginning	4 years 1 month 6 days
Granted	0 years
Forfeited or expired	0 years
Exercised	0 years
Outstanding end	3 years 10 months 24 days
Exercisable end	0 years
Vested and expected to vest	3 years 10 months 24 days
Aggregate Intrinsic Value
Outstanding beginning	$0
Granted	0
Forfeited or expired	0
Exercised	0
Outstanding end	0
Exercisable end	0
Vested and expected to vest	$0

11_SHAREBASED_COMPENSATION_Det2

11. SHARE-BASED COMPENSATION (Details 2) (USD $)	3 Months Ended
	Mar. 31, 2015
Weighted Average Value
Forfeited or expired	$0
Restricted Stock [Member]
Restricted Stock Shares
Nonvested restricted stock at January 1, 2014	0
Granted	132,000
Vested	-132,000
Forfeited or expired	0
Nonvested restricted stock at September 30, 2014	0
Weighted Average Value
Nonvested restricted stock at January 1, 2014	$0
Granted	$0.34
Vested	$0.34
Forfeited or expired	$0
Nonvested restricted stock at September 30, 2014	$0

11_SHAREBASED_COMPENSATION_Det3

11. SHARE-BASED COMPENSATION (Details 3)	3 Months Ended
	Mar. 31, 2015
Share-based Compensation Details 3
Expected life (in years)	5 years
Volatility	80.50%
Risk free interest rate	1.56%
Expected Dividend Rate	0.00%

11_SHAREBASED_COMPENSATION_Det4

11. SHARE-BASED COMPENSATION (Details 4) (USD $)	3 Months Ended
	Mar. 31, 2015	Dec. 31, 2014
Number of Warrants
Outstanding beginning	0
Granted	840,000
Forfeited or expired	0
Exercised	0
Outstanding end	840,000
Exercisable end	840,000
Weighted Average Exercise Price
Outstanding beginning	$0.50	$0
Granted	$0.50
Forfeited or expired	$0
Exercised	$0
Outstanding end	$0.50	$0
Exercisable end	$0.50
Outstanding beginning	0 years
Granted	4 years 10 months 24 days
Forfeited or expired	0 years
Exercised	0 years
Outstanding end	4 years 10 months 24 days
Exercisable end	0 years
Aggregate Intrinsic Value
Outstanding beginning	$0
Granted	$0
Forfeited or expired	$0
Exercised	$0
Outstanding end	$0
Exercisable end	$0

11_SHAREBASED_COMPENSATION_Det5

11. SHARE-BASED COMPENSATION (Details 5) (USD $)	3 Months Ended
	Mar. 31, 2015
Share-based Compensation Details 5
Exercisable Price	$0.50
Stock Options Outstanding	840,000
Stock Options Exercisable	840,000
Weighted Average Remaining Contractual Life	5 years

12_INVENTORY_Details

12. INVENTORY (Details) (USD $)	Mar. 31, 2015	Dec. 31, 2014
Notes to Financial Statements
Raw Materials	$747,600	$579,279
Work in Process	0	102,669
Total Inventory	$747,600	$681,948

13_LOSS_PER_SHARE_Details

13. LOSS PER SHARE (Details) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Basic (loss) earnings per share :
Net loss income	($127,108)	($571,613)
Weighted average common shares outstanding	44,625,236	44,496,680
Basic loss per share	$0	($0.01)
Diluted (loss) earnings per share :
Net loss income	($127,108)	($571,613)
Weighted average common shares outstanding	44,625,236	44,496,680
Potential dilutive securities	0	0
Weighted average common shares outstanding - diluted	44,625,236	44,496,680
Diluted loss per share	$0	($0.01)
Common stock equivalents excluded due to anti-dilutive effect	8,842,311	3,796,429

14_FAIR_VALUE_OF_FINANCIAL_INS2

14. FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) (USD $)	Mar. 31, 2015
Derivative liability	$67,032
Total liabilities measured at fair value	67,032
Level 1
Derivative liability	0
Total liabilities measured at fair value	0
Level 2
Derivative liability	0
Total liabilities measured at fair value	0
Level 3
Derivative liability	67,032
Total liabilities measured at fair value	$67,032

14_FAIR_VALUE_OF_FINANCIAL_INS3

14. FAIR VALUE OF FINANCIAL INSTRUMENTS (Details 1) (USD $)	3 Months Ended
	Mar. 31, 2015
Fair Value Disclosures [Abstract]
Beginning balance as of December 31, 2014	$0
Fair value of derivative liabilities issued	113,820
Gain on change in derivative liability	-46,788
Ending balance as of March 31, 2015	$67,032