NOTE 2 - NATURE OF ORGANIZATION AND LIQUIDITY AND MANAGEMENT PLANS | 3 Months Ended |
Mar. 31, 2014 |
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Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block] | ' |
NOTE 2 – NATURE OF ORGANIZATION AND LIQUIDITY AND MANAGEMENT PLANS |
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The Company sells the COPsync service, which is a real-time, in-car information sharing, communication and data interoperability network for law enforcement agencies. The COPsync service enables patrol officers to collect, report and share critical data in real-time at the point of incident and obtain instant access to various local, state and federal law enforcement databases. The COPsync service also eliminates manual processes and increases officer productivity by enabling officers to electronically write tickets, process DUI and other arrests and document accidents and other incidents. The Company believes that the service saves lives, reduces unsolved crimes and assists in apprehending criminals through such features as a nationwide officer safety alert system, GPS/auto vehicle location and distance-based alerts for crimes in progress, such as child abductions, bank robberies and police pursuits. The Company has designed its system to be “vendor neutral,” meaning it can be used with products and services offered by other law enforcement technology vendors. Additionally, the Company’s system architecture is designed to scale nationwide. |
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In addition to the Company’s core COPsync information sharing, data interoperability and communication network service, in 2012 it released two complementary service/product offerings. These new product offerings were WARRANTsync, a statewide misdemeanor warrant clearing database, and VidTac, an in-vehicle video camera system for law enforcement. |
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WARRANTsync is designed to be a statewide misdemeanor warrant clearing database. It enables law enforcement officers in the field to receive notice of outstanding warrants in real-time at the point of a traffic stop. The WARRANTsync system enables the offender to pay the outstanding warrant fees and costs using a credit card or debit card. Following payment, the offender is given a receipt and the transaction is complete. This product represents a very small portion of our revenues and could be viewed as an enhancement feature to our core COPsync service. |
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VidTac is a software-driven video system for law enforcement. Traditional in-vehicle video systems are “hardware centric” DVR-based systems. The video capture, compression and encryption of the video stream is performed by the DVR. The estimated price of these high-end, digital DVR-based systems range from $5,100 to $11,000 per system. These DVR-based systems are typically replaced, at the same expensive price point, every three to four years as new patrol vehicles are placed into service. |
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The VidTac system is price advantageous vis-a-vis other high-end video systems. The Company is offering it for sale at a much lower price than the average price of DVR-based video systems. Furthermore, for those agencies that already have in-vehicle computers, the VidTac system eliminates the need for the agency to purchase a second computer, i.e., the DVR, and eliminates the need to replace this second (DVR) computer every three to four years. The Company believes that the VidTac system will accelerate the Company’s revenue growth and help it achieve profitability. |
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The Company also offers the COPsync911 threat alert, first introduced in the second quarter of 2013, for use in schools, hospitals, day care facilities, governmental office buildings, energy infrastructure and other facilities with a high level of concern about security. When used in schools, the COPsync911 service enables school personnel to instantly and silently send emergency alerts directly to the closest law enforcement officers in their patrol vehicles, and to the local 911 dispatch center, with the mere click of an icon located on every computer within the facility. The alert is also sent to the cell phones of all law enforcement officers in the area and to all teachers, administrators, and other staff at the school, alerting them of imminent danger. The Company expects its COPsync911 service to reduce emergency law enforcement response times by five to seven minutes. |
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At March 31, 2014, the Company had cash and cash equivalents of $261,354, a working capital deficit of $3,739,471 and an accumulated deficit of $19,423,776. In the first quarter of 2014, the Company continued the efforts it began in fiscal year 2013 to manage its liquidity, to avoid default on any third-party obligations and to continue growing its business towards cash-flow break-even, and ultimately profitability, including the following: |
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1) The Company anticipates that the number of orders for its products and services will increase in 2014 over 2013 as a result of changes it has made in its sales organization, including hiring a new sales executive and the hiring of new, more seasoned, sales representatives. |
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2) In 2013, the Company introduced the COPsync911 real-time threat alert service, which the Company believes is the only threat alert service of its kind in the United States. The service enables a person (such as a schoolteacher in a school) to instantaneously and silently send emergency alerts directly to local law enforcement officers in their patrol vehicles and the local emergency dispatch center with just the click of a computer mouse or screen icon. The Company is primarily offering the COPsync911 service in the State of Texas and other selected regions of the United States. The Company expects the pace of COPsync911 sales to accelerate as its sales team and resellers becomes familiar with the service and the strategies for selling it. |
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3) The Company’s procurement processes for third party hardware employs “just in time” principles, meaning that the Company attempts to schedule delivery to the customer of the third party hardware it sells immediately after it receives the hardware. The Company also continues its attempts to collect customer prepayments for the third party hardware it sells at or about the time it orders the hardware. This change in the processing of third party hardware has helped the Company significantly in managing its working capital. |
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4) The Company’s key vendors continue to accommodate the Company through extended payment terms or practices for its outstanding payables balances, but the Company is uncertain how long these accommodations will continue. |
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5) In the first quarter of 2014, the Company received a $475,000 loan from the City of Pharr, Texas, and it expects to receive an additional loan of $375,000 from that city in May or June of 2014. |
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6) In April 2014, the Company’s Board of Directors authorized management to raise up to $1,000,000 in new capital in 2014, of which 80,000 has been raised as of the date of this report. Additionally, the Company has borrowed $400,000 (see Note 15) and is currently in discussions with potential investors to raise at least $500,000 of the target capital amount. The Company is also seeking a working capital line of credit to fund third party and proprietary equipment purchases from the manufacturers. |
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7) The Company is attempting to secure up to $1.5 million in funding pursuant to an EB-5 program, which the Company hopes to close in 2014. The EB-5 program is a program under which foreign nationals loan money to U.S. companies who are creating U.S. jobs. Following the job creation, the foreign lenders receive U.S. “green cards.” The Company currently has a letter of intent with a financier for the EB-5 program. The financier has already completed the required economic impact analysis for the project, which will be located in Pharr, Texas. The Company will use a portion of any proceeds from this EB-5 program to repay the bridge loans from the City of Pharr. Any remaining funds will be used for general working capital purposes, including the Company’s anticipated hiring of at least 30 employees in the Pharr area over the 24 month period after receiving the proceeds, who will office in a recently refurbished leased facility owned by the City of Pharr. |
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8) The Company plans to reduce its research and development expenses in 2014 by approximately $650,000 from the amount it spent in 2013, even though those expenses increased from 2013 in the first quarter. The Company believes that it has the capability to reduce further operating expenses, should circumstances warrant. |
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The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has accumulated significant losses as it has been developing its current and recently added offerings. The Company has had recurring losses and expects to report losses for fiscal 2014. The Company believes that cash flow from operations, together with the potential sources of debt and equity and revenue-based financing outlined above will be sufficient to fund the Company’s anticipated operations for the next twelve months. |
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