Rekor Systems (REKR) 10-Q 13 Nov 17 2017 Q3 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2017	Nov. 01, 2017
Document And Entity Information
Entity Registrant Name	Novume Solutions, Inc.
Entity Central Index Key	1,697,851
Document Type	10-Q
Document Period End Date	Sep. 30, 2017
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	No
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		14,308,784
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2,017

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets - USD ($)	Sep. 30, 2017	Dec. 31, 2016
CURRENT ASSETS
Cash and cash equivalents	$ 3,762,265	$ 2,788,587
Accounts receivable, net of $24,000 and $0 of allowance for doubtful accounts	3,300,742	1,997,831
Inventory	169,232	0
Notes receivable - current portion	300,000	0
Other current assets	253,607	81,011
Total current assets	7,785,846	4,867,429
PROPERTY AND EQUIPMENT:
Furniture and fixtures	160,749	137,784
Office equipment	976,835	463,937
Camera systems	969,003	0
Vehicles	151,224	0
Leasehold improvements	59,051	33,259
Gross property and equipment	2,316,862	634,980
Less: accumulated depreciation	(1,951,826)	(515,911)
Net property and equipment	365,036	119,069
Goodwill	1,960,345	0
Intangibles, net	2,168,941	0
OTHER ASSETS
Notes receivable - net of current portion	1,649,000	0
Deferred offering and financing costs	0	236,963
Deferred tax asset	1,321,564	219,982
Investment at cost	262,140	0
Deposits	39,387	39,282
Total other assets	3,272,091	496,227
Total Assets	15,552,259	5,482,725
CURRENT LIABILITIES
Accounts payable	1,385,852	577,268
Accrued expenses and other current liabilities	1,904,493	575,203
Deferred revenue	72,500	0
Total current liabilities	3,362,845	1,152,471
LONG-TERM LIABILITIES
Note payable	1,419,753	457,289
Deferred rent	54,705	56,709
Total long-term liabilities	1,474,458	513,998
Total liabilities	4,837,303	1,666,469
Series A Cumulative Convertible Redeemable Preferred stock, $0.0001 par value, 505,000 and 500,000 shares authorized, 502,327 and 301,570 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively	3,845,925	2,269,602
STOCKHOLDERS' EQUITY
Common stock, $0.0001 par value, 25,000,000 shares authorized, 13,933,784 and 5,000,000 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively	1,394	500
Preferred stock, $0.0001 par value, 7,500,000 and zero shares authorized, 505,000 and 500,000 shares designate as Series A as of September 30, 2017 and December 31, 2016, respectively	0	0
Additional paid-in capital	9,325,795	1,976,549
(Accumulated deficit) retained earnings	(2,458,158)	(430,395)
Other comprehensive income	0	0
Total Stockholders’ Equity	6,869,031	1,546,654
Total Liabilities and Stockholders’ Equity	$ 15,552,259	$ 5,482,725

Condensed Consolidated Balance3

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Sep. 30, 2017	Dec. 31, 2016
Preferred stock, par value	$ 0.0001	$ 0.0001
Preferred stock, authorized	7,500,000	0
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, authorized	25,000,000	25,000,000
Common stock, issued	13,933,784	5,000,000
Common stock, outstanding	13,933,784	5,000,000
Series A Cumulative Convertible Redeemable Preferred
Preferred stock, par value	$ 0.0001	$ 0.0001
Preferred stock, authorized	505,000	500,000
Preferred stock, issued	502,327	301,570
Preferred stock, outstanding	502,327	301,570

Condensed Consolidated Statemen

Condensed Consolidated Statements of Operations - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Income Statement [Abstract]
REVENUE	$ 4,421,574	$ 2,405,529	$ 11,131,825	$ 9,582,874
Cost of revenue	2,457,806	1,334,436	6,017,982	5,496,588
Gross Profit	1,963,768	1,071,093	5,113,843	4,086,286
OPERATING EXPENSES
Selling, general, and administrative expenses	2,997,566	1,151,514	8,036,339	3,624,005
Income (loss) from operations	(1,033,798)	(80,421)	(2,922,496)	462,281
OTHER (EXPENSE) INCOME
Interest expense	(33,719)	(15,656)	(97,624)	(28,693)
Other Income	51,016	0	142,283	0
Total other income	17,297	(15,656)	44,659	(28,693)
Income (loss) before taxes	(1,016,502)	(96,077)	(2,877,837)	433,588
Income tax benefit (expense)	362,347	40,535	1,101,582	(13,380)
Net (loss) income	$ (654,155)	$ (55,542)	$ (1,776,255)	$ 420,208
(Loss) earnings per common share - basic	$ (0.06)	$ (0.01)	$ (0.18)	$ 0.06
(Loss) earnings per common share - diluted	$ (0.06)	$ (0.01)	$ (0.18)	$ 0.06
Weighted average shares outstanding
Basic	11,756,560	9,713,956	10,920,866	7,016,373
Diluted	11,756,560	9,713,956	10,920,866	7,123,160

Condensed Consolidated Stateme5

Condensed Consolidated Statements of Changes in Stockholders’ Equity - 9 months ended Sep. 30, 2017 - USD ($)	Common Stock	Additional Paid-In Capital	Retained Earnings	Total
Beginning balance, shares at Dec. 31, 2016	5,000,000
Beginning balance, amount at Dec. 31, 2016	$ 500	$ 1,976,549	$ (430,395)	$ 1,546,654
Net common stock issued in Firestorm acquisition, shares	488,094
Net common stock issued in Firestorm acquisition, amount	$ 49	976,237		976,286
Effect of stock split and contribution to Novume Solutions, Inc., shares	5,158,503
Effect of stock split and contribution to Novume Solutions, Inc., amount	$ 516	(516)		0
Net common stock issued in Brekford acquisition, shares	3,287,187
Net common stock issued in Brekford acquisition, amount	$ 329	5,850,864		5,851,193
Stock-based compensation		227,470		227,470
Issuance of warrants		295,191		295,191
Preferred stock dividends			(251,508)	(251,508)
Net loss			(1,776,255)	(1,776,255)
Ending balance, shares at Sep. 30, 2017	13,933,784
Ending balance, amount at Sep. 30, 2017	$ 1,394	$ 9,325,795	$ (2,458,158)	$ 6,869,031

Condensed Consolidated Stateme6

Condensed Consolidated Statements of Cash Flows - USD ($)	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income	$ (1,776,255)	$ 420,208
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation and amortization	404,143	39,498
Bad debt expense	24,000	0
Deferred taxes	(1,101,582)	0
Share-based compensation	227,470	0
Deferred rent	(18,588)	0
Warrant expense	67,491	0
Changes in operating assets and liabilities
Accounts receivable	(870,426)	(453,985)
Inventory	(1,460)	0
Deposits	(105)	0
Notes receivable	51,000	(24,000)
Prepaid expenses and other current assets	(50,909)	20,932
Other assets	0	(124,919)
Accounts payable	(196,460)	542,077
Accrued expenses and other current liabiltities	987,522	139,724
Deferred revenue	50,007	0
Net cash used in operating activities	(2,204,152)	559,535
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(52,985)	(35,377)
Net cash used in investing activities	(52,985)	(35,377)
CASH FLOWS FROM FINANCING ACTIVITIES
Stockholders' distributions	0	(125,615)
Deferred stock offering costs	75,655	(670,091)
Proceeds from notes payable	47,341	500,000
Loan origination costs	0	(38,285)
Acquisition of Firestorm - net of cash acquired	(417,704)	0
Acquisition of Brekford - net of cash acquired	1,943,777	0
Net proceeds from issuance of preferred stock	1,745,347	0
Payment of preferred dividends	(163,601)	0
Net cash provided by financing activities	3,230,815	(333,991)
Net increase in cash and cash equivalents	973,678	190,167
Cash and cash equivalents at beginning of year	2,788,587	567,866
Cash and cash equivalents at end of period	$ 3,762,265	$ 758,033

NATURE OF OPERATIONS AND RECAPI

NATURE OF OPERATIONS AND RECAPITALIZATION	9 Months Ended
	Sep. 30, 2017
Nature Of Operations And Recapitalization
NATURE OF OPERATIONS AND RECAPITALIZATION	Nature of Operations Novume Solutions, Inc. (the “Company” or “Novume”) was formed in February 2017 and began operations upon the merger of KeyStone Solutions, Inc. (“KeyStone”) and Brekford Traffic Safety, Inc. (“Brekford”) in August 2017 (the “Brekford Merger”) and is headquartered in Chantilly, Virginia. The financial results of Brekford are included in the results of operations from August 28, 2017 through the September 30, 2017. For narrative purposes, Company and Novume references will include the Brekford, Keystone and Firestorm entities. The historical financial statements for Novume prior to the merger with Brekford reflect the historical financial statements of KeyStone. KeyStone was formed in March 2016 as a holding company for its wholly-owned subsidiary AOC Key Solutions, Inc. (“KSI”), which is headquartered in Chantilly, Virginia. KSI provides consulting and technical support services to assist clients seeking U.S. Federal government contracts in the technology, telecommunications, defense, and aerospace industries. On January 25, 2017, Novume (KeyStone) acquired Firestorm (See Note 2), a nationally-recognized leader in crisis management, crisis communications, emergency response, and business continuity, including workplace violence prevention, cyber-breach response, communicable illness/pandemic planning, predictive intelligence, and other emergency, crisis and disaster preparedness initiatives. Firestorm is headquartered in Roswell, Georgia. Brekford, headquartered in Hanover, Maryland, is a leading public safety technology service provider of fully-integrated automated traffic safety enforcement (“ATSE”) solutions, including speed, red light, and distracted driving camera systems. Recapitalization On March 15, 2016, the stockholders of KSI formed KeyStone as a holding company with the same proportionate ownership percentage as KSI. On that same date KSI entered into a merger agreement (the “KSI Merger Agreement”) with KeyStone and KCS Merger Sub, Inc. (“Merger Sub”), a wholly-owned subsidiary of KeyStone with no activity. Pursuant to the KSI Merger Agreement, on March 15, 2016, Merger Sub was merged with and into KSI, and thus KSI became a wholly-owned subsidiary of KeyStone (the “KSI Merger”). To complete the KSI Merger, the stockholders exchanged 100% of the outstanding common stock of KSI for newly issued common stock of KeyStone, representing 100% of the outstanding common stock. This effectively transferred 100% of the voting equity interest and control of KSI to KeyStone. The undistributed earnings totaling $1,192,844 of KSI as of that date were considered a capital contribution to KeyStone and were therefore reclassified to additional paid-in capital. The operations of KSI did not change, nor have any assets or operations transferred to either KeyStone or Merger Sub. The KSI Merger transaction resulted in no gain or loss to either entity. The stockholders’ proportionate ownership of KeyStone remained the same as it was for KSI. KeyStone accounted for the merger transaction as a recapitalization in the accompanying consolidated financial statements.

ACQUISITION

ACQUISITION	9 Months Ended
	Sep. 30, 2017
Acquisition
ACQUISITION	Brekford Acquisition On August 28, 2017, the mergers by and among Novume, KeyStone, Brekford, Brekford Merger Sub, Inc. (“ Brekford Merger Sub KeyStone Merger Sub were consummated (the “Brekford Merger”) as a result of a merger agreement (the “Brekford Merger Agreement”). As a result, Brekford became a wholly-owned subsidiary of the Novume, and Brekford Merger Sub ceased to exist. KeyStone Merger Sub also became a wholly-owned subsidiary of Novume, and KeyStone Solutions, Inc. ceased to exist. When KeyStone Merger Sub filed its certificate of merger with the Secretary of State of the State of Delaware, it immediately effectuated a name-change to KeyStone Solutions, LLC, the name by which it is now known. For the purposed of this document any references to KeyStone are to KeyStone Solutions, Inc. prior to August 28, 2017 and to KeyStone Solutions, LLC on and after August 28, 2017. Upon completion of the Brekford Merger, the merger consideration was issued in accordance with the terms of the Brekford Merger Agreement. Immediately upon completion of the Brekford Merger, the pre-merger stockholders of KeyStone owned approximately 80% of the issued and outstanding capital stock of Novume on a fully-diluted basis, and the pre-merger stockholders of Brekford owned approximately 20% of the issued and outstanding capital stock of Novume on a fully-diluted basis. As the Brekford Merger has recently been completed, the Company is currently in the process of completing the purchase price allocation treating the Brekford Merger as a business combination. The purchase price allocation for Brekford will be included in the Company’s consolidated financial statements in future periods. The table below shows the preliminary analysis related to the Brekford acquisition: Common stock issued $ 5,851,193 Total consideration 5,851,193 Less cash received (1,943,778 ) Less other assets (3,139,007 ) Plus liabilities assumed 1,191,937 Net goodwill/intangible recorded $ 1,960,345 The initial determination of the fair value of the assets acquired and liabilities assumed, which includes approximately $2.0 million of goodwill, is based on a preliminary valuation and the estimates and assumptions for these items are subject to change as we obtain additional information during the measurement period. Subsequent changes to the purchase price or other fair value adjustments determined during the measurement period will be recorded as an adjustment to goodwill and possibly intangibles. Firestorm Acquisition On January 25, 2017 (the “Firestorm Closing Date”), Novume acquired Firestorm Solutions, LLC and Firestorm Franchising, LLC (collectively, the “Firestorm Entities” or “Firestorm”). Membership Interest Purchase Agreement Pursuant to the terms of the Membership Interest Purchase Agreement (the “MIPA”), by and among Novume, each of the Firestorm Entities, each of the Members of the Firestorm Entities (described below), and a newly-created acquisition subsidiary of Novume, Firestorm Holdings, LLC, a Delaware limited liability company (“Firestorm Holdings”), Novume acquired all of the membership interests in each of the Firestorm Entities for the following consideration: ● $500,000 in cash in the aggregate paid by Novume as of the Firestorm Closing Date to the three principals (Harry W. Rhulen, Suzanne Loughlin, and James W. Satterfield, collectively the “Firestorm Principals”) of Firestorm. Of that aggregate amount $250,000 was paid to Mr. Satterfield, and $125,000 was paid to each of Mr. Rhulen and Ms. Loughlin; ● $1,000,000 in the aggregate in the form of four unsecured, subordinated promissory notes issued by Novume payable over five years after the Firestorm Closing Date, to all the Members of the Firestorm Entities (consisting of the Firestorm Principals and Lancer Financial Group, Inc. (“Lancer”)). The principal amount of the note payable to Lancer is $500,000 (the “Lancer Note”). The principal amount of the note payable to Mr. Rhulen is $166,666.66. The principal amount of the notes payable to each of Mr. Satterfield and Ms. Loughlin is $166,666.67. (The notes payable to Mr. Rhulen, Ms. Loughlin and Mr. Satterfield are individually referred to herein as a “Firestorm Principal Note” and collectively, as the “Firestorm Principal Notes”). The Firestorm Principal Notes are payable at an interest rate of 2% and the Lancer Note is payable at an interest rate of 7%. $907,407 was recorded to notes payable to reflect the net fair value of the notes issued due to the difference in interest rates. The Lancer Note also has a capped subordination of $7,000,000, subject to the consent of Lancer; ● Each of the Firestorm Principals was issued 162,698 shares of the common stock, par value $0.0001 per share, of Novume (“Novume Common Shares”), for an aggregate issuance of 946,875 Novume Common Shares; ● Each of the Firestorm Principals received warrants to purchase 105,209 Novume Common Shares, exercisable over a period of five years after the Firestorm Closing Date, at an exercise price of $2.5744 per share; and ● Each of the Firestorm Principals received warrants to purchase 105,209 Novume Common Shares, exercisable over a period of five years after the Firestorm Closing Date, at an exercise price of $3.6048 per share. The Company has completed its analysis of the purchase price allocation. The table below shows the final breakdown related to the Firestorm acquisition: Cash paid $ 500,000 Notes payable issued 907,407 Common stock issued 976,286 Warrants issued, at $2.58 125,411 Warrants issued, at $3.61 102,289 Total consideration 2,611,393 Less cash received (82,296 ) Less other assets (137,457 ) Less intangible and intellectual property (2,497,686 ) Plus liabilities assumed 106,046 Net goodwill recorded $ — The determination of the fair value of the assets acquired and liabilities assumed includes approximately $2.5 million of intangible and intellectual property. In connection with the acquistion, Novume has also entered into employment agreements with three of the founders of the Firestorm Entities as set forth below. Harry W. Rhulen Employment Agreement The Rhulen Employment Agreement provides that upon the Firestorm Closing Date his employment agreement will become effective for an initial five-year term as President of Novume Solutions, Inc. His base salary will be $275,000 per annum, and he will be eligible for a bonus as determined by Novume’s compensation committee. Mr. Rhulen will also be eligible to receive all such other benefits as are provided by Novume to other management employees that are consistent with Novume’s fringe benefits available to any other officer or executive of Novume. Mr. Rhulen has been granted options to purchase 155,195 Novume Common Shares, which shall begin vesting on the one-year anniversary of the Firestorm Closing Date and continue vesting monthly over the following two years, at an exercise price of $1.55 per share. Suzanne Loughlin Employment Agreement The Loughlin Employment Agreement provides that upon the Firestorm Closing Date her employment agreement will become effective for an initial five-year term as General Counsel and Chief Administrative Officer of Novume Solutions, Inc. Her base salary will be $225,000 per annum, and she will be eligible for a bonus as determined by Novume’s compensation committee. Ms. Loughlin will also be eligible to receive all such other benefits as are provided by Novume to other management employees that are consistent with Novume’s fringe benefits available to any other officer or executive of Novume. Ms. Loughlin has been granted options to purchase 155,195 Novume Common Shares, which shall begin vesting on the one-year anniversary of the Firestorm Closing Date and continue vesting monthly over the following two years, at an exercise price of $1.5464 per share. James W. Satterfield Employment Agreement The Satterfield Employment Agreement provides that upon the Firestorm Closing Date his employment agreement will become effective for an initial five-year term as President and Chief Executive Officer of each of the Firestorm Entities. His base salary will be $225,000 per annum, and he will be eligible for a bonus as determined by Novume’s compensation committee. Mr. Satterfield will also be eligible to receive all such other benefits as are provided by Novume to other management employees that are consistent with Novume’s fringe benefits available to any other officer or executive of Novume or its subsidiaries. Mr. Satterfield has been granted options to purchase 96,997 Novume Common Shares, which shall begin vesting on the one-year anniversary of the Firestorm Closing Date and continue vesting monthly over the following two years, at an exercise price of $1.55 per share, in connection with the Acquisition. The following unaudited pro-forma combined financial information gives effect to the acquisition of Firestorm and the merger with Brekford as if they were consummated January 1, 2016. This unaudited pro-forma financial information is presented for information purposes only, and is not intended to present actual results that would have been attained had the acquisition been completed as of January 1, 2016 (the beginning of the earliest period presented) or to project potential operating results as of any future date or for any future periods. For the three months ended September 30, For the nine months ended September 30, 2017 2016 2017 2016 Revenues $ 4,906,343 $ 3,345,473 $ 13,353,752 $ 12,194,573 Net income (loss) $ (928,166 ) $ (394,760 ) $ (2,678,772 ) $ (591,347 ) Basic earnings (loss) per share $ (0.08 ) $ (0.04 ) $ (0.25 ) $ (0.08 ) Diluted earnings (loss) per share $ (0.08 ) $ (0.04 ) $ (0.25 ) $ (0.08 ) Basic Number of Shares 11,756,560 9,713,956 10,920,866 7,016,373 Diluted Number of Shares 11,756,560 9,713,956 10,920,866 7,016,373

SUMMARY OF SIGNIFICANT ACCOUNTI

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	9 Months Ended
	Sep. 30, 2017
Summary Of Significant Accounting Policies
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	Principles of Consolidation The consolidated financial statements include the accounts of Novume, the parent company, and its wholly-owned subsidiaries AOC Key Solutions, Inc., Brekford Traffic Safety Inc., Novume Media, Inc., Chantilly Petroleum, LLC, Firestorm Solutions, LLC and Firestorm Franchising, LLC. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in accordance with the accounting rules under Regulation S-X, as promulgated by the Securities and Exchange Commission (“SEC”). All significant intercompany accounts and transactions have been eliminated in consolidation. Cash Equivalents Novume considers all highly liquid debt instruments purchased with the maturity of three months or less to be cash equivalents. Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable are customer obligations due under normal trade terms. The Company performs continuing credit evaluations of its clients’ financial condition, and the Company generally does not require collateral. Management reviews accounts receivable to determine if any receivables will potentially be uncollectible. Factors considered in the determination include, among other factors, number of days an invoice is past due, client historical trends, available credit ratings information, other financial data and the overall economic environment. Collection agencies may also be utilized if management so determines. The Company records an allowance for doubtful accounts based on specifically identified amounts that are believed to be uncollectible. The Company also considers recording as an additional allowance a certain percentage of aged accounts receivable, based on historical experience and the Company’s assessment of the general financial conditions affecting its customer base. If actual collection experience changes, revisions to the allowance may be required. After all reasonable attempts to collect an account receivable have failed, the amount of the receivable is written off against the allowance. Based on the information available, the Company had an allowance for doubtful accounts of $24,000 at September 30, 2017 and determined that an allowance was not required at December 31, 2016. 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 The cost of furniture and fixtures and office equipment is depreciated over the useful lives of the related assets. Leasehold improvements are amortized over the shorter of their estimated useful lives or the terms of the lease. Depreciation and amortization is recorded on the straight-line basis. The range of estimated useful lives used for computing depreciation are as follows: Furniture and fixtures 2 - 10 years Office equipment 2 - 5 years Leasehold improvements 3 - 10 years Automobiles 3 - 5 years Camera systems 3 years Depreciation and amortization expense for the three months ended September 30, 2017 and 2016 was $353,982 and 9,833, respectively, and for the nine months ended September 30, 2017 and 2016 was $404,143 and $39,498 , respectively. Revenue Recognition The Company recognizes revenues for the provision of services when persuasive evidence of an arrangement exists, services have been rendered or delivery has occurred, the fee is fixed or determinable and the collectability of the related revenue is reasonably assured. The Company principally derives revenues from fees for services generated on a project-by-project basis. Revenues for time-and-materials contracts are recognized based on the number of hours worked by the employees or consultants at an agreed-upon rate per hour set forth in the Company’s standard rate sheet or as written from time to time in the Company’s contracts or purchase orders. Revenues related to firm-fixed-price contracts are primarily recognized upon completion of the project as these projects are typically short-term in nature. Revenue from the sale of individual franchises is recognized when the contract is signed and collectability is assured, unless the franchisee is required to perform certain training before operations commence. The franchisor has no obligation to the franchisee relating to store development and the franchisee is considered operational at the time the franchise agreement is signed or when required training is completed, if applicable. Royalties from individual franchises are earned based upon the terms in the franchising agreement which are generally the greater of $1,000 or 8% of the franchisee’s monthly gross sales. For automated traffic safety enforcement revenue, the Company recognizes the revenue when the required collection efforts, from citizens, are completed and posted to the municipality’s account. The respective municipality is then billed depending on the terms of the respective contract, typically 15 days after the preceding month while collections are reconciled. For contracts where the Company receives a percentage of collected fines, revenue is calculated based upon the posted payments from citizens multiplied by the Company’s contractual percentage. For contracts where the Company receives a specific fixed monthly fee regardless of citations issued or collected, revenue is recorded once the amount collected from citizens exceeds the monthly fee per camera. Brekford’s fixed-fee contracts typically have a revenue neutral provision whereby the municipality’s payment to Brekford cannot exceed amounts collected from citizens within a given month. Advertising The Company expenses all non-direct-response advertising costs as incurred. Such costs were not material for the three or nine months ended September 30, 2017 and 2016. Use of Estimates Management uses estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual amounts may differ from these estimates. On an on-going basis, the Company evaluates its estimates, including those related to collectability of accounts receivable, fair value of debt and equity instruments and income taxes. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not apparent from other sources. Actual results may differ from those estimates under different assumptions or conditions. Income Taxes Through March 15, 2016, KSI elected to be taxed under the provisions of Subchapter S of the Internal Revenue Code. Under those provisions, KSI did not pay U.S. Federal corporate income taxes, and in most instances state income tax, on its taxable income. Instead, the KSI stockholders were liable for individual income taxes on their respective shares of KSI’s net income. KSI effectively revoked its S Corporation election upon the March 15, 2016 merger with the KeyStone. Novume is currently subject to corporate income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company’s evaluation as of September 30, 2017 revealed no uncertain tax positions that would have a material impact on the consolidated financial statements. The 2013 through 2015 tax years remain subject to examination by the IRS and various states. Management does not believe that any reasonably possible changes will occur within the next twelve months that will have a material impact on the consolidated financial statements. Equity-Based Compensation The Company recognizes equity-based compensation based on the grant-date fair value of the award on a straight-line basis over the requisite service period, net of estimated forfeitures. Total equity-based compensation expense included in selling, general and administrative expenses in the accompanying consolidated statements of operations for the three months ended September 30, 2017 and 2016 was $107,321 and $0, respectively, and for the nine months ended September 30, 2017 and 2016 was $227,470 and $51,380, respectively. The Company estimates the fair value of stock options using the Black-Scholes option-pricing model. The use of the Black-Scholes option-pricing model requires the use of subjective assumptions, including the fair value and projected volatility of the underlying common stock and the expected term of the award. The fair value of each option granted has been estimated as of the date of the grant using the Black-Scholes option pricing model with the following assumptions during the nine months ended September 30, 2017: Nine months ended September 30, 2017 Risk-free interest rate 1.00% - 1.99% Expected term .3 – 6 years Volatility 70% Dividend yield 0% Estimated annual forfeiture rate at time of grant 0% - 30% Risk-Free Interest Rate – Expected Term – Expected Volatility – Dividend Yield – Forfeiture Rate – Fair Value of Financial Instruments The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, accounts receivable and accounts payable approximate fair value as of September 30, 2017 and December 31, 2016 because of the relatively short-term maturity of these financial instruments. The carrying amount reported for long-term debt approximates fair value as of September 30, 2017, given management’s evaluation of the instrument’s current rate compared to market rates of interest and other factors. The determination of fair value is based upon the fair value framework established by Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures Level 1 Level 2 Level 3 Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurements. Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy. The Company has concluded that its Series A Preferred Stock is a Level 3 financial instrument and that the fair value approximates the carrying value due to the proximity of the date of the sale of the Series A Preferred Stock to independent third-parties as compared to September 30, 2017. There were no changes in levels during the three or nine months ended September 30, 2017 and the Company did not have any financial instruments prior to 2016. Concentrations of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, and accounts receivable. Concentrations of credit risk with respect to accounts receivable are minimal due to the collection history and due to the nature of the Company’s client base. The Company limits its credit risk with respect to cash by maintaining cash balances with high-quality financial institutions. At times, the Company’s cash may exceed U.S. Federally insured limits, and as of September 30, 2017 and December 31, 2016, the Company had $3,762,265 and $2,788,587 , respectively, of cash and cash equivalents on deposit that exceeded the federally insured limit. Earnings per Share Basic earnings per share, or EPS, is computed using the weighted average number of common shares outstanding during the period. Diluted EPS is computed using the weighted average number of common and potentially dilutive securities outstanding during the period, except for periods of net loss for which no potentially dilutive securities are included because their effect would be anti-dilutive. Potentially dilutive securities consist of common stock issuable upon exercise of stock options or warrants using the treasury stock method. Potentially dilutive securities issuable upon conversion of the Series A Preferred Stock are calculated using the if-converted method. The Company calculates basic and diluted earnings per common share using the two-class method. Under the two-class method, net earnings are allocated to each class of common stock and participating security as if all of the net earnings for the period had been distributed. Participating securities consist of Series A Preferred Stock and warrants that contain a nonforfeitable right to receive dividends and therefore are considered to participate in undistributed earnings with common stockholders. Foreign Currency Transactions Brekford has certain revenue and expense transactions with a functional currency in Mexican pesos and the Company's reporting currency is the U.S. dollar. Assets and liabilities are translated from the functional currency to the reporting currency at the exchange rate in effect at the balance sheet date and equity at the historical exchange rates. Revenue and expenses are translated at rates in effect at the time of the transactions. Any resulting translation gains and losses are accumulated in a separate component of stockholders' equity - other comprehensive income (loss). Realized foreign currency transaction gains and losses are credited or charged directly to operations. Segment Reporting The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 280, Segment Reporting Going Concern Assessment Beginning with the year ended December 31, 2016 and all annual and interim periods thereafter, management will assess going concern uncertainty in the Company’s consolidated financial statements to determine there is sufficient cash on hand and working capital, including available borrowings on loans, to operate for a period of at least one year from the date the consolidated financial statements are issued or available to be issued, which is referred to as the “look-forward period”, as defined in GAAP. As part of this assessment, based on conditions that are known and reasonably knowable to management, management will consider various scenarios, forecasts, projections, estimates and will make certain key assumptions, including the timing and nature of projected cash expenditures or programs, its ability to delay or curtail expenditures or programs and its ability to raise additional capital, if necessary, among other factors. Based on this assessment, as necessary or applicable, management makes certain assumptions around implementing curtailments or delays in the nature and timing of programs and expenditures to the extent it deems probable those implementations can be achieved and management has the proper authority to execute them within the look-forward period. Management’s assessment determined the Company is a going concern. New Accounting Pronouncements Recently Issued Accounting Pronouncements Not Yet Adopted In August 2017, the Financial Accounting Standards Board (“FASB”) issued new guidance related to accounting for hedging activities. This guidance expands strategies that qualify for hedge accounting, changes how many hedging relationships are presented in the financial statements, and simplifies the application of hedge accounting in certain situations. The standard will be effective for us beginning July 1, 2019, with early adoption permitted for any interim or annual period before the effective date. Adoption of the standard will be applied using a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the effective date. The Company is currently evaluating the impact of this standard on our consolidated financial statements, including accounting policies, processes, and systems. In May 2017, the FASB issued Accounting Standards Update (“ASU”) No. 2017-09, Compensation - Stock Compensation: Scope of Modification Accounting In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other: Simplifying the Test for Goodwill Impairment. In October 2016, the FASB issued ASU No. 2016-16, Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory In February 2016, the FASB issued ASU 2016-02, Leases In January 2016, the FASB, issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers ● ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date ● ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations ● ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensin ● ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients The underlying principle is to use a five-step analysis of transactions to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. The standard permits the use of either a retrospective or modified retrospective application. The Company is currently in the process of completing its assessment of any significant contract and assessing the impact the adoption of the new revenue standard will have on its consolidated financial statements and related disclosures. The standard update, as amended, will be effective for annual periods beginning after December 15, 2017. The Company performed an initial assessment of the impact of the ASU and is developing a transition plan, including necessary changes to policies, processes, and internal controls as well as system enhancements to generate the information necessary for the new disclosures. The project is on schedule for adoption on January 1, 2018 and the Company will apply the modified retrospective method. The Company expects revenue recognition across its portfolio of services to remain largely unchanged. However, the Company expects to recognize revenue earlier than it does under current guidance in a few areas, including accounting for variable fees and for certain consulting services, which will be recognized over time rather than at a point in time. While the Company has not finalized its assessment of the impact of the ASU, based on the analysis completed to date, the Company does not currently anticipate that the ASU will have a material impact on its Consolidated Financial Statements. There are currently no other accounting standards that have been issued, but not yet adopted, that will have a significant impact on the Company’s consolidated financial position, results of operations or cash flows upon adoption. Recently Adopted In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes In April 2015, the FASB issued ASU 2015-03, Interest Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements – Going Concern In March 2016, FASB issued ASU ASU 2016-09, Improvements to Employee Share-Based Payment Accounting The Company does not believe that any recently issued accounting standards, in addition to those referenced above, would have a material effect on its consolidated financial statements.

INVESTMENT AT COST AND NOTES RE

INVESTMENT AT COST AND NOTES RECEIVABLE	9 Months Ended
	Sep. 30, 2017
Investment At Cost And Notes Receivable
INVESTMENT AT COST AND NOTES RECEIVABLE	On February 6, 2017, prior to the Brekford Merger, the Company entered into a Contribution and Unit Purchase Agreement (the “CUP Agreement”) with LB&B Associates Inc. (the “LB&B”) and Global Public Safety, LLC (“GPS”). The closing for the transaction set forth in the CUP Agreement occurred on February 28, 2017 (the “GPS Closing”) and on such date the Company contributed substantially all of the assets and certain liabilities related to its vehicle services business to GPS. On the GPS Closing, the Company sold units representing 80.1% of the units of GPS to the LB&B for $6,048,394, after certain purchase price adjustments of prepaid expenses and unbilled customer deposits. $4,048,394 was paid in cash, including a $250,000 deposit that was paid on February 6, 2017, and $2,000,000 was paid by LB&B issuing the Company a promissory note receivable (the “GPS Promissory Note”). After the GPS Closing, the Company continues to own 19.9% of the units of GPS after the transaction. The Company is accounting for this as an investment at cost. The GPS Promissory Note is subordinated to the LB&B’s senior lender and accrues interest at a rate of 3% per annum. The maturity date of the GPS Promissory Note is March 31, 2022. The GPS Promissory Note is to be repaid as follows: (a) $75,000 plus all accrued interest on each of September 30, 2017; December 31, 2017; March 31, 2018, June 30, 2018 and September 30, 2018 (or, in the event any such date is not a business day, the first business day after such date), (b) $100,000 plus all accrued interest on each of December 31, 2018; March 31, 2019; June 30, 2019 and September 30, 2019 (or, in the event any such date is not a business day, the first business day after such date) (c) $125,000 plus all accrued interest on each of December 31, 2019; March 31, 2020; June 30, 2020; September 30, 2020, December 31, 2020; March 31, 2021, June 31, 2021; September 30, 2021; and December 31, 2021 (or, in the event any such date is not a business day, the first business day after such date), and (d) $100,000 on March 31, 2022. The GPS Promissory Note is secured pursuant to the terms of a Pledge Agreement (the “LB&B Pledge Agreement”) between the Company and LB&B. Pursuant to the LB&B Pledge Agreement LB&B, granted the Company a continuing second priority lien and security interest in the LB&B’s units of GPS subject to liens of the LB&B’s senior lender. The current portion of notes receivable was $300,000 and zero as of September 30, 2017 and December 31, 2016. The long-term portion of the notes receivable was $1,649,000 and zero as of September 30, 2017 and December 31, 2016.

SUPPLEMENTAL DISCLOSURES OF CAS

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION	9 Months Ended
	Sep. 30, 2017
Supplemental Disclosures Of Cash Flow Information
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION	Supplemental disclosures of cash flow information for the nine months ended September 30, 2017 and 2016 was as follows: For the Nine Months Ended: September 30, 2017 September 30, 2016 Cash paid for interest $ 33,429 $ 29,083 Cash paid for taxes $ — $ — Warrants issued in connection with note payable $ — $ 58,520 Warrants issued in connection with issuance of Series A Preferred Stock $ 67,491 $ — Business Combinations: Current Assets $ 1,044,893 $ — Property and equipment, net $ 268,398 $ — Intangible assets $ 2,498,737 $ — Goodwill $ 1,960,328 $ — Other non-current assets $ 1,962,140 $ — Assumed liabilities $ (1,258,905 ) $ — Deferred revenue $ (22,493 ) $ — Other non-current liabilities $ (16,584 ) $ — Issuance of common stock $ (7,055,179 ) $ — Notes payable $ (907,407 ) $ — Dividends on the Series A Preferred Stock totaling $5,286 were approved and declared in 2016. On April 7, 2017, the Company paid cash dividends of $75,695 to shareholders of record as of March 30, 2017. On July 8, 2017, the Company paid cash dividends of $87,907 to shareholders of record as of June 30, 2017. On September 30, 2017, the Company declared and accrued dividends of $87,907 payable to shareholders of record as of September 30, 2017.

DEBT

DEBT	9 Months Ended
	Sep. 30, 2017
Debt
DEBT	Line of Credit KSI was a party to a business loan agreement (the “2015 Loan Agreement”) with Sandy Spring Bank (“SSB”) dated as of September 25, 2015. The primary credit facility was an asset-based revolving line of credit up to $1,000,000 which was due to mature on September 30, 2016. To secure its obligations under the 2015 Loan Agreement, KSI had granted to SSB a security interest in its accounts receivable. SSB was required to advance funds to KSI up to the lesser of (1) $1,000,000 or (2) eighty percent (80%) of the aggregate amount of all of its accounts receivable aged 90-days or less which contained selling terms and conditions acceptable to the SSB. KSI’s obligations under the 2015 Loan Agreement were guaranteed by James McCarthy, Chairman of the Board of KSI, and his wife. KSI did not draw any funds from this credit facility in 2015. Pursuant to First Amendment to Business Loan Agreement (Asset Based), dated May 9, 2016, SSB had waived the restrictions in the 2015 Loan Agreement on KSI’s ability to make dividends to the Company. There was no outstanding balance on the 2015 Loan Agreement at December 31, 2016. On August 11, 2016, Novume entered into Loan and Security Agreement (the “2016 Line of Credit”) with SSB that replaced the 2015 Loan Agreement. The 2016 Line of Credit is comprised of: 1) an asset-based revolving line of credit up to $1,000,000 for short-term working capital needs and general corporate purposes which was due to mature on July 31, 2017, bears interest at the Wall Street Journal Prime Rate, floating, plus 0.50% and is secured by a first lien on all of Novume’s business assets; and 2) an optional term loan of $100,000 which must be drawn by July 31, 2017, which is for permanent working capital, bears interest at the Wall Street Journal Prime Rate, floating, plus 0.75%, requires monthly payments of principal plus interest to fully amortize the loan over four (4) years, is secured by a first lien on all of Novume’s business assets, cross-collateralized and cross-defaulted with the revolving line of credit, and matures on February 15, 2019. The 2016 Line of Credit does not require any personal guarantees. The borrowing base for the 2016 Line of Credit is up to the lesser of (1) $1,000,000 or (2) eighty percent (80%) of the aggregate amount of all of Novume’s eligible accounts receivable as defined by SSB. The borrowing base for the $100,000 term loan is fully reserved under the borrowing base for the revolving line of credit. The 2016 Line of Credit has periodic reporting requirements, balance sheet and profitability covenants, as well as affirmative and negative operational and ownership covenants. Novume was in compliance with all 2016 Line of Credit covenents at December 31, 2016. In August 2017, the Company terminated the 2016 Line of Credit with SSB. As such, there was no outstanding balance on the 2016 Line of Credit at September 30, 2017. As of September 30, 2017 and 2016, Novume had no balances due, respectively, for the 2016 Line of Credit and the 2015 Loan Agreement and there are no amounts outstanding as of the date of this Form 10-Q. When Novume replaced the 2015 Loan Agreement with the 2016 Line of Credit on August 11, 2016, neither line of credit had a balance due. The Company terminated its line of credit in August 2017. Long-Term Debt On March 16, 2016, Novume entered into a Subordinated Note and Warrant Purchase Agreement (the “Avon Road Note Purchase Agreement”) pursuant to which Novume agreed to issue up to $1,000,000 in subordinated debt and warrants to purchase up to 242,493 shares of Novume’s common stock (“Avon Road Subordinated Note Warrants”). The exercise price for the Avon Road Subordinated Note Warrants is equal to $1.03 per share of common stock. Subordinated notes with a face amount of $500,000 and Avon Road Subordinated Note Warrants to purchase 121,247 shares of Novume’s common stock have been issued pursuant to the Avon Road Note Purchase Agreement to Avon Road Partners, L.P. (“Avon Road”), an affiliate of Robert Berman, Novume’s CEO and a member of Novume’s Board of Directors. The Avon Road Subordinated Note Warrants has an expiration date of March 16, 2019 and qualified for equity accounting as the warrant did not fall within the scope of ASC Topic 480, Distinguishing Liabilities from Equity The note is subordinated to the Novume’s 2016 Line of Credit with SSB and any successor financing facility. Simple interest accrues on the unpaid principal of the note at a rate equal to the lower of (a) 9% per annum, or (b) the highest rate permitted by applicable law. Interest is payable monthly, and the note matures on March 16, 2019. The Company terminated the 2016 Loan Agreement in August 2017. Pursuant to the terms of the Novume acquisition of the membership interests in the Firestorm Entities, the Company issued $1,000,000 in the aggregate in the form of four unsecured, subordinated promissory notes issued by Novume payable over five years after the Firestorm Closing Date, to all the Members of the Firestorm Entities. The principal amount of the note payable to Lancer is $500,000. The principal amount of the note payable to Mr. Rhulen is $166,666.66. The principal amount of the notes payable to each of Mr. Satterfield and Ms. Loughlin is $166,666.67. The Firestorm Principal Notes are payable at an interest rate of 2% and the Lancer Note is payable at an interest rate of 7%. The balance of these notes payable was $919,753 as of September 30, 2017 to reflect the amortized fair value of the notes issued due to the difference in interest rates.

INCOME TAXES

INCOME TAXES	9 Months Ended
	Sep. 30, 2017
Income Taxes
INCOME TAXES	The Company accounts for income taxes in accordance with ASC Topic 740. Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized. In determining the need for a valuation allowance, management reviews both positive and negative evidence pursuant to the requirements of ASC Topic 740, including current and historical results of operations, future income projections and the overall prospects of the Company’s business. The benefit from income taxes for the three and nine months ended September 30, 2017 consists of the following: Three Months ended September 30, 2017 Nine Months ended September 30, 2017 Deferred: Federal $ (305,972 ) $ (949,428 ) State (56,375 ) (152,154 ) Benefit from income taxes $ (362,347 ) $ (1,101,582 ) The components of deferred income tax assets and liabilities are as follows at September 30, 2017: Deferred tax assets: Amortizable start-up costs $ 110,729 Amortizable intangibles 81,034 Accrued bonuses 53,998 Net operating loss carryforward 1,166,042 1,411,803 Deferred tax liabilities: Fixed assets (90,239 ) Total deferred tax assets, net $ 1,321,564 The difference between the income tax provision computed at the U.S. Federal statutory rate and the actual tax benefit is accounted for as follows for the three and nine months ended September 30, 2017: Three Months ended Nine Months ended U.S. statutory federal rate 34.00 % 34.00 % (Decrease) increase in taxes resulting from: State income tax rate, net of U.S. Federal benefit 5.20 % 5.20 % Net effect of permanent and temporary reconciling items -0.09 % 0.85 % Effective tax rate 39.11 % 40.05 % The Company files income tax returns in the United States and in various state and foreign jurisdictions. No U.S. Federal, state or foreign income tax audits were in process as of September 30, 2017. As more fully disclosed in Note 2, through March 15, 2016, KSI elected to be taxed under the provisions of Subchapter S of the Internal Revenue Code. Under those provisions, KSI did not pay federal corporate income taxes, and in most instances state income tax, on its taxable income. Thus, for the year ended December 31, 2016, KSI did not have any provision for income taxes. There was no valuation allowance for deferred tax assets at September 30, 2017, as management believes that the deferred tax assets will be realized through future operations. At September 30, 2017, Novume had net operating loss carryforwards of approximately $2,974,597. For the three and nine months ended September 30, 2017 and 2016, Novume did not record any interest or penalties related to unrecognized tax benefits. It is the Company’s policy to record interest and penalties related to unrecognized tax benefits as part of income tax expense.

STOCKHOLDERS_ EQUITY

STOCKHOLDERS’ EQUITY	9 Months Ended
	Sep. 30, 2017
Stockholders' Equity Attributable to Parent [Abstract]
STOCKHOLDERS' EQUITY	Common Stock As of September 30, 2017 and December 31, 2016, the authorized, issued and outstanding common shares of Novume were 13,933,784 and 5,000,000 (9.699,722 shares post Brekford Merger), respectively. As described in more detail in Note 1, on March 15, 2016, the stockholders of KSI formed KeyStone as a holding company with the same proportionate ownership percentage as KSI. Pursuant to the Keystone Merger Agreement, the stockholders exchanged 100% of the outstanding common stock of KSI for 5,000,000 (9.699,720 post merger split) shares newly issued KeyStone common stock, representing 100% of the outstanding common stock. The formation of KeyStone provided for 25,000,000 authorized shares of KeyStone $.0001 par value common stock. As of December 31, 2016, 5,000,000 (9.699,720 post merger split) shares of KeyStone common stock were issued and outstanding. In January 2017, the Company issued 488,094 (946,875 post Brekford Merger) shares of Novume common stock as consideration as part of its acquisition of Firestorm. Upon completion of the KeyStone and Brekford merger on August 28, 2017, consideration was issued in accordance with the terms of the Brekford . Immediately upon completion of the Brekford Merger, the pre-merger stockholders of KSI owned approximately 80% of the issued and outstanding capital stock of the Company on a fully-diluted basis, and the pre-merger stockholders of Brekford owned approximately 20% of the issued and outstanding capital stock of Novume on a fully-diluted basis. Series A Cumulative Convertible Redeemable Preferred Stock The formation of Novume provided for 7,500,000 shares of $.0001 par value KeyStone Series A Cumulative Convertible Redeemable Preferred Stock (the “Series A Preferred Stock”). In November 2016, Novume commenced its Reg 1A Offering (the “Reg1A Offering”) of up to 3,000,000 Units. Each Unit, after the Brekford Merger, consisted of one share of Series A Preferred Stock which is convertible to 1.94 shares of Novume Common Stock and one Unit Warrant to purchase 0.48 shares of the Novume Common Stock at an exercise price of $1.03 per share. The Series A Preferred Stock holders are entitled to quarterly dividends of 7.0% per annum per share. The Series A Preferred Stock holder has a put right to convert each share into common stock at an initial conversion price and a specified price which increases annually based on the passage of time beginning in November 2019. The Series A Preferred Stock holder also has put right after 60 months from the issuance date to redeem any or all of the Series A Preferred Stock at a redemption price of $7.73 per share plus any accrued but unpaid dividends. Novume has a call right after 36 months from the issuance date to redeem all of the Series A Preferred Stock at a redemption price which increases annually based on the passage of time beginning in November 2019. The Series A Preferred Stock contains an automatic conversion feature based on a qualified initial public offering in excess of $30,000,000 or a written agreement by at least two-thirds of the Series A Preferred Stock holders at an initial conversion price and a specified price which increases annually based on the passage of time beginning in November 2016. Based on the terms of the Series A Preferred Stock, the Company concluded that the Series A Preferred Stock should be classified as temporary equity in the accompanying consolidated balance sheet as of September 30, 2017. The Reg 1A Offering Units were sold at $10 per Unit in minimum investment amounts of $5,000. There were three closings related to the sales of the Units. The gross proceeds, which the Company deemed to be fair value, from the first closing on December 23, 2016 totaled $3,015,700 with the issuance of 301,570 shares of Series A Preferred Stock and 301,570 Unit Warrants. On January 23, 2017, the Company completed its second closing of the Offering for the issuance of 119,757 shares of Series A Preferred Stock and 119,757 Unit Warrants with the Company receiving aggregate gross proceeds of $1,197,570. On March 20, 2017, the Company increased the total number of designated shares of the Series A Preferred Stock from 500,000 to 505,000 shares. On March 21, 2017, the Company completed its third and final closing of the Reg 1A Offering. The third and final sale of 81,000 shares of Series A Preferred Stock and 81,000 Unit Warrants with the Company receiving aggregate gross proceeds of $810,000. The aggregate total sold in the Reg 1A Offering through and including the third and final closing was 502,327 Units, or 502,327 shares of Series A Preferred Stock and 502,327 Unit Warrants, for total gross proceeds to the Company of $5,023,270. The Reg 1A Offering is now closed. Novume will adjust the value of the Series A Preferred Stock to fair (redemption) value at the end of the reporting period. The adjustment to the redemption value will be recorded through equity. As of September 30, 2017, 502,327 shares of Series A Preferred Stock were issued and outstanding. The Novume Series A Preferred Stock is entitled to quarterly cash dividends of $0.175 (7% per annum) per share. On April 7, 2017, the Company paid cash dividends of $75,695 to shareholders of record as of March 30, 2017. On July 8, 2017, the Company paid cash dividends of $87,907 to shareholders of record as of June 30, 2017. On September 30, 2017, the Company declared and accrued dividends of $87,907 payable to shareholders of record as of September 30, 2017. The expiration date of the Unit Warrants is seven years from the date of issuance. The Unit Warrants are required to be measured at fair value at the time of issuance and classified as equity. The Company determined that under the Black-Scholes option pricing model, the fair value at the date of issuance was $169,125. As of September 30, 2017, 502,327 Unit Warrants are outstanding.

WARRANT DERIVATIVE LIABILITY

WARRANT DERIVATIVE LIABILITY	9 Months Ended
	Sep. 30, 2017
Warrant Derivative Liability
WARRANT DERIVATIVE LIABILITY	On March 17, 2015, Brekford issued a Warrant (“Brekford Warrant”), which permits the holder to purchase 56,000 shares of Common Stock with an exercise price of $7.50 per share and a life of five years. The Brekford Warrant exercise price is subject to anti-dilution adjustments that allow for its reduction 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 $7.50 a share. The Company accounted for the conversion option of the Brekford Warrant in accordance with ASC Topic 815. Accordingly, the conversion option is not considered to be solely indexed to the Company’s own stock and, as such, is recorded as a liability. The derivative liability associated with the Brekford Warrant has been measured at fair value at September 30, 2017 and December 31, 2016 using the 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% - 105.1%; (iii) weighted average risk-free interest rate of 1.14-1.93%; (iv) expected life of five years; and (v) estimated fair value of the Common Stock of $0.10-$0.26 per share. At September 30, 2017 and December 31, 2016, the outstanding fair value of the derivative liability was $18,228 and $24,360, respectively.

COMMON STOCK OPTION AGREEMENT

COMMON STOCK OPTION AGREEMENT	9 Months Ended
	Sep. 30, 2017
Common Stock Option Agreement
COMMON STOCK OPTION AGREEMENT	On March 16, 2016, two stockholders of the Company entered into an option agreement with Avon Road (collectively, the “Avon Road Parties”). Under the terms of this agreement Avon Road paid the stockholders $10,000 each (a total of $20,000) for the right to purchase, on a simultaneous and pro-rata basis, up to 4,318,856 shares of Novume’s common stock owned by those two shareholders at $0.52 per share, which was determined to be the fair value. The option agreement had a two-year term which expires on March 16, 2018. On September 7, 2017, the Avon Road Parties entered into an amended and restated option agreement which extended the right to exercise the option up to and including March 21, 2019.

COMMITMENTS

COMMITMENTS	9 Months Ended
	Sep. 30, 2017
Commitments
COMMITMENTS	Operating Leases KSI leases office space in Chantilly, Virginia under the terms of a ten-year lease expiring October 31, 2019. The lease contains one five-year renewal option. The lease terms include an annual increase in base rent and expenses of 2.75%. KSI also leases office space in New Orleans, Louisiana under the terms of a three-year lease expiring May 31, 2018. Firestorm leases office space in Roswell, Georgia under the terms of a lease expiring on October 31, 2017. Brekford leases office space from Global Public Safety on a month-to-month basis. Brekford also leases space under an operating lease expiring on December 31, 2017. Rent expense for the three months ended September 30, 2017 and 2016 was $193,985 and $178,946 , respectively, and for the nine months ended September 30, 2017 and 2016 was $575,181 and $533,168 , respectively and is included in selling, general and administrative expenses. As of September 30, 2017, the future obligations over the primary terms of Novume’s long-term leases expiring through 2020 are as follows: 2017 $ 188,854 2018 697,153 2019 624,024 2020 64,475 Total $ 1,574,506 The Company is the lessor in an agreement to sublease office space in Chantilly, Virginia with an initial term of two years with eight one-year options to renew the sublease through October 31, 2019. The lease provides for an annual increase in base rent and expenses of 2.90%. The initial term ended October 31, 2011 and the Company exercised the renewal options through 2015. On April 7, 2015, the lease was amended to sublease more space to the subtenant and change the rental calculation. Rent income for the three months ended September 30, 2017 and 2016 was $46,957 and $45,634 , respectively, and for the nine months ended September 30, 2017 and 2016 was $140,871 and $136,901 , respectively, and is included in other income in the accompanying consolidated statements of operations.

EQUITY INCENTIVE PLAN

EQUITY INCENTIVE PLAN	9 Months Ended
	Sep. 30, 2017
Equity Incentive Plan
EQUITY INCENTIVE PLAN	In August 2017, the Company approved and adopted the 2017 Equity Award Plan (the “2017 Plan”) which replaced the 2016 Equity Award Plan (the “2016 Plan”). The 2017 Plan permits the granting of stock options, stock appreciation rights, restricted and unrestricted stock awards, phantom stock, performance awards and other stock-based awards for the purpose of attracting and retaining quality employees, directors and consultants. Maximum awards available under the 2017 Plan were initially set at 3,000,000 shares. To date, only stock options have been issued under the 2016 Plan and the 2017 Plan. Stock Options Stock options granted under the 2017 Plan may be either incentive stock options (“ISOs”) or non-qualified stock options (“NSOs”). ISOs may be granted to employees and NSOs may be granted to employees, directors, or consultants. Stock options are granted at exercise prices as determined by the Board of Directors. The vesting period is generally three to four years with a contractual term of 10 years. The 2017 Plan is administered by the Administrator, which is currently the Board of Directors of the Company. The Administrator has the exclusive authority, subject to the terms and conditions set forth in the 2017 Award Plan, to determine all matters relating to awards under the 2017 Plan, including the selection of individuals to be granted an award, the type of award, the number of shares of Novume common stock subject to an award, and all terms, conditions, restrictions and limitations, if any, including, without limitation, vesting, acceleration of vesting, exercisability, termination, substitution, cancellation, forfeiture, or repurchase of an award and the terms of any instrument that evidences the award. Novume has also designed the 2017 Plan to include a number of provisions that Novume’s management believes promote best practices by reinforcing the alignment of equity compensation arrangements for nonemployee directors, officers, employees, consultants and stockholders’ interests. These provisions include, but are not limited to, the following: No Discounted Awards No Repricing Without Stockholder Approval No Evergreen Provision No Automatic Grants No Transferability. No Tax Gross-Ups. No Liberal Change-in-Control Definition. “Double-trigger” Change in Control Vesting. No Dividends on Unearned Performance Awards Limitation on Amendments. Clawbacks. When making an award under the 2017 Plan, the Administrator may designate the award as “qualified performance-based compensation,” which means that performance criteria must be satisfied in order for an employee to be paid the award. Qualified performance-based compensation may be made in the form of restricted common stock, restricted stock units, common stock options, performance shares, performance units or other stock equivalents. The 2017 Plan includes the performance criteria the Administrator has adopted, subject to stockholder approval, for a “qualified performance-based compensation” award. A summary of stock option activity under the Company’s 2016 Plan and 2017 Plan for the nine months ended September 30, 2017 is as follows: Weighted Number Weighted Average of Share Average Remaining Aggregate Subject to Exercise Contractual Intrinsic Option Price Term Value Balance at December 31, 2016 58,499 $ 1.68 9.29 Granted 1,161,313 1.56 9.30 Exercised — — — Canceled — — — Balance at September 30, 2017 1,219,812 $ 1.56 9.26 $ 430,190 Exercisable at September 30, 2017 262,645 $ 1.57 8.72 $ 102,397 Vested and expected to vest at September 30, 2017 1,131,991 $ 1.56 9.26 $ 399,140 Stock compensation expense for the three months ended September 30, 2017 and 2016 was $107,321 and $0, respectively, and for the nine months ended September 30, 2017 and 2016 was $227,470 and $51,380, respectively, and is included in selling, general and administrative expenses in the accompanying consolidated statements of operations. The intrinsic value of the stock options granted during the nine months ended September 30, 2017 was $400,543. No stock options were granted or outstanding prior to 2016. The total fair value of shares that became vested after grant during the nine months ended September 30, 2017 was $72,750. As of September 30, 2017, there was $527,347 of unrecognized stock compensation expense related to unvested stock options granted under the 2016 Plan that will be recognized over a weighted average period of 2.58 years.

EMPLOYEE BENEFIT PLAN

EMPLOYEE BENEFIT PLAN	9 Months Ended
	Sep. 30, 2017
Employee Benefit Plan
EMPLOYEE BENEFIT PLAN	KSI has a defined contribution savings plan under Section 401(k) of the Internal Revenue Code (the “Code”) (the “401(k) Plan”) which was amended on January 1, 2013, as required by the Code. Pursuant to the amended 401(k) Plan, KSI will make nondiscretionary “safe harbor” matching contributions of 100% of the participant’s salary deferrals up to 3%, and 50% of the next 2%, of a participant’s compensation for all participants. The amount of contributions recorded by Novume during the three months ended September 30, 2017 and 2016 were $25,122 and $31,955 , respectively, and during the nine months ended September 30, 2017 and 2016 were $60,875 and $69,387 , respectively.

INVENTORY

INVENTORY	9 Months Ended
	Sep. 30, 2017
Inventory Abstract
INVENTORY	As of September 30, 2017 and December 31, 2016, inventory consisted entirely of raw materials of $169,232 and $0, respectively.

EARNINGS (LOSS) PER SHARE

EARNINGS (LOSS) PER SHARE	9 Months Ended
	Sep. 30, 2017
Earnings Loss Per Share
EARNINGS (LOSS) PER SHARE	The following table provides information relating to the calculation of earnings (loss) per common share: Three Months Ended Nine Months Ended 2017 2016 2017 2016 Basic and diluted (loss) earnings per share Net (loss) earnings from continuing operations $ (654,155 ) $ (55,542 ) $ (1,776,255 ) $ 422,541 Less: preferred stock dividends (73,732 ) — (144,141 ) — Net income (loss) attributable to shareholders (727,887 ) (55,542 ) (1,920,396 ) 422,541 Weighted average common shares outstanding - basic 11,756,560 9,713,956 10,920,866 7,016,373 Basic (loss) earnings per share $ (0.06 ) $ (0.01 ) $ (0.18 ) $ 0.06 Weighted average common shares outstanding - diluted 11,756,560 9,713,956 10,920,866 7,123,160 Diluted (loss) earnings per share $ (0.06 ) $ (0.01 ) $ (0.18 ) $ 0.06 Common stock equivalents excluded due to anti-dilutive effect 2,105,295 121,247 1,960,282 — For the three months ended September 30, 2017, the following potentially dilutive securities were excluded from diluted loss per share as the Company had a net loss: 1,052,122 common stock equivalents related to the outstanding warrants, 974,487 common stock equivalents related to the Series A Preferred Stock and 78,686 related to outstanding options. In addition, 10,000 options were excluded from the diluted loss per share calculations as the exercise price of these shares exceeded the per share value of the common stock. For the three months ended September 30, 2016, the following potentially dilutive securities were excluded from diluted loss per share as the Company had a net loss: 121,247 common stock equivalents related to the outstanding warrants. A total of 4,167 options were excluded from the diluted loss per share calculations during the three months ended September 30, 2016 as the exercise price of these shares exceeded the per share value of the common stock. For the nine months ended September 30, 2017, the following potentially dilutive securities were excluded from diluted loss per share as the Company had a net loss: 967,845 common stock equivalents related to the outstanding warrants, 917,931 common stock equivalents related to the Series A Preferred Stock and 74,506 related to outstanding options. In addition, 15,707 options were excluded from the diluted loss per share calculations as the exercise price of these shares exceeded the per share value of the common stock. A total of 11,923 options were excluded from the diluted loss per share calculations during the nine months ended September 30, 2016 as the exercise price of these shares exceeded the per share value of the common stock. (Loss) Earnings Per Share under Two – Class Method The Series A Preferred Stock has the non-forfeitable right to participate on an as converted basis at the conversion rate then in effect in any common stock dividends declared and, as such, is considered a participating security. The Series A Preferred Stock is included in the computation of basic and diluted loss per share pursuant to the two-class method. Holders of the Series A Preferred Stock do not participate in undistributed net losses because they are not contractually obligated to do so. The computation of diluted (loss) earnings per share attributable to common stockholders reflects the potential dilution that could occur if securities or other contracts to issue shares of common stock that are dilutive were exercised or converted into shares of common stock (or resulted in the issuance of shares of common stock) and would then share in our earnings. During the periods in which we record a loss attributable to common stockholders, securities would not be dilutive to net loss per share and conversion into shares of common stock is assumed not to occur. The following table provides a reconciliation of net (loss) to preferred shareholders and common stockholders for purposes of computing net (loss) per share for the three and nine months ended September 30, 2017. There were no outstanding participating securities during the three and nine months ended September 30, 2016. Three Months Ended Nine Months Ended 2017 2016 2017 2016 Numerator: Net (loss) earnings from continuing operations $ (654,155 ) $ (55,542 ) $ (1,776,255 ) $ 422,541 Less: preferred stock dividends (73,732 ) — (144,141 ) — Net income (loss) attributable to shareholders $ (727,887 ) $ (55,542 ) $ (1,920,396 ) $ 422,541 Denominator (basic): Weighted average common shares outstanding 11,756,560 9,713,956 10,920,866 7,016,373 Participating securities - Series A preferred stock 502,327 — 473,174 — Weighted average shares outstanding 12,258,887 9,713,956 11,838,797 7,016,373 Loss per common share - basic under two-class method $ (0.06 ) $ (0.01 ) $ (0.16 ) $ 0.06 Denominator (diluted): Weighted average common shares outstanding 11,756,560 9,713,956 10,920,866 7,123,160 Participating securities - Series A preferred stock (1) 502,327 — 917,931 — Weighted average shares outstanding 12,258,887 9,713,956 11,838,797 7,123,160 Loss per common share - basic under two-class method $ (0.06 ) $ (0.01 ) $ (0.16 ) $ 0.06 (1) As these shares are participating securities that participate in earnings, but do not participate in losses based on their contractual rights and obligations, this calculation demonstrates that there is no allocation of the loss to these securities.

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS	9 Months Ended
	Sep. 30, 2017
Subsequent Events [Abstract]
SUBSEQUENT EVENTS	Acquisition of Global Technical Services, Inc and Global Contract Professionals, Inc On October 1, 2017 (the “Global Closing Date”), the Company completed its acquisition of Global Technical Services, Inc. (“GTS”) and Global Contract Professionals, Inc. (“GCP) (collectively, the “Global Entities”) (the “Global Merger”). Consideration (“Global Merger Consideration”) paid as part of the Global Merger included: (a) $750,000 in cash, (b) 375,000 shares of Novume common stock and (c) 240,861 shares of Novume Series B Cumulative Convertible Preferred Stock (the “Novume Series B Preferred Stock”). In addition to the Global Merger Consideration, Novume paid $365,037 to satisfy in full all of the outstanding debt of GTS and GCP at closing, except for certain intercompany debt and ordinary course debt, and amounts due under (a) the Secured Account Purchase Agreement dated August 22, 2012 by and between GTS and Wells Fargo Bank, National Association (the “ GTS Wells Fargo Credit Facility GCP Wells Fargo Credit Facility Wells Fargo Credit Facilities Wells Fargo Guaranty Agreements Issuance of Series B Cumulative Convertible Preferred Stock As part of the Global Merger, the Company created 240,861 shares of $.0001 par value Novume Series B Cumulative Convertible Preferred Stock (the “Series B Preferred Stock”). All Series B Preferred Stock was issued at a price of $10 per share as part of the acquisition of the Global Merger. The Series B Preferred Stock is entitled to quarterly cash dividends of 1.121% (4.484% per annum) per share. The Series B Preferred Stock has a conversion price of $5 per share. Each Series B Preferred Stock has an automatic conversion feature based on the share price of Novume.

SUMMARY OF SIGNIFICANT ACCOUN23

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)	9 Months Ended
	Sep. 30, 2017
Accounting Policies [Abstract]
Principles of Consolidation	The consolidated financial statements include the accounts of Novume, the parent company, and its wholly-owned subsidiaries AOC Key Solutions, Inc., Brekford Traffic Safety Inc., Novume Media, Inc., Chantilly Petroleum, LLC, Firestorm Solutions, LLC and Firestorm Franchising, LLC. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in accordance with the accounting rules under Regulation S-X, as promulgated by the Securities and Exchange Commission (“SEC”). All significant intercompany accounts and transactions have been eliminated in consolidation.
Cash Equivalents	Novume considers all highly liquid debt instruments purchased with the maturity of three months or less to be cash equivalents.
Accounts Receivable and Allowance for Doubtful Accounts	Accounts receivable are customer obligations due under normal trade terms. The Company performs continuing credit evaluations of its clients’ financial condition, and the Company generally does not require collateral. Management reviews accounts receivable to determine if any receivables will potentially be uncollectible. Factors considered in the determination include, among other factors, number of days an invoice is past due, client historical trends, available credit ratings information, other financial data and the overall economic environment. Collection agencies may also be utilized if management so determines. The Company records an allowance for doubtful accounts based on specifically identified amounts that are believed to be uncollectible. The Company also considers recording as an additional allowance a certain percentage of aged accounts receivable, based on historical experience and the Company’s assessment of the general financial conditions affecting its customer base. If actual collection experience changes, revisions to the allowance may be required. After all reasonable attempts to collect an account receivable have failed, the amount of the receivable is written off against the allowance. Based on the information available, the Company had an allowance for doubtful accounts of $24,000 at September 30, 2017 and determined that an allowance was not required at December 31, 2016.
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	The cost of furniture and fixtures and office equipment is depreciated over the useful lives of the related assets. Leasehold improvements are amortized over the shorter of their estimated useful lives or the terms of the lease. Depreciation and amortization is recorded on the straight-line basis. The range of estimated useful lives used for computing depreciation are as follows: Furniture and fixtures 2 - 10 years Office equipment 2 - 5 years Leasehold improvements 3 - 10 years Automobiles 3 - 5 years Camera systems 3 years Depreciation and amortization expense for the three months ended September 30, 2017 and 2016 was $353,982 and 9,833, respectively, and for the nine months ended September 30, 2017 and 2016 was $404,143 and $39,498 , respectively.
Revenue Recognition	The Company recognizes revenues for the provision of services when persuasive evidence of an arrangement exists, services have been rendered or delivery has occurred, the fee is fixed or determinable and the collectability of the related revenue is reasonably assured. The Company principally derives revenues from fees for services generated on a project-by-project basis. Revenues for time-and-materials contracts are recognized based on the number of hours worked by the employees or consultants at an agreed-upon rate per hour set forth in the Company’s standard rate sheet or as written from time to time in the Company’s contracts or purchase orders. Revenues related to firm-fixed-price contracts are primarily recognized upon completion of the project as these projects are typically short-term in nature. Revenue from the sale of individual franchises is recognized when the contract is signed and collectability is assured, unless the franchisee is required to perform certain training before operations commence. The franchisor has no obligation to the franchisee relating to store development and the franchisee is considered operational at the time the franchise agreement is signed or when required training is completed, if applicable. Royalties from individual franchises are earned based upon the terms in the franchising agreement which are generally the greater of $1,000 or 8% of the franchisee’s monthly gross sales. For automated traffic safety enforcement revenue, the Company recognizes the revenue when the required collection efforts, from citizens, are completed and posted to the municipality’s account. The respective municipality is then billed depending on the terms of the respective contract, typically 15 days after the preceding month while collections are reconciled. For contracts where the Company receives a percentage of collected fines, revenue is calculated based upon the posted payments from citizens multiplied by the Company’s contractual percentage. For contracts where the Company receives a specific fixed monthly fee regardless of citations issued or collected, revenue is recorded once the amount collected from citizens exceeds the monthly fee per camera. Brekford’s fixed-fee contracts typically have a revenue neutral provision whereby the municipality’s payment to Brekford cannot exceed amounts collected from citizens within a given month.
Advertising	The Company expenses all non-direct-response advertising costs as incurred. Such costs were not material for the three or nine months ended September 30, 2017 and 2016.
Use of Estimates	Management uses estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual amounts may differ from these estimates. On an on-going basis, the Company evaluates its estimates, including those related to collectability of accounts receivable, fair value of debt and equity instruments and income taxes. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not apparent from other sources. Actual results may differ from those estimates under different assumptions or conditions.
Income Taxes	Through March 15, 2016, KSI elected to be taxed under the provisions of Subchapter S of the Internal Revenue Code. Under those provisions, KSI did not pay U.S. Federal corporate income taxes, and in most instances state income tax, on its taxable income. Instead, the KSI stockholders were liable for individual income taxes on their respective shares of KSI’s net income. KSI effectively revoked its S Corporation election upon the March 15, 2016 merger with the KeyStone. Novume is currently subject to corporate income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company’s evaluation as of September 30, 2017 revealed no uncertain tax positions that would have a material impact on the consolidated financial statements. The 2013 through 2015 tax years remain subject to examination by the IRS and various states. Management does not believe that any reasonably possible changes will occur within the next twelve months that will have a material impact on the consolidated financial statements.
Equity-Based Compensation	The Company recognizes equity-based compensation based on the grant-date fair value of the award on a straight-line basis over the requisite service period, net of estimated forfeitures. Total equity-based compensation expense included in selling, general and administrative expenses in the accompanying consolidated statements of operations for the three months ended September 30, 2017 and 2016 was $107,321 and $0, respectively, and for the nine months ended September 30, 2017 and 2016 was $227,470 and $51,380, respectively. The Company estimates the fair value of stock options using the Black-Scholes option-pricing model. The use of the Black-Scholes option-pricing model requires the use of subjective assumptions, including the fair value and projected volatility of the underlying common stock and the expected term of the award. The fair value of each option granted has been estimated as of the date of the grant using the Black-Scholes option pricing model with the following assumptions during the nine months ended September 30, 2017: Nine months ended September 30, 2017 Risk-free interest rate 1.00% - 1.99% Expected term .3 – 6 years Volatility 70% Dividend yield 0% Estimated annual forfeiture rate at time of grant 0% - 30% Risk-Free Interest Rate – Expected Term – Expected Volatility – Dividend Yield – Forfeiture Rate –
Fair Value of Financial Instruments	The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, accounts receivable and accounts payable approximate fair value as of September 30, 2017 and December 31, 2016 because of the relatively short-term maturity of these financial instruments. The carrying amount reported for long-term debt approximates fair value as of September 30, 2017, given management’s evaluation of the instrument’s current rate compared to market rates of interest and other factors. The determination of fair value is based upon the fair value framework established by Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures Level 1 Level 2 Level 3 Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurements. Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy. The Company has concluded that its Series A Preferred Stock is a Level 3 financial instrument and that the fair value approximates the carrying value due to the proximity of the date of the sale of the Series A Preferred Stock to independent third-parties as compared to September 30, 2017. There were no changes in levels during the three or nine months ended September 30, 2017 and the Company did not have any financial instruments prior to 2016.
Concentrations of Credit Risk	Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, and accounts receivable. Concentrations of credit risk with respect to accounts receivable are minimal due to the collection history and due to the nature of the Company’s client base. The Company limits its credit risk with respect to cash by maintaining cash balances with high-quality financial institutions. At times, the Company’s cash may exceed U.S. Federally insured limits, and as of September 30, 2017 and December 31, 2016, the Company had $3,762,265 and $2,788,587 , respectively, of cash and cash equivalents on deposit that exceeded the federally insured limit.
Earnings per Share	Basic earnings per share, or EPS, is computed using the weighted average number of common shares outstanding during the period. Diluted EPS is computed using the weighted average number of common and potentially dilutive securities outstanding during the period, except for periods of net loss for which no potentially dilutive securities are included because their effect would be anti-dilutive. Potentially dilutive securities consist of common stock issuable upon exercise of stock options or warrants using the treasury stock method. Potentially dilutive securities issuable upon conversion of the Series A Preferred Stock are calculated using the if-converted method. The Company calculates basic and diluted earnings per common share using the two-class method. Under the two-class method, net earnings are allocated to each class of common stock and participating security as if all of the net earnings for the period had been distributed. Participating securities consist of Series A Preferred Stock and warrants that contain a nonforfeitable right to receive dividends and therefore are considered to participate in undistributed earnings with common stockholders.
Foreign Currency Transactions	Brekford has certain revenue and expense transactions with a functional currency in Mexican pesos and the Company's reporting currency is the U.S. dollar. Assets and liabilities are translated from the functional currency to the reporting currency at the exchange rate in effect at the balance sheet date and equity at the historical exchange rates. Revenue and expenses are translated at rates in effect at the time of the transactions. Any resulting translation gains and losses are accumulated in a separate component of stockholders' equity - other comprehensive income (loss). Realized foreign currency transaction gains and losses are credited or charged directly to operations.
Segment Reporting	The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 280, Segment Reporting
Going Concern Assessment	Beginning with the year ended December 31, 2016 and all annual and interim periods thereafter, management will assess going concern uncertainty in the Company’s consolidated financial statements to determine there is sufficient cash on hand and working capital, including available borrowings on loans, to operate for a period of at least one year from the date the consolidated financial statements are issued or available to be issued, which is referred to as the “look-forward period”, as defined in GAAP. As part of this assessment, based on conditions that are known and reasonably knowable to management, management will consider various scenarios, forecasts, projections, estimates and will make certain key assumptions, including the timing and nature of projected cash expenditures or programs, its ability to delay or curtail expenditures or programs and its ability to raise additional capital, if necessary, among other factors. Based on this assessment, as necessary or applicable, management makes certain assumptions around implementing curtailments or delays in the nature and timing of programs and expenditures to the extent it deems probable those implementations can be achieved and management has the proper authority to execute them within the look-forward period. Management’s assessment determined the Company is a going concern.
New Accounting Pronouncements	Recently Issued Accounting Pronouncements Not Yet Adopted In August 2017, the Financial Accounting Standards Board (“FASB”) issued new guidance related to accounting for hedging activities. This guidance expands strategies that qualify for hedge accounting, changes how many hedging relationships are presented in the financial statements, and simplifies the application of hedge accounting in certain situations. The standard will be effective for us beginning July 1, 2019, with early adoption permitted for any interim or annual period before the effective date. Adoption of the standard will be applied using a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the effective date. The Company is currently evaluating the impact of this standard on our consolidated financial statements, including accounting policies, processes, and systems. In May 2017, the FASB issued Accounting Standards Update (“ASU”) No. 2017-09, Compensation - Stock Compensation: Scope of Modification Accounting In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other: Simplifying the Test for Goodwill Impairment. In October 2016, the FASB issued ASU No. 2016-16, Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory In February 2016, the FASB issued ASU 2016-02, Leases In January 2016, the FASB, issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers ● ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date ● ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations ● ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensin ● ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients The underlying principle is to use a five-step analysis of transactions to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. The standard permits the use of either a retrospective or modified retrospective application. The Company is currently in the process of completing its assessment of any significant contract and assessing the impact the adoption of the new revenue standard will have on its consolidated financial statements and related disclosures. The standard update, as amended, will be effective for annual periods beginning after December 15, 2017. The Company performed an initial assessment of the impact of the ASU and is developing a transition plan, including necessary changes to policies, processes, and internal controls as well as system enhancements to generate the information necessary for the new disclosures. The project is on schedule for adoption on January 1, 2018 and the Company will apply the modified retrospective method. The Company expects revenue recognition across its portfolio of services to remain largely unchanged. However, the Company expects to recognize revenue earlier than it does under current guidance in a few areas, including accounting for variable fees and for certain consulting services, which will be recognized over time rather than at a point in time. While the Company has not finalized its assessment of the impact of the ASU, based on the analysis completed to date, the Company does not currently anticipate that the ASU will have a material impact on its Consolidated Financial Statements. There are currently no other accounting standards that have been issued, but not yet adopted, that will have a significant impact on the Company’s consolidated financial position, results of operations or cash flows upon adoption. Recently Adopted In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes In April 2015, the FASB issued ASU 2015-03, Interest Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements – Going Concern In March 2016, FASB issued ASU ASU 2016-09, Improvements to Employee Share-Based Payment Accounting The Company does not believe that any recently issued accounting standards, in addition to those referenced above, would have a material effect on its consolidated financial statements.

ACQUISITION (Tables)

ACQUISITION (Tables)	9 Months Ended
	Sep. 30, 2017
Acquisition Tables
Purchase price allocation	The table below shows the preliminary analysis related to the Brekford acquisition: Common stock issued $ 5,851,193 Total consideration 5,851,193 Less cash received (1,943,778 ) Less other assets (3,139,007 ) Plus liabilities assumed 1,191,937 Net goodwill/intangible recorded $ 1,960,345 The table below shows the final breakdown related to the Firestorm acquisition: Cash paid $ 500,000 Notes payable issued 907,407 Common stock issued 976,286 Warrants issued, at $2.58 125,411 Warrants issued, at $3.61 102,289 Total consideration 2,611,393 Less cash received (82,296 ) Less other assets (137,457 ) Less intangible and intellectual property (2,497,686 ) Plus liabilities assumed 106,046 Net goodwill recorded $ —
Pro-forma financial information	For the three months ended September 30, For the nine months ended September 30, 2017 2016 2017 2016 Revenues $ 4,906,343 $ 3,345,473 $ 13,353,752 $ 12,194,573 Net income (loss) $ (928,166 ) $ (394,760 ) $ (2,678,772 ) $ (591,347 ) Basic earnings (loss) per share $ (0.08 ) $ (0.04 ) $ (0.25 ) $ (0.08 ) Diluted earnings (loss) per share $ (0.08 ) $ (0.04 ) $ (0.25 ) $ (0.08 ) Basic Number of Shares 11,756,560 9,713,956 10,920,866 7,016,373 Diluted Number of Shares 11,756,560 9,713,956 10,920,866 7,016,373

SUMMARY OF SIGNIFICANT ACCOUN25

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)	9 Months Ended
	Sep. 30, 2017
Summary Of Significant Accounting Policies Tables
Estimated useful lives	Furniture and fixtures 2 - 10 years Office equipment 2 - 5 years Leasehold improvements 3 - 10 years Automobiles 3 - 5 years Camera systems 3 years
Assumptions for options granted	Nine months ended September 30, 2017 Risk-free interest rate 1.00% - 1.99% Expected term .3 – 6 years Volatility 70% Dividend yield 0% Estimated annual forfeiture rate at time of grant 0% - 30%

SUPPLEMENTAL DISCLOSURES OF C26

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION (Tables)	9 Months Ended
	Sep. 30, 2017
Supplemental Disclosures Of Cash Flow Information Tables
Supplemental disclosures of cash flow information	For the Nine Months Ended: September 30, 2017 September 30, 2016 Cash paid for interest $ 33,429 $ 29,083 Cash paid for taxes $ — $ — Warrants issued in connection with note payable $ — $ 58,520 Warrants issued in connection with issuance of Series A Preferred Stock $ 67,491 $ — Business Combinations: Current Assets $ 1,044,893 $ — Property and equipment, net $ 268,398 $ — Intangible assets $ 2,498,737 $ — Goodwill $ 1,960,328 $ — Other non-current assets $ 1,962,140 $ — Assumed liabilities $ (1,258,905 ) $ — Deferred revenue $ (22,493 ) $ — Other non-current liabilities $ (16,584 ) $ — Issuance of common stock $ (7,055,179 ) $ — Notes payable $ (907,407 ) $ —

INCOME TAXES (Tables)

INCOME TAXES (Tables)	9 Months Ended
	Sep. 30, 2017
Income Taxes Tables
Income tax benefit	Three Months ended September 30, 2017 Nine Months ended September 30, 2017 Deferred: Federal $ (305,972 ) $ (949,428 ) State (56,375 ) (152,154 ) Benefit from income taxes $ (362,347 ) $ (1,101,582 )
Deferred income tax assets and liabilities	Deferred tax assets: Amortizable start-up costs $ 110,729 Amortizable intangibles 81,034 Accrued bonuses 53,998 Net operating loss carryforward 1,166,042 1,411,803 Deferred tax liabilities: Fixed assets (90,239 ) Total deferred tax assets, net $ 1,321,564
Effective tax rate	Three Months ended Nine Months ended U.S. statutory federal rate 34.00 % 34.00 % (Decrease) increase in taxes resulting from: State income tax rate, net of U.S. Federal benefit 5.20 % 5.20 % Net effect of permanent and temporary reconciling items -0.09 % 0.85 % Effective tax rate 39.11 % 40.05 %

COMMITMENTS (Tables)

COMMITMENTS (Tables)	9 Months Ended
	Sep. 30, 2017
Commitments Tables
Future obligations	2017 $ 188,854 2018 697,153 2019 624,024 2020 64,475 Total $ 1,574,506

EQUITY INCENTIVE PLAN (Tables)

EQUITY INCENTIVE PLAN (Tables)	9 Months Ended
	Sep. 30, 2017
Equity Incentive Plan Tables
Stock option activity	Weighted Number Weighted Average of Share Average Remaining Aggregate Subject to Exercise Contractual Intrinsic Option Price Term Value Balance at December 31, 2016 58,499 $ 1.68 9.29 Granted 1,161,313 1.56 9.30 Exercised — — — Canceled — — — Balance at September 30, 2017 1,219,812 $ 1.56 9.26 $ 430,190 Exercisable at September 30, 2017 262,645 $ 1.57 8.72 $ 102,397 Vested and expected to vest at September 30, 2017 1,131,991 $ 1.56 9.26 $ 399,140

EARNINGS (LOSS) PER SHARE (Tabl

EARNINGS (LOSS) PER SHARE (Tables)	9 Months Ended
	Sep. 30, 2017
Earnings Loss Per Share Tables
Earnings (loss) per common share	Three Months Ended Nine Months Ended 2017 2016 2017 2016 Basic and diluted (loss) earnings per share Net (loss) earnings from continuing operations $ (654,155 ) $ (55,542 ) $ (1,776,255 ) $ 422,541 Less: preferred stock dividends (73,732 ) — (144,141 ) — Net income (loss) attributable to shareholders (727,887 ) (55,542 ) (1,920,396 ) 422,541 Weighted average common shares outstanding - basic 11,756,560 9,713,956 10,920,866 7,016,373 Basic (loss) earnings per share $ (0.06 ) $ (0.01 ) $ (0.18 ) $ 0.06 Weighted average common shares outstanding - diluted 11,756,560 9,713,956 10,920,866 7,123,160 Diluted (loss) earnings per share $ (0.06 ) $ (0.01 ) $ (0.18 ) $ 0.06 Common stock equivalents excluded due to anti-dilutive effect 2,105,295 121,247 1,960,282 —
Earnings (loss) per common share, Class Method	Three Months Ended Nine Months Ended 2017 2016 2017 2016 Numerator: Net (loss) earnings from continuing operations $ (654,155 ) $ (55,542 ) $ (1,776,255 ) $ 422,541 Less: preferred stock dividends (73,732 ) — (144,141 ) — Net income (loss) attributable to shareholders $ (727,887 ) $ (55,542 ) $ (1,920,396 ) $ 422,541 Denominator (basic): Weighted average common shares outstanding 11,756,560 9,713,956 10,920,866 7,016,373 Participating securities - Series A preferred stock 502,327 — 473,174 — Weighted average shares outstanding 12,258,887 9,713,956 11,838,797 7,016,373 Loss per common share - basic under two-class method $ (0.06 ) $ (0.01 ) $ (0.16 ) $ 0.06 Denominator (diluted): Weighted average common shares outstanding 11,756,560 9,713,956 10,920,866 7,123,160 Participating securities - Series A preferred stock (1) 502,327 — 917,931 — Weighted average shares outstanding 12,258,887 9,713,956 11,838,797 7,123,160 Loss per common share - basic under two-class method $ (0.06 ) $ (0.01 ) $ (0.16 ) $ 0.06

NATURE OF OPERATIONS AND RECA31

NATURE OF OPERATIONS AND RECAPITALIZATION (Details Narrative)	9 Months Ended
	Sep. 30, 2017
Nature Of Operations And Recapitalization Details Narrative
Date of operation	Feb. 1, 2017
State of operation	Virginia

ACQUISITION (Details)

ACQUISITION (Details) - USD ($)	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Notes payable issued	$ 907,407	$ 0
Common stock issued	7,055,179	0
Less intangible and intellectual property	(2,498,737)	0
Net goodwill/intangible recorded	1,960,345	$ 0	$ 0
Brekford
Common stock issued	5,851,193
Total consideration	5,851,193
Less cash received	(1,943,778)
Less other assets	(3,139,007)
Plus liabilities assumed	1,191,937
Net goodwill/intangible recorded	1,960,345
Firestorm
Cash paid	500,000
Notes payable issued	907,407
Common stock issued	976,286
Warrants issued, at $2.58	125,411
Warrants issued, at $3.61	102,289
Total consideration	2,611,393
Less cash received	(82,296)
Less other assets	(137,457)
Less intangible and intellectual property	(2,497,686)
Plus liabilities assumed	106,046
Net goodwill/intangible recorded	$ 0

ACQUISITION (Details 1)

ACQUISITION (Details 1) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Acquisition Details 1
Revenues	$ 4,906,343	$ 3,345,473	$ 13,353,752	$ 12,194,573
Net income (loss)	$ (928,166)	$ (394,760)	$ (2,678,772)	$ (591,347)
Basic earnings (loss) per share	$ (0.08)	$ (0.04)	$ (0.25)	$ (0.08)
Diluted earnings (loss) per share	$ (0.08)	$ (0.04)	$ (0.25)	$ (0.08)
Basic Number of Shares	11,756,560	9,713,956	10,920,866	7,016,373
Diluted Number of Shares	11,756,560	9,713,956	10,920,866	7,016,373

SUMMARY OF SIGNIFICANT ACCOUN34

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details)	9 Months Ended
	Sep. 30, 2017
Furniture and fixtures | Minimum
Estimated useful life	2 years
Furniture and fixtures | Maximum
Estimated useful life	10 years
Office equipment | Minimum
Estimated useful life	2 years
Office equipment | Maximum
Estimated useful life	5 years
Leasehold improvements | Minimum
Estimated useful life	3 years
Leasehold improvements | Maximum
Estimated useful life	10 years
Automobiles | Minimum
Estimated useful life	3 years
Automobiles | Maximum
Estimated useful life	5 years
Camera systems
Estimated useful life	3 years

SUMMARY OF SIGNIFICANT ACCOUN35

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1)	9 Months Ended
	Sep. 30, 2017
Volatility	70.00%
Dividend yield	0.00%
Minimum
Risk-free interest rate	1.00%
Expected term	3 months 18 days
Estimated annual forfeiture rate at time of grant	0.00%
Maximum
Risk-free interest rate	1.99%
Expected term	6 years
Estimated annual forfeiture rate at time of grant	30.00%

SUMMARY OF SIGNIFICANT ACCOUN36

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Summary Of Significant Accounting Policies Details Narrative
Allowance for doubtful accounts	$ 24,000		$ 24,000		$ 24,000
Depreciation and amortization expense	353,982	$ 9,833	404,143	$ 39,498
Equity-based compensation expense	107,321	$ 0	227,470	$ 51,380
Uninsured cash and cash equivalents	$ 3,762,265		$ 3,762,265		$ 2,788,587

INVESTMENT AT COST AND NOTES 37

INVESTMENT AT COST AND NOTES RECEIVABLE (Details Narrative) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Investment At Cost And Notes Receivable Details Narrative
Notes receivable, current	$ 300,000	$ 0
Notes receivable, noncurrent	$ 1,649,000	$ 0

SUPPLEMENTAL DISCLOSURES OF C38

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION (Details) - USD ($)	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Supplemental Disclosures Of Cash Flow Information Details
Cash paid for interest	$ 33,429	$ 29,083
Cash paid for taxes	0	0
Warrants issued in connection with note payable	0	58,520
Warrants issued in connection with issuance of Series A Preferred Stock	67,491	0
Business Combinations:
Current Assets	1,044,893	0
Property and equipment, net	268,398	0
Intangible assets	2,498,737	0
Goodwill	1,960,345	0	$ 0
Other non-current assets	1,962,140
Assumed liabilities	(1,258,905)	0
Deferred revenue	(22,493)	0
Other non-current liabilities	(16,584)	0
Issuance of common stock	(7,055,179)	0
Notes payable	$ (907,407)	$ 0

INCOME TAXES (Details)

INCOME TAXES (Details) - USD ($)	3 Months Ended	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2017
Deferred:
Federal	$ (305,972)	$ (949,428)
State	(56,375)	(152,154)
Benefit from income taxes	$ (362,347)	$ (1,101,582)

INCOME TAXES (Details 1)

INCOME TAXES (Details 1)	Sep. 30, 2017USD ($)
Deferred tax assets:
Amortizable start-up costs	$ 110,729
Amortizable intangibles	81,034
Accrued bonuses	53,998
Net operating loss carryforward	1,166,042
Deferred tax assets	1,411,803
Deferred tax liabilities:
Fixed assets	(90,239)
Total deferred tax assets, net	$ 1,321,564

INCOME TAXES (Details 2)

INCOME TAXES (Details 2)	3 Months Ended	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2017
Income Taxes Details 2
U.S. statutory federal rate	34.00%	34.00%
(Decrease) increase in taxes resulting from:
State income tax rate, net of U.S. Federal benefit	5.20%	5.20%
Net effect of permanent and temporary reconciling items	(0.09%)	0.85%
Effective tax rate	39.11%	40.05%

INCOME TAXES (Details Narrative

INCOME TAXES (Details Narrative)	Sep. 30, 2017USD ($)
Income Taxes Details Narrative
Net operating loss carryforwards	$ 2,974,597

STOCKHOLDERS_ EQUITY (Details N

STOCKHOLDERS’ EQUITY (Details Narrative) - $ / shares	Sep. 30, 2017	Dec. 31, 2016
Preferred stock, par value	$ 0.0001	$ 0.0001
Preferred stock, authorized	7,500,000	0
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, authorized	25,000,000	25,000,000
Common stock, issued	13,933,784	5,000,000
Common stock, outstanding	13,933,784	5,000,000
Series A Cumulative Convertible Redeemable Preferred
Preferred stock, par value	$ 0.0001	$ 0.0001
Preferred stock, authorized	505,000	500,000
Preferred stock, issued	502,327	301,570
Preferred stock, outstanding	502,327	301,570

WARRANT DERIVATIVE LIABILITY (D

WARRANT DERIVATIVE LIABILITY (Details Narrative) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Warrant Derivative Liability Details Narrative
Fair value of derivative liability	$ 18,228	$ 24,360

COMMITMENTS (Details)

COMMITMENTS (Details)	Sep. 30, 2017USD ($)
Commitments Details
2,017	$ 188,854
2,018	697,153
2,019	624,024
2,020	64,475
Total	$ 1,574,506

COMMITMENTS (Details Narrative)

COMMITMENTS (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Commitments Details Narrative
Rent expense	$ 193,985	$ 178,946	$ 575,181	$ 533,168
Rent income	$ 46,957	$ 45,634	$ 140,871	$ 136,901

EQUITY INCENTIVE PLAN (Details)

EQUITY INCENTIVE PLAN (Details)	9 Months Ended
	Sep. 30, 2017USD ($)$ / sharesshares
Equity Incentive Plan Details
Number of options outstanding, beginning | shares	58,499
Number of options, granted | shares	1,161,313
Number of options, exercised | shares	0
Number of options, cancelled | shares	0
Number of options outstanding, ending | shares	1,219,812
Number of options outstanding, exercisable | shares	262,645
Number of options outstanding, vested and expected to vest | shares	1,131,991
Weighted average exercise price outstanding, beginning | $ / shares	$ 1.68
Weighted average exercise price, granted | $ / shares	1.56
Weighted average exercise price, exercised | $ / shares	0
Weighted average exercise price, cancelled | $ / shares	0
Weighted average exercise price outstanding, ending | $ / shares	1.56
Weighted average exercise price outstanding, exercisable | $ / shares	1.57
Weighted average exercise price outstanding, vested and expected to vest | $ / shares	$ 1.56
Average remaining contractual term outstanding, beginning	9 years 3 months 14 days
Average remaining contractual term, granted	9 years 3 months 18 days
Average remaining contractual term outstanding, ending	9 years 3 months 4 days
Average remaining contractual term, exercisable	8 years 8 months 19 days
Average remaining contractual term, vested and expected to vest	9 years 3 months 4 days
Aggregate intrinsic value outstanding, ending | $	$ 430,190
Aggregate intrinsic value outstanding, exercisable | $	102,397
Aggregate intrinsic value outstanding, vested and expected to vest | $	$ 399,140

EQUITY INCENTIVE PLAN (Details

EQUITY INCENTIVE PLAN (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Equity Incentive Plan Details Narrative
Stock compensation expense	$ 107,321	$ 0	$ 227,470	$ 51,380
Unrecognized stock compensation expense	$ 527,347		$ 527,347
Unrecognized stock compensation expense, recognition period			2 years 6 months 29 days

EMPLOYEE BENEFIT PLAN (Details

EMPLOYEE BENEFIT PLAN (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Employee Benefit Plan Details Narrative
Contributions	$ 25,122	$ 31,955	$ 60,875	$ 69,387

INVENTORY (Details Narrative)

INVENTORY (Details Narrative) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Inventory Details Narrative
Raw materials	$ 169,232	$ 0

EARNINGS (LOSS) PER SHARE (Deta

EARNINGS (LOSS) PER SHARE (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Basic and diluted (loss) earnings per share
Net (loss) earnings from continuing operations	$ (654,155)	$ (55,542)	$ (1,776,255)	$ 422,541
Less: preferred stock dividends	(73,732)	0	(144,141)	0
Net income (loss) attributable to shareholders	$ (727,887)	$ (55,542)	$ (1,920,396)	$ 422,541
Weighted average common shares outstanding - basic	11,756,560	9,713,956	10,920,866	7,016,373
Basic (loss) earnings per share	$ (0.06)	$ (0.01)	$ (0.18)	$ 0.06
Weighted average common shares outstanding - diluted	11,756,560	9,713,956	10,920,866	7,123,160
Diluted (loss) earnings per share	$ (0.06)	$ (0.01)	$ (0.18)	$ 0.06
Common stock equivalents excluded due to anti-dilutive effect	2,105,295	121,247	1,960,282	0

EARNINGS (LOSS) PER SHARE (De52

EARNINGS (LOSS) PER SHARE (Details 1) - USD ($)		3 Months Ended		9 Months Ended
		Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Numerator:
Net (loss) earnings from continuing operations		$ (654,155)	$ (55,542)	$ (1,776,255)	$ 422,541
Less: preferred stock dividends		(73,732)	0	(144,141)	0
Net income (loss) attributable to shareholders		$ (727,887)	$ (55,542)	$ (1,920,396)	$ 422,541
Denominator (basic):
Weighted average common shares outstanding		11,756,560	9,713,956	10,920,866	7,016,373
Participating securities - Series A preferred stock		502,327	0	473,174	0
Weighted average shares outstanding		12,258,887	9,713,956	11,838,797	7,016,373
Loss per common share - basic under two-class method		$ (0.06)	$ (0.01)	$ (0.16)	$ 0.06
Denominator (diluted):
Weighted average common shares outstanding		11,756,560	9,713,956	10,920,866	7,123,160
Participating securities - Series A preferred stock	[1]	502,327	0	917,931	0
Weighted average shares outstanding		12,258,887	9,713,956	11,838,797	7,123,160
Loss per common share - basic under two-class method		$ (0.06)	$ (0.01)	$ (0.16)	$ 0.06
[1]	As these shares are participating securities that participate in earnings, but do not participate in losses based on their contractual rights and obligations, this calculation demonstrates that there is no allocation of the loss to these securities.

EARNINGS (LOSS) PER SHARE (De53

EARNINGS (LOSS) PER SHARE (Details Narrative) - shares	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Potentially dilutive securities excluded from loss per share	2,105,295	121,247	1,960,282	0
Warrants
Potentially dilutive securities excluded from loss per share	1,052,122	121,247	967,845
Series A Preferred Stock
Potentially dilutive securities excluded from loss per share	974,487		917,931
Options
Potentially dilutive securities excluded from loss per share	78,686	4,167	74,506	11,923