Electronic Control Security (EKCS) 10-Q 14 Nov 13 2014 Q1 Quarterly report Financial data

Document_And_Entity_Informatio

Document And Entity Information	3 Months Ended
	Sep. 30, 2013	Nov. 09, 2013
Document Information [Line Items]	'	'
Document Type	'10-Q	'
Amendment Flag	'false	'
Document Period End Date	30-Sep-13	'
Document Fiscal Year Focus	'2014	'
Document Fiscal Period Focus	'Q1	'
Trading Symbol	'EKCS	'
Entity Common Stock, Shares Outstanding	'	15,866,618
Entity Registrant Name	'ELECTRONIC CONTROL SECURITY INC	'
Entity Central Index Key	'0000803044	'
Current Fiscal Year End Date	'--06-30	'
Entity Filer Category	'Smaller Reporting Company	'

Consolidated_Balance_Sheets

Consolidated Balance Sheets (USD $)	Sep. 30, 2013	Jun. 30, 2013
ASSETS	'	'
Cash and cash equivalents	$556	$556
Accounts receivable, net of allowance of $425,000	621,471	586,319
Inventories	1,840,181	1,842,203
Current portion of deferred income taxes	194,986	167,499
Other current assets	13,109	22,828
Total current assets	2,670,303	2,619,405
Property, equipment and software development costs - net	198,193	219,402
Intangible assets - net	779,998	798,932
Deferred income taxes	687,750	678,981
Other assets	16,289	17,643
ASSETS	4,352,533	4,334,363
LIABILITIES AND SHAREHOLDERS' EQUITY	'	'
Accounts payable and accrued expenses	1,211,199	1,142,391
Due to officers, shareholders and affiliates	563,780	441,771
Current maturities of debt	32,907	32,418
Total current liabilities	1,807,886	1,616,580
Noncurrent liabilities	'	'
Long-term debt	431,892	440,557
Subordinated liabilities to officers and shareholders	848,080	848,080
Other	7,000	7,000
Total liabilities	3,094,858	2,912,217
Shareholders' equity	'	'
Common Stock, $.001 par value; 30,000,000 shares authorized; 15,967,146 and 15,967,146 shares issued; 15,866,618 and 15,867,146 shares outstanding	15,967	15,967
Additional paid-in capital	14,159,476	14,119,909
Accumulated deficit	-12,915,496	-12,711,521
Accumulated other comprehensive income	4,790	4,790
Treasury stock, at cost, 100,528 and 100,000 shares	-10,063	-10,000
Total shareholders' equity	1,257,675	1,422,146
Liabilities and Equity	4,352,533	4,334,363
Series A Convertible Preferred Stock [Member]	'	'
Shareholders' equity	'	'
Preferred Stock	3,000	3,000
Series B 10% Convertible Preferred Stock [Member]	'	'
Shareholders' equity	'	'
Preferred Stock	$1	$1

Consolidated_Balance_Sheets_Pa

Consolidated Balance Sheets [Parenthetical] (USD $)	Sep. 30, 2013	Jun. 30, 2013
Allowance for doubtful accounts receivable, current	$425,000	$425,000
Common stock, par value (in dollars per share)	$0.00	$0.00
Common stock, shares authorized	30,000,000	30,000,000
Common stock, shares issued	15,967,146	15,967,146
Common stock, shares outstanding	15,866,618	15,867,146
Treasury stock, shares	100,528	100,000
Series A Convertible Preferred Stock [Member]	'	'
Preferred stock, par value (in dollars per share)	$0.01	$0.01
Preferred stock, liquidation preference (in dollars per share)	$2	$2
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	300,000	300,000
Preferred stock, shares outstanding	300,000	300,000
Series B 10% Convertible Preferred Stock [Member]	'	'
Preferred stock, par value (in dollars per share)	$0.00	$0.00
Preferred stock, liquidation preference (in dollars per share)	$2,495	$2,434
Preferred stock, shares authorized	2,000	2,000
Preferred stock, shares issued	645	645
Preferred stock, shares outstanding	645	645

Consolidated_Statements_of_Ope

Consolidated Statements of Operations (USD $)	3 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Revenues	$171,019	$432,074
Cost of revenues	157,617	200,190
Gross profit	13,402	231,884
Research and development	16,163	24,931
Selling, general and administrative expenses	174,106	239,805
Loss from operations	-176,867	-32,852
Other expenses (income)	'	'
Interest expense	21,129	17,826
Other, net	1,354	0
Total other expenses (income)	22,483	17,826
Loss before income taxes	-199,350	-50,678
Income tax benefits	-34,944	0
Loss before dividends	-164,406	-50,678
Dividends related to convertible preferred stock	39,568	35,847
Net loss attributable to common shareholders	($203,974)	($86,525)
Net loss per share:	'	'
Basic (in dollars per share)	($0.01)	($0.01)
Diluted (in dollars per share)	($0.01)	($0.01)
Weighted average number of common shares and equivalents:	'	'
Basic (in shares)	15,866,635	11,867,146
Diluted (in shares)	15,866,635	11,867,146

Consolidated_Statements_of_Com

Consolidated Statements of Comprehensive Income (Loss) (USD $)	3 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Loss before dividends	($164,406)	($50,678)
Other comprehensive income, net of tax: Foreign currency translation adjustments	0	0
Comprehensive loss	($164,406)	($50,678)

Consolidated_Statements_of_Cas

Consolidated Statements of Cash Flows (USD $)	3 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Cash flows from operating activities:	'	'
Net loss before deemed dividends	($164,406)	($50,678)
Adjustments to reconcile loss to net cash provided by (used in) operating activities:	'	'
Depreciation and amortization	41,497	40,343
Deferred income taxes	-36,257	0
Increase (decrease) in cash attributable to changes in	'	'
Accounts receivable	-35,152	8,182
Inventories	2,022	-9,237
Other current assets	9,718	19,867
Accounts payable and accrued expenses	68,808	73,034
Other assets and liabilities	0	67
Net cash provided by (used in) operating activities	-113,770	81,578
Cash flows from investing activities:	'	'
Acquisition of property plant and equipment	0	0
Net cash used in investing activities	0	0
Cash flows from financing activities:	'	'
Payments on short-term debt	0	-62,500
Payments on long-term debt	-8,176	0
Purchase of treasury stock	-63	0
Increase in due to officers, shareholders and affiliates	122,009	112,607
Net cash provided by financing activities	113,770	50,107
Net increase in cash and cash equivalents	0	131,685
Cash and cash equivalents at beginning of period	556	1,403
Cash and cash equivalents at end of period	556	133,088
Supplemental disclosures of cash flow information Cash paid during the period for:	'	'
Interest	0	7,561
Taxes	$0	$0

Basis_of_presentation

Basis of presentation	3 Months Ended
	Sep. 30, 2013
Organization, Consolidation and Presentation Of Financial Statements [Abstract]	'
Basis of presentation	'
	Note 1 – Basis of Presentation
	The accompanying unaudited consolidated financial statements of Electronic Control Security Inc. and its subsidiaries (collectively "the Company") have been prepared in accordance with generally accepted accounting principles for interim financial information and Article 8.03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended September 30, 2013 are not necessarily indicative of the results that may be expected for the year ending June 30, 2014. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and footnotes thereto included in the Company's Form 10-K for the year ended June 30, 2013, as filed with the Securities and Exchange Commission.
	The consolidated financial statements have been prepared based on the Company continuing as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company incurred losses before dividends of $164,406 in the three months ended September 30, 2013, and $1,221,153 and $1,531,773 in the years ended June 30, 2013 and 2012, respectively. Our cash flow and liquidity have been severely impacted by the refusal of Lockheed Martin to pay us for the accounts receivable due from them totaling nearly $1 million. Atlantic Stewardship Bank (the “Bank”) has converted the prior line of credit to a term loan, and no further borrowings are available under the agreement (refer to note 6 below). Through the periods ended September 30, 2013, June 30, 2013 and 2012, the principal source of funds used to finance the Company’s operations has been advances from officers, shareholders and affiliates and accrued costs due to those parties. There is no assurance that those parties will continue to provide the operating funds. Through Fiscal 2012 and 2013, there were continuing delays in release of funding at the Department of Defense and Department of Energy on projects where we serve as a prime contractor and as a subcontractor. The budget constraints and budget uncertainty at the U.S. government agencies have significantly reduced the issuance of orders and delayed projects for all participants in our industry. These factors were addressed in our Form 10-K for the year ended June 30, 2013.
	The Company has working capital of about $862,000 and shareholders’ equity of about $1.258 million as of September 30, 2013. In June 2013, the Bank converted the prior line of credit into a term loan, due in installments from July 2013 through June 2015. In connection with this agreement, three of the Company’s officers agreed to subordination agreements with the Bank, under which a total of $848,080 of amounts due to those officers has been subordinated to amounts due to the Bank. The classification of the portion of the Bank loan due after June 30, 2014 and the amounts subordinated by the officers resulted in an increase of the Company’s working capital by $1,288,597. Officers, shareholders and affiliates provided funds in the form of cash advances and deferral of accrued costs and expenses due to them during Fiscal 2013 of $524,412 and $122,009 during the three months ended September 30, 2013. If the Company should require financing of its future accounts receivable, the Company has access to a secured accounts receivable line of credit with Amerisource of approximately $3 million.
	In Fiscal 2013 the Company was awarded, as the prime contractor or as a subcontractor, several contracts from units of the Department of Defense. These contracts awarded provide that task orders under the contracts will require competitive bids to be submitted by the Company as those task orders are issued. Through Fiscal 2012 and 2013, the Company has sought to expand its business both domestically and internationally by continuing to submit proposals in response to Request for Proposals (“RFP’s”) from various government agencies.
	The Company’s ability to continue its operations is dependent upon our ability to generate sufficient cash flow either from operations, from continued funds from officers and shareholders or from additional financing.
	New Authoritative Pronouncements
	The Company has considered all new accounting pronouncements and has concluded that there are no new pronouncements that may have a material impact on results of operations, financial condition, or cash flows, based on current information.

Earnings_Per_Share

Earnings Per Share	3 Months Ended
	Sep. 30, 2013
Earnings Per Share [Abstract]	'
Earnings Per Share	'
	Note 2 - Earnings Per Share
	Basic earnings per share is computed based on the weighted-average number of shares of the Company’s common stock, par value $0.001 per share, outstanding. Diluted earnings per share is computed based on the weighted-average number of shares of the Company’s common stock, including common stock equivalents outstanding. Certain common stock equivalents consisting of stock options, warrants, convertible debentures and convertible preferred stock that would have an anti-dilutive effect were not included in the diluted earnings per share attributable to common stockholders for the three months ended September 30, 2013 and 2012.
	The following is a reconciliation of the denominators of the basic and diluted earnings per share computations:
		Three Months
		Ended September 30,
		2013		2012
	Denominators:
	Weighted-average shares outstanding used to compute basic earnings per share		15,866,635		11,867,146
	Effect of dilutive stock options		-		-
	Weighted-average shares outstanding and dilutive securities used to compute dilutive earnings per share		15,866,635		11,867,146
	For the three months ended September 30, 2013 and 2012, there were outstanding potential common stock equivalent shares of 3,881,764 and 4,004,948, respectively, which were excluded from the computation of diluted earnings per share because the effect would have been anti-dilutive. These potential dilutive common stock equivalent shares may be included in the calculation of future diluted earnings per share.

Inventories

Inventories	3 Months Ended
	Sep. 30, 2013
Inventory Disclosure [Abstract]	'
Inventories	'
	Note 3 - Inventories
	Inventories consist of the following:
		September 30,		June 30,
		2013		2013
	Raw materials	$	230,072	$	228,553
	Work-in-process		317,038		323,836
	Finished goods		1,373,071		1,369,814
	Subtotal		1,920,181		1,922,203
	Allowance		-80,000		-80,000
		$	1,840,181	$	1,842,203

Due_to_Officers_Shareholders_a

Due to Officers, Shareholders and Affiliates ans Subordinated Liabilities to Officers and Shareholders	3 Months Ended
	Sep. 30, 2013
Related Party Transactions [Abstract]	'
Due To Officers and Shareholders	'
	Note 4 - Due to Officers, Shareholders and Affiliates ans Subordinated Liabilities to Officers and Shareholders
	These amounts are composed of the following at September 30, 2013 and June 30, 2013:
		September 30		June 30
		2013		2013
	Interest bearing advances, due on demand	$	28,502	$	19,021
	Other advances		221,700		181,200
	Accrued compensation and other costs		313,578		241,550
	Current liabilities to officers, shareholders and affiliates		563,780		441,771
	Subordinated liabilities to officers and shareholders		848,080		848,080
		$	1,411,860	$	1,289,851

LongTerm_Debt

Long-Term Debt	3 Months Ended
	Sep. 30, 2013
Long-term Debt, Unclassified [Abstract]	'
Long-term Debt	'
	Note 5 – Long-Term Debt
	The long-term debt consists of the amount outstanding under a term loan ECSI International Inc., a wholly-owned subsidiary of the company and Atlantic Stewardship Bank.

Legal_proceeding

Legal proceeding	3 Months Ended
	Sep. 30, 2013
Commitments and Contingencies Disclosure [Abstract]	'
Legal Proceeding	'
	Note 6 – Legal Proceeding
	On March 7, 2012, the Company, through its wholly-owned subsidiary, ECSI International, Inc. filed a lawsuit in the United States District Court for the District of New Jersey against Lockheed Martin Global Training and Logistics (“Lockheed Martin”). The lawsuit, as detailed in the First Amended Complaint and Demand for Trial by Jury (the “Amended Complaint”) dated March 29, 2012, alleges breach of contract and tortious interference by Lockheed Martin and seeks actual damages of approximately $978,000, as well as punitive damages, costs and such further relief as the Court deems equitable and proper. In addition, the Amended Complaint seeks payment under Lockheed Martin’s payment bonds required by the United States Navy Facilities Engineering Command. At September 30, 2013, the Company has included in its accounts receivable (prior to allowances) the amount of the actual damages claimed. In Fiscal 2013, Lockheed Martin was granted a motion to have the matter moved from New Jersey to Maryland. We had been aggressively pursuing our claim against Lockheed Martin. While we believe that we have meritorious claims, due to cash flow constraints, we have not yet been able to pursue our claims against Lockheed Martin in Maryland.

Earnings_Per_Share_Tables

Earnings Per Share (Tables)	3 Months Ended
	Sep. 30, 2013
Earnings Per Share [Abstract]	'
Schedule of Earnings Per Share, Basic and Diluted	'
	The following is a reconciliation of the denominators of the basic and diluted earnings per share computations:
		Three Months
		Ended September 30,
		2013		2012
	Denominators:
	Weighted-average shares outstanding used to compute basic earnings per share		15,866,635		11,867,146
	Effect of dilutive stock options		-		-
	Weighted-average shares outstanding and dilutive securities used to compute dilutive earnings per share		15,866,635		11,867,146

Inventories_Tables

Inventories (Tables)	3 Months Ended
	Sep. 30, 2013
Inventory Disclosure [Abstract]	'
Schedule of Inventory, Current	'
	Note 3 - Inventories
	Inventories consist of the following:
		September 30,		June 30,
		2013		2013
	Raw materials	$	230,072	$	228,553
	Work-in-process		317,038		323,836
	Finished goods		1,373,071		1,369,814
	Subtotal		1,920,181		1,922,203
	Allowance		-80,000		-80,000
		$	1,840,181	$	1,842,203

Due_to_Officers_Shareholders_a1

Due to Officers, Shareholders and Affiliates ans Subordinated Liabilities to Officers and Shareholders (Tables)	3 Months Ended
	Sep. 30, 2013
Related Party Transactions [Abstract]	'
Due To Officers and Shareholders	'
	Note 4 - Due to Officers, Shareholders and Affiliates ans Subordinated Liabilities to Officers and Shareholders
	These amounts are composed of the following at September 30, 2013 and June 30, 2013:
		September 30		June 30
		2013		2013
	Interest bearing advances, due on demand	$	28,502	$	19,021
	Other advances		221,700		181,200
	Accrued compensation and other costs		313,578		241,550
	Current liabilities to officers, shareholders and affiliates		563,780		441,771
	Subordinated liabilities to officers and shareholders		848,080		848,080
		$	1,411,860	$	1,289,851

Basis_of_Presentation_Details_

Basis of Presentation (Details Textual) (USD $)	3 Months Ended		12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Net loss before deemed dividends	($164,406)	($50,678)	($1,221,153)	($1,531,773)
Working Capital	862,000	'	'	'
Stockholders' Equity Attributable To Parent	1,257,675	'	1,422,146	'
Increase Decrease Working Capital	1,288,597	'	'	'
Proceeds From (Repayments Of) Related Party Debt	122,009	112,607	524,412	'
Secured Accounts Receivable	3,000,000	'	'	'
Office [Member]	'	'	'	'
Due to Officers or Stockholders, Noncurrent	848,080	'	'	'
Lockheed Martin [Member]	'	'	'	'
Accounts Receivable	$1,000,000	'	'	'

Earnings_Per_Share_Details

Earnings Per Share (Details)	3 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Denominators:	'	'
Weighted-average shares outstanding used to compute basic earnings per share	15,866,635	11,867,146
Effect of dilutive stock options	0	0
Weighted-average shares outstanding and dilutive securities used to compute dilutive earnings per share	15,866,635	11,867,146

Earnings_Per_Share_Details_Tex

Earnings Per Share (Details Textual) (USD $)	3 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Jun. 30, 2013
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	3,881,764	4,004,948	'
Common Stock, Par Or Stated Value Per Share	$0.00	'	$0.00

Inventories_Details

Inventories (Details) (USD $)	Sep. 30, 2013	Jun. 30, 2013
Raw materials	$230,072	$228,553
Work-in-process	317,038	323,836
Finished goods	1,373,071	1,369,814
Subtotal	1,920,181	1,922,203
Allowance	-80,000	-80,000
Inventories Net	$1,840,181	$1,842,203

Due_to_Officers_Shareholders_a2

Due to Officers, Shareholders and Affiliates ans Subordinated Liabilities to Officers and Shareholders (Details) (USD $)	Sep. 30, 2013	Jun. 30, 2013
Interest bearing advances, due on demand	$28,502	$19,021
Other advances	221,700	181,200
Accrued compensation and other costs	313,578	241,550
Current liabilities to officers, shareholders and affiliates	563,780	441,771
Subordinated liabilities to officers and shareholders	848,080	848,080
Due to Officers or Stockholders	$1,411,860	$1,289,851

Legal_Proceeding_Details_Textu

Legal Proceeding (Details Textual) (USD $)	1 Months Ended
	Mar. 07, 2012
Loss Contingency, Damages Sought, Value	$978,000