Delaware
|
20-4086662
|
|
(State or Other Jurisdiction
|
(I.R.S. Employer
|
|
of Incorporation)
|
Identification No.)
|
PART I – FINANCIAL INFORMATION
|
Page
|
||||
1
|
|||||
1
|
|||||
2
|
|||||
3
|
|||||
4
|
|||||
10
|
|||||
16
|
|||||
PART II – OTHER INFORMATION
|
|||||
17
|
|||||
17
|
|||||
16
|
|||||
17
|
|||||
18
|
|||||
19
|
FINANCIAL STATEMENTS
|
June 30,
2013
|
December 31, 2012 |
|||||||
ASSETS
|
||||||||
CURRENT ASSETS
|
||||||||
Cash
|
$
|
1,450,474
|
$
|
1,415,252
|
||||
Accounts receivable, net of allowance $62,131 and $95,976 at June 30, 2013 and
December 31, 2012, respectively
|
4,543,106
|
4,236,018
|
||||||
Unbilled receivables
|
412,491
|
208,051
|
||||||
Prepaid expenses
|
40,910
|
61,278
|
||||||
Inventory
|
694,836
|
672,874
|
||||||
Total current assets
|
7,141,817
|
6,593,473
|
||||||
Property and equipment, net
|
2,185,643
|
2,477,642
|
||||||
Other non-current assets
|
285,951
|
274,998
|
||||||
TOTAL ASSETS
|
$
|
9,613,411
|
$
|
9,346,113
|
||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
CURRENT LIABILITIES
|
||||||||
Accounts payable and accrued expenses
|
$
|
2,112,392
|
$
|
4,093,356
|
||||
Accrued payroll and related expenses
|
108,692
|
78,303
|
||||||
Line of credit
|
2,500,000
|
—
|
||||||
Income taxes payable
|
49,946
|
50,076
|
||||||
Deferred revenue
|
831,771
|
483,784
|
||||||
Customer deposits
|
110,399
|
71,199
|
||||||
Obligations under capital lease – current portion
|
601,111
|
583,976
|
||||||
Notes payable - stockholders
|
500,000
|
—
|
||||||
Obligations under notes payable auto – current portion
|
34,787
|
23,454
|
||||||
Deferred rent – current portion
|
46,564
|
41,975
|
||||||
Total current liabilities
|
6,895,662
|
5,426,123
|
||||||
LONG - TERM LIABILITIES
|
||||||||
Notes payable – stockholders
|
—
|
500,000
|
||||||
Obligations under capital lease, net of current portion
|
487,375
|
813,945
|
||||||
Notes payable auto, net of current portion
|
93,760
|
49,468
|
||||||
Deferred rent, net of current portion
|
42,316
|
79,557
|
||||||
Total long-term liabilities
|
623,451
|
1,442,970
|
||||||
TOTAL LIABILITIES
|
7,519,113
|
6,869,093
|
||||||
STOCKHOLDERS’ EQUITY
|
||||||||
Preferred stock, par value $0.0001 per share; 20,000,000 shares
authorized; none issued and outstanding
|
—
|
—
|
||||||
Common stock, par value $0.0001 per share; 150,000,000 shares
authorized; 44,273,569 issued and outstanding, at June 30, 2013 and 44,248,569 issued
and outstanding at December 31, 2012
|
4,428
|
4,425
|
||||||
Additional paid-in capital
|
10,145,208
|
10,127,461
|
||||||
Treasury Stock, at cost 10,600 shares at June 30, 2013 and December 31, 2012
|
(5,890)
|
(5,890
|
)
|
|||||
Accumulated deficit
|
(8,049,448
|
)
|
(7,648,976
|
)
|
||||
TOTAL STOCKHOLDERS’ EQUITY
|
2,094,298
|
2,477,020
|
||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$
|
9,613,411
|
$
|
9,346,113
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
2013
|
2012
|
2013
|
2012
|
|||||||||||||
NET REVENUE
|
$
|
3,667,598
|
$
|
4,087,360
|
$
|
8,062,437
|
$
|
8,236,363
|
||||||||
COST OF REVENUE
|
3,002,452
|
3,003,911
|
6,133,937
|
6,081,378
|
||||||||||||
GROSS PROFIT
|
665,146
|
1,083,449
|
1,928,500
|
2,154,985
|
||||||||||||
OPERATING EXPENSES
|
||||||||||||||||
Salaries and related expenses
|
457,197
|
355,116
|
905,285
|
783,329
|
||||||||||||
Selling, general and administrative expenses
|
635,851
|
564,776
|
1,338,315
|
1,047,470
|
||||||||||||
TOTAL OPERATING EXPENSES
|
1,093,048
|
919,892
|
2,243,600
|
1,830,799
|
||||||||||||
(LOSS) INCOME FROM OPERATIONS
|
(427,902)
|
163,557
|
(315,100)
|
324,186
|
||||||||||||
OTHER (EXPENSE) INCOME
|
||||||||||||||||
Interest expense
|
(48,181
|
)
|
(38,793
|
)
|
(85,543
|
)
|
(76,963
|
)
|
||||||||
Interest income
|
15
|
1,771
|
174
|
2,622
|
||||||||||||
Other expense
|
—
|
—
|
—
|
—
|
||||||||||||
TOTAL OTHER INCOME (EXPENSE)
|
(48,166
|
)
|
(37,022
|
)
|
(85,369
|
)
|
(74,341
|
)
|
||||||||
NET (LOSS) INCOME
|
$
|
(476,068)
|
$
|
126,535
|
$
|
(400,469)
|
$
|
249,845
|
||||||||
(LOSS) EARNINGS PER SHARE – BASIC AND DILUTED
|
$
|
(0.01)
|
$
|
0.00
|
$
|
(0.01)
|
$
|
0.01
|
||||||||
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING – BASIC
|
44,273,569
|
44,194,469
|
44,265,420
|
44,025,588
|
||||||||||||
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING – DILUTED
|
44,273,569
|
47,132,833
|
44,265,420
|
47,194,638
|
Six Months Ended June 30, | ||||||||
2013 | 2012 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net (loss) income | $ | (400,469) | $ | 249,845 | ||||
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
|
||||||||
Depreciation and amortization
|
651,498
|
299,800
|
||||||
Share based compensation
|
17,750
|
—
|
||||||
Deferred rent
|
(32,652
|
)
|
(27,246
|
)
|
||||
Bad debt expense
|
124,195
|
88,675
|
||||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivables
|
(431,282
|
)
|
(76,541
|
)
|
||||
Unbilled Receivables
|
(204,440
|
)
|
(142,425
|
)
|
||||
Prepaid expenses and other non-current assets
|
9,415
|
424,098
|
||||||
Inventory
|
(21,962)
|
(20,389
|
)
|
|||||
Customer deposits
|
39,199
|
56,430
|
||||||
Accounts payable and accrued expenses
|
(1,980,964)
|
806,920
|
||||||
Accrued payroll and related expenses
|
30,390
|
4,796
|
||||||
Income tax payable
|
(130)
|
(20,500
|
)
|
|||||
Deferred revenue
|
347,987
|
92,221
|
||||||
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES
|
(1,851,465)
|
1,735,684
|
||||||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Purchases of property and equipment
|
(284,088
|
)
|
(1,182,331
|
)
|
||||
NET CASH USED IN INVESTING ACTIVITIES
|
(284,088
|
)
|
(1,182,331
|
)
|
||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Net change in line of credit
|
2,500,000
|
(500,000
|
)
|
|||||
Capital lease originations
|
—
|
1,000,000
|
||||||
Payments on notes payable - auto
|
(19,786)
|
(9,962
|
)
|
|||||
Principal payments on capital lease obligations
|
(309,439)
|
(98,539
|
)
|
|||||
Purchase of treasury stock
|
—
|
(5,890
|
)
|
|||||
NET CASH PROVIDED BY FINANCING ACTIVITIES
|
2,170,775
|
385,609
|
||||||
NET INCREASE IN CASH
|
35,222
|
938,962
|
||||||
CASH – Beginning of period
|
1,415,252
|
1,832,969
|
||||||
CASH – End of period
|
|
$ |
1,450,474
|
$
|
2,771,931
|
|||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
|
||||||||
Cash paid for interest
|
|
$ |
85,543
|
$
|
76,963
|
|||
Cash paid for income taxes
|
|
$ |
130
|
$
|
20,500
|
|||
Purchase of property and equipment
|
$ |
359,498
|
$
|
1,248,837
|
||||
Cash paid
|
(284,088)
|
(1,182,331
|
)
|
|||||
Amount financed
|
$ |
75,410
|
$
|
66,506
|
●
|
To include any accrued but unpaid interest in the amount that may be converted at the election of the holder; and
|
●
|
To extend the maturity date of the Promissory Notes to the date that is the earlier of (i) four years from the issue date of the Promissory Note or (ii) ten business days from the date on which Brekford Corp. closes any equity financing that generates gross proceeds in the aggregate amount of not less than $5,000,000.
|
Shares Underlying
Warrants
|
Weighted Average
Exercise Price
|
Weighted Average
Remaining Contractual Term (in years)
|
||||
Outstanding and exercisable at January 1, 2013
|
375,000
|
$
|
0.30
|
0.37
|
||
Granted
|
—
|
—
|
—
|
|||
Forfeited or expired
|
(375,000)
|
0.30
|
—
|
|||
Exercised
|
—
|
—
|
—
|
|||
Outstanding and exercisable at June 30, 2013
|
—
|
$
|
—
|
—
|
Restricted
Stock Shares |
Weighted Average
Value
|
|||||
Nonvested restricted stock at January 1, 2013
|
—
|
$
|
—
|
|||
Granted
|
25,000
|
0.71
|
||||
Vested
|
(25,000)
|
0.71
|
||||
Forfeited or expired
|
—
|
—
|
||||
Nonvested restricted stock at June 30, 2013
|
—
|
$
|
—
|
June 30,
2013 |
December 31,
2012 |
|||||||
Raw Materials
|
$
|
640,591
|
$
|
672,874
|
||||
Work in Process
|
54,245
|
—
|
||||||
Total Inventory
|
$
|
694,836
|
$
|
672,874
|
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
||||||||||||||
2013
|
2012
|
2013
|
2012
|
|||||||||||||
Basic (loss) earnings per share :
|
||||||||||||||||
Net (loss) income
|
$
|
(476,068)
|
$
|
126,535
|
$
|
(400,469)
|
$
|
249,845
|
||||||||
Weighted average common shares outstanding
|
44,273,569
|
44,194,469
|
44,265,420
|
44,025,588
|
||||||||||||
Basic earnings per share
|
$
|
(0.01)
|
$
|
0.00
|
$
|
(0.01)
|
$
|
0.01
|
||||||||
Diluted (loss) earnings per share :
|
||||||||||||||||
Net (loss) income
|
$
|
(476,068)
|
$
|
126,535
|
$
|
(400,469)
|
$
|
249,845
|
||||||||
Weighted average common shares outstanding
|
44,273,569
|
44,194,469
|
44,265,420
|
44,025,588
|
||||||||||||
Potential dilutive securities
|
—
|
2,938,364
|
—
|
3,169,050
|
||||||||||||
Weighted average common shares outstanding – diluted
|
44,273,569
|
47,132,833
|
44,265,420
|
47,194,638
|
||||||||||||
Diluted earnings per share
|
$
|
(0.01)
|
$
|
0.00
|
$
|
(0.01)
|
$
|
0.01
|
●
|
High rate of violation detection. ASE units can detect and record multiple violations per minute. This can provide a strong deterrent effect by increasing drivers’ perceived likelihood of being cited for speeding.
|
●
|
Physical safety of ASE operators and motorists. ASE can operate at locations where roadside traffic stops are dangerous or infeasible, and where traffic conditions are unsafe for police vehicles to enter the traffic stream and stop suspected violators. With ASE there is normally no vehicle pursuit or confrontation with motorists. ASE might also reduce the occurrence of traffic congestion due to driver distraction caused by traffic stops on the roadside.
|
●
|
Fairness of operation. Violations are recorded for all vehicles traveling in excess of the enforcement speed threshold.
|
●
|
Efficient use of resources. ASE can act as a “force multiplier,” enhancing the influence of limited traffic enforcement staff and resources.
|
●
|
Notification Continuance
|
●
|
Mail House and Printing Service
|
●
|
Data Purification and Verification Service
|
●
|
Back Office Support Service
|
Six Months Ended June 30,
|
(Decrease) / Increase
|
|||||||||||||||
2013
|
2012
|
$
|
%
|
|||||||||||||
Net Revenues
|
$
|
8,062,437
|
$
|
8,236,363
|
$
|
(173,926)
|
(2.11)
|
%
|
||||||||
Cost of Revenues
|
6,133,937
|
6,081,378
|
52,559
|
0.86
|
%
|
|||||||||||
Gross Profit
|
$
|
1,928,500
|
$
|
2,154,985
|
$
|
(226,485)
|
(10.51)
|
%
|
||||||||
Gross Profit Percentage of Revenue
|
23.92
|
%
|
26.16
|
%
|
Six Months Ended June 30,
|
Increase / (Decrease)
|
|||||||||||||||
2013
|
2012
|
$
|
%
|
|||||||||||||
OPERATING EXPENSES
|
||||||||||||||||
Salaries and related expenses
|
$
|
905,285
|
$
|
783,329
|
$
|
121,956
|
15.57
|
%
|
||||||||
Selling, general and administrative expenses
|
1,338,315
|
1,047,470
|
290,845
|
27.77
|
%
|
|||||||||||
Total operating expenses
|
$
|
2,243,600
|
$
|
1,830,799
|
$
|
412,801
|
22.55
|
%
|
Three Months Ended June 30,
|
(Decrease) / Increase
|
|||||||||||||||
2013
|
2012
|
$
|
%
|
|||||||||||||
Net Revenues
|
$
|
3,667,598
|
$
|
4,087,360
|
$
|
(419,762)
|
(10.27)
|
%
|
||||||||
Cost of Revenues
|
3,002,452
|
3,003,911
|
(1,459)
|
(0.05)
|
%
|
|||||||||||
Gross Profit
|
$
|
665,146
|
$
|
1,083,449
|
$
|
(418,303)
|
(38.61)
|
%
|
||||||||
Gross Profit Percentage of Revenue
|
18.14
|
%
|
26.51
|
%
|
Three Months Ended June 30,
|
Increase / (Decrease)
|
|||||||||||||||
2013
|
2012
|
$
|
%
|
|||||||||||||
OPERATING EXPENSES
|
||||||||||||||||
Salaries and related expenses
|
$
|
457,197
|
$
|
355,116
|
$
|
102,081
|
28.75
|
%
|
||||||||
Selling, general and administrative expenses
|
635,851
|
564,776
|
71,075
|
12.58
|
%
|
|||||||||||
Total operating expenses
|
$
|
1,093,048
|
$
|
919,893
|
$
|
173,155
|
18.82
|
%
|
CONTROLS AND PROCEDURES
|
LEGAL PROCEEDINGS
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
OTHER INFORMATION
|
EXHIBITS
|
Brekford Corp.
|
|||
Date: August 2, 2013
|
By:
|
/s/ C.B. Brechin | |
Chandra (C.B.) Brechin
|
|||
Chief Executive Officer, Chief Financial Officer, Treasurer and Director
|
|||
(Principal Executive Officer and Principal Financial Officer) |
Exhibit
Number
|
Description
|
|
Certification of Principal Executive Officer and Principal Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
|
||
Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
|
||
101.INS
|
XBRL Instance Document (furnished herewith).
|
|
101.SCH
|
XBRL Taxonomy Extension Schema (furnished herewith).
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase (furnished herewith).
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase (furnished herewith).
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase (furnished herewith).
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase (furnished herewith).
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Brekford Corp.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared; and
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: August 2, 2013
|
/s/ Chandra (C.B.) Brechin | ||
Chandra (C.B.) Brechin
|
|||
Chief Executive Officer, Chief Financial Officer, Treasurer and Director
|
|||
(Principal Executive Officer & Principal Accounting Officer) |
Date: August 2, 2013
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/s/ Chandra (C.B.) Brechin | ||
Chandra (C.B.) Brechin
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Chief Executive Officer, Chief Financial Officer, Treasurer and Director
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(Principal Executive Officer & Principal Accounting Officer) |
8. SHARE-BASED COMPENSATION (Tables)
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6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Notes to Financial Statements | ||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Warrant Activity |
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Share-based compensation expense related to restricted stock grants |
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Condensed Consolidated Statements of Operations (Unaudited) (USD $)
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3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2013
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Jun. 30, 2012
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Jun. 30, 2013
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Jun. 30, 2012
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Income Statement [Abstract] | ||||
NET REVENUE | $ 3,667,598 | $ 4,087,360 | $ 8,062,437 | $ 8,236,363 |
COST OF REVENUE | 3,002,452 | 3,003,911 | 6,133,937 | 6,081,378 |
GROSS PROFIT | 665,146 | 1,083,449 | 1,928,500 | 2,154,985 |
OPERATING EXPENSES | ||||
Salaries and related expenses | 457,197 | 355,116 | 905,285 | 783,329 |
Selling, general and administrative expenses | 635,851 | 564,776 | 1,338,315 | 1,047,470 |
TOTAL OPERATING EXPENSES | 1,093,048 | 919,892 | 2,243,600 | 1,830,799 |
(LOSS) INCOME FROM OPERATIONS | (427,902) | 163,557 | (315,100) | 324,186 |
OTHER (EXPENSE) INCOME | ||||
Interest expense | (48,181) | (38,793) | (85,543) | (76,963) |
Interest income | 15 | 1,771 | 174 | 2,622 |
Other expense | 0 | 0 | 0 | 0 |
TOTAL OTHER INCOME (EXPENSE) | (48,166) | (37,022) | (85,369) | (74,341) |
NET (LOSS) INCOME | $ (476,068) | $ 126,535 | $ (400,469) | $ 249,845 |
(LOSS) EARNINGS PER SHARE - BASIC AND DILUTED | $ (0.01) | $ 0.00 | $ (0.01) | $ 0.01 |
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC | 44,273,569 | 44,194,469 | 44,265,420 | 44,025,588 |
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - DILUTED | 44,273,569 | 47,132,833 | 44,265,420 | 47,194,638 |
5. LEASES
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6 Months Ended |
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Jun. 30, 2013
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Notes to Financial Statements | |
NOTE 5 - LEASES | Capital Leases
The Company financed certain equipment under separate non-cancelable equipment loan and security agreements. The agreements mature in March 2015 and April 2015. The agreements require various monthly payments and are secured by the assets under lease. As of June 30, 2013 and 2012, capital lease assets of $1,293,074 and $1,710,913, respectively, net of accumulated amortization of $940,927 and $319,659, respectively, are included in property and equipment on the balance sheets.
Operating Leases
The Company records rent expense under a non-cancelable operating lease that expires on January 2015. Rent expense under this lease amounted to $82,573 and $93,214 for the six months ended June 30, 2013 and 2012, respectively.
The Company leases approximately 2,500 square feet of office space from a related party under a non-cancelable operating leases expiring June 2013. Rent expense under this lease amounted to $21,466 and $21,155 for the six months ended June 30, 2013 and 2012, respectively. |
6. MAJOR CUSTOMERS AND VENDORS (Details Narrative)
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6 Months Ended | |
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Jun. 30, 2013
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Jun. 30, 2012
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Hardware products Vendor
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Revenues from hardware products | 43.00% | 64.00% |
Accounts payable due to distributor | 34.00% | 75.00% |
Two Major Customers
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Net sales | 41.00% | |
Accounts receivable | 64.00% | |
Three Major Customers
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Net sales | 23.00% | |
Accounts receivable | 61.00% |
9. INVENTORY (Tables)
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6 Months Ended | ||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||
Schedule of Inventory |
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8. SHARE-BASED COMPENSATION (Detail Narrative) (USD $)
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6 Months Ended | |
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Jun. 30, 2013
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Jun. 30, 2012
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Financial Instruments Subject to Mandatory Redemption by Settlement Terms [Line Items] | ||
Share - based compensation expense under restricted stock grants | $ 17,750 | $ 0 |
RestrictedStockGrantsMember
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Financial Instruments Subject to Mandatory Redemption by Settlement Terms [Line Items] | ||
Shares of restricted stock | 25,000 | |
Share - based compensation expense under restricted stock grants | $ 17,750 | $ 0 |
8. SHARE-BASED COMPENSATION (Details 1) (Restricted Stock [Member], USD $)
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6 Months Ended | |
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Jun. 30, 2013
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Dec. 31, 2012
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Restricted Stock [Member]
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Restricted Stock Shares | ||
Nonvested restricted stock at January 1, 2013 | ||
Granted | 25,000 | |
Vested | (25,000) | |
Forfeited or expired | ||
Nonvested restricted stock at June 30, 2013 | ||
Weighted Average Value | ||
Nonvested restricted stock beginning | ||
Granted | $ 0.71 | |
Vested | $ 0.71 | |
Forfeited or expired | ||
Nonvested restricted stock ending |
8. SHARE-BASED COMPENSATION (Details) (Warrant [Member], USD $)
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6 Months Ended |
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Jun. 30, 2013
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Warrant [Member]
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Shares Underlying Warrants | |
Outstanding and exercisable at January 1, 2013 | 375,000 |
Granted | |
Forfeited or expired | (375,000) |
Exercised | |
Outstanding and exercisable at June 30, 2013 | |
Weighted Average Exercise Price | |
Outstanding and exercisable at January 1, 2013 | $ 0.30 |
Granted | |
Forfeited or expired | $ 0.30 |
Exercised | |
Outstanding and exercisable at June 30, 2013 | |
Weighted Average Remaining Contractual Term (in years) | |
Outstanding and exercisable at January 1, 2013 | 4 months 13 days |
1. DESCRIPTION OF THE BUSINESS
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6 Months Ended |
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Jun. 30, 2013
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Notes to Financial Statements | |
NOTE 1 - DESCRIPTION OF THE BUSINESS | Brekford Corp. (OTCBB; OTCQB: BFDI) headquartered in Hanover, Maryland is a technology services provider of mobile computer and video systems through its vehicle upfitting services to homeland security agencies and federal, state, and municipal law enforcement agencies and offers traffic safety solutions to municipalities, including automated photo speed enforcement and red light camera solutions. Brekford is an established company which, for more than a decade, has provided services to branches of the U.S. military, various federal entities and numerous security and public safety agencies throughout the United States. Brekford provides these departments and agencies with an end-to-end suite of rugged mobile information technology (IT), vehicle upfitting services, and automated traffic safety photo enforcement technology solutions.
Brekford is a one-stop shop with its unique 360° approach to vehicle upfitting installations, cutting edge rugged mobile technology, and automated traffic enforcement services for jurisdictions in the United States. We provide bumper-to-bumper vehicle modification and automated traffic enforcement products, road safety camera programs, including red light and speed photo enforcement systems, and back office processing services. The Brekford 360° approach provides our customers with a one-stop engineered solution. Our commitment to top quality services, along with the core values that our employees strongly uphold: integrity; accountability; respect; excellence; and teamwork; is why we believe Brekford is the premier all-around vehicle upfitter and automated traffic safety technology solutions provider.
Depending upon the context, the terms BFDI, Brekford Corp., Company, we, our, and us, as used in these notes refer to Brekford Corp. and its consolidated subsidiary. |
3. LINE OF CREDIT AND NOTES PAYABLE - AUTO
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6 Months Ended |
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Jun. 30, 2013
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Notes to Financial Statements | |
NOTE 3 - LINE OF CREDIT AND NOTES PAYABLE - AUTO | On July 12, 2012, the Company closed on an aggregate $3.5 million credit facility (the Credit Facility) with PNC Bank, National Association (PNC) as lender consisting of $3.0 million in revolving loans (the "Revolving Facility") and $500,000 in a committed non-revolving line of credit loan for the purpose of financing up to 90% of the cost of certain equipment (the Equipment Loan). The terms and conditions of the Credit Facility are set forth in a Loan Agreement between the Company and PNC dated June 28, 2012 (the Loan Agreement), and the Revolving Facility is evidenced by a Committed Line of Credit Note issued by the Company to the order of PNC (the Revolving Note). As part of the financing transaction, each of C.B. Brechin and Scott Rutherford, who serve as directors of the Company and as Chief Executive Officer/Chief Financial Officer and as President of the Company, respectively, entered into a Subordination Agreement dated June 28, 2012 with PNC (each, a Subordination Agreement) pursuant to which they agreed that all indebtedness owed to them by the Company (the Subordinated Debt) is subordinate to the indebtedness owed to PNC by the Company. The Subordination Agreements permit the Company to make regular loan payments to Messrs. Brechin and Rutherford so long as the Company is not in default under its loan agreements with PNC. The terms of the Equipment Loan will be evidenced by a separate promissory note if the Company requests that loan. The loan agreement was amended on July 18, 2013 to extend the loans maturity date to September 28, 2013. As of June 30, 2013, amounts outstanding under the line of credit were $2,500,000.
The Company financed certain vehicles and equipment under finance agreements. The agreements mature beginning September 2014 through January 2018. The agreements require various monthly payments under the finance agreements. As of June 30, 2013 and 2012, financed assets of $136,256 and $100,645, respectively, net of accumulated amortization of $32,707 and $16,320, respectively, are included in property and equipment on the balance sheets. |
6. MAJOR CUSTOMERS AND VENDORS
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6 Months Ended |
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Jun. 30, 2013
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Notes to Financial Statements | |
NOTE 6 - MAJOR CUSTOMERS AND VENDORS | Major Customers
The Company has several contracts with government agencies, of which net revenue from two major customers during the six months ended June 30, 2013 represented 41% of the total net revenue for such six-month period. Accounts receivable due from two customers at June 30, 2013 amounted to 64% of total accounts receivable at that date.
For the quarter ended June 30, 2012, the Company had several contracts with government agencies, of which net revenue from two major customers represented 23% of the total net revenue for such six month period. Accounts receivable due from these three customers at June 30, 2012 amounted to 61% of total accounts receivable at that date.
Major Vendors
The Company purchased substantially all hardware products that it resold during the periods presented covered by these financial statements from the major distributors. Revenues from hardware products amounted to 43% and 64% of total revenues for the six months ended June 30, 2013 and 2012, respectively. As of June 30, 2013 and 2012, accounts payable due to this distributor amounted to 34% and 75% of total accounts payable, respectively. |
4. NOTES PAYABLE - STOCKHOLDERS
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6 Months Ended | ||||
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Jun. 30, 2013
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Notes to Financial Statements | |||||
NOTE 4 - NOTES PAYABLE - STOCKHOLDERS | Brekford Corp. financed the repurchase of shares of its common stock and warrants from the proceeds of convertible promissory notes that were issued by Brekford Corp. on November 9, 2009 in favor of a lender group that included two directors of Brekford Corp., Messrs. C.B. Brechin and Scott Rutherford, in the principal amounts of $250,000 each (a Promissory Note, and together, the Promissory Notes). Each Promissory Note bears interest at the rate of 12% per annum and at the time of execution was to be convertible into shares of Common Stock, at the option of each holder, at an original conversion price of $.07 per share. At the time of the execution of the Promissory Notes, Brekford Corp. agreed to pay the unpaid principal balance of the Promissory Notes and all accrued but unpaid interest on the date that was the earlier of (i) two years from the issue date of the notes, or (ii) ten business days from the date on which Brekford Corp. closes any equity financing that generates gross proceeds in the aggregate amount of not less than $5,000,000.
On April 1, 2010, Brekford Corp. and each member of the lender group executed a First Amendment to the Unsecured Promissory Note. Each Promissory Note was amended as follows:
As of June 30, 2013 and December 31, 2012, the amounts outstanding under the Promissory Notes totaled $500,000. |
9. INVENTORY (Details) (USD $)
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Jun. 30, 2013
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Dec. 31, 2012
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Inventory | ||
Raw Materials | $ 640,591 | $ 672,874 |
Work in Process | 54,245 | 0 |
Total Inventory | $ 694,836 | $ 672,874 |