BUSINESS ACQUISITION

6 Months Ended

Jun. 30, 2015

Business Combinations [Abstract]

BUSINESS ACQUISITION

4.BUSINESS ACQUISITION

On March 26, 2015, GCS, a wholly-owned subsidiary of the Company, entered into an Asset Purchase Agreement (the “IPG APA”) by and among the Company, GCS and Iron Protection Group, LLC, a Colorado limited liability company (“IPG” or the “Seller”), whereby GCS agreed to acquire substantially all of the assets of Seller (the “IPG Acquisition”). Pursuant to the terms of the IPG APA, the Company will deliver to Seller 500,000 restricted shares of the Company’s common stock, which will vest over a one-year period (100,000 shares vest on October 1, 2015; 200,000 shares vest on January 1, 2016; and 200,000 shares vest on April 1, 2016).

In addition, the Company delivered to Seller three-year warrants (the “IPG Warrants”) to purchase an aggregate of 500,000 shares of the Company’s common stock at an exercise price of: (i) $4.50 for warrants to purchase 250,000 shares of the Company’s common stock, and (i) $5.00 for warrants to purchase another 250,000 shares of the Company’s common stock. The IPG APA contains certain provisions that require Seller to forfeit a portion of the stock consideration in the event that Seller violates its obligations under the IPG APA relating to non-competition and non-disclosure. The closing date of the IPG Acquisition was March 26, 2015 and the Company has initially calculated the purchase price of the IPG Acquisition to be approximately $1,887,000. At the acquisition date and pursuant to the IPG APA, the Company did not assume any of the Seller’s liabilities and there were no tangible assets of significance.

Calculation of Purchase Price

The total purchase price for IPG was approximately $1,887,000 and was comprised of stock and warrants (see Note 12 for the Company’s calculation of fair values below):

Stock consideration	$	1,054,000
Warrants issued with $4.50 exercise price	421,000
Warrants issued with $5.00 exercise price	412,000
Total purchase price	$	1,887,000

The $1,054,000 value of stock consideration has been included in accrued stock payable as of June 30, 2015.

Preliminary Allocation of Purchase Price

The purchase price allocation continues to be preliminary as of June 30, 2015 due to its accounting significance. Management anticipates completing the Company's purchase price allocation as soon as reasonably possible, not to exceed one year from the acquisition date. The preliminary purchase price allocation as of the date of the acquisition is set forth in the table below and reflects various fair value estimates and analysis. These estimates were determined through established and generally accepted valuation techniques, including work performed by third-party valuation specialists.

Intangible assets:
Customer relationship intangible	$	1,000,000
Marketing-related intangibles	200,000
Non-compete agreements	200,000
Goodwill	487,000
Total intangible assets	$	1,887,000

In connection with the Company’s acquisition of IPG, the Company will issue to the sole shareholder of the Seller 100,000 fully vested warrants to purchase shares of the Company’s stock if sales of the Security business segment exceed $3,000,000 for the year ended December 31, 2015. If the warrants are issued, they will have an exercise price of $2.48, which was the Company’s closing share price on March 26, 2015. Should the sole shareholder of the Seller cease employment with the Company, the right to receive these warrants will be forfeited. At March 26, 2015, the fair value of the warrants was calculated to be approximately $188,000. This has not been included in the purchase price or accrued as contingent compensation at June 30, 2015.