SOURCE: Brekford Corp.

Brekford Corp.

July 31, 2012 08:00 ET

Brekford Announces Second Quarter Operating Results

Automated Traffic Safety Enforcement Program Continues to Gain Momentum

HANOVER, MD--(Marketwire - Jul 31, 2012) - Brekford Corp. (the "Company") (OTCBB: BFDI) (OTCQB: BFDI), a leading public safety technology service provider of fully integrated traffic safety solutions, vehicle up-fitting, and rugged mobile technology, today announced its operating results for the second quarter and first half of 2012.

"While lower municipal tax revenues and the delayed introduction of new law enforcement vehicle models by auto manufacturers resulted in a modest decline in up-fitting revenue in our second quarter, we have been very pleased with our customers' enthusiastic response to the Company's automated traffic safety enforcement solutions during the first half of 2012," stated C.B. Brechin, Chief Executive Officer of Brekford Corp. "We currently have over twelve automated traffic safety enforcement programs operating within the Mid-Atlantic region of the U.S. While our operating results during the first half of 2012 were burdened with front-end costs involving the implementation of new contracts, the terms of our automated traffic enforcement contracts range from three to six years. We expect the profitability of such contracts to increase significantly as the number of systems expands, thereby allowing us to realize the benefits of operating leverage. This should become evident in the second half of 2012 and, based upon currently available information, we continue to anticipate an increase in earnings for the year ending December 31, 2012. In terms of the market opportunity, the Insurance Institute for Highway Safety estimates the U.S. market potential for automated speed enforcement at 35,000 to 50,000 systems and red light enforcement at 20,000 to 30,000 systems. Brekford's commitment to technological innovation and superb customer service should allow us to capture a meaningful share of this market in coming years." 

"In the vehicle up-fitting segment of our business, we announced last month a partnership with Trimble Navigation Limited, the largest Automatic Vehicle Location provider in the country, which is intended to meet a growing need among Federal agencies to reduce fleet operating costs through better management of mileage, idle time and fuel usage, while complying with Federal mandates that require greenhouse emissions to be measured, reported and reduced."

"We are particularly pleased with the favorable influence that our automated speed enforcement cameras are having upon child safety in school zones, where most of our installed systems are located," continued Brechin. "City officials and law enforcement agencies have reported up to a 90 percent reduction in speed violations following the installation of our cameras. This not only represents a dramatic improvement in public safety, but by reducing the costs of speed enforcement for local governments and eliminating the need for police officers to be assigned to radar duty, our systems make it possible for municipalities to more effectively utilize their scarce law enforcement resources in a tax revenue-challenged environment. We are currently bidding on a number of speed and red light enforcement contracts, including several in large cities in the eastern and midwestern United States. Recent innovations by our research and development team should allow Brekford to be competitive in the bidding process. We also devoted significant resources during the second quarter to develop and prepare for the launch of a new business initiative that will leverage our customer service and collections capabilities into additional service offerings that can reduce the resources that municipalities currently devote to accounts receivable management. At this early stage in our growth, such investments represent a higher priority than managing for a target margin in the near term."

Financial highlights for the second quarter of 2012:

Net sales increased to $4.1 million for the quarter ended June 30, 2012, compared with $4.0 million in the quarter ended June 30, 2011. A modest decrease in vehicle up-fitting revenue was more than offset by higher revenue from the Company's automated traffic enforcement business segment.

Net income for the second quarter of 2012 totaled $126,535, which was virtually unchanged from first quarter 2012 net income and compared with net income of $332,084 in the second quarter of 2011. Diluted earnings per share totaled $0.00 in the most recent quarter, versus $0.01 in the prior-year period.

Gross profit for the second quarter of 2012 increased to $1,083,449, compared with $1,046,456 in the second quarter of 2011. Gross profit margin improved to 26.5% of revenue during the second quarter of 2012, compared with 26.1% in the year-earlier quarter, primarily due to higher profit margins from the automated traffic enforcement program. The Company expects gross profit margins to improve in the remaining quarters of the year as automated traffic enforcement revenue continues to grow with new contracts.

Total operating expenses increased from $688,362 in the second quarter of 2011 to $919,893 for the second quarter of 2012, due to increased marketing and business development activities, higher interest expense and greater equipment depreciation expenses.

Financial highlights for the first half of 2012:

Net sales increased 10.3% to approximately $8.2 million in the six months ended June 30, 2012, compared with approximately $7.5 million in the first half of 2011. The increase reflected higher sales of automatic traffic enforcement systems, Rugged IT Products, and electronic ticketing systems. 

Net income for the first half of 2012 totaled $249,845, compared with $445,035 in the first half of 2011. Diluted earnings per share were unchanged at $0.01 in the six months ended June 30, 2012, versus $0.01 in the six months ended June 30, 2011.

Gross profit for the first half of 2012 increased 19.7% to $2,154,985, compared with $1,799,818 in the first half of the previous year. Gross profit margin improved to 26.2% of revenue during the most recent six-month period, compared with 24.1% in the corresponding period of the previous year, primarily due to higher profit margins from the automated traffic enforcement program.

Total operating expenses increased from $1,299,391 in the six months ended June 30, 2011 to $1,830,799 in the first half of 2012, due primarily to increased staff expenses related to the automated traffic enforcement program, higher marketing and business development activities, increased interest expense and higher equipment depreciation expenses.

As of June 30, 2012, the Company's total assets approximated $9.8 million, compared with approximately $8.1 million on December 31, 2011. Cash on hand increased 51% during the first half of 2012 to approximately $2.8 million, versus approximately $1.8 million at the end of 2011, and the Company's current ratio stood at 1.8-to-1.0 ($7.2 million in current assets vs. $4.0 million in current liabilities). There were no borrowings outstanding against the Company's bank line of credit as of June 30, 2012. 

On July 12, 2012, subsequent to the end of its second quarter, the Company closed on an aggregate $3.5 million credit facility with PNC Bank, N.A., consisting of a $3.0 million revolving line of credit and a $500,000 non-revolving equipment credit line. Amounts borrowed under the revolving credit facility bear interest at an annual rate equivalent to the daily LIBOR rate plus 2.5%. "We are very pleased to enter into a new banking relationship with PNC Bank," noted Brechin. "The revolving credit facility should provide the working capital necessary to continue the aggressive expansion of our automated traffic enforcement program and our new receivables management initiative." 

About Brekford Corp.

Brekford Corp. has provided state-of-the-art mobile technology and traffic safety solutions to municipalities, the U.S. military, various federal entities and other security and public safety agencies throughout the United States over the last ten years. Its services include automated traffic safety solutions and an end-to-end suite of mobile computer, video technology and equipment up-fitting services. Brekford's combination of up-fitting services, cutting-edge technology, and automated traffic enforcement services offers a unique 360-degree solution for any organization, including homeland security and law enforcement agencies. Additional information about Brekford may be found online at www.brekford.com.

Forward-Looking Statements
This press release contains forward-looking statements within the meaning of that term in Section 21E of the Securities Exchange Act of 1934, as amended. Actual results may differ materially from the results suggested by these forward-looking statements, for a number of reasons, including, but not limited to, market conditions, the cost and success of development activities and the ability to successfully manage growth. Readers are referred to the documents filed by Brekford Corp. with the SEC, specifically the Company's most recent reports filed on Form 10-K and Forms 10-Q, which further identify important risks, trends and uncertainties which could cause actual results to differ materially from the forward-looking statements in this press release. The Company expressly disclaims any obligation to update any forward-looking statements.

   
Brekford Corp.  
Condensed Consolidated Balance Sheets  
   
    June 30,
2012
      December 31,
2011
 
    (Unaudited)          
ASSETS              
CURRENT ASSETS              
  Cash   $ 2,771,931     $ 1,832,969  
  Accounts receivable, net of allowance $345,592 and $261,417 at June 30, 2012 and December 31, 2011, respectively     3,661,061       3,673,195  
  Unbilled receivables     235,394       92,969  
Prepaid expenses     35,373       47,305  
  Inventory     446,889       426,500  
Total current assets     7,150,648       6,072,938  
Property and equipment, net     2,464,033       1,514,996  
Other non-current assets     138,902       551,070  
TOTAL ASSETS   $ 9,753,583     $ 8,139,004  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
CURRENT LIABILITIES                
  Accounts payable and accrued expenses   $ 2,815,293     $ 2,008,372  
  Accrued payroll and related expenses     55,441       50,645  
  Line of credit     --       500,000  
  Income taxes payable     48,437       68,937  
  Deferred revenue     381,814       289,593  
  Customer deposits     100,054       43,624  
  Obligations under capital leases - current portion     571,459       325,102  
  Obligations under notes payable auto - current portion     27,156       14,937  
  Deferred rent - current portion     41,975       39,470  
Total current liabilities     4,041,629       3,340,680  
                 
LONG - TERM LIABILITIES                
  Notes payable - stockholders     500,000       500,000  
  Obligations under capital lease, net of current portion     1,061,078       405,975  
  Notes payable auto, net of current portion     60,037       15,712  
  Deferred rent, net of current portion     107,804       137,556  
Total long-term liabilities     1,728,919       1,059,243  
TOTAL LIABILITIES     5,770,548       4,399,923  
                 
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; 44,223,569 issued and outstanding, at June 30, 2012 and 43,842,265 issued and outstanding at December 31, 2011     4,423       4,385  
Additional paid-in capital     10,116,963       10,117,001  
  Treasury Stock, at cost 10,600 shares at June 30, 2012 and none at December 31, 2011     (5,890 )     --  
Accumulated deficit     (6,132,461 )     (6,382,305 )
    TOTAL STOCKHOLDERS' EQUITY     3,983,035       3,739,081  
    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $ 9,753,583     $ 8,139,004  
                 
   
   
Brekford Corp.  
Condensed Consolidated Statements of Operations (Unaudited)  
   
    Three Months Ended
June 30,
  Six Months Ended
June 30,
 
    2012   2011   2012   2011  
                   
NET REVENUE   $ 4,087,360   $ 4,014,841   $ 8,236,363   $ 7,468,623  
                           
COST OF REVENUE     3,003,911     2,968,385     6,081,378     5,668,805  
                           
GROSS PROFIT     1,083,449     1,046,456     2,154,985     1,799,818  
                           
OPERATING EXPENSES                          
  Salaries and related expenses     355,116     333,542     783,329     596,062  
  Selling, general and administrative expenses     564,776     354,820     1,047,470     703,329  
                           
TOTAL OPERATING EXPENSES     919,892     688,362     1,830,799     1,299,391  
                           
INCOME FROM OPERATIONS     163,557     358,094     324,186     500,427  
                           
OTHER INCOME (EXPENSE)                          
  Interest expense     (38,793 )   (27,400 )   (76,963 )   (55,187 )
  Interest income     1,771     1,390     2,622     1,795  
Other expense     --     --     --     (2,000 )
                           
TOTAL OTHER INCOME (EXPENSE)     (37,022 )   (26,010 )   (74,341 )   (55,392 )
                           
NET INCOME   $ 126,535   $ 332,084   $ 249,845   $ 445,035  
                           
                           
NET INCOME PER SHARE - BASIC AND DILUTED   $ 0.00   $ 0.01   $ 0.01   $ 0.01  
                           
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC     44,194,469     40,629,301     44,025,588     40,558,526  
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - DILUTED     47,132,833     41,308,314     47,194,638     40,692,007