SOURCE: Brekford Corp.

Brekford Corp.

November 16, 2015 08:30 ET

Brekford Announces Third Quarter 2015 Operating Results

Revenue Increases 8.7%; Paid Citations Increase 52%; BFDI Up-Listed to OTCQX Best Market

HANOVER, MD--(Marketwired - Nov 16, 2015) -  Brekford Corp. (OTCQX: BFDI), a leading public safety technology service provider of fully integrated automated traffic safety solutions, parking enforcement citation management and an end-to-end suite of technology equipment for public safety vehicle services, today announced its operating results for the third quarter and first nine months of 2015.

Third Quarter 2015 Financial Highlights

  • Revenue was $5.78 million, up 8.7% from $5.31 million in the third quarter of 2014.
  • Gross profit declined 23.7% to $890,000 as compared to $1.17 million for the third quarter of 2014.
  • Overall gross margin declined to 15.4% as compared to 22.0% for the third quarter of 2014.
  • Automated Traffic Safety Enforcement ("ATSE") gross margin increased to 64.5% as compared to 56.1% for the third quarter of 2014. 
  • Operating expenses were $883,000, lower by 7.9% than the third quarter of 2014.
  • Operating income was $6,000, down from $208,000 in the third quarter of 2014.
  • Net loss was $243,000 compared to a net income of $161,000 for the third quarter of 2014.
  • ATSE paid citations totaled 49,075, up 52% from 32,275 in the third quarter of 2014.

Nine Months Ended September 30, 2015 Financial Highlights

  • Revenue was $14.59 million, up 5.2% from $13.87 million in the nine months ended September 30, 2014.
  • Gross profit increased 19.1% to $2.87 million as compared to $2.41 million for the nine months ended September 30, 2014.
  • Overall gross margin increased to 19.7% as compared to 17.4% for the nine months ended September 30, 2014.
  • ATSE gross margin increased to 68.7% as compared to 52.9% for the nine months ended September 30, 2014. 
  • Operating expenses were $2.75 million, lower by 22.3% than the nine months ended September 30, 2014.
  • Operating income was $128,000, up from a loss of $1.12 million for the nine months ended September 30, 2014.
  • Net loss was $398,000 compared to a net loss of $1.24 million for the nine months ended September 30, 2014.
  • ATSE paid citations totaled 124,130, up 53% from 81,374 in the nine months ended September 30, 2014.

Rod Hillman, President and Chief Operating Officer of Brekford Corp., commented, "The third quarter of 2015 showed continued improvement in our business expansion efforts. We have made significant strides in developing our ATSE business, while maintaining a steady income stream from our law enforcement vehicle technology products and services. On a quarterly basis, margins in our vehicle services business can fluctuate as we fulfil large purchase orders for technology products that do not include higher margin installation services. Our current sales order pipeline of $2.9 million, with a higher mix of installation projects, indicates improved vehicle services margins for the remainder of 2015. We still anticipate full year 2015 vehicle services gross margin to approximate 12%."

Hillman added, "We are pleased that operating income has remained positive for the 2nd consecutive quarter, and we expect that to continue for the next quarter based on improved margins within our sales order pipeline and increasing contributions from ATSE recurring revenue contracts. Our first international project in Saltillo, Mexico has produced outstanding results with respect to reduction of speeding related accidents and deaths. Even with a lower than anticipated collection rate, the return on investment per camera is comparable to our experience with programs in the U.S. and the Saltillo program is now cash flow positive. As with any new ATSE program, there is a period of adjustment for the City and its citizens with respect to changing driver behavior and enforcing the collection of fines. Due to high initial violation rates, there is a backlog of $15.6 million in unpaid fines. Our partner company, Grupo Canviso Tech ("Canviso"), has worked extensively with the Saltillo Police Department to enhance enforcement through a roadside vehicle checkpoint process which began operation in October. We expect to start seeing a reduction in the unpaid backlog in the fourth quarter of 2015, while at the same time six additional cameras have been activated and we're working with Canviso and the City on a rollout schedule for new installations."

"While we continue to present Saltillo as a model of success for Latin America, Canviso is in discussions with several other large municipalities throughout the country who have become keenly aware of the traffic safety improvements delivered by Brekford's program," continued Hillman. "Additionally our business development team has secured a partner company in Colombia, Shinsen Telecom, to replicate the Mexico business model. Brekford's system has already been evaluated by Colombia's National Transit Police and we currently are conducting a live demonstration in Bogota with one red light and two speed cameras installed and operating. We expect to provide results and receive feedback from the City of Bogota in the fourth quarter of this year. We are also in discussions with potential partners in Paraguay, Peru, and Argentina, and we are exploring market opportunities in Asia."

"Stateside, Brekford has signed a 3-year contract with the City of New Rochelle, New York to provide red light cameras at up to 12 intersections along with complete turnkey processing services. The first four systems are currently being installed and are expected to begin operation on January 2, 2016. Other notable highlights as we continue to expand our reach in the U.S. include submission of several proposals for ATSE services to municipalities in various states as well as our ongoing pilot program with the City of Baltimore for body worn camera and video evidence management services. We have partnered with two industry leaders, Panasonic and Microsoft, to provide what we believe is the best technical solution and the only solution with direct local service and support. The pilot will be completed in December and the City is expected to select a winning vendor in January 2016."

C.B. Brechin, Brekford's Chief Executive Officer, added, "We are excited about the multitude of projects Brekford has initiated within the past year as we remind customers, employees, and shareholders of our long-standing history as a leading public safety services provider. Our legacy vehicle services business is strong and growing, and our ATSE growth prospects are significant. There is much more work ahead in closing certain deals and executing on others; however, we believe we have laid the groundwork for long-term growth and profitability in 2016 and beyond. We established certain goals with respect to renewed commitment to business development and customer retention, and I am confident that these efforts will pay dividends in the future. I also want to note that as of today, Brekford started trading on the OTCQX Best Market. This segment of the OTC provides a superior trading and information experience for our shareholders, with improve ability to attract institutional investors from both inside and outside the United States."

About Brekford Corp.

Brekford Corp. provides state-of-the art public safety technology and automated traffic enforcement solutions to municipalities, the U.S. military, various federal entities and other public safety agencies throughout the United States. Its services include automated speed and red light camera enforcement programs, parking enforcement citation management and an end-to-end suite of technology and equipment for public safety vehicle upfitting. Brekford's combination of upfitting services, cutting-edge technology, and automated traffic enforcement services offers a unique 360-degree solution for law enforcement agencies and municipalities.

The Company is headquartered in Hanover, Maryland, and its common stock is traded on the OTC Markets under the symbol "BFDI." Additional information on Brekford can be accessed 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. Words such as "anticipate," "expect," "project," "intend," "plan," "believe," "target," "aim," "should," and words and terms of similar substance and any financial projections used in connection with any discussion of future plans, strategies, objectives, actions, or events identify forward-looking statements. Forward-looking statements include, among others, those concerning our expected financial performance and strategic and operational plans, as well as all assumptions, expectations, predictions, intentions or beliefs about future events. These statements are based on the beliefs of our management as well as assumptions made by and information currently available to us and reflect our current views concerning future events. As such, they are subject to risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, among many others: the risk that any projections, including earnings, revenues, expenses, synergies, margins or any other financial items that form the basis for management's plans and assumptions are not realized; a reduction in industry profit margin; requirements or changes affecting the business in which we are engaged; our ability to successfully implement new strategies; operating hazards; competition and the loss of key personnel; changing interpretations of generally accepted accounting principles; continued compliance with government regulations; changing legislation and regulatory environments; and the general volatility of the market prices of our securities and general economic conditions. 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. Brekford Corp. expressly disclaims any obligation to update any forward-looking statements.

   
   
Brekford Corp.  
Condensed Consolidated Statements of Operations (Unaudited)  
   
    Three Months Ended
September 30,
 
    2015     2014  
                 
NET REVENUE   $ 5,776,862     $ 5,314,554  
                 
COST OF REVENUE     4,887,299       4,148,130  
                 
GROSS PROFIT     889,563       1,166,424  
                 
OPERATING EXPENSES                
Salaries and related expenses     485,740       485,530  
Selling, general and administrative expenses     397,473       473,392  
                 
TOTAL OPERATING EXPENSES     883,213       958,922  
                 
INCOME (LOSS) FROM OPERATIONS     6,350       207,502  
                 
OTHER (EXPENSE) INCOME                
Interest expense     (64,651 )     (46,465 )
Change in fair value in derivative liability     (54,936 )     --  
Other expense     (129,410 )     --  
                 
TOTAL OTHER (EXPENSE) INCOME     (248,997 )     (46,465 )
                 
NET (LOSS) INCOME   $ (242,647 )   $ 161,037  
                 
OTHER COMPREHENSIVE LOSS - foreign currency translation     (4,383 )     --  
                 
                 
COMPREHENSIVE (LOSS) INCOME   $ (247,030 )   $ 161,037  
                 
(LOSS) INCOME PER SHARE - BASIC AND DILUTED   $ (0.01 )   $ 0.00  
                 
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC     44,632,569       44,500,569  
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - DILUTED     44,632,569       48,071,998  
                 
                 
                 
Brekford Corp.  
Condensed Consolidated Statements of Operations (Unaudited)  
   
    Nine Months Ended
September 30,
 
    2015     2014  
                 
NET REVENUE   $ 14,586,453     $ 13,869,147  
                 
COST OF REVENUE     11,711,852       11,454,502  
                 
GROSS PROFIT     2,874,601       2,414,645  
                 
OPERATING EXPENSES                
Salaries and related expenses     1,482,003       1,419,126  
Selling, general and administrative expenses     1,264,458       2,114,605  
                 
TOTAL OPERATING EXPENSES     2,746,641       3,533,731  
                 
INCOME (LOSS) FROM OPERATIONS     128,140       (1,119,086 )
                 
OTHER (EXPENSE) INCOME                
Interest expense     (181,382 )     (118,172 )
Change in fair value in derivative liability     (39,228 )     --  
Other expense     (305,905 )     --  
                 
TOTAL OTHER (EXPENSE) INCOME     (526,515 )     (118,172 )
                 
NET (LOSS) INCOME   $ (398,375 )   $ (1,237,258 )
                 
OTHER COMPREHENSIVE LOSS - foreign currency translation     (4,383 )     --  
                 
                 
COMPREHENSIVE (LOSS) INCOME   $ (402,758 )   $ (1,237,258 )
                 
(LOSS) INCOME PER SHARE - BASIC AND DILUTED   $ (0.01 )   $ (0.03 )
                 
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC     44,630,151       44,999,287  
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - DILUTED     44,630,151       44,999,287  
                 
                 
                 
Brekford Corp.
Condensed Consolidated Balance Sheets (Unaudited)
 
    September 30,
2015
    December 31,
2014
ASSETS              
CURRENT ASSETS              
Cash, unrestricted   $ 796,410     $ 1,112,881
Accounts receivable, net of allowance $0 at September 30, 2015 and December 31, 2014, respectively     3,839,754       1,706,704
Unbilled receivables     490,646       198,725
Prepaid expenses     152,585       146,569
Inventory     1,170,834       681,948
Total current assets     6,450,229       3,846,827
Property and equipment, net     133,695       284,322
Other non-current assets     173,887       112,132
TOTAL ASSETS   $ 6,757,811     $ 4,243,281
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)              
CURRENT LIABILITIES              
Accounts payable and accrued expenses   $ 2,717,289     $ 1,842,892
Accrued payroll and related expenses     81,214       23,252
Line of credit     2,610,684       1,169,558
Term loan - current portion     229,167       250,000
Deferred revenue     81,954       255,405
Customer deposits     137,315       137,826
Obligations under capital lease - current portion     --       140,209
Obligations under other notes payable - current portion     29,050       28,602
Derivative liability     153,048       --
Other liabilities     47,369       48,669
Deferred rent - current portion     --       --
Total current liabilities     6,087,090       3,896,413
               
LONG - TERM LIABILITIES              
Notes payable - stockholders     500,000       500,000
Other notes payable - net of current portion     29,110       48,371
Deferred rent, net of current portion     44,132       --
Term notes payable, net of current portion     --       166,667
Convertible promissory notes, net of debt discounts of $457,495 and $0 at September 30, 2015 andDecember 31, 2014, respectively     257,505       --
Total long-term liabilities     830,747       715,038
TOTAL LIABILITIES     6,917,837       4,611,451
               
STOCKHOLDERS' (DEFICIT) 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; 44,632,569 issued and outstanding, at September 30, 2015 and 44,500,569 issued and outstanding at December 31, 2014     4,464       4,450
Additional paid-in capital     10,815,366       10,204,479
Treasury Stock, at cost 10,600 shares at September 30, 2015 and December 31, 2014, respectively     (5,890 )     (5,890)
Accumulated deficit     (10,969,583 )     (10,571,209)
Other comprehensive loss     (4,383 )     --
    TOTAL STOCKHOLDERS' EQUITY (DEFICIT)     (160,026 )     (368,170)
    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)   $ 6,757,811     $ 4,243,281
               

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