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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Nevada
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20-0064269
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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| Large accelerated filer | o | Accelerated filer | o |
| Non-accelerated filer | o | Smaller reporting company | þ |
| (Do not check if a smaller reporting company) |
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Class
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Outstanding at August 1, 2012
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Common Stock, $0.001 par value
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16,284,073
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| Page(s) | ||||
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PART I – FINANCIAL INFORMATION
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Item 1. Financial Statements.
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3
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|||
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Condensed Consolidated Balance Sheets – June 30, 2012 and December 31, 2011(Unaudited)
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3 | |||
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Condensed Consolidated Statements of Operations for the Three and Six Months Ended
June 30, 2012 and 2011 (Unaudited)
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4 | |||
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Condensed Consolidated Statements of Stockholders’ Equity for the Six Months Ended
June 30, 2012 (Unaudited)
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5 | |||
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Condensed Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 2012 and 2011 (Unaudited)
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6 | |||
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Notes to the Condensed Consolidated Financial Statements (Unaudited)
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7-21 | |||
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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22 | |||
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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
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49 | |||
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Item 4. Controls and Procedures.
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49 | |||
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PART II – OTHER INFORMATION
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||||
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Item 1. Legal Proceedings.
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50 | |||
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
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51 | |||
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Item 3. Defaults Upon Senior Securities
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52 | |||
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Item 4. Mine Safety Disclosures
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52 | |||
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Item 5. Other Information.
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52 | |||
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Item 6. Exhibits.
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52 | |||
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SIGNATURES
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53 | |||
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EXHIBITS
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54 | |||
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CERTIFICATIONS
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||||
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June 30,
2012
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December 31,
2011
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Assets
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Current assets:
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Cash and cash equivalents
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$ | 1,183,060 | $ | 2,270,393 | ||||
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Accounts receivable-trade, less allowance for doubtful accounts
of $111,608 – 2012 and $125,000 – 2011
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2,934,441 | 2,853,049 | ||||||
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Accounts receivable-other
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59,597 | 104,318 | ||||||
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Inventories
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6,950,842 | 6,683,289 | ||||||
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Prepaid expenses
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280,961 | 302,318 | ||||||
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Total current assets
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11,408,901 | 12,213,367 | ||||||
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Furniture, fixtures and equipment
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4,265,353 | 4,073,713 | ||||||
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Less accumulated depreciation and amortization
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3,503,361 | 3,212,827 | ||||||
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761,992 | 860,886 | ||||||
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Intangible assets, net
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206,509 | 226,802 | ||||||
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Other assets
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80,857 | 97,854 | ||||||
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Total assets
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$ | 12,458,259 | $ | 13,398,909 | ||||
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Liabilities and Stockholders’ Equity
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Current liabilities:
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Accounts payable
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$ | 900,142 | $ | 847,036 | ||||
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Subordinated notes payable-current, net of discount of $92,342 and $0
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2,407,658 | — | ||||||
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Accrued expenses
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726,227 | 833,260 | ||||||
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Capital lease obligation-current
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29,107 | — | ||||||
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Income taxes payable
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4,046 | 21,046 | ||||||
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Customer deposits
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1,878 | 31,899 | ||||||
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Total current liabilities
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4,069,058 | 1,733,241 | ||||||
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Long-term liabilities:
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Subordinated notes payable-long-term, net of discount of $0 and $142,711
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— | 2,357,289 | ||||||
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Litigation accrual –long term
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530,000 | — | ||||||
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Capital lease obligation –long term
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63,315 | — | ||||||
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Total long term liabilities
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593,315 | 2,357,289 | ||||||
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Commitments and contingencies
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Stockholders’ equity:
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Common stock, $0.001 par value; 75,000,000 shares authorized; shares
issued: 16,792,218 – 2012 and 16,662,218 – 2011
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16,792 | 16,662 | ||||||
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Additional paid in capital
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22,966,822 | 22,725,515 | ||||||
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Treasury stock, at cost (shares: 508,145 – 2012 and 508,145 - 2011)
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(2,157,226 | ) | (2,157,226 | ) | ||||
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Accumulated deficit
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(13,030,502 | ) | (11,276,572 | ) | ||||
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Total stockholders’ equity
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7,795,886 | 9,308,379 | ||||||
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Total liabilities and stockholders’ equity
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$ | 12,458,259 | $ | 13,398,909 | ||||
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Three months ended
June 30,
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Six months ended
June 30,
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|||||||||||||||
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2012
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2011
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2012
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2011
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Product revenue
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$ | 4,392,133 | $ | 4,626,242 | $ | 7,980,686 | $ | 9,196,816 | ||||||||
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Other revenue
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208,664 | 117,011 | 402,567 | 276,130 | ||||||||||||
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Total revenue
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4,600,797 | 4,743,253 | 8,383,253 | 9,472,946 | ||||||||||||
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Cost of revenue
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2,125,134 | 2,778,696 | 3,910,973 | 5,531,616 | ||||||||||||
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Gross profit
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2,475,663 | 1,964,557 | 4,472,280 | 3,941,330 | ||||||||||||
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Selling, general and administrative expenses:
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Research and development expense
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574,883 | 710,735 | 1,177,786 | 1,419,504 | ||||||||||||
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Selling, advertising and promotional expense
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691,481 | 538,637 | 1,273,142 | 1,009,317 | ||||||||||||
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Stock-based compensation expense
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120,796 | 216,060 | 241,437 | 443,848 | ||||||||||||
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Litigation charge and related expenses
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654,082 | — | 654,082 | — | ||||||||||||
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General and administrative expense
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1,309,951 | 1,598,573 | 2,733,543 | 3,298,778 | ||||||||||||
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Total selling, general and administrative expenses
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3,351,193 | 3,064,005 | 6,079,990 | 6,171,447 | ||||||||||||
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Operating loss
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(875,530 | ) | (1,099,448 | ) | (1,607,710 | ) | (2,230,117 | ) | ||||||||
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Interest income
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2,143 | 2,756 | 4,779 | 6,761 | ||||||||||||
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Interest expense
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(75,814 | ) | (38,211 | ) | (150,999 | ) | (58,836 | ) | ||||||||
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Loss before income tax benefit
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(949,201 | ) | (1,134,903 | ) | (1,753,930 | ) | (2,282,192 | ) | ||||||||
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Income tax benefit
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— | — | — | — | ||||||||||||
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Net loss
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$ | (949,201 | ) | $ | (1,134,903 | ) | $ | (1,753,930 | ) | $ | (2,282,192 | ) | ||||
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Net loss per share information:
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Basic
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$ | (0.06 | ) | $ | (0.07 | ) | $ | (0.11 | ) | $ | (0.14 | ) | ||||
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Diluted
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$ | (0.06 | ) | $ | (0.07 | ) | $ | (0.11 | ) | $ | (0.14 | ) | ||||
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Weighted average shares outstanding:
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Basic
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16,206,073 | 16,150,590 | 16,179,929 | 16,149,545 | ||||||||||||
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Diluted
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16,206,073 | 16,150,590 | 16,179,929 | 16,149,545 | ||||||||||||
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Common Stock
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Additional
Paid In
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Treasury | Accumulated | |||||||||||||||||||||
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Shares
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Amount
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Capital
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stock
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deficit
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Total
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|||||||||||||||||||
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Balance, January 1, 2012
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16,662,218 | $ | 16,662 | $ | 22,725,515 | $ | (2,157,226 | ) | $ | (11,276,572 | ) | $ | 9,308,379 | |||||||||||
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Stock-based compensation
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— | — | 241,437 | — | — | 241,437 | ||||||||||||||||||
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Restricted common stock grant
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130,000 | 130 | (130 | ) | — | — | — | |||||||||||||||||
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Net loss
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— | — | — | — | (1,753,930 | ) | (1,753,930 | ) | ||||||||||||||||
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Balance, June 30, 2012
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16,792,218 | $ | 16,792 | $ | 22,966,822 | $ | (2,157,226 | ) | $ | (13,030,502 | ) | $ | 7,795,886 | |||||||||||
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2012
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2011
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Cash Flows From Operating Activities:
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Net loss
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$ | (1,753,930 | ) | $ | (2,282,192 | ) | ||
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Adjustments to reconcile net loss to net cash flows
used in operating activities:
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Depreciation and amortization
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372,151 | 412,178 | ||||||
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Stock based compensation
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241,437 | 443,848 | ||||||
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Provision for inventory obsolescence
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3,306 | 185,927 | ||||||
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Provision for doubtful accounts receivable
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(13,392 | ) | 15,000 | |||||
| — | ||||||||
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Change in assets and liabilities:
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(Increase) decrease in:
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Accounts receivable - trade
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(68,000 | ) | 715,820 | |||||
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Accounts receivable - other
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44,721 | 137,416 | ||||||
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Inventories
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(270,859 | ) | 2,193,310 | |||||
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Prepaid expenses
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21,357 | 71,337 | ||||||
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Other assets
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16,997 | (22,711 | ) | |||||
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Increase (decrease) in:
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Accounts payable
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53,106 | (1,797,619 | ) | |||||
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Accrued expenses
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(107,033 | ) | 186,855 | |||||
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Litigation accrual
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530,000 | — | ||||||
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Income taxes payable
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(17,000 | ) | (9,750 | ) | ||||
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Customer deposits
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(30,021 | ) | (764 | ) | ||||
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Net cash (used in) provided by operating activities
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(977,160 | ) | 248,655 | |||||
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Cash Flows from Investing Activities:
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Purchases of furniture, fixtures and equipment
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(96,880 | ) | (129,028 | ) | ||||
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Additions to intangible assets
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(10,955 | ) | (22,330 | ) | ||||
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Net cash used in investing activities
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(107,835 | ) | (151,358 | ) | ||||
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Cash Flows from Financing Activities:
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Proceeds from issuance of subordinated note payable
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— | 1,500,000 | ||||||
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Change in line of credit
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— | (1,500,000 | ) | |||||
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Deferred issuance costs for subordinated note payable
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— | (75,000 | ) | |||||
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Payments on capital lease obligation
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(2,338 | ) | — | |||||
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Net cash used in financing activities
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(2,338 | ) | (75,000 | ) | ||||
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Net increase (decrease) in cash and cash equivalents
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(1,087,333 | ) | 22,297 | |||||
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Cash and cash equivalents, beginning of period
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2,270,393 | 623,475 | ||||||
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Cash and cash equivalents, end of period
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$ | 1,183,060 | $ | 645,772 | ||||
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Supplemental disclosures of cash flow information:
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Cash payments for interest
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$ | 100,631 | $ | 40,109 | ||||
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Cash payments for income taxes
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$ | 17,000 | $ | — | ||||
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Supplemental disclosures of non-cash investing and financing activities:
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Restricted common stock grant
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$ | 130 | $ | 10 | ||||
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Capital expenditures financed by capital lease obligations
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$ | 94,760 | $ | — | ||||
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Transfer of demonstration equipment from inventory to equipment
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$ | — | $ | 510,931 | ||||
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●
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Sales to domestic and international customers are made direct to the end customer (typically a law enforcement agency or a commercial customer) through commissioned third-party sales agents or employee sales personnel. Revenue is recorded when the product is shipped to the end customer.
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●
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Sales to domestic and international customers are made through independent distributors who purchase products from
the Company
at a wholesale price and sell to the end user (typically law enforcement agencies or a commercial customer) at a retail price. The distributor retains the margin as its compensation for its role in the transaction. The distributor generally maintains product inventory, customer receivables and all related risks and rewards of ownership. Revenue is recorded when the product is shipped to the distributor consistent with the terms of the distribution agreement.
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●
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Repair parts and services for domestic and international customers are generally handled by our inside customer service employees. Revenue is recognized upon shipment of the repair parts and acceptance of the service or materials by the end customer.
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●
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Expected term is determined using the contractual term and vesting period of the award;
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●
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Expected volatility of award grants made in the Company’s plan is measured using the weighted average of historical daily changes in the market price of the Company’s common stock over the period equal to the expected term of the award;
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●
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Expected dividend rate is determined based on expected dividends to be declared;
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●
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Risk-free interest rate is equivalent to the implied yield on zero-coupon U.S. Treasury bonds with a maturity equal to the expected term of the awards; and
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●
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Forfeitures are based on the history of cancellations of awards granted and management’s analysis of potential forfeitures.
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| Three Months Ended June 30, |
Six Months Ended June 30,
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|||||||||||||||
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2012
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2011
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2012
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2011
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Sales by geographic area:
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United States of America
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$ | 4,589,116 | $ | 4,622,999 | $ | 8,213,157 | $ | 8,904,020 | ||||||||
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Foreign
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11,681 | 120,254 | 170,096 | 568,926 | ||||||||||||
| $ | 4,600,797 | $ | 4,743,253 | $ | 8,383,253 | $ | 9,472,946 | |||||||||
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Six Months ended June 30,
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Distributor/Agent
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2012
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2011
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Number 1
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$ | 1,372,981 | $ | 1,882,327 | ||||
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Number 2
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$ | 1,178,031 | $ | 571,527 | ||||
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June 30,
2012
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December 31,
2011
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Raw material and component parts
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$ | 2,361,820 | $ | 2,168,761 | ||||
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Work-in-process
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183,193 | 217,264 | ||||||
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Finished goods
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4,956,317 | 4,844,446 | ||||||
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Subtotal
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7,501,330 | 7,230,471 | ||||||
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Reserve for excess and obsolete inventory
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(550,488 | ) | (547,182 | ) | ||||
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Total
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$ | 6,950,842 | $ | 6,683,289 | ||||
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June 30,
2012
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December 31,
2011
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Subordinated notes payable, at par
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$ | 2,500,000 | $ | 2,500,000 | ||||
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Unamortized discount
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(92,342 | ) | (142,711 | ) | ||||
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Total notes payable
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2,407,658 | 2,357,289 | ||||||
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Less: Current maturities of long-term debt
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2,407,658 | - | ||||||
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Subordinated notes payable, long-term
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$ | - | $ | 2,357,289 | ||||
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June 30,
2012
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December 31,
2011
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Accrued warranty expense
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$ | 176,601 | $ | 211,421 | ||||
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Accrued sales commissions
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41,000 | 64,782 | ||||||
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Accrued payroll and related fringes
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284,429 | 305,328 | ||||||
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Accrued insurance
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68,008 | 61,355 | ||||||
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Employee separation agreement
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— | 3,366 | ||||||
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Other
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156,189 | 187,008 | ||||||
| $ | 726,227 | $ | 833,260 | |||||
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2012
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Beginning balance
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$ | 211,421 | ||
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Provision for warranty expense
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64,589 | |||
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Charges applied to warranty reserve
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(99,409 | ) | ||
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Ending balance
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$ | 176,601 | ||
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Year ending December 31:
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2012 (period from July 1, 2012 to December 31, 2012)
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$ | 134,441 | ||
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2013
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— | |||
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2014
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— | |||
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2015
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— | |||
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2016 and thereafter
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— | |||
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$ | 134,441 | ||
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License Type
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Effective
Date
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Expiration
Date
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Terms
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Production software license agreement
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April 2005
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April 2013
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Automatically renews for one year periods unless terminated by either party.
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Software sublicense agreement
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October 2007
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October 2012
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Automatically renews for one year periods unless terminated by either party.
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Technology license agreement
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July 2007
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July 2012
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Automatically renews for one year periods unless terminated by either party.
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Development, license and manufacturing agreement
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July 2011
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July 2016
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Company has option to renew for three successive options to renew for three years periods unless terminated by either party.
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Limited license agreement
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August 2008
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Perpetual
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May be terminated by either party.
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|
Minimum order commitment amount ($)
|
||||||||||||
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Commitment time period
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Commitment
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Purchases
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Remaining
Commitment
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|||||||||
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March 2012 through February 2013
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$ | 846,240 | $ | 352,838 | $ | 493,402 | ||||||
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March 2013 through February 2014
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846,240 | — | 846,240 | |||||||||
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$ | 1,692,480 | $ | 352,838 | $ | 1,339,642 | ||||||
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2012
|
||||
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Expected term of the options in years
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2-3 years
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|||
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Expected volatility of Company stock
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66% -72 | % | ||
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Expected dividends
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None
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|||
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Risk-free interest rate
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0.24% - 0.34 | % | ||
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Forfeiture rate
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5% -75 | % | ||
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Options
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Shares
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Weighted
Average
Exercise Price
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||||||
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Outstanding at January 1, 2012
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4,045,305 | $ | 2.59 | |||||
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Granted
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796,000 | 0.51 | ||||||
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Exercised
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— | — | ||||||
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Exercised and surrendered/cancelled (cashless exercise)
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— | — | ||||||
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Forfeited
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(434,100 | ) | 2.19 | |||||
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Outstanding at June 30, 2012
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4,407,205 | $ | 2.25 | |||||
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Exercisable at June 30, 2012
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2,641,755 | $ | 3.05 | |||||
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Weighted-average fair value for options granted
during the period at fair value
|
796,000 | $ | 0.15 | |||||
|
Outstanding options
|
Exercisable options
|
|||||||||||||||||
|
Exercise price range
|
Number of options
|
Weighted average remaining contractual life
|
Number of options
|
Weighted average remaining contractual life
|
||||||||||||||
| $ | 0.01 to $0.99 | 1,102,000 |
9.6 years
|
- | - | |||||||||||||
| $ | 1.00 to $1.99 | 2,255,205 |
5.4 years
|
1,646,355 |
4.4 years
|
|||||||||||||
| $ | 2.00 to $2.99 | 21,000 |
6.1 years
|
14,000 |
5.4 years
|
|||||||||||||
| $ | 3.00 to $3.99 | 84,000 |
6.0 years
|
36,400 |
4.4 years
|
|||||||||||||
| $ | 4.00 to $4.99 | 235,000 |
5.3years
|
235,000 |
5.3 years
|
|||||||||||||
| $ | 5.00 to $5.99 | - | - | - | - | |||||||||||||
| $ | 6.00 to $6.99 | 700,000 |
5.5 years
|
700,000 |
5.5 years
|
|||||||||||||
| $ | 7.00 to $7.99 | - | - | - | - | |||||||||||||
| $ | 8.00 to $8.99 | 10,000 |
0.8 years
|
10,000 |
0.8 years
|
|||||||||||||
| $ | 9.00 to $9.99 | - | - | - | - | |||||||||||||
| 4,407,205 |
6.5 years
|
2,641,755 |
4.8 years
|
|||||||||||||||
|
Restricted stock
|
Weighted average grant date fair value
|
|||||||
|
Nonvested balance, January 1, 2012
|
22,500 | $ | 2.09 | |||||
|
Granted
|
130,000 | .44 | ||||||
|
Vested
|
(12,500 | ) | 1.89 | |||||
|
Forfeited
|
— | — | ||||||
|
Nonvested balance, June 30 2012
|
140,000 | $ | 0.58 | |||||
|
Year ended December 31,
|
Number of shares
|
|||
|
2012 (July 1, 2012 to December 31, 2012)
|
52,500 | |||
|
2013
|
65,000 | |||
|
2014
|
5,000 | |||
|
2015
|
7,500 | |||
|
2016
|
10,000 | |||
|
Expected term of the Warrants
|
23-30 months
|
|||
|
Expected volatility of Company stock
|
66% - 68 | % | ||
|
Expected dividends
|
None
|
|||
|
Risk-free interest rate
|
0.25% - 0.62 | % | ||
|
Forfeiture rate
|
0 | % | ||
|
Warrants
|
Weighted average exercise price
|
|||||||
|
Vested balance, January 1, 2012
|
560,000 | $ | 1.00 | |||||
|
Vested
|
- | - | ||||||
|
Exercised
|
- | - | ||||||
|
Forfeited
|
- | - | ||||||
|
Vested balance, June 30, 2012
|
560,000 | $ | 1.00 | |||||
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
|
2012
|
2011
|
2012
|
2011
|
|||||||||||||
|
Numerator for basic and diluted income per share – Net loss
|
$ | (949,201 | ) | $ | (1,134,903 | ) | $ | (1,753,930 | ) | $ | (2,282,192 | ) | ||||
|
Denominator for basic loss per share – weighted average shares outstanding
|
16,206,073 | 16,150,590 | 16,179,929 | 16,149,545 | ||||||||||||
|
Dilutive effect of shares issuable under stock options and warrants outstanding
|
- | - | - | - | ||||||||||||
|
Denominator for diluted loss per share – adjusted weighted average shares outstanding
|
16,206,073 | 16,150,590 | 16,179,929 | 16,149,545 | ||||||||||||
|
Net loss per share:
|
||||||||||||||||
|
Basic
|
$ | (0.06 | ) | $ | (0.07 | ) | $ | (0.11 | ) | $ | (0.14 | ) | ||||
|
Diluted
|
$ | (0.06 | ) | $ | (0.07 | ) | $ | (0.11 | ) | $ | (0.14 | ) | ||||
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.
|
|
June 30,
|
March 31,
|
December 31,
|
September 30,
|
June 30,
|
March 31,
|
|||||||||||||||||||
|
2012
|
2012
|
2011
|
2011
|
2011
|
2011
|
|||||||||||||||||||
|
Total revenue
|
$ | 4,600,797 | $ | 3,782,456 | $ | 4,286,314 | $ | 5,817,893 | $ | 4,743,253 | $ | 4,729,693 | ||||||||||||
|
Gross profit
|
2,475,663 | 1,996,617 | 1,841,104 | 2,989,496 | 1,964,557 | 1,976,773 | ||||||||||||||||||
|
Gross profit margin percentage
|
53.8 | % | 52.8 | % | 43.0 | % | 51.4 | % | 41.4 | % | 41.8 | % | ||||||||||||
|
Total selling, general and administrative expenses
|
3,351,193 | 2,728,797 | 3,143,348 | 3,081,936 | 3,064,005 | 3,107,442 | ||||||||||||||||||
|
Operating loss
|
(875,530 | ) | (732,180 | ) | (1,302,244 | ) | (92,440 | ) | (1,099,448 | ) | (1,130,669 | ) | ||||||||||||
|
Operating margin percentage
|
(19.0 | )% | (19.4 | )% | (30.4 | )% | (1.6 | )% | (23.2 | )% | (23.9 | )% | ||||||||||||
|
Net loss
|
$ | (949,201 | ) | $ | (804,729 | ) | $ | (1,517,136 | ) | $ | (162,918 | ) | $ | (1,134,903 | ) | $ | (1,147,289 | ) | ||||||
|
●
|
Revenues increased to $4,600,797 during the second quarter and were the highest achieved since third quarter 2011 when revenues aggregated $5,817,893. We attribute the revenue increase in the second quarter 2012 to the successful reorganization of our law enforcement sales force which was started in late 2011 and continued through the first and second quarters of 2012. We are moving to an employee-based sales force as opposed to our historical usage of independent sales agents. Management believes the sales force reorganization will continue to have a positive impact in the future, but recognizes that the economic climate will continue to depress certain state and local tax bases and continue to make 2012 a challenging business environment.
|
|
●
|
We have developed additional products to complement our DVM-500 and DVM-750 in-car video products. In that respect, we launched the Laser Ally speed detection system in third quarter 2010, the DVM-250 event recorder during first quarter 2011, the DVM-100 in-car video system in third quarter 2011 and the DVM-400 in-car video system in fourth quarter 2011. We are hopeful that our expanded product line will help generate incremental revenues to supplement our traditional DVM-500 Plus and DVM-750 revenues. In addition, the DVM-250 and DVM-250 Plus event recorders are designed for commercial fleet operators, which will allow us to seek new customers outside of law enforcement. Our recently released products, including the DVM 100, the DVM 400, the DVM 250, the DVM 250 Plus, and the Laser Ally, contributed 11% of the total sales for the second quarter 2012 compared to 8% for the first quarter 2012 and 6% for the comparable second quarter 2011.
|
|
●
|
Our total selling, general and administrative expenses increased $622,396 during the second quarter 2012 compared to the first quarter 2012. This reversed a positive trend of lower SG&A expenses resulting from our SG&A cost containment initiative. The primary factor that contributed to the higher SG&A expenses during the second quarter 2012 was the litigation charge and related expenses which resulted from the Z3 litigation. We charged a total of $654,082 to SG&A expenses during the second quarter 2012 related to the Z3 litigation. Therefore, SG&A expenses decreased during the second quarter 2012 compared to the first quarter 2012, excluding the litigation charge. We expect the favorable trend in SG&A expense will continue during the balance of 2012.
|
|
●
|
Our gross profit on sales increased to 53.8% during second quarter 2012 and built on the positive momentum from first quarter 2012 when gross profit increased to 52.8% from fourth quarter 2011, when gross profit had dropped to 43.0%. Our gross profit was 51.4% in third quarter 2011, 41.4% in second quarter 2011 and 41.8% in first quarter 2011. The second quarter 2012 gross margin improvement was attributable to the results of our supply chain improvement plan as we continued producing and shipping both DVM-500 Plus and DVM-750 units containing the lower cost components, which favorably impacted our gross margin during second quarter 2012. During 2011, we implemented our supply chain plan to improve gross margins through better outsourcing of our component parts in the future, including from foreign sources, which allowed us to reduce our production overhead costs through headcount and other cost reductions. In fourth quarter 2011, we implemented a printed circuit board revision that resulted in the replacement of all older version boards in our DVM-750 inventory. The cost of the labor, overhead and material to accomplish this replacement of boards was charged to cost of sales during fourth quarter 2011 and resulted in a significant decrease in our gross margin percentage. Our goal is to continue to improve margins during the balance of 2012 through our supply chain initiative, reduced manufacturing overhead, increases in sales volume and improved product mix. We continue to focus on reducing the costs of our products through changes to our supply chain, whereby we are emphasizing outsourcing of component part production and changing our supply chain vendors to lower cost alternatives suppliers throughout the world. However, we are experiencing increased price competition and pressure from certain of our competitors that has led to pricing discounts on larger contract opportunities. We believe this pricing pressure will continue as our competitors attempt to regain market share and revive sales and expect it to have a negative impact on our gross margins to some degree during the balance of 2012.
|
|
●
|
We believe that current and potential customers may be delaying or reducing the size of orders due to a number of factors, including budget reductions, in order to preserve their currently available funding and budgets. Many of the existing Federal funding programs require matching funds from the local agencies that continues to be difficult, given the budget restrictions faced by many agencies. We cannot predict whether such funding on a matching basis will have a positive impact on our revenues in the future.
|
|
●
|
Our international revenues were substantially less than expected for the six months ended June 30, 2012 and 2011, with total international revenues of $170,096 (2% of total revenues) for the six months ended June 30, 2012, compared to $568,926 (6% of total revenues) for the six months ended June 30, 2011. During the second quarter 2012, we replaced our international sales manager who was responsible for our international distributors and believe this will result in positive changes in the third quarter 2012 and beyond. We have numerous bids for international customers out presently; however, international sale cycles generally take longer than domestic business. We also believe that our new products may appeal to international customers, in particular the DVM-100, DVM-400, DVM-250 and DVM 250 Plus. We have built in the capability to install a variety of language packs into our DVM-750 system, which currently includes English, Spanish, Turkish and Arabic, with additional languages to become available during 2012. This language flexibility may be a positive factor in our efforts to improve future international sales.
|
|
●
|
We have reorganized our production and manufacturing operations by placing a greater emphasis on contract manufacturers. Uncertainties regarding the size and timing of large international orders make it difficult for us to maintain efficient production and staffing levels if all orders are processed through our manufacturing facility. By outsourcing more of our production requirements to contract manufacturers, we believe that we can benefit from greater volume purchasing and production efficiencies, while at the same time reducing our fixed and semi-fixed overhead costs. It is, of course, important that selected contract manufacturers be able to ramp up production quickly in order to meet the varying demands of our international customers.
|
|
●
|
Our recent operating losses caused deterioration in our cash and liquidity in 2012 and 2011. We borrowed $2,500,000 under two unsecured subordinated notes (the "Notes") payable to a private, third party lender. The notes are due and payable in full on May 30, 2013 and may be prepaid without penalty at any time. We utilized the proceeds to retire our bank line of credit and provide cash for operations. We had no institutional credit lines available to provide additional working capital as of June 30, 2012. At June 30, 2012, we had available cash balances of $1,183,060 and approximately $7.3 million of working capital, primarily in the form of inventory and accounts receivable. Subsequent to June 30, 2012, we extended the maturity of the foregoing notes to May 30, 2014. In addition, the Company has entered into a letter of intent providing for a $1.0 million revolving credit facility to be established by an affiliate of one of its non-employee directors. The revolving credit facility will have a term of 17 months and may be prepaid without penalty.
|
|
Minimum order commitment amount ($)
|
||||||||||||
|
Commitment time period
|
Commitment
|
Purchases
|
Remaining
Commitment
|
|||||||||
|
March 2012 through February 2013
|
$ | 846,240 | $ | 352,838 | $ | 493,402 | ||||||
|
March 2013 through February 2014
|
846,240 | — | 846,240 | |||||||||
|
|
$ | 1,692,480 | $ | 352,838 | $ | 1,339,642 | ||||||
|
Three Months Ended
June 30,
|
||||||||
|
2012
|
2011
|
|||||||
|
Revenue
|
100 | % | 100 | % | ||||
|
Cost of revenue
|
46 | % | 59 | % | ||||
|
Gross profit
|
54 | % | 41 | % | ||||
|
Selling, general and administrative expenses:
|
||||||||
|
Research and development expense
|
13 | % | 15 | % | ||||
|
Selling, advertising and promotional expense
|
15 | % | 11 | % | ||||
|
Stock-based compensation expense
|
3 | % | 5 | % | ||||
|
Litigation charge and related expenses
|
14 | % | — | % | ||||
|
General and administrative expense
|
28 | % | 34 | % | ||||
|
|
||||||||
|
Total selling, general and administrative expenses
|
73 | % | 65 | % | ||||
|
|
||||||||
|
Operating loss
|
(19 | %) | (24 | %) | ||||
|
Interest income (expense)
|
(2 | %) | — | % | ||||
|
|
||||||||
|
Loss before income tax benefit
|
(21 | %) | (24 | %) | ||||
|
Income tax (provision)
|
- | % | - | % | ||||
|
|
||||||||
|
Net loss
|
(21 | %) | (24 | %) | ||||
|
|
||||||||
|
Net loss per share information:
|
||||||||
|
Basic
|
$ | (0.06 | ) | $ | (0.07 | ) | ||
|
Diluted
|
$ | (0.06 | ) | $ | (0.07 | ) | ||
|
Product
|
Description
|
Retail
price
|
|||
|
DVM-500 Plus
|
An in-car digital audio/video system that is integrated into a rear view mirror primarily designed for law enforcement customers.
|
$ | 4,295 | ||
|
DVM-500 Ultra
|
An all-weather mobile digital audio/video system that is designed for motorcycle, ATV and boat users mirror primarily for law enforcement customers.
|
$ | 4,495 | ||
|
DVM-750
|
An in-car digital audio/video system that is integrated into a rear view mirror primarily designed for law enforcement customers.
|
$ | 4,995 | ||
|
DVF-500
|
A digital audio/video system that is integrated into a law-enforcement style flashlight primarily designed for law enforcement customers.
|
$ | 695 | ||
|
DVM-100
|
An in-car digital audio/video system that is integrated into a rear view mirror primarily designed for law enforcement customers. This system uses an integrated fixed focus camera.
|
$ | 1,895 | ||
|
DVM-400
|
An in-car digital audio/video system that is integrated into a rear view mirror primarily designed for law enforcement customers. This system uses an external zoom camera.
|
$ | 2,795 | ||
|
DVM-250
|
An in-car digital audio/video system that is integrated into a rear view mirror primarily designed for commercial fleet customers. We also offer the DVM-250 Plus which has additional features and retails for $1,295.
|
$ | 995 | ||
|
Thermal Ally
|
A hand-held thermal imaging camera that improves night vision or other low-light situations primarily designed for law enforcement customers.
|
$ | 3,995 | ||
|
Laser Ally
|
A hand-held mobile speed detection and measurement device that uses light beams rather than sound waves to measure the speed of vehicles.
|
$ | 2,495 | ||
|
FirstVU
|
A body-worn digital audio/video camera system primarily designed for law enforcement customers.
|
$ | 695 | ||
|
●
|
Sales to domestic and international customers are made direct to the end customer (typically a law enforcement agency or a commercial customer) through our direct sales force employees and commissioned third-party sales agents. Revenue is recorded when the product is shipped to the end customer.
|
|
●
|
Sales to domestic and international customers are made through independent distributors who purchase products from us at a wholesale price and sell to the end user (typically law enforcement agencies or a commercial customer) at a retail price. The distributor retains the margin as its compensation for its role in the transaction. The distributor generally maintains product inventory, customer receivables and all related risks and rewards of ownership. Revenue is recorded when the product is shipped to the distributor consistent with the terms of the distribution agreement.
|
|
●
|
Repair parts and services for domestic and international customers are generally handled by our inside customer service employees. Revenue is recognized upon shipment of the repair parts and acceptance of the service or materials by the end customer.
|
|
Three months ended June 30,
|
||||||||
|
2012
|
2011
|
|||||||
|
DVM-550 Plus
|
48 | % | 67 | % | ||||
|
DVM-750
|
20 | % | 8 | % | ||||
|
DVM-250 & DVM- 250 Plus
|
5 | % | 1 | % | ||||
|
DVM-100 & 400
|
4 | % | — | % | ||||
|
First Vu
|
3 | % | 1 | % | ||||
|
Laser Ally
|
2 | % | 5 | % | ||||
|
Repair and service
|
2 | % | 2 | % | ||||
|
DVM-500 Ultra
|
— | % | 9 | % | ||||
|
Accessories and other revenues
|
16 | % | 7 | % | ||||
| 100 | % | 100 | % | |||||
|
●
|
Our revenues decreased due to the challenging economy that negatively impacted state, county and municipal budgets which fund our law enforcement customers. We believe that current and potential customers may have delayed or reduced the size of their orders due to a number of factors, including their local budget reductions and anticipation of receiving the federal government’s stimulus funds in order to preserve their currently available funding and budgets. Our average order size decreased from approximately $3,500 in second quarter 2011 to $2,700 during second quarter 2012. We shipped four individual orders in excess of $100,000, for a total of $882,000 in revenue, in second quarter 2012 compared to four orders individually in excess of $100,000, for total revenue of approximately $1,309,000, in second quarter 2011. We believe that this reflects reduced law enforcement budgets where the customers are covering only the minimum required needs rather than full fleet deployments. In addition, the new products we introduced in 2010 and 2011 (FirstVU, Laser Ally, DVM-250, DVM-250 Plus, DVM-100 and DVM-400) all have lower average selling prices than our digital video mirror lines. Repair orders at lower average invoice amounts have also increased significantly as our installed base continues to come off of warranty. These repair orders are at lower average price levels and are impacting our overall average invoice size. We are hopeful that, during the balance of 2012, we will see an easing of such budgetary constraints and that purchasing patterns will resume at their former, higher levels, although we can make no assurances in this regard. We maintained consistent retail pricing on our law enforcement mirror models during 2012 and do not plan any material changes in pricing during the balance of 2012, including the new products recently introduced. Our newer mirror-based products include the DVM-100, DVM-250 and DVM-250 Plus and the DVM-400, which will be sold at lower retail pricing levels compared to our legacy products during 2012 due to fewer features. We are experiencing some price competition and discounting from our competitors as they attempt to regain market share. For certain opportunities that involve multiple units and/or multi-year contracts we have occasionally discounted our products to gain or retain market share and revenues.
|
|
●
|
We have been reorganizing our domestic sales force and organization for our law enforcement channel since late 2011. Traditionally, we primarily used third party sales agents to market our law enforcement products domestically. We believed that type of sales force was effective and efficient for us when we initially entered the market with a new product. We have changed principally to an employee-based direct sales force that provides us with more control and monitoring of our sales force and their daily activities. In addition, we have reduced the size of certain sales territories and consequently increased the overall number of domestic sales territories and sales personnel from 15 at the beginning of 2012 to 20 in order to better penetrate the market. We performed extensive evaluations of all existing sales agents during late 2011 and 2012 which prompted us to undertake the complete reorganization of our domestic sales force. During 2012, we retained two of such sales agents as independent sales agents in their previous territories because of their past performance, converted two of them to employee-based direct sales personnel and replaced the remaining sales agents with new employee sales personnel. Our objective with this new employee-based model, including the replacement of many sales agents, is to encourage our sales personnel in lower performing territories to improve their efforts and consequently their sales results. We believe that a portion of the revenue decrease experienced in 2011 and 2012 revenues resulted from third party sales agents reducing their sales efforts because they did not have the financial resources to travel, meet and market directly to their customers as a result of the difficult economic conditions. We think that our reorganization has addressed these concerns. We believe that the transition to the employee-based direct sales force model resulting in a number of new territories and sales personnel during 2012 and the training of new sales personnel that replaced underperforming salesmen in certain existing territories have caused temporary disruptions and contributed to the lower revenues in second quarter 2012 compared to 2011. In conjunction with the sales force reorganization, we have identified, hired and trained nine new sales personnel in 2012 that principally replaced underperforming sales agents. We hope that this transition will result in the generation of increased revenues from these historically underperforming territories in the future.
|
|
●
|
Our international revenues decreased to $11,681 (<1% of total revenues) during second quarter 2012, compared to $120,254 (2.5% of total revenues) during second quarter 2011. During the second quarter 2012, we replaced the international sales manager responsible for our international distributors. We have numerous bids for international customers out presently; however, international sale cycles generally take longer than domestic business. We also believe that our new products may appeal to international customers, in particular the DVM-100, DVM-250 and DVM-250 Plus. We have built in the capability to install a variety of language packs into our DVM-750 system, which currently includes English, Spanish, Turkish and Arabic, with additional languages to become available during 2012. This language flexibility may be a positive factor in our efforts to improve future international sales.
|
|
Three Months Ended June30,
|
||||||||
|
2012
|
2011
|
|||||||
|
Research and development expense
|
$ | 574,883 | $ | 710,735 | ||||
|
Selling, advertising and promotional expense
|
691,481 | 538,637 | ||||||
|
Stock-based compensation expense
|
120,796 | 216,060 | ||||||
|
Professional fees and expense
|
213,573 | 223,779 | ||||||
|
Executive, sales and administrative staff payroll
|
522,237 | 632,250 | ||||||
|
Litigation charge and related expenses
|
654,082 | — | ||||||
|
Other
|
574,141 | 742,544 | ||||||
|
Total
|
$ | 3,351,193 | $ | 3,064,005 | ||||
|
Six Months Ended
June 30,
|
||||||||
|
2012
|
2011
|
|||||||
|
Revenue
|
100 | % | 100 | % | ||||
|
Cost of revenue
|
47 | % | 58 | % | ||||
|
Gross profit
|
53 | % | 42 | % | ||||
|
Selling, general and administrative expenses:
|
||||||||
|
Research and development expense
|
14 | % | 15 | % | ||||
|
Selling, advertising and promotional expense
|
15 | % | 11 | % | ||||
|
Stock-based compensation expense
|
3 | % | 5 | % | ||||
|
Litigation charge and related expenses
|
8 | % | — | % | ||||
|
General and administrative expense
|
32 | % | 35 | % | ||||
|
|
||||||||
|
Total selling, general and administrative expenses
|
72 | % | 66 | % | ||||
|
|
||||||||
|
Operating loss
|
(19 | %) | (24 | %) | ||||
|
Interest income (expense)
|
(2 | %) | — | % | ||||
|
|
||||||||
|
Loss before income tax benefit
|
(21 | %) | (24 | %) | ||||
|
Income tax (provision)
|
— | % | — | % | ||||
|
|
||||||||
|
Net loss
|
(21 | %) | (24 | %) | ||||
|
|
||||||||
|
Net loss per share information:
|
||||||||
|
Basic
|
$ | (0.11 | ) | $ | (0.14 | ) | ||
|
Diluted
|
$ | (0.11 | ) | $ | (0.14 | ) | ||
|
Product
|
Description
|
Retail
price
|
|||
|
DVM-500 Plus
|
An in-car digital audio/video system that is integrated into a rear view mirror primarily designed for law enforcement customers.
|
$ | 4,295 | ||
|
DVM-500 Ultra
|
An all-weather mobile digital audio/video system that is designed for motorcycle, ATV and boat users mirror primarily for law enforcement customers.
|
$ | 4,495 | ||
|
DVM-750
|
An in-car digital audio/video system that is integrated into a rear view mirror primarily designed for law enforcement customers.
|
$ | 4,995 | ||
|
DVF-500
|
A digital audio/video system that is integrated into a law-enforcement style flashlight primarily designed for law enforcement customers.
|
$ | 695 | ||
|
DVM-100
|
An in-car digital audio/video system that is integrated into a rear view mirror primarily designed for law enforcement customers. This system uses an integrated fixed focus camera.
|
$ | 1,895 | ||
|
DVM-400
|
An in-car digital audio/video system that is integrated into a rear view mirror primarily designed for law enforcement customers. This system uses an external zoom camera.
|
$ | 2,795 | ||
|
DVM-250
|
An in-car digital audio/video system that is integrated into a rear view mirror primarily designed for commercial fleet customers. We also offer the DVM-250 Plus which has additional features and retails for $1,295.
|
$ | 995 | ||
|
Thermal Ally
|
A hand-held thermal imaging camera that improves night vision or other low-light situations primarily designed for law enforcement customers.
|
$ | 3,995 | ||
|
Laser Ally
|
A hand-held mobile speed detection and measurement device that uses light beams rather than sound waves to measure the speed of vehicles.
|
$ | 2,495 | ||
|
FirstVU
|
A body-worn digital audio/video camera system primarily designed for law enforcement customers.
|
$ | 695 | ||
|
●
|
Sales to domestic and international customers are made direct to the end customer (typically a law enforcement agency or a commercial customer) through commissioned third-party sales agents or our direct sales force employees. Revenue is recorded when the product is shipped to the end customer.
|
|
●
|
Sales to domestic and international customers are made through independent distributors who purchase products from us at a wholesale price and sell to the end user (typically law enforcement agencies or a commercial customer) at a retail price. The distributor retains the margin as its compensation for its role in the transaction. The distributor generally maintains product inventory, customer receivables and all related risks and rewards of ownership. Revenue is recorded when the product is shipped to the distributor consistent with the terms of the distribution agreement.
|
|
●
|
Repair parts and services for domestic and international customers are generally handled by our inside customer service employees. Revenue is recognized upon shipment of the repair parts and acceptance of the service or materials by the end customer.
|
|
Six months ended June 30,
|
||||||||
|
2012
|
2011
|
|||||||
|
DVM-550 Plus
|
52 | % | 61 | % | ||||
|
DVM-750
|
18 | % | 17 | % | ||||
|
DVM-100 & DVM-400
|
4 | % | 1 | % | ||||
|
DVM-250 & DVM-250 Plus
|
4 | % | 1 | % | ||||
|
Laser Ally
|
2 | % | 3 | % | ||||
|
First Vu
|
2 | % | 1 | % | ||||
|
Repair and service
|
2 | % | 1 | % | ||||
|
DVM-500 Ultra
|
- | % | 5 | % | ||||
|
Accessories and other revenues
|
16 | % | 10 | % | ||||
| 100 | % | 100 | % | |||||
|
●
|
Our revenues decreased due to the challenging economy that negatively impacted state, county and municipal budgets which fund our law enforcement customers. We believe that current and potential customers may have delayed or reduced the size of their orders due to a number of factors, including their local budget reductions and anticipation of receiving the federal government’s stimulus funds in order to preserve their currently available funding and budgets. Our average order size decreased from approximately $3,500 for the six months ended June 30, 2011 to $2,500 for the six months ended June 30, 2012. We shipped eight individual orders in excess of $100,000, for a total of $1,450,000 in revenue in the six months ended June 30, 2012, compared to six orders individually in excess of $100,000, for total revenue of approximately $1,774,000 for the six months ended June 30, 2011. We believe that this reflects reduced law enforcement budgets where the customers are covering only the minimum required needs rather than full fleet deployments. In addition, the new products we introduced in 2010 and 2011 (FirstVU, Laser Ally, DVM-250, DVM-250 Plus, DVM-100 and DVM-400) all have lower average selling prices than our digital video mirror lines. Repair orders at lower average invoice amounts have also increased significantly as our installed base continues to come off of warranty. These repair orders are at lower average price levels and are impacting our overall average invoice size. We are hopeful that, during the balance of 2012, we will see an easing of such budgetary constraints and that purchasing patterns will resume at their former, higher levels, although we can make no assurances in this regard. We maintained consistent retail pricing on our law enforcement mirror models during 2012 and do not plan any material changes in pricing during the balance of 2012, including the new products recently introduced. Our newer mirror-based products include the DVM-100, DVM-250, DVM-250 Plus and the DVM-400, which will be sold at lower retail pricing levels compared to our legacy products during 2012 due to fewer features. We are experiencing some price competition and discounting from our competitors as they attempt to regain market share. For certain opportunities that involve multiple units and/or multi-year contracts we have occasionally discounted our products to gain or retain market share and revenues.
|
|
●
|
We have been reorganizing our domestic sales force and organization for our law enforcement channel since late 2011. Traditionally, we used third party sales agents to market our law enforcement products domestically. We believed that type of sales force was effective and efficient for us when we initially entered the market with a new product. We have changed principally to an employee-based direct sales force that provides us with more control and monitoring of our sales force and their daily activities. In addition, we have reduced the size of certain sales territories and consequently increased the overall number of domestic sales territories and sales personnel from 15 at the beginning of 2012 to 20 currently, in order to better penetrate the market. We performed extensive evaluations of all existing sales agents during late 2011 and 2012 which prompted us to undertake the complete reorganization of our domestic sales force. During 2012, we retained two of such sales agents as independent sales agents in their previous territories because of their good performance in the past, converted two of them to employee-based direct sales personnel and replaced the remaining sales agents with new employee sales personnel. Our objective with this new employee-based model, including the replacement of many sales agents, is to encourage our sales personnel in lower performing territories to improve their efforts and consequently their sales results. We believe that a portion of the revenue decrease experienced in 2011 and 2012 revenues resulted from third party sales agents reducing their sales efforts because they did not have the financial resources to travel, meet and market directly to their customers as a result of the difficult economic conditions. We think that our reorganization has addressed these concerns. We believe that the transition to the employee-based direct sales force model resulting in a number of new territories and sales personnel during 2012 and the training of new sales personnel that replaced underperforming salesmen in certain existing territories caused temporary disruptions and contributed to the lower revenues we experienced in first quarter 2012 compared to 2011. In conjunction with the sales force reorganization, we have identified, hired and trained nine new sales personnel in 2012 that have principally replaced underperforming sales agents. We hope that this transition will result in the generation of increased revenues from these historically underperforming territories in the future.
|
|
●
|
Our international revenues decreased to $170,096 (2% of total revenues) for the six months ended June 30, 2012, compared to $568,926 (6% of total revenues) for the six months ended June 30, 2011. During the second quarter 2012, we replaced the international sales manager responsible for our international distributors. We have numerous bids for international customers out presently; however, international sale cycles generally take longer than domestic business. We also believe that our new products may appeal to international customers, in particular the DVM-100 and DVM-250. We have built in the capability to install a variety of language packs into our DVM-750 system, which currently includes English, Spanish, Turkish and Arabic, with additional languages to become available during 2012. This language flexibility may be a positive factor in our efforts to improve future international sales.
|
|
Six Months Ended June30,
|
||||||||
|
2012
|
2011
|
|||||||
|
Research and development expense
|
$ | 1,177,786 | $ | 1,419,504 | ||||
|
Selling, advertising and promotional expense
|
1,273,142 | 1,009,317 | ||||||
|
Stock-based compensation expense
|
241,437 | 443,848 | ||||||
|
Professional fees and expense
|
371,425 | 413,942 | ||||||
|
Executive, sales and administrative staff payroll
|
1,125,795 | 1,502,451 | ||||||
|
Litigation charge and related expenses
|
654,082 | — | ||||||
|
Other
|
1,236,323 | 1,382,385 | ||||||
|
Total
|
$ | 6,079,990 | $ | 6,171,447 | ||||
|
●
|
Operating
activities
:
$977,160
of net
cash used in
operating activities, primarily to fund our net losses. Non-cash charges to income, such as the depreciation and amortization and stock-based compensation, were positive adjustments to reconcile net cash used in operating activities.
|
|
●
|
Investing
activities
:
$107,835
of net
cash used
in
investing activities, primarily to acquire test and quality control equipment to supply our contract manufacturers and the acquisition of demonstration products for our sales personnel.
|
|
●
|
Financing
activities
:
$2,338
of net
cash used in
financing activities.
|
|
Year ending December 31:
|
|
|||
|
2012 (period from July 1, 2012 to December 31, 2012)
|
$ | 134,441 | ||
|
2013
|
— | |||
|
2014
|
— | |||
|
2015
|
— | |||
|
2016 and thereafter
|
— | |||
|
|
||||
|
|
$ | 134,441 | ||
|
License Type
|
Effective
Date
|
Expiration
Date
|
Terms
|
|
Production software license agreement
|
April 2005
|
April 2013
|
Automatically renews for one year periods unless terminated by either party.
|
|
Software sublicense agreement
|
October 2007
|
October 2012
|
Automatically renews for one year periods unless terminated by either party.
|
|
Technology license agreement
|
July 2007
|
July 2012
|
Automatically renews for one year periods unless terminated by either party.
|
|
Development, license and manufacturing agreement
|
July 2011
|
July 2016
|
Company has option to renew for three successive options to renew for three years periods unless terminated by either party.
|
|
Limited license agreement
|
August 2008
|
Perpetual
|
May be terminated by either party.
|
|
Minimum order commitment amount ($)
|
||||||||||||
| Commitment time period | Commitment |
Purchases
|
Remaining
Commitment
|
|||||||||
|
March 2012 through February 2013
|
$ | 846,240 | $ | 352,838 | $ | 492,402 | ||||||
|
March 2013 through February 2014
|
846,240 | — | 846,240 | |||||||||
|
|
$ | 1,692,480 | $ | 352,838 | $ | 1,339,642 | ||||||
|
●
|
Revenue Recognition/ Allowance for Doubtful Accounts;
|
|
●
|
Allowance for Excess and Obsolete Inventory;
|
|
●
|
Warranty Reserves;
|
|
●
|
Stock-based Compensation Expense; and
|
|
●
|
Accounting for Income Taxes.
|
|
(i)
|
Persuasive evidence of an arrangement exists;
|
|
(ii)
|
Delivery has occurred;
|
|
(iii)
|
The price is fixed or determinable; and
|
|
(iv)
|
Collectability is reasonably assured.
|
|
June 30,
2012
|
December 31,
2011
|
|||||||
|
Raw material and component parts
|
$ | 2,361,820 | $ | 2,168,761 | ||||
|
Work-in-process
|
183,193 | 217,264 | ||||||
|
Finished goods
|
4,956,317 | 4,844,446 | ||||||
|
|
||||||||
|
Subtotal
|
7,501,330 | 7,230,471 | ||||||
|
Reserve for excess and obsolete inventory
|
(550,488 | ) | (547,182 | ) | ||||
|
|
||||||||
|
Total
|
$ | 6,950,842 | $ | 6,683,289 | ||||
|
Six Months Ended
June 30, 2012
|
|||
|
Expected term of the options in years
|
2-3 years
|
||
|
Expected volatility of Company stock
|
66%-72%
|
||
|
Expected dividends
|
None
|
||
|
Risk-free interest rate
|
0.24% - 0.34%
|
||
|
Expected forfeiture rate
|
5% -75%
|
|
Period
|
(a)
Total Number of
S
hares Purchased
[1] [2] [3]
|
(b)
Average Price
Paid per Share
[1]
|
(c)
Total Number of Shares Purchased as Part of Publicly Announced Plans
or
Programs
[1]
|
(d)
Maximum
Number (or Approximate Dollar Value)
of Shares that May Yet Be Purchased Under the Plans or
Programs
[1]
|
||||||||||||
|
January 1 to 31, 2011
|
— | — | — | $ | 7,842,774 | |||||||||||
|
February 1 to 28, 2011
|
— | — | — | $ | 7,842,774 | |||||||||||
|
March 1 to 31, 2011
|
— | — | — | $ | 7,842,774 | |||||||||||
|
April 1 to 30, 2011
|
— | — | — | $ | 7,842,774 | |||||||||||
|
May 1 to 31, 2011
|
— | — | — | $ | 7,842,774 | |||||||||||
|
June 1 to 30, 2011
|
— | — | — | $ | 7,842,774 | |||||||||||
|
July 1 to 31, 2011
|
— | — | — | $ | 7,842,774 | |||||||||||
|
August 1 to 31, 2011
|
— | — | — | $ | 7,842,774 | |||||||||||
|
September 1 to 30, 2011
|
— | — | — | $ | 7,842,774 | |||||||||||
|
October 1 to 31, 2011
|
— | — | — | $ | 7,842,774 | |||||||||||
|
November 1 to 30, 2011
|
— | — | — | $ | 7,842,774 | |||||||||||
|
December 1 to 31, 2011
|
— | — | — | $ | 7,842,774 | |||||||||||
|
January1 to 31, 2012
|
— | — | — | $ | 7,842,774 | |||||||||||
|
February 1 to 28, 2012
|
— | — | — | $ | 7,842,774 | |||||||||||
|
March 1 to 31, 2012
|
— | — | — | $ | 7,842,774 | |||||||||||
|
April 1 to 30, 2012
|
— | — | — | $ | 7,842,774 | |||||||||||
|
May 1 to 31, 2012
|
— | — | — | $ | 7,842,774 | |||||||||||
|
June 1 to 30, 2012
|
— | — | — | $ | 7,842,774 [2 | ] | ||||||||||
|
|
[1]
|
During June 2008, the Board of Directors approved a program that authorized the repurchase of up to $10 million of the Company’s common stock in the open market, or in privately negotiated transactions, through July 1, 2010. The Board of Directors approved an extension of this program to July 1, 2012. The repurchases, if and when made, will be subject to market conditions, applicable rules of the Securities and Exchange Commission and other factors. The repurchase program will be funded using a portion of cash and cash equivalents, along with cash flow from operations. Purchases may be commenced, suspended or discontinued at any time. The Company made no purchases under this program during the three months ended June 30, 2012. The Company has repurchased 508,145 shares at a total cost of $2,157,226 (average cost of $4.25 per share) under this program as of June 30, 2012.
|
|
|
[2]
|
The Stock Repurchase Program authorizes the repurchase of up to $10 million of common stock. A total of 508,145 shares have been repurchased under this program as of June 30, 2012, at a total cost of $2,157,226 ($4.25 per share average). As a result, $7,842,774 is the maximum remaining dollar amount of common shares that may be purchased under the Program. The number of shares yet to be purchased is variable based upon the purchase price of the shares at the time.
|
|
|
[3]
|
We purchased vested and unvested employee stock options to acquire 950,000 shares of our common stock in April 2009. The purchase was part of a Separation Agreement reached with our former Executive Vice President of Engineering who resigned to pursue other opportunities. This repurchase was not considered to be part of our Stock Repurchase Program and therefore is not included in the above table.
|
|
Certificate of Stanton E. Ross pursuant to Rule 13a-14(a) under the Securities and Exchange Act of 1934, as amended.
|
|
|
Certificate of Thomas J. Heckman pursuant to Rule 13a-14(a) under the Securities and Exchange Act of 1934, as amended.
|
|
|
Certificate of Stanton E. Ross pursuant to Rule 13a-14(b) under the Securities and Exchange Act of 1934, as amended.
|
|
|
Certificate of Thomas J. Heckman pursuant to Rule 13a-14(b) under the Securities and Exchange Act of 1934, as amended.
|
|
DIGITAL ALLY, INC.,
a Nevada corporation
|
|||
|
Date:
August 10, 2012
|
/s/ Stanton E. Ross | ||
| Name: |
Stanton E. Ross
|
||
| Title: |
President and Chief Executive Officer
|
||
| /s/ Thomas J. Heckman | |||
| Name: |
Thomas J. Heckman
|
||
| Title: |
Chief Financial Officer, Secretary, Treasurer and
Principal Accounting Officer
|
||
|
Exhibit
|
Description
|
|
|
Certificate of Stanton E. Ross pursuant to Rule 13a-14(a) under the Securities and Exchange Act of 1934, as amended.
|
||
|
Certificate of Thomas J. Heckman pursuant to Rule 13a-14(a) under the Securities and Exchange Act of 1934, as amended.
|
||
|
Certificate of Stanton E. Ross pursuant to Rule 13a-14(b) under the Securities and Exchange Act of 1934, as amended.
|
||
|
Certificate of Thomas J. Heckman pursuant to Rule 13a-14(b) under the Securities and Exchange Act of 1934, as amended.
|
No information found
* THE VALUE IS THE MARKET VALUE AS OF THE LAST DAY OF THE QUARTER FOR WHICH THE 13F WAS FILED.
| FUND | NUMBER OF SHARES | VALUE ($) | PUT OR CALL |
|---|
| DIRECTORS | AGE | BIO | OTHER DIRECTOR MEMBERSHIPS |
|---|
No information found
Customers
| Customer name | Ticker |
|---|---|
| The Brink's Company | BCO |
No Suppliers Found
Price
Yield
| Owner | Position | Direct Shares | Indirect Shares |
|---|