Brekford Announces Second Quarter Operating Results

HANOVER, MD--(Marketwired - Aug 13, 2015) - Brekford Corp. (OTC: 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 financial results for the second quarter and six month periods ended June 30, 2015.

Second Quarter Financial Highlights

• Revenue of $3.66 million compared to $3.89 million in the same period of 2014; 44.5% growth in targeted high margin Automated Traffic Safety Enforcement ("ATSE") services;

• Gross profit increased 60.5% to $1.06 million, compared to $660,000 in the same period of 2014; gross profit margin increased to 28.9% for the quarter compared to 17.0% in the prior year period;

• Operating expense decreased 40.6% to $862,000 compared to $1.45 million in the same period of 2014;

• Operating income totaled $198,000, an improvement of $989,000 compared to a net loss of $791,000 in the same period of 2014;

• Net loss narrowed to $29,000, compared to a net loss of $827,000 in the same period of 2014.

Second Quarter Operational Highlights

• Began operations on Saltillo, Mexico contract with the first 10 cameras generating revenue beginning in April 2015; 23 additional cameras expected to begin revenue generation in Q315;

• Completed technical ATSE infrastructure for Mexico, enabling future expansion without significant additional investment;

• Completed initial deployment of next generation self-sustaining solar speed cameras; solar red light and cell phone cameras expected to be ready for deployment Q315;

• New Rochelle, NY Red Light Camera Enforcement program targeted for implementation by the end of 2015;

• Developed body worn camera national expansion strategy in conjunction with release of Panasonic Arbitrator BWC; submitted proposal to the City of Baltimore for 2,500 camera program with potential 5-year contract of $15-20 million;

• Approved as a Master Contractor with the Maryland Department of Information Technology; provides opportunity for selected vendors to bid on $57 million of contract awards over the next six years;

• Processed 43,443 paid citations from 53 cameras compared to 25,975 paid citations from 43 cameras in the same period of 2014.

Management Comments

"The second quarter gross margin improvement and positive operating income demonstrate the effectiveness of our efforts to expand our innovative ATSE services, which are driving our efforts to return to profitability in 2015 and beyond," commented Rod Hillman, President and Chief Operating Officer of Brekford Corp. "As the mix of our business continues to shift towards higher-margin ATSE contracts, we expect to report an increasing level of profitability and achieve positive cash flow for the full-year 2015. The launch of our first international program in Saltillo, Mexico, along with conversion of certain U.S. ATSE contracts to a fixed fee basis, are major drivers of margin and cash flow improvement for the Company. With 23 additional cameras set to go live in Saltillo in the third quarter and the potential for up to 210 cameras when the full deployment is completed, we anticipate continued growth in Mexico. Simultaneous to this implementation we are making significant progress with sales efforts to be selected for other programs in Mexico as well as several other Latin America countries. In the U.S. we are working toward implementation by year-end of our first major red light program with the City of New Rochelle, New York."

"While we see solid growth potential for high margin ATSE services, we still maintain a sharp focus on law enforcement vehicle technology products and services," continued Hillman. "We are gaining traction regionally with sales of Panasonic Arbitrator in-vehicle video evidence capture systems, as agencies seek to add this capability or replace competitors' solutions that have not performed adequately. With the introduction of Panasonic's next generation Arbitrator Body Worn Camera and Microsoft's Azure CJIS compliant cloud storage solution, Brekford intends to compete nationally in this growing market by providing agencies with full turnkey body worn camera programs backed by two of the largest technology companies in the world. We are in discussions with several key prospects and expect to begin implementation of certain programs by the end of 2015."

C.B. Brechin, Brekford's Chief Executive Officer, added, "Brekford continues to focus on our core values as we provide innovative solutions to the public safety agencies we serve. With our proprietary iP360 backend platform for ATSE services, unique self-sustaining photo enforcement products, customized upfitting services, and key manufacturer relationships like Panasonic, we believe we are in a position of strength to deliver world class solutions to our customers. There is still work to be done, but initial results from our international ATSE expansion along with feedback on our body worn camera and vehicle technology solutions demonstrates our capability to provide improved financial results and increasing returns for our shareholders."

Second Quarter 2015 Summary Financial Results

Revenues for the three months ended June 30, 2015 amounted to $3,663,413 as compared to revenues of $3,892,307 for the three months ended June 30, 2014, representing a decrease of $228,894 or 5.9%. The overall decrease was due to lower Vehicle Services revenue as certain projects in the sales order pipeline were not completed as a result of component shipment delays which was partially offset by an increase in ATSE services revenue of $244,775, or 44.5%, as contributions increased from recurring monthly revenues in Saltillo Mexico and certain U.S. clients transitioned to a flat fee payment structure.

Cost of revenues for the three months ended June 30, 2015 amounted to $2,603,951 as compared to $3,232,244 for the three months ended June 30, 2014, a decrease of $628,293 or 19.4%. The decrease was primarily driven by lower costs for technology purchases as we experienced a higher volume of labor driven upfitting projects. ATSE cost of revenues was lower as well due to operational efficiencies and lower overall direct labor cost associated with equipment maintenance and operation.

Gross profit for the three months ended June 30, 2015 amounted to $1,059,462 as compared to $660,063 for the three months ended June 30, 2014, an increase of $399,399 or 60.5%. Two key drivers of the increase were a higher percentage of revenues from ATSE services as well as higher gross margins from Vehicle Services due to increased upfitting projects versus direct technology sales. Overall gross margin percentage for the three months ended June 30, 2015 was 28.9% as compared to 17.0% for the three months ended June 30, 2014. The gross margin percentage increase was attributable to a higher percentage of revenue contributed by ATSE services, as well as higher gross margin percentages for both ATSE services and Vehicle Services.

Salaries and related expenses for the three months ended June 30, 2015 amounted to $456,042 as compared to $445,967 for the three months ended June 30, 2014, an increase of $10,075 or 2.3%. The increase was due to higher costs for corporate support labor.

Selling, general and administrative expenses for the three months ended June 30, 2015 amounted to $405,601 as compared to $1,004,930 for the three months ended June 30, 2014, a decrease of $599,329 or 59.6%. The decrease was primarily driven by lower depreciation expense as certain obsolete assets had been disposed of in the second quarter of 2014 and the Company has not incurred significant additional capital expenditures since 2014.

Operating income amounted to $197,819 for the three months ended June 30, 2015 as compared to a loss of $790,834 for the three months ended June 30, 2014, for an improvement of $988,653 or 125.0%.

Net loss for the three months ended June 30, 2015 amounted to $28,605 compared to a net loss of $826,682 for the three months ended June 30, 2014, a decrease of $798,077 or 96.5%. The decrease was primarily due to higher overall gross profit margins and lower overall operating expenses.

2015 Year-to-Date Summary Financial Results

Revenues for the six months ended June 30, 2015 amounted to $8,809,592 as compared to revenues of $8,554,594 for the six months ended June 30, 2014, representing an increase of $254,998 or 3.0%. Despite the nominal overall revenue increase, there was a change in the revenue mix, with our higher gross margin ATSE services providing an increase of 39% or $409,287, offset by a slight decrease in Vehicle Services revenue as the Company has focused on certain minimum margin requirements for rugged IT and vehicle upfitting projects. ATSE services revenue growth was primarily driven by the launch of our Saltillo, Mexico project in April 2015 coupled with changes to flat fee contract structures for certain U.S. speed camera clients. For the six months ended June 30, 2015 ATSE revenue totaled $1,457,835 or 16.5% of the overall revenue for the period as compared to $1,048,548 for the six months ended June 30, 2014 or 12.3% of the overall revenue for the period.

Cost of revenues for the six months ended June 30, 2015 amounted to $6,824,538 as compared to $7,306,372 for the six months ended June 30, 2014, a decrease of $481,834 or 6.6%. The decrease was primarily driven by lower costs for technology purchases as we experienced a higher volume of labor driven upfitting projects. ATSE cost of revenues was lower as well due to operational efficiencies and lower overall direct labor cost associated with equipment maintenance and operation.

Gross profit for the six months ended June 30, 2015 amounted to $1,985,054 as compared to $1,248,222 for the six months ended June 30, 2014, an increase of $736,832 or 59.0%. Two key drivers of the increase were a higher percentage of revenues from ATSE services as well as higher gross margins from Vehicle Services due to increased upfitting projects versus direct technology sales. Overall gross margin percentage for the six months ended June 30, 2015 was 22.5% as compared to 14.6% for the six months ended June 30, 2014. The gross margin percentage increase was attributable to a higher percentage of revenue contributed by ATSE services, as well as higher gross margin percentages for both ATSE services and Vehicle Services.

Salaries and related expenses for the six months ended June 30, 2015 amounted to $996,263 as compared to $933,596 for the six months ended June 30, 2014, an increase of $62,667 or 6.7%. The increase was due to higher costs for corporate support labor, increased sales commissions, and higher health insurance costs.

Selling, general and administrative expenses for the six months ended June 30, 2015 amounted to $866,986 as compared to $1,641,214 for the six months ended June 30, 2014, a decrease of $774,228 or 47.2%. The decrease was primarily driven by lower depreciation expense as certain obsolete assets had been disposed of in the first half of 2014 and the Company has not incurred significant additional capital expenditures since 2014.

Operating income amounted to $121,805 for the six months ended June 30, 2015 as compared to a loss of $1,326,588 for the six months ended June 30, 2014, for an improvement of $1,448,393 or 109.2%.

Net loss for the six months ended June 30, 2015 amounted to $155,713 compared to a net loss of $1,398,295 for the six months ended June 30, 2014, a decrease of $1,242,582 or 88.9%. The decrease was primarily due to higher overall gross profit margins and lower overall operating expenses.

Balance Sheet Summary

At June 30, 2015, the company had unrestricted cash of $809,873 compared to $1,112,881 at December 31, 2014.

At June 30, 2015, the company had a working capital surplus of approximately $543,943 compared to a working capital deficit of $49,586 at December 31, 2014.

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 Balance Sheets
(Unaudited)
				June 30, 2015				December 31, 2014
ASSETS
CURRENT ASSETS
	Cash, unrestricted			$	809,873			$	1,112,881
	Accounts receivable, net of allowance $0 at June 30, 2015 and December 31, 2014, respectively				2,627,714				1,706,704
	Unbilled receivables				390,930				198,725
	Prepaid expenses				161,506				146,569
	Inventory				965,205				681,948
Total current assets					4,955,228				3,846,827
Property and equipment, net					174,633				284,322
Other non-current assets					109,219				112,132
TOTAL ASSETS				$	5,239,080			$	4,243,281
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
	Accounts payable and accrued expenses			$	2,600,363			$	1,842,892
	Accrued payroll and related expenses				91,858				23,252
	Line of credit				935,999				1,169,558
	Term loan - current portion				250,000				250,000
	Deferred revenue				121,120				255,405
	Customer deposits				225,488				137,826
	Obligations under capital lease - current portion				-				140,209
	Obligations under other notes payable - current portion				28,909				28,602
	Derivative liability				98,112				--
	Other liabilities				47,369				48,669
	Deferred rent - current portion				1,067				--
Total current liabilities					4,400,285				3,896,413
LONG - TERM LIABILITIES
	Notes payable - stockholders				500,000				500,000
	Other notes payable - net of current portion				36,426				48,371
	Deferred rent, net of current portion				42,272				--
	Term notes payable, net of current portion				41,667				166,667
	Convertible promissory notes, net of debt discounts of $577,752 and $0 at June 30, 2015 and December 31, 2014, respectively				137,249				--
Total long-term liabilities					757,614				715,038
TOTAL LIABILITIES					5,157,899				4,611,451
STOCKHOLDERS' (DEFICIT) EQUITY
	Preferred stock, par value $0.0001 per share; 20,000,000 sharesauthorized; none issued and outstanding				--				--
	Common stock, par value $0.0001 per share; 150,000,000 sharesauthorized; 44,632,569 issued and outstanding, at June 30, 2015 and 44,500,569 issued and outstanding at December 31, 2014				4,464				4,450
	Additional paid-in capital				10,811,006				10,204,479
	Treasury Stock, at cost 10,600 shares at June 30, 2015 and December 31, 2014 respectively				(5,890	)			(5,890	))
	Accumulated deficit				(10,726,922	)			(10,571,209	)
	Other comprehensive loss				(1,477	)			-
		TOTAL STOCKHOLDERS' EQUITY (DEFICIT)			81,181				(368,170	)
		TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)		$	5,239,080			$	4,243,281

Brekford Corp.
Condensed Consolidated Statement of Operations
(Unaudited)
			Three Months Ended June 30,								Six Months Ended June 30,
			2015				2014				2015				2014
NET REVENUE			$	3,663,413			$	3,892,307			$	8,809,592			$	8,554,594
COST OF REVENUE				2,603,951				3,232,244				6,824,538				7,306,372
GROSS PROFIT				1,059,462				660,063				1,985,054				1,248,222
OPERATING EXPENSES
Salaries and related expenses				456,042				445,967				996,263				933,596
Selling, general and administrative expenses				405,601				1,004,930				866,986				1,641,214
TOTAL OPERATING EXPENSES				861,643				1,450,897				1,863,249				2,574,810
INCOME (LOSS) FROM OPERATIONS				197,819				(790,834	)			121,805				(1,326,588	)
OTHER (EXPENSE) INCOME
Interest expense				(67,122	)			(35,848	)			(116,731	)			(71,707	)
Change in fair value in derivative liability				(31,080	)			--				15,708				--
	Other expense			(128,222	)			--				(176,495	)			--
TOTAL OTHER (EXPENSE) INCOME				(226,424	)			(35,848	)			(277,518	)			(71,707	)
NET LOSS			$	(28,605	)		$	(826,682	)		$	(155,713	)		$	(1,398,295	)
OTHER COMPREHENSIVE LOSS				(1,477	)			--				(1,477	)			--
NET LOSS & COMPREHENSIVE LOSS			$	(30,082	)		$	(826,682	)		$	(157,190	)		$	(1,398,295	)
LOSS PER SHARE - BASIC AND DILUTED			$	(0.00	)		$	(0.02	)		$	(0.00	)		$	(0.03	)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC				44,632,569				44,500,569				44,628,923				44,498,635
WEIGHTED AVERAGE NUMBER OF SHARESOUTSTANDING - DILUTED				44,632,569				44,500,569				44,628,923				44,498,635