"While the Baltimore ATVES program will greatly expand the scope of our automated traffic enforcement business in 2013, we remain focused on expanding market share now that our infrastructure and industry-leading camera technology are gaining recognition throughout the industry," said Scott Rutherford, Brekford's President and R&D innovator. "We invested a significant amount of time and resources in developing leading-edge intellectual property solutions for our clients, resulting in what we believe to be the best automated traffic enforcement camera technology on the market, complemented by an extremely robust and expandable suite of system management software."
"Supplemental to our efforts with automated traffic enforcement, we are also pursuing contracts to provide financial services involving the collection of past-due receivables for municipalities. Industry analysts estimate that municipal governments throughout the U.S. are saddled with over $40 billion in delinquent receivables, representing uncollected automated traffic fines, city utility bills, parking violations, etc., and we believe Brekford can play a key role in 'monetizing' these past-due receivables for budget-strapped local governments. This would generate additional revenue for our Company, while expanding its role as a strategic partner with the municipalities that are our customers. In addition to the exciting developments associated with our automated traffic enforcement and financial services business product lines, we continued to expand our customer base for the upfitting of law enforcement, utility, and other vehicle fleets during 2012 and expect this legacy product line to continue its growth and profitability in the coming years," concluded Brechin.
Financial highlights for year ended December 31, 2012:
Net revenue increased 9.5% to $18,295,906 for the twelve months ended December 31, 2012, compared with $16,716,560 in the previous year. The increase in total net revenue was primarily due to continued growth in automated traffic enforcement revenue and additional sales of rugged IT products.
As of December 31, 2012, the Company's total assets approximated $9.3 million, compared with approximately $8.1 million on December 31, 2011. Cash on hand approximated $1.4 million at the end of 2012, versus approximately $1.8 million at the end of 2011. The Company's current ratio stood at 1.2-to-1.0 ($6.6 million in current assets vs. $5.4 million in current liabilities). There were no borrowings outstanding against the Company's bank line of credit as of December 31, 2012.
Gross profit declined to $3,589,808 (19.6% of net revenue) in the year ended December 31, 2012, from $4,336,953 (25.9% of net revenue) in 2011. The narrowing in gross profit margin was primarily due to changes in revenue mix and lower profit margins from electronic ticketing systems and rugged IT products.
Total operating expenses increased from $2,998,566 in 2011 to $4,708,291 in 2012. Salaries and related expenses increased 20.7% to $1,554,377, versus $1,287,776 in 2011 due to increased staffing to support growth in the Company's automated traffic enforcement products, including a ramp-up in staffing in preparation for the Baltimore ATVES contract; additional costs that were incurred to support growth in the sales of upfitting products and services; and some increases in the cost of Company benefit plans. Selling, general and administrative expenses increased 84.4%, primarily due to the above-mentioned non-cash increase in bad debt expense, along with higher equipment depreciation, consulting expenses, and accounting/auditing fees. SG&A expenses also increased in the fourth quarter of 2012 due to the Company's pursuit of, and preparation for, the Baltimore ATVES contract, along with investments in Brekford's intellectual property hardware and software.
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