Form
10K
LAW
ENFORCEMENT ASSOCIATES CORPORATION
Filed:
March 23, 2009 (period: December 31, 2008)
|
Table
of Contents
LAW
ENFORCEMENT ASSOCIATES CORPORATION
PART
I
|
||
3
|
||
11
|
||
15
|
||
15
|
||
15
|
||
15
|
||
PART
II
|
||
16
|
||
|
||
16
|
||
17
|
||
19
|
||
19
|
||
19
|
||
19
|
||
19
|
||
PART
III
|
||
20
|
||
23
|
||
24
|
||
25
|
||
25
|
||
PART
IV
|
||
26
|
||
26
|
||
|
Nevada
|
56-2267438
|
|||
(State
of other jurisdiction of Incorporation or Organization)
|
(Employer
Identification Number)
|
·
|
Unique
environmental control systems for long, safe operation in all
climates.
|
·
|
Advanced
technology for evidence collection and
documentation.
|
·
|
Latest
audio and video surveillance
technology.
|
·
|
Strong,
welded-aluminum interior
architecture.
|
·
|
a
shortfall in operating revenue or net income from that expected by
securities analysts and investors;
|
·
|
changes
in securities analysts' estimates of our financial performance or the
financial performance of our competitors or companies in our industry
generally;
|
·
|
general
conditions in our customers' industries;
and
|
·
|
general
conditions in the securities
markets.
|
·
|
difficulty
enforcing agreements through some foreign legal
systems;
|
·
|
general
economic and political conditions in the countries where we sell our
products may have an adverse effect on our sales in those
countries;
|
·
|
foreign
governments may adopt regulations or take other actions that could
directly or indirectly harm our business and growth strategy;
and
|
·
|
it
may be difficult to enforce intellectual property rights in some foreign
countries.
|
High
|
Low
|
|||||||
2007
|
$
|
$
|
||||||
First
Quarter
|
1.05
|
0.77
|
||||||
Second
Quarter
|
0.84
|
0.50
|
||||||
Third
Quarter
|
1.30
|
0.55
|
||||||
Fourth
Quarter
|
1.28
|
0.50
|
||||||
2008
|
||||||||
First
Quarter
|
0.69
|
0.50
|
||||||
Second
Quarter
|
0.58
|
0.26
|
||||||
Third
Quarter
|
0.32
|
0.16
|
||||||
Fourth
Quarter
|
0.30
|
0.12
|
||||||
Name
|
Age
|
Position
|
||
Paul
Feldman
|
52
|
Director,
President, Chief Executive Officer
|
||
Anthony
Rand
|
69
|
Director,
Chairman of the Board
|
||
Martin
Perry
|
48
|
Director,
VP of Sales
|
||
General
James Lindsay
|
76
|
Director
|
||
Joseph
Jordan
|
61
|
Director
|
||
Paul
Briggs
|
38
|
Chief
Financial Officer
|
||
Mark
White
|
50
|
VP
of
Operations
|
Name
and Principal Position
|
Year
|
Salary
|
Bonus
|
Stock
Awards
|
Option
Awards
|
Non-Equity
Incentive Plan Compensation
|
All
Other Compensation
|
Total
|
|||||||||
Paul
Feldman, President
|
2008
|
175,000
|
0
|
0
|
0
|
0
|
14,591
|
189,591
|
|||||||||
2007
|
175,000
|
0
|
0
|
0
|
0
|
0
|
175,000
|
||||||||||
Martin
Perry, VP of Sales
|
2008
|
141,829
|
3,500
|
0
|
0
|
0
|
0
|
145,329
|
|||||||||
2007
|
131,256
|
0
|
0
|
0
|
0
|
0
|
131,256
|
||||||||||
Paul
Briggs, CFO
|
2008
|
107,613
|
3,500
|
0
|
0
|
0
|
0
|
111,113
|
|||||||||
2007
|
N/A
|
N/A
|
|||||||||||||||
Name
and Address of Beneficial Owner
|
Amount
of
|
Percentage
of
|
||||||
Beneficial
|
Beneficial
|
|||||||
Ownership
|
Ownership
|
|||||||
Paul
Feldman (1) (3)*
|
525,725
|
2.04
|
%
|
|||||
Anthony
Rand (1)*
|
125,334
|
0.49
|
%
|
|||||
Martin
L. Perry (1)*
|
131,294
|
0.51
|
%
|
|||||
James
J. Lindsay (1) *
|
52,975
|
0.21
|
%
|
|||||
Joseph
Jordan (1) *
|
1,000
|
0.00
|
%
|
|||||
Raymond
James Financial, Inc. (2)
|
13,149,334
|
51.00
|
%
|
|||||
Paul
Briggs (3) *
|
8,000
|
0.03
|
%
|
|||||
Mark
White (3) *
|
1,300
|
0.00
|
%
|
|||||
All
Directors & Executive Officers as a Group (7 persons)
|
845,628
|
3.28
|
%
|
(1)
|
Director
of our company.
|
(2)
|
The shares are directly owned by Sirchie Acquisition Corp., of which Raymond James Financial, Inc. owns 80%; the remaining 20% of Sirchie Acquisition Corp. is owned by John H. Carrington. |
(3)
|
Officer of our company. |
LAW
ENFORCEMENT ASSOCIATES CORPORATION
|
|||
By:
|
/s/ Paul
Feldman
|
||
Paul
Feldman, President and Chief Executive Officer
|
|||
Dated:
March 23, 2009
|
Signature
|
Title
|
Date
|
||
/s/
Paul Feldman
|
President,
Director and Chief Executive Officer
|
March
23, 2009
|
||
Paul
Feldman
|
||||
/s/
Paul Briggs
|
Chief
Financial Officer
|
March
23, 2009
|
||
Paul
Briggs
|
||||
/s/
Martin L. Perry
|
Director
|
March
23, 2009
|
||
Martin
Perry
|
||||
/s/
James Lindsey
|
Director
|
March
23, 2009
|
||
James
Lindsey
|
||||
/s/
Anthony Rand
|
Director
|
March
23, 2009
|
||
Anthony
Rand
|
||||
/s/ Joseph
Jordan
|
Director
|
March
23, 2009
|
||
Joseph
Jordan
|
2008
|
2007
|
|||||||
Assets
|
||||||||
Current
assets:
|
||||||||
Cash
|
$
|
254,705
|
$
|
325,244
|
||||
Trade
accounts receivable (net of allowance for doubtful
|
||||||||
accounts
of $30,000 and $33,205 at December 31, 2008
|
||||||||
and
2007, respectively)
|
2,011,293
|
713,067
|
||||||
Inventories
|
1,368,049
|
1,256,346
|
||||||
Prepaid
expenses
|
45,629
|
38,187
|
||||||
Deferred
tax asset-current
|
244,741
|
769,338
|
||||||
Total
current assets
|
3,924,417
|
3,102,182
|
||||||
Property
and equipment, net
|
170,027
|
257,025
|
||||||
Other
assets:
|
||||||||
Intangibles,
net
|
2,174,564
|
2,338,831
|
||||||
Assets
held for sale
|
335,505
|
544,711
|
||||||
Deferred
tax asset less current portion
|
820,425
|
296,147
|
||||||
Total
other assets
|
3,330,494
|
3,179,689
|
||||||
Total
assets
|
$
|
7,424,938
|
$
|
6,538,896
|
2008
|
2007
|
|||||||
Liabilities
and Stockholders' Equity
|
||||||||
Current
liabilities:
|
||||||||
Trade
accounts payable
|
$
|
331,451
|
$
|
593,515
|
||||
Line
of credit
|
1,038,809
|
200,000
|
||||||
Accrued
expenses:
|
||||||||
Compensation
and payroll taxes
|
126,695
|
120,304
|
||||||
Profit
sharing plan
|
76,769
|
61,796
|
||||||
Warranty
provision
|
58,809
|
59,911
|
||||||
Other
accrued expenses
|
97,205
|
70,322
|
||||||
Deferred
expenses
|
104,628
|
22,540
|
||||||
Customer
deposits
|
30,540
|
24,533
|
||||||
Total
current liabilities
|
1,864,906
|
1,152,921
|
||||||
Total
liabilities
|
1,864,906
|
1,152,921
|
||||||
Commitments
and contingencies
|
||||||||
Common
stock, subject to possible redemption
|
1,440,374
|
1,338,170
|
||||||
1,200,000
shares, at redemption value
|
||||||||
Stockholders'
equity:
|
||||||||
Common
stock, $0.001 par value, 50,000,000 authorized,
|
||||||||
25,782,436 (including
1,200,000 shares subject to redemption) issued and
|
||||||||
outstanding
at December 31, 2008, and at December 31, 2007
|
25,782
|
25,782
|
||||||
Treasury
stock at cost, 595 shares of common stock held by
|
||||||||
the
Company
|
(625)
|
(625)
|
||||||
Paid
in capital in excess of par
|
4,995,595
|
4,995,595
|
||||||
Retained
earnings/(accumulated deficit)
|
(901,094)
|
(972,947)
|
||||||
Total
stockholders' equity
|
4,119,658
|
4,047,805
|
||||||
Total
liabilities and stockholders' equity
|
$
|
7,424,938
|
$
|
6,538,896
|
2008
|
2007
|
|||||||
Net
sales
|
$
|
9,246,170
|
$
|
6,666,479
|
||||
Cost
of sales
|
6,193,180
|
4,681,694
|
||||||
Gross
profit
|
3,052,990
|
1,984,785
|
||||||
Research
and development
|
81,327
|
227,595
|
||||||
Operating
expenses
|
2,728,271
|
3,406,537
|
||||||
Total
operating expenses
|
2,809,598
|
3,634,132
|
||||||
Net
income (loss) before other income (expense) and
|
||||||||
income
taxes
|
243,392
|
(1,649,347)
|
||||||
Other
income (expense):
|
||||||||
Loss
on sale of assets
|
(43,666)
|
0
|
||||||
Other
income
|
14,234
|
1,431
|
||||||
Interest
income
|
1,507
|
11,029
|
||||||
Interest
expense
|
(143,295)
|
(2,117)
|
||||||
Total
other income (expense)
|
(171,220)
|
10,343
|
||||||
Net
income (loss) before income taxes
|
72,172
|
(1,639,004)
|
||||||
Income
tax (expense) benefit
|
(319)
|
629,258
|
||||||
Net
income (loss)
|
$
|
71,853
|
$
|
(1,009,746)
|
||||
Net
income (loss) per weighted average share, basic and
diluted
|
$
|
0.00
|
$
|
(0.04)
|
||||
Weighted
average number of shares, basic and diluted
|
25,782,436
|
25,423,365
|
Paid
in Capital
|
Retained
Earnings/ Capital
|
Total
|
||||||||||||||||||||||
Number
of
|
Common
|
Treasury
|
in
Excess
|
(accumulated
|
Stockholders'
|
|||||||||||||||||||
Shares
|
Stock
|
Stock
|
of
Par
|
deficit)
|
Equity
|
|||||||||||||||||||
December
31, 2006
|
25,252,436
|
25,252
|
$
|
(625)
|
$
|
5,314,112
|
$
|
58,091
|
$
|
5,396,830
|
||||||||||||||
Common
stock issued for services
|
130,000
|
130
|
-
|
84,110
|
-
|
84,240
|
||||||||||||||||||
Common
stock issued for AVS assets
|
375,000
|
375
|
-
|
369,375
|
-
|
369,750
|
||||||||||||||||||
Common
stock issued to settle lawsuit
|
25,000
|
25
|
-
|
24,625
|
-
|
24,650
|
||||||||||||||||||
Common
stock reclassified from redeemable common stock
|
-
|
-
|
(796,627)
|
(796,627)
|
||||||||||||||||||||
Change
in redemption value of redeemable common
stock
|
-
|
-
|
-
|
(21,292)
|
(21,292)
|
|||||||||||||||||||
Net
loss - year ended Dec. 31 2007
|
-
|
-
|
-
|
-
|
(1,009,746)
|
(1,009,746)
|
||||||||||||||||||
December
31, 2007
|
25,782,436
|
25,782
|
$
|
(625)
|
$
|
4,995,595
|
$
|
(972,947)
|
$
|
4,047,805
|
||||||||||||||
Net
income - year ended Dec. 31 2008
|
-
|
-
|
-
|
-
|
$
|
71,853
|
$
|
71,853
|
||||||||||||||||
December
31, 2008
|
25,782,436
|
25,782
|
$
|
(625)
|
$
|
4,995,595
|
$
|
(901,094)
|
$
|
4,119,658
|
2008
|
2007
|
|||||||
Cash
flows from operating activities
|
||||||||
Net
income (loss)
|
$
|
71,853
|
$
|
(1,009,746)
|
||||
Adjustments
to reconcile net income (loss) to net cash used
|
||||||||
by
operations:
|
||||||||
Depreciation
and amortization
|
294,012
|
257,802
|
||||||
Impairment
charge of EDW patents
|
150,000
|
268,290
|
||||||
Write-off
patents-in-process
|
-
|
80,079
|
||||||
Put
option discount expense
|
102,204
|
-
|
||||||
Deferred
taxes
|
319
|
(629,258)
|
||||||
Loss
on sale of assets
|
43,666
|
-
|
||||||
Change
in allowance for doubtful accounts
|
(3,205)
|
13,205
|
||||||
Change
in inventory reserves
|
(104,131)
|
199,864
|
||||||
Common
stock issued for services and lawsuit
|
0
|
108,890
|
||||||
(Increase)
decrease in assets:
|
||||||||
Trade
accounts receivable
|
(1,295,021)
|
258,724
|
||||||
Inventories
|
(7,572)
|
(214,652)
|
||||||
Refundable
income taxes
|
0
|
62,264
|
||||||
Prepaid
insurance and other assets
|
(7,442)
|
(17,682)
|
||||||
Increase
(decrease) in liabilities:
|
||||||||
Trade
accounts payable
|
(262,064)
|
215,962
|
||||||
Accrued
expenses
|
129,233
|
157,320
|
||||||
Customer
deposits
|
6,007
|
(11,556)
|
||||||
Net
cash used in operating activities
|
(882,141)
|
(260,494)
|
||||||
Cash
flows from investing activities:
|
||||||||
Payments
for deferred charges
|
-
|
413
|
||||||
Proceeds
from sale of property and equipment
|
6,000
|
-
|
||||||
Capital
expenditures
|
(33,207)
|
(26,799)
|
||||||
Net
cash used in investing activities
|
(27,207)
|
(26,386)
|
||||||
Cash
flows financing activities:
|
||||||||
Factor
line of credit
|
1,038,809
|
0
|
||||||
Net
proceeds (repayments) under line of credit agreement
|
(200,000)
|
200,000
|
||||||
Payments
on long-term debt
|
0
|
(40,000)
|
||||||
Net
cash provided by financing activities
|
838,809
|
160,000
|
||||||
Net
decrease in cash
|
(70,539)
|
(126,880)
|
||||||
Cash
at beginning of the year
|
325,244
|
452,124
|
||||||
Cash
at end of the year
|
$
|
254,705
|
$
|
325,244
|
||||
Supplemental
disclosure of cash flow information:
|
||||||||
Cash
paid for interest expense
|
$
|
15,170
|
$
|
2,117
|
||||
Cash
paid for income taxes
|
$
|
-
|
$
|
-
|
||||
155,000
shares of common stock issued for services and lawsuit
|
$
|
0
|
$
|
108,890
|
1.
|
SIGNIFICANT
ACCOUNTING POLICIES
|
1.
|
SIGNIFICANT
ACCOUNTING POLICIES (Continued)
|
1.
|
SIGNIFICANT
ACCOUNTING POLICIES (Continued)
|
1.
|
SIGNIFICANT
ACCOUNTING POLICIES (Continued)
|
2.
|
INVENTORIES
|
2008
|
2007
|
|||||||
Raw
Materials
|
$
|
615,866
|
$
|
625,247
|
||||
Work-in-process
|
64,253
|
90,098
|
||||||
Finished
goods
|
687,930
|
541,001
|
||||||
$
|
1,368,049
|
$
|
1,256,346
|
3.
|
PROPERTY
AND EQUIPMENT
|
Useful
Life
|
2008
|
2007
|
|||||||
Office
furniture & equipment
|
5
to 7 years
|
$ | 98,347 | $ | 107,624 | ||||
Leasehold
improvements
|
7
years
|
14,218 | 5,139 | ||||||
Vehicles
|
5
years
|
101,127 | 101,129 | ||||||
Machinery
& equipment
|
5
to 7 years
|
291,420 | 459,031 | ||||||
505,112 | 672,923 | ||||||||
Less
accumulated depreciation
|
335,085 | 415,898 | |||||||
$ | 170,027 | $ | 257,025 |
4.
|
INTANGIBLE
ASSETS
|
Estimated
Life
|
2008
|
2007
|
|||||||
Trade
name
|
25
years
|
1,400,000
|
1,400,000
|
||||||
Drawings/designs
|
10
years
|
411,000
|
411,000
|
||||||
AVS
Marketing List
|
12
years
|
470,000
|
470,000
|
||||||
AVS
Engineered Drawings
|
15
years
|
230,000
|
230,000
|
||||||
AVS
Trade Name
|
15
years
|
190,000
|
190,000
|
||||||
2,701,000
|
2,701,000
|
||||||||
Less
accumulated amortization
|
526,436
|
362,169
|
|||||||
Total
intangibles, net
|
$
|
2,174,564
|
$
|
2,338,831
|
Year
|
Amount
|
|||
2009
|
$
|
164,267
|
||
2010
|
164,267
|
|||
2011
|
164,267
|
|||
2012
|
164,267
|
|||
2013
|
164,267
|
|||
Future
Years
|
1,353,229
|
|||
$
|
2,174,564
|
5.
|
ASSETS
HELD FOR SALE
|
6.
|
LINE
OF CREDIT AND NOTE PAYABLE
|
7.
|
INCOME
TAXES
|
2008
|
2007
|
|||||||
Deferred
tax assets:
|
||||||||
Inventory
|
$
|
86,766
|
$
|
36,646
|
||||
Allowance
for doubtful accounts
|
11,566
|
12,273
|
||||||
Accrued
wages
|
8,074
|
1,416
|
||||||
Warranty
provision
|
22,673
|
22,144
|
||||||
Intangible
assets
|
450,724
|
386,680
|
||||||
Federal
net operating loss of $1,543,991,
|
||||||||
Expiring
beginning in 2026
|
524,957
|
632,749
|
||||||
State
net economic loss of $1,182,838,
|
||||||||
Expiring
beginning in 2019
|
53,866
|
64,110
|
||||||
1,158,626
|
1,156,018
|
|||||||
Deferred
tax (liabilities):
|
||||||||
Property
and equipment
|
(27,490)
|
(41,086)
|
||||||
Trade
name (AID)
|
(65,970)
|
(49,447)
|
||||||
(93,460)
|
(90,533)
|
|||||||
Deferred
tax asset (liability), net
|
$
|
1,065,166
|
$
|
1,065,485
|
2008
|
2007
|
|||||||
Current
assets
|
$
|
244,741
|
$
|
769,338
|
||||
Non-current
assets
|
820,425
|
296,147
|
||||||
$
|
1,065,166
|
$
|
1,065,485
|
2008
|
2007
|
|||||||
Current:
|
||||||||
Federal
|
$
|
-
|
$
|
-
|
||||
State
|
-
|
-
|
||||||
Deferred
|
319
|
|
(629,258)
|
|||||
Total
|
$
|
319
|
|
$
|
(629,258)
|
2008
|
2007
|
|||||||
Statutory
federal income tax rate
|
34
|
%
|
34
|
%
|
||||
State
income tax – net of federal benefit
|
3
|
%
|
3
|
%
|
||||
Other
|
(37)
|
%
|
1
|
%
|
||||
Effective
tax rate
|
0
|
%
|
38
|
%
|
8.
|
STOCKHOLDERS’
EQUITY TRANSACTIONS
|
11.
|
COMMITMENTS
AND CONTINGENCIES
|
Year
ending December 31:
|
||||
2009
|
$
|
160,415
|
||
2010
|
160,415
|
|||
2011
|
160,415
|
|||
2012
|
153,782
|
|||
2013
|
8,631
|
|||
Later
years
|
0
|
|||
Total
minimum payments required
|
$
|
643,658
|
2009
|
26,667
|
|||
Total
|
$
|
26,667
|
12.
|
CONCENTRATION
OF RISK
|
13.
|
FAIR
VALUE OF FINANCIAL INSTRUMENTS
|
·
|
Level 1 Inputs –
Unadjusted quoted prices in active markets for identical assets or
liabilities that the reporting entity has the ability to access at the
measurement date.
|
·
|
Level 2 Inputs – Inputs
other than quoted prices included in Level 1 Inputs that are observable
for the asset or liability, either directly or
indirectly. These might include quoted prices for similar
assets or liabilities in active markets, quoted prices for identical or
similar assets or liabilities in markets that are not active, inputs other
than quoted prices that are observable for the asset or liability (such as
interest rates, volatilities, prepayment speeds, credit risks, etc.) or
inputs that are derived principally from or corroborated by market data by
correlation or other means.
|
·
|
Level 3 Inputs –
Unobservable inputs for determining the fair values of assets or
liabilities that reflect an entity’s own assumptions about the assumptions
that market participants would use in pricing the assets or
liabilities.
|
Fair Value Measurements as of December 31,
2008
|
||||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
Assets
|
||||||||||||||||
Patents
held for sale
|
$ | - | $ | 335,505 | $ | - | $ | 335,505 |
14.
|
LIQUIDITY
AND CAPITAL RESOURCES
|