CORRECTION OF ERROR AND RESTATEMENT OF 2013 FINANCIAL STATEMENTS

12 Months Ended

Dec. 31, 2014

Accounting Changes and Error Corrections [Abstract]

Accounting Changes and Error Corrections [Text Block]

23. RESTATEMENT OF 2013 CONSOLIDATED FINANCIAL STATEMENTS

During the course of preparing financial statements and schedules for the 2014 year end audit, it was noted that that $107,324 of an $111,115 inventory adjustment made in the fourth quarter of 2014 related primarily to 2013. The actual adjustment was made as result of full physical inventory taken when the Company’s headquarters and manufacturing facility relocated to Pompano Beach from Fort Lauderdale, FL, and the inventory discrepancy (error) was identified. The error occurred as a result of an identified weakness in the accounting system interface between the Company’s sales order and inventory modules. The error occurred when sales invoices were converted from sales orders containing custom items that were entered in the sales order module prior to set up in the inventory module. When this occurred, sales invoices converted from these sales failed to remove the inventory and account for the cost of the sale. This was despite fact that the inventory items had been subsequently added to the inventory module. These items were also not added to any of the categories in the cycle count rotation since they were special order with quick sales turnaround.

The Company has internal controls designed to detect inventory misstatement such as inventory cycle counts and gross profit margin review of sale transactions. Regardless, the controls in place during 2013 failed to detect the identified weakness and misstatement.

However, in 2014, the Company strengthened its internal controls further in its review of sales margins on daily transactions to adjust bills of material as needed, and better identify inventory errors if and when they occurred for timely correction. This unknowingly also addressed much of the identified weakness. Regardless, once the system weakness was identified, the Company also modified its process to enter items in the inventory module prior to entry in the sales order module, which should completely eliminate the identified weakness.

Because the Company determined the $107,324 error significant to the 2013 financial statements as previously reported, they have been restated in the consolidated financial statements these notes support. The restatement to 2013 includes a $107,324 reduction to inventory and corresponding increase to cost of sales.