NOTE 7 - INVENTORY

9 Months Ended

Sep. 30, 2016

Inventory Disclosure [Abstract]

Inventory Disclosure [Text Block]

NOTE 7 – INVENTORY

The Company’s inventory, at September 30, 2016 and December 31, 2015, respectively, consisted of the following:

Category	September 30, 2016			December 31, 2015
	(Unaudited)
Finished goods	$	596,668		$	504,695
Obsolescence Allowance		(20,000	)		(20,000	)
Total Inventory, net	$	576,668		$	484,695

The approximate $92,000 increase in inventory in the first nine-months of 2016 is due to an increase in on-hand general equipment and supplies, partially offset by a reduction in the Company’s VidTac finished goods inventory.   

Total inventory at September 30, 2016 and December 31, 2015 included hardware consisting of computer laptops, printers and ancillary parts, such as electronic components, connectors, adapters and cables, as well as the Company’s proprietary VidTac product and its related components.  The Company attempts to procure hardware as a result of receiving a customer order.  Accordingly, the hardware is procured, delivered to the Company, prepared for installation and then transported by the Company to the customer site for installation.  Beginning in 2016, the Company has begun to procure certain inventory items on a stock basis so the Company can quickly install the equipment for a new contract.  Additionally, the various components of hardware are all considered finished goods because the individual items may be, and are, sold in a package, or on an individual basis, normally at the same pricing structure.

With respect to the Company’s VidTac product, a manufacturing agreement was executed in 2012 with a single contract manufacturer and calls for the Company to periodically place a demand purchase order for a fixed number of finished units to be manufactured and delivered as finished goods.  The Company’s purchase orders placed with the contract manufacturer are non-cancellable; however, there are some relief provisions: (1) the Company may change the original requested delivery dates if the Company gives sufficient advance notice to the contract manufacturer; and (2) should the Company elect to cancel a purchase order in total or in part, it would be financially responsible for any materials that could not be returned by the contract manufacturer to its source suppliers.

When the VidTac product is recorded into finished goods, it consists of a kit consisting of four basic components.  It is inventoried as a single unit of inventory.  If a single component fails or needs to be replaced, the Company will replace with a new unit and inventory the components, which would still be considered finished goods.  Should a component need to be repaired, it is returned to the contracted manufacturer for analysis and repair. The repaired component is then shipped to the Company and inventoried as a finished goods component.