Lifeloc (LCTC) 10-Q 10 Aug 16 2016 Q2 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2016	Aug. 07, 2016
Document And Entity Information
Entity Registrant Name	Lifeloc Technologies, Inc
Entity Central Index Key	1,493,137
Document Type	10-Q
Document Period End Date	Jun. 30, 2016
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		2,454,116
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2,016

Condensed Balance Sheets

Condensed Balance Sheets - USD ($)	Jun. 30, 2016	Dec. 31, 2015
ASSETS
Cash	$ 3,383,541	$ 3,227,190
Accounts receivable, net	745,831	603,817
Inventories, net	949,226	801,661
Income taxes receivable	0	81,031
Deferred taxes	105,589	114,058
Prepaid expenses and other	93,977	23,279
Total current assets	5,278,164	4,851,036
PROPERTY AND EQUIPMENT, at cost:
Land	317,932	317,932
Building	1,921,367	1,911,695
Training courses	432,375	432,375
Production equipment and software	459,855	434,148
Office equipment and software	193,332	193,332
Sales and marketing equipment	232,468	232,468
Research and development equipment and software	78,157	78,157
Less accumulated depreciation	(997,598)	(876,582)
Total property and equipment, net	2,637,888	2,723,525
OTHER ASSETS:
Patents, net	82,892	102,252
Deposits and other	24,490	9,314
Deferred taxes, long term	4,664	7,282
Total other assets	112,046	118,848
Total assets	8,028,098	7,693,409
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable	292,377	222,976
Term loan payable, current portion	37,199	36,147
Customer deposits	97,094	92,870
Accrued expenses	239,503	274,996
Deferred revenue, current portion	74,789	89,179
Reserve for warranty expense	37,500	33,100
Total current liabilities	778,462	749,268
TERM LOAN PAYABLE, net of current portion and debt issuance costs	1,474,874	1,493,793
DEFERRED REVENUE, net of current portion	12,273	19,163
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, no par value; 50,000,000 shares authorized, 2,454,116 shares outstanding	4,544,994	4,533,012
Retained earnings	1,217,495	898,173
Total stockholders' equity	5,762,489	5,431,185
Total liabilities and stockholders' equity	$ 8,028,098	$ 7,693,409

Condensed Balance Sheets (Paren

Condensed Balance Sheets (Parenthetical) - $ / shares	Jun. 30, 2016	Dec. 31, 2015
STOCKHOLDERS' EQUITY:
Common stock, par value	$ 0	$ 0
Common stock, authorized shares	50,000,000	50,000,000
Common stock, outstanding shares	2,454,116	2,454,116

Condensed Statements of Income

Condensed Statements of Income (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
REVENUES:
Product sales	$ 2,025,865	$ 2,001,878	$ 4,125,995	$ 3,952,195
Royalties	234,368	137,915	325,888	201,205
Rental income	27,782	26,569	55,564	53,040
Total sales	2,288,015	2,166,362	4,507,447	4,206,440
COST OF SALES	1,086,716	1,068,714	2,174,461	2,137,693
GROSS PROFIT	1,201,299	1,097,648	2,332,986	2,068,747
OPERATING EXPENSES:
Research and development	259,854	282,479	532,401	557,729
Sales and marketing	375,635	417,686	694,743	828,247
General and administrative	308,600	265,607	607,746	600,166
Total	944,089	965,772	1,834,890	1,986,142
OPERATING INCOME	257,210	131,876	498,096	82,605
OTHER INCOME (EXPENSE):
Interest income	5,535	3,855	7,893	7,345
Bad debt recovery	1,500	4,000	4,500	6,000
Interest expense	(17,540)	(18,143)	(34,966)	(35,639)
Total	(10,505)	(10,288)	(22,573)	(22,294)
NET INCOME BEFORE PROVISION FOR TAXES	246,705	121,588	475,523	60,311
PROVISION FOR FEDERAL AND STATE INCOME TAXES	(80,718)	(45,239)	(156,201)	(22,821)
NET INCOME	$ 165,987	$ 76,349	$ 319,322	$ 37,490
NET INCOME PER SHARE, BASIC	$ 0.07	$ 0.03	$ 0.13	$ 0.02
NET INCOME PER SHARE, DILUTED	$ 0.07	$ 0.03	$ 0.13	$ 0.01
WEIGHTED AVERAGE SHARES, BASIC	2,454,116	2,454,116	2,454,116	2,452,456
WEIGHTED AVERAGE SHARES, DILUTED	2,555,030	2,523,581	2,533,953	2,525,805

Condensed Statements of Cash Fl

Condensed Statements of Cash Flows (Unaudited) - USD ($)	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$ 319,322	$ 37,490
Adjustments to reconcile net income to net cash provided by operating activities-
Depreciation and amortization	140,646	134,519
Share-based compensation expense	11,982	0
Provision for bad debt	2,500	0
Deferred taxes	11,087	(3,084)
Reserve for warranty expense	4,400	2,000
Changes in operating assets and liabilities-
Accounts receivable	(144,514)	114,649
Inventories	(147,565)	12,105
Income taxes receivable	81,031	14,001
Prepaid expenses and other	(70,698)	(28,284)
Deposits and other	(15,176)	(45,668)
Accounts payable	69,401	(325,416)
Customer deposits	4,224	(8,991)
Accrued expenses	(35,493)	(58,500)
Deferred revenue	(21,280)	12,336
Net cash provided from (used in) operating activities	209,867	(142,843)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	(35,379)	(63,449)
Patent filing expense	0	(2,197)
Net cash (used in) investing activities	(35,379)	(65,646)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments made on term loan	(18,137)	(17,530)
Sale of common stock	0	15,544
Net cash (used in) financing activities	(18,137)	(1,986)
NET INCREASE (DECREASE) IN CASH	156,351	(210,475)
CASH, BEGINNING OF PERIOD	3,227,190	2,749,254
CASH, END OF PERIOD	3,383,541	2,538,779
Supplemental cash flow disclosure:
Cash paid for interest	34,694	35,277
Cash paid for income tax	$ 3,217	$ 11,904

1. ORGANIZATION AND NATURE OF B

1. ORGANIZATION AND NATURE OF BUSINESS	6 Months Ended
	Jun. 30, 2016
Notes to Financial Statements
NOTE 1 - ORGANIZATION AND NATURE OF BUSINESS	Lifeloc Technologies, Inc. ("Lifeloc" or the "Company") is a Colorado based developer, manufacturer and marketer of portable hand-held and fixed station breathalyzers and related accessories, supplies and education. We design, produce and sell fuel-cell based breath alcohol testing equipment. We compete in all major segments of the breath alcohol testing instrument market, including law enforcement, workplace, corrections, original equipment manufacturing ("OEM") and consumer markets. In addition, we offer a line of supplies, accessories, services, and training to support customers' alcohol testing programs. We sell globally through distributors as well as directly to users. We define our business as providing "near and remote sensing" products and solutions. Today, the majority of our revenues are derived from products and services for alcohol detection and measurement. We remain committed to growing our breath alcohol testing business. In the future, we anticipate the commercialization of new sensing and measurement products that may allow Lifeloc to successfully expand our business into new growth areas where we do not presently compete or where no satisfactory product solutions exist today. Lifeloc incorporated in Colorado in December 1983. We filed a registration statement on Form 10 with the Securities and Exchange Commission, which became effective on May 31, 2011. Our fiscal year end is December 31. Our principal executive offices are located at 12441 West 49th Avenue, Unit 4, Wheat Ridge, Colorado 80033-3338. Our telephone number is (303) 431-9500. Our websites are www.lifeloc.com, www.lifeguardbreathtester.com, and stsfirst.com. Information contained on our websites does not constitute part of this Form 10-K.

2. SUMMARY OF SIGNIFICANT ACCOU

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	6 Months Ended
	Jun. 30, 2016
Notes to Financial Statements
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	Use of Estimates in the Preparation of Financial Statements. Debt Issuance Costs Simplifying the Presentation of Debt Issuance Costs Fair Value Measurement Fair Value Measurements and Disclosures Level 1 - Quoted prices are available in active markets for identical assets or liabilities as of the reported date. The types of assets and liabilities included in Level 1 are highly liquid and actively traded instruments with quoted prices, such as equity securities listed on the New York Stock Exchange. Level 2 - Pricing inputs are other than quoted prices in active markets, but are either directly or indirectly observable as of the reported date. The types of assets and liabilities in Level 2 are typically either comparable to actively traded securities or contracts or priced with models using highly observable inputs. Level 3 - Significant inputs to pricing that are unobservable as of the reporting date. The types of assets and liabilities included in Level 3 are those with inputs requiring significant management judgment or estimation, such as complex and subjective models and forecasts used to determine the fair value of financial transmission rights. Inventories. 2016 2015 Raw materials & deposits $ 507,383 $ 404,104 Work-in-process 70,071 76,903 Finished goods 462,149 408,154 Total gross inventories 1,039,603 889,161 Less reserve for obsolescence (90,377 ) (87,500 ) Total net inventories $ 949,226 $ 801,661 Income Taxes. Accounting for Income Taxes The estimated annual effective tax rate is applied to the year-to-date ordinary income (or loss) at the end of the interim period. ASC 740 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This pronouncement also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. Revenue Recognition. Supplies are recognized as sales when they are shipped. Training revenues are recognized at the time the training occurs. We have discontinued arranging for customer financing and leasing through unrelated third parties and instead are providing for customer financing and leasing ourselves which we recognize as revenue over the applicable lease term. Occasionally, we rent used equipment to customers, and in those cases, we recognize the revenues as they are earned over the life of the contract. Royalty income is recognized in accordance with agreed upon terms, when performance obligations are satisfied, the amount is fixed or determinable and collectability is reasonably assured. The sales of licenses to our training courses are recognized as revenue at the time of sale. Rental income from space leased to our tenants is recognized in the month in which it is due. On occasion we receive customer deposits for future product orders. Customer deposits are initially recorded as a liability and recognized as revenue when the product is shipped and title has passed to the customer. Deferred Revenue. Recent Accounting Pronouncements The FASB issued ASU No. 2014-09, Revenue from Contracts with Customers In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) Stock-Based Compensation Compensation – Stock Compensation ASC 718 requires companies to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in the accompanying statement of income. Stock-based compensation expense recognized during the period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. We use the Black-Scholes option-pricing model ("Black-Scholes model") to determine fair value. Our determination of fair value of share-based payment awards on the date of grant using an option-pricing model is affected by our stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to our expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. Although the fair value of employee stock options is determined in accordance with ASC 718 using an option-pricing model, that value may not be indicative of the fair value observed in a willing buyer/willing seller market transaction. Stock-based compensation expense recognized under ASC 718 for the six months ended June 30, 2016 and 2015 was $11,982 and $0 respectively, which consisted of stock-based compensation expense related to grants of employee stock options. Stock-based compensation expense recognized under ASC 718 for the three months ended June 30, 2016 and 2015 was $0 and $0 respectively, Segment Reporting.

3. BASIC AND DILUTED INCOME PER

3. BASIC AND DILUTED INCOME PER COMMON SHARE	6 Months Ended
	Jun. 30, 2016
Notes to Financial Statements
NOTE 3 - BASIC AND DILUTED INCOME PER COMMON SHARE	We report both basic and diluted net income per share. Basic net income per common share is computed by dividing net income for the period by the weighted average number of common shares outstanding for the period. Diluted net income per common share is computed by dividing the net income for the period by the weighted average number of common and potential common shares outstanding during the period if the effect of the potential common shares is dilutive. The shares used in the calculation of dilutive potential common shares exclude options to purchase shares where the exercise price was greater than the average market price of common shares for the period. The following table presents the calculation of basic and diluted net income per share: Three Months Ended June 30, 2016 June 30, 2015 Net income $ 165,987 $ 76,349 Weighted average shares-basic 2,454,116 2,454,116 Effect of dilutive potential common shares 100,914 73,349 Weighted average shares-diluted 2,555,030 2,523,581 Net income per share-basic $ .07 $ .03 Net income per share-diluted $ .07 $ .03 Antidilutive employee stock options 50,000 - Six Months Ended June 30, 2016 June 30, 2015 Net income $ 319,322 $ 37,490 Weighted average shares-basic 2,454,116 2,452,456 Effect of dilutive potential common shares 79,837 73,349 Weighted average shares-diluted 2,533,953 2,525,805 Net income per share-basic $ .13 $ .02 Net income per share-diluted $ .13 $ .01 Antidilutive employee stock options 50,000 -

4. STOCKHOLDERS' EQUITY

4. STOCKHOLDERS' EQUITY	6 Months Ended
	Jun. 30, 2016
Notes to Financial Statements
NOTE 4 - STOCKHOLDERS' EQUITY	The following table summarizes information about employee stock options outstanding and exercisable at June 30, 2016: STOCK OPTIONS OUTSTANDING STOCK OPTIONS EXERCISABLE Range of Exercise Prices Number Outstanding Weighted-Average Remaining Contractual Life (in Years) Weighted-Average Exercise Price per Share Number Exercisable Weighted-Average Exercise Price per Share $2.32 - $8.83 105,500 3.01 $5.67 55,500 $2.81 Of the 55,500 options exercisable as of June 30, 2016, all are incentive stock options. The exercise price of all options granted through June 30, 2016 has been equal to or greater than the fair market value of Options to purchase 50,000 shares of stock at $8.83 apiece were granted during the three months ended March 31, 2016. Vesting of these options is subject to performance achieved during the years ending December 31, 2018, 2019 and 2020. No options were granted during the three months ended June 30, 2016. The provisions of ASC 718-10-55 require the measurement and recognition of compensation expense for all share based payment awards made to our employees and directors, including employee stock options, based on estimated fair values. Share-based compensation cost for stock options is measured at the grant date, based on the fair value as calculated by the Black-Scholes-Merton (“BSM”) option-pricing model. The BSM option pricing model requires the use of actual employee exercise behavior data and the application of a number of assumptions, including expected volatility, risk free interest rate and expected dividends. Share-based compensation cost for the three months ended June 30, 2016 was $4,938 and $0 for the same period in 2015. Share-based compensation cost for the six months ended June 30, 2016 was $$11,982 and $0 for the same period in 2015. No options were exercised during the six months ended June 30, 2016. Holders of 6,700 options entitling them to purchase shares of stock at $2.32 apiece exercised their options during the six months ended June 30, 2015. The total number of authorized shares of common stock continues to be 50,000,000, with no change in the par value per share.

5. COMMITMENTS AND CONTINGENCIE

5. COMMITMENTS AND CONTINGENCIES	6 Months Ended
	Jun. 30, 2016
Commitments and Contingencies Disclosure [Abstract]
NOTE 5. COMMITMENTS AND CONTINGENCIES	Mortgage Expense Year Amount 2016 $ 18,551 2017 38,576 2018 40,353 2019 42,211 2020 43,979 2021– 2024 1,338,347 Total 1,522,017 Less financing cost (9,944 ) Net term loan payable 1,512,073 Less current portion (37,199 ) Long term portion $ 1,474,874 Employee Severance Benefits Contractual Commitments and Purchase Orders Regulatory Commitments

6. LINE OF CREDIT

6. LINE OF CREDIT	6 Months Ended
	Jun. 30, 2016
Debt Disclosure [Abstract]
NOTE 6 - LINE OF CREDIT	As part of the long-term financing of our property purchased on October 31, 2014, we obtained a one-year $250,000 revolving line of credit facility with Bank of America, which matured on October 31, 2015 and was extended to October 31, 2016, and bears interest at a rate equal to the LIBOR daily floating rate of .4116% and .1120% on June 30, 2016 and 2015, respectively, plus 2.5%. The revolving line of credit facility is secured by all personal property and assets, whether now owned or hereafter acquired, wherever located. There was no balance due on the line of credit as of June 30, 2016 and December 31, 2015.

7. INCOME TAXES

7. INCOME TAXES	6 Months Ended
	Jun. 30, 2016
Income Tax Disclosure [Abstract]
NOTE 7. INCOME TAXES	The items accounting for the difference between income taxes computed at the federal statutory rate and the provision for income taxes consist of the following: Six Months Ended June 30, 2016 June 30, 2015 Federal statutory rate $ 166,433 $ 20,506 Effect of: State taxes, net of federal benefit (19,414 ) 3,523 Estimated research and development credit (9,036 ) (3,016 ) Other 18,218 1,808 Total $ 156,201 $ 22,821

8. BUSINESS SEGMENTS

8. BUSINESS SEGMENTS	6 Months Ended
	Jun. 30, 2016
Segment Reporting [Abstract]
NOTE 8. BUSINESS SEGMENTS	We currently have two business segments: (i) the sale of physical products, including portable hand-held breathalyzers and related accessories, supplies, education, training ("Product Sales”), and royalties from development contracts with OEM manufacturers (“Royalties” and, together with Product Sales, the “Products” segment), and (ii) rental of a portion of our building (the "Rentals" segment). The accounting policies of the segments are the same as those described in the summary of significant accounting policies. Operating profits for these segments excludes unallocated corporate items. Administrative and staff costs were commonly used by all business segments and were indistinguishable. The following sets forth information about the operations of the business segments for the three months ended June 30, 2016 and 2015: Revenue: 2016 2015 Product Sales $ 2,025,865 $ 2,001,878 Royalties 234,368 137,915 Products Subtotal 2,260,233 2,139,793 Rentals 27,782 26,569 Total $ 2,288,015 $ 2,166,362 Gross profit: Product Sales $ 954,618 $ 983,197 Royalties 234,368 137,915 Products Subtotal 1,188,986 1,121,112 Rentals 12,313 (23,464 ) Total $ 1,201,299 $ 1,097,648 Interest expense: Product Sales $ 9,132 $ 9,608 Royalties - - Products Subtotal 9,132 9,608 Rentals 8,408 8,535 Total $ 17,540 $ 18,143 Net income (loss) before taxes: Product Sales $ 8,432 $ 15,672 Royalties 234,368 137,915 Products Subtotal 242,800 153,587 Rentals 3,905 (31,999 ) Total $ 246,705 $ 121,588 The following sets forth information about the operations of the business segments for the six months ended June 30, 2016 and 2015: Revenue: 2016 2015 Product Sales $ 4,125,995 $ 3,952,195 Royalties 325,888 201,205 Products Subtotal 4,451,883 4,153,400 Rentals 55,564 53,040 Total $ 4,507,447 $ 4,206,440 Gross profit: Product Sales $ 1,988,534 $ 1,864,535 Royalties 325,888 201,205 Products Subtotal 2,314,422 2,065,740 Rentals 18,564 3,007 Total $ 2,332,986 $ 2,068,747 Interest expense: Product Sales $ 18,194 $ 18,706 Royalties - - Products Subtotal 18,194 18,706 Rentals 16,772 16,933 Total $ 34,966 $ 35,639 Net income (loss) before taxes: Product Sales $ 147,843 $ (126,968 ) Royalties 325,888 201,205 Products Subtotal 473,731 74,237 Rentals 1,792 (13,926 ) Total $ 475,523 $ 60,311 There were no intersegment revenues. As of June 30, 2016, $966,298 of our assets were used in the Rentals segment, with the remainder, $7,061,800, used in the Products and unallocated segments.

9. SUBSEQUENT EVENTS

9. SUBSEQUENT EVENTS	6 Months Ended
	Jun. 30, 2016
Notes to Financial Statements
NOTE 9 - SUBSEQUENT EVENTS	We evaluated all of our activity and concluded that no subsequent events have occurred that would require recognition in our financial statements or disclosure in the notes to our financial statements, except as follows: i.In July we signed an agreement effective June 30, 2016 to amend the terms of our term loan with Bank of America which will change the interest rate from 4.45% per annum to 4.00% per annum. The resulting monthly installment payments, commencing in July, will be lowered from $8,801 to $8,417. No other significant terms of the agreement were amended. ii. As previously reported, one of our rental leases expired on June 30, 2016, which will reduce rental income by $2,048 per month commencing in July.

2. SUMMARY OF SIGNIFICANT ACC15

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)	6 Months Ended
	Jun. 30, 2016
Summary Of Significant Accounting Policies Policies
Use of Estimates	The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions. Such estimates and assumptions affect the reported amounts of assets and liabilities as well as disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of sales and expense during the reporting period. Actual results could differ from those estimates.
Debt Issuance Costs	In April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2015-03, Simplifying the Presentation of Debt Issuance Costs
Fair Value Measurement	Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures Level 1 - Quoted prices are available in active markets for identical assets or liabilities as of the reported date. The types of assets and liabilities included in Level 1 are highly liquid and actively traded instruments with quoted prices, such as equity securities listed on the New York Stock Exchange. Level 2 - Pricing inputs are other than quoted prices in active markets, but are either directly or indirectly observable as of the reported date. The types of assets and liabilities in Level 2 are typically either comparable to actively traded securities or contracts or priced with models using highly observable inputs. Level 3 - Significant inputs to pricing that are unobservable as of the reporting date. The types of assets and liabilities included in Level 3 are those with inputs requiring significant management judgment or estimation, such as complex and subjective models and forecasts used to determine the fair value of financial transmission rights.
Inventories	Inventories are stated at the lower of cost (first-in, first-out basis) or market. We reduce inventory for estimated obsolete or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required. At June 30, 2016 and December 31, 2015, inventory consisted of the following: 2016 2015 Raw materials & deposits $ 507,383 $ 404,104 Work-in-process 70,071 76,903 Finished goods 462,149 408,154 Total gross inventories 1,039,603 889,161 Less reserve for obsolescence (90,377 ) (87,500 ) Total net inventories $ 949,226 $ 801,661
Income Taxes	We account for income taxes under the provisions of ASC Topic 740, Accounting for Income Taxes The estimated annual effective tax rate is applied to the year-to-date ordinary income (or loss) at the end of the interim period. ASC 740 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This pronouncement also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.
Revenue Recognition	Revenue from product sales is generally recorded when we ship the product and title has passed to the customer, provided that we have evidence of a customer arrangement and can conclude that collection is probable. The prices at which we sell our products are fixed and determinable at the time we accept a customer's order. We recognize revenue from sales to stocking distributors when there is no right of return, other than for normal warranty claims, and generally have no ongoing obligations related to product sales, except for normal warranty. Supplies are recognized as sales when they are shipped. Training revenues are recognized at the time the training occurs. We have discontinued arranging for customer financing and leasing through unrelated third parties and instead are providing for customer financing and leasing ourselves which we recognize as revenue over the applicable lease term. Occasionally, we rent used equipment to customers, and in those cases, we recognize the revenues as they are earned over the life of the contract. Royalty income is recognized in accordance with agreed upon terms, when performance obligations are satisfied, the amount is fixed or determinable and collectability is reasonably assured. The sales of licenses to our training courses are recognized as revenue at the time of sale. Rental income from space leased to our tenants is recognized in the month in which it is due. On occasion we receive customer deposits for future product orders. Customer deposits are initially recorded as a liability and recognized as revenue when the product is shipped and title has passed to the customer.
Deferred Revenue	Deferred revenues arise from service contracts and from development contracts. Revenues from service contracts are recognized on a straight-line basis over the life of the contract, generally one year. However, there are occasions when they are written for longer terms up to four years. The revenues from that portion of the contract that extend beyond one year are shown in our balance sheet as long term. Deferred revenues also result from progress payments received on development contracts; those revenues are recognized when the contract is complete. All development contracts are for less than one year and all deferred revenues from this source are shown in our balance sheet as short term.
Reclassification	We have reviewed all recently issued, but not yet effective, accounting pronouncements. The FASB issued ASU No. 2014-09, Revenue from Contracts with Customers In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842)
Stock-Based Compensation	Stock-based compensation is presented in accordance with the guidance of ASC Topic 718, Compensation – Stock Compensation ASC 718 requires companies to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in the accompanying statement of income. Stock-based compensation expense recognized during the period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. We use the Black-Scholes option-pricing model ("Black-Scholes model") to determine fair value. Our determination of fair value of share-based payment awards on the date of grant using an option-pricing model is affected by our stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to our expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. Although the fair value of employee stock options is determined in accordance with ASC 718 using an option-pricing model, that value may not be indicative of the fair value observed in a willing buyer/willing seller market transaction. Stock-based compensation expense recognized under ASC 718 for the six months ended June 30, 2016 and 2015 was $11,982 and $0 respectively, which consisted of stock-based compensation expense related to grants of employee stock options. Stock-based compensation expense recognized under ASC 718 for the three months ended June 30, 2016 and 2015 was $0 and $0 respectively,
Segment Reporting	We have concluded that we have two operating segments. Our primary business is as a developer, manufacturer and marketer of portable hand-held breathalyzers and related accessories, supplies and education. As a result of purchasing our building on October 31, 2014, we have a second segment consisting of renting portions of our building to existing tenants, whose leases expire at various times through December 31, 2017.

2. SUMMARY OF SIGNIFICANT ACC16

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)	6 Months Ended
	Jun. 30, 2016
Summary Of Significant Accounting Policies Tables
Inventories	2016 2015 Raw materials & deposits $ 507,383 $ 404,104 Work-in-process 70,071 76,903 Finished goods 462,149 408,154 Total gross inventories 1,039,603 889,161 Less reserve for obsolescence (90,377 ) (87,500 ) Total net inventories $ 949,226 $ 801,661

3. BASIC AND DILUTED INCOME P17

3. BASIC AND DILUTED INCOME PER COMMON SHARE (Tables)	6 Months Ended
	Jun. 30, 2016
Basic And Diluted Income Per Common Share Tables
Basic and diluted net income per share	Three Months Ended June 30, 2016 June 30, 2015 Net income $ 165,987 $ 76,349 Weighted average shares-basic 2,454,116 2,454,116 Effect of dilutive potential common shares 100,914 73,349 Weighted average shares-diluted 2,555,030 2,523,581 Net income per share-basic $ .07 $ .03 Net income per share-diluted $ .07 $ .03 Antidilutive employee stock options 50,000 - Six Months Ended June 30, 2016 June 30, 2015 Net income $ 319,322 $ 37,490 Weighted average shares-basic 2,454,116 2,452,456 Effect of dilutive potential common shares 79,837 73,349 Weighted average shares-diluted 2,533,953 2,525,805 Net income per share-basic $ .13 $ .02 Net income per share-diluted $ .13 $ .01 Antidilutive employee stock options 50,000 -

4. STOCKHOLDERS' EQUITY (Tables

4. STOCKHOLDERS' EQUITY (Tables)	6 Months Ended
	Jun. 30, 2016
Stockholders Equity Tables
Stock options outstanding and exercisable	STOCK OPTIONS OUTSTANDING STOCK OPTIONS EXERCISABLE Range of Exercise Prices Number Outstanding Weighted-Average Remaining Contractual Life (in Years) Weighted-Average Exercise Price per Share Number Exercisable Weighted-Average Exercise Price per Share $2.32 - $8.83 105,500 3.01 $5.67 55,500 $2.81

5. COMMITMENTS AND CONTINGENC19

5. COMMITMENTS AND CONTINGENCIES (Tables)	6 Months Ended
	Jun. 30, 2016
Commitments And Contingencies Tables
Minimum future lease payments	Year Amount 2016 $ 18,551 2017 38,576 2018 40,353 2019 42,211 2020 43,979 2021– 2024 1,338,347 Total 1,522,017 Less financing cost (9,944 ) Net mortgage payable 1,512,073 Less current portion (37,199 ) Long term portion $ 1,474,874

7. INCOME TAXES (Tables)

7. INCOME TAXES (Tables)	6 Months Ended
	Jun. 30, 2016
Income Taxes Tables
Schedule of income tax reconciliation	Six Months Ended June 30, 2016 June 30, 2015 Federal statutory rate $ 166,433 $ 20,506 Effect of: State taxes, net of federal benefit (19,414 ) 3,523 Estimated research and development credit (9,036 ) (3,016 ) Other 18,218 1,808 Total $ 156,201 $ 22,821

8. BUSINESS SEGMENTS (Tables)

8. BUSINESS SEGMENTS (Tables)	6 Months Ended
	Jun. 30, 2016
Segment Reporting [Abstract]
Schedule of Segment Reporting	Revenue: 2016 2015 Product Sales $ 2,025,865 $ 2,001,878 Royalties 234,368 137,915 Products Subtotal 2,260,233 2,139,793 Rentals 27,782 26,569 Total $ 2,288,015 $ 2,166,362 Gross profit: Product Sales $ 954,618 $ 983,197 Royalties 234,368 137,915 Products Subtotal 1,188,986 1,121,112 Rentals 12,313 (23,464 ) Total $ 1,201,299 $ 1,097,648 Interest expense: Product Sales $ 9,132 $ 9,608 Royalties - - Products Subtotal 9,132 9,608 Rentals 8,408 8,535 Total $ 17,540 $ 18,143 Net income (loss) before taxes: Product Sales $ 8,432 $ 15,672 Royalties 234,368 137,915 Products Subtotal 242,800 153,587 Rentals 3,905 (31,999 ) Total $ 246,705 $ 121,588 The following sets forth information about the operations of the business segments for the six months ended June 30, 2016 and 2015: Revenue: 2016 2015 Product Sales $ 4,125,995 $ 3,952,195 Royalties 325,888 201,205 Products Subtotal 4,451,883 4,153,400 Rentals 55,564 53,040 Total $ 4,507,447 $ 4,206,440 Gross profit: Product Sales $ 1,988,534 $ 1,864,535 Royalties 325,888 201,205 Products Subtotal 2,314,422 2,065,740 Rentals 18,564 3,007 Total $ 2,332,986 $ 2,068,747 Interest expense: Product Sales $ 18,194 $ 18,706 Royalties - - Products Subtotal 18,194 18,706 Rentals 16,772 16,933 Total $ 34,966 $ 35,639 Net income (loss) before taxes: Product Sales $ 147,843 $ (126,968 ) Royalties 325,888 201,205 Products Subtotal 473,731 74,237 Rentals 1,792 (13,926 ) Total $ 475,523 $ 60,311

2. SUMMARY OF SIGNIFICANT ACC22

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Inventories
Raw materials & deposits	$ 507,383	$ 404,104
Work-in-process	70,071	76,903
Finished goods	462,149	408,154
Total gross inventories	1,039,603	889,161
Less reserve for obsolescence	(90,377)	(87,500)
Total net inventories	$ 949,226	$ 801,661

3. BASIC AND DILUTED INCOME P23

3. BASIC AND DILUTED INCOME PER COMMON SHARE (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
INCOME PER COMMON SHARE
Net income (loss)	$ 165,987	$ 76,349	$ 319,322	$ 37,490
Weighted-average shares - basic	2,454,116	2,454,116	2,454,116	2,452,456
Effect of dilutive potential common shares	100,914	73,349	79,837	73,349
Weighted-average shares - diluted	2,555,030	2,523,581	2,533,953	2,525,805
Net income (loss) per share - basic	$ 0.07	$ 0.03	$ 0.13	$ 0.02
Net income (loss) per share - diluted	$ 0.07	$ 0.03	$ 0.13	$ 0.01
Antidilutive employee stock options	50,000	0	50,000	0

4. STOCKHOLDERS' EQUITY (Detail

4. STOCKHOLDERS' EQUITY (Details)	6 Months Ended
	Jun. 30, 2016$ / sharesshares
Stockholders Equity Details
Range of Exercise Prices, min	$ 2.32
Range of Exercise Prices, max	$ 8.83
Option Outstanding | shares	105,500
Weighted Average Remaining Contractual Life (in Years)	3 years 4 days
Weighted Average Exercise Price per Share	$ 5.67
Number Exercisable | shares	55,500
Weighted Average Exercise Price per Share	$ 2.81

4. STOCKHOLDERS' EQUITY (Deta25

4. STOCKHOLDERS' EQUITY (Details Narrative) - shares	Jun. 30, 2016	Dec. 31, 2015
Stockholders Equity Details Narrative
Common Stock Authorized	50,000,000	50,000,000

5. COMMITMENTS AND CONTINGENC26

5. COMMITMENTS AND CONTINGENCIES (Details)	Jun. 30, 2016USD ($)
Commitments And Contingencies Tables
2,016	$ 18,551
2,017	38,576
2,018	40,353
2,019	42,211
2,020	43,979
2021 - 2024	1,338,347
Total	1,522,017
Less financing cost	(9,944)
Net term loan payable	1,512,073
Less current portion	(37,199)
Long term portion	$ 1,474,874

7. INCOME TAXES (Details)

7. INCOME TAXES (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Income Tax Disclosure [Abstract]
Federal statutory rate			$ 166,433	$ 20,506
State taxes, net of federal tax benefit			(19,414)	3,523
Estimated research and development credits			(9,036)	(3,016)
Other			18,218	1,808
Total	$ 80,718	$ 45,239	$ 156,201	$ 22,821

8. BUSINESS SEGMENTS (Details)

8. BUSINESS SEGMENTS (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Revenue	$ 2,288,015	$ 2,166,362	$ 4,507,447	$ 4,206,440
Gross profit	1,201,299	1,097,648	2,332,986	2,068,747
Interest expense	17,540	18,143	34,966	35,639
Net income (loss) before taxes	246,705	121,588	475,523	60,311
Products
Revenue	2,025,865	2,001,878	4,125,995	3,952,195
Gross profit	954,618	983,197	1,988,534	1,864,535
Interest expense	9,132	9,608	18,194	18,706
Net income (loss) before taxes	8,432	15,672	147,843	(126,968)
Royalties
Revenue	234,368	137,915	325,888	201,205
Gross profit	234,368	137,915	325,888	201,205
Interest expense	0	0	0	0
Net income (loss) before taxes	234,368	137,915	325,888	201,205
Subtotal
Revenue	2,260,233	2,139,793	4,451,883	4,153,400
Gross profit	1,188,986	1,121,112	2,314,422	2,065,740
Interest expense	9,132	9,608	18,194	18,706
Net income (loss) before taxes	242,800	153,587	473,731	74,237
Rentals
Revenue	27,782	26,569	55,564	53,040
Gross profit	12,313	(23,464)	18,564	3,007
Interest expense	8,408	8,535	16,772	16,933
Net income (loss) before taxes	$ 3,905	$ (31,999)	$ 1,792	$ (13,926)