Lifeloc (LCTC) 10-Q 12 May 17 2017 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2017	May 07, 2017
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	Mar. 31, 2017
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	Q1
Document Fiscal Year Focus	2,017

Condensed Balance Sheets

Condensed Balance Sheets - USD ($)	Mar. 31, 2017	Dec. 31, 2016
ASSETS
Cash	$ 2,593,724	$ 3,772,064
Accounts receivable, net	757,249	495,397
Inventories, net	911,271	835,609
Income taxes receivable	101,850	114,673
Prepaid expenses and other	101,657	52,072
Total current assets	4,465,751	5,269,815
PROPERTY AND EQUIPMENT, at cost:
Land	317,932	317,932
Building	1,928,795	1,928,795
Real-time Alcohol Detection and Recognition equipment and software	569,448	0
Production equipment and software	468,505	456,005
Training courses	432,375	432,375
Office equipment and software	203,614	193,332
Sales and marketing equipment	228,908	228,908
Research and development equipment and software	116,670	78,157
Less accumulated depreciation	(1,172,132)	(1,112,498)
Total property and equipment, net	3,094,115	2,523,006
OTHER ASSETS:
Real-time Alcohol Detection and Recognition equipment	178,052	0
Patents, net	177,644	71,909
Deposits and other	100,548	98,991
Deferred taxes	92,527	109,727
Total other assets	548,771	280,627
Total assets	8,108,637	8,073,448
CURRENT LIABILITIES:
Accounts payable	242,544	284,590
Term loan payable, current portion	40,782	40,218
Customer deposits	53,847	51,611
Accrued expenses	249,381	239,833
Deferred revenue, current portion	58,343	64,283
Reserve for warranty expense	41,500	40,000
Total current liabilities	686,397	720,535
TERM LOAN PAYABLE, net of current portion and debt issuance costs	1,441,680	1,455,604
DEFERRED REVENUE, net of current portion	7,759	8,665
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, no par value; 50,000,000 shares authorized, 2,454,116 shares outstanding	4,563,484	4,557,320
Retained earnings	1,409,317	1,331,324
Total stockholders' equity	5,972,801	5,888,644
Total liabilities and stockholders' equity	$ 8,108,637	$ 8,073,448

Condensed Balance Sheets (Paren

Condensed Balance Sheets (Parenthetical) - $ / shares	Mar. 31, 2017	Dec. 31, 2016
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
	Mar. 31, 2017	Mar. 31, 2016
REVENUES:
Product sales	$ 1,882,189	$ 2,100,130
Royalties	79,825	91,520
Rental income	22,457	27,782
Total sales	1,984,471	2,219,432
COST OF SALES	1,019,592	1,087,745
GROSS PROFIT	964,879	1,131,687
OPERATING EXPENSES:
Research and development	196,368	272,547
Sales and marketing	339,644	319,108
General and administrative	303,594	299,146
Total	839,606	890,801
OPERATING INCOME	125,273	240,886
OTHER INCOME (EXPENSE):
Interest income	1,416	2,358
Bad debt recovery	0	3,000
Interest expense	(15,124)	(17,426)
Total	(13,708)	(12,068)
NET INCOME BEFORE PROVISION FOR TAXES	111,565	228,818
PROVISION FOR FEDERAL AND STATE INCOME TAXES	(33,572)	(75,483)
NET INCOME	$ 77,993	$ 153,335
NET INCOME PER SHARE, BASIC	$ 0.03	$ 0.06
NET INCOME PER SHARE, DILUTED	$ 0.03	$ 0.06
WEIGHTED AVERAGE SHARES, BASIC	2,454,116	2,454,116
WEIGHTED AVERAGE SHARES, DILUTED	2,536,710	2,474,667

Condensed Statements of Cash Fl

Condensed Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 77,993	$ 153,335
Adjustments to reconcile net income to net cash provided by (used in) operating activities-
Depreciation and amortization	61,752	72,920
Provision for doubtful accounts, net change	1,500	5,000
Provision for inventory obsolescence, net change	(43,417)	0
Deferred taxes, net change	17,200	5,259
Reserve for warranty expense, net change	1,500	2,900
Stock based compensation expense related to stock options	6,164	7,044
Changes in operating assets and liabilities-
Accounts receivable	(263,351)	(128,503)
Inventories	(32,246)	(75,250)
Income taxes receivable	12,823	67,857
Prepaid expenses and other	(49,585)	(57,642)
Deposits and other	(1,557)	(544)
Accounts payable	(42,046)	158,162
Customer deposits and deferred grant revenue	2,236	(3,044)
Accrued expenses	9,548	(102,373)
Deferred revenue	(6,846)	(5,352)
Net cash provided from (used in) operating activities	(248,332)	99,769
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	(48,795)	(6,663)
Cash paid for software acquired in asset acquisition	(396,948)	0
Cash paid for equipment acquired in asset acquisition	(363,052)	0
Cash paid for patents and patent applications acquired in asset acquisition	(100,000)	0
Patent filing expense	(7,717)	0
Net cash (used in) investing activities	(916,512)	(6,663)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments made on term loan	(13,496)	(9,113)
Net cash (used in) financing activities	(13,496)	(9,113)
NET INCREASE (DECREASE) IN CASH	(1,178,340)	83,993
CASH, BEGINNING OF PERIOD	3,772,064	3,227,190
CASH, END OF PERIOD	2,593,724	3,311,183
Supplemental cash flow disclosure:
Cash paid for interest	14,988	17,155
Cash paid for income tax	$ 12,408	$ 0

1. ORGANIZATION AND NATURE OF B

1. ORGANIZATION AND NATURE OF BUSINESS	3 Months Ended
	Mar. 31, 2017
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-Q.

2. SUMMARY OF SIGNIFICANT ACCOU

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	3 Months Ended
	Mar. 31, 2017
Notes to Financial Statements
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	Basis of Presentation Use of Estimates in the Preparation of Financial Statements. Deferred Taxes Balance Sheet Classification of Deferred Taxes ( 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. 2017 2016 Raw materials & deposits $ 689,986 $ 592,771 Work-in-process 22,989 42,366 Finished goods 242,379 287,972 Total gross inventories 955,354 923,109 Less reserve for obsolescence (44,083 ) (87,500 ) Total net inventories $ 911,271 $ 835,609 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. Revenue from Contracts with Customers (Topic 606). 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. Revenues from these activities are included in product revenue in our statements of income. 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 and the sale of 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, which approximates if it were recognized on a straight-line basis over the term of the related lease. Rental income from Real-time Alcohol Detection and Recognition equipment is recognized in the month in which it is due, which approximates if it were recognized on a straight-line basis over the term of the related rental agreement. 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 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 used the Black-Scholes option-pricing 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 three months ended March 31, 2017 and 2016 was $6,164 and $7,044 respectively, which consisted of stock-based compensation expense related to grants of employee stock options, and which is allocated to General and Administrative Expense when incurred. Segment Reporting.

3. ASSET ACQUISITION

3. ASSET ACQUISITION	3 Months Ended
	Mar. 31, 2017
Asset Acquisition
NOTE 3 - ASSET ACQUISITION	In March 2017 we acquired all of the assets related to Real-time Alcohol Detection and Recognition ("R.A.D.A.R.") from Track Group, Inc. ("TRCK") for $860,000 in cash. Based on Level 3 inputs, which consisted of estimates of future cash flows, return on investment analyses, and replacement costs, the purchase price was allocated as follows: Asset Allocation Depreciable Life and Method Estimated Future Annual Depreciation Software $ 396,948 15 years; straight line $ 26,463 Rental equipment 172,500 5 years; double declining balance Varies Rental equipment not yet in service 178,052 5 years; double declining balance Varies Patents and patent applications 100,000 15 years; straight line $ 6,667 Production equipment 12,500 5 years; double declining balance Varies Total $ 860,000 The purpose of this acquisition was to expand our offering of substance abuse monitoring services.

4. BASIC AND DILUTED NET INCOME

4. BASIC AND DILUTED NET INCOME PER COMMON SHARE	3 Months Ended
	Mar. 31, 2017
Notes to Financial Statements
NOTE 4 - BASIC AND DILUTED INCOME PER COMMON SHARE	We report both basic and diluted net income or loss per share. Basic net income or loss per common share is computed by dividing net income or loss for the period by the weighted average number of common shares outstanding for the period. Diluted net income or loss per common share is computed by dividing the net income or loss 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 March 31, 2017 March 31, 2016 Net income $ 77,993 $ 153,335 Weighted average shares-basic 2,454,116 2,454,116 Effect of dilutive potential common shares 82,594 20,551 Weighted average shares-diluted 2,536,710 2,474,667 Net income (loss) per share-basic $ .03 $ .06 Net income (loss) per share-diluted $ .03 $ .06 Antidilutive employee stock options 50,000 50,000

5. STOCKHOLDERS' EQUITY

5. STOCKHOLDERS' EQUITY	3 Months Ended
	Mar. 31, 2017
Notes to Financial Statements
NOTE 5 - STOCKHOLDERS' EQUITY	The following table summarizes information about employee stock options outstanding and exercisable at March 31, 2017: 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 60,000 3.44 $7.75 10,000 $2.32 Of the 10,000 options exercisable as of March 31, 2017, all are incentive stock options. The exercise price of all options granted through March 31, 2017 has been equal to or greater than the fair market value of the Company's common stock at the time the options were issued. 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 March 31, 2017. No options were exercised during the three months ended March 31, 2017 or during the three months ended March 31, 2016. The total number of authorized shares of common stock continues to be 50,000,000, with no change in the par value per share.

6. COMMITMENTS AND CONTINGENCIE

6. COMMITMENTS AND CONTINGENCIES	3 Months Ended
	Mar. 31, 2017
Commitments and Contingencies Disclosure [Abstract]
NOTE 6 - COMMITMENTS AND CONTINGENCIES	Mortgage Expense Year Amount 2017 $ 30,583 2018 42,535 2019 44,292 2020 45,964 2021 48,021 2022 – 2024 1,280,604 Total 1,491,999 Less financing cost (9,537 ) Net term loan payable 1,482,462 Less current portion (40,782 ) Long term portion $ 1,441,680 Employee Severance Benefits Contractual Commitments and Purchase Orders Regulatory Commitments

7. LINE OF CREDIT

7. LINE OF CREDIT	3 Months Ended
	Mar. 31, 2017
Debt Disclosure [Abstract]
NOTE 7 - 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 June 30, 2017, and bears interest at a rate equal to the LIBOR daily floating rate, which was.92167% and .3831% as of March 31, 2017 and 2016, respectively, plus 2.5%. The agreement was amended September 20, 2016 to increase the amount of the line to $500,000 and extend the maturity date to June 30, 2017. The revolving line of credit facility is secured by all personal property and assets of the Company, whether now owned or hereafter acquired, wherever located. There was no balance due on the line of credit as of March 31, 2017 and December 31, 2016.

8. INCOME TAXES

8. INCOME TAXES	3 Months Ended
	Mar. 31, 2017
Income Tax Disclosure [Abstract]
NOTE 8 - INCOME TAXES	The items accounting for the difference between income taxes computed at the federal statutory rate and the provision for income taxes consists of the following: Three Months Ended March 31, 2017 March 31, 2016 Federal statutory rate $ 39,048 $ 80,086 Effect of: State taxes, net of federal tax benefit (5,645 ) (9,390 ) Estimated research and development credits (12,764 ) (1,635 ) Other 12,933 6,422 Total $ 33,572 $ 75,483

9. BUSINESS SEGMENTS

9. BUSINESS SEGMENTS	3 Months Ended
	Mar. 31, 2017
Segment Reporting [Abstract]
NOTE 9 - BUSINESS SEGMENTS	We currently have two business segments: (i) the sale and rental 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 March 31, 2017 and 2016: Revenue: 2017 2016 Product Sales $ 1,882,189 $ 2,100,130 Royalties 79,825 91,520 Products Subtotal 1,962,014 2,191,650 Rentals 22,457 27,782 Total $ 1,984,471 $ 2,219,432 Gross profit: Product Sales $ 876,378 $ 1,033,916 Royalties 79,825 91,520 Products Subtotal 956,203 1,125,436 Rentals 8,676 6,251 Total $ 964,879 $ 1,131,687 Interest expense: Product Sales $ 9,878 $ 9,062 Royalties - - Products Subtotal 9,878 9,062 Rentals 5,246 8,364 Total $ 15,124 $ 17,426 Net income (loss) before taxes: Product Sales $ 28,310 $ 139,411 Royalties 79,825 91,520 Products Subtotal 108,135 230,931 Rentals 3,430 (2,113 ) Total $ 111,565 $ 228,818 There were no intersegment revenues. As of March 31, 2017, $680,582

10. SUBSEQUENT EVENTS

10. SUBSEQUENT EVENTS	3 Months Ended
	Mar. 31, 2017
Notes to Financial Statements
NOTE 10 - 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.

2. SUMMARY OF SIGNIFICANT ACC16

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)	3 Months Ended
	Mar. 31, 2017
Summary Of Significant Accounting Policies Policies
Basis of Presentation	Basis of Presentation
Use of Estimates in the Preparation of Financial Statements	Use of Estimates in the Preparation of Financial Statements.
Deferred Taxes	Deferred Taxes Balance Sheet Classification of Deferred Taxes (
Fair Value Measurement	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	Inventories. 2017 2016 Raw materials & deposits $ 689,986 $ 592,771 Work-in-process 22,989 42,366 Finished goods 242,379 287,972 Total gross inventories 955,354 923,109 Less reserve for obsolescence (44,083 ) (87,500 ) Total net inventories $ 911,271 $ 835,609
Income Taxes	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	Revenue Recognition. Revenue from Contracts with Customers (Topic 606). 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. Revenues from these activities are included in product revenue in our statements of income. 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 and the sale of 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, which approximates if it were recognized on a straight-line basis over the term of the related lease. Rental income from Real-time Alcohol Detection and Recognition equipment is recognized in the month in which it is due, which approximates if it were recognized on a straight-line basis over the term of the related rental agreement. 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 Revenue.
Recent Accounting Pronouncements	Recent Accounting Pronouncements The FASB issued ASU No. 2014-09, Revenue from Contracts with Customers 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 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 used the Black-Scholes option-pricing 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 three months ended March 31, 2017 and 2016 was $6,164 and $7,044 respectively, which consisted of stock-based compensation expense related to grants of employee stock options, and which is allocated to General and Administrative Expense when incurred.
Segment Reporting	Segment Reporting.

2. SUMMARY OF SIGNIFICANT ACC17

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)	3 Months Ended
	Mar. 31, 2017
Summary Of Significant Accounting Policies Tables
Inventories	2017 2016 Raw materials & deposits $ 689,986 $ 592,771 Work-in-process 22,989 42,366 Finished goods 242,379 287,972 Total gross inventories 955,354 923,109 Less reserve for obsolescence (44,083 ) (87,500 ) Total net inventories $ 911,271 $ 835,609

3. ASSET ACQUISITION (Tables)

3. ASSET ACQUISITION (Tables)	3 Months Ended
	Mar. 31, 2017
Asset Acquisition Tables
Purchase price allocation	Asset Allocation Depreciable Life and Method Estimated Future Annual Depreciation Software $ 396,948 15 years; straight line $ 26,463 Rental equipment 172,500 5 years; double declining balance Varies Rental equipment not yet in service 178,052 5 years; double declining balance Varies Patents and patent applications 100,000 15 years; straight line $ 6,667 Production equipment 12,500 5 years; double declining balance Varies Total $ 860,000

4. BASIC AND DILUTED NET INCO19

4. BASIC AND DILUTED NET INCOME PER COMMON SHARE (Tables)	3 Months Ended
	Mar. 31, 2017
Basic And Diluted Net Income Per Common Share Tables
Basic and diluted net income per share	Three Months Ended March 31, 2017 March 31, 2016 Net income $ 77,993 $ 153,335 Weighted average shares-basic 2,454,116 2,454,116 Effect of dilutive potential common shares 82,594 20,551 Weighted average shares-diluted 2,536,710 2,474,667 Net income (loss) per share-basic $ .03 $ .06 Net income (loss) per share-diluted $ .03 $ .06 Antidilutive employee stock options 50,000 50,000

5. STOCKHOLDERS' EQUITY (Tables

5. STOCKHOLDERS' EQUITY (Tables)	3 Months Ended
	Mar. 31, 2017
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 60,000 3.44 $7.75 10,000 $2.32

6. COMMITMENTS AND CONTINGENC21

6. COMMITMENTS AND CONTINGENCIES (Tables)	3 Months Ended
	Mar. 31, 2017
Commitments And Contingencies Tables
Minimum future lease payments	Year Amount 2017 $ 30,583 2018 42,535 2019 44,292 2020 45,964 2021 48,021 2022 – 2024 1,280,604 Total 1,491,999 Less financing cost (9,537 ) Net term loan payable 1,482,462 Less current portion (40,782 ) Long term portion $ 1,441,680

8. INCOME TAXES (Tables)

8. INCOME TAXES (Tables)	3 Months Ended
	Mar. 31, 2017
Income Taxes Tables
Schedule of income tax reconciliation	Three Months Ended March 31, 2017 March 31, 2016 Federal statutory rate $ 39,048 $ 80,086 Effect of: State taxes, net of federal tax benefit (5,645 ) (9,390 ) Estimated research and development credits (12,764 ) (1,635 ) Other 12,933 6,422 Total $ 33,572 $ 75,483

9. BUSINESS SEGMENTS (Tables)

9. BUSINESS SEGMENTS (Tables)	3 Months Ended
	Mar. 31, 2017
Segment Reporting [Abstract]
Schedule of Segment Reporting	Revenue: 2017 2016 Product Sales $ 1,882,189 $ 2,100,130 Royalties 79,825 91,520 Products Subtotal 1,962,014 2,191,650 Rentals 22,457 27,782 Total $ 1,984,471 $ 2,219,432 Gross profit: Product Sales $ 876,378 $ 1,033,916 Royalties 79,825 91,520 Products Subtotal 956,203 1,125,436 Rentals 8,676 6,251 Total $ 964,879 $ 1,131,687 Interest expense: Product Sales $ 9,878 $ 9,062 Royalties - - Products Subtotal 9,878 9,062 Rentals 5,246 8,364 Total $ 15,124 $ 17,426 Net income (loss) before taxes: Product Sales $ 28,310 $ 139,411 Royalties 79,825 91,520 Products Subtotal 108,135 230,931 Rentals 3,430 (2,113 ) Total $ 111,565 $ 228,818

2. SUMMARY OF SIGNIFICANT ACC24

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($)	Mar. 31, 2017	Dec. 31, 2016
Inventories
Raw materials & deposits	$ 689,986	$ 592,771
Work-in-process	22,989	42,366
Finished goods	242,379	287,972
Total gross inventories	955,354	923,109
Less reserve for obsolescence	(44,083)	(87,500)
Total net inventories	$ 911,271	$ 835,609

2. SUMMARY OF SIGNIFICANT ACC25

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2016
Summary Of Significant Accounting Policies Details Narrative
Deferred taxes	$ 92,527		$ 109,727
Stock-Based Compensation	$ 6,164	$ 7,044

3. ASSET ACQUISITION (Details)

3. ASSET ACQUISITION (Details)	3 Months Ended
	Mar. 31, 2017USD ($)
Purchase price allocation	$ 860,000
Software
Purchase price allocation	$ 396,948
Depreciable life	15 years
Estimated Future Annual Depreciation	$ 26,463
Rental Equipment
Purchase price allocation	$ 172,500
Depreciable life	5 years
Estimated Future Annual Depreciation		[1]
Rental Equipment Not Yet In Service
Purchase price allocation	$ 178,052
Depreciable life	5 years
Estimated Future Annual Depreciation		[1]
Patents and Patent Applications
Purchase price allocation	$ 100,000
Depreciable life	15 years
Estimated Future Annual Depreciation	$ 6,667
Production Equipment
Purchase price allocation	$ 12,500
Depreciable life	5 years
Estimated Future Annual Depreciation		[1]
[1]	Varies

4. BASIC AND DILUTED NET INCO27

4. BASIC AND DILUTED NET INCOME PER COMMON SHARE (Details) - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Summary Of Significant Accounting Policies Details
Net income	$ 77,993	$ 153,335
Weighted-average shares - basic	2,454,116	2,454,116
Effect of dilutive potential common shares	82,594	20,551
Weighted-average shares - diluted	2,536,710	2,474,667
Net income (loss) per share - basic	$ 0.03	$ 0.06
Net income (loss) per share - diluted	$ 0.03	$ 0.06
Antidilutive employee stock options	50,000	50,000

5. STOCKHOLDERS' EQUITY (Detail

5. STOCKHOLDERS' EQUITY (Details)	3 Months Ended
	Mar. 31, 2017$ / sharesshares
Stockholders Equity Details
Range of Exercise Prices, min	$ 2.32
Range of Exercise Prices, max	$ 8.83
Option Outstanding | shares	60,000
Weighted Average Remaining Contractual Life (in Years)	3 years 5 months 8 days
Weighted Average Exercise Price per Share	$ 7.75
Number Exercisable | shares	10,000
Weighted Average Exercise Price per Share	$ 2.32

5. STOCKHOLDERS' EQUITY (Deta29

5. STOCKHOLDERS' EQUITY (Details Narrative) - shares	Mar. 31, 2017	Dec. 31, 2016
Stockholders Equity Details Narrative
Common Stock Authorized	50,000,000	50,000,000

6. COMMITMENTS AND CONTINGENC30

6. COMMITMENTS AND CONTINGENCIES (Details)	Mar. 31, 2017USD ($)
Commitments And Contingencies Tables
2,017	$ 30,583
2,018	42,535
2,019	44,292
2,020	45,964
2,021	48,021
2022 - 2024	1,280,604
Total	1,491,999
Less financing cost	(9,537)
Net loan payable	1,482,462
Less current portion	(40,782)
Long term portion	$ 1,441,680

8. INCOME TAXES (Details)

8. INCOME TAXES (Details) - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Income Tax Disclosure [Abstract]
Federal statutory rate	$ 39,048	$ 80,086
State taxes, net of federal tax benefit	(5,645)	(9,390)
Estimated research and development credits	(12,764)	(1,635)
Other	12,933	6,422
Total	$ 33,572	$ 75,483

9. BUSINESS SEGMENTS (Details)

9. BUSINESS SEGMENTS (Details) - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Revenue	$ 1,984,471	$ 2,219,432
Gross profit	964,879	1,131,687
Interest expense	15,124	17,426
Net income (loss) before taxes	111,565	228,818
Products
Revenue	1,882,189	2,100,130
Gross profit	876,378	1,033,916
Interest expense	9,878	9,062
Net income (loss) before taxes	28,310	139,411
Royalties
Revenue	79,825	91,520
Gross profit	79,825	91,520
Interest expense	0	0
Net income (loss) before taxes	79,825	91,520
Subtotal
Revenue	2,191,650	1,962,014
Gross profit	1,125,436	956,203
Interest expense	9,062	9,878
Net income (loss) before taxes	230,931	108,135
Rentals
Revenue	22,457	27,782
Gross profit	8,676	6,251
Interest expense	5,246	8,364
Net income (loss) before taxes	$ 3,430	$ (2,113)