Lifeloc (LCTC) 10-Q 14 Nov 17 2017 Q3 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2017	Nov. 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	Sep. 30, 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	Q3
Document Fiscal Year Focus	2,017

Condensed Balance Sheets

Condensed Balance Sheets - USD ($)	Sep. 30, 2017	Dec. 31, 2016
ASSETS
Cash	$ 2,708,924	$ 3,772,064
Accounts receivable, net	724,063	495,397
Inventories, net	1,212,757	835,609
Income taxes receivable	98,539	114,673
Prepaid expenses and other	52,276	52,072
Total current assets	4,796,559	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	531,325	456,005
Training courses	432,375	432,375
Office equipment and software	219,235	193,332
Sales and marketing equipment	228,908	228,908
Research and development equipment and software	116,670	78,157
Less accumulated depreciation	(1,329,234)	(1,112,498)
Total property and equipment, net	3,015,454	2,523,006
OTHER ASSETS:
Patents, net	180,959	71,909
Deposits and other	244,001	98,991
Deferred taxes	96,891	109,727
Total other assets	521,851	280,627
Total assets	8,333,864	8,073,448
CURRENT LIABILITIES:
Accounts payable	380,938	284,590
Term loan payable, current portion	41,655	40,218
Customer deposits	66,034	51,611
Accrued expenses	260,722	239,833
Deferred revenue, current portion	55,811	64,283
Reserve for warranty expense	41,000	40,000
Total current liabilities	846,160	720,535
TERM LOAN PAYABLE, net of current portion and debt issuance costs	1,424,239	1,455,604
DEFERRED REVENUE, net of current portion	10,276	8,665
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, no par value; 50,000,000 shares authorized, 2,454,116 shares outstanding	4,575,814	4,557,320
Retained earnings	1,477,375	1,331,324
Total stockholders' equity	6,053,189	5,888,644
Total liabilities and stockholders' equity	$ 8,333,864	$ 8,073,448

Condensed Balance Sheets (Paren

Condensed Balance Sheets (Parenthetical) - $ / shares	Sep. 30, 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		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
REVENUES:
Product sales	$ 1,944,734	$ 1,960,610	$ 5,706,328	$ 6,086,605
Royalties	43,785	48,070	268,127	373,958
Rental income	12,160	21,725	57,075	77,289
Total	2,000,679	2,030,405	6,031,530	6,537,852
COST OF SALES	1,118,203	1,039,810	3,171,449	3,214,271
GROSS PROFIT	882,476	990,595	2,860,081	3,323,581
OPERATING EXPENSES:
Research and development	242,005	208,085	690,198	740,486
Sales and marketing	367,101	380,448	1,074,219	1,075,191
General and administrative	268,667	251,234	858,987	858,980
Total	877,773	839,767	2,623,404	2,674,657
OPERATING INCOME	4,703	150,828	236,677	648,924
OTHER INCOME (EXPENSE):
Interest income	1,036	1,896	4,682	9,789
Bad debt recovery	0	0	0	4,500
Interest expense	(15,261)	(15,438)	(45,572)	(50,404)
Total	(14,225)	(13,542)	(40,890)	(36,115)
NET (LOSS) INCOME BEFORE PROVISION FOR TAXES	(9,522)	137,286	195,787	612,809
BENEFIT FROM (PROVISION FOR) FEDERAL AND STATE INCOME TAXES	9,712	(46,501)	(49,736)	(202,702)
NET INCOME	$ 190	$ 90,785	$ 146,051	$ 410,107
NET INCOME PER SHARE, BASIC	$ 0	$ 0.04	$ 0.06	$ 0.17
NET INCOME PER SHARE, DILUTED	$ 0	$ 0.04	$ 0.06	$ 0.16
WEIGHTED AVERAGE SHARES, BASIC	2,454,116	2,454,116	2,454,116	2,454,116
WEIGHTED AVERAGE SHARES, DILUTED	2,511,925	2,527,150	2,520,414	2,532,301

Condensed Statements of Cash Fl

Condensed Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 146,051	$ 410,107
Adjustments to reconcile net income to net cash provided by (used in) operating activities-
Depreciation and amortization	225,310	205,789
Provision for doubtful accounts, net change	0	5,500
Provision for inventory obsolescence, net change	37,500	0
Deferred taxes, net change	12,836	6,123
Reserve for warranty expense, net change	1,000	5,900
Stock based compensation expense related to stock options	18,494	18,145
Changes in operating assets and liabilities-
Accounts receivable	(228,666)	(138,074)
Inventories	(414,648)	(154,701)
Income taxes receivable	16,134	52,416
Prepaid expenses and other	(204)	(59,440)
Deposits and other	(145,010)	(39,086)
Accounts payable	96,348	49,723
Customer deposits and deferred grant revenue	14,423	(49,517)
Accrued expenses	20,889	(671)
Deferred revenue	(6,861)	(17,040)
Net cash provided from (used in) operating activities	(206,404)	295,174
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	(139,736)	(35,379)
Cash paid for equipment and software acquired in asset acquisition	(748,198)	0
Reclassification of equipment and software acquired in asset acquisition as inventory	178,750	0
Cash paid for patents and patent applications acquired in asset acquisition	(100,000)	0
Patent filing expense	(17,217)	(8,954)
Net cash (used in) investing activities	(826,401)	(44,333)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments made on term loan	(30,335)	(28,062)
Net cash (used in) financing activities	(30,335)	(28,062)
NET INCREASE (DECREASE) IN CASH	(1,063,140)	222,779
CASH, BEGINNING OF PERIOD	3,772,064	3,227,190
CASH, END OF PERIOD	2,708,924	3,449,969
SUPPLEMENTAL INFORMATION:
Cash paid for interest	30,040	49,997
Cash paid for income tax	$ 13,844	$ 131,434

1. ORGANIZATION AND NATURE OF B

1. ORGANIZATION AND NATURE OF BUSINESS	9 Months Ended
	Sep. 30, 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, offender monitoring, 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, www.stsfirst.com, and www.radar.lifeloc.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	9 Months Ended
	Sep. 30, 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 $ 759,718 $ 592,771 Work-in-process 36,273 42,366 Finished goods 466,766 287,972 Total gross inventories 1,262,757 923,109 Less reserve for obsolescence (50,000 ) (87,500 ) Total net inventories $ 1,212,757 $ 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. 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 our Real-time Alcohol Detection And Recognition (“R.A.D.A.R.”) equipment is recognized in the month in which it is due, which approximates as 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 September 30, 2017 and 2016 was $6,165 and $6,163 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. Stock-based compensation expense recognized under ASC 718 for the nine months ended September 30, 2017 and 2016 was $18,494 and $18,145 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	9 Months Ended
	Sep. 30, 2017
Asset Acquisition
NOTE 3 - ASSET ACQUISITION	In March 2017 we acquired all of the assets related to 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 Adjustments were made to these allocations following closing, reducing the original rental equipment not yet in service of $178,052 by $25,177 during the 3 months ended June 30, 2017. A total of $25,875 (including the reclassified amount from rental equipment not yet in service and an additional cost of $698) were transferred to property and equipment. During the 3 months ended September 30, 2017, all of these amounts were transferred to inventory. These revised classifications are reflected on the balance sheet as of September 30, 2017. 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	9 Months Ended
	Sep. 30, 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 September 30, 2017 September 30, 2016 Net income $ 190 $ 90,785 Weighted average shares-basic 2,454,116 2,454,116 Effect of dilutive potential common shares 57,809 73,034 Weighted average shares-diluted 2,511,925 2,527,150 Net income per share-basic $ - $ .04 Net income per share-diluted $ - $ .04 Antidilutive employee stock options 50,000 - Nine Months Ended September 30, 2017 September 30, 2016 Net income $ 146,051 $ 410,107 Weighted average shares-basic 2,454,116 2,454,116 Effect of dilutive potential common shares 66,298 78,185 Weighted average shares-diluted 2,520,414 2,532,301 Net income (loss) per share-basic $ .06 $ .17 Net income (loss) per share-diluted $ .06 $ .16 Antidilutive employee stock options 50,000 -

5. STOCKHOLDERS' EQUITY

5. STOCKHOLDERS' EQUITY	9 Months Ended
	Sep. 30, 2017
Notes to Financial Statements
NOTE 5 - STOCKHOLDERS' EQUITY	The following table summarizes information about employee stock options outstanding and exercisable at September 30, 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 2.94 $7.75 10,000 $2.32 Of the 10,000 options exercisable as of September 30, 2017, all are incentive stock options. The exercise price of all options granted through September 30, 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 nine months ended September 30, 2017. No options were exercised during the nine months ended September 30, 2017 or during the nine months ended September 30, 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	9 Months Ended
	Sep. 30, 2017
Commitments and Contingencies Disclosure [Abstract]
NOTE 6 - COMMITMENTS AND CONTINGENCIES	Mortgage Expense Year Amount 2017 $ 13,744 2018 42,535 2019 44,292 2020 45,964 2021 48,021 2022- 2024 1,280,604 Total 1,475,160 Less financing cost (9,266 ) Net term loan payable 1,465,894 Less current portion (41,655 ) Long term portion $ 1,424,239 Employee Severance Benefits Contractual Commitments and Purchase Orders Regulatory Commitments

7. LINE OF CREDIT

7. LINE OF CREDIT	9 Months Ended
	Sep. 30, 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 September 30, 2017, and bears interest at a rate equal to the LIBOR daily floating rate, which was 1.18111% and .41989% as of September 30, 2017 and 2016, respectively, plus 2.5%. The agreement was amended May 15, 2017 to increase the amount of the line to $750,000 and extend the maturity date to June 30, 2018. 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 September 30, 2017 or December 31, 2016.

8. INCOME TAXES

8. INCOME TAXES	9 Months Ended
	Sep. 30, 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: Nine Months Ended September 30, 2017 2016 Federal statutory rate $ 68,621 $ 213,110 Effect of: State taxes, net of federal tax benefit (9,959 ) 14,599 Estimated research and development credits (44,863 ) (13,155 ) Other 35,937 (11,852 ) Total $ 49,736 $ 202,702

9. BUSINESS SEGMENTS

9. BUSINESS SEGMENTS	9 Months Ended
	Sep. 30, 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 September 30, 2017 and 2016: 2017 2016 Revenue: Product Sales $ 1,944,734 $ 1,960,610 Royalties 43,785 48,070 Products Subtotal 1,988,519 2,008,680 Rentals 12,160 21,725 Total $ 2,000,679 $ 2,030,405 Gross profit: Product Sales $ 868,506 $ 935,761 Royalties 43,785 48,070 Products Subtotal 912,291 983,831 Rentals (29,815 ) 6,764 Total $ 882,476 $ 990,595 Interest expense: Product Sales $ 4,096 $ 10,227 Royalties - - Products Subtotal 4,096 10,227 Rentals 11,165 5,211 Total $ 15,261 $ 15,438 Net (loss) income before taxes: Product Sales $ (12,327 ) $ 87,663 Royalties 43,785 48,070 Products Subtotal 31,458 135,733 Rentals (40,980 ) 1,553 Total $ (9,522 ) $ 137,286 The following sets forth information about the operations of the business segments for the nine months ended September 30, 2017 and 2016: 2017 2016 Revenue: Product Sales $ 5,706,328 $ 6,086,605 Royalties 268,127 373,958 Products Subtotal 5,974,455 6,460,563 Rentals 57,075 77,289 Total $ 6,031,530 $ 6,537,852 Gross profit: Product Sales $ 2,604,488 $ 2,924,295 Royalties 268,127 373,958 Products Subtotal 2,872,615 3,298,253 Rentals (12,534 ) 25,328 Total $ 2,860,081 $ 3,323,581 Interest expense: Product Sales $ 23,893 $ 28,421 Royalties - - Products Subtotal 23,893 28,421 Rentals 21,679 21,983 Total $ 45,572 $ 50,404 Net income before taxes: Product Sales $ (38,127 ) $ 235,506 Royalties 268,127 373,958 Products Subtotal 230,000 609,464 Rentals (34,213 ) 3,345 Total $ 195,787 $ 612,809 There were no intersegment revenues. As of September 30, 2017, $914,303

10. SUBSEQUENT EVENTS

10. SUBSEQUENT EVENTS	9 Months Ended
	Sep. 30, 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)	9 Months Ended
	Sep. 30, 2017
Summary Of Significant Accounting Policies Policies
Basis of Presentation	These statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) and accounting principles generally accepted in the United States (“GAAP”) for interim financial information. They do not include all information and notes required by GAAP for complete financial statements. However, except as disclosed herein, there has been no material change in the information disclosed in the notes to financial statements included in Lifeloc’s Annual Report on Form 10-K for the year ended December 31, 2016 as filed with the SEC. In the opinion of management, the accompanying unaudited financial statements contain all adjustments, consisting of normal recurring accruals necessary for a fair presentation of our financial position as of September 30, 2017 and December 31, 2016, and our results of operations and cash flows for the periods ended September 30, 2017 and 2016. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for a full year. The Company’s 2016 Annual Report on Form 10-K includes certain definitions and a summary of significant accounting policies and should be read in conjunction with this Form 10-Q.
Use of Estimates in the Preparation of Financial Statements	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.
Deferred Taxes	In November 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2015-17, Balance Sheet Classification of Deferred Taxes (
Fair Value Measurement	Accounting Standards Codification (“ASC”) 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 September 30, 2017 and December 31, 2016, inventory consisted of the following: 2017 2016 Raw materials & deposits $ 759,718 $ 592,771 Work-in-process 36,273 42,366 Finished goods 466,766 287,972 Total gross inventories 1,262,757 923,109 Less reserve for obsolescence (50,000 ) (87,500 ) Total net inventories $ 1,212,757 $ 835,609
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. 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 our Real-time Alcohol Detection And Recognition (“R.A.D.A.R.”) equipment is recognized in the month in which it is due, which approximates as 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	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 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 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 September 30, 2017 and 2016 was $6,165 and $6,163 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. Stock-based compensation expense recognized under ASC 718 for the nine months ended September 30, 2017 and 2016 was $18,494 and $18,145 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	We have concluded that we have two operating segments, including our primary business which is as a developer, manufacturer, lessor 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 until June 30, 2020.

2. SUMMARY OF SIGNIFICANT ACC17

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)	9 Months Ended
	Sep. 30, 2017
Summary Of Significant Accounting Policies Tables
Inventories	2017 2016 Raw materials & deposits $ 759,718 $ 592,771 Work-in-process 36,273 42,366 Finished goods 466,766 287,972 Total gross inventories 1,262,757 923,109 Less reserve for obsolescence (50,000 ) (87,500 ) Total net inventories $ 1,212,757 $ 835,609

3. ASSET ACQUISITION (Tables)

3. ASSET ACQUISITION (Tables)	9 Months Ended
	Sep. 30, 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)	9 Months Ended
	Sep. 30, 2017
Basic And Diluted Net Income Per Common Share Tables
Basic and diluted net income per share	Three Months Ended September 30, 2017 September 30, 2016 Net income $ 190 $ 90,785 Weighted average shares-basic 2,454,116 2,454,116 Effect of dilutive potential common shares 57,809 73,034 Weighted average shares-diluted 2,511,925 2,527,150 Net income per share-basic $ - $ .04 Net income per share-diluted $ - $ .04 Antidilutive employee stock options 50,000 - Nine Months Ended September 30, 2017 September 30, 2016 Net income $ 146,051 $ 410,107 Weighted average shares-basic 2,454,116 2,454,116 Effect of dilutive potential common shares 66,298 78,185 Weighted average shares-diluted 2,520,414 2,532,301 Net income (loss) per share-basic $ .06 $ .17 Net income (loss) per share-diluted $ .06 $ .16 Antidilutive employee stock options 50,000 -

5. STOCKHOLDERS' EQUITY (Tables

5. STOCKHOLDERS' EQUITY (Tables)	9 Months Ended
	Sep. 30, 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 2.94 $7.75 10,000 $2.32

6. COMMITMENTS AND CONTINGENC21

6. COMMITMENTS AND CONTINGENCIES (Tables)	9 Months Ended
	Sep. 30, 2017
Commitments And Contingencies Tables
Minimum future lease payments	Year Amount 2017 $ 13,744 2018 42,535 2019 44,292 2020 45,964 2021 48,021 2022- 2024 1,280,604 Total 1,475,160 Less financing cost (9,266 ) Net term loan payable 1,465,894 Less current portion (41,655 ) Long term portion $ 1,424,239

8. INCOME TAXES (Tables)

8. INCOME TAXES (Tables)	9 Months Ended
	Sep. 30, 2017
Income Taxes Tables
Schedule of income tax reconciliation	Nine Months Ended September 30, 2017 2016 Federal statutory rate $ 68,621 $ 213,110 Effect of: State taxes, net of federal tax benefit (9,959 ) 14,599 Estimated research and development credits (44,863 ) (13,155 ) Other 35,937 (11,852 ) Total $ 49,736 $ 202,702

9. BUSINESS SEGMENTS (Tables)

9. BUSINESS SEGMENTS (Tables)	9 Months Ended
	Sep. 30, 2017
Segment Reporting [Abstract]
Schedule of Segment Reporting	2017 2016 Revenue: Product Sales $ 1,944,734 $ 1,960,610 Royalties 43,785 48,070 Products Subtotal 1,988,519 2,008,680 Rentals 12,160 21,725 Total $ 2,000,679 $ 2,030,405 Gross profit: Product Sales $ 868,506 $ 935,761 Royalties 43,785 48,070 Products Subtotal 912,291 983,831 Rentals (29,815 ) 6,764 Total $ 882,476 $ 990,595 Interest expense: Product Sales $ 4,096 $ 10,227 Royalties - - Products Subtotal 4,096 10,227 Rentals 11,165 5,211 Total $ 15,261 $ 15,438 Net (loss) income before taxes: Product Sales $ (12,327 ) $ 87,663 Royalties 43,785 48,070 Products Subtotal 31,458 135,733 Rentals (40,980 ) 1,553 Total $ (9,522 ) $ 137,286 2017 2016 Revenue: Product Sales $ 5,706,328 $ 6,086,605 Royalties 268,127 373,958 Products Subtotal 5,974,455 6,460,563 Rentals 57,075 77,289 Total $ 6,031,530 $ 6,537,852 Gross profit: Product Sales $ 2,604,488 $ 2,924,295 Royalties 268,127 373,958 Products Subtotal 2,872,615 3,298,253 Rentals (12,534 ) 25,328 Total $ 2,860,081 $ 3,323,581 Interest expense: Product Sales $ 23,893 $ 28,421 Royalties - - Products Subtotal 23,893 28,421 Rentals 21,679 21,983 Total $ 45,572 $ 50,404 Net income before taxes: Product Sales $ (38,127 ) $ 235,506 Royalties 268,127 373,958 Products Subtotal 230,000 609,464 Rentals (34,213 ) 3,345 Total $ 195,787 $ 612,809

2. SUMMARY OF SIGNIFICANT ACC24

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Inventories
Raw materials & deposits	$ 759,718	$ 592,771
Work-in-process	36,273	42,366
Finished goods	466,766	287,972
Total gross inventories	1,262,757	923,109
Less reserve for obsolescence	(50,000)	(87,500)
Total net inventories	$ 1,212,757	$ 835,609

2. SUMMARY OF SIGNIFICANT ACC25

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Summary Of Significant Accounting Policies Details Narrative
Deferred taxes	$ 96,891		$ 96,891		$ 109,727
Stock-Based Compensation	$ 6,165	$ 6,163	$ 18,494	$ 18,145

3. ASSET ACQUISITION (Details)

3. ASSET ACQUISITION (Details)	9 Months Ended
	Sep. 30, 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
Rental Equipment Not Yet In Service
Purchase price allocation	$ 178,052
Depreciable life	5 years
Estimated Future Annual Depreciation
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

4. BASIC AND DILUTED NET INCO27

4. BASIC AND DILUTED NET INCOME PER COMMON SHARE (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Summary Of Significant Accounting Policies Details
Net income	$ 190	$ 90,785	$ 146,051	$ 410,107
Weighted-average shares - basic	2,454,116	2,454,116	2,454,116	2,454,116
Effect of dilutive potential common shares	57,809	73,034	66,298	78,185
Weighted-average shares - diluted	2,511,925	2,527,150	2,520,414	2,532,301
Net income (loss) per share - basic	$ 0	$ 0.04	$ 0.06	$ 0.17
Net income (loss) per share - diluted	$ 0	$ 0.04	$ 0.06	$ 0.16

5. STOCKHOLDERS' EQUITY (Detail

5. STOCKHOLDERS' EQUITY (Details)	9 Months Ended
	Sep. 30, 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)	2 years 11 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	Sep. 30, 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)	Sep. 30, 2017USD ($)
Commitments And Contingencies Tables
2,017	$ 13,744
2,018	42,535
2,019	44,292
2,020	45,964
2,021	48,021
2022 - 2024	1,280,604
Total	1,475,160
Less financing cost	(9,266)
Net loan payable	1,465,894
Less current portion	(41,655)
Long term portion	$ 1,424,239

8. INCOME TAXES (Details)

8. INCOME TAXES (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Income Tax Disclosure [Abstract]
Federal statutory rate			$ 68,621	$ 213,110
State taxes, net of federal tax benefit			(9,959)	14,599
Estimated research and development credits			(44,863)	(13,155)
Other			35,937	(11,852)
Total	$ (9,712)	$ 46,501	$ 49,736	$ 202,702

9. BUSINESS SEGMENTS (Details)

9. BUSINESS SEGMENTS (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Revenue	$ 2,000,679	$ 2,030,405	$ 6,031,530	$ 6,537,852
Gross profit	882,476	990,595	2,860,081	3,323,581
Interest expense	15,261	15,438	45,572	50,404
Net income (loss) before taxes	(9,522)	137,286	195,787	612,809
Products
Revenue	1,944,734	1,960,610	5,706,328	6,086,605
Gross profit	868,506	935,761	2,604,488	2,924,295
Interest expense	4,096	10,227	23,893	28,421
Net income (loss) before taxes	(12,327)	87,663	(38,127)	235,506
Royalties
Revenue	43,785	48,070	268,127	373,958
Gross profit	43,785	48,070	268,127	373,958
Interest expense	0	0	0	0
Net income (loss) before taxes	43,785	48,070	268,127	373,958
Subtotal
Revenue	2,008,680	1,988,519	6,460,563	5,974,455
Gross profit	983,831	912,291	3,298,253	2,872,615
Interest expense	10,227	4,096	28,421	23,893
Net income (loss) before taxes	135,733	31,458	609,464	230,000
Rentals
Revenue	12,160	21,725	57,075	77,289
Gross profit	(29,815)	6,764	(12,534)	25,328
Interest expense	11,165	5,211	21,679	21,983
Net income (loss) before taxes	$ (40,980)	$ 1,553	$ (34,213)	$ 3,345