Lifeloc (LCTC) 10-Q 9 Aug 18 2018 Q2 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2018	Aug. 07, 2018
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, 2018
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	2,018

Condensed Balance Sheets

Condensed Balance Sheets - USD ($)	Jun. 30, 2018	Dec. 31, 2017
ASSETS
Cash	$ 2,588,304	$ 2,669,455
Accounts receivable, net	659,749	593,326
Inventories, net	1,272,384	1,175,103
Income taxes receivable	81,413	121,401
Prepaid expenses and other	84,308	21,804
Total current assets	4,686,158	4,581,089
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	569,448
Production equipment and software	783,490	556,025
Training courses	432,375	432,375
Office equipment and software	270,241	204,282
Sales and marketing equipment	273,433	216,330
Research and development equipment and software	154,611	131,770
Less accumulated depreciation	(1,566,631)	(1,349,499)
Total property and equipment, net	3,163,694	3,007,458
OTHER ASSETS:
Patents, net	170,629	177,244
Deposits and other	5,144	259,037
Deferred taxes	76,936	66,531
Total other assets	252,709	502,812
Total assets	8,102,561	8,091,359
CURRENT LIABILITIES:
Accounts payable	329,607	297,096
Term loan payable, current portion	42,312	42,101
Customer deposits	15,052	48,763
Accrued expenses	198,405	264,290
Deferred revenue, current portion	51,320	53,137
Reserve for warranty expense	40,000	40,000
Total current liabilities	676,696	745,387
TERM LOAN PAYABLE, net of current portion and debt issuance costs	1,390,941	1,410,185
DEFERRED REVENUE, net of current portion	10,757	9,683
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, no par value; 50,000,000 shares authorized, 2,454,116 shares outstanding	4,588,911	4,580,177
Retained earnings	1,435,256	1,345,927
Total stockholders' equity	6,024,167	5,926,104
Total liabilities and stockholders' equity	$ 8,102,561	$ 8,091,359

Condensed Balance Sheets (Paren

Condensed Balance Sheets (Parenthetical) - $ / shares	Jun. 30, 2018	Dec. 31, 2017
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, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
REVENUES:
Product sales	$ 2,013,790	$ 1,879,405	$ 4,136,033	$ 3,761,594
Royalties	96,358	144,517	161,423	224,342
Rental income	19,101	22,458	33,702	44,915
Total	2,129,249	2,046,380	4,331,158	4,030,851
COST OF SALES	1,133,779	1,033,654	2,335,525	2,053,246
GROSS PROFIT	995,470	1,012,726	1,995,633	1,977,605
OPERATING EXPENSES:
Research and development	253,229	251,825	591,555	448,193
Sales and marketing	330,657	367,474	666,058	707,118
General and administrative	296,124	286,726	593,457	590,320
Total	880,010	906,025	1,851,070	1,745,631
OPERATING INCOME	115,460	106,701	144,563	231,974
OTHER INCOME (EXPENSE):
Interest income	4,253	2,230	6,437	3,646
Interest expense	(17,374)	(15,187)	(32,088)	(30,311)
Total	(13,121)	(12,957)	(25,651)	(26,665)
NET INCOME BEFORE PROVISION FOR TAXES	102,339	93,744	118,912	205,309
(PROVISION FOR) FEDERAL AND STATE INCOME TAXES	(24,210)	(25,876)	(29,583)	(59,448)
NET INCOME	$ 78,129	$ 67,868	$ 89,329	$ 145,861
NET INCOME PER SHARE, BASIC	$ 0.03	$ 0.03	$ 0.04	$ 0.06
NET INCOME PER SHARE, DILUTED	$ 0.03	$ 0.03	$ 0.04	$ 0.06
WEIGHTED AVERAGE SHARES, BASIC	2,454,116	2,454,116	2,454,116	2,454,116
WEIGHTED AVERAGE SHARES, DILUTED	2,509,221	2,512,183	2,509,697	2,524,663

Condensed Statements of Cash Fl

Condensed Statements of Cash Flows (Unaudited) - USD ($)	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 89,329	$ 145,861
Adjustments to reconcile net income to net cash provided by (used in) operating activities-
Depreciation and amortization	226,007	143,426
Provision for doubtful accounts, net change	1,000	0
Provision for inventory obsolescence, net change	32,500	42,500
Deferred taxes, net change	(10,405)	14,897
Reserve for warranty expense, net change	0	0
Stock based compensation expense related to stock options	8,734	12,329
Changes in operating assets and liabilities-
Accounts receivable	(67,423)	(140,371)
Inventories	(129,781)	(215,065)
Income taxes receivable	39,988	30,707
Prepaid expenses and other	(62,504)	(7,480)
Deposits and other	253,893	(57,121)
Accounts payable	32,511	(25,825)
Customer deposits	(33,711)	19,500
Accrued expenses	(65,885)	(70,725)
Deferred revenue	(743)	(3,284)
Net cash provided from (used in) operating activities	313,510	(110,651)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	(373,368)	(139,736)
Cash paid for software acquired in asset acquisition	0	(396,948)
Cash paid for equipment acquired in asset acquisition	0	(351,250)
Cash paid for patents and patent applications acquired in asset acquisition	0	(100,000)
Patent filing expense	0	(17,217)
Net cash (used in) investing activities	(373,368)	(1,005,151)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments made on term loan	(21,293)	(23,697)
Net cash (used in) financing activities	(21,293)	(23,697)
NET INCREASE (DECREASE) IN CASH	(81,151)	(1,139,499)
CASH, BEGINNING OF PERIOD	2,669,455	3,772,064
CASH, END OF PERIOD	2,588,304	2,632,565
SUPPLEMENTAL INFORMATION:
Cash paid for interest	29,828	30,040
Cash paid for income tax	$ 0	$ 13,844

1. ORGANIZATION AND NATURE OF B

1. ORGANIZATION AND NATURE OF BUSINESS	6 Months Ended
	Jun. 30, 2018
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 www.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	6 Months Ended
	Jun. 30, 2018
Notes to Financial Statements
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	Basis of Presentation Use of Estimates in the Preparation of Financial Statements. 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. 2018 2017 Raw materials & deposits $ 1,099,582 $ 809,867 Work-in-process 24,906 181,976 Finished goods 240,396 243,260 Total gross inventories 1,364,884 1,235,103 Less reserve for obsolescence (92,500 ) (60,000 ) Total net inventories $ 1,272,384 $ 1,175,103 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 and supplies 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. Training and certification revenues are recognized at the time the training and certification occurs. Data recording revenue is recognized based on each day’s usage of enrolled devices. Revenues arising from extended warranty contracts are booked as sales over their life on a straight-line basis. We are providing for customer financing and leasing, 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 rental of equipment and extended service plans are recognized over the life of the contracts. 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. 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. 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. Topic 606 requires the disaggregation of revenue into broad categories, which we have defined as shown below. Three Months Ended June 30, Product sales: 2018 2017 Product sales and supplies $ 1,805,206 $ 1,691,102 Training, certification and data recording 182,885 157,658 Service plans and equipment rental 25,699 30,645 Product sales subtotal 2,013,790 1,879,405 Royalties 96,358 144,517 Rental income 19,101 22,458 Total revenues $ 2,129,249 $ 2,046,380 Six Months Ended June 30, Product sales: 2018 2017 Product sales and supplies $ 3,740,212 $ 3,414,336 Training, certification and data recording 340,626 286,229 Service plans and equipment rental 55,195 61,029 Product sales subtotal 4,136,033 3,761,594 Royalties 161,423 224,342 Rental income 33,702 44,915 Total revenues $ 4,331,158 $ 4,030,851 Service plans and equipment rental, as well as Training, certification and data recording, include 6 months of revenue in the 6-month period ended June 30, 2018 attributable to the assets related to the Real-time Alcohol Detection and Recognition product (“R.A.D.A.R.”), which we acquired in March 2017, whereas only 4 months of revenue from the R.A.D.A.R. assets are included in the same period a year ago. Deferred Revenue. Recent Accounting Pronouncements 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 six months ended June 30, 2018 and 2017 was $8,734 and $12,329 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	6 Months Ended
	Jun. 30, 2018
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 Inventory 178,052 N/A N/A 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	6 Months Ended
	Jun. 30, 2018
Notes to Financial Statements
NOTE 4 - BASIC AND DILUTED INCOME PER COMMON SHARE	We report both basic and diluted net income per common 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 common share: Three Months Ended June 30, 2018 June 30, 2017 Net income $ 78,129 $ 67,868 Weighted average shares-basic 2,454,116 2,454,116 Effect of dilutive potential common shares 55,105 58,067 Weighted average shares-diluted 2,509,221 2,512,183 Net income per share-basic $ .03 $ .03 Net income per share-diluted $ .03 $ .03 Antidilutive employee stock options 50,000 50,000 Six Months Ended June 30, 2018 June 30, 2017 Net income $ 89,329 $ 145,861 Weighted average shares-basic 2,454,116 2,454,116 Effect of dilutive potential common shares 55,581 70,547 Weighted average shares-diluted 2,509,697 2,524,663 Net income per share-basic $ .04 $ .06 Net income per share-diluted $ .04 $ .06 Antidilutive employee stock options 50,000 50,000

5. STOCKHOLDERS' EQUITY

5. STOCKHOLDERS' EQUITY	6 Months Ended
	Jun. 30, 2018
Notes to Financial Statements
NOTE 5 - STOCKHOLDERS' EQUITY	The following table summarizes information about employee stock options outstanding and exercisable at June 30, 2018: 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 - $6.00 60,000 3.38 $5.39 10,000 $2.32 Of the 10,000 options exercisable as of June 30, 2018, all are incentive stock options. The exercise price of all options granted through June 30, 2018 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 year ended December 31, 2016. These options were forfeited and replaced with options to purchase 50,000 shares of stock at $6.00 apiece in 2017 in conjunction with the amendment of an employment agreement. Vesting of these options is subject to performance achieved during the years ending December 31, 2019 and 2020. No options were granted during the six months ended June 30, 2018. No options were exercised during the six months ended June 30, 2018 or during the six months ended June 30, 2017. 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	6 Months Ended
	Jun. 30, 2018
Commitments and Contingencies Disclosure [Abstract]
NOTE 6 - COMMITMENTS AND CONTINGENCIES	Mortgage Expense Year Amount 2018 $ 21,241 2019 44,292 2020 45,964 2021 48,021 2022 50,005 2023– 2024 1,230,600 Total 1,440,123 Less financing cost (6,870 ) Net term loan payable 1,433,253 Less current portion (42,312 ) Long term portion $ 1,390,941 Employee Severance Benefits Contractual Commitments and Purchase Orders Regulatory Commitments

7. LINE OF CREDIT

7. LINE OF CREDIT	6 Months Ended
	Jun. 30, 2018
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 that bears interest at a rate equal to the LIBOR daily floating rate (which was 1.93325% and 1.17333% on June 30, 2018 and 2017, 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, which has been subsequently extended to June 30, 2020. 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, 2018 and December 31, 2017.

8. INCOME TAXES

8. INCOME TAXES	6 Months Ended
	Jun. 30, 2018
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: Six Months Ended June 30, 2018 June 30, 2017 Federal statutory rate $ 24,971 $ 71,858 Effect of: State taxes, net of federal tax benefit (6,462 ) (10,790 ) Estimated research and development credits (4,437 ) (29,133 ) Other 15,511 27,513 Total $ 29,583 $ 59,448

9. BUSINESS SEGMENTS

9. BUSINESS SEGMENTS	6 Months Ended
	Jun. 30, 2018
Segment Reporting [Abstract]
NOTE 9 - 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 in Note 2. Operating profits for these segments exclude 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, 2018 and 2017. 2018 2017 Product sales $ 2,013,790 $ 1,879,405 Royalties 96,358 144,517 Products subtotal 2,110,148 2,023,922 Rentals 19,101 22,458 Total $ 2,129,249 $ 2,046,380 Gross profit (loss): Product sales $ 900,849 $ 859,604 Royalties 96,358 144,517 Products subtotal 997,207 1,004,121 Rentals (1,737 ) 8,605 Total $ 995,470 $ 1,012,726 Interest expense: Product sales $ 10,350 $ 9,919 Royalties - - Products subtotal 10,350 9,919 Rentals 7,024 5,268 Total $ 17,374 $ 15,187 Net income (loss) before taxes: Product sales $ 14,742 $ (54,110 ) Royalties 96,358 144,517 Products subtotal 111,100 90,407 Rentals (8,761 ) 3,337 Total $ 102,339 $ 93,744 The following sets forth information about the operations of the business segments for the six months ended June 30, 2018 and 2017. 2018 2017 Product sales $ 4,136,033 $ 3,761,594 Royalties 161,423 224,342 Products subtotal 4,297,456 3,985,936 Rentals 33,702 44,915 Total $ 4,331,158 $ 4,030,851 Gross profit (loss): Product sales $ 1,843,591 $ 1,735,982 Royalties 161,423 224,342 Products subtotal 2,005,014 1,960,324 Rentals (9,381 ) 17,281 Total $ 1,995,633 $ 1,977,605 Interest expense: Product sales $ 18,066 $ 19,797 Royalties - - Products subtotal 18,066 19,797 Rentals 14,022 10,514 Total $ 32,088 $ 30,311 Net income (loss) before taxes: Product sales $ (19,108 ) $ (25,800 ) Royalties 161,423 224,342 Products subtotal 142,315 198,542 Rentals (23,403 ) 6,767 Total $ 118,912 $ 205,309 There were no intersegment revenues. At June 30, 2018, $887,306 of our assets were used in the Rentals segment, with the remainder, $7,215,255, used in the Products and unallocated segments.

10. SUBSEQUENT EVENTS

10. SUBSEQUENT EVENTS	6 Months Ended
	Jun. 30, 2018
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)	6 Months Ended
	Jun. 30, 2018
Summary Of Significant Accounting 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, 2017 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 the financial position as of June 30, 2018 and December 31, 2017, and the results of operations and cash flows for the periods ended June 30, 2018 and 2017. 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 2017 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.
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 June 30, 2018 and December 31, 2017, inventory consisted of the following: 2018 2017 Raw materials & deposits $ 1,099,582 $ 809,867 Work-in-process 24,906 181,976 Finished goods 240,396 243,260 Total gross inventories 1,364,884 1,235,103 Less reserve for obsolescence (92,500 ) (60,000 ) Total net inventories $ 1,272,384 $ 1,175,103
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	In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606). Revenue from product sales and supplies 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. Training and certification revenues are recognized at the time the training and certification occurs. Data recording revenue is recognized based on each day’s usage of enrolled devices. Revenues arising from extended warranty contracts are booked as sales over their life on a straight-line basis. We are providing for customer financing and leasing, 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 rental of equipment and extended service plans are recognized over the life of the contracts. 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. 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. 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. Topic 606 requires the disaggregation of revenue into broad categories, which we have defined as shown below. Three Months Ended June 30, Product sales: 2018 2017 Product sales and supplies $ 1,805,206 $ 1,691,102 Training, certification and data recording 182,885 157,658 Service plans and equipment rental 25,699 30,645 Product sales subtotal 2,013,790 1,879,405 Royalties 96,358 144,517 Rental income 19,101 22,458 Total revenues $ 2,129,249 $ 2,046,380 Six Months Ended June 30, Product sales: 2018 2017 Product sales and supplies $ 3,740,212 $ 3,414,336 Training, certification and data recording 340,626 286,229 Service plans and equipment rental 55,195 61,029 Product sales subtotal 4,136,033 3,761,594 Royalties 161,423 224,342 Rental income 33,702 44,915 Total revenues $ 4,331,158 $ 4,030,851 Service plans and equipment rental, as well as Training, certification and data recording, include 6 months of revenue in the 6-month period ended June 30, 2018 attributable to the assets related to the Real-time Alcohol Detection and Recognition product (“R.A.D.A.R.”), which we acquired in March 2017, whereas only 4 months of revenue from the R.A.D.A.R. assets are included in the same period a year ago.
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, and are included in product revenue in our statements of income. 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 sheets as long term. Deferred revenues also result from progress payments received on development contracts; those revenues are recognized when the contract is complete, and are included in product revenue in our statements of income. All development contracts are for less than one year and all deferred revenues from this source are shown in our balance sheets as short term.
Recent Accounting Pronouncements	We have reviewed all recently issued, but not yet effective, accounting pronouncements. 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 six months ended June 30, 2018 and 2017 was $8,734 and $12,329 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

2. SUMMARY OF SIGNIFICANT ACC17

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)	6 Months Ended
	Jun. 30, 2018
Summary Of Significant Accounting Policies Tables Abstract
Inventories	2018 2017 Raw materials & deposits $ 1,099,582 $ 809,867 Work-in-process 24,906 181,976 Finished goods 240,396 243,260 Total gross inventories 1,364,884 1,235,103 Less reserve for obsolescence (92,500 ) (60,000 ) Total net inventories $ 1,272,384 $ 1,175,103
Disaggregation of revenue	Three Months Ended June 30, Product sales: 2018 2017 Product sales and supplies $ 1,805,206 $ 1,691,102 Training, certification and data recording 182,885 157,658 Service plans and equipment rental 25,699 30,645 Product sales subtotal 2,013,790 1,879,405 Royalties 96,358 144,517 Rental income 19,101 22,458 Total revenues $ 2,129,249 $ 2,046,380 Six Months Ended June 30, Product sales: 2018 2017 Product sales and supplies $ 3,740,212 $ 3,414,336 Training, certification and data recording 340,626 286,229 Service plans and equipment rental 55,195 61,029 Product sales subtotal 4,136,033 3,761,594 Royalties 161,423 224,342 Rental income 33,702 44,915 Total revenues $ 4,331,158 $ 4,030,851

3. ASSET ACQUISITION (Tables)

3. ASSET ACQUISITION (Tables)	6 Months Ended
	Jun. 30, 2018
Asset Acquisition Tables Abstract
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 Inventory 178,052 N/A N/A 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)	6 Months Ended
	Jun. 30, 2018
Basic And Diluted Net Income Per Common Share
Basic and diluted net income per share	Three Months Ended June 30, 2018 June 30, 2017 Net income $ 78,129 $ 67,868 Weighted average shares-basic 2,454,116 2,454,116 Effect of dilutive potential common shares 55,105 58,067 Weighted average shares-diluted 2,509,221 2,512,183 Net income per share-basic $ .03 $ .03 Net income per share-diluted $ .03 $ .03 Antidilutive employee stock options 50,000 50,000 Six Months Ended June 30, 2018 June 30, 2017 Net income $ 89,329 $ 145,861 Weighted average shares-basic 2,454,116 2,454,116 Effect of dilutive potential common shares 55,581 70,547 Weighted average shares-diluted 2,509,697 2,524,663 Net income per share-basic $ .04 $ .06 Net income per share-diluted $ .04 $ .06 Antidilutive employee stock options 50,000 50,000

5. STOCKHOLDERS' EQUITY (Tables

5. STOCKHOLDERS' EQUITY (Tables)	6 Months Ended
	Jun. 30, 2018
Stockholders Equity
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 - $6.00 60,000 3.38 $5.39 10,000 $2.32

6. COMMITMENTS AND CONTINGENC21

6. COMMITMENTS AND CONTINGENCIES (Tables)	6 Months Ended
	Jun. 30, 2018
Commitments And Contingencies
Minimum future lease payments	Year Amount 2018 $ 21,241 2019 44,292 2020 45,964 2021 48,021 2022 50,005 2023– 2024 1,230,600 Total 1,440,123 Less financing cost (6,870 ) Net term loan payable 1,433,253 Less current portion (42,312 ) Long term portion $ 1,390,941

8. INCOME TAXES (Tables)

8. INCOME TAXES (Tables)	6 Months Ended
	Jun. 30, 2018
Income Taxes Tables Abstract
Schedule of income tax reconciliation	Six Months Ended June 30, 2018 June 30, 2017 Federal statutory rate $ 24,971 $ 71,858 Effect of: State taxes, net of federal tax benefit (6,462 ) (10,790 ) Estimated research and development credits (4,437 ) (29,133 ) Other 15,511 27,513 Total $ 29,583 $ 59,448

9. BUSINESS SEGMENTS (Tables)

9. BUSINESS SEGMENTS (Tables)	6 Months Ended
	Jun. 30, 2018
Segment Reporting [Abstract]
Schedule of Segment Reporting	2018 2017 Product sales $ 2,013,790 $ 1,879,405 Royalties 96,358 144,517 Products subtotal 2,110,148 2,023,922 Rentals 19,101 22,458 Total $ 2,129,249 $ 2,046,380 Gross profit (loss): Product sales $ 900,849 $ 859,604 Royalties 96,358 144,517 Products subtotal 997,207 1,004,121 Rentals (1,737 ) 8,605 Total $ 995,470 $ 1,012,726 Interest expense: Product sales $ 10,350 $ 9,919 Royalties - - Products subtotal 10,350 9,919 Rentals 7,024 5,268 Total $ 17,374 $ 15,187 Net income (loss) before taxes: Product sales $ 14,742 $ (54,110 ) Royalties 96,358 144,517 Products subtotal 111,100 90,407 Rentals (8,761 ) 3,337 Total $ 102,339 $ 93,744 2018 2017 Product sales $ 4,136,033 $ 3,761,594 Royalties 161,423 224,342 Products subtotal 4,297,456 3,985,936 Rentals 33,702 44,915 Total $ 4,331,158 $ 4,030,851 Gross profit (loss): Product sales $ 1,843,591 $ 1,735,982 Royalties 161,423 224,342 Products subtotal 2,005,014 1,960,324 Rentals (9,381 ) 17,281 Total $ 1,995,633 $ 1,977,605 Interest expense: Product sales $ 18,066 $ 19,797 Royalties - - Products subtotal 18,066 19,797 Rentals 14,022 10,514 Total $ 32,088 $ 30,311 Net income (loss) before taxes: Product sales $ (19,108 ) $ (25,800 ) Royalties 161,423 224,342 Products subtotal 142,315 198,542 Rentals (23,403 ) 6,767 Total $ 118,912 $ 205,309

2. SUMMARY OF SIGNIFICANT ACC24

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($)	Jun. 30, 2018	Dec. 31, 2017
Inventories
Raw materials & deposits	$ 1,099,582	$ 809,867
Work-in-process	24,906	181,976
Finished goods	240,396	243,260
Total gross inventories	1,364,884	1,235,103
Less reserve for obsolescence	(92,500)	(60,000)
Total net inventories	$ 1,272,384	$ 1,175,103

2. SUMMARY OF SIGNIFICANT ACC25

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Summary Of Significant Accounting Policies Details 1Abstract
Product sales and supplies	$ 1,805,206	$ 1,691,102	$ 3,740,212	$ 3,414,336
Training, certification and data recording	182,885	157,658	340,626	286,229
Service plans and equipment rental	25,699	30,645	55,195	61,029
Products subtotal	2,013,790	1,879,405	4,136,033	3,761,594
Royalties	96,358	144,517	161,423	224,342
Building rentals	19,101	22,458	33,702	44,915
Total revenues	$ 2,129,249	$ 2,046,380	$ 4,331,158	$ 4,030,851

2. SUMMARY OF SIGNIFICANT ACC26

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($)	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Summary Of Significant Accounting Policies Details Narrative Abstract
Deferred taxes	$ 76,936		$ 66,531
Stock-Based Compensation	$ 8,734	$ 12,329

3. ASSET ACQUISITION (Details)

3. ASSET ACQUISITION (Details)	6 Months Ended
	Jun. 30, 2018USD ($)
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
Rental Equipment Not Yet In Service
Purchase price allocation	$ 178,052
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

4. BASIC AND DILUTED NET INCO28

4. BASIC AND DILUTED NET INCOME PER COMMON SHARE (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Summary Of Significant Accounting Policies Details Abstract
Net income	$ 78,129	$ 67,868	$ 89,329	$ 145,861
Weighted-average shares - basic	2,454,116	2,454,116	2,454,116	2,454,116
Effect of dilutive potential common shares	55,105	58,067	5,581	70,547
Weighted-average shares - diluted	2,509,221	2,512,183	2,509,697	2,524,663
Net income (loss) per share - basic	$ 0.03	$ 0.03	$ 0.04	$ 0.06
Net income (loss) per share - diluted	$ 0.03	$ 0.03	$ 0.04	$ 0.06

5. STOCKHOLDERS' EQUITY (Detail

5. STOCKHOLDERS' EQUITY (Details)	6 Months Ended
	Jun. 30, 2018$ / sharesshares
Stockholders Equity Details Abstract
Range of Exercise Prices, min	$ 2.32
Range of Exercise Prices, max	$ 6
Option Outstanding | shares	60,000
Weighted Average Remaining Contractual Life (in Years)	3 years 4 months 17 days
Weighted Average Exercise Price per Share	$ 5.39
Number Exercisable | shares	10,000
Weighted Average Exercise Price per Share	$ 2.32

5. STOCKHOLDERS' EQUITY (Deta30

5. STOCKHOLDERS' EQUITY (Details Narrative) - shares	Jun. 30, 2018	Dec. 31, 2017
Stockholders Equity Details Narrative Abstract
Common Stock Authorized	50,000,000	50,000,000

6. COMMITMENTS AND CONTINGENC31

6. COMMITMENTS AND CONTINGENCIES (Details)	Jun. 30, 2018USD ($)
Commitments And Contingencies
2,018	$ 21,241
2,019	44,292
2,020	45,964
2,021	48,021
2,022	50,005
2023 - 2024	1,230,600
Total	1,440,123
Less financing cost	(6,870)
Net loan payable	1,433,253
Less current portion	(42,312)
Long term portion	$ 1,390,941

8. INCOME TAXES (Details)

8. INCOME TAXES (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Income Tax Disclosure [Abstract]
Federal statutory rate			$ 29,741	$ 71,858
State taxes, net of federal tax benefit			(6,462)	(10,790)
Estimated research and development credits			(4,437)	(29,133)
Other			15,511	27,513
Total	$ 24,210	$ 25,876	$ 29,583	$ 59,448

9. BUSINESS SEGMENTS (Details)

9. BUSINESS SEGMENTS (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Revenue	$ 2,129,249	$ 2,046,380	$ 4,331,158	$ 4,030,851
Gross profit	995,470	1,012,726	1,995,633	1,977,605
Interest expense	17,374	15,187	32,088	30,311
Net income before taxes	102,339	93,744	118,912	205,309
Products
Revenue	2,013,790	1,879,405	4,136,033	3,761,594
Gross profit	900,849	859,604	1,843,591	1,735,982
Interest expense	10,350	9,919	18,066	19,797
Net income before taxes	14,742	(54,110)	(19,108)	(25,800)
Royalties
Revenue	96,358	144,517	161,423	224,342
Gross profit	96,358	144,517	161,423	224,342
Interest expense	0	0	0	0
Net income before taxes	96,358	144,517	161,423	224,342
Subtotal
Revenue	2,110,148	2,023,922	3,985,936	4,297,456
Gross profit	997,207	1,004,121	1,960,324	2,005,014
Interest expense	10,350	9,919	19,797	18,066
Net income before taxes	111,100	90,407	198,542	142,315
Rentals
Revenue	19,101	22,458	33,702	44,915
Gross profit	(1,737)	8,605	(9,381)	17,281
Interest expense	7,024	5,268	14,022	10,514
Net income before taxes	$ (8,761)	$ 3,337	$ (23,403)	$ 6,767