Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2020 | May 12, 2020 | |
Document And Entity Information | ||
Entity Registrant Name | Lifeloc Technologies, Inc | |
Entity Central Index Key | 0001493137 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2020 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 2,454,116 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2020 | |
Entity Interactive Data Current | Yes | |
Entity Incorporation State Country Code | CO | |
Entity File Number | 000-54319 |
Condensed Balance Sheets
Condensed Balance Sheets - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
ASSETS | ||
Cash | $ 2,913,332 | $ 3,185,996 |
Accounts receivable, net | 638,038 | 641,239 |
Inventories, net | 2,236,331 | 1,986,299 |
Income taxes receivable | 41,305 | 6,750 |
Prepaid expenses and other | 139,772 | 18,857 |
Total current assets | 5,968,778 | 5,839,141 |
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 | 976,621 | 976,621 |
Training courses | 432,375 | 432,375 |
Office equipment, software and space modifications | 218,074 | 208,986 |
Sales and marketing equipment and space modifications | 232,600 | 232,600 |
Research and development equipment, software and space modifications | 172,429 | 172,429 |
Less accumulated depreciation | (2,053,197) | (1,959,541) |
Total property and equipment, net | 2,795,077 | 2,879,645 |
OTHER ASSETS: | ||
Patents, net | 160,823 | 145,323 |
Deposits and other | 74,027 | 74,027 |
Deferred taxes | 96,007 | 86,658 |
Total other assets | 330,857 | 306,008 |
Total assets | 9,094,712 | 9,024,794 |
CURRENT LIABILITIES: | ||
Accounts payable | 480,361 | 261,798 |
Term loan payable, current portion | 45,494 | 44,879 |
Customer deposits | 184,332 | 214,031 |
Accrued expenses | 319,366 | 290,458 |
Deferred revenue, current portion | 42,849 | 45,874 |
Reserve for warranty expense | 46,000 | 45,000 |
Total current liabilities | 1,118,402 | 902,040 |
TERM LOAN PAYABLE, net of current portion and debt issuance costs | 1,312,732 | 1,324,467 |
DEFERRED REVENUE, net of current portion | 4,552 | 6,066 |
Total liabilities | 2,435,686 | 2,232,573 |
COMMITMENTS AND CONTINGENCIES | ||
STOCKHOLDERS' EQUITY: | ||
Common stock, no par value; 50,000,000 shares authorized, 2,454,116 shares outstanding | 4,635,415 | 4,603,304 |
Retained earnings | 2,023,611 | 2,188,917 |
Total stockholders' equity | 6,659,026 | 6,792,221 |
Total liabilities and stockholders' equity | $ 9,094,712 | $ 9,024,794 |
Condensed Balance Sheets (Paren
Condensed Balance Sheets (Parenthetical) - $ / shares | Mar. 31, 2020 | Dec. 31, 2019 |
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, 2020 | Mar. 31, 2019 | |
REVENUES: | ||
Product sales | $ 1,937,866 | $ 1,970,101 |
Royalties | 59,281 | 72,838 |
Rental income | 21,189 | 25,822 |
Total | 2,018,336 | 2,068,761 |
COST OF SALES | 1,240,260 | 1,136,559 |
GROSS PROFIT | 778,076 | 932,202 |
OPERATING EXPENSES: | ||
Research and development | 296,897 | 245,799 |
Sales and marketing | 326,564 | 316,383 |
General and administrative | 356,887 | 325,175 |
Total | 980,348 | 887,357 |
OPERATING INCOME (LOSS) | (202,272) | 44,845 |
OTHER INCOME (EXPENSE): | ||
Interest income | 7,176 | 9,422 |
Interest expense | (14,131) | (14,423) |
Total other income (expense) | (6,955) | (5,001) |
NET INCOME (LOSS) BEFORE PROVISION FOR TAXES | (209,227) | 39,844 |
BENEFIT FROM (PROVISION FOR) FEDERAL AND STATE INCOME TAXES | 43,921 | (8,880) |
NET INCOME (LOSS) | $ (165,306) | $ 30,964 |
NET INCOME (LOSS) PER SHARE, BASIC | $ (0.07) | $ 0.01 |
NET INCOME (LOSS) PER SHARE, DILUTED | $ (0.07) | $ 0.01 |
WEIGHTED AVERAGE SHARES, BASIC | 2,454,116 | 2,454,116 |
WEIGHTED AVERAGE SHARES, DILUTED | 2,454,116 | 2,504,116 |
Condensed Statement of Stockhol
Condensed Statement of Stockholders' Equity (Unaudited) - USD ($) | Common Stock | Retained Earnings | Total |
Beginning balance at Dec. 31, 2018 | $ 4,597,646 | $ 1,563,091 | $ 6,160,737 |
Net income | 30,964 | 30,964 | |
Stock based compensation expense related to stock options | 2,162 | 2,162 | |
Ending balance at Mar. 31, 2019 | 4,599,808 | 1,594,055 | 6,193,863 |
Beginning balance at Dec. 31, 2019 | 4,603,304 | 2,188,917 | 6,792,221 |
Net income | (165,306) | (165,306) | |
Stock based compensation expense related to stock options | 32,111 | 32,111 | |
Ending balance at Mar. 31, 2020 | $ 4,635,415 | $ 2,023,611 | $ 6,659,026 |
Condensed Statements of Cash Fl
Condensed Statements of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net income | $ (165,306) | $ 30,964 |
Adjustments to reconcile net income (loss) to net cash provided from (used in) operating activities | ||
Depreciation and amortization | 97,199 | 103,047 |
Provision for doubtful accounts, net change | 2,000 | 0 |
Provision for inventory obsolescence, net change | 36,765 | 0 |
Deferred taxes, net change | (9,349) | (54,608) |
Reserve for warranty expense, net change | 1,000 | 0 |
Stock based compensation expense related to stock options | 32,111 | 2,162 |
Changes in operating assets and liabilities- | ||
Accounts receivable | 1,201 | 127,128 |
Inventories | (286,797) | (383,133) |
Income taxes receivable | (34,555) | 55,107 |
Prepaid expenses and other | (120,915) | (99,989) |
Deposits and other | 0 | 86,485 |
Accounts payable | 218,563 | 310,840 |
Customer deposits | (29,699) | 2,248 |
Accrued expenses | 28,908 | (34,254) |
Deferred revenue | (4,539) | 4,544 |
Net cash provided from (used in) operating activities | (233,413) | 150,541 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchases of property and equipment | (9,088) | (128,614) |
Patent filing expense | (18,772) | 0 |
Net cash (used in) investing activities | (27,860) | (128,614) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Principal payments made on term loan | (11,391) | (11,101) |
Net cash (used in) financing activities | (11,391) | (11,101) |
NET INCREASE (DECREASE) IN CASH | (272,664) | 10,826 |
CASH, BEGINNING OF PERIOD | 3,185,996 | 2,788,327 |
CASH, END OF PERIOD | 2,913,332 | 2,799,153 |
SUPPLEMENTAL INFORMATION: | ||
Cash paid for interest | 13,860 | 14,152 |
Cash paid for income tax | $ 20,063 | $ 0 |
1. ORGANIZATION AND NATURE OF B
1. ORGANIZATION AND NATURE OF BUSINESS | 3 Months Ended |
Mar. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
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 | 3 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
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. 2020 2019 Raw materials & deposits $ 1,808,760 $ 1,601,354 Work-in-process 21,053 32,006 Finished goods 583,283 492,939 Total gross inventories 2,413,096 2,126,299 Less reserve for obsolescence (176,765 ) (140,000 ) Total net inventories $ 2,236,331 $ 1,986,299 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. The sales of licenses to our training courses are recognized as revenue at the time of sale. 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 have discontinued arranging for customer financing and leasing through unrelated third parties and instead are providing for customer financing and leasing ourselves, which we recognize as revenue over the applicable lease term. Occasionally, we rent used equipment to customers, and in those cases, we recognize the revenues as they are earned over the life of the contract. Royalty income is recognized in accordance with agreed upon terms, when performance obligations are satisfied, the amount is fixed or determinable and collectability is reasonably assured. 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 and product developments. Customer deposits are initially recorded as a liability and recognized as revenue when the product is shipped and title has passed to the customer, or when agreed milestones are met in the case of product developments. Topic 606 requires the disaggregation of revenue into broad categories, which we have defined as shown below for the three months ended March 31, 2020 and March 31, 2019. Product sales: 2020 2019 Product sales and supplies $ 1,767,140 $ 1,800,783 Training, certification and data recording 148,182 146,496 Service plans and equipment rental 22,544 22,822 Products subtotal 1,937,866 1,970,101 Royalties 59,281 72,838 Building rentals 21,189 25,822 Total revenues $ 2,018,336 $ 2,068,761 Deferred Revenue. Recent Accounting Pronouncements 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, 2020 and 2019 was $32,111 and $2,162 respectively. These amounts consist of stock-based compensation expenses from grants of employee stock options which are allocated to General and Administrative Expense when incurred. Segment Reporting. |
3. BASIC AND DILUTED INCOME (LO
3. BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE | 3 Months Ended |
Mar. 31, 2020 | |
Earnings Per Share [Abstract] | |
NOTE 3 - BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE | We report both basic and diluted net income (or loss) per common share. Basic net income (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 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 shares used in the calculation of dilutive potential common shares exclude options to purchase shares in loss periods since they are anti-dilutive. The following table presents the calculation of basic and diluted net income (loss) per common share for three months ended March 31, 2020 and March 31, 2019: 2020 2019 Net income (loss) $ (165,306 ) $ 30,964 Weighted average shares-basic 2,454,116 2,454,116 Effect of dilutive potential common shares — 50,000 Weighted average shares-diluted 2,454,116 2,504,116 Net income (loss) per share-basic $ (0.07 ) $ 0.01 Net income (loss) per share-diluted $ (0.07 ) $ 0.01 Antidilutive employee stock options — — |
4. STOCKHOLDERS' EQUITY
4. STOCKHOLDERS' EQUITY | 3 Months Ended |
Mar. 31, 2020 | |
STOCKHOLDERS' EQUITY: | |
NOTE 4 - STOCKHOLDERS' EQUITY | The following table summarizes information about employee stock options outstanding and exercisable at March 31, 2020: 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 $6.00 12,500 2.25 $6.00 — — $5.51 3,000 4.33 $5.51 3,000 $5.51 $3.80 32,698 4.92 $3.80 92,698 $3.80 The exercise price of all options granted through March 31, 2020 has been equal to or greater than the fair market value of the Company's common stock at the time the options were issued. We granted 50,000 options to an officer in January of 2016, which vested based on the achievement of certain performance conditions. These options were cancelled and reissued in an amendment on October 1, 2017. Of the 50,000 granted options, 25,000 expired without vesting on December 31, 2019 and 12,500 expired without vesting on March 31, 2020. Vesting of the remaining 12,500 options is subject to performance achieved during the years ending December 31, 2020 and 2021. An additional total of 110,500 options were granted during the three months ended March 31, 2020, 48,000 of which were granted to two officers and three directors. Out of that 48,000, the officers were granted 37,500 and 7,500 and the directors were granted 1,000 each. These options vested immediately upon granting. No options were exercised during the three months ended March 31, 2020 or during the three months ended March 31, 2019. The total number of authorized shares of common stock continues to be 50,000,000, with no change in the par value per share. |
5. COMMITMENTS AND CONTINGENCIE
5. COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
NOTE 5 - COMMITMENTS AND CONTINGENCIES | Mortgage Expense 2020 $ 34,572 2021 48,021 2022 50,005 2023 52,072 2024 1,178,528 Total 1,363,198 Less financing cost (4,972 ) Net term loan payable 1,358,226 Less current portion (45,494 ) Long term portion $ 1,312,732 Employee Severance Benefits Contractual Commitments and Purchase Orders Regulatory Commitments |
6. LINE OF CREDIT
6. LINE OF CREDIT | 3 Months Ended |
Mar. 31, 2020 | |
Line of Credit Facility [Abstract] | |
NOTE 6 - LINE OF CREDIT | As part of the long-term financing of our property purchased on October 31, 2014, we obtained a one-year $250,000 revolving line of credit facility with Bank of America, which matured on October 31, 2015 and was extended to June 30, 2018, and bears interest at a rate equal to the LIBOR daily floating rate of .12088% and 2.382% on March 31, 2020 and 2019, respectively, plus 2.5%. The agreement was amended to increase the amount of the line to $750,000 and extend the maturity date 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 March 31, 2020 and December 31, 2019. |
7. INCOME TAXES
7. INCOME TAXES | 3 Months Ended |
Mar. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
NOTE 7 - INCOME TAXES | The items accounting for the difference between income taxes computed at the federal statutory rate and the provision for (benefit from) income taxes consists of the following: Three Months Ended March 31, 2020 March 31, 2019 Federal statutory rate $ (43,938 ) $ 8,367 Effect of: State taxes, net of federal tax benefit 8,181 (2,634 ) Estimated research and development credits — (3,073 ) Other (8,164 ) 6,220 Total $ (43,921 ) $ 8,880 |
8. BUSINESS SEGMENTS
8. BUSINESS SEGMENTS | 3 Months Ended |
Mar. 31, 2020 | |
Segment Reporting [Abstract] | |
NOTE 8 - BUSINESS SEGMENTS | We currently have two business segments: (i) the sale of physical products, including portable hand-held breathalyzers and related accessories, supplies, education, training ("Product Sales"), and royalties from development contracts with OEM manufacturers ("Royalties" and, together with Product Sales, the "Products" segment), and (ii) rental of a portion of our building (the "Rentals" segment). The accounting policies of the segments are the same as those described in the summary of significant accounting policies 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 March 31, 2020 and 2019. 2020 2019 Product sales $ 1,937,866 $ 1,970,101 Royalties 59,281 72,838 Products subtotal 1,997,147 2,042,939 Rentals 21,189 25,822 Total $ 2,018,336 $ 2,068,761 Gross profit: Product sales $ 714,294 $ 850,237 Royalties 59,281 72,838 Products subtotal 773,575 923,075 Rentals 4,501 9,127 Total $ 778,076 $ 932,202 Interest expense: Product sales $ 9,280 $ 8,262 Royalties — — Products subtotal 9,280 8,262 Rentals 4,851 6,161 Total $ 14,131 $ 14,423 Net income (loss) before taxes: Product sales $ (268,158 ) $ (35,960 ) Royalties 59,281 72,838 Products subtotal (208,877 36,878 Rentals (350 ) 2,966 Total $ (209,227 ) $ 39,844 There were no intersegment revenues. At March 31, 2020, $616,183 of our assets were used in the Rentals segment, with the remainder, $8,478,529, used in the Products and unallocated segments. |
9. SUBSEQUENT EVENTS
9. SUBSEQUENT EVENTS | 3 Months Ended |
Mar. 31, 2020 | |
Subsequent Events [Abstract] | |
NOTE 9 - SUBSEQUENT EVENTS | We evaluated all of our activity and concluded that no subsequent events have occurred that would require recognition in our financial statements or disclosure in the notes to our financial statements, except as follows. The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act allocated $350 billion to help small businesses keep workers employed amid the pandemic and economic downturn. Known as the Paycheck Protection Program (“PPP”), the initiative provides federally guaranteed loans to small businesses. A portion or all of these loans may be forgiven if borrowers comply with certain PPP guidelines including spending the funds on authorized expenses and maintaining their payrolls during the crisis or restore their payrolls afterward. On May 4, 2020, the Company received a $465,097 loan under the PPP (the “PPP Loan”). The PPP Loan has a two-year term, a maturity date of May 3, 2022, and an interest at a rate of 1.0% per annum. Monthly principal and interest payments are deferred for six months after the date of disbursement. The PPP Loan may be prepaid at any time prior to maturity with no prepayment penalties. The PPP Loan note contains events of default and other provisions customary for a loan of this type. The PPP provides that the PPP Loan may be partially or wholly forgiven if the funds are used for certain qualifying expenses as described in the CARES Act. The Company intends to use the entire PPP Loan amount for qualifying expenses and to apply for forgiveness of the loan in accordance with the terms of the CARES Act. The terms of any forgiveness may also be subject to further requirements in any regulations and guidelines the U.S. Small Business Administration may adopt. While the Company currently believes that its use of the Note proceeds will meet the conditions for forgiveness under the Paycheck Protection Program, no assurance is provided that the Company will obtain forgiveness of the Note in whole or in part. |
2. SUMMARY OF SIGNIFICANT ACC_2
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
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, 2019 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 March 31, 2020 and December 31, 2019, and the results of operations and cash flows for the quarter ended March 31, 2020. 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 2019 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 March 31, 2020 and December 31, 2019, inventory consisted of the following: 2020 2019 Raw materials & deposits $ 1,808,760 $ 1,601,354 Work-in-process 21,053 32,006 Finished goods 583,283 492,939 Total gross inventories 2,413,096 2,126,299 Less reserve for obsolescence (176,765 ) (140,000 ) Total net inventories $ 2,236,331 $ 1,986,299 |
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. The sales of licenses to our training courses are recognized as revenue at the time of sale. 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 have discontinued arranging for customer financing and leasing through unrelated third parties and instead are providing for customer financing and leasing ourselves, which we recognize as revenue over the applicable lease term. Occasionally, we rent used equipment to customers, and in those cases, we recognize the revenues as they are earned over the life of the contract. Royalty income is recognized in accordance with agreed upon terms, when performance obligations are satisfied, the amount is fixed or determinable and collectability is reasonably assured. 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 and product developments. Customer deposits are initially recorded as a liability and recognized as revenue when the product is shipped and title has passed to the customer, or when agreed milestones are met in the case of product developments. Topic 606 requires the disaggregation of revenue into broad categories, which we have defined as shown below for the three months ended March 31, 2020 and March 31, 2019. Product sales: 2020 2019 Product sales and supplies $ 1,767,140 $ 1,800,783 Training, certification and data recording 148,182 146,496 Service plans and equipment rental 22,544 22,822 Products subtotal 1,937,866 1,970,101 Royalties 59,281 72,838 Building rentals 21,189 25,822 Total revenues $ 2,018,336 $ 2,068,761 |
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 and do not expect them to have a material effect on our financial statements. |
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 March 31, 2020 and 2019 was $32,111 and $2,162 respectively. These amounts consist of stock-based compensation expenses from grants of employee stock options which are 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, education, training and royalties from development contracts. As a result of purchasing our building on October 31, 2014, we have a second business segment consisting of renting portions of our building to existing tenants, whose leases expire at various times until April 30, 2021. |
2. SUMMARY OF SIGNIFICANT ACC_3
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
Inventories | 2020 2019 Raw materials & deposits $ 1,808,760 $ 1,601,354 Work-in-process 21,053 32,006 Finished goods 583,283 492,939 Total gross inventories 2,413,096 2,126,299 Less reserve for obsolescence (176,765 ) (140,000 ) Total net inventories $ 2,236,331 $ 1,986,299 |
Disaggregation of revenue | Product sales: 2020 2019 Product sales and supplies $ 1,767,140 $ 1,800,783 Training, certification and data recording 148,182 146,496 Service plans and equipment rental 22,544 22,822 Products subtotal 1,937,866 1,970,101 Royalties 59,281 72,838 Building rentals 21,189 25,822 Total revenues $ 2,018,336 $ 2,068,761 |
3. BASIC AND DILUTED INCOME PER
3. BASIC AND DILUTED INCOME PER COMMON SHARE (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Earnings Per Share [Abstract] | |
Basic and diluted net income per share | 2020 2019 Net income (loss) $ (165,306 ) $ 30,964 Weighted average shares-basic 2,454,116 2,454,116 Effect of dilutive potential common shares — 50,000 Weighted average shares-diluted 2,454,116 2,504,116 Net income (loss) per share-basic $ (0.07 ) $ 0.01 Net income (loss) per share-diluted $ (0.07 ) $ 0.01 Antidilutive employee stock options — — |
4. STOCKHOLDERS' EQUITY (Tables
4. STOCKHOLDERS' EQUITY (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
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 $6.00 12,500 2.25 $6.00 — — $5.51 3,000 4.33 $5.51 3,000 $5.51 $3.80 32,698 4.92 $3.80 92,698 $3.80 |
5. COMMITMENTS AND CONTINGENC_2
5. COMMITMENTS AND CONTINGENCIES (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Minimum future lease payments | 2020 $ 34,572 2021 48,021 2022 50,005 2023 52,072 2024 1,178,528 Total 1,363,198 Less financing cost (4,972 ) Net term loan payable 1,358,226 Less current portion (45,494 ) Long term portion $ 1,312,732 |
7. INCOME TAXES (Tables)
7. INCOME TAXES (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Schedule of income tax reconciliation | Three Months Ended March 31, 2020 March 31, 2019 Federal statutory rate $ (43,938 ) $ 8,367 Effect of: State taxes, net of federal tax benefit 8,181 (2,634 ) Estimated research and development credits — (3,073 ) Other (8,164 ) 6,220 Total $ (43,921 ) $ 8,880 |
8. BUSINESS SEGMENTS (Tables)
8. BUSINESS SEGMENTS (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Segment Reporting [Abstract] | |
Schedule of segment reporting | 2020 2019 Product sales $ 1,937,866 $ 1,970,101 Royalties 59,281 72,838 Products subtotal 1,997,147 2,042,939 Rentals 21,189 25,822 Total $ 2,018,336 $ 2,068,761 Gross profit: Product sales $ 714,294 $ 850,237 Royalties 59,281 72,838 Products subtotal 773,575 923,075 Rentals 4,501 9,127 Total $ 778,076 $ 932,202 Interest expense: Product sales $ 9,280 $ 8,262 Royalties — — Products subtotal 9,280 8,262 Rentals 4,851 6,161 Total $ 14,131 $ 14,423 Net income (loss) before taxes: Product sales $ (268,158 ) $ (35,960 ) Royalties 59,281 72,838 Products subtotal (208,877 36,878 Rentals (350 ) 2,966 Total $ (209,227 ) $ 39,844 |
2. SUMMARY OF SIGNIFICANT ACC_4
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Inventories | ||
Raw materials & deposits | $ 1,808,760 | $ 1,601,354 |
Work-in-process | 21,053 | 32,006 |
Finished goods | 583,283 | 492,939 |
Total gross inventories | 2,413,096 | 2,126,299 |
Less reserve for obsolescence | (176,765) | (140,000) |
Total net inventories | $ 2,236,331 | $ 1,986,299 |
2. SUMMARY OF SIGNIFICANT ACC_5
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Accounting Policies [Abstract] | ||
Product sales and supplies | $ 1,767,140 | $ 1,800,783 |
Training, certification and data recording | 148,182 | 146,496 |
Service plans and equipment rental | 22,544 | 22,822 |
Product sales subtotal | 1,937,866 | 1,970,101 |
Royalties | 59,281 | 72,838 |
Rental income | 21,189 | 25,822 |
Total revenues | $ 2,018,336 | $ 2,068,761 |
3. BASIC AND DILUTED INCOME P_2
3. BASIC AND DILUTED INCOME PER COMMON SHARE (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Earnings Per Share [Abstract] | ||
Net income (loss) | $ (165,306) | $ 30,964 |
Weighted-average shares - basic | 2,454,116 | 2,454,116 |
Effect of dilutive potential common shares | 0 | 50,000 |
Weighted-average shares - diluted | 2,454,116 | 2,504,116 |
Net income (loss) per share - basic | $ (0.07) | $ 0.01 |
Net income (loss) per share - diluted | $ (0.07) | $ 0.01 |
Contingently vesting employee stock options | 0 | 0 |
4. STOCKHOLDERS' EQUITY (Detail
4. STOCKHOLDERS' EQUITY (Details) | 3 Months Ended |
Mar. 31, 2020$ / sharesshares | |
Stock Option 1 | |
Range of exercise prices | $ 6 |
Option outstanding | shares | 12,500 |
Weighted average remaining contractual life (in years) | 2 years 3 months |
Weighted average exercise price per share | $ 6 |
Number exercisable | shares | 0 |
Weighted average exercise price per share | $ 0 |
Stock Option 2 | |
Range of exercise prices | $ 5.51 |
Option outstanding | shares | 3,000 |
Weighted average remaining contractual life (in years) | 4 years 3 months 29 days |
Weighted average exercise price per share | $ 5.51 |
Number exercisable | shares | 3,000 |
Weighted average exercise price per share | $ 5.51 |
Stock Option 3 | |
Range of exercise prices | $ 3.80 |
Option outstanding | shares | 32,698 |
Weighted average remaining contractual life (in years) | 4 years 11 months 1 day |
Weighted average exercise price per share | $ 3.80 |
Number exercisable | shares | 92,698 |
Weighted average exercise price per share | $ 3.80 |
4. STOCKHOLDERS' EQUITY (Deta_2
4. STOCKHOLDERS' EQUITY (Details Narrative) - shares | Mar. 31, 2020 | Dec. 31, 2019 |
STOCKHOLDERS' EQUITY: | ||
Common stock, authorized | 50,000,000 | 50,000,000 |
5. COMMITMENTS AND CONTINGENC_3
5. COMMITMENTS AND CONTINGENCIES (Details) | Mar. 31, 2020USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2020 | $ 34,572 |
2021 | 48,021 |
2022 | 50,005 |
2023 | 52,072 |
2024 | 1,178,528 |
Total | 1,363,198 |
Less financing cost | (4,972) |
Net loan payable | 1,358,226 |
Less current portion | (45,494) |
Long term portion | $ 1,312,732 |
7. INCOME TAXES (Details)
7. INCOME TAXES (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Income Tax Disclosure [Abstract] | ||
Federal statutory rate | $ (43,938) | $ 8,367 |
State taxes, net of federal tax benefit | 8,181 | (2,634) |
Estimated research and development credits | 0 | (3,073) |
Other | (8,164) | 6,220 |
Total | $ (43,921) | $ 8,880 |
8. BUSINESS SEGMENTS (Details)
8. BUSINESS SEGMENTS (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Revenue | $ 2,018,336 | $ 2,068,761 |
Gross profit | 778,076 | 932,202 |
Interest expense | 14,131 | 14,423 |
Net income (loss) before taxes | (209,227) | 39,844 |
Products | ||
Revenue | 1,937,866 | 1,970,101 |
Gross profit | 714,294 | 850,237 |
Interest expense | 9,280 | 8,262 |
Net income (loss) before taxes | (268,158) | (35,960) |
Royalties | ||
Revenue | 59,281 | 72,838 |
Gross profit | 59,281 | 72,838 |
Interest expense | 0 | 0 |
Net income (loss) before taxes | 59,281 | 72,838 |
Subtotal | ||
Revenue | 1,997,147 | 2,042,939 |
Gross profit | 773,575 | 923,075 |
Interest expense | 9,280 | 8,262 |
Net income (loss) before taxes | (208,877) | 36,878 |
Rentals | ||
Revenue | 21,189 | 25,822 |
Gross profit | 4,501 | 9,127 |
Interest expense | 4,851 | 6,161 |
Net income (loss) before taxes | $ (350) | $ 2,966 |