Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2015

Revenue Recognition, Policy [Policy Text Block]

Revenue

Recognition

The Company is engaged in research and development contracts with the federal government to develop certain technology to be utilized by the U.S. Department of Defense (“DoD”). The contracts are cost plus fixed fee contracts and revenue is recognized on the basis of such measurement of partial performance as will reflect reasonably assured realization or delivery of completed articles. Fees earned under the Company’s contracts may also be accrued as they are billable, under the terms of the agreements, unless such accrual is not reasonably related to the proportionate performance of the total work or services to be performed by the Company from inception to completion. Under the terms of certain contracts, fixed fees are not recognized until the receipt of full payment has become unconditional, that is, when the product has been delivered and accepted by the Federal government. Backlog represents the estimated amount of future revenues to be recognized under negotiated contracts as work is performed. The Company’s backlog includes future Adaptive

Diagnostic

Electronic

Portable

Testset

(“ADEPT”) units to be developed and delivered to the Federal government.

Unbilled revenue reflects work performed, but not billed at the time, per contractual requirements. The Company had unbilled revenues of $38,884 and $34,366 included in receivables on government contracts as of September 30, 2015 and December 31, 2014, respectively. Billings to customers in excess of revenue earned are classified as advanced billings, and shown as a liability. As of September 30, 2015 and December 31, 2014, the Company had no advanced billings.

Standard Product Warranty, Policy [Policy Text Block]

Warranty

Expense

The Company provides a limited warranty, as defined by the related warranty agreements, for its production units. The Company’s warranties require the Company to repair or replace defective products during such warranty period. The Company estimates the costs that may be incurred under its warranty and records a liability in the amount of such costs at the time product revenue is recognized. Factors that affect the Company’s warranty liability include the number of units sold, expected and anticipated rates of warranty claims, and cost per claim. The Company periodically assesses the adequacy of its recorded warranty liability and adjusts the amount as necessary. During the three months ended September 30, 2015 and 2014, the Company recognized warranty (recoveries) expense of $106,800 and $(10,744), respectively, and $113,400 and

(1,690) for the nine months ended September 30, 2015 and 2014, respectively. Since the inception of the IDIQ contract in March 2010, the Company has delivered 163 ADEPT units. As of September 30, 2015, there are 41 ADEPT units that remain under limited warranty coverage. As of September 30, 2015 and December 31, 2014, the Company had an accrued warranty expense of $139,410 and $33,500, respectively.

The following table reflects the reserve for product warranty activity as of September 30, 2015 and December 31, 2014:

	2015			2014
Reserve for product warranty, beginning of period	$	33,500		$	35,190
Provision for product warranty		136,700			51,210
Product warranty expirations		(23,300	)		(52,900	)
Product warranty costs paid		(7,490	)		-
Reserve for product warranty, end of period	$	139,410		$	33,500

Research, Development, and Computer Software, Policy [Policy Text Block]

Research

and

Development

Costs

Research and Development expenditures for research and development of the Company's products are expensed when incurred, and are included in general and administrative expenses. The Company recognized research and development costs of $24,890 and $1,724 for the three months ended September 30, 2015 and 2014, respectively, and $34,625 and $5,021, for the nine months ended September 30, 2015 and 2014, respectively.

Goodwill and Intangible Assets, Intangible Assets, Policy [Policy Text Block]

Intangible Assets

A majority of the Company’s intangible assets consist of a license acquired in July 2015. Trade names and trademarks with finite lives are amortized using the straight-line method over their estimated useful lives. Licenses are amortized using a straight-line method over their estimated life of six years.

- Definition

Disclosure of accounting policy for its research and development and computer software activities including the accounting treatment for costs incurred for (1) research and development activities, (2) development of computer software for internal use, (3) computer software to be sold, leased or otherwise marketed as a separate product or as part of a product or process and (4) in-process research and development acquired in a purchase business combination.

+ References + Details

- Definition

Disclosure of accounting policy for revenue recognition. If the entity has different policies for different types of revenue transactions, the policy for each material type of transaction is generally disclosed. If a sales transaction has multiple element arrangements (for example, delivery of multiple products, services or the rights to use assets) the disclosure may indicate the accounting policy for each unit of accounting as well as how units of accounting are determined and valued. The disclosure may encompass important judgment as to appropriateness of principles related to recognition of revenue. The disclosure also may indicate the entity's treatment of any unearned or deferred revenue that arises from the transaction.

+ References + Details