Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2018

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash and cash equivalents

Cash balances consist of funds that are immediately available to the Company and are held by financial institutions. For purposes of the cash flow statements, the Company considers all highly liquid investments with original maturities of

three

months or less to be cash equivalents.

Concentration Risk, Credit Risk, Policy [Policy Text Block]

Concentrations of credit risk

Substantially all of the Company’s revenue is derived from Small Business Innovation Research (“SBIR”) and Indefinite-Delivery, Indefinite-Quantity (“IDIQ”) contracts for the federal government. Approximately

98%

and

99%

of revenues in

2018

and

2017,

respectively, were realized in connection with task orders issued under the IDIQ contract with the Naval Surface Warfare Center to deliver ADEPT units and to provide research, development, and program management and implementation of improvements to these units. Although the Company’s operations are

not

subject to any particular government approval or regulations, the Company is dependent upon funding being made available to the DoD in amounts sufficient to cover the SBIR grants and other DoD contracts for which the Company competes.

Financial instruments that subject the Company to credit risk consist of cash and cash equivalents and accounts receivable.

The Company's policy is to limit the amount of credit exposure to any

one

financial institution, and place investments with financial institutions evaluated as being creditworthy, or in short-term money market funds which are exposed to minimal interest rate and credit risk. The Company maintains its cash primarily in investment accounts within large financial institutions. The Federal Deposit Insurance Corporation (“FDIC”) insures these balances up to

$250,000

per bank. At times, the Company’s cash and cash equivalent balances

may

exceed the FDIC insured limits. The Company has

not

experienced any losses on its bank deposits and management believes these deposits do

not

expose the Company to any significant credit risk.

Receivables on government contracts are stated at outstanding balances, less an allowance for doubtful accounts, if necessary. The allowance for doubtful accounts is established through provisions charged against operations. Receivables deemed to be uncollectible are charged against the allowance and subsequent recoveries, if any, are credited to the allowance.

The allowance for doubtful accounts is maintained at a level considered adequate to provide for losses that can be reasonably anticipated. Management’s periodic evaluation of the adequacy of the allowance is based on past experience, aging of the receivables, adverse situations that

may

affect a customers’ ability to pay, current economic conditions, and other relevant factors. This evaluation is inherently subjective as it requires estimates that

may

be susceptible to significant change. Unpaid balances remaining after the stated payment terms are considered past due. Substantially all of our business is conducted with the federal government in which nonpayment for awarded contracts is unlikely.

allowance for doubtful accounts was deemed necessary by management at

December 31, 2018

and

2017.

Property, Plant and Equipment, Policy [Policy Text Block]

Equipment, Furniture and Fixtures

Equipment, furniture and fixtures are stated at cost. Depreciation is computed using the straight-line method based on estimated useful lives of

years. Depreciation expense amounted to

$61,252

and

$23,991

for the years ended

December 31, 2018

and

2017,

respectively, and is included in engineering expense.

Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block]

Impairment of long-lived assets

The Company assesses the potential impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying value

may

not

be recoverable. An asset's value is impaired if management's estimate of the aggregate future cash flows, undiscounted and without interest charges, to be generated by the asset are less than the carrying value of the asset. Such cash flows consider factors such as expected future operating income and historical trends, as well as the effects of demand and competition. To the extent impairment has occurred, the loss is measured as the excess of the carrying amount of the asset over the estimated fair value of the asset. Such estimates require the use of judgment and numerous subjective assumptions, which, if actual experience varies, could result in material differences in the requirements for impairment charges. There were

impairments of long-lived assets in

2018

2017.

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition

We provide our products and services under fixed-price and cost-reimbursable contracts. Under fixed-price contracts we agree to perform the specified work for a pre-determined price. To the extent our actual costs vary from the estimates upon which the price was negotiated, we will generate more or less profit or could incur a loss. Cost-reimbursable contracts provide for the payment of allowable costs incurred during performance of the contract. We also enter into cost-plus-fixed-fee contracts. The fixed-fee in a cost-plus-fixed-fee contract is negotiated at the inception of the contract and that fixed-fee does

not

vary with actual costs. We account for a contract after it has been approved by all parties to the arrangement, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable.

We assess each contract at its inception to determine whether it should be combined with other contracts. When making this determination, we consider factors such as whether

two

or more contracts were negotiated and executed at or near the same time or were negotiated with an overall profit objective. If combined, we treat the combined contracts as a single contract for revenue recognition purposes.

We evaluate the products or services promised in each contract at inception to determine whether the contract should be accounted for as having

one

or more performance obligations. The products and services in our contracts are typically

not

distinct from

one

another due to their complex relationships and the significant contract management functions required to perform under the contract. Accordingly, our contracts are typically accounted for as

one

performance obligation. Significant judgment is required in determining performance obligations, and these decisions could change the amount of revenue and profit recorded in a given period. We classify net sales as products or services on our statements of income and comprehensive income based on the predominant attributes of the performance obligations.

We determine the transaction price for each contract based on the consideration we expect to receive for the products or services being provided under the contract. Our contracts do

not

include variable consideration. At the inception of a contract we estimate the transaction price based on our current rights and do

not

contemplate future modifications. Contracts are often subsequently modified to include changes in specifications, requirements or price, which

may

create new or change existing enforceable rights and obligations. Depending on the nature of the modification, we consider whether to account for the modification as an adjustment to the existing contract or as a separate contract. Generally, modifications to our contracts or delivery orders are distinct and will be accounted for as a separate contract.

We recognize revenue as performance obligations are satisfied and the customer obtains control of the products and services. In determining when performance obligations are satisfied, we consider factors such as contract terms, payment terms and whether there is an alternative future use of the product or service. Substantially all of our revenue is recognized over a period of time as we perform under the contract because control of the work in process transfers continuously to the customer. This continuous transfer of control of the work in process to the customer is supported by clauses in the contract that allow the customer to unilaterally terminate the contract for convenience, pay us for costs incurred plus a reasonable profit, and take control of any work in process.

For performance obligations to deliver products with continuous transfer of control to the customer, revenue is recognized based on the extent of progress towards completion of the performance obligation, generally using the cost-to-cost measure of progress for our contracts because it best depicts the transfer of control to the customer as we incur costs on our contracts. Under the cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs to complete the performance obligation. For performance obligations to provide services to the customer, revenue is recognized over a period of time based on costs incurred as our customer receives and consumes the benefits.

Backlog (i.e., unfulfilled or remaining performance obligations) represents the sales we expect to recognize for our products and services for which control has

not

yet transferred to the customer. The estimated consideration is determined at the outset of the contract and considers the risks related to the technical, schedule and cost impacts to complete the contract. Periodically, we review these risks and

may

increase or decrease backlog accordingly. As the risks on such contracts are successfully retired, the estimated consideration from customers

may

be reduced, resulting in a reduction of backlog without a corresponding recognition of sales. As of

December 31, 2018,

our ending backlog was

$4.8

million. For arrangements with the DoD, we generally do

not

begin work on contracts until funding is appropriated by the customer. Billing timetables and payment terms on our contracts vary based on a number of factors, including the contract type.

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 the

month period following delivery and acceptance of production units by the government. 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, 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 years ended

December 31, 2018

and

2017,

the Company recognized a warranty expense (benefit) of

$142,000

and $(

198,967

), respectively. Since the inception of the ADEPT IDIQ contract in

March 2010,

the Company has delivered

226

ADEPT units. As of

December 31, 2018,

there were

ADEPT units remain under the limited warranty coverage.

The following table reflects the reserve for product warranty activity for:

	December 31,
	2018			2017
Balance, beginning of the period	$	40,000		$	240,980
Provision for product warranty		142,000			40,000
Product warranty expirations		-			(238,967	)
Product warranty costs paid		(28,277	)		(2,013	)
Balance, end of the period	$	153,723		$	40,000

Research and Development Expense, 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 as follows:

	Year ended December 31,
	2018		2017
Salaries	$	74,694	$	228,610
Other costs		69,528		64,117
	$	144,222	$	292,727

Intangible Assets, Finite-Lived, Policy [Policy Text Block]

Intangible Assets

The Company’s intangible assets include a license acquired during

2015.

July 2015,

the Company purchased certain software products, intellectual property and related assets from VSE Corporation. The primary software programs purchased were the Prognostics Framework (PF) and Diagnostic Profiler (DP) programs. The Diagnostic Profiler software is used worldwide by several multinational companies for optimized maintenance of diverse product lines. The Diagnostic Profiler is also used by the US Air Force for depot test programs, and Prognostics Framework is used by the US Army for several missile defense systems. In

2015,

the Company recorded an estimated liability for the estimated purchase price of this license based on the estimated license sales and agreed upon payments due to VSE Corporation over the term of the agreement which is based on the number of sales of these licenses over a

six

year period. At

December 31, 2018

and

2017,

the Company had an accrued liability of

and

$0,

respectively, representing the Company's estimated obligation to VSE Corporation based on future projected license sales through the end of the agreement. A reduction in the contingent liability of

$116,000

was recorded in general and administrative expenses for the year ended

December 31, 2017.

Licenses are amortized using a straight-line method over their estimated life of

six

years. For the years ended

December 31, 2018

and

2017,

amortization expense amounted to

$21,000

each year and is included in general and administrative expenses on the Statements of Operations. Amortization expense for

2019

through

2020

will be

$21,000

and for

2021

will be

$10,500.

The Company has developed and continues to develop intellectual property (technology and data) under SBIR and other contracts. The request for a trademark for the product name “ADEPT” has been approved by the U.S. Patent and Trademark Office, and ADEPT® is a registered trademark of the Company

Under SBIR data rights, the Company is protected from unauthorized use of SBIR-developed technology and data for a period of

five

years after acceptance of all items to be delivered under a particular SBIR contract or any follow-on contract. Trade names and trademarks with finite lives are amortized using the straight-line method over their estimated useful lives. For each of the years ended

December 31, 2018

and

2017,

amortization expense amounted to

$141

and

$153,

respectively, which related to the cost of the patents and trademarks and is included in engineering expenses on the Statements of Income.

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

based Compensation

The Company records compensation expense associated with stock options and other forms of equity compensation based on the estimated fair value at the grant-date. There were

stock options issued for the years ended

December 31, 2018

and

2017.

During

2017,

the Company granted an aggregate of

70,000

shares pursuant to restricted stock awards. The fair value of the restricted stock awards which amounted to

$32,400

was determined on the date of grant using the Company’s closing stock price. The fair value of the restricted stock awards is being amortized over the vesting period of

three

five

years utilizing the straight-line method.

Income Tax, Policy [Policy Text Block]

Income Taxes

The Company accounts for income taxes under a liability method. Deferred tax assets and liabilities are determined based on the differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities, and are measured at the prevailing enacted tax rates that will be in effect when these differences are settled or realized. Deferred tax assets, including tax loss and credit carryforwards, and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The deferred tax assets will be reduced by a valuation allowance if it is more likely than

not

that some portion or all of the deferred tax asset will

not

be realized.

The Company adopted 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.

significant income tax uncertainties were identified. Therefore, as of

December 31, 2018

and

2017,

there were

tax contingencies or unrecognized tax positions recorded.

The Company has determined that any future interest accrued, related to unrecognized tax benefits, will be included in interest expense. In the event the Company must accrue for penalties, such penalties will be included as an operating expense.

December 22, 2017,

the Tax Cuts and Jobs Act (the

“2017

Tax Act”), which enacted a broad range of changes to the Internal Revenue Code, was signed into law. The

2017

Tax Act, among other things, included changes to U.S. federal tax rates, imposed significant additional limitations on the deductibility of interest and net operating losses. The Company’s net deferred tax assets and liabilities have been revalued at the newly enacted U.S. corporate rate and the impact, which was

not

significant, was recognized in tax expense for the year ended

December 31, 2017,

the year of enactment.

Earnings Per Share, Policy [Policy Text Block]

Earnings (loss) per share

Basic earnings (loss) per share ("EPS") is calculated by dividing net earnings (loss) allocable to common shareholders by the weighted average number of common shares outstanding during the period. Diluted EPS reflects the assumed exercise or conversion of all dilutive securities, using the treasury stock method.