Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2020

Risks and Uncertainties [Policy Text Block]

Risks and Uncertainties

The Company is subject to a number of risks and uncertainties similar to those of other companies, such as those associated with the continued expansion of the Company's sales and marketing network, technological developments, intellectual property protection, development of markets for new products and services offered by the Company, the economic health of principal customers of the Company, financial and operational risks associated with expansion of testing facilities used by the Company, government regulation (including, but

not

limited to, Food and Drug Administration (“FDA”) regulations, Brazilian laws, proposed laws and regulations, and delays in implementation of laws and regulations), competition and general economic conditions.

Use of Estimates, Policy [Policy Text Block]

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates, including those related to bad debts, long-lived asset lives, income tax valuation and share based compensation, and assumptions that affect the reported amounts of 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. Changes in estimates are recorded in the period in which they become known.

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities at the date of purchase of

days or less as cash equivalents. As of

December 31, 2020

and

2019,

there were

investments classified as cash equivalents.

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

Property and Equipment

Property & equipment are recorded at cost. Depreciation and amortization is computed over the estimated useful lives of the assets, using the straight-line method. Repair and maintenance costs are expensed as incurred. The estimated useful lives of the assets are:

Computer software (years)	3	to	5
Office furniture and equipment (years)	3	to	7
Laboratory equipment (years)	5	to	7
Leasehold improvements	Lesser of estimated useful life or lease term

The Company recorded depreciation and amortization related to property and equipment and capitalized software of

$2.6

million,

$2.9

million, and

$3.1

million in

2020,

2019

and

2018

respectively. The Company had

$0.8

million of capitalized software and equipment that was

not

placed in service as of

December 31, 2020.

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

Capitalized Software Development Costs

We capitalize costs related to significant software projects developed or obtained for internal use, including costs incurred in a cloud computing arrangement. Costs incurred during the preliminary project work stage or conceptual stage, such as determining the performance requirements, system requirements and data conversion, are expensed as incurred. Costs incurred in the application development phase, such as coding, testing for new software and upgrades that result in additional functionality, are capitalized and are amortized using the straight-line method over the useful life of the software for

years. Costs incurred during the post-implementation/operation stage, including training costs and maintenance costs, are expensed as incurred. In accordance with Company policy, during the years ended

December 31, 2020

and

2019,

we capitalized internally developed software costs of

$213

thousand and

$234

thousand, respectively. Amortization expense related to software development costs was

$293

thousand,

$457

thousand and

$525

thousand in

2020,

2019,

and

2018,

respectively. Determining whether particular costs incurred are more properly attributable to the preliminary or conceptual stage, and thus expensed, or to the application development phase, and thus capitalized and amortized, depends on subjective judgments about the nature of the development work, and our judgments in this regard

may

differ from those made by other companies. General and administrative costs related to developing or obtaining such software is expensed as incurred.

Other Assets [Policy Text Block]

Other Assets

Other assets primarily consist of capitalized legal costs relating to patent applications. The Company amortizes these costs over the lesser of the legal life or estimated useful life of the patent from the date of grant of the applicable patent. The typical life is

twenty

years. As of

December 31, 2020,

the Company had capitalized legal costs relating to patent applications of

$1.0

million with accumulated amortization of

$0.3

million, for a net balance of

$0.7

million. As of

December 31, 2019,

the Company had capitalized legal costs relating to patent applications of

$1.0

million with accumulated amortization of

$0.3

million, for a net balance of

$0.7

million. Amortization expense was

$62

thousand,

$40

thousand, and

$38

thousand in

2020,

2019

and

2018,

respectively. The amount of amortization related to patent applications is expected to remain below

$65

thousand per year for the next

five

years.

Revenue [Policy Text Block]

Revenue Recognition

The Company is in the business of performing drug testing services and reporting the results thereof. The Company's services are primarily drug and alcohol testing for its customers for an agreed-upon fee per unit tested. The revenues are recognized when the drug test is performed and reported to the customer.

January 1, 2018,

the Company adopted ASC

606,

“Revenue from Contracts with Customers”

(“ASC

606”

) using the modified retrospective method. The adoption of ASC

606

did

not

have a material effect on the Company's financial position or results of operations.

Revenue is recognized when control of the services is transferred to our customers, in an amount that reflects the consideration (

none

of which is variable) the Company expects to be entitled to in exchange for those services. The Company typically invoices customers monthly for services provided and payments are generally due within

days of the invoice date.

The table below disaggregates our external revenue by major source (in thousands). For additional revenue detail relating to geographic breakdown of sales, see Note

– “Business Segment Reporting”.

	Year Ended December 31,
	2020		2019		2018
Consolidated Revenue:
Testing	$	19,068	$	34,555	$	39,174
Shipping / Collection (hair)		2,174		2,876		3,159
Other		118		247		341
Total Revenue	$	21,360	$	37,678	$	42,674

Testing Revenue

Drug and alcohol tests for drugs of abuse using hair, performed in the Company's forensic laboratory in California, represents our primary service. Sales to customers are initiated through sales agreements, most of which have standard terms. Most tests are identified through a chain of custody form (“CCF”) and can therefore be uniquely tracked. Revenue is recognized when performance obligations under the terms of the contract with a customer are satisfied; generally, this occurs with the transfer of control of our service, which occurs at a specific point-in-time. The specific point-in-time is the completion of the test and availability of test results to the customer. Most tests are completed the same day that the hair specimen is received.

Substantially all tests are completed within a few days once received for processing at our laboratory in California. As the tests are performed in a forensic laboratory, the exact date and time of each test completion is available and used in the timing of recognition of revenue.

Revenue is measured as the amount of consideration the Company expects to receive in exchange for providing services. Sales taxes the Company pays concurrent with revenue-producing activities are excluded from revenue.

Shipping and Hair Collection Revenue

Shipping revenue represents the amount billed to customers related to shipping of the hair specimen and CCF (“sample”) to the Company's laboratory. Collection revenue represents the amount billed to customers related to the collection of the hair specimen. This collection is done by

third

parties who have contracted with the Company. Shipping and hair collection revenue is recognized when performance obligations under the terms of the contract with a customer are satisfied; generally, this occurs with the transfer of control of the Company's service, which occurs at a specific point-in-time. The specific point-in-time is the completion of the test (associated with the shipping or hair collection charge) and availability of test results to the customer.

Revenue is measured as the amount of consideration the Company expects to receive in exchange for providing services. As the Company controls the service before transferring to the customer, it is considered a principal in the transaction, and therefore records revenues on gross basis, with shipping and hair collection costs in costs of revenues.

Other Revenue

Other revenue represents several items including; urine testing performed by other labs, medical review officer charges, legal/testifying services, and other miscellaneous charges. The total of all of these items is less than

of total revenue. The amounts are generally billed to customers as services are performed, which occurs at a specific point-in-time.

Practical Expedients and Exemptions

The Company generally expenses sales commissions when incurred

as they are typically

not

related to costs to fulfill customer contracts but relate to overall sales targets

. These costs are recorded within marketing and selling expense.

Research and Development Expense, Policy [Policy Text Block]

Research and Development Expenses

The Company expenses all research and development costs as incurred.

Income Tax, Policy [Policy Text Block]

Income Taxes

The Company accounts for income taxes using the liability method pursuant to ASC

740,

“Income Taxes”

. Under this method, the Company recognizes deferred tax assets and liabilities for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts using enacted tax rates in effect for the year the differences are expected to reverse. The Company evaluates uncertain tax positions annually and considers whether the amounts recorded for income taxes are adequate to address the Company's tax risk profile. The Company analyzes the potential tax liabilities of specific transactions and tax positions based on management's judgment as to the expected outcome.

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

Concentration of Credit Risk and Off-Balance Sheet Risk

The Company has

significant off-balance-sheet risk such as foreign exchange contracts, option contracts, or other foreign hedging arrangements. Financial instruments that potentially subject the Company to concentrations of credit risk are principally cash and accounts receivable. The Company's policy is to place its cash in high quality financial institutions. At time, these deposits

may

exceed or be exempt from federally insured limits. The Company does

not

believe significant credit risk exists with respect to these institutions. Concentration of credit risk with respect to accounts receivable is limited to certain customers to whom the Company makes substantial sales. To reduce risk, the Company routinely assesses the financial strength of its customers and, as a consequence, believes that its accounts receivable credit risk exposure is limited. The Company maintains an allowance for potential credit losses but historically has

not

experienced any significant losses related to individual customers or groups of customers in any particular industry or geographic area. The Company does

not

require collateral.

Major Customers, Policy [Policy Text Block]

Significant Customers

The Company had

customers that represented greater than

10%

of revenue for the year ended

December 31, 2020.

One

customer represented

26%

and

31%

of total revenue for the years ended

December 31, 2019

and

2018,

respectively. The Company had

customers that represented greater than

10%

of the total accounts receivable balance as of

December 31, 2020.

The Company had

two

customers that accounted for

13%

and

11%

of the total accounts receivable balance as of

December 31, 2019.

Share-based Payment Arrangement [Policy Text Block]

Stock-Based Compensation

The Company accounts for equity awards in accordance with ASC

718,

“

Compensation — Stock Compensation”

(“ASC

718”

). ASC

718

requires employee equity awards to be accounted for under the fair value method. It also requires the measurement of compensation cost at fair value on the date of grant and recognition of compensation expense over the service period for awards expected to vest. Accordingly, share-based compensation is measured at the grant date based on the fair value of the award. The Company uses the straight-line method to recognize share-based compensation over the service period of the award, which is generally equal to the vesting period. The Company uses the simplified approach to calculate the expected exercise date of options, which is

one

of the components used to determine the fair value of the options. This approach is used due to the small number of recipients receiving stock options

not

providing a reasonable basis for estimating expected term. In

2016,

the Company adopted ASU

2016

09,

Improvements to Employee Share-Based Payment Accounting

, which simplifies several aspects of the accounting for employee share-based payment transactions including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification of related amounts within the statement of cash flows. As a result, we recognize the impact of forfeitures when they occur with

adjustment for estimated forfeitures and recognize excess tax benefits as a reduction of income tax expense regardless of whether the benefit reduces income taxes payable.

Stock compensation expense by income statement account is as follows (in thousands):

Stock-Based Compensation
	Year Ended December 31,
	2020		2019		2018
Cost of revenues	$	50	$	59	$	62
General & administrative		380		579		436
Marketing & selling		74		54		29
Research & development		59		67		67
Total stock compensation	$	563	$	759	$	594

See Note

for additional information relating to the Company's stock plan.

Earnings Per Share, Policy [Policy Text Block]

Basic and Diluted Net Income per Share

Basic net income per share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted net income per share is computed by dividing net income available to common shareholders by the weighted average number of common shares and dilutive common stock equivalents outstanding during the period. The number of dilutive common stock equivalents outstanding during the period has been determined in accordance with the treasury-stock method. Common equivalent shares consist of common stock issuable upon the exercise of outstanding options and the unvested portion of stock unit awards (“SUAs”).

Basic and diluted weighted average common shares outstanding are as follows (in thousands):

	2020	2019	2018
Weighted average common shares outstanding, basic	5,524	5,514	5,502
Dilutive common equivalent shares	-	11	45
Weighted average common shares outstanding, assuming dilution	5,524	5,525	5,547

For the years ended

December 31, 2020,

2019

and

2018,

options to purchase

588

thousand,

357

thousand and

thousand common shares were outstanding but

not

included in the dilutive common equivalent share calculation as their effect would have been anti-dilutive.

Fair Value of Financial Instruments, Policy [Policy Text Block]

Financial Instruments

Financial instruments include cash, accounts receivable and accounts payable. Estimated fair values of these financial instruments approximate carrying values due to their short-term nature. The Company has

two

outstanding equipment loans. One had an interest rate of the

-day LIBOR rate +

1.75%

and the other has a fixed interest rate of

3.79%.

As there is a market interest rate, the carrying amount is fair value. The PPP Loan bears interest on the unpaid balance at the rate of

one

percent (

) per annum.

Basis of Presentation and Consolidation, Policy [Policy Text Block]

Basis of Preparation and Consolidation

The consolidated financial statements include the financial statements of the Company and its wholly-owned subsidiaries have been prepared using accounting principles generally accepted in the United States (“U.S. GAAP”). All intercompany transactions and balances have been eliminated.

Foreign Currency Transactions and Translations Policy [Policy Text Block]

Foreign Currency Translation

To the extent sales are made through our Brazil subsidiary, such sales are transacted in Brazilian Real and translated into US dollars. Foreign currency denominated assets and liabilities are translated into U.S. dollars using the exchange rates in effect at the consolidated balance sheet date. Results of operations and cash flows are translated using the average exchange rates throughout the period. The effect of exchange rate fluctuations on translation of assets and liabilities that are in the functional currency is included as a component of shareholders' equity in accumulated other comprehensive income (loss). The total change in foreign currency translation adjustment for the year ended

December 31, 2020

was an immaterial amount and

2019

was a loss of

$0.2

million. This amounted to an immaterial amount and

$0.2

million after tax impact.

Segment Reporting, Policy [Policy Text Block]

Segment Reporting

The Company manages its operations as

one

segment, drug testing services. As a result, the financial information disclosed herein materially represents all of the financial information related to the Company's principal operating segment. See Note

for geographic breakdown of revenue.

New Accounting Pronouncements, Policy [Policy Text Block]

Recently Adopted Accounting Pronouncements

February 2016,

the Financial Accounting Standards Board (“FASB”) issued ASU

2016

02,

“

Leases”

, which was subsequently amended by ASU

2018

10,

ASU

2018

11,

ASU

2018

and ASU

2019

(collectively, Topic

842

). which introduced the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous guidance. The new standard established a right-of-use ("ROU") model that requires a lessee to record a lease asset and liability on the balance sheet for all leases with terms longer than

months. The standard became effective for fiscal years beginning after

December 15, 2018

and interim periods within those fiscal years. The Company adopted Topic

842

as of

January 1, 2019 (

see Note

– Operating Leases).

August 2018,

the FASB issued ASU

2018

15,

“

Intangibles—Goodwill and Other—Internal-Use Software: Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract”

. The FASB issued ASU

2018

to align the requirements for capitalizing implementation costs in a cloud computing arrangement service contract with the requirements for capitalizing implementation costs incurred for an internal-use software license. ASU

2018

will be effective for the Company's fiscal year

2020,

with the option to early adopt prior to the effective date. The Company adopted ASU

2018

as of

January 1, 2019

with

material impact to the Company's consolidated financial statements and disclosures.

New Accounting Pronouncements

December 2019,

the FASB issued ASU

2019

12,

“

Income Taxes (Topic

740

): Simplifying the Accounting for Income Taxes”

. The amendments in this update simplify the accounting for income taxes by removing certain exceptions to the general principles in ASU Topic

740.

The amendments also improve consistent application of and simplify U.S. GAAP for other areas of ASU Topic

740

by clarifying and amending existing guidance. The amendments in this update are effective for interim and annual periods for the Company beginning after

December 15, 2020,

with early adoption permitted. The Standard

may

be adopted using the prospective or retrospective transition approach and could be applied to a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year adoption. The Company is currently evaluating the impact of this pronouncement on the Company's consolidated financial statements and disclosures.