Lifeloc Technologies, Inc 10-Q for FY2025 Q2
Lifeloc Technologies, Inc (LCTC)
About this 10-Q
Lifeloc Technologies, Inc filed this 10-Q on August 11, 2025, covering the quarter ended June 30, 2025 (FY2025 Q2).
Headline figures
Quarter ended June 30, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $2.22M
- down 7.0% from $2.39M a year earlier
- Net loss
- $393.64K
- compared with a net loss of $297.99K a year earlier
- Diluted EPS
- -$0.14
- compared with -$0.12 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the quarterly period ended |
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the transition period from to |
Commission file number
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of | (I.R.S. Employer Identification No.) |
| incorporation or organization) |
(Address of principal executive offices)
(
(Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| N/A |
Indicate by check
mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes ☐
* The registrant is a voluntary filer of reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, and has filed all such reports during the preceding 12 months.
Indicate by check
mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted and posted pursuant to
Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller reporting company | |
| (Do not check if a smaller reporting company) | |
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check
mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
No
Indicate the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date:
| Common Stock, no par value | Shares |
| (Class) | (outstanding at June 30, 2025) |
LIFELOC TECHNOLOGIES, INC.
FORM 10-Q
For the Six Months Ended June 30, 2025
INDEX
| 2 |
PART I FINANCIAL INFORMATION
ITEM 1 – FINANCIAL STATEMENTS
LIFELOC TECHNOLOGIES, INC.
Condensed Balance Sheets (Unaudited)
| ASSETS | ||||||||
| June 30, 2025 | December 31, 2024 | |||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventories, net | ||||||||
| Federal and state income taxes receivable | ||||||||
| Prepaid expenses and other | ||||||||
| Total current assets | ||||||||
| PROPERTY, PLANT AND EQUIPMENT: | ||||||||
| Land | ||||||||
| Building | ||||||||
| Real-time Alcohol Detection And Recognition equipment and software | ||||||||
| Production equipment, software and space modifications | ||||||||
| Training courses | ||||||||
| Office equipment, software and space modifications | ||||||||
| Sales and marketing equipment and space modifications | ||||||||
| Research and development equipment, software and space modifications | ||||||||
| Research and development equipment, software and space modifications not in service | ||||||||
| Less accumulated depreciation | ( | ) | ( | ) | ||||
| Total property and equipment, net | ||||||||
| OTHER ASSETS: | ||||||||
| Patents, net | ||||||||
| Deposits and other | ||||||||
| Deferred income taxes | ||||||||
| Total other assets | ||||||||
| Total assets | $ | $ | ||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable | $ | $ | ||||||
| Term loan payable, current portion | ||||||||
| Subordinated debentures payable, current portion | ||||||||
| Customer and tenant deposits | ||||||||
| Accrued expenses | ||||||||
| Deferred revenue, current portion | ||||||||
| Product warranty reserve | ||||||||
| Total current liabilities | ||||||||
| TERM LOAN PAYABLE, net of current portion and debt issuance costs | ||||||||
| SUBORDINATED DEBENTURES PAYABLE, net of current portion and debt issuance costs | ||||||||
| DEFERRED REVENUE, net of current portion | ||||||||
| Total liabilities | ||||||||
| COMMITMENTS AND CONTINGENCIES (Note 6) | ||||||||
| STOCKHOLDERS' EQUITY: | ||||||||
| Common stock, par value; shares authorized, shares outstanding ( outstanding at December 31, 2024) | ||||||||
| Retained earnings (deficit) | ( | ) | ||||||
| Total stockholders' equity | ||||||||
| Total liabilities and stockholders' equity | $ | $ | ||||||
The accompanying notes to the condensed financial statements are an integral part of these condensed financial statements.
| 3 |
LIFELOC TECHNOLOGIES, INC.
Condensed Statements of Income (Loss) (Unaudited)
| Three Months Ended June 30, | ||||||||
| REVENUES: | 2025 | 2024 | ||||||
| Product sales | $ | $ | ||||||
| Royalties | ||||||||
| Rental income | ||||||||
| Total | ||||||||
| COST OF SALES | ||||||||
| GROSS PROFIT | ||||||||
| OPERATING EXPENSES: | ||||||||
| Research, development, and sustaining engineering | ||||||||
| Sales and marketing | ||||||||
| General and administrative | ||||||||
| Total | ||||||||
| OPERATING (LOSS) | ( | ) | ( | ) | ||||
| OTHER INCOME (EXPENSE): | ||||||||
| Interest income | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Total | ( | ) | ( | ) | ||||
| NET (LOSS) BEFORE PROVISION FOR TAXES | ( | ) | ( | ) | ||||
| BENEFIT FROM FEDERAL AND STATE INCOME TAXES | ||||||||
| NET (LOSS) | $ | ( | ) | $ | ( | ) | ||
| NET (LOSS) PER SHARE, BASIC | $ | ( | ) | $ | ( | ) | ||
| NET (LOSS) PER SHARE, DILUTED | $ | ( | ) | $ | ( | ) | ||
| WEIGHTED AVERAGE SHARES, BASIC | ||||||||
| WEIGHTED AVERAGE SHARES, DILUTED | ||||||||
The accompanying notes to the condensed financial statements are an integral part of these condensed financial statements.
| 4 |
LIFELOC TECHNOLOGIES, INC.
Condensed Statements of Income (Loss) (Unaudited)
| Six Months Ended June 30, | ||||||||
| REVENUES: | 2025 | 2024 | ||||||
| Product sales | $ | $ | ||||||
| Royalties | ||||||||
| Rental income | ||||||||
| Total | ||||||||
| COST OF SALES | ||||||||
| GROSS PROFIT | ||||||||
| OPERATING EXPENSES: | ||||||||
| Research, development, and sustaining engineering | ||||||||
| Sales and marketing | ||||||||
| General and administrative | ||||||||
| Total | ||||||||
| OPERATING (LOSS) | ( | ) | ( | ) | ||||
| OTHER INCOME (EXPENSE): | ||||||||
| Interest income | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Total | ( | ) | ||||||
| NET (LOSS) BEFORE PROVISION FOR TAXES | ( | ) | ( | ) | ||||
| BENEFIT FROM FEDERAL AND STATE INCOME TAXES | ||||||||
| NET (LOSS) | $ | ( | ) | $ | ( | ) | ||
| NET (LOSS) PER SHARE, BASIC | $ | ( | ) | $ | ( | ) | ||
| NET (LOSS) PER SHARE, DILUTED | $ | ( | ) | $ | ( | ) | ||
| WEIGHTED AVERAGE SHARES, BASIC | ||||||||
| WEIGHTED AVERAGE SHARES, DILUTED | ||||||||
The accompanying notes to the condensed financial statements are an integral part of these condensed financial statements.
| 5 |
LIFELOC
TECHNOLOGIES, INC.
Condensed Statements of Changes in Stockholders' Equity (Unaudited)
| Common Stock Shares | Common Stock Amount | Retained Earnings | Total | |||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | |||||||||||||
| Issuance of shares from option exercise | — | |||||||||||||||
| Warrants issued with subordinated debenture |
|
|
— |
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| Net (loss) | — | ( | ) | ( | ) | |||||||||||
| Ending balance, March 31, 2024 | ||||||||||||||||
| Net (loss) | — | ( | ) | ( | ) | |||||||||||
| Ending balance, June 30, 2024 | $ | $ | $ | |||||||||||||
| Beginning balance, December 31, 2024 | $ | $ | $ | |||||||||||||
| Issuance of shares from option exercise | ||||||||||||||||
| Warrants issued with subordinated debenture |
|
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— |
|
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|
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|
|
| Net (loss) | — | ( | ) | ( | ) | |||||||||||
| Ending balance, March 31, 2025 | ||||||||||||||||
| Net (loss) | — | ( | ) | ( | ) | |||||||||||
| Ending balance, June 30, 2025 | $ | $ | ( | ) | $ | |||||||||||
The accompanying notes to the condensed financial statements are an integral part of these condensed financial statements.
| 6 |
LIFELOC TECHNOLOGIES, INC.
Condensed Statements of Cash Flows (Unaudited)
| Six Months Ended June 30, | ||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | 2025 | 2024 | ||||||
| Net (loss) | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net income (loss) to net cash (used in) operating activities- | ||||||||
| Depreciation and amortization | ||||||||
| Provision for doubtful accounts, net change | ( | ) | ||||||
| Provision for inventory obsolescence, net change | ( | ) | ||||||
| Deferred taxes, net change | ( | ) | ||||||
| Amortization of debt issuance costs | ||||||||
| Changes in operating assets and liabilities- | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Inventories | ||||||||
| Federal and state income taxes receivable | ( | ) | ||||||
| Prepaid expenses and other | ( | ) | ( | ) | ||||
| Deposits and other | ||||||||
| Accounts payable | ||||||||
| Income taxes payable | ( | ) | ||||||
| Customer and tenant deposits | ( | ) | ( | ) | ||||
| Accrued expenses | ( | ) | ||||||
| Deferred revenue | ( | ) | ||||||
| Net cash (used in) operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS (USED IN) INVESTING ACTIVITIES: | ||||||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| Purchases
of research and development equipment, software and space modifications not in service | ( | ) | ( | ) | ||||
| Patent filing expense | ( | ) | ||||||
| Net cash (used in) investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES: | ||||||||
| Principal payments made on term loan | ( | ) | ( | ) | ||||
| Proceeds from issuance of subordinated debenture | ||||||||
| Issuance of shares from option exercise | ||||||||
| Net cash provided from (used in) financing activities | ( | ) | ||||||
| NET (DECREASE) IN CASH | ( | ) | ( | ) | ||||
| CASH, BEGINNING OF PERIOD | ||||||||
| CASH, END OF PERIOD | $ | $ | ||||||
| SUPPLEMENTAL INFORMATION: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income tax | $ | $ | ||||||
| Income tax refund received | $ | $ | ||||||
| Non-cash
financing and investing activities: warrants issued with subordinated debenture | $ | $ | ||||||
The accompanying notes to the condensed financial statements are an integral part of these condensed financial statements.
| 7 |
LIFELOC TECHNOLOGIES, INC.
Notes to Condensed Financial Statements (Unaudited)
June 30, 2025 and 2024
1. ORGANIZATION AND NATURE OF BUSINESS
Lifeloc Technologies, Inc. ("Lifeloc" or the "Company", “Us”, “Our”, or “We”) 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 and monitoring" 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 and www.lifelocuniversity.com.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PROCESSES
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, 2024 as filed with the SEC. In the opinion of management, the accompanying unaudited condensed financial statements contain all adjustments, consisting of only normal recurring adjustments necessary for a fair statement of the financial position as of June 30, 2025 and December 31, 2024, and the results of operations and cash flows for the three and six months ended June 30, 2025 and June 30, 2024. 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 2024 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 regarding allowances for bad debts, inventory obsolescence, accumulated depreciation, and deferred income taxes. 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.
Debt
Issuance Costs. The term loan and the subordinated debentures are shown in the accompanying balance sheet net of debt issuance costs.
Deferred debt issuance costs are amortized over the life of the term loan and the subordinated debentures on a straight-line basis, which
approximates the effective interest method. Total debt issuance cost amortization during the three months ended June 30, 2025 and
2024 was $
| 8 |
Inventories. Inventories are stated at the lower of standard cost or net realizable value. We reduce inventory for estimated obsolete or unmarketable inventory equal to the difference between the cost of inventory and the estimated net realizable value after cost to sell, 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, 2025 and December 31, 2024, inventory consisted of the following:
| Schedule of inventories | ||||||||
| 2025 | 2024 | |||||||
| Raw materials & deposits | $ | $ | ||||||
| Work-in-process | ||||||||
| Finished goods | ||||||||
| Total gross inventories | ||||||||
| Less reserve for obsolescence | ( | ) | ( | ) | ||||
| Total net inventories | $ | $ | ||||||
Income Taxes. We account for income
taxes under the provisions of ASC Topic 740, Accounting for Income Taxes ("ASC 740"). ASC 740 requires recognition of
deferred income tax assets and liabilities for the expected future income tax consequences, based on enacted tax laws, of temporary differences
between the financial reporting and tax bases of assets and liabilities. ASC 740 also requires recognition of deferred tax assets for
the expected future tax effects of all deductible temporary differences, loss carryforwards and tax credit carryforwards. Deferred tax
assets are then reduced, if deemed necessary, by a valuation allowance for the amount of any tax benefits which, more likely than not
based on current circumstances, are not expected to be realized. We estimate that our current effective tax rate to be
ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements, uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts.
Revenue Recognition. Revenue from product sales and supplies is generally recorded when we ship the product and title has passed to the customer, or when agreed milestones are met in the case of product developments, 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.
Revenues arising from extended warranty contracts are booked as sales over their life on a straight-line basis. 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 2,774 square feet of space leased to our tenant 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. The lease expired on June 30, 2025 and was not renewed.
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.
| 9 |
Deferred Revenue. Deferred revenues arise from service contracts and from direct training revenue. 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 (loss). 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 direct training revenue that needs to be scheduled based on the customer’s and Lifeloc’s availability. Revenue is recognized when training is complete and is included in product sales in our condensed statements of income (loss). All direct training is for less than one year and all deferred revenues from this source are shown in our balance sheets as short term.
Recently Issued Accounting Pronouncements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvement to Income Tax Disclosures, amending income tax disclosure requirements for the effective tax rate reconciliation and income taxes paid. The amendments in ASU 2023-09 are effective for fiscal years beginning after December 15, 2024 and are applied prospectively. Early adoption and retrospective application of the amendments are permitted. We continue to evaluate the impact of this update on our financial statements, but do not expect any changes to our current reportable segments.
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires disclosure about the types of costs and expenses included in certain expense captions presented on the income statement. The new disclosure requirements are effective for the Company's annual periods for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted, and may be applied either prospectively or retrospectively. We are currently evaluating the ASU to determine its impact on our consolidated financial statements and disclosures.
The Company does not believe that issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statements.
Segment Reporting. We have concluded that we have two operating segments, including our primary business which is as a developer, manufacturer and marketer of portable hand-held breathalyzers and related accessories, supplies and education. As a result of purchasing our building on October 31, 2014, we have a second segment consisting of renting portions of our building to one tenant, whose lease expired on June 30, 2025 and was not renewed.
The chief operating decision maker evaluates the performance of the Company’s reportable segments based on segment profit or loss from operations, which is inclusive of all respective expenses. The profitability target of each segment is at the profit or loss from operations level, which is how the chief operating decision maker assesses performance. The chief operating decision maker also uses profit or loss from operations to allocate capital and personnel to the segments, which is typically done to improve the efficiency and effectiveness of operations or for expansion of operations, and ultimately to increase profit from operations. The Company’s reportable segments are strategic business units that offer different products. They are managed separately because each business requires different expertise to ensure quality products are produced in an efficient manner and because each business has a different customer base. We view our rentals segment as immaterial as the chief operating decision maker is focused primarily on the products segment. The Company’s chief operating decision maker is the chief executive officer.
We report both basic and diluted net income or loss per common share. Basic net income or 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 or loss per common share is computed by dividing the net income or loss 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 and warrants 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 (loss) per common share for three and six months ended June 30, 2025 and June 30, 2024.
| Schedule of basic and diluted net income per common share | ||||||||
| Three Months Ended June 30, | ||||||||
| 2025 | 2024 | |||||||
| Net (loss) | $ | ( | ) | $ | ( | ) | ||
| Weighted average shares-basic | ||||||||
| Effect of dilutive potential common shares | ||||||||
| Weighted average shares-diluted | ||||||||
| Net (loss) per share-basic | $ | ( | ) | $ | ( | ) | ||
| Net (loss) per share-diluted | $ | ( | ) | $ | ( | ) | ||
| Antidilutive employee stock options | ||||||||
| 10 |
| Six Months Ended June 30, | ||||||||
| 2025 | 2024 | |||||||
| Net (loss) | $ | ( | ) | $ | ( | ) | ||
| Weighted average shares-basic | ||||||||
| Effect of dilutive potential common shares | ||||||||
| Weighted average shares-diluted | ||||||||
| Net (loss) per share-basic | $ | ( | ) | $ | ( | ) | ||
| Net (loss) per share-diluted | $ | ( | ) | $ | ( | ) | ||
| Antidilutive employee stock options | ||||||||
4. STOCKHOLDERS' EQUITY
In
February 2025, options to purchase
At June 30, 2025 there were
5. DEBT
Debentures. On December 31, 2024
we issued a $
In
consideration of the lender providing the financing, the Company issued warrants which entitle the holder to purchase
On March 1, 2025 we issued a $
In
consideration of the lender providing the financing, the Company issued warrants which entitle the holder to purchase
| 11 |
The factors used to calculate the estimated value of the warrants and the resulting fair value, were as follows.
| Schedule of option grant and fair market value | ||||
| Stock price | $ | |||
| Exercise price per share | $ | |||
| Original term (months) | ||||
| Volatility | % | |||
| Annual rate of quarterly dividends | ||||
| Risk free interest rate | % | |||
Applying
these assumptions resulted in a relative fair value of $
Our minimum future principal payments on these subordinated debentures are as follows:
| Schedule of minimum future lease payments | ||||
| June 30, 2026 | $ | |||
| June 30, 2027 | ||||
| June 30, 2028 | ||||
| June 30, 2029 | ||||
| June 30, 2030 | ||||
| December 31, 2030 | ||||
| Total | ||||
| Less debt issuance cost | ( | ) | ||
| Net subordinated debenture payable | ||||
| Less current portion | ( | ) | ||
| Long term portion | $ | |||
Term
Loan Payable. The term loan is secured by a first mortgage on our building, and is payable in 119 equal monthly installments of $
| Schedule of term loan payable | ||||||
| 2025 | $ | |||||
| 2026 | ||||||
| 2027 | ||||||
| 2028 | ||||||
| 2029 | ||||||
| 2030 – 2031 | ||||||
| Total | ||||||
| Less debt issuance cost | ( | ) | ||||
| Net term loan payable | ||||||
| Less current portion | ( | ) | ||||
| Long term portion | $ | |||||
6. COMMITMENTS AND CONTINGENCIES
Employee Severance Benefits. Our obligation with respect to employee severance benefits is minimized by the "at will" nature of the employee relationships. As of June 30, 2025, we had no obligation with respect to contingent severance benefit obligations other than the Company's obligations under the employment agreement with its chief executive officer, Dr. Wayne Willkomm. In the event that Dr. Willkomm's employment is terminated by the Company without Cause (including through a decision by the Company not to renew the employment agreement) or by Dr. Willkomm with Good Reason (as each are defined in the employment agreement), Dr. Willkomm will be eligible, upon satisfaction of certain conditions, for severance equal to two months of salary continuation plus 12 months of health insurance continuation.
| 12 |
Contractual Commitments and Purchase
Orders. Contractual commitments under development agreements and outstanding purchase orders issued to vendors in the ordinary course
of business totaled $
Regulatory Commitments. We are subject to certain regulations of the United States Department of Transportation and various state departments of transportation. We believe that we are in substantial compliance with all known applicable regulations.
7. LEGAL PROCEEDINGS
We were not involved or party to any legal proceedings at June 30, 2025 or December 31, 2024, and therefore made no accruals for legal proceedings in either 2025 or 2024.
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 losses 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, 2025 and 2024. There were no intersegment revenues.
| Schedule of operations of business segments | ||||||||
| Revenues: | 2025 | 2024 | ||||||
| Product sales | $ | $ | ||||||
| Royalties | ||||||||
| Products subtotal | ||||||||
| Rentals | ||||||||
| Total | ||||||||
| Gross profit: | ||||||||
| Product sales | ||||||||
| Royalties | ||||||||
| Products subtotal | ||||||||
| Rentals | ||||||||
| Total | ||||||||
| Interest expense: | ||||||||
| Product sales | ||||||||
| Royalties | ||||||||
| Products subtotal | ||||||||
| Rentals | ||||||||
| Total | ||||||||
| Net (loss) before taxes: | ||||||||
| Product sales | ( | ) | ( | ) | ||||
| Royalties | ||||||||
| Products subtotal | ( | ) | ( | ) | ||||
| Rentals | ||||||||
| Total | $ | ( | ) | $ | ( | ) | ||
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The following sets forth information about the operations of the business segments for the six months ended June 30, 2025 and 2024. There were no intersegment revenues.
| Revenues: | 2025 | 2024 | ||||||
| Product sales | $ | $ | ||||||
| Royalties | ||||||||
| Products subtotal | ||||||||
| Rentals | ||||||||
| Total | ||||||||
| Gross profit: | ||||||||
| Product sales | ||||||||
| Royalties | ||||||||
| Products subtotal | ||||||||
| Rentals | ||||||||
| Total | ||||||||
| Interest expense: | ||||||||
| Product sales | ||||||||
| Royalties | ||||||||
| Products subtotal | ||||||||
| Rentals | ||||||||
| Total | ||||||||
| Net (loss) before taxes: | ||||||||
| Product sales | ( | ) | ( | ) | ||||
| Royalties | ||||||||
| Products subtotal | ( | ) | ( | ) | ||||
| Rentals | ||||||||
| Total | $ | ( | ) | $ | ( | ) | ||
Significant segment expenses
for the three months ended June 30, 2025 are as follows. We have excluded our rentals segment and allocated all expenses to the products
segment in the table below as the rentals segment is immaterial. Similarly, royalties are excluded as none of the expenses are attributable
to royalties. Operating income from royalties was $
| Schedule of significant segment expenses | ||||||||
| Three Months Ended June 30, | ||||||||
| 2025 | 2024 | |||||||
| Product sales | $ | $ | ||||||
| Cost of sales | ( | ) | ( | ) | ||||
| Gross profit | ||||||||
| Less: research , development and sustaining engineering | ( | ) | ( | ) | ||||
| Sales and marketing | ( | ) | ( | ) | ||||
| General and administrative | ( | ) | ( | ) | ||||
| Interest income | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Operating loss before royalties and building rentals | ( | ) | ( | ) | ||||
| Royalties | ||||||||
| Building rentals operating income | ||||||||
| Operating (loss) before taxes | $ | ( | ) | $ | ( | ) | ||
| 14 |
Significant segment expenses for the six months ended
June 30, 2025 are as follows. We have excluded our rentals segment and allocated all expenses to the products segment in the table below
as the rentals segment is immaterial. Similarly, royalties are excluded as none of the expenses are attributable to royalties. Operating
income from royalties was $
| Six Months Ended June 30, | ||||||||
| 2025 | 2024 | |||||||
| Product sales | $ | $ | ||||||
| Cost of sales | ( | ) | ( | ) | ||||
| Gross profit | ||||||||
| Less: research, development and sustaining engineering | ( | ) | ( | ) | ||||
| Sales and marketing | ( | ) | ( | ) | ||||
| General and administrative | ( | ) | ( | ) | ||||
| Interest income | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Operating loss before royalties and building rentals | ( | ) | ( | ) | ||||
| Royalties | ||||||||
| Building rentals operating income | ||||||||
| Operating (loss) before taxes | $ | ( | ) | $ | ( | ) | ||
The following sets forth domestic and international product sales for the three months ended June 30, 2025 and 2024.
| Schedule of domestic and international product | ||||||||||
| Three Months Ended June 30, | ||||||||||
| 2025 | 2024 | |||||||||
| Domestic | $ | $ | ||||||||
| International | ||||||||||
| Total | $ | $ | ||||||||
The following sets forth domestic and international product sales for the six months ended June 30, 2025 and 2024.
| Six Months Ended June 30, | ||||||||||
| 2025 | 2024 | |||||||||
| Domestic | $ | $ | ||||||||
| International | ||||||||||
| Total | $ | $ | ||||||||
Our purchases of assets for the above products segment for the six months ended June 30, 2025 and June 30, 2024 were as follows.
| Schedule of products segment | ||||||||
| 2025 | 2024 | |||||||
| Property, plant and equipment | $ | $ | ||||||
| Research and development equipment, software and space modifications not in service | ||||||||
| Patent filing cost | ||||||||
| Total | $ | $ | ||||||
No assets were purchased for the rentals segment.
At
June 30, 2025, $
| 15 |
The following is the disaggregation of revenue into broad categories, which we have defined as shown below for the three months ended June 30, 2025 and June 30, 2024.
| Schedule of disaggregation | ||||||||
| Product sales: | 2025 | 2024 | ||||||
| Product sales and supplies | $ | $ | ||||||
| Training and certification | ||||||||
| Service plans and equipment rental | ||||||||
| Product sales subtotal | ||||||||
| Royalties | ||||||||
| Rental income | ||||||||
| Total revenues | $ | $ | ||||||
The following is the disaggregation of revenue into broad categories, which we have defined as shown below for the six months ended June 30, 2025 and June 30, 2024.
| Product sales: | 2025 | 2024 | ||||||
| Product sales and supplies | $ | $ | ||||||
| Training and certification | ||||||||
| Service plans and equipment rental | ||||||||
| Product sales subtotal | ||||||||
| Royalties | ||||||||
| Rental income | ||||||||
| Total revenues | $ | $ | ||||||
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of our financial condition and results of operations, and should be read in conjunction with our financial statements and the related notes included elsewhere in this Form 10-Q. Certain statements contained in this section are not historical facts, including statements about our strategies and expectations about new and existing products, market demand, acceptance of new and existing products, technologies and opportunities, market and industry segment growth, and return on investments in products and markets. These statements are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"), and we intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in these statutes. You can identify forward-looking statements by the use of forward-looking terminology such as "believes," "expects," "may," "will," "should," "seeks," "intends," "plans" or "anticipates" or the negative of these words and phrases or similar words or phrases that are predictions of or indicate future events or trends and that do not relate solely to historical matters. Such statements involve substantial risks and uncertainties that may cause actual results to differ materially from those indicated by the forward-looking statements. All forward-looking statements in this section are based on information available to us on the date of this document, and we assume no obligation to update such forward looking statements. Readers of this Form 10-Q are strongly encouraged to review the section titled "Risk Factors" in our December 31, 2024 Form 10-K.
Overview
Lifeloc Technologies, Inc., a Colorado corporation ("Lifeloc" or the "Company"), is a leading developer, manufacturer and marketer of portable hand-held and fixed station breathalyzers, now focused on expanding our offerings into technologies for the detection of drugs of abuse.
We began our alcohol breath testing product line in 1989 with the PBA3000, later replaced by the Phoenix® Classic in 1998, and subsequently by the FC Series and Workplace Series. Our FC Series, launched in 2001, is designed for domestic and international law enforcement and corrections markets and is approved by the U.S. Department of Transportation (DOT) for evidential use. Our Workplace Series, including the EV30 and Phoenix® 6.0 released in 2005 and 2006, also received DOT approval for federally regulated workplace testing. We have since introduced a range of innovations such as Bluetooth connectivity, passive screening devices like the FC5 and Sentinel™ stations, and the EASYCAL® automatic calibration systems.
We compete in all major segments of the portable breath alcohol testing instrument market, including law enforcement, workplace, corrections, and original equipment manufacturing ("OEM") 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.
In 2016, we acquired exclusive rights to develop and commercialize Sandia Corporation’s patented SpinDx™ technology, which enables rapid, on-site, and cost-effective drug testing using a centrifugal disk platform capable of detecting trace levels of drugs from small samples. Despite initial delays due to the pandemic, we have advanced the technology and filed our first utility patent application in 2024 for improvements to the system. SpinDx™ offers a unique advantage over competitors by isolating psychoactive delta-9-THC from its inactive metabolites, enabling more accurate impairment detection—especially critical for marijuana testing where competitive devices may yield false positives from non-impairing compounds. We plan to launch the product in stages, beginning with a saliva-based system, followed by blood and breath sample capabilities, using our LX9 breathalyzer as part of a future marijuana breathalyzer solution. Beta testing with human subjects is set to begin in partnership with Anschutz Medical Center in Colorado, with commercial launch expected in 2026.
We place strong emphasis on high-quality training as a key component of our testing business. Initially offering in-person instruction through Master Trainers, we expanded into online modules, webcam-based training, and in 2011 launched Lifeloc University, a learning management system (LMS) that was later enhanced for mobile use and regulatory updates. Our 2014 acquisition of Superior Training Solutions (STS) added further online training assets and customers that were contributed to Lifeloc University, which now serves as our unified, modern training platform.
We own our corporate headquarters in Wheat Ridge, Colorado, occupying most of the space ourselves. We leased a portion of the space to a third party until our tenant’s lease expired in June 2025. We now expect to expand into the full space. Additionally, we continue to pursue acquisitions aligned with our mission to deliver near and remote sensing and monitoring solutions, aiming to strengthen own position in existing markets and facilitate entry into new ones.
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Outlook
Installed Base of Breathalyzers. We believe the installed base of our breathalyzers will increase as the inherent risks associated with drinking while driving or while working in safety sensitive jobs become more widely acknowledged and as our network of distributors and our direct sales force grows. We believe that increased marketing efforts, the introduction of new products and the expansion of our sales network may provide the basis for increased sales and continuing profitable operations. However, these measures, or any others that we may adopt or determine not to adopt, may not result in either increased sales or continuing profitable operations.
Possibility of Operating Losses. Over many of the past several years we have operated profitably; however, prior to that, and in 2021 through 2024, we incurred operating losses. Those operating losses are continuing in 2025 and we expect them to continue as we continue to work toward the commercialization of SpinDx. There is no assurance that we will not incur operating losses in any given quarter or year in the future.
Sales Growth. We expect to increase sales in the U.S. and worldwide as our network of direct customers and distributors grows and becomes more proficient and expands the number of new accounts. Our growth efforts have focused on expanding our global reach and broadening our product offering in alcohol and drug detection. Orders for all of our products, particularly ignition interlock components, are on an intermittent purchase order basis and there is no assurance they will continue at any given rate, or that orders will repeat.
Sales and Marketing Expenses. We continue our efforts to expand our domestic and international distribution capability, and we believe that sales and marketing expenses will need to be maintained at a healthy level in order to do so. Sales and marketing expenses are expected to increase as we increase our direct sales representatives and marketing efforts.
Research and Development Expenses. We expect to maintain our research and development expenses through 2025, and to begin to reduce them as we complete development of our new product line.
Results of Operations
For the three months ended June 30, 2025 compared to the three months ended June 30, 2024.
Supply chain problems caused by Covid-19, as well as the other market impacts of Covid-19, were mostly resolved by the end of 2024, and the perceived need to monitor for the presence of alcohol reverted back to the level experienced previously. We maintained our reduced costs at their 2024 levels where possible, although inflation took its toll, increasing the cost of raw materials, labor, and freight. We continued and intensified our new product development efforts while maintaining the high level of customer service that has led to an excellent reputation for outstanding customer service. With the introduction of new products, we believe Lifeloc will again be profitable.
Net sales.
Our product sales for the three months ended June 30, 2025 were $2,191,260, a decrease of 8% from $2,370,433 for the same period a year ago. This decrease results from the absence of several larger orders in the current period that may have reflected customers’ availability of funds in the previous period. In addition, the continuing inflationary pressure outlook on customers’ budgets may also have played a role. When royalties of $19,800 and rental income of $8,316 are included, total revenues of $2,219,376 decreased by $167,954, or 7%, for the three months ended June 30, 2025 when compared to the same three months a year ago. Royalties increased as a result of our royalty-paying customers selling more products in the current period vs. the same period a year ago. Rental income increased by $243 and will be discontinued after June 30, 2025 as a result of the expiration of the one remaining lease that was not renewed.
Gross profit.
Total gross profit for the three months ended June 30, 2025 of $924,599 represented a decrease of 7% from total gross profit of $993,596 for the three months ended June 30, 2024, primarily as a result of lower product sales. Cost of product sales decreased from $1,389,951 in the three months ended June 30, 2024 to $1,290,357 in the same period in 2025, a decrease of $99,594 (7%). Gross profit margin on products remained relatively constant at 41% in both periods.
| 18 |
Research, development and sustaining engineering expenses.
Research, development and sustaining engineering expenses continued at the high level of $623,262, or 28% of product sales, for the three months ended June 30, 2025, representing a decrease of $39,014 (6%) over the $662,276 in the same period a year ago. This decrease resulted primarily from a decrease in payments to outside contractors needed for continuing design work related to SpinDx™.
Sales and marketing expenses.
Sales and marketing expenses of $339,528 for the three months ended June 30, 2025 were down by $25,846 (or 7%) from the $365,374 spent in the same period a year ago as a result of lower sales on which commissions were paid.
General and administrative expenses.
General and administrative expenses of $340,074 for the three months ended June 30, 2025 versus $363,008 for the three months ended June 30, 2024 were lower by $22,934 (6%) as a result of various expense reductions.
Other income (expense).
Interest income increased from $8,677 a year ago to $10,931 in 2025 as a result of more funds available at the beginning of the period. Interest expense of $26,305 in the three months ended June 30, 2025 was up from $10,057 in the previous year as a result of the increase in subordinated debentures outstanding in the 2025 quarter vs. none in the same quarter a year ago. The total increase of $13,994 from $1,380 of other expense (net) in the period ended June 30, 2025 to total other expense (net) of $15,374 in the current quarter is expected to continue in future quarters due to the increase in borrowings.
Net income (loss).
We realized a net (loss) of ($393,639) for the three months ended June 30, 2025 compared to a net (loss) of ($297,988) for the three months ended June 30, 2024. This increase of $95,651 (32%) was the result of the changes in gross profit, operating expenses and other income and expense discussed above, which resulted in a (loss) before taxes of ($393,639) or a decrease of $4,803 from the (loss) before taxes of ($398,442) in 2024. The benefit from taxes in the three months ended June 30, 2025 was $0 versus a benefit from taxes of $100,454 in the same period a year ago as a result of increasing the valuation allowance in the three months ended June 30, 2024 and no increase in the three months ended June 30, 2025.
For the six months ended June 30, 2025 compared to the six months ended June 30, 2024.
As was the case for the three months ended June 30, supply chain problems caused by Covid-19, as well as the other market impacts of Covid-19, were mostly resolved by the end of 2024, and the perceived need to monitor for the presence of alcohol reverted back to the level experienced previously. We increased prices and maintained our reduced costs at their 2024 levels where possible, although inflation took its toll, increasing the cost of raw materials, labor, and freight. We continued and intensified our new product development efforts while maintaining the high level of customer service that has led to an excellent reputation for outstanding customer service. With the introduction of new products, we believe Lifeloc will again be profitable.
Net sales.
Our product sales for the six months ended June 30, 2025 were $4,454,307, a decrease of 1% from $4,504,867 for the same period a year ago. This decrease results from the absence of several larger orders in the current period that may have reflected customers’ availability of funds in the previous period. In addition, the continuing inflationary pressure outlook on customers’ budgets may also have played a role. When royalties of $25,471 and rental income of $16,632 are included, total revenues of $4,496,410 decreased by $44,363, or 1%, for the six months ended June 30, 2025 when compared to the same six months a year ago. Royalties increased as a result of our royalty-paying customers selling more products in the current period vs. the same period a year ago. Rental income increased by $486 and will be discontinued after June 30, 2025 as a result of the expiration of the one remaining lease that was not renewed.
Gross profit.
Total gross profit for the six months ended June 30, 2025 of $1,833,165 represented little change from total gross profit of $1,828,903 for the six months ended June 30, 2024. Cost of product sales for the six months ended June 30, 2025 was $2,654,162 vs. $2,705,030, a decrease of $50,868 as a result of lower product sales. Gross profit margin on products remained relatively constant at 40% in both periods.
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Research, development and sustaining engineering expenses.
Research, development and sustaining engineering expenses were $1,092,942 for the six months ended June 30, 2025, a decrease of $124,933 (10%) from the $1,217,875 in the same six months ended June 30, 2024. This decrease results primarily from timing of services from outside contractors and is expected to again increase in the remainder of 2025.
Sales and marketing expenses.
Sales and marketing expenses of $674,084 for the six months ended June 30, 2025 were down by $36,299 (or 5%) from the $710,383 spent in the same period a year ago as a result primarily of lower sales on which commissions were paid.
General and administrative expenses.
General and administrative expenses of $724,952 for the six months ended June 30, 2025 versus $677,934 for the six months ended June 30, 2024 were higher by $47,018 (7%) as a result of various increased expenses.
Other income (expense).
Interest income decreased from $26,349 a year ago to $23,288 in 2025 as a result of less funds available at the beginning of the period. Interest expense of $50,800 in the six months ended June 30, 2025 was up from $20,207 in the previous year as a result of the increase in subordinated debentures outstanding in 2025 vs. none in the same period a year ago. The total increase of $33,654 in other expense (net) in the period ended June 30, 2025 vs. the same six months a year ago is expected to continue for the rest of 2025 due to the increase in borrowings.
Net income (loss).
We realized a net (loss) of ($686,325) for the six months ended June 30, 2025 compared to a net (loss) of ($581,794) for the six months ended June 30, 2024. This increase of $104,531(18%) was the result of the changes in gross profit, operating expenses and other income and expense discussed above, which resulted in a (loss) before taxes of ($686,325) or a decrease of $84,822 from the (loss) before taxes of ($771,147) in 2024. The benefit from taxes in the six months ended June 30, 2025 was $0 versus a benefit from taxes of $189,353 in the same period a year ago as a result of increasing the valuation allowance in the six months ended June 30, 2024 and no increase in the six months ended June 30, 2025.
Trends and Uncertainties That May Affect Future Results
Revenues in the three months ended June 30, 2025 were lower compared to revenues during the same period in 2024. For the six months ended June 30, 2025, revenues were similar to revenues for the same six months in 2024. We believe that continued increased sales efforts, together with the expected availability of SpinDx™ for sale in 2026 may result in improved revenues in 2026 and beyond. Revenues for the rest of 2025 may be similar to revenues in 2024. Inflationary pressures have affected our business in a number of ways, including increasing the cost of raw materials, labor, and freight. Our actions to mitigate the impact of inflation, including pre-ordering components in higher than usual quantities, sourcing new vendors and increasing prices have been moderately successful.
We expect our quarter-to-quarter revenue fluctuations to continue, due to the unpredictable timing of large orders from customers and the size of those orders in relation to total revenues. Going forward, we intend to focus our development efforts on products we believe offer the best prospects to increase our intermediate and near-term revenues, with particular emphasis on completing SpinDx™.
Our operating plan for the remainder of 2025 is focused on growing sales, increasing gross profits, and continuing research and development efforts on new products, including SpinDx™, for long-term growth. We cannot predict with certainty the expected sales, gross profit, net income or loss, or usage of cash and cash equivalents for 2025. However, we believe that cash resources will be sufficient to fund our operations for the next twelve months under our current operating plan. If we are unable to manage the business operations in line with our budget expectations, it could have a material adverse effect on business viability, financial position, results of operations and cash flows. Further, if we are not successful in regaining profitability and remaining at least cash flow break-even, additional borrowings or capital may be required to maintain ongoing operations.
| 20 |
Interest expense.
In connection with the financing of our building purchase on October 31, 2014 we obtained a 10-year term loan from Bank of America in an initial principal amount of $1,581,106 bearing interest at 4.45% per annum (which was decreased to 4% in 2016) and secured by a first-priority mortgage in the acquired property. The Bank of America loan was paid on September 30, 2021 with proceeds from a new term loan from Citywide Banks, also secured by a first-priority mortgage on the property, in the principal amount of $1,350,000. The new loan is payable in monthly installments of $7,453, with interest at 2.95% and a maturity date of September 30, 2031.
On December 31, 2024 we issued an unsecured $750,000 subordinated debenture bearing interest at 8.25%, including 62,500 warrants exercisable on or before December 31, 2030 into 62,500 shares of our common stock at a price of $4.50 per share. On March 1, 2025 we issued an unsecured $75,000 subordinated debenture bearing interest at 8.25%, including 6,250 warrants exercisable on or before December 31, 2030 into 6,250 shares of our common stock at a price of $4.50 per share. Using the Black Scholes model, the fair market value of these warrants resulted in deferred financing cost of $132,000, which is included in our balance sheet at June 30, 2025 at $121,314 after amortization in the six months ending June 30, 2025 of 10,686, and which resulted in an increase to capital of $120,000 on December 31, 2024 and $12,000 on March 1, 2025. In addition to the stated interest of 8.25%, this deferred financing cost represents a charge against income of $5,514 per quarter starting in the second quarter of 2025. The interest of 8.25% will be paid in quarterly increments in 2025, and will be included in monthly payments of $10,119 including principal, starting in 2026.
Liquidity and Capital Resources
We compete in a highly technical, very competitive and, in most cases, price driven alcohol testing marketplace, where products can take years to develop and introduce to distributors and end users. Furthermore, manufacturing, marketing and distribution activities are regulated by the DOT and other regulatory bodies that, while intended to enhance the ultimate quality and functionality of products produced, can contribute to the cost and time needed to maintain existing products and develop and introduce new products.
Except for normal operating contractual commitments and purchase orders, we do not have any material contractual commitments requiring settlement in the future.
We have traditionally funded working capital needs through product sales and close management of working capital components of our business. Historically, we have also received cash from private offerings of our common stock, warrants to purchase shares of our common stock, and notes. In July, 2024 we completed a private placement of 210,000 shares of our common stock at $3.80 per share for a total raise of $798,000 with a related party. On December 31, 2024, we completed the issuance of a six-year subordinated debenture for $750,000 with a third party. On March 1, 2025, we completed the issuance of a 70-month subordinated debenture for $75,000 with a third party. In our earlier years, we incurred quarter to quarter operating losses to develop current product applications, utilizing a number of proprietary and patent-pending technologies. Although we have been profitable in recent years except 2020, 2022 and 2024, we can provide no assurances that operating losses will not occur in the future. Should that situation arise, we may not be able to obtain working capital funds necessary in the time frame needed and at satisfactory terms, if at all.
As of June 30, 2025, cash and cash equivalents were $995,750, trade accounts receivable were $765,730 and current liabilities were $956,094 resulting in net liquid assets of $805,386. We believe that the diminishing of the Covid-19 pandemic, the resolution of supply chain issues, and the introduction of several new products during the last several years, along with new and on-going customer relationships will allow Lifeloc to operate profitably. If the revenue levels prior to 2020 do not continue to increase in a timely manner, if inflationary pressures are not contained, or if the development and market acceptance of SpinDx™ takes longer than expected, we may be required to seek additional sources of capital and/or to implement further cost reduction measures, as necessary.
Equipment expenditures, consisting of SpinDx™ related and other equipment, during the six months ended June 30, 2025 were $242,251 compared to $491,291 for the same period in 2024, a decrease of $249,040. We incurred patent application costs of $21,708 in the six months ended June 30, 2024 versus $0 in 2025. No expired or fully amortized patents were removed from our financial statements in 2025 or 2024. As development of SpinDx progresses, and as normal wear and tear of equipment occurs, we expect to incur outlays for equipment and patent filings in 2025 and beyond.
We generally provide a standard one-year limited warranty on materials and workmanship to our customers. We provide for estimated warranty costs at the time product revenue is recognized. Warranty costs are included as a component of cost of goods sold in the accompanying statements of operations. For the three and six months ended June 30, 2025 and 2024, warranty costs were not deemed significant.
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Critical Accounting Policies and Estimates
Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, 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 periods.
We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. In general, management's estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.
Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, sales and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to bad debts, inventories, sales returns, deferred tax assets, warranty, contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies affect the more significant judgments and estimates used in the preparation of our financial statements.
We have concluded that we have two operating segments, including our primary business which is as a developer, manufacturer and marketer of portable hand-held breathalyzers and related accessories, supplies and education, and a second segment consisting of renting portions of our building to existing tenants.
We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances would be required, which would increase our expenses during the periods in which any such allowances were made. The amount recorded as a provision for bad debts in each period is based upon our assessment of the likelihood that we will be paid on our outstanding receivables, based on customer-specific as well as general considerations. To the extent that our estimates prove to be too high, and we ultimately collect a receivable previously determined to be impaired, we may record a reversal of the provision in the period of such determination.
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. Any write-downs of inventory would reduce our reported net income during the period in which such write-downs were applied.
Property and equipment are stated at cost, with depreciation computed over the estimated useful lives of the assets, generally five years (three years for software and technology licenses). We use the declining method of depreciation for property, including space modifications, and the straight-line method for software and technology licenses. We purchased all of the assets of STS, an online education company, in 2014, which consisted of training courses that were originally set to amortize over 15 years using the straight-line method, but in 2025 we are accelerating the amortization of the remaining cost to fully amortize the asset by December 31, 2025. In October 2014, we purchased our building. A majority of the cost of the building is depreciated over 39 years using the straight-line method. In addition, based on the results of a third-party analysis, a portion of the cost was allocated to components integral to the building. Such components are depreciated over 5 and 15 years, using the declining method.
Revenue from product sales and supplies is generally recorded when we ship the product and title has passed to the customer, or when agreed milestones are met in the case of product developments, 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. Direct training performed by us is recognized when training is completed by the trainer, with the unearned portion classified as deferred revenue. 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.
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Revenues arising from extended warranty contracts are booked as sales over their life on a straight-line basis. 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 was recognized in the month in which it was due.
On occasion we receive customer deposits for future product orders and for product development. 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 in the case of product development, when agreed milestones are met.
Stock-based compensation is presented in accordance with the guidance of Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 718, Compensation — Stock Compensation ("ASC 718"). Under the provisions of ASC 718, companies are required to estimate the fair value of share-based payment awards made to employees and directors including employee stock options based on estimated fair values 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 our statement of operations.
ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4 – CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this Quarterly Report on Form 10-Q, our management has evaluated, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2025.
(b) Changes in Internal Control over Financial Reporting
There were no significant changes in our internal controls over financial reporting during the period ended June 30, 2025 that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Controls
A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. Our management, including our Chief Executive Officer and our Chief Financial Officer, do not expect that the Company's disclosure controls will prevent or detect all errors and all fraud. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with associated policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
| 23 |
PART II. OTHER INFORMATION
ITEM 1 – LEGAL PROCEEDINGS
We may be involved from time to time in litigation, negotiation and settlement matters that may have a material effect on our operations or finances. We are not aware of any pending or threatened litigation against us or our officers or directors in their capacity as such that could have a material impact on our operations or finances.
ITEM 1A – RISK FACTORS
In addition to the other information set forth in this report, you should carefully consider the factors discussed in ''Risk Factors'' in our Annual Report on Form 10-K for the year ended December 31, 2024, which could materially affect our business, financial condition and/or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
In February, 2025 options to purchase 88,500 shares of our common stock were exercised at a price of $3.80 per share for total proceeds of $336,300. Our president and CEO exercised 37,500 options, and 2 directors exercised 1,000 options each. EDCO Partners, LLLP, of which our CFO and board chairman is the general partner provided $132,240 to enable 19 option holders to exercise and simultaneously sell their shares to EDCO Partners, to be held on behalf of certain of its limited partners, including a third director and an entity controlled by our CFO and board chairman. The issuance of these shares was exempt from registration under Section 4(a)(2) of the Securities Act as a transaction not involving a public offering. The shares were issued to existing employees and directors of the Company who had sufficient access to information about the Company. No options were exercised during the three and six months ended June 30, 2025.
On March 1, 2025, in connection with the issuance of a $75,000 subordinated debenture, the Company issued warrants to purchase 6,250 shares of common stock at an exercise price of $4.50 per share. These warrants were valued at $12,000 using the Black-Scholes valuation model. The issuance of these warrants was exempt from registration under Section 4(a)(2) of the Securities Act as a private placement to a sophisticated investor.
There were no sales of equity securities during the three and six months ended June 30, 2025.
The proceeds from the option exercises totaling $336,300 were used for general corporate purposes and working capital needs.
All securities issued were offered and sold in reliance upon exemptions from registration under the Securities Act. No underwriters were involved in the foregoing sales of securities, and no underwriting discounts or commissions were paid by the Company in connection with such sales. The recipients of securities in each transaction represented their intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were affixed to the share certificates and warrant agreements issued in such transactions.
ITEM 3 – DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 – MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5 – OTHER INFORMATION
During the quarter ended June 30, 2025, no
director or officer of the Company
| 24 |
ITEM 6 – EXHIBITS
The following exhibits are filed with this report on Form 10-Q or are incorporated by reference:
| Exhibit No. | Description of Exhibit | |
| 31.1 | Certification of Principal Executive Officer Pursuant To Section 302 Of The Sarbanes—Oxley Act Of 2002 | |
| 31.2 | Certification of Principal Financial Officer Pursuant To Section 302 Of The Sarbanes—Oxley Act Of 2002 | |
| 32.1 | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 32.2 | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101.INS | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document |
| 25 |
SIGNATURES
Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| LIFELOC TECHNOLOGIES, INC. | |||
| August 11, 2025 | By: | /s/ Wayne R. Willkomm | |
| Date | Wayne R. Willkomm, Ph.D. | ||
|
President and Chief Executive Officer (Principal Executive Officer) |
|||
| August 11, 2025 | By: | /s/ Michelle Heim | |
| Date |
Michelle Heim Controller (Principal Accounting Officer) |
| 26 |
Exhibit Index
| Exhibit No. | Description of Exhibit | |
| 31.1 | Certification of Principal Executive Officer Pursuant To Section 302 Of The Sarbanes—Oxley Act Of 2002 | |
| 31.2 | Certification of Principal Financial Officer Pursuant To Section 302 Of The Sarbanes—Oxley Act Of 2002 | |
| 32.1 | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 32.2 | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101.INS | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document |
| 27 |
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Wayne R. Willkomm, certify that:
1. I have reviewed this report on Form 10-Q of Lifeloc Technologies, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Dated: August 11, 2025
| /s/ Wayne R. Willkomm | ||
| Wayne R. Willkomm, Ph.D. | ||
|
Chief Executive Officer (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Vern D. Kornelsen, certify that:
1. I have reviewed this report on Form 10-Q of Lifeloc Technologies, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Dated: August 11, 2025
| /s/ Vern D. Kornelsen | ||
| Vern D. Kornelsen | ||
|
Chief Financial Officer (Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Wayne R. Willkomm, Chief Executive Officer of Lifeloc Technologies, Inc. (the "Company"), hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:
| ● |
the Quarterly Report on Form 10-Q of the Company for the period ended June 30, 2025 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
|
| ● |
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the period covered by the Report.
|
Dated: August 11, 2025
| /s/ Wayne R. Willkomm | ||
|
|
Wayne R. Willkomm, Ph.D. Chief Executive Officer (Principal Executive Officer) |
Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Vern D. Kornelsen, Chief Financial Officer of Lifeloc Technologies, Inc. (the "Company"), hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:
| ● |
the Quarterly Report on Form 10-Q of the Company for the period ended June 30, 2025 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
|
| ● |
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the period covered by the Report.
|
Dated: August 11, 2025
| /s/ Vern D. Kornelsen | ||
| Vern D. Kornelsen | ||
|
Chief Financial Officer (Principal Financial Officer) |