Filed 2026-03-27 · Period ending 2025-12-31 · 35,982 words · SEC EDGAR
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# Lifeloc Technologies, Inc (LCTC) — 10-K
**Filed:** 2026-03-27
**Period ending:** 2025-12-31
**Accession:** 0001079973-26-000376
**Source:** [SEC EDGAR](https://www.sec.gov/Archives/edgar/data/1493137/000107997326000376/)
**Origin leaf:** 66386b9512c851956e508ee4eb64c06ef2bff1518da5d96a4da3563e10f5348d
**Words:** 35,982
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**UNITED STATES**
**SECURITIES AND EXCHANGE COMMISSION**
**WASHINGTON, D.C. 20549**
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**FORM 10-K**
**(Mark One)**
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the fiscal year ended December 31, 2025
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from__________ to __________
**Commission File No.: 000-54319**
**LIFELOC TECHNOLOGIES, INC.**
(Exact name of registrant as specified in
its charter)
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Colorado |
84-1053680 | |
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
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12441 W 49th Ave., Wheat Ridge, Colorado |
80033 | |
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(Address of principal executive offices) |
(Zip Code) | |
Registrant's telephone number, including
area code: **(303) 431-9500**
Securities registered pursuant to Section 12(b)
of the Act: **None**
Securities registered under Section 12(g) of the
Act: **Common Stock, no par value per share**
Indicate by check mark if the registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities Act.
Yes
No
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or 15(d) of the Exchange Act.
Yes
No
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 No
Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Website, if any, 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 and post such files).
Yes
No
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. (Check one):
Large accelerated filer
Accelerated filer Non-accelerated filer
Smaller reporting company
Emerging growth company
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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 has filed a report on and attestation to its managements assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared
or issued its audit report.
If securities are registered pursuant
to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect
the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error
corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrants
executive officers during the relevant recovery period pursuant to 240.10D-1(b).
Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act**).**Yes
No
As of June 30, 2025 (the last business
day of the registrant's most recently completed second fiscal quarter), the aggregate market value, computed by reference to the price
at which the registrant's common equity was last sold, of the 551,632 shares of common stock held by non-affiliates of the issuer on such
date was $1,682,478.
The number of shares outstanding of each of the
issuer's classes of common equity, as of March 25, 2026:
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Common Stock, no par value |
2,752,616 | |
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DOCUMENTS
INCORPORATED BY REFERENCE
Documents
Incorporated by Reference: Items 10, 11, 13 and 14, and a portion of Item 12 of Part III are incorporated by reference from portions of
the registrant's Definitive Proxy Statement for the 2026 Annual Shareholders' Meeting, expected to be filed with the Securities and Exchange
Commission within 120 days after the end of the fiscal year ended December 31, 2025.
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**Table of Contents**
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PART I |
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Item 1. |
Business |
2 | |
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Item 1A. |
Risk Factors |
8 | |
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Item 1B. |
Unresolved Staff Comments |
16 | |
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Item 1C. |
Cybersecurity |
16 | |
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Item 2. |
Properties |
17 | |
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Item 3. |
Legal Proceedings |
17 | |
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Item 4. |
Mine Safety Disclosures |
17 | |
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PART II |
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Item 5. |
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
17 | |
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Item 6. |
[Reserved] |
18 | |
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Item 7. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
18 | |
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Item 7A. |
Quantitative and Qualitative Disclosures About Market Risk |
24 | |
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Item 8. |
Financial Statements and Supplementary Data |
24 | |
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Item 9. |
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
43 | |
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Item 9A. |
Controls and Procedures |
43 | |
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Item 9B. |
Other Information |
44 | |
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Item 9C. |
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. |
44 | |
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PART III |
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Item 10. |
Directors, Executive Officers and Corporate Governance |
44 | |
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Item 11. |
Executive Compensation |
44 | |
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Item 12. |
Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters |
44 | |
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Item 13. |
Certain Relationships and Related Transactions, and Director Independence |
44 | |
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Item 14. |
Principal Accounting Fees and Services |
44 | |
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PART IV |
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Item 15. |
Exhibits, Financial Statements Schedules |
45 | |
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Item 16. |
Form 10-K Summary |
46 | |
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**Forward-Looking Statements**
Statements contained in this Annual Report on
Form 10-K (this Annual Report) include forward-looking statements within the meaning of Section 21E of the Securities Exchange
Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. These 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 Annual Report, including, among other things, statements about:
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our strategies and business plans, | |
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the development, commercialization, and market acceptance of SpinDetect and our other products, | |
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our capital requirements and ability to fund ongoing operations and product development; | |
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our ability to service and refinance our indebtedness, including our outstanding subordinated debentures, | |
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expectations about new and existing products, | |
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market demand, | |
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market size and growth, | |
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the effects of tariffs, trade policy, and geopolitical instability on our supply chain and business, and | |
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return on investments in products and markets, | |
as well as other statements regarding our future
operations, financial condition and prospects, and business strategies. Forward-looking statements may appear throughout this report and
other documents we file with the Securities and Exchange Commission (SEC), including without limitation, the following sections: Part
I, Item 1 "Business"; Part I, Item 1A "Risk Factors"; and Part II, Item 7 "Managements Discussion and
Analysis of Financial Condition and Results of Operations." These forward-looking statements are based on information available to
us as of the date of this Annual Report, and we assume no obligation to update such forward-looking statements, except as required by
applicable law. In some cases, you can identify forward-looking statements by terminology such as "may", "will", "should",
"could", "expects", "plans", "intends", "anticipates", "believes", "estimates",
"predicts", "potential", or "continue" or the negative of such terms or other comparable terminology. Readers
of this Annual Report on Form 10-K are strongly encouraged to review the section entitled *"Risk Factors"*contained in
this Annual Report.
Lifeloc, Easycal, Phoenix and R.A.D.A.R.
are registered trademarks of Lifeloc Technologies, Inc. Sentinel and SpinDetect are trademarks of Lifeloc Technologies;
SpinDx is a trademark of Sandia Corporation. This report may also contain trade names and trademarks of other companies. We do
not intend our use or display of other companies' trade names or trademarks to imply an endorsement or sponsorship of us by such companies,
or any relationship with any of these companies.
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**PART I**
**Item 1. Business**
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**Overview**
Lifeloc Technologies, Inc., a Colorado corporation
("Lifeloc" or the "Company"), is a Colorado-baseddeveloper, 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 portable 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.
In October 2014 we purchased our corporate headquarters
and adjacent property and, for a time, operated a separate rental-property segment based on leases to third-party tenants. Effective June
30, 2025, we terminated those leasing arrangements and now utilize the entire premises for our own operations; accordingly, the rental-property
segment has been discontinued.
Lifeloc incorporated in Colorado in December1983.
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.Information
contained on our websites does not constitute part of this Form 10-K.
**Principal Products and Services and Methods
of Distribution**
*Alcohol Breath Testers*
In 1989, we introduced our first breath alcohol
tester, the PBA3000. Our Phoenix Classic was completed and released for sale in 1998, superseding the PBA3000. In turn, the Phoenix
Classic has been superseded by our FC Series and Workplace Series of portable breath alcohol testers, which are discussed below. Neither
the PBA3000 nor the Phoenix Classic is actively sold today.
In 2001, we completed and released for sale our
new FC Series, designed specifically for domestic and international law enforcement and corrections markets. The portable breath alcohol
testers comprising our FC Series are currently being sold worldwide, having contributed to our growth since their introduction. The FC
Series is designed to meet the needs of domestic and international law enforcement for roadside drink/drive testing and alcohol offender
monitoring. The FC Series is approved by the U.S. Department of Transportation (DOT) as an evidential breath tester, making
it suitable for sale to state law enforcement agencies for preliminary roadside breath alcohol testing. The FC Series is routinely updated
with firmware, software and component improvements as they become available. It is readily adaptable to the specific requirements and
regulations of domestic and international markets.
In 2005 and 2006, we introduced two new models,
the EV30 and Phoenix 6.0 Evidential Breath Tester (Phoenix 6.0), which constitute our Workplace Series of testing
devices. Like their predecessor, the Phoenix Classic, and our FC Series, these instruments are DOT approved. The DOTs specifications
support the DOTs workplace alcohol testing programs, including those applicable to workplace alcohol testing for the federally
regulated transportation industry. We also sell component parts used in alcohol testing devices, such as mouthpieces used by our breathalyzers,
as well as forms and labels used for record keeping, and calibration products for user re-calibration of our devices. We offer optional
service agreements on our equipment, re-calibration services, and spare parts, and we sell supporting instrument training and user certification
training to our workplace customers.
In 2006, we commenced selling breath alcohol equipment
components that we manufacture to other OEMs for inclusion as subassemblies or components in their breath alcohol testing devices.
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In late 2009, Lifeloc released the LifeGuard Personal
Breathalyzer (LifeGuard),a personal alcohol breath tester that incorporates the same fuel-cell technology used in
our professional devices. Intended originally for the global consumer breathalyzer market, LifeGuard was phased out in 2018.
In 2011 and 2012, Lifeloc introduced Bluetooth
wireless keyboard and printer communication options for our Phoenix 6.0 along with a series of web basedworkplace training
courses. We believe these two product innovations have been key to our success and leadership in workplace breath testing.
In 2013, Lifeloc expanded our FC Series of professional
breath alcohol testers targeted at domestic and international law enforcement and corrections markets with the addition of the FC5 Hornet
(the FC5). The FC5 is a passive (no mouthpieces required) portable handheld alcohol screening device that competes directly
with passive alcohol screeners from our competitors in the education, law enforcement, workplace and corrections markets.
In 2013, we also introduced the Sentinel
zero tolerance alcohol screening station, a fully automated wall mounted screening station for use in safety sensitive industries such
as oil and gas and mining. Both devices expand Lifelocs products for passive alcohol screening.
In the third quarter of 2014, we received approval
from DOT for our EASYCAL automatic calibration station for use with our Phoenix 6.0 Evidential Breath Testers, and we began
shipments of the EASYCAL to our law enforcement, corrections, workplace and international customers. The EASYCAL calibration
station is a first of its kind device that automatically performs breath tester instrument calibration, calibration verification and gas
management. As compared to manual instrument calibration, the EASYCAL reduces the opportunity for human error, saves time and
reduces operating costs. In May 2019, we received DOT approval on a second generation EASYCAL with broader capabilities called
the EASYCAL G2.
In October 2015, we expanded our Sentinel
line with the Sentinel VA alcohol screening station, a fully automated station to control vehicular access to safety critical facilities,
such as mines, refineries, power stations and nuclear facilities. The Sentinel VA alcohol screening station is intended to allow
all drivers entering a secure area to be tested quickly and efficiently without leaving their vehicle.
In March 2017 we acquired substantially all of
the assets related to the Real-time Alcohol Detection and Reporting product (R.A.D.A.R.) from Track Group, Inc. (TRCK)
for $860,000 in cash. The purchased assets included the R.A.D.A.R. device with cellular reporting for real-time alcohol monitoring,
database infrastructure to tabulate and manage subscriber behavior, and biometric methodology and intellectual property to fully automate
identity verification. The R.A.D.A.R. device was designed to be part of an offender supervision program as an alternative to
incarceration, and it is assigned to offenders as a condition of parole or probation with random testing throughout the day to demonstrate
that they are meeting the conditions of their sentence. We purchased the assets of R.A.D.A.R. 100 in 2017, knowing the product needed
significant upgrading, which was essentially completed and released for sale several years later as R.A.D.A.R. 200. This product met with
little market acceptance as a result of the underperformance of one feature, namely, the biometric identification confirmation. In order
to meet certain SpinDetect milepost commitments, and to optimally allocate resources, we withdrew R.A.D.A.R. 200 from the market
in 2022. We have outsourced the development of R.A.D.A.R. 300 to a third party but which is currently on hold.
In November 2019, we received approval from DOT
for our LX9 and LT7 base unit alcohol breathalyzers. Both have been updated and both updated versions received DOT approval in December
2021.
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*Testers for Drugs of Abuse*
*SpinDetect*
In August 2016 we entered into a patent license
agreement with Sandia Corporation pursuant to which we acquired the exclusive rights to develop, manufacture and market Sandias
patented SpinDx technology for the detection of drugs of abuse. We believe this license agreement represents the beginning of a
relationship that will become material to the Company in the near future. A prototype was built by Sandia under our Cooperative Research
and Development Agreement, and received in 2018, after which we commenced work on commercializing the device. This effort was hampered
by the pandemic, but with the recovery, our full attention has been given to SpinDetect. Although the patents to the base technology
belong to Sandia, any improvements we make that are patentable belong solely to Lifeloc. The first Lifeloc owned utility patent application
was filed in February 2024.
At the beginning of the computer age, data was
gathered and then sent to an outside service center for processing. Later, with the evolution of the
personal computer, data was gathered and processed locally. We believe SpinDetect will drive the same evolution in drug testing.
Under current practice, a sample is collected and sent to an outside lab for analysis, with the results available a day later, sometimes
several days later at a usual cost of upwards of $100 - $300 per test. SpinDetect makes it possible to collect a sample
and get the results locally within minutes at a cost expected to be in the range of $25 per test. There are efforts underway by
others to capture this market. However, SpinDetect is unique in its ability to accurately and quickly process the sample and provide
a quantitative result vs. the very few devices available today. Lifelocs excellent standing in its alcohol breathalyzer market
is expected to provide an edge so far as credibility of the new SpinDetect drug detection product is concerned.
We are optimistic about the results of the work
to date and expect market introduction via beta testing beginning in 2026, with a sales-ready device
later in 2026. SpinDetect uses a centrifugal disk with micro fluidic flow paths allowing multiple tests to be carried out on a
single small sample. The SpinDetect platform has the potential to revolutionize real-time screening for a panel of high abuse drugs,
with the ability to quickly and quantitatively measure very low concentrations of drugs such as cocaine, heroin, methamphetamine, fentanyl,
marijuana and others. We intend to use this technology, sometimes referred to as Lab on a Disk, to develop devices and tests
that could be used at roadside, emergency rooms and in workplace testing to get a rapid and quantitative measure for a panel of such drugs
of abuse.
Marijuana has many cannabinoids, including delta-9-THC,
which is the primary component that is psychoactive, i.e., the one that causes impairment. Cannabinoids are chemicals found in cannabis
that affect the brain and body by interacting with cannabinoid receptors, and can impact mood, memory, appetite, pain, and more. After
smoking or eating marijuana, the delta-9-THC enters the bloodstream causing the high and the impairment. Over the course of the
next few hours, the liver metabolizes the delta-9-THC, converting it into other molecules that are not psychoactive. We have detected
delta-9-THC (the primary psychoactive component of marijuana) down to concentrations of 5 nanograms per milliliter in our laboratory.
This includes resolving the psychoactive delta-9-THC from its inactive metabolites.
Testing for the presence of delta-9-THC requires
the ability to isolate delta-9-THC from these other molecules. Competitive devices such as Dragers Drugtest 5000 and the Sotoxa
device are unable to make this separation, whereas SpinDetect can do so by locking up the metabolites and then analyzing only the
remaining delta-9-THC. This capability is a patented feature of the technology we licensed from Sandia, but which has been improved upon
by Lifeloc and a patent application has been filed. The practical result of this important difference is that SpinDetect delivers
test results that correlate more accurately to the level of psychoactive delta-9-THC than the competitive devices. Testing for the presence
of marijuana within, say an hour after smoking or eating, will produce the same positive result no matter which device is used. As a result
of the metabolizing process by the liver, however, starting after about an hour and continuing thereafter, the two competitive devices
will still show positive results - but due to the proprietary locking feature, SpinDetect will not unless delta-9-THC is actually present.
And if it is actually present, SpinDetect will read and show the level of impairing delta-9-THC. Once this difference becomes more
widely known, Lifeloc believes society will begin to develop a consensus as to what level is unacceptable for driving (similar, for example,
to .05 for alcohol).
We expect the initial release of the new product
will consist of the SpinDetect base reader unit, an oral fluid collection device and an analysis disk. We expect subsequent product
releases will utilize the same SpinDetect base reader and collection devices for samples from blood and from breath.
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We are initiating beta testing of the SpinDetect
oral-fluid analyzer focused on delta-9-THC detection using a prototype reader, with final component optimization underway under a signed
beta-testing agreement. The initial commercial product is expected to measure delta-9-THC the primary psychoactive compound in
cannabis followed by a multi-drug panel release. We anticipate a commercial launch in 2026, with subsequent expansion into additional
drug panels and sample types, including blood and breath.
The same lab-on-a-disk system used
to detect drugs of abuse can be adapted to identify other biological or chemical targetssuch as food or water contaminants, neonatal
or veterinary drug residues, or environmental toxins. This versatility positions Lifeloc to extend the platform into adjacent markets
in public health, food safety, and environmental testing. While additional research, licensing, and regulatory clearances will be required,
the scalability and analytical precision of the SpinDetect platform provide a solid foundation for sustained growth across multiple
high-impact sectors.
We intend to expand our drug detection offerings
based on the SpinDetect technology platform. Following the initial release of the saliva test system, we expect to release a system
based on samples collected from blood and breath. The breath sample collection will be accomplished with a collection device coupled with
our LX9 breathalyzer. After collection, the blood and breath samples will be analyzed on the SpinDetect reader with a disk designed for
the specific sample source be it saliva, blood or breath.
*Training*
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.
*Real Property*
On October 31, 2014, we purchased the commercial
property we use as our corporate headquarters and certain adjacent property in Wheat Ridge, Colorado. The building consists of 22,325
square feet, all of which we occupy for internal operations effective June 30, 2025. A portion of this space was formerly leased to an
outside tenant but the lease terminated June 30, 2025 and was not renewed. Our purchase of the property was partially financed through
a term loan in an original principal amount of $1,581,106, secured by a first-priority mortgage on the property. This loan was paid on
September 30, 2021 with proceeds from a new term loan, also secured by a first-priority mortgage on the property, in the principal amount
of $1,350,000 which matures in September 2031.
*Additional Areas of Interest*
Consistent with our business goal of providing
near and remote sensing and monitoring products and solutions, our acquisition strategy involves purchasing companies, development
resources and assets that are aligned with our areas of interest and that can further aid in our entry into additional markets. We expect
to actively research and engage in the acquisition of resources that can expedite our entrance into new markets or strengthen our position
in existing ones.
On October 9, 2025, we entered into an Agreement
and Plan of Merger (the Merger Agreement) with Electronic Systems Technology, Inc., a Washington corporation (ELST),
providing that, subject to the terms and conditions set forth therein, a wholly owned subsidiary to be formed by us (Merger Sub)
would merge with and into ELST, with ELST surviving as a wholly owned subsidiary of the Company (the Merger). At the effective
time of the Merger, each outstanding share of common stock of ELST would be converted into the right to receive 0.048 shares of our common
stock for each share of ELST, a maximum of 237,432 shares, with cash paid in lieu of any fractional shares.
On October 15, 2025 we filed a registration statement
on Form S-4/A with the Securities and Exchange Commission in connection with the proposed Merger, which was declared effective on December
9, 2025. However, the Merger did not receive the required approval of ELST shareholders at the special meeting held on February 9, 2026,
and the Merger Agreement was terminated by mutual agreement between the parties.
**Competition and Markets**
We sell our products in a highly competitive market
and we compete for business with both foreign and domestic manufacturers. Most of our competitors are larger and have substantially greater
resources than we do. In addition, there is an ongoing risk that other domestic or foreign companies who do not currently service or manufacture
products for our target markets may seek to produce products or services that compete directly with ours.
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We believe that considerations regarding competition
for sales of alcohol monitoring products and services include regulatory approvals, product performance, product delivery, quality, service,
training, price, device reliability, ease of use and speed. We sell certain of our components to customers for incorporation into their
own product lines and for resale under their own name. We believe that, while our resources are more limited than those of our competitors,
we will continue to compete successfully on the basis of product innovation, quality, reputation and continued customer service excellence.
One of our leading competitors is Intoximeters,
Inc. of St. Louis, Missouri, a long-established company with strong name recognition in the field of alcohol testing. It has well-established
sales channels, a large customer base, and a broad product line. CMI, Inc. of Owensboro, Kentucky, another major competitor, also has
a well-established name, a strong position in stationary units used in police work, and international market coverage. Drgerwerk
AG & Co. KGaA, based in Germany, manufactures safety and gas testing equipment. Its breath alcohol testers are respected for their
quality and performance.
Our competition in the development of a marijuana
breathalyzer includes Cannabix Technologies, Inc., a developer of marijuana and alcohol breathalyzer technologies for law enforcement,
workplaces and laboratories that is working on developing delta-9 THC and alcohol screening devices, and Hound Labs, which is also developing
a marijuana breathalyzer. Both competitors in this space have raised significant funds to develop their testing technology.
In addition, other technologies for the measurement
of breath alcohol exist and are employed in other market and application segments where the technology may be more suitable or developed
to specific requirements. These include:
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Infrared devices, which use infrared light absorption to detect breath alcohol. These devices generally lack portability, and are usually found in fixed locations, such as police stations, where subjects are brought for testing. This technology has the advantage of being mandated by law in most states for evidential use in breath testing. | |
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Semiconductor breath testing technology, which is used primarily in consumer breathalyzers. Its primary advantage is low cost, but the technology is not widely accepted by professional users as being as accurate as fuel cell technology. | |
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Chemical tests, which are based on urine and saliva testing. This approach to alcohol testing is more invasive, less convenient than breath testing, and may require subsequent analysis for results. | |
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Blood alcohol tests, which require blood samples. These tests are widely believed to be the most accurate form of alcohol testing because they measure blood alcohol content directly from a sample of the subject's blood. However, the results are not instantaneous, and the tests are more invasive and expensive than breath alcohol testing. | |
**Marketing**
Marketing activities associated with our business
include the communication of our value proposition through direct mail, direct and indirect sales channels, trade shows and an information-rich
online presence. We sell our products to the workplace and international markets primarily through distributors. We sell our law enforcement,
corrections and consumer products directly to the end user and our OEM products directly to manufacturers. Leveraging our installed base
is important, as is maintaining a well-trained distributor network. In 2009, we revised our workplace distributor program to place additional
emphasis on volume incentives for growth in the form of a rebate program. Under the program, qualifying distributors receive a progressively
greater percentage rebate based on the dollar sales they generate. We believe this program helps incentivize our distributors to achieve
a higher level of sales than would otherwise be the case.
**Domestic Distribution**
The majority of our sales into the workplace market
are made through distributors. Sales are made by these distributors pursuant to agreements that renew automatically each year unless terminated
by either party with advance notice, and such agreements typically grant protected lead generation areas.
**International Distribution**
Over 90% of our international sales for all product
lines are made by local distributors, who are given territories generally pursuant to agreements that renew automatically each year unless
terminated by either party with advance notice. Based on reports from our international distributors, we believe that many countries around
the world are instituting tougher alcohol abuse prevention laws, strengthening the enforcement of current laws, or both. These laws set
limits on the amount of alcohol an individual may have in the blood at specific times (e.g., while driving or during safety-sensitive
work activities), or at any time for certain parolees and probationers. Lifeloc has sold instruments to customers in over 65 countries
on six continents worldwide.
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**Research, Development and Sustaining Engineering**
Lifeloc defines its business broadly to include
"near and remote sensing and monitoring" applications in markets including those outside of traditional alcohol testing.
We believe that our future success depends to a large degree on our ability to conceive and develop improved alcohol detection and measurement
products, as well as to identify attractive opportunities for growth outside of breath alcohol testing. Accordingly, we expect to
continue to invest in research, development and sustaining engineering. We spent $2,152,843 and $2,242,869 during 2025 and 2024, respectively,
on research and development, and on sustaining engineering. The amount spent in 2025 was $90,026 less than the amount spent in 2024 due
primarily to needing less design services from outside contractors in 2025 than were needed in 2024. We expect to continue to increase
our emphasis on new product development efforts for existing and new markets with particular emphasis on developing the SpinDetect
technology. Sustaining engineering is required to maintain and continuously update our base products.
**Raw Materials and Principal Suppliers**
A basic component of our instrument product line
is the fuel cell, which we obtain from only a few suppliers. We believe that our demand for this component is small relative to
the total supply, and that the materials and services required for the production of our products are currently available in sufficient
quantities and will be available for the foreseeable future. However, there are relatively few suppliers of the high-quality fuel
cells which our breathalyzers require. Any sudden disruption to the supply of our fuel cells would pose a significant risk to our
business. New sources of fuel cells are uncertain at this time and changes to our fuel cells require approval by the DOT, which, if not
received, could have a material effect on our revenues. While we have traditionally used only one supplier of fuel cells, we completed
development of our own fuel cell assembly capability, using purchased sensors, in 2018. These Lifeloc-assembled fuel cells have been incorporated
into breathalyzers which have been submitted to and approved by the DOT. Even with the approval of our own assembled fuel cells, we continue
to purchase a portion of our total fuel cell requirements from our current supplier as necessary to meet the needs of the Company.
Supply chain disruptions experienced in 2023 and
into 2024 forced us to maintain larger inventories of certain items in order to accommodate longer lead times, particularly components
sourced internationally. This policy was continued in 2025, but the overall stocking of certain items was reduced.
**Patents, Intellectual Property and Royalties**
We rely, in part, upon patents, trade secrets
and proprietary knowledge as well as personnel policies and employee confidentiality agreements concerning inventions and other creative
efforts (collectively, Lifeloc IP) to develop and to maintain our competitive position. We do not believe that our business
is dependent upon any patent, patent pending or license, although we believe that trade secrets and confidential know-how may be important
to our commercial success.
We file for patents, copyrights and trademarks
to protect our intellectual property rights to the extent practicable. We hold the rights to four United States utility patents,
twoUnited States design patents and have two United States patent applications pending or in preparation for filing, along with
corresponding international patents and applications on our portable breath alcohol testers. These patents have expiration dates ranging
from January 2027 to February 2042.In 2017, we acquired seven United States patents and several active international patent applications
in connection with our purchase of the R.A.D.A.R. assets. The R.A.D.A.R. patents provide protection around the biometric identification
methods used in the R.A.D.A.R. devices along with a removable sampling chamber for maximum hygienics.
We act to protect our patents from infringement
in each instance where we determine that doing so would be economical in light of the expense involved and the level and availability
of our financial resources. While we believe that each of our pending applications relate to a patentable device or concept, there
is no guarantee that the patents will be issued.
We also enter into royalty and licensing agreements
where we license or otherwise confer our intellectual property rights on a licensor in exchange for specified payment terms. In 2012 we
entered into a royalty agreement with an OEM customer which provides for the monthly payment of royalties to us on all products containing
certain of our software sold by our customer. The agreement is of perpetual duration, but is terminable by the OEM customer upon
six months' notice. In 2013 we began receiving royalties from another customer as a result of entering into a second royalty agreement,
which provides for the monthly payment of royalties to us on all products containing certain of our software sold by our customer. The
agreement has been terminated by the customer as a result of redesign of their products. In 2021 we entered into a third agreement which
relates to licensing the design of the EasyTab mouthpieces, which is of perpetual duration.
| 7 | |
| | |
**Employees**
As of December 31, 2025, we had 35 full-time employees
and 3 part-time employees. We are not a party to any collective bargaining agreements.
**Customers**
Revenues from our largest customers, as a percentage of total revenues,
for 2025 and 2024 were as follows:
|
| |
2025 | | |
2024 | | |
|
Customer A | |
| 8 | % | |
| 9 | % | |
|
Customer B | |
| 6 | % | |
| 4 | % | |
|
Customer C | |
| 4 | % | |
| 3 | % | |
|
All others | |
| 82 | % | |
| 84 | % | |
|
Total | |
| 100 | % | |
| 100 | % | |
**Environmental Matters**
Our operations are subject to a variety of federal,
state and local laws and regulations relating to the discharge of materials into the environment or otherwise related to the protection
of the environment. Lifeloc sells cylinders of ethanol in nitrogen (UN1956, Class 2.2) for use in calibrating breath alcohol testers.
The gas mixture is a hazardous material as defined by the DOT (see 49 CFR 172). We believe we are in substantial compliance with the appropriate
DOT regulations for the handling and shipment of dry gas containers, as well as all other state or local laws governing the transportation
of hazardous materials. The DOT regulations include strict labeling and packaging requirements, as well as requirements pertaining to
shipping papers and declaration forms that must be completed by the shipper. In addition, we provide a Safety Data Sheet ("SDS")
with every tank, and all employees involved in shipping hazardous materials are required to have appropriate certification. Failure to
comply with these regulations could result in, among other things, revocation of required licenses, administrative enforcement actions,
fines and civil and criminal liability, which could have a material impact on our business. The cost of complying with these regulations
is considered as an ongoing cost of operations, and is not material.
**Government Regulation of the Business**
In connection with its distribution of cylinders
of ethanol in nitrogen for use in calibrating breath alcohol testers (described above under "Environmental Matters"),
Lifeloc has trained on and is following the requirements of OSHA's Hazardous Communications Standard of 2012 (referred to as "HazCom
2012"). Compliance with HazCom 2012 requires providing employee information and training, labeling of chemicals used by Lifeloc and
updating MSDS to the new harmonized Safety Data Sheets ("SDS") as they become available. It also requires us to prepare and
implement a hazard communication program to follow for workers potentially exposed to hazardous chemicals.
We are also subject to regulation by the United
States Department of Transportation ("DOT") and by various state departments of transportation. The Omnibus Transportation
Employee Testing Act of 1991 requires drug and alcohol testing of safety-sensitive transportation employees in aviation, trucking, railroads,
mass transit, pipelines, and other transportation industries. The DOT Office of Drug & Alcohol Policy & Compliance ("ODAPC")
publishes, implements, and provides authoritative interpretations of these rules. These regulations cover all transportation employers,
safety-sensitive transportation employees, and service agents. Manufacturers submit devices to the DOT for testing and approval.
Instruments are tested according to their model specifications and, if passed, included on the Conforming Products List of Evidential
Breath Alcohol Measurement Devices (the "CPL") published periodically in the Federal Register. Law enforcement applications
also require that portable breath testing instruments be included on the CPL. Lifeloc's FC10, FC10Plus, FC20, FC20BT, EV30, and
Phoenix 6.0 and Phoenix6.0BT are included on the CPL. Lifelocs LX9 and LT7 have received conformance letters from the
DOT and are expected to appear in the next publication of the CPL.
We believe that we were in substantial compliance
with the regulations described above as of December 31, 2025 for our products sold into these markets and states.
See also *Item 1A. Risk Factors We
are subject to a high degree of regulatory oversight and, if we do not continue to receive the necessary regulatory approvals, our revenues
may decline.*
**International
Regulations**
Outside of the United States, Lifeloc is subject
to applicable regional and foreign regulations. In order to sell our products in the European Union, a CE mark is required, which declares
product conformity to relevant directives. Product directives include electromagnetic compatibility and environmental directives which
restrict the use of certain hazardous substances in electronic equipment. Lifeloc has a number of CE marked products and we follow
other foreign regulations as they apply.
Many countries into which our products are sold
recognize the CPL in their selection criteria or have no regulations applicable to the sale of our products. In the case of sales
into countries that do not recognize the CPL in their selection criteria, our products conform to in-country developed specifications
or are not subject to significant government regulation.
**State and Local Regulations**
In certain states, the results of portable fuel-cell
breath testers are admissible as evidence of intoxication in DUI prosecution. In other states, infra-red technology is considered the
standard for evidence of intoxication, because of its ability to perform real-time analysis of the entire breath exhalation thereby giving
it the ability to detect interference from mouth alcohol. In those states, portable fuel-cell based breath testers are not admissible
as evidence of intoxication, although they may still be used to establish "probable cause."
**Insurance**
We are covered under comprehensive general liability
insurance policies, which have per occurrence and aggregate limits of $1 million and $2 million, respectively, and a $5 million umbrella
policy. We maintain customary property and casualty, workers' compensation, employer liability and other commercial insurance policies.
**Human Capital Resources**
At Lifeloc Technologies, we promise to expand
human possibility within our company and we work to attract and develop highly engaged people who can and want to do their best work.
A culture of integrity is fundamental to Lifelocs core values, including a code of ethics. That applies to our principal executive
officer, principal financial officer, principal accounting officer and all other directors and management personnel. This code of ethics
prohibits corrupt acts, bribery and anticompetitive behavior. Employee training is used to reinforce our values companywide, with participation
in trainings related to ethics, environment, health and safety responses at or near 100%. We make the safety and health of our employees
a top priority. We strive for zero workplace injuries and illnesses and operate in a manner that recognizes safety as fundamental to Lifeloc
being a great place to work. We invest in growth and development of our employees. We take pride in our culture and make every effort
to promote from within. We offer workplace benefits to all full-time employees. Our comprehensive benefits include healthcare benefits,
disability and life insurance benefits, paid time off, and leave programs. Lifeloc offers plans and resources to help employees meet future
savings goals through retirement savings plans. We offer flextime, remote work, and part-time arrangements whenever business conditions
permit. Productivity and continuous improvement are important components of our workplace culture.
**Item 1A. Risk Factors**
You should carefully consider the risk factors
described below. If any of the following risk factors actually occur, our business, prospects, financial condition or results of operations
would likely suffer. In such case, the trading price of our common stock could fall, resulting in the loss of all or part of your investment.
You should look at all these risk factors in total. Some risk factors may stand on their own. Some risk factors may affect (or be affected
by) other risk factors. You should not assume we have identified these connections. You should not assume that we will always update these
and future risk factors in a timely manner. Except as required under applicable securities laws, we are not undertaking any obligation
to update these risk factors to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated
events.
**Risks Related to Our Business and Industry**
**Global economic conditions could have a
negative impact on our business, operating results and financial condition.**
Our business can be positively or negatively affected
by fluctuations in exchange rates and country by country economic conditions. Our international customers increase, reduce, delay
or cancel their purchases of our products when exchange rates are unfavorable to importation. Unfavorable economic and currency
situations at times force us to adjust prices downward to remain competitive. We incur losses if a customer's business fails and the customer
is unable to pay us, or pay us on a timely basis. Likewise, if our suppliers have difficulty in obtaining credit or in operating their
businesses, they may not be able to provide us with the materials we use to manufacture our products.Our law enforcement business
is dependent on the availability of federal and state grants to fund new equipment purchases. Should this funding be unavailable or delayed,
our volume may be negatively affected. Our workplace business may be affected by the health of industries with safety-sensitive jobs such
as oil and gas and transportation. Demand for our products may be affected by downturns in these segments. These actions would result
in reduced revenues and higher operating costs, and have an adverse effect on our results of operations and financial condition.
| 8 | |
| | |
**Changes in trade policy and tariffs could
increase our costs and adversely affect our sales.**
Our business is subject to risks arising from
changes in U.S. and foreign trade policy, including the imposition or escalation of tariffs, import restrictions, and retaliatory trade
measures. The current trade environment is characterized by a high degree of policy uncertainty, and the scope and duration of existing
and potential future measures remain difficult to predict.
We purchase components and materials from domestic
and international suppliers. To the extent our suppliers are affected by tariff increases, the cost of such components may rise, and we
may not be able to fully offset those increases through pricing adjustments or by identifying alternative suppliers on a timely basis
or at all.
We also sell our products globally. Foreign governments
may impose retaliatory tariffs or other trade barriers on U.S.-manufactured goods, which could increase the cost of our products for international
customers, reduce demand, or cause distributors to seek alternative suppliers. If we are unable to effectively manage these risks, our
business, financial condition, and results of operations could be materially and adversely affected.
**Geopolitical instability and international
conflicts may disrupt our operations, supply chain, and financial performance.**
Ongoing and escalating international conflicts,
including the Ukraine-Russia war and multiple conflicts in the Middle East, continue to create economic and geopolitical uncertainty,
which may adversely impact our business. Trade restrictions, sanctions, and supply chain disruptions resulting from these conflicts could
materially affect our cost structure, operational efficiency, and overall financial performance.
Beyond regulatory concerns, ongoing conflicts
may also create significant supply chain inefficiencies by increasing transportation costs, delaying shipments, and restricting the availability
of critical materials. We cannot predict the duration or outcome of these geopolitical tensions, nor the extent to which future sanctions
or conflicts may escalate. However, we remain subject to potential financial and operational risks associated with global instability.
If our international operations, suppliers, or markets are affected by sanctions, military actions, trade barriers, or regulatory changes,
our business, results of operations, and financial condition could suffer.
****
**We rely on customers who may not consistently
purchase our products in the future and if we lose any one of these customers, our revenues may decline.**
****
Eighteen percent of our product sales in 2025
and sixteen percent in 2024 were attributable to three customers, with whom we do not have long-term contracts. If orders from those customers
are not renewed, our revenues may be adversely affected. Furthermore, at December 31, 2025, our accounts receivable balance included approximately
$344,879 or 46% from one customer, $56,096 or 7% from a second customer, and $39,780, or 5%, from a third customer.
In the future, a small number of customers may
continue to represent a significant portion of our total revenues in any given period. These customers may not consistently purchase our
products at a particular rate over any subsequent period. A loss of any of these customers could adversely affect our revenues.
**We rely heavily upon the talents of our
Chief Executive Officer, the loss of whom could severely damage our business.**
Our performance depends to a large extent on a
small number of key managerial personnel. In particular, we believe our success is highly dependent upon the services and reputation of
our Chief Executive Officer and President, Dr. Wayne R. Willkomm. Loss of Dr. Willkomm's services could severely damage our business.
**We must continue to be able to attract employees,
including employees with the scientific and technical skills that our business requires, and if we are unable to attract and retain such
individuals, our business could be severely damaged. Labor shortages across the country threaten to damage our business.**
Our ability to attract employees, including employees
with a high degree of scientific and technical talent is crucial to the success of our business. There is intense competition for the
services of such persons, and we cannot guarantee that we will continue to be able to attract and retain individuals possessing the necessary
qualifications. If we cannot attract such individuals, we may not be able to keep our products current, bring new innovations to
market or produce our products. As a result, our business could be damaged.
| 9 | |
| | |
**Our
growth depends in part on the timely development and commercialization, and customer acceptance, of new and enhanced products and services.**
If we do not develop innovative new and enhanced
products and services on a timely basis, our offerings will become obsolete over time and our business will suffer. Our success depends
on several factors, including our ability to:
|
|
|
correctly identify customer needs and preferences and predict future needs and preferences; | |
|
|
|
allocate our R&D funding to products and services with higher growth prospects; | |
|
|
|
anticipate and respond to our competitors development of new products and services and technological innovations; | |
|
|
|
differentiate our offerings from our competitors offerings and avoid commoditization; | |
|
|
|
innovate and develop new technologies and applications; | |
|
|
|
obtain adequate intellectual property rights with respect to key technologies before our competitors do; | |
|
|
|
successfully commercialize new technologies in a timely manner, price them competitively and cost-effectively manufacture and deliver sufficient volumes of new products of appropriate quality on time; | |
|
|
|
obtain necessary regulatory approvals of appropriate scope; and | |
|
|
|
stimulate customer demand for and convince customers to adopt new technologies. | |
If we fail to accurately predict future customer
needs and preferences or fail to produce viable technologies, we may invest heavily in R&D of products and services that do not lead
to significant revenue, which would adversely affect our business. Even when we successfully innovate and develop new and enhanced products
and services, we often incur substantial costs in doing so, and our profitability may suffer. In addition, promising new offerings may
fail to reach the market or realize only limited commercial success because of real or perceived efficacy or safety concerns.
**Our ongoing investment in new products,
services, and technologies is inherently risky, and could disrupt our ongoing businesses.**
****
We have invested and expect to continue to invest
in new products, services, and technologies. Such endeavors involve significant risks and uncertainties, including distraction of management
from current operations, insufficient revenues to offset liabilities assumed and expenses associated with these new investments, inadequate
return of capital on our investments, and unidentified issues not discovered in our due diligence of such strategies and offerings. Because
these new ventures are inherently risky, sometimes they have been unsuccessful and no assurance can be given that such strategies and
offerings will be successful and will not adversely affect our reputation, financial condition, and operating results.
****
**We are subject to a high degree of regulatory
oversight, and, if we do not continue to receive the necessary regulatory approvals, our revenues would decline.**
We are subject to regulation by the United States
Department of Transportation("DOT") and by various state departments of transportation. The Omnibus Transportation Employee
Testing Act of 1991 requires drug and alcohol testing of safety-sensitive transportation employees in aviation, trucking, railroads, mass
transit, pipelines, and other transportation industries. The DOT Office of Drug & Alcohol Policy & Compliance ("ODAPC")
publishes, implements, and provides authoritative interpretations of these rules. These regulations cover all transportation employers,
safety-sensitive transportation employees, and service agents. Manufacturers submit devices to the DOT for testing and approval. Instruments
are tested according to their model specifications and, if passed, included on the CPL. Law enforcement applications also require that
portable breath testing instruments be included on the CPL.Lifeloc's FC10, FC10Plus, FC20, FC20BT, EV30, and Phoenix 6.0 and
Phoenix6.0BT are included on the Conforming Products List of Evidential Breath Alcohol Measurement Devices (CPL). Lifelocs
LX9 and LT7 have received conformance letters from the DOT and are expected to appear in the next publication of the CPL. We believe that
we were in substantial compliance with the regulations described above as of December 31, 2025 for our products sold into these markets
and states.
The DOT has approved the alcohol monitoring products
we currently sell in the United States. However, further DOT approval may be required before we can domestically market additional alcohol
monitoring products that we may develop in the future. We may also seek to sell new drug-related products, or market current products
for new uses, either of which could require us to obtain DOT approval to sell such products. We may also be required to obtain regulatory
approvals or licenses from other federal, state or local agencies or comparable agencies in other countries.
| 10 | |
| | |
We may not continue to receive DOT approval of
our current products or we may not obtain the necessary regulatory clearance, approvals or licenses for the marketing of any of our future
products. Also, we cannot predict the impact on our business of DOT regulations or determinations arising from future legislation or administrative
action. If we lose DOT permission to sell our current products or we do not obtain regulatory permission to sell our future products,
our revenues would likely decline, harming our business.
**Our business in the domestic law enforcement
area is susceptible to changes in state policies and DUI laws.**
Portable breath testers (PBTs) are
not used to the same degree in each state. Usage is determined by a complex combination of individual state DUI laws, historical practice,
and individual state directions for alcohol testing. Some states do not accept breath alcohol testing as evidence.Other states may
prefer different breath alcohol testing technology, such as infrared. Lifeloc cannot control the direction or timing of changes to individual
state DUI laws, public and political sentiment toward the use of PBTs, or individual state preferences for a specific breath alcohol testing
technology. These factors threaten current state contracts and future state contracts and threaten revenue.
**Our business relies on state contracts,
governed by state contracting policies that are beyond our control.**
Many state purchases of PBTs are governed by state
contracts with competitive price bids, multiple year terms and without guarantees of purchases. Other states prefer to share PBT usage
across several vendors, also without guarantees of volume. These state practices limit Lifeloc's ability to retain current business, forecast
volumes and win new business.
Furthermore, a significant amount of our law enforcement
business is concentrated in eight states (Arizona, Arkansas, California, Colorado, Michigan, Idaho, Texas and Nevada). Loss of this business,
or delays or cancellations in purchasing by these states, seriously impacts our law enforcement business.
**We derive a significant portion of our revenue directly
or indirectly from government customers, and our business may be adversely affected by changes in the contracting or fiscal policies of
those governmental entities.**
We derive a significant portion of our revenue
directly or indirectly from federal, international, state and local governments. We believe that the success and growth of our business
will continue to depend on government customers purchasing our products and services either directly from us or indirectly through our
distributors. Changes in government contracting policies or government budgetary constraints may adversely affect our financial performance.
Among the factors that could adversely affect our business are the impact of actions, such as those recently announced by the U.S. Department
of Government Efficiency, intended to reduce the size of the federal government and federal spending; other changes in fiscal policies
or decreases in available government funding; changes in government funding priorities; changes in government programs or applicable requirements;
the adoption of new laws or regulations or changes to existing laws or regulations relating to the provision of biometrics services or
the use of biometric data; changes in political or social attitudes with respect to security and defense issues; changes in audit policies
and procedures of government entities; potential delays or changes in the government appropriations process; and delays in the payment
of our invoices by government payment offices. These and other factors could cause government customers or our distributors to reduce
purchases of products and services from us, which would have a material adverse effect on our business, financial condition and operating
results.
****
****
| 11 | |
| | |
**Third parties may infringe on our patents,
and as a result, we could incur significant expense in protecting our patents or not have sufficient resources to protect them.**
We hold several patents that are important to
our business. We plan to protect these patents from infringement and obtain additional patents whenever feasible. To this end, we have
obtained confidentiality agreements from our employees and consultants and others who have access to the design of our products and other
proprietary information. Protecting and obtaining patents, however, is both time consuming and expensive. We therefore may not have the
resources necessary to assert all potential patent infringement claims or pursue all patents that might be available to us. If our competitors
or other third parties infringe on our patents, our business may be harmed.
**Third parties may claim that we have infringed
on their patentsand as a result, we could be prohibited from using all or part of any technology used in our products.**
Should third parties claim a proprietary right
to all or part of any technology that we use in our products, such a claim, regardless of its merit, could involve us in costly litigation.
If successful, such a claim could also result in us being unable to freely use the technology that was the subject of the claim, or sell
products embodying such technology. If we engage in litigation, our expenses may increase and our business may be harmed. If we
are prohibited from using a particular technology in our products, our revenues may decline and our business may be harmed.
**Third parties to whom we have licensed our
patents may choose to enforce them through litigation, over which we would exert little or no control.**
Should third parties who have licensed our intellectual
property determine it is in their best interest to pursue litigation based on those patents, we would have no control in the direction
of that litigation or the resulting publicity. Litigation may result in unfavorable findings by courts regarding the nature or protectability
of our intellectual property. Litigation may result in additional expenditures or harm the business. Additionally, we would have no control
over the publicity any such litigation may garner, which could negatively affect the company in the marketplace. In any of these situations,
revenues may decline and our business may be harmed.
**Failure of third parties from whom we license
key intellectual property to protect their intellectual property could adversely affect our business.**
We rely on third-party licensors for certain key
intellectual property that is important to our business, and we have limited control over how they protect and enforce their rights. If
any of our licensors fail to adequately protect, maintain, or enforce their intellectual property, it could result in unauthorized use,
infringement by third parties, or legal disputes that diminish the value of the licensed assets. Any such failure could negatively impact
our ability to use the intellectual property as intended, limit our competitive advantages, or expose us to potential litigation, which
could materially affect our business, financial condition, and results of operations.
**We depend on the availability of certain
key supplies and services that are available from only a few sources, and if we experience difficulty with a supplier, we may have difficulty
finding alternative sources of supply.**
We require certain key supplies for our products,
particularly fuel cells, that are available from only a few sources. Based upon our ordering experience to date, we believe the materials
and services required for the production of our products are currently available in sufficient quantities. However, this does not mean
that we will continue to have timely access to adequate supplies of essential materials and services in the future or that supplies of
these materials and services will be available on satisfactory terms when the need arises. Our business could be severely damaged if we
become unable to procure essential materials and services in adequate quantities and at acceptable prices.
From time to time, subcontractors may produce
certain of our products for us, and our business is subject to the risk that these subcontractors may fail to make timely delivery and/or
become unable to acquire essential supplies and services from third parties in a timely fashion. If this occurs, we may not be able to
deliver our products on a timely basis and our revenues may decline. Our products and services are also from time to time used as components
in the products of other manufacturers. We are therefore subject to the risk that manufacturers that integrate our products or services
into their own products may change their source of supply to other vendors, may change their product designs in a way that eliminates
our components, and/or may choose to have their components manufactured by other means. If this occurs, our sales may decline and our
business may be harmed.
**We may be exposed to claims of liability.**
Like any manufacturer, we are and always have
been exposed to liability claims resulting from the use of our products. We maintain product liability insurance to cover us in the event
of liability claims, and as of December 31, 2025, no such claims have been asserted or threatened against us. However, our insurance may
not be sufficient to cover all possible future product liabilities.
**We could be liable if our business operations
harmed the environment, and a failure to maintain compliance with environmental laws could severely damage our business.**
Our operations are subject to a variety of federal,
state and local laws and regulations relating to the protection of the environment. From time to time, we use hazardous materials
in our operations. Although we believe that we are in material compliance with all applicable environmental laws and regulations, our
business could be severely damaged by any failure to maintain such compliance.
**Climate change may adversely impact our
business.**
The impact of continuing climate change could
result in increased costs or reduced demand for our products, carbon asset risks, risks due to severe weather events and may result in
the need for us to devote additional resources to the managementof greenhouse gas emissions which will likely harm our profitability.
****
****
| 12 | |
| | |
**Our quarterly financial results vary quarter
to quarter, which adversely affects our stock price at times. We cannot predict with any certainty our operating results in any particular
fiscal quarter.**
Our quarterly operating results may vary significantly
depending upon factors such as:
|
|
the timing of completion of significant orders; | |
|
|
the timing and amount of our research and development expenditures; | |
|
|
the costs of initial production in connection with new products; | |
|
|
the availability, quality and cost of key components that go into the assembly of our products; | |
|
|
the timing of new product introductions both by us and by our competitors; | |
|
|
changes in the regulatory environment and regulations under which we operate; | |
|
|
the loss of a major customer; | |
|
|
the timing and level of market acceptance of new products or enhanced versions of our existing products; | |
|
|
our ability to retain existing employees, customers and our customers' continued demand for our products and services; | |
|
|
our customers' inventory levels, and levels of demand for our customers' products and services; and | |
|
|
competitive pricing pressures. | |
We may not be able to grow or sustain revenues
or achieve or maintain profitability on a quarterly or annual basis, and levels of revenue and/or profitability may vary from one such
period to another.
**Identification of material weakness in internal control may adversely
affect our financial results.**
We are subject to the ongoing internal control
provisions of Section 404 of the Sarbanes-Oxley Act of 2002. Those provisions provide for the identification of material weaknesses in
internal control. If such a material weakness is identified, it could indicate a lack of adequate controls to generate accurate financial
statements. We routinely assess our internal controls, but we cannot assure you that we will be able to timely remediate any material
weaknesses that may be identified in future periods, or maintain all of the controls necessary for continued compliance.
**We may require additional capital in the future, which may not
be available or may only be available on unfavorable terms.**
We monitor our capital adequacy on an ongoing
basis. To the extent that our funds are insufficient to fund future operating requirements, we may need to raise additional funds through
corporate finance transactions or curtail our growth and reduce our liabilities. Any equity, hybrid or debt financing, if available at
all, may be on terms that are not favorable to us. If we cannot obtain adequate capital on favorable terms or at all, our business, financial
condition and operating results would be adversely affected, and we may be required to reduce, delay, or discontinue our SpinDetect
development program, which could materially affect our business prospects and the value of our investment in that technology.
**Our outstanding indebtedness requires ongoing
debt service and could limit our financial flexibility.**
We have incurred indebtedness in the form of two
subordinated debentures in an aggregate principal amount of $825,000, both bearing interest at 8.25% per annum. Monthly principal and
interest payments on these debentures commenced in January 2026, and balloon payments are due in December 2030. We also carry a mortgage
on our corporate headquarters with a maturity of September 2031. Our ability to service this indebtedness depends on our continued ability
to generate cash from operations. If our revenues decline or our operating costs increase, we may have difficulty meeting these obligations.
If we are unable to service our debt or to refinance or repay it at maturity, we could be required to seek additional financing on unfavorable
terms, sell assets, or take other actions that could adversely affect our business and the interests of our stockholders.
**We have a number of large, well-financed
competitors who have research and marketing capabilities that are superior to ours.**
The industry in which we operate is highly competitive.
Many of our existing and potential competitors have greater financial resources and manufacturing capabilities, more established and larger
marketing and sales organizations and larger technical staffs than we have. Other companies, some with greater experience in the alcohol
monitoring industry, produce products and services that compete with our products and services.When our competitors are successful
in developing products that are superior to our products, or competing products that sell for lower prices, there is a reduction in the
demand for our products and a corresponding reduction in our revenue and our profits.
****
| 13 | |
| | |
**Our products rely on technology that may
become outdated or out of favor.**
All of Lifeloc's products use fuel cell technology
for the measurement of breath alcohol results. This technology has been developed and refined over many years by Lifeloc and our major
competitors. While we expect it to remain as the dominant technology in breath testing devices, other technologies for the measurement
of breath alcohol exist and are employed in other market and application segments where the technology is more suitable or developed to
the specific requirements. Future development of these technologies pose a risk to Lifeloc's business. See Item 1. Business
Competition and Markets for more information about these other technologies.
**Natural disasters, public health crises,
political crises, and other catastrophic events or other events outside of our control may damage our facilities or the facilities of
third parties on which we depend and could impact customer priorities and consumer spending.**
We have global third parties upon whom we rely
and who are sometimes impacted by events outside of our control. An earthquake or other natural disaster or power shortages or outages
could disrupt operations or impair sales. In addition, if any facilities of our suppliers, third-party service providers, vendors, or
customers, is affected by natural disasters, such as earthquakes, tsunamis, power shortages or outages, floods or monsoons, public health
crises, such as pandemics and epidemics, political crises, such as terrorism, war, political instability or other conflict, or other events
outside of our control, our business and operating results could suffer. Any of these disruptions or other events outside of our control
would affect our business negatively, harming our operating results.
**Increasingly common data privacy and cybersecurity regulations
impact the use of or market for our products.**
Information collected with our products may be
governed by certain data privacy and cyber security regulations, breach of which could cause negative publicity or otherwise harm the
company. As a company with information stored online, the company may be vulnerable to cybersecurity attacks which may trigger reporting
requirements and legal liability. Responding to a cybersecurity threat or breach would require financial resources, would cause a loss
of productivity, and would open the Company to legal liability.
**Unstable market and economic conditions
may have serious adverse consequences on our business, financial condition and stock price.**
Global credit and financial markets have experienced,
and may continue to experience, significant volatility and disruption, including periods of increased inflation, diminished liquidity
and credit availability, declines in consumer confidence and economic growth, and uncertainty about economic stability. Ongoing and emerging
geopolitical conflicts, trade tensions, and other destabilizing events contribute to this uncertainty, and the scope, duration, and long-term
impact of any such conditions are difficult to predict. Our general business strategy may be adversely affected by any such economic downturn,
volatile geopolitical and business environment or continued unpredictable and unstable market conditions. If the current equity and credit
markets deteriorate, or do not improve, it may make any necessary debt or equity financing more difficult, more costly, and more dilutive.
Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth
strategy, financial performance and stock price and could require us to delay or abandon research and development plans. In addition,
there is a risk that one or more of our current suppliers or other partners may not survive these difficult economic times, which could
directly affect our ability to attain our operating goals on schedule and on budget.
****
**Risks Related to Our Stock**
**Shares of our common stock lack a significant
trading market.**
Shares of our common stock are not eligible for
trading on any national securities exchange. Our common stock may be quoted in the over-the-counter market on the OTC Bulletin Board or
in what are commonly referred to as "pink sheets." However, these markets are highly illiquid. There is no assurance that an
active trading market in our common stock will develop, or if such a market develops, that it will be sustained. In addition, there is
a greater chance for market volatility for securities quoted on the OTC Bulletin Board and pink sheets as compared with securities traded
on a national exchange. This volatility may be caused by a variety of factors, including the lack of readily available quotations, the
absence of consistent administrative supervision of "bid" and "ask" quotations and generally lower trading volume.
Under certain circumstances, shares of our common
stock may be sold without registration pursuant to the safe harbor provided in Exchange Act Rule 144 ("Rule 144"). Any sale
under Rule 144 or under any other exemption from the Securities Act of 1933, as amended (the "Securities Act"), if available,
or pursuant to registration of shares of common stock of present stockholders, may have a depressive effect upon the price of our common
stock in any market that may develop.
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Additionally, the price of our securities may
be volatile as a result of a number of factors, including, but not limited to, the following:
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our ability to successfully conceive and to develop new products and services to enhance the performance characteristics and methods of manufacture of existing products; | |
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our ability to retain existing customers and customers' continued demand for our products and services; | |
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the timing of our research and development expenditures and of new product introductions; | |
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the timing and level of acceptance of new products or enhanced versions of our existing products; | |
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price and volume fluctuations in the stock market at large which do not relate to our operating performance; and | |
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outside news reports which may or may not accurately convey information about us, our products, our prospectsand opportunities. | |
**Our principal stockholder has significant
voting power and may take actions that may not be in the best interests of other stockholders.**
Vern D. Kornelsen, Chairman of our Board of Directors,
Secretary, and Chief Financial Officer, beneficially owned approximately 77% of our outstanding common stock as of December 31, 2025.
Through this ownership, Mr.Kornelsen is able to control the composition of our Board and direct our management and policies. Accordingly,
Mr.Kornelsen has the direct or indirect power to:
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amend our bylaws and some provisions of our articles of incorporation; and | |
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cause or prevent mergers, consolidations, sales of all or substantially all our assets or other extraordinary transactions. | |
Mr.Kornelsen's significant ownership interest
could adversely affect investors' perceptions of our corporate governance. In addition, Mr.Kornelsen may have an interest in pursuing
acquisitions, divestitures and other transactions that involve risks to us and you. For example, Mr.Kornelsen could cause us to
make acquisitions that increase our indebtedness or to sell revenue-generating assets. Mr.Kornelsen may from time to time acquire
and hold interests in businesses that compete directly or indirectly with us.
**Stockholders should not anticipate receiving
cash dividends on our stock.**
We have never declared or paid any cash dividends
or distributions on our capital stock. We currently intend to retain future earnings to support operations and to finance expansion and
therefore do not anticipate paying any cash dividends on our common stock in the foreseeable future.
**We may issue shares in the future, diluting
your interest in us.**
We issue options to purchase shares of our common
stock to compensate employees, consultants and directors or to raise capital. Any such issuances will have the effect of further diluting
the interest of the holders of our securities.
**General Risk Factors**
****
**Blue Sky considerations limit sales in certain
states.**
The holders of our securities and persons who
desire to purchase them in any trading market that might develop in the future should be aware that there may be significant state law
restrictions upon the ability of investors to resell our securities. Investors should consider any secondary market for our securities
to be a limited one. The "manual exemption" permits a security to be distributed in a particular state without being registered
if the company issuing the security has a listing for that security in a securities manual recognized by the state. However, it is not
enough for the security to be listed in a recognized manual. The listing entry must contain (1) the names of issuers, officers, and directors,
(2) an issuer's balance sheet, and (3) a profit and loss statement for either the fiscal year preceding the balance sheet or for the most
recent fiscal year of operations. Since June 14, 2011, we have been listed in Standard & Poor's. While many states expressly recognize
this manual, a smaller number of states declare that they "recognize securities manuals" but do not specify the recognized manuals,
making applicability of the manual exemption uncertain in those states. The following states do not have provisions expressly recognizing
the manual exemption: Alabama, Illinois, Kentucky, Louisiana, Montana, New York, Pennsylvania, Tennessee and Virginia. While we may, in
our discretion, cause our securities to be registered under the state securities laws of these or other states, there is no guarantee
that we will do so.
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**Compliance with changing regulations of
corporate governance and public disclosure result in expense.**
We are subject to certain federal, state and other
rules and regulations, including those required by the Sarbanes-Oxley Act of 2002, new regulations promulgated by the SEC and the rules
of the OTC Market. The expense of compliance with these and other laws relating to corporate governance and public disclosure is included
in our general and administrative expenses. These laws, regulations and standards are subject to varying interpretations in many cases,
and as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies, which
could result in higher costs necessitated by ongoing revisions to disclosure and governance practices. We are committed to maintaining
high standards of corporate governance and public disclosure. As a result, we invest resources to comply with evolving laws, regulations
and standards, and this investment results in increased general and administrative expenses and a diversion of management time and attention
from revenue-generating activities to compliance activities.
**Item 1B. Unresolved Staff Comments**
Not required for smaller reporting companies.
**Item 1C. Cybersecurity**
****
**Cybersecurity
Risk Management and Strategy**
****
We rely on third party providers and
outsourced IT services to monitor and address cybersecurity related risks, including installing software for threat protection and malware
detection. Such third party providers are tasked with notifying management of any material risks or cybersecurity concerns that they identify,
which management then assesses and may bring to our board of directors to discuss if deemed necessary or appropriate. Based on the results
of our risk assessments, if deemed necessary or appropriate, we take steps to re-design, implement, and maintain reasonable safeguards
to minimize identified risks; reasonably address any identified gaps in existing safeguards; and regularly monitor the effectiveness of
our safeguards. These cybersecurity risk management processes are integrated into our overall enterprise risk management program.
We intend to work with outside counsel
and third party service providers to further develop our expertise, processes and procedures with respect to cybersecurity protection
and our response plan.
To date, we have not (to our knowledge)
encountered cybersecurity challenges that have materially affected our business strategy, results of operations, or financial condition,
though we cannot provide assurance that they will not be materially affected in the future.
**Cybersecurity
Governance**
Our Audit Committee of our Board of
Directors is tasked with general oversight of our risk management process, including risks from cybersecurity threats. Members of management
provide periodic briefings to the Audit Committee of our Board of Directors regarding our cybersecurity risks and activities, including
any recent cybersecurity incidents and related responses, cybersecurity systems testing, activities of third parties, and the like. In
furtherance thereof, the committee is responsible for monitoring and assessing strategic risk exposure.
Our CEO is the member of management primarily
responsible for assessing and managing our cybersecurity risk management program and for informing the Audit Committee about cybersecurity
risks and incidents. He works directly with our third-party IT service providers to evaluate the effectiveness of our cybersecurity safeguards
and to oversee our incident response processes. Our management team has extensive experience managing operational and business risks at
the Company, including risks arising from cybersecurity threats. Because we rely substantially on third-party providers for the technical
aspects of our cybersecurity program, we do not maintain a dedicated in-house cybersecurity function, and the relevant expertise for managing
cybersecurity risks at the Company is provided principally through those third-party relationships rather than through specialized credentials
held by members of management.
In the event of a cybersecurity incident, our
incident response plan is designed to escalate incidents to members of management, and if appropriate to the Audit Committee, depending
on the severity and circumstances of the incident.
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**Item 2. Properties**
On October 31, 2014, we purchased the commercial
property we use as our corporate headquarters and certain adjacent property in Wheat Ridge, Colorado. The building consists of 22,325
square feet, all which is used by us for operations. In addition to housing our corporate headquarters, we use this property for research
and development, manufacturing, shipping/receiving, warehouse, and inventory purposes. Our purchase of the property was partially financed
through a term loan in an original principal amount of $1,581,106, secured by a first-priority mortgage on the property. This loan was
paid on September 30, 2021 with proceeds from a new term loan, also secured by a first-priority mortgage on the property, in the principal
amount of $1,350,000 which matures in September 2031.
**Item 3. 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 material
pending legal proceedings, other than ordinary routine litigation incidental to our business, to which we are a party or of which any
of our property is subject.
**Item 4. Mine Safety Disclosures**
Not applicable.
****
**PART II**
**Item 5. Market for Registrants Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities**
As of December 31, 2025, we had 65 shareholders
of record. Our common stock is not listed on an established public trading market. Since January 17, 2012, our stock has been quoted by
the OTC Markets Group, Inc., in the non-NASDAQ over the counter market. The symbol for our shares is LCTC. Trading in our common stock
is limited and sporadic. Subject to the foregoing qualification, the following table sets forth the range of bid quotations for the fiscal
quarters indicated, as quoted by OTC Markets Group, Inc., and reflects inter-dealer prices, without retail mark up, mark down or commission
and may not necessarily represent actual transactions.
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Fiscal 2025 |
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Bid Price |
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Fiscal 2024 |
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Bid Price |
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1st Quarter |
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$2.62 3.67 |
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1st Quarter |
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$1.90 3.99 |
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2nd Quarter |
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$2.76 3.41 |
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2nd Quarter |
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$3.00 4.30 |
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3rd Quarter |
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$3.00 3.50 |
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3rd Quarter |
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$3.60 5.58 |
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4th Quarter |
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$2.40 3.67 |
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4th Quarter |
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$2.21 3.15 |
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**Dividend Policy**
We have never declared or paid any cash dividend
on shares of our common stock. We do not anticipate paying any cash dividends in the foreseeable future. We currently intend to retain
future earnings, if any, to finance our operations and expand our business. Any future determination to pay cash dividends will be at
the discretion of the board of directors and will be dependent upon our financial condition, operating results, capital requirements,
and other factors the board of directors deems relevant.
**Recent Sales of Unregistered Securities**
On July 23, 2024 we sold 210,000 shares of common
stock to EDCO Partners LLLP, an accredited investor of which our chairman is the managing partner, in a private placement pursuant to
Section 4(a)(2) and Regulation D of the Securities Act. The purchase price under the Private Placement was $3.80 per share, for a total
of $798,000 in proceeds to Lifeloc. There were no discounts or commissions paid to underwriters or placement agents.
On December 31, 2024, in connection with the issuance
of a $750,000 subordinated debenture, the Company issued warrants to purchase 62,500 shares of common stock at an exercise price of $4.50
per share. These warrants were valued at $120,000 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.
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In February 2025, options to purchase 88,500 shares
of our common stock, originally granted as incentive stock options pursuant to our 2013 Stock Option Plan, were assigned by the option
holders to EDCO Partners LLLP and a third director. The Board of Directors approved the assignments and waived the non-transferability
provisions of the applicable option agreements and the Plan solely to permit such assignments. Upon assignment, the options ceased to
qualify as incentive stock options and were reclassified as nonqualified stock options for all tax, accounting, and compliance purposes.
EDCO Partners LLLP, of which our CFO and board chairman is the general partner, and a third director then exercised the assigned options
at a price of $3.80 per share for total proceeds of $336,300 to the Company. The shares were issued to EDCO Partners LLLP and the third
director in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act as transactions not involving
a public offering.
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.
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 6. [Reserved] | |
**Item 7. 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-K. 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
and 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-K are strongly encouraged to review the section
titled *"Risk Factors."*
**Overview**
Lifeloc Technologies, Inc., a Colorado corporation
("Lifeloc" or the "Company"), is a Colorado-baseddeveloper, 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 portable 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 December1983.
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. Information
contained on our websites does not constitute part of this Form 10-K.
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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 2025, we incurred operating losses.
There is no assurance that we will not incur 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 continue to incur research and development expenses as we near completion of the first phase of SpinDetect and to
update our base products.
**SpinDetect Microfluidic Detection Platform**
In 2016, we obtained the exclusive rights to develop
and commercialize Sandia National Laboratories patented centrifugal microfluidic technology (formerly referred to as SpinDx).
Our commercialization effort was initially hampered by the pandemic; however, development has since advanced significantly. A first Lifeloc-owned
utility patent application covering improvements to the system was filed in 2024. Under the license agreement, Sandia retains ownership
of the foundational patents, while patentable enhancements developed by Lifeloc belong solely to us.
After several rounds of optimization, we have
completed the design of the SpinDetect microfluidic disk, enabling the design to move into fabrication and validation. All analytical
chemistry now occurs on the disk after introduction of the sample. This advancement completes the core system required for beta testing
using our prototype reader. We expect commercial launch in 2026, with initial products designed to measure drugs of abuse in oral fluid,
followed by expansion into additional drug panels.
The SpinDetect analyzer is designed to
address key limitations in current drug-testing methods. The platform uses centrifugal forces and microfluidic flow paths to conduct multiple
assays on a microliter-level sample, providing rapid, on-site, and quantitative results. The technology is capable of detecting extremely
low concentrations of potent substances such as fentanyl, cocaine, and delta-9-THC, and can isolate psychoactive delta-9-THC from inactive
metabolites. This separation supports more accurate assessments of recent usean important distinction from traditional immunoassay-based
devices that may report non-impairing metabolites. Development-stage work has demonstrated detection of delta-9-THC at concentrations
as low as 5 ng/mL in laboratory settings.
Drug testing using oral fluid represents a sufficiently
large unmet need to justify the SpinDetect investment. Existing systems lack the analytical specificity needed for accurate, impairment-relevant
results. We already serve this market through our established sales channels, and the SpinDetect platform is designed to be customizable
to various workplace and jurisdictional drug panels.
While oral-fluid drug testing is the initial application,
the SpinDetect reader is designed to accept multiple disk formats, enabling analysis of different sample types on the same instrument.
Potential future applications include human and veterinary blood, breath extract, and neonatal meconium. Each represents a significant
problem area:
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| Veterinary care: Accidental pet ingestion of illicit or recreational drugs is a frequent
occurrence, yet veterinarians lack a rapid method to identify the substance involved. |
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| Neonatal screening: Meconium testing for suspected maternal drug use can require several
hours, during which some mothers leave the hospital with the newborn before the infants safety is assured. |
|
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Beyond drug detection, the SpinDetect platform
can support a broader range of biological and chemical analyses. The same microfluidic lab-on-a-disk architecture can be
adapted to detect food-safety markers such as bacterial pathogens *E. coli*, *Salmonella*, and *Listeria*; environmental
contaminants; performance-enhancing drugs; and human or veterinary diagnostic targets. These applications will require additional research,
regulatory clearances, and, in certain cases, expansion of our license rights. We are actively evaluating and negotiating potential amendments
to enable the development of these non-drug-testing markets.
As we advance toward commercialization, SpinDetect
prototype analyzers have been demonstrated at industry conferences, generating encouraging engagement from potential customers. The feedback
we have receivedincluding suggestions for new use casessupports our belief that the SpinDetect platform can address
substantial unmet needs in rapid, quantitative testing.
We expect an initial commercial release in 2026.
Continued progress toward these milestones is dependent on timely access to capital to support fabrication, validation, regulatory preparation,
and market introduction.
In 2025 we purchased SpinDetect related
test and other equipment totaling $354,381 compared with $667,738 spent in 2024.
**
*R.A.D.A.R.*
On March 8, 2017, we entered into an Asset Purchase
Agreement (the Asset Purchase Agreement) with Track Group Inc., a Delaware corporation. Pursuant to the terms and conditions
of the Asset Purchase Agreement, we acquired certain assets comprised of: (1) handheld hardware device technology (the R.A.D.A.R.
Mobile Devices), designed to measure breath alcohol content of the user; and (2) software technology called R.A.D.A.R. (Real-time
Alcohol Detection and Reporting) Reporting Center designed to allow the Device to be configured and to capture and manage the data being
returned from the Device (together with the Device, the R.A.D.A.R. Assets). We purchased the assets of R.A.D.A.R. 100
knowing the product needed significant upgrading, which was essentially completed and released for sale in 2022 as R.A.D.A.R. 200. This
product met with little market acceptance as a result of the underperformance of one feature, generating nominal revenue in 2022 and none
in subsequent years. In 2023, we outsourced the development of R.A.D.A.R. 300 to a third party, but that effort is currently on hold.
**Results of Operations**
**For the year ended December 31, 2025 compared to the year ended
December 31, 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 2023 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 year ended December
31, 2025 were $8,958,672, an increase of 6% from $8,470,985 for the same period a year ago. This increase is primarily attributable to
new customer acquisitions and expansion within existing customer accounts including fleet refresh activity. When royalties of $51,634
and rental income of $16,632 are included, total revenues of $9,026,938 increased by $488,793, or 6%, for the year ended December 31,
2025 when compared to the same 12 months a year ago. Rental income decreased by $16,146 due to electing not to renew or replace a lease
for a portion of the space formerly occupied by a tenant, and royalties increased by $17,252 due to an increase in sales by royalty-paying
customers.
*Gross profit.*
Total gross profit for the year ended December
31, 2025 of $3,642,045 represented an increase of 6% from total gross profit of $3,446,099 for the year ended December 31, 2024, primarily
as a result of higher product sales. Cost of product sales, excluding rental segment costs, increased from $5,066,779 in the year ended
December 31, 2024 to $5,375,787 in the same period in 2025, an increase of $309,008 (6%).Gross profit margin on products was 40%
in the year ended December 31, 2025 and 40% in the year ended December 31, 2024.
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*Research, development and sustaining engineering
expenses.*
Research, development and sustaining engineering
expenses continued at the high level of $2,152,843 for the year ended December 31, 2025, representing a decrease of $90,026 (4%) over
the $2,242,869 in the same period a year ago. This decrease resulted primarily from a reduction of payments to outside contractors needed
for development of SpinDetect. In 2026 we expect to continue work on SpinDetect.
*Sales and marketing expenses.*
Sales and marketing expenses of $1,331,062 for
the year ended December 31, 2025 were similar to the $1,358,211 spent in the same period a year ago.
*General and administrative expenses.*
General and administrative expenses of $1,388,160
for the year ended December 31, 2025, versus $1,253,236 for the year ended December 31, 2024 were higher by $134,924 (11%) primarily as
a result of public company and legal expense attributable to our S-4 filings.
*Other income (expense).*
Interest income decreased from $42,867 a year
ago to $38,010 in 2025, a decrease of $4,857, as a result of less funds available.Interest expense of $119,190 in the year ended
December 31, 2025 was up $79,045 from $40,145 in the previous year as a result of the increase in the interest and amortization of debt
issuance costs on our debentures. Combined, these changes resulted in a total expense increase of $83,902, or 3082%, in the year ended
December 31, 2025 from the year ended December 31, 2024.
*Net income (loss).*
We realized a net loss of $2,470,399 for the year
ended December 31, 2025 compared to a net loss of $1,052,948 for the year ended December 31, 2024.This increase in loss of $1,417,451
was the result of the changes in gross profit, operating expenses and other income discussed above, which resulted in a loss before taxes
of $1,311,200 in 2025, or a decrease of $94,295 from the loss before taxes of $1,405,495 in 2024. After the provision for valuation allowance
from deferred taxes of $1,159,199 in 2025 versus a benefit from taxes of $352,547 a year ago, we realized a net loss of $2,470,399 in
2025 compared to a net loss of $1,052,948 in 2024. The benefit from taxes of $352,547 in 2024 resulted in an increase to our deferred
tax asset from $806,652 at December 31, 2023 to $1,159,199 at December 31, 2024. The deferred tax asset reserve was increased by $1,159,199
in 2025 which resulted in a net deferred asset of $0 in 2025.
**
*Trends and Uncertainties That MayAffect Future Results*
**
Revenues in the year 2025 were higher compared
to revenues in 2024.We believe that continued increased sales efforts, together with the expected availability of SpinDetect
for sale in 2026 may result in modest improved revenues in 2026 and beyond. 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 somewhat 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 launching SpinDetect into the market.
Our 2026 operating plan is focused on growing
sales of our base products, and on bringing SpinDetect to market, thereby increasing gross profits. We cannot predict with certainty the
expected sales, gross profit, net income or loss, or usage of cash and cash equivalents for 2026. 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 achieving at least cash flow break-even,
additional capital may be required to maintain ongoing operations.
**
| 21 | |
| | |
*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, as
well as a one-year $250,000 line of credit, which was later increased to $750,000 with a maturity date of September 28, 2021. 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. The revolving line of credit facility expired in accordance with its terms and has
not been renewed.
On December 31, 2024 we issued a $750,000 debenture
subordinated to obligations to the Companys secured creditors holding a lien on all assets that calls for interest only at 8.25%
payable quarterly in 2025, with monthly payments of $9,199 including principal and interest at 8.25% commencing on January 31, 2026. A
balloon payment of $451,012 is due in full on December 31, 2030. In consideration of the lender providing this financing, the Company
issued warrants which entitle the holder to purchase 62,500 shares of our common stock at $4.50 per share. The warrants have a life of
70 months. If the debenture is paid in full on or before December 31, 2029, the warrants will have a remaining life of 58 months.
On March 1, 2025 we issued a $75,000 debenture
subordinated to obligations to the Companys secured creditors holding a lien on all assets that calls for interest only at 8.25%
payable quarterly in 2025, with monthly payments of $920 including principal and interest at 8.25% commencing on January 31, 2026. A balloon
payment of $45,707 is due in full on December 31, 2030. In consideration of the lender providing this financing, the Company issued warrants
which entitle the holder to purchase 6,250 shares of our common stock at $4.50 per share. The warrants have a life of 70 months. If the
debenture is paid in full on or before December 31, 2029, the warrants will have a remaining life of 58 months.
**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. See Note 6
Commitments and Contingencies to our Financial Statements in Part II - Item 8.
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 unsecured subordinated debenture for $750,000 with a third party. On March 1, 2025 we completed the issuance of
a 70 month unsecured 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. Between 2002
and 2020, we were consistently profitable, due to stabilization and then growth in our core breathalyzer products. Our recent net losses
in 2024 and 2025 reflect a deliberate investment in the development of our SpinDetect platform rather than a deterioration of our
core breathalyzer business, which has remained stable. We believe our core product and services business, at current revenue levels, is
capable of supporting ongoing operations on a cost-reduced basis. We intend to continue managing costs carefully while advancing SpinDetect
toward its anticipated commercial launch later in 2026. If the development or market acceptance of SpinDetect takes longer than
expected, or if we require additional capital to support commercialization, we may seek additional financing through equity or debt offerings.
As of December 31, 2025, cash and cash equivalents
were $746,001, trade accounts receivable were $772,380 and current liabilities were $836,870 resulting in net liquid assets of $681,511. We
believe our core breathalyzer business has remained fundamentally sound and, together with the anticipated commercialization of SpinDetect,
provides a reasonable basis for a return to profitability. However, if revenues from our core business do not grow as expected, if the
commercialization of SpinDetect is delayed or requires more capital than anticipated, or if general economic conditions deteriorate,
we may be required to seek additional sources of capital and/or to implement further cost reduction measures, as necessary.
| 22 | |
| | |
Equipment expenditures, consisting of updated
production equipment and SpinDetect related equipment, during FY 25 were $354,381 compared to $667,738 for FY 24, a decrease of
$313,357. We incurred patent application costs in preparation for filing of $0 in 2025 versus $21,708 in 2024. Fully depreciated equipment
of $510,767 was removed from our balance sheet in 2025 vs. none in 2024. Fully amortized patents of $2,821 were removed from our balance
sheet in 2025 vs. none in 2024. As development of SpinDetect progresses, and as normal wear and tear of equipment occurs, we expect to
incur outlays for equipmentand patent filings in 2026 and beyond.
As the SpinDetect disk design nears completion,
we expect our outside contractor expenses to decrease materially beginning in Q2 2026. Our outstanding subordinated debentures require
combined monthly payments of approximately $10,100 commencing January 2026, with balloon payments not due until December 2030. We believe
that our cash and receivables position, combined with cash generated from ongoing product sales, cost reductions already implemented,
and the availability of additional financing if needed, are sufficient to fund our operations and meet our financial obligations for the
foreseeable future.
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 loss. For the year ended December 31,
2025 and for the year ended December 31, 2024, warranty costs were not deemed significant.
**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, 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 one operating segment
consisting of our primary business which is as a developer, manufacturer and marketer of portable hand-held breathalyzers and related
accessories, supplies and education.
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.
| 23 | |
| | |
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 are amortized over 15 years using the straight line method.In 2025, we accelerated the amortization of the remaining cost and
fully amortized 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. The R.A.D.A.R. software and patents that were purchased in March 2017 were originally set to amortize over 15 years
using the straight line method, but in 2022 we accelerated the amortization of the remaining cost to fully amortize the assets by December
31, 2025. Maintenance and repairs are expensed as incurred and major additions, replacements and improvements are capitalized.
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 certificationoccurs. Data recording revenue is recognized based on each days usage of enrolled devices.
Revenues arising from extended warranty contracts
are booked as sales over their life on a straight-line basis. We provide customer financing and leasing ourselves, which we recognize
as revenue over the applicable lease term. Occasionally, we rent used equipment to customers, and in those cases, we recognize the revenues
as they are earned over the life of the contract.
Royalty income is recognized in accordance with
agreed upon terms, when performance obligations are satisfied, the amount is fixed or determinable and collectability is reasonably assured.
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.
**Off-Balance Sheet Arrangements**
We currently have no off-balance sheet arrangements
that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition,
revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
**Item 7A. Quantitative and Qualitative Disclosures About Market Risk**
Not required for smaller reporting companies.
**Item 8. Financial Statements and Supplementary Data**
The following financial statements are included
in this Report:
|
| |
Page | | |
|
Report of Independent Registered Public Accounting Firm for the Year Ended December 31, 2025 and 2024 (PCAOB ID: 444) | |
| 25 | | |
|
Balance Sheets as of December 31, 2025 and 2024 | |
| 27 | | |
|
Statements of (Loss) for the Years Ended December 31, 2025 and 2024 | |
| 28 | | |
|
Statements of Changes in Stockholders' Equity for the Years Ended December 31, 2025 and 2024 | |
| 29 | | |
|
Statements of Cash Flows for the Years Ended December 31, 2025 and 2024 | |
| 30 | | |
|
Notes to Financial Statements | |
| 31 | | |
| 24 | |
| | |
*
**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM**
****
To the shareholders and the board of directors
of Lifeloc Technologies, Inc.
****
**Opinion on the Financial Statements**
We have audited the accompanying balance sheets
of Lifeloc Technologies, Inc. (the "Company") as of December 31, 2025 and 2024, the related statements of(loss), changes
in stockholders equity and cash flows for each of the years then ended, and the related notes (collectively referred to as the
"financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position
of the Companyas ofDecember 31, 2025 and 2024, and the results of its operations and its cash flows for the year then ended,
in conformity withaccounting principles generally accepted in the United States of America.
**Basis for Opinion**
These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We
are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding
of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal
control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess
the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. We believe that our audit provide a reasonable basis for our opinion.
| 25 | |
| | |
****
**Critical Audit Matter**
Critical audit matters are matters arising from
the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and
that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective, or complex judgments. We determined that there were no critical audit matters.
We have served as the Company's independent auditor
since 2024.
/s/ Assure CPA,
LLC
Spokane, Washington
March 27, 2026
PCAOB ID Number
444
| 26 | |
| | |
LIFELOC TECHNOLOGIES, INC.
Balance Sheets
|
| |
| | |
| | |
|
ASSETS | | |
| | |
|
| |
December 31, 2025 | | |
December 31, 2024 | | |
|
CURRENT ASSETS: | |
| | | |
| | | |
|
Cash and cash equivalents | |
$ | 746,001 | | |
$ | 1,243,746 | | |
|
Accounts receivable, net | |
| 772,380 | | |
| 732,541 | | |
|
Inventories, net | |
| 2,633,614 | | |
| 2,996,397 | | |
|
Federal and state income taxes receivable | |
| 55,981 | | |
| 80,560 | | |
|
Prepaid expenses and other | |
| 60,825 | | |
| 40,045 | | |
|
Total current assets | |
| 4,268,801 | | |
| 5,093,289 | | |
|
| |
| | | |
| | | |
|
PROPERTY, PLANT AND EQUIPMENT: | |
| | | |
| | | |
|
Land | |
| 317,932 | | |
| 317,932 | | |
|
Building | |
| 1,928,795 | | |
| 1,928,795 | | |
|
Real-time Alcohol Detection And Recognition equipment and software | |
| 569,448 | | |
| 569,448 | | |
|
Production equipment, software and space modifications | |
| 1,366,539 | | |
| 1,349,839 | | |
|
Training courses | |
| | | |
| 432,375 | | |
|
Office equipment, software and space modifications | |
| 197,686 | | |
| 254,333 | | |
|
Sales and marketing equipment and space modifications | |
| 225,173 | | |
| 226,356 | | |
|
Research and development equipment, software and space modifications | |
| 1,213,195 | | |
| 787,664 | | |
|
Research and development equipment, software and space modifications not in service | |
| 19,595 | | |
| 128,007 | | |
|
Less accumulated depreciation | |
| (3,538,455 | ) | |
| (3,613,452 | ) | |
|
Total property, plant and equipment, net | |
| 2,299,908 | | |
| 2,381,297 | | |
|
| |
| | | |
| | | |
|
OTHER ASSETS: | |
| | | |
| | | |
|
Patents, net | |
| 71,039 | | |
| 78,723 | | |
|
Deposits and other | |
| 46,820 | | |
| 12,261 | | |
|
Deferred income taxes | |
| | | |
| 1,159,199 | | |
|
Total other assets | |
| 117,859 | | |
| 1,250,183 | | |
|
| |
| | | |
| | | |
|
Total assets | |
$ | 6,686,568 | | |
$ | 8,724,769 | | |
|
| |
| | | |
| | | |
|
LIABILITIES AND STOCKHOLDERS' EQUITY | | |
| | | |
|
CURRENT LIABILITIES: | |
| | | |
| | | |
|
Accounts payable | |
$ | 301,627 | | |
$ | 251,627 | | |
|
Term loan payable, current portion | |
| 54,850 | | |
| 53,195 | | |
|
Subordinated debentures payable, current portion | |
| 33,371 | | |
| | | |
|
Customer and tenant deposits | |
| 25,694 | | |
| 43,814 | | |
|
Accrued expenses | |
| 321,112 | | |
| 293,981 | | |
|
Deferred revenue, current portion | |
| 53,716 | | |
| 54,458 | | |
|
Product warranty reserve | |
| 46,500 | | |
| 46,500 | | |
|
Total current liabilities | |
| 836,870 | | |
| 743,575 | | |
|
| |
| | | |
| | | |
|
TERM LOAN PAYABLE, net of current portion and | |
| | | |
| | | |
|
debt issuance costs | |
| 1,058,426 | | |
| 1,119,152 | | |
|
| |
| | | |
| | | |
|
SUBORDINATED DEBENTURES PAYABLE, net of current portion and | |
| | | |
| | | |
|
debt issuance costs | |
| 681,343 | | |
| 630,000 | | |
|
| |
| | | |
| | | |
|
DEFERRED REVENUE, net of current portion | |
| 6,151 | | |
| 6,165 | | |
|
Total liabilities | |
| 2,582,790 | | |
| 2,498,892 | | |
|
| |
| | | |
| | | |
|
| |
| | | |
| | | |
|
COMMITMENTS AND CONTINGENCIES (Note 6) | |
| | | |
| | | |
|
` | |
| | | |
| | | |
|
STOCKHOLDERS' EQUITY: | |
| | | |
| | | |
|
Common stock, no par value; 50,000,000 shares authorized, 2,752,616 shares outstanding (2,664,116 outstanding at December 31, 2024) | |
| 5,934,314 | | |
| 5,586,014 | | |
|
Retained earnings (accumulated deficit) | |
| (1,830,536 | ) | |
| 639,863 | | |
|
Total stockholders' equity | |
| 4,103,778 | | |
| 6,225,877 | | |
|
| |
| | | |
| | | |
|
Total liabilities and stockholders' equity | |
$ | 6,686,568 | | |
$ | 8,724,769 | | |
The accompanying notes to the condensed financial statements are an integral part of these condensed financial statements.
| 27 | |
| | |
LIFELOC TECHNOLOGIES, INC.
Statements of (Loss)
|
| |
| | |
| | |
|
| |
Years Ended December 31, | | |
|
REVENUES: | |
2025 | | |
2024 | | |
|
Product sales | |
$ | 8,958,672 | | |
$ | 8,470,985 | | |
|
Royalties | |
| 51,634 | | |
| 34,382 | | |
|
Rental income | |
| 16,632 | | |
| 32,778 | | |
|
Total | |
| 9,026,938 | | |
| 8,538,145 | | |
|
| |
| | | |
| | | |
|
COST OF SALES | |
| 5,384,893 | | |
| 5,092,046 | | |
|
| |
| | | |
| | | |
|
GROSS PROFIT | |
| 3,642,045 | | |
| 3,446,099 | | |
|
| |
| | | |
| | | |
|
OPERATING EXPENSES: | |
| | | |
| | | |
|
Research, development, and sustaining engineering | |
| 2,152,843 | | |
| 2,242,869 | | |
|
Sales and marketing | |
| 1,331,062 | | |
| 1,358,211 | | |
|
General and administrative | |
| 1,388,160 | | |
| 1,253,236 | | |
|
Total | |
| 4,872,065 | | |
| 4,854,316 | | |
|
| |
| | | |
| | | |
|
OPERATING (LOSS) | |
| (1,230,020 | ) | |
| (1,408,217 | ) | |
|
| |
| | | |
| | | |
|
OTHER INCOME (EXPENSE): | |
| | | |
| | | |
|
Interest income | |
| 38,010 | | |
| 42,867 | | |
|
Interest expense | |
| (119,190 | ) | |
| (40,145 | ) | |
|
Total | |
| (81,180 | ) | |
| 2,722 | | |
|
| |
| | | |
| | | |
|
NET (LOSS) BEFORE PROVISION FOR TAXES | |
| (1,311,200 | ) | |
| (1,405,495 | ) | |
|
| |
| | | |
| | | |
|
BENEFIT FROM (PROVISION FOR VALUATION ALLOWANCE) FEDERAL AND
STATE INCOME TAXES |
|
|
(1,159,199 |
) |
|
|
352,547 |
|
|
|
| |
| | | |
| | | |
|
NET (LOSS) | |
$ | (2,470,399 | ) | |
$ | (1,052,948 | ) | |
|
| |
| | | |
| | | |
|
NET (LOSS) PER SHARE, BASIC | |
$ | (0.90 | ) | |
$ | (0.41 | ) | |
|
| |
| | | |
| | | |
|
NET (LOSS) PER SHARE, DILUTED | |
$ | (0.90 | ) | |
$ | (0.41 | ) | |
|
| |
| | | |
| | | |
|
WEIGHTED AVERAGE SHARES, BASIC | |
| 2,738,311 | | |
| 2,546,493 | | |
|
| |
| | | |
| | | |
|
WEIGHTED AVERAGE SHARES, DILUTED | |
| 2,738,311 | | |
| 2,546,493 | | |
The accompanying notes to the condensed financial statements are an integral part of these condensed financial statements.
| 28 | |
| | |
LIFELOC TECHNOLOGIES, INC.
Statements of Changes in Stockholders' Equity
For The Years Ended December 31, 2025 and 2024
|
| |
| | |
| | |
| | |
| | |
|
| |
Common Stock Shares | | |
Common Stock Amount | | |
Retained Earnings (Accumulated
Deficit) | | |
Total | | |
|
Balance, December 31, 2023 | |
| 2,454,116 | | |
$ | 4,668,014 | | |
$ | 1,692,811 | | |
$ | 6,360,825 | | |
|
Issuance of common stock for cash, net of issuance costs | |
| 210,000 | | |
| 798,000 | | |
| | | |
| 798,000 | | |
|
Warrants issued with subordinated debenture | |
| | | |
| 120,000 | | |
| | | |
| 120,000 | | |
|
Net (loss) | |
| | | |
| | | |
| (1,052,948 | ) | |
| (1,052,948 | ) | |
|
Balance, December 31, 2024 | |
| 2,664,116 | | |
$ | 5,586,014 | | |
$ | 639,863 | | |
$ | 6,225,877 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
|
Balance, December 31, 2024 | |
| 2,664,116 | | |
$ | 5,586,014 | | |
$ | 639,863 | | |
$ | 6,225,877 | | |
|
Issuance of shares from option exercise | |
| 88,500 | | |
| 336,300 | | |
| | | |
| 336,300 | | |
|
Warrants issued with subordinated debenture | |
| | | |
| 12,000 | | |
| | | |
| 12,000 | | |
|
Net (loss) | |
| | | |
| | | |
| (2,470,399 | ) | |
| (2,470,399 | ) | |
|
Balance, December 31, 2025 | |
| 2,752,616 | | |
$ | 5,934,314 | | |
$ | (1,830,536 | ) | |
$ | 4,103,778 | | |
The accompanying notes to the condensed financial statements are an integral part of these condensed financial statements.
| 29 | |
| | |
LIFELOC TECHNOLOGIES, INC.
Statements of Cash Flows
|
| |
| | |
| | |
|
| |
Years Ended December 31, | | |
|
CASH FLOWS USED IN OPERATING ACTIVITIES: | |
2025 | | |
2024 | | |
|
Net (loss) | |
$ | (2,470,399 | ) | |
$ | (1,052,948 | ) | |
|
Adjustments to reconcile net (loss) to net cash (used in) operating activities- | |
| | | |
| | | |
|
Depreciation and amortization | |
| 443,454 | | |
| 294,039 | | |
|
Provision for doubtful accounts, net change | |
| 1,500 | | |
| 2,000 | | |
|
Provision for inventory obsolescence, net change | |
| | | |
| 70,000 | | |
|
Deferred taxes, net change | |
| 1,159,199 | | |
| (352,547 | ) | |
|
Amortization of debt issuance costs | |
| 17,988 | | |
| 4,254 | | |
|
Changes in operating assets and liabilities- | |
| | | |
| | | |
|
Accounts receivable | |
| (41,339 | ) | |
| 77,585 | | |
|
Inventories | |
| 362,783 | | |
| (41,563 | ) | |
|
Federal and state income taxes receivable | |
| 24,579 | | |
| (80,560 | ) | |
|
Prepaid expenses and other | |
| (20,780 | ) | |
| 65,922 | | |
|
Deposits and other | |
| (34,559 | ) | |
| 98,896 | | |
|
Accounts payable | |
| 50,000 | | |
| (150,604 | ) | |
|
Income taxes payable | |
| | | |
| (44,952 | ) | |
|
Customer and tenant deposits | |
| (18,120 | ) | |
| (151,905 | ) | |
|
Accrued expenses | |
| 27,131 | | |
| (35,330 | ) | |
|
Deferred revenue | |
| (756 | ) | |
| (29,978 | ) | |
|
Net cash (used in) operating activities | |
| (499,319 | ) | |
| (1,327,691 | ) | |
|
| |
| | | |
| | | |
|
CASH FLOWS (USED IN) INVESTING ACTIVITIES: | |
| | | |
| | | |
|
Purchases of property and equipment | |
| (462,793 | ) | |
| (539,731 | ) | |
|
Purchases of research and development equipment, software and space modifications not in service | |
| 108,412 | | |
| (128,007 | ) | |
|
Patent filing cost | |
| | | |
| (21,708 | ) | |
|
Net cash (used in) investing activities | |
| (354,381 | ) | |
| (689,446 | ) | |
|
| |
| | | |
| | | |
|
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES: | |
| | | |
| | | |
|
Principal payments made on term loan | |
| (55,345 | ) | |
| (53,738 | ) | |
|
Proceeds from issuance of 210,000 shares of common stock at $3.80 per share | |
| | | |
| 798,000 | | |
|
Proceeds from issuance of subordinated debenture | |
| 75,000 | | |
| 750,000 | | |
|
Proceeds from Issuance of shares from option exercise | |
| 336,300 | | |
| | | |
|
Net cash provided from financing activities | |
| 355,955 | | |
| 1,494,262 | | |
|
| |
| | | |
| | | |
|
NET (DECREASE) IN CASH | |
| (497,745 | ) | |
| (522,875 | ) | |
|
| |
| | | |
| | | |
|
CASH, BEGINNING OF PERIOD | |
| 1,243,746 | | |
| 1,766,621 | | |
|
| |
| | | |
| | | |
|
CASH, END OF PERIOD | |
$ | 746,001 | | |
$ | 1,243,746 | | |
|
| |
| | | |
| | | |
|
SUPPLEMENTAL INFORMATION: | |
| | | |
| | | |
|
Cash paid for interest | |
$ | 101,202 | | |
$ | 35,891 | | |
|
| |
| | | |
| | | |
|
NON-CASH FINANCING AND INVESTING ACTIVITIES: | |
| | | |
| | | |
|
Warrants issued with subordinated debenture | |
$ | 12,000 | | |
$ | 120,000 | | |
The accompanying notes to the condensed financial statements are an integral part of these condensed financial statements.
| 30 | |
| | |
**LIFELOC TECHNOLOGIES, INC.**
**Notes to Financial Statements**
**December 31, 2025 and 2024**
1. ORGANIZATION AND NATURE OF BUSINESS
Lifeloc Technologies, Inc. ("Lifeloc"
or the "Company", Us, Our, or We) is a Colorado-baseddeveloper, 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
distributorsas 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 December1983.
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
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 is shown in the accompanying balance sheet net of debt issuance costs. Deferred debt issuance costs are amortized over the life of
the term loan on a straight line basis, which approximates the effective interest method. Total debt issuance cost amortization
during the years ended December 31, 2025 and 2024 was $17,988 and $4,254 respectively, and is included within interest expense on the
statements of (loss).
The debentures are shown in the accompanying balance sheet net of debt
issuance costs. Deferred debt issuance costs are amortized over the life of the debentures on a straight line basis, which approximates
the effective interest method. Using the Black Scholes method, the total fair market value of the warrants was estimated at $132,000 and
recorded in our balance sheet as deferred financing cost. Based on the expected life of the debentures, the deferred financing cost is
amortized over 72 months and 70 months respectively for the two debentures. Amortization in 2025 was $21,714 and $0 in 2024.
Deferred
Income Taxes.Deferred income tax assets and liabilities are presented as noncurrent assets or liabilities in the balance sheet.
Fair Value Measurement.
Accounting Standards Codification ("ASC") Topic 820, Fair Value Measurements and Disclosures*("ASC 820"), provides
a comprehensive framework for measuring fair value and expands disclosures which are required about fair value measurements. Specifically,
ASC 820 sets forth a definition of fair value and establishes a hierarchy prioritizing the inputs to valuation techniques, giving the
highest priority to quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable value
inputs. ASC 820 defines the hierarchy as follows:
Level 1 - Quoted prices are available in active
markets for identical assets or liabilities as of the reported date. The types of assets and liabilities included in Level 1 are highly
liquid and actively traded instruments with quoted prices, such as equity securities listed on the New York Stock Exchange.
Level 2 - Pricing inputs are other than quoted
prices in active markets, but are either directly or indirectly observable as of the reported date. The types of assets and liabilities
in Level 2 are typically either comparable to actively traded securities or contracts or priced with models using highly observable inputs.
Level 3 - Significant inputs to pricing that are
unobservable as of the reporting date. The types of assets and liabilities included in Level 3 are those with inputs requiring significant
management judgment or estimation, such as complex and subjective models and forecasts used to determine the fair value of financial transmission
rights. At December 31, 2025 and 2024, the Company hasnoassets andnoliabilities that are remeasured at fair value
on a recurring or nonrecurring basis.
| 31 | |
| | |
Cash and Cash Equivalents.
For purposes of reporting cash flows, we consider all cash and highly liquid investments with an original maturity of three months or
less to be cash equivalents.
Fair Value of Financial Instruments.
Our financial instruments consist of cash, a term loan secured by a first mortgage, and an unsecured subordinated debenture.The
carrying values of cash, their fair value due to their short term maturities. The carrying value of the term loan approximates its
fair value based on interest rates currently obtainable. The carrying value of the debenture approximates its fair value after allocating
a portion to the attached warrants.
Concentration of Credit Risk.
Financial instruments with significant credit risk include accounts receivable.
We have no significant off-balance sheet concentrations
of credit risk such as foreign exchange contracts, options contracts or other foreign hedging arrangements.
Accounts Receivable. Accounts
receivable are typically unsecured and are derived from transactions with and from entities primarily located in the United States or
from international distributors with a proven payment history. Accordingly, we may be exposed to credit risks generally associated with
the alcohol monitoring industry. Our credit policy calls for payment in accordance with prevailing industry standards, generally 30 days
with occasional exceptions of up to 60 days for large established customers. We maintain allowances for doubtful accounts for estimated
losses resulting from the inability of our customers to make required payments. A summary of the activity in our allowance for doubtful
accounts is as follows:
|
Schedule
of allowance for doubtful accounts | |
| | |
| | |
|
Years Ended December 31 | |
2025 | | |
2024 | | |
|
Balance, beginning of year | |
$ | 7,000 | | |
$ | 5,000 | | |
|
Provision (reduction) for estimated losses | |
| (5,273 | ) | |
| (8,911 | ) | |
|
Recovery (write-off) of uncollectible accounts | |
| 6,773 | | |
| 10,911 | | |
|
Balance, end of year | |
$ | 8,500 | | |
$ | 7,000 | | |
The net accounts receivable balance
at December 31, 2025 of $772,380 included an account from one customer of $344,879 (45%), $56,096 (7%) from a second customer, $39,780
from a third customer (5%), and no more than 3% from any other single customer. The net accounts receivable balance at December 31, 2024
of $732,541 included an account from one customer of $339,925 (46%), $27,383 from a second customer (4%), $19,684 from a third customer
(3%), and no more than 3% from any other single customer.
Inventories. Inventories are
stated at the lower of standard average 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 December 31, 2025 and December 31, 2024, inventory consisted of the following:
|
Schedule of inventories | |
| | |
| | |
|
| |
2025 | | |
2024 | | |
|
Raw materials & deposits | |
$ | 2,576,194 | | |
$ | 2,712,184 | | |
|
Work-in-process | |
| 19,451 | | |
| 6,311 | | |
|
Finished goods | |
| 477,125 | | |
| 717,058 | | |
|
Total gross inventories | |
| 3,072,770 | | |
| 3,435,553 | | |
|
Less reserve for obsolescence | |
| (439,156 | ) | |
| (439,156 | ) | |
|
Total net inventories | |
$ | 2,633,614 | | |
$ | 2,996,397 | | |
A summary of the activity in our inventory reserve
for obsolescence is as follows:
|
Schedule of inventory reserve | |
| | |
| | |
|
Years Ended December 31 | |
2025 | | |
2024 | | |
|
Balance, beginning of year | |
$ | 439,156 | | |
$ | 369,156 | | |
|
Provision for estimated obsolescence | |
| 36,727 | | |
| 89,667 | | |
|
Write-off of obsolete inventory | |
| (36,727 | ) | |
| (19,667 | ) | |
|
Balance, end of year | |
$ | 439,156 | | |
$ | 439,156 | | |
The direct materials, labor and overhead included
in total gross inventories at December 31, 2025 and 2024 were as follows:
|
Schedule
of gross inventories | |
| | |
| | |
|
Years Ended December 31 | |
2025 | | |
2024 | | |
|
Direct materials | |
$ | 3,049,390 | | |
$ | 3,406,684 | | |
|
Direct labor | |
| 5,130 | | |
| 6,378 | | |
|
Production overhead | |
| 18,250 | | |
| 22,491 | | |
|
Total gross inventories | |
$ | 3,072,770 | | |
$ | 3,435,553 | | |
| 32 | |
| | |
Property,
Plant and Equipment. Property, plant and equipment are stated at cost, with depreciation computed over the estimated
useful lives of the assets, generally five - seven years; three years for software and technology licenses; 15 years for space modifications
and for training courses; 39 years for the cost of the building we purchased in October 2014. We utilize the declining balance method
of depreciation for property, equipment and space modifications, and the straight-line method of depreciation for software, training courses,
and the building, due to the expected usage of these assets over time. These methods are expected to continue throughout the life of the
assets. Maintenance and repairs are expensed as incurred and major additions, replacements and improvements are capitalized. Depreciation
expense for the years ended December 31, 2025 and 2024 was $435,770 and $286,615 respectively. No depreciation is recorded on equipment,
software and space modifications not in service until such time as they are placed in service. Gain or loss on property, plant and equipment
that is disposed of is recognized in operations in the statements of income (loss).
Impairment of Long-Lived Asset
Groups.Long-lived asset groups are reviewed for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. A long-lived asset is considered impaired when the carrying amount exceeds the
fair value of the asset, which is typically determined by using a discounted cash flow model or market appraisals. If deemed impaired,
the long-lived asset is reduced to its estimated fair value. Long-lived assets to be disposed of are reported at the lower of their
carrying amount or estimated fair value less cost to sell. No impairments were recorded for the years ended December 31, 2025 and 2024
respectively.
Patents.The costs of
applying for patents are capitalized and amortized on a straight-line basis over the lesser of the patent's economic or legal life (20
years for utility patents in the United States, and 14 years for design patents).In accordance with U.S. generally accepted accounting
principles (GAAP), patents are considered finite-lived intangible assets and are amortized over their estimated useful lives
once the patents are issued and placed in service. Patent application costs are capitalized but are not amortized until the related patent
is issued. Amortization is recognized on a straight-line basis over the estimated economic life of the patent, not to exceed its legal
life. The Company evaluates these intangible assets for impairment whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable. Amortization expense for the years ended December 31, 2025 and 2024, was $7,684 and $7,424 respectively.
Amortization expense for each of the next 5 years is estimated to be $7,684 per year.Capitalized costs are expensed if patents are
not granted. We review the carrying value of our patents periodically to determine whether the patents have continuing value and
such reviews could result in the conclusion that the recorded amounts have been impaired.
A summary of our patents at December 31, 2025
and 2024 is as follows:
|
Schedule of patents | |
| | |
| | |
|
| |
2025 | | |
2024 | | |
|
Patents issued | |
$ | 204,835 | | |
$ | 191,871 | | |
|
Patent applications filed and in process | |
| 32,481 | | |
| 48,266 | | |
|
Accumulated amortization | |
| (166,277 | ) | |
| (161,414 | ) | |
|
Total net patents | |
$ | 71,039 | | |
$ | 78,723 | | |
Customer and Tenant Deposits. We include
customer pre-payments on future orders and tenant security deposits in customer deposits in our balance sheet. Customer pre-payments
are reclassified as revenue when orders are shipped. Tenant security deposits are refunded to tenant upon expiration of lease.
Accrued Expenses. We have accrued various expenses
in our December 31 balance sheets, as follows.
|
Schedule of accrued expenses | |
| | |
| | |
|
| |
2025 | | |
2024 | | |
|
Compensation | |
$ | 171,993 | | |
$ | 162,355 | | |
|
Property and other taxes | |
| 96,395 | | |
| 94,894 | | |
|
Rebates | |
| 52,724 | | |
| 36,732 | | |
|
Total accrued expenses | |
$ | 321,112 | | |
$ | 293,981 | | |
Product Warranty Reserve. We
provide for the estimated cost of product warranties at the time sales are recognized. Our warranty obligation is based upon historical
experience and will be affected by product failure rates and material usage incurred in correcting a product failure. Should actual product
failure rates or material usage costs differ from our estimates, revisions to the estimated warranty liability would be required. A summary
of the activity in our product warranty reserve is as follows:
|
Schedule of product warranty
reserve | |
| | |
| | |
|
Years Ended December 31 | |
2025 | | |
2024 | | |
|
Balance, beginning of year | |
$ | 46,500 | | |
$ | 46,500 | | |
|
Provision for estimated warranty claims | |
| 31,338 | | |
| 40,398 | | |
|
Claims made and paid | |
| (31,338 | ) | |
| (40,398 | ) | |
|
Balance, end of year | |
$ | 46,500 | | |
$ | 46,500 | | |
| 33 | |
| | |
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.
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. For the years ended December 31, 2025 and 2024, we
did not have any significant interest or penalties associated with uncertain tax positions.
In the year ended December 31, 2025, we received
a refund from the State of Colorado for income tax paid in the amount of $24,579. In the year ended December 31, 2024, we paid $81,952
of Federal income tax, and $43,560 of Colorado income tax, for a total paid of $125,512.
Revenue Recognition.
We recognize revenue in accordance with ASC 606
using the five-step model: identifying the contract with a customer, identifying performance obligations, determining and allocating
the transaction price, and recognizing revenue when performance obligations are satisfied.
Our contracts generally contain a single performance
obligation to deliver products or supplies. Transaction prices are fixed and determinable at order acceptance. Revenue is recognized
at a point in time when control transfers to the customer, typically upon shipment when title has passed.
For product development arrangements, revenue
is recognized upon achievement of contractual milestones. Sales to stocking distributors are recognized when control transfers and there
are no rights of return other than standard warranty provisions. We generally have no significant post-delivery obligations other than
standard warranties.
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 certificationoccurs.
Data recording revenue is recognized based on each days usage of enrolled devices.
Revenues arising from extended warranty contracts
are booked as sales over their life on a straight-line basis. We have discontinued arranging for customer financing and leasing through
unrelated third parties and instead are providing for customer financing and leasing ourselves, which we recognize as revenue over the
applicable lease term. Occasionally, we rent used equipment to customers, and in those cases, we recognize the revenues as they are earned
over the life of the contract.
Royalty income is recognized in accordance with
agreed upon terms, when performance obligations are satisfied, the amount is fixed or determinable and collectability is reasonably assured.
Rental income from 2,774 square feet of space
leased to our former 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.
Deferred Revenue. Deferred
revenues arise from service contracts and from direct training revenue. Revenues from service contractsare 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 fromdirect training revenue that needs
to be scheduled based on the customers and Lifelocs availability. Revenue is recognized when training is complete and is
included in product sales in our statements of income. All direct training are for less than one year and all deferred revenues from this
source are shown in our balance sheets as short term.
| 34 | |
| | |
Rebates. Our rebate program
is available to certain of our North American workplace distributors in good standing who are responsible for sales equaling at least
$25,000 in one calendar year. Distributors in good standing who meet the required sales threshold earn a rebate equal to between 1 and
10 percent of that distributor's total sales of the Company's products. We accrue for these rebates monthly; they are shown in our balance
sheets as accrued expenses. We paid $52,925 and $35,502 of rebates for the years ending December 31, 2025 and 2024 respectively.
Recently Issued Accounting Pronouncements:
In November 2024, the FASB issued Accounting Standards Update (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 Companys financial statements.
Research and Development Expenses.Equipment,
software and space modifications used for research and development that have an alternative future use are capitalized in property, plant
and equipment in the balance sheets. Equipment, software and space modifications used for research and development that have no alternative
future use are expensed as research and development costs as incurred.
Stock-Based Compensation. Stock-based
compensation is presented in accordance with the guidance of 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 on the date
of grant based on the trading price of stock issued.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 loss.
ASC 718 requires companies to estimate the fair
value of share-based payment awards on the date of grant.The value of the portion of the award that is ultimately expected to vest
is recognized as expense on a straight line basis over the requisite service periods in the accompanying statement of income (loss). Forfeitures
are recognized as they occur.
Segment Reporting. Previously
we had 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 had
a second segment consisting of renting portions of our building to one tenant, whose lease expired on June 30, 2025 and was not renewed.
After June 30, 2025 we have one operating segment.
ASU 2023-07 requires significant segment expenses
be disclosed for each reportable segment. See Note 11 for a table showing expense allocations for our product sales segment.
The chief operating decision maker evaluates the
performance of the Companys reportable segment 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 segment, which is typically done to improve the efficiency and effectiveness of operations or for expansion of operations, and
ultimately to increase profit from operations. We view our rentals segment as immaterial as the chief operating decision maker is focused
primarily on the products segment. As of December 31st, 2025, rentals are no longer considered a reporting segment. The Companys
chief operating decision maker is the chief executive officer.
3. BASIC AND DILUTED INCOME AND LOSS PER COMMON SHARE
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.
| 35 | |
| | |
The following table presents the calculation of basic and diluted net
income (loss) per common share:
|
Schedule of basic and diluted
net income per common share | |
| | |
| | |
|
|
Years Ended December 31, | | |
|
| |
2025 | | |
2024 | | |
|
Net income (loss) | |
$ | (2,470,399 | ) | |
$ | (1,052,948 | ) | |
|
Weighted average shares-basic | |
| 2,738,311 | | |
| 2,546,493 | | |
|
Effect of dilutive potential common shares | |
| | | |
| | | |
|
Weighted average shares-diluted | |
| 2,738,311 | | |
| 2,546,493 | | |
|
Net (loss) per share-basic | |
$ | (0.90 | ) | |
$ | (0.41 | ) | |
|
Net (loss) per share-diluted | |
$ | (0.90 | ) | |
$ | (0.41 | ) | |
|
Antidilutive employee stock options | |
| 33,500 | | |
| 122,000 | | |
|
Antidilutive warrants | |
| 68,750 | | |
| 62,500 | | |
4. STOCKHOLDERS' EQUITY
Stock Option Plan. In January 2013,
we adopted our 2013 Stock Option Plan (the "2013 Plan") to promote the Company's and its stockholders' interests by helping
us to attract, retain and motivate our key employees and associates. Under the terms of the 2013 Plan, our Board of Directors (the "Board")
can grant either "nonqualified" or "incentive" stock options, as defined by the Internal Revenue Code and related
regulations. The purchase price of the shares subject to a stock option is the fair market value of our common stock on the date the stock
option is granted. Generally, all stock options must be exercised within five years from the date granted. No common shares are reserved
for issuance under the 2013 Plan as it has expired. The 2013 Plan was approved by our shareholders at their regular annual meeting on
April 1, 2013.
A summary of our stock option activity and related
information for equity compensation plans approved by security holders for each of the fiscal years ended December 31, 2025 and 2024 is
as follows:
|
Schedule of stock option
activity | |
| | |
|
| |
| STOCK OPTIONS
OUTSTANDING | |
|
| |
| Number Outstanding | | |
| Weighted Average Exercise Price Per Share | | |
|
TOTAL AND VESTED BALANCE AT DECEMBER 31, 2023 | |
| 123,000 | | |
$ | 3.80 | | |
|
Forfeited/expired | |
| (1,000 | ) | |
| | | |
|
TOTAL AND VESTED BALANCE AT DECEMBER 31, 2024 | |
| 122,000 | | |
$ | 3.80 | | |
|
Exercised | |
| (88,500 | ) | |
| | | |
|
TOTAL AND VESTED BALANCE AT DECEMBER 31, 2025 | |
| 33,500 | | |
$ | 3.80 | | |
The options outstanding at December 31, 2025 are fully
vested and have a weighted average life of 0.58 years.
The options outstanding at December 31, 2025
had an intrinsic value of $0.
The exercise price of all options
granted through December 31, 2025 has been equal to or greater than the fair market value as of the date of grant, as determined by the
Board. As of December 31, 2025, no options for our common stock remain available for grant under the 2013 Plan as it has expired.
In
February 2025, options to purchase 88,500 shares of our common stock, originally granted as incentive stock options pursuant to our 2013
Stock Option Plan, were assigned by the option holders to EDCO Partners LLLP and a third director. The Board of Directors approved the
assignments and waived the non-transferability provisions of the applicable option agreements and the Plan solely to permit such assignments.
Upon assignment, the options ceased to qualify as incentive stock options and were reclassified as nonqualified stock options for all
tax, accounting, and compliance purposes. EDCO Partners LLLP, of which our CFO and board chairman is the general partner, and a third
director then exercised the assigned options at a price of $3.80 per share for total proceeds of $336,300 to the Company. The shares were
issued to EDCO Partners LLLP and the third director in reliance on the exemption from registration provided by Section 4(a)(2) of the
Securities Act as transactions not involving a public offering. No options were exercised during the year ended December 31, 2024.
At
December 31, 2025 there were 68,750 warrants outstanding with a remaining life of 5 years and with an exercise price of $4.50. There were
62,500 warrants outstanding at December 31, 2024.
In 2024, we issued 210,000 shares for cash of $798,000. There were
no issuance costs.
****
****
****
| 36 | |
| | |
****
5. DEBT
Debentures. On December 31, 2024 we issued
a $750,000 unsecured debenture that is subordinated to the Companys existing secured indebtedness, which is collateralized by
a lien on substantially all of the Companys assets. The debenture bears interest only at 8.25% payable quarterly in 2025, with
monthly payments of $9,199 including principal and interest at 8.25% commencing on January 31, 2026. A balloon payment of $451,012 is
due in full on December 31, 2030.
In consideration of the lender providing the financing,
the Company issued warrants which entitle the holder to purchase 62,500 shares of our common stock at $4.50 per share. As shown in the
table below, if the debenture is paid in full on or before December 31, 2029, the warrants will have a life of 60 months from December
31, 2024.
On March 1, 2025 we issued a $75,000 unsecured
debenture that is subordinated to the Companys existing secured indebtedness, which is collateralized by a lien on substantially
all of the Companys assets. The debenture bears interest only at 8.25% payable quarterly in 2025, with monthly payments of $920
including principal and interest at 8.25% commencing on January 31, 2026. A balloon payment of $45,707 is due in full on December 31,
2030. In consideration of the lender providing this financing, the Company issued warrants which entitle the holder to purchase 6,250
shares of our common stock at $4.50 per share. As shown in the table below, the warrants have a life of 70 months. If the debenture is
paid in full on or before December 31, 2029, the warrants will have a remaining life of 58 months from March 1, 2025.
The factors used
to calculate the estimated value of these warrants, which are the same as the factors used to calculate the estimated value of the above
warrants except for the stock price which was $3.45, and the resulting fair value, were as follows.
|
Schedule of option grant
and fair market value | |
| | |
|
Stock price | |
$ | 2.75 | | |
|
Exercise price per share | |
$ | 4.50 | | |
|
Original term (months) | |
| 70 | | |
|
Volatility | |
| 116.58 | % | |
|
Annual rate of quarterly dividends | |
| None | | |
|
Risk free interest rate | |
| 4.38 | % | |
Applying these assumptions resulted in a relative
fair value of $120,000 for the warrants issued on December 31, 2024, which is netted against the face value of the debenture in our balance
sheet and amortized over 72 months, and a relative fair value of $12,000 for the warrants issued on March 1, 2025, which is netted against
the face value of the debenture in our balance sheet and amortized over 70 months.
|
Schedule
of warrants issued | | |
| |
| |
|
| | |
Expiration of Warrants if
Debenture is Paid on December 31, 2030 | |
Expiration of Warrants if
Debenture is Paid on December 31, 2029 | |
|
Warrants issued December 31, 2024 | | |
December 31, 2030 | |
December 31, 2029 | |
|
Warrants issued March 1, 2025 | | |
December 31, 2030 | |
December 31, 2029 | |
Our minimum future principal payments on all of
the above subordinated debentures are as follows:
|
Schedule
of term loan payable | |
| | |
|
December 31, 2026 | |
$ | 55,428 | | |
|
December 31, 2027 | |
| 60,178 | | |
|
December 31, 2028 | |
| 65,334 | | |
|
December 31, 2029 | |
| 70,933 | | |
|
December 31, 2030 | |
| 77,012 | | |
|
December 31, 2030 | |
| 496,115 | | |
|
Total | |
| 825,000 | | |
|
Less debt issuance cost | |
| (110,286 | ) | |
|
Net subordinated debenture payable | |
| 714,714 | | |
|
Less current portion | |
| (33,371 | ) | |
|
Long term portion | |
$ | 681,343 | | |
Term Loan Payable. The term loan is secured
by a first mortgage on our building, and is payable in 119 equal monthly installments of $7,453 commencing October 30 2021, including
principal and interest at 2.95% based on a 360 day year, plus a final payment of $773,727 (excluding interest) on September 30, 2031.
Our minimum future principal payments on this term loan, by year, are as follows:
|
Schedule
of term loan payable | |
| | |
|
December 31, 2026 | |
$ | 57,000 | | |
|
December 31, 2027 | |
| 58,704 | | |
|
December 31, 2028 | |
| 60,460 | | |
|
December 31, 2029 | |
| 62,268 | | |
|
December 31, 2030 | |
| 64,130 | | |
|
December 31, 2031 | |
| 823,079 | | |
|
Total | |
| 1,125,641 | | |
|
Less debt issuance cost | |
| (12,365 | ) | |
|
Net term loan payable | |
| 1,113,276 | | |
|
Less current portion | |
| (54,850 | ) | |
|
Long term portion | |
$ | 1,058,426 | | |
| 37 | |
| | |
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 December
31, 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.
Contractual Commitments and Purchase
Orders. Contractual commitments under development agreements and outstanding purchase orders issued to vendors in the ordinary course
of business totaled $2,252,936 at December 31, 2025.
Regulatory Commitments.
We are subject to certain regulations of the United States Department of Transportationand various state departments of transportation.
We believe that we are in substantial compliance with all known applicable regulations.
7. INCOME TAXES.
On January 1, 2025, the Company adopted ASU 2023-09,*Improvements
to Income Tax Disclosures,*which requires disaggregated information about its effective tax rate reconciliation as well as information
on income taxes paid. Because the Company adopted ASU 2023-09 in 2025 using a retrospective method, disclosures for historical periods
were revised to conform to this ASU.
The items accounting for the difference between income taxes computed
at the federal statutory rate and the benefit provision for income taxes consist of the following:
|
Schedule of income tax provision | |
| | |
| | |
| | |
| | |
|
Years Ended | |
December 31, 2025 | |
December 31,
2024 | |
|
U.S. Federal statutory tax provision | |
$ | (275,352 | ) | |
| (21.0 | %) | |
| 295,154 | | |
| 21.0 | % | |
|
State tax effects: | |
| | | |
| | | |
| | | |
| | | |
|
Colorado state income tax, net of federal benefit | |
| (45,577 | ) | |
| (3.5 | %) | |
| 47,906 | | |
| 3.4 | % | |
|
Other | |
| 3,983 | | |
| 0.3 | % | |
| (2,460 | ) | |
| (0.2 | %) | |
|
Effect of research credit | |
| (66,895 | ) | |
| (5.1 | %) | |
| (71,437 | ) | |
| 5.1 | % | |
|
Impact of change in estimates | |
| (8,176 | ) | |
| (0.6 | %) | |
| 127,744 | | |
| 9.1 | % | |
|
Change in valuation allowance | |
| 392,017 | | |
| 29.9 | % | |
| (187,234 | ) | |
| (13.3 | %) | |
|
Management re-evaluation of usage of prior year deferred tax asset-increase in valuation allowance | |
| (1,159,199 | ) | |
| (88.4 | %) | |
| | | |
| | % | |
|
Total (provision) benefit | |
$ | (1,159,199 | ) | |
| (88.4 | %) | |
| 352,547 | | |
| 25.1% | % | |
The components of the deferred tax asset at December
31, 2025 and 2024 are as follows:
|
Schedule of components of the deferred tax asset | |
| | |
| | |
|
| |
2025 | | |
2024 | | |
|
Net operating loss
carryforward | |
$ | 552,897 | | |
$ | | | |
|
Bad debt reserve | |
| 2,080 | | |
| 1,713 | | |
|
Inventory reserve | |
| 107,488 | | |
| 107,488 | | |
|
Increasing research activities
credit carryover | |
| 321,790 | | |
| 237,166 | | |
|
RADAR asset amortization | |
| 50,004 | | |
| 58,113 | | |
|
Research and development expenses | |
| 652,687 | | |
| 893,024 | | |
|
Accrued vacation | |
| 25,469 | | |
| 22,710 | | |
|
Deferred income | |
| 14,653 | | |
| 14,838 | | |
|
Warranty
reserve | |
| 11,381 | | |
| 11,381 | | |
|
Total deferred tax asset | |
| 1,738,450 | | |
| 1,346,433 | | |
|
Less valuation
allowance | |
| (1,738,450 | ) | |
| (187,234 | ) | |
|
Net deferred
tax asset | |
$ | | | |
$ | 1,159,199 | | |
| 38 | |
| | |
At December 31, 2025, the Company had deferred
tax assets arising from net operating loss carry forwards for income tax purposes. As management cannot determine that it is more likely
than not the benefit of the net deferred tax asset will be realized, a valuation allowance equal to 100% of the net deferred tax asset
has been recorded. Management reassessed the deferred tax asset as of December 31, 2025 and decided it was more likely than not that the
benefit would not be realized. The valuation allowance was increased by $1,159,199 based on the deferred tax asset recorded at December
31, 2024. At December 31, 2025, the Company has federal net operating loss (NOL) carry forwards of approximately $1.3 million,
all of which will never expire but are limited to offsetting up to 80% of taxable income in any future year. The Company has Colorado
state NOL carry forwards of approximately $1.3 million, all of which will never expire but are limited to offsetting up to
80% of taxable income in any future year. The Company has an Increasing Research Activities Credit carryover of $321,790 which expires
between the years 2040 through 2045.
Our income tax filings in the United States and state jurisdictions
are open to examination for the 2022 2025 tax years. Tax attributes from years prior to that can be adjusted as a result of examinations.
In the event we are assessed penalties and or interest, penalties will be charged to other operating expense and interest will be charged
to interest expense. The Company has reviewed its tax positions and believes it has not taken any uncertain tax positions that would not
be sustained under examination.
8. LEGAL PROCEEDINGS
We were not involved or party to any legal proceedings
at December 31, 2025 or December 31, 2024, and therefore made no accruals for legal proceedings in either 2025 or 2024.
9. MAJOR CUSTOMERS/SUPPLIERS
We depend on sales that are generated from our
customers' ongoing usage of alcohol testing instruments.
One customer contributed 8% ($761,092)
to our product sales in 2025, a second customer contributed 6% ($520,959), a third customer contributed 4% ($364,057), and no other customer
contributed more than 2%. One customer contributed 9% ($765,562) to our total sales in 2024, a second customer contributed 4% ($333,185),
a third customer contributed 3% ($269,513), and no other customer contributed more than 2%. In making this determination, we considered
the federal government, state governments, local governments, and foreign governments each as a single customer.
In 2025, we depended upon three vendors
for approximately 22% of our purchases (three vendors and 27% respectively in 2024).
10. DEFINED CONTRIBUTION EMPLOYEE BENEFIT PLAN
We have adopted a 401(k)Profit
Sharing Plan (401(k) Plan) which covers all full-time employees who have completed 3 months of full-time continuous service
and are age eighteen or older. Participants may defer up to 100% of their gross pay up to 401(k) Plan limits. Participants are immediately
vested in their contributions. We make monthly discretionary matching contributions of 3% of the total payroll of the participating employees.
In 2025 and 2024 we contributed $71,360 and $69,678 respectively. The participants vest in Company contributions based on years of service,
with a participant fully vested after six years of credited service.
11.BUSINESS SEGMENTS
We formerly had two business segments through
June 30, 2025:(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). As a result of the lease to one tenant not being renewed on June 30, 2025, we now have only one 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.
| 39 | |
| | |
The following sets forth information about the
operations of the business segments for the years ended December 31, 2025 and 2024. There were no intersegment revenues.
|
Schedule of operations of business segments | |
| | |
| | |
|
Capital expenditures: | |
2025 | | |
2024 | | |
|
Product sales | |
$ | 476,926 | | |
$ | 539,731 | | |
|
Royalties | |
| | | |
| | | |
|
Products subtotal | |
| 476,926 | | |
| 539,731 | | |
|
Rentals | |
| | | |
| | | |
|
Total | |
| 476,926 | | |
| 539,731 | | |
|
| |
| | | |
| | | |
|
Depreciation and amortization: | |
| | | |
| | | |
|
Product sales | |
| 440,430 | | |
| 287,025 | | |
|
Royalties | |
| | | |
| | | |
|
Products subtotal | |
| 440,430 | | |
| 287,025 | | |
|
Rentals | |
| 3,024 | | |
| 7,014 | | |
|
Total | |
| 443,454 | | |
| 294,039 | | |
|
| |
| | | |
| | | |
|
Revenues: | |
| | | |
| | | |
|
Product sales | |
| 8,958,672 | | |
| 8,470,985 | | |
|
Royalties | |
| 51,634 | | |
| 34,382 | | |
|
Products subtotal | |
| 9,010,306 | | |
| 8,505,367 | | |
|
Rentals | |
| 16,632 | | |
| 32,778 | | |
|
Total | |
| 9,026,938 | | |
| 8,538,145 | | |
|
| |
| | | |
| | | |
|
Gross profit: | |
| | | |
| | | |
|
Product sales | |
| 3,581,305 | | |
| 3,404,206 | | |
|
Royalties | |
| 51,634 | | |
| 34,382 | | |
|
Products subtotal | |
| 3,632,939 | | |
| 3,438,588 | | |
|
Rentals | |
| 9,106 | | |
| 7,511 | | |
|
Total | |
| 3,642,045 | | |
| 3,446,099 | | |
|
| |
| | | |
| | | |
|
Interest expense: | |
| | | |
| | | |
|
Product sales | |
| 117,120 | | |
| 35,679 | | |
|
Royalties | |
| | | |
| | | |
|
Products subtotal | |
| 117,120 | | |
| 35,679 | | |
|
Rentals | |
| 2,070 | | |
| 4,466 | | |
|
Total | |
| 119,190 | | |
| 40,145 | | |
|
| |
| | | |
| | | |
|
Net income (loss) before taxes: | |
| | | |
| | | |
|
Product sales | |
| (1,370,360 | ) | |
| (1,442,260 | ) | |
|
Royalties | |
| 51,634 | | |
| 32,299 | | |
|
Products subtotal | |
| (1,318,726 | ) | |
| (1,409,961 | ) | |
|
Rentals | |
| 7,526 | ) | |
| 4,466 | | |
|
Total | |
$ | (1,311,200 | ) | |
$ | (1,405,495 | ) | |
At December 31, 2025, all of our assets
were used in the Products segment.
| 40 | |
| | |
Accounting Standards Update 2023-07 requires all
public entities to disclose significant segment expenses for each reportable segment. We have allocated all expenses to the products segment
in the table below as the royalties and rentals segments are immaterial.
|
Schedule of significant segment expenses | |
| | |
| | |
|
| |
Years
Ended December 31, | | |
|
| |
2025 | | |
2024 | | |
|
Product sales | |
$ | 8,958,672 | | |
$ | 8,470,985 | | |
|
Cost of sales | |
| (5,375,787 | ) | |
| (5,066,779 | ) | |
|
Gross profit | |
| 3,582,885 | | |
| 3,404,206 | | |
|
Less: research, development and sustaining engineering | |
| (2,152,843 | ) | |
| (2,242,869 | ) | |
|
Sales and marketing | |
| (1,331,062 | ) | |
| (1,358,211 | ) | |
|
General and administrative | |
| (1,388,160 | ) | |
| (1,253,236 | ) | |
|
Operating (loss) before royalties and building rentals operating income | |
| (1,289,180 | ) | |
| (1,450,110 | ) | |
|
Royalties income | |
| 51,634 | | |
| 34,382 | | |
|
Building rentals operating income | |
| 7,526 | | |
| 7,511 | | |
|
Operating (loss) | |
$ | (1,230,020 | ) | |
$ | (1,408,217 | ) | |
The following sets forth domestic and international
product sales for the years ended December 31, 2025 and 2024.
|
Schedule of domestic and international product | | |
| | |
| | |
| | |
| | |
|
| | |
December 31, 2025 | | |
December 31,
2024 | | |
|
| | |
Amount | | |
Percent | | |
Amount | | |
Percent | | |
|
| Domestic | | |
| 6,666,904 | | |
| 74 | | |
| 6,009,596 | | |
| 71 | | |
|
| International | | |
| 2,291,768 | | |
| 26 | | |
| 2,461,389 | | |
| 29 | | |
|
| | | |
| 8,958,672 | | |
| 100 | | |
| 8,470,985 | | |
| 100 | | |
|
| | | |
| | | |
| | | |
| | | |
| | | |
Our purchases of assets for the above products
segment for the years December 31, 2025 and 2024 were as follows.
|
Schedule of products segment | |
| | |
| | |
|
| |
2025 | | |
2024 | | |
|
Property, plant and equipment | |
$ | 334,786 | | |
$ | 539,731 | | |
|
Purchases of research and development equipment, software and space modifications not in service | |
| 19,595 | | |
| 128,007 | | |
|
Patent filing cost | |
| | | |
| 21,708 | | |
|
Total | |
$ | 354,381 | | |
$ | 689,446 | | |
At December 31, 2025, all of our assets were used
in the Products segment as the lease in place at June 30, 2025 expired for our Rentals segment and was not renewed. At December
31, 2024, $104,697 of our assets were used in the Rentals segment, with the remainder, $8,620,072 used in the Products segment.
The following is the disaggregation of revenue
into broad categories, which we have defined as shown below for the years ended December 31, 2025 and 2024.
|
Schedule of disaggregation of revenue | |
| | |
| | |
|
Product sales: | |
2025 | | |
2024 | | |
|
Product sales and supplies | |
$ | 8,247,443 | | |
$ | 7,737,741 | | |
|
Training and certification | |
| 623,293 | | |
| 651,426 | | |
|
Service plans and equipment rental | |
| 87,936 | | |
| 81,818 | | |
|
Product sales subtotal | |
| 8,958,672 | | |
| 8,470,985 | | |
|
Royalties | |
| 51,634 | | |
| 34,382 | | |
|
Rental income | |
| 16,632 | | |
| 32,778 | | |
|
Total revenues | |
$ | 9,026,938 | | |
$ | 8,538,145 | | |
| 41 | |
| | |
12. SUBSEQUENT EVENTS
*ELST*
On October 9, 2025, we entered into an Agreement
and Plan of Merger (the Merger Agreement) with Electronic Systems Technology, Inc., a Washington corporation (ELST),
providing that, subject to the terms and conditions set forth therein, a wholly owned subsidiary to be formed by the Company (Merger
Sub) would merge with and into ELST, with ELST surviving as a wholly owned subsidiary of the Company (the Merger).
At the effective time of the Merger, each outstanding share of common stock of ELST would be converted into the right to receive shares
of common stock of the Company in accordance with an agreed exchange ratio, with cash paid in lieu of any fractional shares.
On October 15, 2025 we filed a registration statement
on Form S-4/A with the Securities and Exchange Commission in connection with the proposed Merger. The Merger did not receive the required
approval of ELST shareholders at the special meeting held on February 9, 2026, and the Merger Agreement was terminated.
*Renewal of Willkomm Employment Agreement*
In January 2026, the Board of Directors renewed
the employment agreement of Dr. Wayne R. Willkomm, the Company's President and Chief Executive Officer, for an additional term pursuant
to the terms of the agreement. In connection with the renewal, a renewal bonus of $30,000, as provided for under the terms of the employment
agreement, was paid to Dr. Willkomm in January 2026.
****
| 42 | |
| | |
**Item 9. Changes In and Disagreements with Accountants on Accounting
and Financial Disclosure**
None.
****
**Item 9A. Controls and Procedures**
**Evaluation of Disclosure Controls and Procedures**
As of the end of the period covered by this Annual
Report on Form 10-K, 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 Rules13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934) (the Exchange Act). Disclosure controls and procedures are designed to
ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commission's (SEC) 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 ofDecember 31, 2025.
**Internal Control over Financial Reporting**
|
(a) | Management's Annual Report on Internal Control over Financial
Reporting |
|
Our management is responsible for establishing
and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Under the supervision and
with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we conducted an evaluation
of the effectiveness of our internal control over financial reporting as of December 31, 2025 based on the criteria in *Internal Control-Integrated
Framework*issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013. Based
on our evaluation under the framework in *Internal Control-Integrated Framework*issued by the COSO in 2013, our management concluded
that our internal control over financial reporting was effective as of December 31, 2025.
|
(b) | Attestation report of the registered public accounting firm. |
|
This Annual Report does not include an attestation
report of our independent registered public accounting firm regarding internal control over financial reporting. Management's report was
not subject to attestation by our independent registered public accounting firm pursuant to rules of the SEC, which permit us to provide
only management's report in this Annual Report.
|
(c) | Changes in Internal Control over Financial Reporting |
|
There were no significant changes in our internal
controls over financial reporting during the quarter ended December 31, 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.
| 43 | |
| | |
**Item 9B**. **Other Information**
During the Companys fourth
quarter, no director or officeradoptedorterminateda Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading
arrangement.
**Item 9C**. **Disclosure Regarding Foreign
Jurisdictions that Prevent Inspections.**
Not applicable.
**PART III**
****
****
**Item 10**. **Directors, Executive
Officers and Corporate Governance**
Information in response to this item is incorporated
by reference from the registrant's definitive proxy statement for its 2026 Annual Meeting of Shareholders to be filed within 120 days
after December 31, 2025.
*Policy Prohibiting Insider Trading and Related
Procedures.*
We have adopted an insider trading policy
governing the purchase, sale, and other dispositions of the registrants securities by directors, senior management, and employees.
A copy of the insider trading policy is filed as an exhibit to this Annual Report.
**Item 11**. **Executive Compensation**
Information in response to this item is incorporated
by reference from the registrant's definitive proxy statement for its 2026 Annual Meeting of Shareholders to be filed within 120 days
after December 31, 2025.
**Item 12**. **Security Ownership of Certain
Beneficial Owners and Management and Related Shareholder Matters**
Information in response to this item is incorporated
by reference from the registrant's definitive proxy statement for its 2026 Annual Meeting of Shareholders to be filed within 120 days
after December 31, 2025.
The following table summarizes certain information
regarding our equity compensation plan as of December 31, 2025:
|
Plan Category | |
Number of securities to be issued upon exercise of outstanding options | | |
Weighted-average exercise price of outstanding options | | |
Number of securities remaining available for future issuance under equity compensation plans | | |
|
Equity compensation plans approved by security holders | |
| 33,500 | | |
$ | 3.80 | | |
| | | |
|
Equity compensation plans not approved by security holders | |
| | | |
| | | |
| | | |
|
Total | |
| 33,500 | | |
$ | 3.80 | | |
| | | |
**Item 13**. **Certain Relationships and Related
Transactions, and Director Independence**
Information in response to this item is incorporated
by reference from the registrant's definitive proxy statement for its 2025 Annual Meeting of Shareholders to be filed within 120 days
after December 31, 2025.
**Item 14. Principal Accountant Fees and Services**
Information in response to this item is incorporated
by reference from the registrant's definitive proxy statement for its 2025 Annual Meeting of Shareholders to be filed within 120 days
after December 31, 2025.
| 44 | |
| | |
****
**PART IV**
**Item 15. Exhibits, Financial Statement Schedules**
**(a) Documents filed as part of this Annual Report or incorporated
by reference:**
|
|
(1) |
Our financial statements are provided under Item 8 of this Annual Report. | |
**(b) The following exhibits are filed
with this Annual Report or incorporated by reference, as indicated:**
|
|
|
|
|
Incorporated
by Reference |
|
Filed or
Furnished | |
|
No. |
|
Exhibit Description |
|
Form |
|
Date Filed |
|
Number |
|
Herewith | |
|
2.1 |
|
Agreement and Plan of Merger, dated October 9, 2025. |
|
8-K |
|
10/15/2025 |
|
2.1 |
|
| |
|
3.1 |
|
Articles of Incorporation, dated as of December 29, 1983 |
|
10-12G |
|
3/31/2011 |
|
3.1 |
|
| |
|
3.2 |
|
Articles of Amendment to the Articles of Incorporation, dated as of July 10, 1986 |
|
10-12G |
|
3/31/2011 |
|
3.2 |
|
| |
|
3.3 |
|
Articles of Amendment to the Articles of Incorporation, dated as of August 18, 1986 |
|
10-12G |
|
3/31/2011 |
|
3.3 |
|
| |
|
3.4 |
|
Articles of Amendment to the Articles of Incorporation, dated as of April 18, 1988 |
|
10-12G |
|
3/31/2011 |
|
3.4 |
|
| |
|
3.5 |
|
Articles of Amendment to the Articles of Incorporation, dated as of April 1, 1991 |
|
10-12G |
|
3/31/2011 |
|
3.5 |
|
| |
|
3.6 |
|
Articles of Amendment to the Articles of Incorporation, dated as of May 10, 1993 |
|
10-12G |
|
3/31/2011 |
|
3.6 |
|
| |
|
3.7 |
|
Articles of Amendment to the Articles of Incorporation, dated as of May 11, 1992 |
|
10-12G |
|
3/31/2011 |
|
3.7 |
|
| |
|
3.8 |
|
Articles of Amendment to the Articles of Incorporation, dated as of November 17, 1997 |
|
10-12G |
|
3/31/2011 |
|
3.8 |
|
| |
|
3.9 |
|
Articles of Amendment to the Articles of Incorporation, dated as of July 15, 1998 |
|
10-12G |
|
3/31/2011 |
|
3.9 |
|
| |
|
3.10 |
|
Articles of Amendment to the Articles of Incorporation, dated as of April 1, 1994 |
|
10-12G |
|
3/31/2011 |
|
3.10 |
|
| |
|
3.11 |
|
Bylaws |
|
10-12G |
|
3/31/2011 |
|
3.11 |
|
| |
|
3.12 |
|
Amended and Restated Bylaws of Lifeloc Technologies, Inc., dated as of March 31, 2017 |
|
8-K |
|
4/4/2017 |
|
3.1 |
|
| |
|
4.1 |
|
Form of Certificate representing Common Stock |
|
10-12G |
|
3/31/2011 |
|
4.1 |
|
| |
|
10.1 |
|
Form of Standard Distribution Agreement |
|
10-K |
|
3/28/2025 |
|
10.1 |
|
| |
|
10.2 |
|
2013 Stock Option Plan |
|
10-Q |
|
5/8/2013 |
|
10.1 |
|
| |
|
10.3 |
|
Amended and Restated Employment Agreement with Dr. Wayne Willkomm, Ph.D., dated October 5, 2018 |
|
8-K |
|
10/10/2017 |
|
10.1 |
|
| |
|
10.4 |
|
Lifeloc Technologies, Inc. Option Agreement with Dr. Wayne Willkomm, Ph.D., dated March 31, 2021 |
|
10-K |
|
3/28/2025 |
|
10.4 |
|
| |
|
10.5* |
|
Exclusive Patent License Agreement No. 15-C02736, by and between Sandia Corporation and Lifeloc Technologies, Inc., dated August 29, 2016 |
|
10-K |
|
3/28/2025 |
|
10.5 |
|
| |
|
10.6* |
|
Amendment No. 1 to License Agreement No. 15-C02736, between National Technology & Engineering Solutions of Sandia, LLC and Lifeloc Technologies, Inc., dated June 11, 2020 |
|
10-K |
|
3/28/2025 |
|
10.6 |
|
| |
|
10.7* |
|
Amendment No. 2 to License Agreement No. 15-C02736, between National Technology & Engineering Solutions of Sandia, LLC and Lifeloc Technologies, Inc., dated August 24, 2021 |
|
10-K |
|
3/28/2025 |
|
10.7 |
|
| |
|
10.8* |
|
Amendment No. 3 to License Agreement No. 15-C02736 with National Technology & Engineering Solutions of Sandia, LLC, dated August 26, 2025 |
|
8-K |
|
9/2/2025 |
|
10.1 |
|
| |
|
10.9 |
|
Business Loan Agreement, between Citywide Banks and Lifeloc Technologies, Inc., dated September 30, 2021 |
|
10-K |
|
3/28/2025 |
|
10.8 |
|
| |
|
10.10 |
|
Deed of Trust, between Citywide Banks and Lifeloc Technologies, Inc., dated September 30, 2021 |
|
10-K |
|
3/28/2025 |
|
10.9 |
|
| |
|
10.11 |
|
Subordinated Debenture Purchase Agreement, dated December 31, 2024 |
|
8-K |
|
1/7/2025 |
|
10.1 |
|
| |
| 45 | |
| | |
|
|
|
|
|
Incorporated
by Reference |
|
Filed
or
Furnished | |
|
No. |
|
Exhibit Description |
|
Form |
|
Date Filed |
|
Number |
|
Herewith | |
|
|
|
|
|
|
|
|
|
|
|
| |
|
10.12 |
|
Warrant To Purchase Shares Of Common Stock, dated December 31, 2024 |
|
8-K |
|
1/7/2025 |
|
10.3 |
|
| |
|
10.13 |
|
Lifeloc 8.25% Subordinated Debenture, dated December 31, 2024 |
|
8-K |
|
1/7/2025 |
|
10.2 |
|
| |
|
19.1 |
|
Insider Trading Policy |
|
10-K |
|
3/28/2025 |
|
19.1 |
|
| |
|
31.1 |
|
Certification of Principal Executive Officer Pursuant To Section 302 Of The SarbanesOxley Act Of 2002 |
|
|
|
|
|
|
X |
|
|
31.2 |
|
Certification of Principal Financial Officer Pursuant To Section 302 Of The SarbanesOxley Act Of 2002 |
|
|
|
|
|
|
X |
|
|
32.1 |
|
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
|
|
|
|
|
X |
|
|
32.2 |
|
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
|
|
|
|
|
X |
|
|
101 |
|
Interactive Data Files Pursuant to Rule 405 of Regulation S-T |
|
|
|
|
|
|
X |
|
Indicates a management contract or compensatory
plan or arrangement.
* Certain portions of this exhibit have been redacted
because they are both (i) not material and (ii) would likely cause competitive harm to the company if publicly disclosed. The Company
agrees to furnish an unredacted copy of this exhibit to the SEC upon request.
**Item 16. Form 10-K Summary**
None.
| 46 | |
| | |
**SIGNATURES**
Pursuant to the requirements
of Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Dated: March 27, 2026
|
|
LIFELOC TECHNOLOGIES, INC. |
| |
|
|
|
|
| |
|
|
By: |
/s/ Wayne R. Willkomm |
| |
|
|
|
Wayne R. Willkomm, Ph.D. |
| |
|
|
|
Chief Executive Officer and President |
| |
|
|
|
|
| |
Pursuant
to the requirements of the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
|
|
|
|
|
| |
|
/s/ Wayne R. Willkomm |
|
|
|
| |
|
Wayne R. Willkomm, Ph.D. |
|
|
|
| |
|
Chief Executive Officer and President
(Principal Executive Officer)
Director |
|
|
|
| |
|
|
|
|
|
| |
|
/s/ Vern D. Kornelsen |
|
|
|
| |
|
Vern D. Kornelsen |
|
|
|
| |
|
Chief Financial Officer
(Principal Financial Officer)
Director |
|
|
|
| |
|
|
|
|
|
| |
|
/s/ Michelle Heim |
|
|
|
| |
|
Michelle Heim
Controller
(Principal Accounting Officer) |
|
|
|
| |
|
|
|
|
|
| |
|
/s/ Adam Kashenberg |
|
|
|
| |
|
Adam Kashenberg
Director |
|
|
|
| |
|
|
|
|
|
| |
|
/s/ Michael J. Kornelsen |
|
|
|
| |
|
Michael J. Kornelsen, D.M.A.
Director |
|
|
|
| |
|
|
|
|
|
| |
|
/s/ Donald E. Siecke |
|
|
|
| |
|
Donald E. Siecke
Director |
|
|
|
| |
|
|
|
|
|
| |
| 47 | |
| | |
****
**INDEX TO EXHIBITS**
|
|
|
|
|
Incorporated
by Reference |
|
Filed or
Furnished | |
|
No. |
|
Exhibit Description |
|
Form |
|
Date Filed |
|
Number |
|
Herewith | |
|
2.1 |
|
Agreement and Plan of Merger, dated October 9, 2025. |
|
8-K |
|
10/14/2025 |
|
2.1 |
|
| |
|
3.1 |
|
Articles of Incorporation, dated as of December 29, 1983 |
|
10-12G |
|
3/31/2011 |
|
3.1 |
|
| |
|
3.2 |
|
Articles of Amendment to the Articles of Incorporation, dated as of July 10, 1986 |
|
10-12G |
|
3/31/2011 |
|
3.2 |
|
| |
|
3.3 |
|
Articles of Amendment to the Articles of Incorporation, dated as of August 18, 1986 |
|
10-12G |
|
3/31/2011 |
|
3.3 |
|
| |
|
3.4 |
|
Articles of Amendment to the Articles of Incorporation, dated as of April 18, 1988 |
|
10-12G |
|
3/31/2011 |
|
3.4 |
|
| |
|
3.5 |
|
Articles of Amendment to the Articles of Incorporation, dated as of April 1, 1991 |
|
10-12G |
|
3/31/2011 |
|
3.5 |
|
| |
|
3.6 |
|
Articles of Amendment to the Articles of Incorporation, dated as of May 10, 1993 |
|
10-12G |
|
3/31/2011 |
|
3.6 |
|
| |
|
3.7 |
|
Articles of Amendment to the Articles of Incorporation, dated as of May 11, 1992 |
|
10-12G |
|
3/31/2011 |
|
3.7 |
|
| |
|
3.8 |
|
Articles of Amendment to the Articles of Incorporation, dated as of November 17, 1997 |
|
10-12G |
|
3/31/2011 |
|
3.8 |
|
| |
|
3.9 |
|
Articles of Amendment to the Articles of Incorporation, dated as of July 15, 1998 |
|
10-12G |
|
3/31/2011 |
|
3.9 |
|
| |
|
3.10 |
|
Articles of Amendment to the Articles of Incorporation, dated as of April 1, 1994 |
|
10-12G |
|
3/31/2011 |
|
3.10 |
|
| |
|
3.11 |
|
Bylaws |
|
10-12G |
|
3/31/2011 |
|
3.11 |
|
| |
|
3.12 |
|
Amended and Restated Bylaws of Lifeloc Technologies, Inc., dated as of March 31, 2017 |
|
8-K |
|
4/4/2017 |
|
3.1 |
|
| |
|
4.1 |
|
Form of Certificate representing Common Stock |
|
10-12G |
|
3/31/2011 |
|
4.1 |
|
| |
|
10.1 |
|
Form of Standard Distribution Agreement |
|
10-K |
|
3/28/2025 |
|
10.1 |
|
| |
|
10.2 |
|
2013 Stock Option Plan |
|
10-Q |
|
5/8/2013 |
|
10.1 |
|
| |
|
10.3 |
|
Amended and Restated Employment Agreement with Dr. Wayne Willkomm, Ph.D., dated October 5, 2018 |
|
8-K |
|
10/10/2017 |
|
10.1 |
|
| |
|
10.4 |
|
Lifeloc Technologies, Inc. Option Agreement with Dr. Wayne Willkomm, Ph.D., dated March 31, 2021 |
|
10-K |
|
3/28/2025 |
|
10.4 |
|
| |
|
10.5* |
|
Exclusive Patent License Agreement No. 15-C02736, by and between Sandia Corporation and Lifeloc Technologies, Inc., dated August 29, 2016 |
|
10-K |
|
3/28/2025 |
|
10.5 |
|
| |
|
10.6* |
|
Amendment No. 1 to License Agreement No. 15-C02736, between National Technology & Engineering Solutions of Sandia, LLC and Lifeloc Technologies, Inc., dated June 11, 2020 |
|
10-K |
|
3/28/2025 |
|
10.6 |
|
| |
|
10.7* |
|
Amendment No. 2 to License Agreement No. 15-C02736, between National Technology & Engineering Solutions of Sandia, LLC and Lifeloc Technologies, Inc., dated August 24, 2021 |
|
10-K |
|
3/28/2025 |
|
10.7 |
|
| |
|
10.8* |
|
Amendment No. 3 to License Agreement No. 15-C02736 with National Technology & Engineering Solutions of Sandia, LLC, dated August 26, 2025 |
|
8-K |
|
9/2/2025 |
|
10.1 |
|
| |
|
10.9 |
|
Business Loan Agreement, between Citywide Banks and Lifeloc Technologies, Inc., dated September 30, 2021 |
|
10-K |
|
3/28/2025 |
|
10.8 |
|
| |
|
10.10 |
|
Deed of Trust, between Citywide Banks and Lifeloc Technologies, Inc., dated September 30, 2021 |
|
10-K |
|
3/28/2025 |
|
10.9 |
|
| |
|
10.11 |
|
Subordinated Debenture Purchase Agreement, dated December 31, 2024 |
|
8-K |
|
1/7/2025 |
|
10.1 |
|
| |
| 48 | |
| | |
|
|
|
|
|
Incorporated by Reference |
|
Filed or
Furnished | |
|
No. |
|
Exhibit Description |
|
Form |
|
Date Filed |
|
Number |
|
Herewith | |
|
|
|
|
|
|
|
|
|
|
|
| |
|
10.12 |
|
Warrant To Purchase Shares Of Common Stock, dated December 31, 2024 |
|
8-K |
|
1/7/2025 |
|
10.3 |
|
| |
|
10.13 |
|
Lifeloc 8.25% Subordinated Debenture, dated December 31, 2024 |
|
8-K |
|
1/7/2025 |
|
10.2 |
|
| |
|
19.1 |
|
Insider Trading Policy |
|
10-K |
|
3/28/2025 |
|
19.1 |
|
| |
|
31.1 |
|
Certification of Principal Executive Officer Pursuant To Section 302 Of The SarbanesOxley Act Of 2002 |
|
|
|
|
|
|
|
X | |
|
31.2 |
|
Certification of Principal Financial Officer Pursuant To Section 302 Of The SarbanesOxley Act Of 2002 |
|
|
|
|
|
|
|
X | |
|
32.1 |
|
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
|
|
|
|
|
|
X | |
|
32.2 |
|
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
|
|
|
|
|
|
X | |
|
101 |
|
Interactive Data Files Pursuant to Rule 405 of Regulation S-T |
|
|
|
|
|
|
|
| |
Indicates a management contract or compensatory
plan or arrangement.
* Certain portions of this exhibit have been
redacted because they are both (i) not material and (ii) would likely cause competitive harm to the company if publicly disclosed. The
company agrees to furnish an unredacted copy of this exhibit to the SEC upon request.
| 49 | |