[10-Q] Lifeloc Technologies, Inc Quarterly Earnings Report
Lifeloc Technologies, Inc. reported Q3 2025 results. Total revenues were
For the nine months ended September 30, 2025, revenues were
The company continues investing in SpinDetect™ development. Subsequent to quarter-end, it entered a merger agreement with Electronic Systems Technology, Inc.; an S‑4/A was filed on October 15, 2025, with closing subject to shareholder and regulatory approvals. Common shares outstanding were 2,752,616 as of November 10, 2025.
- None.
- None.
Insights
Sales grew, margins tightened; losses and limited cash persist.
Lifeloc delivered Q3 revenue of
Liquidity is modest: cash was
The company disclosed a planned merger with Electronic Systems Technology, Inc., with an S‑4/A filed on
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
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| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
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LIFELOC TECHNOLOGIES, INC.
FORM 10-Q
For the Nine months Ended September 30, 2025
INDEX
| Page | ||
| Number | ||
| PART I. | FINANCIAL INFORMATION | 3 |
| ITEM 1 | FINANCIAL STATEMENTS (UNAUDITED) | |
| Condensed Balance Sheets as of September 30, 2025 and December 31, 2024 (Unaudited) | 3 | |
| Condensed Statements of Income (Loss) (Unaudited) for the three and nine months ended September 30, 2025 and September 30, 2024 | 4 | |
| Condensed Statements of Changes in Stockholders' Equity (Unaudited) for the three and nine months ended September 30, 2025 and 2024 | 6 | |
| Condensed Statements of Cash Flows (Unaudited) for the nine months ended September 30, 2025 and 2024 | 7 | |
| Notes to Condensed Financial Statements (Unaudited) | 8 | |
| ITEM 2 | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 17 |
| ITEM 3 | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 22 |
| ITEM 4 | CONTROLS AND PROCEDURES | 23 |
| PART II. | OTHER INFORMATION | 23 |
| ITEM 1 | LEGAL PROCEEDINGS | 23 |
| ITEM 1A | RISK FACTORS | 23 |
| ITEM 2 | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | 23 |
| ITEM 3 | DEFAULTS UPON SENIOR SECURITIES | 24 |
| ITEM 4 | MINE SAFETY DISCLOSURES | 24 |
| ITEM 5 | OTHER INFORMATION | 24 |
| ITEM 6 | EXHIBITS | 24 |
| SIGNATURES | 25 | |
| 2 |
PART I FINANCIAL INFORMATION
ITEM 1 – FINANCIAL STATEMENTS
LIFELOC TECHNOLOGIES, INC.
Condensed Balance Sheets (Unaudited)
| ASSETS | ||||||||
| September 30, 2025 | December 31, 2024 | |||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventories, net | ||||||||
| Federal and state income taxes receivable | ||||||||
| Prepaid expenses and other | ||||||||
| Total current assets | ||||||||
| PROPERTY, PLANT AND EQUIPMENT: | ||||||||
| Land | ||||||||
| Building | ||||||||
| Real-time Alcohol Detection And Recognition equipment and software | ||||||||
| Production equipment, software and space modifications | ||||||||
| Training courses | ||||||||
| Office equipment, software and space modifications | ||||||||
| Sales and marketing equipment and space modifications | ||||||||
| Research and development equipment, software and space modifications | ||||||||
| Research and development equipment, software and space modifications not in service | ||||||||
| Less accumulated depreciation | ( | ) | ( | ) | ||||
| Total property and equipment, net | ||||||||
| OTHER ASSETS: | ||||||||
| Patents, net | ||||||||
| Deposits and other | ||||||||
| Deferred income taxes | ||||||||
| Total other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable | $ | $ | ||||||
| Term loan payable, current portion | ||||||||
| Subordinated debentures payable, current portion | ||||||||
| Customer and tenant deposits | ||||||||
| Accrued expenses | ||||||||
| Deferred revenue, current portion | ||||||||
| Product warranty reserve | ||||||||
| Total current liabilities | ||||||||
| TERM LOAN PAYABLE, net of current portion and debt issuance costs |
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| SUBORDINATED DEBENTURES PAYABLE, net of current portion and debt issuance costs |
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| DEFERRED REVENUE, net of current portion | ||||||||
| Total liabilities | ||||||||
| COMMITMENTS AND CONTINGENCIES (Note 6) | — | — | ||||||
| STOCKHOLDERS' EQUITY: | ||||||||
| Common stock, shares outstanding ( |
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| Retained earnings (accumulated deficit) | ( | ) | ||||||
| Total stockholders' equity | ||||||||
| Total liabilities and stockholders' equity | $ | $ | ||||||
The accompanying notes to the condensed financial statements are an integral part of these condensed financial statements.
| 3 |
LIFELOC TECHNOLOGIES, INC.
Condensed Statements of Income (Loss) (Unaudited)
| Three Months Ended September 30, | ||||||||
| REVENUES: | 2025 | 2024 | ||||||
| Product sales | $ | $ | ||||||
| Royalties | ||||||||
| Rental income | ||||||||
| Total | ||||||||
| COST OF SALES | ||||||||
| GROSS PROFIT | ||||||||
| OPERATING EXPENSES: | ||||||||
| Research, development, and sustaining engineering | ||||||||
| Sales and marketing | ||||||||
| General and administrative | ||||||||
| Total | ||||||||
| OPERATING (LOSS) | ( | ) | ( | ) | ||||
| OTHER INCOME (EXPENSE): | ||||||||
| Interest income | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Total | ( | ) | ( | ) | ||||
| NET (LOSS) BEFORE PROVISION FOR TAXES | ( | ) | ( | ) | ||||
| BENEFIT FROM FEDERAL AND STATE INCOME TAXES | ||||||||
| NET (LOSS) | $ | ( | ) | $ | ( | ) | ||
| NET (LOSS) PER SHARE, BASIC | $ | ( | ) | $ | ( | ) | ||
| NET (LOSS) PER SHARE, DILUTED | $ | ( | ) | $ | ( | ) | ||
| WEIGHTED AVERAGE SHARES, BASIC | ||||||||
| WEIGHTED AVERAGE SHARES, DILUTED | ||||||||
The accompanying notes to the condensed financial statements are an integral part of these condensed financial statements.
| 4 |
LIFELOC TECHNOLOGIES, INC.
Condensed Statements of Income (Loss) (Unaudited)
| Nine Months Ended September 30, | ||||||||
| REVENUES: | 2025 | 2024 | ||||||
| Product sales | $ | $ | ||||||
| Royalties | ||||||||
| Rental income | ||||||||
| Total | ||||||||
| COST OF SALES | ||||||||
| GROSS PROFIT | ||||||||
| OPERATING EXPENSES: | ||||||||
| Research and development | ||||||||
| Sales and marketing | ||||||||
| General and administrative | ||||||||
| Total | ||||||||
| OPERATING (LOSS) | ( | ) | ( | ) | ||||
| OTHER INCOME (EXPENSE): | ||||||||
| Interest income | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Total | ( | ) | ||||||
| NET (LOSS) BEFORE PROVISION FOR TAXES | ( | ) | ( | ) | ||||
| BENEFIT FROM FEDERAL AND STATE INCOME TAXES | ||||||||
| NET (LOSS) | $ | ( | ) | $ | ( | ) | ||
| NET (LOSS) PER SHARE, BASIC | $ | ( | ) | $ | ( | ) | ||
| NET (LOSS) PER SHARE, DILUTED | $ | ( | ) | $ | ( | ) | ||
| WEIGHTED AVERAGE SHARES, BASIC | ||||||||
| WEIGHTED AVERAGE SHARES, DILUTED | ||||||||
The accompanying notes to the condensed financial statements are an integral part of these condensed financial statements.
| 5 |
LIFELOC
TECHNOLOGIES, INC.
Condensed Statements of Changes in Stockholders' Equity (Unaudited)
| Common Stock Shares | Common Stock Amount | Retained Earnings (Accumulated Deficit) | Total | |||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | |||||||||||||
| Net (loss) | — | — | ( | ) | ( | ) | ||||||||||
| Ending balance, June 30, 2024 | ||||||||||||||||
| Issuance of common stock for cash, net of issuance costs |
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— |
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| Net (loss) | — | — | ( | ) | ( | ) | ||||||||||
| Ending balance, September 30, 2024 | $ | $ | $ | |||||||||||||
| Balance, December 31, 2024 | $ | $ | $ | |||||||||||||
| Issuance of shares from option exercise | — | |||||||||||||||
| Warrants issued with subordinated debenture |
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— |
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— |
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| Net (loss) | — | — | ( | ) | ( | ) | ||||||||||
| Ending balance, June 30, 2025 | ( | ) | ||||||||||||||
| Net (loss) | — | — | ( | ) | ( | ) | ||||||||||
| Ending balance, September 30, 2025 | $ | $ | ( | ) | $ | |||||||||||
The accompanying notes to the condensed financial statements are an integral part of these condensed financial statements.
| 6 |
LIFELOC TECHNOLOGIES, INC.
Condensed Statements of Cash Flows (Unaudited)
| Nine Months Ended September 30, | ||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | 2025 | 2024 | ||||||
| Net (loss) | ( | ) | ( | ) | ||||
| Adjustments to reconcile net income (loss) to net cash (used in) operating activities- | ||||||||
| Depreciation and amortization | ||||||||
| Provision for doubtful accounts, net change | ||||||||
| Provision for inventory obsolescence, net change | ||||||||
| Deferred taxes, net change | ( | ) | ||||||
| Amortization of debt issuance costs | ||||||||
| Changes in operating assets and liabilities- | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventories | ( | ) | ||||||
| Federal and state income taxes receivable | ( | ) | ||||||
| Prepaid expenses and other | ( | ) | ||||||
| Deposits and other | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Income taxes payable | ( | ) | ||||||
| Customer and tenant deposits | ( | ) | ( | ) | ||||
| Accrued expenses | ( | ) | ||||||
| Deferred revenue | ( | ) | ||||||
| Net cash (used in) operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS (USED IN) INVESTING ACTIVITIES: | ||||||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| Purchases of research and development equipment, software and space modifications not in service |
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( |
) |
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( |
) |
| Patent filing cost | ( | ) | ||||||
| Net cash (used in) investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES: | ||||||||
| Principal payments made on term loan | ( | ) | ( | ) | ||||
| Proceeds from issuance of at $ |
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| Proceeds from issuance of subordinated debenture | ||||||||
| Proceeds from Issuance of shares from option exercise | ||||||||
| Net cash provided from financing activities | ||||||||
| NET (DECREASE) IN CASH | ( | ) | ( | ) | ||||
| CASH, BEGINNING OF PERIOD | ||||||||
| CASH, END OF PERIOD | ||||||||
| SUPPLEMENTAL INFORMATION: | ||||||||
| Cash paid for interest | ||||||||
| Cash paid for income tax | ||||||||
| Income tax refund received | ||||||||
| Non-cash financing and investing activities: warrants issued with subordinated debenture | ||||||||
The accompanying notes to the condensed financial statements are an integral part of these condensed financial statements.
| 7 |
LIFELOC TECHNOLOGIES, INC.
Notes to Condensed Financial Statements (Unaudited)
September 30, 2025 and 2024
1. ORGANIZATION AND NATURE OF BUSINESS
Lifeloc Technologies, Inc. ("Lifeloc" or the "Company", “Us”, “Our”, or “We”) is a Colorado-based developer, manufacturer and marketer of portable hand-held and fixed station breathalyzers and related accessories, supplies and education. We design, produce and sell fuel-cell based breath alcohol testing equipment. We compete in all major segments of the breath alcohol testing instrument market, including law enforcement, workplace, corrections, original equipment manufacturing ("OEM") and consumer markets. In addition, we offer a line of supplies, accessories, services, and training to support customers' alcohol testing programs. We sell globally through distributors as well as directly to users.
We define our business as providing "near and remote sensing and monitoring" products and solutions. Today, the majority of our revenues are derived from products and services for alcohol detection and measurement. We remain committed to growing our breath alcohol testing business. In the future, we anticipate the commercialization of new sensing and measurement products that may allow Lifeloc to successfully expand our business into new growth areas where we do not presently compete or where no satisfactory product solutions exist today.
Lifeloc incorporated in Colorado in December 1983. We filed a registration statement on Form 10 with the Securities and Exchange Commission, which became effective on May 31, 2011. Our fiscal year end is December 31. Our principal executive offices are located at 12441 West 49th Avenue, Unit 4, Wheat Ridge, Colorado 80033-3338. Our telephone number is (303) 431-9500. Our websites are www.lifeloc.com and www.lifelocuniversity.com.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PROCESSES
Basis of Presentation. These statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission ("SEC") and accounting principles generally accepted in the United States ("GAAP") for interim financial information. They do not include all information and notes required by GAAP for complete financial statements. However, except as disclosed herein, there has been no material change in the information disclosed in the notes to financial statements included in Lifeloc's Annual Report on Form 10-K for the year ended December 31, 2024 as filed with the SEC. In the opinion of management, the accompanying unaudited condensed financial statements contain all adjustments, consisting of only normal recurring adjustments necessary for a fair statement of the financial position as of September 30, 2025 and December 31, 2024, and the results of operations and cash flows for the three and nine months ended September 30, 2025 and September 30, 2024. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for a full year. The Company's 2024 Annual Report on Form 10-K includes certain definitions and a summary of significant accounting policies and should be read in conjunction with this Form 10-Q.
Use of Estimates in the Preparation of Financial Statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions regarding allowances for bad debts, inventory obsolescence, accumulated depreciation, and deferred income taxes. Such estimates and assumptions affect the reported amounts of assets and liabilities as well as disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of sales and expense during the reporting period. Actual results could differ from those estimates.
Debt
Issuance Costs. The term loan and the subordinated debentures are shown in the accompanying balance sheet net of debt issuance costs.
Deferred debt issuance costs are amortized over the life of the term loan and the subordinated debentures on a straight-line basis, which
approximates the effective interest method. Total debt issuance cost amortization during the three months ended September 30, 2025 and
2024 was $
Inventories. Inventories are stated at the lower of standard cost or net realizable value. We reduce inventory for estimated obsolete or unmarketable inventory equal to the difference between the cost of inventory and the estimated net realizable value after cost to sell, based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required. At September 30, 2025 and December 31, 2024, inventory consisted of the following:
| Schedule of inventories | ||||||||
| 2025 | 2024 | |||||||
| Raw materials & deposits | $ | $ | ||||||
| Work-in-process | ||||||||
| Finished goods | ||||||||
| Total gross inventories | ||||||||
| Less reserve for obsolescence | ( | ) | ( | ) | ||||
| Total net inventories | $ | $ | ||||||
| 8 |
Income
Taxes. We account for income taxes under the provisions of Accounting Standards Codification Topic 740, Accounting for Income
Taxes ("ASC 740"). ASC 740 requires recognition of deferred income tax assets and liabilities for the expected future income
tax consequences, based on enacted tax laws, of temporary differences between the financial reporting and tax bases of assets and liabilities.
ASC 740 also requires recognition of deferred tax assets for the expected future tax effects of all deductible temporary differences,
loss carryforwards and tax credit carryforwards. Deferred tax assets are then reduced, if deemed necessary, by a valuation allowance
for the amount of any tax benefits which, more likely than not based on current circumstances, are not expected to be realized. We estimate
that our current effective tax rate to be
ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements, uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts.
Revenue Recognition. Revenue from product sales and supplies is generally recorded when we ship the product and title has passed to the customer, or when agreed milestones are met in the case of product developments, provided that we have evidence of a customer arrangement and can conclude that collection is probable. The prices at which we sell our products are fixed and determinable at the time we accept a customer's order. We recognize revenue from sales to stocking distributors when there is no right of return, other than for normal warranty claims, and generally have no ongoing obligations related to product sales, except for normal warranty.
The sales of licenses to our training courses are recognized as revenue at the time of sale. Training and certification revenues are recognized at the time the training and certification occurs.
Revenues arising from extended warranty contracts are booked as sales over their life on a straight-line basis. Occasionally, we rent used equipment to customers, and in those cases, we recognize the revenues as they are earned over the life of the contract.
Royalty income is recognized in accordance with agreed upon terms, when performance obligations are satisfied, the amount is fixed or determinable and collectability is reasonably assured.
Rental income from 2,774 square feet of space leased to our tenant is recognized in the month in which it is due, which approximates if it were recognized on a straight-line basis over the term of the related lease. The lease expired on June 30, 2025 and was not renewed.
On occasion we receive customer deposits for future product orders and product developments. Customer deposits are initially recorded as a liability and recognized as revenue when the product is shipped and title has passed to the customer, or when agreed milestones are met in the case of product developments.
Deferred Revenue. Deferred revenues arise from service contracts and from direct training revenue. Revenues from service contracts are recognized on a straight-line basis over the life of the contract, generally one year, and are included in product revenue in our statements of income (loss). However, there are occasions when they are written for longer terms up to four years. The revenues from that portion of the contract that extend beyond one year are shown in our balance sheets as long term. Deferred revenues also result from direct training revenue that needs to be scheduled based on the customer’s and Lifeloc’s availability. Revenue is recognized when training is complete and is included in product sales in our condensed statements of (loss). All direct training is for less than one year and all deferred revenues from this source are shown in our balance sheets as short term.
Recently Issued Accounting Pronouncements.
In December 2023, the Financial Accounting Standards Board issued Accounting Standards Update 2023-09, Income Taxes (Topic 740): Improvement to Income Tax Disclosures, amending income tax disclosure requirements for the effective tax rate reconciliation and income taxes paid. The amendments in ASU 2023-09 are effective for fiscal years beginning after December 15, 2024 and are applied prospectively. Early adoption and retrospective application of the amendments are permitted.
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires disclosure about the types of costs and expenses included in certain expense captions presented on the income statement. The new disclosure requirements are effective for the Company's annual periods for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted, and may be applied either prospectively or retrospectively. We are currently evaluating the ASU to determine its impact on our consolidated financial statements and disclosures.
The Company does not believe that issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statements.
| 9 |
Segment Reporting. 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.
The chief operating decision maker evaluates the performance of the Company’s reportable segments based on segment profit or loss from operations, which is inclusive of all respective expenses. The profitability target of each segment is at the profit or loss from operations level, which is how the chief operating decision maker assesses performance. The chief operating decision maker also uses profit or loss from operations to allocate capital and personnel to the segments, which is typically done to improve the efficiency and effectiveness of operations or for expansion of operations, and ultimately to increase profit from operations. The Company’s reportable segments are strategic business units that offer different products. They are managed separately because each business requires different expertise to ensure quality products are produced in an efficient manner and because each business has a different customer base. We view our rentals segment as immaterial as the chief operating decision maker is focused primarily on the products segment. The Company’s chief operating decision maker is the chief executive officer.
3. BASIC AND DILUTED (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.
The following table presents the calculation of basic and diluted net (loss) per common share for three and nine months ended September 30, 2025 and September 30, 2024.
| Schedule of basic and diluted net income per common share | ||||||||
| Three Months Ended September 30, | ||||||||
| 2025 | 2024 | |||||||
| Net (loss) | $ | ( | ) | $ | ( | ) | ||
| Weighted average shares-basic | ||||||||
| Effect of dilutive potential common shares | ||||||||
| Weighted average shares-diluted | ||||||||
| Net (loss) per share-basic | $ | ( | ) | $ | ( | ) | ||
| Net (loss) per share-diluted | $ | ( | ) | $ | ( | ) | ||
| Antidilutive employee stock options | ||||||||
| Nine months Ended September 30, | ||||||||
| 2025 | 2024 | |||||||
| Net (loss) | $ | ( | ) | $ | ( | ) | ||
| Weighted average shares-basic | ||||||||
| Effect of dilutive potential common shares | ||||||||
| Weighted average shares-diluted | ||||||||
| Net (loss) per share-basic | $ | ( | ) | $ | ( | ) | ||
| Net (loss) per share-diluted | $ | ( | ) | $ | ( | ) | ||
| Antidilutive employee stock options | ||||||||
4. STOCKHOLDERS' EQUITY
In
February 2025, options to purchase
| 10 |
At
September 30, 2025 there were
5. DEBT
Debentures.
On December 31, 2024 we issued a $
In
consideration of the lender providing the financing, the Company issued warrants which entitle the holder to purchase
On
March 1, 2025 we issued a $
| Schedule of option grant and fair market value | ||||
| Stock price | $ | |||
| Exercise price per share | $ | |||
| Original term (months) | ||||
| Volatility | % | |||
| Annual rate of quarterly dividends | ||||
| Risk free interest rate | % | |||
Applying
these assumptions resulted in a combined total relative fair value of $
Our minimum future principal payments on all of the above subordinated debentures are as follows:
| Schedule of minimum future lease payments | ||||
| September 30, 2026 | $ | |||
| September 30, 2027 | ||||
| September 30, 2028 | ||||
| September 30, 2029 | ||||
| September 30, 2030 | ||||
| December 31, 2030 | ||||
| Total | ||||
| Less debt issuance cost | ( | ) | ||
| Net subordinated debenture payable | ||||
| Less current portion | ( | ) | ||
| Long term portion | $ | |||
Term
Loan Payable. The term loan is secured by a first mortgage on our building, and is payable in 119 equal monthly installments of $
| Schedule of term loan payable | ||||
| September 30, 2026 | $ | |||
| September 30, 2027 | ||||
| September 30, 2028 | ||||
| September 30, 2029 | ||||
| September 30, 2030 | ||||
| 2030 – 2031 | ||||
| Total | ||||
| Less debt issuance cost | ( | ) | ||
| Net term loan payable | ||||
| Less current portion | ( | ) | ||
| Long term portion | $ | |||
| 11 |
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 September 30, 2025, we had no obligation with respect to contingent severance benefit obligations other than the Company's obligations under the employment agreement with its chief executive officer, Dr. Wayne Willkomm. In the event that Dr. Willkomm's employment is terminated by the Company without Cause (including through a decision by the Company not to renew the employment agreement) or by Dr. Willkomm with Good Reason (as each are defined in the employment agreement), Dr. Willkomm will be eligible, upon satisfaction of certain conditions, for severance equal to two months of salary continuation plus 12 months of health insurance continuation.
Contractual
Commitments and Purchase Orders. Contractual commitments under development agreements and outstanding purchase orders issued to vendors
in the ordinary course of business totaled $
Regulatory Commitments. We are subject to certain regulations of the United States Department of Transportation and various state departments of transportation. We believe that we are in substantial compliance with all known applicable regulations.
7. LEGAL PROCEEDINGS
We were not involved or party to any legal proceedings at September 30, 2025 or December 31, 2024, and therefore made no accruals for legal proceedings in either 2025 or 2024.
8. 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.
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The following sets forth information about the operations of the business segments for the three months ended September 30, 2025 and 2024. There were no intersegment revenues.
| Schedule of operations of business segments | ||||||||
| Capital expenditures: | 2025 | 2024 | ||||||
| Product sales | $ | $ | ||||||
| Royalties | ||||||||
| Products subtotal | ||||||||
| Rentals | ||||||||
| Total | ||||||||
| Depreciation and amortization: | ||||||||
| Product sales | ||||||||
| Royalties | ||||||||
| Products subtotal | ||||||||
| Rentals | ||||||||
| Total | ||||||||
| Revenues: | ||||||||
| Product sales | ||||||||
| Royalties | ||||||||
| Products subtotal | ||||||||
| Rentals | ||||||||
| Total | ||||||||
| Gross profit: | ||||||||
| Product sales | ||||||||
| Royalties | ||||||||
| Products subtotal | ||||||||
| Rentals | ( | ) | ( | ) | ||||
| Total | ||||||||
| Interest expense: | ||||||||
| Product sales | ||||||||
| Royalties | ||||||||
| Products subtotal | ||||||||
| Rentals | ||||||||
| Total | ||||||||
| Net income (loss) before taxes: | ||||||||
| Product sales | ( | ) | ( | ) | ||||
| Royalties | ||||||||
| Products subtotal | ( | ) | ( | ) | ||||
| Rentals | ( | ) | ( | ) | ||||
| Total | $ | ( | ) | $ | ( | ) | ||
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The following set forth information about the operations of the business segments for the nine months ended September 30, 2025 and 2024. There were no intersegment revenues.
| Capital expenditures: | 2025 | 2024 | ||||||
| Product sales | $ | $ | ||||||
| Royalties | ||||||||
| Products subtotal | ||||||||
| Rentals | ||||||||
| Total | ||||||||
| Depreciation and amortization: | ||||||||
| Product sales | ||||||||
| Royalties | ||||||||
| Products subtotal | ||||||||
| Rentals | ||||||||
| Total | ||||||||
| Revenues: | ||||||||
| Product sales | ||||||||
| Royalties | ||||||||
| Products subtotal | ||||||||
| Rentals | ||||||||
| Total | ||||||||
| Gross profit: | ||||||||
| Product sales | ||||||||
| Royalties | ||||||||
| Products subtotal | ||||||||
| Rentals | ||||||||
| Total | ||||||||
| Interest expense: | ||||||||
| Product sales | ||||||||
| Royalties | ||||||||
| Products subtotal | ||||||||
| Rentals | ||||||||
| Total | ||||||||
| Net (loss) before taxes: | ||||||||
| Product sales | ( | ) | ( | ) | ||||
| Royalties | ||||||||
| Products subtotal | ( | ) | ( | ) | ||||
| Rentals | ||||||||
| Total | $ | ( | ) | $ | ( | ) | ||
At September 30, 2025, all of our assets were used in the Products and unallocated segments.
Revenue, gross profit and segment expenses for the three months ended September 30, 2025 are as follows. We have excluded our rentals segment and allocated all expenses to the products segment in the table below as the rentals segment is no longer relevant. Similarly, royalties are excluded as none of the expenses are attributable to royalties.
| Schedule of significant segment expenses | ||||||||
| Three Months Ended September 30, | ||||||||
| 2025 | 2024 | |||||||
| Product sales | $ | $ | ||||||
| Cost of sales | ( | ) | ( | ) | ||||
| Gross profit | ||||||||
| Less: research, development and sustaining engineering | ( | ) | ( | ) | ||||
| Sales and marketing | ( | ) | ( | ) | ||||
| General and administrative | ( | ) | ( | ) | ||||
| Interest income | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Operating (loss) before royalties and building rentals | ( | ) | ( | ) | ||||
| Royalties income | ||||||||
| Building rentals operating income (loss) | ( | ) | ||||||
| Operating (loss) before taxes | $ | ( | ) | $ | ( | ) | ||
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Revenue, gross profit and segment expenses for the nine months ended September 30, 2025 are as follows. We have excluded our rentals segment and allocated all expenses to the products segment in the table below as the rentals segment is immaterial and no longer relevant. Similarly, royalties are excluded as none of the expenses are attributable to royalties.
| Nine months Ended September 30, | ||||||||
| 2025 | 2024 | |||||||
| Product sales | $ | $ | ||||||
| Cost of sales | ( | ) | ( | ) | ||||
| Gross profit | ||||||||
| Less: research, development and sustaining engineering | ( | ) | ( | ) | ||||
| Sales and marketing | ( | ) | ( | ) | ||||
| General and administrative | ( | ) | ( | ) | ||||
| Interest income | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Operating loss before royalties and building rentals | ( | ) | ( | ) | ||||
| Royalties | ||||||||
| Building rentals operating income | ||||||||
| Operating (loss) before taxes | $ | ( | ) | $ | ( | ) | ||
The following sets forth domestic and international product sales for the three months ended September 30, 2025 and 2024.
| Schedule of domestic and international product | |||||||||
| Three Months Ended September 30, | |||||||||
| 2025 | 2024 | ||||||||
| Domestic | $ | $ | |||||||
| International | |||||||||
| Total | $ | $ | |||||||
The following sets forth domestic and international product sales for the nine months ended September 30, 2025 and 2024.
| Nine months Ended September 30, | ||||||||
| 2025 | 2024 | |||||||
| Domestic | $ | $ | ||||||
| International | ||||||||
| Total | $ | $ | ||||||
Our purchases of assets for the above products segment for the nine months ended September 30, 2025 and September 30, 2024 were as follows.
| Schedule of products segment | ||||||||
| 2025 | 2024 | |||||||
| Property, plant and equipment | $ | $ | ||||||
| Research and development equipment, software and space modifications | ||||||||
| Office equipment, software and space modifications | ||||||||
| Sales and marketing equipment and space modifications | ||||||||
| Research and development equipment, software and space modifications not in service | ||||||||
| Patent filing cost | ||||||||
| Total | $ | $ | ||||||
At
September 30, 2025, all of our assets were used in the Products and unallocated segments as the lease in place at June 30, 2025 expired
for our Rentals segment and was not renewed. At December 31, 2024, $
The following is the disaggregation of revenue into broad categories, which we have defined as shown below for the three months ended September 30, 2025 and September 30, 2024.
| Schedule of disaggregation | ||||||||
| Product sales: | 2025 | 2024 | ||||||
| Product sales and supplies | $ | $ | ||||||
| Training and certification | ||||||||
| Service plans and equipment rental | ||||||||
| Product sales subtotal | ||||||||
| Royalties | ||||||||
| Rental income | ||||||||
| Total revenues | $ | $ | ||||||
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The following is the disaggregation of revenue into broad categories, which we have defined as shown below for the nine months ended September 30, 2025 and September 30, 2024.
| Product sales: | 2025 | 2024 | ||||||
| Product sales and supplies | $ | $ | ||||||
| Training and certification | ||||||||
| Service plans and equipment rental | ||||||||
| Product sales subtotal | ||||||||
| Royalties | ||||||||
| Rental income | ||||||||
| Total revenues | $ | $ | ||||||
9. SUBSEQUENT EVENTS
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”) will 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 will 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.
Consummation of the Merger is subject to customary closing conditions, including approval of ELST’s shareholders, effectiveness of the Company’s registration statement on Form S-4 covering the shares to be issued under the Merger Agreement, and receipt of any required regulatory approvals. The Merger Agreement contains customary representations, warranties, covenants, termination rights, and conditions.
The foregoing description of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger Agreement, which is filed as Exhibit 2.1 to our Current Report on Form 8-K filed on October 15, 2025.
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 registration statement remains subject to review by the Securities and Exchange Commission and has not yet been declared effective.
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of our financial condition and results of operations, and should be read in conjunction with our financial statements and the related notes included elsewhere in this Form 10-Q. Certain statements contained in this section are not historical facts, including statements about our strategies and expectations about new and existing products, market demand, acceptance of new and existing products, technologies and opportunities, market and industry segment growth, and return on investments in products and markets. These statements are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"), and we intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in these statutes. You can identify forward-looking statements by the use of forward-looking terminology such as "believes," "expects," "may," "will," "should," "seeks," "intends," "plans" or "anticipates" or the negative of these words and phrases or similar words or phrases that are predictions of or indicate future events or trends and that do not relate solely to historical matters. Such statements involve substantial risks and uncertainties that may cause actual results to differ materially from those indicated by the forward-looking statements. All forward-looking statements in this section are based on information available to us on the date of this document, and we assume no obligation to update such forward looking statements. Readers of this Form 10-Q are strongly encouraged to review the section titled "Risk Factors" in our December 31, 2024 Form 10-K.
Overview
Lifeloc Technologies, Inc., a Colorado corporation ("Lifeloc" or the "Company"), is a leading developer, manufacturer and marketer of portable hand-held and fixed station breathalyzers, now focused on expanding our offerings into technologies for the detection of drugs of abuse.
We began our alcohol breath testing product line in 1989 with the PBA3000, later replaced by the Phoenix® Classic in 1998, and subsequently by the FC Series and Workplace Series. Our FC Series, launched in 2001, is designed for domestic and international law enforcement and corrections markets and is approved by the U.S. Department of Transportation (DOT) for evidential use. Our Workplace Series, including the EV30 and Phoenix® 6.0 released in 2005 and 2006, also received DOT approval for federally regulated workplace testing. We have since introduced a range of innovations such as Bluetooth connectivity, passive screening devices like the FC5 and Sentinel™ stations, and the EASYCAL® automatic calibration systems.
We compete in all major segments of the portable breath alcohol testing instrument market, including law enforcement, workplace, corrections, and original equipment manufacturing ("OEM") markets. In addition, we offer a line of supplies, accessories, services, and training to support customers' alcohol testing programs. We sell globally through distributors as well as directly to users.
In 2016, we obtained exclusive rights to develop and commercialize Sandia National Laboratories’ patented SpinDx™ technology for drugs of abuse. Lifeloc has adapted this technology platform which uses centrifugal disk and microfluidics technology to enable rapid, on-site, and cost-effective drug testing capable of detecting trace levels of potent substances such as fentanyl, cocaine, and delta-9-THC from extremely small (microliter-level) samples. After initial delays related to the COVID-19 pandemic, development has advanced significantly, and in 2024 we filed our first utility patent application covering improvements to the core system. While Sandia retains ownership of the foundational patents, patentable enhancements are the property of Lifeloc. We are commercializing this as the SpinDetect™ Centrifugal Drug Analyzer.
The SpinDetect™ analyzer is designed to address key limitations in existing drug-testing methods. Its ability to resolve psychoactive delta-9-THC from inactive metabolites supports more accurate assessments of recent use and potential impairment - an important differentiator in marijuana testing, where other devices may yield false positives from non-impairing compounds. We intend to introduce the system in stages, starting with a saliva-based product, and later expanding to blood and breath sample capabilities, the latter integrated with our LX9 breathalyzer to support a future marijuana breathalyzer solution. Beta testing with human subjects is scheduled in partnership with University of Colorado Anschutz Medical Campus, with commercial launch targeted for 2026.
The platform can be adapted to detect a wide range of substances, and we are actively negotiating an expansion of our license to include applications beyond current drug-testing markets. Potential future applications include the detection of biological hazards such as listeria and salmonella.
We place strong emphasis on high-quality training as a key component of our testing business. Initially offering in-person instruction through Master Trainers, we expanded into online modules, webcam-based training, and in 2011 launched Lifeloc University, a learning management system (LMS) that was later enhanced for mobile use and regulatory updates. Our 2014 acquisition of Superior Training Solutions (STS) added further online training assets and customers that were contributed to Lifeloc University, which now serves as our unified, modern training platform.
We own our corporate headquarters in Wheat Ridge, Colorado, occupying all of the space ourselves. We leased a portion of the space to a third party until our tenant’s lease expired in June 2025. We now expect to expand into the full space. Additionally, we continue to pursue acquisitions aligned with our mission to deliver near and remote sensing and monitoring solutions, aiming to strengthen own position in existing markets and facilitate entry into new ones.
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Outlook
Installed Base of Breathalyzers. We believe the installed base of our breathalyzers will increase as the inherent risks associated with drinking while driving or while working in safety sensitive jobs become more widely acknowledged and as our network of distributors and our direct sales force grows. We believe that increased marketing efforts, the introduction of new products and the expansion of our sales network may provide the basis for increased sales and continuing profitable operations. However, these measures, or any others that we may adopt or determine not to adopt, may not result in either increased sales or continuing profitable operations.
Possibility of Operating Losses. Over many of the past several years we have operated profitably; however, prior to that, and in 2021 through 2024, we incurred operating losses. Those operating losses are continuing in 2025 and we expect them to continue as we continue to work toward the commercialization of SpinDetect™. There is no assurance that we will not incur operating losses in any given quarter or year in the future.
Sales Growth. We expect to increase sales in the U.S. and worldwide as our network of direct customers and distributors grows and becomes more proficient and expands the number of new accounts. Our growth efforts have focused on expanding our global reach and broadening our product offering in alcohol and drug detection. Orders for all of our products, particularly ignition interlock components, are on an intermittent purchase order basis and there is no assurance they will continue at any given rate, or that orders will repeat.
Sales and Marketing Expenses. We continue our efforts to expand our domestic and international distribution capability, and we believe that sales and marketing expenses will need to be maintained at a healthy level in order to do so. Sales and marketing expenses are expected to increase as we increase our direct sales representatives and marketing efforts.
Research and Development Expenses. During the third quarter of 2025, the Company incurred material research, development, and demonstration costs related to its SpinDetect™ centrifugal drug-analysis system, including prototype production and initial customer demonstration activities. These expenditures represent a significant investment in the Company’s future product pipeline. We expect to maintain our research and development expenses through 2025, and to begin to reduce them as we complete development of our new product line.
Results of Operations
For the three months ended September 30, 2025 compared to the three months ended September 30, 2024.
Supply chain problems caused by Covid-19, as well as the other market impacts of Covid-19, were mostly resolved by the end of 2024, and the perceived need to monitor for the presence of alcohol reverted back to the level experienced previously. We maintained our reduced costs at their 2024 levels where possible, although inflation took its toll, increasing the cost of raw materials, labor, and freight. We continued and intensified our new product development efforts while maintaining the high level of customer service that has led to an excellent reputation for outstanding customer service. With the introduction of new products, we believe Lifeloc will again be profitable.
Net sales.
Our product sales for the three months ended September 30, 2025 were $2,241,331, an increase of 8% from $2,075,994 for the same period a year ago. This increase results from the several larger orders in the current period that may have reflected winning additional states’ law enforcement endorsements. When royalties of $16,117 are included, total revenues of $2,257,448 increased by $170,122, or 8%, for the three months ended September 30, 2025 when compared to the same three months a year ago. Royalties increased as a result of our royalty-paying customers selling more products in the current period vs. the same period a year ago. Rental income decreased by $8,316 as a result of the expiration on June 30, 2025 of the one remaining lease that was not renewed.
Gross profit.
Despite higher product sales, total gross profit for the three months ended September 30, 2025 of $906,693 represented a decrease of $5,259 (1%) from total gross profit of $911,952 for the three months ended September 30, 2024, primarily as a result of inflationary pressures and tariffs. Cost of product sales increased from $1,164,947 in the three months ended September 30, 2024 to $1,350,755 in the same period in 2025, an increase of $185,785 (16%). As a result, gross profit margin on products decreased from 44% in the 3 months ended September 30, 2024 to 40% in the same period in 2025.
Research, development and sustaining engineering expenses.
Research, development and sustaining engineering expenses continued at the high level of $458,747, or 20% of product sales, for the three months ended September 30, 2025, representing a decrease of $12% over the $521,107 in the same period a year ago. This decrease is primarily due to timing of services from outside contractors needed for continuing design work related to SpinDetect™.
Sales and marketing expenses.
Sales and marketing expenses of $341,567 for the three months ended September 30, 2025 were up by $11,851 (or 4%) from the $329,716 spent in the same period a year ago as a result of lower trade show and travel expenses.
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General and administrative expenses.
General and administrative expenses of $340,705 for the three months ended September 30, 2025 versus $269,450 for the three months ended September 30, 2024 were higher by $71,255 (26%) as a result of across the board cost increases, including professional fees, insurances, and others.
Other income (expense).
Interest income decreased from $9,525 a year ago to $7,840 in 2025 as a result of less funds available at the beginning of the period. Interest expense of $36,953 in the three months ended September 30, 2025 was up from $10,019 in the previous year as a result of the increase in subordinated debentures outstanding in the 2025 quarter vs. none in the same quarter a year ago. The total increase of $28,619 from $494 of other expense (net) in the period ended September 30, 2024 to total other expense (net) of $29,113 in the current quarter is expected to continue in future quarters due to the increase in borrowings.
Net income (loss).
We realized a net (loss) of ($263,439) for the three months ended September 30, 2025 compared to a net (loss) of ($158,327) for the three months ended September 30, 2024. This increase of $105,112 (66%) was the result of the changes in gross profit, operating expenses and other income and expense discussed above, which resulted in a (loss) before taxes of ($263,439) or an increase of $54,624 from the (loss) before taxes of ($208,815) in 2024. The benefit from taxes in the three months ended September 30, 2025 was $0 versus a benefit from taxes of $50,488 in the same period a year ago as a result of increasing the valuation allowance in the three months ended September 30, 2024 and no increase in the three months ended September 30, 2025.
For the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024.
As was the case for the three months ended September 30, supply chain problems caused by Covid-19, as well as the other market impacts of Covid-19, were mostly resolved by the end of 2024, and the perceived need to monitor for the presence of alcohol reverted back to the level experienced previously. We increased prices and maintained our reduced costs at their 2024 levels where possible, although inflation and tariffs took their 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 nine months ended September 30, 2025 were $6,695,638, an increase of $114,777 or 2% from $6,580,861 for the same period a year ago. This increase results from several larger orders in the current period that may have reflected customers’ increased availability of funds in the current period. In addition, the continuing inflationary outlook on customers’ budgets may also have played a role. When royalties of $41,588 and rental income of $16,632 are included, total revenues of $6,753,858 increased by $125,759, or 2%, for the nine months ended September 30, 2025 when compared to the same nine months a year ago. Royalties increased as a result of our royalty-paying customers selling more products in the current period vs. the same period a year ago. Rental income decreased by $7,830 and was discontinued entirely on June 30, 2025 as a result of the expiration of the one remaining lease that was not renewed.
Gross profit.
Total gross profit for the nine months ended September 30, 2025 of $2,739,858 represented little change from total gross profit of $2,740,855 for the nine months ended September 30, 2024. Cost of product sales for the nine months ended September 30, 2025 was $4,004,894 vs. $3,869,977, an increase of $134,917 as a result of higher product sales. Gross profit margin on products in the nine months ending September 30, 2025 was 40%, down from 41% for the same period in 2024.
Research, development and sustaining engineering expenses.
Research, development and sustaining engineering expenses were $1,551,689 for the nine months ended September 30, 2025, a decrease of $187,293 (11%) from the $1,738,982 in the same nine months ended September 30, 2024. This decrease results primarily from timing of services from outside contractors and is expected to again increase in the remainder of 2025.
Sales and marketing expenses.
Sales and marketing expenses of $1,015,651 for the nine months ended September 30, 2025 were down by $24,448 (or 2%) from the $1,040,099 spent in the same period a year ago as a result primarily of lower trade show and travel expenses.
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General and administrative expenses.
General and administrative expenses of $1,065,657 for the nine months ended September 30, 2025 versus $947,384 for the nine months ended September 30, 2024 were higher by $118,273 (13%) as a result of various increased expenses.
Other income (expense).
Interest income decreased from $35,874 a year ago to $31,128 in 2025 as a result of less funds available at the beginning of the period. Interest expense of $87,753 in the nine months ended September 30, 2025 was up from $30,226 in the previous year as a result of the increase in subordinated debentures outstanding in 2025 vs. none in the same period a year ago. The total decrease of $62,273 in other expense (net) in the period ended September 30, 2025 vs. the same nine months a year ago is expected to continue for the rest of 2025 due to the increase in borrowings.
Net income (loss).
We realized a net (loss) of $949,764) for the nine months ended September 30, 2025 compared to a net (loss) of ($740,121) for the nine months ended September 30, 2024. This increase of $209,643 (28%) was the result of the changes in gross profit, operating expenses and other income and expense discussed above, which resulted in a (loss) before taxes of ($949,764) or a decrease of $30,198 from the (loss) before taxes of ($979,962) in 2024. The benefit from taxes in the nine months ended September 30, 2025 was $0 versus a benefit from taxes of $239,841 in the same period a year ago as a result of increasing the valuation allowance in the nine months ended September 30, 2024 and no increase in the nine months ended September 30, 2025.
Trends and Uncertainties That May Affect Future Results
Revenues in the three months ended September 30, 2025 were higher compared to revenues during the same period in 2024. For the nine months ended September 30, 2025, revenues were similar to revenues for the same nine months in 2024. We believe that continued increased sales efforts, together with the expected availability of SpinDetect™ for sale in 2026 may result in improved revenues in 2026 and beyond. Revenues for the rest of 2025 may be similar to revenues in 2024. Inflationary pressures and tariffs have affected our business in a number of ways, including increasing the cost of raw materials, labor, and freight. Our actions to mitigate the impact of inflation, including pre-ordering components in higher than usual quantities, sourcing new vendors and increasing prices have been moderately successful.
We expect our quarter-to-quarter revenue fluctuations to continue, due to the unpredictable timing of large orders from customers and the size of those orders in relation to total revenues. Going forward, we intend to focus our development efforts on products we believe offer the best prospects to increase our intermediate and near-term revenues, with particular emphasis on completing SpinDetect™.
Our operating plan for the remainder of 2025 is focused on growing sales, increasing gross profits, and continuing research and development efforts on new products, including SpinDetect™, for long-term growth. We cannot predict with certainty the expected sales, gross profit, net income or loss, or usage of cash and cash equivalents for 2025. However, we believe that cash resources will be sufficient to fund our operations for the next twelve months under our current operating plan, although we are seeking additional financing. If we are unable to manage the business operations in line with our budget expectations, it could have a material adverse effect on business viability, financial position, results of operations and cash flows. Further, if we are not successful in regaining profitability and remaining at least cash flow break-even, additional borrowings or capital may be required to maintain ongoing operations.
Interest expense.
In connection with the financing of our building purchase on October 31, 2014 we obtained a 10-year term loan from Bank of America in an initial principal amount of $1,581,106 bearing interest at 4.45% per annum (which was decreased to 4% in 2016) and secured by a first-priority mortgage in the acquired property. The Bank of America loan was paid on September 30, 2021 with proceeds from a new term loan from Citywide Banks, also secured by a first-priority mortgage on the property, in the principal amount of $1,350,000. The new loan is payable in monthly installments of $7,453, with interest at 2.95% and a maturity date of September 30, 2031.
On December 31, 2024 we issued an unsecured $750,000 subordinated debenture bearing interest at 8.25%, including 62,500 warrants exercisable on or before December 31, 2030 into 62,500 shares of our common stock at a price of $4.50 per share. On March 1, 2025 we issued an unsecured $75,000 subordinated debenture bearing interest at 8.25%, including 6,250 warrants exercisable on or before December 31, 2030 into 6,250 shares of our common stock at a price of $4.50 per share. Using the Black Scholes model, the fair market value of these warrants resulted in deferred financing cost of $132,000, which is included in our balance sheet at September 30, 2025 at $115,800 after amortization in the nine months ending September 30, 2025 of 16,200, and which resulted in an increase to capital of $120,000 on December 31, 2024 and $12,000 on March 1, 2025. In addition to the stated interest of 8.25%, this deferred financing cost represents a charge against income of $5,514 per quarter starting in the second quarter of 2025. The interest of 8.25% will be paid in quarterly increments in 2025, and will be included in monthly payments of $10,119 including principal, starting in 2026.
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Liquidity and Capital Resources
We compete in a highly technical, very competitive and, in most cases, price driven alcohol testing marketplace, where products can take years to develop and introduce to distributors and end users. Furthermore, manufacturing, marketing and distribution activities are regulated by the DOT and other regulatory bodies that, while intended to enhance the ultimate quality and functionality of products produced, can contribute to the cost and time needed to maintain existing products and develop and introduce new products.
Except for normal operating contractual commitments and purchase orders, we do not have any material contractual commitments requiring settlement in the future.
We have traditionally funded working capital needs through product sales and close management of working capital components of our business. Historically, we have also received cash from private offerings of our common stock, warrants to purchase shares of our common stock, and notes. In July, 2024 we completed a private placement of 210,000 shares of our common stock at $3.80 per share for a total raise of $798,000 with a related party. On December 31, 2024, we completed the issuance of a six-year subordinated debenture for $750,000 with a third party. On March 1, 2025, we completed the issuance of a 70-month subordinated debenture for $75,000 with a third party. We are seeking additional financing, which, if not secured, is likely to result in delay in releasing SpinDetect™ to the market. In our earlier years, we incurred quarter to quarter operating losses to develop current product applications, utilizing a number of proprietary and patent-pending technologies. Although we have been profitable in recent years except 2020, 2022, 2024 and in 2025, we can provide no assurances that operating losses will not occur in the future. Should that situation arise, we may not be able to obtain working capital funds necessary in the time frame needed and at satisfactory terms, if at all.
As of September 30, 2025, cash and cash equivalents were $685,097, trade accounts receivable were $864,456 and current liabilities were $907,861 resulting in net liquid assets of $641,692. We believe that the diminishing of the Covid-19 pandemic, the resolution of supply chain issues, and the introduction of several new products during the last several years, along with new and on-going customer relationships will allow Lifeloc to operate profitably. If the revenue levels prior to 2020 do not continue to increase in a timely manner, if inflationary pressures are not contained, or if the development and market acceptance of SpinDetect™ takes longer than expected, we may be required to seek additional sources of capital and/or to implement further cost reduction measures, as necessary.
Equipment expenditures, consisting of SpinDetect™ related and other equipment, during the nine months ended September 30, 2025 were $350,156 compared to $625,238 for the same period in 2024, a decrease of $275,082. We incurred patent application costs of $21,708 in the nine months ended September 30, 2024 versus $0 in 2025. No expired or fully amortized patents were removed from our financial statements in 2025 or 2024. As development of SpinDetect progresses, and as normal wear and tear of equipment occurs, we expect to incur outlays for equipment and patent filings in 2026 and beyond.
Critical Accounting Policies and Estimates
Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.
We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. In general, management's estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.
Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, sales and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to bad debts, inventories, sales returns, deferred tax assets, warranty, contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies affect the more significant judgments and estimates used in the preparation of our financial statements.
We have concluded that we have two operating segments, including our primary business which is as a developer, manufacturer and marketer of portable hand-held breathalyzers and related accessories, supplies and education, and a second segment consisting of renting portions of our building to existing tenants.
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We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances would be required, which would increase our expenses during the periods in which any such allowances were made. The amount recorded as a provision for bad debts in each period is based upon our assessment of the likelihood that we will be paid on our outstanding receivables, based on customer-specific as well as general considerations. To the extent that our estimates prove to be too high, and we ultimately collect a receivable previously determined to be impaired, we may record a reversal of the provision in the period of such determination.
We reduce inventory for estimated obsolete or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required. Any write-downs of inventory would reduce our reported net income during the period in which such write-downs were applied.
Property and equipment are stated at cost, with depreciation computed over the estimated useful lives of the assets, generally five years (three years for software and technology licenses). We use the declining method of depreciation for property, including space modifications, and the straight-line method for software and technology licenses. We purchased all of the assets of STS, an online education company, in 2014, which consisted of training courses that were originally set to amortize over 15 years using the straight-line method, but in 2025 we are accelerating the amortization of the remaining cost to fully amortize the asset by December 31, 2025. In October 2014, we purchased our building. A majority of the cost of the building is depreciated over 39 years using the straight-line method. In addition, based on the results of a third-party analysis, a portion of the cost was allocated to components integral to the building. Such components are depreciated over 5 and 15 years, using the declining method.
Revenue from product sales and supplies is generally recorded when we ship the product and title has passed to the customer, or when agreed milestones are met in the case of product developments, provided that we have evidence of a customer arrangement and can conclude that collection is probable. The prices at which we sell our products are fixed and determinable at the time we accept a customer's order. We recognize revenue from sales to stocking distributors when there is no right of return, other than for normal warranty claims, and generally have no ongoing obligations related to product sales, except for normal warranty.
The sales of licenses to our training courses are recognized as revenue at the time of sale. Direct training performed by us is recognized when training is completed by the trainer, with the unearned portion classified as deferred revenue. Training and certification revenues are recognized at the time the training and certification occurs. Data recording revenue is recognized based on each day’s usage of enrolled devices.
Revenues arising from extended warranty contracts are booked as sales over their life on a straight-line basis. Occasionally, we rent used equipment to customers, and in those cases, we recognize the revenues as they are earned over the life of the contract.
Royalty income is recognized in accordance with agreed upon terms, when performance obligations are satisfied, the amount is fixed or determinable and collectability is reasonably assured.
Rental income from space leased to our tenants was recognized in the month in which it was due. The last remaining lease expired on June 30, 2025 and was not renewed.
On occasion we receive customer deposits for future product orders and for product development. Customer deposits are initially recorded as a liability and recognized as revenue when the product is shipped and title has passed to the customer, or in the case of product development, when agreed milestones are met.
Stock-based compensation is presented in accordance with the guidance of Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 718, Compensation — Stock Compensation ("ASC 718"). Under the provisions of ASC 718, companies are required to estimate the fair value of share-based payment awards made to employees and directors including employee stock options based on estimated fair values on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in our statement of operations.
ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, we are required to provide abbreviated market risk disclosures. Our primary market risk exposure is interest rate risk related to our variable and fixed-rate debt obligations. At September 30, 2025, we had outstanding debt of approximately $1.8 million consisting of a term loan with a fixed interest rate of 2.95% and subordinated debentures with a fixed interest rate of 8.25%. We manage this exposure by maintaining predominantly fixed-rate debt, which limits our exposure to interest rate fluctuations. There have been no significant changes in our primary market risk exposures or how they are managed compared to our most recently completed fiscal year ended December 31, 2024, other than the addition of $75,000 in subordinated debentures in March 2025.
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ITEM 4 – CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this Quarterly Report on Form 10-Q, our management has evaluated, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2025.
(b) Changes in Internal Control over Financial Reporting
There were no significant changes in our internal controls over financial reporting during the period ended September 30, 2025 that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Controls
A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. Our management, including our Chief Executive Officer and our Chief Financial Officer, do not expect that the Company's disclosure controls will prevent or detect all errors and all fraud. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with associated policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
PART II. OTHER INFORMATION
ITEM 1 – LEGAL PROCEEDINGS
We may be involved from time to time in litigation, negotiation and settlement matters that may have a material effect on our operations or finances. We are not aware of any pending or threatened litigation against us or our officers or directors in their capacity as such that could have a material impact on our operations or finances.
ITEM 1A – RISK FACTORS
In addition to the other information set forth in this report, you should carefully consider the factors discussed in ''Risk Factors'' in our Annual Report on Form 10-K for the year ended December 31, 2024, which could materially affect our business, financial condition and/or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
In February, 2025 options to purchase 88,500 shares of our common stock were exercised at a price of $3.80 per share for total proceeds of $336,300. Our president and CEO exercised 37,500 options, and 2 directors exercised 1,000 options each. EDCO Partners, LLLP, of which our CFO and board chairman is the general partner provided $132,240 to enable 19 option holders to exercise and simultaneously sell their shares to EDCO Partners, to be held on behalf of certain of its limited partners, including a third director and an entity controlled by our CFO and board chairman. The issuance of these shares was exempt from registration under Section 4(a)(2) of the Securities Act as a transaction not involving a public offering. The shares were issued to existing employees and directors of the Company who had sufficient access to information about the Company. No options were exercised during the three and nine months ended September 30, 2025.
On March 1, 2025, in connection with the issuance of a $75,000 subordinated debenture, the Company issued warrants to purchase 6,250 shares of common stock at an exercise price of $4.50 per share. These warrants were valued at $12,000 using the Black-Scholes valuation model. The issuance of these warrants was exempt from registration under Section 4(a)(2) of the Securities Act as a private placement to a sophisticated investor.
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There were no sales of equity securities during the three and nine months ended September 30, 2025.
The proceeds from the option exercises totaling $336,300 were used for general corporate purposes and working capital needs.
All securities issued were offered and sold in reliance upon exemptions from registration under the Securities Act. No underwriters were involved in the foregoing sales of securities, and no underwriting discounts or commissions were paid by the Company in connection with such sales. The recipients of securities in each transaction represented their intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were affixed to the share certificates and warrant agreements issued in such transactions.
ITEM 3 – DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 – MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5 – OTHER INFORMATION
During
the quarter ended September 30, 2025, no director or officer of the Company
On October 16, 2025, the Company filed Amendment No. 1 to its Registration Statement on Form S-4 in connection with its proposed merger with Electronic Systems Technology, Inc.
ITEM 6 – EXHIBITS
The following exhibits are filed with this report on Form 10-Q or are incorporated by reference:
| Exhibit No. | Description of Exhibit | |
| 2.1 | Agreement and Plan of Merger, dated October 9, 2025, by and among Lifeloc Technologies, Inc. and Electronic Systems Technology, Inc. (Incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K, as filed with the SEC on October 15, 2025) | |
| 31.1 | Certification of Principal Executive Officer Pursuant To Section 302 Of The Sarbanes—Oxley Act Of 2002 | |
| 31.2 | Certification of Principal Financial Officer Pursuant To Section 302 Of The Sarbanes—Oxley Act Of 2002 | |
| 32.1 | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 32.2 | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101.INS | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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SIGNATURES
Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| LIFELOC TECHNOLOGIES, INC. | |||
| November 12, 2025 | By: | /s/ Wayne R. Willkomm | |
| Date | Wayne R. Willkomm, Ph.D. | ||
President and Chief Executive Officer (Principal Executive Officer) |
|||
| November 12, 2025 | By: | /s/ Michelle Heim | |
| Date | Michelle Heim Controller (Principal Accounting Officer) |
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Exhibit Index
| Exhibit No. | Description of Exhibit | |
| 2.1 | Agreement and Plan of Merger, dated October 9, 2025, by and among Lifeloc Technologies, Inc. and Electronic Systems Technology, Inc. (Incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K, as filed with the SEC on October 15, 2025) | |
| 31.1 | Certification of Principal Executive Officer Pursuant To Section 302 Of The Sarbanes—Oxley Act Of 2002 | |
| 31.2 | Certification of Principal Financial Officer Pursuant To Section 302 Of The Sarbanes—Oxley Act Of 2002 | |
| 32.1 | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 32.2 | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101.INS | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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FAQ
What were Lifeloc (LCTC) Q3 2025 revenues and growth?
What was Lifeloc’s Q3 2025 profitability and EPS?
How did Lifeloc perform for the nine months ended September 30, 2025?
What is Lifeloc’s cash position and short‑term obligations?
How much debt does Lifeloc have and at what rates?
How many Lifeloc shares were outstanding?
What is the status of the ELST merger?
