Lifeloc Technologies Inc

Previous wording

Lifeloc Technologies, Inc., a Colorado corporation ("Lifeloc" or the "Company"), 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 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.

Current wording

Lifeloc Technologies, Inc., a Colorado corporation ("Lifeloc", "Company", “We”, “Us”, “Our”, “Them”), 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 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.

Previous wording

Possibility of Operating Losses. Over many of the past several years we have operated profitably; however, prior to that, and in 2021 through 2023, we incurred losses. There is no assurance that we will not incur losses in any given quarter or year in the future.

Current wording

Possibility of Operating Losses. Over many of the past several years we have operated profitably; however, prior to that, and in 2021 through 2023, we incurred losses. Those losses are continuing in 2024 and we expect them to continue in 2025 as we continue to work toward the commercialization of SpinDx. There is no assurance that we will not incur losses in any given quarter or year in the future.

Previous wording

In 2022 we purchased SpinDx related test and other equipment totaling $23,999, but made no similar expenditure in 2023. Our spending on SpinDx related test and other equipment so far in 2024 has been $41,858. We are optimistic about the results of the work to date and expect market introduction later in 2024 and commercialization in 2025. SpinDx™ uses a centrifugal disk with micro fluidic flow paths allowing multiple tests to be carried out on a single small sample. The SpinDx™ 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 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. 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. Resolving the psychoactive levels from metabolites is an important step in establishing impairment. We completed the upgrade of our base breathalyzer platform in 2019 (the LX9), and we remain committed to combining it with the SpinDx technology. If successful, this combination will result in a marijuana breathalyzer.

Current wording

In the first six months of 2024 we purchased SpinDx related test and other equipment totaling $64,249 and in 2023 $0. In addition, during the first six months of 2024 we invested $227,354 in space required for SpinDx related work that is not yet in service. We are estimating that completing and equipping this lab space will require an additional $300,000 during the last six months of 2024. We are optimistic about the results of the work to date and expect market introduction via beta testing later in 2024, which will continue in 2025, with a sales-ready device later 2025. SpinDx™ uses a centrifugal disk with micro fluidic flow paths allowing multiple tests to be carried out on a single small sample. The SpinDx™ 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 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. 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. Resolving the psychoactive levels from metabolites is an important step in establishing impairment. We expect the initial release of the new product will consist of the SpinDx base reader unit, an oral fluid collection device and an analysis disk. We expect subsequent product releases will utilize the same SpinDx base reader and collection devices for samples from blood and from breath. We completed the upgrade of our base breathalyzer platform in 2019 (the LX9), and we remain committed to combining it with the SpinDx technology. If successful, this combination will result in a marijuana breathalyzer.

Previous wording

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 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. We withdrew R.A.D.A.R. 200 from the market and have outsourced the development of R.A.D.A.R. 300 to a third party, which, if successful, will result in proof of concept showing that the above problem has been resolved. Although there is no assurance of market acceptance, widespread adoption of the R.A.D.A.R.® Mobile Devices may provide an alternative to, and thus lower, incarceration rates through better offender monitoring.

Current wording

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 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. We withdrew R.A.D.A.R. 200 from the market and outsourced the development of R.A.D.A.R. 300 to a third party but which is currently on hold as a result of focusing all of our effort on SpinDx.

Previous wording

Our product sales for the quarter ended March 31, 2024 were $2,134,434, relatively unchanged from $2,133,359 for the quarter ended March 31, 2023. When royalties of $10,936 and rental income of $8,073 are included, total revenues of $2,153,443 were also similar to the same quarter a year ago. Rental income decreased by $14,916 due to our election not to renew or replace a lease for a portion of the space formerly occupied by a tenant, and royalties increased by $2,730 due to an increase in sales by royalty-paying customers.

Current wording

Our product sales for the quarter ended June 30, 2024 were $2,370,433, an increase of $124,026 (6%) from $2,246,407 for the quarter ended June 30, 2023. When royalties of $8,824 and rental income of $8,073 are included, total revenues of $2,387,330 were up by $106,984 over the same quarter a year ago. Rental income decreased by $15,716 due to our election not to renew or replace a lease for a portion of the space formerly occupied by a tenant, and royalties decreased by $1,326 due to a decrease in sales by royalty-paying customers.

Previous wording

Gross profit for the 3 months ended March 31, 2024 of $835,307 represented a decrease of 11% from total gross profit of $935,427 for the same three months ended March 31, 2023, primarily as a result of increased cost of materials and labor resulting from inflation, offset in part by increased royalties in 2024. Cost of product sales increased from $1,223,895 in the 3 months ended March 31, 2023 to $1,315,079 in the same period in 2024, an increase of $91,184 (10%). Gross profit margin on products decreased to 38.4% in the quarter ended March 31, 2024 from 42.6% in the same period a year ago primarily as a result of the increase in costs.

Current wording

Total gross profit for the three months ended June 30, 2024 of $993,596 represented a decrease of 5% from total gross profit of $1,042,444 for the same six months ended June 30, 2023, primarily as a result of increased cost of materials and labor resulting from inflation, augmented in part by decreased royalties in 2024. Cost of product sales increased from $1,233,070 in the three months ended June 30, 2023 to $1,389,951 in the same period in 2024, an increase of $156,881 (13%). Gross profit margin on products decreased to 41.4% in the quarter ended June 30, 2024 from 45.1% in the same period a year ago primarily as a result of the increase in costs.

Previous wording

Research and development expenses were $555,599 for the quarter ended March 31, 2024 representing an increase of $158,833 (40%) over the $396,766 in the same period a year ago. This increase resulted primarily from additional personnel, materials and outside contractors needed for our dedication of resources to SpinDx.

Current wording

Research and development expenses were $662,276 for the quarter ended June 30, 2024 representing an increase of $266,495 (67%) over the $395,781 in the same period a year ago. This increase resulted primarily from additional personnel, materials and outside contractors needed for our dedication of resources to SpinDx.

Previous wording

Sales and marketing expenses of $345,009 for the 3 months ended March 31, 2024 were up by $57,126 (or 20%) from the $287,883 spent in the same period a year ago, as a result of expanded marketing efforts, including the additional of personnel.

Current wording

Sales and marketing expenses of $365,374 for the 3 months ended June 30, 2024 were up by $65,299 (or 22%) from the $300,075 spent in the same period a year ago, as a result of expanded marketing efforts, including the additional of personnel.

Previous wording

Interest income increased from $9,800 a year ago to $17,672 in 2024, as a result of higher yield availability. Interest expense of $10,150 in the 3 months ended March 31, 2024 was down from $10,535 in the previous year as a result of the paydown on our loan on our building. The total increase as a result of the above items in the quarter ended March 31, 2024 was $8,257, or 11%.

Current wording

Interest income decreased from $19,200 in the three months a year ago to $8,677 in the three months in 2024, as a result of lower funds availability. Interest expense of $10,057 in the 3 months ended June 30, 2024 was down from $10,290 in the previous year as a result of the paydown on our loan on our building.

Previous wording

We realized a net loss of $283,806 for the 3 months ended March 31, 2024 compared to a net loss of $53,788 for the quarter ended March 31, 2023. This increase of $230,018 was the result of the changes in gross profit, operating expenses and other income discussed above, which resulted in a loss before taxes of $372,705, or an increase of $303,733 from the loss before taxes of $68,972 in 2023. After the benefit from taxes of $88,899 (versus a benefit from taxes of $15,184 a year ago), we realized a net loss of $283,806 compared to a net loss of $53,788 in 2023.

Current wording

We realized a net loss of $581,794 for the 6 months ended June 30, 2024 compared to net income of $1,357 for the same 6 months ended June 30, 2023. This increased loss of $583,151 was the result of the changes in gross profit, operating expenses and other income discussed above, which resulted in a loss before taxes of $771,147, or an increased loss of $773,557 from the profit before taxes of $2,410 in 2023. After the benefit from taxes of $189,353 (versus taxes of $1,053 a year ago), we realized a net loss of $581,794 compared to a net profit of $1,357 in 2023.

Previous wording

Our 2024 operating plan is focused on growing sales, increasing gross profits, and increasing research and development efforts on new products, including SpinDx™, for long-term growth. We cannot predict with certainty the expected sales, gross profit, net income or loss, or usage of cash and cash equivalents for 2024. 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 sustaining profitability and remaining at least cash flow break-even, additional capital may be required to maintain ongoing operations.

Current wording

Our operating plan for the second half of 2024 is focused on growing sales, increasing gross profits, and increasing research and development efforts on new products, including SpinDx™, for long-term growth. We cannot predict with certainty the expected sales, gross profit, net income or loss, or usage of cash and cash equivalents for 2024. 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 sustaining profitability and remaining at least cash flow break-even, additional capital may be required to maintain ongoing operations.

Previous wording

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.

Current wording

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. In July 2024, we obtained a new $750,000 line of credit from Citiwide Banks with a maturity date of one year and a variable interest rate determined by SOFR (Secured Overnight Rate Financing) plus 2.75% payable monthly.

Previous wording

Except for normal operating contractual commitments and purchase orders, we do not have any material contractual commitments requiring settlement in the future. See "Note 5 – Commitments and Contingencies" to our Financial Statements in Part II - Item 8.

Current wording

Except for normal operating contractual commitments and purchase orders, we do not have any material contractual commitments requiring settlement in the future.

Previous wording

As of March 31, 2024, cash and cash equivalents was $1,031,540, trade accounts receivable were $756,907 and current liabilities were $1,084,860 resulting in net liquid assets of $703,587. We believe that the resolution of supply chain issues and the Covid-19 pandemic, 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 during the last several years do not continue to recover in a timely manner, if inflationary pressures are not contained, or if the development of SpinDx takes longer than expected, we may be required to seek additional sources of capital and/or to implement further cost reduction measures, as necessary.

Current wording

As of June 30, 2024, cash and cash equivalents was $504,642, trade accounts receivable were $831,501 and current liabilities were $1,081,693 resulting in net liquid assets of $254,450. We believe that the resolution of supply chain issues and the Covid-19 pandemic, 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 during the last several years do not continue to grow, if inflationary pressures are not contained, or if the development of SpinDx takes longer than expected, we may be required to seek additional sources of capital and/or to implement further cost reduction measures, as necessary.

Previous wording

Equipment expenditures, consisting of updated office equipment and SpinDx related equipment, during Q1 of 2024 were $58,430 compared to $0 in Q1 of 2023, an increase of $58,430. We incurred patent application costs in preparation for filing of $21,708 in 2024 versus $1,404 in 2023. As development of SpinDx progresses, and as normal wear and tear of equipment occurs, we expect to continue to incur outlays for equipment and patent filings in 2024 and beyond.

Current wording

Equipment expenditures, consisting of updated office and production equipment, and SpinDx related equipment, during the first six months of 2024 were $263,937 compared to $14,811 in the first six months of 2023, an increase of $249,126. We incurred patent application costs in preparation for filing of $21,708 in 2024 versus $1,404 in 2023. In addition, during the first six months of 2024 we invested $227,354 in lab space required for SpinDx related work that is not yet in service. We are estimating that completing and equipping this lab space will require an additional $300,000 during the last six months of 2024. As development of SpinDx progresses, and as normal wear and tear of equipment occurs, we expect to continue to incur outlays for equipment and patent filings in 2024 and beyond.