Lifeloc Technologies, Inc

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 2024, we incurred operating losses. There is no assurance that we will not incur losses in any given quarter or year in the future.

Previous wording

In 2023 we purchased SpinDx related test and other equipment totaling $0 and in 2022 $23,999. 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 2024 we purchased SpinDx related test and other equipment totaling $667,738, compared with $0 spent in 2023. We are optimistic about the results of the work to date and expect market introduction via extensive beta testing and validation through 2025 and commercialization in 2026. 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.

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 in 2022 as R.A.D.A.R. 200. This product met with little market acceptance as a result of the underperformance of one feature, generating nominal revenue in 2022 and none in subsequent years. In 2023, we outsourced the development of R.A.D.A.R. 300 to a third party, but that effort is currently on hold as a result of focusing all of our effort on SpinDx.

Previous wording

Our product sales for the year ended December 31, 2023 were $9,228,843, an increase of 11% from $8,350,463 for the same period a year ago. This increase is primarily attributable to price increases and satisfying pent up demand. When royalties of $32,299 and rental income of $68,424 are included, total revenues of $9,329,566 increased by $847,573, or 10%, for the year ended December 31, 2023 when compared to the same 12 months a year ago. Rental income decreased by $22,432 due to electing not to renew or replace a lease for a portion of the space formerly occupied by a tenant, and royalties decreased by $8,375 due to a decrease in sales by royalty-paying customers.

Current wording

Our product sales for the year ended December 31, 2024 were $8,470,985, a decrease of 8% from $9,228,843 for the same period a year ago. This decrease is primarily attributable to having satisfied pent up demand in later 2023 and the first part of 2024. In addition, inflationary pressures on customers’ budgets also played a role. When royalties of $34,382 and rental income of $32,778 are included, total revenues of $8,538,145 decreased by $791,421, or 9%, for the year ended December 31, 2024 when compared to the same 12 months a year ago. Rental income decreased by $35,646 due to electing not to renew or replace a lease for a portion of the space formerly occupied by a tenant, and royalties increased by $2,083 due to an increase in sales by royalty-paying customers.

Previous wording

Gross profit for the year ended December 31, 2023 of $4,039,670 represented an increase of 31% from total gross profit of $3,074,951 for the year ended December 31, 2022, primarily as a result of recognizing a shorter life for the RADAR assets in 2022 vs. none in 2023, offset in part by decreased royalties in 2023. Cost of product sales decreased from $5,352,862 in the year ended December 31, 2022 to $5,260,338 in the same period in 2023, a decrease of $92,524 (2%). Gross profit margin on products increased to 43% in the year ended December 31, 2023 from 35.9% in the year ended December 31, 2022 primarily as a result of the decrease in costs.

Current wording

Gross profit for the year ended December 31, 2024 of $3,446,099 represented a decrease of 15% from total gross profit of $4,039,670 for the year ended December 31, 2023, primarily as a result of lower product sales and rental income, and the inflationary effect on costs. Cost of product sales decreased from $5,260,338 in the year ended December 31, 2023 to $5,066,779 in the same period in 2024, a decrease of $193,559 (4%). Gross profit margin on products decreased to 40% in the year ended December 31, 2024 from 43% in the year ended December 31, 2023 primarily as a result of the sales mix.

Previous wording

Research and development expenses were $1,835,164 for the year ended December 31, 2023, representing an increase of $449,237 (32%) over the $1,385,927 in the same period a year ago. This increase resulted primarily from the addition of personnel, materials and outside contractors needed for our dedication of resources to SpinDx.

Current wording

Research, development and sustaining engineering expenses continued at the high level of $2,242,869 for the year ended December 31, 2024, representing an increase of $407,705 (22%) over the $1,835,164 in the same period a year ago. This increase resulted primarily from the addition of personnel, materials and outside contractors needed for our dedication of resources to SpinDx™. In 2025 we expect to pay $487,300 to a third party contractor for additional work required to complete a portion of the SpinDx development.

Previous wording

Sales and marketing expenses of $1,225,381 for the year ended December 31, 2023 were up by $102,855 (or 9%) from the $1,122,526 spent in the same period a year ago as a result of expanded marketing efforts, including attending trade shows following the decline of the pandemic and resolution of supply chain issues.

Current wording

Sales and marketing expenses of $1,358,211 for the year ended December 31, 2024 were up by $132,830 (or 11%) from the $1,225,381 spent in the same period a year ago as a result of expanded marketing efforts, including attending trade shows and additional personnel following the decline of the pandemic and resolution of supply chain issues.

Previous wording

General and administrative expenses of $1,170,260 for the year ended December 31, 2023 versus $1,216,843 for the year ended December 31, 2022 were relatively unchanged as the decrease of $46,583 represented a decrease of 4% from a year ago.

Current wording

General and administrative expenses of $1,253,236 for the year ended December 31, 2024 versus $1,170,260 for the year ended December 31, 2023 were higher by $82,976 (7%) as a result of the effects of inflation.

Previous wording

We had an employee retention credit of $107,575 in the year ended December 31, 2022 vs. none in the year ended December 31, 2023. Interest income increased from $13,114 a year ago to $70,062 in 2023, as a result of higher yield availability. Interest expense of $41,566 in the year ended December 31, 2023 was down from $43,081 in the previous year as a result of the decrease in the interest rate on our new loan on our building. The total decrease as a result of the above items in the year ended December 31, 2023 was $58,463, or 75%, for the year ended December 31, 2022.

Current wording

Interest income decreased from $70,062 a year ago to $42,867 in 2024 as a result of less funds available. Interest expense of $40,145 in the year ended December 31, 2024 was down slightly from $41,566 in the previous year as a result of the decrease in the interest rate on our new loan on our building. The total decrease as a result of the above items in the year ended December 31, 2024 was $25,774, or 90%, from the year ended December 31, 2023.

Previous wording

We realized net income of $205,614 for the year ended December 31, 2023 compared to a net loss of $455,757 for the year ended December 31, 2022. This increase of $661,371 was the result of the changes in gross profit, operating expenses and other income discussed above, which resulted in a loss before taxes of $162,639, or a decrease of $410,098 from the loss before taxes of $572,737 in 2022. After the benefit from taxes of $368,253 (versus a benefit from taxes of $116,980 a year ago), we realized net income of $205,614 compared to a net loss of $455,757 in 2022. This increased tax benefit resulted from capitalizing qualified research expenses of $1,744,892 in 2023 vs. $1,052,849 in 2022, which resulted in part in an increase in our deferred tax asset from $321,429 at December 31, 2022 to $806,652 at December 31, 2023, or $485,223 for the year ended December 31, 2023.

Current wording

We realized a net loss of $1,052,948 for the year ended December 31, 2024 compared to net income of $205,614 for the year ended December 31, 2023. This decrease of $1,258,562 was the result of the changes in gross profit, operating expenses and other income discussed above, which resulted in a loss before taxes of $1,405,495 or a decrease of $1,242,856 from the loss before taxes of $162,639 in 2023. After the benefit from taxes of $352,547 (versus a benefit from taxes of $368,253 a year ago), we realized a net loss of $(1,052,948) compared to a net income of $205,614 in 2023. The benefit from taxes of $352,547 resulted in an increase to our deferred tax asset from $806,652 at December 31, 2023 to $1,159,199 at December 31, 2024.

Previous wording

Revenues in the year 2023 were higher compared to revenues in 2022. We believe that the anticipated slowdown of the pandemic, along with continued increased sales efforts, may result in improved revenues in 2024 and beyond. Inflationary pressures have affected our business in a number of ways, including increasing the cost of raw materials, labor, and freight. Our actions to mitigate the impact of inflation, including pre-ordering components in higher than usual quantities, sourcing new vendors and increasing prices have been somewhat successful.

Current wording

Revenues in the year 2024 were lower compared to revenues in 2023. We believe that continued increased sales efforts, together with the expected availability of SpinDx™ for sale in 2026 may result in improved revenues in 2026 and beyond. Revenues in 2025 may be similar to revenues in 2024. Inflationary pressures have affected our business in a number of ways, including increasing the cost of raw materials, labor, and freight. Our actions to mitigate the impact of inflation, including pre-ordering components in higher than usual quantities, sourcing new vendors and increasing prices have been somewhat successful.

Previous wording

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 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 and 2022, 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.

Current wording

We have traditionally funded working capital needs through product sales and close management of working capital components of our business. Historically, we have also received cash from private offerings of our common stock, warrants to purchase shares of our common stock, and notes. In July, 2024 we completed a private placement of 210,000 shares of our common stock at $3.80 per share for a total raise of $798,000 with a related party. On December 31, 2024 we completed the issuance of a six year unsecured subordinated debenture for $750,000 with a third party. In our earlier years, we incurred quarter to quarter operating losses to develop current product applications, utilizing a number of proprietary and patent-pending technologies. Although we have been profitable in recent years except 2020, 2022 and 2024, we can provide no assurances that operating losses will not occur in the future. Should that situation arise, we may not be able to obtain working capital funds necessary in the time frame needed and at satisfactory terms, if at all.

Previous wording

As of December 31, 2023, cash and cash equivalents was $1,766,621, trade accounts receivable were $812,126 and current liabilities were $1,149,337 resulting in net liquid assets of $1,429,410. 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 during the last several years prior to 2020 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 December 31, 2024, cash and cash equivalents were $1,243,746, trade accounts receivable were $732,541 and current liabilities were $743,575 resulting in net liquid assets of $1,232,712. We believe that the diminishing of the Covid-19 pandemic, the resolution of supply chain issues, and the introduction of several new products during the last several years, along with new and on-going customer relationships will allow Lifeloc to operate profitably. If the revenue levels prior to 2020 do not continue to increase in a timely manner, if inflationary pressures are not contained, or if the development and market acceptance of SpinDx™ takes longer than expected, we may be required to seek additional sources of capital and/or to implement further cost reduction measures, as necessary.

Previous wording

Equipment expenditures, consisting of updated production equipment and SpinDx related equipment, during FY 23 were $6,811 compared to $213,206 for FY 22, a decrease of $206,395. We incurred patent application costs in preparation for filing of $1,404 in 2023 versus $9,370 in 2022. Expired and fully amortized patents of $13,758 were removed from our financial statements in 2022 vs. none in 2023. As development of SpinDx progresses, and as normal wear and tear of equipment occurs, we expect to incur outlays for equipment and patent filings in 2024 and beyond.

Current wording

Equipment expenditures, consisting of updated production equipment and SpinDx related equipment, during FY 24 were $667,738 compared to $6,811 for FY 23, an increase of $660,927. We incurred patent application costs in preparation for filing of $21,708 in 2024 versus $1,404 in 2023. No expired or fully amortized patents were removed from our financial statements in 2024 or 2023. As development of SpinDx progresses, and as normal wear and tear of equipment occurs, we expect to incur outlays for equipment and patent filings in 2025 and beyond.