Lifeloc Technologies, Inc

December 31, 2024 and 2023

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.stsfirst.com.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates in the Preparation of Financial Statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions regarding allowances for bad debts, inventory obsolescence, accumulated depreciation, and deferred income taxes. Such estimates and assumptions affect the reported amounts of assets and liabilities as well as disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of sales and expense during the reporting period. Actual results could differ from those estimates.

Debt Issuance Costs. The term loan is shown in the accompanying balance sheet net of debt issuance costs. Deferred debt issuance costs are amortized over the life of the term loan on a straight line basis, which approximates the effective interest method. Total debt issuance cost amortization during the years ended December 31, 2024 and 2023 was $4,254 and $4,304 respectively, and is included within interest expense on the statements of income (loss).

Deferred Income Taxes. Deferred income tax assets and liabilities are presented as noncurrent assets or liabilities in the balance sheet.

Fair Value Measurement. Accounting Standards Codification ("ASC") Topic 820,Fair Value Measurements and Disclosures("ASC 820"), provides a comprehensive framework for measuring fair value and expands disclosures which are required about fair value measurements. Specifically, ASC 820 sets forth a definition of fair value and establishes a hierarchy prioritizing the inputs to valuation techniques, giving the highest priority to quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable value inputs. ASC 820 defines the hierarchy as follows:

Level 1 - Quoted prices are available in active markets for identical assets or liabilities as of the reported date. The types of assets and liabilities included in Level 1 are highly liquid and actively traded instruments with quoted prices, such as equity securities listed on the New York Stock Exchange.

Level 2 - Pricing inputs are other than quoted prices in active markets, but are either directly or indirectly observable as of the reported date. The types of assets and liabilities in Level 2 are typically either comparable to actively traded securities or contracts or priced with models using highly observable inputs.

Level 3 - Significant inputs to pricing that are unobservable as of the reporting date. The types of assets and liabilities included in Level 3 are those with inputs requiring significant management judgment or estimation, such as complex and subjective models and forecasts used to determine the fair value of financial transmission rights. At December 31, 2024 and 2023, the Company has no assets and no liabilities that are remeasured at fair value on a recurring or nonrecurring basis.

Cash and Cash Equivalents. For purposes of reporting cash flows, we consider all cash and highly liquid investments with an original maturity of three months or less to be cash equivalents.

Fair Value of Financial Instruments. Our financial instruments consist of cash, a term loan secured by a first mortgage, and an unsecured subordinated debenture. The carrying values of cash, their fair value due to their short term maturities. The carrying value of the term loan approximates its fair value based on interest rates currently obtainable. The carrying value of the debenture approximates its fair value after allocating a portion to the attached warrants.

Concentration of Credit Risk. Financial instruments with significant credit risk include accounts receivable.

We have no significant off-balance sheet concentrations of credit risk such as foreign exchange contracts, options contracts or other foreign hedging arrangements.

Accounts Receivable. Accounts receivable are typically unsecured and are derived from transactions with and from entities primarily located in the United States or from international distributors with a proven payment history. Accordingly, we may be exposed to credit risks generally associated with the alcohol monitoring industry. Our credit policy calls for payment in accordance with prevailing industry standards, generally 30 days with occasional exceptions of up to 60 days for large established customers. We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. A summary of the activity in our allowance for doubtful accounts is as follows:

The net accounts receivable balance at December 31, 2024 of $732,541 included an account from one customer of $339,925 (46%), $27,383 (4%) from a second customer, $19,684 from a third customer (3%), and no more than 3% from any other single customer. The net accounts receivable balance at December 31, 2023 of $812,126 included an account from one customer of $103,739 (13%), $98,412 from a second customer (12%), $42,594 from a third customer 5%, and no more than 5% from any other single customer.

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 December 31, 2024 and December 31, 2023, inventory consisted of the following:

A summary of the activity in our inventory reserve for obsolescence is as follows:

Property, Plant and Equipment. Property, plant and equipment are stated at cost, with depreciation computed over the estimated useful lives of the assets, generally five years; three years for software and technology licenses; 15 years for space modifications and for training courses; 39 years for the cost of the building we purchased in October 2014. We utilize the declining balance method of depreciation for property, equipment and space modifications, and the straight-line method of depreciation for software, training courses, and the building, due to the expected usage of these assets over time. These methods are expected to continue throughout the life of the assets. Maintenance and repairs are expensed as incurred and major additions, replacements and improvements are capitalized. Depreciation expense for the years ended December 31, 2024 and 2023 was $286,815 and $253,876 respectively. No depreciation is recorded on equipment, software and space modifications not in service until such time as they are placed in service. Gain or loss on property, plant and equipment that is disposed of is recognized in operations in the statements of income (loss).

Impairment of Long-Lived Assets. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. A long-lived asset is considered impaired when estimated future cash flows related to the asset, undiscounted and without interest, are insufficient to recover the carrying amount of the asset. If deemed impaired, the long-lived asset is reduced to its estimated fair value. Long-lived assets to be disposed of are reported at the lower of their carrying amount or estimated fair value less cost to sell. No impairments were recorded for the years ended December 31, 2024 and 2023 respectively.

Patents. The costs of applying for patents are capitalized and amortized on a straight-line basis over the lesser of the patent's economic or legal life (20 years for utility patents in the United States, and 14 years for design patents). Amortization expense for the years ended December 31, 2024 and 2023, was $7,424 and $6,644 respectively. Amortization expense for each of the next 5 years is estimated to be $14,273 per year. Capitalized costs are expensed if patents arenot granted. We review the carrying value of our patents periodically to determine whether the patents have continuing value and such reviews could result in the conclusion that the recorded amounts have been impaired. No impairments were included in amortization expense for the years ended December 31, 2024 and 2023 respectively. A summary of our patents at December 31, 2024 and 2023 is as follows:

Customer and Tenant Deposits. We include customer pre-payments on future orders and tenant security deposits in customer deposits, as shown below. Customer pre-payments are reclassified as revenue when orders are shipped. Tenant security deposits are refunded to tenant upon expiration of lease.

Accrued Expenses. We have accrued various expenses in our December 31 balance sheets, as follows.

Product Warranty Reserve. We provide for the estimated cost of product warranties at the time sales are recognized. Our warranty obligation is based upon historical experience and will be affected by product failure rates and material usage incurred in correcting a product failure. Should actual product failure rates or material usage costs differ from our estimates, revisions to the estimated warranty liability would be required. A summary of the activity in our product warranty reserve is as follows:

Income Taxes. We account for income taxes under the provisions of ASC Topic 740,Accounting for Income Taxes ("ASC 740"). ASC 740 requires recognition of deferred income tax assets and liabilities for the expected future income tax consequences, based on enacted tax laws, of temporary differences between the financial reporting and tax bases of assets and liabilities. ASC 740 also requires recognition of deferred tax assets for the expected future tax effects of all deductible temporary differences, loss carryforwards and tax credit carryforwards. Deferred tax assets are then reduced, if deemed necessary, by a valuation allowance for the amount of any tax benefits which, more likely than not based on current circumstances, are not expected to be realized.

ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements, uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts. For the years ended December 31, 2024 and 2023, we didnot have any significant interest or penalties associated with uncertain tax positions.

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. 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. We have discontinued arranging for customer financing and leasing through unrelated third parties and instead are providing for customer financing and leasing ourselves, which we recognize as revenue over the applicable lease term. Occasionally, we rent used equipment to customers, and in those cases, we recognize the revenues as they are earned over the life of the contract.

Royalty income is recognized in accordance with agreed upon terms, when performance obligations are satisfied, the amount is fixed or determinable and collectability is reasonably assured.

Rental income from 2,774 square feet of space leased to our 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 expires on June 30, 2025 and does not have an option to renew.

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.

The following is the disaggregation of revenue into broad categories, which we have defined as shown below.

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 statements of income. All direct training are for less than one year and all deferred revenues from this source are shown in our balance sheets as short term.

Rebates. Our rebate program is available to certain of our North American workplace distributors in good standing who are responsible for sales equaling at least $25,000 in one calendar year. Distributors in good standing who meet the required sales threshold earn a rebate equal to between 1 and 10 percent of that distributor's total sales of the Company's products. We accrue for these rebates monthly; they are shown in our balance sheets as accrued expenses. We paid $35,502 and $34,051 of rebates for the years ending December 31, 2024 and 2023 respectively.

Recently Issued Accounting Pronouncements.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, amending reportable segment disclosure requirements to include disclosure of incremental segment information on an annual and interim basis. Among the disclosure enhancements are new disclosures regarding significant segment expenses that are regularly provided to the chief operating decision-maker and included within each reported measure of segment profit or loss, as well as other segment items bridging segment revenue to each reported measure of segment profit or loss. The amendments in ASU 2023-07 are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, and are applied retrospectively. Early adoption is permitted. See Note 10 for changes to our reportable segment disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvement to Income Tax Disclosures, amending income tax disclosure requirements for the effective tax rate reconciliation and income taxes paid. The amendments in ASU 2023-09 are effective for fiscal years beginning after December 15, 2024 and are applied prospectively. Early adoption and retrospective application of the amendments are permitted. We continue to evaluate the impact of this update on our financial statements, but do not expect any changes to our current reportable segments.

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires disclosure about the types of costs and expenses included in certain expense captions presented on the income statement. The new disclosure requirements are effective for the Company's annual periods for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted, and may be applied either prospectively or retrospectively. We are currently evaluating the ASU to determine its impact on our consolidated financial statements and disclosures.

The Company does not believe that issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statements.

Research and Development Expenses. Equipment, software and space modifications used for research and development that have an alternative future use are capitalized in property, plant and equipment in the balance sheets. Equipment, software and space modifications used for research and development that have no alternative future use are expensed as research and development costs as incurred.

Stock-Based Compensation. Stock-based compensation is presented in accordance with the guidance of ASC Topic 718,Compensation – Stock Compensation ("ASC 718"). Under the provisions of ASC 718, companies are required to estimate the fair value of share-based payment awards on the date of grant based on the trading price of stock issued. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in our statement of income.

ASC 718 requires companies to estimate the fair value of share-based payment awards on the date of grant. The value of the portion of the award that is ultimately expected to vest is recognized as expense on a straight line basis over the requisite service periods in the accompanying statement of income (loss). Forfeitures are recognized as they occur.

Segment Reporting. We have concluded that we have two operating segments, including our primary business which is as a developer, manufacturer and marketer of portable hand-held breathalyzers and related accessories, supplies and education. As a result of purchasing our building on October 31, 2014, we have a second segment consisting of renting portions of our building to one tenant, whose lease expires on June 30, 2025.

Accounting Standards Update 2023-07 requires significant segment expenses be disclosed for each reportable segment. See Note 10 for a table showing expense allocations for our product sales segment.

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 INCOME AND LOSS PER COMMON SHARE

We report both basic and diluted net income or loss per common share. Basic net income or loss per common share is computed by dividing net income or loss for the period by the weighted average number of common shares outstanding for the period. Diluted net income or loss per common share is computed by dividing the net income or loss for the period by the weighted average number of common and potential common shares outstanding during the period if the effect of the potential common shares is dilutive. The shares used in the calculation of dilutive potential common shares exclude options and warrants to purchase shares where the exercise price was greater than the average market price of common shares for the period.

The following table presents the calculation of basic and diluted net income (loss) per common share:

4. STOCKHOLDERS' EQUITY

Stock Option Plan. In January 2013, we adopted our 2013 Stock Option Plan (the "2013 Plan") to promote the Company's and its stockholders' interests by helping us to attract, retain and motivate our key employees and associates. Under the terms of the 2013 Plan, our Board of Directors (the "Board") can grant either "nonqualified" or "incentive" stock options, as defined by the Internal Revenue Code and related regulations. The purchase price of the shares subject to a stock option is the fair market value of our common stock on the date the stock option is granted. Generally, all stock options must be exercised within five years from the date granted. No common shares are reserved for issuance under the 2013 Plan as it has expired. The 2013 Plan was approved by our shareholders at their regular annual meeting on April 1, 2013.

A summary of our stock option activity and related information for equity compensation plans approved by security holders for each of the fiscal years ended December 31, 2024 and 2023 is as follows:

The options outstanding at December 31, 2024 are fully vested and have a weighted average life of 0.56 years.

The options outstanding at December 31, 2024 had an intrinsic value of $0.

The exercise price of all options granted through December 31, 2024 has been equal to or greater than the fair market value as of the date of grant, as determined by the Board. As of December 31, 2024, no options for our common stock remain available for grant under the 2013 Plan as it has expired.

No options were exercised during the years ended December 31, 2024 and 2023.

At December 31, 2024 there were 62,500 warrants outstanding with a life of 6 years and with an exercise price of $4.50. There wereno warrants outstanding at December 31, 2023.

5. DEBT

Debenture. On December 31, 2024 we issued a $750,000 debenture subordinated to obligations to the Company’s general and secured creditors that calls for interest only at 8.25% payable quarterly in the first year, with monthly payments of $9,199 including principal and interest at 8.25% commencing in the second year based on a ten year amortization schedule. A balloon payment of $451,012 is due in full on December 31, 2030.

In consideration of the lender providing the financing, the Company issued warrants which entitle the holder to purchase 62,500 shares of our common stock at $4.50 per share. The warrants were immediately and fully vested, and have a life of 6 years. If the debenture is paid in full on or before December 31, 2029, the warrants will have a life of five years.

The factors used to calculate the estimated value of the warrants and the resulting fair market value, were as follows.

Applying these assumptions resulted in a relative fair value of $120,000, all of which was recorded as debt discount with a corresponding credit to common stock. The debt discount will be amortized as interest expense of $20,000 annually over six years.

Our minimum future principal payments on this subordinated debenture, by year, are as follows:

Term Loan Payable. The term loan is secured by a first mortgage on our building, and is payable in 119 equal monthly installments of $7,453, including principal and interest at 2.95% based on a 360 day year, plus a final payment of $773,727 (excluding interest) on September 30, 2031. Our minimum future principal payments on this term loan, by year, are as follows:

6. COMMITMENTS AND CONTINGENCIES.

Employee Severance Benefits. Our obligation with respect to employee severance benefits is minimized by the "at will" nature of the employee relationships. As of December 31, 2024 we had no obligation with respect to contingent severance benefit obligations other than the Company's obligations under the employment agreement with its chief executive officer, Dr. Wayne Willkomm. In the event that Dr. Willkomm's employment is terminated by the Company without Cause (including through a decision by the Company not to renew the employment agreement) or by Dr. Willkomm with Good Reason (as each are defined in the employment agreement), Dr. Willkomm will be eligible, upon satisfaction of certain conditions, for severance equal to two months of salary continuation plus 12 months of health insurance continuation.

Contractual Commitments and Purchase Orders. Contractual commitments under development agreements and outstanding purchase orders issued to vendors in the ordinary course of business totaled $2,025,429 at December 31, 2024.

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. INCOME TAXES.

Our income tax (provision) benefit is summarized below.

Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. On the basis of this evaluation, as of December 31, 2024, a valuation allowance of $187,234 has been recorded to recognize only the portion of the deferred tax asset that is more likely than not to be realized. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased.

The items accounting for the difference between income taxes computed at the federal statutory rate and the benefit provision for income taxes consist of the following:

The components of the deferred tax asset at December 31, 2024 and 2023 are as follows:

The Company has an Increasing Research Activities Credit carryover of $237,166 which expires between the years 2039 through 2044. Our income tax filings in the United States and state jurisdictions are open to examination for the 2022 – 2024 tax years. Tax attributes from years prior to that can be adjusted as a result of examinations. In the event we are assessed penalties and or interest, penalties will be charged to other operating expense and interest will be charged to interest expense. The Company has reviewed its tax positions and believes it has not taken a position that would not be sustained under examination.

8. LEGAL PROCEEDINGS

We were not involved or party to any legal proceedings at December 31, 2024 or December 31, 2023, and therefore made no accruals for legal proceedings in either 2024 or 2023.

9. MAJOR CUSTOMERS/SUPPLIERS

We depend on sales that are generated from our customers' ongoing usage of alcohol testing instruments.

One customer contributed 9% ($765,562) to our product sales in 2024, a second customer contributed 4% ($333,185), a third customer contributed 2% ($269,513), and no other customer contributed more than 2%. One customer contributed 9% ($790,495) to our total sales in 2023, a second customer contributed 4% ($405,003), a third customer contributed 2% ($201,163), and no other customer contributed more than 3%. In making this determination, we considered the federal government, state governments, local governments, and foreign governments each as a single customer.

In 2024, we depended upon three vendors for approximately 27% of our purchases (three vendors and 28% respectively in 2023).

10. DEFINED CONTRIBUTION EMPLOYEE BENEFIT PLAN

We have adopted a 401(k) Profit Sharing Plan (“401(k) Plan”) which covers all full-time employees who have completed 3 months of full-time continuous service and are age eighteen or older. Participants may defer up to 100% of their gross pay up to 401(k) Plan limits. Participants are immediately vested in their contributions. We make monthly discretionary matching contributions of 3% of the total payroll of the participating employees. In 2024 and 2023 we contributed $69,678 and $64,608 respectively. The participants vest in Company contributions based on years of service, with a participant fully vested after six years of credited service.

11. BUSINESS SEGMENTS

We currently have two business segments: (i) the sale of physical products, including portable hand-held breathalyzers and related accessories, supplies, education, training (“Product Sales”), and royalties from development contracts with OEM manufacturers (“Royalties” and, together with Product Sales, the "Products" segment), and (ii) rental of a portion of our building (the “Rentals” segment). The accounting policies of the segments are the same as those described in the summary of significant accounting policies in Note 2.

Operating profits for these segments exclude unallocated corporate items. Administrative and staff costs were commonly used by all business segments and were indistinguishable.

The following sets forth information about the operations of the business segments for the years ended December 31, 2024 and 2023.

There were no intersegment revenues.

Accounting Standards Update 2023-07 requires all public entities to disclose significant segment expenses for each reportable segment. We have excluded our rentals segment and allocated all expenses to the products segment in the table below as the rentals segment is immaterial. Similarly, royalties are excluded as none of the expenses are attributable to royalties.

Our purchases of assets for the above products segment for the years December 31, 2024 and 2023 were as follows.

No assets were purchased for the rentals segment.

The following sets forth domestic and international product sales for the years ended December 31, 2024 and 2023.

At December 31, 2024, $104,697 of our assets were used in the Rentals segment, with the remainder, $8,620,072, used in the Products and unallocated segments. Future rental income and related expenses will depend on whether existing leases are renewed. Minimum base rents for leases in place at December 31, 2024 are scheduled to be $16,632 in 2024.

12. SUBSEQUENT EVENTS

We evaluated all of our activity and concluded that no subsequent events have occurred that would require recognition in our financial statements or disclosure in the notes to our financial statements, except as follows.

In January, 2025 we issued our purchase order totaling $487,300 for additional work required to complete a portion of the SpinDx development performed by outside contractors.

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 the CFO and a director is the general partner and a third director provided $136,040 to enable selected option holders to exercise and simultaneously sell their shares to EDCO Partners and to the third director.

In March, 2025 a $75,000 subordinated debenture was issued to an unrelated party who is also a limited partner of EDCO Partners LLLP. The terms of the debenture provide for interest at 8.25% per annum, with interest only payable in 2025, and monthly payments commencing in 2026 based on a ten year amortization schedule with the balance due in full on December 31, 2030. Warrants entitling the holder to purchase 6,250 shares of our common stock at $4.50 apiece were attached.