Lifeloc Technologies, Inc
For the period ended Mar 31, 2026. Filed May 14, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2026 · Filed May 14, 2026
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What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-09-30; filed 2025-11-12.
0001079973-25-001691
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2026-03-31; filed 2026-05-14.
0001553350-26-000075
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 78 previous paragraphs and 49 current paragraphs.
27 unchanged; 16 reworded; 6 added; 33 removed; 2 previous and 0 current paragraphs rearranged.
Tables are not compared: 0 previous and 0 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (6)
Current report
In August 2016, we entered into a patent license agreement with Sandia Corporation pursuant to which we acquired the exclusive rights to develop, manufacture, and market Sandia’s patented SpinDx™ technology for the detection of drugs of abuse. The SpinDetect™ platform uses a centrifugal disk with microfluidic flow paths to conduct multiple quantitative drug assays on a single small sample, delivering on-site results in minutes at a fraction of the cost of conventional laboratory testing. The technology is capable of detecting very low concentrations of high-abuse drugs such as fentanyl, cocaine, and delta-9-THC. Importantly, SpinDetect™ can isolate psychoactive delta-9-THC from its inactive metabolites — a capability that existing devices lack, and that we believe will enable more accurate assessments of marijuana impairment. Under the license agreement, Sandia retains ownership of the foundational patents, while patentable enhancements developed by Lifeloc belong solely to us. Our first utility patent application covering improvements to the system was filed in February 2024.
Current report
We have completed the design of the SpinDetect™ microfluidic disk, with all analytical chemistry now occurring on the disk after sample introduction. We are initiating beta testing of the oral-fluid analyzer focused on delta-9-THC detection using a prototype reader, with final component optimization underway under a signed beta-testing agreement. The initial commercial product is expected to measure delta-9-THC, followed by a multi-drug panel release. We anticipate a commercial launch in 2026, with subsequent expansion into additional drug panels and sample types, including blood and breath — the latter integrated with our LX9 breathalyzer. The SpinDetect™ reader is designed to accept multiple disk formats, which may also enable future applications beyond drug testing, such as detection of food-safety markers and environmental contaminants; these applications would require additional research, regulatory clearances, and potential expansion of our existing license rights. Continued progress toward commercialization is dependent on timely access to capital to support fabrication, validation, regulatory preparation, and market introduction.
Current report
General and administrative expenses of $387,402 for the three months ended March 31, 2026 versus $384,878 for the three months ended March 31, 2025 were relatively unchanged.
Current report
During the three months ended March 31, 2026, net cash used in operating activities was $129,365, reflecting the net loss partially offset by non-cash charges and working capital changes. Net cash used in investing activities was $19,781, primarily for equipment purchases. Net cash used in financing activities was $27,525, consisting of scheduled principal payments on our term loan. Subsequent to March 31, 2026, we obtained additional debt financing from a related party to fund the continued development of SpinDetect™.
Current report
As of March 31, 2026, cash and cash equivalents were $569,330, trade accounts receivable were $850,341 and current liabilities were $1,064,101 resulting in net liquid assets of $355,570. We believe our core breathalyzer business has remained fundamentally sound and, together with the anticipated commercialization of SpinDetect™, provides a reasonable basis for a return to profitability. However, if revenues from our core business do not grow as expected, if the commercialization of SpinDetect™ is delayed or requires more capital than anticipated, or if general economic conditions deteriorate, we may be required to seek additional sources of capital and/or to implement further cost reduction measures, as necessary.
Current report
We generally provide a standard one-year limited warranty on materials and workmanship to our customers. We provide for estimated warranty costs at the time product revenue is recognized. Warranty costs are included as a component of cost of goods sold in the accompanying statements of operations. For the three months ended March 31, 2026 and 2025, warranty costs were not deemed significant.
Removed paragraphs (33)
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
For the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024*.*
Previous report
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.
Previous report
Net sales.
Previous report
Gross profit.
Previous report
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.
Previous report
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.
Previous report
Sales and marketing expenses.
Previous report
General and administrative expenses.
Previous report
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.
Previous report
Other income (expense).
Previous report
Net income (loss).
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
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.
Reworded paragraphs (16)
Previous wording
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.
Current wording
We own our corporate headquarters in Wheat Ridge, Colorado, occupying all of the space ourselves after June 30, 2025. Our tenant’s lease expired in June 2025, at which time we expanded 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.
Previous wording
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.
Current wording
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 are on an intermittent purchase order basis and there is no assurance they will continue at any given rate, or that orders will repeat.
Previous wording
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.
Current wording
Research and Development Expenses. We expect to begin to reduce our research and development expenses in 2026 as we complete development of our new product line.
Previous wording
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.
Current wording
We work diligently to maintain reduced costs where possible, although inflation is taking a 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.
Previous wording
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.
Current wording
Our product sales for the three months ended March 31, 2026 were $2,289,759, an increase of 1% from $2,263,047 for the same period a year ago. This increase results from acceleration of several larger orders that may reflect customers’ current availability of funds. In addition, the continuing inflationary pressure outlook on customers’ budgets may also have played a role. When royalties of $4,053 and rental income of $0 are included, total revenues of $2,293,812 increased by $16,778, or 1%, for the three months ended March 31, 2026 when compared to the same three months a year ago. Rental income was discontinued after June 30, 2025, and royalties decreased by $1,618 due to a decrease in sales by royalty-paying customers.
Previous wording
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.* *
Current wording
Gross profit for the three months ended March 31, 2026 of $987,074 represented an increase of 9% from total gross profit of $908,566 for the three months ended March 31, 2025, primarily as a result of higher product sales. Cost of product sales decreased from $1,363,805 in the three months ended March 31, 2025 to $1,306,738 in the same period in 2026, a decrease of $57,067 (4%). Gross profit margin on products increased to 43% in the three months ended March 31, 2026 from 40% in the three months ended March 31, 2025 primarily as a result of the higher sales and product mix.
Previous wording
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™.
Current wording
Research, development and sustaining engineering expenses continued at the high level of $414,445, or 18% of product sales, for the three months ended March 31, 2026, representing a decrease of $55,235 (12%) over the $469,680 in the same period a year ago. This decrease resulted primarily from a lull in payments to outside contractors needed for continuing design work related to SpinDetect™.
Previous wording
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.
Current wording
Sales and marketing expenses of $313,229 for the three months ended March 31, 2026 were down by $21,327 (or 6%) from the $334,556 spent in the same period a year ago as a result of across the board efforts to lower expenses.
Previous wording
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.
Current wording
Interest income decreased from $12,357 a year ago to $6,531 in 2026 as a result of less funds available at the beginning of the period. Interest expense of $31,242 in the three months ended March 31, 2026 was up from $24,495 in the previous year as a result of the increase in subordinated debentures outstanding in the 2026 quarter vs. less in the same quarter a year ago. The total increase of $12,573 from $12,138 of other expense (net) in the period ended March 31, 2025 to total other expense (net) of $24,711 in the current quarter is expected to continue in future quarters due to the increase in borrowings.
Previous wording
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.
Current wording
We realized a net (loss) of ($152,713) for the three months ended March 31, 2026 compared to a net (loss) of ($292,686) for the three months ended March 31, 2025. This decrease of $139,973 (48%) was the result of the changes in gross profit, operating expenses and other income discussed above. The benefit from taxes in the three months ended March 31, 2026 was $0 which was the same amount in the same period a year ago.
Previous wording
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.
Current wording
Revenues in the first three months of 2026 were slightly higher compared to revenues during the same period in 2025. We believe that continued increased sales efforts may result in modestly improved revenues in 2026 and beyond with the anticipated availability of SpinDetect™. Revenues in 2026 may be similar to revenues in 2025. 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
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.
Current wording
Our operating plan for the remainder of 2026 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 2026. However, we believe that cash resources will be sufficient to fund our operations for the next twelve months under our current operating plan. If we are unable to manage the business operations in line with our budget expectations, it could have a material adverse effect on business viability, financial position, results of operations and cash flows. Further, if we are not successful in sustaining profitability and remaining at least cash flow break-even, additional borrowings or capital may be required to maintain ongoing operations.
Previous wording
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.
Current wording
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 March 31, 2026 at $126,829 after amortization in the three months ending March 31, 2026 of $5,171, and which resulted in an increase to capital of $120,000 on December 31, 2024 and $12,000 on March 1, 2025. The interest of 8.25% was paid in quarterly increments in 2025, and will be included in monthly payments of $10,119 including principal in 2026.
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 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.
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 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. In our earlier years, we incurred quarter to quarter operating losses to develop current product applications, utilizing a number of proprietary and patent-pending technologies. Between 2002 and 2020, we were consistently profitable, due to stabilization and then growth in our core breathalyzer products. Our recent net losses in 2024 and 2025 reflect a deliberate investment in the development of our SpinDetect™ platform rather than a deterioration of our core breathalyzer business, which has remained stable. We believe our core product and services business, at current revenue levels, is capable of supporting ongoing operations on a cost-reduced basis. We intend to continue managing costs carefully while advancing SpinDetect™ toward its anticipated commercial launch later in 2026. If the development or market acceptance of SpinDetect™ takes longer than expected, or if we require additional capital to support commercialization, we may seek additional financing through equity or debt offerings.
Previous wording
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.
Current wording
Equipment expenditures during the three months ended March 31, 2026 consisted of SpinDetect™ related equipment of $14,411 compared to $18,548 in the first three months of 2025, and $5,370 in office equipment versus $0 in 2025. No patent application costs were incurred during either period. 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.
Previous wording
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Current wording
There have been no material changes to the Company’s critical accounting policies and estimates from those disclosed in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
Research, development and sustaining engineering expenses.*
Previous report — wording carried elsewhere
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.