LCTC Lifeloc Technologies, Inc - 10-K

Item 1A. Risk Factors

You should carefully consider the risk factors described below. If any of the following risk factors actually occur, our business, prospects, financial condition or results of operations would likely suffer. In such case, the trading price of our common stock could fall, resulting in the loss of all or part of your investment. You should look at all these risk factors in total. Some risk factors may stand on their own. Some risk factors may affect (or be affected by) other risk factors. You should not assume we have identified these connections. You should not assume that we will always update these and future risk factors in a timely manner. Except as required under applicable securities laws, we are not undertaking any obligation to update these risk factors to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events.

Risks Related to Our Business and Industry

Global economic conditions could have a negative impact on our business, operating results and financial condition.

Our business can be positively or negatively affected by fluctuations in exchange rates and country by country economic conditions.  Our international customers increase, reduce, delay or cancel their purchases of our products when exchange rates are unfavorable to importation.  Unfavorable economic and currency situations at times force us to adjust prices downward to remain competitive. We incur losses if a customer's business fails and the customer is unable to pay us, or pay us on a timely basis. Likewise, if our suppliers have difficulty in obtaining credit or in operating their businesses, they may not be able to provide us with the materials we use to manufacture our products. Our law enforcement business is dependent on the availability of federal and state grants to fund new equipment purchases. Should this funding be unavailable or delayed, our volume may be negatively affected. Our workplace business may be affected by the health of industries with safety-sensitive jobs such as oil and gas and transportation. Demand for our products may be affected by downturns in these segments.  These actions would result in reduced revenues and higher operating costs, and have an adverse effect on our results of operations and financial condition.

Changes in trade policy and tariffs could increase our costs and adversely affect our sales.

Our business is subject to risks arising from changes in U.S. and foreign trade policy, including the imposition or escalation of tariffs, import restrictions, and retaliatory trade measures. The current trade environment is characterized by a high degree of policy uncertainty, and the scope and duration of existing and potential future measures remain difficult to predict.

We purchase components and materials from domestic and international suppliers. To the extent our suppliers are affected by tariff increases, the cost of such components may rise, and we may not be able to fully offset those increases through pricing adjustments or by identifying alternative suppliers on a timely basis or at all.

We also sell our products globally. Foreign governments may impose retaliatory tariffs or other trade barriers on U.S.-manufactured goods, which could increase the cost of our products for international customers, reduce demand, or cause distributors to seek alternative suppliers. If we are unable to effectively manage these risks, our business, financial condition, and results of operations could be materially and adversely affected.

Geopolitical instability and international conflicts may disrupt our operations, supply chain, and financial performance.

Ongoing and escalating international conflicts, including the Ukraine-Russia war and multiple conflicts in the Middle East, continue to create economic and geopolitical uncertainty, which may adversely impact our business. Trade restrictions, sanctions, and supply chain disruptions resulting from these conflicts could materially affect our cost structure, operational efficiency, and overall financial performance.

Beyond regulatory concerns, ongoing conflicts may also create significant supply chain inefficiencies by increasing transportation costs, delaying shipments, and restricting the availability of critical materials. We cannot predict the duration or outcome of these geopolitical tensions, nor the extent to which future sanctions or conflicts may escalate. However, we remain subject to potential financial and operational risks associated with global instability. If our international operations, suppliers, or markets are affected by sanctions, military actions, trade barriers, or regulatory changes, our business, results of operations, and financial condition could suffer.

We rely on customers who may not consistently purchase our products in the future and if we lose any one of these customers, our revenues may decline.

Eighteen percent of our product sales in 2025 and sixteen percent in 2024 were attributable to three customers, with whom we do not have long-term contracts. If orders from those customers are not renewed, our revenues may be adversely affected. Furthermore, at December 31, 2025, our accounts receivable balance included approximately $344,879 or 46% from one customer, $56,096 or 7% from a second customer, and $39,780, or 5%, from a third customer.

In the future, a small number of customers may continue to represent a significant portion of our total revenues in any given period. These customers may not consistently purchase our products at a particular rate over any subsequent period.  A loss of any of these customers could adversely affect our revenues.

We rely heavily upon the talents of our Chief Executive Officer, the loss of whom could severely damage our business.

Our performance depends to a large extent on a small number of key managerial personnel. In particular, we believe our success is highly dependent upon the services and reputation of our Chief Executive Officer and President, Dr. Wayne R. Willkomm. Loss of Dr. Willkomm's services could severely damage our business.

We must continue to be able to attract employees, including employees with the scientific and technical skills that our business requires, and if we are unable to attract and retain such individuals, our business could be severely damaged. Labor shortages across the country threaten to damage our business.

Our ability to attract employees, including employees with a high degree of scientific and technical talent is crucial to the success of our business. There is intense competition for the services of such persons, and we cannot guarantee that we will continue to be able to attract and retain individuals possessing the necessary qualifications.  If we cannot attract such individuals, we may not be able to keep our products current, bring new innovations to market or produce our products. As a result, our business could be damaged.

Our growth depends in part on the timely development and commercialization, and customer acceptance, of new and enhanced products and services.

If we do not develop innovative new and enhanced products and services on a timely basis, our offerings will become obsolete over time and our business will suffer. Our success depends on several factors, including our ability to:

correctly identify customer needs and preferences and predict future needs and preferences;

allocate our R&D funding to products and services with higher growth prospects;

anticipate and respond to our competitors’ development of new products and services and technological innovations;

differentiate our offerings from our competitors’ offerings and avoid commoditization;

innovate and develop new technologies and applications;

obtain adequate intellectual property rights with respect to key technologies before our competitors do;

successfully commercialize new technologies in a timely manner, price them competitively and cost-effectively manufacture and deliver sufficient volumes of new products of appropriate quality on time;

obtain necessary regulatory approvals of appropriate scope; and

stimulate customer demand for and convince customers to adopt new technologies.

If we fail to accurately predict future customer needs and preferences or fail to produce viable technologies, we may invest heavily in R&D of products and services that do not lead to significant revenue, which would adversely affect our business. Even when we successfully innovate and develop new and enhanced products and services, we often incur substantial costs in doing so, and our profitability may suffer. In addition, promising new offerings may fail to reach the market or realize only limited commercial success because of real or perceived efficacy or safety concerns.

Our ongoing investment in new products, services, and technologies is inherently risky, and could disrupt our ongoing businesses.

We have invested and expect to continue to invest in new products, services, and technologies. Such endeavors involve significant risks and uncertainties, including distraction of management from current operations, insufficient revenues to offset liabilities assumed and expenses associated with these new investments, inadequate return of capital on our investments, and unidentified issues not discovered in our due diligence of such strategies and offerings. Because these new ventures are inherently risky, sometimes they have been unsuccessful and no assurance can be given that such strategies and offerings will be successful and will not adversely affect our reputation, financial condition, and operating results.

We are subject to a high degree of regulatory oversight, and, if we do not continue to receive the necessary regulatory approvals, our revenues would decline.

We are subject to regulation by the United States Department of Transportation ("DOT") and by various state departments of transportation. The Omnibus Transportation Employee Testing Act of 1991 requires drug and alcohol testing of safety-sensitive transportation employees in aviation, trucking, railroads, mass transit, pipelines, and other transportation industries. The DOT Office of Drug & Alcohol Policy & Compliance ("ODAPC") publishes, implements, and provides authoritative interpretations of these rules. These regulations cover all transportation employers, safety-sensitive transportation employees, and service agents. Manufacturers submit devices to the DOT for testing and approval. Instruments are tested according to their model specifications and, if passed, included on the CPL. Law enforcement applications also require that portable breath testing instruments be included on the CPL. Lifeloc's FC10, FC10Plus, FC20, FC20BT, EV30, and Phoenix® 6.0 and Phoenix®6.0BT are included on the Conforming Products List of Evidential Breath Alcohol Measurement Devices (“CPL”). Lifeloc’s LX9 and LT7 have received conformance letters from the DOT and are expected to appear in the next publication of the CPL. We believe that we were in substantial compliance with the regulations described above as of December 31, 2025 for our products sold into these markets and states.

The DOT has approved the alcohol monitoring products we currently sell in the United States. However, further DOT approval may be required before we can domestically market additional alcohol monitoring products that we may develop in the future. We may also seek to sell new drug-related products, or market current products for new uses, either of which could require us to obtain DOT approval to sell such products. We may also be required to obtain regulatory approvals or licenses from other federal, state or local agencies or comparable agencies in other countries.

We may not continue to receive DOT approval of our current products or we may not obtain the necessary regulatory clearance, approvals or licenses for the marketing of any of our future products. Also, we cannot predict the impact on our business of DOT regulations or determinations arising from future legislation or administrative action.  If we lose DOT permission to sell our current products or we do not obtain regulatory permission to sell our future products, our revenues would likely decline, harming our business.

Our business in the domestic law enforcement area is susceptible to changes in state policies and DUI laws.

Portable breath testers (“PBTs”) are not used to the same degree in each state. Usage is determined by a complex combination of individual state DUI laws, historical practice, and individual state directions for alcohol testing. Some states do not accept breath alcohol testing as evidence. Other states may prefer different breath alcohol testing technology, such as infrared. Lifeloc cannot control the direction or timing of changes to individual state DUI laws, public and political sentiment toward the use of PBTs, or individual state preferences for a specific breath alcohol testing technology. These factors threaten current state contracts and future state contracts and threaten revenue.

Our business relies on state contracts, governed by state contracting policies that are beyond our control.

Many state purchases of PBTs are governed by state contracts with competitive price bids, multiple year terms and without guarantees of purchases. Other states prefer to share PBT usage across several vendors, also without guarantees of volume. These state practices limit Lifeloc's ability to retain current business, forecast volumes and win new business.

Furthermore, a significant amount of our law enforcement business is concentrated in eight states (Arizona, Arkansas, California, Colorado, Michigan, Idaho, Texas and Nevada). Loss of this business, or delays or cancellations in purchasing by these states, seriously impacts our law enforcement business.

We derive a significant portion of our revenue directly or indirectly from government customers, and our business may be adversely affected by changes in the contracting or fiscal policies of those governmental entities.

We derive a significant portion of our revenue directly or indirectly from federal, international, state and local governments. We believe that the success and growth of our business will continue to depend on government customers purchasing our products and services either directly from us or indirectly through our distributors. Changes in government contracting policies or government budgetary constraints may adversely affect our financial performance. Among the factors that could adversely affect our business are the impact of actions, such as those recently announced by the U.S. Department of Government Efficiency, intended to reduce the size of the federal government and federal spending; other changes in fiscal policies or decreases in available government funding; changes in government funding priorities; changes in government programs or applicable requirements; the adoption of new laws or regulations or changes to existing laws or regulations relating to the provision of biometrics services or the use of biometric data; changes in political or social attitudes with respect to security and defense issues; changes in audit policies and procedures of government entities; potential delays or changes in the government appropriations process; and delays in the payment of our invoices by government payment offices. These and other factors could cause government customers or our distributors to reduce purchases of products and services from us, which would have a material adverse effect on our business, financial condition and operating results.

Third parties may infringe on our patents, and as a result, we could incur significant expense in protecting our patents or not have sufficient resources to protect them.

We hold several patents that are important to our business. We plan to protect these patents from infringement and obtain additional patents whenever feasible. To this end, we have obtained confidentiality agreements from our employees and consultants and others who have access to the design of our products and other proprietary information. Protecting and obtaining patents, however, is both time consuming and expensive. We therefore may not have the resources necessary to assert all potential patent infringement claims or pursue all patents that might be available to us. If our competitors or other third parties infringe on our patents, our business may be harmed.

Third parties may claim that we have infringed on their patents and as a result, we could be prohibited from using all or part of any technology used in our products.

Should third parties claim a proprietary right to all or part of any technology that we use in our products, such a claim, regardless of its merit, could involve us in costly litigation. If successful, such a claim could also result in us being unable to freely use the technology that was the subject of the claim, or sell products embodying such technology. If we engage in litigation, our expenses may increase and our business may be harmed.  If we are prohibited from using a particular technology in our products, our revenues may decline and our business may be harmed.

Third parties to whom we have licensed our patents may choose to enforce them through litigation, over which we would exert little or no control.

Should third parties who have licensed our intellectual property determine it is in their best interest to pursue litigation based on those patents, we would have no control in the direction of that litigation or the resulting publicity. Litigation may result in unfavorable findings by courts regarding the nature or protectability of our intellectual property. Litigation may result in additional expenditures or harm the business. Additionally, we would have no control over the publicity any such litigation may garner, which could negatively affect the company in the marketplace. In any of these situations, revenues may decline and our business may be harmed.

Failure of third parties from whom we license key intellectual property to protect their intellectual property could adversely affect our business.

We rely on third-party licensors for certain key intellectual property that is important to our business, and we have limited control over how they protect and enforce their rights. If any of our licensors fail to adequately protect, maintain, or enforce their intellectual property, it could result in unauthorized use, infringement by third parties, or legal disputes that diminish the value of the licensed assets. Any such failure could negatively impact our ability to use the intellectual property as intended, limit our competitive advantages, or expose us to potential litigation, which could materially affect our business, financial condition, and results of operations.

We depend on the availability of certain key supplies and services that are available from only a few sources, and if we experience difficulty with a supplier, we may have difficulty finding alternative sources of supply.

We require certain key supplies for our products, particularly fuel cells, that are available from only a few sources. Based upon our ordering experience to date, we believe the materials and services required for the production of our products are currently available in sufficient quantities. However, this does not mean that we will continue to have timely access to adequate supplies of essential materials and services in the future or that supplies of these materials and services will be available on satisfactory terms when the need arises. Our business could be severely damaged if we become unable to procure essential materials and services in adequate quantities and at acceptable prices.

From time to time, subcontractors may produce certain of our products for us, and our business is subject to the risk that these subcontractors may fail to make timely delivery and/or become unable to acquire essential supplies and services from third parties in a timely fashion. If this occurs, we may not be able to deliver our products on a timely basis and our revenues may decline. Our products and services are also from time to time used as components in the products of other manufacturers. We are therefore subject to the risk that manufacturers that integrate our products or services into their own products may change their source of supply to other vendors, may change their product designs in a way that eliminates our components, and/or may choose to have their components manufactured by other means. If this occurs, our sales may decline and our business may be harmed.

We may be exposed to claims of liability.

Like any manufacturer, we are and always have been exposed to liability claims resulting from the use of our products. We maintain product liability insurance to cover us in the event of liability claims, and as of December 31, 2025, no such claims have been asserted or threatened against us. However, our insurance may not be sufficient to cover all possible future product liabilities.

We could be liable if our business operations harmed the environment, and a failure to maintain compliance with environmental laws could severely damage our business.

Our operations are subject to a variety of federal, state and local laws and regulations relating to the protection of the environment.  From time to time, we use hazardous materials in our operations. Although we believe that we are in material compliance with all applicable environmental laws and regulations, our business could be severely damaged by any failure to maintain such compliance.

Climate change may adversely impact our business.

The impact of continuing climate change could result in increased costs or reduced demand for our products, carbon asset risks, risks due to severe weather events and may result in the need for us to devote additional resources to the management of greenhouse gas emissions which will likely harm our profitability.

Our quarterly financial results vary quarter to quarter, which adversely affects our stock price at times. We cannot predict with any certainty our operating results in any particular fiscal quarter.

Our quarterly operating results may vary significantly depending upon factors such as:

the timing of completion of significant orders;

the timing and amount of our research and development expenditures;

the costs of initial production in connection with new products;

the availability, quality and cost of key components that go into the assembly of our products;

the timing of new product introductions — both by us and by our competitors;

changes in the regulatory environment and regulations under which we operate;

the loss of a major customer;

the timing and level of market acceptance of new products or enhanced versions of our existing products;

our ability to retain existing employees, customers and our customers' continued demand for our products and services;

our customers' inventory levels, and levels of demand for our customers' products and services; and

competitive pricing pressures.

We may not be able to grow or sustain revenues or achieve or maintain profitability on a quarterly or annual basis, and levels of revenue and/or profitability may vary from one such period to another.

Identification of material weakness in internal control may adversely affect our financial results.

We are subject to the ongoing internal control provisions of Section 404 of the Sarbanes-Oxley Act of 2002. Those provisions provide for the identification of material weaknesses in internal control. If such a material weakness is identified, it could indicate a lack of adequate controls to generate accurate financial statements. We routinely assess our internal controls, but we cannot assure you that we will be able to timely remediate any material weaknesses that may be identified in future periods, or maintain all of the controls necessary for continued compliance.

We may require additional capital in the future, which may not be available or may only be available on unfavorable terms.

We monitor our capital adequacy on an ongoing basis. To the extent that our funds are insufficient to fund future operating requirements, we may need to raise additional funds through corporate finance transactions or curtail our growth and reduce our liabilities. Any equity, hybrid or debt financing, if available at all, may be on terms that are not favorable to us. If we cannot obtain adequate capital on favorable terms or at all, our business, financial condition and operating results would be adversely affected, and we may be required to reduce, delay, or discontinue our SpinDetect™ development program, which could materially affect our business prospects and the value of our investment in that technology.

Our outstanding indebtedness requires ongoing debt service and could limit our financial flexibility.

We have incurred indebtedness in the form of two subordinated debentures in an aggregate principal amount of $825,000, both bearing interest at 8.25% per annum. Monthly principal and interest payments on these debentures commenced in January 2026, and balloon payments are due in December 2030. We also carry a mortgage on our corporate headquarters with a maturity of September 2031. Our ability to service this indebtedness depends on our continued ability to generate cash from operations. If our revenues decline or our operating costs increase, we may have difficulty meeting these obligations. If we are unable to service our debt or to refinance or repay it at maturity, we could be required to seek additional financing on unfavorable terms, sell assets, or take other actions that could adversely affect our business and the interests of our stockholders.

We have a number of large, well-financed competitors who have research and marketing capabilities that are superior to ours.

The industry in which we operate is highly competitive. Many of our existing and potential competitors have greater financial resources and manufacturing capabilities, more established and larger marketing and sales organizations and larger technical staffs than we have. Other companies, some with greater experience in the alcohol monitoring industry, produce products and services that compete with our products and services. When our competitors are successful in developing products that are superior to our products, or competing products that sell for lower prices, there is a reduction in the demand for our products and a corresponding reduction in our revenue and our profits.

Our products rely on technology that may become outdated or out of favor.

All of Lifeloc's products use fuel cell technology for the measurement of breath alcohol results. This technology has been developed and refined over many years by Lifeloc and our major competitors. While we expect it to remain as the dominant technology in breath testing devices, other technologies for the measurement of breath alcohol exist and are employed in other market and application segments where the technology is more suitable or developed to the specific requirements. Future development of these technologies pose a risk to Lifeloc's business. See “Item 1. Business – Competition and Markets” for more information about these other technologies.

Natural disasters, public health crises, political crises, and other catastrophic events or other events outside of our control may damage our facilities or the facilities of third parties on which we depend and could impact customer priorities and consumer spending.

We have global third parties upon whom we rely and who are sometimes impacted by events outside of our control. An earthquake or other natural disaster or power shortages or outages could disrupt operations or impair sales. In addition, if any facilities of our suppliers, third-party service providers, vendors, or customers, is affected by natural disasters, such as earthquakes, tsunamis, power shortages or outages, floods or monsoons, public health crises, such as pandemics and epidemics, political crises, such as terrorism, war, political instability or other conflict, or other events outside of our control, our business and operating results could suffer. Any of these disruptions or other events outside of our control would affect our business negatively, harming our operating results.

Increasingly common data privacy and cybersecurity regulations impact the use of or market for our products .

Information collected with our products may be governed by certain data privacy and cyber security regulations, breach of which could cause negative publicity or otherwise harm the company. As a company with information stored online, the company may be vulnerable to cybersecurity attacks which may trigger reporting requirements and legal liability. Responding to a cybersecurity threat or breach would require financial resources, would cause a loss of productivity, and would open the Company to legal liability.

Unstable market and economic conditions may have serious adverse consequences on our business, financial condition and stock price.

Global credit and financial markets have experienced, and may continue to experience, significant volatility and disruption, including periods of increased inflation, diminished liquidity and credit availability, declines in consumer confidence and economic growth, and uncertainty about economic stability. Ongoing and emerging geopolitical conflicts, trade tensions, and other destabilizing events contribute to this uncertainty, and the scope, duration, and long-term impact of any such conditions are difficult to predict. Our general business strategy may be adversely affected by any such economic downturn, volatile geopolitical and business environment or continued unpredictable and unstable market conditions. If the current equity and credit markets deteriorate, or do not improve, it may make any necessary debt or equity financing more difficult, more costly, and more dilutive. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance and stock price and could require us to delay or abandon research and development plans. In addition, there is a risk that one or more of our current suppliers or other partners may not survive these difficult economic times, which could directly affect our ability to attain our operating goals on schedule and on budget.

Risks Related to Our Stock

Shares of our common stock lack a significant trading market.

Shares of our common stock are not eligible for trading on any national securities exchange. Our common stock may be quoted in the over-the-counter market on the OTC Bulletin Board or in what are commonly referred to as "pink sheets." However, these markets are highly illiquid. There is no assurance that an active trading market in our common stock will develop, or if such a market develops, that it will be sustained. In addition, there is a greater chance for market volatility for securities quoted on the OTC Bulletin Board and pink sheets as compared with securities traded on a national exchange. This volatility may be caused by a variety of factors, including the lack of readily available quotations, the absence of consistent administrative supervision of "bid" and "ask" quotations and generally lower trading volume.

Under certain circumstances, shares of our common stock may be sold without registration pursuant to the safe harbor provided in Exchange Act Rule 144 ("Rule 144"). Any sale under Rule 144 or under any other exemption from the Securities Act of 1933, as amended (the "Securities Act"), if available, or pursuant to registration of shares of common stock of present stockholders, may have a depressive effect upon the price of our common stock in any market that may develop.

Additionally, the price of our securities may be volatile as a result of a number of factors, including, but not limited to, the following:

our ability to successfully conceive and to develop new products and services to enhance the performance characteristics and methods of manufacture of existing products;

our ability to retain existing customers and customers' continued demand for our products and services;

the timing of our research and development expenditures and of new product introductions;

the timing and level of acceptance of new products or enhanced versions of our existing products;

price and volume fluctuations in the stock market at large which do not relate to our operating performance; and

outside news reports which may or may not accurately convey information about us, our products, our prospects and opportunities.

Our principal stockholder has significant voting power and may take actions that may not be in the best interests of other stockholders.

Vern D. Kornelsen, Chairman of our Board of Directors, Secretary, and Chief Financial Officer, beneficially owned approximately 77% of our outstanding common stock as of December 31, 2025. Through this ownership, Mr. Kornelsen is able to control the composition of our Board and direct our management and policies. Accordingly, Mr. Kornelsen has the direct or indirect power to:

amend our bylaws and some provisions of our articles of incorporation; and

cause or prevent mergers, consolidations, sales of all or substantially all our assets or other extraordinary transactions.

Mr. Kornelsen's significant ownership interest could adversely affect investors' perceptions of our corporate governance. In addition, Mr. Kornelsen may have an interest in pursuing acquisitions, divestitures and other transactions that involve risks to us and you. For example, Mr. Kornelsen could cause us to make acquisitions that increase our indebtedness or to sell revenue-generating assets. Mr. Kornelsen may from time to time acquire and hold interests in businesses that compete directly or indirectly with us.

Stockholders should not anticipate receiving cash dividends on our stock.

We have never declared or paid any cash dividends or distributions on our capital stock. We currently intend to retain future earnings to support operations and to finance expansion and therefore do not anticipate paying any cash dividends on our common stock in the foreseeable future.

We may issue shares in the future, diluting your interest in us.

We issue options to purchase shares of our common stock to compensate employees, consultants and directors or to raise capital. Any such issuances will have the effect of further diluting the interest of the holders of our securities.

General Risk Factors

Blue Sky considerations limit sales in certain states.

The holders of our securities and persons who desire to purchase them in any trading market that might develop in the future should be aware that there may be significant state law restrictions upon the ability of investors to resell our securities. Investors should consider any secondary market for our securities to be a limited one. The "manual exemption" permits a security to be distributed in a particular state without being registered if the company issuing the security has a listing for that security in a securities manual recognized by the state. However, it is not enough for the security to be listed in a recognized manual. The listing entry must contain (1) the names of issuers, officers, and directors, (2) an issuer's balance sheet, and (3) a profit and loss statement for either the fiscal year preceding the balance sheet or for the most recent fiscal year of operations. Since June 14, 2011, we have been listed in Standard & Poor's. While many states expressly recognize this manual, a smaller number of states declare that they "recognize securities manuals" but do not specify the recognized manuals, making applicability of the manual exemption uncertain in those states. The following states do not have provisions expressly recognizing the manual exemption: Alabama, Illinois, Kentucky, Louisiana, Montana, New York, Pennsylvania, Tennessee and Virginia. While we may, in our discretion, cause our securities to be registered under the state securities laws of these or other states, there is no guarantee that we will do so.

Compliance with changing regulations of corporate governance and public disclosure result in expense.

We are subject to certain federal, state and other rules and regulations, including those required by the Sarbanes-Oxley Act of 2002, new regulations promulgated by the SEC and the rules of the OTC Market. The expense of compliance with these and other laws relating to corporate governance and public disclosure is included in our general and administrative expenses. These laws, regulations and standards are subject to varying interpretations in many cases, and as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies, which could result in higher costs necessitated by ongoing revisions to disclosure and governance practices. We are committed to maintaining high standards of corporate governance and public disclosure. As a result, we invest resources to comply with evolving laws, regulations and standards, and this investment results in increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities.

Item 7.  Management's Discussion and Analysis of Financial Condition and Results of Operations

The following is a discussion of our financial condition and results of operations, and should be read in conjunction with our financial statements and the related notes included elsewhere in this Form 10-K. Certain statements contained in this section are not historical facts, including statements about our strategies and expectations about new and existing products, market demand, acceptance of new and existing products, technologies and opportunities, market and industry segment growth, and return on investments in products and markets. These statements are forward-looking statements and involve substantial risks and uncertainties that may cause actual results to differ materially from those indicated by the forward-looking statements. All forward-looking statements in this section are based on information available to us on the date of this document, and we assume no obligation to update such forward-looking statements. Readers of this Form 10-K are strongly encouraged to review the section titled "Risk Factors."

Overview

Lifeloc Technologies, Inc., a Colorado corporation ("Lifeloc" or the "Company"), is a Colorado-based developer, manufacturer and marketer of portable hand-held and fixed station breathalyzers and related accessories, supplies and education.  We design, produce and sell fuel-cell based breath alcohol testing equipment. We compete in all major segments of the portable breath alcohol testing instrument market, including law enforcement, workplace, corrections, original equipment manufacturing ("OEM") and consumer markets. In addition, we offer a line of supplies, accessories, services, and training to support customers' alcohol testing programs. We sell globally through distributors as well as directly to users.

We define our business as providing "near and remote sensing and monitoring" products and solutions. Today, the majority of our revenues are derived from products and services for alcohol detection and measurement. We remain committed to growing our breath alcohol testing business. In the future, we anticipate the commercialization of new sensing and measurement products that may allow Lifeloc to successfully expand our business into new growth areas where we do not presently compete or where no satisfactory product solutions exist today.

Lifeloc incorporated in Colorado in December 1983. We filed a registration statement on Form 10 with the Securities and Exchange Commission, which became effective on May 31, 2011. Our fiscal year end is December 31.  Our principal executive offices are located at 12441 West 49th Avenue, Unit 4, Wheat Ridge, Colorado 80033-3338. Our telephone number is (303) 431-9500.  Our websites are www.lifeloc.com and www.lifelocuniversity.com. Information contained on our websites does not constitute part of this Form 10-K.

Outlook

Installed Base of Breathalyzers . We believe the installed base of our breathalyzers will increase as the inherent risks associated with drinking while driving or while working in safety sensitive jobs become more widely acknowledged and as our network of distributors and our direct sales force grows. We believe that increased marketing efforts, the introduction of new products and the expansion of our sales network may provide the basis for increased sales and continuing profitable operations. However, these measures, or any others that we may adopt or determine not to adopt, may not result in either increased sales or continuing profitable operations.

Possibility of Operating Losses. Over many of the past several years we have operated profitably; however, prior to that, and in 2021 through 2025, we incurred operating losses. There is no assurance that we will not incur losses in any given quarter or year in the future.

Sales Growth . We expect to increase sales in the U.S. and worldwide as our network of direct customers and distributors grows and becomes more proficient and expands the number of new accounts. Our growth efforts have focused on expanding our global reach and broadening our product offering in alcohol and drug detection. Orders for all of our products, particularly ignition interlock components, are on an intermittent purchase order basis and there is no assurance they will continue at any given rate, or that orders will repeat.

Sales and Marketing Expenses. We continue our efforts to expand our domestic and international distribution capability, and we believe that sales and marketing expenses will need to be maintained at a healthy level in order to do so. Sales and marketing expenses are expected to increase as we increase our direct sales representatives and marketing efforts.

Research and Development Expenses . We expect to continue to incur research and development expenses as we near completion of the first phase of SpinDetect™ and to update our base products.

SpinDetect™ Microfluidic Detection Platform

In 2016, we obtained the exclusive rights to develop and commercialize Sandia National Laboratories’ patented centrifugal microfluidic technology (formerly referred to as SpinDx™). Our commercialization effort was initially hampered by the pandemic; however, development has since advanced significantly. A first Lifeloc-owned utility patent application covering improvements to the system was filed in 2024. Under the license agreement, Sandia retains ownership of the foundational patents, while patentable enhancements developed by Lifeloc belong solely to us.

After several rounds of optimization, we have completed the design of the SpinDetect™ microfluidic disk, enabling the design to move into fabrication and validation. All analytical chemistry now occurs on the disk after introduction of the sample. This advancement completes the core system required for beta testing using our prototype reader. We expect commercial launch in 2026, with initial products designed to measure drugs of abuse in oral fluid, followed by expansion into additional drug panels.

The SpinDetect™ analyzer is designed to address key limitations in current drug-testing methods. The platform uses centrifugal forces and microfluidic flow paths to conduct multiple assays on a microliter-level sample, providing rapid, on-site, and quantitative results. The technology is capable of detecting extremely low concentrations of potent substances such as fentanyl, cocaine, and delta-9-THC, and can isolate psychoactive delta-9-THC from inactive metabolites. This separation supports more accurate assessments of recent use—an important distinction from traditional immunoassay-based devices that may report non-impairing metabolites. Development-stage work has demonstrated detection of delta-9-THC at concentrations as low as 5 ng/mL in laboratory settings.

Drug testing using oral fluid represents a sufficiently large unmet need to justify the SpinDetect™ investment. Existing systems lack the analytical specificity needed for accurate, impairment-relevant results. We already serve this market through our established sales channels, and the SpinDetect™ platform is designed to be customizable to various workplace and jurisdictional drug panels.

While oral-fluid drug testing is the initial application, the SpinDetect™ reader is designed to accept multiple disk formats, enabling analysis of different sample types on the same instrument. Potential future applications include human and veterinary blood, breath extract, and neonatal meconium. Each represents a significant problem area:

Veterinary care: Accidental pet ingestion of illicit or recreational drugs is a frequent occurrence, yet veterinarians lack a rapid method to identify the substance involved.

Neonatal screening: Meconium testing for suspected maternal drug use can require several hours, during which some mothers leave the hospital with the newborn before the infant’s safety is assured.

Beyond drug detection, the SpinDetect™ platform can support a broader range of biological and chemical analyses. The same microfluidic “lab-on-a-disk” architecture can be adapted to detect food-safety markers such as bacterial pathogens E. coli , Salmonella , and Listeria ; environmental contaminants; performance-enhancing drugs; and human or veterinary diagnostic targets. These applications will require additional research, regulatory clearances, and, in certain cases, expansion of our license rights. We are actively evaluating and negotiating potential amendments to enable the development of these non-drug-testing markets.

As we advance toward commercialization, SpinDetect™ prototype analyzers have been demonstrated at industry conferences, generating encouraging engagement from potential customers. The feedback we have received—including suggestions for new use cases—supports our belief that the SpinDetect™ platform can address substantial unmet needs in rapid, quantitative testing.

We expect an initial commercial release in 2026. Continued progress toward these milestones is dependent on timely access to capital to support fabrication, validation, regulatory preparation, and market introduction.

In 2025 we purchased SpinDetect™ related test and other equipment totaling $354,381 compared with $667,738 spent in 2024.

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.

Results of Operations

For the year ended December 31, 2025 compared to the year ended December 31, 2024 .

Supply chain problems caused by Covid-19, as well as the other market impacts of Covid-19, were mostly resolved by the end of 2024, and the perceived need to monitor for the presence of alcohol reverted back to the level experienced previously. We maintained our reduced costs at their 2023 levels where possible, although inflation took its toll, increasing the cost of raw materials, labor, and freight. We continued and intensified our new product development efforts while maintaining the high level of customer service that has led to an excellent reputation for outstanding customer service. With the introduction of new products, we believe Lifeloc will again be profitable.

Net sales.

Our product sales for the year ended December 31, 2025 were $8,958,672, an increase of 6% from $8,470,985 for the same period a year ago. This increase is primarily attributable to new customer acquisitions and expansion within existing customer accounts including fleet refresh activity. When royalties of $51,634 and rental income of $16,632 are included, total revenues of $9,026,938 increased by $488,793, or 6%, for the year ended December 31, 2025 when compared to the same 12 months a year ago. Rental income decreased by $16,146 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 $17,252 due to an increase in sales by royalty-paying customers.

Gross profit.

Total gross profit for the year ended December 31, 2025 of $3,642,045 represented an increase of 6% from total gross profit of $3,446,099 for the year ended December 31, 2024, primarily as a result of higher product sales. Cost of product sales, excluding rental segment costs, increased from $5,066,779 in the year ended December 31, 2024 to $5,375,787 in the same period in 2025, an increase of $309,008 (6%). Gross profit margin on products was 40% in the year ended December 31, 2025 and 40% in the year ended December 31, 2024.

Research, development and sustaining engineering expenses.

Research, development and sustaining engineering expenses continued at the high level of $2,152,843 for the year ended December 31, 2025, representing a decrease of $90,026 (4%) over the $2,242,869 in the same period a year ago. This decrease resulted primarily from a reduction of payments to outside contractors needed for development of SpinDetect™. In 2026 we expect to continue work on SpinDetect™.

Sales and marketing expenses.

Sales and marketing expenses of $1,331,062 for the year ended December 31, 2025 were similar to the $1,358,211 spent in the same period a year ago.

General and administrative expenses.

General and administrative expenses of $1,388,160 for the year ended December 31, 2025, versus $1,253,236 for the year ended December 31, 2024 were higher by $134,924 (11%) primarily as a result of public company and legal expense attributable to our S-4 filings.

Other income (expense).

Interest income decreased from $42,867 a year ago to $38,010 in 2025, a decrease of $4,857, as a result of less funds available. Interest expense of $119,190 in the year ended December 31, 2025 was up $79,045 from $40,145 in the previous year as a result of the increase in the interest and amortization of debt issuance costs on our debentures. Combined, these changes resulted in a total expense increase of $83,902, or 3082%, in the year ended December 31, 2025 from the year ended December 31, 2024.

Net income (loss).

We realized a net loss of $2,470,399 for the year ended December 31, 2025 compared to a net loss of $1,052,948 for the year ended December 31, 2024. This increase in loss of $1,417,451 was the result of the changes in gross profit, operating expenses and other income discussed above, which resulted in a loss before taxes of $1,311,200 in 2025, or a decrease of $94,295 from the loss before taxes of $1,405,495 in 2024. After the provision for valuation allowance from deferred taxes of $1,159,199 in 2025 versus a benefit from taxes of $352,547 a year ago, we realized a net loss of $2,470,399 in 2025 compared to a net loss of $1,052,948 in 2024. The benefit from taxes of $352,547 in 2024 resulted in an increase to our deferred tax asset from $806,652 at December 31, 2023 to $1,159,199 at December 31, 2024. The deferred tax asset reserve was increased by $1,159,199 in 2025 which resulted in a net deferred asset of $0 in 2025.

Trends and Uncertainties That May Affect Future Results

Revenues in the year 2025 were higher compared to revenues in 2024. We believe that continued increased sales efforts, together with the expected availability of SpinDetect™ for sale in 2026 may result in modest improved revenues in 2026 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.

We expect our quarter-to-quarter revenue fluctuations to continue, due to the unpredictable timing of large orders from customers and the size of those orders in relation to total revenues. Going forward, we intend to focus our development efforts on products we believe offer the best prospects to increase our intermediate and near-term revenues, with particular emphasis on launching SpinDetect™ into the market.

Our 2026 operating plan is focused on growing sales of our base products, and on bringing SpinDetect to market, thereby increasing gross profits. 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 regaining profitability and achieving at least cash flow break-even, additional capital may be required to maintain ongoing operations.

Interest expense .

In connection with the financing of our building purchase on October 31, 2014 we obtained a 10-year term loan from Bank of America in an initial principal amount of $1,581,106 bearing interest at 4.45% per annum (which was decreased to 4% in 2016) and secured by a first-priority mortgage in the acquired property, as well as a one-year $250,000 line of credit, which was later increased to $750,000 with a maturity date of September 28, 2021. The Bank of America loan was paid on September 30, 2021 with proceeds from a new term loan from Citywide Banks, also secured by a first-priority mortgage on the property, in the principal amount of $1,350,000. The new loan is payable in monthly installments of $7,453, with interest at 2.95% and a maturity date of September 30, 2031. The revolving line of credit facility expired in accordance with its terms and has not been renewed.

On December 31, 2024 we issued a $750,000 debenture subordinated to obligations to the Company’s secured creditors holding a lien on all assets that calls for interest only at 8.25% payable quarterly in 2025, with monthly payments of $9,199 including principal and interest at 8.25% commencing on January 31, 2026. A balloon payment of $451,012 is due in full on December 31, 2030. In consideration of the lender providing this 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 have a life of 70 months. If the debenture is paid in full on or before December 31, 2029, the warrants will have a remaining life of 58 months.

On March 1, 2025 we issued a $75,000 debenture subordinated to obligations to the Company’s secured creditors holding a lien on all assets that calls for interest only at 8.25% payable quarterly in 2025, with monthly payments of $920 including principal and interest at 8.25% commencing on January 31, 2026. A balloon payment of $45,707 is due in full on December 31, 2030. In consideration of the lender providing this financing, the Company issued warrants which entitle the holder to purchase 6,250 shares of our common stock at $4.50 per share. The warrants have a life of 70 months. If the debenture is paid in full on or before December 31, 2029, the warrants will have a remaining life of 58 months.

Liquidity and Capital Resources

We compete in a highly technical, very competitive and, in most cases, price driven alcohol testing marketplace, where products can take years to develop and introduce to distributors and end users. Furthermore, manufacturing, marketing and distribution activities are regulated by the DOT and other regulatory bodies that, while intended to enhance the ultimate quality and functionality of products produced, can contribute to the cost and time needed to maintain existing products and develop and introduce new products.

Except for normal operating contractual commitments and purchase orders, we do not have any material contractual commitments requiring settlement in the future. See “Note 6 – Commitments and Contingencies” to our Financial Statements in Part II - Item 8.

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. On March 1, 2025 we completed the issuance of a 70 month unsecured 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.

As of December 31, 2025, cash and cash equivalents were $746,001, trade accounts receivable were $772,380 and current liabilities were $836,870 resulting in net liquid assets of $681,511. 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.

Equipment expenditures, consisting of updated production equipment and SpinDetect™ related equipment, during FY 25 were $354,381 compared to $667,738 for FY 24, a decrease of $313,357. We incurred patent application costs in preparation for filing of $0 in 2025 versus $21,708 in 2024. Fully depreciated equipment of $510,767 was removed from our balance sheet in 2025 vs. none in 2024. Fully amortized patents of $2,821 were removed from our balance sheet in 2025 vs. none in 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.

As the SpinDetect™ disk design nears completion, we expect our outside contractor expenses to decrease materially beginning in Q2 2026. Our outstanding subordinated debentures require combined monthly payments of approximately $10,100 commencing January 2026, with balloon payments not due until December 2030. We believe that our cash and receivables position, combined with cash generated from ongoing product sales, cost reductions already implemented, and the availability of additional financing if needed, are sufficient to fund our operations and meet our financial obligations for the foreseeable future.

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 loss. For the year ended December 31, 2025 and for the year ended December 31, 2024, warranty costs were not deemed significant.

Critical Accounting Policies and Estimates

Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. In general, management's estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.

Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, sales and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to bad debts, inventories, sales returns, warranty, contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies affect the more significant judgments and estimates used in the preparation of our financial statements.

We have concluded that we have one operating segment consisting of our primary business which is as a developer, manufacturer and marketer of portable hand-held breathalyzers and related accessories, supplies and education.

We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances would be required, which would increase our expenses during the periods in which any such allowances were made. The amount recorded as a provision for bad debts in each period is based upon our assessment of the likelihood that we will be paid on our outstanding receivables, based on customer-specific as well as general considerations. To the extent that our estimates prove to be too high, and we ultimately collect a receivable previously determined to be impaired, we may record a reversal of the provision in the period of such determination.

We reduce inventory for estimated obsolete or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required. Any write-downs of inventory would reduce our reported net income during the period in which such write-downs were applied.

Property and equipment are stated at cost, with depreciation computed over the estimated useful lives of the assets, generally five years (three years for software and technology licenses). We use the declining method of depreciation for property, including space modifications, and the straight-line method for software and technology licenses. We purchased all of the assets of STS, an online education company, in 2014, which consisted of training courses that are amortized over 15 years using the straight line method. In 2025, we accelerated the amortization of the remaining cost and fully amortized 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.  The R.A.D.A.R.® software and patents that were purchased in March 2017 were originally set to amortize over 15 years using the straight line method, but in 2022 we accelerated the amortization of the remaining cost to fully amortize the assets by December 31, 2025. Maintenance and repairs are expensed as incurred and major additions, replacements and improvements are capitalized.

Revenue from product sales and supplies is generally recorded when we ship the product and title has passed to the customer, or when agreed milestones are met in the case of product developments, provided that we have evidence of a customer arrangement and can conclude that collection is probable. The prices at which we sell our products are fixed and determinable at the time we accept a customer's order. We recognize revenue from sales to stocking distributors when there is no right of return, other than for normal warranty claims, and generally have no ongoing obligations related to product sales, except for normal warranty.

The sales of licenses to our training courses are recognized as revenue at the time of sale. Direct training performed by us is recognized when training is completed by the trainer, with the unearned portion classified as deferred revenue. Training and certification revenues are recognized at the time the training and certification occurs.  Data recording revenue is recognized based on each day’s usage of enrolled devices.

Revenues arising from extended warranty contracts are booked as sales over their life on a straight-line basis. We provide 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.

On occasion we receive customer deposits for future product orders and for product development. Customer deposits are initially recorded as a liability and recognized as revenue when the product is shipped and title has passed to the customer, or in the case of product development, when agreed milestones are met.

Stock-based compensation is presented in accordance with the guidance of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, Compensation — Stock Compensation (“ASC 718”). Under the provisions of ASC 718, companies are required to estimate the fair value of share-based payment awards made to employees and directors including employee stock options based on estimated fair values on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in our statement of operations.

Off-Balance Sheet Arrangements

We currently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.