Lifeloc Technologies, Inc (Form: 10-Q, Received: 05/08/2013 16:49:12)

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended March 31, 2013

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from to

Commission file number 000-54319

LIFELOC TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

Colorado	84-1053680
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)

12441 West 49th Ave., Unit 4

Wheat Ridge, Colorado 80033

(Address of principal executive offices)

(Registrant’s telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes o No x

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer o

Non-accelerated filer o	Smaller reporting company x
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

Indicate the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:

Common Stock, no par value	2,432,416 Shares
(Class)	(outstanding at May 7, 2013)

LIFELOC TECHNOLOGIES, INC.

For the Three Months Ended March 31, 2013

				Page
				Number

PART I. FINANCIAL INFORMATION				3

	ITEM 1		FINANCIAL STATEMENTS (UNAUDITED)

		-	Condensed Balance Sheets as of March 31, 2013 (Unaudited) and December 31, 2012	3
		-	Condensed Statements of Income (Unaudited) for the three months ended March 31, 2013 and 2012	4
		-	Condensed Statements of Cash Flows (Unaudited) for the three months ended March 31, 2013 and 2012	5
		-	Notes to Condensed Financial Statements (Unaudited)	6

	ITEM 2		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	9

	ITEM 3		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	11

	ITEM 4		CONTROLS AND PROCEDURES	11

PART II. OTHER INFORMATION				12

	ITEM 1		LEGAL PROCEEDINGS	12

	ITEM 1A		RISK FACTORS	12

	ITEM 2		UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	12

	ITEM 3		DEFAULTS UPON SENIOR SECURITIES	13

	ITEM 4		MINE SAFETY DISCLOSURES	13

	ITEM 5		OTHER INFORMATION	13

	ITEM 6		EXHIBITS	13

SIGNATURE				14

PART I FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

LIFELOC TECHNOLOGIES, INC.

Condensed Balance Sheets


ASSETS
	March 31,
	2013			December 31,
CURRENT ASSETS:	(Unaudited)			2012
Cash	$	2,126,187		$	2,338,012
Accounts receivable, net		642,107			405,321
Inventories, net		1,069,630			832,670
Income taxes receivable		78,796			174,129
Deferred taxes		154,961			130,172
Prepaid expenses and other		91,149			31,529
Total current assets		4,162,830			3,911,833

PROPERTY AND EQUIPMENT, at cost:
Production equipment		269,766			258,703
Office equipment		147,727			144,202
Sales and marketing equipment		177,701			175,344
Purchased software		46,203			46,203
Less accumulated depreciation		(398,032	)		(365,728	)
Total property and equipment, net		243,365			258,724

OTHER ASSETS:
Technology licenses, net		43,049			55,139
Patents, net		16,053			11,953
Deferred taxes, long term		5,710			2,112
Deposits and other		108,067			54,704
Total other assets		172,879			123,908

Total assets	$	4,579,074		$	4,294,465

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	260,180		$	82,796
Customer deposits		3,472			294
Accrued expenses		161,864			278,324
Deferred income, current portion		211,609			158,527
Reserve for warranty expense		23,850			23,100
Total current liabilities		660,975			543,041

DEFERRED INCOME, net of current portion		15,025			5,559

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
Common stock, no par value; 50,000,000 shares
authorized, 2,432,416 shares outstanding (2,422,416
at December 31, 2012)		4,324,897			4,309,697
Accumulated (deficit)		(421,823	)		(563,832	)
Total stockholders' equity		3,903,074			3,745,865

Total liabilities and stockholders' equity	$	4,579,074		$	4,294,465

See accompanying notes.

LIFELOC TECHNOLOGIES, INC.

Condensed Statements of Income (Unaudited)


	Three Months Ended March 31,
	2013			2012
REVENUES:
Product sales	$	1,777,924		$	1,803,689
Royalties		130,425			-
Total		1,908,349			1,803,689

COST OF SALES		959,179			1,000,291

GROSS PROFIT		949,170			803,398

OPERATING EXPENSES:
Research and development		160,569			119,331
Sales and marketing		248,327			200,018
General and administrative		337,981			306,584
Total		746,877			625,933

OPERATING INCOME		202,293			177,465

OTHER INCOME (EXPENSE):
Interest income		3,663			3,684
Bad debt recovery		3,000			-
Total		6,663			3,684

NET INCOME BEFORE PROVISION FOR TAXES		208,956			181,149

PROVISION FOR FEDERAL AND STATE INCOME TAXES		(66,947	)		(61,441	)

NET INCOME	$	142,009		$	119,708

NET INCOME PER SHARE, BASIC	$	0.06		$	0.05

NET INCOME PER SHARE, DILUTED	$	0.06		$	0.05

WEIGHTED AVERAGE SHARES, BASIC		2,426,542			2,422,416

WEIGHTED AVERAGE SHARES, DILUTED		2,426,542			2,445,416

See accompanying notes.

LIFELOC TECHNOLOGIES, INC.

Condensed Statements of Cash Flows (Unaudited)


	Three Months Ended March 31,
CASH FLOWS FROM OPERATING ACTIVITIES:	2013			2012
Net income	$	142,009		$	119,708
Adjustments to reconcile net income to net cash
provided by operating activities-
Depreciation and amortization		44,753			42,511
Deferred taxes		(28,387	)		(5,066	)
Reserve for warranty expense		750			400
Changes in operating assets and liabilities-
Accounts receivable		(236,786	)		(42,593	)
Inventories		(236,960	)		62,105
Income taxes receivable		95,333			-
Prepaid expenses and other		(59,620	)		858
Deposits and other		(53,363	)		14,294
Accounts payable		177,384			145,452
Customer deposits		3,178			(2,101	)
Accrued expenses		(116,460	)		(298,290	)
Deferred income		62,548			4,744
Income taxes payable		-			66,507
Net cash provided from (used in)
operating activities		(205,621	)		108,529

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(16,945	)		(41,886	)
Purchase of patent		(4,459	)		-

Net cash (used in) investing activities		(21,404	)		(41,886	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of 10,000 shares of common stock at $1.52 per share		15,200			-

NET INCREASE (DECREASE) IN CASH		(211,825	)		66,643

CASH, BEGINNING OF PERIOD		2,338,012			1,844,802

CASH, END OF PERIOD	$	2,126,187		$	1,911,445

See accompanying notes.

LIFELOC TECHNOLOGIES, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

1. ORGANIZATION AND NATURE OF BUSINESS

Lifeloc Technologies, Inc. (“Lifeloc” or the “Company”) is a Colorado based developer, manufacturer and marketer of portable hand-held breathalyzers and related 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 and sales agents, as well as directly to users.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

These financial statements have been prepared by us, without audit, and reflect normal recurring adjustments which, in the opinion of management, are necessary for a fair statement of the results of the first quarter of 2013. These financial statements do not include all disclosures associated with annual financial statements and, accordingly, should be read in conjunction with footnotes contained in our financial statements for the year ended December 31, 2012 included in our Form 10-K.

Use of Estimates in the Preparation of Financial Statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions. Such estimates and assumptions affect the reported amounts of assets and liabilities as well as disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of sales and expense during the reporting period. Actual results could differ from those estimates.

Note Receivable . We made a loan of $62,500 to Tipping Point, Inc. (“TPI”), an early stage company during the second quarter of 2011. Although the loan has been paid down by $25,000, including a repayment of $3,000 in the first quarter of 2013, we do not expect to realize any significant sales to TPI in the near term. We have provided a reserve against the loan for the full amount, leaving a net amount of $0, which is not included in our balance sheet at March 31, 2013. This note has a provision entitling us to convert any outstanding balance into stock of Tipping Point, Inc. TPI is considered a related party as certain of our board members were also TPI board members during a portion of 2011.

Inventories. Inventories are stated at the lower of cost (first-in, first-out basis) or market. 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. At March 31, 2013 and December 31, 2012, inventory consisted of the following:

	2013			2012
Raw materials & deposits	$	405,827		$	271,865
Work-in-process		225,649			126,209
Finished goods		491,351			479,596
Total gross inventories		1,122,827			877,670
Less reserve for obsolescence		(53,197	)		(45,000	)
Total net inventories	$	1,069,630		$	832,670

Income Taxes. We account for income taxes under the provisions of Accounting Standards Codification Topic 740, “Accounting for Income Taxes” (“ASC 740”). We have determined an estimated annual effective tax rate. The rate will be revised, if necessary, as of the end of each successive interim period during our fiscal year to our best current estimate.

The estimated annual effective tax rate is applied to the year-to-date ordinary income (or loss) at the end of the interim period.

ASC 740 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This pronouncement also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.

Revenue Recognition. Revenue from product sales is recorded when we ship the product and title has passed to the customer, 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.

Service and extended warranty contracts are booked as sales over their life on a straight-line basis. Supplies are recognized as sales when they are shipped. Training revenues are recognized at the time the training occurs. On occasion we arrange for customer financing and leasing through unrelated third parties. We recognize as revenue a fee from this arrangement at the time of the transaction. Occasionally, we rent used breathalyzers 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.

Deferred Revenue. Deferred revenues arise from service contracts and from extended warranty contracts. Those revenues are recognized on a straight-line basis over the life of the contract, which generally are written for one year. However, there are occasions when they are written for longer terms up to four years. In those cases, the revenues from that portion of the contract that extend beyond one year are shown in our balance sheet as long term. Deferred revenues also result from progress payments received on development contracts; those revenues are recognized when the contract is complete. All development contracts are for less than one year and all deferred revenues from this source are shown in our balance sheet as short term.

Fair Value of Financial Instruments . Our financial instruments consist of cash and cash equivalents, short-term trade receivables, note receivable and payables. The carrying values of cash and cash equivalents, short-term receivables and payables approximate their fair value due to their short term maturities.

Recent Accounting Pronouncements . We have reviewed all recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements may be expected to cause a material impact on our financial condition or the results of our operations.

3. BASIC AND DILUTED INCOME PER COMMON SHARE

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

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

	Three Months Ended
	March 31, 2013		March 31, 2012
Net income	$	142,009	$	119,708
Weighted-average shares — basic		2,426,542		2,422,416
Effect of dilutive potential common shares		-		23,000
Weighted-average shares — diluted		2,426,542		2,445,416
Net income per share — basic	$	0.06	$	0.05
Net income per share — diluted	$	0.06	$	0.05
Antidilutive employee stock options		0		0

4. STOCKHOLDERS’ EQUITY

The following table summarizes information about employee stock options outstanding and exercisable at March 31, 2013:

	STOCK OPTIONS OUTSTANDING				STOCK OPTIONS EXERCISABLE
Range of Exercise Prices	Number Outstanding	Weighted-Average Remaining Contractual Life (in Years)	Weighted-Average Exercise Price per Share		Number Exercisable	Weighted-Average Exercise Price per Share
$3.69	23,000	4		$3.69	23,000		$3.69

Of the 23,000 options exercisable as of March 31, 2013, all are incentive stock options. The exercise price of all options granted through March 31, 2013 has been equal to or greater than the fair market value.

The total number of authorized shares of common stock continues to be 50,000,000, with no change in the par value per share.

5. RELATED PARTY TRANSACTIONS

During the quarter ended March 31, 2013, we paid a consulting fee of $15,000 to a director.

In May, 2012, we extended our line of credit for $150,000 with Citywide Bank. The credit facility will mature on June 1, 2013, and the interest rate is calculated at the prime rate plus 1%. There was no balance due on the line of credit as of March 31, 2013 and December 31, 2012.

We entered into a development contract in March 2013, which calls for an initial deposit of $31,602, followed by seven monthly payments of $10,534.

8. SUBSEQUENT EVENTS

We evaluated all of our activity and concluded that no subsequent events have occurred that would require recognition in our financial statements or disclosure in the notes to our financial statements, except that our shareholders approved a stock option plan providing for the grant of up to 150,000 shares at their annual meeting on April 1, 2013.

ITEM 2 - 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-Q. 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 as defined in the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”), and we intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in these statutes. You can identify forward-looking statements by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “intends,” “plans” or “anticipates” or the negative of these words and phrases or similar words or phrases that are predictions of or indicate future events or trends and that do not relate solely to historical matters. Such statements 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-Q are strongly encouraged to review the section titled “Risk Factors” in our December 31, 2012 Form 10-K.

We have been a developer and manufacturer of advanced alcohol testing instruments since 1986. We design and produce high-quality, precise and rapid recovery alcohol testing instruments for use in workplace, clinics, schools, law enforcement, corrections, and other applications. We offer our customers accessories, service support, training and supplies. Our internet websites are www.lifeloc.com and www.lifeguardbreathtester.com .

The areas in which we do business are highly competitive and include both foreign and domestic competitors. Our major competitors are larger and have substantially greater resources than we do. Furthermore, other domestic or foreign companies, some with greater financial resources than we have, may seek to produce products or services that compete with ours.

We believe that competition for sales of alcohol testing products is based on product performance, service, delivery and price.

We believe that our future success depends to a large degree on our ability to develop new alcohol testing products and services to enhance the performance characteristics and methods of manufacture of existing products. Accordingly, we expect to continue to invest resources in research and development, to the extent funds are available.

Results of Operations

For the three months ended March 31, 2013 compared to the three months ended March 31, 2012 .

Net sales. Our product sales for the quarter ended March 31, 2013 were $1,777,924, a decrease of 1% from $1,803,689 for the quarter ended March 31, 2012. This decrease is attributable primarily to a decrease in orders from a large customer redesigning its ignition interlock product and therefore placing fewer orders, although it was offset in part by royalties on product sales by a former OEM customer that licensed our patented breath alcohol testing algorithms. When royalties of $130,425 are included, total revenues of $1,908,349 increased by $104,660, or 6%, for the quarter ended March 31, 2013 when compared to the same quarter a year ago.

Gross profit. Gross profit for the quarter ended March 31, 2013 of $949,170 represented an increase of 18% from gross profit of $803,398 for the quarter ended March 31, 2012 as a result of royalties resulting from a royalty agreement we entered into in 2012 with a former OEM customer, which provides for the monthly payment of royalties to us on all products containing certain of our software sold by our customer. Gross profit as a percentage of product sales decreased from 56% to 54% as a result the lower product sales for the quarter ended March 31, 2013 vs. the product sales for the quarter ended March 31, 2012, and as a result of increased compensation for the quarter ended March 31, 2013.

Research and development expenses. Research and development expenses were $160,569 for the quarter ended March 31, 2013, representing an increase of 35% over the $119,331 in the same quarter a year ago. This increase resulted from personnel and compensation increases, as well as payments to outside vendors, required to maintain our product development efforts.

Sales and marketing expenses. Sales and marketing expenses of $248,327 for the quarter ended March 31, 2013 represented an increase of 24% from sales and marketing expenses of $200,018 for the quarter ended March 31, 2012. This increase resulted primarily from increased advertising outlays.

General and administrative expenses. General and administrative expenses were $337,981 for the quarter ended March 31, 2013, which represented an increase of 10% over the $306,584 spent in the same quarter a year ago. This increase results from additional public company expense, and from consulting fees paid to a director.

Other income. The increase in other income resulted from a recovery of principal from the Tipping Point loan in the quarter ended March 31, 2013.

Net income. Net income was $142,009 for the quarter ended March 31, 2013 compared to net income of $119,708 for the quarter ended March 31, 2012. This increase of $22,301, or 19%, was the result of an increase in gross profit, offset in part by increased operating expenses as described above, as well as an increase in the provision for federal and state income taxes of $5,506.

Trends and Uncertainties That May Affect Future Results

Although revenues in 2013 are up slightly compared to revenues in 2012, we received several orders from international customers and from OEM customers in 2012 that are not expected to repeat in future periods. 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.

Our 2013 operating plan is focused on growing sales, increasing gross profits, increasing research and development costs as appropriate while increasing profits and positive cash flows. We cannot predict with certainty the expected sales, gross profit, net income or loss and usage of cash and cash equivalents for 2013. However, we believe that cash resources and borrowing capacity will be sufficient to fund our operations for the next twelve months under our current operating plan. If we are unable to manage the business operations in line with our budget expectations, it could have a material adverse effect on business viability, financial position, results of operations and cash flows. Further, if we are not successful in sustaining profitability and remaining at least cash flow break-even, additional capital may be required to maintain ongoing operations.

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 FDA, 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.

We have traditionally funded working capital needs through product sales and close management of working capital components of our business. Historically, we have also received cash from private offerings of our common stock, warrants to purchase shares of our common stock, and notes. In our earlier years, we incurred quarter to quarter operating losses to develop current product applications, utilizing a number of proprietary and patent-pending technologies. Although we have been profitable during the last several years, we expect that operating losses could well 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 or at all.

On May 11, 2004, we entered into a credit facility agreement with Citywide Bank, which was renewed for one year in May 2012. The terms of the credit facility include a line of credit for $150,000, which matures on June 1, 2013 at an interest rate calculated at prime rate plus 1%, and all of which was available at March 31, 2013. Our borrowing under the credit facility is limited by our eligible receivables and inventory at the time of borrowing. At March 31, 2013 and December 31, 2012 we had not borrowed any amounts from the credit facility. The credit facility requires us to meet certain financial covenants. At March 31, 2013 and at March 31, 2012, we were in compliance with the financial covenants.

As of March 31, 2013, cash and cash equivalents were $2,126,187, trade accounts receivable were $642,107 and current liabilities were $660,975 resulting in a net liquid asset amount of $2,107,319. We believe that the introduction of several new products during the last several years, along with new and on-going customer relationships, will continue to generate sufficient revenues, which are required in order for us to maintain profitability. If these revenues are not achieved on a timely basis, we will be required to implement cost reduction measures, as necessary.

We made a loan of $62,500 to Tipping Point, Inc. (“TPI”), an early stage company, during Q2 of 2011. Although the loan has been paid down by $25,000, a repayment of $3,000 in the first quarter of 2013 we do not expect to realize any significant sales to TPI in the near term. We have provided a reserve against the full amount of the loan, leaving a net amount of $0, which is not included in our balance sheet at March 31, 2013. Two of our directors formerly served as directors of TPI.

We generally provide a standard one-year 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 quarter ended March 31, 2013 and for the quarter ended March 31, 2012, warranty costs were not deemed significant.

Critical Accounting Policies and Estimates

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 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 provide for the estimated cost of product warranties at the time sales are recognized. While we engage in extensive product quality programs and processes, including actively monitoring and evaluating the quality of our component suppliers, we have experienced some costs related to warranties. The warranty accrual is based on historical experience and is adjusted based on current experience. Should actual warranty experience differ from our estimates, revisions to the estimated warranty liability would be required.

We reduce inventory for estimated obsolete or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based on 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. To the extent that our estimates prove to be too high, and we ultimately utilize or sell inventory previously determined to be impaired, we may record a reversal of the provision in the period of such determination.

We recognize deferred income tax assets and liabilities for the expected future income tax consequences, based on enacted tax laws, of temporary differences between the financial reporting and tax bases of assets and liabilities. Deferred tax assets are then reduced, if deemed necessary, by a valuation allowance for the amount of any tax benefits which, more likely than not based on current circumstances, are not expected to be realized. Should we maintain sufficient, sustained income in the future, we may conclude that all or some of the valuation allowance should be reversed.

Property and equipment are stated at cost, with depreciation computed over the estimated useful lives of the assets, generally three to five years. We use the double declining method of depreciation for property and equipment. Leasehold improvements are depreciated over the shorter of the remaining lease term or the estimated useful life of the asset. Maintenance and repairs are expensed as incurred and major additions, replacements and improvements are capitalized.

We amortize our patent costs over their estimated useful lives, which is typically the remaining statutory life. From time to time, we may be required to adjust these useful lives of our patents based on advances in technology, competitor actions, and the like. We review the recorded amounts of patents at each period end to determine if their carrying amount is still recoverable based on our expectations regarding sales of related products. Such an assessment, in the future, may result in a conclusion that the assets are impaired, with a corresponding charge against earnings.

We recognize revenue from product sales when we ship the product and title has passed to the customer, 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.

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.

Deferred revenues arise from service contracts and from extended warranty contracts. Those revenues are recognized on a straight-line basis over the life of the contract, which generally are written for one year. However, there are occasions when they are written for longer terms up to four years. In those cases, the revenues from that portion of the contract that extend beyond one year are shown in our balance sheet as long term. Deferred revenues also result from progress payments received on development contracts; those revenues are recognized when the contract is complete. All development contracts are for less than one year and all deferred revenues from this source are shown in our balance sheet as short term.

ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 4 – CONTROLS AND PROCEDURES

Our Chief Executive Officer and Principal Accounting Officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Form 10-Q, have concluded that, based on such evaluation, our disclosure controls and procedures were not effective as of March 31, 2013 because of the material weaknesses in our internal control over financial reporting discussed below.

1.	Insufficient access to appropriate technical research materials and sufficient technical accounting knowledge within the accounting department related to accounting for complex transactions and to evolving generally accepted accounting principles.

2.	Insufficient technical accounting knowledge within the audit committee to adequately provide oversight of the Company’s accounting and reporting functions.

Because of the material weaknesses identified above, a reasonable possibility exists that a material misstatement in our financial statements will not be prevented or detected on a timely basis. However, our Chief Executive Officer and Principal Accounting Officer believe that the financial statements included in this quarterly report on Form 10-Q present, in all material respects, our financial position, results of operations and cash flows for the periods presented, in conformity with U.S. GAAP.

Plan for Remediation of Material Weaknesses

The remediation efforts outlined below are intended to address the identified material weaknesses in internal control over financial reporting.

1.	We have acquired access to additional technical research materials and have evaluated the need to retain additional personnel to enable our accounting department to adequately respond to changes in our operations and to changes within generally accepted accounting principles.

2.	We will attempt to recruit a new director to be appointed to our audit committee with the required credentials to serve as our audit committee financial expert.

On May 8, 2013, our Board appointed Dr. Wayne Willkomm to replace Dr. Robert Greenlee as chair of our audit committee. We will consider the results of our remediation efforts and related testing as part of our year-end 2013 assessment of the effectiveness of our internal control over financial reporting.

Changes in Internal Control over Financial Reporting

Except as otherwise noted above, there were no significant changes in our internal control over financial reporting during the period ended March 31, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Controls

A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Our management, including our Chief Executive Officer and our Chief Financial Officer, do not expect that the Company’s disclosure controls will prevent or detect all errors and all fraud. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with associated policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

PART II. OTHER INFORMATION

ITEM 1 – LEGAL PROCEEDINGS

From time to time, we are subject to legal proceedings and claims that arise in the ordinary course of business. As of the date of this filing, there are no material pending or overtly threatened legal actions against us of which we are aware.

ITEM 1A – RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the factors discussed in ‘‘Risk Factors’’ in our Annual Report on Form 10-K for the year ended December 31, 2012, which could materially affect our business, financial condition and/or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On January 10, 2013 we sold 3,333 shares of our common stock and on February 15, 2013 we sold 6,667 shares of our common stock, in both cases to an officer and director at $1.52 per share pursuant to the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended. The full purchase price was paid in cash.

ITEM 3 – DEFAULTS UPON SENIOR SECURITIES

ITEM 4 – MINE SAFETY DISCLOSURES

ITEM 5 – OTHER INFORMATION

The following exhibits are filed with this report on Form 10-Q or are incorporated by reference:

Exhibit No.		Description of Exhibit
3.1		Articles of Incorporation, dated as of December 29, 1983 (1)
3.2		Articles of Amendment to the Articles of Incorporation, dated as of July 10, 1986 (1)
3.3		Articles of Amendment to the Articles of Incorporation, dated as of August 18, 1986 (1)
3.4		Articles of Amendment to the Articles of Incorporation, dated as of April 18, 1988 (1)
3.5		Articles of Amendment to the Articles of Incorporation, dated as of April 1, 1991 (1)
3.6		Articles of Amendment to the Articles of Incorporation, dated as of May 10, 1993 (1)
3.7		Articles of Amendment to the Articles of Incorporation, dated as of May 11, 1992 (1)
3.8		Articles of Amendment to the Articles of Incorporation, dated as of November 17, 1997 (1)
3.9		Articles of Amendment to the Articles of Incorporation, dated as of July 15, 1998 (1)
3.10		Articles of Amendment to the Articles of Incorporation, dated as of April 1, 1994 (1)
3.11		Bylaws (1)
4.1		Form of Certificate representing Common Stock (1)
10.1		2013 Stock Option Plan
10.2		Lease by and between Lifeloc Technologies, Inc. and Ward West Properties LLC, dated December 12, 2006 (1)
10.3		First Lease Amendment and Extension, dated May 1, 2011, to the Lease by and between Lifeloc Technologies, Inc. and Ward West Properties LLC, dated December 12, 2006 (1)
10.4		Contract No. 071B0200005 between the State of Michigan and Lifeloc Technologies, Inc., dated October 5, 2009 (1)
10.5		Technology Transfer Agreement between Lifeloc Technologies, Inc. and Fuel Cell Sensors, dated June 1, 2011 (1)
10.6		Form of Standard Distribution Agreement (1)
10.7		Business Loan Agreement between Lifeloc Technologies, Inc. and Citywide Banks, dated May 11, 2011, as amended (1)
10.8		Representation Agreement between Crossco Manufacturers Representatives, Inc. and Lifeloc Technologies, Inc., dated February 2, 2009 (2)
31.1		Certification of Principal Executive Officer Pursuant To Section 302 Of The Sarbanes—Oxley Act Of 2002
31.2		Certification of Principal Financial Officer Pursuant To Section 302 Of The Sarbanes—Oxley Act Of 2002
32.1		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101		Interactive Date Files Pursuant to Rule 405 of Regulation S-T.

(1)	Incorporated by reference to our Registration Statement on Form 10-12G, filed on March 31, 2011.

(2)	Incorporated by reference to our Registration Statement on Form 10-12G (Amendment 1), filed on May 11, 2011.

Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		LIFELOC TECHNOLOGIES, INC.

May 8, 2013	By:	/s/ Barry R. Knott
Date		Barry R. Knott
		President and Chief Executive Officer (Principal Executive Officer)

May 8, 2013	By:	/s/ Kristie L. LaRose
Date		Kristie L. LaRose
		Vice President of Finance and Administration (Principal Accounting Officer)

Exhibit No.		Description of Exhibit
3.1		Articles of Incorporation, dated as of December 29, 1983 (1)
3.2		Articles of Amendment to the Articles of Incorporation, dated as of July 10, 1986 (1)
3.3		Articles of Amendment to the Articles of Incorporation, dated as of August 18, 1986 (1)
3.4		Articles of Amendment to the Articles of Incorporation, dated as of April 18, 1988 (1)
3.5		Articles of Amendment to the Articles of Incorporation, dated as of April 1, 1991 (1)
3.6		Articles of Amendment to the Articles of Incorporation, dated as of May 10, 1993 (1)
3.7		Articles of Amendment to the Articles of Incorporation, dated as of May 11, 1992 (1)
3.8		Articles of Amendment to the Articles of Incorporation, dated as of November 17, 1997 (1)
3.9		Articles of Amendment to the Articles of Incorporation, dated as of July 15, 1998 (1)
3.10		Articles of Amendment to the Articles of Incorporation, dated as of April 1, 1994 (1)
3.11		Bylaws (1)
4.1		Form of Certificate representing Common Stock (1)
10.1		2013 Stock Option Plan
10.2		Lease by and between Lifeloc Technologies, Inc. and Ward West Properties LLC, dated December 12, 2006 (1)
10.3		First Lease Amendment and Extension, dated May 1, 2011, to the Lease by and between Lifeloc Technologies, Inc. and Ward West Properties LLC, dated December 12, 2006 (1)
10.4		Contract No. 071B0200005 between the State of Michigan and Lifeloc Technologies, Inc., dated October 5, 2009 (1)
10.5		Technology Transfer Agreement between Lifeloc Technologies, Inc. and Fuel Cell Sensors, dated June 1, 2011 (1)
10.6		Form of Standard Distribution Agreement (1)
10.7		Business Loan Agreement between Lifeloc Technologies, Inc. and Citywide Banks, dated May 11, 2011, as amended (1)
10.8		Representation Agreement between Crossco Manufacturers Representatives, Inc. and Lifeloc Technologies, Inc., dated February 2, 2009 (2)
31.1		Certification of Principal Executive Officer Pursuant To Section 302 Of The Sarbanes—Oxley Act Of 2002
31.2		Certification of Principal Financial Officer Pursuant To Section 302 Of The Sarbanes—Oxley Act Of 2002
32.1		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101		Interactive Date Files Pursuant to Rule 405 of Regulation S-T.

(1)	Incorporated by reference to our Registration Statement on Form 10-12G, filed on March 31, 2011.

(2)	Incorporated by reference to our Registration Statement on Form 10-12G (Amendment 1), filed on May 11, 2011.

LIFELOC TECHNOLOGIES, INC.

STOCK OPTION PLAN

I. Purpose

The LIFELOC TECHNOLOGIES, INC. Stock Option Plan (the “Plan”) provides for the grant of Stock Options to employees and directors of Lifeloc Technologies, Inc. (the “Company”), and such of its subsidiaries (as defined in Section 424(f) of the Internal Revenue Code of 1986, as amended (the “Code”)) as the Board of Directors of the Company (the “Board”) shall from time to time designate (“Participating Subsidiaries”), in order to advance the interests of the Company and its Participating Subsidiaries through the motivation, attraction and retention of their respective Employees.

II. Incentive Stock Options and Non-Incentive Stock Options

The Stock Options granted under the Plan may be either:

(a) Incentive Stock Options (“ISOs”) which are intended to be “Incentive Stock Options” as that term is defined in Section 422 of the Code; or

(b) Nonstatutory Stock Options (“NSOs”) which are intended to be options that do not qualify as “Incentive Stock Options” under Section 422 of the Code.

All Stock Options shall be ISOs unless the applicable option agreement clearly designates the Stock Options granted thereunder, or a specified portion thereof, as NSOs. Subject to the other provisions of the Plan, a Participant may receive ISOs and NSOs at the same time, provided that the ISOs and NSOs are clearly designated as such in the applicable option agreement.

Except as otherwise expressly provided herein or as required by law, all of the provisions and requirements of the Plan relating to Stock Options shall apply to ISOs and NSOs.

III. Administration

3.1 Administrator .

(a) The Plan shall be administered by the Board of Directors or, to the extent permitted by applicable law, a committee appointed by the Board of Directors composed of one or more directors or such number of directors as may be required under applicable law (in either case, the “Administrator”). The Administrator shall have full authority to administer the Plan, including authority to interpret and construe any provision of the Plan and any Stock Option granted thereunder, and to adopt such rules and regulations for administering the Plan as it may deem necessary in order to comply with the requirements of the Code, in order that Stock Options that are intended to be ISOs will be classified as incentive stock options under the Code, or in order to conform to any regulation or to any change in any law or regulation applicable thereto. Unless otherwise provided in the bylaws of the Company or the applicable charter of any Administrator: (a) a majority of the members of the acting Administrator shall constitute a quorum, and (b) the affirmative vote of a majority of the members present assuming the presence of a quorum or the unanimous written consent of the members of the Administrator shall constitute due authorization of an action by the acting Administrator.

(b) With respect to awards intended to satisfy the requirements for performance-based compensation under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), this Plan shall be administered by a committee consisting solely of two or more outside directors (as this requirement is applied under Section 162(m) of the Code); provided, however, that the failure to satisfy such requirement shall not affect the validity of the action of any committee otherwise duly authorized and acting in the matter. Award grants, and transactions in or involving awards, intended to be exempt under Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), must be duly and timely authorized by the Board or a committee consisting solely of two or more non-employee directors (as this requirement is applied under Rule 16b-3 promulgated under the Exchange Act). To the extent required by any applicable stock exchange, this Plan shall be administered by a committee composed entirely of independent directors (within the meaning of the applicable stock exchange). Awards granted to non-employee directors shall not be subject to the discretion of any officer or employee of the Company and shall be administered exclusively by a committee consisting solely of independent directors.

3.2 Powers of the Administrator .

(a) Subject to the express provisions of this Plan, the Administrator is authorized and empowered to do all things necessary or desirable in connection with the authorization of awards and the administration of this Plan (in the case of a committee or delegation to one or more officers, within the authority delegated to that committee or person(s)).

(b) All actions taken and all interpretations and determinations made by the Administrator in good faith (including determinations of Fair Market Value) shall be final and binding upon all Participants, the Company and all other interested persons. No member of the Administrator shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan, and all members of the Administrator shall, in addition to their rights as directors, be fully protected by the Company with respect to any such action, determination or interpretation.

IV. Definitions

4.1 “ Common Stock ” A share of common stock means a share of authorized but unissued or reacquired common stock (no par value) of the Company.

4.2 “ Change in Control ” For purposes of this Plan, “Change in Control” shall be deemed to have occurred if:

(i)

a tender offer (or series of related offers) shall be made and consummated for the ownership of 50% or more of the outstanding voting securities of the Company, unless as a result of such tender offer more than 50% of the outstanding voting securities of the surviving or resulting corporation shall be owned in the aggregate by the stockholders of the Company (as of the time immediately prior to the commencement of such offer), any employee benefit plan of the Company or its Subsidiaries, and their affiliates;

(ii)

the Company shall be merged or consolidated with another entity, unless as a result of such merger or consolidation more than 50% of the outstanding voting securities of the surviving or resulting entity shall be owned in the aggregate by the stockholders of the Company (as of the time immediately prior to such transaction), any employee benefit plan of the Company or its Subsidiaries, and their affiliates;

(iii)

the Company shall sell substantially all of its assets to another entity that is not wholly owned by the Company, unless as a result of such sale more than 50% of such assets shall be owned in the aggregate by the stockholders of the Company (as of the time immediately prior to such transaction), any employee benefit plan of the Company or its Subsidiaries and their affiliates; or

(iv)

a Person (as defined below) shall acquire 50% or more of the outstanding voting securities of the Company (whether directly, indirectly, beneficially or of record), unless as a result of such acquisition more than 50% of the outstanding voting securities of the surviving or resulting corporation shall be owned in the aggregate by the stockholders of the Company (as of the time immediately prior to the first acquisition of such securities by such Person), any employee benefit plan of the Company or its Subsidiaries, and their affiliates.

For purposes of this Section 4.2, ownership of voting securities shall take into account and shall include ownership as determined by applying the provisions of Rule 13d-3(d)(I)(i) (as in effect on the date hereof) under the Exchange Act. In addition, for such purposes, “Person” shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof; provided, however, that a Person shall not include (A) the Company or any of its subsidiaries; (B) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its subsidiaries; (C) an underwriter temporarily holding securities pursuant to an offering of such securities; or (D) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportion as their ownership of stock of the Company.

4.3 “ Director ” A member of the Board of Directors of the Company or any Participating Subsidiary.

4.4 “ Employee ” An employee of the Company or any Participating Subsidiary.

4.5 “ Fair Market Value ” For purposes of this Plan, “Fair Market Value” shall mean, unless otherwise determined or provided by the Administrator in the circumstances, the closing price for a share of Common Stock on the trading day immediately before the grant date, as furnished by the OTC Markets (the “OTC Markets”) or on the principal stock exchange on which the Common Stock is then listed for the date in question. If the Common Stock is no longer actively traded on the OTC Markets or listed on a principal stock exchange as of the applicable date, the Fair Market Value of the Common Stock shall be the value as reasonably determined by the Administrator for purposes of the award in the circumstances.

4.6 “ Participant ” An Employee or Director to whom a Stock Option is granted.

4.7 “ Stock Option ” The right granted under the Plan to a Participant to purchase, at such time or times and at such price or prices (“Option Price”) as are determined by the Administrator, the number of shares of Common Stock determined by the Administrator.

V. Eligibility and Participation

Grants of Stock Options may be made to Employees and Directors of the Company or any Participating Subsidiary. The Administrator shall from time to time determine the Participants to whom Stock Options shall be granted, the number of shares of Common Stock subject to each Stock Option to be granted to each such Participant, the Option Price of such Stock Options and other terms and provisions of such Stock Options, all as provided in the Plan. The Option Price of any ISO shall be not less than the Fair Market Value of a share of Common Stock on the date on which the Stock Option is granted. Each Stock Option shall be evidenced by a written agreement containing such terms and provisions as the Administrator may determine, subject to the provisions of the Plan.

VI.	Additional Rules Applicable to ISOs

(a) If an ISO is granted to a Participant who, following such grant, owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any parent or subsidiary corporation of the Company, the Option Price of such ISO shall be at least 110% of the Fair Market Value of the Common Stock subject to the ISO at the time such ISO is granted, and such ISO shall not be exercisable after five years after the date on which it was granted.

(b) The aggregate Fair Market Value (determined as of the time the ISO is granted) of the Common Stock as to which all ISOs granted to an Employee may first become exercisable in a particular calendar year may not exceed $100,000.

VII. Shares of Common Stock Subject to the Plan

6.1 Maximum Number . The maximum aggregate number of shares of Common Stock that may be made subject to Stock Options shall be 150,000 authorized but unissued shares, subject to adjustment pursuant to Section 7.2 below. If any shares of Common Stock subject to Stock Options terminate or are not purchased before such Stock Options expire, such shares may again be made available to be granted under the Plan.

6.2 Capital Changes . Upon or in contemplation of any changes made to the shares of Common Stock (whether by reason of merger, consolidation, reorganization, recapitalization, stock dividend in excess of ten percent (10%) at any single time, stock split, combination of shares, exchange of shares, change in corporate structure or otherwise), the Administrator shall make appropriate adjustments in: (i) the number of shares of Common Stock theretofore made subject to Stock Options, and in the purchase price of said shares; and (ii) the maximum aggregate number of shares which may be made subject to Stock Options. With respect to any award that constitutes an ISO, in whole or in part, if the Administrator deems it necessary and in the best interests of the Company, the Administrator may make such an adjustment that causes such ISO to cease to qualify as an ISO without the consent of the affected Participant. If any of the foregoing adjustments shall result in a fractional share, the fraction shall be disregarded, and the Company shall have no obligation to make any cash or other payment with respect to such a fractional share.

VIII. General Terms of Stock Options

8.1 Vesting . Unless otherwise set forth in the applicable option agreement, all Stock Options shall vest immediately upon grant.

8.1 Time of Exercise . Subject to the provisions of the Plan, including without limitation Section 8.5, the Administrator, in its discretion, shall determine the time when a Stock Option, or a portion of a Stock Option, shall become exercisable, and the time when a Stock Option shall expire, provided that unless otherwise set forth in the applicable agreement, all Stock Options shall expire five years after date of grant. Such time or times shall be set forth in the Option Agreement evidencing such Stock Option. The maximum term of each Stock Option (ISO or NSO) shall be ten years. The Administrator may accelerate the vesting of any Participant's Stock Option by giving written notice to the Participant. Upon receipt of such notice, the Participant and the Company shall amend the Option Agreement to reflect the new vesting schedule. The acceleration of the exercise period of a Stock Option shall not affect the expiration date of that Stock Option.

8.2 Delivery of Shares as Consideration for Exercise Price . The Administrator, in its sole discretion, may permit a Participant to surrender to the Company shares of Common Stock previously acquired by the Participant as part or full payment for the exercise of a Stock Option. Such surrendered shares shall be valued at their Fair Market Value on the date of exercise.

8.3 Stock Restriction Agreement . The Administrator may provide that shares of Common Stock issuable upon the exercise of a Stock Option shall, under certain conditions, be subject to restrictions whereby the Company has a right of first refusal with respect to such shares or a right or obligation to repurchase all or a portion of such shares, which restrictions may survive a Participant's term of employment with the Company. The acceleration of time or times at which a Stock Option becomes exercisable may be conditioned upon the Participant's agreement to such restrictions.

8.4 Termination of Employment Before Exercise . If a Participant's employment with the Company or a Participating Subsidiary shall terminate for any reason other than the Participant's death or disability, any Stock Option then held by the Participant, to the extent then exercisable under the applicable Option Agreement(s), shall remain exercisable after the termination of his employment for a period of 30 days (but in no event beyond ten years from the date of grant). If the Participant's employment is terminated because the Participant dies or is disabled within the meaning of Section 22(e)(3) of the Code, any Stock Option then held by the Participant, to the extent then exercisable under the applicable Option Agreement(s), shall remain exercisable after the termination of his employment for a period of three months (but, in the case of an ISO, in no event beyond ten years from the date of grant of the ISO). If the Stock Option is not exercised during the applicable period, it shall be deemed to have been forfeited and of no further force or effect.

8.5 Effect of a Change in Control . Upon a Change in Control, all awards under the Plan shall terminate and be forfeited, subject to any provision that has been expressly made by the Administrator, through a plan of reorganization or otherwise, for the survival, substitution, assumption, exchange or other continuation of such award, provided that the holder of such award shall be given reasonable advance notice of the impending termination and a reasonable opportunity to exercise his or her outstanding Stock Options in accordance with their terms before the termination of such awards. The Administrator may make provision for payment in cash or property (or both) in respect of awards to be terminated pursuant to this section as a result of the Change in Control and may adopt such valuation methodologies for outstanding awards as it deems reasonable and may base such settlement solely upon the excess if any of the per share amount payable upon or in respect of such event over the exercise of the Stock Option. The portion of any ISO accelerated pursuant to this Section 8.5 or any other action permitted hereunder shall remain exercisable as an ISO only to the extent the applicable $100,000 limitation on ISOs is not exceeded. To the extent exceeded, the accelerated portion of the option shall be exercisable as an NSO under the Code.

8.6 Disposition of Forfeited Stock Options . Any shares of Common Stock subject to Stock Options forfeited by a Participant shall not thereafter be eligible for purchase by the Participant but may be made subject to Stock Options granted to other Participants.

IX. Governing Law; Construction; Severability.

9.1 Choice of Law . This Plan, the awards, all documents evidencing awards and all other related documents shall be governed by, and construed in accordance with the laws of the State of Nevada.

9.2 Severability . If a court of competent jurisdiction holds any provision invalid and unenforceable, the remaining provisions of this Plan shall continue in effect.

9.3 Plan Construction .

(a) Rule 16b-3 . It is the intent of the Company that the awards and transactions permitted by awards be interpreted in a manner that, in the case of participants who are or may be subject to Section 16 of the Exchange Act, qualify, to the maximum extent compatible with the express terms of the award, for exemption from matching liability under Rule 16b-3 promulgated under the Exchange Act. Notwithstanding the foregoing, the Company shall have no liability to any participant for Section 16 consequences of awards or events under awards if an award or event does not so qualify.

(b) Code Section 409A Compliance . The Board intends that, except as may be otherwise determined by the Administrator, any awards under the Plan are either exempt from or satisfy the requirements of Section 409A of the Code and related regulations and Treasury pronouncements (“Section 409A”) to avoid the imposition of any taxes, including additional income or penalty taxes, thereunder. If the Administrator determines that an award, award agreement, acceleration, adjustment to the terms of an award, payment, distribution, deferral election, transaction or any other action or arrangement contemplated by the provisions of the Plan would, if undertaken, cause a participant’s award to become subject to Section 409A, unless the Administrator expressly determines otherwise, such award, award agreement, payment, acceleration, adjustment, distribution, deferral election, transaction or other action or arrangement shall not be undertaken and the related provisions of the Plan and/or award agreement will be deemed modified or, if necessary, rescinded in order to comply with the requirements of Section 409A to the extent determined by the Administrator without the content or notice to the participant. Notwithstanding the foregoing, neither the Company nor the Administrator shall have any obligation to take any action to prevent the assessment of any excise tax or penalty on any participant under Section 409A and neither the Company nor the Administrator will have any liability to any participant for such tax or penalty.

(c) No Guarantee of Favorable Tax Treatment . Although the Company intends that awards under the Plan will be exempt from, or will comply with, the requirements of Section 409A of the Code, the Company does not warrant that any award under the Plan will qualify for favorable tax treatment under Section 409A of the Code or any other provision of federal, state, local or foreign law. The Company shall not be liable to any participant for any tax, interest or penalties the participant might owe as a result of the grant, holding, vesting, exercise or payment of any award under the Plan

9.4 Compliance with Laws . This Plan, the granting and vesting of awards under this Plan, the offer, issuance and delivery of shares of common stock, and/or the payment of money under this Plan or under awards are subject to compliance with all applicable federal and state laws, rules and regulations (including but not limited to state and federal securities law, federal margin requirements) and to such approvals by any applicable stock exchange listing, regulatory or governmental authority as may, in the opinion of counsel for the Company, be necessary or advisable in connection therewith. The person acquiring any securities under this Plan will, if requested by the Company or a Participating Subsidiary, provide such assurances and representations to the Company or a Participating Subsidiary as the Administrator may deem necessary or desirable to assure compliance with all applicable legal and accounting requirements.

X. Plan Not Funded.

Awards payable under this Plan shall be payable in shares or from the general assets of the Corporation, and no special or separate reserve, fund or deposit shall be made to assure payment of such awards. No participant, beneficiary or other person shall have any right, title or interest in any fund or in any specific asset (including shares of common stock, except as expressly otherwise provided) of the Company or Participating Subsidiary by reason of any award hereunder. Neither the provisions of this Plan (or of any related documents), nor the creation or adoption of this Plan, nor any action taken pursuant to the provisions of this Plan shall create, or be construed to create, a trust of any kind or a fiduciary relationship between the Company or any Participating Subsidiary and any participant, beneficiary or other person. To the extent that a participant, beneficiary or other person acquires a right to receive payment pursuant to any award hereunder, such right shall be no greater than the right of any unsecured general creditor of the Company.

XI. Tax Withholding.

Upon any exercise, vesting, or payment of any award, the Company or a Participating Subsidiary shall have the right at its option to:

(a) require the participant (or the participant’s personal representative or beneficiary, as the case may be) to pay or provide for payment of at least the minimum amount of any taxes which the Company or a Participating Subsidiary may be required to withhold with respect to such award event or payment; or

(b) deduct from any amount otherwise payable in cash to the participant (or the participant’s personal representative or beneficiary, as the case may be) the minimum amount of any taxes which the Company or a Participating Subsidiary may be required to withhold with respect to such cash payment.

In any case where a tax is required to be withheld in connection with the delivery of shares of common stock under this Plan, the Administrator may in its sole discretion (subject to Section 8.4) grant (either at the time of the award or thereafter) to the participant the right to elect, pursuant to such rules and subject to such conditions as the Administrator may establish, to have the Company reduce the number of shares to be delivered by (or otherwise reacquire) the appropriate number of shares, valued in a consistent manner at their Fair Market Value or at the sales price in accordance with authorized procedures for cashless exercises, necessary to satisfy the minimum applicable withholding obligation on exercise, vesting or payment. In no event shall the shares withheld exceed the minimum whole number of shares required for tax withholding under applicable law.

XII. No Contract of Employment

Nothing in this Plan shall confer upon the Participant the right to continue in the employ of the Company, or any Participating Subsidiary, nor shall it interfere in any way with the right of the Company, or any such Participating Subsidiary, to discharge the Participant at any time for any reason whatsoever, with or without cause. Nothing in this Article IX shall affect any rights or obligations of the Company or any Participant under any written contract of employment.

XIII. No Rights as a Stockholder

A Participant shall have no rights as a stockholder with respect to any shares of Common Stock subject to a Stock Option. Except as provided in Section 6.2, no adjustment shall be made in the number of shares of Common Stock issued to a Participant, or in any other rights of the Participant upon exercise of a Stock Option by reason of any dividend, distribution or other right granted to stockholders for which the record date is prior to the date of exercise of the Participant's Stock Option.

XIV. Assignability; Restrictions on Transferability

No Stock Option granted under this Plan, nor any other rights acquired by a Participant under this Plan, shall be assignable or transferable by a Participant, other than by will or the laws of descent and distribution or, in the case of an NSO, pursuant to a qualified domestic relations order as defined by the Code, Title I of the Employee Retirement Income Security Act, or the rules thereunder. Notwithstanding the preceding sentence, the Administrator may, in its sole discretion, permit the assignment or transfer of an NSO by a Participant other than an officer or director, and the exercise thereof by a person other than such Participant, on such terms and conditions as the Administrator in its sole discretion may determine. Any such terms shall be determined at the time the NSO is granted, and shall be set forth in the Option Agreement. In the event of his death, the Stock Option or any Stock Appreciation Right or Supplemental Bonus right may be exercised by the Personal Representative of the Participant's estate or, if no Personal Representative has been appointed, by the successor or successors in interest determined under the Participant's will or under the applicable laws of descent and distribution.

XV. Amendment

The Board may from time to time alter, amend, suspend or discontinue the Plan, including, where applicable, any modifications or amendments as it shall deem advisable in order that ISOs will be classified as incentive stock options under the Code, or in order to conform to any regulation or to any change in any law or regulation applicable thereto; provided, however, that no such action shall adversely affect the rights and obligations with respect to Stock Options that are outstanding under the Plan as of the date of the action; and provided further that no such action shall, without the approval of the stockholders of the Company, (i) increase the maximum number of shares of Common Stock that may be made subject to Stock Options (unless necessary to effect the adjustments required by Section 6.2), (ii) materially increase the benefits accruing to Participants under the Plan, or (iii) materially modify the requirements as to eligibility for participation in the Plan.

XVI. Registration of Optioned Shares

The Stock Options shall not be exercisable unless the purchase of such optioned shares is pursuant to an applicable effective registration statement under the Securities Act of 1933, as amended (the “1933 Act”), or unless, in the opinion of counsel to the Company, the proposed purchase of such optioned shares would be exempt from the registration requirements of the 1933 Act and from the registration or qualification requirements of applicable state securities laws.

XVII. Withholding Taxes

The Company or Participating Subsidiary may take such steps as it may deem necessary or appropriate for the withholding of any taxes which the Company or the Participating Subsidiary is required by any law or regulation or any governmental authority, whether federal, state or local, domestic or foreign, to withhold in connection with any Stock Option, Stock Appreciation Right or Supplemental Bonus, including, but not limited to, the withholding of all or any portion of any payment or the withholding of issuance of shares of Common Stock to be issued upon the exercise of any Stock Option or Stock Appreciation Right or upon payment of any Supplemental Bonus, until the Participant reimburses the Company or Participating Subsidiary for the amount the Company or Participating Subsidiary is required to withhold with respect to such taxes, or canceling any portion of such payment or issuance in an amount sufficient to reimburse itself for the amount it is required to so withhold.

XVIII. Brokerage Arrangements

The Administrator, in its discretion, may enter into arrangements with one or more banks, brokers or other financial institutions to facilitate the disposition of shares acquired upon exercise of Stock Options.

XIX. Nonexclusivity of the Plan

Neither the adoption of the Plan by the Board nor the submission of the Plan to stockholders of the Company for approval shall be construed as creating any limitations on the power or authority of the Board to adopt such other or additional incentive or other compensation arrangements of whatever nature as the Board may deem necessary or desirable or preclude or limit the continuation of any other plan, practice or arrangement for the payment of compensation or fringe benefits to employees generally, or to any class or group of employees, which the Company or any Participating Subsidiary now has lawfully put into effect, including, without limitation, any retirement, pension, savings and stock purchase plan, insurance, death and disability benefits and executive short-term incentive plans.

XX. Prohibition on Repricing

Except as provided in Section 6.2, the Administrator shall not, without the approval of the stockholders of the Company (i) reduce the exercise price, or cancel and reissue options so as to in effect reduce the exercise price or (ii) change the manner of determining the exercise price so that the exercise price is less than the Fair Market Value per share of common stock.

XXI. Effective Date

This Plan was adopted by the Board of Directors and became effective on March 21, 2013 and was approved by the Company's stockholders on April 1, 2013. No Stock Options shall be granted after March 31, 2023. Stock Options outstanding after March 31, 2023 shall continue to be governed by the provisions of the Plan.

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Barry R. Knott, certify that:

1. I have reviewed this report on Form 10-Q of Lifeloc Technologies, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

		/s/ Barry R. Knott
		Barry R. Knott
		President and Chief Executive Officer

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Vern D. Kornelsen, certify that:

1. I have reviewed this report on Form 10-Q of Lifeloc Technologies, Inc.;

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

		/s/ Vern D. Kornelsen
		Vern D. Kornelsen
		Chief Financial Officer

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Barry R. Knott, President and Chief Executive Officer of Lifeloc Technologies, Inc. (the “Company”), hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

●	the Quarterly Report on Form 10-Q of the Company for the nine months ended March 31, 2013 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

●	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the period covered by he Report.

		/s/ Barry R. Knott
		Barry R. Knott
		President and Chief Executive Officer

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Vern D. Kornelsen, Chief Financial Officer of Lifeloc Technologies, Inc. (the “Company”), hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

●	the Quarterly Report on Form 10-Q of the Company for the nine months ended March 31, 2013 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

●	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the period covered by the Report.

		/s/ Vern D. Kornelsen
		Vern D. Kornelsen
		Chief Financial Officer