10-Q 1 sobr_10q.htm FORM 10-Q sobr_10q.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

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

 

For the quarterly period ended September 30, 2024

 

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:  000-53316

 

SOBR SAFE, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

26-0731818

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

6400 S. Fiddlers Green Circle,

Suite 1400 Greenwood Village, Colorado

 

80111

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code (844) 762-7723

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.00001 par value

 

SOBR 

 

 The Nasdaq Market LLC (Nasdaq Capital Market)

 

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 ☒   No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒   No ☐

 

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

 

Large accelerated filer

Accelerated filer

Non-accelerated Filer

Smaller reporting company

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

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

 

As of November 13, 2024, there were 921,949 shares of common stock, $0.00001 par value, issued and outstanding.

 

 

 

 

SOBR SAFE, INC.

 

TABLE OF CONTENTS

 

PART I – FINANCIAL INFORMATION

 

 

 

 

 

 

 

 

ITEM 1

Condensed Consolidated Financial Statements

 

4

 

 

 

 

 

 

ITEM 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

25

 

 

 

 

 

 

ITEM 3

Quantitative and Qualitative Disclosures About Market Risk

 

34

 

 

 

 

 

 

ITEM 4

Controls and Procedures

 

34

 

 

 

 

 

 

PART II – OTHER INFORMATION

 

 

 

 

 

 

 

 

ITEM 1

Legal Proceedings

 

35

 

 

 

 

 

 

ITEM 1A

Risk Factors

 

35

 

 

 

 

 

 

ITEM 2

Unregistered Sales of Equity Securities and Use of Proceeds

 

35

 

 

 

 

 

 

ITEM 3

Defaults Upon Senior Securities

 

35

 

 

 

 

 

 

ITEM 4

Mine Safety Disclosures

 

35

 

 

 

 

 

 

ITEM 5

Other Information

 

35

 

 

 

 

 

 

ITEM 6

Exhibits

 

36

 

 

 
2

Table of Contents

  

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

 

This Quarterly Report includes forward-looking statements within the meaning of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  These statements are based on management’s beliefs and assumptions, and  information currently available to management.  Forward-looking statements include the information concerning our possible or assumed future results of operation and events set forth under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”  Forward-looking statements include, but are not limited to, statements regarding our outlook, guidance, expectations, beliefs, hopes, intentions and strategies, in which words such as “may,” “if,” “will,” “should,” “intend,” “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate,” “project,” “consider,” or similar expressions are used to identify these forward looking statements.

 

Forward-looking statements are subject to a number of risks, uncertainties, assumptions and other factors that may cause our actual results, performance and achievements to be materially different. Forward-looking statements are not guarantees of future performance, and we undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

 

Readers are cautioned not to put undue reliance on any forward-looking statements. Future actual results, events and stockholder values may differ materially from those expressed or implied in these forward-looking statements. The risks, uncertainties, assumptions and other factors that could cause actual results to differ from the results predicted or implied by forward-looking statements include factors discussed in our filings with the SEC, including those disclosed under captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2023 Form 10-K and our Quarterly Reports on Form 10-Q (including this Quarterly Report).  

  

REVERSE STOCK SPLIT

 

At the open of market on October 2, 2024, our 1-for-110 reverse split of our common stock went effective with Nasdaq Capital Markets. As a result, all common stock share amounts, as well as share amounts and exercise and conversion prices have been adjusted to reflect the reverse stock split.

 

 
3

Table of Contents

  

PART I – FINANCIAL INFORMATION

 

ITEM 1 Condensed Consolidated Financial Statements

 

The condensed consolidated balance sheets as of September 30, 2024, and December 31, 2023, the condensed consolidated statements of operations for the three and nine months ended September 30, 2024, and 2023, the condensed consolidated statements of changes in stockholders’ equity for the three and nine months ended September 30, 2024, and 2023, and the condensed consolidated statements of cash flows for the nine months ended September 30, 2024, and 2023, follow. The unaudited condensed consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented.  All such adjustments are of a normal and recurring nature.

 

 
4

Table of Contents

  

SOBR SAFE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

 

 

 

 

September 30,

 

 

December 31,

 

 

 

2024

 

 

2023

 

ASSETS

 

(Unaudited)

 

 

(Audited)

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash

 

$304,537

 

 

$2,790,147

 

Accounts receivable, net

 

 

45,651

 

 

 

25,280

 

Inventory

 

 

269,984

 

 

 

342,782

 

Prepaid expenses

 

 

288,590

 

 

 

213,261

 

Other current assets

 

 

21,534

 

 

 

-

 

Total current assets

 

 

930,296

 

 

 

3,371,470

 

 

 

 

 

 

 

 

 

 

Intellectual technology, net

 

 

2,184,331

 

 

 

2,473,429

 

Operating lease right-of-use assets, net

 

 

207,398

 

 

 

274,713

 

Other assets

 

 

27,427

 

 

 

27,427

 

Total Assets

 

$3,349,452

 

 

$6,147,039

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$325,310

 

 

$525,665

 

Accrued expenses

 

 

419,999

 

 

 

726,940

 

Accrued interest payable

 

 

103,371

 

 

 

96,988

 

Operating lease liabilities, current portion

 

 

107,620

 

 

 

97,108

 

Notes payable – related parties

 

 

11,810

 

 

 

11,810

 

Notes payable – non-related parties, net

 

 

226,227

 

 

 

64,331

 

Total current liabilities

 

 

1,194,337

 

 

 

1,522,842

 

 

 

 

 

 

 

 

 

 

Operating lease liabilities - less current portion

 

 

121,584

 

 

 

203,295

 

Notes payable - non-related parties - less current portion, net

 

 

-

 

 

 

2,305,898

 

Accrued interest payables

 

 

-

 

 

 

132,467

 

Total Liabilities

 

 

1,315,921

 

 

 

4,164,502

 

Stockholders' Equity

 

 

 

 

 

 

 

 

Common stock, $0.00001 par value; 100,000,000 shares authorized, 316,046 and 169,044 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively

 

 

3

 

 

 

2

 

Treasury stock, at cost; 113 shares as of September 30, 2024 and December 31, 2023

 

 

(38,015 )

 

 

(38,015 )

Additional paid-in capital

 

 

98,182,946

 

 

 

89,840,201

 

Accumulated deficit

 

 

(96,057,720 )

 

 

(87,765,981 )

Total SOBR Safe, Inc. stockholders' equity

 

 

2,087,214

 

 

 

2,036,207

 

Noncontrolling interest

 

 

(53,683 )

 

 

(53,670 )

Total Stockholders' Equity

 

 

2,033,531

 

 

 

1,982,537

 

 

 

 

 

 

 

 

 

 

Total Liabilities and Stockholders' Equity

 

$3,349,452

 

 

$6,147,039

 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

 
5

Table of Contents

   

SOBR SAFE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

 

For The Three Months Ended

September 30,

 

 

For The Nine Months Ended

September 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

 

 

(Unaudited)

 

 

(Unaudited)

 

 

(Unaudited)

 

 

(Unaudited)

 

Revenues

 

$46,129

 

 

$36,274

 

 

$148,310

 

 

$121,743

 

Cost of goods and services

 

 

15,992

 

 

 

20,195

 

 

 

81,929

 

 

 

66,835

 

Gross profit

 

 

30,137

 

 

 

16,079

 

 

 

66,381

 

 

 

54,908

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative

 

 

1,499,296

 

 

 

1,358,749

 

 

 

4,310,791

 

 

 

4,843,082

 

Stock-based compensation expense

 

 

184,243

 

 

 

509,999

 

 

 

584,551

 

 

 

1,836,674

 

Research and development

 

 

194,466

 

 

 

214,374

 

 

 

604,927

 

 

 

588,467

 

Total operating expenses

 

 

1,878,005

 

 

 

2,083,122

 

 

 

5,500,269

 

 

 

7,628,223

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(1,847,868 )

 

 

(2,067,043 )

 

 

(5,433,888 )

 

 

(7,213,315 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income

 

 

12,566

 

 

 

48,677

 

 

 

46,978

 

 

 

179,734

 

Loss on debt extinguishment

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(26,125 )

Notes payable – conversion expense

 

 

-

 

 

 

-

 

 

 

(585,875 )

 

 

-

 

Interest expense

 

 

(5,908 )

 

 

(179,014 )

 

 

(451,720 )

 

 

(613,324 )

Total other income (expense), net

 

 

6,658

 

 

 

(130,337 )

 

 

(990,617 )

 

 

(459,715 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss before provision for income taxes

 

 

(1,841,210 )

 

 

(2,197,380 )

 

 

(6,424,505 )

 

 

(7,673,030 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

(1,841,210 )

 

 

(2,197,380 )

 

 

(6,424,505 )

 

 

(7,673,030 )

Net loss attributable to noncontrolling interest

 

 

4

 

 

 

4

 

 

 

13

 

 

 

13

 

Net loss attributable to SOBR Safe, Inc.

 

$(1,841,206 )

 

$(2,197,376 )

 

$(6,424,492 )

 

$(7,673,017 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deemed dividends related to Convertible Debt Warrants down round provision

 

 

-

 

 

 

-

 

 

 

(23,270 )

 

 

-

 

Deemed dividends related to PIPE Warrants down round provision

 

 

-

 

 

 

-

 

 

 

(46,875 )

 

 

-

 

Deemed dividends related to Original Warrants and New Warrants down round provision

 

 

-

 

 

 

-

 

 

 

(1,455,805 )

 

 

-

 

Warrant Inducement transactional costs

 

 

-

 

 

 

-

 

 

 

(341,297 )

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to common stockholders

 

$(1,841,206 )

 

$(2,197,376 )

 

$(8,291,739 )

 

$(7,673,017 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted loss per common share

 

$(5.83 )

 

$(13.42 )

 

$(35.37 )

 

$(45.51 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding

 

 

316,046

 

 

 

163,680

 

 

 

234,458

 

 

 

168,587

 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

 
6

Table of Contents

  

SOBR SAFE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’

Equity

 

 

 

 

 

 

 

Common Stock

 

 

Preferred Stock

 

 

Treasury Stock

 

 

 

 

 

 

(Deficit)

 

 

 

 

 

 

 

 

 

Amount

 

 

 

 

Amount

 

 

 

 

 

 

Additional

 

 

 

 

SOBR

 

 

 

 

Total

 

 

 

 

 

($0.00001

 

 

 

 

($0.00001

 

 

 

 

Amount

 

 

Paid-in

 

 

Accumulated

 

 

Safe,

 

 

Noncontrolling

 

 

Stockholders’

 

 

 

Shares

 

 

Par)

 

 

Shares

 

 

Par)

 

 

Shares

 

 

(at cost)

 

 

Capital

 

 

Deficit

 

 

Inc.

 

 

Interest

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at January 1, 2023

 

 

154,406

 

 

$2

 

 

 

3,000,000

 

 

$-

 

 

 

(113 )

 

$(38,015 )

 

$87,509,864

 

 

$(78,327,845 )

 

$9,144,006

 

 

$(53,653 )

 

$9,090,353

 

Cumulative effect of adopting ASU 2020-06

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(909,214 )

 

 

776,568

 

 

 

(132,646 )

 

 

-

 

 

 

(132,646 )

Common stock issued for services

 

 

2,046

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

211,500

 

 

 

-

 

 

 

211,500

 

 

 

-

 

 

 

211,500

 

Warrants issued for services

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

162,481

 

 

 

-

 

 

 

162,481

 

 

 

-

 

 

 

162,481

 

Paid-in capital – fair value of stock options and restricted stock units vested

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

698,913

 

 

 

-

 

 

 

698,913

 

 

 

-

 

 

 

698,913

 

Paid in capital - relative fair value of stock warrants granted, net of issuance costs

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

398,517

 

 

 

-

 

 

 

398,517

 

 

 

-

 

 

 

398,517

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,601,687 )

 

 

(2,601,687 )

 

 

(5 )

 

 

(2,601,692 )

Balances at March 31, 2023

 

 

156,452

 

 

$2

 

 

 

3,000,000

 

 

$-

 

 

 

(113 )

 

$(38,015 )

 

$88,072,061

 

 

$(80,152,964 )

 

$7,881,084

 

 

$(53,658 )

 

$7,827,426

 

Conversion of preferred stock to common stock

 

 

9,091

 

 

$-

 

 

 

(3,000,000 )

 

$-

 

 

 

-

 

 

$-

 

 

$-

 

 

$-

 

 

$-

 

 

$-

 

 

$-

 

Common stock issued for restricted stock units vested

 

 

1,682

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Common stock issued upon conversion of convertible debt

 

 

1,364

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

221,182

 

 

 

-

 

 

 

221,182

 

 

 

-

 

 

 

221,182

 

Paid-in capital - fair value of stock options and restricted stock units vested

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

627,762

 

 

 

-

 

 

 

627,762

 

 

 

-

 

 

 

627,762

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,873,954 )

 

 

(2,873,954 )

 

 

(4 )

 

 

(2,873,958 )

Balances at June 30, 2023

 

 

168,589

 

 

$2

 

 

 

-

 

 

$-

 

 

 

(113 )

 

$(38,015 )

 

$88,921,005

 

 

$(83,026,918 )

 

$5,856,074

 

 

$(53,662 )

 

$5,802,412

 

Paid-in capital - fair value of stock options and restricted stock units vested

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

509,999

 

 

 

-

 

 

 

509,999

 

 

 

-

 

 

 

509,999

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,197,376 )

 

 

(2,197,376 )

 

 

(4 )

 

 

(2,197,380 )

Balances at September 30, 2023

 

 

168,589

 

 

$2

 

 

 

-

 

 

$-

 

 

 

(113 )

 

$(38,015 )

 

$89,431,004

 

 

$(85,224,294 )

 

$4,168,697

 

 

$(53,666 )

 

$4,115,031

 

Balances at January 1, 2024

 

 

169,044

 

 

$2

 

 

 

-

 

 

$-

 

 

 

(113 )

 

$(38,015 )

 

$89,840,201

 

 

$(87,765,981 )

 

$2,036,207

 

 

$(53,670 )

 

$1,982,537

 

Common stock issued for restricted stock units vested

 

 

1,046

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Common stock issued upon conversion of convertible debt

 

 

11,800

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,247,922

 

 

 

-

 

 

 

1,247,922

 

 

 

-

 

 

 

1,247,922

 

Paid in capital – fair value of stock options and restricted stock units vested

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

214,398

 

 

 

-

 

 

 

214,398

 

 

 

-

 

 

 

214,398

 

Deemed dividends related to Convertible Debt Warrants down round provision

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

23,270

 

 

 

(23,270 )

 

 

-

 

 

 

-

 

 

 

-

 

Deemed dividends related to PIPE Warrants down round provision

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

42,539

 

 

 

(42,539 )

 

 

-

 

 

 

-

 

 

 

-

 

Deemed dividends related to Original Warrants and New Warrants down round provision

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,455,805

 

 

 

(1,455,805 )

 

 

-

 

 

 

-

 

 

 

-

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,505,916 )

 

 

(2,505,916 )

 

 

(5 )

 

 

(2,505,921 )

Balances at March 31, 2024

 

 

181,890

 

 

$2

 

 

 

-

 

 

 

-

 

 

 

(113 )

 

$(38,015 )

 

$92,824,135

 

 

$(91,793,511 )

 

$992,611

 

 

$(53,675 )

 

$938,936

 

Common stock issued upon conversion of convertible debt

 

 

40,346

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,217,609

 

 

 

-

 

 

 

2,217,609

 

 

 

-

 

 

 

2,217,609

 

Deemed dividends related to PIPE Warrants down round provision

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4,336

 

 

 

(4,336 )

 

 

-

 

 

 

-

 

 

 

-

 

Paid in capital – fair value of stock options and restricted stock units vested

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

185,909

 

 

 

-

 

 

 

185,909

 

 

 

-

 

 

 

185,909

 

Common stock issued upon exercise of warrants

 

 

93,810

 

 

 

1

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,766,714

 

 

 

(341,297 )

 

 

2,425,417

 

 

 

-

 

 

 

2,425,417

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,077,370 )

 

 

(2,077,370 )

 

 

(4 )

 

 

(2,077,374 )

Balances at June 30, 2024

 

 

316,046

 

 

$3

 

 

 

-

 

 

$-

 

 

 

(113 )

 

$(38,015 )

 

$97,998,703

 

 

$(94,216,514 )

 

$3,744,177

 

 

$(53,679 )

 

$3,690,498

 

Paid in capital – fair value of stock options and restricted stock units vested

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

184,243

 

 

 

-

 

 

 

184,243

 

 

 

-

 

 

 

184,243

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,841,206 )

 

 

(1,841,206 )

 

 

(4 )

 

 

(1,841,210 )

Balances at September 30, 2024

 

 

316,046

 

 

$3

 

 

 

-

 

 

$-

 

 

 

(113 )

 

$(38,015 )

 

$98,182,946

 

 

$(96,057,720 )

 

$2,087,214

 

 

$(53,683 )

 

$2,033,531

 

 

 The accompanying notes are an integral part of the condensed consolidated financial statements.

 

 
7

Table of Contents

   

SOBR SAFE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

For The Nine Months Ended

 

 

 

September 30,

 

 

 

2024

 

 

2023

 

 

 

(Unaudited)

 

 

(Unaudited)

 

Operating activities:

 

 

 

 

 

 

Net loss

 

$(6,424,505 )

 

$(7,673,030 )

 

 

 

 

 

 

 

 

 

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Amortization of intangible assets

 

 

289,098

 

 

 

289,098

 

Amortization of debt discounts

 

 

237,250

 

 

 

417,647

 

Loss on extinguishment of debt

 

 

-

 

 

 

26,125

 

Non-cash lease expense

 

 

67,315

 

 

 

34,714

 

Non-cash interest expense

 

 

336,510

 

 

 

29,638

 

Non-cash conversion expense

 

 

585,875

 

 

 

-

 

Bad debt expense

 

 

202

 

 

 

1,132

 

Stock-based compensation expense

 

 

584,551

 

 

 

1,836,674

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(20,573 )

 

 

3,456

 

Inventory

 

 

72,798

 

 

 

(51,721 )

Prepaid expenses

 

 

86,566

 

 

 

571,129

 

Other assets

 

 

(21,534 )

 

 

(18,411 )

Accounts payable

 

 

(200,355 )

 

 

106,054

 

Accrued expenses

 

 

(306,941 )

 

 

13,171

 

Accrued interest payable

 

 

(126,086 )

 

 

(281,079 )

Related party payables

 

 

-

 

 

 

(1,887 )

Operating lease liabilities

 

 

(71,199 )

 

 

(7,728 )

Net cash used in operating activities

 

 

(4,911,028 )

 

 

(4,705,018 )

 

 

 

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

 

 

 

Proceeds from notes payable - non-related parties

 

 

-

 

 

 

3,000,001

 

Repayments of notes payable - non-related parties

 

 

-

 

 

 

(1,211,661 )

Repayments of notes payable - related parties

 

 

-

 

 

 

(1,000,000 )

Debt issuance costs

 

 

-

 

 

 

(537,750 )

Proceeds from exercise of stock warrants

 

 

2,786,174

 

 

 

-

 

Payment of transactional costs for exercise of warrants

 

 

(360,756 )

 

 

-

 

Net cash provided by financing activities

 

 

2,425,418

 

 

 

250,590

 

 

 

 

 

 

 

 

 

 

Net Change In Cash

 

 

(2,485,610 )

 

 

(4,454,428 )

 

 

 

 

 

 

 

 

 

Cash At The Beginning Of The Period

 

 

2,790,147

 

 

 

8,578,997

 

 

 

 

 

 

 

 

 

 

Cash At The End Of The Period

 

$304,537

 

 

$4,124,569

 

 

 

 

 

 

 

 

 

 

Schedule Of Non-Cash Investing And Financing Activities:

 

 

 

 

 

 

 

 

Issuance of common stock and warrants for prepaid services

 

$-

 

 

$373,981

 

Non-related party debt converted to capital

 

$2,879,279

 

 

$341,998

 

Operating lease right-of-use assets and liabilities

 

$-

 

 

$330,707

 

Financing of prepaid insurance premiums

 

$(161,896)

 

$293,882

 

Deemed dividends related to Convertible Debt Warrants down round provision

 

$23,270

 

 

$-

 

Deemed dividends related to PIPE Warrants down round provision

 

$46,875

 

 

$-

 

Deemed dividends related to Original Warrants and New Warrants down round provision

 

$1,455,805

 

 

$-

 

Warrant inducement (transactional costs incurred but not paid)

 

$341,297

 

 

$-

 

Conversion of preferred stock to common stock

 

$-

 

 

$30

 

 

 

 

 

 

 

 

 

 

Supplemental Disclosure:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$266

 

 

$446,069

 

Cash paid for income taxes

 

$-

 

 

$-

 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

 
8

Table of Contents

   

SOBR SAFE, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2024

 

NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

SOBR Safe, Inc., a Delaware corporation, (the “Company”, “we”, “us”, and “our”) is a hardware and software company headquartered in Greenwood Village, Colorado. Our Company integrates proprietary software with our patent pending touch-based alcohol detection products, SOBRcheckTM and SOBRsureTM, enabling non-invasive alcohol detection, biometric identity verification, and real-time cloud-based alerts and reporting. Currently our principal markets are located in North America.

 

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements included herein have been prepared in accordance with generally accepted accounting principles (“GAAP”) as promulgated in the United States of America and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). These unaudited condensed consolidated financial statements and the notes thereto should be read in conjunction with the Company’s audited consolidated financial statements and related notes for the year ended December 31, 2023, included in the Company’s Annual Report on Form 10-K filed with the SEC on March 31, 2024.

 

In management’s opinion, the unaudited condensed consolidated financial statements reflect all adjustments (including reclassifications and normal recurring adjustments) necessary to present fairly the Company’s financial position as of September 30, 2024, and December 31, 2023, and its results of operations for the three and nine-month periods ended September 30, 2024, and cash flows for the nine-months ended September 30, 2024, and 2023. 

 

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its majority-owned subsidiary, TransBiotec-CA, of 98.6%. We have eliminated all intercompany transactions and balances between entities consolidated in these unaudited condensed consolidated financial statements.

 

Use of Estimates

The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Specifically, such estimates were made by the Company for the recoverability and useful lives of long-lived assets, the intellectual technology, stock-based compensation and the valuation allowance related to deferred tax assets. Actual results could differ from those estimates.

 

Financial Instruments 

The Company is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company prioritizes the inputs into three levels that may be used to measure fair value:

 

Level 1

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

 

Level 2

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

 

 
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Table of Contents

  

Level 3

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

 

The Company’s financial instruments consist primarily of cash, accounts receivable, accounts payable, accrued expenses, accrued interest payable, related party payables, notes payable, and other liabilities. The Company believes that the recorded values of our financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

 

At September 30, 2024 and December 31, 2023, the Company did not have financial instruments requiring valuation from observable or unobservable inputs to determine fair value on a recurring basis.

 

Cash

The Company considers all highly liquid investments with an original maturity of three months or less as cash equivalents. The Company does not have any cash equivalents at September 30, 2024 and December 31, 2023. 

 

Accounts Receivable

Customer accounts are monitored for potential credit losses based upon management’s assessment of expected collectability and the allowance for doubtful accounts is reviewed periodically to assess the adequacy of the allowance. In making this assessment, management takes into consideration any circumstances of which the Company is aware regarding a customer’s inability to meet its financial obligations to the Company, and any potential prevailing economic conditions and their impact on the Company’s customers. The Company had no allowance for doubtful accounts and $982 in allowance for doubtful accounts at September 30, 2024 and December 31, 2023, respectively.

 

Inventory

Inventory is comprised of component parts and finished product, and is valued at the lower of cost or net realizable value. The cost of substantially all the Company’s inventory is determined by the FIFO cost method. The Company evaluates the valuation of inventory and periodically adjusts the value for estimated excess based upon estimates of future demand and market conditions, and obsolete inventory based upon otherwise damaged or impaired goods. The Company had no reserves for excess inventory or obsolescence at September 30, 2024 and December 31, 2023.

 

Prepaid Expenses

Amounts incurred in advance of contractual performance or coverage periods are recorded as prepaid assets and recognized as expense in the period service or coverage is provided.  

 

Debt Issuance Costs

Debt issuance costs incurred in connection with the issuance of debt are capitalized and amortized to interest expense over the term of the debt using the effective interest method. The unamortized amount is presented as a reduction of debt on the balance sheet.

 

Preferred Stock

Preferred shares subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. We classify conditionally redeemable preferred shares (if any), which includes preferred shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control, as temporary equity. At all other times, we classify our preferred shares in stockholders’ equity.

 

Noncontrolling Interest

A subsidiary of the Company has minority members representing ownership interests of 1.4% at September 30, 2024 and December 31, 2023. The Company accounts for this noncontrolling interest whereby gains and losses in a subsidiary with a noncontrolling interest are allocated to the noncontrolling interest based on the ownership percentage of the noncontrolling interest, even if that allocation results in a deficit noncontrolling interest balance.

 

Impairment of Long-Lived Assets

Long-lived assets and identifiable intangibles held for use are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. If the sum of undiscounted expected future cash flows is less than the carrying amount of the asset or if changes in facts and circumstances indicate, an impairment loss is recognized and measured using the asset’s fair value. No impairment loss was recognized during the nine-month periods ended September 30, 2024 and 2023.

 

 
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Table of Contents

  

Revenue Recognition

The Company enters contracts with customers and generates revenue through various combinations of software products and services which include the sale of cloud-based software solutions, detection and data collection hardware devices, and cloud-based data reporting and analysis services. Depending on the combination of products and services detailed in the respective customer contract, the identifiable components may be highly interdependent and interrelated with each other such that each is required to provide the substance of the value of the Company’s offering and accounted for as a combined performance obligation, or the specific components may be generally distinct and accounted for as separate performance obligations. Revenue is recognized when control of these software products and/or services are transferred to the customer in an amount that reflects the consideration the Company expects to be entitled in exchange for these respective services and devices.

 

The Company determines revenue recognition through five steps which include (1) identification of the contract or contracts with a customer, (2) identification of individual or combined performance obligations contained in the contract, (3) determination of the transaction price detailed within the contract, (4) allocation of the transaction price to the specific performance obligations, and (5) finally, recognition of revenue as the Company’s performance obligations are satisfied according to the terms of the contract.

 

Contracts with a Single License/Service Performance Obligation

For contracts with a single performance obligation consisting of a license and/or data services, the entire transaction price is allocated to the single performance obligation. Where the Company provides a performance obligation as licensed software or data services, revenue is recognized upon delivery of the software or services ratably over the respective term of the contract.

 

Contracts for Purchase of Hardware Devices Only

Where hardware devices are sold separately by the Company, the entire transaction price is allocated to the device as an individual performance obligation and revenue is recognized at a point in time when either legal title, physical possession or the risks and rewards of ownership have transferred to the customer. Generally, these requirements are satisfied at the point in time the Company ships the product, as this is when the customer obtains control of the asset under the Company’s standard terms and conditions of the purchase.

 

Contracts with Multiple Performance Obligations

Where a Company’s contract with a respective customer contains multiple performance obligations and due to the interdependent and interrelated nature of the licensed software, hardware devices and data reporting services, the Company accounts for the individual performance obligations if they are distinct in nature and the transaction price is allocated to each distinct performance obligations on a directly observable standalone sales price basis. Determining whether products and services are distinct performance obligations that should be accounted for separately or combined as one unit of accounting may require significant judgment. Standalone selling prices are primarily based upon the price at which the performance obligation is sold separately. The Company may be able to establish a standalone sales price based upon observable products or services sold or priced separately in comparable circumstances, competitor pricing or similar customers. Where the performance obligations are either not distinct or directly observable, the Company estimates the standalone sales price of the performance obligations based upon the overall pricing objectives taking into consideration the value of the contract arrangement, number of licenses, number and types of hardware devices and the length of term of the contract. Professional judgement may be required to determine the standalone sales price for each performance obligation where not directly observable. Revenue for Contracts with Multiple Performance Obligations is recognized on a ratable basis for each respective performance obligation as allocated under the prescribed Transaction Price identification model applied.

 

The Company requires customers to make payments related to subscribed software licenses and data services on a monthly basis via authorized bank account ACH withdrawal or an automatic credit card charge during the approved term of the respective agreement. The collectability of future cash flows are reasonably assured with any potential non-payment easily identified with future services being discontinued or suspended due to non-payment.

 

 
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Table of Contents

  

The Company’s contracts are generally three to twelve months in duration, are billed monthly and are non-cancelable. The timing of revenue recognition may differ from the timing of invoicing to customers. The Company generally has an unconditional right to consideration when customers are invoiced and a receivable is recorded. A contract asset (unbilled revenue) is recognized when revenue is recognized prior to invoicing, or a contract liability (deferred revenue) when revenue will be recognized subsequent to invoicing.

 

The Company has elected to charge shipping, freight and delivery to customers who choose an expedited shipping option as a source of revenue to offset respective costs when control has transferred to the customer.

 

We report revenue net of sales and other taxes collected from customers to be remitted to government authorities.

 

Estimated costs for the Company’s standard one-year warranty are charged to cost of goods and services when revenue is recorded for the related product. Royalties are also charged to cost of goods and services.

 

Leases

The Company determines if an arrangement is or contains a lease at inception. Leases with an initial term of twelve months or less are considered short-term leases and are not recognized on the Company’s consolidated balance sheets. Right-of-use (“ROU”) assets and lease liabilities are recognized on the condensed consolidated balance sheets for leases with an expected term greater than twelve months. Operating lease ROU assets represent our right to use an underlying asset over the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at inception based on the present value of lease payments over the lease term. When the rate implicit in the lease is not determinable, the Company uses its estimated secured incremental borrowing rate in determining the present value of lease payments. The lease expense for fixed lease payments is recorded on a straight-line basis over the lease term and variable lease payments are included in the lease expense when the obligation for those payments is incurred. The Company has elected not to separate lease and non-lease components.

 

Stock-based Compensation

The Company uses the fair-value based method to determine compensation for all arrangements under which employees and others receive shares of stock or equity instruments (warrants, options, and restricted stock units). The fair value of each warrant and option is estimated on the date of grant using the Black-Scholes options pricing model that uses assumptions for expected volatility, expected dividends, expected term, and the risk-free interest rate. The Company has not paid dividends historically and does not expect to pay them in the future. Expected volatilities are based on weighted averages of the historical volatility of the Company’s common stock estimated over the expected term of the awards. The expected term of options granted is derived using the “simplified method” which computes expected term as the average of the sum of the vesting term plus the contract term. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the period of the expected term. The grant date fair value of a restricted stock unit equals the closing price of our common stock on the trading day of the grant date.

 

Research and Development

Research and development costs are expensed as incurred. The Company incurred research and development costs as it acquired new knowledge to bring about significant improvements in the functionality, and design of its products and software.

 

Advertising and Marketing Costs

Advertising and marketing costs are charged to operations as incurred.  Advertising and marketing costs were $156,056 and $158,412 during the nine-month periods ended September 30, 2024 and 2023, respectively. Advertising and marketing costs were $48,051 and $61,396 during the three-month periods ended September 30, 2024 and 2023, respectively.   

 

Income Tax

Deferred taxes are provided on an asset and liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The Company has recorded deferred tax assets at September 30, 2024 and December 31, 2023, however these have been offset by a 100% valuation allowance.

 

 
12

Table of Contents

  

Loss Per Share

Basic loss per common share is computed by dividing the net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period.  Diluted loss per share gives effect to all dilutive potential common shares outstanding during the period, including stock options, warrants and convertible instruments.  Diluted net loss per share excludes all potentially issuable shares if their effect is anti-dilutive.  Because the effect of the Company’s dilutive securities is anti-dilutive, diluted net loss per share is the same as basic loss per share for the periods presented.

 

The following table summarizes potential dilutive securities outstanding at the end of each reporting period that were excluded from the calculation of diluted net loss per share as including them would have been anti-dilutive for the nine months ended September 30, 2024 and 2023:

 

 

 

September 30,

 

 

September 30,

 

 

 

2024

 

 

2023

 

Stock options

 

 

14,216

 

 

 

17,823

 

Restricted stock units

 

 

892

 

 

 

1,046

 

Warrants

 

 

214,399

 

 

 

96,961

 

Convertible instruments

 

 

7

 

 

 

14,190

 

Total dilutive securities

 

 

229,514

 

 

 

130,020

 

 

Concentrations

Credit Risk – Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash. The Company maintains its cash at two domestic financial institutions. The Company is exposed to credit risk in the event of a default by the financial institutions to the extent that cash balances are in excess of the amount insured by the Federal Deposit Insurance Corporation of up to $250,000 per institution. The Company places its cash with high-credit quality financial institutions and is managed within established guidelines to mitigate risk. To date, the Company has not experienced any loss on its cash.

 

Concentration of Customers – The Company’s sales during the nine months ending September 30, 2024 and 2023, have been made to a limited number of customers. Should the Company continue to conduct sales to a limited number of customers and remain highly concentrated, revenue may experience significant period to period shifts and may decline if the Company were to lose one or more of its customers, or if the Company were unable to obtain new customers.

 

Concentration of Suppliers – The Company relies on a limited number of component and contract suppliers to assemble its product. If supplier shortages occur, or quality problems arise, production schedules could be significantly delayed or costs could significantly increase, which could in turn have a material adverse effect on the Company’s financial condition, results of operations and cash flow.

 

Related Parties

Related parties are any entities or individuals that, through employment, directorship, ownership, or other means, possess the ability to direct or cause the direction of the management and policies of the Company.

 

Recently Adopted Accounting Standards 

 

The Company has reviewed recently issued, but not yet effective, accounting pronouncements and does not believe the future adoptions of any such pronouncements will be expected to cause a material impact on its financial condition or the results of operations.

 

Reclassifications

Certain prior period amounts have been reclassified to conform with the current period presentation. None of these reclassifications had a material impact on the condensed consolidated financial statements. 

 

 
13

Table of Contents

  

NOTE 2. GOING CONCERN 

 

The Company has incurred recurring losses from operations and has limited cash liquidity and capital resources to meet future capital requirements. The Company’s ability to meet future capital requirements will depend on many factors, including the Company’s ability to develop and sell products, generate cash flow from operations, and assess competing market developments. The Company may need additional capital resources in the near future. Sources of debt financing may result in additional interest expense. Any financing, if available, may be on unfavorable terms. If adequate funds are not available or obtained, the Company may be required to reduce or curtail operations.

 

As of September 30, 2024, the Company has an accumulated deficit of approximately ($96,100,000). During the nine months ended September 30, 2024, the Company experienced negative cash flows from operating activities of approximately ($4,900,000). These principal conditions and events, when considered in the aggregate, could indicate it is probable that the Company will be unable to meet its obligations as they become due within one year after the date the financial statements are issued. However, the Company has identified factors that may mitigate the probable conditions that have raised substantial doubt about the entity’s ability to continue as a going concern.

 

Based on an evaluation of current operating cash usage, management identified several areas in which the Company is capable to reduce spend should it be needed. This includes reductions in operating headcount, discretionary sales & marketing spend, investor relations initiatives, and product/software research and development planning. Ongoing activities to identify and reduce monthly expenses by management will continue in perpetuity until such time financial liquidity and substantial cash flow from sales are realized.

 

Management believes the defined focus on the multi-vertical Behavioral Health space has positioned the Company to generate improvement in revenue generation and positive cash flows from sales.

 

Management believes that cash balances of approximately $300,000 and negative working capital of approximately ($265,000) at September 30, 2024, do not provide adequate capital for operating activities for the next twelve months after the date these financial statements are issued. However, management believes actions presently being taken to generate product and services revenues, and positive cash flows, in addition to the Company’s ability to access capital sources and implement expense reduction tactics to preserve working capital provide the opportunity for the Company to continue as a going concern as of September 30, 2024. These plans are contingent upon the actions to be performed by the Company and these conditions have not been met on or before November 13, 2024. As such, substantial doubt about the entity’s ability to continue as a going concern has not been alleviated as of September 30, 2024. Refer to Note 14 – Subsequent Events for additional information about the Company’s cash balances.

 

NOTE 3. INVENTORY

 

Inventory consists of the following:

 

 

 

September 30,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Component parts

 

$59,199

 

 

$59,157

 

Finished goods

 

 

210,785

 

 

 

283,625

 

Inventory

 

$269,984

 

 

$342,782

 

 

 
14

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NOTE 4. PREPAID EXPENSES

 

Prepaid expenses consist of the following:

 

 

 

September 30,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Insurance

 

$248,227

 

 

$156,724

 

Deposit

 

 

15,736

 

 

 

15,736

 

Rent

 

 

-

 

 

 

16,714

 

Other

 

 

24,627

 

 

 

24,087

 

Prepaid expenses

 

$288,590

 

 

$213,261

 

 

NOTE 5. LEASES

 

The Company leases its corporate headquarters office space and certain office equipment under arrangements classified as operating leases. 

 

The Company entered into its lease agreement to rent office space for a twelve-month period beginning July 1, 2022, with a monthly base rent of $9,744.  The lease did not contain renewal options and was considered a short-term lease at inception. In April 2023, the Company executed an amendment to extend the term of the lease from July 1, 2023, through September 30, 2026. The amended lease provides for monthly base rent of $9,744 through September 2024, with fixed escalating monthly base rent for each year thereafter, and no rent due for the months of July through September 2023.

 

The Company determined that the amendment results in a lease modification that is not accounted for as a separate contract.  Further, due to the extension of the lease term beyond the initial 12 months, the office lease can no longer be considered a short-term lease. The Company has recorded a right-of-use asset and lease liability as of April 17, 2023 (the effective date of the amendment) based on the modified terms and conditions of the amended lease.     

 

For the nine-month period ended September 30, 2024, total operating lease expense was $147,878, which included $61,104 of variable lease expense. For the three-month period ended September 30, 2024, total operating lease expense was $50,123 which included $21,198 of variable lease expense. For the nine-month period ended September 30, 2023, total operating lease expense was $130,346, of which $17,094 was attributable to variable lease expenses, and $65,375 was attributable to short-term lease expense. For the three-month period ended September 30, 2023, total operating lease expense was $31,710, of which $2,786 was attributable to variable lease expense.

 

Operating lease obligations recorded on the condensed consolidated balance sheet at September 30, 2024 are as follows:

 

Operating lease liabilities, current portion

 

$107,620

 

Operating lease liabilities, long-term

 

 

121,584

 

Total Operating lease liabilities

 

$229,204

 

 

Future lease payments included in the measurement of operating lease liabilities on the condensed consolidated balance sheet at September 30, 2024 are as follows:

 

2024

 

$31,173

 

2025

 

 

125,644

 

2026

 

 

95,063

 

Total future minimum lease payments

 

 

251,880

 

Less imputed interest

 

 

(22,676 )

Total Operating lease liabilities

 

$229,204

 

 

The weighted average remaining lease term is 24 months, and the weighted average discount rate is 10%. 

 

 
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NOTE 6. INTANGIBLE ASSETS

 

Intangible assets consisted of the following at September 30, 2024:

 

 

 

Gross Carrying

 

 

Accumulated

 

 

Net Intangible

 

 

Amortization Period

 

 

 

Amount

 

 

Amortization

 

 

Asset

 

 

(in years)

 

SOBRsafeTM  Intellectual Technology

 

$3,854,675

 

 

$1,670,344

 

 

$2,184,331

 

 

 

10

 

 

Intangible assets consisted of the following at December 31, 2023:

 

 

 

Gross Carrying

 

 

Accumulated

 

 

Net Intangible

 

 

Amortization Period

 

 

 

Amount

 

 

Amortization

 

 

Asset

 

 

(in years)

 

SOBRsafeTM  Intellectual Technology

 

$3,854,675

 

 

$1,381,246

 

 

$2,473,429

 

 

 

10

 

 

Amortization expense was $289,098 for each of the nine-month periods ended September 30, 2024, and 2023, and was $96,366 for each of the three-month periods ended September 30, 2024, and 2023.

 

Estimated future amortization expense for device technology intangible assets is as follows:

 

2024

 

 

2025

 

 

2026

 

 

2027

 

 

2028

 

 

Thereafter

 

$

96,366

 

 

$385,464

 

 

$385,464

 

 

$385,464

 

 

$385,464

 

 

$546,109

 

 

 NOTE 7. RELATED PARTY TRANSACTIONS

 

On March 1, 2022, the Board of Directors approved the designation of 3,000,000 shares of the Company’s Preferred Stock as “Series B Convertible Preferred Stock”. The Series B Convertible Preferred Stock shares were issued in exchange for 3,030 shares of the Company’s common stock held by the Company’s CEO David Gandini and 6,061 shares of the Company’s common stock held by IDTEC SPV, LLC, an entity controlled by a beneficial owner of the Company (see Note 11). On April 20, 2023, the 3,000,000 Series B Convertible Preferred shares were converted to 9,091 shares of the Company’s common stock at the option of the preferred stockholders. Neither the exchange nor the conversion resulted in the transfer of value.

 

NOTE 8. ACCRUED EXPENSES

 

Accrued expenses consist of the following:

 

 

 

September 30,

2024

 

 

December 31,

2023

 

Consulting services

 

$218,647

 

 

$328,196

 

R&D services

 

 

-

 

 

 

220,000

 

Other

 

 

201,352

 

 

 

178,744

 

Accrued expenses

 

$419,999

 

 

$726,940

 

 

NOTE 9. NOTES PAYABLE

 

RELATED PARTIES

 

Related party notes payable consist of the following:

 

 

 

September 30,

2024

 

 

December 31,

2023

 

Non-convertible note payable

 

$11,810

 

 

$11,810

 

Less current portion

 

 

(11,810 )

 

 

(11,810 )

Net long-term portion

 

$-

 

 

$-

 

 

 
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Total interest expense for related party notes was none and $90,338 for the nine-month periods ended September 30, 2024, and 2023, respectively. Total interest expense for related party notes was none for the three-month periods ended September 30, 2024, and 2023.

 

Non-Convertible Note Payable

 

The Company has one non-convertible note payable to a related party that has a principal balance of $11,810 as of September 30, 2024, and December 31, 2023. The note carries an interest rate of 0%. The note payable had a due date of December 31, 2012, and is currently in default.

 

NON-RELATED PARTIES 

 

Notes payable to non-related parties consist of the following:

 

 

 

September 30,

2024

 

 

December 31, 

2023

 

Convertible notes payable with warrants - 2023 Debt Offering

 

$-

 

 

$3,219,724

 

Convertible notes payable

 

 

9,183

 

 

 

9,183

 

Non-convertible notes payable

 

 

17,500

 

 

 

17,500

 

Premium financing notes payable

 

 

199,544

 

 

 

37,648

 

Unamortized debt discount

 

 

-

 

 

 

(913,826 )

Net non-related party notes payable

 

226,227

 

 

2,370,229

 

Current portion

 

 

(226,227 )

 

 

(64,331 )

Net long-term portion

 

$-

 

 

$2,305,898

 

 

Total interest expense for non-related party notes was $70,078 and $522,042 for the nine-month periods ended September 30, 2024, and 2023, respectively. Total interest expense for non-related party notes was $5,593 and $178,699 for the three-month periods ended September 30, 2024, and 2023, respectively.

 

Convertible Notes Payable with Warrants - 2023 Debt Offering

 

On March 7, 2023, the Company entered into a Debt Offering (the “2023 Debt Offering”) pursuant to a Purchase Agreement (the “Agreement”) and Registration Rights Agreement with institutional investors. The 2023 Debt Offering closed on March 9, 2023. The 2023 Debt Offering includes 15% Original Issue Discount Convertible Notes (the “Notes”) and Common Stock Purchase Warrants (the “Warrants”).  Under the terms of the Agreement, the Company received $3,000,001 from the Purchasers and in exchange issued the Notes in principal amounts of $3,529,412 and Warrants to purchase up to 3,519 shares of the Company’s common stock. The Notes are convertible voluntarily by the Purchaser at any time the principal amounts are outstanding into shares of our common stock at a conversion price $250.80. The Notes are due March 10, 2025, and accrue interest quarterly at 5% per annum. The accrued interest is payable by way of inclusion in the convertible amount and is compounded quarterly. The Warrants are exercisable at any time through March 9, 2028, into shares of the Company’s common stock at an exercise price of $277.20 per share. The Company received approximately $2,500,000 of net proceeds from the 2024 Debt Offering after offering-related costs.

 

On May 10, 2023, noteholders elected to convert a total of $341,999 (the “Conversion Amount”) pertaining to the 2023 Debt Offering into 1,364 shares of the Company’s common stock at $250.80 per share. As provided for in the Agreement, the Conversion Amount included original Note principal of $309,688, as well as accrued interest of $32,311

 

On March 4, 2024, the Company entered into inducement offer letter agreements (the “Inducement Letters”) with each holder (collectively, the “Holders”, and individually, a “Holder”) of the Notes issued on March 9, 2023.

 

 
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Pursuant to the Inducement Letters, the Holders agreed to convert some or all of the Applicable Notes at a reduced conversion price equal to $68.20 per share (such reduced conversion price, the “Notes Conversion Price”). Simultaneously with the execution of the Inducement Letters, the Company received conversion notices from such Holders for the conversion of approximately $804,000 aggregate principal amount of the Applicable Notes, representing approximately 25% of the aggregate principal amount of the Applicable Notes. In connection with such conversion, the Notes Conversion Price was permanently reduced to $68.20. The Company recognized conversion expense of $585,875 for the induced conversion.

  

In addition, pursuant to the Inducement Letters, the exercise price in the Common Stock Purchase Warrants issued on March 9, 2023 (the “Applicable Warrants”) currently held by Holders was permanently reduced to $68.20 per share (such reduced exercise price, the “Warrants Exercise Price”).

  

In March, May, and June 2024 noteholders elected to convert an aggregate total of $3,556,233 (the “Conversion Amount”) pertaining to the 2023 Debt Offering into 52,145 shares of the Company’s common stock at $68.20 per share. As provided for in the Agreement, the Conversion Amount included original Note principal of $3,219,724, as well as accrued interest of $336,509.

 

Convertible Notes Payable

 

The Company has two convertible notes payable to a non-related entity with principal balances totaling $9,183 as of September 30, 2024, and December 31, 2023.  The notes bear interest at 12% and are convertible into shares of the Company’s common stock at $3,551.90 per share. The notes were due in 2013 and are currently in default.

  

Non-Convertible Notes Payable

 

The Company has two non-convertible notes payable to non-related parties with principal balances totaling $17,500 as of September 30, 2024, and December 31, 2023. These notes carry interest rates ranging from 9% - 10% and have due dates ranging from December 2013 to November 2015. The notes are currently in default. 

 

Premium Financing Notes Payable

 

On June 15, 2023, the Company entered into a financing agreement for payment of its annual insurance premiums for coverage from May 2023 through May 2024 totaling $367,352. The financing agreement required an initial down payment of $73,470 with the remaining amount of $293,882 financed for an eight-month period at an annual interest rate of 8.49% with monthly payments of $37,914 beginning in June 2023.

 

On July 1, 2024, the Company entered into a financing agreement for payment of its annual insurance premiums for coverage from July 2024 through June 2025 totaling $330,083. The financing agreement required an initial down payment of $66,017 with the remaining amount of $264,066 financed for an eight-month period at an annual interest rate of 9.14% with monthly payments of $34,150 beginning in July 2024.

 

NOTE 10. COMMON STOCK

 

The Company’s common stock transactions for the nine months ended September 30, 2024, consist of the following:

 

The Company issued 1,046 shares of common stock for RSUs vested during 2024.

 

The Company issued 11,800 shares of common stock upon conversion of a portion of the Convertible Notes issued in the 2023 Debt Offering.

 

The Company issued 27,288 shares of common stock upon conversion of a portion of the Convertible Notes issued in the 2023 Debt Offering.

 

The Company issued 13,058 shares of common stock upon conversion of a portion of the Convertible Notes issued in the 2023 Debt Offering.

 

The Company issued 51,838 shares of common stock upon exercise of warrants during 2024.

 

The Company issued 41,973 shares of common stock upon exercise of warrants during 2024.

  

The Company’s common stock transactions for the nine months ended September 30, 2023, consist of the following:

 

 
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The Company issued 2,046 shares of common stock to a consultant for investor relations services to be provided over a six-month period during 2023. 

 

The Company issued 1,682 shares of its common stock for RSUs vested in April and June 2023. 

 

The Company issued 1,364 shares of its common stock upon conversion of a portion of the Notes issued in the 2023 Debt Offering. 

  

The Company exchanged 3,000,000 shares of Series B Convertible Preferred Stock with related parties for 9,091 shares of common stock (see Notes 7 and 11).

  

NOTE 11. PREFERRED STOCK

 

On November 20, 2015, the Company’s Board of Directors authorized a class of stock designated as preferred stock with a par value of $0.00001 per share comprising 25,000,000 shares, 3,000,000 shares of which were classified as Series A Convertible Preferred Stock. In each calendar year, the holders of the Series A Convertible Preferred Stock are entitled to receive, when, as and if, declared by the Board of Directors, out of any funds and assets of the Company legally available, non-cumulative dividends, in an amount equal to any dividends or other Distribution on the common stock in such calendar year (other than a Common Stock Dividend). No dividends (other than a Common Stock Dividend) shall be paid and no distribution shall be made with respect to the common stock unless dividends shall have been paid or declared and set apart for payment to the holders of the Series A Convertible Preferred Stock simultaneously. Dividends on the Series A Convertible Preferred Stock shall not be mandatory or cumulative, and no rights or interest shall accrue to the holders of the Series A Convertible Preferred Stock by reason of the fact that the Company shall fail to declare or pay dividends on the Series A Convertible Preferred Stock, except for such rights or interest that may arise as a result of the Company paying a dividend or making a distribution on the common stock in violation of the terms. The holders of each share of Series A Convertible Preferred Stock then outstanding shall be entitled to be paid, out of the Available Funds and Assets, and prior and in preference to any payment or Distribution (or any setting part of any payment or Distribution) of any Available Funds and Assets on any shares of common stock, and equal in preference to any payment or Distribution (or any setting part of any payment or Distribution)  of any Available Funds and Assets on any shares of any other series of preferred stock that have liquidation preference, an amount per share equal to the Original Issue Price of the series A Convertible Preferred Stock plus all declared but unpaid dividends on the Series A Convertible Preferred Stock. A reorganization, or any other consolidation or merger of the Company with or into any other corporation, or any other sale of all or substantially all of the assets of the Company, shall not be deemed a liquidation, dissolution, or winding up of the Company. Shares of the Series A Convertible Preferred Stock are convertible at a 35% discount rate to the average closing price per share of the Company’s common stock (either as listed on a national exchange or as quoted over-the-market) for the last 15 trading days immediately prior to conversion. However, no conversions of the Series A Convertible Preferred Stock to shares of common stock can occur unless the average closing price per share of the Company’s common stock (either as listed on a national exchange or as quoted over-the-market) for the last 15 trading days immediately prior to conversion is at least $551.10. The shares of Series A Convertible Preferred Stock vote on a one for one basis. The right of conversion is limited by the fact the holder of the Series A Convertible Preferred Stock may not convert if such conversion would cause the holder to beneficially own more than 4.9% of the Company’s common stock after giving effect to such conversion. 

 

On December 9, 2019, the Company’s Board of Directors created a class of preferred stock designated as 8% Series A-1 Convertible Preferred Stock comprising of 2,000,000 shares. During 2020, the authorized shares were increased to 2,700,000 shares. The rights and preferences of the 8% Series A-1 Convertible Preferred Stock are as follows: (a) dividend rights of 8% per annum based on the original issuance price of $1 per share, (b) liquidation preference over the Company’s common stock, (c) conversion rights into shares of the Company’s common stock at $3 per share (not to be affected by any reverse stock split in connection with the Asset Purchase Agreement with IDTEC), (d) redemption rights such that we have the right, upon 30 days written notice, at any time after one year from the date of issuance, to redeem all or part of the Series A-1 Convertible Preferred Stock for 150% of the original issuance price, (e) no call rights by the Company, and (f) each share of Series A-1 Convertible Preferred Stock will vote on an “as converted” basis.

 

 
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On March 1, 2022, the Board of Directors approved the designation of 3,000,000 shares of the Company’s Preferred Stock as Series B Convertible Preferred Stock. The rights and preferences of the Series B Convertible Preferred Stock are as follows: (a) dividends shall not be mandatory or cumulative, (b) liquidation preference over the Company’s common stock at an amount per share equal to the original issue price of the Series B Convertible Preferred Stock plus all accrued but unpaid dividends on the Series B Convertible Preferred Stock, (c) each three shares of Series B Convertible Preferred Stock shall be convertible, at the option of the holder, beginning on the date that is nine months from the date the Holder acquired the shares of Series B Convertible Preferred Stock, and without the payment of additional consideration by the holder, into one share of common stock, (d) no redemption rights by the Company, (e) no call rights by the Company, and (f) each share of Series B Convertible Preferred Stock will vote on an “as converted” basis

 

On March 1, 2022, a total of 3,000,000 Series B Convertible Preferred shares were issued in exchange for 3,030 shares of the Company’s common stock held by the Company’s CEO David Gandini and 6,061 shares of the Company’s common stock held by IDTEC SPV, LLC, an entity controlled by a beneficial owner of the Company. The Company entered into the Share Exchange Agreements to provide certain changes to its capital structure in connection with the underwriting offering and listing on Nasdaq. On April 20, 2023, the 3,000,000 Series B Convertible Preferred shares were converted back into 9,091 shares of the Company’s common stock. Neither the exchange nor the conversion resulted in any value transfer.

  

NOTE 12. STOCK WARRANTS, STOCK OPTIONS AND RESTRICTED STOCK UNITS

 

The Company accounts for share-based compensation stock options and restricted stock units, and non-employee stock warrants under ASC 718, whereby costs are recorded based on the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable, utilizing the Black-Scholes pricing or the Monte Carlo simulation option pricing models for stock options and warrants, and the closing price of our common stock on the grant date for restricted stock units. Unless otherwise provided for, the Company covers equity instrument exercises by issuing new shares. 

 

Stock Warrants

 

In January 2023, the Company entered into a consulting agreement for professional services to be provided over a 6-month period in exchange for the issuance of 2,046 common shares and 2,046 warrants to purchase shares of common stock at $148.50 per share.  The warrants expire three years from the date of issuance. The warrants were valued at $162,481 using the Black-Scholes model on the date of issuance, which was recognized over the six month term of the agreement. 

 

On March 9, 2023, in conjunction with the 2023 Debt Offering (see Note 9), the Company issued a total of 3,519 warrants to purchase shares of common stock at $277.20 per share. The warrants expire five years from the date of issuance. Total proceeds from the 2023 Debt Offering were allocated to the warrants based on their relative fair value, resulting in $398,517 allocated to the warrants after issuance costs.

  

On March 6, 2024, pursuant to the Adjustment terms of the September 2021 and the March 2022 Armistice Warrants as a result of the Inducement Letters, the Company issued an aggregate 24,174 warrants (the “Armistice Warrants”) consisting of (i) 19,339 warrants pursuant to the Adjustment terms under the September 2021 Armistice Warrant, and (ii) 4,835 warrants pursuant to the Adjustment terms of the March 2022 Armistice warrant. In addition, the Armistice Warrants include conditions where the warrant exercise price may be adjusted downward in the event securities instruments or exercise prices are subsequently issued or reduced, respectively, below the then current exercise prices of $148.50 per unit of the Armistice Warrants. Where the Inducement Letters stipulate a reduction in the warrant securities exercise prices below the Armistice Warrant exercise price of $148.50 per unit, the conditions of a downward adjustment were met reducing the Armistice Warrants exercise price permanently to $68.20 per unit. The additional issuance of the Armistice Warrants expire seven years from the date of the original issuance on September 28, 2021, and March 30, 2022, respectively. The difference with respect to the adjusted additional warrants is treated as a deemed dividend and a reduction in net income available to common stockholders.

  

On March 6, 2024, pursuant to the Inducement letters, the exercise price for Common Stock Purchase Warrants issued on September 30, 2022, in relation to the PIPE Offering were permanently reduced to $68.20 per share. The difference with respect to the adjusted warrant exercise price is treated as a deemed dividend and a reduction in net income available to common stockholders.

  

 
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In June 2024, the Company entered into a Warrant Inducement with a certain holder of its existing warrants to exercise for cash an aggregate of 93,811 shares of the Company’s common stock at a reduced exercise price of $29.70 per share. The exercised warrants included warrants issued in the Amended and Restated Common Stock Purchase Warrants, with an initial exercise date of September 27, 2021, dated September 2022, the Amended and Restated Common Stock Purchase Warrants, with an initial exercise date of March 30, 2022, dated September 2022, and warrants issued under the Waiver agreement dated March 30, 2022. As part of the Warrant Inducement, the Company agreed to issue new unregistered warrants to purchase up to 187,622 shares of Common Stock. The warrants are exercisable upon the Company obtaining stockholder approval for purposes of complying with applicable Nasdaq rules with an exercise price of $29.70 per share. The warrants will expire five years following the issuance date. The total gross proceeds from the Warrant Inducement was $2,786,174 with net proceeds of $2,425,418 after deducting $360,756 in commissions and transaction costs.

  

Upon the close of the transaction, the Company issued the holder 51,838 of the 93,811 shares of common stock that were issuable upon exercise of the existing warrants. Due to the beneficial ownership limitation provisions in the inducement offer letter agreement, the remaining 41,973 shares were initially unissued, and reserved in abeyance with the Company’s transfer agent for the benefit of the holder until notice from the holder that the shares may be issued in compliance with the agreement. As of June 24, 2024, no shares remained in abeyance.

 

On June 4, 2024, pursuant to the Warrant Inducement, the exercise price for Common Stock Purchase Warrants issued on September 30, 2022, in relation to the PIPE Offering were permanently reduced to $29.70 per share. The difference with respect to the adjusted warrant exercise price is treated as a deemed dividend and a reduction in net income available to common stockholders.

  

The fair values of stock warrants granted during the nine-month periods ended September 30, 2024, and 2023 were determined based on the following assumptions:

 

 

 

September 30,

 2024

 

 

September 30,

2023

 

Exercise price 

 

$

29.7068.20

 

 

$

148.50277.20

 

Dividend yield

 

 

0

%

 

 

0

%

Volatility

 

147173

%

 

162209

%

Risk-free interest rate

 

4.134.50

%

 

4.564.73

%

Expected term

 

2.35.3 Years

 

 

1.52.5 Years

 

 

The following tables summarize the changes in the Company’s outstanding warrants during the nine-month periods ended September 30, 2024, and 2023:

 

 

 

Warrants

Outstanding

Number

of Shares

 

 

Exercise Price

Per Share

 

 

Weighted Average Remaining

Contractual Life

 

 

Weighted Average

Exercise Price

Per Share

 

 

Aggregate

Intrinsic Value

 

Balance at December 31, 2022

 

 

94,436

 

 

$

 148.50990.00

 

 

5.11 Years

 

 

$

211.20

 

 

$

-

 

Warrants granted

 

 

5,563

 

 

 

 148.50277.20

 

 

 

N/A

 

 

 

229.90

 

 

 

-

 

Warrants exercised

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Warrants expired  

 

 

(3,038

)

 

 

990.00

 

 

 

-

 

 

 

990.00

 

 

 

-

 

Balance at September 30, 2023

 

 

96,961

 

 

$

 148.50584.10

 

 

4.48 Years

 

 

$

187.90

 

 

$

-

 

 

 
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Table of Contents

  

 

 

Warrants

Outstanding

Number

of Shares

 

 

Exercise Price

Per Share

 

 

Weighted Average Remaining Contractual Life

 

Weighted Average

Exercise Price

Per Share

 

 

Aggregate

Intrinsic Value

 

Balance at December 31, 2023

 

 

96,415

 

 

$

148.50584.10

 

 

4.59 Years

 

$

187.00

 

 

$

-

 

Warrants granted

 

 

211,795

 

 

 

29.7068.20

 

 

4.93 Years

 

 

29.70

 

 

 

-

 

Warrants exercised

 

 

(93,811

)

 

 

29.70

 

 

-

 

 

29.70

 

 

 

-

 

Warrants expired

 

 

-

 

 

-

 

 

-

 

 

-

 

 

 

-

 

Balance at September 30, 2024

 

 

214,399

 

 

$

29.70584.10

 

 

4.49 Years

 

$

48.40

 

 

$

-

 

 

Share-Based Compensation

 

On October 24, 2019, the Company’s 2019 Equity Incentive Plan (the “Plan”) went effective authorizing 1,282,823 shares of the Company’s common stock for issuance as stock options and restricted stock units (“RSUs”) to employees, directors or consultants. The Plan was approved by the Company’s Board of Directors and the holders of a majority of the Company’s voting stock on September 9, 2019. In January 2022, the stockholders approved and ratified an amendment to increase the shares authorized under the Plan to 1,733,333. In June 2023, the stockholders approved and ratified an amendment to increase the shares authorized under the Plan to 3,500,000

 

The Company generally recognizes share-based compensation expense on the grant date and over the period of vesting or period that services will be provided.

 

Stock Options

 

As of September 30, 2024, and December 31, 2023, the Company has granted stock options to acquire 14,216 and 15,387 shares of common stock under the Plan, respectively.  As of September 30, 2024, the Plan had 10,741 vested options and 3,475 non-vested options. As of December 31, 2023, the Plan had 9,239 vested options and 6,162 non-vested options. The stock options are held by our officers, directors, employees, and certain key consultants.

 

For the nine months ended September 30, 2024, and 2023, the Company recorded $537,980 and $1,298,979, respectively, of share-based compensation expense related to stock options. For the three months ended September 30, 2024, and 2023, the Company recorded $168,720 and $456,524, respectively, of share-based compensation expense related to stock options. Unrecognized compensation expense as of September 30, 2024, was $575,789 which will be recognized over a weighted average period of 15 months.

 

For the nine months ended September 30, 2024, the Company did not grant any stock options to directors, officers, employees or other third parties. The weighted average grant date fair value per option granted during the nine-month periods ended September 30, 2023 was $206.80. The fair value was estimated at the grant date using the Black-Scholes option pricing model and the following assumptions:

 

 

 

September 30,

 2024

 

 

September 30,

2023

 

Exercise price

 

$

-

 

 

$

149.60255.20

 

Dividend yield

 

 

-

%

 

 

0

%

Volatility

 

-

%

 

143207

%

Risk-free interest rate

 

-

%

 

4.094.69

%

Expected term

 

-

 

 

2.75.8 Years

 

 

 
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Table of Contents

  

The following tables summarize the changes in the Company’s outstanding stock options during the nine-month periods ended September 30, 2024 and 2023:

 

 

 

Options

Outstanding

Number

of Shares

 

 

Exercise Price

Per Share

 

 

Weighted Average Remaining

Contractual Life

 

 

Weighted Average

Exercise Price

Per Share

 

 

Aggregate Intrinsic Value

 

Balance at December 31, 2022

 

 

10,035

 

 

$

86.901,023.00

 

 

5.33 Years

 

 

$

188.10

 

 

$

-

 

Options granted

 

 

7,953

 

 

149.60255.20

 

 

-

 

 

 

248.60

 

 

 

-

 

Options exercised

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Options expired/forfeited

 

 

(165)

 

 

 

232.10

 

 

 

-

 

 

 

-

 

 

 

-

 

Balance at September 30, 2023

 

 

17,823

 

 

$

86.901,023.00

 

 

5.81 Years

 

 

$

213.84

 

 

$

-

 

 

 

 

Options

Outstanding

Number of

Shares

 

 

Exercise Price Per

Share

 

 

Weighted Average Remaining Contractual Life

 

 

Weighted Average

Exercise Price Per Share

 

 

Aggregate Intrinsic Value

 

Balance at December 31, 2023

 

 

15,401

 

 

$

52.801,023.00

 

 

5.66 Years

 

 

$

221.10

 

 

$

-

 

Options granted

 

 

-

 

 

-

 

 

-

 

 

-

 

 

 

-

 

Options exercised

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Options expired/forfeited

 

 

(1,185)

 

 

232.10262.90

 

 

 

-

 

 

-

 

 

 

-

 

Balance at September 30, 2024

 

 

14,216

 

 

$

52.801,023.00

 

 

5.17 Years

 

 

$

217.87

 

 

$

-

 

 

 

 

Options

Outstanding

Number of

Shares

 

 

Exercise Price Per

Share

 

 

Weighted Average Remaining Contractual Life

 

Weighted Average

Exercise Price Per Share

 

 

Aggregate Intrinsic Value

 

Exercisable at December 31, 2023

 

 

9,226

 

 

$52.801,023.00

 

 

 

4.36 Years

 

$

235.40

 

 

$

-

 

Exercisable at September 30, 2024           

 

 

10,741

 

 

$52.801,023.00

 

 

 

4.71 Years

 

$

226.71

 

 

$

-

 

 

Restricted Stock Units

 

The Plan provides for the grant of RSUs.  RSUs are settled in shares of the Company’s common stock as the RSUs become vested.

 

The following tables summarize RSU activity under the Plan for the nine-month periods ended September 30, 2024 and 2023:

 

 

 

RSUs

 

 

Weighted Average

Grant Date Fair Value Per Share

 

 

Weighted Average

Vesting Period

 

Unvested at December 31, 2022

 

 

3,455

 

 

$238.70

 

 

0.74 Years

 

Granted

 

 

-

 

 

 

-

 

 

 

-

 

Cancelled

 

 

(728 )

 

 

238.70

 

 

 

-

 

Vested

 

 

(1,681 )

 

 

238.70

 

 

 

-

 

Unvested at September 30, 2023

 

 

1,046

 

 

$238.70

 

 

1.17 Years

 

 

 
23

Table of Contents

     

 

 

RSUs

 

 

Weighted Average

Grant Date Fair Value Per Share

 

 

Weighted Average

Vesting Period

 

Unvested at December 31, 2023

 

 

1,938

 

 

$206.80

 

 

1.74 Years

 

Granted

 

 

-

 

 

 

-

 

 

 

-

 

Cancelled

 

 

-

 

 

 

-

 

 

 

-

 

Vested

 

 

(1,046)

 

 

238.70

 

 

 

-

 

Unvested at September 30, 2024

 

 

892

 

 

$

 168.30

 

 

1.25 Years

 

 

In total for the nine months ended September 30, 2024, and 2023, the Company recorded $46,571 and $537,695, respectively, in stock-based compensation expense related to RSUs. In total for the three months ended September 30, 2024, and 2023, the Company recorded $15,524 and $53,475 respectively, in stock-based compensation expense related to RSUs. As of September 30, 2024, total unrecognized compensation cost related to RSUs was $77,618 which will be recognized over a period of 15 months.

 

Executive Officer Stock Options and RSUs

 

The Company had 6,413 vested and 3,095 unvested outstanding executive officers stock options exercisable at $52.80 - $255.20 per share with a weighted average remaining contractual life of 6.46 years as of September 30, 2024, and 3,977 vested and 4,182 unvested outstanding executive stock options exercisable at $86.90 to $262.90 per share with a weighted average remaining contractual life of 7.51 years as of December 31, 2023. The Company had no vested and 892 unvested RSUs granted to executive officers as of September 30, 2024, and no vested and 1,938 unvested RSU’s granted to executive officers as of December 31, 2023.

 

NOTE 13. COMMITMENTS AND CONTINGENCIES

 

Legal Proceedings

 

On December 6, 2006, Orange County Valet and Security Patrol, Inc. filed a lawsuit against the Company in Orange County California State Superior Court for Breach of Contract in the amount of $11,164. A default judgment was taken against the Company in this matter. In mid-2013 we learned the Plaintiff’s perfected the judgment against the Company, but we have not heard from the Plaintiffs. As of September 30, 2024, the Company has accrued $11,164 plus accrued interest of approximately $21,000. In the event we pay any money related to this lawsuit, IDTEC agreed, in connection with closing a 2020 asset purchase transaction with IDTEC, to pay the amount for us in exchange for shares of our common stock.

 

NOTE 14. SUBSEQUENT EVENTS

 

The Company has evaluated subsequent events for recognition and disclosure through November 13, 2024, which is the date the condensed consolidated financial statements were available to be issued and has determined that there are no material subsequent events that require recognition or disclosure in the accompanying condensed consolidated financial statements other than those following. Note these subsequent events are reflective of the reverse stock split conducted on October 2, 2024 as detailed below:

 

On October 2, 2024, the Company effected a 1-for-110 reverse stock split of the Company’s common stock. Any fractional shares as a result of the reverse stock split were rounded up to one full share of common stock. Following the reverse stock split the lowest day’s VWAP in the five days following the reverse split was $4.74 per share and the exercise price of the Common Share Purchase Warrants issued on June 4, 2024, were reduced to $4.74 per share effective October 10, 2024.

 

On October 7, 2024, the Company entered into a private placement transaction with certain institutional investors for gross proceeds of $8.2 million. As part of the private placement, the Company issued an aggregate of 2,024,691 units at a purchase price of $4.05 per unit, each Unit consisting of (i) one share of common stock of the Company, or one pre-funded warrant in lieu thereof, (ii) two Series A Warrants, each to purchase one share of Common Stock at an exercise price of $3.80