UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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:
(Exact name of registrant as specified in its charter) |
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(State or other jurisdiction of incorporation or organization) |
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(Address of principal executive offices) |
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Registrant’s telephone number, including area code (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading Symbol(s) |
| Name of each exchange on which registered |
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| The |
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.
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).
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 | ☐ |
☐ | 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
As of November 13, 2024, there were
SOBR SAFE, INC.
TABLE OF CONTENTS
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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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 | ||||||||
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| September 30, |
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| December 31, |
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| 2023 |
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ASSETS |
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Current assets |
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Cash |
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Accounts receivable, net |
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Inventory |
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Prepaid expenses |
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Other current assets |
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Total current assets |
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Intellectual technology, net |
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Operating lease right-of-use assets, net |
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Other assets |
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Total Assets |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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Current liabilities |
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Accounts payable |
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Accrued expenses |
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Accrued interest payable |
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Operating lease liabilities, current portion |
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Notes payable – related parties |
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Notes payable – non-related parties, net |
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Total current liabilities |
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Operating lease liabilities - less current portion |
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Notes payable - non-related parties - less current portion, net |
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Accrued interest payables |
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Total Liabilities |
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Stockholders' Equity |
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Common stock, $ |
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Treasury stock, at cost; |
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Additional paid-in capital |
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Accumulated deficit |
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Total SOBR Safe, Inc. stockholders' equity |
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Noncontrolling interest |
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Total Stockholders' Equity |
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Total Liabilities and Stockholders' Equity |
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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
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| For The Three Months Ended September 30, |
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| For The Nine Months Ended September 30, |
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Revenues |
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Cost of goods and services |
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Gross profit |
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Operating expenses: |
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General and administrative |
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Stock-based compensation expense |
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Research and development |
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Total operating expenses |
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Loss from operations |
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Other income (expense): |
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Other income |
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Loss on debt extinguishment |
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Notes payable – conversion expense |
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Interest expense |
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Total other income (expense), net |
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Loss before provision for income taxes |
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Provision for income taxes |
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Net loss |
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Net loss attributable to noncontrolling interest |
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Net loss attributable to SOBR Safe, Inc. |
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Deemed dividends related to Convertible Debt Warrants down round provision |
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Deemed dividends related to PIPE Warrants down round provision |
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Deemed dividends related to Original Warrants and New Warrants down round provision |
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Warrant Inducement transactional costs |
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Net loss attributable to common stockholders |
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Basic and diluted loss per common share |
| $ | ( | ) |
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Weighted average number of common shares outstanding |
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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) |
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| Stockholders’ Equity |
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| Common Stock |
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| Preferred Stock |
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| Treasury Stock |
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| Amount |
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| Amount |
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| Additional |
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| SOBR |
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| Total |
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| ($0.00001 |
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| ($0.00001 |
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| Amount |
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| Paid-in |
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| Accumulated |
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| Safe, |
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| Noncontrolling |
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| Stockholders’ |
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| Shares |
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| Par) |
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| Par) |
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| (at cost) |
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| Capital |
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| Deficit |
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| Inc. |
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| Interest |
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| Equity |
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Balances at January 1, 2023 |
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| $ |
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| $ | ( | ) |
| $ |
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| $ | ( | ) |
| $ |
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| $ | ( | ) |
| $ |
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Cumulative effect of adopting ASU 2020-06 |
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| - |
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| - |
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| - |
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Common stock issued for services |
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| - |
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| - |
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Warrants issued for services |
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| - |
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| - |
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| - |
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Paid-in capital – fair value of stock options and restricted stock units vested |
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| - |
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| - |
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| - |
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Paid in capital - relative fair value of stock warrants granted, net of issuance costs |
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| - |
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| - |
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| - |
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Net loss |
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| - |
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| - |
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| - |
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Balances at March 31, 2023 |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ |
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| $ | ( | ) |
| $ |
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Conversion of preferred stock to common stock |
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| $ |
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| $ |
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| - |
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| $ |
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| $ |
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| $ |
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| $ |
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| $ |
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| $ |
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Common stock issued for restricted stock units vested |
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| - |
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| - |
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Common stock issued upon conversion of convertible debt |
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| - |
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| - |
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Paid-in capital - fair value of stock options and restricted stock units vested |
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| - |
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| - |
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| - |
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Net loss |
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| - |
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| - |
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| - |
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Balances at June 30, 2023 |
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| $ |
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| - |
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| $ |
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| ( | ) |
| $ | ( | ) |
| $ |
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| $ | ( | ) |
| $ |
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| $ | ( | ) |
| $ |
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Paid-in capital - fair value of stock options and restricted stock units vested |
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| - |
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| - |
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| - |
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Net loss |
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| - |
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| - |
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| - |
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| ( | ) |
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| ( | ) |
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| ( | ) |
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| ( | ) | ||||
Balances at September 30, 2023 |
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| $ |
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| - |
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| $ |
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| ( | ) |
| $ | ( | ) |
| $ |
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| $ | ( | ) |
| $ |
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| $ | ( | ) |
| $ |
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Balances at January 1, 2024 |
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| $ |
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| - |
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| $ |
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| ( | ) |
| $ | ( | ) |
| $ |
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| $ | ( | ) |
| $ |
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| $ | ( | ) |
| $ |
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Common stock issued for restricted stock units vested |
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| - |
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| - |
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Common stock issued upon conversion of convertible debt |
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| - |
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| - |
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Paid in capital – fair value of stock options and restricted stock units vested |
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| - |
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| - |
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| - |
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Deemed dividends related to Convertible Debt Warrants down round provision |
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| - |
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| - |
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| - |
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| ( | ) |
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Deemed dividends related to PIPE Warrants down round provision |
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| - |
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| - |
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| - |
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|
|
|
|
|
|
|
| |||||||
Deemed dividends related to Original Warrants and New Warrants down round provision |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
| |||||||
Net loss |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) | ||||
Balances at March 31, 2024 |
|
|
|
| $ |
|
|
| - |
|
|
|
|
|
| ( | ) |
| $ | ( | ) |
| $ |
|
| $ | ( | ) |
| $ |
|
| $ | ( | ) |
| $ |
| ||||||
Common stock issued upon conversion of convertible debt |
|
|
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Deemed dividends related to PIPE Warrants down round provision |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
| |||||||
Paid in capital – fair value of stock options and restricted stock units vested |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Common stock issued upon exercise of warrants |
|
|
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
| ||||||||
Net loss |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) | ||||
Balances at June 30, 2024 |
|
|
|
| $ |
|
|
| - |
|
| $ |
|
|
| ( | ) |
| $ | ( | ) |
| $ |
|
| $ | ( | ) |
| $ |
|
| $ | ( | ) |
| $ |
| ||||||
Paid in capital – fair value of stock options and restricted stock units vested |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Net loss |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) | ||||
Balances at September 30, 2024 |
|
|
|
| $ |
|
|
| - |
|
| $ |
|
|
| ( | ) |
| $ | ( | ) |
| $ |
|
| $ | ( | ) |
| $ |
|
| $ | ( | ) |
| $ |
|
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 |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Amortization of intangible assets |
|
|
|
|
|
| ||
Amortization of debt discounts |
|
|
|
|
|
| ||
Loss on extinguishment of debt |
|
|
|
|
|
| ||
Non-cash lease expense |
|
|
|
|
|
| ||
Non-cash interest expense |
|
|
|
|
|
| ||
Non-cash conversion expense |
|
|
|
|
|
| ||
Bad debt expense |
|
|
|
|
|
| ||
Stock-based compensation expense |
|
|
|
|
|
| ||
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
| ( | ) |
|
|
| |
Inventory |
|
|
|
|
| ( | ) | |
Prepaid expenses |
|
|
|
|
|
| ||
Other assets |
|
| ( | ) |
|
| ( | ) |
Accounts payable |
|
| ( | ) |
|
|
| |
Accrued expenses |
|
| ( | ) |
|
|
| |
Accrued interest payable |
|
| ( | ) |
|
| ( | ) |
Related party payables |
|
|
|
|
| ( | ) | |
Operating lease liabilities |
|
| ( | ) |
|
| ( | ) |
Net cash used in operating activities |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
|
Proceeds from notes payable - non-related parties |
|
|
|
|
|
| ||
Repayments of notes payable - non-related parties |
|
|
|
|
| ( | ) | |
Repayments of notes payable - related parties |
|
|
|
|
| ( | ) | |
Debt issuance costs |
|
|
|
|
| ( | ) | |
Proceeds from exercise of stock warrants |
|
|
|
|
|
| ||
Payment of transactional costs for exercise of warrants |
|
| ( | ) |
|
|
| |
Net cash provided by financing activities |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Net Change In Cash |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Cash At The Beginning Of The Period |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Cash At The End Of The Period |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Schedule Of Non-Cash Investing And Financing Activities: |
|
|
|
|
|
|
|
|
Issuance of common stock and warrants for prepaid services |
| $ |
|
| $ |
| ||
Non-related party debt converted to capital |
| $ |
|
| $ |
| ||
Operating lease right-of-use assets and liabilities |
| $ |
|
| $ |
| ||
Financing of prepaid insurance premiums |
| $ | ( | ) |
| $ |
| |
Deemed dividends related to Convertible Debt Warrants down round provision |
| $ |
|
| $ |
| ||
Deemed dividends related to PIPE Warrants down round provision |
| $ |
|
| $ |
| ||
Deemed dividends related to Original Warrants and New Warrants down round provision |
| $ |
|
| $ |
| ||
Warrant inducement (transactional costs incurred but not paid) |
| $ |
|
| $ |
| ||
Conversion of preferred stock to common stock |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Supplemental Disclosure: |
|
|
|
|
|
|
|
|
Cash paid for interest |
| $ |
|
| $ |
| ||
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.
9 |
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 $
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
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.
10 |
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.
11 |
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 $
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
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 |
|
|
|
|
|
| ||
Restricted stock units |
|
|
|
|
|
| ||
Warrants |
|
|
|
|
|
| ||
Convertible instruments |
|
|
|
|
|
| ||
Total dilutive securities |
|
|
|
|
|
|
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 $
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 ($
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 $
NOTE 3. INVENTORY
Inventory consists of the following:
|
| September 30, |
|
| December 31, |
| ||
|
| 2024 |
|
| 2023 |
| ||
Component parts |
| $ |
|
| $ |
| ||
Finished goods |
|
|
|
|
|
| ||
Inventory |
| $ |
|
| $ |
|
14 |
Table of Contents |
NOTE 4. PREPAID EXPENSES
Prepaid expenses consist of the following:
|
| September 30, |
|
| December 31, |
| ||
|
| 2024 |
|
| 2023 |
| ||
Insurance |
| $ |
|
| $ |
| ||
Deposit |
|
|
|
|
|
| ||
Rent |
|
|
|
|
|
| ||
Other |
|
|
|
|
|
| ||
Prepaid expenses |
| $ |
|
| $ |
|
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
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 $
Operating lease obligations recorded on the condensed consolidated balance sheet at September 30, 2024 are as follows:
Operating lease liabilities, current portion |
| $ |
| |
Operating lease liabilities, long-term |
|
|
| |
Total Operating lease liabilities |
| $ |
|
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 |
| $ |
| |
2025 |
|
|
| |
2026 |
|
|
| |
Total future minimum lease payments |
|
|
| |
Less imputed interest |
|
| ( | ) |
Total Operating lease liabilities |
| $ |
|
The weighted average remaining lease term is
15 |
Table of Contents |
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 |
| $ |
|
| $ |
|
| $ |
|
|
|
|
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 |
| $ |
|
| $ |
|
| $ |
|
|
|
|
Amortization expense was $
Estimated future amortization expense for device technology intangible assets is as follows:
2024 |
|
| 2025 |
|
| 2026 |
|
| 2027 |
|
| 2028 |
|
| Thereafter |
| ||||||
$ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
NOTE 7. RELATED PARTY TRANSACTIONS
On March 1, 2022, the Board of Directors approved the designation of
NOTE 8. ACCRUED EXPENSES
Accrued expenses consist of the following:
|
| September 30, 2024 |
|
| December 31, 2023 |
| ||
Consulting services |
| $ |
|
| $ |
| ||
R&D services |
|
|
|
|
|
| ||
Other |
|
|
|
|
|
| ||
Accrued expenses |
| $ |
|
| $ |
|
NOTE 9. NOTES PAYABLE
RELATED PARTIES
Related party notes payable consist of the following:
|
| September 30, 2024 |
|
| December 31, 2023 |
| ||
Non-convertible note payable |
| $ |
|
| $ |
| ||
Less current portion |
|
| ( | ) |
|
| ( | ) |
Net long-term portion |
| $ |
|
| $ |
|
16 |
Table of Contents |
Total interest expense for related party notes was none and $
Non-Convertible Note Payable
The Company has one non-convertible note payable to a related party that has a principal balance of $
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 |
| $ |
|
| $ |
| ||
Convertible notes payable |
|
|
|
|
|
| ||
Non-convertible notes payable |
|
|
|
|
|
| ||
Premium financing notes payable |
|
|
|
|
|
| ||
Unamortized debt discount |
|
|
|
|
| ( | ) | |
Net non-related party notes payable |
|
|
|
| ||||
Current portion |
|
| ( | ) |
|
| ( | ) |
Net long-term portion |
| $ |
|
| $ |
|
Total interest expense for non-related party notes was $
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
On May 10, 2023, noteholders elected to convert a total of $
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.
17 |
Table of Contents |
Pursuant to the Inducement Letters,
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 $
In March, May, and June 2024 noteholders elected to convert an aggregate total of $
Convertible Notes Payable
The Company has two convertible notes payable to a non-related entity with principal balances totaling $
Non-Convertible Notes Payable
The Company has two non-convertible notes payable to non-related parties with principal balances totaling $
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 $
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 $
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
The Company issued
The Company issued
The Company issued
The Company issued
The Company issued
The Company’s common stock transactions for the nine months ended September 30, 2023, consist of the following:
18 |
Table of Contents |
The Company issued
The Company issued
The Company issued
The Company exchanged
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 $
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
19 |
Table of Contents |
On March 1, 2022, the Board of Directors approved the designation of
On March 1, 2022, a total of
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
On March 9, 2023, in conjunction with the 2023 Debt Offering (see Note 9), the Company issued a total of
On March 6, 2024, pursuant to the Adjustment terms of the September 2021 and the March 2022 Armistice
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.
20 |
Table of Contents |
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
Upon the close of the transaction, the Company issued the holder
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 $
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 |
| $ |
|
| $ |
| ||
Dividend yield |
|
| % |
|
| % | ||
Volatility |
| % |
| % | ||||
Risk-free interest rate |
| % |
| % | ||||
Expected term |
|
|
|
|
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 |
|
|
|
| $ | |
|
|
|
| $ |
|
| $ |
| |||||
Warrants granted |
|
|
|
|
| |
|
|
| N/A |
|
|
|
|
|
|
| |||
Warrants exercised |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
| |||
Warrants expired |
|
| ( | ) |
|
|
|
|
| - |
|
|
|
|
|
|
| |||
Balance at September 30, 2023 |
|
|
|
| $ | |
|
|
|
| $ |
|
| $ |
|
21 |
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 |
|
|
|
| $ |
|
|
| $ |
|
| $ |
| |||||
Warrants granted |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Warrants exercised |
|
| ( | ) |
|
|
|
| - |
|
|
|
|
|
| |||
Warrants expired |
|
| - |
|
|
|
| - |
|
|
|
|
|
| ||||
Balance at September 30, 2024 |
|
|
|
| $ |
|
|
| $ |
|
| $ |
|
Share-Based Compensation
On October 24, 2019, the Company’s 2019 Equity Incentive Plan (the “Plan”) went effective authorizing
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
For the nine months ended September 30, 2024, and 2023, the Company recorded $
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 $
|
| September 30, 2024 |
|
| September 30, 2023 |
| ||
Exercise price |
| $ |
|
| $ |
| ||
Dividend yield |
|
| - | % |
|
| % | |
Volatility |
| - | % |
| % | |||
Risk-free interest rate |
| - | % |
| % | |||
Expected term |
| - |
|
|
|
22 |
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 |
|
|
|
| $ |
|
|
|
| $ |
|
| $ |
| ||||||
Options granted |
|
|
|
|
|
| - |
|
|
|
|
|
|
| ||||||
Options exercised |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
| |||
Options expired/forfeited |
|
| ( |
|
|
|
|
|
| - |
|
|
|
|
|
|
| |||
Balance at September 30, 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, 2023 |
|
|
|
| $ |
|
|
|
| $ |
|
| $ |
| ||||||
Options granted |
|
| - |
|
|
|
| - |
|
|
|
|
|
| ||||||
Options exercised |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
| |||
Options expired/forfeited |
|
| ( |
|
|
|
|
| - |
|
|
|
|
|
| |||||
Balance at September 30, 2024 |
|
|
|
| $ |
|
|
|
| $ |
|
| $ |
|
|
| 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 |
|
|
|
| $ |
|
|
|
| $ |
|
| $ |
| ||||
Exercisable at September 30, 2024 |
|
|
|
| $ |
|
|
|
| $ |
|
| $ |
|
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 |
|
|
|
| $ |
|
|
| ||||
Granted |
|
| - |
|
|
|
|
|
| - |
| |
Cancelled |
|
| ( | ) |
|
|
|
|
| - |
| |
Vested |
|
| ( | ) |
|
|
|
|
| - |
| |
Unvested at September 30, 2023 |
|
|
|
| $ |
|
|
|
23 |
Table of Contents |
|
| RSUs |
|
| Weighted Average Grant Date Fair Value Per Share |
|
| Weighted Average Vesting Period |
| |||
Unvested at December 31, 2023 |
|
|
|
| $ |
|
|
| ||||
Granted |
|
| - |
|
|
|
|
|
| - |
| |
Cancelled |
|
| - |
|
|
|
|
|
| - |
| |
Vested |
|
| ( | ) |
|
|
|
|
| - |
| |
Unvested at September 30, 2024 |
|
|
|
| $ | |
|
|
|
In total for the nine months ended September 30, 2024, and 2023, the Company recorded $
Executive Officer Stock Options and RSUs
The Company had
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 $
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 $