As filed with the Securities and Exchange Commission on August 26, 2021
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
SOBR Safe, Inc. |
www.sobrsafe.com
(Exact name of registrant as specified in its charter)
Delaware |
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3829 |
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26-0731818 |
(State or other jurisdiction of incorporation or organization |
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(Primary Standard Industrial Classification Code Number) |
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(I.R.S. Employer Identification No.) |
885 Arapahoe Avenue Boulder, CO 80302 |
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(844) 762-7723 |
(Address, including zip code, of registrant’s principal executive offices) |
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(Telephone number, including area code) |
Kevin Moore, Chief Executive Officer
David Gandini, Chief Financial Officer
SOBR Safe, Inc.
885 Arapahoe Avenue
Boulder, CO 80302
(844) 762-7723
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
COPIES TO:
Craig V. Butler, Esq.
Law Offices of Craig V. Butler
300 Spectrum Center Drive, Suite 300
Irvine, CA 92618
(949) 484-5667
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☒
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer |
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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(Do not check if a smaller reporting company) |
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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 accounting standards provided to Section 7(a)(2)(B) of the Securities Act. ☐
CALCULATION OF REGISTRATION FEE
Title of each class of securities to be registered |
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Amount to be registered |
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Proposed maximum offering price per share(2) |
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Proposed maximum aggregate offering price |
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Amount of registration fee(9) |
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Common Stock, par value $0.00001, per share(1)(2) |
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$ | 22,000,000 | (2)(3) |
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$ | 2,400.20 |
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Common Stock, par value $0.00001, per share(1)(4) |
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668,334 |
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$ |
3.00 |
(5) |
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$ | 2,005,000 |
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$ | 218.75 |
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Warrants(1) |
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1,002,500 |
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$ |
-- |
(7) |
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$ |
-- |
(7) |
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$ | -- |
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Common Stock, par value $0.00001, per share(1)(6) |
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1,002,500 |
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$ |
3.00 |
(8) |
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$ | 3,007,500 |
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$ | 328.12 |
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Total Registration Fee |
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$ |
2,947.07 |
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(1) |
Pursuant to Rule 416(a) of the Securities Act, there are also being registered an indeterminable number of additional securities as may be issued to prevent dilution resulting from stock splits, stock dividends or similar transactions. |
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(2) |
Represents the shares being registered for a primary offering of our common stock. The number being registered will be determined by the offering price per share of the offering. Estimated solely for the purpose of computing the amount of the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended. |
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(3) |
Includes the offering price of shares of common stock that may be sold if the underwriter fully exercise their option to purchase additional shares of common stock. |
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(4) |
Represents shares of our common stock that may be issued upon conversion of outstanding convertible debentures held by the Selling Securityholders, which have a conversion price of $3.00 per share, subject to adjustment. |
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(5) |
Calculated pursuant to Rule 457(g) under the Securities Act, based on the conversion price of the convertible debentures. |
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(6) |
Represents shares of our common stock that may be issued upon exercise of outstanding warrants held by the Selling Securityholders. |
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(7) |
In accordance with Rule 457(g), the entire registration fee for the warrants is allocated to the shares of common stock underlying the warrants, and no separate fee is payable for the warrants. |
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(8) |
Calculated pursuant to Rule 457(g) under the Securities Act, based on the conversion price of outstanding warrants, with each warrant exercisable for one share of common stock, subject to adjustment, for an exercise price of $3.00 per share. |
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(9) |
To be paid in connection with the initial filing of this Registration Statement. |
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
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YOU MAY RELY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE INFORMATION DIFFERENT FROM THAT CONTAINED IN THIS PROSPECTUS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR SALE OF COMMON STOCK MEANS THAT INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT AFTER THE DATE OF THIS PROSPECTUS. THIS PROSPECTUS IS NOT AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THESE SHARES OF THE COMMON STOCK IN ANY CIRCUMSTANCES UNDER WHICH THE OFFER OR SOLICITATION IS UNLAWFUL.
Until ____________, 2022, all dealers that effect transactions in these securities whether or not participating in this offering may be required to deliver a prospectus. This is in addition to the dealer’s obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
[_____] SHARES
SOBR SAFE, INC.
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PROSPECTUS
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__________, 2021
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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the SEC is effective. This prospectus is not an offer to sell and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. |
Subject to Completion, Dated August 26, 2021
PROSPECTUS
Up to [_______] shares of common stock
SOBR SAFE, INC.
We are registering up to [_________] shares, representing approximately [__]% of our outstanding common stock if all shares are sold. It is currently estimated that the public offering price will be between $[___] and $[___] per share. This offering will terminate when all 10,000,000 shares are sold or on [___________], 2021, unless we terminate it earlier. Our common stock is currently quoted on the OTCQB market, operated by OTC Markets Group, under the symbol “SOBR.” On August 25, 2021, the last quoted price of our common stock as reported on the OTCQB was $3.20 per share. The final offering price may be at a discount or a premium to the trading price of our common stock on the OTCQB. This price will fluctuate based on the demand for our common stock. There is a limited public trading market for our common stock. The final public offering price will be determined through a negotiation between us and the underwriters in the offering and will take into account the recent market price of our common stock, the general condition of the securities market at the time of the Offering, the history of, and the prospects for, the industry in which we compete, our past and present operations, and our prospects for future revenues.
This prospectus also relates to the resale of an aggregate of 1,670,834 shares of our common stock underlying certain outstanding convertible debentures and warrants issued by us in previous private placement transactions and held by the 28 selling security holders named herein under “Selling Securityholders.” The shares being registered for resale by the Selling Securityholders would represent approximately 6.0% of our then outstanding common stock if all the convertible debentures were converted, and all the warrants exercised, based on our current common stock outstanding. We will not receive any proceeds from the resale of these shares of common stock by the Selling Securityholders.
We plan to apply to list our common stock on NASDAQ Capital Market and to complete this uplisting in connection with this Offering.
We will receive proceeds from the sale of the shares being registered in this offering. See “Use of Proceeds” for more information about how we will use the proceeds from this offering.
Investing in our common stock involves risks. SOBR Safe, Inc., currently has no revenue, and limited assets, is in unsound financial condition, and you should not invest unless you can afford to lose your entire investment. See “Risk Factors” beginning on page 7. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
In connection with this offering, we plan to enter into an underwriting agreement with one or more firms (who we refer to as the Representative), who will act as the representative of the underwriters to be named with respect to the sale of shares of common stock in this Offering. Regarding the public offering:
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Per Share |
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Total |
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Public offering price |
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$ | [ ] |
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$ | [ ] |
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Underwriting discounts and commissions(1) |
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$ | [ ] |
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$ | [ ] |
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Proceeds, before expenses, to us |
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$ | [ ] |
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$ | [ ] |
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(1) |
See “Underwriting” on page [__] for additional disclosure regarding underwriting discounts and commissions, overallotments, and reimbursement of expenses. |
We plan to grant the underwriters an option for a period of [__] days from the date of this prospectus to purchase up to an additional [_________] shares of common stock at the public offering price, less the underwriting discount.
We anticipate that delivery of the shares will be made on or about [--], 2021
The date of this prospectus is ___________ __, 2021
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MARKET AND INDUSTRY DATA
This prospectus includes estimates regarding market and industry data that we prepared based on our management’s knowledge and experience in the markets in which we operate, together with information obtained from various sources, including publicly available information, industry reports and publications, surveys, our customers, distributors, suppliers, trade and business organizations and other contacts in the markets in which we operate. In some cases, we do not expressly refer to the sources from which this data is derived. Management estimates are derived from publicly available information released by independent industry analysts and third-party sources, as well as data from our internal research, and are based on assumptions made by us upon reviewing such data and our knowledge of such industry and markets which we believe to be reasonable.
In presenting this information, we have made certain assumptions that we believe to be reasonable based on such data and other similar sources and on our knowledge of, and our experience to date in, the markets for the products we distribute. Market share data is subject to change and may be limited by the availability of raw data, the voluntary nature of the data gathering process and other limitations inherent in any statistical survey of market shares. In addition, customer preferences are subject to change.
CERTAIN TRADEMARKS, TRADE NAMES AND SERVICE MARKS
This prospectus includes trademarks and service marks owned by us, including, without limitation, SOBRSafe™, SOBRCheck™, SOBRsure™, and our logo, which are our property and are protected under applicable intellectual property laws. This prospectus also contains trademarks, trade names and service marks of other companies, which are the property of their respective owners. Solely for convenience, trademarks, trade names and service marks referred to in this prospectus may appear without the ®, ™ or SM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable licensor to these trademarks, trade names and service marks. We do not intend our use or display of other parties’ trademarks, trade names or service marks to imply, and such use or display should not be construed to imply, a relationship with, or endorsement or sponsorship of us by, these other parties.
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You should read the following summary together with the more detailed information and the financial statements appearing elsewhere in this Prospectus. This Prospectus contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under “Risk Factors” and elsewhere in this Prospectus. Unless the context indicates or suggests otherwise, references to “we,” “our,” “us,” the “Company,” or the “Registrant” refer to SOBR Safe, Inc., a Delaware corporation.
SOBR SAFE, INC.
Our Company
We intend to create substance-free environments by integrating and commercializing critical detection technologies. These technologies will be integrated within our robust and scalable data platform, producing human physiology metrics, statistical and measurable user and business data and, eventually, predictive analytics. Our mission is to save lives, improve and monitor employee health, increase productivity, create significant economic benefit and positively impact behavior. To that end, we developed the scalable, patented SOBRSafe™ software platform for non-invasive alcohol detection and identity verification, a solution that has anticipated applications in commercial vehicle fleets, school buses, manufacturing and warehousing.
We are currently managing installed pilots of our SOBRcheck™ product with Continental Services, HAS, Advanced Freight and several other companies. These pilots are being conducted prior to, and in anticipation of, the commercial release of our SOBRcheck™ product. We expect commercial production to commence during the fourth quarter of 2021. Manufacturing and assembly of our SOBRcheck™ device will take place in Denver, Colorado.
Our SOBRsafe™ technology can also be deployed across numerous additional devices for various uses; among those we are currently exploring include possible integrations with existing telematics systems, as well as law enforcement technologies to enhance public safety. In addition, we are proactively evaluating other emerging detection technologies for alcohol, cannabis, opioids, human health and more. Currently, our plan is to deploy our SOBRSafe™ technology in two initial devices: the SOBRsure™ wearable band and the SOBRcheck™ system.
Our Opportunity
Our management believes the key to developing a successful product is to find a potential solution to a need not being adequately addressed with current technologies. When that need also involves a potential solution for a societal crisis – like the impact of substance abuse on the workplace and individual lives – then the motivation is even stronger, and the potential results that are much more impactful.
Through crime, lost work productivity and healthcare expenses, the annual cost of alcohol abuse in the U.S. is estimated to be $249 billion. Half of all industrial accidents involve alcohol, and commercial fleets suffer from over 11,000 alcohol-related accidents each year. We believe we have a solution that addresses this problem, and our technology is now available for pilot evaluation in commercial fleet management, school bus safety and manufacturing facilities.
Risks Related to our Business
Our ability to implement our business strategy is subject to numerous risks, as more fully described in the section entitled “Risk Factors” immediately following this prospectus summary. These risks include, among others:
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We are an early-stage company with a history of significant net losses, we expect to continue to incur operating losses for the foreseeable future and we may not be able to achieve or sustain profitability. |
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Currently our plan for future revenue will be primarily generated from sales of our SOBRcheck™ and SOBRsure™ devices, and related subscription services, and we are therefore highly dependent on the success of those products. |
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Our quarterly and annual operating results may fluctuate significantly and may not fully reflect the underlying performance of our business. This makes our future operating results difficult to predict and could cause our operating results to fall below expectations or any guidance we may provide. |
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Even if this offering is successful, we may need additional funding beyond the proceeds of this offering to finance our planned operations, and may not be able to raise capital when needed, which could force us to delay, reduce or eliminate one or more of our product development programs and future commercialization efforts. |
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The commercial success of our SOBRcheck™ and SOBRsure™ devices will depend upon the degree of market acceptance of our products among insurance companies, fleet drivers, manufacturing facilities, and other industries. |
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We have limited experience in training and marketing and selling our products and we may provide inadequate training, fail to increase our sales and marketing capabilities or fail to develop and maintain broad brand awareness in a cost-effective manner. |
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We face competition from many sources, including larger companies, and we may be unable to compete successfully. |
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We have limited experience manufacturing our products in large-scale commercial quantities, and we face a number of manufacturing risks that may adversely affect our manufacturing abilities which could delay, prevent or impair our growth. |
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We depend upon third-party suppliers, including contract manufacturers and single source suppliers, making us vulnerable to supply shortages and price fluctuations that could negatively affect our business, financial condition and results of operations. |
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If we receive a significant number of warranty claims or our SOBRcheck™ and SOBRsure™ devices require significant amounts of service after sale, our operating expenses may substantially increase and our business and financial results will be adversely affected. |
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Our business, financial condition, results of operations and growth have been adversely impacted by the effects of the COVID-19 pandemic and may continue to be adversely impacted. |
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We may encounter difficulties in managing our growth, which could disrupt our operations. |
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Our internal computer systems, or those used by our contractors or consultants, may fail or suffer security breaches, and such failure could negatively affect our business, financial condition and results of operations. |
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The sizes of the addressable markets for our SOBRcheck™ and SOBRsure™ devices have not been established with precision and our potential market opportunity may be smaller than we estimate and may decline. |
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Until we are able to achieve broader market acceptance of our SOBRcheck™ and SOBRsure™ devices, we may face risks associated with a more concentrated customer base. |
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We are highly dependent on our senior management team and key personnel, and our business could be harmed if we are unable to attract and retain personnel necessary for our success. |
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Our products and operations are subject to government regulation and oversight both in the United States and abroad, and our failure to comply with applicable requirements could harm our business. |
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If we are unable to adequately protect our intellectual property rights, or if we are accused of infringing on the intellectual property rights of others, our competitive position could be harmed or we could be required to incur significant expenses to enforce or defend our rights. |
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We have identified a material weakness in our internal control over financial reporting and may identify additional material weaknesses in the future or otherwise fail to maintain effective internal control over financial reporting, which may result in material misstatements of our financial statements or cause us to fail to meet our periodic reporting obligations. |
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If you purchase our common stock in this offering, you will incur immediate and substantial dilution. |
Corporate Information
We were incorporated under the name Imagine Media, Ltd. in August 2007 to publish and distribute Image Magazine, a monthly guide and entertainment source for the Denver, Colorado area. We generated only limited revenue and essentially abandoned the business plan in January 2009. On September 19, 2011, we, Imagine Media, Ltd., a Delaware corporation, acquired approximately 52% of the outstanding shares of TransBiotec, Inc. (the “Company” or “TBT”), a California corporation, from TBT’s directors in exchange for 373,315 shares of our common stock.
On January 17, 2012, our Board of Directors amended our Certificate of Incorporation changing our name from Imagine Media, Ltd. to TransBiotec, Inc.
On January 31, 2012, we acquired approximately 45% of the remaining outstanding shares of TBT in exchange for 329,936 shares of our common stock.
With the acquisitions in September 2011 and January 2012 of TBT common stock, we own approximately 99% of the outstanding shares of TBT.
As a result of the acquisitions, TBT’s business is our business, and, unless otherwise indicated, any references to “we” or “us” include the business and operations of TBT.
On March 9, 2020, in connection with our transaction with IDTEC, LLC (as detailed herein) our Board of Directors approved the amendment to our Certificate of Incorporation on March 9, 2020 and stockholders holding 52.24% of our then outstanding voting stock approved the amendment to our Articles of Incorporation. The Certificate of Amendment to our Certificate of Incorporation was for the purpose of, among other things, (i) changing our name from “TransBiotec, Inc.” to “SOBR Safe, Inc.”, (ii) effecting a 1-for-33.26 reverse stock split of our common stock, and (iii) decreasing our authorized common stock from 800,000,000 shares to 100,000,000 shares, and became effective with the State of Delaware on April 24, 2020.
As a result of the reverse stock split effected by our Certificate of Amendment to our Certificate of Incorporation, every 33.26 shares of our outstanding common stock prior to the effect of that amendment were combined and reclassified into one share of our common stock, and the number of outstanding shares of our common stock at the time was reduced from 266,097,657 (pre-split) to approximately 8,000,000 (post-split). No fractional shares were issued in connection with the reverse stock split, and any of our stockholders that would have been entitled to receive a fractional share as a result of the reverse stock split instead received one additional share of our common stock in lieu of the fractional share. The reverse stock split did not in itself affect any stockholder’s ownership percentage of our common stock, except to the extent that any fractional share were rounded up to the nearest whole share.
At the open of trading on June 8, 2020, our new name and reverse stock split went effective with OTC Markets, and we began trading on the “OTC Pink Current Information” tier of OTC Markets on a post reverse stock split basis. Our ticker symbol for the quotation of our common stock is now “SOBR”. On November 16, 2020, we began trading on the “OTCQB” tier of OTC Markets.
Our corporate offices are located at 885 Arapahoe Avenue, Boulder, Colorado 80302, telephone number (844) 762-7723.
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SUMMARY OF THE OFFERING
Common stock offered by SOBR Safe, Inc. |
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We are registering to sell to new investors up to [_______] shares of our common stock, at $[_____] per share. |
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Option to purchase additional shares |
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We plan to grant the underwriters an option exercisable for a period of [__] days to purchase up to an [______] additional shares of our common stock at the public offering price, less the underwriting discounts and commissions. |
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Common stock outstanding before the offering |
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25,981,203 shares of our common stock as of the date hereof. |
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Common stock outstanding after the offering |
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[________] shares of our common stock, (or [______] shares if the underwriters exercise their option to purchase additional shares of common stock in full). |
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Offering price per share |
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$[___] per share of common stock, pursuant to the terms herein. |
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Use of proceeds |
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We estimate that the net proceeds to us from this offering will be approximately $ million, or approximately $ million if the underwriters exercise their option to purchase additional shares in full, based upon an assumed public offering price of $ per share, which is the midpoint of the estimated price range set forth on the cover page of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
We currently intend to use the net proceeds from this offering, together with our existing cash and cash equivalents, to hire additional sales and marketing personnel and expand marketing programs in the United States, to fund product development and research and development activities and the remainder for working capital and other general corporate purposes.
The use of proceeds is discussed herein under “Use of Proceeds.” We will not receive proceeds from the sale of any shares by the Selling Securityholders. |
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Common shares offered by Selling Securityholders |
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1,670,834 shares of our common stock underlying certain convertible debentures And warrants held by the Selling Securityholders. |
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Common stock outstanding if Selling Security convert all convertible debentures and exercise all warrants |
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27,652,037 shares of our common stock as of the date hereof. |
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Common stock outstanding after offering if if Selling Security convert all convertible debentures and exercise all warrants |
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[___________] shares of our common stock. |
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Proposed Nasdaq Global Market symbol |
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TBD. |
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Risk Factors |
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The shares of our common stock offered hereby involves a high degree of risk and should not be purchased by investors who cannot afford the loss of their entire investment. See “Risk Factors”. |
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Voting rights |
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Shares of our common stock are entitled to one vote per share. There are no other classes of stock and, therefore, all holders of our common stock, including our officers and directors, are entitled to the same voting rights. |
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Lock-ups |
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We anticipate that our officers and directors, and certain holders of our capital stock will enter into lock-ups restricting the transfer of shares of, or relating to, our capital stock for [______] ([__]) months after the date of this prospectus. |
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Unless we indicate otherwise, all information in this prospectus:
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assumes no exercise by the representatives of the underwriters of its option to purchase up to an additional [________] shares of common stock; and |
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excludes 2,959,727 shares of our common stock issuable upon exercise of outstanding stock options at a weighted average exercise price of $0.8646 per share as of June 30, 2021; |
Any investment in our securities involves a high degree of risk. You should consider carefully the following information, together with the other information contained in this Prospectus, before you decide to buy our common stock. We face risks in developing devices based on our SOBRsafe™ platform, as well in marketing and selling such devices. If we are not successful in developing, marketing, and/or selling devices based on our SOBRsafe™ platform we will not be successful in generating revenue. The following risks are material risks that we face. If any of the events or developments discussed below occur, our business, our ability to achieve revenues, our operating results and our financial condition could be seriously harmed. In such an event, the fair value of our common stock could decline and you could lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our operations. Our primary risk factors and other considerations include:
Risks Related to the Company
We have a limited operating history and historical financial information upon which you may evaluate our performance.
You should consider, among other factors, our prospects for success in light of the risks and uncertainties encountered by companies that, like us, are in their early stages of development. We may not successfully address these risks and uncertainties or successfully implement our existing and new products. If we fail to do so, it could materially harm our business and impair the value of our common stock. Even if we accomplish these objectives, we may not generate the positive cash flows or profits we anticipate in the future. We were incorporated in Delaware on August 10, 2007. Our business to date business focused on developing and improving our technologies, potential products, filing patents, and hiring management and staff personnel. Unanticipated problems, expenses and delays are frequently encountered in establishing a new business and developing new products. These include, but are not limited to, inadequate funding, lack of consumer acceptance, competition, product development, and inadequate sales and marketing. The failure by us to meet any of these conditions would have a materially adverse effect upon us and may force us to reduce or curtail operations. No assurance can be given that we can or will ever operate profitably.
We may not be able to meet our future capital needs.
To date, we have not generated any revenue and we have limited cash liquidity and capital resources. Our future capital requirements will depend on many factors, including our ability to develop our products, cash flow from operations, and competing market developments. We will need additional capital in the near future. Any equity financings will result in dilution to our then-existing stockholders. Sources of debt financing may result in high interest expense. Any financing, if available, may be on unfavorable terms. If adequate funds are not obtained, we will be required to reduce or curtail operations.
If we cannot obtain additional funding, our technology and product development and commercialization efforts may be reduced or discontinued and we may not be able to continue operations.
We have historically experienced negative cash flows from operations since our inception and we expect the negative cash flows from operations to continue for the foreseeable future. Unless and until we are able to generate revenues, we expect such losses to continue for the foreseeable future. As discussed in our financial statements, there exists substantial doubt regarding our ability to continue as a going concern.
Development of our technology and our product development efforts are highly dependent on the amount of cash and cash equivalents on hand combined with our ability to raise additional capital to support our future operations through one or more methods, including but not limited to, issuing additional equity or debt.
In addition, we may also raise additional capital through additional equity offerings, and licensing our future products in development. While we will continue to explore these potential opportunities, there can be no assurances that we will be successful in raising sufficient capital on terms acceptable to us, or at all, or that we will be successful in licensing our future products.
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Our business plan, which is focused on the development and commercialization of alcohol detection devices, is dependent upon our SOBR® Safe™ technology. If that technology proves to be ineffective at detecting alcohol in person’s system through secretions from their skin it would significantly impact our business.
Our business is dependent upon our SOBR® Safe™ technology. Our business plan calls for us to develop and commercialize alcohol detection devices based on our SOBR® Safe™ technology. In the event that technology proves to be ineffective at detecting alcohol in person’s system through secretions from their skin, it would significantly impact our business.
Our quarterly and annual operating results may fluctuate significantly and may not fully reflect the underlying performance of our business. This makes our future operating results difficult to predict and could cause our operating results to fall below expectations or any guidance we may provide.
Our quarterly and annual results of operations, including our revenue, profitability and cash flow, may vary significantly in the future, and period-to-period comparisons of our operating results may not be meaningful. Accordingly, the results of any one quarter or period should not be relied upon as an indication of future performance. Our quarterly and annual operating results may fluctuate significantly as a result of a variety of factors, many of which are outside our control and, as a result, may not fully reflect the underlying performance of our business. Such fluctuations in quarterly and annual operating results may decrease the value of our common stock. Because our quarterly operating results may fluctuate, period-to-period comparisons may not be the best indication of the underlying results of our business and should only be relied upon as one factor in determining how our business is performing. These fluctuations may occur due to a variety of factors, many of which are outside of our control, including, but not limited to:
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the level of adoption and demand for our products in our key industries like insurance companies, fleet companies, manufacturing facilities, etc. |
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positive or negative coverage in the media, or changes in commercial perception, of our products or competing products, including our brand reputation; |
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the degree of competition in our industry and any change in the competitive landscape, including consolidation among competitors or future partners; |
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any safety, reliability or effectiveness concerns that arise regarding our products; |
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unanticipated pricing pressures in connection with the sale of our products; |
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the effectiveness of our sales and marketing efforts, including our ability to deploy a sufficient number of qualified representatives to sell and market our products; |
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the timing of customer orders for our products and the number of available selling days in any quarterly period, which can be impacted by holidays, the mix of products sold and the geographic mix of where products are sold; |
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unanticipated delays in product development or product launches; |
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the cost of manufacturing our products, which may vary depending on the quantity of production and the terms of our agreements with third-party suppliers; |
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our ability to raise additional capital on acceptable terms, or at all, if needed to support the commercialization of our products; |
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our ability to achieve and maintain compliance with all regulatory requirements applicable to our products and services; |
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our ability to obtain, maintain and enforce our intellectual property rights; |
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our ability and our third-party suppliers’ ability to supply the components of our products in a timely manner, in accordance with our specifications, and in compliance with applicable regulatory requirements; and |
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introduction of new products or technologies that compete with our products. |
The cumulative effects of these factors could result in large fluctuations and unpredictability in our quarterly and annual operating results. If our assumptions regarding the risks and uncertainties we face, which we use to plan our business, are incorrect or change due to circumstances in our business or our markets, or if we do not address these risks successfully, our operating and financial results could deviate materially from our expectations and our business could suffer.
This variability and unpredictability could also result in our failure to meet the expectations of industry or financial analysts or investors for any period. If our revenue or operating results fall below the expectations of analysts or investors or below any forecasts we may provide to the market, it will negatively affect our business, financial condition and results of operations.
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The coronavirus pandemic is causing disruptions in the workplace, which will have negative repercussions on our business if they continue for an extended period time.
We are closely monitoring the coronavirus pandemic and the directives from federal and local authorities regarding not only our workforce, but how it impacts companies we work with for the development of our SOBRSafe™ technology and the devices that deploy that technology. Currently states and localities are fluctuating and inconsistent in their implementation of social distancing and “work from home” regulations. If those regulations increase then the chances increase that more and more companies will be forced to either shut down, slow down or alter their work routines. Since the development and testing of our SOBR technologies and the potential platform devices is a “hands on” process these alternative work arrangements could significantly slow down our anticipated schedules for the development, marketing and leasing/sale of our SOBR devices, which could have a negative impact our business.
Because we face intense competition, we may not be able to operate profitably in our markets.
The market for our products is highly competitive and is becoming more so, which could hinder our ability to successfully market our products. We may not have the resources, expertise or other competitive factors to compete successfully in the future. We expect to face additional competition from existing competitors and new market entrants in the future. Many of our competitors have greater name recognition and more established relationships in the industry than we do. As a result, these competitors may be able to:
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develop and expand their product offerings more rapidly; |
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adapt to new or emerging changes in customer requirements more quickly; |
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take advantage of acquisition and other opportunities more readily; and |
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devote greater resources to the marketing and sale of their products and adopt more aggressive pricing policies than we can. |
If our products do not gain expected market acceptance, prospects for our sales revenue may be affected.
We intend to use the SOBR Safe™ technology in various platforms in the preventative, B2B market, as opposed to the judicially-mandated individual user market. Currently, most alcohol sensing devices are breath analyzers and ankle bracelets employed in the judicially-mandated market where the use is usually required by law as a punishment for committing a crime. We will be asking companies and institutions that have an interest in monitoring whether their employees or contractors have alcohol in their systems due to their job responsibilities (such as fleet and school bus drivers, factory machinists, forklift operators, etc.), to adopt a new requirement that their employees or contractors must abide in order to remain employed. While we believe this will be attractive to many companies and industries, we must achieve some level of market acceptance to be successful. If we are unable to achieve market acceptance, our investors could lose their entire investment.
If critical components become unavailable or contract manufacturers delay their production, our business will be negatively impacted.
Currently, we manufacture the limited number of SOBRCheck™ prototype devices we have developed by applying our proprietary know-how to “off the shelf” parts and components. However, if we are successful in our growth plan, eventually we will have to contract out our manufacturing of the devices. At that time, the stability of component supply will be crucial to determining our manufacturing process. Due to the fact we currently manufacture the device from “off the shelf” parts and components, all of our critical devices and components are supplied by certain third-party manufacturers, and we may be unable to acquire necessary amounts of key components at competitive prices.
If we are successful in our growth, outsourcing the production of certain parts and components would be one way to reduce manufacturing costs. We plan to select these particular manufacturers based on their ability to consistently produce these products according to our requirements in an effort to obtain the best quality product at the most cost effective price. However, the loss of all or one of these suppliers or delays in obtaining shipments would have an adverse effect on our operations until an alternative supplier could be found, if one may be located at all. If we get to that stage of growth, such loss of manufacturers could cause us to breach any contracts we have in place at that time and would likely cause us to lose sales.
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If our contract manufacturers fail to meet our requirements for quality, quantity and timeliness, our business growth could be harmed.
We eventually plan to outsource the manufacturing of devices utilizing the SOBR® Safe™ alcohol detection system to contract manufacturers. These manufacturers will procure most of the raw materials for us and provide all necessary facilities and labor to manufacture our products. If these companies were to terminate their agreements with us without adequate notice, or fail to provide the required capacity and quality on a timely basis, we would be delayed in our ability or unable to process and deliver our products to our customers.
Our products could contain defects or they may be installed or operated incorrectly, which could reduce sales of those products or result in claims against us.
Although we have quality assurance practices in place to ensure good product quality, defects still may be found in the future in our future products.
End-users could lose their confidence in our products our company when they unexpectedly use defective products or use our products improperly. This could result in loss of revenue, loss of profit margin, or loss of market share.
We have limited experience manufacturing our products in large-scale commercial quantities, and we face a number of manufacturing risks that may adversely affect our manufacturing abilities which could delay, prevent or impair our growth.
Our growth strategy depends on our ability to manufacture our current and future products in sufficient quantities and on a timely basis to meet customer demand, while adhering to product quality standards, complying with regulatory quality system requirements and managing manufacturing costs in our current manufacturing facility or any future manufacturing facilities. We have a sole manufacturing facility located in Denver, Colorado, where we manufacture, assemble, inspect, test, package and ship our products. We currently assemble all of our SOBRcheck™ devices at this one facility, and we do not have additional facilities. If this facility, or any of our future manufacturing facilities, suffers damage, or a force majeure event, such damage or event could materially impact our ability to operate, which could materially and adversely affect our business and financial performance.
We are also subject to numerous other risks relating to our manufacturing capabilities, including:
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quality and reliability of components, sub-assemblies and materials that we source from third-party suppliers, who are required to meet our quality specifications, almost all of whom are single source suppliers for the items and materials that they supply; |
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our inability to secure components, sub-assemblies and materials in a timely manner, in sufficient quantities or on commercially reasonable terms; |
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our inability to maintain compliance with quality system requirements or pass regulatory quality inspections; |
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our failure to increase production capacity or volumes to meet demand; |
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potential risks associated with disruptions in our supply chain, such as on account of the COVID-19 pandemic or other macroeconomic events; |
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lead times associated with securing key components; |
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our inability to design or modify production processes to enable us to produce future products efficiently or implement changes in current products in response to design or regulatory requirements; and |
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difficulty identifying and qualifying, and obtaining new regulatory approvals, for alternative suppliers for components in a timely manner. |
These risks are likely to be exacerbated by our limited experience with our current products and manufacturing processes. As demand for our products increases, we will have to invest additional resources to purchase components, sub-assemblies and materials, hire and train employees and enhance our manufacturing processes. If we fail to increase our production capacity efficiently, we may not be able to fill customer orders on a timely basis, our sales may not increase in line with our expectations and our operating margins could fluctuate or decline. In addition, although some future products may share product features, components, sub-assemblies and materials with our existing products, the manufacture of these products may require modification of our current production processes or unique production processes, the hiring of specialized employees, the identification of new suppliers for specific components, sub-assemblies and materials or the development of new manufacturing technologies. It may not be possible for us to manufacture these products at a cost or in quantities sufficient to make these products commercially viable or to maintain current operating margins, all of which could have a material adverse effect on our business, financial condition and results of operations.
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Because our technology is innovative and disruptive, we may additional time to enter the market due to the need to further discover the profile companies within our target markets.
Our products are new to the marketplace. As a result, we will need time to penetrate our target markets by furthering developing the profile companies that could benefit the most from our products and technology. If we are not successful in discovering these companies it could greatly slow our growth and adversely impact our financial condition.
We are currently only selling our products through direct sales and will need time to develop relationship with distributors in order to properly grow the market for our products.
We currently rely on our direct sales force to sell our products to targeted industries. This limits our ability to grow. We are working on developing relationships with targeted distributors in our target companies industries, but this will take time. Any failure to maintain and grow our direct sales force and distributor relationships could harm our business. The members of our direct sales force are adequately trained and possess technical expertise, which we believe is critical in driving the awareness and adoption of our products. The members of our U.S. sales force are at-will employees. The loss of these personnel to competitors, or otherwise, could materially harm our business. If we are unable to retain our direct sales force personnel or replace them with individuals of comparable expertise and qualifications, or if we are unable to successfully instill such expertise in replacement personnel, our product sales, revenues and results of operations could be materially harmed.
In order to generate future growth, we plan to continue to significantly expand and leverage our commercial infrastructure to increase our customer base and increase awareness and adoption by existing customers to drive our growth. Identifying and recruiting qualified sales and marketing professionals and training them on our products and on our internal policies and procedures requires significant time, expense and attention. It can take several months or more before a sales representative is fully trained and productive. Our sales force may subject us to higher fixed costs than those of companies with competing products or treatments that can utilize independent third parties, placing us at a competitive disadvantage. Our business may be harmed if our efforts to expand and train our sales force do not generate a corresponding increase in product sales and revenue, and our higher fixed costs may slow our ability to reduce costs in the face of a sudden decline in demand for our products. Any failure to hire, develop and retain talented sales personnel, to achieve desired productivity levels in a reasonable period of time or timely reduce fixed costs, could have material adverse effect on our business, financial condition and results of operations.
Our ability to increase our customer base and achieve broader market acceptance of our products will depend, to a significant extent, on our ability to expand our sales and marketing and educational efforts. We plan to dedicate significant resources to our sales and marketing and educational programs. Our business may be harmed if these efforts and expenditures do not generate a corresponding increase in revenue. If we fail to successfully promote our products in a cost-effective manner, we may fail to attract or retain the market acceptance necessary to realize a sufficient return on our promotional and educational efforts, or to achieve broad adoption of our products.
We need to ensure strong product performance and reliability to maintain and grow our business.
We need to maintain and continuously improve the performance and reliability of our products to achieve our profitability objectives. Poor product performance and reliability could lead to customer dissatisfaction, adversely affect our reputation and revenues, and increase our service and distribution costs and working capital requirements. In addition, our SOBRsafe™ technology, and the software and hardware incorporated into our SOBRcheck™ and SOBRsure™ devices may contain errors or defects, especially when first introduced and while we have made efforts to test this software and hardware extensively, we cannot assure that the software and hardware, or software and hardware developed in the future, will not experience errors or performance problems.
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Our internal computer systems, or those used by our contractors or consultants, may fail or suffer security breaches, and such failure could negatively affect our business, financial condition and results of operations.
We depend on our information technology systems for the efficient functioning of our business, including the manufacture, distribution and maintenance of our products, as well as for accounting, data storage, compliance, purchasing, inventory management and other related functions. We do not have redundant information technology in all aspects of our systems at this time. Despite the implementation of security and back-up measures, our internal computer, server, and other information technology systems as well as those of our third-party consultants, contractors, suppliers, and service providers, may be vulnerable to damage from physical or electronic break-ins, accidental or intentional exposure of our data by employees or others with authorized access to our networks, computer viruses, malware, ransomware, supply chain attacks, natural disasters, terrorism, war, telecommunication and electrical failure, denial of service, and other cyberattacks or disruptive incidents that could result in unauthorized access to, use or disclosure of, corruption of, or loss of sensitive, and/or proprietary data, including personal information, including health-related information, and could subject us to significant liabilities and regulatory and enforcement actions, and reputational damage. Additionally, theft of our intellectual property or proprietary business information could require substantial expenditures to remedy. Such theft could also lead to loss of intellectual property rights through disclosure of our proprietary business information, and such loss may not be capable of remedying. If we or our third-party consultants, contractors, suppliers, or service providers were to suffer an attack or breach, for example, that resulted in the unauthorized access to or use or disclosure of personal information, we may have to notify consumers, partners, collaborators, government authorities, and the media, and may be subject to investigations, civil penalties, administrative and enforcement actions, and litigation, any of which could harm our business and reputation. The COVID-19 pandemic has generally increased the risk of cybersecurity intrusions. Our reliance on internet technology and the number of our employees who are working remotely may create additional opportunities for cybercriminals to exploit vulnerabilities. For example, there has been an increase in phishing and spam emails as well as social engineering attempts from “hackers” hoping to use the recent COVID-19 pandemic to their advantage. Furthermore, because the techniques used to obtain unauthorized access to, or to sabotage, systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures. We may also experience security breaches that may remain undetected for an extended period. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or systems or data or systems of our commercial partners, or inappropriate or unauthorized access to or disclosure or use of confidential, proprietary, or other sensitive, personal, or health information, we could incur liability and suffer reputational harm. Failure to maintain or protect our information technology systems effectively could negatively affect our business, financial condition and results of operations.
If we are unable to recruit and retain qualified personnel, our business could be harmed.
Our growth and success highly depend on qualified personnel. Competition in the industry could cause us difficulty in recruiting or retaining a sufficient number of qualified technical personnel, which could harm our ability to develop new products. If we are unable to attract and retain necessary key talents, it would harm our ability to develop competitive product and retain good customers and could adversely affect our business and operating results.
We may be unable to adequately protect our proprietary rights.
We currently have one “use” patent covering the SOBR® Safe™ alcohol detection system and/or the SOBR devices and two provisional patents pending with the USPTO. These are not patents over the components of the device, but instead covering the use of those components in the SOBR device. Our ability to compete partly depends on the superiority, uniqueness and value of our intellectual property. To protect our proprietary rights, we will rely on a combination of patent, copyright and trade secret laws, confidentiality agreements with our employees and third parties, and protective contractual provisions. Despite these efforts, any of the following occurrences may reduce the value of our intellectual property:
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Our applications for patents relating to our business may not be granted and, if granted, may be challenged or invalidated; |
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Issued patents may not provide us with any competitive advantages; |
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Our efforts to protect our intellectual property rights may not be effective in preventing misappropriation of our technology; |
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Our efforts may not prevent the development and design by others of products or technologies similar to or competitive with, or superior to those we develop; or |
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Another party may obtain a blocking patent and we would need to either obtain a license or design around the patent in order to continue to offer the contested feature or service in our products. |
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We may become involved in lawsuits to protect or enforce our patents that would be expensive and time consuming.
In order to protect or enforce our patent rights, we may initiate patent litigation against third parties. In addition, we may become subject to interference or opposition proceedings conducted in patent and trademark offices to determine the priority and patentability of inventions. The defense of intellectual property rights, including patent rights through lawsuits, interference or opposition proceedings, and other legal and administrative proceedings, would be costly and divert our technical and management personnel from their normal responsibilities. An adverse determination of any litigation or defense proceedings could put our pending patent applications at risk of not being issued.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. For example, during the course of this kind of litigation, confidential information may be inadvertently disclosed in the form of documents or testimony in connection with discovery requests, depositions or trial testimony. This disclosure could have a material adverse effect on our business and our financial results.
The internal controls we utilize to produce reliable financial reports have material weaknesses. If we continue to have material weaknesses in our internal controls, we may not be able to report our financial results accurately or timely or to detect fraud, which could have a material adverse effect on our business.
An effective internal control environment is necessary for us to produce reliable financial reports and is an important part of our effort to prevent financial fraud. We are required to periodically evaluate the effectiveness of the design and operation of our internal controls over financial reporting. Based on these evaluations, we concluded in our Quarterly Report on Form 10-Q for the period ended June 30, 2021, as well as in all of our quarterly and annual reports since evaluations and disclosure regarding our internal controls became required disclosure, that we have material weaknesses in our internal controls and enhancements, modifications, and changes to our internal controls are necessary in order to eliminate these weaknesses. As of June 30, 2021, the specific weaknesses our management has identified include: (i) we do not have sufficient segregation of duties within our accounting functions, (ii) we have not documented our internal controls, and (iii) effective controls over the control environment were not maintained. See “Internal Control Over Financial Reporting”, herein. There are inherent limitations on the effectiveness of internal controls, including collusion, management override, and failure of human judgment. In addition, control procedures are designed to reduce rather than eliminate business risks. If we continue to fail to maintain an effective system of internal controls we may be unable to produce reliable, timely financial reports or prevent fraud, which could have a material adverse effect on our business, including subjecting us to sanctions or investigation by regulatory authorities, such as the Securities and Exchange Commission. Any such actions could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements, which could cause the market price of our common stock to decline or limit our access to capital.
Our common stock has been thinly traded and we cannot predict the extent to which a trading market will develop.
Our common stock is quoted on the OTBQB-tier of OTC Markets. Our common stock is thinly-traded compared to larger more widely known companies. Thinly traded common stock can be more volatile than common stock trading in an active public market. We cannot predict the extent to which an active public market for our common stock will develop or be sustained.
We may not be able to identify, negotiate, finance or close future acquisitions.
One component of our growth strategy focuses on acquiring additional technologies, companies and/or assets. We may not, however, be able to identify, audit, or acquire technologies, companies and/or assets on acceptable terms, if at all. Additionally, we may need to finance all or a portion of the purchase price for an acquisition by incurring indebtedness. There can be no assurance that we will be able to obtain financing on terms that are favorable, if at all, which will limit our ability to acquire additional companies or assets in the future. Failure to acquire additional companies or assets on acceptable terms, if at all, would have a material adverse effect on our ability to increase assets, revenues and net income and on the trading price of our common Stock.
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We may acquire businesses without any apparent synergies with our current operations of alcohol detection devices.
In an effort to diversify our sources of revenue and profits, we may decide to acquire businesses without any apparent synergies with our current alcohol detection device operations. For example, we believe that the acquisition of technologies unrelated to alcohol detection devices may be an important way for us to enhance our stockholder value. Notwithstanding the critical importance of diversification, some members of the investment community and research analysts would prefer that micro-cap or small-cap companies restrict the scope of their activity to a single line of business, and may not be willing to make an investment in, or recommend an investment in, a micro-cap or small-cap company that undertakes multiple lines of business. This situation could materially adversely impact our company and the trading price of our stock.
We may not be able to properly manage multiple businesses.
We may not be able to properly manage multiple businesses. Managing multiple businesses would be more complicated than managing a single line of business, and would require that we hire and manage executives with experience and expertise in different fields. We can provide no assurance that we will be able to do so successfully. A failure to properly manage multiple businesses could materially adversely affect our company and the trading price of our stock.
We may not be able to successfully integrate new acquisitions.
Even if we are able to acquire additional technologies, companies and/or assets, we may not be able to successfully integrate those companies or assets. For example, we may need to integrate widely dispersed operations with different corporate cultures, operating margins, competitive environments, computer systems, compensation schemes, business plans and growth potential requiring significant management time and attention. In addition, the successful integration of any companies we acquire will depend in large part on the retention of personnel critical to our combined business operations due to, for example, unique technical skills or management expertise. We may be unable to retain existing management, finance, engineering, sales, customer support, and operations personnel that are critical to the success of the integrated company, resulting in disruption of operations, loss of key information, expertise or know-how, unanticipated additional recruitment and training costs, and otherwise diminishing anticipated benefits of these acquisitions, including loss of revenue and profitability. Failure to successfully integrate acquired businesses could have a material adverse effect on our company and the trading price of our stock.
Our acquisitions of businesses may be extremely risky and we could lose all of our investments.
We may invest in other technology businesses or other risky industries. An investment in these companies may be extremely risky because, among other things, the companies we are likely to focus on: (1) typically have limited operating histories, narrower product lines and smaller market shares than larger businesses, which tend to render them more vulnerable to competitors’ actions and market conditions, as well as general economic downturns; (2) tend to be privately-owned and generally have little publicly available information and, as a result, we may not learn all of the material information we need to know regarding these businesses; (3) are more likely to depend on the management talents and efforts of a small group of people; and, as a result, the death, disability, resignation or termination of one or more of these people could have an adverse impact on the operations of any business that we may acquire; (4) may have less predictable operating results; (5) may from time to time be parties to litigation; (6) may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence; and (7) may require substantial additional capital to support their operations, finance expansion or maintain their competitive position. Our failure to make acquisitions efficiently and profitably could have a material adverse effect on our business, results of operations, financial condition and the trading price of our stock.
Future acquisitions may fail to perform as expected.
Future acquisitions may fail to perform as expected. We may overestimate cash flow, underestimate costs, or fail to understand risks. This could materially adversely affect our company and the trading price of our Stock.
Competition may result in overpaying for acquisitions.
Other investors with significant capital may compete with us for attractive investment opportunities. These competitors may include publicly-traded companies, private equity firms, privately held buyers, individual investors, and other types of investors. Such competition may increase the price of acquisitions, or otherwise adversely affect the terms and conditions of acquisitions. This could materially adversely affect our company and the trading price of our stock.
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We may have insufficient resources to cover our operating expenses and the expenses of raising money and consummating acquisitions.
We have limited cash to cover our operating expenses and to cover the expenses incurred in connection with money raising and a business combination. It is possible that we could incur substantial costs in connection with money raising or a business combination. If we do not have sufficient proceeds available to cover our expenses, we may be forced to obtain additional financing, either from our management or third parties. We may not be able to obtain additional financing on acceptable terms, if at all, and neither our management nor any third party is obligated to provide any financing. This could have a negative impact on our company and our stock price.
The nature of our proposed future operations is speculative and will depend to a great extent on the businesses which we acquire.
While management typically intends to seek a merger or acquisition of privately held entities with established operating histories, there can be no assurance that we will be successful in locating an acquisition candidate meeting such criteria. In the event we complete a merger or acquisition transaction, of which there can be no assurance, our success if any will be dependent upon the operations, financial condition and management of the acquired company, and upon numerous other factors beyond our control. If the operations, financial condition or management of the acquired company were to be disrupted or otherwise negatively impacted following an acquisition, our company and our stock price would be negatively impacted.
We may make actions that will not require our stockholders’ approval.
The terms and conditions of any acquisition could require us to take actions that would not require stockholder approval. In order to acquire certain companies or assets, we may issue additional shares of common or preferred stock, borrow money or issue debt instruments including debt convertible into capital stock. Not all of these actions would require our stockholders’ approval even if these actions dilute our shareholders’ economic or voting interest.
Our investigation of potential acquisitions will be limited.
Our analysis of new business opportunities will be undertaken by or under the supervision of our executive officers and directors. Inasmuch as we will have limited funds available to search for business opportunities and ventures, we will not be able to expend significant funds on a complete and exhaustive investigation of such business or opportunity. We will, however, investigate, to the extent believed reasonable by our management, such potential business opportunities or ventures by conducting a so-called “due diligence investigation”. In a so-called “due diligence investigation”, we intend to obtain and review materials regarding the business opportunity. Typically such materials will include information regarding a target business’ products, services, contracts, management, ownership, and financial information. In addition, we intend to cause our officers or agents to meet personally with management and key personnel of target businesses, ask questions regarding the company’s prospects, tour facilities, and conduct other reasonable investigation of the target business to the extent of our limited financial resources and management and technical expertise. Any failure of our typical “due diligence investigation” to uncover issues and problems relating to potential acquisition candidates could materially adversely affect our company and the trading price of our stock.
We will have only a limited ability to evaluate the directors and management of potential acquisitions.
We may make a determination that our current directors and officers should not remain, or should reduce their roles, following money raising or a business combination, based on an assessment of the experience and skill sets of new directors and officers and the management of target businesses. We cannot assure you that our assessment of these individuals will prove to be correct. This could have a negative impact on our company and our stock price.
We may be dependent on outside advisors to assist us.
In order to supplement the business experience of management, we may employ accountants, technical experts, appraisers, attorneys or other consultants or advisors. The selection of any such advisors will be made by management and without any control from shareholders. Additionally, it is anticipated that such persons may be engaged by us on an independent basis without a continuing fiduciary or other obligation to us.
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We may be unable to protect or enforce the intellectual property rights of any target business that we acquire or the target business may become subject to claims of intellectual property infringement.
After completing a business combination, the procurement and protection of trademarks, copyrights, patents, domain names, and trade secrets may be critical to our success. We will likely rely on a combination of copyright, trademark, trade secret laws and contractual restrictions to protect any proprietary technology and rights that we may acquire. Despite our efforts to protect those proprietary technology and rights, we may not be able to prevent misappropriation of those proprietary rights or deter independent development of technologies that compete with the business we acquire. Litigation may be necessary in the future to enforce our intellectual property rights, to protect our trade secrets, or to determine the validity and scope of the proprietary rights of others. It is also possible that third parties may claim we have infringed their patent, trademark, copyright or other proprietary rights. Claims or litigation, with or without merit, could result in substantial costs and diversions of resources, either of which could have an adverse effect on our competitive position and business. Further, depending on the target business or businesses that we acquire, it is likely that we will have to protect trademarks, patents, and domain names in an increasing number of jurisdictions, a process that is expensive and may not be successful in every location. These factors could negatively impact our company and the trading price of our stock.
Integrating acquired businesses may divert our management’s attention away from our day-to-day operations and harm our business.
Acquisitions generally involve significant risks, including the risk of overvaluation of potential acquisitions and risks in regard to the assimilation of personnel, operations, products, services, technologies, and corporate culture of acquired companies. Dealing with these risks may place a significant burden on our management and other internal resources. This could materially adversely affect our business and the trading price of our stock.
We may fail to manage our growth effectively.
Future growth through acquisitions and organic expansion would place a significant strain on our managerial, operational, technical, training, systems and financial resources. We can give you no assurance that we will be able to manage our expanding operations properly or cost effectively. A failure to properly and cost-effectively manage our expansion could materially adversely affect our company and the trading price of our stock.
The management of companies we acquire may lose their enthusiasm or entrepreneurship after the sale of their businesses.
We can give no assurance that the management of future companies we acquire will have the same level of enthusiasm for the operation of their businesses following their acquisition by us, or if they cease performing services for the acquired businesses that we will be able to install replacement management with the same skill sets and determination. There also is always a risk that management will attempt to reenter the market and possibly seek to recruit some of the former employees of the business, who may continue to be key employees of ours. This could materially adversely affect our business and the trading price of our Stock.
We will be subject to the significant influence of one of our current stockholders after this Offering, and their interests may not always coincide with those of our other stockholders.
Gary Graham, currently beneficially owns approximately 43% of our outstanding common stock, and will beneficially own approximately 44% of our outstanding Common Stock following the completion of this Offering. As a result, Mr. Graham will be able to significantly influence all matters requiring approval by our stockholders, including the election of directors and the approval of mergers or other business combination transactions. Because the interests of Mr. Graham may not always coincide with those of our other stockholders, such stockholder may influence or cause us to take actions with which our other stockholders disagree.
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Our management has discretion as to how to use any proceeds from the sale of securities.
The net proceeds from the sale of the shares of common stock under this Offering will be used for the purposes described under “Use of Proceeds.” We reserve the right to use the funds obtained from this Offering for other similar purposes not presently contemplated which our management deems to be in the best interests of the company and our stockholders in order to address changed circumstances or opportunities. As a result of the foregoing, our success will be substantially dependent upon the discretion and judgment of management with respect to application and allocation of the net proceeds of this Offering. Investors for the shares of common stock offered hereby will be entrusting their funds to our management, upon whose judgment and discretion the investors must depend.
The Selling Securityholders may sell their shares of common stock in the open market, which may cause our stock price to decline.
The Selling Securityholders may sell the shares of common stock being registered in this offering in the public market. That means that up to 1,670,834 shares of common stock, the number of shares being registered in this offering for sale by the Selling Securityholders if they convert their debentures and exercise their warrants, may be sold in the public market. Such sales will likely cause our stock price to decline.
Sale of our common stock by the Selling Securityholders could encourage short sales by third parties, which could contribute to the further decline of our stock price.
The significant downward pressure on the price of our common stock caused by the sale of material amounts of common stock could encourage short sales by third parties. Such an event could place further downward pressure on the price of our common stock.
This Prospectus contains forward-looking statements that are based on our current expectations, estimates and projections but are not guarantees of future performance and are subject to risks and uncertainties.
This Prospectus contains forward-looking statements. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about our industry, our beliefs and our assumptions. Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” and “estimates,” and variations of these words and similar expressions, are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. These risks and uncertainties include those described in “Risk Factors” and elsewhere in this Prospectus. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect our management’s view only as of the date of this Prospectus. Except as required by law, we undertake no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.
Because we are subject to the “penny stock” rules, the level of trading activity in our stock may be reduced.
Our common stock is traded on the OTC Markets. Broker-dealer practices in connection with transactions in “penny stocks” are regulated by certain penny stock rules adopted by the Securities and Exchange Commission. Penny stocks, like shares of our common stock, generally are equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on NASDAQ. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and, if the broker-dealer is the sole market maker, the broker-dealer must disclose this fact and the broker-dealer’s presumed control over the market, and monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, broker-dealers who sell these securities to persons other than established customers and “accredited investors” must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. Consequently, these requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a security subject to the penny stock rules, and investors in our common stock may find it difficult to sell their shares.
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SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS
We have made forward-looking statements in this prospectus, including the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” that are based on our management’s beliefs and assumptions and on information currently available to our management. Forward-looking statements include the information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities, the effects of future regulation and the effects of competition. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate” or similar expressions. These statements are only predictions and involve known and unknown risks and uncertainties, including the risks outlined under “Risk Factors” and elsewhere in this prospectus.
Although we believe that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee future results, events, levels of activity, performance or achievement. We are not under any duty to update any of the forward-looking statements after the date of this prospectus to conform these statements to actual results, unless required by law.
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We estimate that the net proceeds to us from the sale of shares of our common stock in this offering will be approximately $[________] million, or approximately $[_____] million if the underwriters exercise their option to purchase additional shares in full, based upon an assumed public offering price of $[___] per share, which is the midpoint of the estimated price range set forth on the cover page of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
Each $1.00 increase or decrease in the assumed initial public offering price of $[___] per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, would increase or decrease, as applicable, the net proceeds to us from this offering by approximately $[_____] million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting underwriting discounts and estimated offering expenses payable by us. Similarly, each increase or decrease of 1.0 million shares in the number of shares sold in this offering by us, as set forth on the cover page of this prospectus, would increase or decrease, as applicable, the net proceeds to us from this offering by approximately $[______] million, assuming an public offering price of $[______] per share remains the same, and after deducting underwriting discounts and estimated offering expenses payable by us. The information discussed above is illustrative only and will adjust based on the actual public offering price and other terms of this offering determined at pricing.
The principal purposes of this offering are to obtain additional capital to support our operations, to create a public market for shares of our common stock, to facilitate our future access to the public equity markets and to increase awareness of our company among potential customers. We currently intend to use the net proceeds from this offering, together with our existing cash and cash equivalents, as follows:
|
· |
approximately $ million to hire additional sales and marketing personnel; |
|
· |
approximately $ million to fund product development and research and development activities; and |
|
· |
the remainder, if any, for working capital and other general corporate purposes. |
We may also use a portion of the net proceeds from this offering to acquire, license or invest in products, technologies or businesses that are complementary to our business. However, we currently have no agreements or commitments to complete any such transaction.
Based on our operating plan, we currently believe that our existing cash and cash equivalents, anticipated revenue and available financing arrangements, together with the net proceeds from this offering, will be sufficient to meet our capital requirements and fund our operations through at least the next twelve months from the date of this prospectus.
Our management will have broad discretion over the use of the net proceeds from this offering. The expected use of net proceeds from this offering represents our intentions based upon our present plans and business conditions, which could change in the future as or plans and business conditions evolve. We may find it necessary or advisable to use the net proceeds for other purposes, and we will have broad discretion in the application of the net proceeds.
Pending the uses described above, we plan to invest the net proceeds from this offering in short-and intermediate-term, interest-bearing obligations, investment-grade instruments or other securities.
We will not receive any proceeds from the sale of our common stock by the Selling Securityholders.
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SELLING SECURITYHOLDERS
The Selling Securityholders may offer and sell, from time to time, any or all of the shares of common stock underlying certain convertible debentures and warrants being offered for resale by this prospectus, which consists of:
|
· |
up to 668,334 shares issuable upon the conversion of convertible debentures (the “Debenture Shares”), and |
|
|
|
|
· |
up to 1,002,500 shares issuable upon the exercise of warrants (the “Warrant Shares”); |
The term “Selling Securityholders” includes the securityholders listed in the tables below and their permitted transferees.
The following table provides, as of the date of this Prospectus, information regarding the beneficial ownership of our convertible debentures and warrants of each selling securityholder, and the number of shares of common stock underlying each Selling Securityholders’ convertible debenture and warrant. The below shares are not currently owned by the Selling Securityholder but will be if they convert their debenture and exercise their warrant.
Because each Selling Securityholder may dispose of all, none or some portion of their securities, no estimate can be given as to the number of securities that will be beneficially owned by a Selling Securityholder upon termination of this Offering. For purposes of the table below, however, we have assumed that after termination of this Offering none of the securities covered by this prospectus will be beneficially owned by the Selling Securityholders and further assumed that the Selling Securityholders will not acquire beneficial ownership of any additional securities during the offering. In addition, the Selling Securityholders may have sold, transferred or otherwise disposed of, or may sell, transfer or otherwise dispose of, at any time and from time to time, our securities in transactions exempt from the registration requirements of the Securities Act after the date on which the information in the tables is presented.
We may amend or supplement this Prospectus from time to time in the future to update or change this Selling Securityholders list and the securities that may be resold.
Please see the section titled “Plan of Distribution” for further information regarding the stockholders’ method of distributing these shares.
Name of Selling Shareholder |
|
Shares of Common Stock Owned Prior to Offering |
|
|
Shares of Common Stock to be Offered for the Selling Shareholder’s Account |
|
|
Shares of Common Stock Owned by Selling Shareholder After the Offering |
|
|
Percent of Common Stock to be Owned by the Selling Shareholder After the Offering |
| ||||
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|
|
|
|
|
|
|
|
|
|
|
| ||||
Financial House, LLC(1) |
|
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83,334 |
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|
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83,334 |
|
|
|
-- |
|
|
|
-- |
|
Mishal Family Trust(2) |
|
|
43,945 |
|
|
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41,667 |
|
|
|
2,278 |
|
|
|
<1 |
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The Anil Manaktala and Alka Manaktala Family Trust(3) |
|
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83,334 |
|
|
|
83,334 |
|
|
|
-- |
|
|
|
-- |
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Anita Mishal |
|
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41,667 |
|
|
|
41,667 |
|
|
|
-- |
|
|
|
-- |
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Priya Manaktala |
|
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41,667 |
|
|
|
41,667 |
|
|
|
|
|
|
|
|
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Steven J. Wandschneider |
|
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41,667 |
|
|
|
41,667 |
|
|
|
-- |
|
|
|
-- |
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Loy Pham |
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41,667 |
|
|
|
41,667 |
|
|
|
-- |
|
|
|
-- |
|
Arizado Capital, LLC(4) |
|
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83,334 |
|
|
|
83,334 |
|
|
|
-- |
|
|
|
-- |
|
Christopher Beabout |
|
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41,667 |
|
|
|
41,667 |
|
|
|
-- |
|
|
|
-- |
|
Rajeshwari Dwshmukh Qualified Domestic Trust |
|
|
41,667 |
|
|
|
41,667 |
|
|
|
-- |
|
|
|
-- |
|
Heptagon Energy, LLC(5) |
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|
41,667 |
|
|
|
41,667 |
|
|
|
-- |
|
|
|
-- |
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Steve Scofes |
|
|
41,667 |
|
|
|
41,667 |
|
|
|
-- |
|
|
|
-- |
|
Prakash K. Pawar |
|
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41,667 |
|
|
|
41,667 |
|
|
|
-- |
|
|
|
-- |
|
Rego Family Partnership, LLC(6) |
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41,667 |
|
|
|
41,667 |
|
|
|
-- |
|
|
|
-- |
|
Noah Nordheimer |
|
|
125,000 |
|
|
|
125,000 |
|
|
|
-- |
|
|
|
-- |
|
Premier Trust FBO Ford Fay |
|
|
41,667 |
|
|
|
41,667 |
|
|
|
-- |
|
|
|
-- |
|
RGN 2021 Growth Equity, LLC(7) |
|
|
166,667 |
|
|
|
166,667 |
|
|
|
-- |
|
|
|
-- |
|
Jeff Mahan |
|
|
41,667 |
|
|
|
41,667 |
|
|
|
-- |
|
|
|
-- |
|
Solsa Capital, LLC(8) |
|
|
4,167 |
|
|
|
4,167 |
|
|
|
-- |
|
|
|
-- |
|
Matthew L. Rossetti |
|
|
83,334 |
|
|
|
83,334 |
|
|
|
-- |
|
|
|
-- |
|
Garfield SobrSafe 18, LLC(9) |
|
|
41,667 |
|
|
|
41,667 |
|
|
|
-- |
|
|
|
-- |
|
Robert McHugh |
|
|
41,667 |
|
|
|
41,667 |
|
|
|
-- |
|
|
|
-- |
|
Guodong Xu |
|
|
41,667 |
|
|
|
41,667 |
|
|
|
-- |
|
|
|
-- |
|
Robert J. Perez |
|
|
41,667 |
|
|
|
41,667 |
|
|
|
-- |
|
|
|
-- |
|
Larry Suarez |
|
|
433,834 |
|
|
|
208,334 |
|
|
|
225,500 |
|
|
|
<1 |
|
Vaisvil Holdings, LLC(10) |
|
|
41,667 |
|
|
|
41,667 |
|
|
|
-- |
|
|
|
-- |
|
Scott Bennett |
|
|
41,667 |
|
|
|
41,667 |
|
|
|
-- |
|
|
|
-- |
|
Joseph M. Say |
|
|
41,667 |
|
|
|
41,667 |
|
|
|
-- |
|
|
|
-- |
|
23 |
Table of Contents |
(1) |
Financial House, LLC is controlled by James Bardy, a member of our Board of Directors. |
(2) |
Mishal Family Trust is controlled by Devadatt Mishal. Devadatt Mishall owns 1,115,093 shares of our common stock individually. Since those shares are owned individually they are not included in the above table. |
(3) |
The Anil Manaktala and Alka Manaktala Family Trust is controlled by Alka Manaktala. Alka Manaktala owns 3,644 shares of our common stock individually. Since those shares are owned individually they are not included in the above table. |
(4) |
Arizado Capital, LLC is controlled by Jim DeSorrento. |
(5) |
Heptagon Energy, LLC is controlled by Douglas D. Scheetz. |
(6) |
Rego Family Partnership, LLC is controlled by Richard Rego |
(7) |
RGN 2021 Growth Equity, LLC is controlled by David L. Ruttenberg. |
(8) |
Solsa Capital, LLC is controlled by David L. Ruttenberg. |
(9) |
Garfield SobrSafe 18, LLC is controlled by Ronald Garfield. |
(10) |
Vaivsil Holdings, LLC is controlled by Chris Vaivsil. |
None of the Selling Securityholders has, or within the past three years has had, any position, office or material relationship with us or any of our predecessors or affiliates, except as follows:
● |
James Bardy, the principal of Financial House, LLC joined our Board of Directors in August 2021. |
● |
Devadatt Mishall, Trustee of the Mishal Family Trust resigned from our Board of Directors in 2019. |
● |
Ford Fay is on our Board of Directors. |
MARKET PRICE FOR OUR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
Our common stock is not quoted on a national exchange, rather, they are currently quoted on OTC Markets’ OTCQB-tier under the symbol “SOBR.” We were quoted on OTC Markets on March 18, 2009 and quoted on OTCQB in November 16, 2020. The following table sets forth the high and low bid information for each quarter within the fiscal years ended December 31, 2020 and 2019, as best we could estimate from publicly-available information. The information reflects prices between dealers, and does not include retail markup, markdown, or commission, and may not represent actual transactions. The below information has been adjusted for our 1-for-33.26 reverse split of our common stock that went effective on OTC Markets at the open of market on June 8, 2020. On August 20, 2021, the closing bid price for one share of our common stock was $2.80.
|
|
|
Bid Prices |
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Fiscal Year Ended December 31, |
|
Period |
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High |
|
|
Low |
| ||
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|
|
|
|
|
|
|
| ||
2019 |
|
First Quarter |
|
$ | 0.53 |
|
|
$ | 0.05 |
|
|
|
Second Quarter |
|
$ | 0.32 |
|
|
$ | 0.13 |
|
|
|
Third Quarter |
|
$ | 1.08 |
|
|
$ | 0.14 |
|
|
|
Fourth Quarter |
|
$ | 2.82 |
|
|
$ | 0.24 |
|
|
|
|
|
|
|
|
|
|
|
|
2020 |
|
First Quarter |
|
$ | 2.66 |
|
|
$ | 1.08 |
|
|
|
Second Quarter |
|
$ | 3.00 |
|
|
$ | 1.14 |
|
|
|
Third Quarter |
|
$ | 3.99 |
|
|
$ | 1.90 |
|
|
|
Fourth Quarter |
|
$ | 3.00 |
|
|
$ | 2.50 |
|
|
|
|
|
|
|
|
|
|
|
|
2021 |
|
First Quarter |
|
$ | 6.00 |
|
|
$ | 2.20 |
|
|
|
Second Quarter |
|
$ | 3.95 |
|
|
$ | 2.20 |
|
|
|
Third Quarter (to date) |
|
$ | 4.00 |
|
|
$ | 2.58 |
|
24 |
Table of Contents |
The Securities Enforcement and Penny Stock Reform Act of 1990 requires additional disclosure relating to the market for penny stocks in connection with trades in any stock defined as a penny stock. The Commission has adopted regulations that generally define a penny stock to be any equity security that has a market price of less than $5.00 per share, subject to a few exceptions which we do not meet. Unless an exception is available, the regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the risks associated therewith. There are no limitations on dividends.
Holders
As of August 20, 2021, there were 25,981,203 shares of our common stock outstanding held by approximately 175 holders of record and numerous shares held in brokerage accounts.
Stock Options, Warrants and Convertible Debentures
From March 2021 through May 31, 2021, in connection with a $2M securities offering under Rule 506 of Regulation D, we issued convertible promissory notes totaling $2,005,000 to 27 non-affiliated investors, and one affiliate investor – Mr. Ford Fay, one of our Directors ($50,000). The notes mature two years from the date of issuance, carry an interest rate of 12% per annum, and can be converted into shares of our common stock at $3.00 per share. The investors were also issued warrants to acquire an aggregate of 1,002,500 shares of our common stock at an exercise price of $3.00 per share, which expire two years from the date of issuance.
In October 2020, we entered into an Advisory Agreement with Steven Beabout, a member of our Board of Directors, under which he agreed to provide us with strategic legal advice in relation to certain business and legal matters for a period of sixteen (16) months. In exchange for his services, we agreed to issue him 75,000 restricted stock units. The restricted stock units were issued under our 2019 Equity Plan and vest upon the earlier of (i) the expiration of any lock-up period that includes any of our securities owned by the Advisor after the uplift of the Corporation to a national exchange (NASDAQ, NYSE, etc.) or (ii) January 1, 2023.
In November 2020, in consideration of Steven Beabout’s work as Chairman of the Compensation Committee of our Board of Directors, we agreed to issue Mr. Beabout 90,000 restricted stock units. The restricted stock units were issued under our 2019 Equity Plan and vest upon the earlier of (i) the expiration of any lock-up period that includes any of our securities owned by the Advisor after the uplift of the Corporation to a national exchange (NASDAQ, NYSE, etc.) or (ii) January 1, 2023.
In connection with closing the transaction with IDTEC detailed herein, we issued a convertible promissory note totaling approximately $1,500,000 to IDTEC. The promissory note was convertible any time by the holder into shares of our common stock at a conversion price of $0.50 per share, subject to anti-dilution protection against any future securities we may issue at an effective price of less than $0.50 per share. On November 17, 2020, IDTEC converted the total of $1,551,514 of principal and interest due under the promissory note into 3,103,028 shares of our common stock.
At the closing of the same transaction, we also issued Warrant to Purchase Common Stock to IDTEC, under which IDTEC can purchase up to 320,000 shares of our common stock at an exercise price of $0.50 per share.
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Table of Contents |
On December 12, 2019, in connection with the closing of the first $1,000,000 investment into our Series A-1 Preferred Stock, we issued First Capital Ventures a three-year stock warrant to purchase 144,318 shares of our Common Stock at an exercise price of $1.039 per share.
On October 25, 2019, we granted Charles Bennington, one of our officers and directors at the time, an option to acquire 24,053 shares of our common stock under our 2019 Equity Incentive Plan. The stock option has an exercise price of $0.2634 and vests quarterly over a one-year period commencing January 1, 2020. The stock option has a five-year term.
On October 25, 2019, we granted Nick Noceti, our Chief Financial Officer at the time, an option to acquire 24,053 shares of the Company’s common stock under our 2019 Equity Incentive Plan. The stock option has an exercise price of $0.2634 and vests quarterly over a two-year period commencing January 1, 2020. The stock option has a five-year term.
On October 25, 2019, we granted Gary Graham, one of our directors at the time, an option to acquire 24,053 shares of our common stock under our 2019 Equity Incentive Plan. The stock option has an exercise price of $0.2634 and vests quarterly over a one-year period commencing January 1, 2020. The stock option has a five-year term.
On October 25, 2019, we entered into an Employment Agreement with Kevin Moore to serve as our Chief Executive Officer. Under the terms of the agreement, we granted an option to Kevin Moore under our 2019 Equity Compensation Plan to acquire 1,058,329 shares of our common stock at an exercise price of $0.2634, with the stock options to vest in 36 equal monthly installments of 29,398 shares during the three-year term of the employment agreement. A total of 411,572 options were vested as of December 31, 2020. None of the vested stock options have been exercised and no shares have been issued during the year ended December 31, 2020.
On October 25, 2019, we entered into an Employment Agreement with David Gandini to serve as our Chief Revenue Officer. Under the terms of the agreement, we granted David Gandini stock options under our 2019 Equity Compensation Plan to acquire 721,588 shares of our common stock, at an exercise price of $0.2634, to vest in 36 equal monthly installments of 20,045 shares during the three-year term of the Agreement. David Gandini was also granted an aggregate of 240,530 additional option shares (the “Pre-Vesting Option Shares”) to vest as follows: (i) 200,439 Pre-Vesting Option Shares representing the monthly vesting option shares for the ten months ended October 31, 2019 to vest on November 1, 2019; and (ii) the remaining 40,091 Pre-Vesting Option Shares representing the monthly vesting option shares for the two months ended December 31, 2019 shall vest on January 1, 2020. The stock options have a ten-year term. A total of 521,146 options were vested as of December 31, 2020. None of the vested stock options have been exercised and no shares have been issued during the year ended December 31, 2020.
On October 25, 2019, we granted stock options to four non-affiliated individuals and entities to acquire an aggregate of 192,424 shares of our common stock. The stock options were issued under the 2019 Equity Incentive Plan at an exercise price of $0.2634 vesting quarterly over a two-year period commencing January 1, 2020. The stock options have either a two year or five-year term.
On October 27, 2019, we entered into a patent purchase agreement under which the Company granted stock options to a non-affiliated party to acquire 96,212 shares of our common stock at an exercise price of $1.039 and vested upon grant. The stock option has a five-year term. As of December 31, 2020, 45,906 of these stock options have been exercised and 50,305 remain unexercised.
Dividends
There have been no cash dividends declared on our common stock and we do not anticipate paying cash dividends on our common stock in the foreseeable future. Common stock dividends are not limited and are declared at the sole discretion of our Board of Directors.
26 |
Table of Contents |
Our Series A-1 Convertible Preferred Stock earns cumulative dividends at a rate of 8% per annum, payable in cash or common stock at the option of the Company on June 30 and December 31 of each year. If paid in common stock, the common stock will be valued at the average of the closing price for the five business days prior to the dividend payment date. The Preferred shareholders will participate in any common stock dividends on an as converted basis. During the years ended December 31, 2020 and 2019, $107,880 and $0, respectively, in dividends were declared for holders of our 8% Series A-1 Convertible Preferred stock. The $107,880 in dividends were paid through the issuance of 43,169 shares of our common stock.
Securities Authorized for Issuance Under Equity Compensation Plans
On October 24, 2019, our 2019 Equity Incentive Plan went effective. The plan was approved by our Board of Directors and the holders of a majority of our voting stock on September 9, 2019. The plan’s number of authorized shares is 3,848,467. As of June 30, 2021, there were stock options granted to acquire 2,909,422 shares of common stock at a weighted exercise price of $0.8646 per share under the plan. As of June 30, 2021, the plan had 1,600,986 vested shares and 1,308,436 non-vested shares. The stock options are held by our officers, directors and certain key employees and consultants.
Preferred Stock
On August 8, 2019, we entered into an 8% Series A-1 Convertible Preferred Stock Investment Agreement with First Capital Ventures, LLC (“FCV”), and its assignee. We desired to raise between $1,000,000 and $2,000,000 from the sale of our 8% Series A-1 Convertible Preferred Stock and FCV intended to raise between $1,000,000 and $2,000,000 (net after offering expenses) in a special purchase vehicle (“SPV”) created by FCV to purchase the 8% Series A-1 Convertible Preferred Stock. We granted FCV and its assigns, the exclusive right to purchase the 8% Series A-1 Convertible Preferred Stock. We agreed to pay $26,196 in legal and other expenses of the SPV subsequent to the day in which we receive a minimum of $1,000,000 from the sale of 1,000,000 shares of the 8% Series A-1 Convertible Preferred Stock. We also agreed to cancel all shares of our issued and outstanding Series A Preferred Stock, immediately following the closing date. In accordance with the August 8, 2019, Investment Agreement with FCV, on December 9, 2019, our Board of Directors created a class of preferred stock designated as 8% Series A-1 Convertible Preferred Stock comprising of 2,000,000 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 our common stock, (c) conversion rights into shares of our common stock at $1 per share (not to be affected by any reverse stock split in connection with the IDTEC APA), (d) redemption rights such that we have the right, upon thirty (30) days written notice, at any time after one year from the date of issuance, to redeem the all or part of the Series A-1 Preferred Stock for 150% of the original issuance price, (e) no call rights by us, and (f) each share of Series A Convertible Preferred stock will vote on an “as converted” basis. On December 12, 2019, we entered into a Series A-1 Preferred Stock Purchase Agreement (the “SPA”) with SOBR SAFE, LLC, a Delaware limited liability company and an entity controlled by Gary Graham, one of our Directors (“SOBR SAFE”), under which SOBR SAFE agreed to acquire One Million (1,000,000) shares of our Series A-1 Convertible Preferred Stock (the “Preferred Shares”), in exchange for One Million Dollars ($1,000,000) (the “Purchase Price”). We received the Purchase Price on December 12, 2019. In connection with the closing of the SPA, holders of our common stock representing approximately 52% of our then-outstanding common stock and voting rights signed irrevocable proxies to Gary Graham and/or Paul Spieker for the purpose of allowing Mr. Graham and/or Mr. Spieker to vote those shares on any matters necessary to close the transaction that was the subject of the certain Asset Purchase Agreement May 6, 2019, as amended.
On May 7, 2020 and November 30, 2020, we entered into Amendment No. 1 and Amendment No. 2 to the Investment Agreement with FCV, which amended the following terms of the Investment Agreement and the rights and preferences of the Series A-1 Convertible Preferred Stock: (a) increase the authorized Series A-1 Convertible Preferred Stock to 2,700,000 shares, (b) changing the conversion terms of the Series A-1 Stock from automatically convertible immediately upon our common stock having a closing bid price equal or greater than $2.00 per share for three (3) consecutive days of trading to the earliest of either (i) SOBR LLC submitting a written Notice of Conversion to us, or (ii) seven (7) days after we are quoted on the OTCQB-tier of OTC Markets, and (c) permitting all holders of Series A-1 Convertible Preferred Stock on a Dividend Payment Date, regardless of when the Series A-1 Stock was acquired, to participate in full in any dividend payments.
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Our Series A-1 Convertible Preferred Stock earned cumulative dividends at a rate of 8% per annum, payable in cash or common stock at the option of the Company on June 30 and December 31 of each year (each a “Dividend Payment Date”). If paid in common stock, the common stock will be valued at the average of the closing price for the five business days prior to the dividend payment date. The Preferred shareholders will participate in any common stock dividends on an as converted basis. As of November 30, 2020, we had one holder of our Series A-1 Convertible Preferred Stock, SOBR Safe, LLC, and we owed $107,880 in accrued dividends to the holder of our Series A-1 Preferred Stock. On November 30, 2020, the holder of all our Series A-1 Convertible Preferred Stock converted the Series A-1 Convertible Preferred Stock into 2,700,000 shares of our common stock. Pursuant to the conversion, we issued the holder an additional 43,169 shares of our common stock as payment for all unpaid dividends.
As of August 20, 2021, we did not have any shares of Series A-1 Convertible Preferred Stock outstanding.
On November 20, 2015, our 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 of our funds and assets 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 we 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 us 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 our common stock (either as listed on a national exchange or as quoted over-the-market) for the last fifteen (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 our common stock (either as listed on a national exchange or as quoted over-the-market) for the last fifteen (15) trading days immediately prior to conversion is at least five cents ($0.05). The shares of Series A Convertible Preferred stock vote on an “as converted” 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 our common stock after giving effect to such conversion.
As of August 20, 2021 and December 31, 2020, we had no issued shares of Series A Convertible Preferred stock.
As a condition of the 8% Series A-1 Convertible Preferred Stock agreement, the outstanding shares of our Series A Convertible Preferred stock were cancelled as of December 31, 2019. During the year ended December 31, 2019 and 2018, no dividends were declared for holders of the Series A Convertible Preferred stock.
Purchases of Equity Securities
During the year ended December 31, 2020, we did not purchase any of our equity securities.
The following table sets forth our cash and cash equivalents and our capitalization as of June 30, 2021:
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on an actual basis; and |
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on a pro forma as adjusted basis, to give effect to the pro forma adjustments described above as well as the sale and issuance by us of shares of our common stock in this offering at the initial public offering price of $ per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, net of amounts recorded in accrued expenses and other current liabilities and other assets at June 30, 2021. |
The information below is illustrative only and our capitalization following the closing of this offering will be adjusted based on the actual public offering price and other terms of this offering determined at the pricing of this offering. You should read this information in conjunction with the sections titled “Use of Proceeds,” “Prospectus Summary─Summary Consolidated Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes included elsewhere in this prospectus.
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As of June 30, 2021 |
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Actual |
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Pro forma Adjusted(1) |
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CASH |
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$ | 609,526 |
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$ | - |
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STOCKHOLDERS’ EQUITY: |
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Common stock, par value $0.00001 per share, 100,000,000 shares authorized, 25,981,203 and [_______] shares issued and outstanding as of June 30, 2021 and shares issued and outstanding as adjusted. |
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260 |
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Additional paid-in capital |
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55,096,399 |
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Accumulated deficit |
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(52,146,273 | ) |
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Total SOBR Safe, Inc. stockholders’ equity |
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2,950,386 |
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Noncontrolling interest |
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(53,628 | ) ) |
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) |
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Total stockholders’ equity |
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$ | 2,896,758 |
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|
$ | - |
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Total capitalization |
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$ | 3,879,626 |
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$ | 12,919,626 |
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_____________
(1) |
Each $1.00 increase or decrease in the assumed initial public offering price of $ per share, which is the midpoint of the estimated price range set forth on the cover page of this prospectus, would increase or decrease, as applicable, the pro forma as adjusted amount of each of our cash and cash equivalents, additional paid-in capital and total stockholders’ equity by approximately $ , assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase or decrease of 1.0 million shares in the number of shares offered by us at the assumed public offering price would increase or decrease, as applicable, each of our cash and cash equivalents, additional paid-in capital and total stockholders’ equity by approximately $ , assuming the shares of our common stock offered by this prospectus are sold at the assumed public offering price of $ per share and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. The pro forma as adjusted information discussed above is illustrative only and will be adjusted based on the actual public offering price, the number of shares we sell and other terms of this offering that will be determined at pricing. |
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The preceding table does not include: |
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the exercise by the representatives of the underwriters of its option to purchase up to an additional [______] shares of common stock; and |
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2,959,727 shares of our common stock issuable upon exercise of outstanding stock options at a weighted average exercise price of $0.8646 per share as of June 30, 2021. |
DETERMINATION OF OFFERING PRICE
Although our common stock is currently quoted on the OTCQB-tier of OTC Markets, our stock is thinly traded and there is a limited public market for our common stock. As a result, our management in connection negotiations with any underwriters in this Offering, will be determining the offering price for this Offering. In addition to prevailing market conditions, the factors considered in determining the public offering price for this Offering will include, but not be limited to:
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the information included in this prospectus and otherwise available to us and any underwriters; |
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the valuation multiples of publicly traded companies that we and any underwriters believe to be comparable to us; |
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our financial information; |
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our prospects and the history and the prospects of the industry in which we compete; |
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an assessment of our management, its past and present operations, and the prospects for, and timing of, our future revenues; |
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the present state of our development; and |
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the above factors in relation to market values and various valuation measures of other companies engaged in activities similar to ours. |
If you invest in our common stock in this offering, your interest will be diluted to the extent of the difference between the amount per share paid by purchasers of shares of our common stock in this public offering and the as adjusted net tangible book value per share of our common stock immediately after this Offering.
As of June 30, 2021, our historical net tangible book value (deficit) was ($549,011), or ($0.02113108) per share of common stock. Our historical net tangible book value (deficit) represents our total tangible assets less total liabilities and our redeemable convertible preferred stock, which is not included within stockholders’ equity.
After giving further effect to our sale of shares of our common stock in this offering at an assumed initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of June 30, 2021 would have been approximately $ million, or $ per share. This represents an immediate increase in pro forma net tangible book value of $ per share to our existing stockholders and an immediate dilution in pro forma net tangible book value of approximately $ per share to new investors purchasing shares of our common stock in this offering.
The following table illustrates this dilution on a per share basis to new investors:
Proposed public offering price (per share) |
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$ |
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Net tangible book value per share (June 30, 2021) |
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$ |
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Increase in net tangible book value per share attributable to proceeds from the maximum offering |
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$ |
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Pro forma net tangible book value per share after the offering |
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$ |
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Dilution to new investors |
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$ |
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Each $1.00 increase or decrease in the assumed initial offering price of $ per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, would increase or decrease, as applicable, our pro forma as adjusted net tangible book value by $ , or $ per share, and the dilution per share of common stock to new investors in this offering by $ per share, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase of 1.0 million shares in the number of shares of common stock offered by us, as set forth on the cover page of this prospectus, would increase our pro forma as adjusted net tangible book value per share by $ and decrease the dilution per share to new investors by $ , assuming no change in the assumed initial public offering price and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. Each decrease of 1.0 million shares in the number of shares of common stock offered by us, as set forth on the cover page of this prospectus, would decrease our pro forma as adjusted net tangible book value per share by $ and increase the dilution per share to new investors by $ , assuming no change in the assumed initial public offering price and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
We are registering for sale to new investors up to [___________] shares at $[___] per share. The following table sets forth on a pro forma basis at June 30, 2021, the differences between existing stockholders and new investors with respect to the number of shares of common stock purchased from us, the total consideration paid to us, and the average price paid per share (assuming a proposed public offering price of $[___] per share).
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Shares Purchased |
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Total Consideration |
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Weighted Average Price |
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Number |
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Percent |
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Amount |
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Percent |
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Per Share |
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Existing Shareholders |
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[___]% |
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$[_____] |
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New Investors |
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[___]% |
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$[_____] |
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Total |
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100% |
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100% |
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Each $1.00 increase or decrease in the assumed initial public offering price of $ per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, would increase or decrease, as applicable, total consideration paid by new investors by $ million and total consideration paid by all stockholders and weighted-average price per share paid by all stockholders by $ million and $ per share, respectively, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase or decrease of 1.0 million shares in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase or decrease, as applicable, total consideration paid by new investors by $ million and total consideration paid by all stockholders and weighted-average price per share paid by all stockholders by $ million and $ per share, respectively, assuming the assumed initial public offering price of $ per share remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
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PLAN OF DISTRIBUTION
Although we have not at this point engaged any underwriters for the sale of these shares we plan to do so in the near future. If we engage underwriters for this Offering we will update this disclosure to disclose all material terms of our arrangement with the underwriters.
Terms of the Offering
This Offering will start on the date that this registration statement is declared effective by the SEC and continue for a period of [___] days. The offering shall terminate on the earlier of (i) the date when the sale of all [_______] shares is completed, (ii) when the Board of Directors and any underwriters decide that it is in the best interest of the Company to terminate the offering prior the completion of the sale of all [________] shares registered under the registration statement of which this Prospectus is part, and (iii) [____] days of the effective date of this registration statement. We will not accept any money under this Offering until this registration statement is declared effective by the SEC.
We are not offering any of the Selling Securityholders’ securities. These shares may be sold by the Selling Securityholders from time to time at prevailing market prices. We will not receive any of the proceeds from any sale by the Selling Securityholders. The Selling Securityholders may sell or distribute their shares in transactions through underwriters, brokers, dealers or agents from time to time or through privately negotiated transactions, including in distributions to shareholders or partners or other persons affiliated with the Selling Securityholders. If the Selling Securityholder enters into an agreement after the date of this prospectus to sell their shares to a broker-dealer as a principal and that broker-dealer is acting as an underwriter, we will file a post-effective amendment to the registration statement containing this prospectus identifying the broker-dealer and disclosing required information on the plan of distribution. Additionally, prior to any involvement of any broker-dealer in the offering, such broker-dealer must seek and obtain clearance of the underwriting compensation and arrangements from the Financial Industry Regulatory Agency.
Penny Stock Rules / Section 15(g) of the Exchange Act
Our shares may be considered penny stock covered by Section 15(g) of the Securities Exchange Act of 1934, as amended, and Rules 15g-1 through 15g-6 promulgated thereunder. They impose additional sales practice requirements on broker/dealers who sell our securities to persons other than established customers and accredited investors who are generally institutions with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 (including spouse's net worth and may include the fair market value of home furnishings and automobiles, but excluding from the calculation the value any primary residence and the related amount of any indebtedness on primary residence up to the fair market value of the primary residence (any indebtedness that exceeds the fair market value of the primary residence must be deducted from net worth calculation)) or annual income exceeding $200,000 or $300,000 jointly with their spouses.
Rule 15g-1 exempts a number of specific transactions from the scope of the penny stock rules. Rule 15g-2 declares unlawful broker/dealer transactions in penny stocks unless the broker/dealer has first provided to the customer a standardized disclosure document.
Rule 15g-3 provides that it is unlawful for a broker/dealer to engage in a penny stock transaction unless the broker/dealer first discloses and subsequently confirms to the customer current quotation prices or similar market information concerning the penny stock in question.
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Rule 15g-4 prohibits broker/dealers from completing penny stock transactions for a customer unless the broker/dealer first discloses to the customer the amount of compensation or other remuneration received as a result of the penny stock transaction.
Rule 15g-5 requires that a broker/dealer executing a penny stock transaction, other than one exempt under Rule 15g-1, disclose to its customer, at the time of or prior to the transaction, information about the sales person’s compensation.
Rule 15g-6 requires broker/dealers selling penny stocks to provide their customers with monthly account statements.
Rule 15g-9 requires broker/dealers to approved the transaction for the customer’s account; obtain a written agreement from the customer setting forth the identity and quantity of the stock being purchased; obtain from the customer information regarding his investment experience; make a determination that the investment is suitable for the investor; deliver to the customer a written statement for the basis for the suitability determination and that it is unlawful to effect the transaction without written authorization for the transaction from the customer.
The application of the penny stock rules may affect your ability to resell your shares due to broker-dealer reluctance to undertake the above-described regulatory burdens.
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DESCRIPTION OF SECURITIES
General. Our authorized capital stock consists of 100,000,000 shares of common stock, par value $0.00001, and 25,000,000 shares of preferred stock, par value $0.00001. As of August 20, 2021, there are 25,981,203 shares of our common stock issued and outstanding, held by approximately 175 shareholders of record. There are no shares of our preferred stock outstanding as of the date of this filing.
Common Stock. Each shareholder of our common stock is entitled to a pro rata share of cash distributions made to shareholders, including dividend payments. The holders of our common stock are entitled to one vote for each share of record on all matters to be voted on by shareholders. There is no cumulative voting with respect to the election of our directors or any other matter. Therefore, the holders of more than 50% of the shares voted for the election of those directors can elect all of the directors. The holders of our common stock are entitled to receive dividends when and if declared by our Board of Directors from funds legally available therefore. Cash or stock dividends are at the sole discretion of our Board of Directors. In the event of our liquidation, dissolution or winding up, the holders of common stock are entitled to share ratably in all assets remaining available for distribution to them after payment of our liabilities and after provision has been made for each class of stock, if any, having any preference in relation to our common stock. Holders of shares of our common stock have no conversion, preemptive or other subscription rights, and there are no redemption provisions applicable to our common stock.
Dividend Policy. We have never issued any dividends to our common stock holders do not expect to pay any stock dividend or any cash dividends on our common stock in the foreseeable future. We currently intend to retain our earnings, if any, for use in our business. Any dividends declared on our common stock in the future will be at the discretion of our Board of Directors and subject to any restrictions that may be imposed by our lenders.
Liquidation Rights. In the event of a voluntary or involuntary liquidation, dissolution or winding up of our company, the holders of our common stock will be entitled to share ratably on the basis of the number of shares held in any of the assets available for distribution after we have paid in full all of our debts and after the holders of all outstanding preferred stock, if any, have received their liquidation preferences in full.
Exclusive Forum Provision. In the event of litigation with an investor that participates in the Offering, the subscription agreement for the sale of the Units contains an exclusive forum provision that states any litigation much be filed exclusively in the state and federal courts sitting in Boulder County, Colorado. However, notwithstanding this provision, this choice of forum provision does not preclude or contract the scope of exclusive federal or concurrent jurisdiction for any actions brought under the Securities Act or the Exchange Act and does not apply to claims arising under the federal securities laws. Accordingly, our exclusive forum provision will not relieve us of our duties to comply with the federal securities laws and the rules and regulations thereunder, and our compliance with these laws, rules, and regulations cannot be waived by us or an investor. This exclusive forum provision would not apply to purchasers in secondary transactions.
Anti-Takeover Provisions
Amended Certificate of Incorporation and Amended and Restated Bylaws
Our amended certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for: (i) any derivative action or proceeding brought on behalf of us; (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees or agents to us or our stockholders; (iii) any action asserting a claim against us arising pursuant to any provision of the Delaware General Corporation Law or our amended certificate of incorporation or amended and restated bylaws; or as to which the Delaware General Corporation Law of the State of Delaware confers jurisdiction to the Court of Chancery of the State of Delaware, or (iv) any action asserting a claim against us governed by the internal affairs doctrine; provided that, the exclusive forum provision will not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction; and provided further that, if and only if the Court of Chancery of the State of Delaware dismisses any such action for lack of subject matter jurisdiction, such action may be brought in another state or federal court sitting in the State of Delaware. Our amended and restated certificate of incorporation will also provide that the federal district courts of the United States of America will be the exclusive forum for the resolution of any complaint asserting a cause of action against us or any of our directors, officers, employees or agents and arising under the Securities Act. Under the Securities Act, federal and state courts have concurrent jurisdiction over all suits brought to enforce any duty or liability created by the Securities Act, and investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. Accordingly, there is uncertainty as to whether a court would enforce such a forum selection provision as written in connection with claims arising under the Securities Act. The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that, in connection with any action, a future court could find the choice of forum provisions contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in such action. These provisions may also result in increased costs for investors seeking to bring a claim against us or any of our directors, officers or other employees.
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Section 203 of the Delaware General Corporation Law
We are subject to Section 203 of the DGCL, which prohibits a Delaware corporation from engaging in any business combination with any interested stockholder for a period of three years after the date that such stockholder became an interested stockholder, with the following exceptions:
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before such date, our board of directors approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder; |
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upon closing of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction began, excluding for purposes of determining the voting stock outstanding (but not the outstanding voting stock owned by the interested stockholder) those shares owned by (i) persons who are directors and also officers and (ii) employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or on or after such date, the business combination is approved by our board of directors and authorized at an annual or special meeting of the stockholders, and not by written consent, by the affirmative vote of at least 66-2/3% of the outstanding voting stock that is not owned by the interested stockholder. |
In general, Section 203 defines business combination to include the following:
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any merger or consolidation involving the corporation and the interested stockholder; |
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any sale, transfer, pledge or other disposition of 10% or more of the assets of the corporation involving the interested stockholder; |
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subject to certain exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder; |
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any transaction involving the corporation that has the effect of increasing the proportionate share of the stock or any class or series of the corporation beneficially owned by the interested stockholder; or |
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the receipt by the interested stockholder of the benefit of any loss, advances, guarantees, pledges or other financial benefits by or through the corporation. |
In general, Section 203 defines an “interested stockholder” as an entity or person who, together with the person’s affiliates and associates, beneficially owns, or within three years prior to the time of determination of interested stockholder status did own, 15% or more of the outstanding voting stock of the corporation.
Limitations on Liability and Indemnification Matters
Section 1 of Article VI of our Articles of Incorporation provides that, to the fullest extent permitted by the General Corporation Law of the State of Delaware we will indemnify our officers and directors from and against any and all expenses, liabilities, or other matters.
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Section 2 of Article VI of our Articles of Incorporation provides that, to the fullest extent permitted by law, no director or officer shall be personally liable to the corporation or its shareholders for damages for breach of any duty owed to the corporation or its shareholders.
Article XI of our Amended and Restated Bylaws further addresses indemnification of our directors and officers and allows us to indemnify our directors and officers in the event they meet certain criteria in terms of acting in good faith and in an official capacity within the scope of their duties, when such conduct leads them to be involved in a legal action.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the “Act”) may be permitted to directors, officers and controlling persons of the small business issuer pursuant to the foregoing provisions, or otherwise, the small business issuer has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.
Transfer Agent. The transfer agent for our common stock is Equiniti, 1110 Centre Pointe Curve, Suite 101, Mendota Heights, MN 55120, phone: (651) 450-4120.
INTEREST OF NAMED EXPERTS AND COUNSEL
Law Offices of Craig V. Butler serves as our legal counsel in connection with this offering. The principal of the Law Offices of Craig V. Butler, Mr. Craig V. Butler owns 75,166 shares of our common stock and stock options to acquire 79,318 shares of our common stock at an exercise price $0.2634 per share.
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Corporate History
We were incorporated under the name Imagine Media, Ltd. in August 2007 to publish and distribute Image Magazine, a monthly guide and entertainment source for the Denver, Colorado area. We generated only limited revenue and essentially abandoned the business plan in January 2009. On September 19, 2011, we, Imagine Media, Ltd., a Delaware corporation, acquired approximately 52% of the outstanding shares of TransBiotec, Inc. (the “Company” or “TBT”), a California corporation, from TBT’s directors in exchange for 373,315 shares of our common stock.
On January 17, 2012, our Board of Directors amended our Certificate of Incorporation changing our name from Imagine Media, Ltd. to TransBiotec, Inc.
On January 31, 2012, we acquired approximately 45% of the remaining outstanding shares of TBT in exchange for 329,936 shares of our common stock.
With the acquisitions in September 2011 and January 2012 of TBT common stock, we own approximately 99% of the outstanding shares of TBT.
As a result of the acquisitions, TBT’s business is our business, and, unless otherwise indicated, any references to “we” or “us” include the business and operations of TBT.
On March 9, 2020, in connection with our transaction with IDTEC, LLC (as detailed herein) our Board of Directors approved the amendment to our Certificate of Incorporation on March 9, 2020 and stockholders holding 52.24% of our then outstanding voting stock approved the amendment to our Articles of Incorporation. The Certificate of Amendment to our Certificate of Incorporation was for the purpose of, among other things, (i) changing our name from “TransBiotec, Inc.” to “SOBR Safe, Inc.”, (ii) effecting a 1-for-33.26 reverse stock split of our common stock, and (iii) decreasing our authorized common stock from 800,000,000 shares to 100,000,000 shares, and became effective with the State of Delaware on April 24, 2020.
As a result of the reverse stock split effected by our Certificate of Amendment to our Certificate of Incorporation, every 33.26 shares of our outstanding common stock prior to the effect of that amendment were combined and reclassified into one share of our common stock, and the number of outstanding shares of our common stock at the time was reduced from 266,097,657 (pre-split) to approximately 8,000,000 (post-split). No fractional shares were issued in connection with the reverse stock split, and any of our stockholders that would have been entitled to receive a fractional share as a result of the reverse stock split will instead receive one additional share of our common stock in lieu of the fractional share. The reverse stock split did not in itself affect any stockholder’s ownership percentage of our common stock, except to the extent that any fractional share were rounded up to the nearest whole share.
At the open of trading on June 8, 2020, our new name and reverse stock split went effective with OTC Markets, and we began trading on the “OTC Pink Current Information” tier of OTC Markets on a post reverse stock split basis. Our ticker symbol for the quotation of our common stock is now “SOBR”. On November 16, 2020, we began trading on the “OTCQB” tier of OTC Markets.
Our corporate offices are located at 885 Arapahoe Avenue, Boulder, Colorado 80302, telephone number (844) 762-7723.
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Business Overview
General
We intend to create substance-free environments by integrating and commercializing critical detection technologies. These technologies will be integrated within our robust and scalable data platform, producing human physiology metrics, statistical and measurable user and business data and, eventually, predictive analytics. Our mission is to save lives, improve and monitor employee health, increase productivity, create significant economic benefit and positively impact behavior. To that end, we developed the scalable, patented SOBRSafe™ software platform for non-invasive alcohol detection and identity verification, a solution that has anticipated applications in commercial vehicle fleets, school buses, manufacturing and warehousing.
We are currently managing installed pilots of our SOBRcheck™ product with Continental Services, HAS, Advanced Freight and several other companies. These pilots are being conducted prior to, and in anticipation of, the commercial release of our SOBRcheck™ product. We expect commercial production to commence during the fourth quarter of 2021. Manufacturing and assembly of our SOBRcheck™ device will take place in Denver, Colorado.
Our SOBRsafe™ technology can also be deployed across numerous additional devices for various uses; among those we are currently exploring include possible integrations with existing telematics systems, as well as law enforcement technologies to enhance public safety. In addition, we are proactively evaluating other emerging detection technologies for alcohol, cannabis, opioids, human health and more. Currently, our plan is to deploy our SOBRSafe™ technology in two initial devices: the SOBRcheck™ system and the SOBRsure™ wearable band.
SOBRcheck™
SOBRcheck™ is our stationary identification and alcohol monitoring product. When installed, SOBRcheck™ enables a rapid, hygienic biometric finger scan to authenticate ID and determine the presence or absence of alcohol. The SOBRcheck™ product provides the employer with real-time results, delivered securely, to more efficiently manage their existing zero tolerance policy. We started the direct sales program in the business-to-business marketplace in the 2nd quarter of 2021.
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SOBRsure™
SOBRsure™ is a transdermal, alcohol-detecting wearable band containing our SOBRsafe™ technology for ongoing, real-time alcohol and human health monitoring. We will be conducting clinical pilots for SOBRsure™ with alcohol rehabilitation/managed care and pre- and post-operation environments in a specific segment of insurance-sponsored organ transplants. SOBRsafe expects to initiate these clinical pilots during 2021.
We believe our device portfolio approach could yield a substantial repository of user data – a potentially monetizable asset for statistical, predictive analytics. The opportunity to collect millions of data points over time could enable the development of business and insurance liability benchmarking, and through AI, powerful guidance for perpetual safety improvement (and associated cost savings capture). By demonstrating substance-free environments, employers could deliver a data-driven argument for lowering insurance premiums. We could potentially partner with insurance providers to mandate use of the SOBRsafe™ devices and/or technology.
In addition to focusing on the development, marketing and commercialization of the SOBRcheck™ and SOBRsure™ devices, we are also constantly reviewing synergistic technologies and businesses for potential partnerships, including licensing the SOBRsafe™ technology in fields where we believe our technology would be beneficial – such as the existing health band market, telematics providers and law enforcement.
The Substance Abuse Problem
Our management believes the key to developing a successful product is to find a potential solution to a need not being adequately addressed with current technologies. When that need also involves a potential solution for a societal crisis – like the impact of substance abuse on the workplace and individual lives – then the motivation is even stronger, and the potential results that much more impactful.
Through crime, lost work productivity and healthcare expenses, the annual cost of alcohol abuse in the U.S. is estimated to be $249 billion. Half of all industrial accidents involve alcohol, and commercial fleets suffer from over 11,000 alcohol-related accidents each year. We believe we have a solution that addresses this problem, and our technology is now available for pilot evaluation in commercial fleet management, school bus safety and manufacturing facilities.
Competitive Advantages
SOBRsafe™ is currently the only preventative transdermal (touch-based) alcohol detection system in the U.S. market – we seek to eliminate the possibility of alcohol-related accidents before they occur, not simply punish the offender post-fact. Companies like SCRAM, BACTRACK, BI TAD, Soberlink, Smart Start, Intoxalock and others are focused on the judicially-mandated market, i.e. breathalyzers for blood alcohol content (BAC) measurement, or court-ordered ankle monitors. Only SOBRsafe™ provides the data needed to get ahead of an issue, not simply react to its consequences.
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Our SOBRcheck™ device is a patent-pending, touch-based identity verification and alcohol detection solution. A user places two fingers on the device’s sensors: one reads specific data points under the skin via privacy-compliant biometrics to confirm identity, while the other senses ethanol secreted via sweat through the pores of the fingertip.
Marketing
We have developed a marketing plan that includes 1) outsourced multi-channel appointment setting, 2) popular and trade media public relations, 3) advocacy group alignment, 4) dynamic social media brand development, 5) industry-expert business development contractors and 6) continuous pursuit of cutting-edge detection technologies for future integration.
We have recently launched pilot programs with a global employer, a national detection technology distributor and Michigan’s largest food management company. We anticipate launching multiple additional pilot programs with significant employers in the coming weeks.
Research and Development
Our SOBRsafe™ system for non-invasive alcohol detection and identity verification has been completed and tested. Based on the results of testing, including in a live pilot program with a multinational manufacturer, we believe the system is ready for manufacturing in volume across our various applications.
We are currently pursuing multiple generations of the SOBRsure™ wearable band, each with successively advanced capabilities. We are also proactively evaluating emerging technologies, including light, nano sensors, optics, ECG and more to most accurately detect alcohol, cannabis, opioids and determinants of human health. The current iteration of our SOBRsure™ wearable integrates health monitoring and predictive analytics into a stylish wearable band.
SOBRcheckTM, the patent-pending, multiuser, touch-based alcohol detection platform with identity detection, evidenced outstanding performance in human trials and is currently being tooled for manufacturing.
Intellectual Property
We currently have the following patent and patent applications related to our SOBRsafe™ system and related devices:
|
1) |
U.S. Patent No. 9,296,298, titled “Alcohol detection system for vehicle driver testing with integral temperature compensation”, which expires in 2032. |
|
2) |
Provisional Patent Application No. 63,014,776, titled “Non-invasive Transdermal Alcohol Screening System” |
|
3) |
Provisional Patent Application No. 63,109,134, titled “Wearable Data Collection Device w/Non-Invasive Sensing” |
We are applying for trademarks related to the SOBRsafe™ system, SOBRcheck™ and SOBRsure™. We have also applied for trademark registration for “SOBR” as standard characters with no specific formatting.
Government Regulation
At the present time, only the judicially mandated market is regulated. Devices sold into this market must be approved by state government agencies. Since we utilize a unique “Go/No Go” methodology that simply alerts to the presence of alcohol (as opposed to measuring a discrete BAC) – information that may be used at the discretion of the employer (or counselor, parent, etc.) – we do not believe we will be subject to any government regulation.
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Employees
As of August 19, 2021, there are a total of 9 full time employees, including CEO Kevin Moore, Chairman/CFO/Secretary/CRO David Gandini and VP of Operations Scott Bennett.
Human Capital Resources
The remainder of our workforce are consultants due to the nature of our business. As it relates to our employees and the consultants that work with us:
Oversight and Management
Our executive officers are tasked with leading our organization in managing employment-related matters, including recruiting and hiring, onboarding and training, compensation planning and talent management and development. We are committed to providing team members with the training and resources necessary to continually strengthen their skills. Our executive team is responsible for periodically reviewing team member programs and initiatives, including healthcare and other benefits, as well as our management development and succession planning practices. Management periodically reports to the Board regarding our human capital measures and results that guide how we attract, retain and develop a workforce to enable our business strategies.
Diversity, Equity and Inclusion
We believe that a diverse workforce is critical to our success, and we continue to monitor and improve the application of our hiring, retention, compensation and advancement processes for women and underrepresented populations across our workforce, including persons of color, veterans and LGBTQ+ to enhance our inclusive and diverse culture. We continue to invest in recruiting diverse talent.
Workplace Safety and Health
A vital part of our business is providing our workforce with a safe, healthy and sustainable working environment. We focus on implementing change through workforce observation and feedback channels to recognize risk and continuously improve our processes.
Importantly during 2020, our focus on providing a positive work environment on workplace safety have enabled us to preserve business continuity without sacrificing our commitment to keeping our colleagues and workplace visitors safe during the COVID-19 pandemic. We took immediate action at the onset of the COVID-19 pandemic to enact rigorous safety protocols in our facilities by improving sanitation measures, implementing mandatory social distancing, use of facing coverings, reducing on-site workforce through staggered shifts and schedules, remote working where possible, and restricting visitor access to our locations. We believe these actions helped minimize the impact of COVID-19 on our workforce.
Corporate Information
Our corporate offices are located at 885 Arapahoe Avenue, Boulder, CO 80302, telephone number (844) 762-7723.
DESCRIPTION OF PROPERTY
Our executive offices, consisting of approximately 250-500 square feet, are located at 885 Arapahoe Avenue, Boulder, Colorado 80302. We do not own our own manufacturing facility but plan to outsource with third party manufacturing companies for our manufacturing.
Available Information
We are a fully reporting issuer, subject to the Securities Exchange Act of 1934. Our Quarterly Reports, Annual Reports, and other filings can be obtained from the SEC’s Public Reference Room at 100 F Street, NE., Washington, DC 20549, on official business days during the hours of 10 a.m. to 3 p.m. You may also obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. The Commission maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the Commission at http://www.sec.gov.
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ORGANIZATION WITHIN LAST FIVE YEARS
On March 9, 2020, in connection with our transaction with IDTEC, LLC (as detailed herein) our Board of Directors approved the amendment to our Certificate of Incorporation on March 9, 2020 and stockholders holding 52.24% of our then outstanding voting stock approved the amendment to our Articles of Incorporation. The Certificate of Amendment to our Certificate of Incorporation was for the purpose of, among other things, (i) changing our name from “TransBiotec, Inc.” to “SOBR Safe, Inc.”, (ii) effecting a 1-for-33.26 reverse stock split of our common stock, and (iii) decreasing our authorized common stock from 800,000,000 shares to 100,000,000 shares, and became effective with the State of Delaware on April 24, 2020.
As a result of the reverse stock split effected by our Certificate of Amendment to our Certificate of Incorporation, every 33.26 shares of our outstanding common stock prior to the effect of that amendment were combined and reclassified into one share of our common stock, and the number of outstanding shares of our common stock at the time was reduced from 266,097,657 (pre-split) to approximately 8,000,000 (post-split). No fractional shares were issued in connection with the reverse stock split, and any of our stockholders that would have been entitled to receive a fractional share as a result of the reverse stock split will instead receive one additional share of our common stock in lieu of the fractional share. The reverse stock split did not in itself affect any stockholder’s ownership percentage of our common stock, except to the extent that any fractional share were rounded up to the nearest whole share.
Our executive offices, consisting of approximately 250-500 square feet, are located at 885 Arapahoe Avenue, Boulder, Colorado 80302. We do not own our own manufacturing facility but plan to outsource with third party manufacturing companies for our manufacturing.
LEGAL PROCEEDINGS
On December 6, 2006, Orange County Valet and Security Patrol, Inc. filed a lawsuit against us in Orange County California State Superior Court for Breach of Contract in the amount of $11,164. A default judgment was taken against us in this matter. In mid-2013 we learned the Plaintiff’s perfected the judgment against us, but we have not heard from the Plaintiffs as of August 2021. In the event we pay any money related to this lawsuit, IDTEC, LLC agreed, in connection with us closing the asset purchase transaction with IDTEC, to pay the amount for us in exchange for shares of our common stock.
We had one outstanding judgment against us involving a past employee of the Company. The matter was under the purview of the State of California, Franchise Tax Board, Industrial Health and Safety Collections. We owed approximately $28,786 plus accrued interest of approximately $53,000 to our ex-employee for unpaid wages under these Orders. On March 8, 2021, we received an Acknowledgement of Satisfaction of Judgement-Full by the California Court notifying us that the judgement has been settled with a payment of approximately $85,000 including the accrued interest owed through settlement date and legal fees of approximately $3,000. IDTEC, LLC agreed, in connection with us closing the asset purchase transaction with IDTEC, to pay the amount for us in exchange for shares of our common stock acquired through the exercise of a warrant held by IDTEC, LLC.
In the ordinary course of business, we are from time to time involved in various pending or threatened legal actions. The litigation process is inherently uncertain and it is possible that the resolution of such matters might have a material adverse effect upon our financial condition and/or results of operations. However, in the opinion of our management, other than as set forth herein, matters currently pending or threatened against us are not expected to have a material adverse effect on our financial position or results of operations.
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SELECTED FINANCIAL DATA
As a smaller reporting company, we are not required to provide this information.
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FINANCIAL STATEMENTS
Index to Financial Statements |
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F-2 |
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Consolidated Balance Sheets of SOBR SAFE, Inc. as of December 31, 2020 and 2019 |
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F-5 |
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F-6 |
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F-7 |
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F-8 |
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F-9 |
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Consolidated Balance Sheets of SOBR SAFE, Inc. as of June 30, 2021 (unaudited) and December 31, 2020 |
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F-36 |
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F-37 |
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F-38 |
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F-39 |
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F-40 |
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F-1 |
Table of Contents |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of SOBR Safe, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of SOBR Safe, Inc. and Subsidiaries (the “Company”) as of December 31, 2020, and the related consolidated statements of operations, changes in stockholders’ equity (deficit), and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of SOBR Safe, Inc. as of December 31, 2020, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying financial statements have been prepared assuming that the entity will continue as a going concern. As discussed in Note 2 to the financial statements, the entity has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the entity’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to SOBR Safe, Inc. in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. SOBR Safe, Inc. is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
F-2 |
Table of Contents |
Asset Purchase Transaction of Intellectual Technology, Certain Robotics Assets and Other Business-Related Assets and Impairment Assessments
The Company completed the purchase of certain assets from IDTEC, LLC on June 5, 2020 for a total consideration of $29,222,955. The Company’s assets are assessed for impairment annually, or more often if events or circumstances indicated that impairment may have occurred. If the fair value of the asset is less than its carrying amount, an impairment loss is recognized in an amount equal to the difference. In connection with its impairment assessments during the year-ended December 31, 2020, the Company recorded impairment charges of $25,320,555 related to its intellectual technology. Auditing the Company's estimate of fair value of the asset purchase transaction, as well as the fair value estimates used in the impairment assessments, is complex due to the significant management judgments and estimates required. Management valued the intellectual technology using a discounted cash-flow model analysis. Significant estimates and assumptions in estimating the fair value of the intellectual technology include future expected cash flows from product sales, customer contracts, revenue growth rate, customer ramp-up period, technology obsolescence rates, and discount rates, all of which are forward-looking and affected by expectations about economic, industry and company-specific factors.
The principal considerations for our determination that performing procedures relating to the valuation of the intellectual technology, robotics assets and office equipment acquired in the IDTEC, LLC asset acquisition is a critical audit matter are (i) a high degree of auditor judgment and subjectivity in performing procedures relating to the fair value measurement of the intellectual technology, robotic assets and office equipment due to the significant judgment by management when developing these estimates, (ii) the significant audit effort in evaluating the significant assumptions relating to the valuation of the intellectual technology related to the revenue growth rate, the customer ramp-up period, the technology obsolescence rates, and the discount rates, and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements. These procedures included, among others, obtaining an understanding of the Company’s acquisition accounting and impairment assessments for the intellectual technology, robotics assets and office equipment; reading the asset purchase agreement; and testing management’s process for determining the fair value of these assets at acquisition and as part of the impairment assessments, including evaluating the appropriateness of the valuation methods (the Company’s use of the discounted cash flows method), testing the completeness and accuracy of underlying data used in the methods to develop the projected financial information, and evaluating the reasonableness of the significant assumptions related to the revenue growth rate, the customer ramp-up period, the technology obsolescence rates, and the discount rates. Evaluating the reasonableness of the revenue growth rate and the customer ramp-up period involved considering current industry data and market and economic trends. Evaluating the reasonableness of the technology obsolescence rates involved considering the benchmarking of peer companies and other market participant considerations. Professionals with specialized skill and knowledge were used to assist in evaluating the appropriateness of valuation methods and the reasonableness of the customer ramp-up period, the technology obsolescence rates, and the discount rates.
/s/ Macias Gini & O’Connell LLP
We have served as SOBR Safe, Inc. auditor since 2018.
Irvine, CA
March 31, 2021, except for Note 17, as to which the date is June 17, 2021
F-3 |
Table of Contents |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of SOBR Safe, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of SOBR Safe, Inc. and Subsidiaries (the "Company") as of December 31, 2019 and the related consolidated statements of operations, changes in stockholders’ deficit and cash flows for the year then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
Substantial Doubt About the Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses from operations and has a working capital deficit and stockholders’ deficit, and in all likelihood, will be required to make significant future expenditures in connection with continuing marketing efforts along with general and administrative expenses. As of December 31, 2019, the Company has an accumulated deficit of $19,511,168, carrying loans of principal and interest in default totaling $1,440,193. During the year ended December 31, 2019, the Company also experienced negative cash flows from operating activities of $543,956. It appears these principal conditions or events, considered in the aggregate, indicate it is probable that the entity will be unable to meet its obligations as they become due within one year after the date the financial statements are issued. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
We served as the Company’s auditor from 2018.
Irvine, CA
April 16, 2020
F-4 |
Table of Contents |
CONSOLIDATED BALANCE SHEETS | ||||||||||||
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December 31, |
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December 31, |
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2020 |
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2019 |
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ASSETS |
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Current assets |
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|
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| ||||||
Cash |
|
$ | 232,842 |
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|
$ | 681,759 |
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Prepaid expenses |
|
|
115,230 |
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|
|
9,054 |
| ||||
Total current assets |
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|
348,072 |
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|
|
690,813 |
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|
|
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| |||||
SOBR Safe Intellectual Technology, net of accumulated amortization of $224,854 at December 31, 2020 |
|
|
3,629,821 |
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|
|
- |
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|
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|
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Other assets |
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8,680 |
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|
|
- |
| ||||
Total Assets |
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$ | 3,986,573 |
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|
$ | 690,813 |
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LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT) |
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Current liabilities |
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Accounts payable |
|
$ | 101,308 |
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|
$ | 213,880 |
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Accrued expenses |
|
|
313,032 |
|
|
|
419,836 |
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Accrued interest payable |
|
|
134,444 |
|
|
|
674,041 |
| ||||
Related party payables |
|
|
28,624 |
|
|
|
905,443 |
| ||||
Derivative liabilities |
|
|
- |
|
|
|
60,650 |
| ||||
Common stock subscriptions payable |
|
|
253,688 |
|
|
|
79,624 |
| ||||
Preferred stock subscriptions payable |
|
|
- |
|
|
|
1,000,000 |
| ||||
Notes payable - current - related parties |
|
|
11,810 | * |
|
|
760,886 |
* | ||||
* Includes unamortized debt discount related to detached warrants of none and $8,656 at December 31, 2020 and December 31, 2019, respectively |
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|
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Notes payable - current portion - non-related parties |
|
|
79,183 |
|
|
|
169,574 |
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Total current liabilities |
|
|
922,089 |
|
|
|
4,283,934 |
| ||||
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|
|
|
|
|
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|
| ||||
Notes payable - less current portion-non-related parties |
|
|
25,500 |
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|
|
- |
| ||||
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|
|
|
|
|
|
|
| ||||
Total Liabilities |
|
|
947,089 |
|
|
|
4,283,934 |
| ||||
Stockholders' Equity (Deficit) |
|
|
|
|
|
|
|
| ||||
Preferred stock, $0.00001 par value; 19,300,000 shares authorized, no shares issued or outstanding as of December 31, 2020 and December 31, 2019 |
|
|
- |
|
|
|
- |
| ||||
Series A Convertible Preferred stock, $0.00001 par value; 3,000,000 shares authorized, no shares issued and outstanding as of December 31, 2020 and December 31, 2019 |
|
|
- |
|
|
|
- |
| ||||
Series A-1 Convertible Preferred stock, $0.00001 par value; 2,700,000 shares authorized, no shares issued and outstanding as of December 31, 2020 and December 31, 2019 |
|
|
- |
|
|
|
- |
| ||||
Common stock, $0.00001 par value; 100,000,000 shares authorized; 25,922,034 and 6,452,993 shares issued and outstanding as of December 31, 2020 and December 31, 2019, respectively, after 1-for-33.26 reverse stock split |
|
|
260 |
|
|
|
65 |
| ||||
Additional paid-in capital |
|
|
52,693,974 |
|
|
|
15,971,392 |
| ||||
Accumulated deficit |
|
|
(49,601,220 | ) |
|
|
(19,511,168 | ) | ||||
Total SOBR Safe, Inc. stockholders' equity (deficit) |
|
|
3,093,014 |
|
|
|
(3,539,711 | ) | ||||
Noncontrolling interest |
|
|
(53,530 | ) |
|
|
(53,410 | ) | ||||
|
|
|
|
|
|
|
|
| ||||
Total Stockholders' Equity (Deficit) |
|
|
3,039,484 |
|
|
|
(3,593,121 | ) | ||||
|
|
|
|
|
|
|
|
| ||||
Total Liabilities and Stockholders' Equity (Deficit) |
|
$ | 3,986,573 |
|
|
$ | 690,813 |
|
The accompanying notes are an integral part of the consolidated financial statements.
F-5 |
Table of Contents |
CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||
| |||||||||
|
|
For The Year Ended |
| ||||||
|
|
December 31, |
|
|
December 31, |
| |||
|
|
2020 |
|
|
2019 |
| |||
|
|
|
|
|
|
| |||
Revenues |
|
$ | - |
|
|
$ | - |
| |
|
|
|
|
|
|
|
|
| |
Operating expenses: |
|
|
|
|
|
|
|
| |
General and administrative |
|
|
632,426 |
|
|
|
232,178 |
| |
Stock-based compensation expense |
|
|
273,443 |
|
|
|
44,082 |
| |
Management salaries and consulting fees |
|
|
1,370,681 |
|
|
|
498,246 |
| |
Research and development |
|
|
633,050 |
|
|
|
12,787 |
| |
Loss on disposal of property and equipment |
|
|
39,434 |
|
|
|
- |
| |
Asset impairment adjustment |
|
|
25,320,555 |
|
|
|
- |
| |
Total operating expenses |
|
|
28,269,589 |
|
|
|
787,293 |
| |
|
|
|
|
|
|
|
|
| |
Loss from operations |
|
|
(28,269,589 | ) |
|
|
(787,293 | ) | |
|
|
|
|
|
|
|
|
| |
Other income (expense): |
|
|
|
|
|
|
|
| |
Loss on debt extinguishment, net |
|
|
(224,166 | ) |
|
|
- |
| |
Gain on fair value adjustment - derivatives |
|
|
60,650 |
|
|
|
4,150 |
| |
Interest expense |
|
|
(141,512 | ) |
|
|
(457,505 | ) | |
Amortization of interest - beneficial conversion feature |
|
|
(1,407,675 | ) |
|
|
(11,509 | ) | |
Total other expense, net |
|
|
(1,712,703 | ) |
|
|
(464,864 | ) | |
|
|
|
|
|
|
|
|
| |
Loss before provision for income taxes |
|
|
(29,982,292 | ) |
|
|
(1,252,157 | ) | |
|
|
|
|
|
|
|
|
| |
Provision for income taxes |
|
|
- |
|
|
|
- |
| |
Provision for income tax |
|
|
- |
|
|
|
- |
| |
|
|
|
|
|
|
|
|
| |
Net loss |
|
|
(29,982,292 | ) |
|
|
(1,252,157 | ) | |
Net loss attributable to noncontrolling interest |
|
|
120 |
|
|
|
3,125 |
| |
Net loss attributable to SOBR Safe, Inc. |
|
|
(29,982,172 | ) |
|
|
(1,249,032 | ) | |
Dividends on convertible preferred stock |
|
|
(107,880 | ) |
|
|
- |
| |
Net loss attributable to common stockholders |
|
$ | (30,090,052 | ) |
|
$ | (1,249,032 | ) | |
|
|
|
|
|
|
|
|
| |
Basic and diluted loss per common share |
|
$ | (1.95 | ) |
|
$ | (0.23 | ) | |
|
|
|
|
|
|
|
|
| |
Weighted average number of common shares outstanding |
|
|
15,399,208 |
|
|
|
5,081,122 |
|
The accompanying notes are an integral part of the consolidated financial statements.
F-6 |
Table of Contents |
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) | ||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||
|
|
Common Stock |
|
|
Preferred Stock |
|
|
|
|
|
|
|
|
Stockholders' |
|
|
|
|
|
|
| |||||||||||||||||||||||
|
|
|
|
|
Amount($0.00001 |
|
|
|
|
|
Amount($0.00001 |
|
|
Additional Paid-in |
|
|
Accumulated |
|
|
Equity (Deficit) SOBR Safe, |
|
|
Noncontrolling |
|
|
Total Stockholders' Equity |
| |||||||||||||||||
|
|
Shares |
|
|
Par) |
|
|
Shares |
|
|
Par) |
|
|
Capital |
|
|
Deficit |
|
|
Inc. |
|
|
Interest |
|
|
(Deficit) |
| |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Balances at January 1, 2019 |
|
|
3,510,255 |
|
|
$ | 35 |
|
|
|
1,388,575 |
|
|
$ | 14 |
|
|
$ | 14,888,941 |
|
|
$ | (18,262,136 | ) |
|
$ | (3,373,146 | ) |
|
$ | (50,285 | ) |
|
$ | (3,423,431 | ) | ||||||||
Common stock issued for cash |
|
|
1,065,982 |
|
|
|
11 |
|
|
|
- |
|
|
|
- |
|
|
|
38,989 |
|
|
|
- |
|
|
|
39,000 |
|
|
|
- |
|
|
|
39,000 |
| ||||||||
Common stock issued for executive compensation |
|
|
420,926 |
|
|
|
4 |
|
|
|
- |
|
|
|
- |
|
|
|
59,496 |
|
|
|
- |
|
|
|
59,500 |
|
|
|
- |
|
|
|
59,500 |
| ||||||||
Common stock issued due to stock warrants exercise |
|
|
1,038,339 |
|
|
|
11 |
|
|
|
- |
|
|
|
- |
|
|
|
146,763 |
|
|
|
- |
|
|
|
146,774 |
|
|
|
- |
|
|
|
146,774 |
| ||||||||
Common stock issued upon conversion of convertible preferred stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
- |
| ||||||||
to common stock |
|
|
417,491 |
|
|
|
4 |
|
|
|
(1,388,575 | ) |
|
|
(14 | ) |
|
|
(1,329,550 | ) |
|
|
- |
|
|
|
(1,329,560 | ) |
|
|
- |
|
|
|
(1,329,560 | ) | ||||||||
Paid-in capital - fair value of stock warrants granted |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
160,544 |
|
|
|
- |
|
|
|
160,544 |
|
|
|
- |
|
|
|
160,544 |
| ||||||||
Paid-in capital - fair value of related party stock options vested |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
71,655 |
|
|
|
- |
|
|
|
71,655 |
|
|
|
- |
|
|
|
71,655 |
| ||||||||
Paid-in capital - fair value of non-related party stock options granted |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
23,912 |
|
|
|
- |
|
|
|
23,912 |
|
|
|
- |
|
|
|
23,912 |
| ||||||||
Paid-in capital - gain on related party executive compensation conversion |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
535,500 |
|
|
|
- |
|
|
|
535,500 |
|
|
|
- |
|
|
|
535,500 |
| ||||||||
Paid-in capital - gain on related party debt conversion |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
39,992 |
|
|
|
- |
|
|
|
39,992 |
|
|
|
- |
|
|
|
39,992 |
| ||||||||
Paid-in capital - gain on related party preferred stock conversion |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,329,561 |
|
|
|
- |
|
|
|
1,329,561 |
|
|
|
- |
|
|
|
1,329,561 |
| ||||||||
Paid-in capital - beneficial conversion feature |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
5,589 |
|
|
|
- |
|
|
|
5,589 |
|
|
|
- |
|
|
|
5,589 |
| ||||||||
Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,249,032 | ) |
|
|
(1,249,032 | ) |
|
|
(3,125 | ) |
|
|
(1,252,157 | ) | ||||||||
Balances at December 31, 2019 |
|
|
6,452,993 |
|
|
$ | 65 |
|
|
|
- |
|
|
$ | - |
|
|
$ | 15,971,392 |
|
|
$ | (19,511,168 | ) |
|
$ | (3,539,711 | ) |
|
$ | (53,410 | ) |
|
$ | (3,593,121 | ) | ||||||||
Common stock issued for compensation |
|
|
1,025 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
20,800 |
|
|
|
- |
|
|
|
20,800 |
|
|
|
- |
|
|
|
20,800 |
| ||||||||
Common stock issued for executive compensation |
|
|
72,159 |
|
|
|
1 |
|
|
|
- |
|
|
|
- |
|
|
|
76,479 |
|
|
|
- |
|
|
|
76,480 |
|
|
|
- |
|
|
|
76,480 |
| ||||||||
Common stock issued due to stock warrants exercise |
|
|
454,097 |
|
|
|
4 |
|
|
|
- |
|
|
|
- |
|
|
|
65,724 |
|
|
|
- |
|
|
|
65,728 |
|
|
|
- |
|
|
|
65,728 |
| ||||||||
Common stock issued for asset purchase |
|
|
12,000,000 |
|
|
|
120 |
|
|
|
- |
|
|
|
- |
|
|
|
27,119,880 |
|
|
|
- |
|
|
|
27,120,000 |
|
|
|
- |
|
|
|
27,120,000 |
| ||||||||
Common stock issued to settle accounts payable and accrued expenses |
|
|
159,395 |
|
|
|
2 |
|
|
|
- |
|
|
|
- |
|
|
|
265,675 |
|
|
|
- |
|
|
|
265,677 |
|
|
|
- |
|
|
|
265,677 |
| ||||||||
Common stock issued to settle related party payables |
|
|
260,150 |
|
|
|
3 |
|
|
|
- |
|
|
|
- |
|
|
|
579,811 |
|
|
|
- |
|
|
|
579,814 |
|
|
|
- |
|
|
|
579,814 |
| ||||||||
Common stock issued to settle related party debt |
|
|
648,739 |
|
|
|
6 |
|
|
|
- |
|
|
|
- |
|
|
|
826,958 |
|
|
|
- |
|
|
|
826,964 |
|
|
|
- |
|
|
|
826,964 |
| ||||||||
Common stock issued to settle non-related party debt |
|
|
70,448 |
|
|
|
1 |
|
|
|
- |
|
|
|
- |
|
|
|
166,525 |
|
|
|
- |
|
|
|
166,526 |
|
|
|
- |
|
|
|
166,526 |
| ||||||||
Common stock issued upon conversion of related party debt and accrued interest |
|
|
3,103,028 |
|
|
|
31 |
|
|
|
- |
|
|
|
- |
|
|
|
1,551,483 |
|
|
|
- |
|
|
|
1,551,514 |
|
|
|
- |
|
|
|
1,551,514 |
| ||||||||
Common stock issued upon conversion of convertible preferred stock to common stock |
|
|
2,700,000 |
|
|
|
27 |
|
|
|
(2,700,000 | ) |
|
|
(27 | ) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
| ||||||||
Series A-1 Convertible Preferred stock issued for cash |
|
|
- |
|
|
|
- |
|
|
|
2,700,000 |
|
|
|
27 |
|
|
|
2,699,973 |
|
|
|
- |
|
|
|
2,700,000 |
|
|
|
- |
|
|
|
2,700,000 |
| ||||||||
Paid-in capital - fair value of stock options vested |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
239,476 |
|
|
|
- |
|
|
|
239,476 |
|
|
|
- |
|
|
|
239,476 |
| ||||||||
Paid-in capital - fair value of stock warrants granted |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
915,124 |
|
|
|
- |
|
|
|
915,124 |
|
|
|
- |
|
|
|
915,124 |
| ||||||||
Paid-in capital - gain on related party payables conversion |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
272,299 |
|
|
|
- |
|
|
|
272,299 |
|
|
|
- |
|
|
|
272,299 |
| ||||||||
Paid-in capital - gain on related party debt conversion |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
124,291 |
|
|
|
- |
|
|
|
124,291 |
|
|
|
- |
|
|
|
124,291 |
| ||||||||
Paid-in capital - loss on debt extinguishment |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
390,409 |
|
|
|
- |
|
|
|
390,409 |
|
|
|
- |
|
|
|
390,409 |
| ||||||||
Paid-in capital - beneficial conversion feature |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,407,675 |
|
|
|
- |
|
|
|
1,407,675 |
|
|
|
- |
|
|
|
1,407,675 |
| ||||||||
Dividends - Series A-1 Convertible Preferred stock |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(107,880 | ) |
|
|
(107,880 | ) |
|
|
- |
|
|
|
(107,880 | ) | ||||||||
Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(29,982,172 | ) |
|
|
(29,982,172 | ) |
|
|
(120 | ) |
|
|
(29,982,292 | ) | ||||||||
Balances at December 31, 2020 |
|
|
25,922,034 |
|
|
$ | 260 |
|
|
|
- |
|
|
|
- |
|
|
$ | 52,693,974 |
|
|
$ | (49,601,220 | ) |
|
$ | 3,093,014 |
|
|
$ | (53,530 | ) |
|
$ | 3,039,484 |
|
The accompanying notes are an integral part of the consolidated financial statements.
F-7 |
Table of Contents |
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||
| |||||||||
|
|
For The Year Ended |
| ||||||
|
|
December 31, |
| ||||||
|
|
2020 |
|
|
2019 |
| |||
|
|
|
|
|
|
| |||
Operating Activities: |
|
|
|
|
|
| |||
Net loss |
|
|
(29,982,292 | ) |
|
$ | (1,252,157 | ) | |
|
|
|
|
|
|
|
|
| |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
| |
Depreciation and amortization |
|
|
232,194 |
|
|
|
- |
| |
Loss on debt extinguishment, net |
|
|
224,166 |
|
|
|
- |
| |
Loss on disposal of property and equipment |
|
|
39,434 |
|
|
|
- |
| |
Change in fair value of derivative liability |
|
|
(60,650 | ) |
|
|
(4,150 | ) | |
Interest expense-embedded conversion feature |
|
|
- |
|
|
|
64,800 |
| |
Amortization-debt discount |
|
|
8,656 |
|
|
|
5,920 |
| |
Amortization of interest - beneficial conversion feature |
|
|
1,407,675 |
|
|
|
5,589 |
| |
Stock warrants expense |
|
|
219,670 |
|
|
|
159,961 |
| |
Stock options expense |
|
|
239,478 |
|
|
|
95,567 |
| |
Stock-based compensation expense |
|
|
54,283 |
|
|
|
44,082 |
| |
Asset impairment adjustment |
|
|
25,320,555 |
|
|
|
- |
| |
Changes in assets and liabilities: |
|
|
|
|
|
|
|
| |
Prepaid expenses |
|
|
3,515 |
|
|
|
3,937 |
| |
Other assets |
|
|
(8,680 | ) |
|
|
- |
| |
Accounts payable |
|
|
113,158 |
|
|
|
22,166 |
| |
Accrued expenses |
|
|
(4,666 | ) |
|
|
(1,165 | ) | |
Accrued interest payable |
|
|
26,677 |
|
|
|
160,772 |
| |
Related party payables |
|
|
(24,706 | ) |
|
|
72,369 |
| |
Stock subscriptions payable |
|
|
- |
|
|
|
78,353 |
| |
|
|
|
|
|
|
|
|
| |
Net cash used in operating activities |
|
|
(2,191,533 | ) |
|
|
(543,956 | ) | |
|
|
|
|
|
|
|
|
| |
Investing Activities: |
|
|
|
|
|
|
|
| |
Proceeds from disposal of property and equipment |
|
|
951 |
|
|
|
- |
| |
|
|
|
|
|
|
|
|
| |
Financing Activities: |
|
|
|
|
|
|
|
| |
Proceeds from notes payable - related parties |
|
|
- |
|
|
|
186,626 |
| |
Proceeds from notes payable - non-related parties |
|
|
41,665 |
|
|
|
- |
| |
Proceeds from issuances of common stock - non-related parties |
|
|
- |
|
|
|
39,000 |
| |
Proceeds from offering of preferred stock - related parties |
|
|
1,700,000 |
|
|
|
1,000,000 |
| |
Net cash provided by financing activities |
|
|
1,741,665 |
|
|
|
1,225,626 |
| |
|
|
|
|
|
|
|
|
| |
Net Change In Cash |
|
|
(448,917 | ) |
|
|
681,670 |
| |
|
|
|
|
|
|
|
|
| |
Cash At The Beginning Of The Period |
|
|
681,759 |
|
|
|
89 |
| |
|
|
|
|
|
|
|
|
| |
Cash At The End Of The Period |
|
$ | 232,842 |
|
|
$ | 681,759 |
| |
|
|
|
|
|
|
|
|
| |
Schedule Of Non-Cash Investing And Financing Activities: |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| |
Prepaid expenses with common shares |
|
$ | 122,162 |
|
|
$ | - |
| |
|
|
|
|
|
|
|
|
| |
Issuance of common stock, stock warrants and convertible note for asset purchase |
|
$ | 29,222,955 |
|
|
$ | - |
| |
|
|
|
|
|
|
|
|
| |
Accounts payables and accrued expenses converted to capital |
|
$ | 265,677 |
|
|
$ | - |
| |
|
|
|
|
|
|
|
|
| |
Related party payables converted to capital |
|
$ | 579,814 |
|
|
$ | 59,500 |
| |
|
|
|
|
|
|
|
|
| |
Gain on related party payables converted to capital |
|
$ | 272,299 |
|
|
$ | 575,492 |
| |
|
|
|
|
|
|
|
|
| |
Related party debt converted to capital |
|
$ | 2,378,478 |
|
|
$ | - |
| |
|
|
|
|
|
|
|
|
| |
Related party debt converted to capital after exercise of cashless stock warrants |
|
$ | 65,728 |
|
|
$ | - |
| |
|
|
|
|
|
|
|
|
| |
Gain on related party debt converted to capital |
|
$ | 124,291 |
|
|
$ | - |
| |
|
|
|
|
|
|
|
|
| |
Non-related party debt converted to capital |
|
$ | 166,526 |
|
|
$ | - |
| |
|
|
|
|
|
|
|
|
| |
Shares issued for cash received in prior years |
|
$ | 1,000,000 |
|
|
$ | - |
| |
|
|
|
|
|
|
|
|
| |
Shares issued for executive compensation in prior year |
|
$ | 76,480 |
|
|
$ | - |
| |
|
|
|
|
|
|
|
|
| |
Gain on related party conversion of preferred stock into common stock |
|
$ | - |
|
|
$ | 1,329,561 |
| |
|
|
|
|
|
|
|
|
| |
Shares to be issued for accrued dividends |
|
$ | 107,880 |
|
|
$ | - |
| |
|
|
|
|
|
|
|
|
| |
Fair value of embedded conversion feature |
|
$ | - |
|
|
$ | 64,800 |
| |
|
|
|
|
|
|
|
|
| |
Intrinsic value-beneficial conversion feature |
|
$ | 1,407,501 |
|
|
$ | 5,589 |
| |
|
|
|
|
|
|
|
|
| |
Fair value of stock options granted |
|
$ | - |
|
|
$ | 95,567 |
| |
|
|
|
|
|
|
|
|
| |
Fair value of stock warrants granted |
|
$ | - |
|
|
$ | 160,544 |
| |
|
|
|
|
|
|
|
|
| |
Exercise of cashless stock warrants |
|
$ | - |
|
|
$ | 146,774 |
| |
|
|
|
|
|
|
|
|
| |
Supplemental Disclosure: |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| |
Cash paid for interest |
|
$ | 1,979 |
|
|
$ | 3,750 |
| |
|
|
|
|
|
|
|
|
| |
Cash paid for income taxes |
|
$ | - |
|
|
$ | - |
|
The accompanying notes are an integral part of the consolidated financial statements.
F-8 |
Table of Contents |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2020
NOTE 1. ORGANIZATION, OPERATIONS, AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SOBR Safe, Inc. (“SOBR Safe”), formerly TransBiotec, Inc., was incorporated as Imagine Media, Ltd. in August, 2007 in the State of Delaware. A corporation also named TransBiotec, Inc. (“TransBiotec – CA”) was formed in the state of California July 4, 2004. Effective September 19, 2011 SOBR Safe was acquired by TransBiotec - CA in a transaction classified as a reverse acquisition as the shareholders of TransBiotec - CA retained the majority of the outstanding common stock of SOBR Safe after the share exchange. The consolidated financial statements represent the activity of TransBiotec - CA from July 4, 2004 forward, and the consolidated activity of SOBR Safe and TransBiotec - CA from September 19, 2011 forward. SOBR Safe and TransBiotec - CA are hereinafter referred to collectively as the “Company” or “We”. The Company has developed and plans to market and sell a non-invasive alcohol sensing system which includes an ignition interlock. The Company has not generated any revenues from its operations.
On March 23, 2020, the Company filed a Definitive 14-C providing notice that the Board of Directors has recommended, and that holders of a majority of the voting power of the Company’s outstanding stock voted, to approve the following.
|
1. |
To remove and re-elect four (4) directors to serve until the next Annual Meeting of Shareholders and thereafter until their successors are elected and qualified; and |
|
|
|
|
2. |
To approve an amendment to the Company’s Certificate of Incorporation to: (a) change the Company’s name to SOBR SAFE, Inc., (b) decrease the Company’s authorized common stock from 800,000,000 shares, par value $0.00001 to 100,000,000 shares, par value $0.00001, and (c) effect a reverse stock split of the Company’s outstanding common stock at a ratio between 1-for-32 and 1-for-35 (with the exact ratio to be determined by the directors in their sole discretion without further approval by the shareholders). |
The above actions taken by the Company’s stockholders became effective on or about May 21, 2020. The effective dates of the above actions were June 5, 2020 and April 20, 2020, respectively, and the actual reverse stock split ratio was 1-for-33.26. All share and per share amounts have been adjusted in these consolidated financial statements to reflect the effect of the reverse stock split.
Basis of Presentation
The accompanying audited consolidated financial statements 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”) for the presentation of annual financial information.
In management’s opinion, the audited consolidated financial statements reflect all adjustments (including reclassifications and normal recurring adjustments) necessary to present fairly the financial position for the years ended December 31, 2020 and December 31, 2019, and results of operations and cash flows for the years ended December 31, 2020 and December 31, 2019.
Principles of Consolidation
The accompanying audited consolidated financial statements include the accounts of the Company and its majority owned subsidiary, TransBiotec-CA. We have eliminated all intercompany transactions and balances between entities consolidated in these audited financial statements.
F-9 |
Table of Contents |
Use of Estimates
The preparation of audited consolidated financial statements in conformity with generally accepted accounting principles 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 valuation of the derivative liabilities, beneficial conversion feature expenses and intellectual technology. Actual results could differ from those estimates.
Financial Instruments
Pursuant to Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures and ASC 825, Financial Instruments, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 and 825 establishes a 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. ASC 820 and 825 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.
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 payable, accrued expenses, accrued interest payable, related party payables, notes payable, convertible debentures, and other liabilities. Pursuant to ASC 820 and 825, the fair value of our derivative liabilities is determined based on “Level 3” inputs. We believe that the recorded values of all of our other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.
The following table presents assets and liabilities that are measured and recognized at fair value as of December 31, 2020 and December 31, 2019:
December 31, 2020 |
|
|
|
|
|
| ||||||
|
|
|
|
|
|
| ||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
| |||
Derivative liabilities |
|
$ | - |
|
|
$ | - |
|
|
$ | - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
| |||
Derivative liabilities |
|
$ | - |
|
|
$ | - |
|
|
$ | 60,650 |
|
F-10 |
Table of Contents |
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 as of December 31, 2020 and December 31, 2019.
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.
Beneficial Conversion Features
From time to time, the Company may issue convertible notes that may contain a beneficial conversion feature. A beneficial conversion feature exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the remaining unallocated proceeds of the note after first considering the allocation of a portion of the note proceeds to the fair value of the warrants, if related warrants have been granted. The intrinsic value of the beneficial conversion feature is recorded as a debt discount with a corresponding amount to additional paid-in capital. The debt discount is amortized to interest expense over the life of the note using the effective interest method.
Derivative Instruments
The Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instruments are initially recorded at their fair values and are then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations under other income (expense). The accounting treatment of derivative financial instruments requires that the Company record the embedded conversion option at its fair value as of the inception date of the agreement and at fair value as of each subsequent balance sheet date. Any change in fair value is recorded as non-operating, non-cash income or expense for each reporting period at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification. As a result of entering into warrant agreements, for which such instruments contained a variable conversion feature with no floor, the Company has adopted a sequencing policy in accordance with ASC 815-40-35-12 whereby all future instruments may be classified as a derivative liability with the exception of instruments related to share-based compensation issued to employees or directors. For stock-based derivative financial instruments, the Company uses a Monte Carlo Simulation model to value the derivative instruments at inception and on subsequent valuation dates.
The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.
Preferred Stock
We apply the guidance enumerated in ASC 480 “Distinguishing Liabilities from Equity” when determining the classification and measurement of 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 classified our preferred shares in stockholders’ equity.
Minority Interest (Noncontrolling Interest)
A subsidiary of the Company has minority members representing ownership interests of 1.38% at December 31, 2020 and December 31, 2019. The Company accounts for these minority, or noncontrolling interests, pursuant to ASC 810-10-65 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.
F-11 |
Table of Contents |
Stock-based Compensation
The Company follows the guidance of the accounting provisions of ASC 718 “Share-based Compensation”, which requires the use of the fair-value based method to determine compensation for all arrangements under which employees and others receive shares of stock or equity instruments (warrants and options). The fair value of each option award 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 options. 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 as historically the Company had limited activity surrounding its options. 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.
Research and Development
The Company accounts for its research and development costs pursuant to ASC 730, whereby it requires the Company to disclose the amounts of costs for company and customer-sponsored research and development activities, if material. 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 SOBR product. Research and development costs were $633,050 and $12,787 during the years ended December 31, 2020 and December 31, 2019, respectively.
Advertising and Marketing Costs
Advertising and marketing costs are charged to operations as incurred. Advertising and marketing costs were $96,637 and $3,724 during the years ended December 31, 2020 and December 31, 2019, respectively.
Income Tax
The Company accounts for income taxes pursuant to ASC 740. Under ASC 740 deferred taxes are provided on a 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 a deferred tax asset of approximately $2,830,000 and $1,832,000 that is offset by a 100% valuation allowance at December 31, 2020 and December 31, 2019, respectively. Therefore, the Company has not recorded any deferred tax assets or liabilities at December 31, 2020 and December 31, 2019.
Net Loss Per Share
Basic net loss per 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 the 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.
Concentration of Credit Risk
Certain financial instruments potentially subject the Company to concentrations of credit risk. Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash deposits. Cash held in operating accounts may exceed the Federal Deposit Insurance Corporation (“FDIC”), insurance limits. Accounts at each institution are insured by the FDIC up to $250,000. While the Company monitors cash balances in our operating accounts on a regular basis and adjust the balances as appropriate, these balances could be impacted if the underlying financial institutions fail. To date, the Company has experienced no loss or lack of access to our cash; however, the Company can provide no assurances that access to our cash will not be impacted by adverse conditions in the financial markets. At December 31, 2020 and December 31, 2019, the Company had $0 and $431,759 in excess of the FDIC insured limit, respectively.
F-12 |
Table of Contents |
Related Parties
Related parties are any entities or individuals that, through employment, ownership or other means, possess the ability to direct or cause the direction of the management and policies of the Company.
New Pronouncements
In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities. ASU 2019-12 is effective for fiscal years beginning after December 15, 2021. Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The Company is evaluating the effects, if any, of the adoption of ASU 2019-12 guidance on the Company's financial position, results of operations and cash flows.
In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which address issues identified as a result of the complexity associated with applying generally accepted accounting principles for certain financial instruments with characteristics of liabilities and equity. This amendment is effective for public business entities that meet the definition of a SEC filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is evaluating the effects, if any, of the adoption of ASU 2020-06 guidance on the Company's financial position, results of operations and cash flows.
In October 2020, the FASB issued ASU No. 2020-08, Codification Improvements to Subtopic 310-20, Receivables-Nonrefundable Fees and Other Costs, amendments the guidance in ASU No. 2017-08, (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities, which addresses multiple call dates of a callable debt security. This amendment is effective for public business entities, for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Early application is not permitted. The Company is evaluating the effects, if any, of the adoption of ASU 2020-08 guidance on the Company's financial position, results of operations and cash flows.
NOTE 2. GOING CONCERN
The Company has incurred recurring losses from operations and has limited cash liquidity and capital resources. Future capital requirements will depend on many factors, including the Company’s ability to develop products, cash flow from operations, and competing market developments. The Company will need additional capital in the near future. Sources of debt financing may result in high interest expense. Any financing, if available, may be on unfavorable terms. If adequate funds are not obtained, we will be required to reduce or curtail operations.
As of December 31, 2020, the Company has an accumulated deficit of approximately $50,000,000. During the year ended December 31, 2020, the Company also experienced negative cash flows from operating activities of approximately $2,200,000. It appears these principal conditions or events, considered in the aggregate, 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. As such, there is substantial doubt about the entity’s ability to continue as a going concern.
F-13 |
Table of Contents |
The Company has identified factors that mitigate the probable conditions that have raised substantial doubt about the entity’s ability to continue as a going concern. On January 15, 2021, the Company initiated a Private Offering (the “Offering”) of up to 40 Units ($2,000,000) with each Unit consisting of one $50,000 principal amount secured convertible debenture, convertible at $3.00 per share, and a Warrant to purchase 25,000 shares of the Company’s common stock at $3.00 per share. The Secured Debentures carry interest at 12% and mature 24 months after issuance. The Warrants are exercisable six months after issuance and expire 24 months after issuance . The Offering will be made on a continuous basis until March 31, 2021, which may be extended one-time by our Board of Directors until April 30, 2021 (the “Termination Date”), unless earlier terminated or canceled. There will be no closing of the Offering until a minimum of $500,000 is raised. After an initial closing is held, offers to purchase Units will be aggregated for subsequent closings to be held on a monthly basis until the maximum of $2,000,000 has been raised or until the Termination Date, whichever is earlier. The Offering may be canceled by the Company at any time and will in any event be canceled if no closing has occurred before the Termination Date. As of the date of this report the Company has received $1,100,000 of the Offering amount.
We will need additional funds beyond the money raised in this Offering, even if the maximum Offering is met. As a result, we are planning on additional financings in the future.
On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (the “COVID-19 outbreak”) and the risks to the international community as the virus spreads globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally. The full impact of the COVID-19 outbreak continues to evolve as of the date of this report. Management is actively monitoring the global situation on its financial condition, liquidity, operations, suppliers, industry, and workforce. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Company is not able to estimate the effects of the COVID-19 outbreak on its results of operations, financial condition, or liquidity for fiscal year 2021. However, if the pandemic continues, it may have a adverse effect on the Company’s results of future operations, financial position, and liquidity in fiscal year 2021.
Management believes actions presently being taken to obtain additional funding provide the opportunity for the Company to continue as a going concern; however, these plans are contingent upon actions to be performed by the Company and these conditions have not been met on or before December 31, 2020. Additionally, the COVID-19 outbreak could have a continued material adverse impact on economic and market conditions and trigger a period of global economic slowdown, which would impair the Company’s ability to raise needed funds to continue as a going concern. As such, substantial doubt about the entity’s ability to continue as a going concern was not alleviated as of December 31, 2020.
NOTE 3. ASSET PURCHASE
On June 5, 2020, the Company completed a transaction (the “Transaction”) with IDTEC subject to the terms and conditions of the APA and that was accounted for as an asset purchase. Pursuant to the APA, IDTEC provided personnel, experience, and access to funding to assist with the development of the SOBR device, as well as sold to us certain robotics assets, which our management believes are synergistic with our current assets, in exchange for 12,000,000 shares of our common stock after giving effect to the reverse stock split effected in connection with closing the Transaction. The closing of the Transaction was subject to several conditions precedent, primarily: (i) the Company had to be current in reporting requirements under the Securities Exchange Act of 1934, as amended, (ii) had to complete a reverse stock split of common stock such that approximately 8,000,000 shares were outstanding immediately prior to closing the transaction, (iii) could only have outstanding convertible instruments as set forth in the APA, (iv) authorized common stock had to be reduced to 100,000,000 shares, and (v) not have more than approximately $125,000 in current liabilities. Effective with the closing of the Transaction all of the closing conditions had been met, modified or waived by IDTEC, and the Company issued the 12,000,000 shares to IDTEC.
F-14 |
Table of Contents |
In advance of closing the Transaction, IDTEC and a few other affiliated parties voluntarily committed personnel and funds to the Company to assist with (i) general costs related to the Transaction, (ii) ongoing operating expenses and pay for further engineering and development work on the Company’s products and prototypes, (iii) protect, maintain and develop the Company’s products and intellectual property, (iv) hire, pay and retain the proposed management team, third party consultants and advisors for the Company following the consummation of the sale contemplated in the APA and, (v) take such further actions as are necessary to more quickly expand the Company’s business subsequent to the sale of the purchased assets. The parties agreed that the funds advanced directly to the Company’s vendors were voluntary and were not the obligation of the Company and the Company had no obligation to repay these funds in the event the transaction contemplated by the APA did not close. In the event the Transaction did close, then on the closing date, the Company would issue promissory notes for the aggregate amounts incurred, paid or advanced. As a result of closing the Transaction, the Company issued a convertible promissory note for all the funds spent or advanced by IDTEC prior to closing. This note totaled $1,485,189 (the “APA Note”), with simple interest at 10% per annum, due upon demand, and may be convertible into shares of common stock at $0.50 per share (after giving effect to the reverse stock split and subject to anti-dilution protection against any future securities we may issue at an effective price of less than $0.50 per share) at the discretion of the holder. The repayment of APA Note is secured by a first priority security lien or security interest in the patents, trademarks, tradenames, and other intellectual property of the Company.
At closing, some of the closing conditions under the APA were either waived and/or modified by the parties. In order to document those modifications and waivers, we entered into a Waiver Under Asset Purchase Agreement and Post-Closing Covenant Agreement with IDTEC. One of the closing conditions that was the subject of the Waiver Under Asset Purchase Agreement and Post-Closing Covenant Agreement was the requirement that the Company have under $125,000 in permitted liabilities (not including aged liabilities) after closing of the Transaction. At closing we had approximately $158,000 in non-permitted liabilities under the APA. As a result, the Company issued a Warrant to Purchase Common Stock to IDTEC (the “Warrant”), under which IDTEC will purchase up to 320,000 shares of our common stock (post-split) at an exercise price of $0.50 per share, if either (i) we are forced to pay a non-permitted liability, then we may force IDTEC to exercise the Warrant and pay the exercise price to pay the non-permitted liability, but only in an amount sufficient to pay the non-permitted liability, or (ii) if IDTEC otherwise elects to exercise the Warrant and acquire some or all of the shares underlying the Warrant. The Warrant expires five years after the date of issuance.
The Transaction recorded as an asset purchase was valued at $29,222,955, which consists of the market price as of June 5, 2020 of the Company’s 12,000,000 shares of common stock issued totaling $27,120,000, the funds spent by IDTEC and affiliates prior to closing of $1,407,051 and the fair value of the Warrant issued of $695,454. In determining the fair value of the intangible assets, the Company considered, among other factors, the best use of acquired assets such as the analysis of historical financial performance of the products and estimates of future performance of the products and intellectual properties acquired. The allocation to identifiable intangible assets required extensive use of financial information and management's best estimate of fair value.
The following summarizes the transaction closing with IDTEC on June 5, 2020:
Property and equipment |
|
$ | 47,725 |
|
Intangible assets |
|
|
29,175,230 |
|
Total assets |
|
$ | 29,222,955 |
|
|
|
|
|
|
Net purchase (fair value of stock issued, warrants and notes payable) |
|
$ | 29,222,955 |
|
Subsequent to the Transaction closing, the Company evaluated the fair value of the assets acquired based on market estimates for property and equipment and discounted net cash flow for the SOBR Safe intellectual technology. The present value of the discounted cash flow utilized a 75% discount, which included a 25% risk return premium, over an estimated five-year net revenue stream expected to be derived from the technology acquired. Based on the assessment of fair value, the Company recognized an asset impairment loss of $25,320,555 resulting from the APA during the year ended December 31, 2020. The impairment was due to the increase of the Company's stock price value. The stock price of the Company at closing of the Transaction was significantly higher than expected from the stock price of the Company when the Company signed the APA. The number of shares to be given to IDTEC as consideration for the Transaction would not get updated for any stock price changes.
F-15 |
Table of Contents |
NOTE 4. PREPAID EXPENSES
Prepaid expenses consist of the following:
|
|
December 31, 2020 |
|
|
December 31, 2019 |
| ||
Insurance |
|
$ | 3,370 |
|
|
$ | - |
|
Consulting services |
|
|
111,860 |
|
|
|
7,343 |
|
Other prepaid expenses |
|
|
- |
|
|
|
1,711 |
|
|
|
|
|
|
|
|
|
|
Prepaid expenses |
|
$ | 115,230 |
|
|
$ | 9,054 |
|
During 2020, the Company entered into two consulting agreements for marketing services. The Company has to issue a total of 87,500 of its common shares valued at $142,714 under the terms of the agreements. As of December 31, 2020, the share value is included in common stock subscriptions payable as the shares had not been issued. Stock- based compensation expense for the year ended December 31, 2020 includes approximately $33,000 for these service agreements.
NOTE 5. PROPERTY AND EQUIPMENT
Property and equipment, net consists of the following:
|
|
December 31, 2020 |
| |
Robotics and testing equipment |
|
$ | 46,200 |
|
Office furniture and equipment |
|
|
1,525 |
|
|
|
47,725 |
| |
Accumulated depreciation |
|
|
(7,340 | ) |
Net property and equipment disposed |
|
|
(40,385 | ) |
Property and equipment, net |
|
$ | 0 |
|
Depreciation is computed on a straight-line basis over the assets estimated useful lives of three years. Depreciation for the years ended December 31, 2020 and 2019 was $7,340 and none, respectively.
NOTE 6. INTANGIBLE ASSETS
Intangible assets consist of the following at December 31, 2020:
|
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Net Intangible Asset |
|
|
Amortization Period (in years) |
| ||||
SOBR Safe |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Intellectual Technology |
|
$ | 3,854,675 |
|
|
$ | 224,854 |
|
|
$ | 3,629,821 |
|
|
|
10 |
|
Amortization expense for the years ended December 31, 2020 and 2019 was $224,854 and none, respectively.
Estimated future amortization expense for device technology intangible assets is as follows:
2021 |
|
|
2022 |
|
|
2023 |
|
|
2024 |
|
|
2025 |
|
|
Thereafter |
| ||||||
$ |
385,467 |
|
|
$ | 385,467 |
|
|
$ | 385,467 |
|
|
$ | 385,467 |
|
|
$ | 385,467 |
|
|
$ | 1,702,486 |
|
F-16 |
Table of Contents |
NOTE 7. RELATED PARTY TRANSACTIONS
On December 3, 2014, Lanphere Law Group, a related party and shareholder, entered into an agreement with the Company to convert 50% of its outstanding accounts payable of $428,668 to a note payable. This note payable represents one half of the balance in the amount of $214,334 of legal fees and costs owed up until October 31, 2014. This agreement further provided that the remaining 50% of unpaid legal fees in accounts payable were to be paid and retained as a current payable. In addition, 50% of the legal fees and costs incurred beginning with the legal services provided to the Company on November 1, 2014 are to be converted on a monthly basis to common stock at a price of $0.09 per share until the accounts payable balance for legal fees is paid current. The Company has recorded to equity, a total related party gain connected to these conversions during the years ended December 31, 2020 and 2019 of none and $22,585, respectively. The Company converted the remaining payables to common stock through a separate agreement and there are no more payables to convert as of December 31, 2020.
On July 1, 2015, the Company amended the December 3, 2014 note payable agreement with Lanphere Law Group, which forgave $108,000 of the note payable’s principal balance. This debt forgiveness decreased the original principal balance on the note of $214,334 to a new principal balance of $106,335, and a related party gain of $108,000 was recorded to additional paid-in capital. This amendment also extended the note payable’s due date to December 2, 2015. The note was converted to common stock during the year ended December 31, 2020.
On March 8, 2017, Lanphere Law Group irrevocably elected to exercise warrants in order to acquire 969,601 shares of the Company’s common stock in exchange for an aggregate exercise price of $112,871, which was used for the deduction of $74,672 of principal and $38,199 of accrued interest related to the December 3, 2014 note payable agreement with Lanphere Law Group. The forgiveness of the note payable principal of $74,672 was recorded to equity and the $38,199 of related accrued interest was also recorded to equity. The principal balance of the note after the debt deduction was $31,662. On January 3, 2020, the note payable principal balance of $31,662 was converted to 9,520 common shares at a per share price of $3.326. As of December 31, 2020 and December 31, 2019, the principal balance of this note was none and $31,662, respectively. As of December 31, 2020 and December 31, 2019, the accrued interest on this note was none and $9,508, respectively.
Due to cash flow constraints, the Company experienced difficulty in compensating its directors for their service in their capacity as directors; therefore, such directors may receive stock options to purchase common shares as awarded by its Board of Directors or (as to future stock options) a compensation committee which may be established. Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with business related travel and attendance at meetings of its Board of Directors. The Company’s Board of Directors may award special remuneration to any director undertaking any special services on our behalf other than services ordinarily required of a director. On August 23, 2019, the Company entered into a Common Stock Purchase Agreement (the “Bennington SPA”) with Charles Bennington, one of the Company’s then directors, under which the Company agreed to issue 420,926 shares of its common stock in exchange for Mr. Bennington forgiving $595,000 in accrued compensation and services due. The Company also recorded a related party gain on the conversion of executive compensation to common shares of $535,500 that was accounted for as additional paid-in capital. The common shares were issued on or about August 28, 2019 at a per-share purchase price of $1.4135 per share.
On August 23, 2019, the Company entered into a Debt Conversion and Common Stock Purchase Plan (the “Lanphere SPA”) with Michael Lanphere, a beneficial owner of the Company, under which the Company agreed to issue 643,438 shares of its common stock in exchange for a reduction in the amounts owed to Mr. Lanphere under numerous promissory notes. Mr. Lanphere’s option to acquire the shares was under the terms of certain Loan Agreement with Promissory Note and Stock Fees agreements entered into with the Company and Mr. Lanphere. The amount of the debt reduction and, therefore the purchase price of the shares, was $96,303 which was used for the deduction of related party notes payable principal of $77,927 and accrued interest of $18,376. The Company recognized a related party gain of $5,350 and accounted for it as additional paid-in capital. The common shares were issued on or about August 28, 2019 at an effective conversion price of $0.1497 per share. After this exercise, Lanphere Law Group owned warrants to acquire an additional 454,097 shares of our common stock, which were subsequently exercised during 2020.
F-17 |
Table of Contents |
On August 23, 2019, the Company entered into a Debt Conversion and Common Stock Purchase Plan (the “Mishal SPA”) with Devadatt Mishal, one of the Company’s former directors and current shareholder, under which the Company agreed to issue 394,901 shares of its common stock in exchange for a reduction in the amounts owed to Mr. Mishal under numerous promissory notes. Mr. Mishal’s option to acquire the shares was under the terms of certain Loan Agreement with Promissory Note and Stock Fees agreements entered into with the Company and Mr. Mishal. The amount of the debt reduction and, therefore the purchase price of the shares, was $56,478 which was used for the deduction of related party notes payable principal of $45,000 and accrued interest of $11,478. The Company recognized a related party gain of $657 and accounted for it as additional paid-in capital. The common shares were issued on or about August 28, 2019 at an effective conversion price of $0.1430 per share. After this exercise, Devadatt Mishal owns no warrants to acquire additional shares of our common stock.
On August 23, 2019, the Company entered, into a Share Exchange Agreement (the “Lanphere SEA”) with Michael Lanphere, a beneficial owner of the Company under which the Company agreed to issue 156,537 shares of its common stock in exchange for 520,643 shares of the Company’s Series A Convertible Preferred Stock owned by Mr. Lanphere. The Series A Convertible Preferred Stock were exchanged for the Company’s common shares at a price of $3.326 per share. The fair value of the common shares was $22,127. Per ASC 470-50-40-2, debt modification and extinguishment transactions between related parties are in essence a capital contribution from a related party. As a result, rather than recording a gain on extinguishment of debt, the Company recorded $498,516 to additional paid-in capital.
On August 23, 2019, the Company entered into a Share Exchange Agreement (the “Justus SEA”) with Vernon Justus, a shareholder, under which the Company agreed to issue 260,954 shares of its common stock in exchange for 867,932 shares of the Company’s Series A Convertible Preferred Stock owned by Mr. Justus. The Series A Convertible Preferred Stock were exchanged for the Company’s common shares at a price of $3.326 per share. The fair value of the common shares was $36,887. Per ASC 470-50-40-2, debt modification and extinguishment transactions between related parties are in essence a capital contribution from a related party. As a result, rather than recording a gain on extinguishment of debt, the Company recorded $831,045 to additional paid-in capital.
The Company entered into a lease agreement with Lanphere Law Group, a related party and shareholder, whereas the Company was the tenant and paying monthly rent of $4,100. The term of this operating lease ran from July 1, 2015 to June 30, 2019. From July 1, 2019 through December 31, 2019, the Company leased the same office space on a month to month basis. Rent expense, including CAM charges, for the years ended December 31, 2020 and 2019 of none and $39,315, respectively, was accounted for as general and administrative expense.
On October 25, 2019, the Company granted Charles Bennington, one of the Company’s directors, an option to acquire 24,053 shares of the Company’s common stock under the Company’s 2019 Equity Incentive Plan. The stock option has an exercise price of $0.2635, which is equal to 110% of the fair market value of our common stock on October 25, 2019, with option vesting quarterly over a one-year period commencing January 1, 2020. The stock option has a five-year term. The issuance of the stock option was exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, due to the fact Mr. Bennington is one of the Company’s directors, is a sophisticated investor and familiar with our operations. None of Mr. Bennington’s common stock options vested, and therefore none were expensed during the year ended December 31, 2019. For the year ended December 31, 2020, stock option expense for the options vested was $4,592. No vested options were exercised as of December 31, 2020.
On October 25, 2019, the Company granted Nick Noceti, the Company’s former Chief Financial Officer, an option to acquire 24,053 shares of our common stock under our 2019 Equity Incentive Plan. The stock option has an exercise price of $0.2635, which is equal to 110% of the fair market value of our common stock on October 25, 2019, with option vesting quarterly over a two-year period commencing January 1, 2020. The stock option has a five-year term. The issuance of the stock option was exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, due to the fact Mr. Noceti was at that time the Company’s Chief Financial Officer, is a sophisticated investor and familiar with our operations. None of Mr. Noceti’s common stock options vested, and therefore none were expensed during the year ended December 31, 2019. For the year ended December 31, 2020, stock option expense for the options vested was $2,271. No vested options were exercised as of December 31, 2020.
F-18 |
Table of Contents |
On October 25, 2019, the Company granted Gary Graham, one of the Company’s former directors and current beneficial owner of the Company, an option to acquire 24,053 shares of our common stock under our 2019 Equity Incentive Plan. The stock option has an exercise price of $0.2635, which is equal to 110% of the fair market value of our common stock on October 25, 2019, with option vesting quarterly over a one-year period commencing January 1, 2020. The stock option has a five-year term. The issuance of the stock option was exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, due to the fact Mr. Graham had been consulting with the Company for more than one year at the time of grant, is a sophisticated investor and familiar with our operations. None of Mr. Graham’s common stock options vested, and therefore none were expensed during the year ended December 31, 2019. For the year ended December 31, 2020, stock option expense for the options vested was $4,592. No vested options were exercised as of December 31, 2020.
On October 25, 2019, the Company entered into an Employment Agreement with Mr. Kevin Moore to serve as the Company’s Chief Executive Officer (the “Moore Agreement”). Under the terms of the Moore Agreement, Mr. Moore will perform services for the Company that are customary and usual for a chief executive officer of a company, in exchange for: (i) 24,053 shares of our common stock per month until the IDTEC Transaction closes, (ii) thereafter, an annual base salary of $213,000, (iii) sales bonuses based on the Company’s sales, and (iv) incentive stock options under the Company’s 2019 Equity Compensation Plan to acquire 1,058,329 shares of our common stock, at an exercise price of $0.2635, which is equal to 110% of the fair market value of our common stock on October 25, 2019, with the stock options to vest in 36 equal monthly installments of 29,398 shares during the three-year term of the Moore Agreement. The stock options have a ten-year term. 58,796 of these common stock option shares, valued at $14,080, were vested and expensed at December 31, 2019. No shares have been issued to Mr. Moore as of December 31, 2019. For the year ended December 31, 2020, stock option expense for the 352,776 options vested was $79,557. No vested options were exercised as of December 31, 2020.
On October 25, 2019, the Company entered into an Employment Agreement with Mr. David Gandini to serve as the Company’s Chief Revenue Officer (the “Gandini Agreement”). Under the terms of the Gandini Agreement, Mr. Gandini will perform services for the Company that are customary and usual for a chief revenue officer of a company, in exchange for: (i) an annual base salary of $185,000, (ii) sales bonuses based on the Company’s sales, (iii) incentive stock options under our 2019 Equity Compensation Plan to acquire 721,588 shares of our common stock, at an exercise price of $0.2635, which is equal to 110% of the fair market value of our common stock on October 25, 2019, with the stock options to vest in 36 equal monthly installments of 20,044 shares during the three-year term of the Gandini Agreement, and (iv) an aggregate of 240,530 additional option shares (the “Pre-Vesting Option Shares”) to vest as follows: (i) 200,439 Pre-Vesting Option Shares representing the monthly vesting option shares for the ten months ended October 31, 2019 to vest on November 1, 2019; and (ii) the remaining 40,091 Pre-Vesting Option Shares representing the monthly vesting option shares for the two months ended December 31, 2019 shall vest on January 1, 2020. The stock options have a ten-year term. The Company will be issuing Mr. Gandini a stock option agreement for the options he was issued under the Gandini Agreement. 240,530 of these common stock option shares, valued at $57,574, were vested and expensed at December 31, 2019. No shares have been issued to Mr. Gandini as of December 31, 2019. For the year ended December 31, 2020, stock option expense for the 240,530 options vested was $54,720. No vested options were exercised as of December 31, 2020.
On January 3, 2020, the Company entered into a Debt Conversion and Common Stock Purchase Plan with Michael Lanphere, a beneficial owner of the Company, under which he agreed to exercise warrants and the Company agreed to issue 454,097 shares of its common stock in exchange for a reduction in the amounts owed to Mr. Lanphere under two promissory notes. Mr. Lanphere’s option to acquire the shares was under the terms of certain Loan Agreement with Promissory Note and Stock Fees agreements entered into with the Company and Mr. Lanphere on April 17, 2019 and July 17, 2019. The amount of the debt reduction, and therefore the purchase price of the shares, was approximately $66,000 which was used for the deduction of related party notes payable principal of approximately $66,000. 180,397 common shares were issued on January 3, 2020 at an effective conversion price of $0.133 and 273,700 common shares were issued on January 3, 2020 at an effective conversion price of $0.153. After this exercise, Lanphere Law Group owns no warrants for shares of our common stock.
On January 3, 2020, the Company entered into another Debt Conversion and Common Stock Purchase Plan with Michael Lanphere, under which the Company agreed to issue 63,225 shares of its common stock in exchange for a reduction in the amounts owed to Mr. Lanphere under numerous other remaining promissory notes. The amount of the debt reduction, and therefore the purchase price of the shares, was $210,285 which was used for the deduction of related party notes payable principal of $169,606 and accrued interest of $40,679. Based on the fair value of the shares issued, the Company recognized a related party gain of approximately $52,000 and accounted for it as additional paid-in capital. The common shares were issued on January 3, 2020 at an effective conversion price of $3.326 per share.
F-19 |
Table of Contents |
On January 3, 2020, the Company entered into a Debt Conversion and Common Stock Purchase Plan with Vernon Justus, a shareholder, under which the Company agreed to issue 84,963 shares of its common stock in exchange for a reduction in the amounts owed to Mr. Justus under a promissory note. The amount of the debt reduction, and therefore the purchase price of the shares, was $282,588 which was used for the deduction of a related party note payable principal of $180,001 and accrued interest of $102,587. Based on the fair value of the shares issued, the Company recognized a related party gain of approximately $70,000 and accounted for it as additional paid-in capital. The common shares were issued on January 3, 2020 at an effective conversion price of $3.326 per share.
On January 16, 2020, the Company entered into a Accounts Payable Conversion and Common Stock Purchase Plan with Michael Lanphere, under which the Company agreed to issue 214,883 shares of its common stock in exchange for a reduction in the amounts owed to Mr. Lanphere for unpaid legal bills. The amount of the debt reduction, and therefore the purchase price of the shares, was $714,700 which was used for the deduction of related party payables of $714,700. Based on the fair value of the shares issued, the Company recognized a related party gain of approximately $222,000 and accounted for it as additional paid-in capital. The common shares were issued on January 16, 2020 at an effective conversion price of $3.326 per share.
On January 30, 2020, the Company entered into a Debt Conversion and Common Stock Purchase Plan with Devadatt Mishal, one of the Company’s former directors and current shareholder, under which the Company agreed to issue 499,965 shares of its common stock in exchange for a reduction in the amounts owed to Mr. Mishal under numerous promissory notes. The amount of the debt reduction, and therefore the purchase price of the shares, was $456,641 which was used for the deduction of related party notes payable principal of $270,300 and accrued interest of $186,341. The Company also recorded a loss on related party debt extinguishment of approximately $144,000. The common shares were issued on January 30, 2020 at an effective conversion price of $0.91465 per share.
On March 23, 2020, the Company entered into a Debt Conversion and Common Stock Purchase Plan with Prakash Gadgil, one of the Company’s former directors and current shareholder, under which the Company agreed to issue 586 shares of its common stock in exchange for a reduction in the amounts owed to Mr. Gadgil under a promissory note. The amount of the debt reduction, and therefore the purchase price of the shares, was $1,950 which was used for the deduction of a related party note payable principal of $1,950. Based on the fair value of the shares issued, the Company recognized a related party gain of approximately $1,000 and accounted for it as additional paid-in capital. The common shares were issued on March 23, 2020 at an effective conversion price of $3.326 per share.
On April 6, 2020, the Company agreed with Nick Noceti, the Company’s former Chief Financial Officer, to issue 38,437 shares of its common stock in exchange for amounts due for accounting fees. The amount of the debt reduction, and therefore the purchase price of the shares, was $127,840 which was used for the deduction of a related party accounts payable of $127,480. Based on the fair value of the shares issued, the Company recognized a related party gain of approximately $49,000 and accounted for it as additional paid-in capital. The common shares were issued on April 4, 2020 at an effective conversion price of $3.326 per share.
On April 7, 2020, the Company agreed with Charles Bennington, one of the Company’s directors, to issue 6,831 shares of its common stock in exchange for amounts due for Board of Director fees. The amount of the debt reduction, and therefore the purchase price of the shares, was $9,656 which was used for the deduction of a related party accounts payable of $9,656. Based on the fair value of the shares issued, the Company recognized a related party gain of approximately $2,000 and accounted for it as additional paid-in capital. The common shares were issued on April 7, 2020 at an effective conversion price of $1.41 per share.
F-20 |
Table of Contents |
NOTE 8. NOTES PAYABLE
RELATED PARTIES
Related party notes payable consist of the following:
|
|
December 31, 2020 |
|
|
December31, 2019 |
| ||
|
|
|
|
|
|
| ||
Convertible Notes Payable |
|
$ | - |
|
|
$ | 161,000 |
|
Conventional Non-Convertible Notes Payable |
|
|
11,810 |
|
|
|
328,423 |
|
Notes Payable with Detached Free-standing Warrants |
|
|
- |
|
|
|
280,119 |
|
Unamortized Discount |
|
|
- |
|
|
|
(8,656 | ) |
Net Related Party Notes Payable |
|
$ | 11,810 |
|
|
$ | 760,886 |
|
Total interest expense for related party notes was $98,313 and $91,845 for the years ended December 31, 2020 and 2019, respectively.
Related Party Convertible Notes Payable
The Company has none and seven convertible notes payable to related parties that have a principal balance of none and $161,000 as of December 31, 2020 and December 31, 2019, respectively. These notes carried interest rates ranging from 7% to 10%. These notes carried fixed and variable conversion prices per share. The Company evaluated these convertible notes payable for embedded and beneficial conversion features. The Company determined that there were both derivative embedded conversion features and beneficial conversion features to record. The conversion features were either fully amortized upon grant or over the life of the convertible notes payable. The Company evaluated these convertible notes and determined that its embedded conversion feature carried a debt discount that should be fully amortized upon grant. The Company fully amortized this debt discount and recorded it as amortization of debt discount – interest expense in the amount of $64,800 for the year end December 31, 2019.
During 2020, the Company entered into a Debt Conversion and Common Stock Purchase Plan with a related party, under which the Company agreed to issue approximately 157,000 shares of its common stock in exchange for a reduction of four convertible notes payable to related parties. The amount of the debt reduction, and therefore the purchase price of the shares, was $143,119 which was used for the deduction of related party convertible notes payable principal of $91,000 and accrued interest of $52,119.
On June 5, 2020 the Company issued the convertible APA Note to a related party with a principal balance of $1,485,189, which included the $70,000 balance of three convertible notes payable to related parties and related accrued interest of $7,689 outstanding at December 31, 2019. The note includes simple interest at 10% per annum, due upon demand, and may be convertible into shares of common stock at $0.50 per share (after giving effect to the reverse stock split and subject to anti-dilution protection against any future securities we may issue at an effective price of less than $0.50 per share) at the discretion of the holder. The Company evaluated the convertible note payable for derivative embedded and beneficial conversion features. The Company determined that there was a beneficial conversion feature to record. During the year ended December 31, 2020, beneficial conversion feature amortization expense related to this related party convertible note payable of $1,407,675 was accounted for as amortization of interest - beneficial conversion feature expense in the consolidated statements of operations. On November 15, 2020, the related party holder elected to convert the note principal and accrued interest balance of $1,551,514 into 3,103,028 of shares of common stock.
F-21 |
Table of Contents |
Related Party Non-convertible Notes Payable
The Company has one and nine non-convertible notes payable to related parties that have a principal balance of $11,810 and $328,423 as of December 31, 2020 and December 31, 2019, respectively. These notes carry interest rates ranging from 0% to 10%. The outstanding note payable as of December 31, 2020 had a due date of December 31, 2012 and is currently in default.
During 2020, the Company entered into Debt Conversion and Common Stock Purchase Plans with four related parties, under which the Company agreed to issue approximately 343,000 shares of its common stock in exchange for a reduction of eight non-convertible notes payable to related parties. The amount of the debt reduction, and therefore the purchase price of the shares, was $549,311 which was used for the reduction of related party non-convertible notes payable principal of $316,613 and accrued interest of $232,698.
Related Party Notes Payable with Warrants
The Company has none and twenty-four notes payable with detached free-standing warrants to related parties that have a principal balance of none and $280,119 as of December 31, 2020 and December 31, 2019, respectively. These notes carried interest rates ranging from 7% to 10%. The exercise price for each note payable with detached free-standing warrant ranged from $0.1330 - $0.1530. As of December 31, 2019, these notes carried outstanding detached free-standing warrants of 454,097. The unamortized discount related to these stock warrants at December 31, 2020 and December 31, 2019 is none and $8,656, respectively. During the years ended December 31, 2020 and 2019, stock warrants amortization expense recorded as interest expense related to these stock warrants was $8,656 and $37,072, respectively. The relative fair market value of the related stock warrants granted during the years ended December 31, 2020 and 2019 was none and $38,998, respectively.
During 2020, the Company entered into Debt Conversion and Common Stock Purchase Plans with two related parties, under which the Company agreed to issue approximately 602,000 shares of its common stock in exchange for a reduction of 24 notes payable with detached free-standing warrants to related parties. The amount of the debt reduction, and therefore the purchase price of the shares, was $320,858 which was used for the deduction of related party notes payable with detached free-standing warrants principal of $280,119 and accrued interest of $40,739.
NON- RELATED PARTIES
Non- related party notes payable consist of the following:
|
|
December 31, 2020 |
|
|
December 31, 2019 |
| ||
Convertible Notes Payable |
|
$ | 56,683 |
|
|
$ | 143,136 |
|
Conventional Non-Convertible Notes Payable |
|
|
42,500 |
|
|
|
21,438 |
|
Notes Payable with Detached Free-standing Warrants |
|
|
5,000 |
|
|
|
5,000 |
|
Non-Related Party Notes Payable |
|
|
104,183 |
|
|
|
167,574 |
|
Current Portion |
|
|
79,183 |
|
|
|
- |
|
Net Long Term Portion |
|
$ | 25,000 |
|
|
$ | 169,574 |
|
Total interest expense for non-related party notes was $17,415 and $56,546 for the years ended December 31, 2020 and 2019, respectively.
F-22 |
Table of Contents |
Convertible Notes Payable
The Company has three and fifteen convertible notes payable to non-related parties that have a principal balance of $56,683 and $143,136 as of December 31, 2020 and December 31, 2019, respectively. These notes carry interest rates ranging from 5% - 30% and have due dates ranging from 2/08/2012 – 3/06/2022. Two of the three notes as of December 31, 2020 are in default. These notes carry conversion prices ranging from $0.0565- $10.7619 per share. The Company evaluated these convertible notes payable for derivative embedded and beneficial conversion features. The Company determined that there were beneficial conversion features to record. The conversion features were either fully amortized upon grant or over the life of the convertible notes payable. The conversion features were fully amortized as of December 31, 2020 and 2019. During the years ended December 31, 2020 and 2019, beneficial conversion feature amortization expense related to these convertible notes payable of none and $5,920, respectively, was accounted for as amortization of interest - beneficial conversion feature expense in the consolidated statements of operations.
During 2020, the Company entered into Debt Conversion and Common Stock Purchase Plans with six non-related parties, under which the Company agreed to issue 50,135 shares of its common stock in exchange for a reduction of eleven convertible notes payable to non-related parties. The amount of the debt reduction, and therefore the purchase price of the shares, was $166,750 which was used for the deduction of non-related party convertible notes payable principal of $83,953 and accrued interest of $82,797. The Company recorded a non-related party gain on loan extinguishment of approximately $103,000.
During 2020, the Company also entered into a non-related party convertible note payable agreement to convert a high interest rate convertible non-related party note payable with a principal balance of $25,000 and accrued interest due of $22,500 to a non-related party convertible note payable of $47,500 that accrues interest at 5%. The note conversion rate is $2 per common share. The Company recorded a loss on non-related party debt extinguishment of $11,697.
During 2020, the holder of a $25,000 convertible promissory note with interest at 30% and accrued interest of $61,875 replaced the carrying amount of the note and its conversion features with a new non-convertible note totaling $25,000 that bears interest at 5%. The Company recorded a gain on non-related party debt extinguishment of $61,875.
Non-convertible Notes Payable
The Company has three non-convertible notes payable to non-related parties that have a principal balance of $42,500 and $21,438 as of December 31, 2020 and December 31, 2019, respectively. These notes carry interest rates ranging from 5% - 18% and have due dates ranging from 1/31/2013 - 6/09/2022. Two of the three notes as of December 31, 2020 are in default.
During 2020, the Company entered into a Debt Conversion and Common Stock Purchase Plan with a non-related party, under which the Company agreed to issue 20,313 shares of its common stock in exchange for a reduction of a non-convertible non-related party note payable. The amount of the debt reduction, and therefore the purchase price of the shares, was $67,561 which was used for the deduction of non-related party non-convertible notes payable principal of $3,938 and accrued interest of $63,623. The Company recorded a non-related party gain on loan extinguishment of approximately $14,000.
On May 12, 2020, the Company received proceeds of $41,665 from a commercial bank under the SBA Payroll Protection Loan Program. The loan requires interest at 1% and 18 monthly payments of principal and interest beginning December 5, 2020. Provisions of the SBA Payroll Protection Loan Program allow for portions or all the loan balance to be forgiven should certain criteria be met. On December 7, 2020 the Company was notified that the principal balance and accrued interest of $242 was forgiven, and thus the Company recorded a gain on loan extinguishment of approximately $42,000.
Notes Payable with Warrants
The Company has one note payable with detached free-standing warrants to a non-related party that has a principal balance of $5,000 and $5,000 as of December 31, 2020 and December 31, 2019, respectively. This note carries an interest rate of 10% and had a due date of 9/11/2014. This note is currently in default The detached free-standing warrants for this note payable were not exercised by the note holder and expired on May 16, 2019. There was no unamortized discount related to these stock warrants as of December 31, 2020 and December 31, 2019, and no stock warrant amortization expense was recorded to interest expense during the years ended December 31, 2020 and 2019.
F-23 |
Table of Contents |
NOTE 9. DERIVATIVE LIABILITY
In 2019, the Company borrowed $ 70,000 under convertible promissory notes agreement from an unrelated party that are due upon demand. The notes bear interest at a rate of 10% per annum and are convertible into the Company’s common shares at a variable conversion price based on a 50% discount of the market price at an undetermined future date. The Company analyzed the conversion features of the note agreement for derivative accounting consideration under ASU 2017-11 (ASC 815-15, Derivatives and Hedging), and determined the embedded conversion features should be classified as a derivative because the exercise price of the convertible note is subject to a variable conversion rate and should therefore be accounted for at fair value under ASC 820, Fair Value Measurements and Disclosures, and ASC 825, Financial Instruments. In accordance with ASC 815-15, the Company has bifurcated the conversion feature of the note and recorded a derivative liability.
The embedded derivative for the notes were carried on the Company’s balance sheet at fair value. The derivative liability was marked to market each measurement period and any unrealized change in fair value is recorded as a component of the statement of operations and the associated fair value carrying amount on the balance sheet was adjusted by the change. The Company fair valued the embedded derivatives using a Monte Carlo simulation model based on the following assumptions: (1) expected volatility of 180%, (2) risk-free interest rate of 0.13%, and (3) expected life from 1 month to 1 year. On March 1, 2019, the date of the first note, the fair value of the embedded derivative was $28,000. On May 3, 2019, the date of the second note, the fair value of the embedded derivative was $28,100. On October 26, 2019, the date of the third note, the fair value of the embedded derivative was $8,700. The notes carried an embedded conversion feature of $64,800 that was fully amortized to interest expense during the year ended December 31, 2019. The notes were not converted and deemed paid in full at the closing of the Transaction on June 5, 2020. The principal amounts of these notes were settled and transferred to the APA Note and a loss on debt extinguishment of $273,462 was recognized during the year ended December 31, 2020. The fair value of the embedded derivative recorded on the balance sheet as a liability was none and $60,650 at December 31, 2020 and December 31, 2019, respectively. Utilizing level 3 inputs, the Company recorded a fair market value gain of $60,650 and $4,150 for the years ended December 31, 2020 and 2019, respectively.
A summary of the activity of the derivative liability is shown below:
Balance at December 31, 2019 |
|
$ | 60,650 |
|
Fair market value adjustments (including settlements) |
|
|
(60,650 | ) |
Balance at December 31, 2020 |
|
$ | 0 |
|
NOTE 10. COMMON STOCK
The Company’s common stock transactions for the year ended December 31, 2019 consists of the following:
1,065,982 shares were issued to non-related parties for $39,000 in cash.
420,926 shares were issued for the conversion of $595,500 of accrued executive compensation owed to a related party at $0.0143 per share. A related party gain of $535,500 was recorded as additional paid-in capital.
1,038,339 shares were issued for the conversion of $152,781 of related party debt from $0.1430 to $0.1497 per share. 1,038,339 stock warrants were settled along with the related party debt.
F-24 |
Table of Contents |
417,491 shares were issued to related parties in exchange for 1,388,575 shares of the Company’s Series A Convertible Preferred Stock at $3.326 per share. A related party gain of $1,329,561 was recorded as additional paid-in capital.
The Company’s common stock transactions for the year ended December 31, 2020 consists of the following:
1,025 shares were issued at $20.29 per share to a non-related party as compensation for services provided.
72,159 shares were issued for services provided under an Employment Agreement with Kevin Moore dated October 25, 2019.
454,097 shares were issued for the conversion of $65,728 of related parties’ debt from $0.1530 to $0.13304 per share pursuant to terms of the convertible promissory notes. 454,097 stock warrants were settled along with the related party debt.
12,000,000 shares were issued to complete the Transaction with IDTEC that was accounted for as an asset purchase. The shares were issued at a value of $27,120,000.
159,395 shares were issued to non-related parties for the conversion of approximately $266,000 of accounts payable and accrued expenses from $0.5821 to $3.326 per share. The Company recorded a net gain of approximately $62,000 resulting from the stock issuance.
260,150 shares were issued to related parties for the conversion of $852,196 of related party payables from $1.115 to $3.326 per share. A related party gain of $272,299 was recorded as additional paid-in capital.
648,739 shares were issued to related parties for the conversion of $622,004 of debt from $0.9146 to $3.326 per share. The Company recorded $143,660 of loss on debt extinguishment and a related party gain of $124,291 was recorded as additional paid in-capital as a result of the stock issuance.
70,448 shares were issued to non-related parties for the conversion of $65,391 of debt at $3.326 per share. The Company recorded $41,665 of loss resulting from the stock issuance.
3,103,028 shares were issued to a related party for the conversion of $1,551,514 of debt under the terms of a convertible promissory note. The note converted at $0.50 per share.
2,700,000 shares were issued to a related party under the terms governing the shares of Series A-1 Convertible Preferred Stock. In addition, as a result of the conversion of the Series A-1 Convertible Preferred Stock we owed accrued dividends totaling $107,880, which we could pay in cash or in shares of our common stock based on the price of common stock on the applicable dividend dates. Our management and Board of Directors elected to pay the accrued dividends in shares of common stock. Based on the price of the common stock on the applicable dividend dates, we owed 43,169 shares of common stock in full satisfaction of the accrued dividends. As of December 31, 2020, 43,169 shares were recorded in common stock subscriptions payable and were issued on January 6, 2021.
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 Corporation’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 $1.67. 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.
F-25 |
Table of Contents |
On August 8, 2019, the Company entered into an 8% Series A-1 Convertible Preferred Stock Investment Agreement (the “Investment Agreement”) with First Capital Ventures, LLC (“FCV”), an entity controlled by a beneficial owner of the Company, and its assignee. The Company desired to raise between $1,000,000 and $2,000,000 from the sale of its 8% Series A-1 Convertible Preferred Stock and FCV intends to raise between $1,000,000 and $2,000,000 (net after offering expenses) in a special purchase vehicle (“SPV”) created by FCV to purchase the 8% Series A-1 Convertible Preferred Stock. The Company granted FCV and its assigns, the exclusive right to purchase the 8% Series A-1 Convertible Preferred Stock. The Company also agreed to cancel all shares of its previously issued and outstanding Series A Convertible Preferred Stock immediately following the closing date. The Company further agreed to issue FCV a three-year stock warrant to purchase 144,317 shares of its common stock at an exercise price of $1.039375 per share immediately following the closing date, which was valued at $122,889 and expensed upon grant for services provided. The Company agreed to enter into a “business development” agreement with FCV, or its assignee, on the sale of the first $1,000,000 of 8% Series A-1 Convertible Preferred Stock and also granted FCV and its assigns, the right to use the name “SOBR SAFE” and any related intellectual property in connection with the SPV, and the offering of the Interests in the SPV.
In accordance with the August 8, 2019 Investment Agreement with FCV, 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 $1 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.
On August 23, 2019, the Company entered into a Share Exchange Agreement (the “Lanphere” SEA) with Michael Lanphere, a beneficial owner of the Company, under which the Company agreed to issue 156,537 shares of its common stock in exchange for 520,643 shares of the Company’s Series A Convertible Preferred Stock owned by Mr. Lanphere. The Series A Convertible Preferred Stock were exchanged for the Company’s common shares at a price of $3.326 per share and were issued on or about August 28, 2019. The fair value of the common shares was $22,127. Per ASC 470-50-40-2, debt modification and extinguishment transactions between related parties are in essence a capital contribution from a related party. As a result, rather than recording a gain on extinguishment of debt, the Company recorded $498,516 to additional paid-in capital.
On August 23, 2019, the Company entered into a Share Exchange Agreement (the “Justus” SEA) with Vernon Justus, a shareholder, under which the Company agreed to issue 260,954 shares of its common stock in exchange for 867,932 shares of the Company’s Series A Convertible Preferred Stock owned by Mr. Justus. The Series A Convertible Preferred Stock were exchanged for the Company’s common shares at a price of $3.326 per share and were issued on or about August 28, 2019. The fair value of the common shares was $36,887. Per ASC 470-50-40-2, debt modification and extinguishment transactions between related parties are in essence a capital contribution from a related party. As a result, rather than recording a gain on extinguishment of debt, the Company recorded $831,045 to additional paid-in capital.
F-26 |
Table of Contents |
On December 12, 2019, the Company entered into a Series A-1 Preferred Stock Purchase Agreement (the “SPA”) with SOBR SAFE, LLC (“SOBR SAFE”), a Delaware limited liability company and an entity controlled by a beneficial owner of the Company, under which SOBR SAFE agreed to acquire 1,000,000 shares of our Series A-1 Convertible Preferred Stock in exchange for $1,000,000 (the “Purchase Price”). The Company received the Purchase Price on December 12, 2019.
On May 7, 2020, the Company amended a Convertible Preferred Stock Investment Agreement granting the exclusive right to SOBR SAFE to purchase up to 2,700,000 shares.
On July 2, 2020, the Company executed Amendment No. 2 to the Stock Investment Agreement which provides that the full amount of each dividend due on a dividend payment date, even if not declared, shall be paid to any holder regardless of the date on which the holder acquired the stock.
On December 7, 2020, we sent a Notice of Automatic Conversion and Calculation of Dividend Shares to SOBR SAFE notifying them that under the terms governing the shares of Series A-1 Convertible Preferred Stock the 2,700,000 shares of Series A-1 Convertible Preferred Stock owned by SOBR SAFE automatically converted into 2,700,000 shares of our common stock. In addition, as a result of the conversion of the Series A-1 Convertible Preferred Stock we owed SOBR SAFE accrued dividends totaling $107,880, which we could pay in cash or in shares of our common stock based on the price of common stock on the applicable dividend dates. Our management and Board of Directors elected to pay SOBR SAFE the accrued dividends in shares of our common stock.
NOTE 12. STOCK SUBSCRIPTIONS PAYABLE
The Company has stock subscriptions payable of $253,688 payable with 147,587 of its common shares of which $111,024 is payable to related parties with 60,087 of its common shares as of December 31, 2020 and $79,624 payable to related parties with 60,087 of its common stock at December 31, 2019. The Company recorded a related party gain of none and $39,992 related to the outstanding stock subscriptions payable during the years ended December 31, 2020 and 2019, respectively.
The Company had no preferred stock subscriptions payable as of December 31, 2020. The Company has preferred stock subscriptions payable due to a related party of $1,000,000 convertible into 1,000,000 of its 8% Series A-1 Convertible Preferred shares as of December 31, 2019.
NOTE 13. STOCK WARRANTS AND STOCK OPTIONS
Stock Warrants
The Company accounts for employee stock options and non-employee stock warrants under ASC 718 and ASC 505, whereby option 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 model. Unless otherwise provided for, the Company covers option exercises by issuing new shares.
F-27 |
Table of Contents |
Beginning on December 12, 2012, Michael A. Lanphere, a related party and non-employee, loaned the Company money for a variety of purposes, some for working capital and some to allow the Company to pay outstanding obligations. Each of these loans were made pursuant to the terms of a Loan Agreement with Promissory Note and Stock Fee (the “Agreements”). Under the terms of the Agreements, Mr. Lanphere was not only entitled to repayment of the principal amount loaned to us, with interest, but also what was termed in the Agreements as a “Stock Fee” that the parties are interpreting as a stock warrant, which permits Mr. Lanphere to acquire shares of our common stock in exchange for an exercise price that was estimated based on the date of the loan agreement. The number of shares to be issued to Mr. Lanphere as a Stock Fee under each Agreement was an estimate and varied based on the loan amount and the price of our common stock on the day of the loan and was calculated by this formula: 60% or 80% of the loan amount divided by the Company’s stock price on the day of the loan, but at a price per share no higher than ($0.025). Each Stock Fee is fully vested immediately and expires 5 years from the date of the loan. Although the Stock Fee could be taken by Mr. Lanphere as a stock grant or a stock warrant, due to the fully vested nature of the Stock Fee, Mr. Lanphere is deemed to beneficially own those shares on the date of each Agreement. After the Company entered into a Debt Conversion and Common Stock Purchase Plan with Mr. Lanphere dated January 3, 2020, Mr. Lanphere agreed to exercise his stock warrants and the Company agreed to convert and issue 454,097 shares of its common stock to reduce a notes payable principal balance consisting of two notes in the amount of $65,875. The Company did not record a loss on debt extinguishment for this conversion pursuant to ASC 470-20-40-4 that states that upon conversion in accordance with its original terms, the carrying amount of the convertible debt without a beneficial conversion feature, including any unamortized premium or discount, is credited to the capital accounts and no gain or loss should be recognized. Mr. Lanphere owns no more warrants to shares of our common stock. The number of warrants outstanding to Mr. Lanphere at December 31, 2020 and December 31, 2019 were none and 454,097, respectively.
On August 8, 2019, the Company entered into an 8% Series A-1 Convertible Preferred Stock Investment agreement with First Capital Ventures, LLC (“FCV”), an entity controlled by a beneficial owner of the Company. FCV set up a special purpose vehicle (“SPV”) or SOBR SAFE, LLC, an entity controlled by a beneficial owner of the Company, that purchased 1,000,000 of the 8% Series A-1 Convertible Preferred Shares at $1.00 per share on December 12, 2019. Upon purchase, the Company issued the SPV through FCV a three-year warrant to purchase 144,317 shares of the Company’s common stock at an exercise price of $1.039375 per share. The number of warrants outstanding to the SPV through FCV at December 31, 2020 and December 31, 2019 are 144,317 and 144,317, respectively.
On May 4,2020, the Company entered into an agreement with a vendor to provide investor relations services. Under the terms of the agreement, we issued warrants to purchase up to 120,000 shares of our common stock at an exercise price of $2.00 per share. The warrants expire five years after the date of issuance. Approximately $220,000 of expense was recognized for the warrants issued for the services provide by the vendor.
On June 5, 2020, upon closing of the Transaction, the Company entered into a Waiver Under Asset Purchase Agreement and Post-Closing Covenant Agreement under which we issued warrants to IDTEC to purchase up to 320,000 shares of our common stock (post-split) at an exercise price of $0.50 per share. The warrants expire five years after the date of issuance, (see Note 3).
The total outstanding balance of all non-employee stock warrants in the Company is 584,317 and 598,414 at December 31, 2020 and December 31 2019, respectively. There were 440,000 non-employee detached free-standing stock warrants granted during the year ended December 31, 2020 and 916,579 non-employee detached free-standing stock warrants granted during the year ended December 31, 2019. The fair value of these non-employee stock warrants granted during the years ended December 31, 2020 and 2019 totaled $915,124 and $160,544, respectively, and were determined using the Black-Scholes option pricing model based on the following assumptions:
|
|
Dec. 31, 2020 |
|
|
Dec. 31, 2019 |
| ||
Exercise Price |
|
$ |
0.50-$2.00 |
|
|
$ |
0.1330-$1.0394 |
|
Dividend Yield |
|
|
0 |
% |
|
|
0 |
% |
Volatility |
|
|
153%-154% |
|
|
|
134% - 167% |
|
Risk-free Interest Rate |
|
|
0.19%- 0.29% |
|
|
|
1.69% – 2.40% |
|
Life of Warrants |
|
|
5 Years |
|
|
|
.038-5 Years |
|
F-28 |
Table of Contents |
The following table summarizes the changes in the Company’s outstanding warrants during the years ended December 31, 2020 and 2019:
|
|
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, 2018 |
|
|
721,678 |
|
|
$ |
0.1397 - 0.6319 |
|
|
3.45 Years |
|
$ | 0.1929 |
|
|
$ | - |
|
Warrants Granted |
|
|
916,579 |
|
|
$ |
0.06 - 0.2062 |
|
|
3.97 Years |
|
$ | 0.2860 |
|
|
$ | 2,022,912 |
|
Warrants Exercised |
|
|
(1,038,339 | ) |
|
$ |
0.1430 - 0.1497 |
|
|
|
|
$ | 0.1463 |
|
|
|
|
|
Warrants Expired |
|
|
(1,504 | ) |
|
$ | 0.6319 |
|
|
|
|
$ | 0.6319 |
|
|
|
|
|
Balance at December 31, 2019 |
|
|
598,414 |
|
|
$ |
.13304 - 1.039375 |
|
|
3.97 Years |
|
$ | 0.3592 |
|
|
$ | 1,276,870 |
|
|
|
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, 2019 |
|
|
598,414 |
|
|
$ |
0.13304 – 1.039375 |
|
|
3.97 Years |
|
$ | 0.3592 |
|
|
$ | 1,276,870 |
|
Warrants Granted |
|
|
440,000 |
|
|
$ |
0.50-2.00 |
|
|
4.41 Years |
|
$ | 0.9091 |
|
|
$ | 898,000 |
|
Warrants Exercised |
|
|
(454,097 | ) |
|
$ |
0.13304 - 0.15299 |
|
|
|
|
$ | 0.1451 |
|
|
|
|
|
Warrants Expired |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2020 |
|
|
584,317 |
|
|
$ |
0.50 – 2.00 |
|
|
3.80 Years |
|
$ | 0.9413 |
|
|
$ | 1,173,737 |
|
F-29 |
Table of Contents |
Stock Options
On October 24, 2019, the Company’s 2019 Equity Incentive Plan went effective. 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. The plan’s number of authorized shares is 3,848,467. As of December 31, 2020 and December 31, 2019, the Company has granted stock options to acquire 2,521,922 and 2,285,028 shares of common stock under the plan, respectively. As of December 31, 2020, the plan has1,202,168 vested shares and1,319,753 non-vested shares. As of December 31, 2019, the plan had 539,847 vested shares and 1,745,181 non-vested shares. As of December 31, 2020 and December 31, 2019 the plan has options available to be issued of 1,326,545 and 1,563,439, respectively. The stock options are held by our officers, directors, employees, and certain key consultants.
During 2020, under the 2019 Equity Incentive Plan the Company granted stock options and units to acquire approximately 236,000 shares of its common stock at exercise prices ranging from $1.645 to $3.30 to certain employees and key consultants. The fair value of the options granted was approximately $515,000. The stock options vest monthly and quarterly over 1 to 3-year terms. A total of 15,000 stock options were vested as of December 31, 2020. None of the vested stock options have been exercised and no shares have been issued as December 31, 2020. Additionally, the Company granted stock options to acquire 1,894 shares of its common stock, in addition to the 48,106 options granted to key consultants on October 25, 2019 for a total of 50,000 shares of its common stock in accordance with the Company’s agreements with the consultants. The stock options stock exercise price is $0.2635. The stock options vest over a one-year period beginning January 1, 2020 and have a five-year term. A total of 50,000 and 0 stock options were vested at December 31, 2020 and December 31, 2019, respectively. None of the vested stock options have been exercised and no shares have been issued as of December 31, 2020.
For the years ended December 31, 2020 and 2019, the Company recorded $239,478 and $95,566, respectively, of share-based compensation expense related to the stock options. The unrecognized compensation expense as of December 31, 2020 was approximately $650,000 for non-vested share-based awards to be recognized over periods of approximately three to seven years.
In applying the Black-Scholes options pricing model, assumptions used to compute the fair value of the stock options granted during the year ended December 31, 2020 and 2019 were as follows:
|
|
December 31, 2020 |
|
|
December 31, 2019 |
| ||
Exercise Price |
|
$ |
1.645-3.30 |
|
|
$ |
0.026-1.039 |
|
Dividend Yield |
|
|
0 | % |
|
|
0 | % |
Expected Volatility |
|
162%-181 |
% |
|
133%-146 |
% | ||
Risk-free Interest Rate |
|
0.19%-0.43 |
% |
|
1.61%-1.70 |
% | ||
Expected Life |
|
1- 2.7 years |
|
|
2.0-7.17years |
|
F-30 |
Table of Contents |
The following table summarizes the changes in the Company’s outstanding stock options during the years ended December 31, 2020 and 2019:
|
|
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, 2018 |
|
|
53,368 |
|
|
$ |
0.1497 – 8.31 |
|
|
2.32 Years |
|
$ | 0.2761 |
|
|
$ | - |
|
Options Granted |
|
|
2,381,239 |
|
|
$ |
0.26341-1.0393 |
|
|
9.00 Years |
|
$ | 0.2960 |
|
|
$ | 5,238,080 |
|
Options Exercised |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
Options Cancelled |
|
|
(45,100 | ) |
|
$ | 0.1497 |
|
|
|
|
$ | 0.1497 |
|
|
|
|
|
Options Expired |
|
|
(8,268 | ) |
|
$ |
0.2328-8.31 |
|
|
9.00 Years |
|
$ | 0.9678 |
|
|
|
|
|
Balance at December 31, 2019 |
|
|
2,381,239 |
|
|
$ |
0.2634 – 1.039 |
|
|
9.00 Years |
|
$ | 0.2761 |
|
|
$ | 5,238,080 |
|
|
|
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, 2019 |
|
|
2,381,239 |
|
|
$ |
0.2634-1.039 |
|
|
9.00 Years |
|
$ | 0.2761 |
|
|
$ | 5,238,080 |
|
Options Granted |
|
|
236,894 |
|
|
$ |
0.2635–3.300 |
|
|
1.84 Years |
|
$ | 2.6661 |
|
|
$ | 67,265 |
|
Options Exercised |
|
|
(45,906 | ) |
|
$ | 1.039 |
|
|
|
|
|
|
|
|
|
|
|
Options Cancelled |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
Options Expired |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2020 |
|
|
2,572,227 |
|
|
$ |
0.26342–3.300 |
|
|
7.45 Years |
|
$ | 0.4999 |
|
|
$ | 6,302,277 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2019 |
|
|
539,847 |
|
|
$ |
0.2634–1.03938 |
|
|
8.2 Years |
|
$ | 0.4 |
|
|
$ | 1,129,786 |
|
Exercisable at December 31, 2020 |
|
|
1,252,474 |
|
|
$ |
0.26342–3.300 |
|
|
7.4 Years |
|
$ | 0.3165 |
|
|
$ | 3,299,006 |
|
Executive Stock Options
The Company has 2,521,922 outstanding executive stock options exercisable at $0.26341 to $3.30 per share with a weighted average remaining contractual life of 7.5 years as of December 31, 2020 and 2,285,028 outstanding executive stock options exercisable at $0.26341 per share with a weighted average remaining contractual life of 9 years as of December 31, 2019.
F-31 |
Table of Contents |
On October 25, 2019, the Company granted Charles Bennington, one of the Company’s directors, options to acquire 24,053 shares of the Company’s common stock under its 2019 Equity Incentive Plan. The stock options have an exercise price of $0.2635 and vest quarterly over a one-year period commencing January 1, 2020. The stock options have a five-year term. A total of 24,053 and 0 stock options were vested as of December 31, 2020 and December 31, 2019, respectively. None of the vested stock options have been exercised and no shares have been issued as of December 31, 2020.
On October 25, 2019, the Company granted Nick Noceti, the Company’s former Chief Financial Officer, options to acquire 24,053 shares of the Company’s common stock under its 2019 Equity Incentive Plan. The stock options have an exercise price of $0.2635 and vest quarterly over a two-year period commencing January 1, 2020. The stock options have a five-year term. A total of 12,026 and 0 stock options were vested as of December 31, 2020 and December 31, 2019, respectively. None of the vested stock options have been exercised and no shares have been issued as of December 31, 2020.
On October 25, 2019, the Company entered into an Employment Agreement with Kevin Moore to serve as the Company’s Chief Executive Officer. Under the terms of the agreement, the Company granted Kevin Moore stock options under its 2019 Equity Compensation Plan to acquire 1,058,328 shares of its common stock at an exercise price of $0.2635. The stock options vest in 36 equal monthly installments of 29,398 shares during the three-year term of his Employment Agreement. A total of411,572 and 58,796 stock options were vested as of December 31, 2020 and December 31, 2019, respectively. None of the vested stock options have been exercised and no shares have been issued as of December 31, 2020 or December 31, 2019.
On October 25, 2019, the Company entered into an Employment Agreement with David Gandini to serve as the Company’s Chief Revenue Officer. Under the terms of the agreement, the Company granted David Gandini stock options under its 2019 Equity Compensation Plan to acquire 721,588 shares of its common stock at an exercise price of $0.2635. The stock options vest in 36 equal monthly installments of 20,044 shares during the three-year term of his Employment Agreement. David Gandini was also granted an aggregate of 240,529 additional option shares (the “Pre-Vesting Option Shares”) to vest as follows: (i) 200,439 Pre-Vesting Option Shares representing the monthly vesting option shares for the ten months ended October 31, 2019 to vest on November 1, 2019; and (ii) the remaining 40,090 Pre-Vesting Option Shares representing the monthly vesting option shares for the two months ended December 31, 2019 shall vest on January 1, 2020. The stock options have a ten-year term. A total of 521,146 and 240,521 stock options were vested as of December 31, 2020 and December 31, 2019, respectively. None of the vested stock options have been exercised and no shares have been issued as of December 31, 2020 or December 31, 2019.
NOTE 14. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leased office space under a long-term operating lease that expired in June 2019. The Company leased the same office space on a month-to-month basis until December 31, 2019. On October 15, 2019, the Company entered into a short-term lease agreement that is between $2,800 - $2,900 per month and ended on October 31, 2020. The lease has been renewed for another twelve months under the same general terms and conditions. The Company also leases an office space for $1,300 per month on a short-term (month to month) basis through a related party that terminates at any time. Rent expense under office leases, including CAM charges, was $63,978 and $64,679 for the years ended December 31, 2020 and 2019, respectively.
F-32 |
Table of Contents |
Legal Proceedings
On December 6, 2006, Orange County Valet and Security Patrol, Inc. filed a lawsuit against us in Orange County California State Superior Court for Breach of Contract in the amount of $11,164. A default judgment was taken against us in this matter. In mid-2013 we learned the Plaintiff’s perfected the judgment against us, but we have not heard from the Plaintiffs as of December 2020. As of December 31, 2020, the Company has accrued $11,164 plus accrued interest of approximately $1,000. In the event we pay any money related to this lawsuit, IDTEC agreed, in connection with us closing the asset purchase transaction with IDTEC, to pay the amount for us in exchange for shares of our common stock.
We currently have one outstanding judgment against us involving a past employee of the Company. The matter is under the purview of the State of California, Franchise Tax Board, Industrial Health and Safety Collections. We currently owe approximately $28,786 plus accrued interest of approximately $53,000, which has been accrued as of December 31, 2020 to our ex-employee for unpaid wages under these Orders. On March 8, 2021 we received an Acknowledgement of Satisfaction of Judgement-Full by the California Court that the judgement has been settled with a payment of approximately $83,000 including accrued interest. In the event we pay any money related to this lawsuit, IDTEC agreed, in connection with us closing the asset purchase transaction with IDTEC, to pay the amount for us in exchange for shares of our common stock.
NOTE 15. INCOME TAXES
Deferred income taxes arise from the temporary differences between financial statement and income tax recognition of net operating losses. These loss carryovers are limited under the Internal Revenue Code should a significant change in ownership occur.
For the years ended December 31, 2020 and 2019, the Company incurred net losses and therefore has no tax liability. The Company began operations in 2007 and has net operating loss carry-forwards of approximately $13,346,000 that will be carried forward and can be used through the year 2040 to offset future taxable income. In the future, the cumulative net operating loss carry forward for income tax purposes may differ from the cumulative financial statement loss due to timing differences between book and tax reporting.
At December 31, 2020 and 2019, the Company has net operating loss carry forwards of approximately $13,346,000 and $9,634,000, respectively, that may be offset against future taxable income, if any. These carry-forwards are subject to review by the Internal Revenue Service. As of December 31, 2020 and 2019, the deferred tax asset of approximately $2,830,000 and $1,832,000, respectively, created by the net operating losses has been offset by a 100% valuation allowance because the likelihood of realization of the tax benefit cannot be determined. The change in the valuation allowance in 2020 and 2019 was approximately $998,000 and $187,000, respectively.
There is no current or deferred tax expense for the years ended December 31, 2020 and 2019. The Company has not filed its tax returns for the years ended 2012 through 2020; however, management believes there are no taxes due as of December 31, 2020 and 2019.
The Company includes interest and penalties arising from the underpayment of income taxes in general and administrative expense in the consolidated statements of operations.
The provision for Federal income tax consists of the following for the years ended December 31, 2020 and 2019:
|
|
December 31, |
|
|
December 31, |
| ||
|
|
2020 |
|
|
2019 |
| ||
|
|
|
|
|
|
| ||
Income tax benefit attributable to: |
|
|
|
|
|
| ||
Net loss |
|
$ | (29,982,222 | ) |
|
$ | (1,249,032 | ) |
Permanent differences |
|
|
1,830,697 |
|
|
|
313,778 |
|
Valuation allowance |
|
|
28,151,525 |
|
|
|
935,254 |
|
Net provision for income tax |
|
$ | - |
|
|
$ | - |
|
F-33 |
Table of Contents |
The cumulative tax effect at the expected federal tax rate of 21% of significant items comprising our net deferred tax amount is as follows on December 31, 2020 and 2019:
|
|
December 31, |
|
|
December 31, |
| ||
|
|
2020 |
|
|
2019 |
| ||
|
|
|
|
|
|
| ||
Deferred tax asset attributable to: |
|
|
|
|
|
| ||
Net operating loss carry forward |
|
$ | 2,163,000 |
|
|
$ | 1,832,000 |
|
Valuation allowance |
|
|
(2,163,000 | ) |
|
|
(1,832,000 | ) |
Net deferred tax asset |
|
$ | - |
|
|
$ | - |
|
The cumulative tax effect at the expected state tax rate of 5% of significant items comprising our net deferred tax amount is as follows on December 31, 2020 and 2019:
|
|
December 31, |
|
|
December 31, |
| ||
|
|
2020 |
|
|
2019 |
| ||
|
|
|
|
|
|
| ||
Deferred tax asset attributable to: |
|
|
|
|
|
| ||
Net operating loss carry forward |
|
$ | 667,000 |
|
|
$ | 482,000 |
|
Valuation allowance |
|
|
(667,000 | ) |
|
|
(482,000 | ) |
Net deferred tax asset |
|
$ | - |
|
|
$ | - |
|
Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards of approximately $13,304,000 for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carry forwards may be further limited to use in future years.
The Company has identified the United States Federal tax returns as its “major” tax jurisdiction. The United States Federal tax return years 2012 – 2020 are still subject to tax examination by the United States Internal Revenue Service; however, we do not currently have any ongoing tax examinations.
F-34 |
Table of Contents |
NOTE 16. SUBSEQUENT EVENTS
The Company has evaluated subsequent events for recognition and disclosure through March 31, 2021, which is the date the consolidated financial statements were available to be issued.
On January 6, 2021, the Company issued 43,169 shares of its common stock to SOBR Safe, LLC in full satisfaction of accrued dividends resulting from the December 2020 conversion of the Series A-1 Convertible Preferred Stock into common shares.
On January 15, 2021, the Company initiated a Private Offering (the “Offering”) of up to 40 Units ($2,000,000) with each Unit consisting of one $50,000 principal amount secured convertible debenture, convertible at $3.00 per share (“Secured Debentures”), and a warrant to purchase 25,000 shares of the Company’s common stock (the “Debenture Warrants”). The Secured Debentures will mature 24 months after issuance. The Secured Debentures will not be redeemable but contain an automatic conversion feature. Interest on the Secured Debentures will accrue at a rate of 12% per annum, beginning on the date we have access to the investor’s funds. At the date of their investment in the Offering, investors may elect to have the interest due under the Secured Debenture paid in cash monthly or have the interest accrue and be payable on the maturity date of the Secured Debenture. For investors that elect to accrue the interest due under the Secured Debenture, the interest will be paid in cash or may be converted into shares of our common stock under the same terms as the principal amount on the maturity date. The Secured Debentures will be convertible at any time, and from time to time, by the holder beginning on the date of issuance, into shares of our common stock. The Secured Debentures will be convertible at $3.00 per share (the “Conversion Price”); provided, however, that the right of conversion will be limited by the terms of the Secured Debentures to the extent necessary to ensure that each Secured Debenture holder will never beneficially own more than 4.9% of our class of common stock at any one time while any portion of the holder’s Secured Debenture remains outstanding. The repayment of the Secured Debentures will be secured by the Company’s patent and patent applications. The Debenture Warrants will be exercisable at any time, and from time to time, beginning six months after issuance and expiring two years after issuance, into shares at an exercise price of $3.00 per share. The Debenture Warrants contain a repurchase right by the Company. The shares underlying the Secured Debentures and Debenture Warrants will have registration rights. Units may be purchased in increments of $50,000, with the minimum investment being one Unit for $50,000. The Offering will be made on a continuous basis until 5:00 p.m. on March 31, 2021, which may be extended one-time by our Board of Directors until April 30, 2021 (the “Termination Date”), unless earlier terminated or canceled. There will be no closing of the Offering until a minimum of $500,000 is raised (the “Minimum Offering”). After an initial closing is held, offers to purchase Units will be aggregated for subsequent closings to be held on a monthly basis until the maximum of $2,000,000 has been raised or until the Termination Date, whichever is earlier. The Offering may be canceled by the Company at any time and will in any event be canceled if no closing has occurred before the Termination Date. In the event the offer to purchase Units is rejected or the Offering is canceled, then the amounts remitted will be promptly returned without interest or deduction.
As of the date of this report the Company has received $1,100,000 of Offering proceeds.
NOTE 17. REVISION TO PREVIOUSLY FILED FINANCIAL STATEMENTS
While reviewing the financial statements in connection with a Form 1-A filing, the Company discovered an error in the statement of operations for the year ended December 31, 2020. The error related to the presentation of the loss on disposal of property and equipment and asset impairment adjustment in accordance with ASC 360-10-45.
Loss on disposal of property and equipment and asset impairment adjustment of $39,434 and $25,320,555, respectively, were presented as other income/expense-net, instead of as operating expenses. As a result, loss from operations for the year ended December 31, 2020, was understated by $25,359,989 and other income/expenses-net was overstated by the same amount. The classification errors had no affect on the net loss or net loss per share for the year ended December 31, 2020.
As a result of this correction, the statement of operations for the year ended December 31, 2020 in the accompanying financial statements have been revised. The results of the revisions increased total operating expenses and loss from operations from $2,909,600 to $28,269,589, and decreased other expense from $27,072,692 to $1,172,703.
F-35 |
Table of Contents |
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
June 30, 2021 |
|
|
December 31, 2020 |
| ||
|
|
(Unaudited) |
|
|
(Audited) |
| ||
|
|
|
|
|
|
| ||
ASSETS |
|
|
|
|
|
| ||
|
|
|
|
|
|
| ||
Current assets |
|
|
|
|
|
| ||
Cash |
|
$ | 609,526 |
|
|
$ | 232,842 |
|
Prepaid expenses |
|
|
41,622 |
|
|
|
115,230 |
|
Total current assets |
|
|
651,148 |
|
|
|
348,072 |
|
|
|
|
|
|
|
|
|
|
SOBR Safe Intellectual Technology, net of accumulated amortization of $417,586 and $224,854 at June 30, 2021 and December 31, 2020, respectively |
|
|
3,437,089 |
|
|
|
3,629,821 |
|
|
|
|
|
|
|
|
|
|
Other assets |
|
|
8,680 |
|
|
|
8,680 |
|
Total Assets |
|
$ | 4,096,917 |
|
|
$ | 3,986,573 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES & STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ | 216,117 |
|
|
$ | 101,308 |
|
Accrued expenses |
|
|
299,688 |
|
|
|
313,032 |
|
Accrued interest payable |
|
|
134,227 |
|
|
|
134,444 |
|
Related party payables |
|
|
18,504 |
|
|
|
28,624 |
|
Common stock subscriptions payable |
|
|
209,354 |
|
|
|
253,688 |
|
Current portion notes payable - related parties |
|
|
11,810 |
|
|
|
11,810 |
|
Current portion notes payable - non-related parties |
|
|
104,183 |
|
|
|
79,183 |
|
Total current liabilities |
|
|
993,883 |
|
|
|
922,089 |
|
|
|
|
|
|
|
|
|
|
Notes payable -related parties-less current portion |
|
|
|
|
|
|
|
|
* Includes unamortized debt discount and beneficial conversion feature related to detached warrants and convertible notes of $897,603 and none at June 30, 2021 and December 31, 2020, respectively |
|
|
102,397 | * |
|
|
- |
|
Notes payable -non-related parties-less current portion |
|
|
|
|
|
|
|
|
* Includes unamortized debt discount and beneficial conversion feature related to detached warrants and convertible notes of $901,121 and none at June 30, 2021 and December 31, 2020, respectively |
|
|
103,879 | * |
|
|
25,000 |
|
|
|
|
|
|
|
|
|
|
Total Liabilities |
|
|
1,200,159 |
|
|
|
947,089 |
|
Stockholders' Equity |
|
|
|
|
|
|
|
|
Preferred stock, $0.00001 par value; 19,300,000 shares authorized, no shares issued or outstanding as of June 30, 2021 and December 31, 2020 |
|
|
- |
|
|
|
- |
|
Series A Convertible Preferred stock, $0.00001 par value; 3,000,000 shares authorized, no shares issued or outstanding as of June 30, 2021 and December 31, 2020 |
|
|
- |
|
|
|
- |
|
Series A-1 Convertible Preferred stock, $0.00001 par value; 2,700,000 shares authorized, no shares issued or outstanding as of June 30, 2021 and December 31, 2020 |
|
|
- |
|
|
|
- |
|
Common stock, $0.00001 par value; 100,000,000 shares authorized; 25,981,203 and 25,922,034 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively |
|
|
260 |
|
|
|
260 |
|
Additional paid-in capital |
|
|
55,096,399 |
|
|
|
52,693,974 |
|
Accumulated deficit |
|
|
(52,146,273 | ) |
|
|
(49,601,220 | ) |
Total SOBR Safe, Inc. stockholders' equity |
|
|
2,950,386 |
|
|
|
3,093,014 |
|
Noncontrolling interest |
|
|
(53,628 | ) |
|
|
(53,530 | ) |
|
|
|
|
|
|
|
|
|
Total Stockholders' Equity |
|
|
2,896,758 |
|
|
|
3,039,484 |
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders' Equity |
|
$ | 4,096,917 |
|
|
$ | 3,986,573 |
|
The accompanying notes are an integral part of the condensed consolidated financial statements.
F-36 |
Table of Contents |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||
(UNAUDITED) |
|
|
For The Three Months Ended |
|
|
For The Six Months Ended |
| ||||||||||
|
|
June 30, |
|
|
June 30, |
|
|
June 30, |
|
|
June 30, |
| ||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Revenues |
|
$ | - |
|
|
$ | - |
|
|
$ | - |
|
|
$ | - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
|
295,966 |
|
|
|
177,915 |
|
|
|
559,049 |
|
|
|
276,107 |
|
Stock-based compensation expense |
|
|
168,375 |
|
|
|
- |
|
|
|
187,065 |
|
|
|
41,302 |
|
Management salaries and consulting fees |
|
|
535,815 |
|
|
|
461,864 |
|
|
|
1,049,593 |
|
|
|
683,993 |
|
Research and development |
|
|
314,532 |
|
|
|
89,570 |
|
|
|
485,995 |
|
|
|
157,280 |
|
Asset impairment adjustment |
|
|
- |
|
|
|
25,320,555 |
|
|
|
- |
|
|
|
25,320,555 |
|
Total operating expenses |
|
|
1,314,688 |
|
|
|
26,049,904 |
|
|
|
2,281,702 |
|
|
|
26,479,237 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
|
(1,314,688 | ) |
|
|
(26,049,904 | ) |
|
|
(2,281,702 | ) |
|
|
(26,479,237 | ) |
|
|
|
|
|
|
|