Quarterly report pursuant to Section 13 or 15(d)


9 Months Ended
Sep. 30, 2020

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 September 30, 2020, the Company has an accumulated deficit of approximately $48,570,000. During the nine months ended September 30, 2020, the Company also experienced negative cash flows from operating activities of $1,443,783. 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. As such, there is substantial doubt about the entity’s ability to continue as a going concern.


The Company has been considering opportunities to create synergy with its SOBR product to mitigate the probable conditions that have raised substantial doubt about the entity’s ability to continue as a going concern.


On May 6, 2019, the Company entered into an Asset Purchase Agreement with IDTEC, LLC (and Amendment No. 1 dated March 9, 2020) (the “APA”), under which IDTEC, LLC (“IDTEC”), an affiliate owned by First Capital Holdings, LLC (“FCH”), agreed to provide personnel, experience, and access to funding to assist with the development of the Company’s SOBR device, as well as to sell to the Company certain robotics assets, which the Company’s management believes are synergistic with its current assets. The APA transaction closed on June 5, 2020 providing the Company with ownership in the SOBR Safe intellectual technology.


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 Gary Graham, one of the Company’s Directors, under which (i) the Company agreed to create a new series of convertible preferred stock entitled “Series A-1 Convertible Preferred Stock,” with 2,000,000 shares authorized and the following rights: (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, (d) redemption rights such that the Company has the right, upon thirty 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) shall not be callable by the Company, and (f) each share of Series A-1 Convertible Preferred Stock will vote on an “as converted” basis; and (ii) SOBR SAFE agreed to acquire 1,000,000 shares of the Company’s Series A-1 Convertible Preferred Stock (the “Preferred Shares”), once created, in exchange for $1,000,000 (the “Purchase Price”). The Company received the Purchase Price on December 12, 2019 and has not issued these Preferred Shares as of September 30, 2020: however, the Company plans to issue these Preferred Shares in the fourth quarter of 2020. 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. The Company received the additional $1,700,000 during the nine months ended September 30, 2020 and plans to issue the Preferred Shares in the fourth quarter of 2020. As a result of the offering, the Company has a cash balance of $979,641 and $681,759 at September 30, 2020 and December 31, 2019, respectively. 


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 Annual 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 2020. However, if the pandemic continues, it will have an adverse effect on the Company’s results of future operations, financial position, and liquidity in year 2020.


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 September 30, 2020. Additionally, the COVID-19 outbreak could have a continued 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 September 30, 2020.