UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Mark One)
For the quarterly period ended
For the transition period from _______________ to _______________.
Commission file number:
(Exact name of registrant as specified in its charter) |
| ||
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
|
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| ||
(Address of principal executive offices) |
| (Zip Code) |
(
Registrant’s telephone number, including area code
_______________________________________
(Former name, address, if changed since last report)
____________________________________
(Former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading Symbol(s) |
| Name of each exchange on which registered | ||||
None |
| None |
| None | ||||
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.00001 par value
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
|
| Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Applicable only to issuers involved in bankruptcy proceedings during the preceding five years:
Indicate by check mark whether the registrant filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☐ No ☐
Applicable only to corporate issuers:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of August 13, 2021, there were
SOBR SAFE, INC.
TABLE OF CONTENTS
| 2 |
| Table of Contents |
PART I – FINANCIAL INFORMATION
Forward-Looking Statement Disclaimer
This Quarterly Report includes forward-looking statements within the meaning of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements are based on management’s beliefs and assumptions, and on information currently available to management. Forward-looking statements include the information concerning our possible or assumed future results of operations set forth under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements also include statements in which words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate,” “consider,” or similar expressions are used.
Forward-looking statements are not guarantees of future performance. They involve risks, uncertainties, and assumptions. Our future results and shareholder values may differ materially from those expressed in these forward-looking statements. Readers are cautioned not to put undue reliance on any forward-looking statements.
Reverse Stock Split
At the open of market on June 8, 2020, our 1-for-33.26 reverse split of our common stock went effective with OTC Markets. As a result, all common stock share amounts, as well as share amounts and exercise and conversion prices in derivative security instruments have been adjusted to reflect the reverse stock split.
| 3 |
| Table of Contents |
ITEM 1 Condensed Consolidated Financial Statements
The condensed consolidated balance sheets as of June 30, 2021 and December 31, 2020, the condensed consolidated statements of operations for the three and six months ended June 30, 2021 and 2020, the condensed consolidated statements of changes in stockholders’ equity (deficit) for the three and six months ended June 30, 2021 and 2020, and the condensed consolidated statements of cash flows for the six months ended June 30, 2021 and 2020, follow. The unaudited condensed consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. All such adjustments are of a normal and recurring nature.
SOBR Safe, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
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| June 30, 2021 |
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| December 31, 2020 |
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| (Unaudited) |
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| (Audited) |
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ASSETS |
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Current assets |
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Cash |
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Prepaid expenses |
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Total current assets |
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SOBR Safe Intellectual Technology, net of accumulated amortization of $ |
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Other assets |
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Total Assets |
| $ |
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| $ |
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LIABILITIES & STOCKHOLDERS' EQUITY |
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Current liabilities |
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Accounts payable |
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Accrued expenses |
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Accrued interest payable |
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Related party payables |
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Common stock subscriptions payable |
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Current portion notes payable - related parties |
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Current portion notes payable - non-related parties |
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Total current liabilities |
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Notes payable -related parties-less current portion |
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* Includes unamortized debt discount and beneficial conversion feature related to detached warrants and convertible notes of $ |
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Notes payable -non-related parties-less current portion |
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* Includes unamortized debt discount and beneficial conversion feature related to detached warrants and convertible notes of $ |
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Total Liabilities |
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Stockholders' Equity |
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Preferred stock, $ |
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Series A Convertible Preferred stock, $ |
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Series A-1 Convertible Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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Total SOBR Safe, Inc. stockholders' equity |
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Noncontrolling interest |
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Total Stockholders' Equity |
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Total Liabilities and Stockholders' Equity |
| $ |
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| $ |
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The accompanying notes are an integral part of the condensed consolidated financial statements.
| 4 |
| Table of Contents |
SOBR SAFE, Inc. | ||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||
(UNAUDITED) |
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| For The Three Months Ended |
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| For The Six Months Ended |
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| June 30, |
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| June 30, |
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| June 30, |
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| 2021 |
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| 2020 |
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Revenues |
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Operating expenses: |
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General and administrative |
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Stock-based compensation expense |
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Management salaries and consulting fees |
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Research and development |
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Asset impairment adjustment |
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Total operating expenses |
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Loss from operations |
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Other income (expense): |
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Loss on extinguishment of debt, net |
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| - |
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Gain on fair value adjustment - derivatives |
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Interest expense |
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Amortization of interest - beneficial conversion features |
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Total other expense, net |
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Loss before provision for income taxes |
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Provision for income taxes |
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Net loss |
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Net loss attributable to noncontrolling interest |
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Net loss attributable to SOBR Safe, Inc. |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
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Basic and diluted loss per common share |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
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Weighted average number of common shares outstanding |
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The accompanying notes are an integral part of the condensed consolidated financial statements.
| 5 |
| Table of Contents |
SOBR SAFE, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(UNAUDITED)
|
| Common Stock |
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| Preferred Stock |
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| Stockholders' Equity |
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| Total |
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| Shares |
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| Amount ($0.00001 Par) |
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| Shares |
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| Amount ($0.00001 Par) |
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| Additional Paid-in Capital |
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| Accumulated Deficit |
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| (Deficit)SOBR Safe, Inc. |
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| Noncontrolling Interest |
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| Stockholders' Equity (Deficit) |
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Balances at January 1, 2020 |
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| $ |
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| - |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) | ||||
Common stock issued for compensation |
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| - |
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Common stock issued due to stock warrants exercise |
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| - |
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Common stock issued to settle related party payables |
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| - |
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Common stock issued to settle accounts payable and accrued expenses |
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| - |
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Common stock issued to settle related party debt |
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| - |
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Common stock issued to settle non-related party debt |
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| - |
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Paid-in capital - fair value of stock options vested |
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| - |
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| - |
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Paid-in capital - gain on related party debt conversion |
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| - |
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| - |
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Paid-in capital - gain on related party payables conversion |
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| - |
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| - |
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Paid-in capital - loss on debt extinguishment |
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| - |
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| - |
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Paid-in capital - beneficial conversion feature |
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| - |
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| - |
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Net loss for the period |
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Balances at March 31, 2020 |
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| - |
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| $ |
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| $ | ( | ) |
| $ | ( | ) |
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Common stock issued to settle accounts payable and accrued expenses |
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| - |
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Common stock issued to settle related party payables |
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| - |
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Common stock issued for asset purchase |
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| - |
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Paid-in capital - beneficial conversion feature |
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| - |
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| - |
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Paid-in capital - fair value of stock warrants granted |
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| - |
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Paid-in capital - gain on related party payables conversion |
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| - |
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Paid-in capital - loss on extinguishment of convertible notes |
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| - |
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Paid-in capital - fair value of stock options vested |
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| - |
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| - |
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Net loss for the period |
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| - |
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| - |
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Balances at June 30, 2020 |
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| $ |
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| - |
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| $ |
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| $ |
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| $ | ( | ) |
| $ |
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| $ | ( | ) |
| $ |
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Balances at January 1, 2021 |
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| $ |
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| - |
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| $ |
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| $ |
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| $ | ( | ) |
| $ |
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| $ | ( | ) |
| $ |
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Common stock issued to settle dividends - Series A-1 Convertible Preferred stock |
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| - |
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Paid-in capital - fair value of stock options and RSU vested |
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| - |
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| - |
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Paid-in capital - relative fair value of stock warrants granted |
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| - |
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| - |
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Paid-in capital - beneficial conversion feature |
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| - |
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| - |
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Net loss for the period |
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| - |
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| - |
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| ( | ) |
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| ( | ) |
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| ( | ) |
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| ( | ) | |||
Balances at March 31, 2021 |
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| $ |
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| - |
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| $ |
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| $ |
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| $ | ( | ) |
| $ |
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| $ | ( | ) |
| $ |
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Common stock issued for facility lease |
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| - |
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| ||||||||
Paid-in capital - fair value of stock options and RSU vested |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Paid-in capital - relative fair value of stock warrants granted |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Paid-in capital - beneficial conversion feature |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net loss for the period |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) | |||
Balances at June 30, 2021 |
|
|
|
| $ |
|
|
| - |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
|
| $ | ( | ) |
| $ |
| ||||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
| 6 |
| Table of Contents |
SOBR SAFE, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
| For The Six Months Ended |
| |||||
|
| June 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
| ||
Operating Activities: |
|
|
|
|
|
| ||
Net loss |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Amortization |
|
|
|
|
|
| ||
Loss on debt extinguishment, net |
|
| - |
|
|
| 269,144 |
|
Change in fair value of derivative liability |
|
|
|
|
| ( | ) | |
Amortization of interest - beneficial conversion feature |
|
|
|
|
|
| ||
Amortization of interest |
|
|
|
|
|
| ||
Stock options expense |
|
|
|
|
|
| ||
Stock-based compensation expense |
|
|
|
|
|
| ||
Asset impairment adjustment |
|
|
|
|
|
| ||
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
Due from related party |
|
|
|
|
| ( | ) | |
Prepaid expenses |
|
|
|
|
| ( | ) | |
Other assets |
|
|
|
|
| ( | ) | |
Accounts payable |
|
|
|
|
|
| ||
Accrued expenses |
|
| ( | ) |
|
|
| |
Accrued interest payable |
|
| ( | ) |
|
| ( | ) |
Related party payables |
|
| ( | ) |
|
| ( | ) |
Common stock subscriptions payable |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Net cash used in operating activities |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Financing Activities: |
|
|
|
|
|
|
|
|
Proceeds from notes payable - related parties |
|
|
|
|
|
| ||
Repayments of notes payable - related parties |
|
| ( | ) |
|
|
| |
Proceeds from notes payable - non-related parties |
|
|
|
|
|
| ||
Proceeds from offering of preferred stock - related parties |
|
|
|
|
|
| ||
Net cash provided by financing activities |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Net Change In Cash |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Cash At The Beginning Of The Period |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Cash At The End Of The Period |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Schedule Of Non-Cash Investing And Financing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid expenses with common shares |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Issuance of common stock for prior year accrued dividends |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Intrinsic value-beneficial conversion feature |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Relative fair value of stock warrants granted |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Gain on related party payables converted to capital |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses converted to capital |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Related party payables converted to capital |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Related party debt converted to capital after exercise of cashless stock warrants |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Related party debt converted to capital |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Non-related party debt converted to capital |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Gain on related party debt converted to capital |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Shares issued for cash received in prior years |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Issuance of common stock, stock warrants and convertible note for asset purchase |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Supplemental Disclosure: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Cash paid for income taxes |
| $ |
|
| $ |
| ||
The accompanying notes are an integral part of the condensed consolidated financial statements.
| 7 |
| Table of Contents |
SOBR SAFE, Inc.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2021
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, TransBiotec 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 TransBiotec 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 14C 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 |
The above actions taken by the Company’s stockholders became effective on or about May 21, 2020.
Basis of Presentation
The accompanying unaudited condensed 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”). These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes for the year ended December 31, 2020, included in the Company’s Annual Report on Form 10-K filed with the SEC on March 31, 2021.
In management’s opinion, the unaudited condensed consolidated financial statements reflect all adjustments (including reclassifications and normal recurring adjustments) necessary to present fairly the financial position as of June 30, 2021 and December 31, 2020, and results of operations and cash flows for the three and six month periods ended June 30, 2021 and 2020.
Principles of Consolidation
The accompanying unaudited condensed 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 unaudited condensed financial statements.
| 8 |
| Table of Contents |
SOBR SAFE, Inc.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2021
Use of Estimates
The preparation of unaudited condensed 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 recoverability and useful lives of long-lived assets, the intellectual technology, the valuation of the derivative liabilities, beneficial conversion feature expenses, stock-based compensation and the valuation allowance related to deferred tax assets. 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.
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 June 30, 2021 and December 31, 2020. Cash held by escrow agent related to Offering proceeds is readily available to the Company with no restrictions, see Note 2.
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.
| 9 |
| Table of Contents |
SOBR SAFE, Inc.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2021
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 June 30, 2021 and December 31, 2020. 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.
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 common stock 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 $
Advertising and Marketing Costs
Advertising and marketing costs are charged to operations as incurred. Advertising and marketing costs were $
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 not recorded any deferred tax assets or liabilities at June 30, 2021 and December 31, 2020 as these have been offset by a
| 10 |
| Table of Contents |
SOBR SAFE, Inc.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2021
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 $
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 evaluated the adoption of ASU 2020-08 guidance and determined no effects on the Company's financial position, results of operations and cash flows.
In May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entitiy’s Own Equity (Subtpoic 815-40), which addresses issuer’s accounting for certain modifications or exchanges of freestanding equity-classified written call options. This amendment is effective for all entities, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted. The Company is evaluating the effects, if any, of the adoption of ASU 2021-04 guidance on the Company's financial position, results of operations and cash flows.
| 11 |
| Table of Contents |
SOBR SAFE, Inc.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2021
Correction of Error
While preparing financial statements for periods in 2021, 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 $
As a result of this correction, the statement of operations for the three and six month periods ended June 30, 2020 in the accompanying financial statements has been retroactively restated.
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 June 30, 2021, the Company has an accumulated deficit of approximately $52,146,000. During the six months ended June 30, 2021, the Company also experienced negative cash flows from operating activities of approximately $
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.
We will need additional funds beyond the money raised in this Offering. 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 an adverse effect on the Company’s results of future operations, financial position, and liquidity in fiscal year 2021.
| 12 |
| Table of Contents |
SOBR SAFE, Inc.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 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 June 30, 2021. 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 June 30, 2021.
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
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 $
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 $
The Transaction recorded as an asset purchase was valued at $
The following summarizes the transaction closing with IDTEC on June 5, 2020:
Property and equipment |
| $ |
| |
Intangible assets |
|
|
| |
Total assets |
| $ |
| |
|
|
|
|
|
Net purchase (fair value of stock issued, warrants and notes payable) |
| $ |
|
| 13 |
| Table of Contents |
SOBR SAFE, Inc.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2021
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.
NOTE 4. PREPAID EXPENSES
Prepaid expenses consist of the following:
|
| June 30, 2021 |
|
| December 31, 2020 |
| ||
|
|
|
|
|
|
| ||
| Consulting service |
| $ |
|
| $ |
| ||
| Rent |
|
|
|
|
|
| ||
| Insurance |
|
|
|
|
|
| ||
| Prepaid expenses |
| $ |
|
| $ |
| ||
On February 26, 2021, the Company entered into a new lease agreement for its office facility for a 12-month term beginning March 1, 2021. In addition to monthly base rent of $
NOTE 5. INTANGIBLE ASSETS
Intangible assets consist of the following at June 30, 2021:
|
| Gross Carrying |
|
| Accumulated |
|
| Net Intangible |
|
| Amortization Period |
| ||||
|
| Amount |
|
| Amortization |
|
| Asset |
|
| (in years) |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SOBR Safe Intellectual Technology |
| $ |
|
| $ |
|
| $ |
|
|
|
| ||||
Amortization expense for the six-month period ended June 30, 2021 and 2020 was $
Estimated future amortization expense for device technology intangible assets is as follows:
2022 |
|
| 2023 |
|
| 2024 |
|
| 2025 |
|
| 2026 |
|
| Thereafter |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||||
NOTE 6. RELATED PARTY TRANSACTIONS
On July 1, 2015, the Company amended a December 3, 2014, note payable agreement with Lanphere Law Group, a related party and shareholder, which forgave $
On March 8, 2017, Lanphere Law Group irrevocably elected to exercise warrants in order to acquire
| 14 |
| Table of Contents |
SOBR SAFE, Inc.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2021
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
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
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
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
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
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
| 15 |
| Table of Contents |
SOBR SAFE, Inc.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2021
On April 6, 2020, the Company agreed with Nick Noceti, the Company’s former Chief Financial Officer, to issue
On April 7, 2020, the Company agreed with Charles Bennington, one of the Company’s former directors, to issue
On February 12, 2021, the Company entered into a note payable agreement with David Gandini, an officer and shareholder, under which Mr. Gandini advanced the Company $
On March 30, 2021, the Company received notification from IDTEC that it was exercising a portion of the
On March 3 and 31, 2021, the Company issued convertible notes payable (see Note 7) totaling $
On May 31, 2021, the Company issued convertible notes payable (see Note 7) totaling $
NOTE 7. NOTES PAYABLE
RELATED PARTIES
Related party notes payable consist of the following:
|
| June 30, 2021 |
|
| December 31, 2020 |
| ||
Convertible Notes Payable with Detached Free-standing Warrants |
| $ |
|
| $ |
| ||
Conventional Non-Convertible Notes Payable |
|
|
|
|
|
| ||
Unamortized Debt Discount |
|
| ( | ) |
|
|
| |
Net Related Party Notes Payable |
| $ |
|
| $ |
| ||
Current Portion |
|
| ( | ) |
|
| ( | ) |
Net Long-Term Portion |
| $ |
|
| $ |
| ||
| 16 |
| Table of Contents |
SOBR SAFE, Inc.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2021
Total interest expense for related party notes was $24,904 and $42,161 for the six month period ended June 30, 2021 and 2020, respectively.
Related Party Convertible Notes Payable with Warrants
The Company has thirteen convertible notes payable to related parties, each with detached free-standing warrants to purchase the Company’s common stock at $3 per share, that have a total principal balance of $
Related Party Convertible Notes Payable
On June 5, 2020 the Company issued the convertible APA Note to a related party with a principal balance of $
Related Party Non-convertible Notes Payable
The Company has one non-convertible note payable to a related party that has a principal balance of $
| 17 |
| Table of Contents |
SOBR SAFE, Inc.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2021
NON-RELATED PARTIES
Non-related party notes payable consist of the following:
|
| June 30, 2021 |
|
| December 31, 2020 |
| ||
Convertible Notes Payable with Detached Free-standing Warrants |
| $ |
|
| $ |
| ||
Convertible Notes Payable |
|
|
|
|
|
| ||
Conventional Non-Convertible Notes Payable |
|
|
|
|
|
| ||
Notes Payable with Detached Free-standing Warrants |
|
|
|
|
|
| ||
Unamortized Debt Discount |
|
| ( | ) |
|
|
| |
Net Non-Related Party Notes Payable |
| $ |
|
| $ |
| ||
Current Portion |
|
| ( | ) |
|
| ( | ) |
Net Long-Term Portion |
| $ |
|
| $ |
| ||
Total interest expense for non-related party notes was $
Convertible Notes Payable with Warrants
The Company has sixteen convertible notes payable to non-related parties, each with detached free-standing warrants to purchase the Company’s common stock at $
| 18 |
| Table of Contents |
SOBR SAFE, Inc.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2021
Convertible Notes Payable
The Company has three convertible notes payable to non-related parties that have a principal balance of $
During the three months ended March 31, 2020, the Company entered into Debt Conversion and Common Stock Purchase Plans with six non-related parties, under which the Company agreed to issue
During the three months ended March 31, 2020, the Company 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 $
During 2020, the holder of a $
Non-convertible Notes Payable
The Company has three non-convertible notes payable to non-related parties that have a principal balance of $
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
On May 12, 2020, the Company received proceeds of $
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 $
| 19 |
| Table of Contents |
SOBR SAFE, Inc.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2021
NOTE 8. DERIVATIVE LIABILITY
In 2019, the Company borrowed $
The embedded derivatives 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 consolidated 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
NOTE 9. STOCK SUBSCRIPTIONS PAYABLE
The Company has common stock subscriptions payable due to related parties of $
The Company has common stock subscriptions payable due to non-related parties of $
NOTE 10. COMMON STOCK
The Company’s common stock transactions for the six months ended June 30, 2020, consist of the following:
The Company issued
The Company issued
The Company issued
| 20 |
| Table of Contents |
SOBR SAFE, Inc.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2021
The Company issued
The Company issued
The Company issued
The Company agreed to convert
The Company issued
The Company issued
The Company’s common stock transactions for the six months ended June 30, 2021, consist of the following:
The Company issued
The Company issued
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 $
| 21 |
| Table of Contents |
SOBR SAFE, Inc.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2021
On December 9, 2019, the Company’s Board of Directors created a class of preferred stock designated as
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
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
NOTE 12. STOCK WARRANTS AND STOCK OPTIONS
Stock Warrants
The Company accounts for employee stock options and 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.
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
| 22 |
| Table of Contents |
SOBR SAFE, Inc.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2021
On May 4, 2020, the Company entered into an agreement with a vendor to provide investor relations services.
On June 5, 2020, at 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
During March, April and May 2021, the Company issued through the Offering convertible notes payable with warrants, see Note 7, to purchase up to
The total outstanding balance of all stock warrants in the Company is
|
| June 30, 2021 |
|
| June 30, 2020 |
| ||
Exercise Price |
| $ |
|
| $ |
| ||
Dividend Yield |
|
| % |
|
| % | ||
Volatility |
|
| % |
|
| % | ||
Risk-free Interest Rate |
| | % |
|
| % | ||
Life of Warrants |
| |
|
| |
| ||
| 23 |
| Table of Contents |
SOBR SAFE, Inc.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2021
The following table summarizes the changes in the Company’s outstanding warrants during the six-month period ended June 30, 2021 and 2020, and as of June 30, 2021 and 2020:
|
| 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 |
|
|
|
| $ |
|
|
| $ |
|
| $ |
| |||||
Warrants Granted |
|
|
|
| $ |
|
|
| $ |
|
| $ |
| |||||
Warrants Exercised |
|
| ( | ) |
| $ |
|
|
|
| $ |
|
|
|
|
| ||
Warrants Expired |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2020 |
|
|
|
| $ |
|
|
| $ |
|
| $ |
| |||||
|
| 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, 2020 |
|
|
|
| $ |
|
|
| $ |
|
| $ |
| |||||
Warrants Granted |
|
|
|
| $ |
|
|
| $ |
|
| $ |
| |||||
Warrants Exercised |
|
| ( | ) |
| $ |
|
|
|
| $ |
|
|
|
|
| ||
Warrants Expired |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2021 |
|
|
|
| $ |
|
|
| $ |
|
| $ |
| |||||
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
| 24 |
| Table of Contents |
SOBR SAFE, Inc.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2021
In total for the six months ended June 30, 2021 and 2020, the Company recorded $243,023 and $296,932, respectively, of share-based compensation expense related to stock options and restricted stock units. The unrecognized compensation expense as of June 30, 2021, was approximately $
In applying the Black-Scholes options pricing model, assumptions used to compute the fair value of the stock options granted during the six-month period ended June 30, 2021 and 2020 were as follows:
|
| June 30, 2021 |
|
| June 30, 2020 |
| ||
Exercise Price |
| $ |
|
| $ |
| ||
Dividend Yield |
|
| % |
|
| % | ||
Expected Volatility |
| | % |
|
| % | ||
Risk-free Interest Rate |
| % |
|
| % | |||
Expected Life |
|
|
|
| ||||
The following table summarizes the changes in the Company’s outstanding stock options during the six-month period ended June 30, 2021 and 2020, and as of June 30, 2021 and 2020:
|
| 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 |
|
|
|
| $ |
|
| $ |
|
| $ |
| |||||
Options Granted |
|
|
|
| $ |
|
| $ |
|
| $ |
| |||||
Options Exercised |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Cancelled |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Expired |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2020 |
|
|
|
| $ |
|
| $ |
|
| $ |
| |||||
| 25 |
| Table of Contents |
SOBR SAFE, Inc.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2021
|
| 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, 2020 |
|
|
| $ |
|
| $ |
|
| $ |
| |||||
Options Granted |
|
|
| $ |
|
| $ |
|
| $ |
| |||||
Options Exercised |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Cancelled |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Expired |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2021 |
|
|
| $ |
|
| $ |
|
| $ |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2020 |
|
|
| $ |
|
| $ |
|
| $ |
| |||||
Exercisable at June 30, 2021 |
|
|
| $ |
|
| $ |
|
| $ |
| |||||
Executive Stock Options
The Company has
NOTE 13. COMMITMENTS AND CONTINGENCIES
Operating Leases
On October 15, 2019, the Company entered into a short-term lease agreement that is between $
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 $
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 $
NOTE 14. SUBSEQUENT EVENTS
The Company has evaluated subsequent events for recognition and disclosure through August 16, 2021, which is the date the condensed consolidated financial statements were available to be issued, and has determined that there are no other material subsequent events that require recognition or disclosure in the accompanying condensed consolidated financial statements.
| 26 |
| Table of Contents |
ITEM 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Disclaimer Regarding Forward Looking Statements
Our Management’s Discussion and Analysis or Plan of Operations contains not only statements that are historical facts, but also statements that are forward-looking. Forward-looking statements are, by their very nature, uncertain and risky. These risks and uncertainties include international, national and local general economic and market conditions; demographic changes; our ability to sustain, manage, or forecast growth; our ability to successfully make and integrate acquisitions; raw material costs and availability; new product development and introduction; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; the loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability to protect technology; and other risks that might be detailed from time to time in our filings with the Securities and Exchange Commission (“SEC”).
Although the forward-looking statements in this Quarterly Report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this report and in our other reports as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results of operations and prospects.
Reverse Stock Split
At the open of market on June 8, 2020, our 1-for-33.26 reverse split of our common stock went effective with OTC Markets. As a result, all common stock share amounts, as well as share amounts and exercise and conversion prices in derivative security instruments have been adjusted to reflect the reverse stock split.
Overview
We intend to create substance-free environments by integrating and commercializing critical substance detection technologies. These technologies will be integrated within our robust and scalable data platform producing statistical analytics and predictive user data. Our mission is to save lives, accelerate intervention, 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 school buses, commercial vehicle fleets and facility access control, as well as addiction treatment and managed care.
Currently, our plan is to deploy our SOBRSafe™ technology in two initial devices: the SOBRtab™ wearable band and the SOBRCheck™ system. SOBRtab™ is a transdermal, alcohol-detecting wearable band containing our SOBRSafe™ technology for ongoing, real-time alcohol monitoring, with predictive heart rate monitoring. SOBRCheck™ is our centralized access control product. When installed in manufacturing facilities, warehouses and more, SOBRCheck™ enables a rapid, hygienic finger scan, with real-time results delivered securely to the employer for any necessary corrective action. The SOBRSafe™ technology can also be deployed across numerous additional devices for various uses. Currently, additional devices for our SOBRSafe™ alcohol detection technology we are exploring include possible integrations with existing 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.
| 27 |
| Table of Contents |
Statistical analytics and predictive user data is another potential valuable asset. We believe our device portfolio approach could yield this highly valuable information asset. The opportunity to collect millions of data points over time could enable the development of predictive analytics for perpetual safety improvement (and associated cost savings capture). And by demonstrating substance-free environments, employers could deliver a data-driven argument for lowering insurance premiums and 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 SOBRtab™ devices, we are also constantly reviewing synergistic technologies and businesses for potential partnerships, including licensing of the SOBRSafe™ technology.
On June 5, 2020, we closed the transaction (the “Transaction”) that was the subject of that certain Asset Purchase Agreement dated May 6, 2019 (and Amendment No. 1 dated March 9, 2020, together the “APA”) with IDTEC, LLC (“IDTEC”), under which IDTEC agreed to provide personnel, experience, and access to funding to assist with the development of our SOBR device, as well as to sell 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) we had to be current in our reporting requirements under the Securities Exchange Act of 1934, as amended, (ii) we had to complete a reverse stock split of our common stock such that approximately 8,000,000 shares were outstanding immediately prior to closing the transaction, (iii) we could only have outstanding convertible instruments as set forth in the APA, (iv) our authorized common stock had to be reduced to 100,000,000 shares, and (v) we could 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 we issued the 12,000,000 shares to IDTEC in exchange for IDTEC providing access to personnel, experience, funding to assist with the development of our SOBR device, as well as the robotics assets. The description of the APA set forth in this report is qualified in its entirety by reference to the full text of that document and the amendment, which are attached hereto as Exhibits 10.1 and 10.12, respectively.
In advance of closing the Transaction, IDTEC and a few other affiliated parties (i) loaned funds directly to us, (ii) spent funds for the general costs related to the transaction, and/or (iii) spent funds to further develop and enhance the current SOBR product. As a result of closing the transaction, all the funds spent by IDTEC for any reason related to the transaction were turned into a convertible promissory note. The note totaled approximately $1,500,000 at closing, carry a simple interest rate of 10% per annum, are due upon demand, and may be convertible into shares of our 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 promissory note is due on demand of the holder. The repayment of this promissory note is secured by a first priority security lien or security interest in our patents, trademarks, tradenames and other intellectual property described in Exhibit A of the promissory note. The convertible promissory notes we issued are in the form attached hereto as Exhibit 10.13.
As noted above, in connection with the closing of the Transaction, both companies had certain closing conditions under the APA that had to be met. 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. The description of the Waiver Under Asset Purchase Agreement and Post-Closing Covenant Agreement set forth in this report is qualified in its entirety by reference to the full text of that document, which is attached hereto as Exhibit 10.14.
| 28 |
| Table of Contents |
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 we 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, we 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 (which are listed on Exhibit A of the Warrant), 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 description of the Warrant set forth in this report is qualified in its entirety by reference to the full text of that document, which is attached hereto as Exhibit 10.15.
Corporate Overview
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.
| 29 |
| Table of Contents |
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 will not in itself affect any stockholder’s ownership percentage of our common stock, except to the extent that any fractional share is 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, CO 80302, telephone number (844) 762-7723.
The following discussion:
|
| o | summarizes our plan of operation; and |
|
|
|
|
|
| o | analyzes our financial condition and the results of our operations for the three and six months ended June 30, 2021. |
This discussion and analysis should be read in conjunction with our financial statements included as part of this Quarterly Report on Form 10-Q, as well as our financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020.
| 30 |
| Table of Contents |
Results of Operations for Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020
Summary of Results of Operations
|
| Three Months Ended June 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Revenue |
| $ | - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
| 295,966 |
|
|
| 177,915 |
|
Stock-based compensation expense |
|
| 168,375 |
|
|
| - |
|
Management salaries and consulting fees |
|
| 535,815 |
|
|
| 461,864 |
|
Research and development |
|
| 314,532 |
|
|
| 89,570 |
|
Asset impairment adjustment |
|
| - |
|
|
| 25,320,555 |
|
Total operating expenses |
|
| 1,314,688 |
|
|
| 26,049,904 |
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
| (1,314,688 | ) |
|
| (26,049,904 | ) |
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
Loss on extinguishment of debt, net |
|
| - |
|
|
| (297,711 | ) |
Gain on fair value adjustment – derivatives |
|
| - |
|
|
| 61,350 |
|
Interest expense |
|
| (146,028 | ) |
|
| (17,397 | ) |
Amortization of interest – beneficial conversion feature |
|
| (82,001 | ) |
|
| (1,407,501 | ) |
Total other expense, net |
|
| (228,029 | ) |
|
| (1,661,259 | ) |
|
|
|
|
|
|
|
|
|
Net loss |
| $ | (1,542,717 | ) |
| $ | (27,711,163 | ) |
The asset impairment adjustment classified as an operating expense herein was previously reported as other expense, net. As a result, the operating loss previously reported for the three month period ended June 30, 2020 was understated by $25,320,555 and total other expenses, net was overstated by the same amount. The error had no effect on the net loss for the three month period ended June 30, 2020.
Operating Loss; Net Loss
Our net loss decreased by $26,168,446 from $27,711,163 to $1,542,717, from the three-month period ended June 30, 2020 compared to the three-month period ended June 30, 2021. Our operating loss decreased by $24,735,216, from $26,049,904 to $1,314,688 for the same periods. The change in our net loss and operating loss for the three months ended June 30, 2021, compared to the prior year period, is primarily a result of an asset impairment expense related to the assets we acquired from IDTEC during the quarter ended June 30, 2020, partially offset by increases in general and administrative expenses, stock-based compensation expense, management salaries and consulting fees, and research in development, all of which are primarily related to our increased operations during the quarter ended June 30, 2021 compared to June 30, 2020. The increases were partially offset by decreases in our stock-based compensation expense and our interest expense. The changes are detailed below.
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| Table of Contents |
Revenue
We have not had any revenues since our inception. Since September 2011, we have been involved in the development of our patented SOBR® Safe™ system, including, but not limited to, the developing, testing and marketing of SOBR®Check™, our unique alcohol sensor technology. Although we have not had any sales to date, we are planning to be ready to commercialize the SOBR®Check™ device in the third quarter of 2021.
General and Administrative Expenses
General and administrative expenses increased by $118,051, from $177,915 for the three month period ended June 30, 2020 to $295,966 for the three month period ended June 30, 2021, primarily due to increases in facilities rents, marketing and promotion, accounting and other professional fees.
Stock-Based Compensation Expense
We had stock-based compensation expense of $168,375 for the three months ended June 30, 2021, compared to $0 for the three months ended June 30, 2020. The stock-based compensation expense in 2021 was related to the issuance of our common stock as compensation to certain consultants and employees.
Management Salaries and Consulting Fees
Management salaries and consulting fees increased by $73,951, to $535,815 for the three months ended June 30, 2021, compared to $461,864 for the three months ended June 30, 2020. The management salaries and consulting fees in both years were related to salaries and fees paid to our management and consultants.
Research and Development
Research and development increased by $224,962, to $314,532 for the three months ended June 30, 2021, compared to $89,570 for the three months ended June 30, 2020. The increase in research and development was due to the ramp up of expenses to develop our SOBR® Safe™ system, including, but not limited to, the developing and testing of SOBRCheck, our unique alcohol sensor technology, as we prepare to commercialize the device in the near future.
Asset Impairment Adjustment
We had an asset impairment adjustment of $25,320,555 in the three months ended June 30, 2020. We did not have an asset impairment adjustment in the three months ended June 30, 2021. The asset impairment adjustment in 2020 was related to the value of the stock we issued to IDTEC that was attributed to the robotic assets we acquired from IDTEC versus the value of the assets. When we negotiated the transaction with IDTEC in early-to-mid-2019, the agreed to issue IDTEC 12,000,000 shares of our common stock (post-split) in exchange for the consideration they were transferring to us at the close of the transaction. At the time we negotiated the transaction and signed the Asset Purchase Agreement, our common stock was trading at a lower price than what it was trading at when we closed the transaction and issued the shares. As a result, during the three months ended June 30, 2020, we impaired the value of the robotic assets we received in the transaction.
Loss on Extinguishment of Debt, Net
Loss on extinguishment of debt, net was $0 for the three months ended June 30, 2021, compared to $297,711 for the three months ended June 30, 2020. This decrease was due to us converting several notes payable into shares of our common stock during the three months ended June 30, 2020, but none during the three months ended June 30, 2021.
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Gain on Fair Value Adjustment – Derivatives
Gain on fair value adjustment – derivatives was $0 for the three months ended June 30, 2021, compared to $61,350 for the three months ended June 30, 2020. For the period in 2020 the amount is related to us having an outstanding financial instrument that contained an embedded derivative liability. The gain related to the instrument is tied to the price of our common stock.
Interest Expense
Interest expense increased by $128,631, from $17,397 for the three-month period ended June 30, 2020 to $146,028 for the three-month period ended June 30, 2021. For both periods these amounts are largely due to the interest on outstanding debt. The increase between the two periods is largely related to the fact that we had more outstanding debt during the three months ended June 30, 2021 compared to the same period in 2020.
Amortization of Interest – Beneficial Conversion Feature
During the three months ended June 30, 2021, we had amortization of interest – beneficial conversion feature expense of $82,001 compared to $1,407,501 during the three months ended June 30, 2020. The expenses for both periods were related to the amortized discount on convertible notes payable.
Results of Operations for Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020
Summary of Results of Operations
|
| Six Months Ended June 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Revenue |
| $ | - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
| 559,049 |
|
|
| 276,107 |
|
Stock-based compensation expense |
|
| 187,065 |
|
|
| 41,302 |
|
Management salaries and consulting fees |
|
| 1,049,593 |
|
|
| 683,993 |
|
Research and development |
|
| 485,995 |
|
|
| 157,280 |
|
Asset impairment adjustment |
|
| - |
|
|
| 25,320,555 |
|
Total operating expenses |
|
| 2,281,702 |
|
|
| 26,479,237 |
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
| (2,281,702 | ) |
|
| (26,479,237 | ) |
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
Loss on extinguishment of debt, net |
|
| - |
|
|
| (269,144 | ) |
Gain on fair value adjustment – derivatives |
|
| - |
|
|
| 60,650 |
|
Interest expense |
|
| (171,906 | ) |
|
| (65,631 | ) |
Amortization of interest – beneficial conversion feature |
|
| (91,543 | ) |
|
| (1,407,675 | ) |
Total other expense, net |
|
| (263,449 | ) |
|
| (1,681,800 | ) |
|
|
|
|
|
|
|
|
|
Net loss |
| $ | (2,545,151 | ) |
| $ | (28,160,987 | ) |
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| Table of Contents |
The asset impairment adjustment classified as an operating expense herein was previously reported as other expense, net. As a result, the operating loss previously reported for the six month period ended June 30, 2020 was understated by $25,320,555 and total other expenses, net was overstated by the same amount. The error had no effect on the net loss for the six month period ended June 30, 2020.
Operating Loss; Net Loss
Our net loss decreased by $25,615,836 from $28,160,987 to $2,545,151, from the six-month period ended June 30, 2020 compared to the six-month period ended June 30, 2021. Our operating loss decreased by $24,197,535, from $26,479,237 to $2,281,702 for the same periods. The change in our net loss and operating loss for the six months ended June 30, 2021, compared to the prior year period, is primarily a result of an asset impairment expense related to the assets we acquired from IDTEC during the quarter ended June 30, 2020, partially offset by increases in general and administrative expenses, stock-based compensation expense, management salaries and consulting fees, and research in development, all of which are primarily related to our increased operations during the quarter ended June 30, 2021 compared to June 30, 2020. The increases were partially offset by decreases in our stock-based compensation expense and our interest expense. The changes are detailed below.
Revenue
We have not had any revenues since our inception. Since September 2011, we have been involved in the development of our patented SOBR® Safe™ system, including, but not limited to, the developing, testing and marketing of SOBR®Check™, our unique alcohol sensor technology. Although we have not had any sales to date, we are planning to be ready to commercialize the SOBR®Check™ device in the third quarter of 2021.
General and Administrative Expenses
General and administrative expenses increased by $282,942, from $276,107 for the six month period ended June 30, 2020 to $559,049 for the six month period ended June 30, 2021, primarily due to increases in facilities rents, marketing and promotion, accounting and other professional fees.
Stock-Based Compensation Expense
We had stock-based compensation expense of $187,065 for the six months ended June 30, 2021, compared to $41,302 for the six months ended June 30, 2020. The stock-based compensation expense for both periods was related to the issuance of our common stock as compensation to certain consultants and employees.
Management Salaries and Consulting Fees
Management salaries and consulting fees increased by $365,600, to $1,049,593 for the six months ended June 30, 2021, compared to $683,993 for the six months ended June 30, 2020. The management salaries and consulting fees in both years were related to salaries and fees paid to our management and consultants.
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| Table of Contents |
Research and Development
Research and development increased by $328,715, to $485,995 for the six months ended June 30, 2021, compared to $157,280 for the six months ended June 30, 2020. The increase in research and development was due to the ramp up of expenses to develop our SOBR® Safe™ system, including, but not limited to, the developing and testing of SOBRCheck, our unique alcohol sensor technology, as we prepare to commercialize the device in the near future.
Asset Impairment Adjustment
We had an asset impairment adjustment of $25,320,555 in the six months ended June 30, 2020. We did not have an asset impairment adjustment in the six months ended June 30, 2021. The asset impairment adjustment in 2020 was related to the value of the stock we issued to IDTEC that was attributed to the robotic assets we acquired from IDTEC versus the value of the assets. When we negotiated the transaction with IDTEC in early-to-mid-2019, the agreed to issue IDTEC 12,000,000 shares of our common stock (post-split) in exchange for the consideration they were transferring to us at the close of the transaction. At the time we negotiated the transaction and signed the Asset Purchase Agreement, our common stock was trading at a lower price than what it was trading at when we closed the transaction and issued the shares. As a result, during the six months ended June 30, 2020, we impaired the value of the robotic assets we received in the transaction.
Loss on Extinguishment of Debt, Net
Loss on extinguishment of debt, net was $0 for the six months ended June 30, 2021, compared to $269,144 for the six months ended June 30, 2020. This decrease was due to us converting several notes payable into shares of our common stock during the six months ended June 30, 2020, but none during the six months ended June 30, 2021.
Gain on Fair Value Adjustment – Derivatives
Gain on fair value adjustment – derivatives was $0 for the six months ended June 30, 2021, compared to $60,650 for the six months ended June 30, 2020. For the period in 2020 the amount is related to us having an outstanding financial instrument that contained an embedded derivative liability. The gain related to the instrument is tied to the price of our common stock.
Interest Expense
Interest expense increased by $106,275, from $65,631 for the six-month period ended June 30, 2020 to $171,906 for the six-month period ended June 30, 2021. For both periods these amounts are largely due to the interest on outstanding debt. The increase between the two periods is largely related to the fact that we had more outstanding debt during the six months ended June 30, 2021 compared to the same period in 2020.
Amortization of Interest – Beneficial Conversion Feature
During the six months ended June 30, 2021, we had amortization of interest – beneficial conversion feature expense of $91,543 compared to $1,407,675 during the six months ended June 30, 2020. The expenses for both periods were related to the amortized discount on convertible notes payable.
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| Table of Contents |
Liquidity and Capital Resources for Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020
Introduction
During the six months ended June 30, 2021 and 2020, because of our operating losses, we did not generate positive operating cash flows. Our cash on hand as of June 30, 2021 is $609,526 and our monthly cash flow burn rate is approximately $200,000. As a result, we do not have short term cash needs, but need to raise additional funds to finance our long term business plans. Our cash needs are being satisfied through proceeds from the sales of our securities and loans from both related parties and third parties. We currently do not believe we will be able to satisfy our cash needs from our revenues for some time, and there is no guarantee we will be successful in the future satisfying these needs through the proceeds generated from the sales of our securities.
Our cash, current assets, total assets, current liabilities, and total liabilities as of June 30, 2021 and as of December 31, 2020, respectively, are as follows:
|
| June 30, 2021 |
|
| December 31, 2020 |
|
| Change |
| |||
|
|
|
|
|
|
|
|
|
| |||
Cash |
| $ | 609,526 |
|
| $ | 232,842 |
|
| $ | 376,684 |
|
Total Current Assets |
| $ | 651,148 |
|
| $ | 348,072 |
|
| $ | 303,076 |
|
Total Assets |
| $ | 4,096,917 |
|
| $ | 3,986,573 |
|
| $ | 110,344 |
|
Total Current Liabilities |
| $ | 993,883 |
|
| $ | 922,089 |
|
| $ | 71,794 |
|
Total Liabilities |
| $ | 1,200,159 |
|
| $ | 947,089 |
|
| $ | 253,070 |
|
Our current assets increased as of June 30, 2021, as compared to December 31, 2020, primarily due to us having more cash on hand at June 30, 2021, as a result of debt issued during the six months ended June 30, 2021. The increase in our total assets between the two periods is also primarily related to us having more cash on hand at June 30, 2021 compared to December 31, 2020.
Our current liabilities increased as of June 30, 2021, as compared to December 31, 2020. This increase was primarily due to increases in accounts payable and current portion notes payable – non-related parties, partially offset by decreases in accrued expenses, related party payables, and common stock subscriptions payable.
In order to repay our obligations in full or in part when due, we will be required to raise significant capital from other sources. There is no assurance, however, that we will be successful in these efforts.
| 36 |
| Table of Contents |
Sources and Uses of Cash
Operations
We had net cash used in operating activities of $1,628,316 for the six-month period ended June 30, 2021, as compared to net cash used for operating activities of $765,791 for the six-month period ended June 30, 2020. For the period in 2021, the net cash used in operating activities consisted primarily of our net loss of $2,545,151, offset by amortization of $192,732, amortization of interest – beneficial conversion feature of $91,543, stock warrants expense of $111,655, stock options expense of $140,726, and stock-based compensation expense of $187,065, and changes in our assets and liabilities of prepaid expenses of $13,517, accounts payable of $114,809, accrued expenses of ($13,344), accrued interest payable of ($217), related party payables of ($10,120), and common stock subscriptions payable of $88,469. For the period in 2020, the net cash used in operating activities consisted primarily of our net loss of $28,161,037 and change in fair value of derivative liability of $60,650, offset by asset impairment adjustment of $25,320,555, loss on debt extinguishment, net of $269,144, amortization of $33,227, amortization of interest – beneficial conversion feature of $1,407,675, stock warrants expense of $8,656, stock options expense of $296,932, stock-based compensation expense of $41,302, and changes in our assets and liabilities of related party receivables of $6,446, prepaid expenses of $434, other assets of $8,680, accounts payable of $123,736, accrued expenses of $39,644, accrued interest payable of $47,675, and related party payables of $21,740.
Investments
We had no cash provided by or used for investing activities during the six-month period ended June 30, 2021 or June 30, 2020.
Financing
Our net cash provided by financing activities for the six-month period ended June 30, 2021 was $2,005,000, compared to $811,665 for the six-month period ended June 30, 2020. For the six-month period ended June 30, 2021, our net cash from financing activities consisted of proceeds from notes payable – non-related parties of $1,005,000, proceeds from notes payable – related parties of $1,030,000, and repayments of notes payable-related parties of ($30,000). For the six-month period ended June 30, 2020, our net cash from financing activities consisted of proceeds from offering of preferred stock – related parties of $770,000, and proceeds from notes payable – non-related parties of $41,665.
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 filing. Management is actively monitoring the global situation on our 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, we are not able to estimate the effects of the COVID-19 outbreak on our results of operations, financial condition, or liquidity for fiscal year 2021. However, if the pandemic continues, it could have an adverse effect on our results of future operations, financial position, and liquidity in year 2021.
Off Balance Sheet Arrangements
We have no off balance sheet arrangements as of June 30, 2021 and December 31, 2020.
| 37 |
| Table of Contents |
ITEM 3 Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company, we are not required to provide the information required by this Item.
ITEM 4 Controls and Procedures
(a) Evaluation of Disclosure and Controls Procedures
Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Disclosure and control procedures are also designed to ensure that such information is accumulated and communicated to management, including the chief executive officer and chief financial officer, to allow timely decisions regarding required disclosures.
As of June 30, 2021, we carried out an evaluation, under the supervision and with the participation of management, including our chief executive officer (our Principal Executive Officer) and chief financial officer (our Principal Financial Officer), of the effectiveness of the design and operation of our disclosure controls and procedures. In designing and evaluating the disclosure controls and procedures, management recognizes that there are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their desired control objectives. Additionally, in evaluating and implementing possible controls and procedures, management is required to apply its reasonable judgment. We also do not have an audit committee. Based on the evaluation described above, and as a result, in part, of not having an audit committee and having one individual serve as our chief executive officer and another individual serve as our chief financial officer, management has concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were not effective to the same extent as reported in our Annual Report on Form 10-K for the year ended December 31, 2020.
As funds become available to us, we expect to implement additional measures to improve disclosure controls and procedures.
(b) Changes in Internal Controls over Financial Reporting
There was no change in our internal controls over financial reporting that occurred during the period covered by this report, which has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
(c) Officer’s Certifications
Appearing as an exhibit to this quarterly report on Form 10-Q are “Certifications” of our Chief Executive and Financial Officer. The Certifications are required pursuant to Sections 302 of the Sarbanes-Oxley Act of 2002 (the “Section 302 Certifications”). This section of the quarterly report on Form 10-Q contains information concerning the Controls Evaluation referred to in the Section 302 Certifications. This information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.
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| Table of Contents |
PART II – OTHER INFORMATION
ITEM 1 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 May 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.
ITEM 1A Risk Factors
As a smaller reporting company, we are not required to provide the information required by this Item.
ITEM 2 Unregistered Sales of Equity Securities and Use of Proceeds
During the three months ended June 30, 2021 we issued the following unregistered securities:
In the second quarter of 2021, in connection with a $2M securities offering under Rule 506 of Regulation D, we issued convertible promissory notes totaling $905,000 to eleven non-affiliated investors. 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 452,500 shares of our common stock at an exercise price of $3.00 per share, which expire two years from the date of issuance. The issuance of the shares was exempt from registration pursuant to Rule 506 of Regulation D of the Securities Act of 1933. The investors are accredited investors and there was no solicitation.
ITEM 3 Defaults Upon Senior Securities
On December 28, 2010, we borrowed $11,810 from a related party. The note payable carries an interest rate of 0% and matured on December 31, 2012. As of June 30, 2021 this note was in default.
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| Table of Contents |
On February 20, 2012, we borrowed $3,750 from a non-related party. The note payable carries an interest rate of 12% and matured on February 19, 2013. As of June 30, 2021 this note was in default.
On March 20, 2012, we borrowed $5,433 from a non-related party. The note payable carries an interest rate of 12% and matured on March 19, 2013. As of June 30, 2021 this note was in default.
On September 27, 2013, we borrowed $15,000 from a non-related party. The note payable carries an interest rate of 9% and matured on December 25, 2013. As of June 30, 2021 this note was in default.
On March 14, 2014, we borrowed $5,000 from a non-related party. The note payable carries an interest rate of 10% and matured on September 14, 2014. As of June 30, 2021 this note was in default.
On July 31, 2015, we borrowed $2,500 from a non-related party. The note payable carries an interest rate of 10% and matured on November 28, 2015. As of June 30, 2021 this note was in default.
ITEM 4 Mine Safety Disclosures
There have been no events which are required to be reported under this Item.
ITEM 5 Other Information
Regulation D Offering
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.
| 40 |
| Table of Contents |
ITEM 6 Exhibits
| 41 |
| Table of Contents |
101.INS ** |
| Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document). | |||||||
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| |||||||
101.SCH ** |
| Inline XBRL Taxonomy Extension Schema Document. | |||||||
|
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| |||||||
101.CAL ** |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |||||||
|
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| |||||||
101.DEF ** |
| Inline XBRL Taxonomy Extension Definition Linkbase Document. | |||||||
|
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| |||||||
101.LAB ** |
| Inline XBRL Taxonomy Extension Labels Linkbase Document. | |||||||
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| |||||||
101.PRE ** |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |||||||
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| |||||||
104** |
| Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). | |||||||
* Filed herewith.
** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registrati0n statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
| 42 |
| Table of Contents |
(1) | Incorporated by reference from our Registration Statement on Form SB-2, filed with the Commission on January 31, 2008 |
|
|
(2) | Incorporated by reference from our Registration Statement on Form S-1, filed with the Commission on November 6, 2012 |
|
|
(3) | Incorporated by reference from our Annual Report on Form 10-K for the year ended December 31, 2017, filed with the Commission on February 6, 2019 |
|
|
(4) | Incorporated by reference from our Current Report on Form 8-K, filed with the Commission on May 14, 2019. |
|
|
(5) | Incorporated by reference from our Current Report on Form 8-K, filed with the Commission on September 10, 2019. |
|
|
(6) | Incorporated by reference from our Current Report on Form 8-K, filed with the Commission on November 19, 2019 |
|
|
(7) | Incorporated by reference from our Current Report on Form 8-K, filed with the Commission on December 23, 2019 |
|
|
(8) | Incorporated by reference from our Annual Report on Form 10-K, filed with the Commission on April 17, 2020 |
|
|
(9) | Incorporated by reference from our Quarterly Report on Form 10-Q for the period ended June 30, 2020, filed with the Commission on May 26, 2020 |
|
|
(10) | Incorporated by reference from our Current Report on Form 8-K filed with the Commission on June 11, 2020 |
|
|
(11) | Incorporated by reference from our Annual Report on Form 10-K for the period ended December 31, 2020, filed with the Commission on June 30, 2021 |
| 43 |
| Table of Contents |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| SOBR Safe, Inc. |
| |
|
|
|
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Dated: August 16, 2021 |
| /s/ Kevin Moore |
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| By: | Kevin Moore |
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| Its: | Chief Executive Officer and Principal Executive Officer |
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| 44 |
EXHIBIT 31.1
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
I, Kevin Moore, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of SOBR Safe, Inc.; |
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| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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| 3. | Based on my knowledge, the financial statements, and other financial information included in this report fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exhibit Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and |
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| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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| Dated: August 16, 2021 |
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| /s/ Kevin Moore |
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| By: | Kevin Moore |
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| Chief Executive Officer and Principal Executive Officer |
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EXHIBIT 31.2
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
I, David Gandini, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of SOBR Safe, Inc.; |
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| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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| 3. | Based on my knowledge, the financial statements, and other financial information included in this report fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exhibit Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and |
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| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Dated: August 16, 2021 |
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| /s/ David Gandini |
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| By: | David Gandini |
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| Chief Financial Officer and Chief Accounting Officer |
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EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 USC, SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of SOBR Safe, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2021, as filed with the Securities and Exchange Commission on or about the date hereof (the “Report”), I, Kevin Moore, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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| (2) | Information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Dated: August 16, 2021 |
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| /s/ Kevin Moore |
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| By: | Kevin Moore |
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| Chief Executive Officer and Principal Executive Officer |
A signed original of this written statement required by Section 906 has been provided to SOBR Safe, Inc. and will be retained by SOBR Safe, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
EXHIBIT 32.2
CERTIFICATION PURSUANT TO 18 USC, SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of SOBR Safe, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2021, as filed with the Securities and Exchange Commission on or about the date hereof (the “Report”), I, David Gandini, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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| (2) | Information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Dated: August 16, 2021 |
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| /s/ David Gandini |
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| By: | David Gandini |
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| Chief Financial Officer and Chief Accounting Officer |
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A signed original of this written statement required by Section 906 has been provided to SOBR Safe, Inc. and will be retained by SOBR Safe, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
Cover - shares |
6 Months Ended | |
|---|---|---|
Jun. 30, 2021 |
Aug. 13, 2021 |
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| Cover [Abstract] | ||
| Entity Registrant Name | SOBR Safe, Inc | |
| Entity Central Index Key | 0001425627 | |
| Document Type | 10-Q | |
| Amendment Flag | false | |
| Current Fiscal Year End Date | --12-31 | |
| Entity Small Business | true | |
| Entity Shell Company | false | |
| Entity Emerging Growth Company | false | |
| Entity Current Reporting Status | Yes | |
| Document Period End Date | Jun. 30, 2021 | |
| Entity Filer Category | Non-accelerated Filer | |
| Document Fiscal Period Focus | Q2 | |
| Document Fiscal Year Focus | 2021 | |
| Entity Common Stock Shares Outstanding | 25,981,203 | |
| Document Quarterly Report | true | |
| Document Transition Report | false | |
| Entity Interactive Data Current | Yes | |
| Entity File Number | 000-53316 | |
| Entity Incorporation State Country Code | DE | |
| Entity Tax Identification Number | 26-0731818 | |
| Entity Address Address Line 1 | 885 Arapahoe Avenue | |
| Entity Address City Or Town | Boulder | |
| Entity Address State Or Province | CO | |
| Entity Address Postal Zip Code | 80302 | |
| City Area Code | 844 | |
| Local Phone Number | 762-7723 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
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| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) | ||||
| Revenues | $ 0 | $ 0 | $ 0 | $ 0 |
| Operating expenses: | ||||
| General and administrative | 295,966 | 177,915 | 559,049 | 276,107 |
| Stock-based compensation expense | 168,375 | 0 | 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 | 0 | 25,320,555 | 29,222,955 | 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) |
| Other income (expense): | ||||
| Loss on extinguishment of debt, net | 0 | (297,711) | 86,739 | (269,144) |
| Gain on fair value adjustment - derivatives | 0 | 61,350 | 0 | 60,650 |
| Interest expense | (146,028) | (17,397) | (171,906) | (65,631) |
| Amortization of interest - beneficial conversion features | (82,001) | (1,407,501) | (91,543) | (1,407,675) |
| Total other expense, net | (228,029) | (1,661,259) | (263,449) | (1,681,800) |
| Loss before provision for income taxes | (1,542,717) | (27,711,163) | (2,545,151) | (28,161,037) |
| Provision for income taxes | 0 | 0 | 0 | 0 |
| Net loss | (1,542,717) | (27,711,163) | (2,545,151) | (28,161,037) |
| Net loss attributable to noncontrolling interest | 4 | 199 | 98 | 50 |
| Net loss attributable to SOBR Safe, Inc. | $ (1,542,713) | $ (27,710,964) | $ (2,545,053) | $ (28,160,987) |
| Basic and diluted loss per common share | $ (0.06) | $ (2.45) | $ (0.10) | $ (2.97) |
| Weighted average number of common shares outstanding | 25,978,390 | 11,330,815 | 25,970,402 | 9,484,508 |
ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
6 Months Ended | |||||||||
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Jun. 30, 2021 | ||||||||||
| ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||||||||||
| NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 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, TransBiotec 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 TransBiotec 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 14C 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.
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 unaudited condensed 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”). These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes for the year ended December 31, 2020, included in the Company’s Annual Report on Form 10-K filed with the SEC on March 31, 2021.
In management’s opinion, the unaudited condensed consolidated financial statements reflect all adjustments (including reclassifications and normal recurring adjustments) necessary to present fairly the financial position as of June 30, 2021 and December 31, 2020, and results of operations and cash flows for the three and six month periods ended June 30, 2021 and 2020.
Principles of Consolidation The accompanying unaudited condensed 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 unaudited condensed financial statements. Use of Estimates The preparation of unaudited condensed 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 recoverability and useful lives of long-lived assets, the intellectual technology, the valuation of the derivative liabilities, beneficial conversion feature expenses, stock-based compensation and the valuation allowance related to deferred tax assets. 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.
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 June 30, 2021 and December 31, 2020. Cash held by escrow agent related to Offering proceeds is readily available to the Company with no restrictions, see Note 2.
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. 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 June 30, 2021 and December 31, 2020. 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.
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 common stock 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 $485,995 and $157,280 during the six month periods ended June 30, 2021 and 2020, respectively.
Advertising and Marketing Costs Advertising and marketing costs are charged to operations as incurred. Advertising and marketing costs were $59,500 and $34,973 during the six month periods ended June 30, 2021 and 2020, respectively, and are included in general and administrative expenses in the consolidated statements of operations.
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 not recorded any deferred tax assets or liabilities at June 30, 2021 and December 31, 2020 as these have been offset by a 100% valuation allowance. 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 June 30, 2021 and December 31, 2020, the Company had no amounts in excess of the FDIC insured limits.
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 evaluated the adoption of ASU 2020-08 guidance and determined no effects on the Company's financial position, results of operations and cash flows.
In May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entitiy’s Own Equity (Subtpoic 815-40), which addresses issuer’s accounting for certain modifications or exchanges of freestanding equity-classified written call options. This amendment is effective for all entities, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted. The Company is evaluating the effects, if any, of the adoption of ASU 2021-04 guidance on the Company's financial position, results of operations and cash flows. Correction of Error
While preparing financial statements for periods in 2021, 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 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 three and six month periods ended June 30, 2020 in the accompanying financial statements has been retroactively restated. |
GOING CONCERN |
6 Months Ended |
|---|---|
Jun. 30, 2021 | |
| GOING CONCERN | |
| NOTE 2. GOING CONCERN | 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 June 30, 2021, the Company has an accumulated deficit of approximately $52,146,000. During the six months ended June 30, 2021, the Company also experienced negative cash flows from operating activities of approximately $1,628,000 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.
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 per share, and a Warrant to purchase 25,000 shares of the Company’s common stock at $3 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 closed on May 31, 2021 and raised $2,005,000, see Note 7. As of June 30, 2021, the Company has received $1,505,000 of the Offering proceeds, of which $500,000 is readily available in the cash escrow account.
We will need additional funds beyond the money raised in this Offering. 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 an 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 June 30, 2021. 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 June 30, 2021. |
ASSET PURCHASE |
6 Months Ended | |||||||||||||||||||||||||
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Jun. 30, 2021 | ||||||||||||||||||||||||||
| ASSET PURCHASE | ||||||||||||||||||||||||||
| NOTE 3. ASSET PURCHASE | 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.
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:
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. |
PREPAID EXPENSES |
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| NOTE 4. PREPAID EXPENSES | NOTE 4. PREPAID EXPENSES
Prepaid expenses consist of the following:
On February 26, 2021, the Company entered into a new lease agreement for its office facility for a 12-month term beginning March 1, 2021. In addition to monthly base rent of $6,000, the agreement requires the issuance on 16,000 shares of its common stock valued at $49,600, all of which has been issued as of June 30, 2021. |
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INTANGIBLE ASSETS |
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| NOTE 5. INTANGIBLE ASSETS | NOTE 5. INTANGIBLE ASSETS
Intangible assets consist of the following at June 30, 2021:
Amortization expense for the six-month period ended June 30, 2021 and 2020 was $192,732 and 32,122, respectively, and is included in general and administrative expenses in the consolidated statements of operations.
Estimated future amortization expense for device technology intangible assets is as follows:
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RELATED PARTY TRANSACTIONS |
6 Months Ended |
|---|---|
Jun. 30, 2021 | |
| RELATED PARTY TRANSACTIONS | |
| NOTE 6. RELATED PARTY TRANSACTIONS | NOTE 6. RELATED PARTY TRANSACTIONS
On July 1, 2015, the Company amended a December 3, 2014, note payable agreement with Lanphere Law Group, a related party and shareholder, which forgave $108,000 of a 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 three months ended March 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. 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.
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 former 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.
On February 12, 2021, the Company entered into a note payable agreement with David Gandini, an officer and shareholder, under which Mr. Gandini advanced the Company $30,000 for working capital purposes. The unsecured note carried interest at 0% and was paid in April 2021.
On March 30, 2021, the Company received notification from IDTEC that it was exercising a portion of the 320,000 warrants issued resulting from the Waiver Under Asset Purchase Agreement and Post-Closing Covenant Agreement with IDTEC. The warrant exercise price is $0.50 per share. With the proceeds of the exercise we paid $88,469 during the six-month period ended June 30, 2021 to settle an outstanding judgement (see Note 13) against the Company which was considered as a non-permitted liability under the Post-Closing Covenant Agreement. We will issue 176,938 shares of our common stock for the $88,469 we received from IDTEC to pay the settlement. As the shares had not been issued by June 30, 2021, the amount received from IDTEC is included in the common stock subscriptions payable balance at June 30, 2021.
On March 3 and 31, 2021, the Company issued convertible notes payable (see Note 7) totaling $450,000 to existing shareholders holding a direct or indirect interest in the Company and $100,000 to a Company’s director and another director’s family member. The principal amount of the secured convertible debentures are convertible at $3 per share, and include warrants to purchase in total 275,000 shares of the Company’s common stock at $3 per share.
On May 31, 2021, the Company issued convertible notes payable (see Note 7) totaling $400,000 to existing shareholders holding a direct or indirect interest in the Company and $50,000 to a Company’s officer. The principal amount of the secured convertible debentures are convertible at $3 per share, and include warrants to purchase in total 225,000 shares of the Company’s common stock at $3 per share. |
NOTES PAYABLE |
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| NOTES PAYABLE | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NOTE 7. NOTES PAYABLE | NOTE 7. NOTES PAYABLE
RELATED PARTIES
Related party notes payable consist of the following:
Total interest expense for related party notes was $24,904 and $42,161 for the six month period ended June 30, 2021 and 2020, respectively.
Related Party Convertible Notes Payable with Warrants
The Company has thirteen convertible notes payable to related parties, each with detached free-standing warrants to purchase the Company’s common stock at $3 per share, that have a total principal balance of $1,000,000 as of June 30, 2021. The notes, secured by the Company’s patents and patents applications, include interest at 12%, are convertible at $3 per share of the Company’s common stock and are due 24 months after issuance. The note holders may elect to have the interest paid in cash monthly or have the interest accrue and be payable on the maturity date. Interest elected to be accrued 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 notes contain both voluntary and automatic conversion features. The notes will be convertible at any time, by the holders, beginning on the date of issuance. However, the holders may not convert any outstanding amounts due under the note if at the time of such conversion the amount of common stock issued for the conversion, when added to other shares of Company common stock owned by the holders or which can be acquired by holders upon exercise or conversion of any other instrument, would cause the holder to own more than 4.9% of the Company’s outstanding common stock. Beginning on the issuance date, the outstanding principal amount of the note, and any accrued interest, will automatically convert into shares of the Company’s common stock if the Company’s common stock closes at or above $6 per share for five (5) consecutive trading days while listed on NASDAQ. The Company evaluated the convertible notes payable for derivative embedded and beneficial conversion features. The Company determined that there were beneficial conversion features to record. The total beneficial conversion feature debt discount of $448,999 is amortized over the life of the convertible notes payable. The debt discount amortization expense recorded as amortization of interest – beneficial conversion feature in the consolidated statements of operations was $46,155 for the six-month period ended June 30, 2021. As of June 30, 2021, these notes carry outstanding warrants of 500,000. The relative fair market value of the related stock warrants granted during the six-month period ended June 30, 2021 and 2020 was $551,001 and none, respectively. The unamortized discount at June 30, 2021 and December 31, 2020 is $494,759 and none, respectively. Stock warrants amortization expense recorded as interest expense was $56,242 for the six-month period ended June 30, 2021.
Related Party Convertible Notes Payable
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.
Related Party Non-convertible Notes Payable
The Company has one non-convertible note payable to a related party that has a principal balance of $11,810 as of June 30, 2021 and December 31, 2020. The note carries an interest rate at 0%. The note payable had a due date of December 31, 2012 and is currently in default. NON-RELATED PARTIES
Non-related party notes payable consist of the following:
Total interest expense for non-related party notes was $31,614 and $10,885 for the six-month periods ended June 30, 2021 and 2020, respectively.
Convertible Notes Payable with Warrants
The Company has sixteen convertible notes payable to non-related parties, each with detached free-standing warrants to purchase the Company’s common stock at $3 per share, that have a total principal balance of $1,005,000 as of June 30, 2021. The notes, secured by the Company’s patents and patents applications, include interest at 12%, are convertible at $3 per share of the Company’s common stock and are due 24 months after issuance. The note holders may elect to have the interest paid in cash monthly or have the interest accrue and be payable on the maturity date. Interest elected to be accrued 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 notes contain both voluntary and automatic conversion features. The notes will be convertible at any time, by the holders, beginning on the date of issuance. However, the holders may not convert any outstanding amounts due under the note if at the time of such conversion the amount of common stock issued for the conversion, when added to other shares of Company common stock owned by the holders or which can be acquired by holders upon exercise or conversion of any other instrument, would cause the holder to own more than 4.9% of the Company’s outstanding common stock. Beginning on the issuance date, the outstanding principal amount of the note, and any accrued interest, will automatically convert into shares of the Company’s common stock if the Company’s common stock closes at or above $6 per share for five (5) consecutive trading days while listed on NASDAQ. The Company evaluated the convertible notes payable for derivative embedded and beneficial conversion features. The Company determined that there were beneficial conversion features to record. The total beneficial conversion feature debt discount of $460,215 is amortized over the life of the convertible notes payable. The debt discount recorded as amortization of interest – beneficial conversion feature in the consolidated statements of operations was $45,388 for the six-month period ended June 30, 2021. As of June 30, 2021, these notes carry outstanding warrants of 502,500. The relative fair market value of the related stock warrants granted during the six-month period ended June 30, 2021 and 2020 was $541,707 and none, respectively. The unamortized discount at June 30, 2021 and December 31, 2020 was $486,294 and none, respectively. Stock warrants amortization expense recorded as interest expense was $55,413 for the six-month period ended June 30, 2021. Convertible Notes Payable
The Company has three convertible notes payable to non-related parties that have a principal balance of $56,683 as of June 30, 2021 and December 31, 2020. These notes carry interest rates ranging from 5% - 12% and have due dates ranging from 2/19/2013 – 3/06/2022. Two of the three notes are currently in default. These notes carry conversion prices ranging from $1.99- $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 prior to 2020.
During the three months ended March 31, 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 the three months ended March 31, 2020, the Company 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 as of June 30, 2021, and December 31, 2020. These notes carry interest rates ranging from 5% - 10% and have due dates ranging from 12/25/2013 - 6/06/2022. Two of the three notes are currently 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 as of June 30, 2021 and December 31, 2020. 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. |
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DERIVATIVE LIABILITY |
6 Months Ended |
|---|---|
Jun. 30, 2021 | |
| DERIVATIVE LIABILITY | |
| NOTE 8. DERIVATIVE LIABILITY | NOTE 8. 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 bifurcated the conversion feature of the note and recorded a derivative liability.
The embedded derivatives 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 consolidated 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 at December 31, 2020. Utilizing level 3 inputs, the Company recorded a fair market value gain of none and $60,650 for the six months ended June 30, 2021 and 2020, respectively. |
STOCK SUBSCRIPTIONS PAYABLE |
6 Months Ended |
|---|---|
Jun. 30, 2021 | |
| STOCK SUBSCRIPTIONS PAYABLE | |
| NOTE 9. STOCK SUBSCRIPTIONS PAYABLE | NOTE 9. STOCK SUBSCRIPTIONS PAYABLE
The Company has common stock subscriptions payable due to related parties of $91,613 payable with 193,856 of its common shares at June 30, 2021. The Company has common stock subscriptions payable due to related parties of $111,024 payable with 60,087 of its common shares at December 31, 2020.
The Company has common stock subscriptions payable due to non-related parties of $117,741 payable with 87,500 of its common shares at June 30, 2021 and December 31,2020. |
COMMON STOCK |
6 Months Ended |
|---|---|
Jun. 30, 2021 | |
| COMMON STOCK | |
| NOTE 10. COMMON STOCK | NOTE 10. COMMON STOCK
The Company’s common stock transactions for the six months ended June 30, 2020, consist of the following:
The Company issued 601 shares of its common stock for compensation for services rendered.
The Company issued 454,097 shares of its common stock 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.
The Company issued 214,883 shares of its common stock for the settlement of related party payables of $714,700. A related party gain of approximately $222,000 was recorded as additional paid-in capital from the stock issuance. The Company issued 38,323 shares of its common stock for the settlement of accounts payables and accrued expenses of approximately $127,000. The Company recorded a net gain of approximately $27,000 from the stock issuance.
The Company issued 648,739 shares of its common stock 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 as additional paid in-capital as a result of the stock issuance.
The Company issued 70,448 shares of its common stock 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.
The Company agreed to convert 121,072 shares of its common stock at values between $0.5821 to $1.039 per share to non-related parties in exchange for their agreement to settle payable balances of $91,464 owed to them. The conversion was in full satisfaction of all outstanding amounts owed. The Company recorded a non-related party loss of $81,867 as other expense in the consolidated statements of operations.
The Company issued 45,268 shares of its common stock to related parties in exchange for their agreement to settle related party accounts payable of $137,496 owed to them. The shares were issued at a value of $86,739 and recorded a related party gain of $50,741 to additional paid-in-capital.
The Company issued 12,000,000 shares of its common stock valued at $2.26 as result of the Transaction with IDTEC (see Note 3).
The Company’s common stock transactions for the six months ended June 30, 2021, consist of the following:
The Company issued 43,169 shares of its common stock to SOBR Safe, LLC, an entity controlled by a beneficial owner of the Company, in full satisfaction of $107,880 of accrued dividends resulting from the December 2020 conversion of the Series A-1 Convertible Preferred Stock into common shares, see Note 11.
The Company issued 16,000 shares of its common stock valued at $49,600 to its landlord under the terms of a lease agreement expiring in February 2022. The amount has been recorded as prepaid expense and amortized monthly over the lease term as general and administrative expense in the consolidated statement of operations. |
PREFERRED STOCK |
6 Months Ended |
|---|---|
Jun. 30, 2021 | |
| PREFERRED STOCK | |
| NOTE 11. PREFERRED STOCK | NOTE 11. PREFERRED STOCK
On November 20, 2015, the Company’s Board of Directors authorized a class of stock designated as preferred stock with a par value of $0.00001 per share comprising 25,000,000 shares, 3,000,000 shares of which were classified as Series A Convertible Preferred Stock. In each calendar year, the holders of the Series A Convertible Preferred Stock are entitled to receive, when, as and if, declared by the Board of Directors, out of any funds and assets of the Company legally available, non-cumulative dividends, in an amount equal to any dividends or other Distribution on the common stock in such calendar year (other than a Common Stock Dividend). No dividends (other than a Common Stock Dividend) shall be paid and no distribution shall be made with respect to the common stock unless dividends shall have been paid or declared and set apart for payment to the holders of the Series A Convertible Preferred Stock simultaneously. Dividends on the Series A Convertible Preferred Stock shall not be mandatory or cumulative, and no rights or interest shall accrue to the holders of the Series A Convertible Preferred Stock by reason of the fact that the Company shall fail to declare or pay dividends on the Series A Convertible Preferred Stock, except for such rights or interest that may arise as a result of the Company paying a dividend or making a distribution on the common stock in violation of the terms. The holders of each share of Series A Convertible Preferred Stock then outstanding shall be entitled to be paid, out of the Available Funds and Assets, and prior and in preference to any payment or Distribution (or any setting part of any payment or Distribution) of any Available Funds and Assets on any shares of common stock, and equal in preference to any payment or Distribution (or any setting part of any payment or Distribution) of any Available Funds and Assets on any shares of any other series of preferred stock that have liquidation preference, an amount per share equal to the Original Issue Price of the Series A Convertible Preferred Stock plus all declared but unpaid dividends on the Series A Convertible Preferred Stock. A reorganization, or any other consolidation or merger of the Company with or into any other corporation, or any other sale of all or substantially all of the assets of the Company, shall not be deemed a liquidation, dissolution, or winding up of the Company. Shares of the Series A Convertible Preferred Stock are convertible at a 35% discount rate to the average closing price per share of the Company’s common stock (either as listed on a national exchange or as quoted over-the-market) for the last 15 trading days immediately prior to conversion. However, no conversions of the Series A Convertible Preferred Stock to shares of common stock can occur unless the average closing price per share of the Company’s common stock (either as listed on a national exchange or as quoted over-the-market) for the last 15 trading days immediately prior to conversion is at least $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. 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 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 of Series A-1 Convertible Preferred Stock.
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, which were issued in January 2021. |
STOCK WARRANTS AND STOCK OPTIONS |
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| NOTE 12. STOCK WARRANTS AND STOCK OPTIONS | NOTE 12. STOCK WARRANTS AND STOCK OPTIONS
Stock Warrants
The Company accounts for employee stock options and 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.
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 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 June 30, 2021 and December 31, 2020 are 144,317. 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, at 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.
During March, April and May 2021, the Company issued through the Offering convertible notes payable with warrants, see Note 7, to purchase up to 1,002,500 shares of our common stock at an exercise price of $3 per share. The warrants expire two years after the date of issuance.
The total outstanding balance of all stock warrants in the Company is 1,409,879 and 584,317 at June 30, 2021 and December 31 2020, respectively. There were 1,002,500 detached free-standing stock warrants granted during the six-month period ended June 30, 2021, and 320,000 detached free-standing stock warrants granted during the six month period ended June 30, 2020. The fair value of these non-employee stock warrants granted during the six-month periods ended June 30, 2021 and 2020 totaled $1,092,708 and $695,454, respectively, and were determined using the Black-Scholes option pricing model based on the following assumptions:
The following table summarizes the changes in the Company’s outstanding warrants during the six-month period ended June 30, 2021 and 2020, and as of June 30, 2021 and 2020:
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 June 30, 2021 and December 31, 2020, the Company has granted stock options to acquire 2,909,422 and 2,521,921 shares of common stock under the plan, respectively. As of June 30, 2021, the plan has 1,600,986 vested shares and 1,308,436 non-vested shares. As of December 31, 2020, the plan had 1,202,724 vested shares and 1,319,197 non-vested shares. As of June 30, 2021 and December 31, 2020 the plan has options available to be issued of 939,045 and 1,326,546, respectively. The stock options are held by our officers, directors, employees, and certain key consultants. In total for the six months ended June 30, 2021 and 2020, the Company recorded $243,023 and $296,932, respectively, of share-based compensation expense related to stock options and restricted stock units. The unrecognized compensation expense as of June 30, 2021, was approximately $1,325,000 for non-vested share-based awards to be recognized over periods of approximately one 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 six-month period ended June 30, 2021 and 2020 were as follows:
The following table summarizes the changes in the Company’s outstanding stock options during the six-month period ended June 30, 2021 and 2020, and as of June 30, 2021 and 2020:
Executive Stock Options
The Company has 1,328,230 and 981,771 outstanding executive stock options exercisable at $0.2634 to $3.38 per share as of June 30, 2021, and December 31, 2020, respectively. |
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COMMITMENTS AND CONTINGENCIES |
6 Months Ended |
|---|---|
Jun. 30, 2021 | |
| COMMITMENTS AND CONTINGENCIES | |
| NOTE 13. COMMITMENTS AND CONTINGENCIES | NOTE 13. COMMITMENTS AND CONTINGENCIES
Operating Leases 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 lease was subsequently canceled to accommodate additional space, and a new lease was executed February 26, 2021, effective for a 12-month term beginning March 1, 2021. The lease requires monthly base rent payments of $6,000 and the issuance of 16,000 shares of the Company’s common stock. The value of the common stock of $49,600 is amortized to rent expense on a monthly basis over the lease term. The Company also leases an office space for approximately $1,800 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 $65,197 and $42,348 for the six-month period ended June 30, 2021 and 2020, respectively.
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 the date of this report. As of June 30, 2021, and December 31, 2020, the Company has accrued $11,164 plus accrued interest of approximately $17,000. 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 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 $28,786 plus accrued interest of approximately $53,000, which had 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 $85,000 including accrued interest through settlement date and legal fees of approximately $3,000. IDTEC agreed, in connection with us closing the asset purchase transaction with IDTEC, to pay the amounts for us in exchange for shares of our common stock. |
SUBSEQUENT EVENTS |
6 Months Ended |
|---|---|
Jun. 30, 2021 | |
| SUBSEQUENT EVENTS | |
| NOTE 14. SUBSEQUENT EVENTS | NOTE 14. SUBSEQUENT EVENTS
The Company has evaluated subsequent events for recognition and disclosure through August 16, 2021, which is the date the condensed consolidated financial statements were available to be issued, and has determined that there are no other material subsequent events that require recognition or disclosure in the accompanying condensed consolidated financial statements. |
ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
6 Months Ended |
|---|---|
Jun. 30, 2021 | |
| ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
| Basis of Presentation | The accompanying unaudited condensed 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”). These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes for the year ended December 31, 2020, included in the Company’s Annual Report on Form 10-K filed with the SEC on March 31, 2021.
In management’s opinion, the unaudited condensed consolidated financial statements reflect all adjustments (including reclassifications and normal recurring adjustments) necessary to present fairly the financial position as of June 30, 2021 and December 31, 2020, and results of operations and cash flows for the three and six month periods ended June 30, 2021 and 2020. |
| Principles of consolidation | The accompanying unaudited condensed 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 unaudited condensed financial statements. |
| Use of Estimates | The preparation of unaudited condensed 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 recoverability and useful lives of long-lived assets, the intellectual technology, the valuation of the derivative liabilities, beneficial conversion feature expenses, stock-based compensation and the valuation allowance related to deferred tax assets. 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. |
| 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 June 30, 2021 and December 31, 2020. Cash held by escrow agent related to Offering proceeds is readily available to the Company with no restrictions, see Note 2. |
| 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. |
| 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 June 30, 2021 and December 31, 2020. 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. |
| 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 common stock 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 $485,995 and $157,280 during the six month periods ended June 30, 2021 and 2020, respectively. |
| Advertising and Marketing Costs | Advertising and marketing costs are charged to operations as incurred. Advertising and marketing costs were $59,500 and $34,973 during the six month periods ended June 30, 2021 and 2020, respectively, and are included in general and administrative expenses in the consolidated statements of operations. |
| 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 not recorded any deferred tax assets or liabilities at June 30, 2021 and December 31, 2020 as these have been offset by a 100% valuation allowance. |
| 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 June 30, 2021 and December 31, 2020, the Company had no amounts in excess of the FDIC insured limits. |
| 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 evaluated the adoption of ASU 2020-08 guidance and determined no effects on the Company's financial position, results of operations and cash flows.
In May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entitiy’s Own Equity (Subtpoic 815-40), which addresses issuer’s accounting for certain modifications or exchanges of freestanding equity-classified written call options. This amendment is effective for all entities, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted. The Company is evaluating the effects, if any, of the adoption of ASU 2021-04 guidance on the Company's financial position, results of operations and cash flows. |
| Correction of Error | While preparing financial statements for periods in 2021, 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 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 three and six month periods ended June 30, 2020 in the accompanying financial statements has been retroactively restated. |
ASSET PURCHASE (Tables) |
6 Months Ended | |||||||||||||||||||||||||
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Jun. 30, 2021 | ||||||||||||||||||||||||||
| ASSET PURCHASE | ||||||||||||||||||||||||||
| Summary of closing transactions |
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PREPAID EXPENSES (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PREPAID EXPENSES | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of prepaid expenses |
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INTANGIBLE ASSETS (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| INTANGIBLE ASSETS | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Intangible Assets |
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| Schedule of estimated future amortization expense |
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NOTES PAYABLE (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NOTES PAYABLE | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of notes payables - related parties |
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| Schedule of notes payables - non related parties |
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STOCK WARRANTS AND STOCK OPTIONS (Tables) |
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Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| STOCK WARRANTS AND STOCK OPTIONS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of fair value of non-employee stock/warrants |
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| Schedule of fair value of stock options |
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| Schedule of outstanding options |
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ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) |
1 Months Ended | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||
|---|---|---|---|---|---|---|---|
May 21, 2020 |
Mar. 23, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
Dec. 31, 2020 |
|
| Research and development costs | $ 314,532 | $ 89,570 | $ 485,995 | $ 157,280 | |||
| Impairment loss | 39,434 | 25,320,555 | |||||
| Loss from operation | (1,314,688) | $ (26,049,904) | (2,281,702) | (26,479,237) | $ (25,359,989) | ||
| Advertising and marketing costs | $ 59,500 | $ 34,973 | |||||
| Valuation allowance, percentage | 100.00% | 100.00% | |||||
| FDIC insured limit | $ 250,000 | $ 250,000 | |||||
| Ownership interest, percentage | 1.38% | 1.38% | 1.38% | ||||
| Common stock, shares authorized | 100,000,000 | 100,000,000 | 100,000,000 | ||||
| Common stock, par value | $ 0.00001 | $ 0.00001 | $ 0.00001 | ||||
| Annual Meeting of Shareholders [Member] | |||||||
| Common stock, shares authorized | 100,000,000 | 800,000,000 | 800,000,000 | ||||
| Common stock, par value | $ 0.00001 | $ 0.00001 | $ 0.00001 | ||||
| Description of reverse stock split | 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 | 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). | |||||
GOING CONCERN (Details Narrative) - USD ($) |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Mar. 31, 2021 |
Jun. 30, 2021 |
Jun. 30, 2020 |
Dec. 31, 2020 |
|
| Accumulated deficit | $ (52,146,273) | $ (49,601,220) | ||
| Net cash used in operating activities | $ (1,628,000) | (1,628,316) | $ (765,791) | |
| Private Offering [Member] | January 15, 2021 [Member] | ||||
| Additional offering amount | 500,000 | |||
| Termination date description | 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 per share, and a Warrant to purchase 25,000 shares of the Company’s common stock at $3 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 closed on May 31, 2021 and raised $2,005,000, see Note 7. As of June 30, 2021 | |||
| Offering amount | $ 1,505,000 | |||
ASSET PURCHASE (Details) |
Jun. 05, 2020
USD ($)
|
|---|---|
| ASSET PURCHASE | |
| 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 |
ASSET PURCHASE (Details Narrative) - USD ($) |
3 Months Ended | 6 Months Ended | |||||
|---|---|---|---|---|---|---|---|
Jun. 05, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
May 31, 2021 |
Mar. 31, 2021 |
|
| Liability required | $ 125,000 | $ 158,000 | $ 158,000 | ||||
| Exercise price per share | $ 0.50 | ||||||
| Market price of shares | $ 27,120,000 | ||||||
| Assets purchase upon shares issued | $ 29,222,955 | 1,407,051 | $ 1,407,051 | ||||
| Assets purchase upon shares issued, shares | 12,000,000 | ||||||
| Common stock issuable upon exercise of warrant, shares | 320,000 | ||||||
| Asset impairment loss | 0 | $ 25,320,555 | $ 29,222,955 | $ 25,320,555 | |||
| Fair value of warrants issued | $ 695,454 | $ 695,454 | |||||
| Description of fair value of assets evaluation | 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 | ||||||
| Convertible Notes Payable | $ 225,000 | $ 275,000 | |||||
| Asset Purchase Agreement [Member] | IDTEC [Member] | |||||||
| Common stock, shares issued upon assets purchase | 12,000,000 | ||||||
| Convertible notes, conversion price | $ 0.50 | $ 0.50 | |||||
| Interest rate | 10.00% | ||||||
| Convertible Notes Payable | $ 1,485,189 | $ 1,485,189 | |||||
PREPAID EXPENSES (Details) - USD ($) |
Jun. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| ASSET PURCHASE | ||
| Consulting services | $ 0 | $ 111,860 |
| Rent | 33,067 | 0 |
| Insurance | 8,555 | 3,370 |
| Prepaid expenses | $ 41,622 | $ 115,230 |
PREPAID EXPENSES (Details Narrative) - USD ($) |
6 Months Ended | |
|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
|
| Rent | $ 65,197 | $ 42,348 |
| Lease Agreement [Member] | ||
| Prepaid expenses with common shares | $ 49,600 | |
| Common stock issued | 16,000 | |
| Rent | $ 6,000 | |
INTANGIBLE ASSETS (Details) - USD ($) |
6 Months Ended | |
|---|---|---|
Jun. 30, 2021 |
Dec. 31, 2020 |
|
| Intangible assets, net | $ 3,437,089 | $ 3,629,821 |
| Intellectual Technology [Member] | ||
| Intangible assets, gross | 3,854,675 | |
| Accumulated amortization | 417,586 | |
| Intangible assets, net | $ 3,437,089 | |
| Amortization Period | 10 years |
INTANGIBLE ASSETS (Details 1) |
Jun. 30, 2021
USD ($)
|
|---|---|
| INTANGIBLE ASSETS | |
| 2022 | $ 385,467 |
| 2023 | 385,467 |
| 2024 | 385,467 |
| 2025 | 385,467 |
| 2026 | 385,467 |
| Thereafter | $ 1,509,754 |
INTANGIBLE ASSETS (Details Narrative) - USD ($) |
6 Months Ended | |
|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
|
| INTANGIBLE ASSETS | ||
| Amortization expense | $ 192,732 | $ 33,227 |
NOTES PAYABLE (Details) - USD ($) |
Jun. 30, 2021 |
May 31, 2021 |
Mar. 31, 2021 |
Dec. 31, 2020 |
|---|---|---|---|---|
| Net Related Party Notes Payable | $ 11,810 | $ 11,810 | ||
| Net Long-Term Portion | $ 225,000 | $ 275,000 | ||
| Related Party Notes Payable [Member] | ||||
| Convertible Notes Payable with Detached Free-standing Warrants | 1,000,000 | 0 | ||
| Conventional Non-Convertible Notes Payable | 11,810 | 11,810 | ||
| Unamortized Debt Discount | (897,603) | 0 | ||
| Net Related Party Notes Payable | 114,207 | 11,810 | ||
| Current portion | (11,810) | (11,810) | ||
| Net Long-Term Portion | $ 102,397 | $ 0 |
NOTES PAYABLE (Details 1) - USD ($) |
Jun. 30, 2021 |
May 31, 2021 |
Mar. 31, 2021 |
Dec. 31, 2020 |
|---|---|---|---|---|
| Net Long-Term Portion | $ 225,000 | $ 275,000 | ||
| Non-Related Party Notes Payable [Member] | ||||
| Convertible Notes Payable with Detached Free-standing Warrants | $ 1,005,000 | $ 0 | ||
| Convertible Notes Payable | 56,683 | 56,683 | ||
| Conventional Non-Convertible Notes Payable | 42,500 | 42,500 | ||
| Notes Payable with Detached Free-standing Warrants | 5,000 | 5,000 | ||
| Unamortized Debt Discount | (901,121) | 0 | ||
| Net Non-Related Party Notes Payable | 208,062 | 104,183 | ||
| Current portion | (104,183) | (79,183) | ||
| Net Long-Term Portion | $ 103,879 | $ 25,000 |
STOCK SUBSCRIPTIONS PAYABLE (Details Narrative) - USD ($) |
Jun. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Common stock shares subscriptions, amount | $ 209,354 | $ 253,688 |
| Due To Related Parties [Member] | ||
| Common stock shares subscriptions, amount | $ 91,613 | $ 111,024 |
| Common stock shares subscriptions, shares | 193,856 | 60,087 |
| Non-Related Party Notes Payable [Member] | ||
| Common stock shares subscriptions, amount | $ 117,741 | $ 117,741 |
| Common stock shares subscriptions, shares | 87,500 | 87,500 |
PREFERRED STOCK (Details Narratve) - USD ($) |
1 Months Ended | 12 Months Ended | |||||
|---|---|---|---|---|---|---|---|
Dec. 07, 2020 |
Aug. 08, 2019 |
Dec. 31, 2020 |
Jun. 30, 2021 |
May 07, 2020 |
Dec. 09, 2019 |
Nov. 20, 2015 |
|
| Accrued dividends payable | $ 107,880 | ||||||
| Preferred stock, shares authorized | 19,300,000 | 19,300,000 | 25,000,000 | ||||
| Preferred stock, par value | $ 0.00001 | $ 0.00001 | |||||
| Series A-1 Convertible Preferred stock [Member] | |||||||
| Preferred stock, shares authorized | 2,700,000 | 2,700,000 | |||||
| Conversion of preferred stock shares | 2,700,000 | ||||||
| Converted shares of common stock | 2,700,000 | ||||||
| Preferred stock shares sold | 2,700,000 | ||||||
| Preferred stock, par value | $ 0.00001 | $ 0.00001 | |||||
| Series A Convertible Preferred Stock [Member] | |||||||
| Preferred stock, shares authorized | 3,000,000 | 3,000,000 | 3,000,000 | ||||
| Preferred stock, par value | $ 0.00001 | $ 0.00001 | $ 0.00001 | ||||
| Preferred stock conversion description | Series A Convertible Preferred Stock are convertible at a 35% discount rate to the average closing price per share of the Company’s common stock (either as listed on a national exchange or as quoted over-the-market) for the last 15 trading days immediately prior to conversion. However, no conversions of the Series A Convertible Preferred Stock to shares of common stock can occur unless the average closing price per share of the Company’s common stock (either as listed on a national exchange or as quoted over-the-market) for the last 15 trading days immediately prior to conversion is at least $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 | ||||||
| SOBR SAFE, LLC [Member] | Asset purchase agreement [Member] | |||||||
| Convertible preferred stock issuable | 2,700,000 | ||||||
| SOBR SAFE, LLC [Member] | Series A-1 Preferred Stock Purchase Agreement [Member] | Series A-1 Convertible Preferred stock [Member] | SOBR's Director company [Member] | |||||||
| Preferred stock, shares authorized | 2,000,000 | ||||||
| Right of dividend | 8.00% | ||||||
| Shares issuance price | $ 1 | ||||||
| Preferences and rights of preferred stock | (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 |
STOCK WARRANTS AND STOCK OPTIONS (Details) - $ / shares |
6 Months Ended | |
|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
|
| Volatility | 180.00% | |
| Risk free interest rate | 0.13% | |
| Maximum [Member] | ||
| Exercise Price | $ 3.38 | |
| Volatility | 158.00% | |
| Risk free interest rate | 0.14% | |
| Minimum [Member] | ||
| Exercise Price | $ 2.77 | |
| Volatility | 152.00% | |
| Risk free interest rate | 0.16% | |
| Warrants [Member] | ||
| Dividend yield | 0.00% | 0.00% |
| Exercise Price | $ 3.00 | $ 0.50 |
| Volatility | 158.00% | 153.00% |
| Life of warrants | 2 years | 5 years |
| Risk free interest rate | 0.29% | |
STOCK WARRANTS AND STOCK OPTIONS (Details 2) - $ / shares |
6 Months Ended | |
|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
|
| Expected volatility | 180.00% | |
| Risk free interest rate | 0.13% | |
| Stock Options [Member] | ||
| Expected life | 5 years | |
| Expected volatility | 153.00% | |
| Dividend yield | 0.00% | 0.00% |
| Risk free interest rate | 0.29% | |
| Weighted average exercise price per share | $ 2.00 | |
| Maximum [Member] | ||
| Exercise Price | $ 3.38 | |
| Expected life | 5 years | |
| Risk free interest rate | 0.34% | |
| Expected volatility | 158.00% | |
| Risk free interest rate | 0.14% | |
| Minimum [Member] | ||
| Exercise Price | $ 2.77 | |
| Expected life | 2 years | |
| Risk free interest rate | 0.27% | |
| Expected volatility | 152.00% | |
| Risk free interest rate | 0.16% | |
COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) |
6 Months Ended | |||||
|---|---|---|---|---|---|---|
Oct. 15, 2019 |
Jun. 30, 2021 |
Jun. 30, 2020 |
Mar. 31, 2021 |
Dec. 31, 2020 |
Dec. 06, 2006 |
|
| Rent expense | $ 65,197 | $ 42,348 | ||||
| Contract settlement amount | $ 11,164 | |||||
| Due to related party | 18,504 | $ 28,624 | ||||
| Prepaid expenses with common shares | 49,600 | $ 0 | ||||
| Short Term Lease Agreement [Member] | Highland School [Member] | ||||||
| Lease expiration term | Oct. 31, 2020 | |||||
| Short Term Lease Agreement [Member] | Highland School [Member] | Minimum [Member] | ||||||
| Operating lease, monthly payment | $ 2,800 | |||||
| Short Term Lease Agreement [Member] | Highland School [Member] | Maximum [Member] | ||||||
| Operating lease, monthly payment | $ 2,900 | |||||
| Short Term Operating Lease [Member] | ||||||
| Operating lease, monthly payment | $ 1,800 | |||||
| Issuance of common stock | 16,000 | |||||
| Rent payments, monthly | $ 6,000 | |||||
| Prepaid expenses with common shares | 49,600 | |||||
| California [Member] | ||||||
| Contract settlement amount | $ 85,000 | |||||
| Legal fees | 3,000 | |||||
| Due to related party | $ 28,786 | |||||
| Accrued interest | $ 53,000 | |||||