SOBR Safe(SOBR) - 2023 Q4 - Annual Report

Financial Performance - The company has generated limited revenue since the first quarter of 2022, with initial revenues from the SOBRsure™ device starting in October 2023[26]. - As of December 31, 2023, the company reported an accumulated deficit of $87,765,981, indicating ongoing financial challenges[49]. - Revenue for the year ended December 31, 2023, was$157,292, a significant increase from $35,322 in 2022, representing a growth of 345$62,350, with a gross margin of 39.6%, compared to a gross profit of $16,007 and a margin of 45.3$10,214,721 in 2023 from $12,354,930 in 2022, reflecting a reduction of$2,140,209[166]. - General and administrative expenses rose to $6,350,723 in 2023, up from$6,024,001 in 2022, primarily due to increased payroll and benefits[169]. - The cost of goods sold for 2023 was $94,942, compared to$19,315 in 2022[165]. - Stock-based compensation expense decreased to $2,245,871 in 2023 from$3,008,395 in 2022, attributed to reduced issuance of stock options and restricted stock units[170]. - Research and development expenses fell by $380,751 to$1,016,302 in 2023, down from $1,397,053 in 2022, due to the finalization of the SOBRsureTM wearable device[171]. - Interest expense decreased significantly by$2,652,746 to $804,261 in 2023 from$3,457,007 in 2022, mainly due to a one-time debt default penalty in the prior year[176]. - Cash on hand as of December 31, 2023, was $2,790,147, with a normalized monthly operating cash flow burn rate of approximately$425,000[177]. - Total current assets decreased to $3,371,470 in 2023 from$9,025,717 in 2022, a reduction of $5,654,247, primarily due to cash usage to support negative cash flow from operations[179]. - Net cash used in operating activities was$5,928,076 in 2023, compared to $6,156,172 in 2022, with a net loss of$10,214,721 offset by non-cash items[181]. - Net cash provided by financing activities dropped to $139,226 in 2023 from$13,852,901 in 2022, reflecting a significant decrease in capital raised[183]. - Total liabilities increased to $4,164,502 in 2023 from$2,821,684 in 2022, an increase of $1,342,818[179]. Business Operations - The company has engaged six channel partners to enhance sales and marketing efforts, serving six business customers with SOBRsafe™ devices and services[36]. - The SOBRcheck™ revenue model includes a one-time purchase price per device and a recurring monthly SaaS fee per user[30]. - The wearable band SOBRsure™ became available for sale in late September 2023, with initial revenues generated in October 2023[26]. - The company is focused on developing and commercializing alcohol detection devices based on its SOBRsafe™ technology, which is critical for its business plan[52]. - The company has entered the behavioral health and judicially-mandated market, differentiating itself from competitors focused on breathalyzers and ankle monitors[32]. - The company’s technology allows for non-invasive alcohol detection, which may not be subject to government regulation in targeted markets[39]. - The introduction of the SOBR Safe™ technology aims to penetrate markets like fleet management and alcohol rehabilitation, but market acceptance is essential for success[60]. - Supply chain stability is crucial, as delays or unavailability of critical components could negatively impact customer contracts and revenue[61]. - The company relies on third-party manufacturers for production, and any failure to meet quality and timeliness requirements could harm business growth[64]. - The ability to expand sales and marketing efforts is vital for increasing the customer base and achieving broader market acceptance[76]. - The company must maintain strong product performance and reliability to achieve profitability objectives and avoid customer dissatisfaction[78]. Compliance and Regulatory Issues - As of December 31, 2023, the company's stockholders' equity was below the Nasdaq minimum requirement of$2,500,000[95]. - The company's common stock traded below $1.00 per share for over 30 consecutive business days, receiving a deficiency letter from Nasdaq on November 15, 2023[93]. - The company has been provided an initial period of 180 calendar days until May 13, 2024, to regain compliance with the Bid Price Requirement[93]. - If compliance is not regained by the Compliance Date, the company may be eligible for an additional 180 calendar day compliance period[94]. Corporate Governance - The company has identified material weaknesses in internal controls, including insufficient segregation of duties and lack of documentation[86]. - Enhancements to internal controls were necessary during fiscal 2023 to eliminate identified weaknesses[86]. - The company may face significant influence from major stockholders, with Gary Graham and Cord Carpenter owning approximately 12.4$46 million[202]. - Christopher Whitaker became CFO in January 2024, having served as VP of Finance since February 2022, with a background in managing financial operations for multinational corporations[204]. - The company employs 14 full-time employees as of March 29, 2024, primarily operating from its corporate offices in Colorado[40]. - The company anticipates hiring an expert in licensing and integration in 2024 to support global expansion efforts[144]. - The company has a Chief Financial Officer with an annual base salary of $175,000 and incentive stock options to acquire 66,667 shares at an exercise price of$7.755[133]. Financing Activities - The company is currently evaluating opportunities to increase stockholders' equity, including capital financing and debt conversion inducement options[95]. - The company raised $3,000,000 from a Debt Offering on March 9, 2023, issuing Convertible Notes and Warrants, with net proceeds of approximately$2,500,000 after costs[120]. - The company completed a PIPE Offering on September 30, 2022, raising approximately $6 million, issuing 1,925,677 Non Pre-Funded Units and 2,128,378 Pre-Funded Units[121]. - The company issued 1,750,225 Armistice Warrants on September 30, 2022, as a result of entering into the PIPE Offering[122]. - The company issued 150,000 shares of common stock for Restricted Stock Units that vested during 2023, exempt from registration under Section 4(a)(2) of the Securities Act of 1933[116]. - On May 10, 2023, noteholders converted$341,999 into 150,000 shares of common stock at a conversion price of $2.28 per share[117]. - The company has never issued dividends to common stockholders and does not expect to pay any in the foreseeable future[135]. - The company entered into a six-month agreement with a consultant on January 1, 2023, issuing 225,000 shares of restricted common stock and 225,000 warrants[120].