SOBR 10-Q
SOBR Safe, Inc. (SOBR)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _______________ to _______________.
Commission file number:
(Exact name of registrant as specified in its charter) |
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(State or other jurisdiction of incorporation or organization) |
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(Address of principal executive offices) |
| (Zip Code) |
Registrant’s telephone number, including area code (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading Symbol(s) |
| Name of each exchange on which registered |
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| The |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☐ | Smaller reporting company | ||
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of August 13, 2026, there were
SOBR SAFE, INC.
TABLE OF CONTENTS
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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| Table of Contents |
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 information currently available to management. Forward-looking statements include the information concerning our possible or assumed future results of operation and events set forth under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements include, but are not limited to, statements regarding our outlook, guidance, expectations, beliefs, hopes, intentions and strategies, in which words such as “may,” “if,” “will,” “should,” “intend,” “expect,” “anticipate,” “plan,” “believe,” “estimate,” “project,” “consider,” or similar expressions are used to identify these forward looking statements.
Forward-looking statements are subject to a number of risks, uncertainties, assumptions and other factors that may cause our actual results, performance and achievements to be materially different. Forward-looking statements are not guarantees of future performance, and we undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Readers are cautioned not to put undue reliance on any forward-looking statements. Future actual results, performance, achievements, events and stockholder values may differ materially from those expressed or implied in these forward-looking statements. The risks, uncertainties, assumptions and other factors that could cause actual results to differ from the results predicted or implied by forward-looking statements include factors discussed in our filings with the SEC, including those disclosed under captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2025 Form 10-K and our Quarterly Reports on Form 10-Q (including this Quarterly Report).
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| Table of Contents |
PART I – FINANCIAL INFORMATION
ITEM 1 Condensed Consolidated Financial Statements
The unaudited condensed consolidated balance sheets as of June 30, 2026, and December 31, 2025, the unaudited condensed consolidated statements of operations for the three and six months ended June 30, 2026, and 2025, the unaudited condensed consolidated statements of changes in stockholders’ equity (deficit) for the three and six months ended June 30, 2026, and 2025, and the unaudited condensed consolidated statements of cash flows for the six months ended June 30, 2026, and 2025, follow. The unaudited condensed consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary to present a fair statement of the results for the interim periods presented. All such adjustments are of a normal and recurring nature.
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SOBR SAFE, INC. | ||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
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| December 31, |
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ASSETS |
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Current assets |
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Cash |
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Accounts receivable, net |
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Inventory |
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Prepaid expenses |
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Other current assets |
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Total current assets |
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Property and equipment, net |
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Intellectual technology, net |
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Operating lease right-of-use assets, net |
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Other assets |
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Total Assets |
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LIABILITIES & STOCKHOLDERS’ EQUITY (DEFICIT) |
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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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Deferred revenue |
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Operating lease liabilities, current portion |
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Notes payable - related parties, net |
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Notes payable - non-related parties, net |
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Total current liabilities |
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Total Liabilities |
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Commitments and contingencies |
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Stockholders’ Equity (Deficit) |
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Common stock, $ |
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Treasury stock, at cost; |
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Additional paid-in capital |
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Accumulated deficit |
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Total SOBR Safe, Inc. stockholders’ equity (deficit) |
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Noncontrolling interest |
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Total Stockholders’ Equity (Deficit) |
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Total Liabilities and Stockholders’ Equity |
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The accompanying notes are an integral part of the condensed consolidated financial statements.
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| Table of Contents |
SOBR SAFE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
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| For The Three Months Ended June 30, |
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| For The Six Months Ended June 30, |
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Revenues |
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Cost of goods and services |
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Gross profit (loss) |
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Operating expenses: |
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General and administrative |
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Stock-based compensation expense |
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Research and development |
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Asset impairment loss |
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Total operating expenses |
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Loss from operations |
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Other income (expense): |
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Other income, net |
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Interest expense |
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Total other income (expense), net |
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Loss before provision for income taxes |
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Provision for income taxes |
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Net loss |
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Net loss attributable to noncontrolling interest |
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Net loss attributable to SOBR Safe, Inc. |
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Deemed dividends related to Convertible Debt Warrants down round provision |
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Deemed dividends related to 2024 PIPE Warrants down round provision |
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Deemed Dividends related to 2024 PIPE Warrants round down provision |
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Net loss attributable to common stockholders |
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Basic and diluted loss per common share |
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Weighted average number of common shares outstanding |
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The accompanying notes are an integral part of the condensed consolidated financial statements.
| 6 |
| Table of Contents |
SOBR SAFE, INC. |
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited) |
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| Common Stock |
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| Treasury Stock |
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| Stockholders' |
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| Amount ($0.00001 Par) |
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| Amount |
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| Additional Paid-in Capital |
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| Accumulated Deficit |
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| Equity SOBR Safe, Inc. |
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| Noncontrolling Interest |
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| Total Stockholders’ Equity |
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Balance at December 31, 2024 |
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Paid in capital - fair value of stock options and restricted stock units vested |
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Deemed dividends related to 2024 PIPE Warrants down round provision |
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Deemed dividends related to Convertible Debt Warrants down round provision |
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Deemed dividends related to 2024 PIPE Warrants down round provision |
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Common stock issued upon exercise of warrants |
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Net loss |
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Balance at March 31, 2025 |
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Paid in capital - fair value of stock options and restricted stock units vested |
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True-up payment related to 2024 PIPE Warrants |
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Additional common stock issued upon reverse stock split |
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Adjustment to common stock to $0.00001 par value upon reverse stock split |
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Net loss |
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Balance at June 30, 2025 |
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| Common Stock |
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| Treasury Stock |
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| Stockholders' |
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| Amount ($0.00001 Par) |
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| Amount |
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| Additional Paid-in Capital |
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| Accumulated Deficit |
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| Equity SOBR Safe, Inc. |
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| Noncontrolling Interest |
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| Total Stockholders’ Equity (Deficit) |
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Balance at December 31, 2025 |
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Paid in capital - fair value of stock options and restricted stock units vested |
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Common stock issued upon exercise of warrants |
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Net loss |
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Balance at March 31, 2026 |
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Paid in capital - fair value of stock options and restricted stock units vested |
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Common stock issued upon exercise of warrants |
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Net loss |
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Balance at June 30, 2026 |
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The accompanying notes are an integral part of the condensed consolidated financial statements.
| 7 |
| Table of Contents |
SOBR SAFE, INC. | ||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
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| For The Six Months Ended |
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| June 30, |
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| 2026 |
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| 2025 |
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| (Unaudited) |
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Operating Activities: |
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Net loss |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Amortization and depreciation |
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Non-cash lease expense |
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Non-cash interest expense |
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Non-cash disposal of obsolete inventory |
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Non-cash asset impairment loss |
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Bad debt expense |
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Stock-based compensation expense |
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Changes in assets and liabilities: |
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Accounts receivable |
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Inventory |
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Prepaid expenses |
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Other assets |
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Accounts payable |
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Accrued expenses |
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Accrued interest payable |
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Deferred revenue |
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Operating lease liabilities |
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| ( | ) |
|
| ( | ) |
|
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|
Net cash used in operating activities |
|
| ( | ) |
|
| ( | ) |
|
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|
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|
Financing Activities: |
|
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|
Repayments of notes payable - non-related parties |
|
| ( | ) |
|
| ( | ) |
Proceeds from exercise of stock warrants |
|
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| ||
Payment of transactional costs for exercise of warrants |
|
|
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|
| ( | ) | |
Net cash provided by financing activities |
|
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| ||
|
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Net Change In Cash |
|
| ( | ) |
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| |
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|
Cash At The Beginning Of The Period |
|
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| ||
|
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|
Cash At The End Of The Period |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Schedule Of Non-Cash Investing And Financing Activities: |
|
|
|
|
|
|
|
|
True-up payment accrual related to 2024 PIPE Warrants |
| $ |
|
| $ | ( | ) | |
Deemed dividends related to Convertible Debt Warrants down round provision |
| $ |
|
| $ | ( | ) | |
Deemed dividends related to 2024 PIPE Warrants down round provision |
| $ |
|
| $ | ( | ) | |
Deemed dividends related to 2024 PIPE warrants round down provision |
| $ |
|
| $ | ( | ) | |
|
|
|
|
|
|
|
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|
Supplemental Disclosure: |
|
|
|
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|
|
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|
Cash paid for interest |
| $ |
|
| $ |
| ||
Cash paid for income taxes |
| $ |
|
| $ |
| ||
The accompanying notes are an integral part of the condensed consolidated financial statements.
| 8 |
| Table of Contents |
SOBR SAFE, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2026
NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SOBR Safe, Inc., a Delaware corporation, (the “Company,” “we,” “us,” and “our”) is a hardware and software company headquartered in Denver, Colorado. Our Company integrates proprietary software, SOBRsafeTM, with our patent pending touch-based alcohol detection products, SOBRcheckTM and SOBRsureTM, enabling non-invasive alcohol monitoring and detection, biometric identity verification, and qualified, real-time cloud-based alerts and reporting. Currently our principal markets are located in North America.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements included herein have been prepared in accordance with generally accepted accounting principles (“GAAP”) as promulgated in the United States of America and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). These unaudited condensed consolidated financial statements and the notes thereto should be read in conjunction with the Company’s audited consolidated financial statements and related notes for the year ended December 31, 2025, included in the Company’s Annual Report on Form 10-K filed with the SEC on April 10, 2026.
In management’s opinion, the unaudited condensed consolidated financial statements reflect all adjustments (including reclassifications and normal recurring adjustments) necessary to present fairly the Company’s financial position as of June 30, 2026, and December 31, 2025, and its results of operations for the six months ended June 30, 2026 and 2025, and cash flows for the six-months ended June 30, 2026, and 2025.
Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its majority-owned subsidiary, TransBiotec-CA (“TBT”), of 98.6%. We have eliminated all intercompany transactions and balances between entities consolidated in these unaudited condensed consolidated financial statements.
Use of Estimates
The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Specifically, such estimates were made by the Company for the recoverability and useful lives of long-lived assets, intellectual technology, stock-based compensation and the valuation allowance related to deferred tax assets. Actual results could differ from those estimates.
Financial Instruments
The Company is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The fair value hierarchy is based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The hierarchy is broken down into three levels based on reliability of the inputs as follows:
Level I: Inputs that reflect unadjusted quoted prices in active markets that are accessible to SOBRsafe for identical assets or liabilities.
Level II: 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 III: Applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
The Company’s financial instruments consist primarily of cash, accounts receivable, accounts payable, accrued expenses, accrued interest payable, related party payables, notes payable, and other liabilities. The Company believes that the recorded values of our financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.
At June 30, 2026 and December 31, 2025, the Company did not have financial instruments requiring valuation from observable or unobservable inputs to determine fair value on a recurring basis.
| 9 |
| Table of Contents |
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less as cash equivalents. The Company does not have any cash equivalents at June 30, 2026, and December 31, 2025.
Accounts Receivable
Customer accounts are monitored for potential credit losses based upon management’s assessment of expected collectability and the allowance for doubtful accounts is reviewed periodically to assess the adequacy of the allowance. In making this assessment, management takes into consideration any circumstances of which the Company is aware regarding a customer’s inability to meet its financial obligations to the Company, and any potential prevailing economic conditions and their impact on the Company’s customers. The Company had $
Inventory
Inventory is comprised of component parts and finished product, and is valued at the lower of cost or net realizable value. The cost of substantially all the Company’s inventory is determined by the FIFO cost method. The Company evaluates the valuation of inventory and periodically adjusts the value for estimated excess based upon estimates of future demand and market conditions, and obsolete inventory based upon otherwise damaged or impaired goods. The Company had no reserves for obsolescence at June 30, 2026, and December 31, 2025.
Prepaid Expenses
Amounts incurred in advance of contractual performance or coverage periods are recorded as prepaid assets and recognized as expense in the period service or coverage is provided.
Debt Issuance Costs
Debt issuance costs incurred in connection with the issuance of debt are capitalized and amortized to interest expense over the term of the debt using the effective interest method. The unamortized amount is presented as a reduction of debt on the unaudited condensed consolidated balance sheet.
Preferred Stock
Preferred shares subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. The Company classifies 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, the Company classifies preferred shares in stockholders’ equity.
Noncontrolling Interest
A subsidiary of the Company, TBT, has minority members representing ownership interests of
Long-Lived Assets
The Company records intangible assets based on estimated fair value on the date of acquisition. Long-lived assets consist of net property and equipment and intangible assets. The finite-lived intangible assets are intellectual property and are amortized on a straight-line basis over the estimated lives of the assets.
The Company assesses impairment of long-lived assets when events or changes in circumstances indicate that their carrying value amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: (i) significant decreases in the market price of the asset; (ii) significant adverse changes in the business climate or legal or regulatory factors; (iii) or, expectations that the asset will more likely than not be sold or disposed of significantly before the end of its estimated useful life.
If the estimated future discounted cash flows, excluding interest charges, from the use of an asset are less than the carrying value, a write-down would be recorded to reduce the related asset to its estimated fair value.
Impairment of Long-Lived Assets
Long-lived assets and identifiable intangibles held for use are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the sum of undiscounted expected future cash flows is less than the carrying amount of the asset or if changes in facts and circumstances indicate, an impairment loss is recognized and measured using the asset’s fair value. An impairment loss of $
| 10 |
| Table of Contents |
Revenue Recognition
The Company enters contracts with customers and generates revenue through various combinations of software products and services which include the sale of cloud-based software solutions, monitoring, detection and data collection hardware devices, and cloud-based data reporting and analysis services. Depending on the combination of products and services detailed in the respective customer contract, the identifiable components may be highly interdependent and interrelated with each other such that each is required to provide the substance of the value of the Company’s offering and accounted for as a combined performance obligation, or the specific components may be generally distinct and accounted for as separate performance obligations. Revenue is recognized when control of these software products and/or services are transferred to the customer in an amount that reflects the consideration the Company expects to be entitled to in exchange for respective services and devices.
The Company determines revenue recognition through five steps which include: (1) identification of the contract or contracts with a customer; (2) identification of individual or combined performance obligations contained in the contract; (3) determination of the transaction price detailed within the contract; (4) allocation of the transaction price to the specific performance obligations; (5) recognition of revenue as the Company’s performance obligations are satisfied according to the terms of the contract.
Contracts with a Single License/Service Performance Obligation
For contracts with a single performance obligation consisting of a license and/or data services, the entire transaction price is allocated to the single performance obligation. Where the Company provides a performance obligation as licensed software or data services, revenue is recognized upon delivery of the software or services ratably over the respective term of the contract.
Contracts for Purchase of Hardware Devices Only
Where hardware devices are sold separately by the Company, the entire transaction price is allocated to the device as an individual performance obligation and revenue recognized at a point in time when either legal title, physical possession, or the risks and rewards of ownership have transferred to the customer. Generally, these requirements are satisfied at the point in time the Company ships the product, as this is when the customer obtains control of the asset under SOBR’s standard terms and conditions of the purchase.
Contracts with Multiple Performance Obligations
Where a Company’s contract with a respective customer contains multiple performance obligations and due to the interdependent and interrelated nature of the licensed software, hardware devices and data reporting services, the Company accounts for the individual performance obligations if they are distinct in nature and the transaction price is allocated to each distinct performance obligation(s) on a directly observable standalone sales price basis. Determining whether products and services are distinct performance obligations that should be accounted for separately or combined as one unit of accounting may require significant judgment. Standalone selling prices are primarily based upon the price at which the performance obligation is sold separately. The Company may be able to establish a standalone sales price based upon observable products or services sold or priced separately in comparable circumstances, competitor pricing or similar customers. Where the performance obligations are either not distinct or directly observable, the Company estimates the standalone sales price of the performance obligations based upon the overall pricing objectives taking into consideration the value of the contract arrangement, number of licenses, number and types of hardware devices and the length of term of the contract. Professional judgement may be required to determine the standalone sales price for each performance obligation where not directly observable. Revenue for contracts with multiple performance obligations is recognized on a ratable basis for each respective performance obligation as allocated under the prescribed Transaction Price identification model applied.
The Company requires customers to make payments related to subscribed software licenses and data services on a monthly basis via authorized bank account ACH withdrawal or an automatic credit card charge during the approved term of the respective agreement. The collectability of future cash flows are reasonably assured with any potential non-payment easily identified with future services being discontinued or suspended due to non-payment.
The Company’s contracts are generally three to twelve months in duration, billed monthly, and non-cancelable. The timing of revenue recognition may differ from the timing of invoicing to customers. The Company generally has an unconditional right to consideration when customers are invoiced, and a receivable is recorded. A contract asset (unbilled revenue) is recognized when revenue is recognized prior to invoicing, or a contract liability (deferred revenue) when revenue will be recognized subsequent to invoicing.
The Company has elected to charge shipping, freight, and delivery costs to customers who choose expedited shipping options as a source of revenue to offset respective costs when control has transferred to the customer.
The Company reports revenue net of sales and other taxes collected from customers to be remitted to government authorities.
Estimated costs for the Company’s standard one-year warranty are charged to cost of goods and services when revenue is recorded for the related product. Royalties are also charged to cost of goods and services.
| 11 |
| Table of Contents |
Leases
The Company determines if an arrangement is or contains a lease at inception. Leases with an initial term of twelve months or less are considered short-term leases and are not recognized on the Company’s unaudited condensed consolidated balance sheet. Right-of-use (“ROU”) assets and liabilities are recognized on the unaudited condensed consolidated balance sheet for leases with an expected term greater than twelve months. Operating lease ROU assets represent our right to use an underlying asset over the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at inception based on the present value of lease payments over the lease term. When the rate implicit in the lease is not determinable, the Company uses its estimated secured incremental borrowing rate in determining the present value of lease payments. The lease expense for fixed lease payments is recorded on a straight-line basis over the lease term and variable lease payments are included in the lease expense when the obligation for those payments is incurred. The Company has elected not to separate lease and non-lease components.
Stock-based Compensation
The Company uses the fair-value based method to determine compensation for all arrangements under which employees and others receive shares of stock or equity instruments (warrants, options, and restricted stock units). The fair value of each warrant and option is estimated on the date of grant using the Black-Scholes options pricing model that uses assumptions for expected volatility, expected dividends, expected term, and the risk-free interest rate. The Company has not paid dividends historically and does not expect to pay them in the future. Expected volatilities are based on weighted averages of the historical volatility of the Company’s common stock estimated over the expected term of the awards. The expected term of options granted is derived using the “simplified method” which computes expected term as the average of the sum of the vesting term plus the contract term as historically the Company had limited activity surrounding its awards. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the period of the expected term. The grant date fair value of a restricted stock unit equals the closing price of our common stock on the trading day of the grant date.
Research and Development
Research and development costs are expensed as incurred. The Company incurs research and development costs as it acquires new knowledge to bring about significant improvements in the functionality and design of its products and software.
Advertising and Marketing Costs
Advertising and marketing costs are charged to operations as incurred. Advertising and marketing costs were $
Income Tax
Deferred taxes are provided on an asset and liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The Company has not recorded any deferred tax assets or liabilities at June 30, 2026, and December 31, 2025, as these have been offset by a
| 12 |
| Table of Contents |
Loss Per Share
Basic 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, restricted stock units, warrants and convertible instruments. Diluted net loss per share excludes all potentially issuable shares if their effect is anti-dilutive. Because the effect of the Company’s dilutive securities is anti-dilutive, diluted net loss per share is the same as basic loss per share for the periods presented.
The following outstanding and potentially issuable shares at June 30, 2026 and 2025, have been excluded from the computation of diluted weighted shares outstanding, as they could have been anti-dilutive:
|
| June 30, |
|
| June 30, |
| ||
|
| 2026 |
|
| 2025 |
| ||
Stock options |
|
|
|
|
|
| ||
Restricted stock units |
|
| - |
|
|
|
| |
Warrants |
|
|
|
|
|
| ||
Convertible instruments |
|
|
|
|
|
| ||
Total dilutive securities |
|
|
|
|
|
| ||
Concentration of Credit Risk
Credit Risk – Financial instruments that potentially subject the Company to concentration of credit risk consisted primarily of cash. The Company maintains its cash at two domestic financial institutions. The Company is exposed to credit risk in the event of a default by the financial institutions to the extent that cash balances are in excess of the amount insured by the Federal Deposit Insurance Corporation of up to $
Concentration of Customers – To date, the Company's sales have been concentrated among a limited number of customers in the business-to-business ("B2B") segment, while its eCommerce sales are more diversified and do not present the same level of customer concentration risk. As a result, the Company's overall revenue may experience significant period-to-period fluctuations due to its reliance on a small number of B2B customers. The reduction in the Company’s dedicated B2B sales team may impair the Company's ability to maintain existing relationships with its concentrated B2B customer base, respond to their needs, or identify and secure new B2B customers to replace lost revenue, particularly to the extent institutional knowledge and customer relationships resided with the departed personnel. The Company cannot provide assurance that its remaining personnel, alternative sales strategies, or reliance on eCommerce channels will be sufficient to offset any resulting decline in B2B revenue. Revenue could decline materially if the Company loses one or more key B2B customers or is unable to secure new customers, even as it maintains a broader, less concentrated presence in the eCommerce market.
Concentration of Suppliers – The Company relies on a limited number of component and contract suppliers to assemble and distribute its product. If supplier shortages occur, or quality problems arise, production and distribution schedules could be significantly delayed or costs significantly increased, which could in turn have a material adverse effect on the Company’s financial condition, results of operations and cash flows.
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 management and policies of the Company.
Recently Adopted Accounting Standards
The Company has reviewed recently issued, but not yet effective, accounting pronouncements and does not believe the future adoptions of any such pronouncements will be expected to cause a material impact on its financial condition or the results of operations.
Reclassifications
Certain prior period amounts have been reclassified to conform with the current period presentation. None of these reclassifications had a material impact on the condensed consolidated financial statements.
| 13 |
| Table of Contents |
NOTE 2. GOING CONCERN
The Company has incurred recurring losses and negative cash flows from operations since inception. As of June 30, 2026, the Company had an accumulated deficit of approximately $112,685,000 and negative cash flows from operating activities of approximately $4,360,000 for the six months then ended. As of June 30, 2026, the Company had cash of approximately $
On March 19, 2026, the Company received a deficiency letter from the Nasdaq Listing Qualifications Department indicating that it no longer satisfied the $1.00 minimum bid price requirement under Nasdaq Listing Rule 5550(a)(2). Because the Company's prior reverse stock splits exceeded the cumulative threshold under Listing Rule 5810(c)(3)(A), it was not eligible for the standard 180-day compliance period. The Company timely appealed Nasdaq's determination, which stayed any suspension or delisting action pending a hearing. Following a hearing held April 28, 2026, the Nasdaq Hearings Panel granted the Company's request for continued listing until September 15, 2026, conditioned on the Company completing its proposed merger with Clean World Ventures, Inc. ("CWV") and demonstrating compliance with Nasdaq's initial listing requirements by that date. There can be no assurance that the Company will satisfy these conditions or otherwise regain or maintain compliance. Management also expects that stockholders' equity may fall below Nasdaq's minimum continued-listing requirement absent additional capital or improved results. A delisting would materially impair the Company's access to the public capital markets and to future financing.
During the six months ended June 30, 2026, the Company initiated a restructuring program reducing its workforce by
On April 24, 2026, the Company entered into a merger agreement with CWV, pursuant to which CWV will become a wholly owned subsidiary of the Company. Upon closing, former CWV shareholders are expected to hold approximately 98% of the combined company and existing Company shareholders approximately 2%. Completion of the merger remains subject to a number of conditions outside the Company's control, including effectiveness of a Form S-4 registration statement, approval by the stockholders of both companies, Nasdaq approval, and other regulatory and contractual requirements, and accordingly management cannot conclude that completion is probable. On July 16, 2026, the Company completed a warrant inducement transaction generating approximately $
These conditions and events, when considered in the aggregate, raise substantial doubt about the Company's ability to continue as a going concern within one year after the issuance date of these financial statements. This includes recurring losses, negative operating cash flows, the accumulated deficit, limited liquidity, the Nasdaq listing uncertainty, the planned discontinuation of the Company's legacy operations, and the uncertainty surrounding completion of the pending merger. While management has taken steps intended to improve liquidity, including the workforce reductions and cost-reduction measures described above, the July 2026 financing, and pursuit of the merger, these plans are not considered probable of being effectively implemented and of mitigating the underlying conditions within the required timeframe. Accordingly, substantial doubt about the Company's ability to continue as a going concern has not been alleviated as of the date these financial statements are issued.
NOTE 3. INVENTORY
Inventory consists of the following:
|
| June 30, |
|
| December 31, |
| ||
|
| 2026 |
|
| 2025 |
| ||
Component parts |
| $ |
|
| $ |
| ||
Finished goods |
|
|
|
|
|
| ||
Inventory |
| $ |
|
| $ |
| ||
| 14 |
| Table of Contents |
NOTE 4. PREPAID EXPENSES
Prepaid expenses consist of the following:
|
| June 30, |
|
| December 31, |
| ||
|
| 2026 |
|
| 2025 |
| ||
Insurance |
| $ |
|
| $ |
| ||
Deposit |
|
|
|
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|
| ||
Other |
|
|
|
|
|
| ||
Prepaid expenses |
| $ |
|
| $ |
| ||
On July 1, 2025, the Company entered into a financing agreement for payment of its annual insurance premiums for coverage from July 2025 through June 2026 totaling $
On July 1, 2024, the Company entered into a financing agreement for payment of its annual insurance premiums for coverage from July 2024 through June 2025 totaling $
NOTE 5. LEASES
The Company leases its corporate headquarters office space and certain office equipment under arrangements classified as operating leases.
The Company entered into its lease agreement to rent office space for a
The Company determined that the amendment results in a lease modification that is not accounted for as a separate contract. Further, due to the extension of the lease term beyond the initial twelve months, the office lease can no longer be considered a short-term lease. The Company has recorded a right-of-use asset and lease liability as of April 17, 2023 (the effective date of the amendment) based on the modified terms and conditions of the amended lease.
For the six months ended June 30, 2026, total operating lease expense was $
Operating lease obligations recorded on the condensed consolidated balance sheet at June 30, 2026 are as follows:
Operating lease liabilities, current portion |
| $ |
| |
Operating lease liabilities, long-term |
|
|
| |
Total operating lease liabilities |
| $ |
|
Future lease payments included in the measurement of operating lease liabilities on the condensed consolidated balance sheet at June 30, 2026 are as follows:
2026 |
|
|
| |
Total undiscounted future minimum lease payments |
|
|
| |
Less imputed interest |
|
| ( | ) |
Total operating lease liabilities |
| $ |
|
The weighted average remaining lease term is
| 15 |
| Table of Contents |
NOTE 6. PROPERTY AND EQUIPMENT, NET
Property and equipment consist of the following:
|
| June 30, 2026 |
|
| December 31, 2025 |
| ||
Leasehold improvements |
| $ |
|
| $ |
| ||
Furniture and fixtures |
|
|
|
|
|
| ||
Total property and equipment |
|
|
|
|
|
| ||
Accumulated depreciation |
|
| ( | ) |
|
| ( | ) |
Net property and equipment |
| $ |
|
| $ |
| ||
Total depreciation expense was $
NOTE 7. INTANGIBLE ASSETS
Intangible assets are comprised of SOBRsafeTM Intellectual Technology and consist of the following:
|
| June 30, 2026 |
|
| December 31, 2025 |
| ||
Gross carrying amount |
| $ |
|
| $ |
| ||
Accumulated amortization |
|
| ( | ) |
|
| ( | ) |
Asset impairment loss |
|
| ( | ) |
|
| ( | ) |
Net intangible asset |
| $ |
|
| $ |
| ||
Amortization period (in years) |
|
|
|
|
|
| ||
On June 30, 2026, the Company discontinued cash flow generating operations supported by the SOBRsafeTM Intellectual Technology where all commercialization activity related to the intellectual property ceased. The Company has no plan to continue using, selling, licensing or otherwise monetizing the intellectual property through commercial means, and has not identified alternative uses including direct acquisition of the technology from the immediate observable market indicating residual value exists that would generate future cash flows. At June 30, 2026, the Company recognized an asset impairment loss of $
Total amortization expense was $
NOTE 8. ACCRUED EXPENSES
Accrued expenses consist of the following:
| June 30, | December 31, |
| |||||
| 2026 | 2025 |
| |||||
Professional consulting services |
| $ |
|
| $ |
| ||
Franchise taxes |
|
|
|
|
|
| ||
Employee benefits |
|
|
|
|
|
| ||
Other |
|
|
|
|
|
| ||
Total accrued expenses |
| $ |
|
| $ |
| ||
NOTE 9. NOTES PAYABLE
RELATED PARTIES
Related party notes payable consist of the following:
|
| June 30, 2026 |
|
| December 31, 2025 |
| ||
Non-convertible note payable |
| $ |
|
| $ |
| ||
Less current portion |
|
| ( | ) |
|
| ( | ) |
Net long-term portion |
| $ |
|
| $ |
| ||
| 16 |
| Table of Contents |
The Company has one related party note payable that has an interest rate of
NON-RELATED PARTIES
Notes payable to non-related parties consist of the following:
|
| June 30, 2026 |
|
| December 31, 2025 |
| ||
Convertible notes payable |
| $ |
|
| $ |
| ||
Non-convertible notes payable |
|
|
|
|
|
| ||
Premium financing note payable |
|
|
|
|
|
| ||
Net non-related party notes payable |
|
|
|
|
|
| ||
Current portion |
|
| ( | ) |
|
| ( | ) |
Net long-term portion |
| $ |
|
| $ |
| ||
Total interest expense for non-related party notes was $
Convertible Notes Payable with Warrants - 2023 Debt Offering
On March 7, 2023, the Company entered into a Debt Offering (the “2023 Debt Offering”) pursuant to a Purchase Agreement (the “Agreement”) and Registration Rights Agreement with institutional investors (the “Purchasers”). The 2023 Debt Offering closed on March 9, 2023. The 2023 Debt Offering includes
On May 10, 2023, noteholders elected to convert a total of $
On March 4, 2024, the Company entered into inducement offer letter agreements (the “Inducement Letters”) with each holder (collectively, the “Holders”, and individually, a “Holder”) of the Notes issued on March 9, 2023. Pursuant to the Inducement Letters, the
In addition, pursuant to the Inducement Letters, the exercise price in the Common Stock Purchase Warrants issued on March 9, 2023 (the “Applicable Warrants”) currently held by Holders was permanently reduced to $
In March, May, and June 2024 noteholders elected to convert an aggregate total of $
On January 15, 2025, the Reset Date for the Series A Warrants issued in conjunction with the 2024 PIPE Offering, the final determination of the Reset Exercise Price was determined to be $
| 17 |
| Table of Contents |
Convertible Notes Payable
The Company has two convertible notes payable to a non-related entity with principal balances totaling $
Non-Convertible Notes Payable
The Company has two non-convertible notes payable to non-related parties with principal balances totaling $
Premium Financing Notes Payable
On July 1, 2025, the Company entered into a financing agreement for payment of its annual insurance premiums for coverage from July 2025 through June 2026 totaling $
On July 1, 2024, the Company entered into a financing agreement for payment of its annual insurance premiums for coverage from July 2024 through June 2025 totaling $
NOTE 10. COMMON STOCK
The Company’s common stock transactions for the six-months ended June 30, 2026, consist of the following:
The Company issued
The Company’s common stock transactions for the six-months ended June 30, 2025, consist of the following:
| 18 |
| Table of Contents |
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 $
On December 19, 2019, the Company’s Board of Directors created a class of Preferred Stock designated as
On March 1, 2022, the Company’s Board of Directors created a class of shares of Preferred Stock designated as Series B Convertible Preferred Stock comprising
As of June 30, 2026 and December 31, 2025, the remaining
| 19 |
| Table of Contents |
NOTE 12. STOCK WARRANTS, STOCK OPTIONS AND RESTRICTED STOCK UNITS
The Company accounts for share-based compensation stock options and restricted stock units, and non-employee stock warrants 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 for stock options and warrants, and the closing price of our common stock on the grant date for restricted stock units. Unless otherwise provided for, the Company covers equity instrument exercises by issuing new shares.
Stock Warrants
On March 6, 2024, pursuant to the Adjustment terms of
On March 6, 2024, pursuant to the Inducement letters, the exercise price for Common Stock Purchase Warrants issued on September 30, 2022, in relation to the 2022 PIPE Offering were permanently reduced to $
In June 2024, the Company entered into a Warrant Inducement with a certain holder of its existing warrants to exercise for cash an aggregate of
Upon the close of the transaction, the Company issued the holder
On June 4, 2024, pursuant to the Warrant Inducement, the exercise price for Common Stock Purchase Warrants issued on September 30, 2022, in relation to the 2022 PIPE Offering were permanently reduced to $
| 20 |
| Table of Contents |
In October 2024, the Company entered into a private investment in public equity offering (the “2024 PIPE Offering”) pursuant to a Securities Purchase Agreement (the “Agreement”) and Registration Rights Agreement (the “Registration Rights Agreement”) where the Company agreed to issue an aggregate of
On October 18, 2024, the Company received exercise notices from various institutional investors at a weighted-average exercise price of approximately $
During December 2024, the Company received exercise notices from various institutional investors at a weighted-average exercise price of approximately $
On January 15, 2025, the Reset Date for the Series A Warrants issued in the 2024 PIPE Offering, the final determination of the Reset Exercise Price was determined to be $8.29 per share. Pursuant to the Reset Date and Reset Exercise Price, the exercise price for Series A Warrants in relation to the 2024 PIPE Offering, and the Common Stock Purchase Warrants issued on September 30, 2022 in relation to the 2022 PIPE Offering were permanently reduced to $
On April 11, 2024, pursuant to the terms and conditions of the Series A Warrants issued on October 9, 2024 in conjunction with the 2024 PIPE Financing, the Company evaluated the impact of the 1-for-10 reverse split of the Company’s common stock, or Share Combination Event, on the Nasdaq Capital Markets. The terms of the Series A Warrant Agreement stipulate in the event of Share Combination Event, or reverse split, where the resulting closing share price is lower than the then Exercise Price, the Exercise Price will be reduced to the Floor Price determined in the Warrant Agreement of $
During January and February of 2025, the Company received exercise notices from various institutional investors at a weighted average exercise price of approximately $8.39. In exchange for the issuance of 579,219 shares of common stock, the Company received net proceeds of $3,680,411.
On December 29, 2025, the Company entered into a private investment in public equity offering (the “2025 PIPE Offering”) pursuant to a securities purchase agreement and registration rights agreement where
The rights and privileges of the 2025 PIPE Offering Pre-funded Warrants are set forth in the warrant agreement between the Company and each of the respective warrant holders. The 2025 PIPE Offering Pre-funded Warrants are exercisable at the option of the warrant holder at any time and do not expire. However, as set forth in the warrant agreements with each holder, the number of pre-funded warrants that may be exercised at any given time may be limited if, upon exercise, the warrant holder and any of its affiliates would beneficially own more than 9.99% of the Company’s common stock, or have voting power of more than 9.99% of the Company’s common stock. The 2025 PIPE Offering Pre-funded Warrants do not provide any of the rights or privileges provided by the Company’s common stock, including any voting rights, until the pre-funded warrants are exercised and settled in underlying shares of common stock.
The Company evaluated the 2025 PIPE Offering Pre-funded Warrants and concluded the warrants are indexed to the Company’s common stock, meet the criteria to be classified as equity and are not subject to remeasurement. The proceeds received from the issuance of the pre-funded warrants were recorded as additional paid-in capital. The Company issued
| 21 |
| Table of Contents |
The fair values of stock warrants granted during the six months ended June 30, 2026, were determined using the Monte Carlo simulation and Black-Scholes option pricing models based on the following assumptions:
|
| June 30, 2026 |
|
| June 30, 2025 |
| ||
Exercise price |
| $ | |
|
| $ |
| |
Dividend yield |
|
| % |
|
| % | ||
Volatility |
| % |
|
| % | |||
Risk-free interest rate |
| % |
| % | ||||
Expected life (years) |
|
|
|
|
|
| ||
The following tables summarize the changes in the Company’s outstanding warrants during the six months ended June 30, 2026:
|
| Warrants Outstanding Number of Shares |
|
| Exercise Price Per Share |
|
| Weighted Average Remaining Contractual Life (Years) |
|
| Weighted Average Exercise Price Per Share |
|
| Aggregate Intrinsic Value |
| |||||
Balance at December 31, 2025 |
|
|
|
| $ | |
|
|
|
|
| $ |
|
| $ |
| ||||
Warrants granted |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
| |||
Warrants exercised |
|
| ( | ) |
| $ | |
|
|
|
|
| $ |
|
| $ |
| |||
Warrants expired |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
| |||
Balance at June 30, 2026 |
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
| |||||
The following tables summarize the changes in the Company’s outstanding warrants during the six months ended June 30, 2025:
|
| Warrants Outstanding Number of Shares |
|
| Exercise Price Per Share |
|
| Weighted Average Remaining Contractual Life (Years) |
|
| Weighted Average Exercise Price Per Share |
|
| Aggregate Intrinsic Value |
| |||||
Balance at December 31, 2024 |
|
|
|
| $ | |
|
|
|
|
| $ |
|
| $ |
| ||||
Warrants granted |
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
| |||||
Warrants exercised |
| ( | ) |
| $ |
|
|
|
|
| $ |
|
| $ |
| |||||
Warrants expired |
|
| ( | ) |
| $ |
|
|
| - |
|
| $ |
|
| $ |
| |||
Balance at June 30, 2025 |
|
|
|
| $ | |
|
|
|
|
| $ |
|
| $ |
| ||||
Share-Based Compensation
On October 24, 2019, the Company’s 2019 Equity Incentive Plan (the “Plan”) went effective authorizing
The Company generally recognizes share-based compensation expense on the grant date or over the period of vesting or period that services will be provided.
Stock Options
As of June 30, 2026, and December 31, 2025, the Company had granted stock options to acquire
For the six months ended June 30, 2026, and 2025, the Company recorded $
During the six months ended June 30, 2026, the Company did not grant any stock options to directors, officers, employees or other third parties.
| 22 |
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The following table summarizes the changes in the Company’s outstanding stock options during the six months ended June 30, 2026:
|
| Options Outstanding Number of Shares |
|
| Exercise Price Per Share |
|
| Weighted Average Remaining Contractual Life (Years) |
|
| Weighted Average Exercise Price |
|
| Aggregate Intrinsic Value |
| |||||
Balance at December 31, 2025 |
|
|
|
| $ | |
|
|
|
|
| $ |
|
| $ |
| ||||
Granted |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
| |||
Exercised |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
| |||
Expired/forfeited |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
| |||
Balance at June 30, 2026 |
|
|
|
| $ | |
|
|
|
|
| $ |
|
| $ |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at June 30, 2026 |
|
|
|
| $ | |
|
|
|
|
| $ |
|
| $ |
| ||||
The following table summarizes the changes in the Company’s outstanding stock options during the six months ended June 30, 2025:
|
| Options Outstanding Number of Shares |
|
| Exercise Price Per Share |
|
| Weighted Average Remaining Contractual Life (Years) |
|
| Weighted Average Exercise Price |
|
| Aggregate Intrinsic Value |
| |||||
Balance at December 31, 2024 |
|
|
|
| $ | |
|
|
|
|
| $ |
|
| $ |
| ||||
Granted |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
| |||
Exercised |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
| |||
Expired/forfeited |
|
| ( | ) |
|
|
|
|
|
| $ |
|
|
|
| |||||
Balance at June 30, 2025 |
|
|
|
| $ | |
|
|
|
|
| $ |
|
| $ |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at June 30, 2025 |
|
|
|
| $ | |
|
|
|
|
| $ |
|
| $ |
| ||||
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| Table of Contents |
Restricted Stock Units
The Plan provides for the grant of RSUs. RSUs are settled in shares of the Company’s common stock as the RSUs become vested. During the six months ended June 30, 2026 and 2025, the Company granted no service based RSUs to directors, executive officers or employees.
For the six months ended June 30, 2026, and 2025, the Company recorded zero and $
Executive Officer Stock Options and RSUs
The Company has
NOTE 13. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
On December 6, 2006, Orange County Valet and Security Patrol, Inc. filed a lawsuit against the Company in Orange County California State Superior Court for Breach of Contract in the amount of $
NOTE 14. SEGMENT REPORTING
The Company is managed as one reportable operating segment, which includes all of our operations primarily designed to enable customers to purchase products and services through channel partners, sales agents or enterprise and consumer digital channels. Substantially all of our consolidated revenues and cash flows are generated in the United States. The segment information aligns with how the Company’s Chief Operating Decision Maker (“CODM”), designated as the Company’s Chief Financial Officer, reviews and manages the Company’s business. The Company’s CODM monitors our consolidated operating income and net earnings/(loss) to evaluate performance and make operating decisions.
Financial information and annual operating plans and forecasts are prepared and reviewed by the CODM at a consolidated level. The CODM assesses performance for the single operating segment and decides how to better allocate resources based on revenues, gross profit/(loss), net income/(loss) and other applicable benchmarks that are reported on the Consolidated Statement of Operations and Consolidated Statement of Cash Flows. The Company’s objective in making resource allocation decisions is to optimize the Company’s operating financial results and financial position. The accounting policies of our single operating segment are the same as those described in the Summary of Significant Accounting Policies herein. For additional reportable single operating segment level financial information, see the Consolidated Financial Statements.
NOTE 15. SUBSEQUENT EVENTS
Discontinuation of Legacy Operations
On July 10, 2026, the Board of Directors approved and committed to a plan to discontinue the Company's revenue-generating alcohol monitoring and detection hardware and software operations, effective July 31, 2026. The plan includes the cessation of manufacturing and sales of the Company's SOBRcheck and SOBRsure devices, termination of related SOBRsafe software support agreements, further workforce reductions (following a reduction of three employees in June 2026), and termination of the Company's corporate office lease. The Company estimates these actions will reduce annual operating expenses by approximately $
Warrant Inducement Transaction
On July 15, 2026, the Company entered into a warrant inducement agreement with certain holders of existing warrants to purchase an aggregate of
The Company has evaluated subsequent events through the date these financial statements were issued and has determined that no other material subsequent events require disclosure or adjustment to the financial statements as presented.
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| 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 forward-looking statements within the meaning of the Exchange Act. Forward-looking statements include statements in which words such as “may,” “if,” “will,” “should,” “intend,” “expect,” “anticipate,” “plan,” “believe,” “estimate,” “project,” “consider,” or similar expressions are used. 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 access to capital to fund our continuing operations, our ability to sell our products and services and 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.
Corporate Overview
On September 19, 2011, we, as Imagine Media, Ltd., a Delaware corporation, acquired approximately 52% of the outstanding shares of TransBiotec, Inc. (“TBT”), a California corporation, from TBT’s directors in exchange for 124,439 shares of our common stock. In January 2012, our Board of Directors (the “Board”) amended our Certificate of Incorporation, changing our name from Imagine Media, Ltd. to TransBiotec, Inc., and we acquired approximately 45% of the remaining outstanding shares of TBT in exchange for 109,979 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, our Board approved the amendment to our Certificate of Incorporation and stockholders holding 52% of our then outstanding voting stock approved an amendment to our Certificate of Incorporation. The Certificate of Amendment to our Certificate of Incorporation was for the purpose of, among other things, changing our name from “TransBiotec, Inc.” to “SOBR Safe, Inc.” The Certificate of Amendment to our Certificate of Incorporation became effective with the State of Delaware on April 24, 2020.
Pursuant to approval of an application with the Nasdaq Capital Market (“Nasdaq”) to uplist our common stock to their exchange under the ticker symbol “SOBR,” our common stock began trading and quoted on the Nasdaq on May 16, 2022. Prior to this uplist to the Nasdaq exchange, our common stock was quoted on the “OTCQB” tier of the OTC Markets under the ticker symbol “SOBR.”
Our corporate offices are located at 6300 E. Hampden Ave., Suite C-308, Denver, Colorado 80222, 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 six months ended June 30, 2026. |
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, 2025.
Business Operations, Outlook and Challenges
We provide non-invasive technology to quickly and discreetly monitor, detect and identify the presence of alcohol in individuals. Our mission is to save lives, positively impact behavioral outcomes and individual wellness, increase workplace safety and productivity, and create significant economic benefits. Our non-invasive technologies are integrated within our scalable and patent-pending software platform, SOBRsafeTM, producing statistical, measurable business and user data. We operate as a single segment designed to enable customers to purchase products directly through channel partners, sales agents or through our digital enterprise and consumer channels. To that end, our SOBRsafe software platform, along with our integrated hardware devices, SOBRcheck™ and SOBRsure™, used to provide non-invasive alcohol monitoring, detection and identity verification, combine to create a robust solution that has current and potential applications in:
| ➢ | Behavioral wellness |
| ➢ | Licensing and integration |
| ➢ | Commercial environments, including but not limited to oil and gas, fleet management, telematics, ride share programs, and general workplace safety |
| ➢ | Individual consumer use, including co-parenting trust, personal accountability |
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| Table of Contents |
Our SOBRcheck device is a patent-pending, touch-based identity verification and alcohol tracking solution. Users place two fingers on the device sensors, one compares biometric data points from the finger to confirm identity, while the other senses alcohol contained in perspiration emitted through the pores of the fingertip. The touch-based device connects to the SOBRsafe software solution to collect, present and communicate data collected to subscribed parties.
Our SOBRsure device is a patent-pending, fitness-style wearable band with a personal alcohol awareness tracking solution intended for discrete, low-profile and voluntary use providing qualified, real-time alcohol tracking and GPS tracking. The wearable band is a device which includes a contained sensor which senses alcohol contained in perspiration released through the pores of the skin. The wearable band connects to a mobile device via Bluetooth communication where the SOBRsafe mobile application collects and transmits data to the SOBRsafe software solution. The SOBRsure device provides passive, qualified, real-time alcohol insights to administrators, parents and more, and also includes device removal and service interruption notifications.
Our SOBRsafe technology can also be deployed across numerous additional devices for various uses. We are currently exploring possible integrations with existing systems and licensing by third parties.
We believe our device portfolio approach could yield a substantial repository of user data – a potentially monetizable asset for statistical analytics. The opportunity to collect data points over time could enable the development of business and insurance liability benchmarking, through artificial intelligence (“AI”), powerful guidance for perpetual safety improvement and associated economic cost savings capture. By demonstrating substance-free environments, organizations could deliver a data-driven argument for a reduction in annual insurance premiums. We could potentially partner with insurance providers to mandate use of the SOBRsafe devices and/or technology.
During fiscal 2026 and as in prior years, design, manufacturing, quality testing and distribution for all SOBRsafe integrated devices take place in the United States.
Our brand, products and software services continue to gain awareness and recognition through a robust marketing platform, trade shows, media exposure, social media and product demonstrations. We currently employ four highly experienced sales professionals facilitating direct sales and channel partner relationships. Licensing and integration opportunities with third parties continue in preliminary stages.
Since inception we have generated significant losses from operations and anticipate that we will continue to generate significant losses for the foreseeable future. Our success is dependent on our ability to access additional capital. Additional capital will be required under the following circumstances: 1) to offset negative cash flows from operations, 2) to accelerate customer acquisition, thereby increasing capital outlay, 3) for advanced purchasing of materials, 4) for the development and acquisition of new technology, 5) for potential acquisition of a key asset, and 6) for sales expansion.
Alcohol Use Disorder and Its Effects
SOBRsafe is committed to supporting individuals and organizations seeking tools to increase awareness of alcohol use behaviors and patterns. In the context of rising alcohol consumption trends, many individuals are seeking greater visibility into their habits to support personal wellness goals and informed decision-making. According to the National Institute on Alcohol Abuse and Alcoholism (NIAAA), alcohol use remains widespread, with millions of individuals reporting patterns of consumption that may impact overall well-being. Increased awareness of these patterns can play an important role in supporting behavioral wellness and healthier lifestyle choices. Alcohol use can influence both short- and long-term aspects of general health and well-being, including sleep, mood, and daily functioning. As awareness grows, there is an increasing need for tools that support individuals in understanding their behaviors and making self-directed lifestyle decisions.
In the United States, alcohol consumption and AUD can be linked to more than 200 diseases including 50% of all liver disease and 25% of pancreatitis cases and contributes to 5% of cancer related deaths. Approximately 178,000 alcohol related deaths occurred in the United States during 2022 and continue to increase annually.
Further attributing to the ongoing and ever-increasing AUD epidemic, less than 10% of those affected have available or receive treatment leaving approximately 26 million in the United States without traditional medical treatment options. The demographics of the 26 million untreated individuals cover a wide range including 17 million men and 12 million women with 1.5 million under the age of 21. Those who cannot receive medications or clinical behavioral treatments must work to find alternative support to address and recover from AUD such as the SOBR Safe personal alcohol awareness tracking solutions. We continue ongoing efforts to identify the wide-ranging demographics of the AUD epidemic in an effort to provide solutions defined for each group according to their treatment needs and journeys.
We have begun executing a strategic initiative to expand beyond our core cloud-based personal alcohol awareness tracking solutions to establish a broader presence within the health and wellness ecosystem. This evolution reflects SOBR’s commitment to supporting users not only in maintaining sobriety but also in achieving overall physical and mental well-being. Approximately 40% of Americans who experience AUD each year also experience depression, and around 35% live with anxiety. This overlap highlights a sizable total addressable market that spans behavioral health providers including sober living facilities, intensive outpatient programs, and residential treatment centers as well as retail consumers managing recovery for themselves or supporting a loved one. We believe this expansion will strengthen user engagement, diversify revenue streams, and position the Company as a comprehensive wellness technology provider in the future. Our ongoing focus will be placed on product innovation, providing data-driven user insights, and ensuring that new offerings remain consistent with our mission to promote a healthier, safer world free from the impacts of alcohol with balanced lifestyles.
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| Table of Contents |
Marketing
We have developed a marketing plan that includes:
➢ | consumer and enterprise e-commerce web-solutions, |
➢ | search engine optimization (SEO) and search engine marketing (SEM), |
➢ | integrated digital and traditional media campaigns, |
➢ | brand ambassadors, affiliate partners and social media influencers, |
➢ | public relations initiatives and trade shows, |
➢ | business to business targeted digital campaigns, |
➢ | Marketing automation, |
➢ | alcohol tracking channel partners, |
➢ | territorial sales agents, |
➢ | advocacy group alignment, |
➢ | ongoing brand development, and |
➢ | continuous pursuit of cutting-edge technologies for future integration. |
Our marketing strategy continues to evolve as we continue our focus across business-to-business (“B2B”) and consumer markets. An Account-Based Marketing (ABM) program is in development, and we have strengthened our marketing automation infrastructure to enable scalable outreach, improve lead management, and support data-driven decision-making. These efforts aim to increase awareness of our solutions among organizations that support wellness amongst the estimated 27.9 million Americans aged 12 or older who experienced AUD in the past year. In addition, we engaged a nationally recognized independent research firm to conduct in-depth qualitative and quantitative market research in the fourth quarter of 2025. The research included consumer insights and market demand assessment. The findings confirm demand for our flagship product, SOBRsure, and validate that it addresses a gap in the alcohol tracking market, as no other wearable devices offer alcohol tracking capabilities. The research indicates that the strongest demand for SOBRsure, as currently designed, is among individuals engaging in regular or above-average alcohol use. It also identified key demographic segments within this population, enabling more targeted and efficient marketing through our selected media channels. Further research revealed that approximately half of the potential market is unaware of wearable alcohol tracking technology, representing a significant opportunity for market expansion through continued education and awareness-building initiatives. These insights directly inform our product positioning, pricing strategy, and future go-to-market efforts. Our SOBRsure wristband is designed to address the limitations of traditional alcohol tracking solutions, such as breathalyzers, which provide only point-in-time readings. SOBRsure offers discreet, continuous alcohol tracking that supports sustained accountability while prioritizing user privacy and convenience. This combination of features differentiates our product within the growing alcohol tracking technology ecosystem and underpins our ongoing marketing and commercialization strategy.
As of June 30, 2026, we have retained six channel partners to augment our sales and marketing efforts, serving business customers with SOBRsafe technology solutions, including the SOBRcheck and SOBRsure devices.
Recent Developments
During the six months ended June 30, 2026, the following developments occurred:
| ➢ | Conducted a pricing analysis across priority customer segments with the highest purchase propensity to optimize hardware and software pricing strategy and support margin expansion. |
➢ | Refined core marketing campaigns based on targeted market research insights to improve customer acquisition efficiency and conversion within high-intent segments. | |
➢ | Updated marketing and sales materials to align with applicable U.S. Food and Drug Administration ("FDA") general wellness guidance and conducted compliance training for employees and external partners, reducing regulatory risk and supporting scalable commercialization. | |
| ➢ | In connection with the deficiency letter issued by Nasdaq on March 19, 2026 and the request filed by the Company for a hearing with the Nasdaq Hearings Panel, on April 28, 2026, the Company presented its plan to regain compliance with the minimum $1.00 per share requirement (the “Bid Price Requirement”) and requested the continued listing of its securities on The Nasdaq Capital Market pending such compliance. |
➢ | On April 24, 2026, the Company entered into an Agreement and Plan of Merger and Reorganization with Clean World Ventures, Inc. ("CWV") and SOBR Safe Merger Sub Inc., its wholly owned subsidiary, pursuant to which the subsidiary will merge with and into CWV, with CWV surviving as a wholly owned subsidiary of the Company. The transaction is intended to qualify as a tax-free reorganization under Section 368(a) of the Internal Revenue Code. Upon completion of the merger, CWV equity holders will receive shares of the Company's common stock in exchange for their CWV shares, and CWV equity awards will be converted into comparable Company awards; the Company expects to issue approximately 589,388,108 shares to CWV equity holders, as compared to 2,876,562 shares of the Company's common stock outstanding as of June 8, 2026. On a pro forma basis, CWV stockholders are expected to own approximately 98% of the combined company, with existing Company stockholders owning approximately 2%. For accounting purposes, the transaction is expected to be treated as an in-substance reverse recapitalization, with CWV as the accounting acquirer. The transaction is subject to customary closing conditions, including approval by the stockholders of both companies, Nasdaq's confirmation that the combined company will satisfy its initial listing requirements, the effectiveness of a registration statement on Form S-4, and completion of a CWV Pre-Closing Financing of approximately $22.0 million at $2.42 per share. The merger has been approved by the board of directors of both companies. Upon closing, CWV is expected to designate the board of directors and management of the combined company. The Merger Agreement will terminate if the merger is not completed on or before October 15, 2026. | |
| ➢ | On May 7, 2026, in connection with the Merger Agreement, the Company committed to and commenced a restructuring plan to reduce operating costs and better align its workforce with its business following the CWV transaction. Under the plan, the Company plans to reduce its workforce by 11 employees (approximately 70%), which is expected to decrease annual operating costs by approximately $1.6 million. The Company estimated it would incur aggregate restructuring charges of approximately $105,000, primarily related to severance and other employee-related costs and contract termination costs, recorded and paid primarily during the second quarter of 2026. |
| ➢ | On May 21, 2026, the Company received a letter from the Nasdaq Hearings Panel granting the Company’s request for continued listing until September 15, 2026, in order to allow the Company to regain compliance with the Bid Price Requirement. The Company’s request for continued listing of its securities on The Nasdaq Capital Market until September 15, 2026 was granted subject to the condition that on or before September 15, 2026, the Company shall complete the proposed business combination with CWV, and demonstrate compliance with Nasdaq’s Initial Listing Rules. |
| ➢ | On June 9, 2026, the Company filed a registration statement with the SEC on Form S-4 in connection with the Merger. |
| 27 |
| Table of Contents |
Subsequent to the six months ended June 30, 2026, the following developments occurred as detailed below:
Summary of Results of Operations
Results of Operations for Three Months Ended June 30, 2026, Compared to Three Months Ended June 30, 2025
|
| Three Months Ended June 30, |
| |||||
|
| 2026 |
|
| 2025 |
| ||
Revenues |
| $ | 29,075 |
|
| $ | 104,228 |
|
Cost of goods and services |
|
| 146,399 |
|
|
| 44,344 |
|
Gross profit (loss) |
|
| (117,324 | ) |
|
| 59,884 |
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
General and administrative |
|
| 1,831,475 |
|
|
| 1,815,028 |
|
Stock-based compensation expense |
|
| 5,701 |
|
|
| 115,252 |
|
Research and development |
|
| 7,049 |
|
|
| 198,675 |
|
Asset impairment loss |
|
| 1,105,052 |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
| 2,949,277 |
|
|
| 2,128,955 |
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
| (3,066,601 | ) |
|
| (2,069,071 | ) |
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
Other income, net |
|
| 6,735 |
|
|
| 75,713 |
|
Interest expense |
|
| (1,818 | ) |
|
| (2,127 | ) |
Total other income, net |
|
| 4,917 |
|
|
| 73,586 | |
|
|
|
|
|
|
|
|
|
Net loss |
| $ | (3,061,684 | ) |
| $ | (1,995,485 | ) |
Revenue
Revenues of $29,075 for the three months ended June 30, 2026, decreased by $75,153, or 72.1%, as compared to $104,228 for the three months ended June 30, 2025. The decrease was primarily due to lower unit sales resulting from backordered inventory of our SOBRcheck and SOBRsure devices during the quarter.
Gross Profit (Loss)
For the three months ended June 30, 2026, cost of goods and services was $146,399, resulting in a gross loss of $117,324 and a negative gross margin, compared to cost of goods and services of $44,344 for the three months ended June 30, 2025, which resulted in a gross profit of $59,884 and a gross margin of 57.5%. The decline in gross margin was primarily attributable to the $142,222 write-off of inventory related to the Company's SOBRcheck and SOBRsure devices, recorded in connection with the Board's July 10, 2026 decision to discontinue the Company's legacy alcohol monitoring operations, effective July 31, 2026.
General and Administrative Expenses
General and administrative expenses increased by $16,447 from $1,815,028 for the three months ended June 30, 2025, to $1,831,475 for the three months ended June 30, 2026. This change was not material and reflects increases in professional services and marketing spend, largely offset by lower payroll-related and other administrative costs during the quarter.
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| Table of Contents |
Stock-Based Compensation Expense
The Company had stock-based compensation expense of $5,701 for the three months ended June 30, 2026, compared to $115,252 for the three months ended June 30, 2025, a decrease of $109,551, or 95.1%. The reduction in stock-based compensation expense is due to previously issued equity compensation awards becoming fully vested with no significant issuance of new awards during the quarter.
Research and Development
Research and development expenses decreased by $191,626, or 96.5%, to $7,049 for the three months ended June 30, 2026, compared to $198,675 for the three months ended June 30, 2025. The decrease in research and development is due to the Company making limited improvements to its existing SOBRsafe software platform and mobile application during the quarter, whereas the prior year spend was primarily driven by hardware development initiatives, including the second generation of the SOBRsure device.
Asset Impairment Loss
During the three months ended June 30, 2026, the Company recognized a non-cash asset impairment loss of $1,105,052 related to the write-down of its SOBRsafe intellectual technology intangible asset, reducing its net carrying value to $0 as of June 30, 2026, compared to $1,246,124 as of December 31, 2025. No impairment loss was recognized during the three months ended June 30, 2025. See Note 7 – Intangible Assets to the accompanying condensed consolidated financial statements for additional information.
Other Income, net
Other income, net decreased by $68,978, or 91.1%, from $75,713 for the three months ended June 30, 2025, to $6,735 for the three months ended June 30, 2026. Other income consists primarily of interest income earned on cash deposits. The decrease is due to lower average cash balances during the three months ended June 30, 2026, as compared to the same period in 2025.
Interest Expense
Interest expense decreased by $309, or 14.5%, from $2,127 for the three months ended June 30, 2025, to $1,818 for the three months ended June 30, 2026. The change was not material.
Operating Loss; Net Loss
Our operating loss increased by $997,530, or 48.2%, from $2,069,071 for the three months ended June 30, 2025, to $3,066,601 for the three months ended June 30, 2026. The increase in our operating loss was primarily attributable to the $1,105,052 non-cash asset impairment loss described above and the decline in gross profit, offset by decreases in stock-based compensation and research and development expenses.
Our net loss increased by $1,066,199, or 53.4%, from $1,995,485 for the three months ended June 30, 2025, to $3,061,684 for the three months ended June 30, 2026. The increase in our net loss was primarily attributable to the increase in our operating loss as detailed above, offset in part by a decrease in interest expense.
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| Table of Contents |
Results of Operations for Six Months Ended June 30, 2026, Compared to Six Months Ended June 30, 2025
|
| Six Months Ended June 30, |
| |||||
|
| 2026 |
|
| 2025 |
| ||
Revenues |
| $ | 108,078 |
|
| $ | 190,845 |
|
Cost of goods and services |
|
| 180,484 |
|
|
| 79,997 |
|
Gross profit/(loss) |
|
| (72,406 | ) |
|
| 110,848 |
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
General and administrative |
|
| 4,155,464 |
|
|
| 3,638,497 |
|
Stock-based compensation expense |
|
| 12,944 |
|
|
| 254,930 |
|
Research and development |
|
| 30,742 |
|
|
| 239,599 |
|
Asset impairment loss |
|
| 1,105,052 |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
| 5,304,202 |
|
|
| 4,133,026 |
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
| (5,376,608 | ) |
|
| (4,022,178 | ) |
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
Other income, net |
|
| 27,286 |
|
|
| 153,430 |
|
Interest expense |
|
| (5,284 | ) |
|
| (5,792 | ) |
Total other income, net |
|
| 22,002 |
|
|
| 147,638 |
|
|
|
|
|
|
|
|
|
|
Net loss |
| $ | (5,354,606 | ) |
| $ | (3,874,540 | ) |
Revenue
Revenues of $108,078 for the six months ended June 30, 2026, decreased by $82,767, or 43.4%, as compared to $190,845 for the six months ended June 30, 2025. The decrease was primarily due to backordered sales of our SOBRcheck and SOBRsure devices during the period.
Gross Profit (Loss)
For the six months ended June 30, 2026, cost of goods and services was $180,484, resulting in a gross loss of $72,406, compared to cost of goods and services of $79,997 for the six months ended June 30, 2025, which resulted in a gross profit of $110,848. The decline in gross margin was primarily attributable to a $142,222 write-off of inventory related to the Company's SOBRcheck and SOBRsure devices, recorded in the second quarter of 2026 in connection with the Board's July 10, 2026 decision to discontinue the Company's legacy alcohol monitoring operations, effective July 31, 2026. As a result of this decision, the Company ceased manufacturing of these devices and does not expect to realize the carrying value of the related inventory through future sales.
General and Administrative Expenses
General and administrative expenses increased by $516,967, or 14.2%, from $3,638,497 for the six months ended June 30, 2025, to $4,155,464 for the six months ended June 30, 2026. This increase was primarily attributable to an increase in professional services fees of approximately $258,600 (primarily legal, investor relations, and sales and marketing professional services), an increase in payroll and employee benefits costs of approximately $110,600, an increase in marketing expense of $196,150 (including third-party consumer market research studies), and an increase in Delaware franchise tax and other organizational expenses of approximately $29,400, offset in part by a decrease in human resources and recruiting fees of approximately $43,800 and a decrease in finance and accounting professional services of approximately $13,400.
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| Table of Contents |
Stock-Based Compensation Expense
The Company had stock-based compensation expense of $12,944 for the six months ended June 30, 2026, compared to $254,930 for the six months ended June 30, 2025, a decrease of $241,986, or 94.9%. The reduction in stock-based compensation expense is due to previously issued equity compensation awards becoming fully vested with no significant issuance of new awards during the period.
Research and Development
Research and development expenses decreased by $208,857, or 87.2%, to $30,742 for the six months ended June 30, 2026, compared to $239,599 for the six months ended June 30, 2025. The decrease in research and development is due to the Company making improvements to its existing SOBRsafe software platform and mobile application, whereas the prior year spend was primarily driven by hardware development initiatives, including the second generation of the SOBRsure device.
Asset Impairment Loss
During the six months ended June 30, 2026, the Company recognized a non-cash asset impairment loss of $1,105,052, all of which was recorded during the second quarter of 2026, related to the write-down of its SOBRsafe intellectual technology intangible asset. No impairment loss was recognized during the six months ended June 30, 2025. See Note 7 – Intangible Assets to the accompanying condensed consolidated financial statements for additional information.
Other Income, net
Other income, net decreased by $126,144, or 82.2%, from $153,430 for the six months ended June 30, 2025, to $27,286 for the six months ended June 30, 2026. Other income consists primarily of interest income earned on cash deposits. The decrease is due to lower average cash balances during the six months ended June 30, 2026, as compared to the same period in 2025.
Interest Expense
Interest expense decreased by $508, or 8.8%, from $5,792 for the six months ended June 30, 2025, to $5,284 for the six months ended June 30, 2026. The change was not material.
Operating Loss; Net Loss
Our operating loss increased by $1,354,430, or 33.7%, from $4,022,178 for the six months ended June 30, 2025, to $5,376,608 for the six months ended June 30, 2026. The increase in our operating loss was primarily attributable to the $1,105,052 non-cash asset impairment loss described above and the decline in gross profit, offset by decreases in stock-based compensation and research and development expenses.
Our net loss increased by $1,480,066, or 38.2%, from $3,874,540 for the six months ended June 30, 2025, to $5,354,606 for the six months ended June 30, 2026. The increase in our net loss was primarily attributable to the increase in our operating loss as detailed above, offset in part by a decrease in interest expense.
Liquidity and Capital Resources for Six Months Ended June 30, 2026, Compared to December 31, 2025
Introduction
During the six months ended June 30, 2026 and 2025, the Company incurred recurring losses from operations. Future capital requirements will depend on many factors, including the Company's ability to sell and develop products, generate cash flow from operations, and respond to competing market developments. The Company will need additional capital in the near term. Cash on hand as of June 30, 2026 was $429,068, and net cash used in operating activities averaged approximately $726,600 per month during the six months ended June 30, 2026. As of June 30, 2026, the Company had a working capital deficit of approximately $411,000, compared to positive working capital of approximately $3,534,900 as of December 31, 2025.
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| Table of Contents |
During the six months ended June 30, 2026, the Company initiated a restructuring program reducing its workforce by 11 employees, or approximately 70%, expected to reduce annual operating costs by approximately $1.6 million, with aggregate restructuring charges of approximately $105,000 recorded primarily in the second quarter of 2026. The Company further reduced its workforce by three employees in June 2026. On July 10, 2026, the Board approved the discontinuation of the Company's legacy alcohol monitoring operations, effective July 31, 2026, including the cessation of SOBRcheck and SOBRsure device manufacturing, termination of related software support, further workforce reductions, and exit from the Company's corporate office lease. These actions are expected to reduce annual operating expenses by an additional approximately $1.2 million against approximately $50,000 in one-time exit costs.
On July 16, 2026, the Company completed a warrant inducement transaction generating approximately $3.1 million in gross proceeds before placement agent fees and offering expenses, which the Company intends to use for working capital, general corporate purposes, the proposed merger described below, and Nasdaq compliance efforts. This financing extends the Company's near-term cash runway but is not by itself sufficient to fund operations for the twelve months following the issuance date of these financial statements.
The Company is also subject to risks related to its Nasdaq listing. On March 19, 2026, the Company received a deficiency letter regarding the minimum bid price requirement under Nasdaq Listing Rule 5550(a)(2). Following a hearing held April 28, 2026, the Nasdaq Hearings Panel granted the Company's request for continued listing until September 15, 2026, conditioned on the Company completing its proposed merger with Clean World Ventures, Inc. and demonstrating compliance with Nasdaq's initial listing requirements by that date. There can be no assurance that the Company will satisfy these conditions or otherwise regain or maintain compliance; a delisting, should it occur, would materially impair the Company's access to capital markets and the financing sources described above.
The Company's current cash balances and rate of cash used in operations are not sufficient to fund operations for the twelve months following the date these financial statements are issued. As described above and in Note 1 to the accompanying condensed consolidated financial statements, the Company is pursuing a proposed merger with Clean World Ventures, Inc. and is evaluating additional equity and debt financing alternatives, and management has implemented cost-reduction measures; however, these plans have not been completed, are not currently considered probable of being effectively implemented, and there is no assurance that the Company will obtain additional financing on acceptable terms, or at all, or complete the proposed merger. These conditions raise substantial doubt about the Company's ability to continue as a going concern for the twelve months following the date these financial statements are issued.
Our cash, current assets, total assets, current liabilities, and total liabilities as of June 30, 2026, and as of December 31, 2025, respectively, are as follows:
|
| June 30, 2026 |
|
| December 31, 2025 |
|
| Change |
| |||
Cash |
| $ | 429,068 |
|
| $ | 4,759,370 |
|
| $ | (4,330,302 | ) |
Total current assets |
|
| 515,232 |
|
|
| 5,230,936 |
|
|
| (4,715,704 | ) |
Total assets |
|
| 600,871 |
|
|
| 6,621,222 |
|
|
| (6,020,351 | ) |
Total current liabilities |
|
| 926,276 |
|
|
| 1,696,033 |
|
|
| (769,757 | ) |
Total liabilities |
|
| 926,276 |
|
|
| 1,696,033 |
|
|
| (769,757 | ) |
Our total current assets and total assets decreased as of June 30, 2026, as compared to December 31, 2025, primarily due to a decrease in cash on hand of $4,330,302, driven by operating cash used to fund the Company's continuing losses from operations. Total assets also decreased due to a non-cash impairment and amortization of our SOBRsafe intellectual technology intangible asset of $1,105,052 and $141,072, respectively, recorded in connection with the Board's approved plan to discontinue the Company's legacy alcohol monitoring operations, and a decrease in inventory of $146,522, reflecting a write-off of approximately $142,222 of SOBRcheck and SOBRsure device inventory recorded in connection with that same decision, as the Company does not expect to realize the carrying value of this inventory through future sales. The remaining decrease in total assets was attributable to a decrease in prepaid expenses of $193,803 and a decrease in operating lease right-of-use assets of $54,706.
Our total current liabilities and total liabilities decreased as of June 30, 2026, as compared to December 31, 2025. The decrease was primarily due to the payment of accrued liabilities, including Delaware franchise tax, employee paid-time-off payouts, and severance and other employee-related costs associated with the Company's restructuring program initiated during the second quarter of 2026, of approximately $502,000, a decrease in the current portion of notes payable of approximately $93,000 related to the payoff of our insurance premium financing note, and a decrease in operating lease liabilities of approximately $61,000, offset in part by an increase in deferred revenue of approximately $13,900 related to backordered device sales.
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| Table of Contents |
Sources and Uses of Cash
Operations
We had net cash used in operating activities of $4,359,606 for the six months ended June 30, 2026, as compared to net cash used in operating activities of $3,313,203 for the six months ended June 30, 2025. For the six months ended June 30, 2026, net cash used in operating activities consisted primarily of our net loss of $5,354,606, offset by non-cash expense items including a $1,105,052 non-cash asset impairment loss, a $142,222 non-cash write-off of obsolete SOBRcheck and SOBRsure device inventory, amortization and depreciation of $144,889, non-cash lease expense of $54,706, bad debt expense of $22,331, stock-based compensation expense of $12,944, and non-cash interest expense of $1,145. The asset impairment loss and inventory write-off were recorded in connection with the Board's approved plan to discontinue the Company's legacy alcohol monitoring operations, effective July 31, 2026. Net cash used in operating activities also reflected changes in our assets and liabilities, primarily consisting of a decrease in prepaid expenses of $193,803 and a decrease in accrued expenses of $532,907, offset in part by a decrease in accounts payable of $130,947.
For the six months ended June 30, 2025, net cash used in operating activities of $3,313,203 consisted primarily of our net loss of $3,874,540, offset by non-cash expense items including amortization and depreciation of $192,732 and stock-based compensation expense of $254,930, and changes in our assets and liabilities primarily consisting of a decrease in accrued expenses of $133,086.
Investments
We had no cash provided by or used in investing activities during the six months ended June 30, 2026, or June 30, 2025.
Financing
Net cash provided by financing activities was $29,304 for the six months ended June 30, 2026, as compared to net cash provided by financing activities of $3,395,483 for the six months ended June 30, 2025. For the six months ended June 30, 2026, net cash provided by financing activities consisted of proceeds from the exercise of stock warrants of $91,068, offset by repayments of notes payable to non-related parties of $61,764. For the six months ended June 30, 2025, net cash provided by financing activities consisted primarily of proceeds from the exercise of stock warrants of $3,680,411, offset by payment of transactional costs for the exercise of warrants of $184,021 and repayments of notes payable to non-related parties of $100,907.
Contractual Obligations and Commitments
At June 30, 2026, the Company had contractual commitments to make payments under operating leases. Payments due under these commitments are as follows:
|
| Total |
|
| Due Within 1 Year |
| ||
Operating lease obligations |
| $ | 31,140 |
|
| $ | 31,140 |
|
Total contractual cash obligations |
| $ | 31,140 |
|
| $ | 31,140 |
|
For additional information about our contractual commitments for these leases, see “Note 5 – Leases” included in our Notes to the Condensed Consolidated Financial Statements.
Off Balance Sheet Arrangements
We have no off-balance sheet arrangements as of June 30, 2026, and December 31, 2025.
Effects of Inflation
We do not believe that inflation has had a material impact on our business, revenue or operating results during the periods presented. However, continued increases in inflation could have an adverse effect on our results of future operations, financial position, and liquidity in 2026.
Recent Accounting Pronouncements
New pronouncements issued for future implementation are discussed in Note 1 to the financial statements.
| 33 |
| 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 Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (our Principal Executive Officer) and Chief Financial Officer (our Principal Accounting Officer), of the effectiveness of our disclosure controls and procedures as defined in Exchange Act Rules 13a – 15(c) and 15d – 15(e)). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer, who are our Principal Executive Officer and Principal Financial Officer, respectively, concluded that, as of the quarter ended June 30, 2026, our disclosure controls and procedures were effective.
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.
(b) Changes in Internal Controls over Financial Reporting
There have been no changes in our internal control over financial reporting during the quarter ended June 30, 2026, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Our process for evaluating controls and procedures is continuous and encompasses constant improvement of the design and effectiveness of established controls and procedures and the remediation of any deficiencies, which may be identified during this process.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
(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 June 30, 2026. 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.
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” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item. However, our current risk factors are set forth in our Annual Report on Form 10-K for the year ended December 31, 2025 as filed with the SEC on April 10, 2026.
ITEM 2 Unregistered Sales of Equity Securities and Use of Proceeds
There were no unregistered sales of the Company’s equity securities during the six months ended June 30, 2026, that were not previously reported in a Current Report on Form 8-K.
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, 2026, this note was in default.
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, 2026, 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, 2026, 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, 2026, 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, 2026, this note was in default.
ITEM 4 Mine Safety Disclosures
Not applicable.
ITEM 5 Other Information
As set forth in our Current Report on Form 8-K as filed on April 30, 2026, on April 24, 2026, the Company entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) with Clean World Ventures, Inc., a Nevada corporation (“CWV”), and SOBR Safe Merger Sub, Inc., a Nevada corporation and wholly owned subsidiary of the Company (“Merger Sub”), pursuant to which, among other matters, and subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, Merger Sub will merge with and into CWV, with CWV continuing as a wholly owned subsidiary of the Company and the surviving corporation of the merger (the “Merger”). The Merger is intended to qualify for federal income tax purposes as a tax-free reorganization under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended.
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| Table of Contents |
On June 9, 2026, the Company filed a registration statement with the SEC on Form S-4 in connection with the Merger.
As set forth in our Current Report on Form 8-K as filed on May 13, 2026, on May 7, 2026, the Company committed to and commenced a restructuring to reduce operating costs and better align its workforce with the needs of its business following its entry into the Merger Agreement. Under the restructuring plan, the Company is reducing its workforce by 11 employees (approximately 70%). The Company expects that the workforce reduction will decrease its annual operating costs by approximately $1.6 million. In connection with the restructuring, the Company estimates that it will incur aggregate restructuring charges of approximately $105,000, which will be recorded primarily in the second quarter of 2026, related to severance payments and other employee-related costs, and contract termination costs. The cash payments related to the personnel-related restructuring and contract termination costs will be paid primarily during the second quarter of 2026. The charges that the Company expects to incur in connection with the workforce reduction and contract terminations are subject to a number of assumptions, and actual results may differ materially. The Company may also incur additional costs not currently contemplated due to events that may occur as a result of, or that are associated with, the workforce reduction.
As previously reported in the Company’s Current Report on Form 8-K filed on March 25, 2026, on March 19, 2026, SOBR Safe, Inc. received a deficiency letter (the “Letter”) from the Listing Qualifications Department (the “Staff”) of the Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that, for the preceding 30 consecutive business days, the closing bid price of the Company’s common stock remained below the minimum $1.00 per share requirement for continued inclusion on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Requirement”).
On March 26, 2026 the Company filed a request for a hearing with the Nasdaq Hearings Panel (the “Hearings Panel”) and on March 30, 2026, the Hearings Panel granted the Company a stay of delisting pending the hearing and a final written decision by the Hearings Panel.
The delisting hearing was held on April 28, 2026 before the Hearings Panel. At the hearing, the Company presented its plan to regain compliance with the Bid Price Requirement and requested the continued listing of its securities on The Nasdaq Capital Market pending such compliance.
As previously reported in the Company’s Current Report on Form 8-K filed on May 27, 2026, on May 21, 2026, the Company received a letter from the Hearings Panel granting the Company’s request for continued listing until September 15, 2026, in order to allow the Company to regain compliance with the Bid Price Requirement. The Company’s request for continued listing of its securities on The Nasdaq Capital Market until September 15, 2026 was granted subject to the condition that on or before September 15, 2026, the Company shall complete the proposed business combination with CWV, and demonstrate compliance with Nasdaq’s Initial Listing Rules.
As previously reported in the Company’s Current Report on Form 8-K filed on July 10, 2026, the Board of Directors approved and committed to a course of action to discontinue its revenue generating operations derived from its alcohol monitoring and detection hardware and software solutions effective July 31, 2026 which includes the sale of the Company’s SOBRcheck and SOBRsure devices, and its SOBRsafe software services. By the end of July 2026, the Company will have discontinued the manufacturing of the SOBRcheck and SOBRsure devices, terminated software support agreements necessary to provide the SOBRsafe software services to customers, and terminated the corporate office lease agreement. In June 2026, the Company further reduced its workforce by three employees. These actions will decrease the Company’s annual operating costs by approximately $1.2 million. This course of action is being taken to preserve cash resources to support the completion of the proposed business combination with CWV.
As previously reported in the Company’s Current Report on Form 8-K filed on July 17, 2026, on July 15, 2026, the Company entered into a warrant inducement agreement (the “Warrant Inducement”) with certain holders (each a “Holder”) of existing warrants to purchase 2,360,648 of shares of the Company’s common stock, par value $0.00001 per share (the “Common Stock”). Such warrants are comprised of: (i) warrants to purchase 1,290,324 shares of Common Stock which were issued pursuant to the Securities Purchase Agreement dated December 24, 2025 (the “Securities Purchase Agreement”), and had a five-year exercise term and an exercise price of $1.30 per share (the “Series C Warrants”); and (ii) warrants to purchase 1,070,324 shares of Common Stock, also issued pursuant to the Securities Purchase Agreement, and had a 24-month exercise term and an exercise price of $1.30 per share (the “Series D Warrants” and together with the Series C Warrants, the “Existing Warrants”). The transactions contemplated pursuant to the Warrant Inducement closed on July 16, 2026 (the “Closing Date”). The Company expects to use the net proceeds from these transactions for general corporate purposes.
Upon exercise for cash of any New Warrants, the Company has agreed in certain circumstances to pay the Placement Agent a cash fee of 7.5% of the aggregate gross exercise price paid in cash with respect the exercise of the New Warrants, and a management fee of 1.0% of the aggregate gross exercise price paid in cash with respect to the New Warrants. The Company has also agreed to issue to the Placement Agent or its designees warrants (the “Placement Agent Warrants”) to purchase up to 177,049 shares of Common Stock (representing 7.5% of the Existing Warrants being exercised), which have the same terms as the Series E Warrants except the Placement Agent Warrants have an exercise price equal to $1.625 per share (125% of the exercise price paid by the Holders for their exercise of the Existing Warrants). Similar to the Series E Warrants, the Placement Agent Warrants are exercisable immediately until the 5-year anniversary of the effective date of the Resale Registration Statement (as defined below). Upon exercise for cash of any New Warrants, the Company has agreed in certain circumstances to issue the Placement Agent warrants representing 7.5% of the shares of Common Stock underlying such New Warrants.
The resale of the Common Stock underlying the Existing Warrants has been registered pursuant to an existing resale registration statement on Form S-1 (File No. 333-292709) which was declared effective by the Securities and Exchange Commission (the “SEC”) on January 21, 2026. The Company also agreed to file a registration statement on Form S-3 (or other appropriate form if the Company is not then Form S-3 eligible) providing for the resale of the New Warrant Shares issued or issuable upon the exercise of the New Warrants (the “Resale Registration Statement”) within thirty (30) calendar days of the date of the Warrant Inducement.
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ITEM 6 Exhibits
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| Table of Contents |
Exhibit |
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| Reference |
| Filed or Furnished |
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Number |
| Exhibit Description |
| Form |
| Exhibit |
| Filing Date |
| Herewith |
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8-K |
| 10.3 |
| 10/01/2021 |
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8-K |
| 10.4 |
| 10/01/2021 |
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Form of Secured Convertible Debenture issued by SOBR Safe, Inc. in $2M Regulation D Offering | S-1/A |
| 10.21 |
| 12/01/2021 |
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Form of Share Exchange Agreement with David Gandini and Gary Graham for Series B Preferred Stock | S-1/A |
| 10.28 |
| 03/17/2022 |
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Waiver by and between SOBR Safe, Inc. and Armistice Capital Master Fund Ltd. dated March 30, 2022 | 8-K |
| 10.1 |
| 04/01/2022 |
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8-K |
| 10.1 |
| 10/03/2022 |
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8-K |
| 10.2 |
| 10/03/2022 |
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8-K |
| 10.3 |
| 10/03/2022 |
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Form of Warrant Agreement by and between SOBR Safe, Inc. and Purchasers dated September 30, 2022 | 8-K/A |
| 10.4 |
| 10/14/2022 |
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Executive Employment Agreement with David Gandini dated January 30th, 2023 | 8-K |
| 10.1 |
| 02/03/2023 |
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Purchase Agreement between SOBR Safe, Inc. and Purchasers dated March 7, 2023 | 8-K |
| 10.1 |
| 03/13/2023 |
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Registration Rights Agreement between SOBR Safe, Inc. and Purchasers dated March 7, 2023 | 8-K |
| 10.2 |
| 03/13/2023 |
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8-K |
| 10.1 |
| 07/27/2022 |
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8-K | 10.2 | 07/27/2022 | ||||||||||||||
Confirming Agreement by and between SOBR Safe, Inc. and Winterstone Group, LLC dated May 16, 2022 | 8-K | 10.3 | 07/27/2022 | |||||||||||||
8-K | 10.4 | 07/27/2022 | ||||||||||||||
8-K | 10.1 | 03/05/2024 | ||||||||||||||
8-K | 10.1 | 06/04/2024 | ||||||||||||||
8-K | 10.1 | 10/10/2024 | ||||||||||||||
8-K | 10.4 | 10/10/2024 | ||||||||||||||
8-K | 10.6 | 10/10/2024 | ||||||||||||||
8-K | 10.1 | 12/30/2025 | ||||||||||||||
8-K | 10.5 | 12/30/2025 | ||||||||||||||
Employment Agreement between the Company and CFO effective March 1, 2025 | 8-K | 10.1 | 05/13/2025 | |||||||||||||
8-K | 10.7 | 12/30/2025 |
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101 | The following materials from the SOBR Safe, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2026, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Operations; (iii) the Consolidated Statements of Comprehensive Earnings (Loss); (iv) the Consolidated Statements of Stockholders' Equity; (v) the Consolidated Statements of Cash Flows and (vi) related notes. |
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104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
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* This certification is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act.
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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 14, 2026 |
| /s/ David Gandini |
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| By: | David Gandini |
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| Its: | Chief Executive Officer and Principal Executive Officer |
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