Business Context and Reporting Period
TransBiotec, Inc. (Delaware corporation) filed this Form 8-K on December 23, 2019, reporting events occurring on December 12, 2019. The filing details a material definitive agreement and unregistered sale of equity securities involving SOBR SAFE, LLC, an entity controlled by Director Gary Graham.
Key Financial Metrics and Transaction Details
- Capital Raised: $1,000,000 received on December 12, 2019.
- Instrument Issued: 1,000,000 shares of Series A-1 Convertible Preferred Stock.
- Issuance Price: $1.00 per share.
- Dividend Rate: 8% per annum based on the original issuance price.
- Conversion Rights: Convertible into common stock at $1.00 per share.
- Redemption Rights: Company may redeem shares after one year at 150% of the original issuance price ($1.50 per share) upon 30 days' written notice.
- Liquidity Impact: Immediate cash inflow of $1,000,000; no debt incurred.
Material Changes and Corporate Actions
The primary material change is the creation of a new equity class (Series A-1) and the injection of $1,000,000 in capital. Additionally, holders of approximately 52% of the company's outstanding common stock signed irrevocable proxies in favor of Gary Graham and/or Paul Spieker. These proxies are intended to facilitate voting on matters necessary to close a separate Asset Purchase Agreement dated May 6, 2019.
Guidance, Risks, and Unusual Items
- Regulatory Status: The issuance was exempt from registration under Section 4(a)(2) of the Securities Act of 1933, citing the investor's status as an accredited investor and director affiliate.
- Related Party Transaction: The investor, SOBR SAFE, LLC, is controlled by a company director, presenting a related-party dynamic.
- Future Obligations: The company has a potential future cash outflow obligation if it exercises its redemption right after one year, requiring payment of $1.50 per share.
- Operational Context: The transaction is linked to the closing of a prior Asset Purchase Agreement, suggesting ongoing restructuring or asset acquisition efforts.
Investor Verification Checklist
- Verify the full text of the Series A-1 Preferred Stock Purchase Agreement (Exhibit 10.1) for additional covenants or restrictions not summarized here.
- Confirm the status of the Asset Purchase Agreement dated May 6, 2019, and whether the proxy votes were successfully utilized to close it.
- Review the press release (Exhibit 99.1) for any additional management commentary regarding the use of proceeds.
- Assess the dilution impact on existing common shareholders upon conversion of the preferred shares.