Business Context and Reporting Period
Company: TransBioTec, Inc. (filing as SOBR Safe, Inc. in metadata; formerly Imagine Media, LTD.)
Reporting Period: Quarter and six months ended June 30, 2012
Status: Development Stage Company
Operations: The Company pivoted from a defunct magazine publishing business to developing a non-invasive transdermal alcohol sensing system (SOBR) for ignition interlock applications. Following a reverse acquisition in September 2011, the Company is currently in the beta testing and manufacturing development phase with no commercial revenue to date.
Key Financial Metrics
| Metric | Six Months Ended June 30, 2012 | Six Months Ended June 30, 2011 |
|---|---|---|
| Revenues | $0 | $0 |
| Net Loss (Attributable to TransBioTec) | $(2,279,885) | $(263,281) |
| Operating Expenses | $2,176,998 | $150,832 |
| Interest Expense | $108,061 | $112,449 |
| Cash Flow from Operations | $(304,010) | $(130,743) |
| Cash Flow from Financing | $192,386 | $144,469 |
| Cash Balance (End of Period) | $215 | $44,421 |
| Total Assets | $4,241 | $109,443 |
| Total Liabilities | $1,698,840 | $1,598,048 |
| Stockholders' Equity | $(1,694,599) | $(1,488,605) |
Liquidity & Debt: The Company holds only $215 in cash against total current liabilities of $1,367,975. Total debt includes significant related-party notes ($926,659 principal) and accrued interest ($117,763). The Company has a substantial working capital deficit.
Material Changes vs. Prior Period
- Expense Surge: Operating expenses increased from $150,832 to $2,176,998. This is primarily driven by a $1,888,871 non-cash charge for compensatory equity issuances (stock-based compensation) to consultants and officers.
- Cash Depletion: Cash reserves dropped from $108,019 at the beginning of the period to $215 at period end, a decrease of $107,804.
- Debt Structure: While interest expense remained relatively stable, the Company recognized $64,171 in beneficial conversion feature expenses related to convertible notes, which did not occur in the prior year.
- Asset Reduction: Total assets decreased by over $105,000, largely due to the cash burn and the sale of fixed assets (automobile) for $4,790.
Outlook, Risks, and Management Commentary
- Going Concern: The filing explicitly states that recurring losses, working capital deficits, and the need for significant future expenditures raise "substantial doubt" about the Company's ability to continue as a going concern.
- Capital Requirements: Management projects a need for $160,000 by December 2012 to refine the product and sell 500 units, followed by $370,000 in early 2013 for manufacturing scaling.
- Revenue Strategy: The Company plans to initially target commercial vehicle applications before expanding to consumer markets (automobiles, boats, etc.). No revenue is expected until manufacturing and sales targets are met.
- Risks: The Company relies entirely on future equity or debt financing to fund operations. Failure to secure funding will halt development. Additionally, the Company has significant related-party debt obligations with varying interest rates and conversion terms.
Investor Verification Checklist
- Cash Runway: Verify the immediate ability to operate with only $215 in cash and $1.3M in current liabilities.
- Related Party Debt: Review the terms of the $926,659 in related-party notes, specifically the high interest rates (up to 30%) and conversion privileges that could dilute existing shareholders.
- Equity Dilution: Assess the impact of the $1.8M in stock-based compensation and the potential for further dilution required to meet the $900,000+ capital requirements outlined in the plan of operation.
- Product Viability: Confirm the status of beta testing and the existence of any binding purchase agreements for the projected 500-unit sales target.
- Legal Status: Verify the consolidation of the reverse acquisition and the legal standing of the "SOBR Safe, Inc." name change referenced in metadata versus the "TransBioTec, Inc." name on the filing.