OVERVIEW
SOBR Safe, Inc, ("SOBRsafe") (NASDAQ:SOBR) develops and provides organizations with a non-invasive technology to quickly and safely identify potential alcohol issues with their employees or contractors. If left undetected, alcohol related driving accidents and workplace incidents could result in injury, death, reputational harm, and increased insurance rates. These products and technologies are integrated within a robust and scalable data platform that produces statistical and measurable user and business data. The company's stated mission is to save lives, increase productivity, and create economic benefit for its customers.
The company has developed a scalable, patent pending SOBRsafe™ hardware/software platform for non-invasive alcohol detection and identity verification. This solution has potential applications in commercial vehicle fleets, manufacturing and warehousing facilities, construction, DUI probation, third-party alcohol testing, outpatient alcohol rehabilitation and youth drivers. The comprehensive daily use of this device could result in material insurance savings across workers' compensation, general liability, umbrella and fleet policies.
In 2021, the company successfully completed several pilot testing programs involving the SOBRsafe™ system with the SOBRcheck device. This device is a palm sized detector used for non-invasive alcohol detection and identity verification. After successful validation of the software platform and hardware device, the company has now progressed to commercial production, launch and sale of the SOBRcheck™ devices and software solution to initial customers with an initial focus on last mile delivery fleets.
The company has developed a second device which is a wearable wristband branded as SOBRsure™. The wristband utilizes the same SOBRsafe™ sensor technology and software platform, which was validated during the SOBRcheck™ development process. The primary intended use for this band is for managed care / alcohol rehabilitation and commercial safety fleet management, with an additional potential application for young individual drivers. The wearable band is now commercially available and expected to be sold in the consumer markets as well starting in 2023.
The addressable market for these devices and solutions could approach $30 billion in total value. This includes last mile delivery or trucking fleets, warehouses, manufacturing facilities, construction sites, young drivers, or alcohol related rehabilitation facilities and processes. The annual cost of alcohol abuse in the U.S. across various avenues is approximately $250 billion.
In May 2022, the company raised $10 million in gross proceeds from a public offering. Net proceeds to the company were $8.7 million of which $3.0 million was used to repay existing debt balances. Based on current levels of cash, the company believes it has sufficient capital to fund operations through March 2023.
PRODUCTS AND TECHNOLOGY
SOBRcheck is a palm sized device that utilizes finger touch technology to detect the presence of alcohol in the body. The device takes the natural humidity in the skin and tests the natural vapor for alcohol components. The SOBRcheck is placed at entry points to facilities or driver centers and employees place their hands/fingers on the device to verify and scan for alcohol. Employees who receive a green light are then given the keys to their particular vehicle.
Unlike traditional breathalyzer tests, the SOBRcheck is very hygienic with no need for blood, saliva or breath-based components. The results are almost instantaneous, and the company has reported it can test 180 employees per hour. According to the company's research, the dependability or accuracy rate is 97% compared to average accuracy rates of 84% for classic breathalyzer machines, which is a 60-year-old technology.
One of the key competitive advantages of this system is the device connects to a powerful cloud-based reporting and data management system. This database and reporting system aggregates data in order to maintain compliance and safety discounting with insurers as well as create safety management and incident reporting for clients. Current and potential partnerships with property & casualty insurers is a key focus in terms of product development, insurer support, and client productivity and cost savings.
The company's second device is a wearable wristband branded as SOBRsure and is the mobile version of the company's core SOBRsafe technologies. This is a continuous on person monitoring device that can be used in markets such as teenage driving, remote monitoring of last mile and fleet management applications, alcohol rehabilitation support and corporate wellness efforts. The product is commercially available now with an initial focus on alcohol rehabilitation facilities and addiction programs. SOBRsure is expected to be available for consumer purchase in 2023.
The company will employ a SaaS-based business model for the SOBRsafe platform to create significant levels of recurring revenues. The clients will typically engage in an evergreen 60-month contract which will reduce churn and create insurance incentives. The SOBRcheck device will be given free to clients, and they incur a $30 monthly fee per user. The SOBRsure band will be sold for approximately $299.95 and incur user fees of $19.95 monthly. This model has the potential to create high SaaS-type gross margins of over 70.0%.
OPPORTUNITY AND ADDRESSABLE MARKET
The annual cost of alcohol abuse in the U.S. is $249 billion according to Centers for Disease Control and Prevention (CDC). $179 billion of that is related to workplace productivity. It is estimated that almost half of all industrial accidents with injuries are alcohol-related and that 1-in-10 U.S. commercial drivers test positive for alcohol, which is among the highest in the world. SOBRsafe is focused on a preventative solution in an industry that has historically been reactive, meaning breathalyzers.
The company believes the total addressable market in potential revenue dollars could be $28 billion. This includes $5.8 billion in local fleet, or last-mile delivery services. The company is focusing its sales efforts on Amazon's Delivery Service Partner (DSP) program which is a last-mile delivery service by Amazon where owners typically employ 40-100 drivers and manage a fleet of between 20-40 vans on average.
Manufacturing facilities in the country also represent a large potential market with an estimated value of $4.7 billion. The commercial and residential construction markets represent a further $2.5 billion in value. Warehouses are also a potential $720 million in revenues. For the SOBRsure wristband device, teenage drivers and alcohol rehabilitation operations represent a combined market opportunity of over $14 billion.
These potential opportunity estimates are based on total users per vertical times current levels of SOBRsafe pricing models. Future pricing actions resulting from the proven and validated success of the SOBRsafe platform could materially increase these market opportunity values.
FINANCIAL REVIEW
Since inception, the company has been operating in research and development mode and did not start commercial sales of its products until 2022. No revenues were generated in 2021 and the company's use of cash was $3.7 million. The company has been successful in raising capital in 2020 and 2021 through debt offerings, convertible debentures, and preferred stock offerings.
In May 2022, the company received net proceeds of $8.8 million from a public offering of which $3.0 million was used to redeem the convertible debentures outstanding at the time. As of 6/30/22, cash and equivalents totaled $3.75 million and total outstanding debt balances were $1.5 million.
For the six-month period ending 6/30/22, total revenues were nominal as expected at $3,000 which generated a gross profit of $1,900. Operating expenses ramped up significantly from the prior period as the company moved towards commercialization with SG&A expenses almost doubling and R&D expenses increasing 9.5%. There were also additional expenses related to the company's public offering in May 2022.
GAAP loss from operations for the six-month period was ($4.4) million, however, due to a large number of non-cash items, the cash flow operating loss was only ($2.7) million. GAAP net loss for the period was ($5.8) million, or ($0.66) per share. Total common shares outstanding as of 8/12/22 was 10,973,759 shares. Fully diluted outstanding shares are approximately 22,109,472.
RECENT NEWS
SOBRsafe has made multiple announcements in 2022 that highlight growing partnerships and distribution channels that is laying the foundation for future growth.
On August 24th, the company announced that global manufacturing expert David Crandall has joined SOBRsafe in the role of Advisor to the Board of Directors. Mr. Crandall brings to SOBRsafe the vision and experience to help maximize current manufacturing capacity, while positioning the company for future international licensing and production. Mr. Crandall currently serves as executive director of manufacturing and integrated product team lead for an American multinational aerospace and defense technology company.
On August 18th, the company announced that third-party administrator (TPA) Butterfield Onsite Drug Testing (Butterfield) has launched its new touch-based detection offering with an initial purchase of the SOBRcheck™ technology. Butterfield has established a large customer network over its 19 years in the industry which includes national airlines for testing of pilots, flight attendants and ground crew. Butterfield is expected to have a dedicated sales professional represent SOBRsafe solutions to this network.
On August 11th, the company announced it has signed a distribution agreement with value-add reseller Reconnect. Reconnect is a Public Benefit Corporation, committed to improving outcomes for participants in the justice space. Reconnect leverages technology to reduce incarceration, recidivism and costs. Reconnect intends to deploy the company's SOBRcheck system as a critical prescreening tool.
On August 9th, the company announced its partnership with rideshare company RubiRides, a membership-based service that delivers reliable transportation with an emphasis on safety for children through a network of vetted and dedicated drivers. SOBRsafe will supply RubiRides' growing pool of drivers with the SOBRsure wearable wristband. SOBRsafe will empower RubiRides management with a centralized, real-time reporting and safety intelligence platform.
On August 3rd, the company announced it was awarded the Occupational Health & Safety (OH&S) New Product of the Year in the Safety Monitoring Devices category for its SOBRcheck™ system. OH&S is a leading publication in the industrial health and safety market. In this year's OH&S New Product Awards, 26 companies were selected for the magazine's annual New Product of the Year award across 31 categories.
On July 26th, the company announced a partnership with North-Star Care, an innovative virtual reality alcohol dependency treatment platform, in which they will utilize the SOBRcheck wristband. The agreement calls for an initial 1,150 white label bands which North-Star intends to deploy through the 2022 and anticipates up to 7,500 patient utilization in the first year of the program.
On July 13th, the company announced it had signed an agreement with Continental Services, a Michigan based food distributor. As Michigan's largest food management company, Continental has over 1,800 employees across six locations and its last mile fleet serves more than 700 corporate customers. Continental will utilize the company's SOBRcheck device.
On June 2nd, the company announced that it signed its first Master Distributor Agreement with Virginia-based RecoveryTrek. RecoveryTrek provides innovative alcohol management solutions to clients nationwide in the behavioral health, judicial, workplace and human services markets. Under the agreement, RecoveryTrek intends to expand SOBRsafe's national footprint as a reseller of its products.
MANAGEMENT
SOBRsafe is led by a seasoned management team with many years of experience in business development, technology, entrepreneurship and finance. Chairman and CEO Dave Gandini is an experienced entrepreneur and has spent his career in telecommunications, technology, software and automated packaging. In his role at SOBRsafe, he is responsible for capital creation, new business acquisition, business strategy & development and partnership revenue generation.
The Chief Financial Officer for the company is Jerry Wenzel. Mr. Wenzel has more than 40 years of leadership experience in financial management and reporting, public accounting and auditing. Prior to SOBRsafe, he was a partner in the firm B2BCFO from 2018 through 2021, providing strategic financial leadership to business owners regarding growth and transaction opportunities. From 2016 to 2018, he was the Chief Financial Officer for PRIDE Centric Resources, a national commercial food service equipment buying group.
Scott Bennett is the Executive Vice President of Business Operations and has more than 20 years' experience as a senior executive in various technology-driven enterprises. Prior to joining SOBRsafe, Scott co-founded cybersecurity firm GBprotect, and served as its COO until its successful sale to Nuspire. In addition to his technical contributions to GBprotect, Scott was also responsible for key business functions such as quality assurance, inventory management and customer service.
Chief Revenue Officer Michael Watson has more than 25 years' experience as a sales and marketing executive in cutting-edge organizations. He has garnered expertise across product advancement, customer acquisition and partnership formation and optimization. Prior to SOBRsafe, Michael invented and successfully marketed a groundbreaking business services product for the healthcare industry. Michael is accomplished in building sales systems and executing product rollouts in both B2B and B2C environments.
SUMMARY
SOBRsafe has taken a leadership position in the alcohol policy management industry by focusing on prevention versus reactive, or after-the-fact processes. The company is beginning to generate revenues from its SOBRsafe platform with two devices targeting specific end markets. The company's primary sales focus initially will be last-mile fleet delivery companies with a target size of over 250 drivers. The company has already received multiple industry endorsements and support from property & casualty insurers, alcohol testing providers, DUI probation agencies and delivery and warehousing organizations.
The company has a recession resistant business model in which the need for safe driving and the need for businesses to be more cost efficient is a perennial necessity. Long-term recurring revenue contracts also provide stability to the business model. The company will begin to generate meaningful revenues in the 2nd half of 2022, however 2023 is expected to be a revenue breakthrough year in terms of widespread commercialization of the company's products.
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