Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)

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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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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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.

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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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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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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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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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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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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.

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