Cover
Cover - USD ($) | 12 Months Ended | ||
Dec. 31, 2021 | Mar. 24, 2022 | Jun. 30, 2021 | |
Cover [Abstract] | |||
Document Type | 10-K | ||
Amendment Flag | false | ||
Document Annual Report | true | ||
Document Transition Report | false | ||
Document Period End Date | Dec. 31, 2021 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2021 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity File Number | 001-31972 | ||
Entity Registrant Name | TELKONET, INC. | ||
Entity Central Index Key | 0001094084 | ||
Entity Tax Identification Number | 87-0627421 | ||
Entity Incorporation, State or Country Code | UT | ||
Entity Address, Address Line One | 20800 Swenson Drive | ||
Entity Address, Address Line Two | Suite 175 | ||
Entity Address, City or Town | Waukesha | ||
Entity Address, State or Province | WI | ||
Entity Address, Postal Zip Code | 53186 | ||
City Area Code | (414) | ||
Local Phone Number | 302-2299 | ||
Title of 12(g) Security | Common Stock, $0.001 par value | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Interactive Data Current | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Small Business | true | ||
Entity Emerging Growth Company | false | ||
Entity Shell Company | false | ||
Entity Public Float | $ 6,136,325 | ||
Entity Common Stock, Shares Outstanding | 299,212,282 | ||
Auditor Firm ID | 344 | ||
Auditor Name | Wipfli LLP | ||
Auditor Location | Minneapolis, Minnesota |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Dec. 31, 2021 | Dec. 31, 2020 |
Current assets: | ||
Cash and cash equivalents | $ 2,361,059 | $ 3,011,811 |
Accounts receivable, net | 1,010,554 | 865,174 |
Inventories, net | 825,559 | 1,388,262 |
Contract assets | 266,014 | 104,989 |
Prepaid expenses | 735,092 | 142,733 |
Income taxes receivable | 0 | 105,745 |
Total current assets | 5,198,278 | 5,618,714 |
Property and equipment, net | 84,201 | 127,672 |
Other assets: | ||
Deposits | 7,595 | 7,000 |
Operating lease right of use assets | 570,512 | 737,551 |
Total other assets | 578,107 | 744,551 |
Total Assets | 5,860,586 | 6,490,937 |
Current liabilities: | ||
Accounts payable | 1,865,535 | 1,043,007 |
Accrued liabilities | 718,721 | 563,312 |
Line of credit | 403,089 | 267,289 |
Contract liabilities – current | 800,965 | 888,060 |
Operating lease liabilities – current | 195,176 | 242,299 |
Note payable – current | 0 | 913,063 |
Income taxes payable | 5,431 | 0 |
Total current liabilities | 3,988,917 | 3,917,030 |
Long-term liabilities: | ||
Contract liabilities – long-term | 140,265 | 164,307 |
Operating lease liabilities – long-term | 459,668 | 592,341 |
Accrued royalties – long-term | 360,000 | 500,000 |
Total long-term liabilities | 959,933 | 1,256,648 |
Total liabilities | 4,948,850 | 5,173,678 |
Stockholders’ Equity | ||
Common Stock, par value $.001 per share; 475,000,000 and 190,000,000 shares authorized at December 31, 2021 and 2020, respectively; 136,311,335 and 136,311,335 shares issued and outstanding at December 31, 2021 and 2020, respectively. | 136,311 | 136,311 |
Additional paid-in-capital | 127,740,976 | 127,733,714 |
Accumulated deficit | (128,668,176) | (128,255,391) |
Total stockholders’ equity | 911,736 | 1,317,259 |
Total Liabilities and Stockholders’ Equity | 5,860,586 | 6,490,937 |
Series A Preferred Stock [Member] | ||
Stockholders’ Equity | ||
Preferred Stock, Value | 1,340,566 | 1,340,566 |
Series B Preferred Stock [Member] | ||
Stockholders’ Equity | ||
Preferred Stock, Value | $ 362,059 | $ 362,059 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Dec. 31, 2021 | Dec. 31, 2020 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 475,000,000 | 190,000,000 |
Common stock, shares issued | 136,311,335 | 136,311,335 |
Common stock, shares outstanding | 136,311,335 | 136,311,335 |
Series A Preferred Stock [Member] | ||
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred Stock, Shares Authorized | 215 | 215 |
Preferred Stock, Shares Outstanding | 185 | 185 |
Preferred stock, liquidiation preference | $ 1,822,450 | $ 1,748,423 |
Series B Preferred Stock [Member] | ||
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred Stock, Shares Authorized | 567 | 567 |
Preferred Stock, Shares Outstanding | 52 | 52 |
Preferred stock, liquidiation preference | $ 497,605 | $ 476,782 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Revenues, net: | ||
Total Net Revenues | $ 6,274,399 | $ 6,493,870 |
Cost of Sales: | ||
Total Cost of Sales | 3,031,660 | 3,608,557 |
Gross Profit | 3,242,739 | 2,885,313 |
Operating Expenses: | ||
Research and development | 1,129,957 | 1,177,282 |
Selling, general and administrative | 4,289,920 | 4,754,783 |
Depreciation and amortization | 43,471 | 58,853 |
Total Operating Expenses | 5,463,348 | 5,990,918 |
Operating Loss | (2,220,609) | (3,105,605) |
Other Income (Expenses): | ||
Gain on debt extinguishment | 1,836,780 | 0 |
Interest expense, net | (21,067) | (21,645) |
Total Other Income (Expense) | 1,815,713 | (21,645) |
Loss before Provision for Income Taxes | (404,896) | (3,127,250) |
Income Tax Provision | 7,889 | 22,602 |
Net Loss | $ (412,785) | $ (3,149,852) |
Net Loss per Common Share: | ||
Basic - net loss attributable to common stockholders | $ 0 | $ (0.02) |
Diluted - net loss attributable to common stockholders | $ 0 | $ (0.02) |
Weighted Average Common Shares Outstanding - basic | 136,311,335 | 136,231,562 |
Weighted Average Common Shares Outstanding - diluted | 136,311,335 | 136,231,562 |
Product [Member] | ||
Revenues, net: | ||
Total Net Revenues | $ 5,542,404 | $ 5,742,251 |
Cost of Sales: | ||
Total Cost of Sales | 2,978,886 | 3,527,977 |
Recurring [Member] | ||
Revenues, net: | ||
Total Net Revenues | 731,995 | 751,619 |
Cost of Sales: | ||
Total Cost of Sales | $ 52,774 | $ 80,580 |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) | Preferred Stock Series A [Member] | Preferred Stock Series B [Member] | Common Stock [Member] | Additional Paid-in Capital [Member] | Retained Earnings [Member] | Total |
Beginning balance, value at Dec. 31, 2019 | $ 1,340,566 | $ 362,059 | $ 135,990 | $ 127,708,773 | $ (125,105,539) | $ 4,441,849 |
Beginning Balance, Shares at Dec. 31, 2019 | 185 | 52 | 135,990,491 | |||
Shares issued to directors | $ 321 | 17,679 | 18,000 | |||
Shares issued to directors, shares | 320,844 | |||||
Stock-based compensation expense related to employee stock options | 7,262 | 7,262 | ||||
Net loss attributable to common stockholders | (3,149,852) | (3,149,852) | ||||
Ending balance, value at Dec. 31, 2020 | $ 1,340,566 | $ 362,059 | $ 136,311 | 127,733,714 | (128,255,391) | 1,317,259 |
Ending Balance, Shares at Dec. 31, 2020 | 185 | 52 | 136,311,335 | |||
Shares issued to directors | ||||||
Stock-based compensation expense related to employee stock options | 7,262 | 7,262 | ||||
Net loss attributable to common stockholders | (412,785) | (412,785) | ||||
Ending balance, value at Dec. 31, 2021 | $ 1,340,566 | $ 362,059 | $ 136,311 | $ 127,740,976 | $ (128,668,176) | $ 911,736 |
Ending Balance, Shares at Dec. 31, 2021 | 185 | 52 | 136,311,335 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Cash Flows from Operating Activities: | ||
Net loss | $ (412,785) | $ (3,149,852) |
Adjustments to reconcile net loss to cash used in operating activities: | ||
Stock-based compensation expense related to employee stock options | 7,262 | 7,262 |
Stock issued to directors as compensation | 0 | 18,000 |
Depreciation and amortization | 43,471 | 58,853 |
Noncash operating lease expense | 229,548 | 230,944 |
Deferred income taxes | 0 | 28,021 |
Gain on debt extinguishment | (1,836,780) | 0 |
Changes in operating assets and liabilities: | ||
Accounts receivable, net | (145,380) | 1,418,413 |
Inventories, net | 562,703 | (15,188) |
Prepaid expenses | (592,359) | 108,886 |
Deposits | (595) | 10,130 |
Accounts payable | 822,528 | (222,553) |
Accrued royalties – long-term | (140,000) | 500,000 |
Accrued liabilities | 166,063 | 35,486 |
Contract liabilities | (111,137) | 288,183 |
Contract assets | (161,025) | 83,131 |
Operating lease liabilities | (242,305) | (223,835) |
Accrued income tax payable | 5,431 | 0 |
Income taxes receivable | 105,745 | (20,675) |
Net Cash Used In Operating Activities | (1,699,615) | (844,794) |
Cash Flows From Financing Activities: | ||
Proceeds from note payable | 913,063 | 913,063 |
Proceeds from line of credit | 6,764,968 | 5,835,000 |
Payments on line of credit | (6,629,168) | (6,192,058) |
Net Cash Provided By Financing Activities | 1,048,863 | 556,005 |
Net decrease in cash and cash equivalents | (650,752) | (288,789) |
Cash and cash equivalents at the beginning of the period | 3,011,811 | 3,300,600 |
Cash and cash equivalents at the end of the period | 2,361,059 | 3,011,811 |
Cash transactions: | ||
Cash paid during the year for interest | 22,885 | 29,082 |
Cash paid (received) during the year for income taxes, net of refunds | (104,456) | 11,262 |
Non-cash transactions: | ||
Issuance of stock to directors | $ 0 | $ 18,000 |
BASIS OF PRESENTATION AND SIGNI
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES | NOTE A – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES A summary of the significant accounting policies applied in the preparation of the accompanying consolidated financial statements follows. Business and Basis of Presentation Telkonet, Inc. (the “Company”, “Telkonet”), formed in 1999 and incorporated under the laws of the state of Utah, is the creator of the EcoSmart and the Rhapsody Platforms of intelligent automation solutions designed to optimize energy efficiency, comfort and analytics in support of the emerging Internet of Things (“IoT”). In 2007, the Company acquired substantially all of the assets of Smart Systems International (“SSI”), which was a provider of energy management products and solutions to customers in the United States and Canada and the precursor to the Company’s EcoSmart platform. In 2020, the Company launched the Rhapsody Platform, which simplifies the installation and setup of the Company’s newest products and integrations. Both platforms provide comprehensive savings, management reporting, analytics and virtual engineering of a customer’s portfolio and/or property’s room-by-room energy consumption. Telkonet has deployed more than a half million intelligent devices worldwide in properties within the hospitality, educational, governmental and other commercial markets. The platforms are recognized as a solution for reducing energy consumption, operational costs and carbon footprints, and eliminating the need for new energy generation in these marketplaces – all whilst improving occupant comfort and convenience. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Telkonet Communications, Inc., operating as a single reportable business segment. As previously reported in our Current Reports on Form 8-K dated August 10, 2021, and January 13, 2022, on August 6, 2021, the Company entered into a stock purchase agreement (the “Purchase Agreement”) with VDA Group S.p.A., an Italian joint stock company (“VDA”), pursuant to which VDA would, at the Closing (as defined in the Purchase Agreement), contribute $5 162,900,947 105,380,666 Following the issuance of 162,900,947 shares of Common Stock to VDA upon the Closing, VDA owns 53% of the issued and outstanding Common Stock on a fully diluted as exercised/converted basis, resulting in a change of control of the Company. VDA could eventually own as much as 65% of the issued and outstanding Common Stock on a fully diluted as exercised/converted basis if it fully exercises the Warrant. Concentrations of Credit Risk Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, consist primarily of cash, cash equivalents and trade receivables. The Company places its cash and temporary cash investments with credit quality institutions. At times, such investments may be in excess of the FDIC insurance limit. The Company has never experienced any losses related to these balances. With respect to trade receivables, the Company performs ongoing credit evaluations of its customers’ financial conditions and limits the amount of credit extended when deemed necessary. The Company provides credit to its customers primarily in the United States in the normal course of business. The Company routinely assesses the financial strength of its customers and, as a consequence, believes its trade receivables credit risk exposure is limited. Cash and Cash Equivalents The Company considers all highly liquid debt instruments purchased with an original maturity date of three months or less to be cash equivalents. Accounts Receivable Accounts receivable are uncollateralized customer obligations due under normal trade terms. The Company records allowances for doubtful accounts based on customer-specific analysis and general matters such as current assessment of past due balances and economic conditions. The Company writes off accounts receivable when they become uncollectible. The allowance for doubtful accounts was $ 5,563 7,973 Inventories Inventories consist of thermostats, sensors and controllers for Telkonet’s product platforms. These inventories are purchased for resale and do not include manufacturing labor and overhead. Inventories are stated at the lower of cost or net realizable value determined by the first in, first out (FIFO) method. The Company’s inventories are subject to technological obsolescence. Management evaluates the net realizable value of its inventories on a quarterly basis and when it is determined that the Company’s carrying cost of such excess and obsolete inventories cannot be recovered in full, a charge is taken against income for the difference between the carrying cost and the estimated realizable amount. The reserve for inventory obsolescence was approximately $ 443,000 404,000 Property and Equipment In accordance with Accounting Standards Codification ASC 360 “Property Plant and Equipment ” 2 to 10 years Fair Value of Financial Instruments The Company accounts for the fair value of financial instruments in accordance with ASC 820, which defines fair value for accounting purposes, established a framework for measuring fair value and expanded disclosure requirements regarding fair value measurements. Fair value is defined as an exit price, which is the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date. The degree of judgment utilized in measuring the fair value of assets and liabilities generally correlates to the level of pricing observability. Financial assets and liabilities with readily available, actively quoted prices or for which fair value can be measured from actively quoted prices in active markets generally have more pricing observability and require less judgment in measuring fair value. Conversely, financial assets and liabilities that are rarely traded or not quoted have less price observability and are generally measured at fair value using valuation models that require more judgment. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency of the asset, liability or market and the nature of the asset or liability. The Company categorizes financial assets and liabilities that are recurring, at fair value into a three-level hierarchy in accordance with these provisions. · Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; · Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; or · Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and are unobservable. The Company’s financial instruments include cash and cash equivalents, accounts receivable, accounts payable, and certain accrued liabilities. The carrying amounts of these assets and liabilities approximate fair value due to the short maturity of these instruments (Level 1 instruments), except for the line of credit. The carrying amount of the line of credit approximates fair value due to the interest rate and terms approximating those available to the Company for similar obligations (Level 2 instruments). Long-Lived Assets The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with ASC 360-10. Recoverability is measured by comparison of the carrying amount to the future net cash flows which the assets are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds their fair value. Based on the assessment for impairment performed during 2021 and 2020, no impairment was recorded. Income (Loss) per Common Share The Company computes earnings per share under ASC 260-10, “Earnings Per Share”. Basic net income (loss) per common share is computed using the weighted average shares outstanding. Diluted net income (loss) per common share is computed using the treasury stock method, which assumes that the proceeds to be received on exercise of outstanding stock options and warrants are used to repurchase shares of the Company at the average market price of the common shares for the year. Dilutive common stock equivalents consist of shares issuable upon the exercise of the Company's outstanding stock options and warrants. For the years ended December 31, 2021 and 2020, there were 3,349,793 3,599,793 Numerator for basic and diluted loss per share: 2021 2020 Net loss $ (412,785 ) $ (3,149,852 ) Less: cumulative dividends earned on Series A and Series B preferred stock (94,850 ) (95,106 ) Net loss attributable to common shareholders $ (507,635 ) $ (3,244,958 ) Shares used in the calculation of diluted EPS for the years ended December 31, 2021 and 2020 are summarized below: Schedule of diluted EPS 2021 2020 Weighted average common shares outstanding - basic 136,311,335 136,231,562 Dilutive effect of stock options – – Weighted average common shares outstanding - diluted 136,311,335 136,231,562 Use of Estimates The preparation of financial statements in conformity with United States of America (U.S.) generally accepted accounting principles (“GAAP”) requires management to make certain estimates, judgments and assumptions that affect the 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. Estimates are used when accounting for items and matters such as revenue recognition and allowances for uncollectible accounts receivable, inventory obsolescence, depreciation and amortization, long-lived assets, taxes and related valuation allowance, income tax provisions, stock-based compensation, and contingencies. The Company believes that the estimates, judgments and assumptions are reasonable, based on information available at the time they are made. Actual results may differ from those estimates. Income Taxes The Company accounts for income taxes in accordance with ASC 740-10 “Income Taxes.” Under this method, deferred income taxes (when required) are provided based on the difference between the financial reporting and income tax bases of assets and liabilities and net operating losses at the statutory rates enacted for future periods. The Company has a policy of establishing a valuation allowance when it is more likely than not that the Company will not realize the benefits of its deferred income tax assets in the future. The Company follows ASC 740-10-25, which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740-10-25 also provides guidance on de-recognition, classification, treatment of interest and penalties, and disclosure of such positions. Revenue from Contracts with Customers Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (“ASC 606, the Standard”) supersedes nearly all legacy revenue recognition guidance. ASC 606, the Standard outlines a comprehensive five-step revenue recognition model based on the principle that an entity should recognize revenue based on when it satisfies its performance obligations by transferring control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for said goods or services. Identify the customer contracts The Company accounts for a customer contract under ASC 606 when the contract is legally enforceable. A contract is legally enforceable when all of the following criteria are met: (1) the contract has been approved by the Company and the customer and both parties are committed to perform their respective obligations, (2) the Company can identify each party’s rights regarding goods or services transferred, (3) the Company can identify payment terms for goods or services transferred, (4) the contract has commercial substance, and (5) collectability of all the consideration to which the Company is entitled in exchange for the goods or services transferred is probable. A contract does not exist if either party to the contract has the unilateral right to terminate a wholly unperformed contract without compensating the other party (or parties). Nearly all of the Company’s contracts do not contain such mutual termination rights for convenience. All contracts are in written form. Identify the performance obligations The Company will enter into product only contracts that contain a single performance obligation related to the transfer of products to a customer. The Company will also enter into certain customer contracts that encompass product and installation services, referred to as “turnkey” solutions. These contracts ultimately provide the customer with a solution that enhances the functionality of the customer’s existing equipment. For this reason, the Company has determined that the product and installation services are not separately identifiable performance obligations, but in essence represent one, combined performance obligation (“turnkey”). The Company also offers technical phone support services to customers. This service is considered a separate performance obligation. Determine the transaction price The Company generally enters into contracts containing fixed prices. It is not customary for the Company to include contract terms that would result in variable consideration. In the rare situation that a contract does include this type of provision, it is not expected to result in a material adjustment to the transaction price. The Company regularly extends pricing discounts; however, they are negotiated up front and adjust the fixed transaction price set out in the contract. Customer contracts will typically contain upfront deposits that will be applied against future invoices, as well as customer retainage. The intent of any required deposit or retainage is to ensure that the obligations of either party are honored and follow customary industry practices. In addition, the Company will typically be paid in advance at the beginning of any support contracts, consistent with industry practices. None of these payment provisions are intended to represent significant implicit financing. The Company’s standard payment terms are thirty days from invoice date. Products are fully refundable when returned in their original packaging without damage or defacing less a restocking fee. Historical returns have shown to be immaterial. The Company offers a standard one-year assurance warranty. However, customers can purchase an extended warranty. Under the revenue recognition standard, extended warranties are accounted for as a service warranty, requiring the revenue to be recognized over the extended service periods. Contracts involving an extended warranty are immaterial and will continue to be combined with technical phone support services revenue and recognized on a straight-line basis over the term of the contract. Allocate the transaction price to the performance obligations Revenues from customer contracts are allocated to the separate performance obligations based on their relative stand-alone selling price (“SSP”) at contract inception. The SSP is the price at which the Company would sell a promised good or service separately. The best evidence of an SSP is the observable price of a good or service when the entity sells that good or service separately in similar circumstances and to similar customers. However, turnkey solutions are sold for a broad range of amounts resulting from, but not limited to, tiered discounting for value-added resellers (“VAR”) based upon committed volumes and other economic factors. Due to the high variability of our pricing, the Company cannot establish a reliable SSP using observable data. Accordingly, the Company uses the residual approach to allocate the transaction price to performance obligations related to its turnkey solutions. When support services are not included within the turnkey solution, the residual method is not utilized and no allocation of the transaction price to the performance obligation is necessary. All support service agreements, whether single or multi-year terms, automatically renew for one-year terms at a suggested retail price (“SRP”). Support service renewals are consistently priced and therefore would support the use of SRP as the best estimate of an SSP for such performance obligations. Revenue Recognition The Company recognizes revenues from product only sales at a point in time when control over the product has transferred to the customer. As the Company’s principal terms of sale are FOB shipping point, the Company primarily transfers control and records revenue for product only sales upon shipment. A typical turnkey project involves the installation and integration of 200-300 rooms in a customer-controlled facility and usually takes sixty days to complete. Since control over goods and services transfers to a customer once a room is installed, the Company recognizes revenue for turnkey solutions over time. The Company uses an outputs measure based on the number of rooms installed to recognize revenues from turnkey solutions. Revenues from support services are recognized over time, in even daily increments over the term of the contract, and are presented as “Recurring Revenue” in the Statement of Operations. Contracts are billed in accordance with the terms and conditions, either at periodic intervals or upon substantial completion. This can result in billing occurring subsequent to revenue recognition, resulting in contract assets. Contract assets are presented as current assets in the Consolidated Balance Sheet. Contract liabilities include deferrals for the monthly support service fees. Long-term contract liabilities represent support service fees that will be recognized as revenue after December 31, 2022. Contract Fulfillment Cost The Company recognizes related costs of the contract over time in relation to the revenue recognition. Costs included within the projects relate to the cost of material, direct labor and costs of outside services utilized to complete projects. These are presented as “Contract assets” in the Consolidated Balance Sheet. Sales Taxes Unless provided with a resale or tax exemption certificate, the Company assesses and collects sales tax on sales transactions and records the amount as a liability. It is recognized as a liability until remitted to the applicable state. Total revenues do not include sales tax as the Company is considered a pass through conduit for collecting and remitting sales taxes. Guarantees and Product Warranties The Company records a liability for potential warranty claims in cost of sales at the time of sale. The amount of the liability is based on the trend in the historical ratio of claims to sales, the historical length of time between the sale and resulting warranty claim, new product introductions and other factors. The products sold are generally covered by a warranty for a period of one year. In the event the Company determines that its current or future product repair and replacement costs exceed its estimates, an adjustment to these reserves would be charged to earnings in the period such determination is made. For the years ended December 31, 2021 and 2020, the Company experienced returns of approximately 1% to 3% 46,650 45,328 Product warranties for the years ended December 31 are as follows: Schedule of allowance for doubtful accounts 2021 2020 Beginning balance $ 45,328 $ 58,791 Warranty claims incurred (16,075 ) (20,499 ) Provision charged to expense 17,397 7,036 Ending balance $ 46,650 $ 45,328 Advertising The Company follows the policy of charging the costs of advertising to expenses as incurred. The Company incurred $ 10,525 10,104 Research and Development The Company accounts for research and development costs in accordance with the ASC 730-10, “Research and Development”. Under ASC 730-10, all research and development costs must be charged to expense as incurred. Accordingly, internal research and development costs are expensed as incurred. Third-party research and development costs are expensed when the contracted work has been performed or as milestone results have been achieved. Company-sponsored research and development costs related to both present and future products are expensed in the period incurred. Total expenditures on research and product development for 2021 and 2020 were $ 1,129,957 1,177,282 Stock-Based Compensation The Company accounts for stock-based awards in accordance with ASC 718-10, “Share-Based Compensation”, which requires a fair value measurement and recognition of compensation expense for all share-based payment awards made to the Company’s employees and directors, including employee stock options and restricted stock awards. The Company estimates the fair value of stock options granted using the Black-Scholes valuation model. This model requires the Company to make estimates and assumptions including, among other things, estimates regarding the length of time an employee will hold vested stock options before exercising them, the estimated volatility of the Company’s common stock price and the number of options that will be forfeited prior to vesting. The fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. Changes in these estimates and assumptions can materially affect the determination of the fair value of stock-based compensation and consequently, the related amount recognized in the Company’s consolidated statements of operations. The expected term of the options represents the estimated period of time until exercise and is based on historical experience of similar awards, giving consideration to the contractual terms, vesting schedules and expectations of future employee behavior. The expected stock price volatility is based on the historical volatility of the Company’s stock for the related expected term. Stock-based compensation expense in connection with options granted to employees was $ 7,262 |
NEW ACCOUNTING PRONOUNCEMENTS
NEW ACCOUNTING PRONOUNCEMENTS | 12 Months Ended |
Dec. 31, 2021 | |
Accounting Changes and Error Corrections [Abstract] | |
NEW ACCOUNTING PRONOUNCEMENTS | NOTE B – NEW ACCOUNTING PRONOUNCEMENTS In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 provides guidance for estimating credit losses on certain types of financial instruments, including trade receivables, by introducing an approach based on expected losses. The expected loss approach will require entities to incorporate considerations of historical information, current information and reasonable and supportable forecasts. ASU 2016-13 also amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The guidance requires a modified retrospective transition method and early adoption is permitted. In November 2019, FASB issued ASU No. 2019-10, Financial Instruments – Credit Losses, Derivatives and Hedging, and Leases (“ASU 2019-10”), which defers the adoption of ASU 2016-13 for smaller reporting companies until January 1, 2023. The Company will continue to evaluate the impact of ASU 2016-13 on its consolidated financial statements. Management has evaluated other recently issued accounting pronouncements and does not believe any will have a significant impact on our consolidated financial statements and related disclosures. |
REVENUE
REVENUE | 12 Months Ended |
Dec. 31, 2021 | |
Revenue from Contract with Customer [Abstract] | |
REVENUE | NOTE C– REVENUE The following table presents the Company’s product and recurring revenues disaggregated by industry for the year ended December 31, 2021. Disaggregation of revenues Hospitality Education Multiple Government Healthcare Total Product $ 4,724,880 $ 279,486 $ 295,873 $ 193,970 $ 48,195 $ 5,542,404 Recurring 592,655 112,879 26,461 – – 731,995 $ 5,317,535 $ 392,365 $ 322,334 $ 193,970 $ 48,195 $ 6,274,399 The following table presents the Company’s product and recurring revenues disaggregated by industry for the year ended December 31, 2020. Hospitality Education Multiple Government Healthcare Total Product $ 4,940,887 $ 443,001 $ 143,886 $ 214,477 $ – $ 5,742,251 Recurring 597,490 129,541 24,588 – – 751,619 $ 5,538,377 $ 572,542 $ 168,474 $ 214,477 $ – $ 6,493,870 Sales taxes and other usage-based taxes are excluded from revenues. Remaining performance obligations As of December 31, 2021, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $ 1.2 100 0.9 Contract assets and liabilities Contract Assets and Liabilities 2021 2020 Variance Contract assets $ 266,014 $ 104,989 $ 161,025 Contract liabilities 941,230 1,052,367 (111,137 ) Contracts are billed in accordance with the terms and conditions, either at periodic intervals or upon substantial completion. This can result in billing occurring subsequent to revenue recognition, resulting in contract assets. Contract assets are presented as current assets in the Consolidated Balance Sheet. Often, the Company will require customers to pay a deposit upon contract signing that will be applied against work performed or products shipped. In addition, the Company will often invoice the full term of support at the start of the support period. Billings that occur prior to revenue recognition result in contract liabilities. The change in the contract liability balance during the 12 month period ended December 31, 2021 is the result of cash payments received and billing in advance of satisfying performance obligations. Contract costs Costs to complete a turnkey contract primarily relate to the materials cost and direct labor and are recognized proportionately as the performance obligation is satisfied. The Company will defer cost to complete a contract when materials have shipped (and control over the materials has transferred to the customer), but an insignificant amount of rooms have been installed. The Company will recognize any deferred costs in proportion to revenues recognized from the related turnkey contract. The Company does not expect deferred contract costs to be long-lived since a typical turnkey project takes sixty days to complete. Deferred contract costs are generally presented as current assets in the Consolidated Balance Sheet. The Company incurs incremental costs to obtain a contract in the form of sales commissions. These costs, whether related to performance obligations that extend beyond twelve months or not, are immaterial and will continue to be recognized in the period incurred within selling, general and administrative expenses. |
ACCOUNTS RECEIVABLE
ACCOUNTS RECEIVABLE | 12 Months Ended |
Dec. 31, 2021 | |
Receivables [Abstract] | |
ACCOUNTS RECEIVABLE | NOTE D – ACCOUNTS RECEIVABLE Components of accounts receivable as of December 31, 2021 and 2020 are as follows: Schedule of accounts receivable 2021 2020 Accounts receivable $ 1,016,117 $ 873,147 Allowance for doubtful accounts (5,563 ) (7,973 ) Accounts receivable, net $ 1,010,554 $ 865,174 |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 12 Months Ended |
Dec. 31, 2021 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | NOTE E – PROPERTY AND EQUIPMENT The Company’s property and equipment as of December 31, 2021 and 2020 consists of the following: Schedule of property and equipment 2021 2020 Development test equipment $ 16,461 $ 16,461 Computer software 76,134 76,134 Office equipment 66,685 66,685 Office fixtures and furniture 330,568 330,568 Leasehold improvements 18,016 18,016 Total 507,864 507,864 Accumulated depreciation and amortization (423,663 ) (380,192 ) Total property and equipment $ 84,201 $ 127,672 Depreciation and amortization expense included as a charge to income was $ 43,471 58,853 |
CURRENT ACCRUED LIABILITIES
CURRENT ACCRUED LIABILITIES | 12 Months Ended |
Dec. 31, 2021 | |
Payables and Accruals [Abstract] | |
CURRENT ACCRUED LIABILITIES | NOTE F – CURRENT ACCRUED LIABILITIES Current accrued liabilities as of December 31, 2021 and 2020 are as follows : Schedule of accrued liabilities and expenses 2021 2020 Accrued payroll and payroll taxes $ 242,131 $ 252,595 Accrued professional 136,584 176,842 Accrued sales taxes, penalties, and interest 16,634 31,396 Product warranties 46,650 45,328 Other accrued liabilities 276,722 57,151 Total current accrued liabilities $ 718,721 $ 563,312 |
DEBT
DEBT | 12 Months Ended |
Dec. 31, 2021 | |
Debt Disclosure [Abstract] | |
DEBT | NOTE G – DEBT Revolving Credit Facility On September 30, 2014, the Company entered into a loan and security agreement (the “Heritage Bank Loan Agreement”), with Heritage Bank of Commerce, a California state chartered bank (“Heritage Bank”), governing a revolving credit facility in a principal amount not to exceed $2,000,000 (the “Credit Facility”). Availability of borrowings under the Credit Facility is subject to a borrowing base calculation based on the Company’s eligible accounts receivable and eligible inventory each multiplied by an applicable advance rate, with an overall limitation tied to the Company’s eligible accounts receivable. The Credit Facility is secured by all of the Company’s assets. The Heritage Bank Loan Agreement is available for working capital and other general business purposes. The outstanding principal balance of the Credit Facility bears interest at the Prime Rate plus 3.00% 6.25 250,000 0.20 October 9, 2021 On September 30, 2021, the Company entered into a twelfth amendment to the Heritage Bank Loan Agreement to extend the revolving maturity date to December 31, 2021, unless earlier accelerated under the terms of the Heritage Bank Loan Agreement. In addition, subject to certain conditions as specified in the Twelfth Amendment, Heritage Bank consented to the VDA Transaction (as described above under the “Business and Basis of Presentation” section in Note A – Basis of Presentation and Significant Accounting Policies) between the Company and VDA, and acknowledged and agreed that certain events occurring in connection with the VDA Transaction, including the change of control of the Company resulting from the VDA Transaction, do not constitute Events of Default as defined in the Heritage Bank Loan Agreement. On December 13, 2021, the Company entered into a thirteenth amendment to the Heritage Bank Loan Amendment to extend the revolving maturity date to March 31, 2022, unless earlier accelerated under the terms of the Heritage Bank Loan Agreement. In addition, the Heritage Bank Loan Amendment reduced the credit extension amount to $ 1,000,000 On March 10, 2022, the Company entered into a fourteenth amendment to the Heritage Bank Loan Amendment to extend the revolving maturity date to June 30, 2023 The Heritage Bank Loan Agreement contains covenants that place restrictions on, among other things, the incurrence of debt, granting of liens and sale of assets. The Heritage Bank Loan Agreement also contains financial covenants. As discussed above, the EBITDA loss covenant was eliminated in the eleventh amendment to the Credit Facility. The sole financial covenants are a minimum asset coverage ratio and a minimum unrestricted cash balance of $1 million, both of which are measured at the end of each month. A violation of either of these covenants could result in an event of default under the Heritage Bank Loan Agreement. Upon the occurrence of such an event of default or certain other customary events of defaults, payment of any outstanding amounts under the Credit Facility may be accelerated and Heritage Bank’s commitment to extend credit under the Heritage Bank Loan Agreement may be terminated. The Heritage Bank Loan Agreement contains other representations and warranties, covenants, and other provisions customary to transactions of this nature. The outstanding balance on the Credit Facility was $ 403,089 267,289 460,000 442,000 Paycheck Protection Program The Company has received two loans under the Paycheck Protection Program (the “PPP”) administered by the United States Small Business Administration (the “SBA”) and authorized by the Keeping American Workers Employed and Paid Act, which is part of the Coronavirus Aid, Relief, and Economic Security Act, enacted on March 27, 2020. On April 17, 2020, the Company entered into an unsecured promissory note for $ 913,063 913,063 7,610 On April 27, 2021, the Company entered into an unsecured promissory note, dated as of April 26, 2021, for a second PPP loan (“the Second PPP Loan”), with Heritage Bank under a second draw of the PPP administered by the SBA and authorized by the Keeping American Workers Employed and Paid Act. The principal amount of the Second PPP Loan was $ 913,063 Under the terms of the PPP, the Company could apply for, and be granted, forgiveness for all or a portion of the Second PPP Loan. Such forgiveness would be determined, subject to limitations and ongoing rulemaking by the SBA, based on the use of loan proceeds for eligible purposes, including payroll costs, mortgage interest, rent, utility costs and the maintenance of employee and compensation levels. At least 60% of such loan proceeds must be used for eligible payroll costs. The amount of loan forgiveness would be reduced if the Company terminates employees or reduces salaries during the Covered Period (as defined in the Note). In September 2021, the Company applied for forgiveness of the amount due on the Second PPP Loan. On September 15, 2021, Heritage Bank confirmed that the Second PPP Loan granted to the Company, in the original principal amount of $ 913,063 3,044 The total amount forgiven in 2021 for principal and accrued interest under the PPP Loans was $ 1,836,780 |
PREFERRED STOCK
PREFERRED STOCK | 12 Months Ended |
Dec. 31, 2021 | |
Equity [Abstract] | |
PREFERRED STOCK | NOTE H – PREFERRED STOCK Series A The Company has designated 215 0.363 215 1,628,800 0.33 13,774 0.363 1,075,000 Series B The Company has designated 567 0.13 267 5,134,626 0.13 5,000 38,461 0.13 1,335,000 5,211,542 0.13 38,461 0.13 1,355,000 486 Preferred stock carries certain preference rights as detailed in the Company’s Amended Articles of Incorporation related to both the payment of dividends and as to payments upon liquidation in preference to any other class or series of capital stock of the Company. As of December 31, 2021, the liquidation preference of the preferred stock is based on the following order: first, Series B with a preference value of $ 497,605 237,605 1,822,450 897,450 476,782 216,782 1,748,423 823,423 |
CAPITAL STOCK
CAPITAL STOCK | 12 Months Ended |
Dec. 31, 2021 | |
Equity [Abstract] | |
CAPITAL STOCK | NOTE I – CAPITAL STOCK The Company has authorized 15,000,000 shares of preferred stock, with a par value of $ .001 215 567 185 52 As of December 31, 2021 and the date of this filing, following the closing of the VDA Transaction, the Company has authorized 475,000,000 .001 190,000,000 .001 136,311,335 During the year ended December 31, 2021, no shares were issued. During the year ended December 31, 2020, the Company issued 320,844 18,000 During the years ended December 31, 2021 and 2020, no During the years ended December 31, 2021 and 2020, no |
STOCK OPTIONS AND WARRANTS
STOCK OPTIONS AND WARRANTS | 12 Months Ended |
Dec. 31, 2021 | |
Share-based Payment Arrangement [Abstract] | |
STOCK OPTIONS AND WARRANTS | NOTE J – STOCK OPTIONS AND WARRANTS Employee Stock Options The Company maintains an equity incentive plan (the “2020 Plan”). The 2020 Plan was established in 2020 as an incentive plan for officers, employees, non-employee directors, prospective employees and other key persons. The 2020 Plan replaced the 2010 Amended and Restated Stock Option and Incentive Plan, as amended (the “2010 Plan”), which expired on November 17, 2020. The 2020 Plan is administered by the Board of Directors or the compensation committee, which is comprised of not less than two non-employee directors who are independent. A total of 10,000,000 10,000,000 It is anticipated that providing such persons with a direct stake in the Company’s welfare will assure a better alignment of their interests with those of the Company and its stockholders. The following table summarizes the changes in options outstanding and the related prices for the shares of the Company’s common stock issued to employees of the Company under the 2010 Plan as of December 31, 2021. No options have been issued under the 2021 Plan. Schedule of options by exercise price Options Outstanding Options Exercisable Exercise Prices Number Weighted Average Weighted Average Number Weighted Average $0.01 - $0.15 2,000,000 5.01 $ 0.14 2,000,000 $ 0.14 $0.16 - $0.30 1,349,793 1.84 0.18 1,325,040 0.18 3,349,793 3.73 $ 0.16 3,325,040 $ 0.16 Transactions involving stock options issued to employees are summarized as follows: Schedule of option activity Number of Weighted Average Exercise Outstanding at January 1, 2020 3,349,793 $ 0.16 Granted – – Exercised – – Cancelled or expired – – Outstanding at December 31, 2020 3,349,793 $ 0.16 Granted – – Exercised – – Cancelled or expired – – Outstanding at December 31, 2021 3,349,793 $ 0.16 The expected life of awards granted represents the period of time that they are expected to be outstanding. The Company determines the expected life based on historical experience with similar awards, giving consideration to the contractual terms, vesting schedules, exercise patterns and pre-vesting and post-vesting forfeitures. The Company estimates the volatility of the Company’s common stock based on the calculated historical volatility of the Company’s common stock using the share price data for the trailing period equal to the expected term prior to the date of the award. The Company bases the risk-free interest rate used in the Black-Scholes option valuation model on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent remaining term equal to the expected life of the award. The Company has not paid any cash dividends on the Company’s common stock and does not anticipate paying any cash dividends in the foreseeable future. Consequently, the Company uses an expected dividend yield of zero in the Black-Scholes option valuation model. The Company uses historical data to estimate pre-vesting option forfeitures and records share-based compensation for those awards that are expected to vest. In accordance with ASC 718-10, the Company calculates share-based compensation for changes to the estimate of expected equity award forfeitures based on actual forfeiture experience. There were no options granted in the years ended December 31, 2021 and 2020. The total estimated fair value of the options granted during both the years ended December 31, 2021 and 2020 was $ 0 5,053 6,303 zero no 7,262 Warrants The following table summarizes the changes in warrants outstanding and the related exercise price for the warrants issued to the debt holder in relation to the revolving credit facility, see Note G. Transactions involving warrants are summarized as follows: Schedule of warrants outstanding and exercisable Number of Weighted Average Exercise Outstanding at January 1, 2020 250,000 $ 0.20 Issued – – Exercised – – Cancelled or expired – – Outstanding at December 31, 2020 250,000 $ 0.20 Issued – – Exercised – – Cancelled or expired 250,000 0.20 Outstanding at December 31, 2021 – $ – There were no 250,000 no |
STOCK ISSUANCE TO NON-EMPLOYEE
STOCK ISSUANCE TO NON-EMPLOYEE DIRECTORS | 12 Months Ended |
Dec. 31, 2021 | |
Stock Issuance To Non-employee Directors | |
STOCK ISSUANCE TO NON-EMPLOYEE DIRECTORS | NOTE K – STOCK ISSUANCE TO NON-EMPLOYEE DIRECTORS During the years ended December 31, 2021 and 2020, the Company issued common stock in the amount of $ 0 18,000 0 60,000 223,000 100,000 |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2021 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | NOTE L – INCOME TAXES The Company follows ASC 740-10 “Income Taxes” which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statement or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between financial statements and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. A reconciliation of tax expense computed at the statutory federal tax rate on loss from operations before income taxes to the actual income tax (benefit) / expense is as follows: Schedule of reconciliation of tax expense 2021 2020 Tax benefit computed at the statutory rate $ (85,028 ) $ (656,723 ) State taxes (7,398 ) 9,489 Book (income not taxable) expenses not deductible for tax purposes (385,135 ) 540 Rate change 26,739 (30,914 ) Deferred tax write-off 42,782 – Other (393 ) 10,218 Total adjustments to tax provision (408,433 ) (667,390 ) Change in valuation allowance for deferred tax assets 416,322 689,992 Income tax expense $ 7,889 $ 22,602 Deferred income taxes include the net tax effects of net operating loss (NOL) carry forwards and the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets are as follows: Schedule of deferred tax assets and liabilities 2021 2020 Deferred Tax Assets: Net operating loss carry forwards $ 22,078,280 $ 21,641,665 Intangibles 17,728 117,533 Other 638,477 558,964 Total deferred tax assets 22,734,485 22,318,162 Deferred Tax Liabilities: Intangibles – – Total deferred tax liabilities – – Valuation allowance (22,734,485 ) (22,318,162 ) Net deferred tax asset $ – $ – A valuation allowance is recorded when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets depends on the ability of the Company to generate sufficient taxable income of the appropriate character in the future and in the appropriate taxing jurisdictions. As of December 31, 2021 and December 31, 2020, the Company’s valuation allowance, established for the tax benefit that may not be realized, totaled approximately $ 22,730,000 22,320,000 At December 31, 2021 the Company had net operating loss carryforwards of approximately $ 98,300,000 24,900,000 The Company’s NOL and tax credit carryovers may be significantly limited under Section 382 of the Internal Revenue Code (IRC). NOL and tax credit carryovers are limited under Section 382 when there is a significant “ownership change” as defined in the IRC. During 2005 and in prior years, the Company may have experienced such ownership changes that could have imposed such limitations. The limitation imposed by Section 382 would place an annual limitation on the amount of NOL and tax credit carryovers that can be utilized. When the Company completes the necessary studies, the amount of NOL carryovers available may be reduced significantly. However, since the valuation allowance fully reserves for all available carryovers, the effect of the reduction would be offset by a reduction in the valuation allowance. The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The Company is generally no longer subject to U.S. federal income tax examinations by tax authorities for years before 2017 and various states before 2017. Although these years are no longer subject to examination by the Internal Revenue Service (IRS) and various state taxing authorities, net operating loss carryforwards generated in those years may still be adjusted upon examination by the IRS or state taxing authorities if they have been or will be used in a future period. The Company follows the provisions of uncertain tax positions as addressed in FASB Accounting Standards Codification 740-10-65-1. The Company recognized no change in the liability for unrecognized tax benefits. The Company has no tax positions at December 31, 2021 or 2020 for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expense. No such interest or penalties were recognized during the periods presented. The Company had no accruals for interest and penalties at December 31, 2021 or 2020. The Company’s utilization of any net operating loss carryforwards may be unlikely due to its continuing losses. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE M – COMMITMENTS AND CONTINGENCIES Office Leases Obligations In October 2013, the Company entered into a lease agreement for 6,362 square feet of commercial office space in Waukesha, Wisconsin for its corporate headquarters. The Waukesha lease would have expired in April 2021 10,344 In May 2017, the Company entered into a lease agreement for 5,838 May 2024 In November 2021, the Company entered into a lease agreement for 425 November 30, 2022 The Company determines if an arrangement is a lease at inception. This determination generally depends on whether the arrangement conveys to the Company the right to control the use of an explicitly or implicitly identified fixed asset for a period of time in exchange for consideration. Control of an underlying asset is conveyed to the Company if the Company obtains the rights to direct the use of and to obtain substantially all of the economic benefits from using the underlying asset. The Company does not separate non-lease components from lease components to which they relate and accounts for the combined lease and non-lease components as a single lease component. Operating leases are included in our Consolidated Balance Sheet as right-of-use assets, operating lease liabilities – current and operating lease liabilities – long-term. We do not recognize a right-of-use asset and lease liability for leases with a term of 12 months or less. Our current operating leases are for facilities. Our leases may contain renewal options; however, we do not recognize right-of-use assets or lease liabilities for renewal periods unless it is determined that we are reasonably certain of renewing the lease at inception or when a triggering event occurs. Some of our lease agreements may contain rent escalation clauses, rent holidays, capital improvement funding, or other lease concessions. In determining our right-of-use assets and lease liabilities, we apply a discount rate to the minimum lease payments within each lease agreement. ASC 842 requires us to use the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment. When we cannot readily determine the discount rate implicit in the lease agreement, we utilize our current borrowing rate on our outstanding line of credit. The Company’s line of credit utilizes market rates to assess an interest rate. Refer to Note G for further discussion. We recognize our minimum rental expense on a straight-line basis based on the fixed components of a lease arrangement. Payments are set on a pre-determined schedule within each lease agreement. We amortize this expense over the term of the lease beginning with the date of the standard adoption for current leases and beginning with the date of initial possession, which is the date we enter the leased space and begin to make improvements in the preparation for its intended use, for future leases. Variable lease components represent amounts that are not fixed in nature and are not tied to an index or rate and are recognized as incurred. Variable lease components consist primarily of the Company's proportionate share of common area maintenance, utilities, taxes and insurance and are presented as operating expenses in the Company’s statements of operations in the same line item as expense arising from fixed lease payments. The components of lease expense for the years ended December 31 is as follows: Components of lease expense Operating lease expense: 2021 2020 Operating lease cost - fixed $ 229,548 $ 230,944 Variable lease cost 122,356 125,872 Total operating lease cost $ 351,904 $ 356,816 Other information related to leases as of December 31 is as follows: Other information related to leases 2021 2020 Operating lease liability - current $ 195,176 $ 242,299 Operating lease liability - long-term $ 459,668 $ 592,341 Operating cash outflows from operating leases $ 242,305 $ 223,835 Weighted-average remaining lease term of operating leases 4.1 4.8 Weighted-average discount rate of operating leases 8.5 8.5 Future annual minimum operating lease payments as of December 31, 2021 were as follows: Future annual minimum operating lease payments 2022 $ 195,176 2023 193,169 2024 172,425 2025 158,510 2026 and thereafter 53,183 Total minimum lease payments 772,463 Less imputed interest (117,619 ) Total $ 654,844 Rental expenses charged to operations for the years ended December 31, 2021 and 2020 was $ 351,904 356,816 Employment and Consulting Agreements The Company has employment agreements with certain of its key employees which include non-disclosure and confidentiality provisions for protection of the Company’s proprietary information. Under the terms of a Consulting Agreement, Piercarlo Gramaglia will serve as Chief Executive Officer of the Company for a term of eighteen (18) months, unless earlier terminated pursuant to the terms of the Consulting Agreement. In exchange for his service as Chief Executive Officer, the Company will pay Mr. Gramaglia an annual fee of $ 30,000 Jason L. Tienor, Chief Sales & Operations Officer of the Americas, is employed pursuant to an employment agreement with us effective January 7, 2022. Mr. Tienor’s employment agreement has an initial term of two (2) years, which will automatically renew for a period of an additional twelve (12) months, and provides for a base salary of $ 222,800 Jeffrey J. Sobieski, Chief Technology Officer, is employed pursuant to an employment agreement with us effective January 7, 2022. Mr. Sobieski’s employment agreement has an initial term of one (1) year, which will automatically renew for a period of an additional twelve (12) months, and provides for a base salary of $ 211,625 Richard E. Mushrush, Chief Financial Officer, is employed pursuant to an employment agreement with us effective January 7, 2022. Mr. Mushrush’s employment agreement has an initial term of one (1) year, which will automatically renew for a period of an additional twelve (12) months, and provides for a base salary of $ 122,000 In addition to the foregoing, stock options are periodically granted to employees under the Company’s 2010 equity incentive plan at the discretion of the Compensation Committee of the Board of Directors. Executives of the Company are eligible to receive stock option grants, based upon individual performance and the performance of the Company as a whole. Litigation The Company is subject to legal proceedings and claims which arise in the ordinary course of its business. Although occasional adverse decisions or settlements may occur, other than the Sipco Lawsuit discussed below and which has been terminated, the Company believes that the final disposition of such matters should not have a material adverse effect on its financial position, results of operations or liquidity. Sipco Litigation and License Agreement On June 30, 2020, Sipco, LLC (“Sipco”) filed a lawsuit against the Company in the United States District Court for the Eastern District of Wisconsin (Case No. 20-CV-00981) (the “Sipco Lawsuit”) alleging infringement on multiple essential wireless mesh (“EWM”) patents held by the Sipco. The EWM patent portfolio covers technologies used in multi-hop wireless networks utilizing wireless protocols such as, but not limited to, Zigbee. The portfolio also covers applications including, but not limited to, home and building automation and industrial controls. The complaint contended that the Company sold, and was continuing to sell, various automated networked products designed to manage energy, lighting and temperature and those products employ wireless mesh network communication utilizing Zigbee enabled technology. The complaint alleged patent infringement and sought damages, costs, expenses, pre-judgment and post-judgment interest and post-judgment royalties. The complaint also alleged that the infringement was willful and that this is an “exceptional case” and requested treble damages and attorneys’ fees. On November 30, 2020, the Company entered into a Wireless Network Patent License Agreement (the “License Agreement”) with SIPCO, LLC (“Sipco”) and IPCO, LLC dba IntusIQ (collectively, the “Licensors”) in order to settle the Sipco Lawsuit, without the expense of costly litigation. Pursuant to the terms of the License Agreement, on November 30, 2020, Sipco and the Company filed a Stipulation of Dismissal in the United States District Court for the Eastern District of Wisconsin to stipulate to the dismissal of the Sipco Lawsuit in its entirety, with prejudice. Under the terms of the License Agreement, the Company is required to pay the Licensors royalties on (a) all Licensed Products (as defined in the License Agreement) sold by Telkonet or its affiliates from July 1, 2020 to December 31, 2024 and (b) all Licensed Products in Telkonet or its affiliates’ possession, but not sold, as of December 31, 2024. Specifically, the Company is required to pay a royalty fee, calculated quarterly, equal to 3.50% of applicable sales for the period beginning on July 1, 2020 and continuing until December 31, 2021 (the “First Period”). There was also an upfront payment of $ 40,000 127,000 87,000 The minimum payments required under the License Agreement have been accrued for on the Company’s Consolidated Balance Sheet in accordance with GAAP, which specifies that when a liability is probable and the amount can be reasonably estimated, said liability should be recorded in the current reporting period. Per the License Agreement, the contractual minimum payments begin on January 1, 2022 and continue until December 31, 2024, thus satisfying both criteria of probable and reasonably estimable. Accordingly, a long-term liability was recorded representing the sum of those contractual minimums. As of December 31, 2021, the Company had a current liability of approximately $ 166,000 26,000 140,000 360,000 All quarterly payments are due within thirty days of the end of the relevant three-month period (with the exception of the payment for the quarter ended September 30, 2020, which was due by December 31, 2020). In the event (a) the Company fails to make the payments and provide the statements required under the License Agreement and such breach is not cured within thirty days of written notice from the Licensors and (b) the Licensors elect not to terminate the License Agreement, the Licensors are entitled to an immediate and accelerated payment of any remaining payments due under the License Agreement. In addition to the payment terms described above, the License Agreement contains representations and warranties and other provisions customary to agreements of this nature. Indemnification Agreements On March 31, 2010, the Company entered into Indemnification Agreements with executives Jason L. Tienor, then President and Chief Executive Officer, and Jeffrey J. Sobieski, then Chief Operating Officer. On April 24, 2012, the Company entered into an Indemnification Agreement with director Tim S. Ledwick. On January 1, 2017, the Company entered into an Indemnification Agreement with Chief Financial Officer Richard E. Mushrush. The Indemnification Agreements provide that the Company will indemnify the Company's officers and directors, to the fullest extent permitted by law, relating to, resulting from or arising out of any threatened, pending or completed action, suit or proceeding, or any inquiry or investigation by reason of the fact that such officer or director (i) is or was a director, officer, employee or agent of the Company or (ii) is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. In addition, the Indemnification Agreements provide that the Company will make an advance payment of expenses to any officer or director who has entered into an Indemnification Agreement, in order to cover a claim relating to any fact or occurrence arising from or relating to events or occurrences specified in this paragraph, subject to receipt of an undertaking by or on behalf of such officer or director to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Company as authorized under the Indemnification Agreement. Sales Tax Unless provided with a resale or tax exemption certificate, the Company assesses and collects sales tax on sales transactions and records the amount as a liability. It is recognized as a liability until remitted to the applicable state. Total revenues do not include sales tax as the Company is considered a pass through conduit for collecting and remitting sales taxes. The following table sets forth the change in the sales tax accrual during the years ended December 31: Schedule of sales tax accrual 2021 2020 Balance, beginning of year $ 31,396 $ 26,957 Sales tax collected 85,589 94,904 Provisions (reversals) (7,685 ) 27,916 Payments (92,666 ) (118,381 ) Balance, end of year $ 16,634 $ 31,396 |
BUSINESS CONCENTRATION
BUSINESS CONCENTRATION | 12 Months Ended |
Dec. 31, 2021 | |
Risks and Uncertainties [Abstract] | |
BUSINESS CONCENTRATION | NOTE N – BUSINESS CONCENTRATION For the year ended December 31, 2021, one customer represented approximately 18 28 As of December 31, 2021, there were five customers, each representing over 10% of the Company’s net accounts receivable, accounting for 64 21 Purchases from one supplier approximated $ 1,878,803 82 2,287,950 91 134,000 470,000 |
EMPLOYEE BENEFIT PLAN
EMPLOYEE BENEFIT PLAN | 12 Months Ended |
Dec. 31, 2021 | |
Retirement Benefits [Abstract] | |
EMPLOYEE BENEFIT PLAN | NOTE O – EMPLOYEE BENEFIT PLAN The Company has an employee savings plan covering substantially all employees who are at least 21 years of age and have completed at least 3 months of service. The plan provides for matching contributions equal to 100% of each dollar contributed by the employee up to 4 0 53,000 |
SUBSEQUENT EVENT
SUBSEQUENT EVENT | 12 Months Ended |
Dec. 31, 2021 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENT | NOTE P – SUBSEQUENT EVENT On January 12, 2022, the Company closed on the contribution of $5 million to the Company (the “Financing”) by VDA Group S.p.A., an Italian joint stock company (“VDA”), in exchange for the issuance (the “Issuance”) by the Company to VDA of (i) 162,900,947 shares of common stock of Telkonet, par value $0.001 per share (the “Common Stock”); and (ii) a warrant to purchase 105,380,666 additional shares of Common Stock (the “Warrant”) (the Financing and the Issuance referred to herein collectively as the “Transaction”). Also in connection with the Transaction, effective upon the closing, the majority of the existing members of Telkonet’s board of directors (the “Board”) resigned and the vacancies resulting from those resignations were filled by individuals designated by VDA and appointed by the remaining Board members, resulting in a change of control of the Board. In addition, effective upon the closing, Jason L. Tienor resigned as Chief Executive Officer of the Company to become its’ Chief Sales & Operation Officer of the Americas and Piercarlo Gramaglia, Chief Executive Officer of VDA, will provide chief executive officer services to the Company pursuant to a consulting agreement between the Company and VDA. Following the issuance of 162,900,947 shares of Common Stock to VDA upon the closing of the Transaction, VDA owns 53% of the issued and outstanding Common Stock on a fully diluted as exercised/converted basis and could eventually own as much as 65% of the issued and outstanding Common Stock on a fully diluted as exercised/converted basis if it fully exercises the Warrant. Accordingly, the Transaction resulted in a change of control of the Company. The Transaction was subject to customary closing conditions, including, without limitation: (i) approval by the stockholders of Telkonet of an amendment to Telkonet’s Amended and Restated Articles of Incorporation (the “Amendment”) and the filing of the Amendment; (ii) the approval by the stockholders of Telkonet of the Issuance to effectuate the Transaction. The stockholders approved the Amendment and filing and the Issuance at the Special Meeting of Stockholders held on October 27, 2021. On March 10, 2022, the Company entered into a fourteenth amendment to the Heritage Bank Loan Amendment to extend the revolving maturity date to June 30, 2023, unless earlier accelerated under the terms of the Heritage Bank Loan Agreement. |
BASIS OF PRESENTATION AND SIG_2
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Business and Basis of Presentation | Business and Basis of Presentation Telkonet, Inc. (the “Company”, “Telkonet”), formed in 1999 and incorporated under the laws of the state of Utah, is the creator of the EcoSmart and the Rhapsody Platforms of intelligent automation solutions designed to optimize energy efficiency, comfort and analytics in support of the emerging Internet of Things (“IoT”). In 2007, the Company acquired substantially all of the assets of Smart Systems International (“SSI”), which was a provider of energy management products and solutions to customers in the United States and Canada and the precursor to the Company’s EcoSmart platform. In 2020, the Company launched the Rhapsody Platform, which simplifies the installation and setup of the Company’s newest products and integrations. Both platforms provide comprehensive savings, management reporting, analytics and virtual engineering of a customer’s portfolio and/or property’s room-by-room energy consumption. Telkonet has deployed more than a half million intelligent devices worldwide in properties within the hospitality, educational, governmental and other commercial markets. The platforms are recognized as a solution for reducing energy consumption, operational costs and carbon footprints, and eliminating the need for new energy generation in these marketplaces – all whilst improving occupant comfort and convenience. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Telkonet Communications, Inc., operating as a single reportable business segment. As previously reported in our Current Reports on Form 8-K dated August 10, 2021, and January 13, 2022, on August 6, 2021, the Company entered into a stock purchase agreement (the “Purchase Agreement”) with VDA Group S.p.A., an Italian joint stock company (“VDA”), pursuant to which VDA would, at the Closing (as defined in the Purchase Agreement), contribute $5 162,900,947 105,380,666 Following the issuance of 162,900,947 shares of Common Stock to VDA upon the Closing, VDA owns 53% of the issued and outstanding Common Stock on a fully diluted as exercised/converted basis, resulting in a change of control of the Company. VDA could eventually own as much as 65% of the issued and outstanding Common Stock on a fully diluted as exercised/converted basis if it fully exercises the Warrant. |
Concentrations of Credit Risk | Concentrations of Credit Risk Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, consist primarily of cash, cash equivalents and trade receivables. The Company places its cash and temporary cash investments with credit quality institutions. At times, such investments may be in excess of the FDIC insurance limit. The Company has never experienced any losses related to these balances. With respect to trade receivables, the Company performs ongoing credit evaluations of its customers’ financial conditions and limits the amount of credit extended when deemed necessary. The Company provides credit to its customers primarily in the United States in the normal course of business. The Company routinely assesses the financial strength of its customers and, as a consequence, believes its trade receivables credit risk exposure is limited. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid debt instruments purchased with an original maturity date of three months or less to be cash equivalents. |
Accounts Receivable | Accounts Receivable Accounts receivable are uncollateralized customer obligations due under normal trade terms. The Company records allowances for doubtful accounts based on customer-specific analysis and general matters such as current assessment of past due balances and economic conditions. The Company writes off accounts receivable when they become uncollectible. The allowance for doubtful accounts was $ 5,563 7,973 |
Inventories | Inventories Inventories consist of thermostats, sensors and controllers for Telkonet’s product platforms. These inventories are purchased for resale and do not include manufacturing labor and overhead. Inventories are stated at the lower of cost or net realizable value determined by the first in, first out (FIFO) method. The Company’s inventories are subject to technological obsolescence. Management evaluates the net realizable value of its inventories on a quarterly basis and when it is determined that the Company’s carrying cost of such excess and obsolete inventories cannot be recovered in full, a charge is taken against income for the difference between the carrying cost and the estimated realizable amount. The reserve for inventory obsolescence was approximately $ 443,000 404,000 |
Property and Equipment | Property and Equipment In accordance with Accounting Standards Codification ASC 360 “Property Plant and Equipment ” 2 to 10 years |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company accounts for the fair value of financial instruments in accordance with ASC 820, which defines fair value for accounting purposes, established a framework for measuring fair value and expanded disclosure requirements regarding fair value measurements. Fair value is defined as an exit price, which is the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date. The degree of judgment utilized in measuring the fair value of assets and liabilities generally correlates to the level of pricing observability. Financial assets and liabilities with readily available, actively quoted prices or for which fair value can be measured from actively quoted prices in active markets generally have more pricing observability and require less judgment in measuring fair value. Conversely, financial assets and liabilities that are rarely traded or not quoted have less price observability and are generally measured at fair value using valuation models that require more judgment. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency of the asset, liability or market and the nature of the asset or liability. The Company categorizes financial assets and liabilities that are recurring, at fair value into a three-level hierarchy in accordance with these provisions. · Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; · Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; or · Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and are unobservable. The Company’s financial instruments include cash and cash equivalents, accounts receivable, accounts payable, and certain accrued liabilities. The carrying amounts of these assets and liabilities approximate fair value due to the short maturity of these instruments (Level 1 instruments), except for the line of credit. The carrying amount of the line of credit approximates fair value due to the interest rate and terms approximating those available to the Company for similar obligations (Level 2 instruments). |
Long-Lived Assets | Long-Lived Assets The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with ASC 360-10. Recoverability is measured by comparison of the carrying amount to the future net cash flows which the assets are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds their fair value. Based on the assessment for impairment performed during 2021 and 2020, no impairment was recorded. |
Income (Loss) per Common Share | Income (Loss) per Common Share The Company computes earnings per share under ASC 260-10, “Earnings Per Share”. Basic net income (loss) per common share is computed using the weighted average shares outstanding. Diluted net income (loss) per common share is computed using the treasury stock method, which assumes that the proceeds to be received on exercise of outstanding stock options and warrants are used to repurchase shares of the Company at the average market price of the common shares for the year. Dilutive common stock equivalents consist of shares issuable upon the exercise of the Company's outstanding stock options and warrants. For the years ended December 31, 2021 and 2020, there were 3,349,793 3,599,793 Numerator for basic and diluted loss per share: 2021 2020 Net loss $ (412,785 ) $ (3,149,852 ) Less: cumulative dividends earned on Series A and Series B preferred stock (94,850 ) (95,106 ) Net loss attributable to common shareholders $ (507,635 ) $ (3,244,958 ) Shares used in the calculation of diluted EPS for the years ended December 31, 2021 and 2020 are summarized below: Schedule of diluted EPS 2021 2020 Weighted average common shares outstanding - basic 136,311,335 136,231,562 Dilutive effect of stock options – – Weighted average common shares outstanding - diluted 136,311,335 136,231,562 |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with United States of America (U.S.) generally accepted accounting principles (“GAAP”) requires management to make certain estimates, judgments and assumptions that affect the 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. Estimates are used when accounting for items and matters such as revenue recognition and allowances for uncollectible accounts receivable, inventory obsolescence, depreciation and amortization, long-lived assets, taxes and related valuation allowance, income tax provisions, stock-based compensation, and contingencies. The Company believes that the estimates, judgments and assumptions are reasonable, based on information available at the time they are made. Actual results may differ from those estimates. |
Income Taxes | Income Taxes The Company accounts for income taxes in accordance with ASC 740-10 “Income Taxes.” Under this method, deferred income taxes (when required) are provided based on the difference between the financial reporting and income tax bases of assets and liabilities and net operating losses at the statutory rates enacted for future periods. The Company has a policy of establishing a valuation allowance when it is more likely than not that the Company will not realize the benefits of its deferred income tax assets in the future. The Company follows ASC 740-10-25, which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740-10-25 also provides guidance on de-recognition, classification, treatment of interest and penalties, and disclosure of such positions. |
Revenue from Contracts with Customers | Revenue from Contracts with Customers Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (“ASC 606, the Standard”) supersedes nearly all legacy revenue recognition guidance. ASC 606, the Standard outlines a comprehensive five-step revenue recognition model based on the principle that an entity should recognize revenue based on when it satisfies its performance obligations by transferring control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for said goods or services. |
Identify the customer contracts | Identify the customer contracts The Company accounts for a customer contract under ASC 606 when the contract is legally enforceable. A contract is legally enforceable when all of the following criteria are met: (1) the contract has been approved by the Company and the customer and both parties are committed to perform their respective obligations, (2) the Company can identify each party’s rights regarding goods or services transferred, (3) the Company can identify payment terms for goods or services transferred, (4) the contract has commercial substance, and (5) collectability of all the consideration to which the Company is entitled in exchange for the goods or services transferred is probable. A contract does not exist if either party to the contract has the unilateral right to terminate a wholly unperformed contract without compensating the other party (or parties). Nearly all of the Company’s contracts do not contain such mutual termination rights for convenience. All contracts are in written form. |
Identify the performance obligations | Identify the performance obligations The Company will enter into product only contracts that contain a single performance obligation related to the transfer of products to a customer. The Company will also enter into certain customer contracts that encompass product and installation services, referred to as “turnkey” solutions. These contracts ultimately provide the customer with a solution that enhances the functionality of the customer’s existing equipment. For this reason, the Company has determined that the product and installation services are not separately identifiable performance obligations, but in essence represent one, combined performance obligation (“turnkey”). The Company also offers technical phone support services to customers. This service is considered a separate performance obligation. |
Determine the transaction price | Determine the transaction price The Company generally enters into contracts containing fixed prices. It is not customary for the Company to include contract terms that would result in variable consideration. In the rare situation that a contract does include this type of provision, it is not expected to result in a material adjustment to the transaction price. The Company regularly extends pricing discounts; however, they are negotiated up front and adjust the fixed transaction price set out in the contract. Customer contracts will typically contain upfront deposits that will be applied against future invoices, as well as customer retainage. The intent of any required deposit or retainage is to ensure that the obligations of either party are honored and follow customary industry practices. In addition, the Company will typically be paid in advance at the beginning of any support contracts, consistent with industry practices. None of these payment provisions are intended to represent significant implicit financing. The Company’s standard payment terms are thirty days from invoice date. Products are fully refundable when returned in their original packaging without damage or defacing less a restocking fee. Historical returns have shown to be immaterial. The Company offers a standard one-year assurance warranty. However, customers can purchase an extended warranty. Under the revenue recognition standard, extended warranties are accounted for as a service warranty, requiring the revenue to be recognized over the extended service periods. Contracts involving an extended warranty are immaterial and will continue to be combined with technical phone support services revenue and recognized on a straight-line basis over the term of the contract. |
Allocate the transaction price to the performance obligations | Allocate the transaction price to the performance obligations Revenues from customer contracts are allocated to the separate performance obligations based on their relative stand-alone selling price (“SSP”) at contract inception. The SSP is the price at which the Company would sell a promised good or service separately. The best evidence of an SSP is the observable price of a good or service when the entity sells that good or service separately in similar circumstances and to similar customers. However, turnkey solutions are sold for a broad range of amounts resulting from, but not limited to, tiered discounting for value-added resellers (“VAR”) based upon committed volumes and other economic factors. Due to the high variability of our pricing, the Company cannot establish a reliable SSP using observable data. Accordingly, the Company uses the residual approach to allocate the transaction price to performance obligations related to its turnkey solutions. When support services are not included within the turnkey solution, the residual method is not utilized and no allocation of the transaction price to the performance obligation is necessary. All support service agreements, whether single or multi-year terms, automatically renew for one-year terms at a suggested retail price (“SRP”). Support service renewals are consistently priced and therefore would support the use of SRP as the best estimate of an SSP for such performance obligations. |
Revenue Recognition | Revenue Recognition The Company recognizes revenues from product only sales at a point in time when control over the product has transferred to the customer. As the Company’s principal terms of sale are FOB shipping point, the Company primarily transfers control and records revenue for product only sales upon shipment. A typical turnkey project involves the installation and integration of 200-300 rooms in a customer-controlled facility and usually takes sixty days to complete. Since control over goods and services transfers to a customer once a room is installed, the Company recognizes revenue for turnkey solutions over time. The Company uses an outputs measure based on the number of rooms installed to recognize revenues from turnkey solutions. Revenues from support services are recognized over time, in even daily increments over the term of the contract, and are presented as “Recurring Revenue” in the Statement of Operations. Contracts are billed in accordance with the terms and conditions, either at periodic intervals or upon substantial completion. This can result in billing occurring subsequent to revenue recognition, resulting in contract assets. Contract assets are presented as current assets in the Consolidated Balance Sheet. Contract liabilities include deferrals for the monthly support service fees. Long-term contract liabilities represent support service fees that will be recognized as revenue after December 31, 2022. |
Contract Fulfillment Cost | Contract Fulfillment Cost The Company recognizes related costs of the contract over time in relation to the revenue recognition. Costs included within the projects relate to the cost of material, direct labor and costs of outside services utilized to complete projects. These are presented as “Contract assets” in the Consolidated Balance Sheet. |
Sales Taxes | Sales Taxes Unless provided with a resale or tax exemption certificate, the Company assesses and collects sales tax on sales transactions and records the amount as a liability. It is recognized as a liability until remitted to the applicable state. Total revenues do not include sales tax as the Company is considered a pass through conduit for collecting and remitting sales taxes. |
Guarantees and Product Warranties | Guarantees and Product Warranties The Company records a liability for potential warranty claims in cost of sales at the time of sale. The amount of the liability is based on the trend in the historical ratio of claims to sales, the historical length of time between the sale and resulting warranty claim, new product introductions and other factors. The products sold are generally covered by a warranty for a period of one year. In the event the Company determines that its current or future product repair and replacement costs exceed its estimates, an adjustment to these reserves would be charged to earnings in the period such determination is made. For the years ended December 31, 2021 and 2020, the Company experienced returns of approximately 1% to 3% 46,650 45,328 Product warranties for the years ended December 31 are as follows: Schedule of allowance for doubtful accounts 2021 2020 Beginning balance $ 45,328 $ 58,791 Warranty claims incurred (16,075 ) (20,499 ) Provision charged to expense 17,397 7,036 Ending balance $ 46,650 $ 45,328 |
Advertising | Advertising The Company follows the policy of charging the costs of advertising to expenses as incurred. The Company incurred $ 10,525 10,104 |
Research and Development | Research and Development The Company accounts for research and development costs in accordance with the ASC 730-10, “Research and Development”. Under ASC 730-10, all research and development costs must be charged to expense as incurred. Accordingly, internal research and development costs are expensed as incurred. Third-party research and development costs are expensed when the contracted work has been performed or as milestone results have been achieved. Company-sponsored research and development costs related to both present and future products are expensed in the period incurred. Total expenditures on research and product development for 2021 and 2020 were $ 1,129,957 1,177,282 |
Stock-Based Compensation | Stock-Based Compensation The Company accounts for stock-based awards in accordance with ASC 718-10, “Share-Based Compensation”, which requires a fair value measurement and recognition of compensation expense for all share-based payment awards made to the Company’s employees and directors, including employee stock options and restricted stock awards. The Company estimates the fair value of stock options granted using the Black-Scholes valuation model. This model requires the Company to make estimates and assumptions including, among other things, estimates regarding the length of time an employee will hold vested stock options before exercising them, the estimated volatility of the Company’s common stock price and the number of options that will be forfeited prior to vesting. The fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. Changes in these estimates and assumptions can materially affect the determination of the fair value of stock-based compensation and consequently, the related amount recognized in the Company’s consolidated statements of operations. The expected term of the options represents the estimated period of time until exercise and is based on historical experience of similar awards, giving consideration to the contractual terms, vesting schedules and expectations of future employee behavior. The expected stock price volatility is based on the historical volatility of the Company’s stock for the related expected term. Stock-based compensation expense in connection with options granted to employees was $ 7,262 |
BASIS OF PRESENTATION AND SIG_3
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Numerator for basic and diluted loss per share: | Numerator for basic and diluted loss per share: 2021 2020 Net loss $ (412,785 ) $ (3,149,852 ) Less: cumulative dividends earned on Series A and Series B preferred stock (94,850 ) (95,106 ) Net loss attributable to common shareholders $ (507,635 ) $ (3,244,958 ) |
Schedule of diluted EPS | Schedule of diluted EPS 2021 2020 Weighted average common shares outstanding - basic 136,311,335 136,231,562 Dilutive effect of stock options – – Weighted average common shares outstanding - diluted 136,311,335 136,231,562 |
Schedule of allowance for doubtful accounts | Schedule of allowance for doubtful accounts 2021 2020 Beginning balance $ 45,328 $ 58,791 Warranty claims incurred (16,075 ) (20,499 ) Provision charged to expense 17,397 7,036 Ending balance $ 46,650 $ 45,328 |
REVENUE (Tables)
REVENUE (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Revenue from Contract with Customer [Abstract] | |
Disaggregation of revenues | Disaggregation of revenues Hospitality Education Multiple Government Healthcare Total Product $ 4,724,880 $ 279,486 $ 295,873 $ 193,970 $ 48,195 $ 5,542,404 Recurring 592,655 112,879 26,461 – – 731,995 $ 5,317,535 $ 392,365 $ 322,334 $ 193,970 $ 48,195 $ 6,274,399 The following table presents the Company’s product and recurring revenues disaggregated by industry for the year ended December 31, 2020. Hospitality Education Multiple Government Healthcare Total Product $ 4,940,887 $ 443,001 $ 143,886 $ 214,477 $ – $ 5,742,251 Recurring 597,490 129,541 24,588 – – 751,619 $ 5,538,377 $ 572,542 $ 168,474 $ 214,477 $ – $ 6,493,870 |
Contract Assets and Liabilities | Contract Assets and Liabilities 2021 2020 Variance Contract assets $ 266,014 $ 104,989 $ 161,025 Contract liabilities 941,230 1,052,367 (111,137 ) |
ACCOUNTS RECEIVABLE (Tables)
ACCOUNTS RECEIVABLE (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Receivables [Abstract] | |
Schedule of accounts receivable | Schedule of accounts receivable 2021 2020 Accounts receivable $ 1,016,117 $ 873,147 Allowance for doubtful accounts (5,563 ) (7,973 ) Accounts receivable, net $ 1,010,554 $ 865,174 |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property and equipment | Schedule of property and equipment 2021 2020 Development test equipment $ 16,461 $ 16,461 Computer software 76,134 76,134 Office equipment 66,685 66,685 Office fixtures and furniture 330,568 330,568 Leasehold improvements 18,016 18,016 Total 507,864 507,864 Accumulated depreciation and amortization (423,663 ) (380,192 ) Total property and equipment $ 84,201 $ 127,672 |
CURRENT ACCRUED LIABILITIES (Ta
CURRENT ACCRUED LIABILITIES (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Payables and Accruals [Abstract] | |
Schedule of accrued liabilities and expenses | Schedule of accrued liabilities and expenses 2021 2020 Accrued payroll and payroll taxes $ 242,131 $ 252,595 Accrued professional 136,584 176,842 Accrued sales taxes, penalties, and interest 16,634 31,396 Product warranties 46,650 45,328 Other accrued liabilities 276,722 57,151 Total current accrued liabilities $ 718,721 $ 563,312 |
STOCK OPTIONS AND WARRANTS (Tab
STOCK OPTIONS AND WARRANTS (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Share-based Payment Arrangement [Abstract] | |
Schedule of options by exercise price | Schedule of options by exercise price Options Outstanding Options Exercisable Exercise Prices Number Weighted Average Weighted Average Number Weighted Average $0.01 - $0.15 2,000,000 5.01 $ 0.14 2,000,000 $ 0.14 $0.16 - $0.30 1,349,793 1.84 0.18 1,325,040 0.18 3,349,793 3.73 $ 0.16 3,325,040 $ 0.16 |
Schedule of option activity | Schedule of option activity Number of Weighted Average Exercise Outstanding at January 1, 2020 3,349,793 $ 0.16 Granted – – Exercised – – Cancelled or expired – – Outstanding at December 31, 2020 3,349,793 $ 0.16 Granted – – Exercised – – Cancelled or expired – – Outstanding at December 31, 2021 3,349,793 $ 0.16 |
Schedule of warrants outstanding and exercisable | Schedule of warrants outstanding and exercisable Number of Weighted Average Exercise Outstanding at January 1, 2020 250,000 $ 0.20 Issued – – Exercised – – Cancelled or expired – – Outstanding at December 31, 2020 250,000 $ 0.20 Issued – – Exercised – – Cancelled or expired 250,000 0.20 Outstanding at December 31, 2021 – $ – |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Income Tax Disclosure [Abstract] | |
Schedule of reconciliation of tax expense | Schedule of reconciliation of tax expense 2021 2020 Tax benefit computed at the statutory rate $ (85,028 ) $ (656,723 ) State taxes (7,398 ) 9,489 Book (income not taxable) expenses not deductible for tax purposes (385,135 ) 540 Rate change 26,739 (30,914 ) Deferred tax write-off 42,782 – Other (393 ) 10,218 Total adjustments to tax provision (408,433 ) (667,390 ) Change in valuation allowance for deferred tax assets 416,322 689,992 Income tax expense $ 7,889 $ 22,602 |
Schedule of deferred tax assets and liabilities | Schedule of deferred tax assets and liabilities 2021 2020 Deferred Tax Assets: Net operating loss carry forwards $ 22,078,280 $ 21,641,665 Intangibles 17,728 117,533 Other 638,477 558,964 Total deferred tax assets 22,734,485 22,318,162 Deferred Tax Liabilities: Intangibles – – Total deferred tax liabilities – – Valuation allowance (22,734,485 ) (22,318,162 ) Net deferred tax asset $ – $ – |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
Components of lease expense | Components of lease expense Operating lease expense: 2021 2020 Operating lease cost - fixed $ 229,548 $ 230,944 Variable lease cost 122,356 125,872 Total operating lease cost $ 351,904 $ 356,816 |
Other information related to leases | Other information related to leases 2021 2020 Operating lease liability - current $ 195,176 $ 242,299 Operating lease liability - long-term $ 459,668 $ 592,341 Operating cash outflows from operating leases $ 242,305 $ 223,835 Weighted-average remaining lease term of operating leases 4.1 4.8 Weighted-average discount rate of operating leases 8.5 8.5 |
Future annual minimum operating lease payments | Future annual minimum operating lease payments 2022 $ 195,176 2023 193,169 2024 172,425 2025 158,510 2026 and thereafter 53,183 Total minimum lease payments 772,463 Less imputed interest (117,619 ) Total $ 654,844 |
Schedule of sales tax accrual | Schedule of sales tax accrual 2021 2020 Balance, beginning of year $ 31,396 $ 26,957 Sales tax collected 85,589 94,904 Provisions (reversals) (7,685 ) 27,916 Payments (92,666 ) (118,381 ) Balance, end of year $ 16,634 $ 31,396 |
Numerator for basic and diluted
Numerator for basic and diluted loss per share: (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Net loss | $ (412,785) | $ (3,149,852) |
Less: cumulative dividends earned on Series A and Series B preferred stock | (94,850) | (95,106) |
Net loss attributable to common shareholders | $ (507,635) | $ (3,244,958) |
BASIS OF PRESENTATION AND SIG_4
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Details - Diluted EPS) - shares | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Weighted average common shares outstanding - basic | 136,311,335 | 136,231,562 |
Dilutive effect of stock options | 0 | 0 |
Weighted average common shares outstanding - diluted | 136,311,335 | 136,231,562 |
BASIS OF PRESENTATION AND SIG_5
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Details-Product warranties) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Beginning balance | $ 45,328 | $ 58,791 |
Warranty claims incurred | (16,075) | (20,499) |
Provision charged to expense | 17,397 | 7,036 |
Ending balance | $ 46,650 | $ 45,328 |
BASIS OF PRESENTATION AND SIG_6
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | Jan. 07, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 |
Subsequent Event [Line Items] | ||||
Accounts Receivable, Allowance for Credit Loss, Current | $ 5,563 | $ 7,973 | ||
Inventory obsolescence | $ 443,000 | $ 404,000 | ||
Property and equipment useful lives | 2 to 10 years | |||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 3,349,793 | 3,599,793 | ||
Guarantees and product warranty return percentage | 1% to 3% | 1% to 3% | ||
Warranty liabilities | $ 46,650 | $ 45,328 | $ 58,791 | |
Advertising expense | 10,525 | 10,104 | ||
Research and development expenses | 1,129,957 | 1,177,282 | ||
Stock based compensation expenses | $ 7,262 | $ 7,262 | ||
Subsequent Event [Member] | VDA Purchase Agreement [Member] | ||||
Subsequent Event [Line Items] | ||||
Stock Issued During Period, Shares, Acquisitions | 162,900,947 | |||
[custom:WarrantsIssued] | 105,380,666 |
REVENUE (Details - Disaggregati
REVENUE (Details - Disaggregation of income) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Disaggregation of Revenue [Line Items] | ||
Revenues | $ 6,274,399 | $ 6,493,870 |
Hospitality [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 5,317,535 | 5,538,377 |
Education [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 392,365 | 572,542 |
Multiple Dwelling Units [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 322,334 | 168,474 |
Government [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 193,970 | 214,477 |
Healthcare [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 48,195 | 0 |
Product [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 5,542,404 | 5,742,251 |
Product [Member] | Hospitality [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 4,724,880 | 4,940,887 |
Product [Member] | Education [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 279,486 | 443,001 |
Product [Member] | Multiple Dwelling Units [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 295,873 | 143,886 |
Product [Member] | Government [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 193,970 | 214,477 |
Product [Member] | Healthcare [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 48,195 | 0 |
Recurring Income [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 731,995 | 751,619 |
Recurring Income [Member] | Hospitality [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 592,655 | 597,490 |
Recurring Income [Member] | Education [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 112,879 | 129,541 |
Recurring Income [Member] | Multiple Dwelling Units [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 26,461 | 24,588 |
Recurring Income [Member] | Government [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | 0 | 0 |
Recurring Income [Member] | Healthcare [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Revenues | $ 0 | $ 0 |
REVENUE (Details - Contract ass
REVENUE (Details - Contract assets and liabilities) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Revenue from Contract with Customer [Abstract] | ||
Contract assets | $ 266,014 | $ 104,989 |
Decrease in contract assets | 161,025 | (83,131) |
Contract liabilities | 941,230 | 1,052,367 |
Increase in contract liabilities | $ (111,137) | $ 288,183 |
REVENUE (Details Narrative)
REVENUE (Details Narrative) - USD ($) $ in Thousands | Dec. 31, 2021 | Dec. 31, 2020 |
Revenue from Contract with Customer [Abstract] | ||
Remaining performance obligations | $ 1,200 | $ 900 |
Revenue, Remaining Performance Obligation, Percentage | 100.00% |
ACCOUNTS RECEIVABLE (Details)
ACCOUNTS RECEIVABLE (Details) - USD ($) | Dec. 31, 2021 | Dec. 31, 2020 |
Receivables [Abstract] | ||
Accounts receivable | $ 1,016,117 | $ 873,147 |
Allowance for doubtful accounts | (5,563) | (7,973) |
Accounts receivable, net | $ 1,010,554 | $ 865,174 |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) | Dec. 31, 2021 | Dec. 31, 2020 |
Property, Plant and Equipment [Line Items] | ||
Total property and equipment | $ 507,864 | $ 507,864 |
Accumulated depreciation and amortization | (423,663) | (380,192) |
Property and equipment, net | 84,201 | 127,672 |
Development Test Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Total property and equipment | 16,461 | 16,461 |
Computer Software, Intangible Asset [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Total property and equipment | 76,134 | 76,134 |
Office Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Total property and equipment | 66,685 | 66,685 |
Furniture and Fixtures [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Total property and equipment | 330,568 | 330,568 |
Leasehold Improvements [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Total property and equipment | $ 18,016 | $ 18,016 |
PROPERTY AND EQUIPMENT (Detai_2
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation and amortization expense | $ 43,471 | $ 58,853 |
CURRENT ACCRUED LIABILITIES (De
CURRENT ACCRUED LIABILITIES (Details) - USD ($) | Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 |
Payables and Accruals [Abstract] | |||
Accrued payroll and payroll taxes | $ 242,131 | $ 252,595 | |
Accrued professional | 136,584 | 176,842 | |
Accrued sales taxes, penalties, and interest | 16,634 | 31,396 | |
Product warranties | 46,650 | 45,328 | $ 58,791 |
Other accrued liabilities | 276,722 | 57,151 | |
Total current accrued liabilities | $ 718,721 | $ 563,312 |
DEBT (Details Narrative)
DEBT (Details Narrative) - USD ($) | Sep. 15, 2021 | Feb. 16, 2021 | Dec. 31, 2021 | Dec. 31, 2021 | Apr. 27, 2021 | Dec. 31, 2020 | Apr. 21, 2020 | Oct. 09, 2014 |
Line of Credit Facility [Line Items] | ||||||||
Line of credit balance | $ 403,089 | $ 403,089 | $ 267,289 | |||||
Debt and interest forgiven | $ 1,836,780 | |||||||
PPP Loan [Member] | ||||||||
Line of Credit Facility [Line Items] | ||||||||
Debt, principal amount | $ 913,063 | |||||||
Note Payable - current | $ 913,063 | $ 913,063 | ||||||
Accrued interest | $ 7,610 | |||||||
Second PPP Loan [Member] | ||||||||
Line of Credit Facility [Line Items] | ||||||||
Debt, principal amount | $ 913,063 | |||||||
Accrued interest | $ 3,044 | |||||||
Heritage Bank [Member] | Revolving Credit Facility [Member] | ||||||||
Line of Credit Facility [Line Items] | ||||||||
Effective interest rate | Prime Rate plus 3.00% | |||||||
Effective interest rate | 6.25% | 6.25% | ||||||
Warrant issued | 250,000 | |||||||
Warrant, exercise price | $ 0.20 | |||||||
Warrant expiry date | Oct. 9, 2021 | |||||||
Line of Credit Facility, Maximum Borrowing Capacity | $ 1,000,000 | $ 1,000,000 | ||||||
Line of Credit Facility, Expiration Date | Jun. 30, 2023 | |||||||
Line of credit balance | $ 403,089 | 403,089 | 267,289 | |||||
Line of credit remaining borrowing capacity | $ 460,000 | $ 460,000 | $ 442,000 |
PREFERRED STOCK (Details Narrat
PREFERRED STOCK (Details Narrative) - USD ($) | Apr. 08, 2011 | Aug. 04, 2010 | Nov. 16, 2009 | Dec. 31, 2021 | Dec. 31, 2020 |
Class of Stock [Line Items] | |||||
Conversion price | $ 0.13 | ||||
Purchase warrants | $ 1,628,800 | $ 5,211,542 | |||
Stock per share | $ 0.33 | ||||
Convertible common stock | 13,774 | ||||
Shares issued | 1,075,000 | ||||
Number of shares purchased | 5,134,626 | ||||
Stock of shares | 5,000 | ||||
Convertible common stock | 38,461 | ||||
Stock Issued During Period, Shares, Conversion of Units | 38,461 | ||||
Preferred shares issued | 486 | ||||
Series A Preferred Stock [Member] | |||||
Class of Stock [Line Items] | |||||
Preferred stock, shares authorized | 215 | 215 | 215 | ||
Conversion price | $ 0.363 | ||||
Liquidation preference | $ 1,822,450 | $ 1,748,423 | |||
Unpaid dividends | $ 897,450 | $ 823,423 | |||
Series B Preferred Stock [Member] | |||||
Class of Stock [Line Items] | |||||
Preferred stock, shares authorized | 267 | 567 | 567 | ||
Conversion price | $ 0.13 | ||||
Received from sales | $ 1,355,000 | $ 1,335,000 | |||
Liquidation preference | $ 497,605 | $ 476,782 | |||
Unpaid dividends | $ 237,605 | $ 216,782 |
CAPITAL STOCK (Details Narrativ
CAPITAL STOCK (Details Narrative) - USD ($) | 12 Months Ended | |||
Dec. 31, 2021 | Dec. 31, 2020 | Aug. 04, 2010 | Nov. 16, 2009 | |
Class of Stock [Line Items] | ||||
Common stock, par value | $ 0.001 | $ 0.001 | ||
Common stock, shares authorized | 475,000,000 | 190,000,000 | ||
Common stock, shares issued | 136,311,335 | 136,311,335 | ||
Common stock, shares outstanding | 136,311,335 | 136,311,335 | ||
Warrants exercised, shares | 0 | 0 | ||
Preferred stock converted | 0 | 0 | ||
Directors [Member] | ||||
Class of Stock [Line Items] | ||||
Shares issued to directors, shares | 320,844 | |||
Shares issued to directors, value | $ 18,000 | |||
Series A Preferred Stock [Member] | ||||
Class of Stock [Line Items] | ||||
Preferred stock, shares authorized | 215 | 215 | 215 | |
Preferred stock, shares outstanding | 185 | 185 | ||
Series B Preferred Stock [Member] | ||||
Class of Stock [Line Items] | ||||
Preferred stock, shares authorized | 567 | 567 | 267 | |
Preferred stock, shares outstanding | 52 | 52 |
STOCK OPTIONS AND WARRANTS (Det
STOCK OPTIONS AND WARRANTS (Details - Options by Exercise Price) - Share-based Payment Arrangement, Option [Member] - $ / shares | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Options outstanding | 3,349,793 | 3,349,793 | 3,349,793 |
Options outstanding, weighted average remaining contractual life (Years) | 3 years 8 months 23 days | ||
Options outstanding, weighted average exercise price | $ 0.16 | $ 0.16 | $ 0.16 |
Options exercisable | 3,325,040 | ||
Options exercisable, weighted average exercise price | $ 0.16 | ||
Exercise price range $0.01-$0.15 [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Options outstanding | 2,000,000 | ||
Options outstanding, weighted average remaining contractual life (Years) | 5 years 3 days | ||
Options outstanding, weighted average exercise price | $ 0.14 | ||
Options exercisable | 2,000,000 | ||
Options exercisable, weighted average exercise price | $ 0.14 | ||
Exercise price range $0.16-$0.30 [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Options outstanding | 1,349,793 | ||
Options outstanding, weighted average remaining contractual life (Years) | 1 year 10 months 2 days | ||
Options outstanding, weighted average exercise price | $ 0.18 | ||
Options exercisable | 1,325,040 | ||
Options exercisable, weighted average exercise price | $ 0.18 |
STOCK OPTIONS AND WARRANTS (D_2
STOCK OPTIONS AND WARRANTS (Details - Option Activity) - Share-based Payment Arrangement, Option [Member] - $ / shares | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Options outstanding, ending balance | 3,349,793 | 3,349,793 |
Weighted average price per share - beginning balance | $ 0.16 | $ 0.16 |
Options granted | 0 | 0 |
Weighted average price per share - granted | $ 0 | $ 0 |
Options exercised | 0 | 0 |
Weighted average price per share - exercised | $ 0 | $ 0 |
Options cancelled or expired | 0 | 0 |
Weighted average price per share - cancelled or expired | $ 0 | $ 0 |
Options outstanding, ending balance | 3,349,793 | 3,349,793 |
Weighted average price per share - ending balance | $ 0.16 | $ 0.16 |
STOCK OPTIONS AND WARRANTS (D_3
STOCK OPTIONS AND WARRANTS (Details-Warrants Outstanding and Exercisable) - Warrant [Member] - $ / shares | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Warrants outstanding, beginning balance | 250,000 | 250,000 |
Weighted average price per share - beginning balance | $ 0.20 | $ 0.20 |
Warrants issued | 0 | 0 |
Weighted average price per share - issued | $ 0 | $ 0 |
Warrants exercised | 0 | 0 |
Weighted average price per share - exercised | $ 0 | $ 0 |
Warrants cancelled or expired | 250,000 | 0 |
Weighted average price per share - cancelled or expired | $ 0.20 | $ 0 |
Warrants outstanding, ending balance | 0 | 250,000 |
Weighted average price per share - ending balance | $ 0 | $ 0.20 |
STOCK OPTIONS AND WARRANTS (D_4
STOCK OPTIONS AND WARRANTS (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested in Period, Fair Value | $ 5,053 | $ 6,303 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding, Aggregate Intrinsic Value | 0 | |
Share-based Payment Arrangement, Noncash Expense | $ 7,262 | $ 7,262 |
Share-based Payment Arrangement, Option [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross | 0 | 0 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Expirations in Period | 0 | 0 |
Number of warrants - exercised | 0 | |
Number of warrants - cancelled or expired | 250,000 | 0 |
2020 Plan [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Shares authorized under the plan | 10,000,000 | |
Shares available for issuance | 10,000,000 |
STOCK ISSUANCE TO NON-EMPLOYE_2
STOCK ISSUANCE TO NON-EMPLOYEE DIRECTORS (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Defined Benefit Plan Disclosure [Line Items] | ||
Due to Related Parties | $ 223,000 | $ 100,000 |
Non-Employee Directors [Member] | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Shares Issued, Value, Share-based Payment Arrangement, before Forfeiture | 0 | 18,000 |
Noninterest Expense Directors Fees | $ 0 | $ 60,000 |
INCOME TAXES (Details-Reconcili
INCOME TAXES (Details-Reconciliation) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Income Tax Disclosure [Abstract] | ||
Tax benefit computed at the statutory rate | $ (85,028) | $ (656,723) |
State taxes | (7,398) | 9,489 |
Book (income not taxable) expenses not deductible for tax purposes | (385,135) | 540 |
Rate change | 26,739 | (30,914) |
Deferred tax write-off | 42,782 | 0 |
Other | (393) | 10,218 |
Total adjustments to tax provision | (408,433) | (667,390) |
Change in valuation allowance for deferred tax assets | 416,322 | 689,992 |
Income tax expense | $ 7,889 | $ 22,602 |
INCOME TAXES (Details-Deferred
INCOME TAXES (Details-Deferred Taxes) - USD ($) | Dec. 31, 2021 | Dec. 31, 2020 |
Deferred Tax Assets: | ||
Net operating loss carry forwards | $ 22,078,280 | $ 21,641,665 |
Intangibles | 17,728 | 117,533 |
Other | 638,477 | 558,964 |
Total deferred tax assets | 22,734,485 | 22,318,162 |
Deferred Tax Liabilities: | ||
Intangibles | 0 | 0 |
Total deferred tax liabilities | 0 | 0 |
Valuation allowance | (22,734,485) | (22,318,162) |
Net deferred tax asset | $ 0 | $ 0 |
INCOME TAXES (Details Narrative
INCOME TAXES (Details Narrative) - USD ($) | Dec. 31, 2021 | Dec. 31, 2020 |
Operating Loss Carryforwards [Line Items] | ||
Operating Loss Carryforwards, Valuation Allowance | $ 22,730,000 | $ 22,320,000 |
Domestic Tax Authority [Member] | ||
Operating Loss Carryforwards [Line Items] | ||
Operating loss carryforward | 98,300,000 | |
State and Local Jurisdiction [Member] | ||
Operating Loss Carryforwards [Line Items] | ||
Operating loss carryforward | $ 24,900,000 |
COMMITMENTS AND CONTINGENCIES_2
COMMITMENTS AND CONTINGENCIES (Details - Lease expense) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Operating lease expense: | ||
Operating lease cost - fixed | $ 229,548 | $ 230,944 |
Variable lease cost | 122,356 | 125,872 |
Total operating lease cost | $ 351,904 | $ 356,816 |
COMMITMENTS AND CONTINGENCIES_3
COMMITMENTS AND CONTINGENCIES (Details - Other information related to leases) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Operating lease liability - current | $ 195,176 | $ 242,299 |
Operating lease liability - long term | 459,668 | 592,341 |
Operating cash flows from operating leases | $ 242,305 | $ 223,835 |
Weighted average remaining lease term of operating leases | 4 years 1 month 6 days | 4 years 9 months 18 days |
Weighted average discount rate of operating leases | 8.50% | 8.50% |
COMMITMENTS AND CONTINGENCIES_4
COMMITMENTS AND CONTINGENCIES (Details - Future lease payments) | Dec. 31, 2021USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2022 | $ 195,176 |
2023 | 193,169 |
2024 | 172,425 |
2025 | 158,510 |
2026 and thereafter | 53,183 |
Total minimum lease payments | 772,463 |
Less imputed interest | (117,619) |
Total | $ 654,844 |
COMMITMENTS AND CONTINGENCIES_5
COMMITMENTS AND CONTINGENCIES (Details-Sales Tax Accrual) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Balance, Beginning of year | $ 31,396 | $ 26,957 |
Sales tax collected | 85,589 | 94,904 |
Provisions (reversals) | (7,685) | 27,916 |
Payments | (92,666) | (118,381) |
Balance, End of period | $ 16,634 | $ 31,396 |
COMMITMENTS AND CONTINGENCIES_6
COMMITMENTS AND CONTINGENCIES (Details Narrative) | 1 Months Ended | 12 Months Ended | ||
Nov. 30, 2021ft² | May 31, 2017ft² | Dec. 31, 2021USD ($)ft² | Dec. 31, 2020USD ($) | |
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||
Rental expenses | $ 351,904 | $ 356,816 | ||
Upfront payment | 40,000 | |||
Royalty fees | 127,000 | $ 87,000 | ||
Current liability | 166,000 | |||
Accounts payable | 26,000 | |||
Accrued liabilities | 140,000 | |||
Non-current liability | 360,000 | |||
Gramaglia [Member] | ||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||
Annual fee | 30,000 | |||
Tienor [Member] | ||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||
Base salary | 222,800 | |||
Sobieski [Member] | ||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||
Base salary | 211,625 | |||
Mushrush [Member] | ||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||
Base salary | $ 122,000 | |||
Waukesha Office [Member] | ||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||
Lease expiration date | April 2021 | |||
Leased square feet | ft² | 10,344 | |||
Waukesha Floor [Member] | ||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||
Lease expiration date | May 2024 | |||
Leased square feet | ft² | 5,838 | |||
Gaithersburg [Member] | ||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||
Lease expiration date | November 30, 2022 | |||
Leased square feet | ft² | 425 |
BUSINESS CONCENTRATION (Details
BUSINESS CONCENTRATION (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Revenue Benchmark [Member] | Customer Concentration Risk [Member] | One Customer [Member] | ||
Concentration Risk [Line Items] | ||
Concentration percentage | 18.00% | |
Revenue Benchmark [Member] | Customer Concentration Risk [Member] | Two Customers [Member] | ||
Concentration Risk [Line Items] | ||
Concentration percentage | 28.00% | |
Accounts Receivable [Member] | Customer Concentration Risk [Member] | One Customer [Member] | ||
Concentration Risk [Line Items] | ||
Concentration percentage | 21.00% | |
Accounts Receivable [Member] | Customer Concentration Risk [Member] | Five Customers [Member] | ||
Concentration Risk [Line Items] | ||
Concentration percentage | 64.00% | |
Total Purchases [Member] | Product Concentration Risk [Member] | One Supplier [Member] | ||
Concentration Risk [Line Items] | ||
Concentration percentage | 82.00% | 91.00% |
Cost, Direct Material | $ 1,878,803 | $ 2,287,950 |
Accounts Payable, Trade, Current | $ 134,000 | $ 470,000 |
EMPLOYEE BENEFIT PLAN (Details
EMPLOYEE BENEFIT PLAN (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Retirement Benefits [Abstract] | ||
Share-based Compensation Arrangement by Share-based Payment Award, Maximum Employee Subscription Rate | 4.00% | |
Company contributions | $ 0 | $ 53,000 |