Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2020 | Apr. 30, 2020 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2020 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q1 | |
Trading Symbol | OSS | |
Title of 12(b) Security | Common Stock, $0.0001 par value per share | |
Security Exchange Name | NASDAQ | |
Entity Registrant Name | One Stop Systems, Inc. | |
Entity Central Index Key | 0001394056 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Small Business | true | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | false | |
Entity Shell Company | false | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Entity Common Stock, Shares Outstanding | 16,485,362 | |
Entity File Number | 001-38371 | |
Entity Tax Identification Number | 33-0885351 | |
Entity Incorporation, State or Country Code | DE | |
Entity Address, Address Line One | 2235 Enterprise Street #110 | |
Entity Address, City or Town | Escondido | |
Entity Address, State or Province | CA | |
Entity Address, Postal Zip Code | 92029 | |
City Area Code | 760 | |
Local Phone Number | 745-9883 |
UNAUDITED CONSOLIDATED BALANCE
UNAUDITED CONSOLIDATED BALANCE SHEETS - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Current assets | ||
Cash and cash equivalents | $ 3,038,006 | $ 5,185,321 |
Accounts receivable, net | 9,111,679 | 11,667,157 |
Inventories, net | 8,984,877 | 7,369,356 |
Prepaid expenses and other current assets | 840,525 | 453,938 |
Total current assets | 21,975,087 | 24,675,772 |
Property and equipment, net | 3,552,551 | 3,568,564 |
Deposits and other | 45,133 | 47,146 |
Deferred tax assets, net | 3,459,972 | 3,019,823 |
Goodwill | 7,120,510 | 7,120,510 |
Intangible assets, net | 1,171,667 | 1,346,192 |
Total Assets | 37,324,920 | 39,778,007 |
Current liabilities | ||
Accounts payable | 3,833,791 | 4,115,977 |
Accrued expenses and other liabilities | 4,610,506 | 4,607,432 |
Current portion of notes payable, net of debt discount of $7,019 and $7,019, respectively (Note 8) | 1,016,814 | 1,377,751 |
Current portion of related-party notes payable, net of debt discount of $23,060 and $23,060, respectively (Note 8) | 575,422 | 561,441 |
Total current liabilities | 10,036,533 | 10,662,601 |
Notes payable, net of current portion and debt discount of $292 and $2,047, respectively (Note 8) | 15,722 | 149,301 |
Related-party notes payable, net of current portion and debt discount of $961 and $6,726 , respectively (Note 8) | 50,686 | 199,943 |
Total liabilities | 10,102,941 | 11,011,845 |
Commitments and contingencies (Notes 10 and 11) | ||
Stockholders’ equity | ||
Common stock, $.0001 par value; 50,000,000 shares authorized; 16,476,661 and 16,121,747 shares issued and outstanding, respectively | 1,647 | 1,612 |
Additional paid-in capital | 30,144,896 | 30,537,015 |
Noncontrolling interest | 500 | |
Accumulated other comprehensive loss | (73,340) | (17,773) |
Accumulated deficit | (2,851,224) | (1,755,192) |
Total stockholders’ equity | 27,221,979 | 28,766,162 |
Total liabilities and stockholders' equity | $ 37,324,920 | $ 39,778,007 |
UNAUDITED CONSOLIDATED BALANC_2
UNAUDITED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Debt discount on notes payable, current | $ 30,079 | |
Debt discount on notes payable, noncurrent | $ 1,253 | |
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 50,000,000 | 50,000,000 |
Common stock, shares issued | 16,476,661 | 16,121,747 |
Common stock, shares outstanding | 16,476,661 | 16,121,747 |
Notes Payable | ||
Debt discount on notes payable, current | $ 7,019 | $ 7,019 |
Debt discount on notes payable, noncurrent | 292 | 2,047 |
Related Parties | ||
Debt discount on notes payable, current | 23,060 | 23,060 |
Debt discount on notes payable, noncurrent | $ 961 | $ 6,726 |
UNAUDITED CONSOLIDATED STATEMEN
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Income Statement [Abstract] | ||
Revenue | $ 13,359,637 | $ 10,057,899 |
Cost of revenue | 9,963,950 | 7,646,277 |
Gross profit | 3,395,687 | 2,411,622 |
Operating expenses: | ||
General and administrative | 2,514,065 | 2,043,934 |
Marketing and selling | 1,189,351 | 1,137,932 |
Research and development | 1,203,425 | 1,261,964 |
Total operating expenses | 4,906,841 | 4,443,830 |
Loss from operations | (1,511,154) | (2,032,208) |
Other income (expense): | ||
Interest income | 24,637 | 3,107 |
Interest expense | (68,784) | (6,268) |
Other income (expense), net | (8,029) | (11,271) |
Total other income (expense), net | (52,176) | (14,432) |
Loss before income taxes | (1,563,330) | (2,046,640) |
Benefit for income taxes | (467,298) | (1,101,911) |
Net loss attributable to common stockholders | $ (1,096,032) | $ (944,729) |
Net loss per share attributable to common stockholders: | ||
Basic | $ (0.07) | $ (0.07) |
Diluted | $ (0.07) | $ (0.07) |
Weighted average common shares outstanding: | ||
Basic | 16,332,898 | 14,239,711 |
Diluted | 16,332,898 | 14,239,711 |
UNAUDITED CONSOLIDATED STATEM_2
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Statement Of Income And Comprehensive Income [Abstract] | ||
Net loss attributable to common stockholders | $ (1,096,032) | $ (944,729) |
Other comprehensive loss: | ||
Currency translation adjustment | (55,567) | (41,869) |
Total other comprehensive loss | (55,567) | (41,869) |
Comprehensive loss | $ (1,151,599) | $ (986,598) |
UNAUDITED CONSOLIDATED STATEM_3
UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - USD ($) | Total | Common Stock | Additional Paid-in Capital | Noncontrolling Interest | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit |
Balance at Dec. 31, 2018 | $ 26,572,322 | $ 1,422 | $ 27,424,113 | $ 500 | $ 1,142 | $ (854,855) |
Balance, Shares at Dec. 31, 2018 | 14,216,328 | |||||
Stock-based compensation | 167,474 | 167,474 | ||||
Exercise of stock options, RSU's and Warrants | 14,201 | $ 5 | 14,196 | |||
Exercise of stock options, RSU's and Warrants, Shares | 54,098 | |||||
Currency translation adjustment | (41,869) | (41,869) | ||||
Net loss | (944,729) | (944,729) | ||||
Balance at Mar. 31, 2019 | 25,767,399 | $ 1,427 | 27,605,783 | 500 | (40,727) | (1,799,584) |
Balance, Shares at Mar. 31, 2019 | 14,270,426 | |||||
Balance at Dec. 31, 2019 | 28,766,162 | $ 1,612 | 30,537,015 | 500 | (17,773) | (1,755,192) |
Balance, Shares at Dec. 31, 2019 | 16,121,747 | |||||
Stock-based compensation | 207,761 | 207,761 | ||||
Exercise of stock options, RSU's and Warrants | 57,000 | $ 35 | 56,965 | |||
Exercise of stock options, RSU's and Warrants, Shares | 354,914 | |||||
Return of capital upon dissolution of SkyScale | (500) | $ (500) | ||||
Taxes paid on net issuance of employee stock options | (656,845) | (656,845) | ||||
Currency translation adjustment | (55,567) | (55,567) | ||||
Net loss | (1,096,032) | (1,096,032) | ||||
Balance at Mar. 31, 2020 | $ 27,221,979 | $ 1,647 | $ 30,144,896 | $ (73,340) | $ (2,851,224) | |
Balance, Shares at Mar. 31, 2020 | 16,476,661 |
UNAUDITED CONSOLIDATED STATEM_4
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Cash flows from operating activities: | ||
Net loss attributable to common stockholders | $ (1,096,032) | $ (944,729) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Deferred benefit for income taxes | (441,282) | (1,165,219) |
(Gain) on disposal of property and equipment | (1,542) | (1,050) |
Provision for bad debt | (2,405) | (88) |
Warranty reserves | 5,075 | (3,428) |
Amortization of deferred gain | (41,479) | (16,479) |
Amortization of intangibles | 174,525 | 349,419 |
Depreciation | 221,300 | 115,308 |
Inventory reserves | 148,418 | 57,046 |
Amortization of debt discount | 7,520 | 0 |
Stock-based compensation expense | 207,761 | 167,474 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 2,530,072 | 1,868,297 |
Inventories | (1,826,564) | (2,699,867) |
Prepaid expenses and other current assets | (386,005) | (185,596) |
Accounts payable | (275,428) | 1,467,746 |
Accrued expenses and other liabilities | 54,293 | 791,149 |
Net cash used in operating activities | (721,773) | (200,017) |
Cash flows from investing activities: | ||
Purchases of property and equipment, including capitalization of labor costs for test equipment and ERP | (200,049) | (803,243) |
Proceeds from sales of property and equipment | 1,542 | 1,050 |
Net cash used in investing activities | (198,507) | (802,193) |
Cash flows from financing activities: | ||
Proceeds from issuance of stock and stock options exercised | 57,000 | 14,201 |
Payment of payroll taxes on net issuance of employee stock options | (656,845) | |
Net (repayment) borrowings on bank lines of credit | (430,313) | 140,967 |
Net repayments on related-party notes payable | (141,042) | |
Net repayments on notes payable | (42,919) | (972,440) |
Net cash used in financing activities | (1,214,119) | (817,272) |
Net change in cash and cash equivalents | (2,134,399) | (1,819,482) |
Effect of exchange rates on cash | (12,916) | 2,660 |
Cash and cash equivalents, beginning of period | 5,185,321 | 2,272,256 |
Cash and cash equivalents, end of period | 3,038,006 | 455,434 |
Supplemental disclosure of cash flow information: | ||
Cash paid during the period for interest | $ 22,369 | 6,268 |
Cash paid during the period for income taxes | $ 62,349 |
The Company and Basis of Presen
The Company and Basis of Presentation | 3 Months Ended |
Mar. 31, 2020 | |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
The Company and Basis of Presentation | NOTE 1 – THE COMPANY AND BASIS OF PRESENTATION Nature of Operations One Stop Systems, Inc. (“we,” “our,” “OSS,” or the “Company”) was originally incorporated as a California corporation in 1999 after initially being formed as a California limited liability company in 1998. On December 14, 2017, the Company was reincorporated as a Delaware corporation in connection with its initial public offering. The Company designs, manufactures and markets industrial grade computer systems and components that are based on industry standard computer architectures. The Company markets its products to manufacturers of automated equipment used for entertainment, telecommunications, industrial and military applications. During the year ended December 31, 2015, the Company formed a new wholly-owned subsidiary in Germany (“OSS GmbH”). During July 2016, the Company acquired Mission Technologies Group, Inc. (“Magma”) and its operations. In April 2017, the Company and a related entity formed a joint venture named SkyScale, LLC in the State of California (“SkyScale”). In accordance with the Contribution Agreement, each member contributed $750,000 and received a 50% interest in the joint venture. The purpose of SkyScale was to engage in the business of providing high performance computing capabilities as cloud services. As a result of changes in the competitive landscape and downward pressure on pricing from large competitors, the members to the SkyScale joint venture agreement agreed to dissolve SkyScale and ceased operations as of December 31, 2018. In May 2017, the Company entered into a Technology and Software License Agreement with Western Digital (“WDT”) for their Ion flash storage software. The agreement provides the Company with the Ion source code and rights to develop and market derivative products. The Company intends to develop and sell Ion flash storage software with its high-density storage arrays, as well as service existing WDT software users. In July 2017, the Company entered in to a Service Agreement with WDT to service its existing customer base that utilizes Ion flash storage software. The Company also purchased certain equipment from WDT and hired selected employees to assist in the servicing of these existing customers. Management has determined that the activities and assets acquired from WDT comprise a business as defined in ASC 805-10-55-4 through 55. Consideration paid by the Company to WDT pursuant to the arrangements described above was $67,000. In addition, the Company is required to pay prospective royalties to WDT of $2,500 or $5,000 for each sale of the Company’s products that include licensed software. WDT is obligated to pay the Company for services rendered to support existing WDT software users the amount of $1,400,000 in defined declining quarterly amounts over a three year period. Management does not believe this business acquisition meets the significance definition provided in Regulation S-X, Rule 210.1-02(w). On August 31, 2018, the Company acquired Concept Development Inc. (CDI) located in Irvine, California for cash of $646,759, and common stock valued at $4,194,673 (Note 3). CDI specializes in the design and manufacture of custom high-performance computing systems for airborne in-flight entertainment systems. On October 31, 2018, the Company’s wholly-owned German subsidiary, OSS GmbH, acquired 100% of the outstanding stock of Bressner Technology GmbH, a Germany limited liability company located near Munich, Germany, from its principal owners for cash consideration of €4,725,000 (US$5,374,582) and stock consideration of 106,463 newly-issued restricted shares of the Company’s common stock. Liquidity and Going Concern Considerations Given our recent operating losses, the Company’s primary sources of liquidity have been provided by (i) the Company’s February 2018 initial public offering (net proceeds were approximately $16,100,000), (ii) March 2019 notes payable from members of the Board of Directors and others of $1,500,000, (iii) the July 2019 sale of 1,554,832 shares of the Company’s common stock for net cash proceeds of $2,488,148 and (iv) the April 24, 2020 sale of $3,000,000 of Senior Secured Convertible Promissory Notes issued at a 10% original issue discount. As of March 31, 2020, the Company’s cash and cash equivalents were $3,038,006 and working capital was $11,938,554. Cash and cash equivalents held by Bressner totaled $599,511 (USD) at March 31, 2020, and Bressner’s debt covenants do not permit the use of those funds by its parent company. During the three months ended March 31, 2020, the Company experienced an operating loss of $1,511,154, with cash used in operating activities of $721,773. Our largest customer, engaged in the media and entertainment industry, is having significant financial hardships attributable to the COVID-19 pandemic and as a result has been slow in paying its outstanding accounts receivables. The Company has formulated a plan whereby extended terms have been made available, and our customer is presently honoring those terms. The Company’s revenue growth, inclusive of two acquisitions made in 2018, has resulted in growth of the Company as a whole, but has been offset by increased spending in all areas of operating expenses: general and administrative, marketing and selling, and research and development. The recent outbreak of the novel strain of coronavirus, or COVID-19, which has been declared by the World Health Organization to be a “public health emergency of international concern,” has spread across the globe and is impacting worldwide economic activity. A public health pandemic, including COVID-19, poses the risk that we or our employees, contractors, suppliers, and other partners may be prevented from conducting business activities for an indefinite period of time, including due to shutdowns that may be requested or mandated by governmental authorities. While it is not possible at this time to estimate the impact that COVID-19 could have on our business, the continued spread of COVID-19 and the measures taken by the governments of countries affected could disrupt the supply chain and adversely impact our business, financial condition or results of operations. The COVID-19 outbreak and mitigation measures may also have an adverse impact on global economic conditions which could have an adverse effect on our business and financial condition. The extent to which the COVID-19 outbreak impacts our results will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact. Though management has been successfully managing through the current known impacts, if the situation further deteriorates or the outbreak results in further restriction on both supply and demand factors, our cash flows, financial position and operating results for fiscal year 2020 and beyond will be negatively impacted. Neither the length of time nor the magnitude of the negative impacts can be presently determined. Management’s plans with respect to the above is to continue its efforts to restructure the Company with the primary objectives of reducing costs, conserving cash, strengthening margins, and improving company-wide execution. Specific actions already implemented by management include the deferral of certain executive and Board compensation payments, a freeze on hiring and minimizing overtime, travel and entertainment, and contractor costs. On April 7, 2020, the Company implemented a cost reduction plan which included the termination of certain employees and elimination of certain costs. Estimated savings from this effort are estimated to be $2.5 to $3.0 million for the year ending 2020. While management expects these actions to result in prospective cost reductions, management is also committed to securing debt and/or equity financing to ensure that liquidity will be sufficient to meet the Company’s cash requirements through at least a period of the next twelve months. Management believes potential sources of liquidity include at least the following: ▪ In March 2019, the Company received funding commitments in the amount of $4,000,000 from members of the Board of Directors, of which $1,500,000 has been drawn through December 31, 2019, of which $786,125 remains outstanding. Management expects that $500,000 of such remaining commitments is available to the Company. ▪ In May 2019, the Company filed a Form S-3 prospectus with the Securities and Exchange Commission which became effective on June 19, 2019, and allows the Company to offer up to $100,000,000 aggregate dollar amount of shares of its common stock, preferred stock, debt securities, warrants to purchase its common stock, preferred stock or debt securities, subscription rights to purchase its common stock, preferred stock or debt securities and\or units consisting of some or all of these securities, in any combination, together or separately, in one of more offerings, in amounts, at prices and on the terms that the Company will determine at the time of the offering and which will be set forth in a prospectus supplement and any related free writing prospectus. ▪ On April 24, 2020, the Company completed a $6.0 million debt financing on a non-interest bearing convertible note with a 10% original issue discount. The first tranche of $3.0 million was received April 27, 2020, with an additional $3.0 million available seven months from the date of closing at the option of the Company conditioned upon meeting certain requirements. The note is repayable in twenty-two installments beginning three months after closing. ▪ On April 28, 2020, the Company received a Paycheck Protection Program (PPP) loan in the amount of $1,500,000. As a result of management’s cost reduction plans, the Company’s potential sources of liquidity and management’s most recent cash flow forecasts, management believes that the Company has sufficient liquidity to satisfy its anticipated cash requirements for at least the next twelve months. However, there can be no assurance that management’s cost reduction efforts will be effective, the forecasted cash flows will be achieved, or that external sources of financing, including the issuance of debt and/or equity securities, will be available at times and on terms acceptable to the Company, or at all. Basis of Presentation The accompanying consolidated financial statements have been prepared on an accrual basis of accounting in accordance with United States Generally Accepted Accounting Principles (“U.S. GAAP”), as set forth in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”). The unaudited consolidated financial statements herein have been prepared by the Company pursuant to the rules and regulations of the United States Securities Exchange Commission (“SEC”). The accompanying interim unaudited consolidated financial statements have been prepared under the presumption that users of the interim financial information have either read or have access to the audited consolidated financial statements for the latest year ended December 31, 2019. Accordingly, note disclosures which would substantially duplicate the disclosures contained in the December 31, 2019 audited consolidated financial statements have been omitted from these interim unaudited consolidated financial statements. The Company evaluated all subsequent events and transactions through the date of filing this report. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2020, are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. For further information, refer to the audited consolidated financial statements and notes for the year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 26, 2020. Principles of Consolidation The accompanying unaudited consolidated financial statements include the accounts of OSS, which include the results from the Magma acquisition, Ion business combination, and acquisition of Concept Development Inc., since their respective dates of acquisition, its wholly-owned subsidiary, OSS GmbH, which includes the acquisition of Bressner Technology GmbH, and the accounts of the joint venture, SkyScale LLC, which was approved for dissolution on December 31, 2018 (collectively referred to as the “Company”). Intercompany balances and transactions have been eliminated in consolidation. |
Significant Accounting Policies
Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies | NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosures of contingent assets, liabilities, and expenses at the date of the consolidated financial statements during the reporting period. Significant estimates made by management include, among others, the fair value of acquired net assets of CDI in August 2018 with reevaluation in April 2019, and Bressner Technology GmbH in October 2018, the allowance for doubtful accounts, fair value of stock options, recoverability of inventories and long-lived assets, and realizability of deferred tax assets. Actual results could differ from those estimates. Concentration Risks At times, deposits held with financial institutions may exceed the amount of insurance provided by the Federal Deposit Insurance Corporation (“FDIC”), which provides basic deposit coverage with limits up to $250,000 per owner. As of March 31, 2020, the Company had $2,169,502 in excess of the insurance limits. The Company has not experienced any such losses in these accounts. In Germany, the deposit insurance is €100,000 per bank, per customer. As of March 31, 2020, Bressner has €443,844 (US$489,275) on deposit with banks in excess of the insurance limits. In the three month periods ended March 31, 2020, and 2019, the Company has one customer which represented greater than 10% of the Company’s revenue. Collectively, this customer represented approximately 27%, and 26% of revenue, respectively. As of March 31, 2020 and December 31, 2019, one customer accounted for 59% and 45% of net trade accounts receivables, respectively. The Company made purchases from certain suppliers of which each supplier was greater than 10% of the Company’s total vendor purchases on an annual basis. Collectively these vendors represented approximately 17 Cash and Cash Equivalents Cash and cash equivalents consist of cash on deposit and money market accounts. The Company considers all highly liquid temporary cash investments with an initial maturity of 90 days or less when acquired to be cash equivalents. Management believes that the carrying amounts of cash equivalents approximate their fair value because of the short maturity period. Accounts Receivable Accounts receivable are presented at net realizable value. This value includes an appropriate allowance for estimated uncollectible accounts to reflect any loss anticipated on the trade accounts receivable and unbilled receivables. Unbilled receivables include costs and gross profit earned in excess of billings. The allowance for doubtful accounts is an estimate to cover the losses resulting from the inability of customers to make payments on their outstanding balances and unbilled receivables. In estimating the required allowance, management considers the overall quality and aging of the accounts receivable, specific customer circumstances, current economic trends, and historical experience with collections. At March 31, 2020 and December 31, 2019, the allowance for doubtful accounts was $11,518, and $14,000, respectively. Revenues earned in excess of related billings are recorded as an asset on the balance sheet as unbilled receivables. Unbilled receivables as of March 31, 2020 and December 31, 2019, were $214 and $25,432, respectively. Inventories Inventories are valued at the lower of cost or net realizable value. The Company uses the average cost method for purposes of determining cost, which approximates the first-in, first-out method. The Company establishes reserves on its inventories to write-down the carrying value of its estimated obsolete or excess inventories to estimated net realizable value based upon observations of historical usage and assumptions about future demand and market conditions. In addition, the Company considers changes in the market value of components in determining the net realizable value of its inventory. Inventory reserves are not typically reversed until the specific inventories are sold or otherwise disposed. Actual demand, product mix and alternative usage may be lower than those that we project and this difference could have a material adverse effect on our gross margin if inventory write-downs beyond those initially recorded become necessary. Alternatively, if actual demand, product mix and alternative usage are more favorable than those we estimated at the time of such a write-down, our gross margin could be favorably impacted in future periods. Property and Equipment Property and equipment, other than leasehold improvements, are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the assets, generally from three to seven years. Leasehold improvements are recorded at cost and are amortized using the straight-line method over the shorter of the remaining lease term or the estimated useful life of the related asset. Tooling and test equipment includes capitalized labor costs associated with the development of the related tooling and test equipment. Costs incurred for maintenance and repairs are expensed as incurred, and expenditures for major replacements and improvements are capitalized. Upon retirement or sale, the cost and related accumulated depreciation and amortization of disposed assets are removed from the accounts and any resulting gain or loss is included in other income (expense), net. Goodwill Goodwill represents the excess of the purchase price paid over the fair value of the net assets acquired in business combinations. Goodwill is not amortized but is tested for impairment at least annually or when we deem that a triggering event has occurred. The Company reviews goodwill for impairment annually on December 31. The Company completed its annual assessment for goodwill impairment and determined that goodwill is not impaired as of December 31, 2019 and no adjustment was required. In April 2019, the Company performed an impairment test of goodwill, as a result of a short-fall in the actual overall financial performance of CDI as compared to plan, a recurring need for working capital, and a decrease in the Company’s stock price. As a result of this interim evaluation, the Company recorded an impairment loss to goodwill of $1,697,394, which was charged to operating expenses during the second quarter of 2019. Intangible Assets and Long-lived Assets We evaluate our intangible and long-lived assets for impairment when events or circumstances arise that indicate our intangible and long-lived assets may be impaired. Indicators of impairment include, but are not limited to, a significant deterioration in overall economic conditions, a decline in our market capitalization, the loss of significant business, significant decreases in funding for our contracts, or other significant adverse changes in industry or market conditions. The Company completed its qualitative assessment for impairment in December 2019 and determined that there was no impairment as of December 31, 2019. There were no events or circumstances that arose during the three month period ended March 31, 2020, that gave an indication of impairment. There can be no assurance, however, that market conditions will not change or demand for the Company’s products will continue, which could result in an impairment of intangible and long-lived assets in the future. Fair Value Measurements The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. These tiers include: • Level 1, defined as quoted market prices in active markets for identical assets or liabilities; • Level 2, defined as inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, model-based valuation techniques for which all significant assumptions are observable in the market, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and • Level 3, defined as unobservable inputs that are not corroborated by market data. The carrying value of financial instruments including cash and cash equivalents accounts receivable and accounts payable and accrued expenses, lines of credit, and other liabilities approximate fair value due to the short-term nature of these instruments. Assets and liabilities assumed in the acquisition of the Ion software, Concept Development Inc., and Bressner Technology GmbH were recorded at fair value based upon the Company’s market assumptions which approximated carrying value (except for acquired intangible assets – Note 3) due to the short-term nature of the instruments. The carrying amounts of the Company’s notes payable and Bressner’s existing lines of credit and notes payable approximate their fair values at the stated interest rates and are reflective of the prevailing market rates. Revenue Recognition On January 1, 2019, the Company adopted the new accounting standard update ASC 606, Revenue from Contracts with Customers, which superseded nearly all existing revenue recognition guidance under GAAP, to all contracts using the modified retrospective method. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. The Company’s performance obligations are satisfied over time as work is performed or at a point in time. The majority of the Company’s revenue is recognized at a point in time when products ship and control is transferred to the customer. The Company determines revenue recognition through the following steps: (1) identification of the contract with a customer; (2) identification of the performance obligations in the contract; (3) determination of the transaction price; (4) allocation of the transaction price to the performance obligations in the contract; and (5) recognition of revenue when, or as, a performance obligation is satisfied. The Company’s contracts are executed through a combination of written agreements along with purchase orders with all customers including certain general terms and conditions. Generally, purchase orders entail products, quantities and prices, which define the performance obligations of each party and are approved and accepted by the Company. The Company’s contracts with customers do not include extended payment terms. Payment terms vary by contract type and type of customer and generally range from 30 to 60 days from invoice. Additionally, taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer and deposited with the relevant government authority, are excluded from revenue. The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring goods or services to the customer adjusted for estimated variable consideration, if any. Variable consideration may include discounts, rights of return, refunds, and other similar obligations. The Company allocates the transaction price to each distinct product and service based on its relative standalone selling price. The standalone selling price for products primarily involves the cost to produce the deliverable plus the anticipated margin and for services is estimated based on the Company’s approved list price. In the normal course of business, the Company does not accept product returns unless the items are defective as manufactured. The Company establishes provisions for estimated returns and warranties. In addition, the Company does not typically provide customers with the right to a refund and does not transact for noncash consideration. Customer agreements include one vendor managed inventory program. The Company recognizes revenue under this arrangement when all of the following criteria are met: (i) the goods have been identified separately as belonging to the customer; (ii) the goods are ready for physical shipment to the customer; (iii) the Company does not have the ability to direct the goods to another customer; and (iv) the arrangement was requested by the customer and that the customer has sufficiently explained a substantial business purpose for the arrangement. Management also considers whether the customer's custodial risks are insured and whether modifications to the Company's normal billing and credit terms were required. The Company recorded revenue from product sales that are held in vendor managed inventory under these agreements of $3,179,943 and $1,494,078 during the three month periods ended March 31, 2020 and 2019, respectively. As of March 31, 2020 and December 31, 2019, $1,329,057 and $459,893, respectively, of product sold through those dates were held by the Company in the vendor management program. Revenues on certain fixed-price contracts where we provide engineering services, prototypes and completed products are recognized based upon percentage of completion or based upon milestones delivered that are provided during the period and compared to milestone goals to be provided over the entire contract. These services require that we perform significant, extensive and complex design, development, modification or implementation of our customers’ systems. Performance will often extend over long periods of time, and our right to receive future payment depends on our future performance in accordance with the agreement. The percentage-of-completion methodology involves recognizing probable and reasonably estimable revenue using the percentage of services completed, on a current cumulative cost to estimated total cost basis, using a reasonably consistent profit margin over the performance period. Due to the long-term nature of these projects, developing the estimates of costs often requires significant judgment. Factors that must be considered in estimating the progress of work completed and ultimate cost of the projects include, but are not limited to, the availability of labor and labor productivity, the nature and complexity of the work to be performed and the impact of delayed performance. If changes occur in delivery, productivity or other factors used in developing the estimates of costs or revenues, we revise our cost and revenue estimates, which may result in increases or decreases in revenues and costs, and such revisions are reflected in earnings in the period in which the revision becomes known. During the three month periods ended March 31, 2020 and 2019, revenue recognized on a fixed price contractual basis was $73,750 and $43,071, respectively. The Company recognizes contract assets or unbilled receivables related to revenue recognized for services completed but not yet invoiced to the clients. Unbilled receivables are recorded as accounts receivable when the Company has an unconditional right to contract consideration. A contract liability is recognized as deferred revenue when the Company invoices clients in advance of performing the related services under the terms of a contract. Deferred revenue is recognized as revenue when the Company has satisfied the related performance obligation. On certain contracts with several of the Company’s significant customers, the Company receives payments in advance of manufacturing. Advanced payments are recorded as deferred revenue until the revenue recognition criteria described above has been met. Related billings that are in excess of revenue earned are deferred and recorded as a liability on the consolidated balance sheet until the related services are provided. Deferred revenue was $12,359 and $24,718 as of March 31, 2020 and December 31 2019, respectively. Remaining performance obligations represent the amount of revenue from fixed-fee contracts. As of March 31, 2020 and December 31, 2019, approximately $0, attributable to cancellation of a contract, and $317,718, respectively of revenue from fixed-fee contracts that is expected to be recognized from these remaining performance obligations. We elected to utilize the practical expedient exemption to exclude from this disclosure the amount of revenue from contracts which are not fixed-fee and where we do not have the right to invoice until the services have been performed. The Company’s operating segment revenues disaggregated by primary geographic market, which is determined based on a customer’s geographic location, for the three months ended March 31, 2020 and 2019 is as follows: For The Three Month Period Ended March 31, 2020 For The Three Month Period Ended March 31, 2019 Entity: Domestic International Total Domestic International Total Customized computers and flash arrays $ 6,207,898 $ 1,610,380 $ 7,818,278 $ 2,042,510 $ 3,187,576 $ 5,230,086 In-flight entertainment & connectivity 529,406 92,540 621,946 296,529 2,925 299,454 Value-added reseller with minimal customization - 4,919,413 4,919,413 - 4,528,359 4,528,359 $ 6,737,304 $ 6,622,333 $ 13,359,637 $ 2,339,039 $ 7,718,860 $ 10,057,899 Warranty Reserves The Company offers product warranties that extend for one year from the date of sale. Such warranties are considered assurance-type warranties and therefore, they would not be deemed to be a separate performance obligation under ASC 606. Such warranties require the Company to repair or replace defective product returned to the Company during the warranty period at no cost to the customer. The Company records an estimate for warranty‑related costs at the time of sale based on its historical and estimated future product return rates and expected repair or replacement costs (Note 7). While such costs have historically been within management’s expectations and the provisions established, unexpected changes in failure rates could have a material adverse impact on the Company, requiring additional warranty reserves and could adversely affect the Company’s gross profit and gross margins. The Company offers customers extended warranties beyond the standard one-year warranty on the product. The extended warranties are considered service-type warranties and would be considered as a separate performance obligation under ASC 606. The Company is the primary obligor and, revenue is recognized on a gross basis ratably over the term of the extended warranty. The customer can purchase extended warranties from one to five years, in the bronze, silver or gold categories. This entails hardware repair or replacement, shipping methods on how the warranties will be returned / delivered, response times and hours of operations to receive support. The amount of warranties sold for the three months ended March 31, 2020 and 2019 were $92,724 and $80,123, respectively. The revenue that was recognized for the warranties sold for the three months ended March 31, 2020 and 2019 were $69,105 and $106,698, respectively. The Company does have recourse with some of its suppliers that offer more than a one-year guarantee on parts, but this is not standard. The few that offer greater than a year warranty, the Company may be able to cover the cost of the part from the manufacturer for the failed part. The amounts of these costs vary in a wide range, but are not material, due to the infrequency of failure. As of March 31, 2020 and December 31, 2019, deferred revenue totaled $388,378 and $394,571, respectively. The Company expects to recognize $388,378 of unearned revenue amounts from 2020 through 2024. Shipping and Handling Costs The Company's shipping and handling costs are included in cost of goods sold for all periods presented. Foreign Currency We operate primarily in the United States. Foreign sales of products and services are primarily denominated in U.S. dollars. We also conduct business outside the United States through our foreign subsidiary in Germany, where business is largely transacted in non-U.S. dollar currencies, particularly the Euro, which is subject to fluctuations due to changes in foreign currency exchange rates. Accordingly, we are subject to exposure from changes in the exchange rates of local currencies. Foreign currency transaction gains and losses are recorded in other income (expense), net in the consolidated statements of operations OSS GmbH operates as an extension of OSS’ domestic operations. The functional currency of OSS GmbH is the Euro. Transactions denominated in currencies other than the functional currency are remeasured to the functional currency at the average exchange rate in effect during the period. At the end of each reporting period, monetary assets and liabilities are remeasured using exchange rates in effect at the balance sheet date. Non-monetary assets and liabilities are remeasured at historical exchange rates. Consequently, changes in the exchange rates of the currencies may impact the translation of the foreign subsidiaries’ statements of operations into U.S. dollars, which may in turn affect our consolidated statements of operations. Derivative Financial Instruments We employ derivatives to manage certain market risks through the use of foreign exchange forward contracts. We do not use derivatives for trading or speculative purposes. Our derivatives are designated as a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge). We hedge a portion of the exchange risk involved in anticipation of highly probable foreign currency-denominated transactions. In anticipation of these transactions, we enter into foreign exchange contracts to provide currency at a fixed rate. As of March 31, 2020, the Company had no foreign exchange contracts outstanding. Unrealized gains on derivatives designated as cash flow hedges are recorded at fair value as assets, and unrealized losses on derivatives designated as cash flow hedges are recorded at fair value as liabilities. For derivative instruments designated as cash flow hedges, the effective portion is reported as a component of accumulated other comprehensive income until reclassified into interest expense in the same period the hedged transaction affects earnings. The gain or loss on the ineffective portion is recognized as “Other income (expense) – net” in the consolidated statements of income in each period. Stock-Based Compensation The Company accounts for employee and director share-based compensation in accordance with the provisions of ASC Topic 718 “Compensation – Stock Compensation” All transactions in which goods or services are the consideration received for the issuance of equity instruments to non-employees are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date used to determine the estimated fair value of the equity instrument issued is the earlier of the date on which the third-party performance is complete or the date on which it is probable that performance will occur. Employee and director stock-based compensation expense recognized during the period is based on the value of the portion of stock-based payment awards that is ultimately expected to vest during the period. Given that stock-based compensation expense recognized in the accompanying consolidated statements of operations is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. The Company’s estimated average forfeiture rates are based on historical forfeiture experience and estimated future forfeitures. Compensation cost for stock awards, which include restricted stock units (“RSUs”), is measured at the fair value on the grant date and recognized as expense, net of estimated forfeitures, over the related service period. The fair value of stock awards is based on the quoted price of our common stock on the grant date. The estimated fair value of common stock option awards is calculated using the Black-Scholes option pricing model. The Black-Scholes model requires subjective assumptions regarding future stock price volatility and expected time to exercise, along with assumptions about the risk-free interest rate and expected dividends, all of which affect the estimated fair values of the Company’s common stock option awards. The expected term of options granted is calculated using the simplified method, which is the weighted average vesting period and the contractual lives of the options. This calculation is based on a method acceptable in instances where the vesting and exercise terms of options granted meet certain conditions and where limited historical exercise data is available. The expected volatility is based on the historical volatility of the common stock of comparable public companies that operate in similar industries as the Company. The risk-free rate selected to value any particular grant is based on the U.S. Treasury rate that corresponds to the expected term of the grant effective as of the date of the grant. The expected dividend assumption is based on the Company’s history and management’s expectation regarding dividend payouts. Compensation expense for common stock option awards with graded vesting schedules is recognized on a straight-line basis over the requisite service period for the last separately vesting portion of the award, provided that the accumulated cost recognized as of any date at least equals the value of the vested portion of the award. If there are any modifications or cancellations of the underlying vested or unvested stock-based awards, the Company may be required to accelerate, increase or cancel any remaining unearned stock-based compensation expense, or record additional expense for vested stock-based awards. Future stock-based compensation expense and unearned stock- based compensation may increase to the extent that the Company grants additional common stock options or other stock-based awards. Business Combinations We utilize the acquisition method of accounting for business combinations and allocate the purchase price of an acquisition to the various tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. We primarily establish fair value using the income approach based upon a discounted cash flow model. The income approach requires the use of many assumptions and estimates including future revenues and expenses, as well as discount factors and income tax rates. Other estimates include: • Estimated step-ups or write-downs for fixed assets and inventory; • Estimated fair values of intangible assets; and • Estimated income tax assets and liabilities assumed from the target While we use our best estimates and assumptions as part of the purchase price allocation process to accurately value assets acquired and liabilities assumed at the business acquisition date, our estimates and assumptions are inherently uncertain and subject to refinement. As a result, during the purchase price allocation period, which is generally one year from the business acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. For changes in the valuation of intangible assets between preliminary and final purchase price allocation, the related amortization is adjusted in the period it occurs. Subsequent to the purchase price allocation period, any adjustment to assets acquired or liabilities assumed is included in operating results in the period in which the adjustment is determined. Should we issue shares of our common stock in an acquisition, we will be required to estimate the fair value of the shares issued. See Note 3. Advertising Costs Advertising costs are expensed as incurred and included in marketing and selling expense in the accompanying consolidated statements of operations. Advertising costs for the three month periods ended March 31, 2020 and 2019 were $122,092 and $130,922, respectively. Research and Development Expenses Research and development expenditures are expensed in the period incurred. Research and development expenses primarily consist of salaries, benefits and stock-based compensation, as well as consulting expenses and allocated facilities and other overhead costs. Research and development activities include the development of new technologies, features and functionality in support of the Company’s products and customer needs. Income Taxes The Company utilizes the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the difference between the consolidated financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. Under ASC Topic 740, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Additionally, ASC Topic 740 provides requirements for derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company files income tax returns in the U.S. federal jurisdiction, California and Germany. The Company has elected to treat the tax effect of Global Intangible Low Tax Income (“GILTI”) as a current-period expense when occurred. The Company does not foresee material changes to its gross liability of uncertain tax positions within the next twelve months. In response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act (CARES Act) was signed into law in March 2020. The CARES Act lifts certain deduction limitations originally imposed by the Tax Cuts and Jobs Act of 2017 (2017 Tax Act). Corporate taxpayers may carryback net operating losses (NOLs) originating during 2018 through 2020 for up to five years, which was not previously allowed under the 2017 Tax Act. The CARES Act also eliminates the 80% of taxable income limitations by allowing corporate entities to fully utilize NOL carryforwards to offset taxable income in 2018, 2019 or 2020. Taxpayers may generally deduct interest up to the sum of 50% of adjusted taxable income plus business interest income (30% limit under the 2017 Tax Act) for tax years beginning January 1, 2019 and 2020. The CARES Act allows taxpayers with alternative minimum tax credits to claim a refund in 2020 for the entire amount of the credits instead of recovering the credits through refunds over a period of years, as originally enacted by the 2017 Tax Act. In addition, the CARES Act raises the corporate charitable deduction limit to 25% of taxable income and makes qualified improvement property generally eligible for 15-year cost-recovery and 100% bonus depreciation. The enactment of the CARES Act resulted in two adjustments to our income tax provision for the three months ended March 31, 2020, relating to a projected 2018 NOL utilization and tax benefits from NOL carrybacks. We have recorded a discrete benefit of $100,000 in our income tax provision for the three months ended March 31, 2020 related to the CARES Act. Interest Expense Interest expense consists primarily of interest associated with the Company’s issued debt including the amortization of debt discounts. The Company recognizes the amortization of debt discounts and the amortization of interest costs using a straight-line method which approximates the effective interest method. Net Income (Loss) Per Share Basic net income (loss) per share is calculated by dividing net income (loss) by the weighted-average common shares outstanding during the period. Diluted net income (loss) per share is calculated by dividing the net income (loss) by the weighted-average shares and dilutive potential common shares outstanding during the period. Dilutive potential shares consist of dilutive shares iss |
Long-Lived Intangible Assets
Long-Lived Intangible Assets | 3 Months Ended |
Mar. 31, 2020 | |
Goodwill And Intangible Assets Disclosure [Abstract] | |
Long-Lived Intangible Assets | NOTE 3 – Long-Lived Intangible Assets Definite lived intangible assets related to acquisition are as follows, as of March 31, 2020: Expected Life Remaining Months Gross Intangible Assets Accumulated Amortization Net Intangible Assets Customer lists and relationships 36 to 60 months 19 to 41 months $ 2,084,515 $ (1,226,805 ) $ 857,710 Drawings and Technology 36 months 0 months 760,207 (760,207 ) - Trade name, Trademarks & other 24 to 36 months 5 to 19 months 447,274 (255,655 ) 191,619 Non-compete 36 months 19 months 246,797 (124,460 ) 122,337 $ 3,538,793 $ (2,367,126 ) $ 1,171,667 Definite lived intangibles assets related to acquisitions are as follows, as of December 31, 2019: Expected Life Remaining Months Gross Intangible Assets Accumulated Amortization Net Intangible Assets Customer lists and relationships 36 to 60 months 22 to 44 months $ 2,084,515 $ (1,109,681 ) $ 974,834 Drawings and Technology 36 months 0 months 760,207 (760,207 ) - Trade name, Trademarks & other 24 to 36 months 8 to 22 months 447,274 (217,570 ) 229,704 Non-compete 36 months 22 months 246,797 (105,143 ) 141,654 $ 3,538,793 $ (2,192,601 ) $ 1,346,192 As of March 31, 2020, amortization expense of the definite lived intangible assets for the years remaining is as follows: 2020 2021 2022 2023 Total $ 509,410 $ 556,872 $ 63,231 $ 42,154 $ 1,171,667 Amortization expense recognized during the three months ended March 31, 2020 and 2019 was $174,525 and $349,419, respectively. |
Accounts Receivable
Accounts Receivable | 3 Months Ended |
Mar. 31, 2020 | |
Accounts Receivable Net Current [Abstract] | |
Accounts Receivable | NOTE 4 – ACCOUNTS RECEIVABLE Accounts receivable, net consists of the following: March 31, December 31, 2020 2019 Accounts receivable $ 9,122,983 $ 11,655,725 Unbilled receivables 214 25,432 9,123,197 11,681,157 Less: allowance for doubtful accounts (11,518 ) (14,000 ) $ 9,111,679 $ 11,667,157 Unbilled receivables include amounts associated with percentage of completion and milestone billing accounting, which includes cost and gross profit earned in excess of billing, not currently billable due to contractual provisions. Recoveries of bad debt expense related to accounts receivable was ($2,405) and ($88) for the three month periods ended March 31, 2020 and 2019, respectively. |
Inventories
Inventories | 3 Months Ended |
Mar. 31, 2020 | |
Inventory Disclosure [Abstract] | |
Inventories | NOTE 5 – INVENTORIES Inventories, net consist of the following: March 31, December 31, 2020 2019 Raw materials $ 3,820,575 $ 2,478,882 Sub-assemblies 1,277,061 1,857,004 Work-in-process 1,024,973 493,276 Finished goods 3,490,385 3,087,529 9,612,994 7,916,691 Less: reserves for obsolete and slow-moving inventories (628,117 ) (547,335 ) $ 8,984,877 $ 7,369,356 |
Property and Equipment
Property and Equipment | 3 Months Ended |
Mar. 31, 2020 | |
Property Plant And Equipment [Abstract] | |
Property and Equipment | NOTE 6 – PROPERTY AND EQUIPMENT Property and equipment, net consists of the following: March 31, December 31, 2020 2019 Computers and computer equipment $ 659,763 $ 633,546 Furniture and office equipment 337,901 340,801 Manufacturing equipment and engineering tools 2,503,576 2,501,020 ERP System 1,892,420 1,709,125 Leasehold improvements 902,974 892,097 6,296,634 6,076,589 Less: accumulated depreciation and amortization (2,744,083 ) (2,508,025 ) $ 3,552,551 $ 3,568,564 During the three month periods ended March 31, 2020 and 2019, the Company incurred $221,300 and $115,308, respectively of depreciation and amortization expense related to property and equipment. |
Accrued Expenses and Other Liab
Accrued Expenses and Other Liabilities | 3 Months Ended |
Mar. 31, 2020 | |
Accrued Liabilities And Other Liabilities [Abstract] | |
Accrued Expenses and Other Liabilities | NOTE 7 – ACCRUED EXPENSES AND OTHER LIABILITIES Accrued expenses and other liabilities consist of the following: March 31, December 31, 2020 2019 Accrued compensation and related liabilities $ 1,798,990 $ 1,621,177 Deferred revenue and customer deposits 1,410,491 1,260,126 Warranty reserve 422,782 424,011 Other accrued expenses 978,243 1,302,118 $ 4,610,506 $ 4,607,432 |
Debt
Debt | 3 Months Ended |
Mar. 31, 2020 | |
Debt Disclosure [Abstract] | |
Debt | NOTE 8 – DEBT Bank Lines of Credit Bressner Technology GmbH has three revolving lines of credit with German institutions totaling €3,600,000 (US$3,968,492). Borrowing under the lines of credit bear interest at variable rates of Euribor plus a stated rate. Current rates are between 3.75% and 7.99%. There were no outstanding lines of credit balances as of March 31, 2020 and December 31, 2019. Foreign Debt Obligations Bressner Technology GmbH has two term loans outstanding with a total balance outstanding of €763,556 (US$841,713) as follows: Bressner entered into a note payable in September 2017, in the amount of €400,000 (US$436,272) which bears interest at 2.125% and matured on January 31, 2020. As of March 31, 2020, this note has been paid in full. Quarterly principal payments of €25,000 (US$28,068) were due in January, April, July and November of 2019. The balance outstanding as of December 31, 2019 is €25,000 (US$28,068). Bressner entered into a note payable in April 2019 in the amount of €500,000 (US$561,350) which bears interest at 2.25% and matures on March 30, 2021 with monthly payments of principal and interest of €22,232 (US$24,960). The balance outstanding as of March 31, 2020 and December 31, 2019 is €263,556 (US$290,534) and €328,525 (US$368,835), respectively. Bressner entered into a note payable in June 2019 in the amount of €500,000 (US$551,180) which bears interest at 1.70.% and matures on June 25, 2020 with a balloon payment of principal and interest. The amount outstanding as of March 31, 2020 and December 31, 2019 is €509,544 (US$561,700) and €508,679 (US$571,095), respectively. Bressner is in the process of having this loan’s maturity date extend one year. Bressner entered into a note payable in September 2019 in the amount of €300,000 (US$336,810) which bears interest at 1.65.% and matured on March 24, 2020, with a balloon payment of principal and interest. The outstanding balance was paid in full as of March 31, 2020. At December 31, 2019 the outstanding balance was €301,650 (US$338,663). Notes Payable In April 2019, the Company borrowed $350,000 from three individuals for a two year period at an interest rate of 9.5% which requires the Company to make monthly principal and interest payments of $16,100 per month. These loans are secured by the assets of the Company. In connection with these loans, the Company issued to the noteholders warrants to purchase shares of the Company’s common stock equal to 10% of the original principal at a price per share equal to $2.15 per share. Accordingly, the Company issued to the noteholders warrants to purchase 16,276 shares of the Company’s common stock at an exercise price of $2.15 per share. The relative fair value of each warrant was $0.90. The relative fair value of warrants was estimated using Black-Scholes with the following weighted-average assumptions: fair value of the Company’s common stock at issuance of $2.15 per share; five year contractual term; 44.60% volatility; 0.0% dividend rate; and a risk-free interest rate of 2.307%. The total relative fair value of the warrants issued is $14,037. The balance outstanding as of March 31, 2020 and December 31, 2019 is $198,134 and $241,054, respectively. Notes Payable – Related Parties In April 2019, the Company borrowed $1,150,000 from three individuals who serve on the Company’s board of directors for a two year period at an interest rate of 9.5% which requires the Company to make monthly principal and interest payments of $52,900 per month. These loans are secured by the assets of the Company. In connection with these loans, the Company issued to the noteholders warrants to purchase shares of the Company’s common stock equal to 10% of the original principal at a price per share equal to $2.15 per share. Accordingly, the Company issued to the noteholders warrants to purchase 53,490 shares of the Company’s common stock at an exercise price of $2.15 per share. The relative fair value of each warrant was $0.90. The relative fair value of warrants was estimated using Black-Scholes with the following weighted-average assumptions: fair value of the Company’s common stock at issuance of $2.15 per share; five year contractual term; 42.60% volatility; 0.0% dividend rate; and a risk-free interest rate of 2.3067%. The relative fair value of warrants issued is $46,121. The balance outstanding as of March 31, 2020 and December 31, 2019 is $650,129 and $791,170, respectively. Debt Discount The relative fair value of warrants were recorded as debt discount, decreasing notes payable and related-party notes payable and increasing additional paid-in-capital on the accompanying consolidated balance sheets. The debt discounts are being amortized to interest expense over the term of the corresponding notes payable using the straight-line method which approximates the effective interest method. For the three month periods ended March 31, 2020 and 2019, total debt discount amortization was $7,520 and $0, respectively, and such amounts are included in interest expense in the accompanying consolidated statements of operations. Total future payments under notes payable and related-party notes payable as of March 31, 2020 are as follows: Period Ending March 31, Related Parties Third Parties Foreign Total Discount 2020 $ 598,482 $ 182,120 $ 841,713 $ 1,622,315 $ (30,079 ) 2021 51,647 16,014 - 67,661 (1,253 ) Total minimum payments 650,129 198,134 841,713 1,689,976 (31,332 ) Current portion of notes payable (598,482 ) (182,120 ) (841,713 ) (1,622,315 ) 30,079 Notes payable, net of current portion $ 51,647 $ 16,014 $ - $ 67,661 $ (1,253 ) |
Stockholders' Equity
Stockholders' Equity | 3 Months Ended |
Mar. 31, 2020 | |
Stockholders Equity Note [Abstract] | |
Stockholders' Equity | NOTE 9 – STOCKHOLDERS’ EQUITY The Company’s amended and restated certificate of incorporation filed on December 14, 2017, authorizes the Company to issue 10,000,000 shares of preferred stock and 50,000,000 shares of common stock. Common Stock The voting, dividend and liquidation rights of the holders of the common stock are subject to rights of preferred stockholders, if any, as designated by the Board of Directors. Common stockholders have voting rights at all meetings of stockholders and are entitled to one vote for each share held subject to certain limitations otherwise required by law. Dividends may be declared and paid on the common stock as and when determined by the Board of Directors subject to any preferential dividend or other rights of preferred stockholders. The Company does not anticipate declaring any dividends in the foreseeable future. Upon the dissolution or liquidation of the Company, common stockholders are entitled to receive all assets of the Company, subject to any preferential or other rights of preferred stockholders. On June 26, 2019, the Company filed a prospectus supplement relating to its common stock, par value $0.0001 per share, whereby under the prospectus supplement, the Company may offer and sell common stock having an aggregate offering price of up to $10,000,000 through Noble Capital Markets, Inc., (“Noble”) acting as the Company’s agent. As such, the Company entered into an Equity Distribution Agreement with Noble dated as of June 26, 2019. In July 2019, the Company sold 1,554,832 shares of common stock through this offering for total gross proceeds of $2,700,714, which resulted in net proceeds to us of $2,488,148, after deducting compensation payable to Noble of $55,127 and other expenses of $157,439. The Equity Distribution Agreement with Noble was terminated on August 26, 2019. Exercise of Stock Options and Warrants During the three months ended March 31, 2020, the Company issued 354,914 shares of common stock for proceeds of $57,000 in cash related to the exercise of stock options and warrants. Of the total shares issued, 279,914 shares of common stock were issued as a cashless exercise of stock options. During the three months ended March 31, 2019, the Company issued 54,098 shares of common stock for proceeds of $14,201 in cash related to the exercise of stock options and warrants. Of the total shares issued, 17,598 shares of common stock were issued as a cashless exercise of stock. Preferred Stock Preferred Stock may be issued from time to time in one or more series, each of these series to have such terms as stated or expressed in resolutions providing for the issue of such series adopted by the Board of Directors. Since February 1, 2018, there has been no outstanding preferred stock. Regarding unissued preferred stock, the Board of Directors is authorized to determine or alter any or all of the rights, preferences, privileges and restrictions granted to or imposed upon wholly unissued series of preferred stock, and to fix or alter the number of shares comprising any such series and the designation thereof, or any of them, and to provide for rights and terms of redemption or conversion of the shares of any such series. Stock Options A summary of stock option activity under each of the Company’s stock option plans during the three month period ended March 31, 2020: Stock Options Outstanding Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life (in years) Aggregate Intrinsic Value Outstanding at January 1, 2020 1,686,444 $ 1.32 4.84 $ 1,416,279 Granted 20,000 $ 2.70 Forfeited / Cancelled (6,500 ) $ 2.12 Exercised (686,250 ) $ 0.79 Outstanding at March 31, 2020 1,013,694 $ 1.69 5.08 $ 287,953 Exercisable at March 31, 2020 866,837 $ 1.49 5.08 $ 287,953 Vested and expected to vest at March 31, 2020 1,009,288 $ 1.69 5.55 $ 287,953 The following table presents details of the assumptions used to calculate the weighted-average grant date fair value of common stock options granted by the Company: For the Three Months Ended March 31, 2020 2019 Expected term (in years) 5.87 4.65 - 5.87 Expected volatility 43.5 - 47.8% 43.7 - 44.4% Risk-free interest rate 1.41 % 3.00 % Weighted average grant date fair value per share $ 2.70 $ 1.09 Grant date fair value of options vested $ 720,095 $ 1,441,371 Intrinsic value of options exercised $ 463,800 $ 56,369 As of March 31, 2020, the amount of unearned stock-based compensation estimated to be expensed from 2020 through 2029 related to unvested common stock options is $158,871, net of estimated forfeitures. The weighted-average period over which the unearned stock-based compensation is expected to be recognized is 1.57 years. If there are any modifications or cancellations of the underlying unvested awards, the Company may be required to accelerate, increase or cancel any remaining unearned stock-based compensation expense or calculate and record additional expense. Future stock-based compensation expense and unearned stock-based compensation will increase to the extent that the Company grants additional common stock options or other stock-based awards. Restricted Stock Units Restricted stock units may be granted at the discretion of the compensation committee of the Board of Directors under the Company’s 2017 Equity Incentive Plan that was adopted on October 10, 2017 (the “2017 Plan”) in connection with the hiring and retention of personnel and are subject to certain conditions. Restricted stock units generally vest quarterly or semi-annually over a period of one to three years and are typically forfeited if employment is terminated before the restricted stock unit vest. The compensation expense related to the restricted stock units is calculated as the fair value of the common stock on the grant date and is amortized to expense over the vesting period and is adjusted for estimated forfeitures. The Company’s restricted stock unit activity for the three months ended March 31, 2020 is as follows: Restricted Stock Units Number of Shares Weighted Average Grant Date Fair Value Unvested at January 1, 2020 216,670 $ 3.02 Granted 80,000 $ 2.31 Vested (91,669 ) $ 2.94 Cancelled (12,500 ) $ 2.43 Unvested at March 31, 2020 192,501 $ 2.80 As of March 31, 2020, there was $423,077 of unrecognized compensation cost related to unvested restricted stock units which is expected to be recognized over a weighted average period of 1.51 years. Stock-based compensation expense for the three month periods ended March 31, 2020 and 2019 was comprised of the following: For the Three Months Ended March 31, Stock-based compensation classified as: 2020 2019 General and administrative $ 159,680 $ 125,206 Production 17,969 14,898 Marketing and selling 17,292 14,393 Research and development 12,820 12,977 $ 207,761 $ 167,474 Warrants The following table summarizes the Company’s warrant activity during the three months ended March 31, 2020: Number of Warrants Weighted Average Exercise Price Warrants outstanding – January 1, 2020 630,947 $ 4.16 Warrants granted - $ - Warrants exercised - $ - Warrants outstanding – March 31, 2020 630,947 $ 4.16 |
Employee Benefit Plan
Employee Benefit Plan | 3 Months Ended |
Mar. 31, 2020 | |
Defined Contribution Pension And Other Postretirement Plans Disclosure [Abstract] | |
Employee Benefit Plan | NOTE 10 – EMPLOYEE BENEFIT PLAN The Company has a 401(k) retirement plan. Under the terms of the plan, eligible employees may defer up to 20% of their pre-tax earnings, subject to the Internal Revenue Service annual contribution limit. Additionally, the Plan allows for discretionary matching contributions by the Company. In the three month periods ended March 31, 2020 and 2019, the matching contributions were 100% of the employee's contribution up to a maximum of 5% of the employee’s annual compensation. During the three month periods ended March 31, 2020 and 2019, the Company contributed $116,527 and $91,371, respectively, to the 401(k) Plan. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2020 | |
Commitments And Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | NOTE 11 – COMMITMENTS AND CONTINGENCIES Legal From time to time the Company is subject to various legal claims and proceedings arising in the ordinary course of business. In the opinion of management, after consultation with legal counsel, the ultimate disposition of any such matters as of March 31, 2020 and December 31, 2019, will not have a materially adverse effect on the consolidated financial position or results of operations of the Company. Guarantees and Indemnities The Company has made certain indemnities, under which it may be required to make payments to an indemnified party, in relation to certain transactions. The Company indemnifies its directors, officers, employees and agents to the maximum extent permitted under the laws of the State of Delaware. In connection with its facility lease, the Company has indemnified its lessor for certain claims arising from the use of the facilities. Also, in connection with its Credit Agreement (Note 8), the Company has agreed to indemnify its lender and others related to the use of the proceeds and other matters. The duration of the indemnities varies, and in many cases is indefinite. These indemnities do not provide for any limitation of the maximum potential future payments the Company could be obligated to make. Historically, the Company has not been obligated to make any payments for these obligations and no liabilities have been recorded for these indemnities in the accompanying consolidated balance sheets. Leases The Company leases its offices, manufacturing, and warehouse facility in San Diego County under a non-cancelable operating lease. Our corporate headquarters are in a leased space comprising approximately 29,342 For the three month periods ended March 31, 2020 and 2019, rent expense was $189,417 and $171,145, respectively. |
Related Party Transactions
Related Party Transactions | 3 Months Ended |
Mar. 31, 2020 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | NOTE 12 – RELATED PARTY TRANSACTIONS In April 2019, certain members of the Company’s Board of Directors executed definitive agreements to commit funds of up to $4,000,000 as a credit facility. The Company initially borrowed $1,150,000 from members of the Board of Directors and $350,000 from other shareholders for a two year period at an interest rate of 9.5% which requires the Company to make monthly principal and interest payment of $69,000 per month. In connection with these loans, the Company issued to these note holders warrants to purchase shares of the Company’s common stock equal to 10% of the original principal at a price per share equal to $2.15 per share. Accordingly, the Company issued to these note holders warrants to purchase 69,766 share of the Company’s common stock. The relative fair value of the warrants issued was $60,158. Interest expense on all related-party notes payable for the three months ended March 31, 2020 and 2019 totaled $17,156 and $0, respectively. The Company has engaged an advertising firm whose president is a former member of the Board of Directors of the Company. Amounts paid to this company are included in marketing and selling expense in the accompanying consolidated statements of operations and for the three months ended March 31, 2020 and 2019, totaled $6,000 and $9,000, respectively. The Company has appointed certain stockholders to the Board of Directors. Director fees paid by the Company, including stock-based compensation, for the three months ended March 31, 2020 and 2019 totaled $50,505 and $82,836, respectively, and are included in general and administrative expenses in the accompanying consolidated statements of operations. The Company has engaged a related-party law firm (a principal of that firm owns shares in the Company) to provide legal services. Legal fees paid to this firm are included in general and administrative expenses in the accompanying consolidated statements of operations for the three months periods ended March 31, 2020 and 2019 and totaled $9,000 and $9,000, respectively. The Company has engaged an IT network support firm whose owner is an employee of the Company. Fees paid to this firm are included in general and administrative expense in the accompanying consolidated statements of operations for the three months ended March 31, 2020 and 2019 totaled $356 and $660, respectively. |
Net Loss Per Share
Net Loss Per Share | 3 Months Ended |
Mar. 31, 2020 | |
Earnings Per Share [Abstract] | |
Net Loss Per Share | NOTE 13 – NET LOSS PER SHARE Basic and diluted net loss per share was calculated as follows for the three month periods ended March 31, 2020 and 2019: For the Three Months Ended March 31, 2020 2019 Basic and diluted net loss per share attributable to common stockholders: Numerator: Net loss attributable to common stockholders $ (1,096,032 ) $ (944,729 ) Denominator: Weighted average common shares outstanding - basic 16,332,898 14,239,711 Effect of dilutive securities - - Weighted average common shares outstanding - diluted 16,332,898 14,239,711 Net loss per common share attributable to common stockholders: Basic $ (0.07 ) $ (0.07 ) Diluted $ (0.07 ) $ (0.07 ) |
Segment and Geographic Informat
Segment and Geographic Information | 3 Months Ended |
Mar. 31, 2020 | |
Segment Reporting [Abstract] | |
Segment and Geographic Information | NOTE 14 – SEGMENT AND GEOGRAPHIC INFORMATION The Company operates in three reportable segments: the design and manufacture of high-performance customized computers and flash arrays, in-flight entertainment & connectivity and value-added reseller with minimal customization. The Company evaluates financial performance on a company-wide basis. Segment detail for the three month periods ended March 31, 2020 and 2019 is as follows: For The Three Month Period Ended March 31, 2020 For The Three Month Period Ended March 31, 2019 OSS CDI Bressner Total OSS CDI Bressner Total Revenues $ 7,818,278 $ 621,946 $ 4,919,413 $ 13,359,637 $ 5,230,086 $ 299,454 $ 4,528,359 $ 10,057,899 Cost of revenues (5,621,751 ) (499,158 ) (3,843,041 ) (9,963,950 ) (3,729,173 ) (345,727 ) (3,571,377 ) (7,646,277 ) Gross profit 2,196,527 122,788 1,076,372 3,395,687 1,500,913 (46,273 ) 956,982 2,411,622 Gross margin % 28.1% 19.7% 21.9% 25.4% 28.7% -15.5% 21.1% 24.0% Total operating expenses 3,530,278 455,931 920,632 4,906,841 3,137,869 312,977 992,984 4,443,830 (Loss) income from operations $ (1,333,751 ) $ (333,143 ) $ 155,740 $ (1,511,154 ) $ (1,636,956 ) $ (359,250 ) $ (36,002 ) $ (2,032,208 ) Revenue from customers with non-U.S. billing addresses represented approximately 50% and 72% of the Company’s revenue during the three month periods ended March 31, 2020 and 2019, respectively. As of March 31, 2020, substantially all the Company’s long-lived assets were located in the United States of America with the exception of assets of $223,000 located in Germany. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2020 | |
Subsequent Events [Abstract] | |
Subsequent Events | NOTE 15 – SUBSEQUENT EVENTS Cost Reduction Plan On April 5, 2020, the Board of Directors approved workforce reductions as part of the Company’s cost cutting measures implemented in response to the negative financial and operational impacts resulting from the rapidly evolving novel coronavirus (“COVID-19”) pandemic. Approximately 19% of the Company’s 115 employees are impacted through workforce reductions as well as some reduced-hour work weeks. On April 7, 2020, the Company implemented a cost reduction plan which included the termination of certain employees and elimination of certain costs. Estimated savings from this effort are expected to be $2.5 to $3.0 million for the year ending 2020. Bressner – Line of Credit On April 9, 2020, Bressner converted €500,000 of their line of credit from UniCredit Bank to a one year term loan at 1.9% interest with principal and interest due upon maturity. Senior Secured Convertible Promissory Notes On April 20, 2020, the Company entered into a Securities Purchase Agreement providing for the issuance of the Company’s Senior Secured Convertible Promissory Notes with a principal face amount of up to 6,000,000. The Notes are, subject to certain conditions, convertible into shares of the Company’s common stock, par value $0.0001 per share at an initial conversion price per share of $2.50. Pursuant to the Purchase Agreement, the Notes will be issued with a 10% original issue discount. On April 24, 2020, the Company consummated the initial closing of the offering (the “Initial Closing”) under the Purchase Agreement and issued a Senior Secured Convertible Promissory Note with an aggregate of $3,000,000 to an institutional investor (“Initial Note”). The investors purchased the Initial Note for an aggregate purchase price of $2,700,000, at the Initial Closing after a 10% original issue discount. The Initial Note bears no interest rate (except upon event of default) and, unless earlier converted or redeemed, will mature on the date that is the twenty-three (23) month anniversary of the last day from the Initial Closing. On April 28, 2020, the Company received a two year, 1% Paycheck Protection Program (PPP) loan of $1.5 million. The Company has evaluated subsequent events after the consolidated balance sheet dated as of March 31, 2020 through the date of filing of this quarterly report. Based upon the Company’s evaluation, management has determined that, other than as disclosed in the accompanying notes, no subsequent events have occurred that would require recognition in the accompanying consolidated financial statements or disclosure in the notes thereto. |
Significant Accounting Polici_2
Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
Liquidity and Going Concern Considerations | Liquidity and Going Concern Considerations Given our recent operating losses, the Company’s primary sources of liquidity have been provided by (i) the Company’s February 2018 initial public offering (net proceeds were approximately $16,100,000), (ii) March 2019 notes payable from members of the Board of Directors and others of $1,500,000, (iii) the July 2019 sale of 1,554,832 shares of the Company’s common stock for net cash proceeds of $2,488,148 and (iv) the April 24, 2020 sale of $3,000,000 of Senior Secured Convertible Promissory Notes issued at a 10% original issue discount. As of March 31, 2020, the Company’s cash and cash equivalents were $3,038,006 and working capital was $11,938,554. Cash and cash equivalents held by Bressner totaled $599,511 (USD) at March 31, 2020, and Bressner’s debt covenants do not permit the use of those funds by its parent company. During the three months ended March 31, 2020, the Company experienced an operating loss of $1,511,154, with cash used in operating activities of $721,773. Our largest customer, engaged in the media and entertainment industry, is having significant financial hardships attributable to the COVID-19 pandemic and as a result has been slow in paying its outstanding accounts receivables. The Company has formulated a plan whereby extended terms have been made available, and our customer is presently honoring those terms. The Company’s revenue growth, inclusive of two acquisitions made in 2018, has resulted in growth of the Company as a whole, but has been offset by increased spending in all areas of operating expenses: general and administrative, marketing and selling, and research and development. The recent outbreak of the novel strain of coronavirus, or COVID-19, which has been declared by the World Health Organization to be a “public health emergency of international concern,” has spread across the globe and is impacting worldwide economic activity. A public health pandemic, including COVID-19, poses the risk that we or our employees, contractors, suppliers, and other partners may be prevented from conducting business activities for an indefinite period of time, including due to shutdowns that may be requested or mandated by governmental authorities. While it is not possible at this time to estimate the impact that COVID-19 could have on our business, the continued spread of COVID-19 and the measures taken by the governments of countries affected could disrupt the supply chain and adversely impact our business, financial condition or results of operations. The COVID-19 outbreak and mitigation measures may also have an adverse impact on global economic conditions which could have an adverse effect on our business and financial condition. The extent to which the COVID-19 outbreak impacts our results will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact. Though management has been successfully managing through the current known impacts, if the situation further deteriorates or the outbreak results in further restriction on both supply and demand factors, our cash flows, financial position and operating results for fiscal year 2020 and beyond will be negatively impacted. Neither the length of time nor the magnitude of the negative impacts can be presently determined. Management’s plans with respect to the above is to continue its efforts to restructure the Company with the primary objectives of reducing costs, conserving cash, strengthening margins, and improving company-wide execution. Specific actions already implemented by management include the deferral of certain executive and Board compensation payments, a freeze on hiring and minimizing overtime, travel and entertainment, and contractor costs. On April 7, 2020, the Company implemented a cost reduction plan which included the termination of certain employees and elimination of certain costs. Estimated savings from this effort are estimated to be $2.5 to $3.0 million for the year ending 2020. While management expects these actions to result in prospective cost reductions, management is also committed to securing debt and/or equity financing to ensure that liquidity will be sufficient to meet the Company’s cash requirements through at least a period of the next twelve months. Management believes potential sources of liquidity include at least the following: ▪ In March 2019, the Company received funding commitments in the amount of $4,000,000 from members of the Board of Directors, of which $1,500,000 has been drawn through December 31, 2019, of which $786,125 remains outstanding. Management expects that $500,000 of such remaining commitments is available to the Company. ▪ In May 2019, the Company filed a Form S-3 prospectus with the Securities and Exchange Commission which became effective on June 19, 2019, and allows the Company to offer up to $100,000,000 aggregate dollar amount of shares of its common stock, preferred stock, debt securities, warrants to purchase its common stock, preferred stock or debt securities, subscription rights to purchase its common stock, preferred stock or debt securities and\or units consisting of some or all of these securities, in any combination, together or separately, in one of more offerings, in amounts, at prices and on the terms that the Company will determine at the time of the offering and which will be set forth in a prospectus supplement and any related free writing prospectus. ▪ On April 24, 2020, the Company completed a $6.0 million debt financing on a non-interest bearing convertible note with a 10% original issue discount. The first tranche of $3.0 million was received April 27, 2020, with an additional $3.0 million available seven months from the date of closing at the option of the Company conditioned upon meeting certain requirements. The note is repayable in twenty-two installments beginning three months after closing. ▪ On April 28, 2020, the Company received a Paycheck Protection Program (PPP) loan in the amount of $1,500,000. As a result of management’s cost reduction plans, the Company’s potential sources of liquidity and management’s most recent cash flow forecasts, management believes that the Company has sufficient liquidity to satisfy its anticipated cash requirements for at least the next twelve months. However, there can be no assurance that management’s cost reduction efforts will be effective, the forecasted cash flows will be achieved, or that external sources of financing, including the issuance of debt and/or equity securities, will be available at times and on terms acceptable to the Company, or at all. |
Basis of Presentation | Basis of Presentation The accompanying consolidated financial statements have been prepared on an accrual basis of accounting in accordance with United States Generally Accepted Accounting Principles (“U.S. GAAP”), as set forth in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”). The unaudited consolidated financial statements herein have been prepared by the Company pursuant to the rules and regulations of the United States Securities Exchange Commission (“SEC”). The accompanying interim unaudited consolidated financial statements have been prepared under the presumption that users of the interim financial information have either read or have access to the audited consolidated financial statements for the latest year ended December 31, 2019. Accordingly, note disclosures which would substantially duplicate the disclosures contained in the December 31, 2019 audited consolidated financial statements have been omitted from these interim unaudited consolidated financial statements. The Company evaluated all subsequent events and transactions through the date of filing this report. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2020, are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. For further information, refer to the audited consolidated financial statements and notes for the year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 26, 2020. |
Principles of Consolidation | Principles of Consolidation The accompanying unaudited consolidated financial statements include the accounts of OSS, which include the results from the Magma acquisition, Ion business combination, and acquisition of Concept Development Inc., since their respective dates of acquisition, its wholly-owned subsidiary, OSS GmbH, which includes the acquisition of Bressner Technology GmbH, and the accounts of the joint venture, SkyScale LLC, which was approved for dissolution on December 31, 2018 (collectively referred to as the “Company”). Intercompany balances and transactions have been eliminated in consolidation. |
Use of Estimates | Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosures of contingent assets, liabilities, and expenses at the date of the consolidated financial statements during the reporting period. Significant estimates made by management include, among others, the fair value of acquired net assets of CDI in August 2018 with reevaluation in April 2019, and Bressner Technology GmbH in October 2018, the allowance for doubtful accounts, fair value of stock options, recoverability of inventories and long-lived assets, and realizability of deferred tax assets. Actual results could differ from those estimates. |
Concentration Risks | Concentration Risks At times, deposits held with financial institutions may exceed the amount of insurance provided by the Federal Deposit Insurance Corporation (“FDIC”), which provides basic deposit coverage with limits up to $250,000 per owner. As of March 31, 2020, the Company had $2,169,502 in excess of the insurance limits. The Company has not experienced any such losses in these accounts. In Germany, the deposit insurance is €100,000 per bank, per customer. As of March 31, 2020, Bressner has €443,844 (US$489,275) on deposit with banks in excess of the insurance limits. In the three month periods ended March 31, 2020, and 2019, the Company has one customer which represented greater than 10% of the Company’s revenue. Collectively, this customer represented approximately 27%, and 26% of revenue, respectively. As of March 31, 2020 and December 31, 2019, one customer accounted for 59% and 45% of net trade accounts receivables, respectively. The Company made purchases from certain suppliers of which each supplier was greater than 10% of the Company’s total vendor purchases on an annual basis. Collectively these vendors represented approximately 17 |
Cash and Cash Equivalents | Cash and Cash Equivalents Cash and cash equivalents consist of cash on deposit and money market accounts. The Company considers all highly liquid temporary cash investments with an initial maturity of 90 days or less when acquired to be cash equivalents. Management believes that the carrying amounts of cash equivalents approximate their fair value because of the short maturity period. |
Accounts Receivable | Accounts Receivable Accounts receivable are presented at net realizable value. This value includes an appropriate allowance for estimated uncollectible accounts to reflect any loss anticipated on the trade accounts receivable and unbilled receivables. Unbilled receivables include costs and gross profit earned in excess of billings. The allowance for doubtful accounts is an estimate to cover the losses resulting from the inability of customers to make payments on their outstanding balances and unbilled receivables. In estimating the required allowance, management considers the overall quality and aging of the accounts receivable, specific customer circumstances, current economic trends, and historical experience with collections. At March 31, 2020 and December 31, 2019, the allowance for doubtful accounts was $11,518, and $14,000, respectively. Revenues earned in excess of related billings are recorded as an asset on the balance sheet as unbilled receivables. Unbilled receivables as of March 31, 2020 and December 31, 2019, were $214 and $25,432, respectively. |
Inventories | Inventories Inventories are valued at the lower of cost or net realizable value. The Company uses the average cost method for purposes of determining cost, which approximates the first-in, first-out method. The Company establishes reserves on its inventories to write-down the carrying value of its estimated obsolete or excess inventories to estimated net realizable value based upon observations of historical usage and assumptions about future demand and market conditions. In addition, the Company considers changes in the market value of components in determining the net realizable value of its inventory. Inventory reserves are not typically reversed until the specific inventories are sold or otherwise disposed. Actual demand, product mix and alternative usage may be lower than those that we project and this difference could have a material adverse effect on our gross margin if inventory write-downs beyond those initially recorded become necessary. Alternatively, if actual demand, product mix and alternative usage are more favorable than those we estimated at the time of such a write-down, our gross margin could be favorably impacted in future periods. |
Property and Equipment | Property and Equipment Property and equipment, other than leasehold improvements, are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the assets, generally from three to seven years. Leasehold improvements are recorded at cost and are amortized using the straight-line method over the shorter of the remaining lease term or the estimated useful life of the related asset. Tooling and test equipment includes capitalized labor costs associated with the development of the related tooling and test equipment. Costs incurred for maintenance and repairs are expensed as incurred, and expenditures for major replacements and improvements are capitalized. Upon retirement or sale, the cost and related accumulated depreciation and amortization of disposed assets are removed from the accounts and any resulting gain or loss is included in other income (expense), net. |
Goodwill | Goodwill Goodwill represents the excess of the purchase price paid over the fair value of the net assets acquired in business combinations. Goodwill is not amortized but is tested for impairment at least annually or when we deem that a triggering event has occurred. The Company reviews goodwill for impairment annually on December 31. The Company completed its annual assessment for goodwill impairment and determined that goodwill is not impaired as of December 31, 2019 and no adjustment was required. In April 2019, the Company performed an impairment test of goodwill, as a result of a short-fall in the actual overall financial performance of CDI as compared to plan, a recurring need for working capital, and a decrease in the Company’s stock price. As a result of this interim evaluation, the Company recorded an impairment loss to goodwill of $1,697,394, which was charged to operating expenses during the second quarter of 2019. |
Intangible Assets and Long-lived Assets | Intangible Assets and Long-lived Assets We evaluate our intangible and long-lived assets for impairment when events or circumstances arise that indicate our intangible and long-lived assets may be impaired. Indicators of impairment include, but are not limited to, a significant deterioration in overall economic conditions, a decline in our market capitalization, the loss of significant business, significant decreases in funding for our contracts, or other significant adverse changes in industry or market conditions. The Company completed its qualitative assessment for impairment in December 2019 and determined that there was no impairment as of December 31, 2019. There were no events or circumstances that arose during the three month period ended March 31, 2020, that gave an indication of impairment. There can be no assurance, however, that market conditions will not change or demand for the Company’s products will continue, which could result in an impairment of intangible and long-lived assets in the future. |
Fair Value Measurements | Fair Value Measurements The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. These tiers include: • Level 1, defined as quoted market prices in active markets for identical assets or liabilities; • Level 2, defined as inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, model-based valuation techniques for which all significant assumptions are observable in the market, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and • Level 3, defined as unobservable inputs that are not corroborated by market data. The carrying value of financial instruments including cash and cash equivalents accounts receivable and accounts payable and accrued expenses, lines of credit, and other liabilities approximate fair value due to the short-term nature of these instruments. Assets and liabilities assumed in the acquisition of the Ion software, Concept Development Inc., and Bressner Technology GmbH were recorded at fair value based upon the Company’s market assumptions which approximated carrying value (except for acquired intangible assets – Note 3) due to the short-term nature of the instruments. The carrying amounts of the Company’s notes payable and Bressner’s existing lines of credit and notes payable approximate their fair values at the stated interest rates and are reflective of the prevailing market rates. |
Revenue Recognition | Revenue Recognition On January 1, 2019, the Company adopted the new accounting standard update ASC 606, Revenue from Contracts with Customers, which superseded nearly all existing revenue recognition guidance under GAAP, to all contracts using the modified retrospective method. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. The Company’s performance obligations are satisfied over time as work is performed or at a point in time. The majority of the Company’s revenue is recognized at a point in time when products ship and control is transferred to the customer. The Company determines revenue recognition through the following steps: (1) identification of the contract with a customer; (2) identification of the performance obligations in the contract; (3) determination of the transaction price; (4) allocation of the transaction price to the performance obligations in the contract; and (5) recognition of revenue when, or as, a performance obligation is satisfied. The Company’s contracts are executed through a combination of written agreements along with purchase orders with all customers including certain general terms and conditions. Generally, purchase orders entail products, quantities and prices, which define the performance obligations of each party and are approved and accepted by the Company. The Company’s contracts with customers do not include extended payment terms. Payment terms vary by contract type and type of customer and generally range from 30 to 60 days from invoice. Additionally, taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer and deposited with the relevant government authority, are excluded from revenue. The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring goods or services to the customer adjusted for estimated variable consideration, if any. Variable consideration may include discounts, rights of return, refunds, and other similar obligations. The Company allocates the transaction price to each distinct product and service based on its relative standalone selling price. The standalone selling price for products primarily involves the cost to produce the deliverable plus the anticipated margin and for services is estimated based on the Company’s approved list price. In the normal course of business, the Company does not accept product returns unless the items are defective as manufactured. The Company establishes provisions for estimated returns and warranties. In addition, the Company does not typically provide customers with the right to a refund and does not transact for noncash consideration. Customer agreements include one vendor managed inventory program. The Company recognizes revenue under this arrangement when all of the following criteria are met: (i) the goods have been identified separately as belonging to the customer; (ii) the goods are ready for physical shipment to the customer; (iii) the Company does not have the ability to direct the goods to another customer; and (iv) the arrangement was requested by the customer and that the customer has sufficiently explained a substantial business purpose for the arrangement. Management also considers whether the customer's custodial risks are insured and whether modifications to the Company's normal billing and credit terms were required. The Company recorded revenue from product sales that are held in vendor managed inventory under these agreements of $3,179,943 and $1,494,078 during the three month periods ended March 31, 2020 and 2019, respectively. As of March 31, 2020 and December 31, 2019, $1,329,057 and $459,893, respectively, of product sold through those dates were held by the Company in the vendor management program. Revenues on certain fixed-price contracts where we provide engineering services, prototypes and completed products are recognized based upon percentage of completion or based upon milestones delivered that are provided during the period and compared to milestone goals to be provided over the entire contract. These services require that we perform significant, extensive and complex design, development, modification or implementation of our customers’ systems. Performance will often extend over long periods of time, and our right to receive future payment depends on our future performance in accordance with the agreement. The percentage-of-completion methodology involves recognizing probable and reasonably estimable revenue using the percentage of services completed, on a current cumulative cost to estimated total cost basis, using a reasonably consistent profit margin over the performance period. Due to the long-term nature of these projects, developing the estimates of costs often requires significant judgment. Factors that must be considered in estimating the progress of work completed and ultimate cost of the projects include, but are not limited to, the availability of labor and labor productivity, the nature and complexity of the work to be performed and the impact of delayed performance. If changes occur in delivery, productivity or other factors used in developing the estimates of costs or revenues, we revise our cost and revenue estimates, which may result in increases or decreases in revenues and costs, and such revisions are reflected in earnings in the period in which the revision becomes known. During the three month periods ended March 31, 2020 and 2019, revenue recognized on a fixed price contractual basis was $73,750 and $43,071, respectively. The Company recognizes contract assets or unbilled receivables related to revenue recognized for services completed but not yet invoiced to the clients. Unbilled receivables are recorded as accounts receivable when the Company has an unconditional right to contract consideration. A contract liability is recognized as deferred revenue when the Company invoices clients in advance of performing the related services under the terms of a contract. Deferred revenue is recognized as revenue when the Company has satisfied the related performance obligation. On certain contracts with several of the Company’s significant customers, the Company receives payments in advance of manufacturing. Advanced payments are recorded as deferred revenue until the revenue recognition criteria described above has been met. Related billings that are in excess of revenue earned are deferred and recorded as a liability on the consolidated balance sheet until the related services are provided. Deferred revenue was $12,359 and $24,718 as of March 31, 2020 and December 31 2019, respectively. Remaining performance obligations represent the amount of revenue from fixed-fee contracts. As of March 31, 2020 and December 31, 2019, approximately $0, attributable to cancellation of a contract, and $317,718, respectively of revenue from fixed-fee contracts that is expected to be recognized from these remaining performance obligations. We elected to utilize the practical expedient exemption to exclude from this disclosure the amount of revenue from contracts which are not fixed-fee and where we do not have the right to invoice until the services have been performed. The Company’s operating segment revenues disaggregated by primary geographic market, which is determined based on a customer’s geographic location, for the three months ended March 31, 2020 and 2019 is as follows: For The Three Month Period Ended March 31, 2020 For The Three Month Period Ended March 31, 2019 Entity: Domestic International Total Domestic International Total Customized computers and flash arrays $ 6,207,898 $ 1,610,380 $ 7,818,278 $ 2,042,510 $ 3,187,576 $ 5,230,086 In-flight entertainment & connectivity 529,406 92,540 621,946 296,529 2,925 299,454 Value-added reseller with minimal customization - 4,919,413 4,919,413 - 4,528,359 4,528,359 $ 6,737,304 $ 6,622,333 $ 13,359,637 $ 2,339,039 $ 7,718,860 $ 10,057,899 |
Warranty Reserve | Warranty Reserves The Company offers product warranties that extend for one year from the date of sale. Such warranties are considered assurance-type warranties and therefore, they would not be deemed to be a separate performance obligation under ASC 606. Such warranties require the Company to repair or replace defective product returned to the Company during the warranty period at no cost to the customer. The Company records an estimate for warranty‑related costs at the time of sale based on its historical and estimated future product return rates and expected repair or replacement costs (Note 7). While such costs have historically been within management’s expectations and the provisions established, unexpected changes in failure rates could have a material adverse impact on the Company, requiring additional warranty reserves and could adversely affect the Company’s gross profit and gross margins. The Company offers customers extended warranties beyond the standard one-year warranty on the product. The extended warranties are considered service-type warranties and would be considered as a separate performance obligation under ASC 606. The Company is the primary obligor and, revenue is recognized on a gross basis ratably over the term of the extended warranty. The customer can purchase extended warranties from one to five years, in the bronze, silver or gold categories. This entails hardware repair or replacement, shipping methods on how the warranties will be returned / delivered, response times and hours of operations to receive support. The amount of warranties sold for the three months ended March 31, 2020 and 2019 were $92,724 and $80,123, respectively. The revenue that was recognized for the warranties sold for the three months ended March 31, 2020 and 2019 were $69,105 and $106,698, respectively. The Company does have recourse with some of its suppliers that offer more than a one-year guarantee on parts, but this is not standard. The few that offer greater than a year warranty, the Company may be able to cover the cost of the part from the manufacturer for the failed part. The amounts of these costs vary in a wide range, but are not material, due to the infrequency of failure. As of March 31, 2020 and December 31, 2019, deferred revenue totaled $388,378 and $394,571, respectively. The Company expects to recognize $388,378 of unearned revenue amounts from 2020 through 2024. |
Shipping and Handling Costs | Shipping and Handling Costs The Company's shipping and handling costs are included in cost of goods sold for all periods presented. |
Foreign Currency | Foreign Currency We operate primarily in the United States. Foreign sales of products and services are primarily denominated in U.S. dollars. We also conduct business outside the United States through our foreign subsidiary in Germany, where business is largely transacted in non-U.S. dollar currencies, particularly the Euro, which is subject to fluctuations due to changes in foreign currency exchange rates. Accordingly, we are subject to exposure from changes in the exchange rates of local currencies. Foreign currency transaction gains and losses are recorded in other income (expense), net in the consolidated statements of operations OSS GmbH operates as an extension of OSS’ domestic operations. The functional currency of OSS GmbH is the Euro. Transactions denominated in currencies other than the functional currency are remeasured to the functional currency at the average exchange rate in effect during the period. At the end of each reporting period, monetary assets and liabilities are remeasured using exchange rates in effect at the balance sheet date. Non-monetary assets and liabilities are remeasured at historical exchange rates. Consequently, changes in the exchange rates of the currencies may impact the translation of the foreign subsidiaries’ statements of operations into U.S. dollars, which may in turn affect our consolidated statements of operations. |
Derivative Financial Instruments | Derivative Financial Instruments We employ derivatives to manage certain market risks through the use of foreign exchange forward contracts. We do not use derivatives for trading or speculative purposes. Our derivatives are designated as a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge). We hedge a portion of the exchange risk involved in anticipation of highly probable foreign currency-denominated transactions. In anticipation of these transactions, we enter into foreign exchange contracts to provide currency at a fixed rate. As of March 31, 2020, the Company had no foreign exchange contracts outstanding. Unrealized gains on derivatives designated as cash flow hedges are recorded at fair value as assets, and unrealized losses on derivatives designated as cash flow hedges are recorded at fair value as liabilities. For derivative instruments designated as cash flow hedges, the effective portion is reported as a component of accumulated other comprehensive income until reclassified into interest expense in the same period the hedged transaction affects earnings. The gain or loss on the ineffective portion is recognized as “Other income (expense) – net” in the consolidated statements of income in each period. |
Stock-Based Compensation | Stock-Based Compensation The Company accounts for employee and director share-based compensation in accordance with the provisions of ASC Topic 718 “Compensation – Stock Compensation” All transactions in which goods or services are the consideration received for the issuance of equity instruments to non-employees are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date used to determine the estimated fair value of the equity instrument issued is the earlier of the date on which the third-party performance is complete or the date on which it is probable that performance will occur. Employee and director stock-based compensation expense recognized during the period is based on the value of the portion of stock-based payment awards that is ultimately expected to vest during the period. Given that stock-based compensation expense recognized in the accompanying consolidated statements of operations is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. The Company’s estimated average forfeiture rates are based on historical forfeiture experience and estimated future forfeitures. Compensation cost for stock awards, which include restricted stock units (“RSUs”), is measured at the fair value on the grant date and recognized as expense, net of estimated forfeitures, over the related service period. The fair value of stock awards is based on the quoted price of our common stock on the grant date. The estimated fair value of common stock option awards is calculated using the Black-Scholes option pricing model. The Black-Scholes model requires subjective assumptions regarding future stock price volatility and expected time to exercise, along with assumptions about the risk-free interest rate and expected dividends, all of which affect the estimated fair values of the Company’s common stock option awards. The expected term of options granted is calculated using the simplified method, which is the weighted average vesting period and the contractual lives of the options. This calculation is based on a method acceptable in instances where the vesting and exercise terms of options granted meet certain conditions and where limited historical exercise data is available. The expected volatility is based on the historical volatility of the common stock of comparable public companies that operate in similar industries as the Company. The risk-free rate selected to value any particular grant is based on the U.S. Treasury rate that corresponds to the expected term of the grant effective as of the date of the grant. The expected dividend assumption is based on the Company’s history and management’s expectation regarding dividend payouts. Compensation expense for common stock option awards with graded vesting schedules is recognized on a straight-line basis over the requisite service period for the last separately vesting portion of the award, provided that the accumulated cost recognized as of any date at least equals the value of the vested portion of the award. If there are any modifications or cancellations of the underlying vested or unvested stock-based awards, the Company may be required to accelerate, increase or cancel any remaining unearned stock-based compensation expense, or record additional expense for vested stock-based awards. Future stock-based compensation expense and unearned stock- based compensation may increase to the extent that the Company grants additional common stock options or other stock-based awards. |
Business Combinations | Business Combinations We utilize the acquisition method of accounting for business combinations and allocate the purchase price of an acquisition to the various tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. We primarily establish fair value using the income approach based upon a discounted cash flow model. The income approach requires the use of many assumptions and estimates including future revenues and expenses, as well as discount factors and income tax rates. Other estimates include: • Estimated step-ups or write-downs for fixed assets and inventory; • Estimated fair values of intangible assets; and • Estimated income tax assets and liabilities assumed from the target While we use our best estimates and assumptions as part of the purchase price allocation process to accurately value assets acquired and liabilities assumed at the business acquisition date, our estimates and assumptions are inherently uncertain and subject to refinement. As a result, during the purchase price allocation period, which is generally one year from the business acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. For changes in the valuation of intangible assets between preliminary and final purchase price allocation, the related amortization is adjusted in the period it occurs. Subsequent to the purchase price allocation period, any adjustment to assets acquired or liabilities assumed is included in operating results in the period in which the adjustment is determined. Should we issue shares of our common stock in an acquisition, we will be required to estimate the fair value of the shares issued. See Note 3. |
Advertising Costs | Advertising Costs Advertising costs are expensed as incurred and included in marketing and selling expense in the accompanying consolidated statements of operations. Advertising costs for the three month periods ended March 31, 2020 and 2019 were $122,092 and $130,922, respectively. |
Research and Development Expense | Research and Development Expenses Research and development expenditures are expensed in the period incurred. Research and development expenses primarily consist of salaries, benefits and stock-based compensation, as well as consulting expenses and allocated facilities and other overhead costs. Research and development activities include the development of new technologies, features and functionality in support of the Company’s products and customer needs. |
Income Taxes | Income Taxes The Company utilizes the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the difference between the consolidated financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. Under ASC Topic 740, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Additionally, ASC Topic 740 provides requirements for derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company files income tax returns in the U.S. federal jurisdiction, California and Germany. The Company has elected to treat the tax effect of Global Intangible Low Tax Income (“GILTI”) as a current-period expense when occurred. The Company does not foresee material changes to its gross liability of uncertain tax positions within the next twelve months. In response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act (CARES Act) was signed into law in March 2020. The CARES Act lifts certain deduction limitations originally imposed by the Tax Cuts and Jobs Act of 2017 (2017 Tax Act). Corporate taxpayers may carryback net operating losses (NOLs) originating during 2018 through 2020 for up to five years, which was not previously allowed under the 2017 Tax Act. The CARES Act also eliminates the 80% of taxable income limitations by allowing corporate entities to fully utilize NOL carryforwards to offset taxable income in 2018, 2019 or 2020. Taxpayers may generally deduct interest up to the sum of 50% of adjusted taxable income plus business interest income (30% limit under the 2017 Tax Act) for tax years beginning January 1, 2019 and 2020. The CARES Act allows taxpayers with alternative minimum tax credits to claim a refund in 2020 for the entire amount of the credits instead of recovering the credits through refunds over a period of years, as originally enacted by the 2017 Tax Act. In addition, the CARES Act raises the corporate charitable deduction limit to 25% of taxable income and makes qualified improvement property generally eligible for 15-year cost-recovery and 100% bonus depreciation. The enactment of the CARES Act resulted in two adjustments to our income tax provision for the three months ended March 31, 2020, relating to a projected 2018 NOL utilization and tax benefits from NOL carrybacks. We have recorded a discrete benefit of $100,000 in our income tax provision for the three months ended March 31, 2020 related to the CARES Act. |
Interest Expense | Interest Expense Interest expense consists primarily of interest associated with the Company’s issued debt including the amortization of debt discounts. The Company recognizes the amortization of debt discounts and the amortization of interest costs using a straight-line method which approximates the effective interest method. |
Net Income (Loss) Per Share | Net Income (Loss) Per Share Basic net income (loss) per share is calculated by dividing net income (loss) by the weighted-average common shares outstanding during the period. Diluted net income (loss) per share is calculated by dividing the net income (loss) by the weighted-average shares and dilutive potential common shares outstanding during the period. Dilutive potential shares consist of dilutive shares issuable and the exercise or vesting of outstanding stock options and warrants, respectively, computed using the treasury stock method. During a period where a net loss is incurred, dilutive potential shares are excluded from the computation of dilutive net loss per share, as inclusion is anti-dilutive. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In February 2016, the FASB issued ASU No. 2016-02, Leases In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business December 31, 2019 In September 2018, the FASB issued ASU No. 2018-07, Stock-based Compensation: Improvements to Nonemployee Share-based Payment Accounting |
Recently Implemented Accounting Pronouncements | Recently Implemented Accounting Pronouncements In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers Revenue Recognition In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments |
Significant Accounting Polici_3
Significant Accounting Policies (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
Schedule of Operating Segment Revenues Disaggregated by Primary Geographic Market Based on Customer's Geographic Location | The Company’s operating segment revenues disaggregated by primary geographic market, which is determined based on a customer’s geographic location, for the three months ended March 31, 2020 and 2019 is as follows: For The Three Month Period Ended March 31, 2020 For The Three Month Period Ended March 31, 2019 Entity: Domestic International Total Domestic International Total Customized computers and flash arrays $ 6,207,898 $ 1,610,380 $ 7,818,278 $ 2,042,510 $ 3,187,576 $ 5,230,086 In-flight entertainment & connectivity 529,406 92,540 621,946 296,529 2,925 299,454 Value-added reseller with minimal customization - 4,919,413 4,919,413 - 4,528,359 4,528,359 $ 6,737,304 $ 6,622,333 $ 13,359,637 $ 2,339,039 $ 7,718,860 $ 10,057,899 |
Long-Lived Intangible Assets (T
Long-Lived Intangible Assets (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Goodwill And Intangible Assets Disclosure [Abstract] | |
Schedule of Definite Lived Intangible Assets | Definite lived intangible assets related to acquisition are as follows, as of March 31, 2020: Expected Life Remaining Months Gross Intangible Assets Accumulated Amortization Net Intangible Assets Customer lists and relationships 36 to 60 months 19 to 41 months $ 2,084,515 $ (1,226,805 ) $ 857,710 Drawings and Technology 36 months 0 months 760,207 (760,207 ) - Trade name, Trademarks & other 24 to 36 months 5 to 19 months 447,274 (255,655 ) 191,619 Non-compete 36 months 19 months 246,797 (124,460 ) 122,337 $ 3,538,793 $ (2,367,126 ) $ 1,171,667 Definite lived intangibles assets related to acquisitions are as follows, as of December 31, 2019: Expected Life Remaining Months Gross Intangible Assets Accumulated Amortization Net Intangible Assets Customer lists and relationships 36 to 60 months 22 to 44 months $ 2,084,515 $ (1,109,681 ) $ 974,834 Drawings and Technology 36 months 0 months 760,207 (760,207 ) - Trade name, Trademarks & other 24 to 36 months 8 to 22 months 447,274 (217,570 ) 229,704 Non-compete 36 months 22 months 246,797 (105,143 ) 141,654 $ 3,538,793 $ (2,192,601 ) $ 1,346,192 |
Schedule of Amortization Expense of Definite Lived Intangible Assets | As of March 31, 2020, amortization expense of the definite lived intangible assets for the years remaining is as follows: 2020 2021 2022 2023 Total $ 509,410 $ 556,872 $ 63,231 $ 42,154 $ 1,171,667 |
Accounts Receivable (Tables)
Accounts Receivable (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Accounts Receivable Net Current [Abstract] | |
Schedule of Accounts Receivable, Net | Accounts receivable, net consists of the following: March 31, December 31, 2020 2019 Accounts receivable $ 9,122,983 $ 11,655,725 Unbilled receivables 214 25,432 9,123,197 11,681,157 Less: allowance for doubtful accounts (11,518 ) (14,000 ) $ 9,111,679 $ 11,667,157 |
Inventories (Tables)
Inventories (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Inventory Disclosure [Abstract] | |
Summary of Inventories, Net | Inventories, net consist of the following: March 31, December 31, 2020 2019 Raw materials $ 3,820,575 $ 2,478,882 Sub-assemblies 1,277,061 1,857,004 Work-in-process 1,024,973 493,276 Finished goods 3,490,385 3,087,529 9,612,994 7,916,691 Less: reserves for obsolete and slow-moving inventories (628,117 ) (547,335 ) $ 8,984,877 $ 7,369,356 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Property Plant And Equipment [Abstract] | |
Property and Equipment, Net | Property and equipment, net consists of the following: March 31, December 31, 2020 2019 Computers and computer equipment $ 659,763 $ 633,546 Furniture and office equipment 337,901 340,801 Manufacturing equipment and engineering tools 2,503,576 2,501,020 ERP System 1,892,420 1,709,125 Leasehold improvements 902,974 892,097 6,296,634 6,076,589 Less: accumulated depreciation and amortization (2,744,083 ) (2,508,025 ) $ 3,552,551 $ 3,568,564 |
Accrued Expenses and Other Li_2
Accrued Expenses and Other Liabilities (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Accrued Liabilities And Other Liabilities [Abstract] | |
Schedule of Accrued Expenses and Other Liabilities | Accrued expenses and other liabilities consist of the following: March 31, December 31, 2020 2019 Accrued compensation and related liabilities $ 1,798,990 $ 1,621,177 Deferred revenue and customer deposits 1,410,491 1,260,126 Warranty reserve 422,782 424,011 Other accrued expenses 978,243 1,302,118 $ 4,610,506 $ 4,607,432 |
Debt (Tables)
Debt (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Debt Disclosure [Abstract] | |
Schedule of Total Future Payments under Notes Payable and Related Party Notes Payable | Total future payments under notes payable and related-party notes payable as of March 31, 2020 are as follows: Period Ending March 31, Related Parties Third Parties Foreign Total Discount 2020 $ 598,482 $ 182,120 $ 841,713 $ 1,622,315 $ (30,079 ) 2021 51,647 16,014 - 67,661 (1,253 ) Total minimum payments 650,129 198,134 841,713 1,689,976 (31,332 ) Current portion of notes payable (598,482 ) (182,120 ) (841,713 ) (1,622,315 ) 30,079 Notes payable, net of current portion $ 51,647 $ 16,014 $ - $ 67,661 $ (1,253 ) |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Stockholders Equity Note [Abstract] | |
Summary of Stock Option Activity | A summary of stock option activity under each of the Company’s stock option plans during the three month period ended March 31, 2020: Stock Options Outstanding Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life (in years) Aggregate Intrinsic Value Outstanding at January 1, 2020 1,686,444 $ 1.32 4.84 $ 1,416,279 Granted 20,000 $ 2.70 Forfeited / Cancelled (6,500 ) $ 2.12 Exercised (686,250 ) $ 0.79 Outstanding at March 31, 2020 1,013,694 $ 1.69 5.08 $ 287,953 Exercisable at March 31, 2020 866,837 $ 1.49 5.08 $ 287,953 Vested and expected to vest at March 31, 2020 1,009,288 $ 1.69 5.55 $ 287,953 |
Schedule of Assumption to Calculate Weighted Average Grant Date Fair Value of Options Grant | The following table presents details of the assumptions used to calculate the weighted-average grant date fair value of common stock options granted by the Company: For the Three Months Ended March 31, 2020 2019 Expected term (in years) 5.87 4.65 - 5.87 Expected volatility 43.5 - 47.8% 43.7 - 44.4% Risk-free interest rate 1.41 % 3.00 % Weighted average grant date fair value per share $ 2.70 $ 1.09 Grant date fair value of options vested $ 720,095 $ 1,441,371 Intrinsic value of options exercised $ 463,800 $ 56,369 |
Schedule of Restricted Stock Unit Activity | The Company’s restricted stock unit activity for the three months ended March 31, 2020 is as follows: Restricted Stock Units Number of Shares Weighted Average Grant Date Fair Value Unvested at January 1, 2020 216,670 $ 3.02 Granted 80,000 $ 2.31 Vested (91,669 ) $ 2.94 Cancelled (12,500 ) $ 2.43 Unvested at March 31, 2020 192,501 $ 2.80 |
Summary of Stock-Based Compensation Expense | Stock-based compensation expense for the three month periods ended March 31, 2020 and 2019 was comprised of the following: For the Three Months Ended March 31, Stock-based compensation classified as: 2020 2019 General and administrative $ 159,680 $ 125,206 Production 17,969 14,898 Marketing and selling 17,292 14,393 Research and development 12,820 12,977 $ 207,761 $ 167,474 |
Schedule of Warrant Activity | The following table summarizes the Company’s warrant activity during the three months ended March 31, 2020: Number of Warrants Weighted Average Exercise Price Warrants outstanding – January 1, 2020 630,947 $ 4.16 Warrants granted - $ - Warrants exercised - $ - Warrants outstanding – March 31, 2020 630,947 $ 4.16 |
Net Loss Per Share (Tables)
Net Loss Per Share (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Earnings Per Share [Abstract] | |
Summary of Basic and Diluted Net Loss Per Share | Basic and diluted net loss per share was calculated as follows for the three month periods ended March 31, 2020 and 2019: For the Three Months Ended March 31, 2020 2019 Basic and diluted net loss per share attributable to common stockholders: Numerator: Net loss attributable to common stockholders $ (1,096,032 ) $ (944,729 ) Denominator: Weighted average common shares outstanding - basic 16,332,898 14,239,711 Effect of dilutive securities - - Weighted average common shares outstanding - diluted 16,332,898 14,239,711 Net loss per common share attributable to common stockholders: Basic $ (0.07 ) $ (0.07 ) Diluted $ (0.07 ) $ (0.07 ) |
Segment and Geographic Inform_2
Segment and Geographic Information (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Segment Reporting [Abstract] | |
Schedule of (Loss) Income from Operations by Reporting Segments | Segment detail for the three month periods ended March 31, 2020 and 2019 is as follows: For The Three Month Period Ended March 31, 2020 For The Three Month Period Ended March 31, 2019 OSS CDI Bressner Total OSS CDI Bressner Total Revenues $ 7,818,278 $ 621,946 $ 4,919,413 $ 13,359,637 $ 5,230,086 $ 299,454 $ 4,528,359 $ 10,057,899 Cost of revenues (5,621,751 ) (499,158 ) (3,843,041 ) (9,963,950 ) (3,729,173 ) (345,727 ) (3,571,377 ) (7,646,277 ) Gross profit 2,196,527 122,788 1,076,372 3,395,687 1,500,913 (46,273 ) 956,982 2,411,622 Gross margin % 28.1% 19.7% 21.9% 25.4% 28.7% -15.5% 21.1% 24.0% Total operating expenses 3,530,278 455,931 920,632 4,906,841 3,137,869 312,977 992,984 4,443,830 (Loss) income from operations $ (1,333,751 ) $ (333,143 ) $ 155,740 $ (1,511,154 ) $ (1,636,956 ) $ (359,250 ) $ (36,002 ) $ (2,032,208 ) |
The Company and Basis of Pres_2
The Company and Basis of Presentation - Additional Information (Details) | Apr. 27, 2020USD ($)Installment | Apr. 24, 2020USD ($) | Apr. 07, 2020USD ($) | Oct. 31, 2018USD ($)shares | Oct. 31, 2018EUR (€)shares | Aug. 31, 2018USD ($) | Apr. 30, 2017USD ($) | Jul. 31, 2019USD ($)shares | Mar. 31, 2019USD ($) | Feb. 28, 2018USD ($) | Jul. 31, 2017USD ($) | Mar. 31, 2020USD ($)shares | Mar. 31, 2019USD ($) | Dec. 31, 2019USD ($)shares | Apr. 28, 2020USD ($) | Jun. 19, 2019USD ($) | Mar. 20, 2019USD ($) |
Organization Consolidation And Presentation Of Financial Statements [Line Items] | |||||||||||||||||
Net proceeds from issuance of initial public offering | $ 16,100,000 | ||||||||||||||||
Common stock, shares issued | shares | 1,554,832 | 16,476,661 | 16,121,747 | ||||||||||||||
Proceeds from issuance of common stock | $ 2,488,148 | ||||||||||||||||
Cash and cash equivalents | $ 3,038,006 | $ 5,185,321 | |||||||||||||||
Working capital | 11,938,554 | ||||||||||||||||
Operating loss | 1,511,154 | $ 2,032,208 | |||||||||||||||
Cash used in operating activities | 721,773 | $ 200,017 | |||||||||||||||
Loan amount | 1,689,976 | ||||||||||||||||
Follow-on Public Offering | |||||||||||||||||
Organization Consolidation And Presentation Of Financial Statements [Line Items] | |||||||||||||||||
Aggregate of common stock preferred stock debt securities and warrants securities | $ 100,000,000 | ||||||||||||||||
Subsequent Event | |||||||||||||||||
Organization Consolidation And Presentation Of Financial Statements [Line Items] | |||||||||||||||||
Non-interest bearing convertible note | $ 6,000,000 | ||||||||||||||||
Original issue discount rate | 10.00% | ||||||||||||||||
Subsequent Event | Tranche One | |||||||||||||||||
Organization Consolidation And Presentation Of Financial Statements [Line Items] | |||||||||||||||||
Non-interest bearing convertible note | $ 3,000,000 | ||||||||||||||||
Debt maturity term | 3 months | ||||||||||||||||
Subsequent Event | Tranche Two | |||||||||||||||||
Organization Consolidation And Presentation Of Financial Statements [Line Items] | |||||||||||||||||
Non-interest bearing convertible note | $ 3,000,000 | ||||||||||||||||
Debt maturity term | 7 months | ||||||||||||||||
Number of note repayable installments | Installment | 22 | ||||||||||||||||
Senior Secured Convertible Promissory Notes | Subsequent Event | |||||||||||||||||
Organization Consolidation And Presentation Of Financial Statements [Line Items] | |||||||||||||||||
Debt instrument, face amount | $ 3,000,000 | ||||||||||||||||
Debt instrument, interest rate | 10.00% | ||||||||||||||||
Paycheck Protection Program | Subsequent Event | |||||||||||||||||
Organization Consolidation And Presentation Of Financial Statements [Line Items] | |||||||||||||||||
Loan amount | $ 1,500,000 | ||||||||||||||||
Members of Board of Directors and Others | |||||||||||||||||
Organization Consolidation And Presentation Of Financial Statements [Line Items] | |||||||||||||||||
Proceeds from notes payable | $ 1,500,000 | ||||||||||||||||
Management | |||||||||||||||||
Organization Consolidation And Presentation Of Financial Statements [Line Items] | |||||||||||||||||
Funding commitments, line of credit | $ 4,000,000 | ||||||||||||||||
Funding commitments, line of credit, borrowed | $ 1,500,000 | ||||||||||||||||
Remaining outstanding line of credit | 786,125 | ||||||||||||||||
Funding commitments, line of credit, remaining available | 500,000 | ||||||||||||||||
Concept Development Inc. | |||||||||||||||||
Organization Consolidation And Presentation Of Financial Statements [Line Items] | |||||||||||||||||
Business acquisition date | Aug. 31, 2018 | ||||||||||||||||
Cash paid to acquire businesses | $ 646,759 | ||||||||||||||||
Common stock shares issued, Value | $ 4,194,673 | ||||||||||||||||
Bressner Technology | |||||||||||||||||
Organization Consolidation And Presentation Of Financial Statements [Line Items] | |||||||||||||||||
Cash paid to acquire businesses | $ 5,374,582 | € 4,725,000 | |||||||||||||||
Percentage of shares acquired | 100.00% | 100.00% | |||||||||||||||
Bressner Technology | Restricted Stock | |||||||||||||||||
Organization Consolidation And Presentation Of Financial Statements [Line Items] | |||||||||||||||||
Stock consideration | shares | 106,463 | 106,463 | |||||||||||||||
Bressner Technology GmbH | |||||||||||||||||
Organization Consolidation And Presentation Of Financial Statements [Line Items] | |||||||||||||||||
Cash and cash equivalents | $ 599,511 | ||||||||||||||||
Minimum | Management | Subsequent Event | |||||||||||||||||
Organization Consolidation And Presentation Of Financial Statements [Line Items] | |||||||||||||||||
Estimated savings from cost reduction plan | $ 2,500,000 | ||||||||||||||||
Maximum | Management | Subsequent Event | |||||||||||||||||
Organization Consolidation And Presentation Of Financial Statements [Line Items] | |||||||||||||||||
Estimated savings from cost reduction plan | $ 3,000,000 | ||||||||||||||||
Technology and Software License Agreement | Western Digital | |||||||||||||||||
Organization Consolidation And Presentation Of Financial Statements [Line Items] | |||||||||||||||||
Consideration paid for assets acquired | $ 67,000 | ||||||||||||||||
Receivable for services rendered | $ 1,400,000 | ||||||||||||||||
Servicer payments period | 3 years | ||||||||||||||||
Technology and Software License Agreement | Minimum | Western Digital | |||||||||||||||||
Organization Consolidation And Presentation Of Financial Statements [Line Items] | |||||||||||||||||
Prospective royalties payable | $ 2,500 | ||||||||||||||||
Technology and Software License Agreement | Maximum | Western Digital | |||||||||||||||||
Organization Consolidation And Presentation Of Financial Statements [Line Items] | |||||||||||||||||
Prospective royalties payable | $ 5,000 | ||||||||||||||||
SkyScale, LLC | |||||||||||||||||
Organization Consolidation And Presentation Of Financial Statements [Line Items] | |||||||||||||||||
Member contribution to joint venture | $ 750,000 | ||||||||||||||||
Interest received in joint venture | 50.00% |
Significant Accounting Polici_4
Significant Accounting Policies - Additional Information (Details) | 1 Months Ended | 3 Months Ended | 12 Months Ended | ||
Apr. 30, 2019USD ($) | Mar. 31, 2020USD ($)CustomerContract | Mar. 31, 2019USD ($)Customer | Dec. 31, 2019USD ($)Customer | Mar. 31, 2020EUR (€) | |
Significant Accounting Policies [Line Items] | |||||
Maximum basic deposit coverage per owner | $ 250,000 | ||||
Aggregate amount of deposits coverage in excess of insurance limits | 2,169,502 | ||||
Allowance for doubtful accounts receivable | 11,518 | $ 14,000 | |||
Unbilled receivables | 214 | 25,432 | |||
Goodwill impairment | 0 | ||||
Goodwill impairment | $ 1,697,394 | ||||
Impairment of intangible and long-lived assets | 0 | ||||
Amount of warranties sold | 13,359,637 | $ 10,057,899 | |||
Deferred revenue | $ 12,359 | 24,718 | |||
Customers extended warranties, description | The Company offers customers extended warranties beyond the standard one-year warranty on the product. The extended warranties are considered service-type warranties and would be considered as a separate performance obligation under ASC 606. The Company is the primary obligor and, revenue is recognized on a gross basis ratably over the term of the extended warranty. The customer can purchase extended warranties from one to five years, in the bronze, silver or gold categories. | ||||
Term of customers product warranty | 1 year | ||||
Deferred revenue to be recognized | $ 388,378 | ||||
Unearned revenue recognition period | 2020 through 2024 | ||||
Purchase price allocation period | 1 year | ||||
Advertising costs | $ 122,092 | 130,922 | |||
Discrete benefit in Income tax provision | 100,000 | ||||
Fixed Price Contractual | |||||
Significant Accounting Policies [Line Items] | |||||
Amount of warranties sold | 73,750 | 43,071 | |||
Product Warranty | |||||
Significant Accounting Policies [Line Items] | |||||
Amount of warranties sold | 92,724 | 80,123 | |||
Deferred revenue | 388,378 | 394,571 | |||
Revenue recognized | 69,105 | 106,698 | |||
Vendor Managed Inventory Program Agreements | |||||
Significant Accounting Policies [Line Items] | |||||
Amount of warranties sold | 3,179,943 | $ 1,494,078 | |||
Product sold but held in inventory | $ 1,329,057 | $ 459,893 | |||
Minimum | |||||
Significant Accounting Policies [Line Items] | |||||
Estimated useful lives | 3 years | ||||
Contracts with customers payment terms | 30 days | ||||
Term of customers product extended warranty | 1 year | ||||
Maximum | |||||
Significant Accounting Policies [Line Items] | |||||
Estimated useful lives | 7 years | ||||
Contracts with customers payment terms | 60 days | ||||
Term of customers product extended warranty | 5 years | ||||
Percentage of uncertain income tax positions not recognized | 50.00% | ||||
Revenue | Customer Concentration Risk | |||||
Significant Accounting Policies [Line Items] | |||||
Concentration risk, number of customers | Customer | 1 | 1 | |||
Concentration risk, percentage | 27.00% | 26.00% | |||
Cost of Goods, Total | Supplier Concentration Risk | |||||
Significant Accounting Policies [Line Items] | |||||
Concentration risk, percentage | 17.00% | 30.00% | |||
Net Trade Accounts Receivable | Customer Concentration Risk | |||||
Significant Accounting Policies [Line Items] | |||||
Concentration risk, number of customers | Customer | 1 | 1 | |||
Concentration risk, percentage | 59.00% | 45.00% | |||
Bressner | |||||
Significant Accounting Policies [Line Items] | |||||
Maximum basic deposit coverage per owner | € | € 100,000 | ||||
Aggregate amount of deposits coverage in excess of insurance limits | $ 489,275 | € 443,844 | |||
Bressner | Designated as Hedging Instrument | |||||
Significant Accounting Policies [Line Items] | |||||
Number of foreign exchange contracts | Contract | 0 |
Significant Accounting Polici_5
Significant Accounting Policies - Additional Information (Details 1) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Fixed Fee Contract | ||
Significant Accounting Policies [Line Items] | ||
Remaining performance obligation expected to be recognized | $ 0 | $ 317,718 |
Significant Accounting Polici_6
Significant Accounting Policies - Schedule of Operating Segment Revenues Disaggregated by Primary Geographic Market Based on Customer's Geographic Location (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Disaggregation Of Revenue [Line Items] | ||
Operating segment revenues | $ 13,359,637 | $ 10,057,899 |
Customized Computers and Flash Arrays | ||
Disaggregation Of Revenue [Line Items] | ||
Operating segment revenues | 7,818,278 | 5,230,086 |
In-flight Entertainment & Connectivity | ||
Disaggregation Of Revenue [Line Items] | ||
Operating segment revenues | 621,946 | 299,454 |
Value-added Reseller with Minimal Customization | ||
Disaggregation Of Revenue [Line Items] | ||
Operating segment revenues | 4,919,413 | 4,528,359 |
Domestic | ||
Disaggregation Of Revenue [Line Items] | ||
Operating segment revenues | 6,737,304 | 2,339,039 |
Domestic | Customized Computers and Flash Arrays | ||
Disaggregation Of Revenue [Line Items] | ||
Operating segment revenues | 6,207,898 | 2,042,510 |
Domestic | In-flight Entertainment & Connectivity | ||
Disaggregation Of Revenue [Line Items] | ||
Operating segment revenues | 529,406 | 296,529 |
International | ||
Disaggregation Of Revenue [Line Items] | ||
Operating segment revenues | 6,622,333 | 7,718,860 |
International | Customized Computers and Flash Arrays | ||
Disaggregation Of Revenue [Line Items] | ||
Operating segment revenues | 1,610,380 | 3,187,576 |
International | In-flight Entertainment & Connectivity | ||
Disaggregation Of Revenue [Line Items] | ||
Operating segment revenues | 92,540 | 2,925 |
International | Value-added Reseller with Minimal Customization | ||
Disaggregation Of Revenue [Line Items] | ||
Operating segment revenues | $ 4,919,413 | $ 4,528,359 |
Long-Lived Intangible Assets -
Long-Lived Intangible Assets - Schedule of Definite Lived Intangible Assets (Details) - USD ($) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Dec. 31, 2019 | |
Finite Lived Intangible Assets [Line Items] | ||
Definite lived intangible assets, Gross | $ 3,538,793 | $ 3,538,793 |
Definite lived intangible assets, Accumulated Amortization | (2,367,126) | (2,192,601) |
Definite lived intangible assets, Net | 1,171,667 | 1,346,192 |
Customer Lists and Relationships | ||
Finite Lived Intangible Assets [Line Items] | ||
Definite lived intangible assets, Gross | 2,084,515 | 2,084,515 |
Definite lived intangible assets, Accumulated Amortization | (1,226,805) | (1,109,681) |
Definite lived intangible assets, Net | $ 857,710 | $ 974,834 |
Customer Lists and Relationships | Minimum | ||
Finite Lived Intangible Assets [Line Items] | ||
Definite lived intangible assets, Expected Life | 36 months | 36 months |
Definite lived intangible assets, Remaining Months | 19 months | 22 months |
Customer Lists and Relationships | Maximum | ||
Finite Lived Intangible Assets [Line Items] | ||
Definite lived intangible assets, Expected Life | 60 months | 60 months |
Definite lived intangible assets, Remaining Months | 41 months | 44 months |
Drawings and Technology | ||
Finite Lived Intangible Assets [Line Items] | ||
Definite lived intangible assets, Expected Life | 36 months | 36 months |
Definite lived intangible assets, Remaining Months | 0 days | 0 days |
Definite lived intangible assets, Gross | $ 760,207 | $ 760,207 |
Definite lived intangible assets, Accumulated Amortization | (760,207) | (760,207) |
Trade name, Trademarks & other | ||
Finite Lived Intangible Assets [Line Items] | ||
Definite lived intangible assets, Gross | 447,274 | 447,274 |
Definite lived intangible assets, Accumulated Amortization | (255,655) | (217,570) |
Definite lived intangible assets, Net | $ 191,619 | $ 229,704 |
Trade name, Trademarks & other | Minimum | ||
Finite Lived Intangible Assets [Line Items] | ||
Definite lived intangible assets, Expected Life | 24 months | 24 months |
Definite lived intangible assets, Remaining Months | 5 months | 8 months |
Trade name, Trademarks & other | Maximum | ||
Finite Lived Intangible Assets [Line Items] | ||
Definite lived intangible assets, Expected Life | 36 months | 36 months |
Definite lived intangible assets, Remaining Months | 19 months | 22 months |
Non-Compete | ||
Finite Lived Intangible Assets [Line Items] | ||
Definite lived intangible assets, Expected Life | 36 months | 36 months |
Definite lived intangible assets, Remaining Months | 19 months | 22 months |
Definite lived intangible assets, Gross | $ 246,797 | $ 246,797 |
Definite lived intangible assets, Accumulated Amortization | (124,460) | (105,143) |
Definite lived intangible assets, Net | $ 122,337 | $ 141,654 |
Long-Lived Intangible Assets _2
Long-Lived Intangible Assets - Schedule of Amortization Expense of Definite Lived Intangible Assets (Details) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Goodwill And Intangible Assets Disclosure [Abstract] | ||
2020 | $ 509,410 | |
2021 | 556,872 | |
2022 | 63,231 | |
2023 | 42,154 | |
Definite lived intangible assets, Net | $ 1,171,667 | $ 1,346,192 |
Long-Lived Intangible Assets _3
Long-Lived Intangible Assets - Additional Information (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Goodwill And Intangible Assets Disclosure [Abstract] | ||
Amortization expense | $ 174,525 | $ 349,419 |
Accounts Receivable - Schedule
Accounts Receivable - Schedule of Accounts Receivable, Net (Details) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Accounts Notes And Loans Receivable [Line Items] | ||
Accounts receivable gross | $ 9,123,197 | $ 11,681,157 |
Less: allowance for doubtful accounts | (11,518) | (14,000) |
Accounts receivable, total | 9,111,679 | 11,667,157 |
Accounts Receivable | ||
Accounts Notes And Loans Receivable [Line Items] | ||
Accounts receivable gross | 9,122,983 | 11,655,725 |
Unbilled Receivables | ||
Accounts Notes And Loans Receivable [Line Items] | ||
Accounts receivable gross | $ 214 | $ 25,432 |
Accounts Receivable - Additiona
Accounts Receivable - Additional Information (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Accounts Receivable Net Current [Abstract] | ||
Recoveries of bad debt expense | $ (2,405) | $ (88) |
Inventories - Summary of Invent
Inventories - Summary of Inventories, Net (Details) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Inventory Disclosure [Abstract] | ||
Raw materials | $ 3,820,575 | $ 2,478,882 |
Sub-assemblies | 1,277,061 | 1,857,004 |
Work-in-process | 1,024,973 | 493,276 |
Finished goods | 3,490,385 | 3,087,529 |
Inventory gross | 9,612,994 | 7,916,691 |
Less: reserves for obsolete and slow-moving inventories | (628,117) | (547,335) |
Inventory net | $ 8,984,877 | $ 7,369,356 |
Property and Equipment - Schedu
Property and Equipment - Schedule of Property and Equipment, Net (Details) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Property Plant And Equipment [Line Items] | ||
Property and equipment, gross | $ 6,296,634 | $ 6,076,589 |
Less: accumulated depreciation and amortization | (2,744,083) | (2,508,025) |
Property plant and equipment, net excluding construction in progress and software implementation | 3,552,551 | 3,568,564 |
Computers and Computer Equipment | ||
Property Plant And Equipment [Line Items] | ||
Property and equipment, gross | 659,763 | 633,546 |
Furniture and Office Equipment | ||
Property Plant And Equipment [Line Items] | ||
Property and equipment, gross | 337,901 | 340,801 |
Manufacturing Equipment and Engineering Tools | ||
Property Plant And Equipment [Line Items] | ||
Property and equipment, gross | 2,503,576 | 2,501,020 |
ERP System | ||
Property Plant And Equipment [Line Items] | ||
Property and equipment, gross | 1,892,420 | 1,709,125 |
Leasehold Improvements | ||
Property Plant And Equipment [Line Items] | ||
Property and equipment, gross | $ 902,974 | $ 892,097 |
Property and Equipment - Additi
Property and Equipment - Additional Information (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Property and Equipment | ||
Property Plant And Equipment [Line Items] | ||
Depreciation and amortization | $ 221,300 | $ 115,308 |
Accrued Expenses and Other Li_3
Accrued Expenses and Other Liabilities - Schedule of Accrued Expenses and Other Liabilities (Details) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Accrued Liabilities And Other Liabilities [Abstract] | ||
Accrued compensation and related liabilities | $ 1,798,990 | $ 1,621,177 |
Deferred revenue and customer deposits | 1,410,491 | 1,260,126 |
Warranty reserve | 422,782 | 424,011 |
Other accrued expenses | 978,243 | 1,302,118 |
Accrued expenses and other liabilities | $ 4,610,506 | $ 4,607,432 |
Debt - Additional Information (
Debt - Additional Information (Details) | 1 Months Ended | 3 Months Ended | ||||||||||||||
Sep. 30, 2019USD ($) | Jun. 30, 2019USD ($) | Apr. 30, 2019USD ($)Individual$ / sharesshares | Apr. 30, 2019EUR (€)Individual | Sep. 30, 2017USD ($) | Sep. 30, 2017EUR (€) | Mar. 31, 2020USD ($)LineofCreditTermLoan | Mar. 31, 2019USD ($) | Mar. 31, 2020EUR (€)LineofCreditTermLoan | Dec. 31, 2019USD ($) | Dec. 31, 2019EUR (€) | Sep. 30, 2019EUR (€) | Jun. 30, 2019EUR (€) | Apr. 30, 2019EUR (€)shares | Sep. 30, 2017EUR (€) | ||
Debt Instrument [Line Items] | ||||||||||||||||
Debt discount amortization | $ 7,520 | $ 0 | ||||||||||||||
April 2019 Notes | ||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||
Total balance outstanding | 198,134 | $ 241,054 | ||||||||||||||
Debt instrument, face amount | $ 350,000 | |||||||||||||||
Debt instrument, interest rate | 9.50% | 9.50% | ||||||||||||||
Debt instrument, monthly / quarterly principal and interest payments | $ 16,100 | |||||||||||||||
Number of individuals | Individual | 3 | 3 | ||||||||||||||
Debt maturity term | 2 years | 2 years | ||||||||||||||
Warrants to purchase common stock percentage equal to original principal | 10.00% | 10.00% | ||||||||||||||
Warrants exercise price | $ / shares | $ 2.15 | |||||||||||||||
Warrants to purchase common stock | shares | 16,276 | 16,276 | ||||||||||||||
Estimated fair value of each warrants | $ / shares | $ 0.90 | |||||||||||||||
April 2019 Notes | Warrants | ||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||
Fair value of the warrant issued | $ 14,037 | |||||||||||||||
April 2019 Notes | Warrants | Exercise Price | ||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||
Warrants exercise price | $ / shares | $ 2.15 | |||||||||||||||
April 2019 Notes | Warrants | Contractual Term | ||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||
Fair value assumptions | 5 years | 5 years | ||||||||||||||
April 2019 Notes | Warrants | Volatility Rate | ||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||
Fair value assumptions | 0.4460 | 0.4460 | ||||||||||||||
April 2019 Notes | Warrants | Dividend Rate | ||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||
Fair value assumptions | 0 | 0 | ||||||||||||||
April 2019 Notes | Warrants | Risk-free Interest Rate | ||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||
Fair value assumptions | 0.02307 | 0.02307 | ||||||||||||||
April 2019 Related Party Notes | Board of Directors | ||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||
Total balance outstanding | $ 650,129 | 791,170 | ||||||||||||||
Debt instrument, face amount | $ 1,150,000 | |||||||||||||||
Debt instrument, interest rate | 9.50% | 9.50% | ||||||||||||||
Debt instrument, monthly / quarterly principal and interest payments | $ 52,900 | |||||||||||||||
Number of individuals | Individual | 3 | 3 | ||||||||||||||
Debt maturity term | 2 years | 2 years | ||||||||||||||
Warrants to purchase common stock percentage equal to original principal | 10.00% | 10.00% | ||||||||||||||
Warrants exercise price | $ / shares | $ 2.15 | |||||||||||||||
Warrants to purchase common stock | shares | 53,490 | 53,490 | ||||||||||||||
Estimated fair value of each warrants | $ / shares | $ 0.90 | |||||||||||||||
April 2019 Related Party Notes | Warrants | ||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||
Fair value of the warrant issued | $ 46,121 | |||||||||||||||
April 2019 Related Party Notes | Warrants | Exercise Price | ||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||
Warrants exercise price | $ / shares | $ 2.15 | |||||||||||||||
April 2019 Related Party Notes | Warrants | Contractual Term | ||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||
Fair value assumptions | 5 years | 5 years | ||||||||||||||
April 2019 Related Party Notes | Warrants | Volatility Rate | ||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||
Fair value assumptions | 0.4260 | 0.4260 | ||||||||||||||
April 2019 Related Party Notes | Warrants | Dividend Rate | ||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||
Fair value assumptions | 0 | 0 | ||||||||||||||
April 2019 Related Party Notes | Warrants | Risk-free Interest Rate | ||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||
Fair value assumptions | 0.023067 | 0.023067 | ||||||||||||||
Bressner Technology GmbH | ||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||
Number of term loans outstanding | TermLoan | 2 | 2 | ||||||||||||||
Bressner Technology GmbH | Term Loans | ||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||
Total balance outstanding | $ 841,713 | € 763,556 | [1] | |||||||||||||
Bressner Technology GmbH | Note Payable Maturing on January 31, 2020 | ||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||
Total balance outstanding | 28,068 | € 25,000 | ||||||||||||||
Debt instrument, face amount | $ 436,272 | € 400,000 | ||||||||||||||
Debt instrument, interest rate | 2.125% | 2.125% | ||||||||||||||
Debt instrument, monthly / quarterly principal and interest payments | $ 28,068 | € 25,000 | ||||||||||||||
Debt instrument, maturity date | Jan. 31, 2020 | Jan. 31, 2020 | ||||||||||||||
Bressner Technology GmbH | Note Payable Maturing on March 30, 2021 | ||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||
Total balance outstanding | 290,534 | 263,556 | 368,835 | 328,525 | ||||||||||||
Debt instrument, face amount | $ 561,350 | € 500,000 | ||||||||||||||
Debt instrument, interest rate | 2.25% | 2.25% | ||||||||||||||
Debt instrument, monthly / quarterly principal and interest payments | $ 24,960 | € 22,232 | ||||||||||||||
Debt instrument, maturity date | Mar. 30, 2021 | Mar. 30, 2021 | ||||||||||||||
Bressner Technology GmbH | Note Payable Maturing on April 30, 2020 | ||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||
Total balance outstanding | $ 561,700 | € 509,544 | 571,095 | 508,679 | ||||||||||||
Debt instrument, face amount | $ 551,180 | € 500,000 | ||||||||||||||
Debt instrument, interest rate | 1.70% | 1.70% | ||||||||||||||
Debt instrument, maturity date | Jun. 25, 2020 | |||||||||||||||
Debt instrument, extended maturity period | 1 year | |||||||||||||||
Bressner Technology GmbH | Note Payable Maturing on March 24, 2020 | ||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||
Total balance outstanding | 338,663 | € 301,650 | ||||||||||||||
Debt instrument, face amount | $ 336,810 | € 300,000 | ||||||||||||||
Debt instrument, interest rate | 1.65% | 1.65% | ||||||||||||||
Debt instrument, maturity date | Mar. 24, 2020 | |||||||||||||||
German Institutions | Revolving Credit Facility | Bressner Technology GmbH | ||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||
Number of lines of credit | LineofCredit | 3 | 3 | ||||||||||||||
Line of credit facility, maximum borrowing capacity | $ 3,968,492 | € 3,600,000 | ||||||||||||||
Outstanding lines of credit balance | $ 0 | $ 0 | ||||||||||||||
Minimum | German Institutions | Revolving Credit Facility | Bressner Technology GmbH | ||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||
Line of credit current rate | 3.75% | |||||||||||||||
Maximum | German Institutions | Revolving Credit Facility | Bressner Technology GmbH | ||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||
Line of credit current rate | 7.99% | |||||||||||||||
[1] | € |
Debt - Schedule of Total Future
Debt - Schedule of Total Future Payments under Notes Payable and Related Party Notes Payable (Details) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Debt Instrument [Line Items] | ||
2020 | $ 1,622,315 | |
2021 | 67,661 | |
Total minimum payments | 1,689,976 | |
Current portion of notes payable | (1,622,315) | |
Notes payable, net of current portion | 67,661 | |
2020 | (30,079) | |
2021 | (1,253) | |
Total minimum payments | (31,332) | |
Current portion of notes payable | 30,079 | |
Notes payable, net of current portion | (1,253) | |
Related Parties | ||
Debt Instrument [Line Items] | ||
2020 | 598,482 | |
2021 | 51,647 | |
Total minimum payments | 650,129 | |
Current portion of notes payable | (598,482) | |
Notes payable, net of current portion | 51,647 | |
Current portion of notes payable | 23,060 | $ 23,060 |
Notes payable, net of current portion | (961) | $ (6,726) |
Third Parties | ||
Debt Instrument [Line Items] | ||
2020 | 182,120 | |
2021 | 16,014 | |
Total minimum payments | 198,134 | |
Current portion of notes payable | (182,120) | |
Notes payable, net of current portion | 16,014 | |
Foreign | ||
Debt Instrument [Line Items] | ||
2020 | 841,713 | |
Total minimum payments | 841,713 | |
Current portion of notes payable | $ (841,713) |
Stockholders' Equity - Addition
Stockholders' Equity - Additional Information (Details) - USD ($) | Jun. 26, 2019 | Jul. 31, 2019 | Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | Feb. 01, 2018 |
Class Of Stock [Line Items] | ||||||
Preferred stock, shares authorized | 10,000,000 | |||||
Common stock, shares authorized | 50,000,000 | 50,000,000 | ||||
Common stock voting rights | one vote for each share | |||||
Common stock, par value | $ 0.0001 | $ 0.0001 | ||||
Gross proceeds from issuance of common stock | $ 2,488,148 | |||||
Exercise of stock options and warrants | $ 57,000 | $ 14,201 | ||||
Preferred stock, shares outstanding | 0 | |||||
Unvested common stock options, net of estimated forfeitures | $ 158,871 | |||||
Unearned stock-based compensation expected to be recognized | 1 year 6 months 25 days | |||||
Cashless Exercise of Stock Options | ||||||
Class Of Stock [Line Items] | ||||||
Number of common stock issued for exercise of stock options | 279,914 | 17,598 | ||||
Restricted Stock Units (RSUs) | ||||||
Class Of Stock [Line Items] | ||||||
Unvested common stock options, net of estimated forfeitures | $ 423,077 | |||||
Unearned stock-based compensation expected to be recognized | 1 year 6 months 3 days | |||||
Restricted Stock Units (RSUs) | 2017 Equity Incentive Plan | Minimum | ||||||
Class Of Stock [Line Items] | ||||||
Vesting period | 1 year | |||||
Restricted Stock Units (RSUs) | 2017 Equity Incentive Plan | Maximum | ||||||
Class Of Stock [Line Items] | ||||||
Vesting period | 3 years | |||||
Common Stock | ||||||
Class Of Stock [Line Items] | ||||||
Number of common stock issued for exercise of stock options and warrants | 354,914 | 54,098 | ||||
Follow-on Public Offering | Noble Capital Markets, Inc | ||||||
Class Of Stock [Line Items] | ||||||
Common stock, par value | $ 0.0001 | |||||
Common stock aggregate offering price | $ 10,000,000 | |||||
Follow-on Public Offering | Common Stock | Noble Capital Markets, Inc | ||||||
Class Of Stock [Line Items] | ||||||
Common stock sold under public offering | 1,554,832 | |||||
Gross proceeds from issuance of common stock | $ 2,700,714 | |||||
Net proceeds from issuance of common stock | 2,488,148 | |||||
Compensation payable | 55,127 | |||||
Other expenses | $ 157,439 | |||||
Equity distribution agreement termination date | Aug. 26, 2019 |
Stockholders' Equity - Summary
Stockholders' Equity - Summary of Stock Option Activity (Details) - Stock Options - USD ($) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Dec. 31, 2019 | |
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||
Number of Shares, Outstanding beginning balance | 1,686,444 | |
Number of Shares, Granted | 20,000 | |
Number of Shares, Forfeited / Cancelled | (6,500) | |
Number of Shares, Exercised | (686,250) | |
Number of Shares, Outstanding ending balance | 1,013,694 | 1,686,444 |
Number of Shares, Exercisable ending balance | 866,837 | |
Number of Shares, Vested and expected to vest ending balance | 1,009,288 | |
Weighted Average Exercise Price, Outstanding beginning balance | $ 1.32 | |
Weighted Average Exercise Price, Granted | 2.70 | |
Weighted Average Exercise Price, Forfeited / Cancelled | 2.12 | |
Weighted Average Exercise Price, Exercised | 0.79 | |
Weighted Average Exercise Price, Outstanding ending balance | 1.69 | $ 1.32 |
Weighted Average Exercise Price, Exercisable ending balance | 1.49 | |
Weighted Average Exercise Price, Vested and expected to vest ending balance | $ 1.69 | |
Weighted Average Remaining Contractual Life (in years), Outstanding balance | 5 years 29 days | 4 years 10 months 2 days |
Weighted Average Remaining Contractual Life (in years), Exercisable balance | 5 years 29 days | |
Weighted Average Remaining Contractual Life (in years), Vested and expected to vest balance | 5 years 6 months 18 days | |
Aggregate Intrinsic Value, Outstanding balance | $ 287,953 | $ 1,416,279 |
Aggregate Intrinsic Value, Exercisable balance | 287,953 | |
Aggregate Intrinsic Value, Vested and expected to vest balance | $ 287,953 |
Stockholders' Equity - Schedule
Stockholders' Equity - Schedule of Assumption to Calculate Weighted Average Grant Date Fair Value of Options Grant (Details) - Common Stock - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Class Of Stock [Line Items] | ||
Expected term (in years) | 5 years 10 months 13 days | |
Expected volatility, minimum | 43.50% | 43.70% |
Expected volatility, maximum | 47.80% | 44.40% |
Risk-free interest rate | 1.41% | 3.00% |
Weighted average grant date fair value per share | $ 2.70 | $ 1.09 |
Grant date fair value of options vested | $ 720,095 | $ 1,441,371 |
Intrinsic value of options exercised | $ 463,800 | $ 56,369 |
Minimum | ||
Class Of Stock [Line Items] | ||
Expected term (in years) | 4 years 7 months 24 days | |
Maximum | ||
Class Of Stock [Line Items] | ||
Expected term (in years) | 5 years 10 months 13 days |
Stockholders' Equity - Summar_2
Stockholders' Equity - Summary of Restricted Stock Unit Activity (Details) - Restricted Stock Units (RSUs) | 3 Months Ended |
Mar. 31, 2020$ / sharesshares | |
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |
Number of Shares, Outstanding beginning balance | shares | 216,670 |
Number of Shares, Granted | shares | 80,000 |
Number of shares, Vested | shares | (91,669) |
Number of Shares, Cancelled | shares | (12,500) |
Number of Shares, Outstanding ending balance | shares | 192,501 |
Weighted Average Grant Date Fair Value, Outstanding beginning balance | $ / shares | $ 3.02 |
Weighted Average Grant Date Fair Value, Granted | $ / shares | 2.31 |
Weighted Average Grant Date Fair Value, Vested | $ / shares | 2.94 |
Weighted Average Grant Date Fair Value, Cancelled | $ / shares | 2.43 |
Weighted Average Grant Date Fair Value / Exercise Price, Outstanding ending balance | $ / shares | $ 2.80 |
Stockholders' Equity - Summar_3
Stockholders' Equity - Summary of Stock-Based Compensation Expense (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||
Stock-based compensation expense | $ 207,761 | $ 167,474 |
General and Administrative | ||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||
Stock-based compensation expense | 159,680 | 125,206 |
Production | ||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||
Stock-based compensation expense | 17,969 | 14,898 |
Marketing and Selling | ||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||
Stock-based compensation expense | 17,292 | 14,393 |
Research and Development | ||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||
Stock-based compensation expense | $ 12,820 | $ 12,977 |
Stockholders' Equity - Schedu_2
Stockholders' Equity - Schedule of Warrant Activity (Details) - Warrants | 3 Months Ended |
Mar. 31, 2020$ / sharesshares | |
Class Of Stock [Line Items] | |
Number of Shares, Beginning Warrants outstanding | shares | 630,947 |
Number of Shares, Ending Warrants outstanding | shares | 630,947 |
Weighted Average Grant Date Fair Value, Outstanding beginning balance | $ / shares | $ 4.16 |
Weighted Average Grant Date Fair Value / Exercise Price, Outstanding ending balance | $ / shares | $ 4.16 |
Employee Benefit Plan - Additio
Employee Benefit Plan - Additional Information (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Defined Contribution Pension And Other Postretirement Plans Disclosure [Abstract] | ||
Defined contribution plan name | 401(k) | |
Employee pre-tax earnings | 20.00% | |
Maximum pretax contribution per employee | 100.00% | 100.00% |
Defined contribution plan, employer matching contribution, percent | 5.00% | 5.00% |
Contributions made by company | $ 116,527 | $ 91,371 |
Commitments and Contingencies -
Commitments and Contingencies - Additional Information (Details) | 3 Months Ended | |
Mar. 31, 2020USD ($)ft² | Mar. 31, 2019USD ($) | |
Operating Leased Assets [Line Items] | ||
Operating lease, rent expense | $ | $ 189,417 | $ 171,145 |
Offices, Manufacturing and Warehouse Facility | Bressner Technology GmbH | ||
Operating Leased Assets [Line Items] | ||
Operating leases, area | 8,073 | |
Offices, Manufacturing and Warehouse Facility | Escondido, California | ||
Operating Leased Assets [Line Items] | ||
Operating leases, area | 29,342 | |
Operating lease renewal period | 2018-08 | |
Operating lease, expiration date | Aug. 31, 2024 | |
Offices, Manufacturing and Warehouse Facility | Salt Lake City, Utah | ||
Operating Leased Assets [Line Items] | ||
Operating leases, area | 3,208 | |
Offices, Manufacturing and Warehouse Facility | Irvine, California | CDI | ||
Operating Leased Assets [Line Items] | ||
Operating leases, area | 12,000 | |
Operating lease, expiration date | Mar. 31, 2021 |
Related Party Transactions - Ad
Related Party Transactions - Additional Information (Details) - USD ($) | 1 Months Ended | 3 Months Ended | |
Apr. 30, 2019 | Mar. 31, 2020 | Mar. 31, 2019 | |
Related Party Transaction [Line Items] | |||
Interest expense on all the related party | $ 17,156 | $ 0 | |
Marketing and selling | 1,189,351 | 1,137,932 | |
Management | Credit Facility | |||
Related Party Transaction [Line Items] | |||
Line of credit facility, maximum borrowing capacity | $ 4,000,000 | ||
Debt instrument, face amount | 1,150,000 | ||
Other Shareholders | Credit Facility | |||
Related Party Transaction [Line Items] | |||
Debt instrument, face amount | $ 350,000 | ||
Members of Board of Directors and Other Shareholders | Credit Facility | |||
Related Party Transaction [Line Items] | |||
Term of loan agreement | 2 years | ||
Interest rate | 9.50% | ||
Debt instrument, monthly / quarterly principal and interest payments | $ 69,000 | ||
Warrants to purchase common stock percentage equal to original principal | 10.00% | ||
Warrants exercise price | $ 2.15 | ||
Warrants to purchase common stock | 69,766 | ||
Members of Board of Directors and Other Shareholders | Credit Facility | Warrants | |||
Related Party Transaction [Line Items] | |||
Fair value of the warrant issued | $ 60,158 | ||
Board of Directors | |||
Related Party Transaction [Line Items] | |||
Marketing and selling | 6,000 | 9,000 | |
Board of directors fees including stock-based Compensation | 50,505 | 82,836 | |
Related Law Firm | General and Administrative | |||
Related Party Transaction [Line Items] | |||
Legal Fees | 9,000 | 9,000 | |
IT Network Support Firm | General and Administrative | |||
Related Party Transaction [Line Items] | |||
Fees paid | $ 356 | $ 660 |
Net Loss Per Share - Summary of
Net Loss Per Share - Summary of Basic and Diluted Net Loss Per Share (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Numerator: | ||
Net loss attributable to common stockholders | $ (1,096,032) | $ (944,729) |
Denominator: | ||
Weighted average common shares outstanding - basic | 16,332,898 | 14,239,711 |
Weighted average common shares outstanding - diluted | 16,332,898 | 14,239,711 |
Net loss per common share attributable to common stockholders: | ||
Basic | $ (0.07) | $ (0.07) |
Diluted | $ (0.07) | $ (0.07) |
Segment and Geographic Inform_3
Segment and Geographic Information - Additional Information (Details) | 3 Months Ended | |
Mar. 31, 2020USD ($)Segment | Mar. 31, 2019 | |
Segment Reporting Reconciling Item For Operating Profit Loss From Segment To Consolidated [Line Items] | ||
Number of Reportable Segments | Segment | 3 | |
Germany | ||
Segment Reporting Reconciling Item For Operating Profit Loss From Segment To Consolidated [Line Items] | ||
Exception of Long-Lived Assets | $ | $ 223,000 | |
Revenue | Customer Concentration Risk | ||
Segment Reporting Reconciling Item For Operating Profit Loss From Segment To Consolidated [Line Items] | ||
Concentration risk, percentage | 27.00% | 26.00% |
Revenue | Customer Concentration Risk | International | ||
Segment Reporting Reconciling Item For Operating Profit Loss From Segment To Consolidated [Line Items] | ||
Concentration risk, percentage | 50.00% | 72.00% |
Segment and Geographic Inform_4
Segment and Geographic Information - Schedule of (Loss) Income from Operations by Reporting Segments (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Segment Reporting Reconciling Item For Operating Profit Loss From Segment To Consolidated [Line Items] | ||
Revenue | $ 13,359,637 | $ 10,057,899 |
Cost of revenues | (9,963,950) | (7,646,277) |
Gross profit | $ 3,395,687 | $ 2,411,622 |
Gross margin % | 25.40% | 24.00% |
Total operating expenses | $ 4,906,841 | $ 4,443,830 |
Loss from operations | (1,511,154) | (2,032,208) |
OSS Segment | ||
Segment Reporting Reconciling Item For Operating Profit Loss From Segment To Consolidated [Line Items] | ||
Revenue | 7,818,278 | 5,230,086 |
Cost of revenues | (5,621,751) | (3,729,173) |
Gross profit | $ 2,196,527 | $ 1,500,913 |
Gross margin % | 28.10% | 28.70% |
Total operating expenses | $ 3,530,278 | $ 3,137,869 |
Loss from operations | (1,333,751) | (1,636,956) |
CDI Segment | ||
Segment Reporting Reconciling Item For Operating Profit Loss From Segment To Consolidated [Line Items] | ||
Revenue | 621,946 | 299,454 |
Cost of revenues | (499,158) | (345,727) |
Gross profit | $ 122,788 | $ (46,273) |
Gross margin % | 19.70% | (15.50%) |
Total operating expenses | $ 455,931 | $ 312,977 |
Loss from operations | (333,143) | (359,250) |
Bressner Segment | ||
Segment Reporting Reconciling Item For Operating Profit Loss From Segment To Consolidated [Line Items] | ||
Revenue | 4,919,413 | 4,528,359 |
Cost of revenues | (3,843,041) | (3,571,377) |
Gross profit | $ 1,076,372 | $ 956,982 |
Gross margin % | 21.90% | 21.10% |
Total operating expenses | $ 920,632 | $ 992,984 |
Loss from operations | $ 155,740 | $ (36,002) |
Subsequent Events - Additional
Subsequent Events - Additional Information (Details) | Apr. 24, 2020USD ($) | Apr. 20, 2020USD ($)$ / shares | Apr. 09, 2020EUR (€) | Apr. 07, 2020USD ($) | Apr. 05, 2020Employee | Apr. 28, 2020USD ($) | Mar. 31, 2020USD ($)$ / shares | Dec. 31, 2019$ / shares |
Subsequent Event [Line Items] | ||||||||
Common stock, par value | $ / shares | $ 0.0001 | $ 0.0001 | ||||||
Loan amount | $ 1,689,976 | |||||||
Subsequent Event | ||||||||
Subsequent Event [Line Items] | ||||||||
Non-interest bearing convertible note | $ 6,000,000 | |||||||
Original issue discount rate | 10.00% | |||||||
Subsequent Event | Senior Secured Convertible Promissory Notes | ||||||||
Subsequent Event [Line Items] | ||||||||
Debt instrument, interest rate | 10.00% | |||||||
Subsequent Event | Paycheck Protection Program | ||||||||
Subsequent Event [Line Items] | ||||||||
Loan amount | $ 1,500,000 | |||||||
Term of loan | 2 years | |||||||
Loan amount, interest percentage | 1.00% | |||||||
Subsequent Event | Securities Purchase Agreement | Senior Secured Convertible Promissory Notes | ||||||||
Subsequent Event [Line Items] | ||||||||
Debt maturity term | 23 months | |||||||
Debt instrument, interest rate | 0.00% | |||||||
Non-interest bearing convertible note | $ 3,000,000 | $ 6,000,000 | ||||||
Common stock, par value | $ / shares | $ 0.0001 | |||||||
Debt instrument, initial conversion price per share | $ / shares | $ 2.50 | |||||||
Original issue discount rate | 10.00% | 10.00% | ||||||
Debt instrument, aggregate purchase price | $ 2,700,000 | |||||||
Subsequent Event | Bressner Technology GmbH | ||||||||
Subsequent Event [Line Items] | ||||||||
Line of credit amount converted to term loan | € | € 500,000 | |||||||
Subsequent Event | Term Loans | Bressner Technology GmbH | ||||||||
Subsequent Event [Line Items] | ||||||||
Debt maturity term | 1 year | |||||||
Debt instrument, interest rate | 1.90% | |||||||
Subsequent Event | Minimum | ||||||||
Subsequent Event [Line Items] | ||||||||
Expected cost savings | $ 2,500,000 | |||||||
Subsequent Event | Maximum | ||||||||
Subsequent Event [Line Items] | ||||||||
Expected cost savings | $ 3,000,000 | |||||||
Subsequent Event | Cost Reduction Plan | ||||||||
Subsequent Event [Line Items] | ||||||||
Percentage of workforce reductions | 19.00% | |||||||
Employees impacted through workforce reductions | Employee | 115 |