Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2019 | Mar. 23, 2020 | Jun. 30, 2019 | |
Change in valuation | |||
Entity Registrant Name | Surna Inc. | ||
Entity Central Index Key | 0001482541 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2019 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Interactive Data Current | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Small Business Flag | true | ||
Entity Emerging Growth Company | false | ||
Entity Shell Company | false | ||
Entity Public Float | $ 8,757,000 | ||
Entity Common Stock, Shares Outstanding | 236,526,638 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2019 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Current Assets | ||
Cash and cash equivalents | $ 922,177 | $ 253,387 |
Accounts receivable (net of allowance for doubtful accounts of $151,673 and $119,022, respectively) | 138,357 | 210,187 |
Inventory, net | 1,231,243 | 935,886 |
Prepaid expenses and other | 269,491 | 128,348 |
Total Current Assets | 2,561,268 | 1,527,808 |
Noncurrent Assets | ||
Property and equipment, net | 257,923 | 520,321 |
Goodwill | 631,064 | 631,064 |
Intangible assets, net | 11,930 | 23,028 |
Deposits | 51,000 | 51,000 |
Operating lease right-of-use asset | 534,133 | |
Total Noncurrent Assets | 1,486,050 | 1,225,413 |
TOTAL ASSETS | 4,047,318 | 2,753,221 |
CURRENT LIABILITIES | ||
Accounts payable and accrued liabilities | 1,832,959 | 1,917,087 |
Deferred revenue | 1,444,472 | 641,798 |
Accrued equity compensation | 503,466 | |
Current portion of operating lease liability | 217,843 | |
Total Current Liabilities | 3,998,740 | 2,558,885 |
NONCURRENT LIABILITIES | ||
Operating lease liability, net of current portion | 404,209 | |
Total Noncurrent Liabilities | 404,209 | |
TOTAL LIABILITIES | 4,402,949 | 2,558,885 |
Commitments and Contingencies (Note 10) | ||
SHAREHOLDERS' (DEFICIT) EQUITY | ||
Preferred stock, $0.00001 par value; 150,000,000 shares authorized; 42,030,331 shares issued and outstanding | 420 | 420 |
Common stock, $0.00001 par value; 350,000,000 shares authorized; 228,216,638 and 224,989,794 shares issued and outstanding, respectively | 2,283 | 2,250 |
Additional paid in capital | 25,326,593 | 24,538,027 |
Accumulated deficit | (25,684,927) | (24,346,361) |
Total Shareholders' (Deficit) Equity | (355,631) | 194,336 |
TOTAL LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY | $ 4,047,318 | $ 2,753,221 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts, net | $ 151,673 | $ 119,022 |
Preferred stock, par value | $ 0.00001 | $ 0.00001 |
Preferred stock, shares authorized | 150,000,000 | 150,000,000 |
Preferred stock, shares issued | 42,030,331 | 42,030,331 |
Preferred stock, shares outstanding | 42,030,331 | 42,030,331 |
Common stock, par value | $ 0.00001 | $ 0.00001 |
Common stock, shares authorized | 350,000,000 | 350,000,000 |
Common stock, shares issued | 228,216,638 | 224,989,794 |
Common stock, shares outstanding | 228,216,638 | 224,989,794 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Income Statement [Abstract] | ||
Revenue, net | $ 15,224,454 | $ 9,581,968 |
Cost of revenue | 10,675,601 | 7,132,090 |
Gross profit | 4,548,853 | 2,449,878 |
Operating expenses: | ||
Advertising and marketing expenses | 675,703 | 979,711 |
Product development costs | 521,044 | 317,713 |
Selling, general and administrative expenses | 4,662,695 | 5,972,948 |
Total operating expenses | 5,859,442 | 7,270,372 |
Operating loss | (1,310,589) | (4,820,494) |
Other (expense) income: | ||
Other (expense) income, net | (27,977) | 58,254 |
Interest expense | (2,908) | |
Gain on change in fair value of derivative liabilities | 21,403 | |
Total other (expense) income | (27,977) | 76,749 |
Loss before provision for income taxes | (1,338,566) | (4,743,745) |
Income taxes | ||
Net loss | $ (1,338,566) | $ (4,743,745) |
Loss per common share - basic and dilutive | $ (0.006) | $ (0.022) |
Weighted average number of common shares outstanding, basic and dilutive | 227,662,184 | 218,752,365 |
Consolidated Statements of Chan
Consolidated Statements of Changes in Shareholders' (Deficit) Equity - USD ($) | Preferred Stock [Member] | Common Stock [Member] | Additional Paid in Capital [Member] | Accumulated Deficit [Member] | Total |
Balance at Dec. 31, 2017 | $ 772 | $ 2,062 | $ 20,664,563 | $ (19,254,911) | $ 1,412,486 |
Balance, shares to be issued at Dec. 31, 2017 | |||||
Balance, shares at Dec. 31, 2017 | 77,220,000 | 206,248,522 | |||
Cumulative effect of changes due to adoption of ASC 606 revenue recognition | 56,912 | 56,912 | |||
Adjusted balance January 1, 2018 to reflect adoption of ASC 606 | $ 772 | $ 2,062 | 20,664,563 | (19,197,999) | 1,469,398 |
Adjusted balance January 1, 2018 to reflect adoption of ASC 606, shares | 77,220,000 | 206,248,522 | |||
Extinguishment of derivative liability upon exercise of investor warrants | 389,477 | 389,477 | |||
Common shares issued on cashless exercise of former director and investor warrants | $ 27 | (27) | |||
Common shares issued on cashless exercise of former director and investor warrants, shares | 2,666,865 | ||||
Common shares issued on exercise of investor warrants and employee options | $ 1 | 18,375 | 18,376 | ||
Common shares issued on exercise of investor warrants and employee options, shares | 125,000 | ||||
Common shares issued or to be issued on settlement of restricted stock units and award of stock bonuses | $ 88 | (88) | |||
Common shares issued or to be issued on settlement of restricted stock units and award of stock bonuses, shares to be issued | 1,000,000 | ||||
Common shares issued or to be issued on settlement of restricted stock units and award of stock bonuses, shares | 8,867,368 | 1,168,540 | |||
Common shares issued as compensation for services | $ 19 | 408,617 | $ 408,636 | ||
Common shares issued as compensation for services, shares | 1,809,349 | ||||
Common shares issued in settlement agreement | $ 8 | 226,392 | 226,400 | ||
Common shares issued in settlement agreement, shares | 800,000 | ||||
Fair value of vested restricted stock units awarded to employees and directors | 1,295,368 | 1,295,368 | |||
Fair value of vested stock options granted to employees and directors | 160,218 | 160,218 | |||
Fair value of vested incentive stock bonuses awarded to employees | 165,208 | 165,208 | |||
Common shares issued for cash | $ 76 | 1,209,924 | 1,210,000 | ||
Common shares issued for cash, shares | 7,562,500 | ||||
Repurchase of common shares from related party | $ (31) | (399,969) | (400,000) | ||
Repurchase of common shares from related party, shares | (3,125,000) | ||||
Repurchase of preferred stock from related party in exchange for issuance of common stock | $ (352) | (4,648) | (5,000) | ||
Repurchase of preferred stock from related party in exchange for issuance of common stock, shares | (35,189,669) | 35,190 | |||
Net loss | (4,743,745) | (4,743,745) | |||
Balance at Dec. 31, 2018 | $ 420 | 2,250 | 24,538,027 | (24,346,361) | 194,336 |
Balance, shares to be issued at Dec. 31, 2018 | $ 1,000,000 | ||||
Balance, shares at Dec. 31, 2018 | 42,030,331 | 224,989,794 | |||
Common shares issued as compensation for services | $ 10 | 74,990 | 75,000 | ||
Common shares issued as compensation for services, shares | 986,844 | ||||
Fair value of vested incentive stock bonuses awarded to employees | 44,209 | 44,209 | |||
Common shares issued or to be issued on settlement of restricted stock units and award of stock bonuses, vested restricted stock units canceled | $ 23 | (23) | |||
Common shares issued or to be issued on settlement of restricted stock units and award of stock bonuses, vested restricted stock units canceled, shares to be issued | 560,000 | ||||
Common shares issued or to be issued on settlement of restricted stock units and award of stock bonuses, vested restricted stock units canceled, shares | 2,240,000 | ||||
Fair value of vested restricted stock units awarded to employees | 278,906 | 278,906 | |||
Fair value of vested stock options granted to employees and consultants | 390,484 | 390,484 | |||
Net loss | (1,338,566) | (1,338,566) | |||
Balance at Dec. 31, 2019 | $ 420 | 2,283 | $ 25,326,593 | $ (25,684,927) | $ (355,631) |
Balance, shares to be issued at Dec. 31, 2019 | $ 1,560,000 | ||||
Balance, shares at Dec. 31, 2019 | 42,030,331 | 228,216,638 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Cash Flows From Operating Activities: | ||
Net loss | $ (1,338,566) | $ (4,743,745) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||
Depreciation and intangible asset amortization expense | 161,180 | 163,700 |
Gain on change in derivative liabilities | (21,403) | |
Compensation paid in equity | 788,599 | 2,029,430 |
Provision for doubtful accounts | 32,651 | 13,755 |
Provision for excess and obsolete inventory | (223,971) | (28,037) |
Loss on disposal of assets | 115,359 | 19,279 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 39,179 | 198,647 |
Inventory | (71,386) | (385,227) |
Prepaid expenses and other | (141,143) | 165,660 |
Accounts payable and accrued liabilities | 23,830 | 52,329 |
Deferred revenue | 802,674 | (313,161) |
Lease liability, net | (20,039) | |
Accrued equity compensation | 503,466 | |
Net cash provided by (used in) operating activities | 671,833 | (2,848,773) |
Cash Flows From Investing Activities | ||
Capitalization of intangible assets | (5,028) | |
Purchases of property and equipment | (3,043) | (261,222) |
Proceeds from payment of tenant improvement allowance | 100,000 | |
Cash disbursed for equipment held for lease | (16,237) | |
Net cash used in investing activities | (3,043) | (182,487) |
Cash Flows From Financing Activities | ||
Cash proceeds from sale of common stock and warrants | 1,210,000 | |
Proceeds from exercises of stock options | 3,375 | |
Proceeds from exercise of investor warrants | 15,000 | |
Repurchase of common shares from related party | (400,000) | |
Purchase of option to repurchase preferred stock from related party | (5,000) | |
Payments on loans from shareholders | (6,927) | |
Net cash provided by financing activities | 816,448 | |
Net increase (decrease) in cash | 668,790 | (2,214,812) |
Cash, beginning of period | 253,387 | 2,468,199 |
Cash, end of period | 922,177 | 253,387 |
Non-cash investing and financing activities: | ||
Equity issued in settlement | 226,400 | |
Extinguishment of derivative liability on cashless exercise of warrants | 389,477 | |
Unpaid purchases of equipment and other assets | $ 4,500 |
Description of Business
Description of Business | 12 Months Ended |
Dec. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Description of Business | Note 1 – Description of Business Surna Inc. (the “Company”) was incorporated in Nevada on October 15, 2009 and is headquartered in Boulder, Colorado. The Company designs, engineers and sells cultivation technologies for controlled environment agriculture to state- and provincial-regulated cannabis cultivators in the U.S. and Canada. The Company’s products and services consist primarily of: (i) liquid-based process cooling systems and other climate control systems, (ii) air handling equipment and systems, (iii) a full-service engineering package for designing and engineering commercial scale thermodynamic systems specific to cannabis cultivation facilities, and (iv) automation and control devices, systems and technologies used for environmental, lighting and climate control. Currently, the Company’s revenue stream is derived primarily from supplying its products, services and technologies to commercial indoor and hybrid sealed greenhouse cannabis cultivation facilities. The Company leverages its experience in this space to bring value-added climate control solutions to its customers that help improve their overall crop quality and yield, optimize energy and water efficiency, and satisfy the evolving code and regulatory requirements. The Company is not involved in the production or sale of cannabis. |
Basis of Presentation; Summary
Basis of Presentation; Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
Basis of Presentation; Summary of Significant Accounting Policies | Note 2 – Basis of Presentation; Summary of Significant Accounting Policies Financial Statement Presentation The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect reported amounts and related disclosures. In the opinion of management, all adjustments (consisting of normal recurring items) considered necessary for a fair presentation have been included. The accompanying consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has not generated sufficient revenue and has historically funded its operations through the sale of common stock, the issuance of debt and the receipt of advance payments from customers. The Company is subject to risks, expenses and uncertainties similar to those encountered by similarly situated companies. See Note 3. Basis of Consolidation and Reclassifications The consolidated financial statements include the accounts of the Company and its controlled and wholly-owned subsidiary, Hydro Innovations, LLC (“Hydro”). Intercompany transactions, profit, and balances are eliminated in consolidation. The Company has made certain reclassifications to prior period financial information to conform with the current periods presented. These reclassifications had no impact on net loss, total assets and liabilities, or equity. Use of Estimates Management makes estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and that affect the reported amounts of revenue and expenses during the reporting period. The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates. Key estimates include: allocation of transaction prices to performance obligations under contracts with customers, standalone selling prices, timing of expected revenue recognition on remaining performance obligations under contracts with customers, valuation of derivative liabilities, valuation of intangible assets, valuation of equity-based compensation, valuation of deferred tax assets and liabilities, warranty accruals, inventory allowances, and legal contingencies. Cash and Cash Equivalents All highly liquid investments with original maturities of three months or less at the date of purchase are considered to be cash equivalents. The Company may, from time to time, have deposits in financial institutions that exceed the federally insured amount. The Company has not experienced any losses to date on depository accounts. Accounts Receivable and Allowance for Doubtful Accounts Accounts receivables are recorded at the invoiced amount, or based on revenue earned for items not yet invoiced, and generally do not bear interest. An allowance for doubtful accounts is established, as necessary, based on past experience and other factors, which, in management’s judgment, deserve current recognition in estimating bad debts. Based on the Company’s review, it establishes or adjusts the allowance for specific customers and the accounts receivable portfolio as a whole. As of December 31, 2019 and 2018, the allowance for doubtful accounts was $151,673 and $119,022, respectively. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. Inventory Inventory is stated at the lower of cost or net realizable value. The inventory is valued based on a first-in, first-out (“FIFO”) basis. Lower of cost or net realizable value is evaluated by considering obsolescence, excessive levels of inventory, deterioration and other factors. Adjustments to reduce the cost of inventory to its net realizable value, if required, are made for estimated excess, obsolescence or impaired inventory. Excess and obsolete inventory is charged to cost of revenue and a new lower-cost basis for that inventory is established and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis. As of December 31, 2019 and 2018, the allowance for excess and obsolete inventory was $71,376 and $295,347, respectively. Property and Equipment Property and equipment are stated at cost. For financial statement purposes, property and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives, which is generally five years. Leasehold improvements are amortized on a straight-line basis over the lesser of their useful lives or the life of the lease. Upon sale or retirement of assets, the cost and related accumulated depreciation and amortization are removed from the balance sheet and the resulting gain or loss is reflected in operations. Maintenance and repairs are charged to operations as incurred. Long-lived tangible assets, including property and equipment, are reviewed for impairment whenever events or changes in business circumstances indicate the carrying value of the assets may not be recoverable. When such an event occurs, management determines whether there has been impairment by comparing the anticipated undiscounted future net cash flows to the related asset’s carrying value. If an asset is considered impaired, the asset is written down to fair value, which is determined based either on discounted cash flows or appraised value, depending on the nature of the asset. The Company has not identified any indicators of impairment during the years ended December 31, 2019 and 2018. Goodwill and Intangible Assets The Company recorded goodwill in connection with its acquisition of Hydro in July 2014. Goodwill is reviewed for impairment annually or more frequently when events or changes in circumstances indicate that fair value of the reporting unit has been reduced to less than its carrying value. The Company performs a quantitative impairment test annually during the fourth quarter by comparing the fair value of the reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill is considered not impaired. An impairment charge would be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value. The Company determined that it has one reporting unit. The Company completed this assessment as of December 31, 2019, and concluded that no impairment existed. Separable identifiable intangibles consist of intellectual property such as patents and trademarks, and capitalized website costs. Except for trademarks, which are not amortized, the Company’s separable identifiable intangible assets are subject to amortization on a straight-line basis over their estimated useful lives. Separable identifiable intangibles are also subject to evaluation for potential impairment if events or circumstances indicate the carrying value may not be recoverable. Fair Value Measurement The Company records its financial assets and liabilities at fair value. The accounting standard for fair value provides a framework for measuring fair value, clarifies the definition of fair value, and expands disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting standard establishes a three-tier hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value: Level 1 - inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 - inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 - inputs are unobservable inputs based on the Company’s assumptions used to measure assets and liabilities at fair value. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability. As of January 1, 2018, the Company had outstanding warrants to purchase 2,625,000 shares of the Company’s common stock that were issued in connection with Series 3 convertible notes (“Series 3 Warrants”) that provided for a reduction in the exercise price of the warrants in the event the Company issued common stock in a registered offering at a price below the exercise price. In such event, the exercise price under the warrants would be reduced to the price of the common stock in the dilutive issuance. The Company determined that these outstanding Series 3 Warrants, which were subject to the exercise price reduction, qualified as a derivative financial instrument. Accordingly, the Series 3 Warrants were marked to market at the end of each reporting period. Any change in fair value during the period was recorded in as gain (loss) on change in derivative liabilities in the Company’s consolidated statements of operations. During the year ended December 31, 2018, the Company issued 1,168,540 shares of its restricted common stock upon the cashless exercise of all of the outstanding Series 3 Warrants. The change in fair value in derivative liabilities of $21,403 during the year ended December 31, 2018 was recorded as gain on change in derivative liabilities in the Company’s consolidated statements of operations, and the Company extinguished the derivative liability of approximately $389,000 and recorded an increase in additional paid-in capital of the same amount during the year ended December 31, 2018. The following table sets forth movement in the derivative liability related to the Series 3 Warrants: Balance January 1, 2018 $ 410,880 Gain on change in derivative liability, net (21,403 ) Balance prior to exercise of associated warrants 389,477 Extinguishment of derivative liability on cashless exercise of associated warrants (389,477 ) Balance December 31, 2018 $ - Due to their short-term nature, the carrying values of cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses, approximate fair value. Derivative Financial Instruments The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company uses the Black-Scholes Option Pricing Model (the “Black-Scholes Model”) to value the derivative instruments. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within twelve months of the balance sheet date. As of December 31, 2019 and 2018, there were no derivative financial instruments. Revenue Recognition On January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2014-09 (Topic 606), Revenue from Contracts with Customers The following table sets forth the Company’s revenue by source: For the Years Ended 2019 2018 Equipment and systems sales $ 13,692,863 $ 8,288,102 Engineering and other services 1,239,130 1,040,764 Shipping and handling 292,461 243,072 Other revenue - 10,030 Total revenue $ 15,224,454 $ 9,581,968 Revenue Recognition Accounting Policy Summary The Company accounts for revenue in accordance with ASC 606. Under the revenue standard, a performance obligation is a promise in a contract with a customer to transfer a distinct good or service to the customer. Most of the Company’s contracts contain multiple performance obligations that include engineering and technical services as well as the delivery of a diverse range of climate control system equipment and components, which can span multiple phases of a customer’s project life-cycle from facility design and construction to equipment delivery and system installation and start-up. The Company does not provide construction services or system installation services. Some of the Company’s contracts with customers contain a single performance obligation, typically engineering only services contracts. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. When there are multiple performance obligations within a contract, the Company allocates the transaction price to each performance obligation based on standalone selling price. The Company determines the standalone selling price for each of the performance obligations at the inception of the contract and does not adjust the initial allocation for future changes in any selling prices. When estimating the selling price, the Company uses various observable inputs. The best observable input is the Company’s actual selling price for the same good or service, however, this input is generally not available for the Company’s contracts containing multiple performance obligations. For engineering services, the Company estimates the standalone selling price by reference to certain physical characteristics of the project, such as facility size and mechanical systems involved, which are indicative of the scope and complexity of the mechanical engineering services to be provided. For equipment sales, the standalone selling price is determined by forecasting the expected costs of the equipment and components and then adding an appropriate margin, based on a range of acceptable margins established by management. Depending on the nature of the performance obligations, the Company may use a combination of different methods and observable inputs if certain performance obligations have highly variable or uncertain standalone selling prices. Once the selling prices are determined, the Company applies the relative values to the total contract consideration and estimates the amount of the transaction price to be recognized as each promise is fulfilled. Generally, satisfaction occurs when control of the promised goods is transferred to the customer or as services are rendered or completed in exchange for consideration in an amount for which the Company expects to be entitled. The Company recognizes revenue for the sale of goods when control transfers to the customer, which primarily occurs at the time of shipment. The Company’s historical rates of return are insignificant as a percentage of sales and, as a result, the Company does not record a reserve for returns at the time the Company recognizes revenue. The Company has elected to exclude from the measurement of the transaction price all taxes (e.g., sales, use, value added, and certain excise taxes) that are assessed by a governmental authority in connection with a specific revenue-producing transaction and collected by the Company from the customer. Accordingly, the Company recognizes revenue net of sales taxes. The revenue and cost for freight and shipping is recorded when control over the sale of goods passes to the Company’s customers. The Company also has performance obligations to perform certain engineering services that are satisfied over a period of time. Revenue is recognized from this type of performance obligation as services are rendered based on the percentage completion towards certain specified milestones. The Company offers assurance-type warranties for its products and products manufactured by others to meet specifications defined by the contracts with customers and does not have any material separate performance obligations related to these warranties. The Company maintains a warranty reserve based on historical warranty costs. Other Judgments and Assumptions The Company typically receives customer payments in advance of its performance of services or transfers of goods. Applying the practical expedient in ASC 606-10-32-18, which the Company has elected, the Company does not adjust the promised amount of consideration for the effects of a significant financing component since the Company expects, at contract inception, that the period between when the Company transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less. Accordingly, the remaining performance obligations related to customer contracts does not consider the effects of the time value of money. Applying the practical expedient in ASC 340-40-25-4, the Company recognizes the incremental costs of obtaining contracts as an expense when incurred since the amortization period of the assets that the Company otherwise would have recognized is one year or less. These costs include certain sales commissions and incentives, which are included in selling, general and administrative expenses, and are payable only when associated revenue has been collected and earned by the Company. Contract Assets and Contract Liabilities Contract assets reflect revenue recognized and performance obligations satisfied in advance of customer billing. Contract liabilities relate to payments received in advance of the satisfaction of performance under the contract. The Company receives payments from customers based on the terms established in its contracts. Contract assets include unbilled amounts where revenue recognized exceeds the amount billed to the customer and the right of payment is conditional, subject to completing a milestone, such as a phase of a project. The Company typically does not have material amounts of contract assets since revenue is recognized as control of goods are transferred or as services are performed. As of December 31, 2019 and 2018, the Company had no contract assets. Contract liabilities consist of advance payments in excess of revenue recognized. The Company’s contract liabilities are recorded as a current liability in deferred revenue in the consolidated balance sheets since the timing of when the Company expects to recognize revenue is generally less than one year. As of December 31, 2019 and 2018, deferred revenue, which was classified as a current liability, was $1,444,472 and $641,798, respectively. For the year ended December 31, 2019, the Company recognized revenue of $473,682 related to the deferred revenue at January 1, 2019, or 74%. For the year ended December 31, 2018, the Company recognized revenue of $876,350 related to the deferred revenue at January 1, 2018, or 87%. Remaining Performance Obligations Remaining performance obligations, or backlog, represents the aggregate amount of the transaction price allocated to the remaining obligations that the Company has not performed under its customer contracts. The Company has elected not to use the optional exemption in ASC 606-10-50-14, which exempts an entity from such disclosures if a performance obligation is part of a contract with an original expected duration of one year or less. Accordingly, the information disclosed about remaining performance obligations includes all customer contracts, including those with an expected duration of one year or less. Industry uncertainty, project financing concerns, and the licensing and qualification of our prospective customers, which are out of the Company’s control, make it difficult for the Company to predict when it will recognize revenue on its remaining performance obligations. There are risks that the Company may not realize the full contract value on customer projects in a timely manner or at all, and completion of a customer’s cultivation facility project is dependent upon the customer’s ability to secure funding and real estate, obtain a license and then build their cultivation facility so they can take possession of the equipment. Accordingly, the time it takes for customers to complete a project, which corresponds to when the Company is able to recognize revenue, is driven by numerous factors including: (i) the large number of first-time participants interested in the indoor cannabis cultivation business; (ii) the complexities and uncertainties involved in obtaining state and local licensure and permitting; (iii) local and state government delays in approving licenses and permits due to lack of staff or the large number of pending applications, especially in states where there is no cap on the number of cultivators; (iv) the customer’s need to obtain cultivation facility financing; (v) the time needed, and coordination required, for our customers to acquire real estate and properly design and build the facility (to the stage when climate control systems can be installed); (vi) the large price tag and technical complexities of the climate control and air sanitation system; (vii) the availability of power; and (viii) delays that are typical in completing any construction project. Further, based on the current economic climate, the uncertainty regarding the COVID-19 virus, and the Company’s recent cost cutting measures, there is no assurance that the Company will be able fulfill its backlog, and the Company may experience contract cancellations, project scope reductions or project delays. As of December 31, 2019, the Company’s remaining performance obligations, or backlog, was $9,558,000, of which $5,903,000, or 62%, was attributable to customer contracts for which the Company has only received an initial advance payment to cover the allocated value of the Company’s engineering services (“engineering only paid contracts”). There is the risk that the equipment portion of these engineering only paid contracts will not be completed or will be delayed; these reasons include the customer being dissatisfied with the quality or timeliness of the Company’s engineering services, there is a delay or abandonment of the project because of the customer’s inability to obtain project financing or licensing, or other reasons such as a challenging business climate or change in business direction. After the customer has made an advance payment for a portion of the equipment to be delivered under the contract (“partial equipment paid contracts”), the Company is typically better able to estimate the timing of revenue recognition since the risks and delays associated with licensing, permitting and project funding are typically mitigated once the initial equipment payment is received. There is significant uncertainty regarding the timing of the Company’s recognition of revenue on its remaining performance obligations, and there is no certainty that these will result in actual revenues. The backlog at December 31, 2019 includes booked sales orders of $384,000 from several customers that the Company does not expect to be realized until 2022, if at all. The remaining performance obligations expected to be recognized through 2022 are as follows: 2020 2021 2022 Total Remaining performance obligations related to engineering only paid contracts $ 5,359,000 $ 271,000 $ 273,000 $ 5,903,000 Remaining performance obligations related to partial equipment paid contracts 3,130,000 414,000 111,000 3,655,000 Total remaining performance obligations $ 8,489,000 $ 685,000 $ 384,000 $ 9,558,000 Product Warranty The Company warrants the products that it manufactures for a warranty period equal to the lesser of 12 months from start-up or 18 months from shipment. The Company’s warranty provides for the repair, rework, or replacement of products (at the Company’s option) that fail to perform within stated specification. The Company’s third-party suppliers also warrant their products under similar terms, which are passed-through to the Company’s customers. The Company assesses the historical warranty claims on its manufactured products and, since 2016, warranty claims have been approximately 1% of annual revenue generated on these products. The Company continues to assess the need to record a warranty reserve at the time of sale based on historical claims and other factors. As of December 31, 2019 and 2018, the Company had an accrued warranty reserve amount of $185,234 and $144,822, respectively, which are included in accounts payable and accrued liabilities on the Company’s consolidated balance sheets. Concentrations One customer accounted for 44% of the Company’s revenue for the year ended December 31, 2019. No customers accounted for more than 10% of the Company’s revenue for the year ended December 31, 2018. The Company’s accounts receivable from three customers made up 59%, 16%, and 10%, respectively, of the total balance as of December 31, 2019. The Company’s accounts receivable from three customers made up 17%, 12%, and 11%, respectively, of the total balance as of December 31, 2018. Three suppliers accounted for 30%, 17% and 12% of the Company’s purchases of inventory for the year ended December 31, 2019, and one supplier accounted for 39% of the Company’s purchases of inventory for the year ended December 31, 2018. Product Development The Company expenses product development costs as incurred. Internal product development costs are expensed as incurred, and third-party product developments costs are expensed when the contracted work has been performed or as milestone results have been achieved. For the years ended December 31, 2019 and 2018, the Company incurred $521,044 and $317,713, respectively, on product development. Accounting for Share-Based Compensation The Company recognizes the cost resulting from all share-based compensation arrangements, including stock options, restricted stock awards and restricted stock units that the Company grants under its equity incentive plan in its consolidated financial statements based on their grant date fair value. For awards subject to service conditions, compensation expense is recognized over the vesting period on a straight-line basis. Awards subject to performance conditions are attributed separately for each vesting tranche of the award and are recognized ratably from the service inception date to the vesting date for each tranche, based on the probability of vesting. The probability of awards with future performance conditions is evaluated each reporting period and compensation expense is adjusted based on the probability assessment. Awards are considered granted, and the service inception date begins, when mutual understanding of the key terms and conditions of the award between the Company and the recipient has been established. For awards that provide discretion to adjust the amount of the award, the service inception date for such awards could precede the grant date as a mutual understanding of the key terms and conditions of the award between the Company and the recipient has not yet been established. For awards in which the service inception date precedes the grant date, compensation cost is accrued beginning on the service inception date. Subsequent to December 31, 2019, the Company’s Board of Directors (the “Board”) approved annual incentive compensation awards to certain employees and the Company’s independent directors payable in non-qualified stock options, based on the Company’s performance and each employee’s and director’s contributions to such performance for the 2019 year. See Note 16. The non-qualified stock options were granted subsequent to December 31, 2019, were not subject to an additional service requirement and were immediately vested at the date of the grant. The final amount of the annual incentive compensation award, and number of non-qualified stock options granted, were determined, and communicated to the employee, subsequent to December 31, 2019. The estimated compensation expense of $503,466 related to the 2019 incentive awards was accrued as of December 31, 2019. Since such incentive awards will be settled in non-qualified stock options, the accrued compensation expense has been classified as a current liability until the number of non-qualified stock options is fixed pursuant to a grant by the Board. At that time, the incentive award becomes equity-classified. The grant date fair value of stock options is based on the Black-Scholes Model. The Black-Scholes Model requires judgmental assumptions including volatility and expected term, both based on historical experience. The risk-free interest rate is based on U.S. Treasury interest rates whose term is consistent with the expected term of the option. The grant date fair value of restricted stock and restricted stock units is based on the closing price of the underlying stock on the date of the grant. The Company has elected to reduce share-based compensation expense for forfeitures as the forfeitures occur since the Company does not have historical data or other factors to appropriately estimate the expected employee terminations and to evaluate whether particular groups of employees have significantly different forfeiture expectations. In June 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-07, Compensation — Stock Compensation (Topic 718) — Improvements to Nonemployee Share-Based Payment Accounting Topic 718 Topic 718 Share-based compensation costs (including accrued compensation expense related to the 2019 incentive awards settled in non-qualified stock options after December 31, 2019) totaled $1,292,065 and $2,029,430 for the years ended December 31, 2019 and 2018, respectively. Such share-based compensation costs are classified in the Company’s consolidated financial statements in the same manner as if such compensation was paid in cash. The following is a summary of such share-based compensation costs included in the Company’s consolidated statements of operations for the years ended December 31, 2019 and 2018: For the Years Ended 2019 2018 Share-based compensation costs included in: Cost of revenue $ 91,081 $ 100,736 Advertising and marketing expenses 33,977 7,671 Product development costs 45,330 4,548 Selling, general and administrative expenses 1,121,677 1,916,475 Total share-based compensation expense included in consolidated statement of operations $ 1,292,065 $ 2,029,430 Income Taxes The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, the Company determines deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. The Company recognizes deferred tax assets to the extent that the Company believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If the Company determines that it would be able to realize its deferred tax assets in the future in excess of their net recorded amount, the Company would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. The Company records uncertain tax positions on the basis of a two-step process in which: (i) the Company determines whether it is more likely than not that the tax positions will |
Going Concern
Going Concern | 12 Months Ended |
Dec. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Going Concern | Note 3 – Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has experienced recurring losses since its inception. The Company incurred a net loss of approximately $1,338,600 for the year ended December 31, 2019, and had an accumulated deficit of approximately $25,685,000 and a shareholders’ deficit of approximately $356,000 as of December 31, 2019. Since inception, the Company has financed its activities principally through debt and equity financing, advance payments from customers and revenues from completed contracts. Management expects to incur additional losses and cash outflows in the foreseeable future in connection with its operating activities. The Company is subject to a number of risks similar to those of other similar stage and situated companies, including general economic conditions, its customers’ operations and prospects for and ability to obtain project financing, and market and business disruptions, including the disruptions from and response to the recent outbreak of COVID-19, a novel strain of coronavirus first identified in China; dependence on key individuals, successful development, marketing and branding of products; uncertainty of product development and generation of revenues; dependence on outside sources of financing; risks associated with research, development; dependence on third-party suppliers and collaborators; protection of intellectual property; and competition with larger, better-capitalized companies. Ultimately, the attainment of profitable operations is dependent on future events, including obtaining adequate financing to fulfill its development activities and generating a level of revenues adequate to support the Company’s cost structure. There can be no assurance that the Company will be able to raise debt or equity financing in sufficient amounts, when and if needed, on acceptable terms or at all. The Company’s ability to raise equity capital is also limited by the Company’s stock price, and any such issuance could be highly dilutive to existing shareholders. While the Company’s 2019 revenue of approximately $15,224,000 represents an increase of 59% over the prior year, the Company’s revenue recognition on contracts continues to be unpredictable and inconsistent quarter-over-quarter, and the Company has incurred, and expects to incur, additional operating expenses to support such growth. The Company generated approximately $672,000 in cash flow from operating activities in 2019. However, as a result of the Company’s growth and its efforts to expand and upgrade its products, the Company’s working capital deficit as of December 31, 2019 was approximately $1,437,000, compared to approximately $1,031,000 as of December 31, 2018. However, the Company’s 2019 year-end working capital deficit includes $503,000 of accrued compensation expense that was paid in stock options in the first quarter of 2020. See Note 16. A number of recent events have had an adverse impact on the Company’s operations and financial condition, including constraints on capital availability for the Company’s customers and prospects who have commenced, or are contemplating, new or expanded cultivation facilities and the recent outbreak of a novel strain of coronavirus, which has spread across the globe including the U.S. As a result of these events, the Company has assessed its near-term operations, working capital, finances and capital formation opportunities, and implemented, in late March 2020, a downsizing of its operations, including workforce reductions, reductions of salaried employee compensation and a reduction of hours worked to preserve cash resources, cut costs and focus its operations on customer-centric sales and project management activities. In addition, any potential government mandate to limit non-essential work would have a material adverse effect on management’s revised plans. The extent to which COVID-19 will impact the Company’s business and financial results will depend on future developments, which are uncertain and cannot be predicted. See Note 16. The duration and likelihood of success of this downsizing effort, workforce reduction and cost-cutting measures are uncertain. If these actions do not meet management’s expectations, or additional capital is not available, there is substantial doubt about the Company’s ability to continue as a going concern. Other factors that will impact the Company’s ability to continue operations include the market demand for the Company’s products and services, the ability to service its customers and prospects with a reduced workforce, potential contract cancellations, project scope reductions and project delays, the Company’s ability to fulfill its backlog, the management of working capital, and the continuation of normal payment terms and conditions for purchase of the Company’s products. The Company believes its cash balances and cash flow from operations will be insufficient to fund its operations for the next twelve months. If the Company is unable to increase revenues, or otherwise generate cash flows from operations, there is substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the date the financial statements are issued. These consolidated financial statements do not include any adjustment that might result from the outcome of this uncertainty. |
Leases
Leases | 12 Months Ended |
Dec. 31, 2019 | |
Leases [Abstract] | |
Leases | Note 4 – Leases In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) The new lease standard provides a number of optional practical expedients in transition. The Company has elected to apply the “package of practical expedients” which allow the Company to not reassess: (i) whether existing or expired arrangements contain a lease, (ii) the lease classification of existing or expired leases, or (iii) whether previous initial direct costs would qualify for capitalization under the new lease standard. The Company has also elected to apply the short-term lease exemption for all leases with an original term of less than 12 months, for purposes of applying the recognition and measurements requirements in the new lease standard. On June 27, 2017, the Company entered into a lease for its manufacturing and office space (the “Facility Lease”), which commenced September 29, 2017 and continues through August 31, 2022. The Company occupied its 12,700 square foot space for $12,967 per month until January 1, 2018. On January 2, 2018, the leased space was expanded to 18,600 square feet, and the monthly rental rate increased to $18,979 until August 31, 2018. Beginning September 1, 2018 and 2019, the monthly rent increased to $19,549 and $20,135, respectively. On each September 1 through the end of the lease, the monthly rent will increase by 3%. Pursuant to the current lease, the Company made a security deposit of $51,000 on July 31, 2017. The Company has the option to renew the Facility Lease for an additional five years. Total rent under the Facility Lease is charged to expense over the term of the lease on a straight-line basis, resulting in the same monthly rent expense throughout the lease. The difference between the rent expense amount and the actual rent paid is recorded to operating lease liability on the Company’s condensed consolidated balance sheets. As of January 1, 2019, the remaining deferred rent of $26,477 was reclassified to the operating lease liability under the new lease standard. Upon adoption of the new lease standard, the Company recognized its lease for manufacturing and office space (the “Facility Lease”) on the balance sheet as an operating lease right-of-use asset in the amount of $714,416 and as a lease liability of $822,374. The renewal option to extend the Facility Lease is not included in the right-of-use asset or lease liability as the option is not reasonably certain of exercise. The Company regularly evaluates the renewal option and when it is reasonably certain of exercise, the Company will include the renewal period in its lease term. Under the Facility Lease, the landlord agreed to pay the Company or the Company’s contractors for tenant improvements made by the Company not to exceed $100,000, which were used for normal tenant improvements. The Company determined that these improvements were not specialized and could be utilized by a subsequent tenant and, as such, the improvements were considered assets of the lessor. As of January 1, 2019, the unamortized amount of tenant improvement allowance of $81,481 was treated as a reduction in measuring the right-of-use asset. Under the Facility Lease, the Company pays the actual amounts for property taxes and insurance, excludes such payments from lease contract consideration, and records such payments as incurred. The Company also pays the landlord for common area maintenance, which is considered a nonlease component. For the Facility Lease, the Company has elected to exclude nonlease components from lease contract consideration. In determining the right-of-use asset and lease liability, the Company applied a discount rate to the minimum lease payments under the Facility Lease. ASC 842 requires the Company to use the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Since the discount rate is not implicit in the lease agreement, we utilized an estimated incremental borrowing rate provided by the Company’s depository bank. The lease cost, cash flows and other information related to the Facility Lease were as follows: For the Year Ended December 31, 2019 Operating lease cost $ 216,889 Operating cash outflow from operating lease $ 236,930 As of Operating lease right-of-use assset $ 534,133 Operating lease liability, current $ 217,843 Operating lease liability, long-term $ 404,209 Remaining lease term 2.7 years Discount rate 5.00 % Future annual minimum lease payments on the Facility Lease as of December 31, 2019 were as follows: Years Ended December 31, 2020 $ 244,038 2021 251,360 2022 170,891 Total minimum lease payments 666,289 Less imputed interest (44,237 ) Present value of minimum lease payments $ 622,052 |
Inventory
Inventory | 12 Months Ended |
Dec. 31, 2019 | |
Inventory Disclosure [Abstract] | |
Inventory | Note 5 – Inventory Inventory consisted of the following: As of December 31, 2019 2018 Finished goods $ 1,041,369 $ 869,895 Work in progress 3,851 9,080 Raw materials 257,399 352,258 Allowance for excess & obsolete inventory (71,376 ) (295,347 ) Inventory, net $ 1,231,243 $ 935,886 Overhead expenses of $31,831 and $34,000 were included in the inventory balance as of December 31, 2019 and 2018, respectively. |
Property and Equipment
Property and Equipment | 12 Months Ended |
Dec. 31, 2019 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | Note 6 – Property and Equipment Property and equipment consisted of the following: As of December 31, 2019 2018 Furniture and equipment $ 389,090 $ 386,047 Equipment held for lease - 176,042 Vehicles 15,000 15,000 Leasehold improvements 215,193 215,193 619,283 792,282 Accumulated depreciation (361,360 ) (271,961 ) Property and equipment, net $ 257,923 $ 520,321 Depreciation expense amounted to $157,860 for the year ended December 31, 2019, of which $7,010 was allocated to cost of revenue. Depreciation expense amounted to $158,683 for the year ended December 31, 2018, of which $7,940 was allocated to cost of revenue. As of December 31, 2018, the Company’s property and equipment, net included the gross cost of the equipment leased to a cultivation company affiliated with one of the Co-founders of $176,042, and accumulated depreciation of $39,120. During the year ended December 31, 2019, the Company wrote-off the carrying value of the leased equipment. See Note 9. |
Intangible Assets
Intangible Assets | 12 Months Ended |
Dec. 31, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets | Note 7 – Intangible Assets Intangible assets consisted of the following: As of December 31, 2019 2018 Patents $ 12,234 $ 20,012 Website development costs 22,713 22,713 Trademarks 1,830 1,830 36,777 44,555 Accumulated amortization (24,847 ) (21,527 ) Intangible assets, net $ 11,930 $ 23,028 Patents when issued are amortized over 14 years, and web site development costs are amortized over five years. Trademarks are not amortized since they have an indefinite life. Amortization expense for intangibles amounted to $3,320 and $5,017 for the years ended December 31, 2019 and 2018, respectively. During the year ended December 31, 2019, the Company wrote-off $7,778 related to patents that had been abandoned. |
Accounts Payable and Accrued Li
Accounts Payable and Accrued Liabilities | 12 Months Ended |
Dec. 31, 2019 | |
Payables and Accruals [Abstract] | |
Accounts Payable and Accrued Liabilities | Note 8 – Accounts Payable and Accrued Liabilities Accounts payable and accrued liabilities consisted of the following: As of December 31, 2019 2018 Accounts payable $ 1,299,015 $ 1,278,678 Sales commissions payable 69,532 56,277 Accrued payroll liabilities 169,052 127,915 Product warranty accrual 185,234 144,822 Other accrued expenses 110,127 309,395 Total $ 1,832,959 $ 1,917,087 |
Related Party Agreements and Tr
Related Party Agreements and Transactions | 12 Months Ended |
Dec. 31, 2019 | |
Related Party Transactions [Abstract] | |
Related Party Agreements and Transactions | Note 9 – Related Party Agreements and Transactions Agreements and Transaction with Company’s Co-Founders The following describes certain agreements and transactions between the Company and its co-founders (the “Co-founders”). The Co-founders held various executive officer and director positions with the Company until May 2018. One of the Co-founders also was a consultant to the Company until May 2018. The Co-founders are also shareholders of the Company. Based on information available to the Company, the Co-founders did not own more than 10% of the Company’s outstanding common stock at any time during 2019. Consulting Agreement In May 2017, the Company entered into a three-year consulting agreement with one of the Co-founders to provide certain consulting services to the Company including research and development, new product design and innovations, existing product enhancements and improvements, and other technology advancements with respect to the Company’s business and products in exchange for an annual consulting fee of $30,000. Pursuant to the terms of the consulting agreement, the Company recorded consulting fees of $10,000 during the year ended December 31, 2018. In May 2018, the consulting agreement was terminated by the parties. Equipment, Demonstration and Product Testing Agreement In May 2017, the Company entered into a three-year equipment, demonstration and product testing agreement with a licensed cannabis cultivation company affiliated with one of the Co-founders. Under this agreement, the Company agreed to lease the cultivation company certain cultivation equipment in exchange for a quarterly fee of $16,500, which was increased to $18,330 to reflect additional leased equipment requested by the cultivation company (the “Lease Fee”). In consideration for access to the cultivation facility to conduct demonstration tours and for the product testing and data to be provided by the cultivation company, the Company agreed to pay the cultivation company a quarterly fee of $12,000 (the “Demo and Testing Fee”). The Company and the cultivation company each made their respective payments under this agreement through June 30, 2018. Thereafter, the cultivation company failed to make any subsequent payments of the Lease Fee and, as a result, the Company did not pay the Demo and Testing Fee. During the second quarter of 2019, the Company notified the cultivation company of its breach for non-payment of the Lease Fee. In February 2020, the parties mutually agreed to terminate this agreement and release each other from all claims related to this agreement, including any unpaid Lease Fees or Demo and Testing Fees. The Company also agreed to transfer the equipment to the cultivation company for no additional consideration. See Note 16. During the year ended December 31, 2018, the Company recorded Demo and Testing Fees of $32,000 as operating expenses in the consolidated statements of operations. During the year ended December 31, 2018, the Company also recorded Lease Fees of $48,880 as “Other income, net” in the consolidated statements of operations. As of December 31, 2018, unpaid Lease Fees of $36,660 were included in accounts receivable and unpaid Demo and Testing Fees of $24,000 were included in accounts payable. During the third quarter of 2019, the Company determined that it was unlikely that any further payment of Lease Fees would be paid by the cultivation company, and the Company: (i) wrote off the balance of the accounts receivable related to unpaid Lease Fees, with a corresponding charge to “Other income, net” in the consolidated statements of operations, (ii) reversed the accounts payable related to the unpaid Demo and Testing Fees, with a corresponding credit to operating expenses, and (iii) wrote-off the remaining carrying value of the leased equipment of $107,581, which was included in property and equipment on the Company’s consolidated balance sheet. For the year ended December 31, 2019, the net impact of the foregoing items on the consolidated statements of operations was a charge of $120,241. Employment Agreement In May 2018, the Company and one of the Co-founders entered into an employment agreement which provided for an initial base salary of $150,000 per year and certain sales incentive. Pursuant to the employment agreement, the Company awarded 4,800,000 restricted stock units (“RSUs”) to the Co-founder that vested at certain dates in the future, subject to the co-founder’s continued employment. As of December 31, 2019: (i) the Company has issued 2,000,000 shares of common stock in settlement of vested RSUs, (ii) 1,000,000 shares of common stock in settlement of RSUs that vested December 31, 2019 were issued subsequent to December 31, 2019, (iii) the parties mutually agreed to cancel 1,000,000 RSUs, and (iii) 800,000 RSUs are scheduled to vest on April 30, 2020. Stock Repurchase Agreement In May 2018, the Company and the Co-founders entered into a stock repurchase agreement, pursuant to which the Company agreed to repurchase from the Co-founders certain shares of the Company’s common stock, subject to the closing of a private placement offering to accredited investors of the Company’s common stock, which occurred during the second quarter of 2018. In June 2018, the Company closed the transaction under the stock repurchase agreement and repurchased 3,125,000 shares of the Company’s common stock from the Co-founders for a total purchase price of $400,000. See Note 11. Purchase of Preferred Stock In May 2018, the Company and the Co-founders entered into a preferred stock option agreement under which the Company had the right, but not the obligation, to acquire all 35,189,669 shares of preferred stock owned by the Co-founders (the “Preferred Stock”) on or before April 30, 2020. Pursuant to the preferred stock option agreement, upon exercise of the option by the Company, the Company agreed to issue one share of the Company’s common stock for each 1,000 shares of Preferred Stock purchased by the Company. As consideration for the Co-founders’ grant of the option, the Company paid them $5,000. The Company exercised this option and, in December 2018, completed the repurchase of the Preferred Stock and issued 35,190 shares of the Company’s common stock to the Co-founders. See Note 11. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 10 – Commitments and Contingencies Litigation As of December 31, 2019, there were 6,750,000 restricted stock units that had not been settled due to a dispute with a former employee over the required withholding taxes to be paid to the Company for remittance to the appropriate tax authorities. The Company commenced an arbitration action against the former employee regarding the dispute. The former employee also made claims in the arbitration action against the Company for unpaid wages. As stated in a pleading in the arbitration, on March 9, 2020, the Company issued the former employee 6,750,000 shares of the Company’s common stock in settlement of these restricted stock units after taking measures to mitigate the Company’s exposure to penalties and liability for the failure to properly withhold income taxes. See Note 16. From time to time, in the normal course of its operations, the Company is subject to litigation matters and claims. Litigation can be expensive and disruptive to normal business operations. Moreover, the results of complex legal proceedings are difficult to predict and the Company’s view of these matters may change in the future as the litigation and events related thereto unfold. The Company expenses legal fees as incurred. The Company records a liability for contingent losses when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. An unfavorable outcome to any legal matter, if material, could have an adverse effect on the Company’s operations or its financial position, liquidity or results of operations. Other Commitments In the ordinary course of business, the Company may provide indemnifications of varying scope and terms to customers, vendors, lessors, business partners, and other parties with respect to certain matters, including, but not limited to, losses arising out of the Company’s breach of such agreements, services to be provided by the Company, or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with its directors and certain of its officers and employees that will require the Company to, among other things, indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers, or employees. The Company maintains director and officer insurance, which may cover certain liabilities arising from its obligation to indemnify its directors and certain of its officers and employees, and former officers, directors, and employees of acquired companies, in certain circumstances. |
Preferred and Common Stock
Preferred and Common Stock | 12 Months Ended |
Dec. 31, 2019 | |
Equity [Abstract] | |
Preferred and Common Stock | Note 11 – Preferred and Common Stock Preferred Stock In May 2018, the Company acquired an option to purchase 35,189,669 shares of preferred stock owned by the Co-founders. The Company paid the Co-founders $5,000 for this option. The Company exercised this option and, in December 2018, completed the repurchase by these shares of preferred stock and issued 35,190 shares of the Company’s common stock to the Co-founders. The Company recorded the purchase price for the repurchased shares as a reduction to preferred stock at par value with the remainder of the purchase price reflected as an increase to accumulated deficit. As of December 31, 2019 and 2018, there were 42,030,331 shares of Series A preferred stock, par value $0.00001 per share, issued and outstanding. The holders of Series A preferred stock have one vote per share of Series A preferred stock equivalent to one vote of the Company’s common stock. The Series A preferred stock ranks senior to the Company’s common stock. The holders of shares of Series A preferred stock are not entitled to receive dividends and have no conversion or preemptive rights. Upon liquidation, dissolution or winding up of the Company’s business, after payment to the holders of any senior securities, the holders of Series A preferred stock are entitled to receive a preferential cash payment per share of Series A preferred stock equal to the stated value of the preferred stock, prior to any payment to the holders of common stock. Common Stock During the year ended December 31, 2019, the Company did not issue any shares of its common stock in a private, non-registered transaction. During the year ended December 31, 2018, the Company issued shares of its common stock in private, non-registered transactions as follows: ● 100,000 shares upon the exercise of certain warrants by an investor and payment of the exercise price of $15,000; ● 1,498,325 shares upon the exercise of certain warrants by a former director on a cashless exercise basis; ● 1,168,540 shares upon exercise of certain warrants by investors on a cashless exercise basis; ● 800,000 shares in connection with the settlement of a commercial dispute; ● 273,675 shares to consultants as compensation for services rendered; ● 31,562 shares to certain employees under a sales incentive plan; ● 7,562,500 shares of common stock were issued to accredited investors in a unit offering completed in June 2018 (see Note 12); and ● 35,190 shares of common stock were issued to the Co-founders in December 2018 in connection with the Company’s exercise of the preferred stock option (see Note 9). During the year ended December 31, 2019, the Company issued shares of its common stock under the Company’s 2017 Equity Plan as follows: ● 197,370 shares of common stock were issued to independent directors in lieu of cash director fees; ● 789,474 shares of common stock were issued to independent directors as the 2019 equity retainer fee; ● 1,120,000 shares of common stock were issued to certain employees in settlement of vested restricted stock units; and ● 1,120,000 shares of common stock were issued to certain employees as a stock incentive bonus. During the year ended December 31, 2018, the Company also issued shares of its common stock under the Company’s 2017 Equity Plan as follows: ● 345,454 shares of common stock were issued to independent directors in lieu of cash director fees; ● 5,447,368 shares of common stock were issued to certain employees and independent directors in settlement of vested restricted stock units; ● 3,420,000 shares of common stock were issued to certain employees as a stock incentive bonus; ● 1,158,658 shares of common stock were issued to a consultant as compensation for services rendered in lieu of cash fees and a bonus fee; and ● 25,000 shares of common stock were issued to a former employee upon exercise of certain non-qualified stock options. In June 2018, the Company repurchased 3,125,000 shares of the Company’s common stock from the Co-founders for a repurchase price of $400,000. See Note 9. Following the repurchase, the Company retired these shares and returned them to unauthorized and unissued shares. The Company recorded the purchase price for the repurchased shares as a reduction to common stock at par value with the remainder of the purchase price reflected as an increase to accumulated deficit. |
Unit Offering
Unit Offering | 12 Months Ended |
Dec. 31, 2019 | |
Unit Offering | |
Unit Offering | Note 12 – Unit Offering In June 2018, the Company completed a private placement offering of investment units, at a price of $0.16 per unit, with certain accredited investors. Each unit consisted of one share of the Company’s common stock and one warrant for the purchase of one share of the Company’s common stock (the “Q2 2018 Warrants”). The Company issued a total of 7,562,500 units for aggregate proceeds of $1,210,000, with $400,000 from the proceeds used to repurchase shares of common stock from the Co-founders. |
Outstanding Warrants
Outstanding Warrants | 12 Months Ended |
Dec. 31, 2019 | |
Equity [Abstract] | |
Outstanding Warrants | Note 13 – Outstanding Warrants Series 2 Warrants In October 2014, the Company offered up to 60 investment units at a price per unit of $50,000. Each unit consisted of (i) 250,000 shares of the Company’s common stock, (ii) a $50,000 10% convertible promissory note (“Series 2 Convertible Note”), and (iii) warrants for the purchase of 50,000 shares of the Company’s common stock (“Series 2 Warrants”). As of December 31, 2018, Series 2 Warrants to purchase 901,250 shares of common stock were outstanding, all of which expired unexercised during the year ended December 31, 2019. Warrants Issued to Investment Bank Pursuant to a certain agreement for services rendered in connection with the conversion of the Series 2 Convertible Notes, during the year ended December 31, 2017, the Company issued to an investment bank or its designees a warrant (“Banker Warrant”) to purchase, at an exercise price $0.35 per share, 500,000 shares of the Company’s common stock. The Banker Warrants were fully vested on the date of issuance, were exercisable beginning December 20, 2017 and expire June 20, 2020. As of December 31, 2019, the Banker Warrant is outstanding. Q1 2017 Warrants In March 2017, the Company issued 16,781,250 investment units, for aggregate gross proceeds of $2,685,000, or $0.16 per unit. Each unit consisted of one share of the Company’s common stock and one warrant for the purchase of one share of the Company’s common stock (“Q1 2017 Warrants”); however, one investor declined receipt of the warrant to purchase 468,750 shares of the Company’s common stock. Pursuant to the Q1 2017 Warrants, the holder thereof may at any time on or after six months after the issuance date and on or prior to the close of business on the date that is the third anniversary of the issuance date, purchase up to the number of shares of the Company’s common stock as set forth in the respective warrant. The exercise price per share of the common stock under the Q1 2017 Warrants is $0.26, subject to customary adjustments as provided in the warrant. Each Q1 2017 Warrant is callable at the Company’s option commencing six months from the issuance date, provided the closing price of the Company’s common stock is $0.42 or greater for five consecutive trading days. Commencing at any time after the date on which such call condition is satisfied, the Company has the right, upon 30 days’ notice to the holder, to redeem the warrant shares at a price of $0.01 per warrant share. The holder may exercise the warrant at any time (in whole or in part) prior to the redemption date at the exercise price. As of December 31, 2019, Q1 2017 Warrants to purchase 16,312,500 shares of common stock were outstanding. See Note 16. Q4 2017 Warrants In December 2017, the Company issued 14,734,000 investment units for aggregate proceeds of $1,768,080, or $0.12 per unit. Each unit consisted of one share of the Company’s common stock and one warrant for the purchase of one share of the Company’s common stock (“Q4 2017 Warrants”). The Q4 2017 Warrants have an exercise price of $0.20 per share, subject to customary adjustments as provided in the warrant, and have a term of three years. The Q4 2017 Warrants are callable at the Company’s option, provided the closing price of the Company’s common stock is $0.36 or greater for five consecutive trading days. Commencing at any time after the date on which the call condition is satisfied, the Company has the right, upon notice to the holders, to redeem the shares of common stock underlying each warrant at a price of $0.01 per share, but such redemption may not occur earlier than sixty-one (61) days following the date of the receipt of notice by the holder. The holder may exercise the warrant at any time (in whole or in part) prior to the redemption date at the exercise price. As of December 31, 2019, Q4 2017 Warrants to purchase 14,734,000 shares of common stock were outstanding. Q2 2018 Warrants In June 2018, the Company completed a private placement offering of investment units, with each unit consisting of one share of the Company’s common stock and one Q2 2018 Warrant. See Note 12. The Q2 2018 Warrants have an exercise price of $0.25 per share of the common stock underlying each warrant, subject to customary adjustments as provided in the warrant. The Q2 2018 Warrants are exercisable commencing July 1, 2018 until June 30, 2021. The Q2 2018 Warrants are callable at the Company’s option, beginning on July 1, 2019 until the expiration thereof on June 30, 2021, provided the closing price of the Company’s common stock is $0.40 (subject to adjustment as provided in the warrant) or greater for five consecutive trading days. Commencing at any time after the date on which the call condition is satisfied, the Company has the right, upon notice to the holders, to redeem the shares of common stock underlying each warrant at a price of $0.01 per share, but such redemption may not occur earlier than sixty-one (61) days following the date of the receipt of notice by the holder. The holder may exercise the warrant (in whole or in part) prior to the redemption date at the exercise price. As of December 31, 2019, Q2 2018 Warrants to purchase 7,562,500 shares of common stock were outstanding. |
Equity Incentive Plan
Equity Incentive Plan | 12 Months Ended |
Dec. 31, 2019 | |
Share-based Payment Arrangement [Abstract] | |
Equity Incentive Plan | Note 14 – Equity Incentive Plan On August 1, 2017, the Board adopted and approved the Company’s 2017 Equity Incentive Plan (the “2017 Equity Plan”) in order to attract, motivate, retain, and reward high-quality executives and other employees, officers, directors, consultants, and other persons who provide services to the Company by enabling such persons to acquire an equity interest in the Company. Under the 2017 Equity Plan, the Board (or the compensation committee of the Board, if one is established) may award stock options, stock appreciation rights (“SARs”), restricted stock awards (“RSAs”), restricted stock unit awards (“RSUs”), shares granted as a bonus or in lieu of another award, and other stock-based performance awards. The 2017 Equity Plan allocates 50,000,000 shares of the Company’s common stock (“Plan Shares”) for issuance of equity awards under the 2017 Equity Plan. As of December 31, 2019, the Company has granted, under the 2017 Equity Plan, awards in the form of RSAs for services rendered by independent directors and consultants, non-qualified stock options, RSUs and stock bonus awards. The total unrecognized compensation expense for unvested non-qualified stock options and RSUs at December 31, 2019 was $96,939, which will be recognized over 1.0 years. Restricted Stock Awards During the year ended December 31, 2018, the Company awarded 1,406,055 shares of restricted stock under the 2017 Equity Plan in consideration of services rendered by the Company’s independent directors and certain consultants. These restricted shares were fully vested at the time of the award and the aggregate value attributable to these shares was $301,650, as calculated using the fair value of the Company’s common stock on date the Board approved these awards. As of December 31, 2018, the Company had accrued fees owed to the Company’s independent directors totaling $15,000, which were payable in equity. During the year ended December 31, 2019, the Company issued 197,370 shares of restricted stock, which were fully vested at the time of the award, in settlement of these accrued fees. During the year ended December 31, 2019, the Company also awarded 789,474 shares of restricted stock under the 2017 Equity Plan to the Company’s independent directors and consultants as an equity retainer fee for 2019. These restricted shares were fully vested at the time of the award and the aggregate value attributable to these shares was $60,000, as calculated using the fair value of the Company’s common stock on date the Board approved these awards. Non-Qualified Stock Options The Company uses the Black-Scholes Model to determine the fair value of options granted. Option-pricing models require the input of highly subjective assumptions, particularly for the expected stock price volatility and the expected term of options. Changes in the subjective input assumptions can materially affect the fair value estimate. The expected stock price volatility assumptions are based on the historical volatility of the Company’s common stock over periods that are similar to the expected terms of grants and other relevant factors. The Company derives the expected term based on an average of the contract term and the vesting period taking into consideration the vesting schedules and future employee behavior with regard to option exercise. The risk-free interest rate is based on U.S. Treasury yields for a maturity approximating the expected term calculated at the date of grant. The Company has never paid any cash dividends on its common stock and the Company has no intention to pay a dividend at this time; therefore, the Company assumes that no dividends will be paid over the expected terms of option awards. The Company determines the assumptions used in the valuation of option awards as of the date of grant. Differences in the expected stock price volatility, expected term or risk-free interest rate may necessitate distinct valuation assumptions at those grant dates. As such, the Company may use different assumptions for options granted throughout the year. The valuation assumptions used to determine the fair value of each option award on the date of grant were: expected stock price volatility 114.32% - 118.90%; expected term in years 1.5 - 7.5 and risk-free interest rate 1.32% - 2.87%. A summary of the non-qualified stock options granted to employees and consultants under the 2017 Equity Plan during the years ended December 31, 2019 and 2018 are presented in the table below: Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding, December 31, 2017 10,235,000 $ 0.121 8.7 $ 1,218,375 Granted 6,500,000 $ 0.118 Exercised (25,000 ) $ 0.135 Forfeited (6,083,332 ) $ 0.147 Expired (66,668 ) $ 0.135 Outstanding, December 31, 2018 10,560,000 $ 0.104 8.4 $ - Granted 2,000,000 $ 0.080 Exercised - - Forfeited (2,408,333 ) $ 0.116 Expired (16,667 ) $ 0.105 Outstanding, December 31, 2019 10,135,000 $ 0.096 7.7 $ - Exercisable, December 31, 2019 8,135,000 $ 0.098 7.4 $ - Outstanding vested and expected to vest, December 31, 2019 10,135,000 $ 0.096 7.7 $ - A summary of non-vested non-qualified stock options activity for employees and consultants under the 2017 Equity Plan for the years ended December 31, 2019 and 2018 are presented in the table below: Number of Options Weighted Average Grant-Date Fair Value Aggregate Intrinsic Value Grant-Date Fair Value Nonvested, December 31, 2017 8,349,992 $ 0.107 $ 1,000,499 $ 891,855 Granted 6,500,000 $ 0.102 $ 663,569 Vested (1,433,331 ) $ 0.088 $ 125,988 Forfeited (6,083,332 ) $ 0.132 $ 800,680 Expired - - $ - Nonvested, December 31, 2018 7,333,329 $ 0.086 $ - $ 628,756 Granted 2,000,000 $ 0.065 $ 130,120 Vested (4,924,996 ) $ 0.074 $ 362,998 Forfeited (2,408,333 ) $ 0.102 $ 246,344 Expired - - $ - Nonvested, December 31, 2019 2,000,000 $ 0.075 $ - $ 149,534 For the years ended December 31, 2019 and 2018, the Company recorded $390,485 and $148,013 as compensation expense related to vested options issued to employees and consultants, net of forfeitures, respectively. As of December 31, 2019, total unrecognized share-based compensation related to unvested options was $71,777. As of December 31, 2019, the Company had granted non-qualified options to purchase 10,250,000 shares which were performance-based. At December 31, 2019, non-qualified options to purchase 6,000,000 shares were forfeited due to the failure to satisfy the 2017, 2018 and 2019 revenue-based performance thresholds and 4,250,000 shares were forfeited due to employee terminations. No compensation expense had been recognized with respect to these performance-based awards since the likelihood of performance levels being obtained was determined to be remote. A summary of the non-qualified stock options granted to directors under the 2017 Equity Plan during the years ended December 31, 2019 and 2018 are presented in the table below: Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value ($000) Outstanding, December 31, 2017 900,000 $ 0.135 9.6 $ 94,500 Granted - - Exercised - - Forfeited/Cancelled - - Expired - - Outstanding, December 31, 2018 900,000 $ 0.135 8.6 $ - Granted - - Exercised - - Forfeited/Cancelled - - Expired - - Outstanding, December 31, 2019 900,000 $ 0.135 7.6 $ - Exercisable, December 31, 2019 900,000 $ 0.135 7.6 $ - A summary of non-vested non-qualified stock options activity for directors under the 2017 Equity Plan for the years ended December 31, 2019 and 2018 are presented in the table below: Number of Options Weighted Average Grant-Date Fair Value Aggregate Intrinsic Value Grant-Date Fair Value Nonvested, December 31, 2017 450,000 $ 0.123 $ 52,470 $ 55,530 Granted - - Vested (450,000 ) $ 0.123 $ 55,530 Forfeited - - Expired - - Nonvested, December 31, 2018 - - $ - Granted - - Vested - Forfeited - - Expired - - Nonvested, December 31, 2019 - - $ - For the years ended December 31, 2019 and 2018, the Company recorded $0 and $12,205 as compensation expense related to vested options issued to directors, respectively. As of December 31, 2019, there was no unrecognized share-based compensation related to unvested options issued to directors. Restricted Stock Units A summary of the RSUs awarded to employees, directors and consultants under the 2017 Equity Plan during the years ended December 31, 2019 and 2018 are presented in the table below: Number of Units Weighted Average Grant-Date Fair Value Aggregate Intrinsic Value Outstanding, December 31, 2017 13,800,000 $ 0.122 $ 3,312,000 Granted 5,514,736 $ 0.185 Vested and settled with share issuance 1 (6,447,368 ) $ 0.153 Forfeited (3,000,000 ) $ 0.112 Outstanding, December 31, 2018 9,867,368 $ 0.140 $ 730,185 Granted - - Vested and settled with share issuance 2 (1,120,000 ) $ 0.181 Forfeited/canceled (1,197,368 ) $ 0.179 Outstanding, December 31, 2019 7,550,000 $ 0.128 $ 528,500 Vested but not settled as of December 31, 2019 3 6,750,000 $ 0.121 $ 472,500 Expected to vest as of December 31, 2019 800,000 $ 0.184 $ 56,000 1 2 3 For the years ended December 31, 2019 and 2018, the Company recorded $278,906 and $1,295,368 as compensation expense related to vested RSUs issued to employees, directors and consultants. As of December 31, 2019, total unrecognized share-based compensation related to unvested RSUs was $25,162. The total intrinsic value of RSUs vested and settled with share issuance was $79,120 and $1,289,500 for the years ended December 31, 2019 and 2018. Subsequent to December 31, 2019, the total intrinsic value of RSUs vested and settled with share issuance was $1,105,750, including the intrinsic value of $1,035,750 related to RSUs that had vested in 2018 but had not been settled due to a dispute with a former employee over the required withholding taxes to be paid to the Company for remittance to the appropriate tax authorities. See Notes 10 and 16. During the year ended December 31, 2018, 3,000,000 RSUs granted to a former executive officer and subject to performance-based vesting were forfeited due to termination of employment. The Company had not recognized any expense related to these RSUs prior to forfeiture since the likelihood of the performance thresholds being satisfied was determined to be remote. Incentive Stock Bonuses The Company has entered into certain “at-will” employment agreements with certain employees. Under these agreements, the employees are eligible to receive special incentive stock bonuses, provided the Board has determined, in its sole discretion, that the employee’s performance has been average or better for the applicable special bonus period. This special stock incentive bonus is payable only if the employee continues in the employment of the Company. For accounting purposes, the Company treats these special incentive stock bonuses as vesting over each bonus’s service period based on the fair value of the award at the time of grant. Even though these bonuses are subject to Board approval, the awards are vested over each service period because it is more likely than not that the Board will approve the award based on the “average or better” employee performance standard. Since the awards are denominated in shares of common stock, the fair value of the vested bonus is charged to additional paid-in capital. A summary of the incentive stock bonus awards granted to employees under the 2017 Equity Plan during the years ended December 31, 2019 and 2018 are presented in the table below: Number of Shares Weighted Average Grant-Date Fair Value Aggregate Intrinsic Value Unvested, December 31, 2017 7,040,000 $ 0.113 $ 1,689,600 Awarded 4,000,000 $ 0.170 Vested (1,860,000 ) $ 0.113 Forfeited (7,500,000 ) $ 0.144 Unvested, December 31, 2018 1,680,000 $ 0.112 $ 124,320 Awarded - - Vested 1 (1,680,000 ) $ 0.112 Forfeited - - Unvested, December 31, 2019 - - 1 For the years ended December 31, 2019 and 2018, the Company recorded $44,209 and $165,208 as compensation expense related to vested stock bonus awards issued to employees, net of forfeitures of $0 and $404,689, respectively. As of December 31, 2019, there was no unrecognized share-based compensation related to unvested stock bonus awards. The total intrinsic value of stock bonus awards vested and settled with share issuance was $58,240 and $624,520 for the years ended December 31, 2019 and 2018, respectively. Subsequent to December 31, 2019, the total intrinsic value of stock bonus awards vested and settled with share issuance was $39,200. See Note 16. |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note 15 – Income Taxes For financial reporting purposes, there were no provisions for U.S. federal, state or international income taxes for the years ended December 31, 2019 or 2018 due to the Company’s net operating losses (“NOLs”) in such periods and full valuation allowance recorded against the net deferred tax assets. The differences between income taxes expected at the U.S. federal statutory income tax rate and the reported provision for income taxes are summarized as follows: 2019 2018 Income taxes computed at the federal statutory rate $ (281,000 ) $ (996,000 ) States taxes, net of federal benefits (53,000 ) (187,000 ) Permanent differences 17,000 105,000 True-up adjustments 199,000 49,000 Adjustment to net operating loss (86,000 ) (87,000 ) Other, net - (1,000 ) Change in valuation allowance 204,000 1,117,000 Reported income tax (benefit) expense $ - $ - The components of the net deferred tax assets as of December 31, 2019 and 2018 are as follows: 2019 2018 Deferred tax assets: Net operating losses $ 4,081,000 $ 3,899,000 Equity compensation 392,000 321,000 Other deferred tax assets 149,000 188,000 Total deferred tax assets 4,622,000 4,408,000 Deferred tax liabilities: Other deferred tax liabilities (58,000 ) (48,000 ) Total deferred tax liabilities (58,000 ) (48,000 ) Net deferred tax assets before valuation allowance 4,564,000 4,360,000 Less valuation allowance (4,564,000 ) (4,360,000 ) Net deferred tax assets $ - $ - As of December 31, 2019, the Company has U.S. federal and state net operating losses (“NOLs”) of approximately $16,355,000, which will expire, if not utilized, in the years 2034 through 2037, however, NOLs generated subsequent to December 31, 2017 do not expire but may only be used against taxable income to 80%. Pursuant to Section 382 of the Internal Revenue Code of 1986, as amended, use of the Company’s NOLs carryforwards may be limited in the event of cumulative changes in ownership of more than 50% within a three-year period. The Company must assess the likelihood that its net deferred tax assets will be recovered from future taxable income, and to the extent the Company believes that recovery is not likely, the Company establishes a valuation allowance. Management’s judgment is required in determining the Company’s provision for income taxes, deferred tax assets and liabilities, and any valuation allowance recorded against the net deferred tax assets. The Company recorded a full valuation allowance as of December 31, 2019 and 2018. Based on the available evidence, the Company believes it is more likely than not that it will not be able to utilize its net deferred tax assets in the foreseeable future. The Company intends to maintain valuation allowances until sufficient evidence exists to support the reversal of such valuation allowances. The Company makes estimates and judgments about its future taxable income that are based on assumptions that are consistent with the Company’s plans. Should the actual amounts differ from the Company’s estimates, the carrying value of the Company’s deferred tax assets could be materially impacted. The Company is subject to examination by the IRS for the calendar year 2015 and thereafter. These examinations may lead to ordinary course adjustments or proposed adjustments to the Company’s taxes or the Company’s net operating losses with respect to years under examination as well as subsequent periods. The Company has filed Colorado state income tax returns for years 2014 through 2018, Alaska, California and Connecticut state income tax returns for the years 2017 and 2018, and Michigan state income tax returns for the year 2018. The Company recognizes in its consolidated financial statements the impact of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of operating expense. The Company does not believe there are any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within twelve months of the reporting date. There were no penalties or interest liabilities accrued as of December 31, 2019 or 2018, nor were any penalties or interest costs included in expense for the years ended December 31, 2019 and 2018. |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 16 – Subsequent Events In accordance with ASC 855, Subsequent Events Since December 31, 2019, the Company issued shares of its common stock under the 2017 Equity Plan as follows: ● 1,000,000 shares to an employee in settlement of certain RSUs that vested in 2019; and ● 560,000 shares to an employee pursuant to a special incentive stock bonus approved the Board for the period ended December 31, 2019. Subsequent to December 31, 2019, the Board approved annual incentive compensation awards to certain employees and the Company’s independent directors payable in non-qualified stock options, based on the Company’s performance and each employee’s and director’s contributions to such performance for the 2019 year. A total of 8,616,900 non-qualified stock options were granted under the 2017 Equity Plan subsequent to December 31, 2019, with an exercise price of $0.07 per share. These non-qualified stock options were immediately vested at the date of the grant. The estimated compensation expense of $503,466 related to the 2019 incentive awards was accrued as of December 31, 2019. The accrued compensation expense was classified as a current liability as of December 31, 2019. In January 2020, the Company granted to a consultant the following non-qualified stock options with an exercise price of $0.07 per share: (i) 1,000,000 options which vested on the date of grant, and (ii) 1,000,000 options which vest on June 30, 2020, subject to the consultant’s continued service through the vesting date. In February 2020, the Company and a cultivation company affiliated with one of the Co-founders mutually agreed to terminate the equipment, demonstration and product testing agreement and release each other from all claims related to this agreement, including any unpaid Lease Fees or Demo and Testing Fees. The Company also agreed to transfer the leased equipment to the cultivation company for no additional consideration. See Note 9. Subsequent to December 31, 2019, Q1 2017 Warrants to purchase 14,062,000 shares of common stock expired unexercised. See Note 13. On March 9, 2020, the Company issued 6,750,000 shares of the Company’s common stock in settlement of restricted stock units to a former employee after taking measures to mitigate the Company’s exposure to penalties and liability for the failure to properly withhold income taxes. See Note 10. In late March 2020, the Company assessed its near-term operations and finances and implemented a downsizing of its operations, including workforce reductions, reductions of salaried employee compensation and a reduction of hours worked to preserve cash resources, cut costs and focus its operations on customer-centric sales and project management activities. This downsizing was implemented in response to recent events, including constraints on capital availability for the Company’s customers and prospects who have commenced, or are contemplating, new or expanded cultivation facilities as well as the recent outbreak of COVID-19. The extent to which COVID-19 will impact the Company’s business and financial results will depend on future developments, which are uncertain and cannot be predicted. See Note 3. |
Basis of Presentation; Summar_2
Basis of Presentation; Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
Financial Statement Presentation | Financial Statement Presentation The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect reported amounts and related disclosures. In the opinion of management, all adjustments (consisting of normal recurring items) considered necessary for a fair presentation have been included. The accompanying consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has not generated sufficient revenue and has historically funded its operations through the sale of common stock, the issuance of debt and the receipt of advance payments from customers. The Company is subject to risks, expenses and uncertainties similar to those encountered by similarly situated companies. See Note 3. |
Basis of Consolidation and Reclassifications | Basis of Consolidation and Reclassifications The consolidated financial statements include the accounts of the Company and its controlled and wholly-owned subsidiary, Hydro Innovations, LLC (“Hydro”). Intercompany transactions, profit, and balances are eliminated in consolidation. The Company has made certain reclassifications to prior period financial information to conform with the current periods presented. These reclassifications had no impact on net loss, total assets and liabilities, or equity. |
Use of Estimates | Use of Estimates Management makes estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and that affect the reported amounts of revenue and expenses during the reporting period. The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates. Key estimates include: allocation of transaction prices to performance obligations under contracts with customers, standalone selling prices, timing of expected revenue recognition on remaining performance obligations under contracts with customers, valuation of derivative liabilities, valuation of intangible assets, valuation of equity-based compensation, valuation of deferred tax assets and liabilities, warranty accruals, inventory allowances, and legal contingencies |
Cash and Cash Equivalents | Cash and Cash Equivalents All highly liquid investments with original maturities of three months or less at the date of purchase are considered to be cash equivalents. The Company may, from time to time, have deposits in financial institutions that exceed the federally insured amount. The Company has not experienced any losses to date on depository accounts. |
Accounts Receivable and Allowance for Doubtful Accounts | Accounts Receivable and Allowance for Doubtful Accounts Accounts receivables are recorded at the invoiced amount, or based on revenue earned for items not yet invoiced, and generally do not bear interest. An allowance for doubtful accounts is established, as necessary, based on past experience and other factors, which, in management’s judgment, deserve current recognition in estimating bad debts. Based on the Company’s review, it establishes or adjusts the allowance for specific customers and the accounts receivable portfolio as a whole. As of December 31, 2019 and 2018, the allowance for doubtful accounts was $151,673 and $119,022, respectively. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. |
Inventory | Inventory Inventory is stated at the lower of cost or net realizable value. The inventory is valued based on a first-in, first-out (“FIFO”) basis. Lower of cost or net realizable value is evaluated by considering obsolescence, excessive levels of inventory, deterioration and other factors. Adjustments to reduce the cost of inventory to its net realizable value, if required, are made for estimated excess, obsolescence or impaired inventory. Excess and obsolete inventory is charged to cost of revenue and a new lower-cost basis for that inventory is established and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis. As of December 31, 2019 and 2018, the allowance for excess and obsolete inventory was $71,376 and $295,347, respectively. |
Property and Equipment | Property and Equipment Property and equipment are stated at cost. For financial statement purposes, property and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives, which is generally five years. Leasehold improvements are amortized on a straight-line basis over the lesser of their useful lives or the life of the lease. Upon sale or retirement of assets, the cost and related accumulated depreciation and amortization are removed from the balance sheet and the resulting gain or loss is reflected in operations. Maintenance and repairs are charged to operations as incurred. Long-lived tangible assets, including property and equipment, are reviewed for impairment whenever events or changes in business circumstances indicate the carrying value of the assets may not be recoverable. When such an event occurs, management determines whether there has been impairment by comparing the anticipated undiscounted future net cash flows to the related asset’s carrying value. If an asset is considered impaired, the asset is written down to fair value, which is determined based either on discounted cash flows or appraised value, depending on the nature of the asset. The Company has not identified any indicators of impairment during the years ended December 31, 2019 and 2018. |
Goodwill and Intangible Assets | Goodwill and Intangible Assets The Company recorded goodwill in connection with its acquisition of Hydro in July 2014. Goodwill is reviewed for impairment annually or more frequently when events or changes in circumstances indicate that fair value of the reporting unit has been reduced to less than its carrying value. The Company performs a quantitative impairment test annually during the fourth quarter by comparing the fair value of the reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill is considered not impaired. An impairment charge would be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value. The Company determined that it has one reporting unit. The Company completed this assessment as of December 31, 2019, and concluded that no impairment existed. Separable identifiable intangibles consist of intellectual property such as patents and trademarks, and capitalized website costs. Except for trademarks, which are not amortized, the Company’s separable identifiable intangible assets are subject to amortization on a straight-line basis over their estimated useful lives. Separable identifiable intangibles are also subject to evaluation for potential impairment if events or circumstances indicate the carrying value may not be recoverable. |
Fair Value Measurement | Fair Value Measurement The Company records its financial assets and liabilities at fair value. The accounting standard for fair value provides a framework for measuring fair value, clarifies the definition of fair value, and expands disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting standard establishes a three-tier hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value: Level 1 - inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 - inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 - inputs are unobservable inputs based on the Company’s assumptions used to measure assets and liabilities at fair value. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability. As of January 1, 2018, the Company had outstanding warrants to purchase 2,625,000 shares of the Company’s common stock that were issued in connection with Series 3 convertible notes (“Series 3 Warrants”) that provided for a reduction in the exercise price of the warrants in the event the Company issued common stock in a registered offering at a price below the exercise price. In such event, the exercise price under the warrants would be reduced to the price of the common stock in the dilutive issuance. The Company determined that these outstanding Series 3 Warrants, which were subject to the exercise price reduction, qualified as a derivative financial instrument. Accordingly, the Series 3 Warrants were marked to market at the end of each reporting period. Any change in fair value during the period was recorded in as gain (loss) on change in derivative liabilities in the Company’s consolidated statements of operations. During the year ended December 31, 2018, the Company issued 1,168,540 shares of its restricted common stock upon the cashless exercise of all of the outstanding Series 3 Warrants. The change in fair value in derivative liabilities of $21,403 during the year ended December 31, 2018 was recorded as gain on change in derivative liabilities in the Company’s consolidated statements of operations, and the Company extinguished the derivative liability of approximately $389,000 and recorded an increase in additional paid-in capital of the same amount during the year ended December 31, 2018. The following table sets forth movement in the derivative liability related to the Series 3 Warrants: Balance January 1, 2018 $ 410,880 Gain on change in derivative liability, net (21,403 ) Balance prior to exercise of associated warrants 389,477 Extinguishment of derivative liability on cashless exercise of associated warrants (389,477 ) Balance December 31, 2018 $ - Due to their short-term nature, the carrying values of cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses, approximate fair value. |
Derivative Financial Instruments | Derivative Financial Instruments The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company uses the Black-Scholes Option Pricing Model (the “Black-Scholes Model”) to value the derivative instruments. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within twelve months of the balance sheet date. As of December 31, 2019 and 2018, there were no derivative financial instruments. |
Revenue Recognition | Revenue Recognition On January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2014-09 (Topic 606), Revenue from Contracts with Customers The following table sets forth the Company’s revenue by source: For the Years Ended 2019 2018 Equipment and systems sales $ 13,692,863 $ 8,288,102 Engineering and other services 1,239,130 1,040,764 Shipping and handling 292,461 243,072 Other revenue - 10,030 Total revenue $ 15,224,454 $ 9,581,968 Revenue Recognition Accounting Policy Summary The Company accounts for revenue in accordance with ASC 606. Under the revenue standard, a performance obligation is a promise in a contract with a customer to transfer a distinct good or service to the customer. Most of the Company’s contracts contain multiple performance obligations that include engineering and technical services as well as the delivery of a diverse range of climate control system equipment and components, which can span multiple phases of a customer’s project life-cycle from facility design and construction to equipment delivery and system installation and start-up. The Company does not provide construction services or system installation services. Some of the Company’s contracts with customers contain a single performance obligation, typically engineering only services contracts. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. When there are multiple performance obligations within a contract, the Company allocates the transaction price to each performance obligation based on standalone selling price. The Company determines the standalone selling price for each of the performance obligations at the inception of the contract and does not adjust the initial allocation for future changes in any selling prices. When estimating the selling price, the Company uses various observable inputs. The best observable input is the Company’s actual selling price for the same good or service, however, this input is generally not available for the Company’s contracts containing multiple performance obligations. For engineering services, the Company estimates the standalone selling price by reference to certain physical characteristics of the project, such as facility size and mechanical systems involved, which are indicative of the scope and complexity of the mechanical engineering services to be provided. For equipment sales, the standalone selling price is determined by forecasting the expected costs of the equipment and components and then adding an appropriate margin, based on a range of acceptable margins established by management. Depending on the nature of the performance obligations, the Company may use a combination of different methods and observable inputs if certain performance obligations have highly variable or uncertain standalone selling prices. Once the selling prices are determined, the Company applies the relative values to the total contract consideration and estimates the amount of the transaction price to be recognized as each promise is fulfilled. Generally, satisfaction occurs when control of the promised goods is transferred to the customer or as services are rendered or completed in exchange for consideration in an amount for which the Company expects to be entitled. The Company recognizes revenue for the sale of goods when control transfers to the customer, which primarily occurs at the time of shipment. The Company’s historical rates of return are insignificant as a percentage of sales and, as a result, the Company does not record a reserve for returns at the time the Company recognizes revenue. The Company has elected to exclude from the measurement of the transaction price all taxes (e.g., sales, use, value added, and certain excise taxes) that are assessed by a governmental authority in connection with a specific revenue-producing transaction and collected by the Company from the customer. Accordingly, the Company recognizes revenue net of sales taxes. The revenue and cost for freight and shipping is recorded when control over the sale of goods passes to the Company’s customers. The Company also has performance obligations to perform certain engineering services that are satisfied over a period of time. Revenue is recognized from this type of performance obligation as services are rendered based on the percentage completion towards certain specified milestones. The Company offers assurance-type warranties for its products and products manufactured by others to meet specifications defined by the contracts with customers and does not have any material separate performance obligations related to these warranties. The Company maintains a warranty reserve based on historical warranty costs. Other Judgments and Assumptions The Company typically receives customer payments in advance of its performance of services or transfers of goods. Applying the practical expedient in ASC 606-10-32-18, which the Company has elected, the Company does not adjust the promised amount of consideration for the effects of a significant financing component since the Company expects, at contract inception, that the period between when the Company transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less. Accordingly, the remaining performance obligations related to customer contracts does not consider the effects of the time value of money. Applying the practical expedient in ASC 340-40-25-4, the Company recognizes the incremental costs of obtaining contracts as an expense when incurred since the amortization period of the assets that the Company otherwise would have recognized is one year or less. These costs include certain sales commissions and incentives, which are included in selling, general and administrative expenses, and are payable only when associated revenue has been collected and earned by the Company. Contract Assets and Contract Liabilities Contract assets reflect revenue recognized and performance obligations satisfied in advance of customer billing. Contract liabilities relate to payments received in advance of the satisfaction of performance under the contract. The Company receives payments from customers based on the terms established in its contracts. Contract assets include unbilled amounts where revenue recognized exceeds the amount billed to the customer and the right of payment is conditional, subject to completing a milestone, such as a phase of a project. The Company typically does not have material amounts of contract assets since revenue is recognized as control of goods are transferred or as services are performed. As of December 31, 2019 and 2018, the Company had no contract assets. Contract liabilities consist of advance payments in excess of revenue recognized. The Company’s contract liabilities are recorded as a current liability in deferred revenue in the consolidated balance sheets since the timing of when the Company expects to recognize revenue is generally less than one year. As of December 31, 2019 and 2018, deferred revenue, which was classified as a current liability, was $1,444,472 and $641,798, respectively. For the year ended December 31, 2019, the Company recognized revenue of $473,682 related to the deferred revenue at January 1, 2019, or 74%. For the year ended December 31, 2018, the Company recognized revenue of $876,350 related to the deferred revenue at January 1, 2018, or 87%. Remaining Performance Obligations Remaining performance obligations, or backlog, represents the aggregate amount of the transaction price allocated to the remaining obligations that the Company has not performed under its customer contracts. The Company has elected not to use the optional exemption in ASC 606-10-50-14, which exempts an entity from such disclosures if a performance obligation is part of a contract with an original expected duration of one year or less. Accordingly, the information disclosed about remaining performance obligations includes all customer contracts, including those with an expected duration of one year or less. Industry uncertainty, project financing concerns, and the licensing and qualification of our prospective customers, which are out of the Company’s control, make it difficult for the Company to predict when it will recognize revenue on its remaining performance obligations. There are risks that the Company may not realize the full contract value on customer projects in a timely manner or at all, and completion of a customer’s cultivation facility project is dependent upon the customer’s ability to secure funding and real estate, obtain a license and then build their cultivation facility so they can take possession of the equipment. Accordingly, the time it takes for customers to complete a project, which corresponds to when the Company is able to recognize revenue, is driven by numerous factors including: (i) the large number of first-time participants interested in the indoor cannabis cultivation business; (ii) the complexities and uncertainties involved in obtaining state and local licensure and permitting; (iii) local and state government delays in approving licenses and permits due to lack of staff or the large number of pending applications, especially in states where there is no cap on the number of cultivators; (iv) the customer’s need to obtain cultivation facility financing; (v) the time needed, and coordination required, for our customers to acquire real estate and properly design and build the facility (to the stage when climate control systems can be installed); (vi) the large price tag and technical complexities of the climate control and air sanitation system; (vii) the availability of power; and (viii) delays that are typical in completing any construction project. Further, based on the current economic climate, the uncertainty regarding the COVID-19 virus, and the Company’s recent cost cutting measures, there is no assurance that the Company will be able fulfill its backlog, and the Company may experience contract cancellations, project scope reductions or project delays. As of December 31, 2019, the Company’s remaining performance obligations, or backlog, was $9,558,000, of which $5,903,000, or 62%, was attributable to customer contracts for which the Company has only received an initial advance payment to cover the allocated value of the Company’s engineering services (“engineering only paid contracts”). There is the risk that the equipment portion of these engineering only paid contracts will not be completed or will be delayed; these reasons include the customer being dissatisfied with the quality or timeliness of the Company’s engineering services, there is a delay or abandonment of the project because of the customer’s inability to obtain project financing or licensing, or other reasons such as a challenging business climate or change in business direction. After the customer has made an advance payment for a portion of the equipment to be delivered under the contract (“partial equipment paid contracts”), the Company is typically better able to estimate the timing of revenue recognition since the risks and delays associated with licensing, permitting and project funding are typically mitigated once the initial equipment payment is received. There is significant uncertainty regarding the timing of the Company’s recognition of revenue on its remaining performance obligations, and there is no certainty that these will result in actual revenues. The backlog at December 31, 2019 includes booked sales orders of $384,000 from several customers that the Company does not expect to be realized until 2022, if at all. The remaining performance obligations expected to be recognized through 2022 are as follows: 2020 2021 2022 Total Remaining performance obligations related to engineering only paid contracts $ 5,359,000 $ 271,000 $ 273,000 $ 5,903,000 Remaining performance obligations related to partial equipment paid contracts 3,130,000 414,000 111,000 3,655,000 Total remaining performance obligations $ 8,489,000 $ 685,000 $ 384,000 $ 9,558,000 |
Product Warranty | Product Warranty The Company warrants the products that it manufactures for a warranty period equal to the lesser of 12 months from start-up or 18 months from shipment. The Company’s warranty provides for the repair, rework, or replacement of products (at the Company’s option) that fail to perform within stated specification. The Company’s third-party suppliers also warrant their products under similar terms, which are passed-through to the Company’s customers. The Company assesses the historical warranty claims on its manufactured products and, since 2016, warranty claims have been approximately 1% of annual revenue generated on these products. The Company continues to assess the need to record a warranty reserve at the time of sale based on historical claims and other factors. As of December 31, 2019 and 2018, the Company had an accrued warranty reserve amount of $185,234 and $144,822, respectively, which are included in accounts payable and accrued liabilities on the Company’s consolidated balance sheets. |
Concentrations | Concentrations One customer accounted for 44% of the Company’s revenue for the year ended December 31, 2019. No customers accounted for more than 10% of the Company’s revenue for the year ended December 31, 2018. The Company’s accounts receivable from three customers made up 59%, 16%, and 10%, respectively, of the total balance as of December 31, 2019. The Company’s accounts receivable from three customers made up 17%, 12%, and 11%, respectively, of the total balance as of December 31, 2018. Three suppliers accounted for 30%, 17% and 12% of the Company’s purchases of inventory for the year ended December 31, 2019, and one supplier accounted for 39% of the Company’s purchases of inventory for the year ended December 31, 2018. |
Product Development | Product Development The Company expenses product development costs as incurred. Internal product development costs are expensed as incurred, and third-party product developments costs are expensed when the contracted work has been performed or as milestone results have been achieved. For the years ended December 31, 2019 and 2018, the Company incurred $521,044 and $317,713, respectively, on product development. |
Accounting for Share-Based Compensation | Accounting for Share-Based Compensation The Company recognizes the cost resulting from all share-based compensation arrangements, including stock options, restricted stock awards and restricted stock units that the Company grants under its equity incentive plan in its consolidated financial statements based on their grant date fair value. For awards subject to service conditions, compensation expense is recognized over the vesting period on a straight-line basis. Awards subject to performance conditions are attributed separately for each vesting tranche of the award and are recognized ratably from the service inception date to the vesting date for each tranche, based on the probability of vesting. The probability of awards with future performance conditions is evaluated each reporting period and compensation expense is adjusted based on the probability assessment. Awards are considered granted, and the service inception date begins, when mutual understanding of the key terms and conditions of the award between the Company and the recipient has been established. For awards that provide discretion to adjust the amount of the award, the service inception date for such awards could precede the grant date as a mutual understanding of the key terms and conditions of the award between the Company and the recipient has not yet been established. For awards in which the service inception date precedes the grant date, compensation cost is accrued beginning on the service inception date. Subsequent to December 31, 2019, the Company’s Board of Directors (the “Board”) approved annual incentive compensation awards to certain employees and the Company’s independent directors payable in non-qualified stock options, based on the Company’s performance and each employee’s and director’s contributions to such performance for the 2019 year. See Note 16. The non-qualified stock options were granted subsequent to December 31, 2019, were not subject to an additional service requirement and were immediately vested at the date of the grant. The final amount of the annual incentive compensation award, and number of non-qualified stock options granted, were determined, and communicated to the employee, subsequent to December 31, 2019. The estimated compensation expense of $503,466 related to the 2019 incentive awards was accrued as of December 31, 2019. Since such incentive awards will be settled in non-qualified stock options, the accrued compensation expense has been classified as a current liability until the number of non-qualified stock options is fixed pursuant to a grant by the Board. At that time, the incentive award becomes equity-classified. The grant date fair value of stock options is based on the Black-Scholes Model. The Black-Scholes Model requires judgmental assumptions including volatility and expected term, both based on historical experience. The risk-free interest rate is based on U.S. Treasury interest rates whose term is consistent with the expected term of the option. The grant date fair value of restricted stock and restricted stock units is based on the closing price of the underlying stock on the date of the grant. The Company has elected to reduce share-based compensation expense for forfeitures as the forfeitures occur since the Company does not have historical data or other factors to appropriately estimate the expected employee terminations and to evaluate whether particular groups of employees have significantly different forfeiture expectations. In June 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-07, Compensation — Stock Compensation (Topic 718) — Improvements to Nonemployee Share-Based Payment Accounting Topic 718 Topic 718 Share-based compensation costs (including accrued compensation expense related to the 2019 incentive awards settled in non-qualified stock options after December 31, 2019) totaled $1,292,065 and $2,029,430 for the years ended December 31, 2019 and 2018, respectively. Such share-based compensation costs are classified in the Company’s consolidated financial statements in the same manner as if such compensation was paid in cash. The following is a summary of such share-based compensation costs included in the Company’s consolidated statements of operations for the years ended December 31, 2019 and 2018: For the Years Ended 2019 2018 Share-based compensation costs included in: Cost of revenue $ 91,081 $ 100,736 Advertising and marketing expenses 33,977 7,671 Product development costs 45,330 4,548 Selling, general and administrative expenses 1,121,677 1,916,475 Total share-based compensation expense included in consolidated statement of operations $ 1,292,065 $ 2,029,430 |
Income Taxes | Income Taxes The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, the Company determines deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. The Company recognizes deferred tax assets to the extent that the Company believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If the Company determines that it would be able to realize its deferred tax assets in the future in excess of their net recorded amount, the Company would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. The Company records uncertain tax positions on the basis of a two-step process in which: (i) the Company determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position, and (ii) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more likely than not to be realized upon ultimate settlement with the related tax authority. |
Basic and Diluted Net Loss per Common Share | Basic and Diluted Net Loss per Common Share Basic income (loss) per common share is computed by dividing net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding during the period without consideration of common stock equivalents. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding and potentially dilutive common stock equivalents, including stock options, warrants and restricted stock units and other equity-based awards, except in periods when losses are reported where the effect of the common stock equivalents would be antidilutive. Potential common stock equivalents consist of common stock issuable upon exercise of stock options and warrants and the vesting of restricted stock units using the treasury method. |
Commitments and Contingencies | Commitments and Contingencies In the normal course of business, the Company is subject to loss contingencies, such as legal proceedings and claims arising out of its business, that cover a wide range of matters, including, among others, customer disputes, government investigations and tax matters. An accrual for a loss contingency is recognized when it is probable that an asset had been impaired or a liability had been incurred and the amount of loss can be reasonably estimated. |
Other Risks and Uncertainties | Other Risks and Uncertainties To achieve profitable operations, the Company must successfully develop, manufacture and market its products. There can be no assurance that any such products can be developed or manufactured at an acceptable cost and with appropriate performance characteristics, or that such products will be successfully marketed. These factors could have a material adverse effect upon the Company’s financial results, financial position, and future cash flows. The Company is subject to risks common to similarly-situated companies including, but not limited to, general economic conditions, its customers’ operations and access to capital, and market and business disruptions including severe weather conditions, natural disasters, health hazards, terrorist activities, financial crises, political crises or other major events, or the prospect of these events, new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations, uncertainty of market acceptance of products, product liability, and the need to obtain additional financing. As a supplier of services and equipment to cannabis cultivators, the Company is also subject to risks related to the cannabis industry. Although certain states have legalized medical and/or recreational cannabis, U.S. federal laws continue to prohibit marijuana in all its forms as well as its derivatives. Any changes in the enforcement of U.S. federal laws may adversely affect the implementation of state and local cannabis laws and regulations that permit medical or recreational cannabis and, correspondingly, may adversely impact the Company’s customers. The Company’s success is also dependent upon its ability to raise additional capital and to successfully develop and market its products. See Note 3. |
Segment Information | Segment Information Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the Company’s senior management team in deciding how to allocate resources and in assessing performance. The Company has one operating segment that is dedicated to the manufacture and sale of its products. |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes, In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) – Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement In June 2018, the FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718) – Improvements to Nonemployee Share-Based Payment Accounting Revenue from Contracts with Customers Compensation – Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606) Codification Improvements – Share-Based Consideration Payable to a Customer In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Subtopic 326-20 Topic 842, Leases Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures. |
Basis of Presentation; Summar_3
Basis of Presentation; Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
Schedule of Derivative Liability Related to Warrants | The following table sets forth movement in the derivative liability related to the Series 3 Warrants: Balance January 1, 2018 $ 410,880 Gain on change in derivative liability, net (21,403 ) Balance prior to exercise of associated warrants 389,477 Extinguishment of derivative liability on cashless exercise of associated warrants (389,477 ) Balance December 31, 2018 $ - |
Schedule of Revenue by Source | The following table sets forth the Company’s revenue by source: For the Years Ended 2019 2018 Equipment and systems sales $ 13,692,863 $ 8,288,102 Engineering and other services 1,239,130 1,040,764 Shipping and handling 292,461 243,072 Other revenue - 10,030 Total revenue $ 15,224,454 $ 9,581,968 |
Schedule of Remaining Performance Obligations Expected to be Recognized | The remaining performance obligations expected to be recognized through 2022 are as follows: 2020 2021 2022 Total Remaining performance obligations related to engineering only paid contracts $ 5,359,000 $ 271,000 $ 273,000 $ 5,903,000 Remaining performance obligations related to partial equipment paid contracts 3,130,000 414,000 111,000 3,655,000 Total remaining performance obligations $ 8,489,000 $ 685,000 $ 384,000 $ 9,558,000 |
Schedule of Share-based Compensation Costs | The following is a summary of such share-based compensation costs included in the Company’s consolidated statements of operations for the years ended December 31, 2019 and 2018: For the Years Ended 2019 2018 Share-based compensation costs included in: Cost of revenue $ 91,081 $ 100,736 Advertising and marketing expenses 33,977 7,671 Product development costs 45,330 4,548 Selling, general and administrative expenses 1,121,677 1,916,475 Total share-based compensation expense included in consolidated statement of operations $ 1,292,065 $ 2,029,430 |
Leases (Tables)
Leases (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Leases [Abstract] | |
Schedule of Lease Cost | The lease cost, cash flows and other information related to the Facility Lease were as follows: For the Year Ended December 31, 2019 Operating lease cost $ 216,889 Operating cash outflow from operating lease $ 236,930 As of Operating lease right-of-use assset $ 534,133 Operating lease liability, current $ 217,843 Operating lease liability, long-term $ 404,209 Remaining lease term 2.7 years Discount rate 5.00 % |
Schedule of Future Annual Minimum Lease Payments | Future annual minimum lease payments on the Facility Lease as of December 31, 2019 were as follows: Years Ended December 31, 2020 $ 244,038 2021 251,360 2022 170,891 Total minimum lease payments 666,289 Less imputed interest (44,237 ) Present value of minimum lease payments $ 622,052 |
Inventory (Tables)
Inventory (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventory | Inventory consisted of the following: As of December 31, 2019 2018 Finished goods $ 1,041,369 $ 869,895 Work in progress 3,851 9,080 Raw materials 257,399 352,258 Allowance for excess & obsolete inventory (71,376 ) (295,347 ) Inventory, net $ 1,231,243 $ 935,886 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property and Equipment | Property and equipment consisted of the following: As of December 31, 2019 2018 Furniture and equipment $ 389,090 $ 386,047 Equipment held for lease - 176,042 Vehicles 15,000 15,000 Leasehold improvements 215,193 215,193 619,283 792,282 Accumulated depreciation (361,360 ) (271,961 ) Property and equipment, net $ 257,923 $ 520,321 |
Intangible Assets (Tables)
Intangible Assets (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Intangible Assets | Intangible assets consisted of the following: As of December 31, 2019 2018 Patents $ 12,234 $ 20,012 Website development costs 22,713 22,713 Trademarks 1,830 1,830 36,777 44,555 Accumulated amortization (24,847 ) (21,527 ) Intangible assets, net $ 11,930 $ 23,028 |
Accounts Payable and Accrued _2
Accounts Payable and Accrued Liabilities (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Payables and Accruals [Abstract] | |
Schedule of Accounts Payable and Accrued Liabilities | Accounts payable and accrued liabilities consisted of the following: As of December 31, 2019 2018 Accounts payable $ 1,299,015 $ 1,278,678 Sales commissions payable 69,532 56,277 Accrued payroll liabilities 169,052 127,915 Product warranty accrual 185,234 144,822 Other accrued expenses 110,127 309,395 Total $ 1,832,959 $ 1,917,087 |
Equity Incentive Plan (Tables)
Equity Incentive Plan (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Schedule of Stock Option Activity | A summary of the non-qualified stock options granted to employees and consultants under the 2017 Equity Plan during the years ended December 31, 2019 and 2018 are presented in the table below: Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding, December 31, 2017 10,235,000 $ 0.121 8.7 $ 1,218,375 Granted 6,500,000 $ 0.118 Exercised (25,000 ) $ 0.135 Forfeited (6,083,332 ) $ 0.147 Expired (66,668 ) $ 0.135 Outstanding, December 31, 2018 10,560,000 $ 0.104 8.4 $ - Granted 2,000,000 $ 0.080 Exercised - - Forfeited (2,408,333 ) $ 0.116 Expired (16,667 ) $ 0.105 Outstanding, December 31, 2019 10,135,000 $ 0.096 7.7 $ - Exercisable, December 31, 2019 8,135,000 $ 0.098 7.4 $ - Outstanding vested and expected to vest, December 31, 2019 10,135,000 $ 0.096 7.7 $ - |
Summary of Non-vested Non-Qualified Stock Option Activity | A summary of non-vested non-qualified stock options activity for employees and consultants under the 2017 Equity Plan for the years ended December 31, 2019 and 2018 are presented in the table below: Number of Options Weighted Average Grant-Date Fair Value Aggregate Intrinsic Value Grant-Date Fair Value Nonvested, December 31, 2017 8,349,992 $ 0.107 $ 1,000,499 $ 891,855 Granted 6,500,000 $ 0.102 $ 663,569 Vested (1,433,331 ) $ 0.088 $ 125,988 Forfeited (6,083,332 ) $ 0.132 $ 800,680 Expired - - $ - Nonvested, December 31, 2018 7,333,329 $ 0.086 $ - $ 628,756 Granted 2,000,000 $ 0.065 $ 130,120 Vested (4,924,996 ) $ 0.074 $ 362,998 Forfeited (2,408,333 ) $ 0.102 $ 246,344 Expired - - $ - Nonvested, December 31, 2019 2,000,000 $ 0.075 $ - $ 149,534 |
Schedule of Restricted Stock Units Activity | A summary of the RSUs awarded to employees, directors and consultants under the 2017 Equity Plan during the years ended December 31, 2019 and 2018 are presented in the table below: Number of Units Weighted Average Grant-Date Fair Value Aggregate Intrinsic Value Outstanding, December 31, 2017 13,800,000 $ 0.122 $ 3,312,000 Granted 5,514,736 $ 0.185 Vested and settled with share issuance 1 (6,447,368 ) $ 0.153 Forfeited (3,000,000 ) $ 0.112 Outstanding, December 31, 2018 9,867,368 $ 0.140 $ 730,185 Granted - - Vested and settled with share issuance 2 (1,120,000 ) $ 0.181 Forfeited/canceled (1,197,368 ) $ 0.179 Outstanding, December 31, 2019 7,550,000 $ 0.128 $ 528,500 Vested but not settled as of December 31, 2019 3 6,750,000 $ 0.121 $ 472,500 Expected to vest as of December 31, 2019 800,000 $ 0.184 $ 56,000 1 2 3 |
Schedule of Incentive Stock Bonus Awarded to Employees | A summary of the incentive stock bonus awards granted to employees under the 2017 Equity Plan during the years ended December 31, 2019 and 2018 are presented in the table below: Number of Shares Weighted Average Grant-Date Fair Value Aggregate Intrinsic Value Unvested, December 31, 2017 7,040,000 $ 0.113 $ 1,689,600 Awarded 4,000,000 $ 0.170 Vested (1,860,000 ) $ 0.113 Forfeited (7,500,000 ) $ 0.144 Unvested, December 31, 2018 1,680,000 $ 0.112 $ 124,320 Awarded - - Vested 1 (1,680,000 ) $ 0.112 Forfeited - - Unvested, December 31, 2019 - - |
2017 Equity Plan [Member] | Directors [Member] | |
Schedule of Stock Option Activity | A summary of the non-qualified stock options granted to directors under the 2017 Equity Plan during the years ended December 31, 2019 and 2018 are presented in the table below: Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value ($000) Outstanding, December 31, 2017 900,000 $ 0.135 9.6 $ 94,500 Granted - - Exercised - - Forfeited/Cancelled - - Expired - - Outstanding, December 31, 2018 900,000 $ 0.135 8.6 $ - Granted - - Exercised - - Forfeited/Cancelled - - Expired - - Outstanding, December 31, 2019 900,000 $ 0.135 7.6 $ - Exercisable, December 31, 2019 900,000 $ 0.135 7.6 $ - |
Summary of Non-vested Non-Qualified Stock Option Activity | A summary of non-vested non-qualified stock options activity for directors under the 2017 Equity Plan for the years ended December 31, 2019 and 2018 are presented in the table below: Number of Options Weighted Average Grant-Date Fair Value Aggregate Intrinsic Value Grant-Date Fair Value Nonvested, December 31, 2017 450,000 $ 0.123 $ 52,470 $ 55,530 Granted - - Vested (450,000 ) $ 0.123 $ 55,530 Forfeited - - Expired - - Nonvested, December 31, 2018 - - $ - Granted - - Vested - Forfeited - - Expired - - Nonvested, December 31, 2019 - - $ - |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Schedule of U.S. Federal Statutory Income Tax Rate and Reported Provision for Income Taxes | The differences between income taxes expected at the U.S. federal statutory income tax rate and the reported provision for income taxes are summarized as follows: 2019 2018 Income taxes computed at the federal statutory rate $ (281,000 ) $ (996,000 ) States taxes, net of federal benefits (53,000 ) (187,000 ) Permanent differences 17,000 105,000 True-up adjustments 199,000 49,000 Adjustment to net operating loss (86,000 ) (87,000 ) Other, net - (1,000 ) Change in valuation allowance 204,000 1,117,000 Reported income tax (benefit) expense $ - $ - |
Schedule of Deferred Tax Assets | The components of the net deferred tax assets as of December 31, 2019 and 2018 are as follows: 2019 2018 Deferred tax assets: Net operating losses $ 4,081,000 $ 3,899,000 Equity compensation 392,000 321,000 Other deferred tax assets 149,000 188,000 Total deferred tax assets 4,622,000 4,408,000 Deferred tax liabilities: Other deferred tax liabilities (58,000 ) (48,000 ) Total deferred tax liabilities (58,000 ) (48,000 ) Net deferred tax assets before valuation allowance 4,564,000 4,360,000 Less valuation allowance (4,564,000 ) (4,360,000 ) Net deferred tax assets $ - $ - |
Basis of Presentation; Summar_4
Basis of Presentation; Summary of Significant Accounting Policies (Details Narrative) | 12 Months Ended | ||
Dec. 31, 2019USD ($)Number | Dec. 31, 2018USD ($)Numbershares | Jan. 02, 2018shares | |
Allowance for doubtful accounts | $ 151,673 | $ 119,022 | |
Property and equipment useful lives | 5 years | ||
Restricted common stock upon the cashless exercise | shares | 1,168,540 | ||
Gain on change in fair value of derivative liabilities | $ 21,403 | ||
Extinguish of derivative liability | 389,477 | ||
Deferred revenue | 1,444,472 | 641,798 | |
Revenue recognized | $ 473,682 | $ 876,350 | |
Revenue recognized, percentage | 74.00% | 87.00% | |
Remaining performance obligations | $ 9,558,000 | ||
Remaining performance obligations related to engineering only paid contracts | $ 5,903,000 | ||
Remaining performance obligations, percentage | 62.00% | ||
Warranty claims, percentage | 1.00% | ||
Product development costs | $ 521,044 | $ 317,713 | |
Share based compensation expense | 788,599 | $ 2,029,430 | |
2019 Incentive Awards [Member] | |||
Share based compensation expense | $ 503,466 | ||
Customer Concentration Risk [Member] | Sales Revenue, Net [Member] | |||
Number of customers | Number | 1 | ||
Concentration risk percentage | 10.00% | ||
Customer Concentration Risk [Member] | Sales Revenue, Net [Member] | Customer One [Member] | |||
Concentration risk percentage | 44.00% | ||
Customer Concentration Risk [Member] | Accounts Receivable [Member] | |||
Number of customers | Number | 3 | 3 | |
Customer Concentration Risk [Member] | Accounts Receivable [Member] | Customer One [Member] | |||
Concentration risk percentage | 59.00% | 17.00% | |
Customer Concentration Risk [Member] | Accounts Receivable [Member] | Customer Two [Member] | |||
Concentration risk percentage | 16.00% | 12.00% | |
Customer Concentration Risk [Member] | Accounts Receivable [Member] | Customer Three [Member] | |||
Concentration risk percentage | 10.00% | 11.00% | |
Supplier Concentration Risk [Member] | Purchases of Inventory [Member] | |||
Number of suppliers | Number | 3 | 1 | |
Supplier Concentration Risk [Member] | Purchases of Inventory [Member] | Supplier One [Member] | |||
Concentration risk percentage | 30.00% | 39.00% | |
Supplier Concentration Risk [Member] | Purchases of Inventory [Member] | Supplier Two [Member] | |||
Concentration risk percentage | 17.00% | ||
Supplier Concentration Risk [Member] | Purchases of Inventory [Member] | Supplier Three [Member] | |||
Concentration risk percentage | 12.00% | ||
Accounts Payable and Accrued Liabilities [Member] | |||
Accrued warranty reserve | $ 185,234 | $ 144,822 | |
2022 [Member] | |||
Remaining performance obligations | 384,000 | ||
Remaining performance obligations related to engineering only paid contracts | 273,000 | ||
Series 3 Warrants [Member] | |||
Warrants to purchase common stock | shares | 2,625,000 | ||
Inventory Valuation and Obsolescence [Member] | |||
Inventory adjustments | $ 71,376 | $ 295,347 |
Basis of Presentation; Summar_5
Basis of Presentation; Summary of Significant Accounting Policies - Schedule of Derivative Liability Related to Warrants (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Accounting Policies [Abstract] | ||
Balance beginning | $ 410,880 | |
Gain on change in derivative liability, net | (21,403) | |
Balance prior to exercise of associated warrants | 389,477 | |
Extinguishment of derivative liability on cashless exercise of associated warrants | (389,477) | |
Balance ending |
Basis of Presentation; Summar_6
Basis of Presentation; Summary of Significant Accounting Policies - Schedule of Revenue by Source (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Disaggregation of Revenue [Line Items] | ||
Total revenue | $ 15,224,454 | $ 9,581,968 |
Equipment and Systems Sales [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | 13,692,863 | 8,288,102 |
Engineering and Other Services [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | 1,239,130 | 1,040,764 |
Shipping and Handling [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | 292,461 | 243,072 |
Other Revenue [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | $ 10,030 |
Basis of Presentation; Summar_7
Basis of Presentation; Summary of Significant Accounting Policies - Schedule of Remaining Performance Obligations Expected to be Recognized (Details) | Dec. 31, 2019USD ($) |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligations related to engineering only paid contracts | $ 5,903,000 |
Remaining performance obligations related to partial equipment paid contracts | 3,655,000 |
Total remaining performance obligations | 9,558,000 |
2020 [Member] | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligations related to engineering only paid contracts | 5,359,000 |
Remaining performance obligations related to partial equipment paid contracts | 3,130,000 |
Total remaining performance obligations | 8,489,000 |
2021 [Member] | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligations related to engineering only paid contracts | 271,000 |
Remaining performance obligations related to partial equipment paid contracts | 414,000 |
Total remaining performance obligations | 685,000 |
2022 [Member] | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligations related to engineering only paid contracts | 273,000 |
Remaining performance obligations related to partial equipment paid contracts | 111,000 |
Total remaining performance obligations | $ 384,000 |
Basis of Presentation; Summar_8
Basis of Presentation; Summary of Significant Accounting Policies - Schedule of Share-based Compensation Costs (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Total share-based compensation expense included in consolidated statement of operations | $ 788,599 | $ 2,029,430 |
Cost of Revenue [Member] | ||
Total share-based compensation expense included in consolidated statement of operations | 91,081 | 100,736 |
Advertising and Marketing Expenses [Member] | ||
Total share-based compensation expense included in consolidated statement of operations | 33,977 | 7,671 |
Product Development Costs [Member] | ||
Total share-based compensation expense included in consolidated statement of operations | 45,330 | 4,548 |
Selling, General and Administrative Expenses [Member] | ||
Total share-based compensation expense included in consolidated statement of operations | $ 1,121,677 | $ 1,916,475 |
Going Concern (Details Narrativ
Going Concern (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Net loss | $ (1,338,566) | $ (4,743,745) | ||
Accumulated deficit | (25,684,927) | (24,346,361) | ||
Stockholder's deficit | (355,631) | 194,336 | $ 1,412,486 | |
Revenues | $ 15,224,454 | 9,581,968 | ||
Increase in revenue percentage | 59.00% | |||
Cash flow from operating activities | $ 671,833 | (2,848,773) | ||
Working capital deficit | $ 1,437,000 | $ 1,031,000 | ||
Subsequent Event [Member] | ||||
Accrued compensation expense | $ 503,000 |
Leases (Details Narrative)
Leases (Details Narrative) | Sep. 02, 2019USD ($) | Sep. 02, 2018USD ($) | Jan. 02, 2018USD ($)ft² | Jun. 27, 2017USD ($)ft² | Dec. 31, 2019USD ($) | Jan. 02, 2019USD ($) | Dec. 31, 2018USD ($) | Jul. 31, 2017USD ($) |
Lessee, Lease, Description [Line Items] | ||||||||
Security deposit | $ 51,000 | |||||||
Operating lease right-of-use asset | $ 534,133 | |||||||
Lease liability | $ 622,052 | |||||||
ASU 2016-02 [Member] | ||||||||
Lessee, Lease, Description [Line Items] | ||||||||
Deferred rent reclassified to operating lease liability | $ 26,477 | |||||||
Operating lease right-of-use asset | 714,416 | |||||||
Lease liability | 822,374 | |||||||
Unamortized amount of tenant improvement allowance | 81,481 | |||||||
ASU 2016-02 [Member] | Maximum [Member] | ||||||||
Lessee, Lease, Description [Line Items] | ||||||||
Tenant improvements | $ 100,000 | |||||||
Facility Lease [Member] | ||||||||
Lessee, Lease, Description [Line Items] | ||||||||
Area of land | ft² | 18,600 | 12,700 | ||||||
Lease rental expense | $ 20,135 | $ 19,549 | $ 18,979 | $ 12,967 | ||||
Operating lease term description | Until August 31, 2018 | Until January 1, 2018 | ||||||
Monthly rent description | On each September 1 through the end of the lease, the monthly rent will increase by 3%. | |||||||
Operating lease renewal term | 5 years |
Leases - Schedule of Lease Cost
Leases - Schedule of Lease Cost (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Leases [Abstract] | ||
Operating lease cost | $ 216,889 | |
Operating cash outflow from operating lease | 236,930 | |
Operating lease right-of-use asset | 534,133 | |
Operating lease liability, current | 217,843 | |
Operating lease liability, long-term | $ 404,209 | |
Remaining lease term | 2 years 8 months 12 days | |
Discount rate | 5.00% |
Leases - Schedule of Future Ann
Leases - Schedule of Future Annual Minimum Lease Payments (Details) | Dec. 31, 2019USD ($) |
Leases [Abstract] | |
2020 | $ 244,038 |
2021 | 251,360 |
2022 | 170,891 |
Total minimum lease payments | 666,289 |
Less imputed interest | (44,237) |
Present value of minimum lease payments | $ 622,052 |
Inventory (Details Narrative)
Inventory (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Inventory Disclosure [Abstract] | ||
Overhead expenses | $ 31,831 | $ 34,000 |
Inventory - Schedule of Invento
Inventory - Schedule of Inventory (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Inventory Disclosure [Abstract] | ||
Finished goods | $ 1,041,369 | $ 869,895 |
Work in progress | 3,851 | 9,080 |
Raw materials | 257,399 | 352,258 |
Allowance for excess & obsolete inventory | (71,376) | (295,347) |
Inventory, net | $ 1,231,243 | $ 935,886 |
Property and Equipment (Details
Property and Equipment (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Cost of equipment | $ 619,283 | $ 792,282 |
Accumulated depreciation | 361,360 | 271,961 |
Co-Founders [Member] | ||
Cost of equipment | 176,042 | |
Accumulated depreciation | 39,120 | |
Property and Equipment [Member] | ||
Depreciation expense | 157,860 | 158,683 |
Property and Equipment [Member] | Cost of Revenue [Member] | ||
Depreciation expense | $ 7,010 | $ 7,940 |
Property and Equipment - Schedu
Property and Equipment - Schedule of Property and Equipment (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Property, Plant and Equipment [Line Items] | ||
Property and equipment, Gross | $ 619,283 | $ 792,282 |
Accumulated depreciation | (361,360) | (271,961) |
Property and equipment, net | 257,923 | 520,321 |
Furniture and Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, Gross | 389,090 | 386,047 |
Equipment Held for Lease [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, Gross | 176,042 | |
Vehicles [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, Gross | 15,000 | 15,000 |
Leasehold Improvements [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, Gross | $ 215,193 | $ 215,193 |
Intangible Assets (Details Narr
Intangible Assets (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Amortization expense | $ 3,320 | $ 5,017 |
Patents [Member] | ||
Intangible assets amortization period | 14 years | |
Written-off finite lived intangible assets | $ 7,778 | |
WebSite Development Costs [Member] | ||
Intangible assets amortization period | 5 years |
Intangible Assets - Schedule of
Intangible Assets - Schedule of Intangible Assets (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Intangible assets | $ 36,777 | $ 44,555 |
Accumulated amortization | (24,847) | (21,527) |
Intangible assets, Net | 11,930 | 23,028 |
Patents [Member] | ||
Intangible assets | 12,234 | 20,012 |
WebSite Development Costs [Member] | ||
Intangible assets | 22,713 | 22,713 |
Trademarks [Member] | ||
Intangible assets | $ 1,830 | $ 1,830 |
Accounts Payable and Accrued _3
Accounts Payable and Accrued Liabilities - Schedule of Accounts Payable and Accrued Liabilities (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Payables and Accruals [Abstract] | ||
Accounts payable | $ 1,299,015 | $ 1,278,678 |
Sales commissions payable | 69,532 | 56,277 |
Accrued payroll liabilities | 169,052 | 127,915 |
Product warranty accrual | 185,234 | 144,822 |
Other accrued expenses | 110,127 | 309,395 |
Total | $ 1,832,959 | $ 1,917,087 |
Related Party Agreements and _2
Related Party Agreements and Transactions (Details Narrative) - USD ($) | 1 Months Ended | 3 Months Ended | 12 Months Ended | |||||
Dec. 31, 2018 | Jun. 30, 2018 | May 31, 2018 | May 31, 2017 | Mar. 24, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2019 | |
Demo and testing fees | $ 32,000 | |||||||
Lease fees | 48,880 | |||||||
Property and equipment | $ 520,321 | $ 257,923 | 520,321 | |||||
Net of impact of foregoing item charge | $ 120,241 | |||||||
Stock Repurchased During Period, value | $ 400,000 | |||||||
Preferred Stock [Member] | ||||||||
Stock repurchased during period, shares | ||||||||
Stock Repurchased During Period, value | ||||||||
Number of shares of common stock issued, shares | ||||||||
Common Stock [Member] | ||||||||
Stock repurchased during period, shares | (3,125,000) | |||||||
Stock Repurchased During Period, value | $ 31 | |||||||
Number of shares of common stock issued, shares | 7,562,500 | |||||||
Leased Equipment [Member] | ||||||||
Property and equipment | $ 107,581 | |||||||
Accounts Receivable [Member] | ||||||||
Unpaid lease fees | $ 36,660 | |||||||
Accounts Payable [Member] | ||||||||
Unpaid demo and Testing Fees | $ 24,000 | |||||||
Co-Founders [Member] | ||||||||
Ownership percentage | 10.00% | |||||||
Stock repurchased during period, shares | 3,125,000 | |||||||
Stock Repurchased During Period, value | $ 400,000 | |||||||
Number of shares of common stock issued, shares | 35,190 | 35,190 | ||||||
Co-Founders [Member] | Consulting Agreement [Member] | ||||||||
Agreement term | 3 years | |||||||
Consulting fees | $ 30,000 | $ 10,000 | ||||||
Co-Founders [Member] | Equipment, Demonstration and Product Testing Agreement [Member] | ||||||||
Agreement term | 3 years | |||||||
Quarterly fee, receivable | $ 16,500 | |||||||
Quarterly fee, payable | 12,000 | |||||||
Co-Founders [Member] | Equipment, Demonstration and Product Testing Agreement [Member] | Maximum [Member] | ||||||||
Quarterly fee, receivable | $ 18,330 | |||||||
Co-Founders [Member] | Employment Agreement [Member] | ||||||||
Base salary | $ 150,000 | |||||||
Co-Founders [Member] | Employment Agreement [Member] | Restricted Stock Units (RSUs) [Member] | ||||||||
Share based payment award, shares issued in period | 4,800,000 | |||||||
Number of shares vested and to be settled with issued shares | 2,000,000 | |||||||
Stock cancelled during period, shares | 1,000,000 | |||||||
Co-Founders [Member] | Employment Agreement [Member] | Restricted Stock Units (RSUs) [Member] | April 30, 2020 [Member] | ||||||||
Number of stock expected to vest | 800,000 | |||||||
Co-Founders [Member] | Employment Agreement [Member] | Restricted Stock Units (RSUs) [Member] | Subsequent Event [Member] | ||||||||
Number of shares vested and to be settled with issued shares | 1,000,000 | |||||||
Co-Founders [Member] | Stock Repurchase Agreement [Member] | ||||||||
Stock repurchased during period, shares | 3,125,000 | |||||||
Stock Repurchased During Period, value | $ 400,000 | |||||||
Co-Founders [Member] | Preferred Stock Option Agreement [Member] | ||||||||
Number of shares acquired | 35,189,669 | |||||||
Stock option expiration | Apr. 30, 2020 | |||||||
Convertible preferred stock, terms of conversion | Pursuant to the preferred stock option agreement, upon exercise of the option by the Company, the Company agreed to issue one share of the Company's common stock for each 1,000 shares of Preferred Stock purchased by the Company | |||||||
Paid for the granted option | $ 5,000 | |||||||
Co-Founders [Member] | Preferred Stock Option Agreement [Member] | Preferred Stock [Member] | ||||||||
Stock repurchased during period, shares | 35,190 | |||||||
Co-Founders [Member] | Preferred Stock Option Agreement [Member] | Common Stock [Member] | ||||||||
Stock repurchased during period, shares | 35,190 |
Commitments and Contingencies (
Commitments and Contingencies (Details Narrative) - Restricted Stock Units (RSUs) [Member] - shares | Mar. 09, 2020 | Dec. 31, 2019 |
Number of units, vested but not settled | 6,750,000 | |
Subsequent Event [Member] | ||
Number of units, vested and settled | 6,750,000 |
Preferred and Common Stock (Det
Preferred and Common Stock (Details Narrative) - USD ($) | 1 Months Ended | 12 Months Ended | |||
Dec. 31, 2018 | Jun. 30, 2018 | May 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | |
Preferred stock, par value | $ 0.00001 | $ 0.00001 | $ 0.00001 | ||
Preferred stock, shares issued | 42,030,331 | 42,030,331 | 42,030,331 | ||
Preferred stock, shares outstanding | 42,030,331 | 42,030,331 | 42,030,331 | ||
Number of shares of common stock issued, value | $ 1,210,000 | ||||
Number of shares issued for settlement of commercial dispute | 80,000 | ||||
Stock repurchased during period, value | $ 400,000 | ||||
2017 Equity Incentive Plan [Member] | Non-Qualified Stock Options [Member] | |||||
Number of options acquired to purchase shares | 10,250,000 | ||||
Series A preferred stock [Member] | |||||
Preferred stock, par value | $ 0.00001 | $ 0.00001 | $ 0.00001 | ||
Preferred stock, shares issued | 42,030,331 | 42,030,331 | 42,030,331 | ||
Preferred stock, shares outstanding | 42,030,331 | 42,030,331 | 42,030,331 | ||
Co-Founders [Member] | |||||
Number of shares of common stock issued, shares | 35,190 | 35,190 | |||
Stock repurchased during period, shares | 3,125,000 | ||||
Stock repurchased during period, value | $ 400,000 | ||||
Consultants [Member] | |||||
Number of shares issued for services, shares | 273,675 | ||||
Consultants [Member] | 2017 Equity Incentive Plan [Member] | |||||
Number of shares issued for services in lieu of cash fees and bonus fees | 1,158,658 | ||||
Employees [Member] | Sales Incentive Plan [Member] | |||||
Number of shares of common stock issued, shares | 31,562 | ||||
Accredited Investors [Member] | |||||
Number of shares of common stock issued, shares | 7,562,500 | ||||
Independent Directors [Member] | 2017 Equity Incentive Plan [Member] | |||||
Number of shares of common stock issued, shares | 197,370 | 345,454 | |||
Independent Directors One [Member] | 2017 Equity Incentive Plan [Member] | |||||
Number of shares of common stock issued, shares | 789,474 | ||||
Employee [Member] | 2017 Equity Incentive Plan [Member] | |||||
Number of common stock shares issued in settlement of vested restricted stock, shares | 1,120,000 | 5,447,368 | |||
Number of shares issued for stock incentive bonus | 1,120,000 | 3,420,000 | |||
Former Employee [Member] | 2017 Equity Incentive Plan [Member] | Non-Qualified Stock Options [Member] | |||||
Number of shares issued for exercise of stock option | 25,000 | ||||
Preferred Stock [Member] | |||||
Number of shares of common stock issued, shares | |||||
Number of shares of common stock issued, value | |||||
Number of shares issued for services, shares | |||||
Stock repurchased during period, shares | |||||
Stock repurchased during period, value | |||||
Preferred Stock [Member] | Co-Founders [Member] | |||||
Number of options acquired to purchase shares | 35,189,669 | ||||
Payments of option to purchase stock from related party | $ 5,000 | ||||
Warrant [Member] | Investor [Member] | |||||
Number of shares of common stock issued, shares | 100,000 | ||||
Number of shares of common stock issued, value | $ 15,000 | ||||
Warrant [Member] | Former Director [Member] | |||||
Number of shares of common stock issued, shares | 1,498,325 | ||||
Warrant [Member] | Investor One [Member] | |||||
Number of shares of common stock issued, shares | 1,168,540 |
Unit Offering (Details Narrativ
Unit Offering (Details Narrative) - USD ($) | 1 Months Ended | 12 Months Ended | ||
Dec. 31, 2018 | Jun. 30, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | |
Number of shares of common stock issued, value | $ 1,210,000 | |||
Payments for repurchase of common stock | $ 400,000 | |||
Accredited Investors [Member] | ||||
Number of shares of common stock issued, shares | 7,562,500 | |||
Co-Founders [Member] | ||||
Number of shares of common stock issued, shares | 35,190 | 35,190 | ||
Q2 2018 Warrants [Member] | ||||
Price per share | $ 0.40 | |||
Number of shares of common stock issued, shares | 7,562,500 | |||
Number of shares of common stock issued, value | $ 1,210,000 | |||
Q2 2018 Warrants [Member] | Accredited Investors [Member] | ||||
Price per share | $ 0.16 | |||
Q2 2018 Warrants [Member] | Co-Founders [Member] | ||||
Payments for repurchase of common stock | $ 400,000 |
Outstanding Warrants (Details N
Outstanding Warrants (Details Narrative) | 1 Months Ended | 12 Months Ended | |||||
Jun. 30, 2018Number$ / shares | Dec. 31, 2017USD ($)Number$ / sharesshares | Mar. 31, 2017USD ($)Number$ / sharesshares | Oct. 31, 2014USD ($)Numbershares | Dec. 31, 2017$ / sharesshares | Dec. 31, 2019shares | Dec. 31, 2018shares | |
Common stock shares, issued | shares | 228,216,638 | 224,989,794 | |||||
Investment Bank [Member] | |||||||
Warrant description | The Banker Warrants were fully vested on the date of issuance, were exercisable beginning December 20, 2017 and expire June 20, 2020 | ||||||
Series 2 Warrants [Member] | |||||||
Number of investment unit offered | Number | 60 | ||||||
Offered investments, price per unit | $ | $ 50,000 | ||||||
Common stock shares, issued | shares | 250,000 | ||||||
Warrants for the purchase of shares of common stock | shares | 50,000 | 901,250 | |||||
Series 2 Warrants [Member] | Series 2 Convertible Notes [Member] | |||||||
Convertible promissory note | $ | $ 50,000 | ||||||
Debt instrument, interest rate | 10.00% | ||||||
Warrant [Member] | Investment Bank [Member] | |||||||
Warrants for the purchase of shares of common stock | shares | 500,000 | 500,000 | |||||
Exercise price of warrants | $ 0.35 | $ 0.35 | |||||
Q1 2017 Warrants [Member] | |||||||
Number of investment unit offered | Number | 16,781,250 | ||||||
Warrants for the purchase of shares of common stock | shares | 468,750 | 16,312,500 | |||||
Exercise price of warrants | $ 0.26 | ||||||
Proceeds from investment | $ | $ 2,685,000 | ||||||
Conversion stock, description | Each unit consisted of one share of the Company's common stock and one warrant for the purchase of one share of the Company's common stock ('Q1 2017 Warrants"). | ||||||
Price per share | $ 0.42 | ||||||
Consecutive trading days | Number | 5 | ||||||
Redeem warrant shares at a price | $ 0.01 | ||||||
Q4 2017 Warrants [Member] | |||||||
Number of investment unit offered | Number | 14,734,000 | ||||||
Warrants for the purchase of shares of common stock | shares | 14,734,000 | ||||||
Exercise price of warrants | $ 0.20 | 0.20 | |||||
Proceeds from investment | $ | $ 1,768,080 | ||||||
Conversion stock, description | Each unit consisted of one share of the Company's common stock and one warrant for the purchase of one share of the Company's common stock ("Q4 2017 Warrants") | ||||||
Price per share | $ 0.36 | 0.36 | |||||
Consecutive trading days | Number | 5 | ||||||
Redeem warrant shares at a price | $ 0.01 | $ 0.01 | |||||
Warrant term | 3 years | 3 years | |||||
Q2 2018 Warrants [Member] | |||||||
Warrants for the purchase of shares of common stock | shares | 7,562,500 | ||||||
Exercise price of warrants | $ 0.25 | ||||||
Warrant description | The Q2 2018 Warrants are exercisable commencing July 1, 2018 until June 30, 2021. | ||||||
Conversion stock, description | Each unit consisting of one share of the Company's common stock and one Q2 2018 Warrant. | ||||||
Price per share | $ 0.40 | ||||||
Consecutive trading days | Number | 5 | ||||||
Redeem warrant shares at a price | $ 0.01 |
Equity Incentive Plans (Details
Equity Incentive Plans (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | |
Mar. 24, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Number of common shares issued for services, value | $ 75,000 | $ 408,636 | |
Share based compensation expense | 788,599 | $ 2,029,430 | |
Restricted Stock Units (RSUs) [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Number of shares forfeited for terminations | 3,000,000 | ||
Total intrinsic value of restricted stock unit | 79,120 | $ 1,289,500 | |
Restricted Stock Units (RSUs) [Member] | Subsequent Event [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Total intrinsic value of restricted stock unit | $ 1,035,750 | ||
Intrinsic value of vested and settled with issuance of share | 1,105,750 | ||
Restricted Stock Units (RSUs) [Member] | Employees, Directors and Consultants [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Share based compensation expense | 278,906 | 1,295,368 | |
Unvested Restricted Stock Units (RSUs) [Member] | Employees, Directors and Consultants [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Unrecognized compensation expense | 25,162 | ||
Incentive Stock Bonus Awards [Member] | Employees [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Unrecognized compensation expense | 0 | ||
Share based compensation expense | 44,209 | 165,208 | |
Intrinsic value of vested and settled with issuance of share | 58,240 | 624,520 | |
Share based compensation award forfeited | $ 0 | $ 404,689 | |
Incentive Stock Bonus Awards [Member] | Employees [Member] | Subsequent Event [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Intrinsic value of vested and settled with issuance of share | $ 39,200 | ||
2017 Equity Incentive Plan [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Number of common stock shares issuance | 50,000,000 | ||
Unrecognized compensation expense | $ 96,939 | ||
Unrecognized compensation expense term | 1 year | ||
2017 Equity Incentive Plan [Member] | Independent Directors [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Number of shares of common stock issued | 197,370 | ||
Director fees | $ 15,000 | ||
2017 Equity Incentive Plan [Member] | Independent Directors [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Number of shares of common stock issued | 789,474 | ||
Director fees | $ 60,000 | ||
2017 Equity Incentive Plan [Member] | Non-Qualified Stock Options [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Expected stock price volatility, minimum | 114.32% | ||
Expected stock price volatility, maximum | 118.90% | ||
Risk-free interest rate, minimum | 1.32% | ||
Risk-free interest rate, maximum | 2.87% | ||
2017 Equity Incentive Plan [Member] | Non-Qualified Stock Options [Member] | Minimum [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Expected term | 1 year 6 months | ||
2017 Equity Incentive Plan [Member] | Non-Qualified Stock Options [Member] | Maximum [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Expected term | 7 years 6 months | ||
2017 Equity Incentive Plan [Member] | Independent Directors [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Number of shares of common stock issued | 197,370 | 345,454 | |
2017 Equity Incentive Plan [Member] | Independent Directors [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Number of shares of common stock issued | 789,474 | ||
2017 Equity Incentive Plan [Member] | Directors [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Unrecognized compensation expense | |||
Share based compensation expense | $ 0 | $ 12,205 | |
2017 Equity Incentive Plan [Member] | Restricted Stock [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Number of common shares issued for services | 1,406,055 | ||
Number of common shares issued for services, value | $ 301,650 | ||
2017 Equity Incentive Plan [Member] | Non-Qualified Stock Options [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Number of options to purchase shares | 10,250,000 | ||
Stock option to purchase - thresholds - performance based | 6,000,000 | ||
Number of shares forfeited for terminations | 4,250,000 | ||
2017 Equity Incentive Plan [Member] | Non-Qualified Stock Options [Member] | Employees and Consultants [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Share based compensation expense | $ 390,485 | $ 148,013 | |
2017 Equity Incentive Plan [Member] | Unvested Options [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Share based compensation expense | $ 71,777 |
Equity Incentive Plans - Schedu
Equity Incentive Plans - Schedule of Stock Option Activity (Details) - 2017 Equity Incentive Plan [Member] - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Directors [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Number of Options, Outstanding Beginning | 900,000 | 900,000 |
Number of Options, Granted | ||
Number of Options, Exercised | ||
Number of Options, Forfeited/Cancelled | ||
Number of Options, Expired | ||
Number of Options, Outstanding Ending | 900,000 | 900,000 |
Number of Options, Exercisable Ending | 900,000 | |
Weighted Average Exercise Price, Outstanding Beginning | $ 0.135 | $ 0.135 |
Weighted Average Exercise Price, Granted | ||
Weighted Average Exercise Price, Exercised | ||
Weighted Average Exercise Price, Forfeited | ||
Weighted Average Exercise Price, Expired | ||
Weighted Average Exercise Price, Outstanding Ending | 0.135 | $ 0.135 |
Weighted Average Exercise Price, Exercisable Ending | $ 0.135 | |
Weighted Average Remaining Contractual Term, Outstanding Beginning | 8 years 7 months 6 days | 9 years 7 months 6 days |
Weighted Average Remaining Contractual Term, Outstanding Ending | 7 years 7 months 6 days | 8 years 7 months 6 days |
Weighted Average Remaining Contractual Term, Exercisable Ending | 7 years 7 months 6 days | |
Aggregate Intrinsic Value, Outstanding Beginning | $ 94,500 | |
Aggregate Intrinsic Value, Outstanding Ending | ||
Employees and Consultants [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Number of Options, Outstanding Beginning | 10,560,000 | 10,235,000 |
Number of Options, Granted | 2,000,000 | 6,500,000 |
Number of Options, Exercised | (25,000) | |
Number of Options, Forfeited/Cancelled | (2,408,333) | (6,083,332) |
Number of Options, Expired | (16,667) | (66,668) |
Number of Options, Outstanding Ending | 10,135,000 | 10,560,000 |
Number of Options, Exercisable Ending | 8,135,000 | |
Number of Options, Outstanding vested and Expected to vest Ending | 10,135,000 | |
Weighted Average Exercise Price, Outstanding Beginning | $ 0.104 | $ 0.121 |
Weighted Average Exercise Price, Granted | 0.080 | 0.118 |
Weighted Average Exercise Price, Exercised | 0.135 | |
Weighted Average Exercise Price, Forfeited | 0.116 | 0.147 |
Weighted Average Exercise Price, Expired | 0.105 | 0.135 |
Weighted Average Exercise Price, Outstanding Ending | 0.096 | $ 0.104 |
Weighted Average Exercise Price, Exercisable Ending | 0.098 | |
Weighted Average Exercise Price, Outstanding vested and Expected to vest Ending | $ 0.096 | |
Weighted Average Remaining Contractual Term, Outstanding Beginning | 8 years 4 months 24 days | 8 years 8 months 12 days |
Weighted Average Remaining Contractual Term, Outstanding Ending | 7 years 8 months 12 days | 8 years 4 months 24 days |
Weighted Average Remaining Contractual Term, Exercisable Ending | 7 years 4 months 24 days | |
Weighted Average Remaining Contractual Term, Outstanding vested and expected to vest, Ending | 7 years 8 months 12 days | |
Aggregate Intrinsic Value, Outstanding Beginning | $ 1,218,375 | |
Aggregate Intrinsic Value, Outstanding Ending | ||
Aggregate Intrinsic Value, Exercisable Ending | ||
Aggregate Intrinsic Value, Outstanding vested and Expected to vest Ending |
Equity Incentive Plans - Summar
Equity Incentive Plans - Summary of Non-vested Non-Qualified Stock Option Activity (Details) - 2017 Equity Incentive Plan [Member] - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Directors [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Number of Options Nonvested, Beginning | 450,000 | |
Number of Options Nonvested, Granted | ||
Number of Options Nonvested, Vested | (450,000) | |
Number of Options Nonvested, Forfeited | ||
Number of Options Nonvested, Expired | ||
Number of Options Nonvested, Ending | ||
Weighted Average Grant-Date Fair Value, Beginning | $ 0.123 | |
Weighted Average Grant-Date Fair Value, Granted | ||
Weighted Average Grant-Date Fair Value, Vested | 0.123 | |
Weighted Average Grant-Date Fair Value, Forfeited | ||
Weighted Average Grant-Date Fair Value, Expired | ||
Weighted Average Grant-Date Fair Value, Ending | ||
Aggregated Intrinsic Value, Nonvested Beginning | $ 52,470 | |
Aggregated Intrinsic Value, Nonvested Ending | ||
Grant Date Fair Value Nonvested, Beginning | 55,530 | |
Grant Date Fair Value Nonvested, Vested | $ 55,530 | |
Employees and Consultants [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Number of Options Nonvested, Beginning | 7,333,329 | 8,349,992 |
Number of Options Nonvested, Granted | 2,000,000 | 6,500,000 |
Number of Options Nonvested, Vested | (4,924,996) | (1,433,331) |
Number of Options Nonvested, Forfeited | (2,408,333) | (6,083,332) |
Number of Options Nonvested, Expired | ||
Number of Options Nonvested, Ending | 2,000,000 | 7,333,329 |
Weighted Average Grant-Date Fair Value, Beginning | $ 0.086 | $ 0.107 |
Weighted Average Grant-Date Fair Value, Granted | 0.065 | 0.102 |
Weighted Average Grant-Date Fair Value, Vested | 0.074 | 0.088 |
Weighted Average Grant-Date Fair Value, Forfeited | 0.102 | 0.132 |
Weighted Average Grant-Date Fair Value, Expired | ||
Weighted Average Grant-Date Fair Value, Ending | $ 0.075 | $ 0.086 |
Aggregated Intrinsic Value, Nonvested Beginning | $ 1,000,499 | |
Aggregated Intrinsic Value, Nonvested Ending | ||
Grant Date Fair Value Nonvested, Beginning | 628,756 | 891,855 |
Grant Date Fair Value Nonvested, Granted | 130,120 | 663,569 |
Grant Date Fair Value Nonvested, Vested | 362,998 | 125,988 |
Grant Date Fair Value Nonvested, Forfeited | 246,344 | 800,680 |
Grant Date Fair Value Nonvested, Expired | ||
Grant Date Fair Value Nonvested, Ending | $ 149,534 | $ 628,756 |
Equity Incentive Plans - Sche_2
Equity Incentive Plans - Schedule of Restricted Stock Units Activity (Details) - USD ($) | 1 Months Ended | 12 Months Ended | ||||
Jan. 31, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Number of Units, Vested and settled with share issuance | (1,000,000) | (1,000,000) | ||||
2017 Equity Incentive Plan [Member] | Employees, Directors and Consultants [Member] | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Number of Units, beginning | 9,867,368 | 9,867,368 | 13,800,000 | |||
Number of Units, Granted | 5,514,736 | |||||
Number of Units, Vested and settled with share issuance | (1,120,000) | [1] | (6,447,368) | [2] | ||
Number of Units, Forfeited/canceled | (1,197,368) | (3,000,000) | ||||
Number of Units, ending | 7,550,000 | 9,867,368 | ||||
Number of Units, Vested but not settled | [3] | 6,750,000 | ||||
Number of Units, Expected to Vest | 800,000 | |||||
Weighted Average Grant Date Fair Value, beginning | $ 0.140 | $ 0.140 | $ 0.122 | |||
Weighted Average Grant Date Fair Value, Granted | [1] | 0.185 | [2] | |||
Weighted Average Grant Date Fair Value, Vested and settled with share issuance | 0.181 | 0.153 | ||||
Weighted Average Grant Date Fair Value, Forfeited/canceled | 0.179 | 0.112 | ||||
Weighted Average Grant Date Fair Value, ending | 0.128 | $ 0.140 | ||||
Weighted Average Grant Date Fair Value, Vested but not settled | [3] | 0.121 | ||||
Weighted Average Grant Date Fair Value, Expected to Vest | $ 0.184 | |||||
Aggregated Intrinsic Value, Outstanding beginning | $ 730,185 | $ 730,185 | $ 3,312,000 | |||
Aggregated Intrinsic Value, Outstanding ending | 528,500 | $ 730,185 | ||||
Aggregated Intrinsic Value, Vested but not settled | [3] | 472,500 | ||||
Aggregated Intrinsic Value, Expected to Vest | $ 56,000 | |||||
[1] | Includes 1,000,000 RSUs that were vested as of December 31, 2019 and settled with the issuance of 1,000,000 shares of common stock in January 2020. | |||||
[2] | Includes 1,000,000 RSUs that were vested as of December 31, 2018 and settled with the issuance of 1,000,000 shares of common stock in January 2019. | |||||
[3] | As of December 31, 2019, these RSUs had not been settled due to a dispute with a former employee over the required withholding taxes to be paid to the Company for remittance to the appropriate tax authorities. On March 9, 2020, the Company issued the former employee 6,750,000 shares of the Company's common stock in settlement of these restricted stock units after taking measures to mitigate the Company'sexposure to penalties and liability for the failure to properly withhold income taxes. See Notes 10 and 17. |
Equity Incentive Plans - Sche_3
Equity Incentive Plans - Schedule of Restricted Stock Units Activity (Details) (Parenthetical) - shares | Mar. 09, 2020 | Jan. 31, 2019 | Dec. 31, 2019 | Dec. 31, 2018 |
Restricted stock of shares vested | 1,000,000 | 1,000,000 | ||
Settled with the issuance of common stock | 1,000,000 | |||
Subsequent Event [Member] | Former Employee [Member] | ||||
Number of shares settlement of restricted stock | 6,750,000 | |||
January 2020 [Member] | ||||
Settled with the issuance of common stock | 1,000,000 |
Equity Incentive Plans - Sche_4
Equity Incentive Plans - Schedule of Incentive Stock Bonus Awarded to Employees (Details) - Incentive Stock Bonus Awards [Member] - 2017 Equity Incentive Plan [Member] - Employees [Member] - $ / shares | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Number of Shares, Nonvested, Beginning | 1,680,000 | 7,040,000 | |
Number of Shares, Awarded | 4,000,000 | ||
Number of Shares, Vested | (1,680,000) | [1] | (1,860,000) |
Number of Shares, Forfeited | (7,500,000) | ||
Number of Shares, Nonvested, Ending | 1,680,000 | ||
Weighted Average Grant-date Fair Value, Beginning | $ 0.112 | $ 0.113 | |
Weighted Average Grant-date Fair Value, Awarded | 0.170 | ||
Weighted Average Grant-Date Fair Value, Vested | 0.112 | [1] | 0.113 |
Weighted Average Grant-date Fair Value, Forfeited | 0.144 | ||
Weighted Average Grant-date Fair Value, Ending | 0.112 | ||
Aggregated Intrinsic Value, Nonvested Beginning | 124,320 | 1,689,600 | |
Aggregated Intrinsic Value, Nonvested Ending | $ 124,320 | ||
[1] | Includes 560,000 stock incentive bonus shares that were vested as of December 31, 2019 and approved by the Company's Board and settled with the issuance of 560,000 shares of common stock in January 2020. |
Equity Incentive Plans - Sche_5
Equity Incentive Plans - Schedule of Incentive Stock Bonus Awarded to Employees (Details) (Parenthetical) - Incentive Stock Bonus Awards [Member] - shares | 1 Months Ended | 12 Months Ended |
Jan. 31, 2020 | Dec. 31, 2019 | |
Stock incentive bonus shares vested | 560,000 | |
Subsequent Event [Member] | ||
Number of shares issued for settlement | 560,000 |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | ||
Net operating loss carry forward amount | $ 16,355,000 | |
Net operating loss expiration term | 2034 through 2037 | |
NOLs usage against taxable income, percentage | 80.00% | |
Percentage of ownership change | 50.00% | |
NOLs carryforwards term | 3 years | |
Penalties and interest |
Income Taxes - Schedule of U.S.
Income Taxes - Schedule of U.S. Federal Statutory Income Tax Rate and Reported Provision for Income Taxes (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | ||
Income taxes computed at the federal statutory rate | $ (281,000) | $ (996,000) |
States taxes, net of federal benefits | (53,000) | (187,000) |
Permanent differences | 17,000 | 105,000 |
True-up adjustments | 199,000 | 49,000 |
Adjustment to net operating loss | (86,000) | (87,000) |
Other, net | (1,000) | |
Change in valuation allowance | 204,000 | 1,117,000 |
Reported income tax (benefit) expense |
Income Taxes - Schedule of Defe
Income Taxes - Schedule of Deferred Tax Assets (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Income Tax Disclosure [Abstract] | ||
Net operating losses | $ 4,081,000 | $ 3,899,000 |
Equity compensation | 392,000 | 321,000 |
Other deferred tax assets | 149,000 | 188,000 |
Total deferred tax assets | 4,622,000 | 4,408,000 |
Other deferred tax liabilities | (58,000) | (48,000) |
Total deferred tax liabilities | (58,000) | (48,000) |
Net deferred tax assets before valuation allowance | 4,564,000 | 4,360,000 |
Less valuation allowance | (4,564,000) | (4,360,000) |
Net deferred tax assets |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - USD ($) | Mar. 09, 2020 | Jan. 31, 2020 | Mar. 24, 2020 | Dec. 31, 2019 |
2019 Incentive Awards [Member] | ||||
Compensation expense | $ 503,466 | |||
Subsequent Event [Member] | Q1 2017 Warrants [Member] | ||||
Warrants to purchase shares of common stock | 14,062,000 | |||
Subsequent Event [Member] | Consultant [Member] | Non-Qualified Stock Options [Member] | ||||
Stock options exercise price per share | $ 0.07 | |||
Number of stock options vested | 1,000,000 | |||
Subsequent Event [Member] | Consultant [Member] | Non-Qualified Stock Options [Member] | June 30, 2020 [Member] | ||||
Number of stock options vested | 1,000,000 | |||
Subsequent Event [Member] | Former Employee [Member] | Restricted Stock Units (RSUs) [Member] | ||||
Number of shares vested and to be settled with issued shares | 6,750,000 | |||
Subsequent Event [Member] | 2017 Equity Incentive Plan [Member] | ||||
Stock issued for incentive stock bonus | 560,000 | |||
Subsequent Event [Member] | 2017 Equity Incentive Plan [Member] | Non-Qualified Stock Options [Member] | ||||
Number of Options, Granted | 8,616,900 | |||
Stock options exercise price per share | $ 0.07 | |||
Subsequent Event [Member] | 2017 Equity Incentive Plan [Member] | Employee [Member] | Restricted Stock Units (RSUs) [Member] | ||||
Number of shares vested and to be settled with issued shares | 1,000,000 |