Document And Entity Information
Document And Entity Information - shares | 9 Months Ended | |
Sep. 30, 2020 | Nov. 06, 2020 | |
Document Information Line Items | ||
Entity Registrant Name | ONDAS HOLDINGS INC. | |
Document Type | 10-Q | |
Current Fiscal Year End Date | --12-31 | |
Entity Common Stock, Shares Outstanding | 59,388,085 | |
Amendment Flag | false | |
Entity Central Index Key | 0001646188 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Accelerated Filer | |
Document Period End Date | Sep. 30, 2020 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q3 | |
Entity Small Business | true | |
Entity Emerging Growth Company | true | |
Entity Shell Company | false | |
Entity Ex Transition Period | false | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Entity File Number | 000-56004 | |
Entity Incorporation, State or Country Code | NV | |
Entity Tax Identification Number | 47-2615102 | |
Entity Address, Address Line One | 165 Gibraltar Court | |
Entity Address, City or Town | Sunnyvale | |
Entity Address, State or Province | CA | |
Entity Address, Postal Zip Code | 94089 | |
City Area Code | (888) | |
Local Phone Number | 350-9994 | |
Entity Interactive Data Current | Yes |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Current Assets: | ||
Cash and cash equivalents | $ 2,129,013 | $ 2,153,028 |
Restricted cash | 19,332 | |
Accounts receivable, net | 543,785 | 20,212 |
Inventory | 975,000 | 427,516 |
Other current assets | 203,625 | 700,599 |
Total current assets | 3,870,755 | 3,301,355 |
Property and equipment, net | 186,765 | 252,246 |
Other Assets: | ||
Licenses, net | 230,677 | 200,000 |
Intangible assets, net | 152,338 | 126,344 |
Lease deposits | 48,577 | 52,152 |
Deferred offering costs | 201,038 | |
Operating lease right of use assets | 125,258 | 331,419 |
Total other assets | 757,888 | 709,915 |
Total assets | 4,815,408 | 4,263,516 |
Current Liabilities: | ||
Accounts payable | 3,024,023 | 2,322,198 |
Operating lease liabilities | 183,995 | 489,407 |
Accrued expenses and other current liabilities | 2,419,468 | 2,762,799 |
Secured promissory note, net of debt discount $351,189 and $252,933, respectively | 11,453,047 | 10,106,895 |
Deferred revenue | 309,218 | 378,850 |
Derivative liability | 169,229 | |
Note payable | 370,051 | |
Total current liabilities | 17,929,031 | 16,060,149 |
Long-Term Liabilities: | ||
Notes payable | 596,040 | 539,921 |
Accrued interest | 35,471 | 41,239 |
Operating lease liabilities, net of current | 52,449 | |
Total long-term liabilities | 631,511 | 633,609 |
Total liabilities | 18,560,542 | 16,693,758 |
Commitments and Contingencies | ||
Stockholders’ Deficit: | ||
Preferred stock, value | ||
Common stock - par value $0.0001; 350,000,000 shares authorized; 59,388,085 and 59,268,085 issued and outstanding at September 30, 2020 and December 31, 2019, respectively | 5,939 | 5,927 |
Additional paid in capital | 47,374,065 | 39,335,498 |
Accumulated deficit | (61,125,373) | (51,771,667) |
Total stockholders’ deficit | (13,745,134) | (12,430,242) |
Total liabilities and stockholders’ deficit | 4,815,408 | 4,263,516 |
Series A Preferred Stock | ||
Stockholders’ Deficit: | ||
Preferred stock, value | $ 235 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parentheticals) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Secured promissory note, net of debt discount (in Dollars) | $ 351,189 | $ 252,933 |
Preferred stock, par value (in Dollars per share) | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 5,000,000 | 10,000,000 |
Preferred stock, shares issued | ||
Preferred stock, shares outstanding | ||
Common stock, par value (in Dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 350,000,000 | 350,000,000 |
Common stock, shares issued | 59,388,085 | 59,268,085 |
Common stock, shares outstanding | 59,388,085 | 59,268,085 |
Series A Preferred Stock | ||
Preferred stock, par value (in Dollars per share) | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Preferred stock, shares issued | 2,350,400 | |
Preferred stock, shares outstanding | 2,350,400 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Income Statement [Abstract] | ||||
Revenues, net | $ 614,026 | $ 88,132 | $ 1,969,598 | $ 313,583 |
Cost of goods sold | 365,863 | 15,185 | 1,087,540 | 71,133 |
Gross profit | 248,163 | 72,947 | 882,058 | 242,450 |
General and administration | 1,823,336 | 1,036,013 | 5,222,180 | 3,874,186 |
Sales and marketing | 253,560 | 1,174,293 | 934,948 | 4,728,505 |
Research and development | 904,378 | 1,250,736 | 2,555,223 | 4,411,266 |
Total operating expenses | 2,981,274 | 3,461,042 | 8,712,351 | 13,013,957 |
Operating loss | (2,733,111) | (3,388,095) | (7,830,293) | (12,771,507) |
Other income | 7,262 | 7,915 | 16,275 | 12,223 |
Interest income | 53 | 102 | 211 | 1,769 |
Interest expense | (463,761) | (615,518) | (1,403,576) | (1,891,802) |
Change in fair value of derivative liability | (136,323) | (136,323) | ||
Impairment of deferred offering and financing costs associated with canceled financing efforts | (1,208,063) | (1,478,695) | ||
Total other income (expense) | (592,769) | (1,815,564) | (1,523,413) | (3,356,505) |
Loss before provision for income taxes | (3,325,880) | (5,203,659) | (9,353,706) | (16,128,012) |
Provision for income taxes | ||||
Net loss | (3,325,880) | (5,203,659) | (9,353,706) | (16,128,012) |
Foreign currency translation loss | (21,655) | (7,755) | ||
Comprehensive loss | $ (3,325,880) | $ (5,225,314) | $ (9,353,706) | $ (16,135,767) |
Net loss per share - basic (in Dollars per share) | $ (0.06) | $ (0.10) | $ (0.16) | $ (0.32) |
Weighted average number of common shares outstanding, basic (in Shares) | 59,269,390 | 50,731,929 | 59,268,523 | 50,554,113 |
Net loss per share – fully diluted (in Dollars per share) | $ (0.06) | $ (0.10) | $ (0.16) | $ (0.32) |
Weighted average number of common shares outstanding, fully diluted (in Shares) | 60,132,656 | 50,887,702 | 59,833,452 | 50,659,117 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT (Unaudited) - USD ($) | Preferred Stock | Common Stock | Additional Paid in Capital | Accumulated Deficit | Other Accumulated Comprehensive Income (Loss) | Total |
Balance at Dec. 31, 2018 | $ 5,046 | $ 17,491,734 | $ (32,381,535) | $ (14,884,755) | ||
Balance (in Shares) at Dec. 31, 2018 | 50,463,732 | |||||
Balance at Mar. 31, 2019 | $ 5,046 | 17,538,757 | (38,205,260) | 4,661 | (20,656,796) | |
Balance (in Shares) at Mar. 31, 2019 | 50,463,732 | |||||
Stock-based compensation | 47,023 | 47,023 | ||||
Foreign currency translation gain/loss | 4,661 | 4,661 | ||||
Net loss | (5,823,725) | (5,823,725) | ||||
Balance at Jun. 30, 2019 | $ 5,046 | 17,563,770 | (43,305,888) | 13,900 | (25,723,172) | |
Balance (in Shares) at Jun. 30, 2019 | 50,463,732 | |||||
Stock-based compensation | 25,013 | 25,013 | ||||
Foreign currency translation gain/loss | 9,239 | 9,239 | ||||
Net loss | (5,100,628) | (5,100,628) | ||||
Balance at Sep. 30, 2019 | $ 5,869 | 38,168,991 | (48,509,547) | (7,755) | (10,342,442) | |
Balance (in Shares) at Sep. 30, 2019 | 58,688,485 | |||||
Stock-based compensation | 840,840 | 840,840 | ||||
Issuance of Series A in connection with private placement, net of costs | $ 243 | 5,268,090 | 5,268,333 | |||
Issuance of Series A in connection with private placement, net of costs (in Shares) | 2,426,000 | |||||
Issuance of Series A in connection with exchange of debt | $ 580 | 14,496,291 | 14,496,871 | |||
Issuance of Series A in connection with exchange of debt (in Shares) | 5,798,753 | |||||
Foreign currency translation gain/loss | (21,655) | (21,655) | ||||
Net loss | (5,203,659) | (5,203,659) | ||||
Balance at Dec. 31, 2019 | $ 5,927 | 39,335,498 | (51,771,667) | (12,430,242) | ||
Balance (in Shares) at Dec. 31, 2019 | 59,268,085 | |||||
Balance at Mar. 31, 2020 | $ 5,927 | 39,511,099 | (54,578,952) | (15,061,926) | ||
Balance (in Shares) at Mar. 31, 2020 | 59,268,085 | |||||
Stock-based compensation | 25,599 | 25,599 | ||||
Forgiveness of accrued officers’ salary | 150,002 | 150,002 | ||||
Net loss | (2,807,285) | (2,807,285) | ||||
Balance at Jun. 30, 2020 | $ 5,927 | 41,392,179 | (57,799,493) | (16,401,387) | ||
Balance (in Shares) at Jun. 30, 2020 | 59,268,085 | |||||
Stock-based compensation | 1,881,080 | 1,881,080 | ||||
Net loss | (3,220,541) | (3,220,541) | ||||
Balance at Sep. 30, 2020 | $ 235 | $ 5,939 | 47,374,065 | (61,125,373) | (13,745,134) | |
Balance (in Shares) at Sep. 30, 2020 | 2,350,400 | 59,388,085 | ||||
Stock-based compensation | 1,141,291 | 1,141,291 | ||||
Issuance of Series A in connection with private placement, net of costs | $ 222 | 4,217,747 | 4,217,969 | |||
Issuance of Series A in connection with private placement, net of costs (in Shares) | 2,217,500 | |||||
Derivative liability | (32,906) | (32,906) | ||||
Issuance of Series A in connection with exchange of debt | $ 13 | 265,766 | 265,779 | |||
Issuance of Series A in connection with exchange of debt (in Shares) | 132,900 | |||||
Issuance in connection with extension of debt | $ 12 | 389,988 | 390,000 | |||
Issuance in connection with extension of debt (in Shares) | 120,000 | |||||
Net loss | $ (3,325,880) | $ (3,325,880) |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
CASH FLOWS FROM OPERATING ACTIVITES | ||
Net loss | $ (9,353,706) | $ (16,128,012) |
Depreciation | 74,079 | 102,085 |
Amortization of debt discount | 481,916 | 209,056 |
Amortization of intangible assets | 13,152 | 742 |
Change in fair value of derivative liability | 136,323 | |
Disposal of license | 33,334 | |
Non-cash lease expense | 206,161 | 38,867 |
Impairment of operating lease | 259,926 | |
Impairment of deferred offering and financing costs | 270,632 | |
Stock-based compensation | 3,047,970 | 912,876 |
Accounts receivable | (523,573) | (44,726) |
Inventory | (120,799) | (75,417) |
Other current assets | (205,992) | (185,494) |
Accounts payable | 701,825 | 1,642,113 |
Operating lease liability | (357,860) | (279,009) |
Deferred revenue | (69,632) | (11,424) |
Accrued expenses and other current liabilities | 1,061,665 | 1,954,301 |
Net cash flows used in operating activities | (4,875,137) | (11,333,484) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Patent costs | (27,915) | (63,208) |
Purchase of equipment | (8,598) | (72,030) |
Proceeds from sub-lease deposit | 19,332 | |
Security deposit | 3,575 | (6,625) |
Purchase of licenses | (200,000) | |
Net cash flows used in investing activities | (13,606) | (341,863) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Proceeds from sale of preferred stock, net of costs | 4,217,969 | |
Proceeds from paycheck protection program loan | 666,091 | |
Proceeds from secured promissory note | 10,000,000 | |
Proceeds from sale of common stock, net of costs | 5,268,332 | |
Payment of deferred offering costs | (67,350) | |
Net cash flows provided by financing activities | 4,884,060 | 15,200,982 |
Increase decrease in cash, cash equivalents and restricted cash | (4,683) | 3,525,635 |
Effect of foreign currency translation of cash | (5,180) | |
Cash and cash equivalent, beginning of period | 2,153,028 | 1,129,863 |
Cash, cash equivalents and restricted cash, end of period | 2,148,345 | 4,650,318 |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | ||
Cash paid for interest | 11,939 | 921,605 |
Cash paid for income taxes | ||
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES: | ||
Forgiveness of accrued officers salary | 150,002 | |
Debt exchanged for preferred stock | 265,779 | |
Accrued interest converted to debt | 1,254,236 | 230,565 |
Shares issue for extension of debt | $ 390,000 | |
Debt exchanged for common stock | $ 14,496,871 |
DESCRIPTION OF BUSINESS AND BAS
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION | 9 Months Ended |
Sep. 30, 2020 | |
Description of Business and Basis of Presentation [Abstract] | |
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION | NOTE 1 – DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION The Company Ondas Holdings Inc. (“Ondas Holdings,” the “Company,” “we,” or “our”) was originally incorporated in Nevada on December 22, 2014 under the name of Zev Ventures Incorporated. On September 28, 2018, we closed an acquisition, described below, changed our name to Ondas Holdings Inc., and Ondas Networks Inc., a Delaware corporation (“Ondas Networks”), became our sole focus and wholly owned subsidiary. The corporate headquarters for Ondas Holdings and operational headquarters for Ondas Networks is located in Sunnyvale, California. We have two wholly owned subsidiaries: (i) Ondas Networks, our operating company, originally incorporated in Delaware on February 16, 2006 under the name Full Spectrum Inc., subsequently changed to Ondas Networks Inc. on August 10, 2018, and (ii) FS Partners (Cayman) Limited, a Cayman Islands limited liability company (“FS Partners”). We have one majority owned subsidiary, Full Spectrum Holding Limited, a Cayman Islands limited liability company (“FS Holding”), which owned 100% of Ondas Network Limited, organized in Chengdu Province, China. FS Partners and Ondas Network Limited were both formed for the purpose of operating in China. As of December 31, 2019, we revised our business strategy, and discontinued all operations in China. On June 2, 2020, Ondas Network Limited was deregistered by the authority of the Chengdu High-Tech Zone, Market Supervision Administration. We are in the process of dissolving FS Partners and FS Holding and expect the process to be completed by the end of 2020. Business Activity Ondas Networks provides wireless connectivity solutions enabling mission-critical Industrial Internet applications and services. We refer to these applications as the Mission-Critical Internet of Things (“MC-IoT”). The Company’s wireless networking products are applicable to a wide range of MC-IoT applications which are most often located at the very edge of large industrial networks. We design, develop, manufacture, sell and support FullMAX, our patented, Software Defined Radio (“SDR”) platform for secure, licensed, private, wide-area broadband networks. Our customers install FullMAX systems in order to upgrade and expand their legacy wide-area network (“WAN”) infrastructure. We sell our products and services globally through a direct sales force and value-added sales partners to critical infrastructure providers including major rail operators, commercial and industrial drone operators, electric and gas utilities, water and wastewater utilities, oil and gas producers and pipeline operators, and for other critical infrastructure applications in areas such as homeland security and defense, and transportation. Our business consists of a single segment of products and services all of which are sold and provided in the United States and certain international markets. Siemens Mobility, Inc. Agreements On April 23, 2020, effective April 24, 2020, the Company and Siemens Mobility, Inc. (“Siemens”) (the “Parties”) entered into a Joint Development Agreement (the “JDA”) and a Brand Label and Master Purchase Agreement (the “BLA”). The JDA calls for the joint development of (i) a dual-mode 900 MHz over-the-air advanced train control system (“ATCS’) compatible, MC-IoT capable base station radio and (ii) a dual-purpose 900 MHz, over-the-air ATCS compatible, MC-IoT capable wayside radio. The BLA calls for the purchase by Siemens of certain products developed under the JDA to create a Siemens-branded portfolio of wireless radio communication systems to the North American Rail Market. These agreements follow a Letter of Intent entered into by the Parties on November 19, 2019 wherein the Company would begin preliminary work to establish (i) project scope, (ii) project management plan, (ii) project schedule, (iv) system requirements specifications, and (v) software containerization requirements specifications. The Acquisition On September 28, 2018, we entered into the Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) with Zev Merger Sub, Inc. and Ondas Networks to acquire Ondas Networks. The transactions contemplated by the Merger Agreement were consummated on September 28, 2018 (the “Closing”), and pursuant to the terms of the Merger Agreement, all outstanding shares of common stock of Ondas Networks, $0.00001 par value per share, (the “Ondas Networks Shares”), were exchanged for shares of our common stock, $0.0001 par value per share (the “Company Shares”). Accordingly, Ondas Networks became our wholly owned subsidiary and its business became the business of the Company. At the Closing, each Ondas Networks Share outstanding immediately prior to the Closing was converted into 3.823 Company Shares (the “Exchange Ratio”), with all fractional shares rounded down to the nearest whole share. Accordingly, we issued an aggregate of 25,463,732 Company Shares for all of the then-outstanding Ondas Networks Shares. In connection with the Closing, we amended and restated our articles of incorporation, effective September 28, 2018 to (i) change our name to Ondas Holdings Inc. and (ii) increase our authorized capital to 360,000,000 shares, consisting of 350,000,000 shares of common stock, par value $0.0001 per share, and 10,000,000 shares of “blank check” preferred stock, par value $0.0001 per share. In connection with the Acquisition, our trading symbol changed to “ONDS” effective at the opening of business on October 5, 2018. Also in connection with the Closing, (i) our sole director appointed additional individuals, who previously were members of the board of directors of Ondas Networks and its chief executive officer, to serve on our Board, and our Board subsequently appointed executive officers; (ii) the former holders of the Ondas Networks Shares executed lock-up agreements (the “Lock-Up Agreements”), which provided for an initial 12-month lock-up period, commencing with the date of the Closing, with a subsequent 12-month limited sale period; (iii) we entered into a Common Stock Repurchase Agreement with Energy Capital, LLC, a current stockholder of the Company (“Energy Capital”), pursuant to which the entity sold an aggregate of 32.6 million Company Shares (the “Repurchase Shares”) to us at $0.0001 per share, for an aggregate consideration of $3,260, which Repurchase Shares were canceled and returned to our authorized but unissued shares; (iv) our Board approved, and our stockholders adopted, the 2018 Incentive Stock Plan (the “2018 Plan”) pursuant to which 10 million Company Shares have been reserved for issuance to employees, including officers, directors and consultants; and (v) we entered into a Loan and Security Agreement with Energy Capital, pursuant to which Energy Capital agreed to lend us an aggregate principal amount of up to $10 million, subject to specified conditions. On August 30, 2019, the Company entered into a First Amendment to Lock-Up Agreements (the “Amendment”) with stockholders owning an aggregate of 24,428,681 of the Company Shares, representing 41% of the Company’s then outstanding shares of common stock. The Amendment revised the terms of the Lock-Up Agreements to extend the lock-up period to September 28, 2020 and eliminated the 12-month limited sale period. The Lock-Up Agreements were subsequently amended to extend the lock-up period to March 28, 2021. In accordance with ASC 805-40, Reverse Acquisitions Liquidity and Going Concern We have incurred losses since inception and have funded our operations primarily through debt and the sale of capital stock. At September 30, 2020, we had a stockholders’ deficit of approximately $13,700,000. At September 30, 2020, we had net short and long-term borrowings outstanding of approximately $11,800,000 and $600,000, respectively. As of September 30, 2020, we had cash available of approximately $2,100,000 and a working capital deficit of approximately $14,100,000. Our future capital requirements will depend upon many factors, including progress with developing, manufacturing and marketing our technologies, the time and costs involved in preparing, filing, prosecuting, maintaining and enforcing patent claims and other proprietary rights, our ability to establish collaborative arrangements, marketing activities and competing technological and market developments, including regulatory changes and overall economic conditions in our target markets. Our ability to generate revenue and achieve profitability requires us to successfully market and secure purchase orders for our products from customers currently identified in our sales pipeline as well as new customers. We also will be required to efficiently manufacturer and deliver equipment on those purchase orders. These activities, including our planned research and development efforts, will require significant uses of working capital through the end of 2020 and beyond. Based on our current operating plans, we believe that our existing cash at the time of this filing will only be sufficient to meet our anticipated operating needs through March 31, 2021. Accounting standards require management to evaluate the Company’s ability to continue as a going concern for a period of one year subsequent to the date of the filing of this Form 10-Q (“evaluation period”). As such, we have evaluated if cash on hand and cash generated through operating activities would be sufficient to sustain projected operating activities through November 6, 2021. We anticipate that our current resources will be insufficient to meet our cash requirements throughout the evaluation period, including funding anticipated losses and scheduled debt maturities. We expect to seek additional funds from a combination of dilutive and/or nondilutive financings in the future. Because such transactions have not been finalized, receipt of additional funding is not considered probable under current accounting standards. If we do not generate sufficient cash flows from operations and obtain sufficient funds when needed, we expect that we would scale back our operating plan by deferring or limiting some, or all, of our capital spending, and/or eliminating planned headcount additions, as well as other cost reductions to be determined. Because such contingency plans have not been finalized (the specifics would depend on the situation at the time), such actions are also not considered probable for purposes of current accounting standards. Because, under current accounting standards, neither future cash generated from operating activities, nor management’s contingency plans to mitigate the risk and extend cash resources through the evaluation period, are considered probable, substantial doubt is deemed to exist about the Company’s ability to continue as a going concern. As we continue to incur losses, our transition to profitability is dependent upon achieving a level of revenues adequate to support our cost structure. We may never achieve profitability, and unless and until doing so, we intend to fund future operations through additional dilutive or non-dilutive financings. There can be no assurances; however, that additional funding will be available on terms acceptable to us, if at all. The financial information contained in these financial statements have been prepared on a basis that assumes that we will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. This financial information and these financial statements do not include any adjustments that may result from the outcome of this uncertainty. COVID-19 In December 2019, a novel strain of coronavirus (“COVID-19”) was identified in Wuhan, China, and has subsequently spread to other regions of the world, and has resulted in increased travel restrictions, business disruptions and emergency quarantine measures across the world including the United States. The Company’s business, financial condition and results of operations were impacted from the COVID-19 pandemic during the three and nine months ended September 30, 2020 as follows: ● sales and marketing efforts were disrupted as our business development team was unable to travel to visit customers and customers were unable to receive visitors for on-location meetings; ● f ield activity for testing and deploying our wireless systems was delayed due to the inability for our field service team to install and test equipment for our customers; ● supply chain disruptions led to component shortages and inefficiencies in and delays in producing and delivering equipment for certain purchase orders; and ● delays in fulfilling purchase orders reduced our cash flow from operations. In the first quarter of 2020, we reduced our business activity to critical operations only, and furloughed 80% of our workforce. Per orders issued by the Health Officer of the County of Santa Clara, our corporate headquarters were closed, except for functions related to the support of remote workers and product support related to the essential transportation sector. On May 13, 2020, we reopened our corporate headquarters and as of September 30, 2020 we have no employees remaining on furlough. Of the 18 employees previously furloughed, 14 are currently employed by us. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted. The CARES Act is an approximately $2 trillion emergency economic stimulus package in response to the Coronavirus outbreak, which among other things contains numerous income tax provisions. Some of these tax provisions are expected to be effective retroactively for years ending before the date of enactment. The Company applied for, and received, funds under the Paycheck Protection Program after the period end in the approximate amount of $666,000. The application for these funds requires the Company to, in good faith, certify that the current economic uncertainty made the loan request necessary to support operations of the Company. This certification further requires the Company to consider its current business activity and ability to access other sources of liquidity sufficient to support ongoing operations in a manner that is not significantly detrimental to the business. The receipt of these funds, and the forgiveness of the loan related to these funds, is dependent on the Company having initially qualified for the loan and qualifying for the forgiveness of such loan based on our future adherence to the forgiveness criteria. The Company expects its business, financial condition and results of operations will be impacted from the COVID-19 pandemic for the remainder of 2020 primarily due to the deferral of customer activity from the first half of the year. Further, the COVID-19 pandemic is ongoing and remains an unknown risk for the foreseeable future. The extent to which the coronavirus may impact our business will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus. As a result, the Company is unable to reasonably estimate the full extent of the impact from the COVID-19 pandemic on its future business, financial condition and results of operations. The Company may also be unable to comply with the financial and other material covenants under its debt agreements and may not be able to negotiate waivers or amendments to such debt agreements in order to maintain ongoing compliance. In addition, if the Company were to experience any new impact to its operations, or incur additional unanticipated costs and expenses as a result of the COVID-19 pandemic, such operational delays and unanticipated costs and expenses there could be a further adverse impact on the Company’s business, financial condition and results of operations in 2020 and 2021. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the Company’s financial statements for interim periods in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The information included in this quarterly report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and the accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 (“2019 Form 10-K”). The Company’s accounting policies are described in the “ Notes to Consolidated Financial Statements Principles of Consolidation The consolidated financial statements include the accounts of the Company and our wholly owned subsidiaries, Ondas Networks and FS Partners, and our majority owned subsidiary, FS Holding. All significant inter-company accounts and transactions between these entities have been eliminated in these unaudited condensed consolidated financial statements. Use of Estimates The process of preparing financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of assets and liabilities at the date of the financial statements. Such management estimates include those relating to revenue recognition, inventory write-downs to reflect net realizable value, assumptions used in the valuation of stock-based awards and valuation allowances against deferred tax assets. Actual results could differ from those estimates. Cash, Cash Equivalents and Restricted Cash The Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents. Restricted cash consists of amounts held under a sublease agreement (see Leases Inventory Inventories, which consist solely of equipment components, are stated at the lower of cost (first-in, first-out) or net realizable value, net of reserves for obsolete inventory. We continually analyze our slow-moving and excess inventories. Based on historical and projected sales volumes and anticipated selling prices, we established reserves. Inventory that is in excess of current and projected use is reduced by an allowance to a level that approximates its estimate of future demand. Products that are determined to be obsolete are written down to net realizable value. As of September 30, 2020 and December 31, 2019, we determined that no such reserves were necessary. Inventory consists of the following: September 30, 2020 December 31, 2019 Raw Material $ 784,297 $ 372,101 Work in Process 116,709 - Finished Goods 73,994 55,415 TOTAL INVENTORY $ 975,000 $ 427,516 Fair Value of Financial Instruments Our financial instruments consist primarily of receivables, accounts payable, accrued expenses and short- and long-term debt. The carrying amount of receivables, accounts payable and accrued expenses approximates our fair value because of the short-term maturity of such instruments. We have categorized our assets and liabilities that are valued at fair value on a recurring basis into a three-level fair value hierarchy in accordance with U.S. GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets and liabilities (Level 1) and lowest priority to unobservable inputs (Level 3). Assets and liabilities recorded in the balance sheets at fair value are categorized based on a hierarchy of inputs, as follows: Level 1 Level 2 Level 3 The following table provides a summary of changes in fair value associated with the Level 3 liabilities for the nine months ended September 30, 2020 and the year ended December 31, 2019: Fair Value Measurements Using Significant Unobservable Inputs Nine Months Ended September 30, Year ended December 31, Balance, beginning of period $ - $ - Issuances of derivative liability (32,906 ) - Change in fair value of derivative liability (136,323 ) - Balance, end of period $ (169,229 ) $ - The above table of Level 3 liabilities begins with the prior period balance and adjusts the balance for changes that occurred during the current period. The ending balance of the Level 3 financial instrument presented above represent our best estimates and may not be substantiated by comparisons to independent markets and, in many cases, could not be realized in immediate settlement of the instruments. Derivative Liability for Embedded Conversion Features The Company evaluates its financial instruments to determine if those contracts or embedded components of those contracts qualify as derivatives to be accounted for separately. In circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated and there are also other bifurcated embedded derivative instruments in the convertible instrument, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument. The result of this accounting treatment is that the fair value of the embedded derivative is recorded as a liability and marked-to-market each balance sheet date, with the change in fair value recorded in the statements of operations as other income or expense. Deferred Offering Costs The Company capitalizes certain legal, professional accounting and other third-party fees that are directly associated with in-process equity financings as deferred offering costs until such financings are consummated. After consummation of equity financings, these costs are recorded in stockholders’ deficit as a reduction of additional paid-in capital generated as a result of the offering. Should the planned equity financings be abandoned, the deferred offering costs are expensed immediately as a charge to other income (expenses) in the unaudited condensed consolidated statement of operations. During the three months ended September 30, 2020, the Company recorded deferred financing costs totaling $201,038. For the three months ended September 30, 2020 and 2019, the Company expensed financing costs of $0 and $1,208,063, respectively. For the nine months ended September 30, 2020 and 2019, the Company expensed financing costs of $0 and $1,478,695, respectively. Revenue from Contracts with Customers On January 1, 2018, we adopted ASC 606 , Revenue from Contracts with Customers Revenue Recognition Under ASC 606, the Company recognizes revenue when the customer obtains control of promised products or services, in an amount that reflects the consideration which is expected to be received in exchange for those products or services. The Company recognizes revenue following the five-step model prescribed under ASC 606: (i) identify contract(s) with a customer; (ii) identify the performance obligation(s) in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligation(s) in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the products or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the products or services promised within each contract and determines those that are performance obligations and assesses whether each promised product or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. To the extent the transaction price includes variable consideration, we estimate the amount of variable consideration that should be included in the transaction price utilizing the expected value method. Variable consideration is included in the transaction price if, in our judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. Estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of our anticipated performance and all information (historical, current and forecasted) that is reasonably available. Sales and other taxes collected on behalf of third parties are excluded from revenue. For the three and nine months ended September 30, 2020 and 2019, none of our contracts with customers included variable consideration. Contracts that are modified to account for changes in contract specifications and requirements are assessed to determine if the modification either creates new or changes the existing enforceable rights and obligations. Generally, contract modifications are for products or services that are not distinct from the existing contract due to the inability to use, consume or sell the products or services on their own to generate economic benefits and are accounted for as if they were part of that existing contract. The effect of a contract modification on the transaction price and measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulative catch-up basis. For the three and nine months ended September 30, 2020 and 2019, there were no modifications to contract specifications. The Company is engaged in the development, marketing and sale of wireless radio systems for secure, wide area mission-critical, business-to-business networks. We generate revenue primarily from the sale of our FullMAX System and the delivery of related services, along with non-recurring engineering (“NRE”) development projects with certain customers. Product revenue is comprised of sales of the Company’s software defined base station and remote radios, its network management and monitoring system, and accessories. The Company’s software and hardware is sold with a limited one-year basic warranty included in the price. The limited one-year basic warranty is an assurance-type warranty, is not a separate performance obligation, and thus no transaction price is allocated to it. The nature of tasks under the limited one-year basic warranty only provide for remedying defective product(s) covered by the warranty. Product revenue is generally recognized when the customer obtains control of our product, which occurs at a point in time, and may be upon shipment or upon delivery based on the contractual shipping terms of a contract, or upon installation when the combined performance obligation is not distinct within the context of the contract. Service revenue is comprised of separately priced extended warranty sales, network support and maintenance, remote monitoring, as well as ancillary services directly related to the sale of the Company’s wireless communications products including wireless network design, systems engineering, radio frequency planning, software configuration, product training, installation, and onsite support. The extended warranty we sell provides a level of assurance beyond the coverage for defects that existed at the time of a sale or against certain types of covered damage. The extended warranty includes 1) factory hardware repair or replacement of the base station and remote radios, at our election, 2) software upgrades, bug fixes and new features of the radio software and network management system (“NMS”), 3) deployment and network architecture support, and 4) technical support by phone and email. Ancillary service revenues are recognized at the point in time when those services have been provided to the customer and the performance obligation has been satisfied. With respect to extended warranty sales and remote monitoring, the Company applies the input method using straight-line recognition. Development revenue is comprised primarily of non-recurring engineering service contracts to develop software and hardware applications for various customers. A significant portion of this revenue is generated through one contract with a customer whereby the Company will develop such applications to interoperate within the customers infrastructure. For this contract, the Company and the customer work cooperatively, whereby the customer’s involvement is to provide technical specifications for the product design, as well as, to review and approve the project progress at various markers based on predetermined milestones. The products developed are not able to be sold to any other customer and are based in part upon existing Company and customer technology. This development contract is in effect until March 31, 2021, at which time the Company will grant the customer an irrevocable, perpetual, royalty-free, and exclusive right to market, offer for sale, sell, and resell the developed product without restriction. Development revenue is recognized as services are provided over the life of the contract as the Company has an enforceable right to payment for services completed to date and there is no alternative use of the product. If the customer contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. We enter into certain contracts within our service revenues that have multiple performance obligations, one or more of which may be delivered subsequent to the delivery of other performance obligations. We allocate the transaction price based on the estimated relative standalone selling prices of the promised products or services underlying each performance obligation. We determine standalone selling prices based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, we estimate the standalone selling price considering available information such as market conditions and internally approved pricing guidelines related to the performance obligations. Revenue is then allocated to the performance obligations using the relative selling prices of each of the performance obligations in the contract. Our payment terms vary and range from Net 15 to Net 30 days from the date of the invoices for product and services related revenue. Our payment terms for the majority of our development related revenue carry milestone related payment obligations which span the contract life. For milestone-based contracts, the customer reviews the completed milestone and once approved, makes payment in advance towards the next milestone. Disaggregation of Revenue The following tables present our disaggregated revenues by Type of Revenue and Timing of Revenue: Three Months Ended Nine Months Ended 2020 2019 2020 2019 Type of Revenue Product revenue $ 245,075 $ 61,182 $ 1,043,585 $ 212,905 Service revenue 16,410 26,950 53,500 100,459 Development revenue 351,248 - 866,119 - Other revenue 1,293 - 6,394 219 Total revenue $ 614,026 $ 88,132 $ 1,969,598 $ 313,583 Three Months Ended Nine Months Ended 2020 2019 2020 2019 Timing of Revenue Revenue recognized point in time $ 331,528 $ 79,166 $ 1,170,409 $ 281,333 Revenue recognized over time 282,498 8,966 799,189 32,250 Total revenue $ 614,026 $ 88,132 $ 1,969,598 $ 313,583 Contract Assets and Liabilities We recognize a receivable or contract asset when we perform a service or transfer a good in advance of receiving consideration. A receivable is recorded when our right to consideration is unconditional and only the passage of time is required before payment of that consideration is due. A contract asset is recorded when our right to consideration in exchange for goods or services that we have transferred or provided to a customer is conditional on something other than the passage of time. We did not have any contract assets recorded at September 30, 2020 or December 31, 2019. We recognize a contract liability when we receive consideration, or if we have the unconditional right to receive consideration, in advance of satisfying the performance obligation. A contract liability is our obligation to transfer goods or services to a customer for which we have received consideration, or an amount of consideration is due from the customer. The table below details the activity in our contract liabilities during the nine months ended September 30, 2020, and the year ended December 31, 2019, which is included in accrued expenses and other current liabilities in the Company’s unaudited condensed consolidated balance sheet. Nine Months Ended Year Ended Balance at beginning of period $ 378,850 $ 20,631 Additions 1,046,250 397,269 Transfer to revenue (1,115,882 ) (39,050 ) Balance at end of period $ 309,218 $ 378,850 Warranty Reserve For our software and hardware products, we provide a limited one-year assurance-type warranty and for our development service, we provide no warranties. The assurance-type warranty covers defects in material and workmanship only. If a warranted software or hardware component is determined to be defective after being tested by the Company, the Company will repair, replace or refund the price of the covered hardware and/or software to the customer (not including any shipping, handling, delivery or installation charges). We estimate, based upon a review of historical warranty claim experience, the costs that may be incurred under our warranties and record a liability in the amount of such estimate at the time a product is sold. Factors that affect our warranty liability include the number of units sold, historical and anticipated rates of warranty claims, and cost per claim. We periodically assess the adequacy of our recorded warranty liability and adjust the accrual as claims data and historical experience warrants. The Company has assessed the costs of fulfilling its existing assurance-type warranties and has determined that the estimated outstanding warranty obligation at September 30, 2020 and December 31, 2019 are immaterial to the Company’s financial statements. Leases Under Topic 842, operating lease expense is generally recognized evenly over the term of the lease. During the nine months ended September 30, 2020, the Company had operating leases primarily consisting of two office space leases in Sunnyvale, California (the “North Pastoria Lease” and the “Gibraltar Lease”) (collectively, the “Sunnyvale Leases”). During the nine months ended September 30, 2019, the Company had the Sunnyvale Leases and a property lease in Chengdu, Sichuan Province, People’s Republic of China (the “Chengdu Lease”). In December 2019, in conjunction with the closure of Ondas Networks Limited, the Chengdu Lease was terminated. As of September 30, 2020, the remaining terms for the Sunnyvale Leases range from nine months on the North Pastoria Lease and eight months on the Gibraltar Lease. In March 2019, the North Pastoria Lease was abandoned and the likelihood of entering into a sublease agreement for the property was minimal; therefore, the Right to Use Asset value of $259,926 was considered impaired and the amount was charged to asset impairment on the accompanying unaudited condensed consolidated financial statements. On January 24, 2020, the Company and a third party (the “Sublessee”) entered into a Sublease agreement (the “Sublease”) on the North Pastoria Lease, wherein the Sublessee will occupy the premises through December 31, 2020. The Sublessee will make rent payments of approximately $9,666 and management fee payments of approximately $457 per month beginning February 1, 2020, and a one-time security deposit equal to two months rent, or $19,332. Sublease rental income for the three and nine months ended September 30, 2020 was $20,245 and $70,858, respectively. We determine if an arrangement is a lease, or contains a lease, at the inception of the arrangement. If we determine the arrangement is a lease, or contains a lease, at lease inception, we then determine whether the lease is an operating lease or financial lease. Operating and finance leases result in recording a right-of-use (“ROU”) asset and lease liability on our consolidated balance sheets. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. For purposes of calculating operating lease ROU assets and operating lease liabilities, we use the non-cancellable lease term plus options to extend that we are reasonably certain to take. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term. Our leases generally do not provide an implicit rate. As such, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. This rate is generally consistent with the interest rate we pay on borrowings under our credit facilities, as this rate approximates our collateralized borrowing capabilities over a similar term of the lease payments. We utilized the consolidated group incremental borrowing rate for all leases, as we have centralized treasury operations. We have elected not to recognize ROU assets and lease liabilities that arise from short-term (12 months or less) leases for any class of underlying assets. We have elected not to separate lease and non-lease components for any class of underlying asset. Lease Costs Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Components of total lease costs: Operating lease expense $ 80,725 $ 148,922 $ 246,680 $ 445,148 Short-term lease costs (1) 2,100 11,122 7,650 38,626 Sublease rental income (20,245 ) - (70,858 ) - Total lease costs $ 62,580 $ 160,044 $ 183,472 $ 483,774 (1) Represents short-term leases which are immaterial. Lease Positions as of September 30, 2020 and December 31, 2019 ROU lease assets and lease liabilities for our operating leases were recorded in the unaudited condensed consolidated balance sheet as follows: As of September 30, 2020 As of December 31, 2019 Assets: Operating lease assets $ 125,258 $ 331,419 Total lease assets $ 125,258 $ 331,419 Liabilities: Operating lease liabilities, current $ 183,995 $ 489,407 Operating lease liabilities, net of current - 52,449 Total lease liabilities $ 183,995 $ 541,856 Other Information Nine Months Ended September 30, 2020 2019 Operating cash flows for operating leases $ 398,374 $ 340,044 Weighted average remaining lease term (in years) – operating lease 0.4 2.3 Weighted average discount rate – operating lease 14 % 14 % Undiscounted Cash Flows Future lease payments included in the measurement of lease liabilities on the unaudited condensed consolidated balance sheet as of September 30, 2020, for the following five years and thereafter are as follows: Years ending December 31, 2020 (3 months) $ 132,791 2021 57,153 Total future minimum lease payments 189,944 Lease imputed interest (5,949 ) Total $ 183,995 Net Loss Per Common Share Basic earnings per share (“EPS”) is calculated under the two-class method under which all earnings (distributed and undistributed) are allocated to each class of common stock and participating securities based on their respective rights to receive dividends. Our outstanding convertible preferred stock are considered participating securities as the holders may participate in undistributed earnings with holders of common shares and are not obligated to share in our net losses. Diluted EPS is computed by dividing the net income attributable to the Company’s common shareholders by the weighted average number of common shares outstanding during the period increased by the number of additional common shares that would have been outstanding if the impact of assumed exercises and conversions is dilutive. The dilutive effects of outstanding options, warrants, nonvested shares of common stock and nonvested restricted stock units that vest solely on the basis of a service condition are calculated using the treasury stock method. The dilutive effects of the outstanding preferred stock are calculated using the if-converted method. Below are reconciliations of the numerators and denominators in the EPS computations. Three Months Ended September 30, Nine Months ended September 30, NUMERATOR: 2020 2019 2020 2019 Basic and diluted - net $ (3,325,880 ) $ (5,225,314 ) $ (9,353,706 ) $ (16,135,767 ) DEMOMINATOR: Weighted average number of shares of common stock outstanding 59,269,390 50,731,929 59,268,523 50,554,113 Weighted average number of shares of common stock underlying vested restricted stock units 722,588 151,186 424,251 103,458 Weighted average number of shares of common stock underlying shares issuable for warrants with minimal consideration 140,678 4,587 140,678 1,546 Basic EPS – weighted average number of shares outstanding 60,132,656 50,887,702 59,833,452 50,659,117 Effect of dilutive securities outstanding - - - - Diluted EPS – weighted average number of shares outstanding 60,132,656 50,887,702 59,833,452 50,659,117 No effects of potentially dilutive securities outstanding during the three and nine months ended September 30, 2020 and 2019, were included in the calculation of diluted EPS for the three and nine months ended September 30, 2020 and 2019, because to do so would be anti-dilutive as a result of our loss from continuing operations. Potentially dilutive securities outstanding during the periods included our outstanding convertible preferred stock, options, warrants, nonvested restricted stock units and nonvested stock. The following potentially dilutive securities for the nine months ended September 30, 2020 and 2019 have been excluded from the computation of diluted net loss per share because the effect of their inclusion would have been anti-dilutive. Nine months ended 2020 2019 Warrants to purchase common stock 5,498,489 - Options to purchase common stock 1,499,000 - Restricted stock units 2,250,000 189,238 Convertible debt - 140,678 Total potentially dilutive securities 7,898,389 329,916 Concentration of Customers Because we have only recently invested in our customer service and support organization, a small number of customers have accounted for a substantial amount of our revenue. The table below sets forth the Company’s customers that accounted for greater than 10% of its revenues for the three and nine-month periods ended September 30, 2020 and 2019, respectively: Three Months Ended Nine Months Ended Customer 2020 2019 2020 2019 A 29 % - % 51 % - % B 58 % - % 44 % - % C 13 % - % - % - % D - % - % - 44 % E - % 85 % - 36 % F - % - % - 18 % Customer B accounted for 99% of the Company’s accounts receivable balance at September 30, 2020. Recent Accounting Pronouncements In August 2020, the FASB issued ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies an issuer’s accounting for convertible instruments by reducing the number of accounting models that require separate accounting for embedded conversion features. ASU 2020-06 also simplifies the settlement assessment that entities are required to perform to determine whether a contract qualifies for equity classification and makes targeted improvements to the disclosures for convertible instruments and earnings-per-share (EPS) guidance. This update will be effective for the Company’s fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Entities can elect to adopt the new guidance through either a modified retrospective method of transition or a fully retrospective method of transition. The Company is currently evaluating the impact of the pending adoption of the new standard on its financial statements and intends to adopt the standard as of January 1, 2022. Aside from ASU 2020-06, there have been no material changes to our significant accounting policies as summarized in NOTE 2 of our 2019 Form 10-K. We do not expect that the adoption of any recent accounting pronouncements will have a material impact on our accompanying unaudited condensed consolidated financial statements. Reclassification Certain amounts reported in the prior year financial statements have been reclassified to conform to the current year presentation. |
OTHER CURRENT ASSETS
OTHER CURRENT ASSETS | 9 Months Ended |
Sep. 30, 2020 | |
Disclosure Text Block Supplement [Abstract] | |
OTHER CURRENT ASSETS | NOTE 3 –OTHER CURRENT ASSETS Other current assets consist of the following: September 30, December 31, Prepaid insurance $ 171,022 $ 85,201 Other prepaid expenses 29,603 105,013 Deposits 3,000 28,115 Advances for raw material purchases - 450,691 Prepaid marketing costs - 31,579 Total other current assets $ 203,625 $ 700,599 |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 9 Months Ended |
Sep. 30, 2020 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | NOTE 4 – PROPERTY AND EQUIPMENT Property and equipment consist of the following: September 30, 2020 December 31, 2019 Vehicle $ 149,916 $ 149,916 Computer Equipment 112,616 109,509 Furniture and fixtures 94,053 93,464 Software 61,287 67,287 Leasehold improvements 58,613 58,613 Test Equipment 25,395 20,493 501,880 499,282 Less: accumulated depreciation (315,115 ) (247,036 ) Total property and equipment $ 186,765 $ 252,246 Depreciation expense for the three months ended September 30, 2020 and 2019 was $24,606 and $34,403, respectively. Depreciation expense for the nine months ended September 30, 2020 and 2019 was $74,079 and $102,085, respectively. |
INTANGIBLE ASSETS
INTANGIBLE ASSETS | 9 Months Ended |
Sep. 30, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
INTANGIBLE ASSETS | NOTE 5 – INTANGIBLE ASSETS At September 30, 2020, our intangible assets included patent costs and license costs totaling $155,507 and $241,909, respectively, less accumulated amortization of patent costs and license costs of $3,169 and $11,232, respectively. Amortization expense for the three months ended September 30, 2020 and 2019 was $640 and $313, respectively. Amortization expense for the nine months ended September 30, 2020 and 2019 was $13,152 and $742, respectively. At December 31, 2019, our intangible assets include patent costs totaling $127,593 less accumulated amortization of patent costs of $1,249. Estimated amortization expense for the next five years for the patent and license costs currently being amortized is as follows: Year Ending December 31, Estimated Amortization 2020 (3 months) $ 6,688 2021 $ 26,752 2022 $ 26,752 2023 $ 26,752 2024 $ 26,752 |
ACCRUED EXPENSES AND OTHER CURR
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | 9 Months Ended |
Sep. 30, 2020 | |
Disclosure Text Block Supplement [Abstract] | |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | NOTE 6 – ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Accrued expenses and other current liabilities consist of the following: September 30, December 31, Accrued payroll and other benefits $ 2,030,035 $ 2,094,536 D&O insurance financing payable 102,000 33,660 Accrued interest 72,844 437,569 Accrued professional fees 69,449 104,602 Other accrued expenses 64,206 67,848 Accrued rent and facilities costs 61,602 24,584 Sublease deposit 19,332 - Total accrued expenses and other current liabilities $ 2,419,468 $ 2,762,799 |
SECURED PROMISSORY NOTES
SECURED PROMISSORY NOTES | 9 Months Ended |
Sep. 30, 2020 | |
Investments, Debt and Equity Securities [Abstract] | |
SECURED PROMISSORY NOTES | NOTE 7 –SECURED PROMISSORY NOTES Steward Capital Holdings LP On March 9, 2018, we entered into a loan and security agreement (the “Agreement”) with Steward Capital Holdings LP (the “Steward Capital”) wherein Steward Capital made available to us a loan in the aggregate principal amount of up to $10,000,000 (the “Loan”). On March 9, 2018, the Company and Steward Capital, pursuant to the Agreement, entered into a Secured Term Promissory Note for $5,000,000, having a maturity date of September 9, 2019 (“Tranche A”). The Note bears interest at a per annum rate equal to the greater of (a) 11.25% or (b) 11.25% plus the Prime Rate, less 3.25%. The Agreement also includes payments of $25,000 in loan commitment fees and $100,000 (1%) of the funding in loan facility charges. The loan commitment fees and $50,000 in loan facility charges associated with Tranche A were recorded as debt discount and amortized over the life of the Loan. There is also an end of term charge of $250,000. The end of term charge was being recorded as accreted costs over the term of the Loan. The Note is secured by substantially all of the assets of the Company. On October 9, 2018, the Company and Steward Capital, pursuant to the Agreement, entered into a second Secured Term Promissory Note for $5,000,000 having a maturity date of April 9, 2020 (the “Second Note”) to complete the Agreement for $10,000,000. The Second Note bears interest at a per annum rate equal to the greater of (a) 11.25% or (b) 11.25% plus the Prime Rate, less 3.25%. Pursuant to the terms of the Agreement, the Company is required to pay a $50,000 loan facility charge. On June 18, 2019, the Company and Steward Capital entered into a letter of agreement to amend the Agreement (the “First Amendment”) to (i) extend and amend the Maturity Date, as defined in Section 1.1 of the Agreement, to read in its entirety “means September 9, 2020”; (ii) waive the repayment requirement to Steward Capital under Section 2.3 of the Agreement, in connection with the then proposed public offering of the Company as described in the Company’s Registration Statement on Form S-1, as amended, originally filed on April 12, 2019, and (iii) waive the restriction by Steward Capital on the prepayment of Indebtedness under Section 7.4 of the Agreement. In connection with the waivers, extension and amendment, the Company agreed to pay to Steward Capital, upon the earlier of (a) the completion of the public offering as set forth in Section 2.3 of the Agreement and (b) ten (10) days following the Company’s receipt of Steward’s written demand therefor, a fee equal to three percent (3%) of the current outstanding principal balance of the Loan (as defined in the Agreement), neither of which have occurred at the time of this filing. The Company concluded that the modifications created by the First Amendment resulted in a troubled debt restructuring under Accounting Standard Codification—Debt (Topic 470) as it was determined that a concession was granted by Steward Capital. However, as the future payments to be made subsequent to the modification are greater than the carrying value at the time of the modification, no gain or loss was required to be recognized on the troubled debt restructuring. As the difference between the effective interest rate method and the straight-line method is deemed immaterial, the Company will continue to amortize the deferred loan costs using the straight-line method over the remaining term of the Loan. On October 28, 2019, the Company and Steward Capital entered into a letter of agreement to amend the Agreement, as amended (the “Second Amendment”) wherein the parties agreed to (i) extend and amend the due date for all accrued and unpaid interest starting September 2, 2019 to the Maturity Date (September 9, 2020) and (ii) extend and amend the due date for the 3% fee payable to Steward Capital in connection with the First Amendment and waiver dated June 2019 to be payable on the Maturity Date. In connection with the extensions and amendments, the Company issued Steward Capital 120,000 shares of the Company’s common stock valued at $300,000 on December 15, 2019. The value was recorded as debt discount and amortized over the life of the Loan. The Company concluded that the modifications created by the Second Amendment resulted in a troubled debt restructuring under Accounting Standard Codification—Debt (Topic 470) as it was determined that a concession was granted by Steward Capital. However, as the future payments to be made subsequent to the modification are greater than the carrying value at the time of the modification, no gain or loss was required to be recognized on the troubled debt restructuring. As the difference between the effective interest rate method and the straight-line method is deemed immaterial, the Company will continue to amortize the deferred loan costs using the straight-line method over the remaining term of the Loan. The Agreement also contains covenants which included certain restrictions with respect to subsequent indebtedness, liens, loans and investments, asset sales and share repurchases and other restricted payments, subject to certain exceptions. The Agreement also contained financial reporting obligations. An event of default under the Agreement includes, but is not limited to, breach of covenants, insolvency, and occurrence of any default under any agreement or obligation of the Company. In addition, the Agreement contained a customary material adverse effect clause which states that in the event of a material adverse effect, an event of default would occur, and the lender has the option to accelerate and demand payment of all or any part of the loan. A material adverse effect is defined in the Agreement as a material change in our business, operations, properties, assets or financial condition or a material impairment of its ability to perform all obligations under its Agreement. On September 4, 2020, the Company and Steward Capital entered into the Second Amendment to the Loan and Security Agreement (the “Second Amendment”) to (i) extend the Maturity Date to September 9, 2021 and agree to convert all accrued interest into the note, resulting in a new principal balance of $11,254,236, (ii) make all accrued and unpaid interest from September 9, 2020 through the date of maturity due on the Maturity Date, (iii) on or before October 1, 2020, Company shall issue 120,000 shares of Company’s stock to Steward and (iv) make the fee of 3% of the outstanding principal balance of the loan, or $300,000 (as defined in the First Amendment), due at the updated maturity date of September 9, 2021. The 120,000 shares were issued on September 30, 2020 and valued at $3.25 per share, or total of $390,000. The Company concluded that the modifications created by the Second Amendment resulted in a troubled debt restructuring under Accounting Standard Codification—Debt (Topic 470) as it was determined that a concession was granted by Steward Capital. However, as the future payments to be made subsequent to the modification are greater than the carrying value at the time of the modification, no gain or loss was required to be recognized on the troubled debt restructuring. As of September 30, 2020, the principal balance was $11,254,236, net of debt discount of $351,189 and accreted cost of $550,000. As of December 31, 2019, the principal balance was $10,000,000, net of debt discount of $252,933 and accreted cost of $359,828. As of September 30, 2020 and December 31, 2019, accrued interest was $72,844 and $437,569, respectively, and included accrued expenses and other current liabilities in the balance sheet in the accompanying unaudited condensed consolidated financial statements. Interest expense for the three and nine months ended September 30, 2020 was $338,415 and $937,165, respectively. Interest expense for the three and nine months ended September 30, 2019 was $343,046 and $1,022,629, respectively. |
LONG-TERM NOTES PAYABLE
LONG-TERM NOTES PAYABLE | 9 Months Ended |
Sep. 30, 2020 | |
Debt Disclosure [Abstract] | |
LONG-TERM NOTES PAYABLE | NOTE 8 – LONG-TERM NOTES PAYABLE Promissory Notes On February 15 and June 7, 2016, the Company entered into two 10%, 18-month promissory notes for $100,000 each with an individual (the “Promissory Notes”). Pursuant to several amendments to the Promissory Notes through July 2019, (i) the Promissory Notes were extended to September 30, 2021 (the “Maturity Date”), (ii) accrued and unpaid interest on the Promissory Notes totaling $39,921 was transferred to principal, and (iii) interest will be accrued from August 2019 through the Maturity Date. On August 27, 2020, pursuant to a purchase agreement (see NOTE 9 for further details), the Company issued an aggregate of 132,890 shares of Series A Preferred to the holder of the Promissory Notes in exchange the principal and accrued interest then outstanding. The principal balance of the Promissory Notes at September 30, 2020 and December 31, 2019 was $0 and $239,921, respectively. Accrued interest at September 30, 2020 and December 31, 2019 was $0 and $9,997, respectively. Interest expense for the three and nine months ended September 30, 2020 was $3,865 and $15,861, respectively. Interest expense for the three and nine months ended September 30, 2019 was $5,981 and $17,447, respectively. Convertible Promissory Notes On September 14, 2017, the Company and an individual entered into a convertible promissory note with unilateral conversion preferences by the individual (the “Convertible Promissory Note”). On July 11, 2018, the Company’s Board approved certain changes to the Convertible Promissory Note wherein the conversion feature was changed from unilateral to mutual between the individual and the Company. At both September 30, 2020 and December 31, 2019, the total outstanding balance of the convertible promissory note (the “Note”) was $300,000. The maturity date of the Note is based on the payment of 0.6% of quarterly gross revenue until 1.5 times the amount of the Note is paid. Accrued interest at September 30, 2020 and December 31, 2019 was $35,471 and $31,243, respectively. Interest expense for the three and nine months ended both September 30, 2020 and 2019 was $11,250 and $33,750, respectively. On September 27, 2019, the holder of the Note was granted a warrant to purchase 140,678 shares of common stock of the Company. The fair value of this warrant was recorded as financing costs in the accompanying unaudited condensed consolidated financial statements. See NOTE 9 for further details. Paycheck Protection Program Loan On May 4, 2020, the Company applied for a loan pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), as administered by the U.S. Small Business Administration (the “SBA”). The loan, in the principal amount of approximately $666,000 (the “PPP Loan”), was disbursed by Wells Fargo Bank, National Association (“Lender”) on May 6, 2020, pursuant to a Paycheck Protection Program Promissory Note and Agreement (the “Note and Agreement”). The PPP Loan matures on the two-year anniversary of the funding date and bears interest at a fixed rate of 1.00% per annum. Monthly principal and interest payments, less the amount of any potential forgiveness (discussed below), will commence after the nine-month anniversary of the funding date. The Company did not provide any collateral or guarantees for the PPP Loan, nor did the Company pay any facility charge to obtain the PPP Loan. The Note and Agreement provides for customary events of default, including those relating to failure to make payment, bankruptcy, breaches of representations and material adverse effects. The Company may prepay the principal of the PPP Loan at any time without incurring any prepayment charges. The Company has recorded $370,051 in current liabilities and $396,040 in long-term liabilities in the Company’s unaudited condensed consolidated balance sheet. All or a portion of the PPP Loan may be forgiven by the SBA upon application to the Lender by the Company within 10 months after the last day of the covered period. The Lender will have 90 days to review borrower’s forgiveness application and the SBA will have an additional 60 days to review the Lender’s decision as to whether the borrower’s loan may be forgiven. Under the CARES Act, loan forgiveness is available for the sum of documented payroll costs, covered rent payments, and covered utilities, and certain covered mortgage interest payments during the twenty-four-week period beginning on the date of the first disbursement of the PPP Loan. For purposes of the CARES Act, payroll costs exclude compensation of an individual employee earning more than $100,000, prorated annually. Not more than 40% of the forgiven amount may be for non-payroll costs. Forgiveness is reduced if full-time headcount declines, or if salaries and wages for employees with salaries of $100,000 or less annually are reduced by more than 25%. Although the Company currently believes that its use of the PPP Loan will meet the conditions for forgiveness of the PPP Loan, the Company cannot assure that the PPP Loan will be forgiven, in whole or in part. |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 9 Months Ended |
Sep. 30, 2020 | |
Stockholders' Equity Note [Abstract] | |
STOCKHOLDERS’ EQUITY | NOTE 9 – STOCKHOLDERS’ EQUITY Preferred Stock At September 30, 2020, the Company had 10,000,000 shares of preferred stock, par value $0.0001, authorized, of which 5,000,000 shares are designated as Series A (see below for details) and 5,000,000 shares are non-designated (“blank check”) shares. Series A Preferred Stock Offering On August 14, 2020, the Company entered into securities purchase agreements (the “2020 Purchase Agreements”) with certain purchasers (the “2020 Investors”), which provided for the sale of an aggregate of $4,435,000 and the exchange for debt of $265,779 of the Company’s Series A Convertible Preferred Stock (the “Series A Preferred”) at a purchase price of $2.00 per share (the “Purchase Price”) (the “Offering”). On August 14, 2020 and August 27, 2020, pursuant to the 2020 Purchase Agreements, the Company issued an aggregate of 2,350,390 shares of Series A Preferred to the Investors (collectively the “2020 Closing”). In connection with the 2020 Closing, Eric Brock, the Company’s Chief Executive Officer purchased 157,500 shares of Series A Preferred. The aggregate gross proceeds to the Company from the 2020 Closing was $4,700,779. After payment of offering expenses, the net proceeds to the Company from the 2020 Closing was $4,483,749. The Company evaluated its Series A Preferred to determine if those instruments or embedded components of those instruments qualify as derivatives to be accounted for separately. The Preferred Shares include an embedded contingent automatic conversion option which is bifurcated from the Preferred Shares and recorded separately as a derivative liability, creating a discount to the Preferred Shares. The fair value of the embedded derivative is recorded as a liability and marked-to-market each balance sheet date, with the change in fair value recorded as other income (expense) in the Company’s unaudited condensed consolidated statement of operations. The discount arising from the identification of the embedded conversion feature will not be accreted or amortized as the Series A Preferred has been classified in equity. The Series A Preferred were offered and sold exclusively to accredited investors in a transaction exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), as a transaction not involving a public offering, pursuant to Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder. The Investors represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were placed upon the stock certificates and book entry statements issued in the transaction. The offer and sale of the securities were made without any general solicitation or advertising. Certificate of Designation Series A Preferred Stock In connection with the Closing on August 14, 2020, the Company filed a Certificate of Designation with the State of Nevada to designated 5,000,000 shares of the Company’s preferred stock as Series A Preferred. Shares of Series A Preferred rank pari passu with the Company’s common stock, except that holders of Series A Preferred shall have certain liquidation preferences as set forth in the Certificate of Designation and the holders of the Series A Preferred are not entitled to vote on any matters presented to the stockholder of the Company. The Certificate of Designation became effective on the Closing Date. The Series A Preferred is convertible at a holder’s election any time beginning nine months from the 2020 Closing into shares of the Company’s common stock at an initial conversion price equal to the Purchase Price, subject to certain adjustments described below, so that, initially, each share of Series A Preferred shall be convertible into one (1) share of the Company’s common stock. Also, the Series A Preferred will be automatically converted into the Company’s common stock (a “Mandatory Conversion”), at the then applicable conversion price, in the event of an equity offering of shares of the Company’s common stock resulting in the Company uplisting to a national securities exchange (provided that if the per share offering price in such offering is less than the then applicable conversion price for the Series A Preferred, the Series A Preferred will automatically convert based on the offering price in such offering). In the event of any stock split, stock dividend, or stock combination, the number of shares deliverable and the conversion price of the Series A Preferred will be appropriately adjusted. In the event a Mandatory Conversion is triggered, if the offering price on the date such Mandatory Conversion is triggered is less than a 25% premium to the Purchase Price, the Company will issue additional shares of the Company’s common stock for each outstanding share of Series A Preferred to ensure the effective conversion price equals a 25% discount to the Purchase Price. Also, for a period of one year from the date of the Purchase Agreements, if the Company undertakes an underwritten public equity offering, the holders of Series A Preferred will enter into a lock-up agreement with respect to the sale of the Series A Preferred and the Company’s common stock underlying such Series A Preferred as may be reasonably requested by the Company or the Company’s underwriter for such public equity offering. Common Stock At September 30, 2020, the Company had 350,000,000 shares of common stock, par value $0.0001 (the “Common Stock”) authorized for issuance, of which 59,388,085 shares of our Common Stock were issued and outstanding. Warrants to Purchase Common Stock We use the Black-Scholes-Merton option pricing model (“Black-Scholes Model”) to determine the fair value of warrants to purchase Common Stock of the Company (“Warrants”). The Black-Scholes Model is an acceptable model in accordance with the GAAP. The Black-Scholes Model requires the use of a number of assumptions including volatility of the stock price, the weighted average risk-free interest rate, and the weighted average term of the Warrant. The risk-free interest rate assumption is based upon observed interest rates on zero coupon U.S. Treasury bonds whose maturity period is appropriate for the term of the Warrants. Estimated volatility is a measure of the amount by which our stock price is expected to fluctuate each year during the expected life of the award. Our estimated volatility is an average of the historical volatility of peer entities whose stock prices were publicly available over a period equal to the expected life of the awards. We used the historical volatility of peer entities due to the lack of sufficient historical data of our stock price. On May 6, 2020, the Company’s Board issued (i) Warrants to purchase an aggregate of 143,750 shares of Common Stock with an exercise price of $2.50 per share, and (ii) Warrants to purchase an aggregate of 29,375 shares of Common Stock with an exercise price of $2.13 per share. On May 6, 2020, the Company also issued Warrants to purchase an aggregate of 694,625 shares of Common Stock with an exercise price of $2.50 to certain former employees in exchange for 694,625 stock options to purchase Common Stock of the Company. The Company did not recognize any incremental compensation as a result of the exchange. All of the above Warrants were issued to certain individuals for prior service to the Company. The Warrants are fully vested and have a term of five years. The Warrants were, and the shares of Common Stock underlying the Warrants will be, issued in reliance on the exemption from registration provided by Section 4(a)(2) under the Securities Act of 1933, as amended, as a sale not involving any public offering. The assumptions used in the Black-Scholes Model are set forth in the table below. Stock price $ 2.00 Risk-free interest rate 0.24 % Volatility 45.17 % Expected life in years 3 Dividend yield 0.00 % For the three and nine months ended September 30, 2020, $0 and $83,654, respectively was recorded in stock-based compensation in the accompanying unaudited condensed consolidated financial statements. No Warrants were issued during the nine months ended September 30, 2019. As of September 30, 2020, we had Warrants outstanding to purchase an aggregate of 5,639,167 shares of Common Stock with a weighted-average contractual remaining life of approximately 2.4 years, and exercise prices ranging from $0.01 to $3.25 per share, resulting in a weighted average exercise price of $3.05 per share. At September 30, 2020, no Warrants had been exercised. Equity Incentive Plan In connection with the Closing, our Board approved, and our stockholders adopted, the 2018 Equity Incentive Plan (the “2018 Plan”) pursuant to which 10,000,000 shares of our Common Stock has been reserved for issuance to employees, including officers, directors and consultants. The 2018 Plan shall be administered by the Board, provided however, that the Board may delegate such administration to the compensation committee of the Board (the “Compensation Committee”). Subject to the provisions of the 2018 Plan, the Board and/or the Compensation Committee shall have authority to grant, in its discretion, incentive stock options, or non-statutory options, stock awards or restricted stock purchase offers (“Equity Awards”). Stock Options to Purchase Common Stock In January 2020, pursuant to the terms of a Severance Agreement, a stock option to purchase 19,625 shares of the Company’s Common Stock (the “Option”) (valued at $15,479), was promised to a former employee pursuant to the 2018 Plan. On May 6, 2020, the Option was, by mutual consent, changed to a Warrant, which Warrant is included in the discussion of Warrants above. On May 6, 2020, the Compensation Committee of the Board granted Options to purchase an aggregate of 1,499,000 shares of the Company’s Common Stock with an exercise price of $2.13 per share. These Options, granted pursuant to the Company’s 2018 Plan, were granted to employees and consultants of the Company in connection with their service to the Company. The assumptions used in the Black-Scholes Model are set forth in the table below. Stock price $ 2.00 Risk-free interest rate 0.37 % Volatility 42.03-42.19 % Expected life in years 5.5-5.8 Dividend yield 0.00 % For the three and nine months ended September 30, 2020, $81,174 and $833,959, respectively, was recorded in stock-based compensation in the accompanying unaudited condensed consolidated financial statements. No Options were issued during the nine months ended September 30, 2019. As of September 30, 2020, we had outstanding Options to purchase an aggregate of 1,499,000 shares of the Company Common Stock, with a weighted-average contractual remaining life of approximately 9.6 years, and all of which having an exercise price of $2.13. At September 30, 2020, total unrecognized estimated compensation expense related to non-vested Options issued prior to that date was approximately $301,216, which is expected to be recognized over a weighted-average period of 1.6 years. At September 30, 2020, no Options had been exercised. Restricted Stock Purchase Offers On June 3, 2020, the Company entered into an agreement wherein restricted stock purchase offers (“RSU(s)”) for the issuance of 3,000,000 shares of the Company’s Common Stock, with deferred distribution, was granted and issued to Thomas V. Bushey, the Company’s President, pursuant to the 2018 Plan. Stock-based compensation expense for the three and nine months ended September 30, 2020 was $1,050,000 and $2,100,000. Non-vested RSUs as of September 30, 2020 totaled 2,250,000 shares. The weighted average grant-date fair value for the RSU is $2.80. The weighted average vesting period of the RSU is 2.0 years. As of September 30, 2020, unrecognized compensation expense related to the unvested portion of the RSU was $6,300,000, which is expected to be recognized over a weighted average period of 1.5 years. During 2018, the Company entered into an agreement wherein RSUs for the issuance of 378,478 shares of the Company’s Common Stock (the “2018 RSUs”), with deferred distribution, was promised to a consultant pursuant to the 2018 Plan (the “RSU Agreement”). On September 21, 2020, the Company executed the RSU Agreement with the consultant. The 2018 RSUs vested upon the issuance of the RSU Agreement: however, the underlying shares of the Company’s Common Stock will not be issued and delivered to the consultant until December 1, 2021, at the request of the consultant. Stock-based compensation expense for the three and nine months ended September 30, 2020 was $10,117 and $30,357, respectively. The weighted average grant-date fair value for the RSU is $0.22. The weighted average vesting period of the RSU is 2.0 years. As of September 30, 2020, there was no unrecognized compensation expense related to these RSU’s. The Company recognizes RSU expense over the period of vesting or period that services will be provided. Compensation associated with shares of Common Stock issued or to be issued to consultants and other non-employees is recognized over the expected service period beginning on the measurement date, which is generally the time the Company and the service provider enter into a commitment whereby the Company agrees to grant shares in exchange for the services to be provided. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 10 – COMMITMENTS AND CONTINGENCIES We may be involved in legal proceedings, claims and assessments arising in the ordinary course of business. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. There are no such loss contingencies that are included in the financial statements as of September 30, 2020. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 9 Months Ended |
Sep. 30, 2020 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | NOTE 11 – RELATED PARTY TRANSACTIONS Between April 16 and December 31, 2019, we accrued $141,667 in payroll for Eric Brock, our Chief Executive Officer. On March 12, 2020, Mr. Brock waived the accrued payroll. During the nine months ended September 30, 2020, we accrued payroll amounts totaling $94,218. As of September 30, 2020, the accrued balance was $94,218. As of December 31, 2019, Stewart Kantor, the Company’s Chief Financial Officer, had accrued payroll totaling $280,209. On March 12, 2020, Mr. Kantor waived $8,334 in accrued salary. During the nine months ended September 30, 2020, we accrued payroll amounts totaling $2,956. As of September 30, 2020, the accrued balance was $274,831. Thomas Bushey joined the Company as President on June 3, 2020. For the period from June 3, 2020 to September 30, 2020, we accrued payroll amounts totaling $70,387. As of September 30, 2020, the accrued balance was $70,387. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2020 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 12 – SUBSEQUENT EVENTS Form S-1 Registration Statement On October 26, 2020, the Company filed a Registration Statement on Form S-1 with the Securities and Exchange Commission for a public offering of its common stock. The proposed maximum aggregate offering is $25,000,000. The Form S-1 has not yet been declared effective by the Securities and Exchange Commission. The Company can provide no assurance that it will consummate an offering under the Form S-1. The foregoing does not constitute an offer of any securities for sale. In connection with the Form S-1, on October 14, 2020, (i) Steward Capital waived the repayment requirement under the Agreement if the Company completes a public offering and realizes gross cash proceeds of not less than $20,000,000 and (ii) the Company agreed to repay Steward Capital $5,000,000 if the Company completes a public offering and realizes gross proceeds of not less than $20,000,000. Reverse Stock Split On November 3, 2020, the Board of Directors of the Company approved a 1-for-3 reverse stock split of the Company’s authorized and outstanding common stock, effective November 13, 2020 (the “Reverse Stock Split”). No fractional shares will be issued in connection with the Reverse Stock Split. Any fractional shares resulting from the Reverse Stock Split will be rounded up to the nearest whole share. The Company’s common stock is expected to commence trading on a post-split basis on November 16, 2020. |
Accounting Policies, by Policy
Accounting Policies, by Policy (Policies) | 9 Months Ended |
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the Company’s financial statements for interim periods in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The information included in this quarterly report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and the accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 (“2019 Form 10-K”). The Company’s accounting policies are described in the “ Notes to Consolidated Financial Statements |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of the Company and our wholly owned subsidiaries, Ondas Networks and FS Partners, and our majority owned subsidiary, FS Holding. All significant inter-company accounts and transactions between these entities have been eliminated in these unaudited condensed consolidated financial statements. |
Use of Estimates | Use of Estimates The process of preparing financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of assets and liabilities at the date of the financial statements. Such management estimates include those relating to revenue recognition, inventory write-downs to reflect net realizable value, assumptions used in the valuation of stock-based awards and valuation allowances against deferred tax assets. Actual results could differ from those estimates. |
Cash, Cash Equivalents and Restricted Cash | Cash, Cash Equivalents and Restricted Cash The Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents. Restricted cash consists of amounts held under a sublease agreement (see Leases |
Inventory | Inventory Inventories, which consist solely of equipment components, are stated at the lower of cost (first-in, first-out) or net realizable value, net of reserves for obsolete inventory. We continually analyze our slow-moving and excess inventories. Based on historical and projected sales volumes and anticipated selling prices, we established reserves. Inventory that is in excess of current and projected use is reduced by an allowance to a level that approximates its estimate of future demand. Products that are determined to be obsolete are written down to net realizable value. As of September 30, 2020 and December 31, 2019, we determined that no such reserves were necessary. Inventory consists of the following: September 30, 2020 December 31, 2019 Raw Material $ 784,297 $ 372,101 Work in Process 116,709 - Finished Goods 73,994 55,415 TOTAL INVENTORY $ 975,000 $ 427,516 |
Fair Value of Financial Instruments | Fair Value of Financial Instruments Our financial instruments consist primarily of receivables, accounts payable, accrued expenses and short- and long-term debt. The carrying amount of receivables, accounts payable and accrued expenses approximates our fair value because of the short-term maturity of such instruments. We have categorized our assets and liabilities that are valued at fair value on a recurring basis into a three-level fair value hierarchy in accordance with U.S. GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets and liabilities (Level 1) and lowest priority to unobservable inputs (Level 3). Assets and liabilities recorded in the balance sheets at fair value are categorized based on a hierarchy of inputs, as follows: Level 1 Level 2 Level 3 The following table provides a summary of changes in fair value associated with the Level 3 liabilities for the nine months ended September 30, 2020 and the year ended December 31, 2019: Fair Value Measurements Using Significant Unobservable Inputs Nine Months Ended September 30, Year ended December 31, Balance, beginning of period $ - $ - Issuances of derivative liability (32,906 ) - Change in fair value of derivative liability (136,323 ) - Balance, end of period $ (169,229 ) $ - The above table of Level 3 liabilities begins with the prior period balance and adjusts the balance for changes that occurred during the current period. The ending balance of the Level 3 financial instrument presented above represent our best estimates and may not be substantiated by comparisons to independent markets and, in many cases, could not be realized in immediate settlement of the instruments. |
Derivative Liability for Embedded Conversion Features | Derivative Liability for Embedded Conversion Features The Company evaluates its financial instruments to determine if those contracts or embedded components of those contracts qualify as derivatives to be accounted for separately. In circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated and there are also other bifurcated embedded derivative instruments in the convertible instrument, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument. The result of this accounting treatment is that the fair value of the embedded derivative is recorded as a liability and marked-to-market each balance sheet date, with the change in fair value recorded in the statements of operations as other income or expense. |
Deferred Offering Costs | Deferred Offering Costs The Company capitalizes certain legal, professional accounting and other third-party fees that are directly associated with in-process equity financings as deferred offering costs until such financings are consummated. After consummation of equity financings, these costs are recorded in stockholders’ deficit as a reduction of additional paid-in capital generated as a result of the offering. Should the planned equity financings be abandoned, the deferred offering costs are expensed immediately as a charge to other income (expenses) in the unaudited condensed consolidated statement of operations. During the three months ended September 30, 2020, the Company recorded deferred financing costs totaling $201,038. For the three months ended September 30, 2020 and 2019, the Company expensed financing costs of $0 and $1,208,063, respectively. For the nine months ended September 30, 2020 and 2019, the Company expensed financing costs of $0 and $1,478,695, respectively. |
Revenue from Contracts with Customers | Revenue from Contracts with Customers On January 1, 2018, we adopted ASC 606 , Revenue from Contracts with Customers Revenue Recognition Under ASC 606, the Company recognizes revenue when the customer obtains control of promised products or services, in an amount that reflects the consideration which is expected to be received in exchange for those products or services. The Company recognizes revenue following the five-step model prescribed under ASC 606: (i) identify contract(s) with a customer; (ii) identify the performance obligation(s) in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligation(s) in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the products or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the products or services promised within each contract and determines those that are performance obligations and assesses whether each promised product or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. To the extent the transaction price includes variable consideration, we estimate the amount of variable consideration that should be included in the transaction price utilizing the expected value method. Variable consideration is included in the transaction price if, in our judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. Estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of our anticipated performance and all information (historical, current and forecasted) that is reasonably available. Sales and other taxes collected on behalf of third parties are excluded from revenue. For the three and nine months ended September 30, 2020 and 2019, none of our contracts with customers included variable consideration. Contracts that are modified to account for changes in contract specifications and requirements are assessed to determine if the modification either creates new or changes the existing enforceable rights and obligations. Generally, contract modifications are for products or services that are not distinct from the existing contract due to the inability to use, consume or sell the products or services on their own to generate economic benefits and are accounted for as if they were part of that existing contract. The effect of a contract modification on the transaction price and measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulative catch-up basis. For the three and nine months ended September 30, 2020 and 2019, there were no modifications to contract specifications. The Company is engaged in the development, marketing and sale of wireless radio systems for secure, wide area mission-critical, business-to-business networks. We generate revenue primarily from the sale of our FullMAX System and the delivery of related services, along with non-recurring engineering (“NRE”) development projects with certain customers. Product revenue is comprised of sales of the Company’s software defined base station and remote radios, its network management and monitoring system, and accessories. The Company’s software and hardware is sold with a limited one-year basic warranty included in the price. The limited one-year basic warranty is an assurance-type warranty, is not a separate performance obligation, and thus no transaction price is allocated to it. The nature of tasks under the limited one-year basic warranty only provide for remedying defective product(s) covered by the warranty. Product revenue is generally recognized when the customer obtains control of our product, which occurs at a point in time, and may be upon shipment or upon delivery based on the contractual shipping terms of a contract, or upon installation when the combined performance obligation is not distinct within the context of the contract. Service revenue is comprised of separately priced extended warranty sales, network support and maintenance, remote monitoring, as well as ancillary services directly related to the sale of the Company’s wireless communications products including wireless network design, systems engineering, radio frequency planning, software configuration, product training, installation, and onsite support. The extended warranty we sell provides a level of assurance beyond the coverage for defects that existed at the time of a sale or against certain types of covered damage. The extended warranty includes 1) factory hardware repair or replacement of the base station and remote radios, at our election, 2) software upgrades, bug fixes and new features of the radio software and network management system (“NMS”), 3) deployment and network architecture support, and 4) technical support by phone and email. Ancillary service revenues are recognized at the point in time when those services have been provided to the customer and the performance obligation has been satisfied. With respect to extended warranty sales and remote monitoring, the Company applies the input method using straight-line recognition. Development revenue is comprised primarily of non-recurring engineering service contracts to develop software and hardware applications for various customers. A significant portion of this revenue is generated through one contract with a customer whereby the Company will develop such applications to interoperate within the customers infrastructure. For this contract, the Company and the customer work cooperatively, whereby the customer’s involvement is to provide technical specifications for the product design, as well as, to review and approve the project progress at various markers based on predetermined milestones. The products developed are not able to be sold to any other customer and are based in part upon existing Company and customer technology. This development contract is in effect until March 31, 2021, at which time the Company will grant the customer an irrevocable, perpetual, royalty-free, and exclusive right to market, offer for sale, sell, and resell the developed product without restriction. Development revenue is recognized as services are provided over the life of the contract as the Company has an enforceable right to payment for services completed to date and there is no alternative use of the product. If the customer contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. We enter into certain contracts within our service revenues that have multiple performance obligations, one or more of which may be delivered subsequent to the delivery of other performance obligations. We allocate the transaction price based on the estimated relative standalone selling prices of the promised products or services underlying each performance obligation. We determine standalone selling prices based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, we estimate the standalone selling price considering available information such as market conditions and internally approved pricing guidelines related to the performance obligations. Revenue is then allocated to the performance obligations using the relative selling prices of each of the performance obligations in the contract. Our payment terms vary and range from Net 15 to Net 30 days from the date of the invoices for product and services related revenue. Our payment terms for the majority of our development related revenue carry milestone related payment obligations which span the contract life. For milestone-based contracts, the customer reviews the completed milestone and once approved, makes payment in advance towards the next milestone. Disaggregation of Revenue The following tables present our disaggregated revenues by Type of Revenue and Timing of Revenue: Three Months Ended Nine Months Ended 2020 2019 2020 2019 Type of Revenue Product revenue $ 245,075 $ 61,182 $ 1,043,585 $ 212,905 Service revenue 16,410 26,950 53,500 100,459 Development revenue 351,248 - 866,119 - Other revenue 1,293 - 6,394 219 Total revenue $ 614,026 $ 88,132 $ 1,969,598 $ 313,583 Three Months Ended Nine Months Ended 2020 2019 2020 2019 Timing of Revenue Revenue recognized point in time $ 331,528 $ 79,166 $ 1,170,409 $ 281,333 Revenue recognized over time 282,498 8,966 799,189 32,250 Total revenue $ 614,026 $ 88,132 $ 1,969,598 $ 313,583 Contract Assets and Liabilities We recognize a receivable or contract asset when we perform a service or transfer a good in advance of receiving consideration. A receivable is recorded when our right to consideration is unconditional and only the passage of time is required before payment of that consideration is due. A contract asset is recorded when our right to consideration in exchange for goods or services that we have transferred or provided to a customer is conditional on something other than the passage of time. We did not have any contract assets recorded at September 30, 2020 or December 31, 2019. We recognize a contract liability when we receive consideration, or if we have the unconditional right to receive consideration, in advance of satisfying the performance obligation. A contract liability is our obligation to transfer goods or services to a customer for which we have received consideration, or an amount of consideration is due from the customer. The table below details the activity in our contract liabilities during the nine months ended September 30, 2020, and the year ended December 31, 2019, which is included in accrued expenses and other current liabilities in the Company’s unaudited condensed consolidated balance sheet. Nine Months Ended Year Ended Balance at beginning of period $ 378,850 $ 20,631 Additions 1,046,250 397,269 Transfer to revenue (1,115,882 ) (39,050 ) Balance at end of period $ 309,218 $ 378,850 Warranty Reserve For our software and hardware products, we provide a limited one-year assurance-type warranty and for our development service, we provide no warranties. The assurance-type warranty covers defects in material and workmanship only. If a warranted software or hardware component is determined to be defective after being tested by the Company, the Company will repair, replace or refund the price of the covered hardware and/or software to the customer (not including any shipping, handling, delivery or installation charges). We estimate, based upon a review of historical warranty claim experience, the costs that may be incurred under our warranties and record a liability in the amount of such estimate at the time a product is sold. Factors that affect our warranty liability include the number of units sold, historical and anticipated rates of warranty claims, and cost per claim. We periodically assess the adequacy of our recorded warranty liability and adjust the accrual as claims data and historical experience warrants. The Company has assessed the costs of fulfilling its existing assurance-type warranties and has determined that the estimated outstanding warranty obligation at September 30, 2020 and December 31, 2019 are immaterial to the Company’s financial statements. |
Leases | Leases Under Topic 842, operating lease expense is generally recognized evenly over the term of the lease. During the nine months ended September 30, 2020, the Company had operating leases primarily consisting of two office space leases in Sunnyvale, California (the “North Pastoria Lease” and the “Gibraltar Lease”) (collectively, the “Sunnyvale Leases”). During the nine months ended September 30, 2019, the Company had the Sunnyvale Leases and a property lease in Chengdu, Sichuan Province, People’s Republic of China (the “Chengdu Lease”). In December 2019, in conjunction with the closure of Ondas Networks Limited, the Chengdu Lease was terminated. As of September 30, 2020, the remaining terms for the Sunnyvale Leases range from nine months on the North Pastoria Lease and eight months on the Gibraltar Lease. In March 2019, the North Pastoria Lease was abandoned and the likelihood of entering into a sublease agreement for the property was minimal; therefore, the Right to Use Asset value of $259,926 was considered impaired and the amount was charged to asset impairment on the accompanying unaudited condensed consolidated financial statements. On January 24, 2020, the Company and a third party (the “Sublessee”) entered into a Sublease agreement (the “Sublease”) on the North Pastoria Lease, wherein the Sublessee will occupy the premises through December 31, 2020. The Sublessee will make rent payments of approximately $9,666 and management fee payments of approximately $457 per month beginning February 1, 2020, and a one-time security deposit equal to two months rent, or $19,332. Sublease rental income for the three and nine months ended September 30, 2020 was $20,245 and $70,858, respectively. We determine if an arrangement is a lease, or contains a lease, at the inception of the arrangement. If we determine the arrangement is a lease, or contains a lease, at lease inception, we then determine whether the lease is an operating lease or financial lease. Operating and finance leases result in recording a right-of-use (“ROU”) asset and lease liability on our consolidated balance sheets. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. For purposes of calculating operating lease ROU assets and operating lease liabilities, we use the non-cancellable lease term plus options to extend that we are reasonably certain to take. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term. Our leases generally do not provide an implicit rate. As such, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. This rate is generally consistent with the interest rate we pay on borrowings under our credit facilities, as this rate approximates our collateralized borrowing capabilities over a similar term of the lease payments. We utilized the consolidated group incremental borrowing rate for all leases, as we have centralized treasury operations. We have elected not to recognize ROU assets and lease liabilities that arise from short-term (12 months or less) leases for any class of underlying assets. We have elected not to separate lease and non-lease components for any class of underlying asset. Lease Costs Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Components of total lease costs: Operating lease expense $ 80,725 $ 148,922 $ 246,680 $ 445,148 Short-term lease costs (1) 2,100 11,122 7,650 38,626 Sublease rental income (20,245 ) - (70,858 ) - Total lease costs $ 62,580 $ 160,044 $ 183,472 $ 483,774 (1) Represents short-term leases which are immaterial. Lease Positions as of September 30, 2020 and December 31, 2019 ROU lease assets and lease liabilities for our operating leases were recorded in the unaudited condensed consolidated balance sheet as follows: As of September 30, 2020 As of December 31, 2019 Assets: Operating lease assets $ 125,258 $ 331,419 Total lease assets $ 125,258 $ 331,419 Liabilities: Operating lease liabilities, current $ 183,995 $ 489,407 Operating lease liabilities, net of current - 52,449 Total lease liabilities $ 183,995 $ 541,856 Other Information Nine Months Ended September 30, 2020 2019 Operating cash flows for operating leases $ 398,374 $ 340,044 Weighted average remaining lease term (in years) – operating lease 0.4 2.3 Weighted average discount rate – operating lease 14 % 14 % Undiscounted Cash Flows Future lease payments included in the measurement of lease liabilities on the unaudited condensed consolidated balance sheet as of September 30, 2020, for the following five years and thereafter are as follows: Years ending December 31, 2020 (3 months) $ 132,791 2021 57,153 Total future minimum lease payments 189,944 Lease imputed interest (5,949 ) Total $ 183,995 |
Net Loss Per Common Share | Net Loss Per Common Share Basic earnings per share (“EPS”) is calculated under the two-class method under which all earnings (distributed and undistributed) are allocated to each class of common stock and participating securities based on their respective rights to receive dividends. Our outstanding convertible preferred stock are considered participating securities as the holders may participate in undistributed earnings with holders of common shares and are not obligated to share in our net losses. Diluted EPS is computed by dividing the net income attributable to the Company’s common shareholders by the weighted average number of common shares outstanding during the period increased by the number of additional common shares that would have been outstanding if the impact of assumed exercises and conversions is dilutive. The dilutive effects of outstanding options, warrants, nonvested shares of common stock and nonvested restricted stock units that vest solely on the basis of a service condition are calculated using the treasury stock method. The dilutive effects of the outstanding preferred stock are calculated using the if-converted method. Below are reconciliations of the numerators and denominators in the EPS computations. Three Months Ended September 30, Nine Months ended September 30, NUMERATOR: 2020 2019 2020 2019 Basic and diluted - net $ (3,325,880 ) $ (5,225,314 ) $ (9,353,706 ) $ (16,135,767 ) DEMOMINATOR: Weighted average number of shares of common stock outstanding 59,269,390 50,731,929 59,268,523 50,554,113 Weighted average number of shares of common stock underlying vested restricted stock units 722,588 151,186 424,251 103,458 Weighted average number of shares of common stock underlying shares issuable for warrants with minimal consideration 140,678 4,587 140,678 1,546 Basic EPS – weighted average number of shares outstanding 60,132,656 50,887,702 59,833,452 50,659,117 Effect of dilutive securities outstanding - - - - Diluted EPS – weighted average number of shares outstanding 60,132,656 50,887,702 59,833,452 50,659,117 No effects of potentially dilutive securities outstanding during the three and nine months ended September 30, 2020 and 2019, were included in the calculation of diluted EPS for the three and nine months ended September 30, 2020 and 2019, because to do so would be anti-dilutive as a result of our loss from continuing operations. Potentially dilutive securities outstanding during the periods included our outstanding convertible preferred stock, options, warrants, nonvested restricted stock units and nonvested stock. The following potentially dilutive securities for the nine months ended September 30, 2020 and 2019 have been excluded from the computation of diluted net loss per share because the effect of their inclusion would have been anti-dilutive. Nine months ended 2020 2019 Warrants to purchase common stock 5,498,489 - Options to purchase common stock 1,499,000 - Restricted stock units 2,250,000 189,238 Convertible debt - 140,678 Total potentially dilutive securities 7,898,389 329,916 |
Concentration of Customers | Concentration of Customers Because we have only recently invested in our customer service and support organization, a small number of customers have accounted for a substantial amount of our revenue. The table below sets forth the Company’s customers that accounted for greater than 10% of its revenues for the three and nine-month periods ended September 30, 2020 and 2019, respectively: Three Months Ended Nine Months Ended Customer 2020 2019 2020 2019 A 29 % - % 51 % - % B 58 % - % 44 % - % C 13 % - % - % - % D - % - % - 44 % E - % 85 % - 36 % F - % - % - 18 % Customer B accounted for 99% of the Company’s accounts receivable balance at September 30, 2020. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In August 2020, the FASB issued ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies an issuer’s accounting for convertible instruments by reducing the number of accounting models that require separate accounting for embedded conversion features. ASU 2020-06 also simplifies the settlement assessment that entities are required to perform to determine whether a contract qualifies for equity classification and makes targeted improvements to the disclosures for convertible instruments and earnings-per-share (EPS) guidance. This update will be effective for the Company’s fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Entities can elect to adopt the new guidance through either a modified retrospective method of transition or a fully retrospective method of transition. The Company is currently evaluating the impact of the pending adoption of the new standard on its financial statements and intends to adopt the standard as of January 1, 2022. Aside from ASU 2020-06, there have been no material changes to our significant accounting policies as summarized in NOTE 2 of our 2019 Form 10-K. We do not expect that the adoption of any recent accounting pronouncements will have a material impact on our accompanying unaudited condensed consolidated financial statements. |
Reclassification | Reclassification Certain amounts reported in the prior year financial statements have been reclassified to conform to the current year presentation. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
Schedule of inventory | September 30, 2020 December 31, 2019 Raw Material $ 784,297 $ 372,101 Work in Process 116,709 - Finished Goods 73,994 55,415 TOTAL INVENTORY $ 975,000 $ 427,516 |
Schedule of changes in fair value associated with level 3 liabilities | Fair Value Measurements Using Significant Unobservable Inputs Nine Months Ended September 30, Year ended December 31, Balance, beginning of period $ - $ - Issuances of derivative liability (32,906 ) - Change in fair value of derivative liability (136,323 ) - Balance, end of period $ (169,229 ) $ - |
Schedule of disaggregation of revenue | Three Months Ended Nine Months Ended 2020 2019 2020 2019 Type of Revenue Product revenue $ 245,075 $ 61,182 $ 1,043,585 $ 212,905 Service revenue 16,410 26,950 53,500 100,459 Development revenue 351,248 - 866,119 - Other revenue 1,293 - 6,394 219 Total revenue $ 614,026 $ 88,132 $ 1,969,598 $ 313,583 Three Months Ended Nine Months Ended 2020 2019 2020 2019 Timing of Revenue Revenue recognized point in time $ 331,528 $ 79,166 $ 1,170,409 $ 281,333 Revenue recognized over time 282,498 8,966 799,189 32,250 Total revenue $ 614,026 $ 88,132 $ 1,969,598 $ 313,583 |
Schedule of deferred warranty activity | Nine Months Ended Year Ended Balance at beginning of period $ 378,850 $ 20,631 Additions 1,046,250 397,269 Transfer to revenue (1,115,882 ) (39,050 ) Balance at end of period $ 309,218 $ 378,850 |
Schedule of lease costs | Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Components of total lease costs: Operating lease expense $ 80,725 $ 148,922 $ 246,680 $ 445,148 Short-term lease costs (1) 2,100 11,122 7,650 38,626 Sublease rental income (20,245 ) - (70,858 ) - Total lease costs $ 62,580 $ 160,044 $ 183,472 $ 483,774 (1) Represents short-term leases which are immaterial. |
Schedule of ROU lease assets and lease liabilities | As of September 30, 2020 As of December 31, 2019 Assets: Operating lease assets $ 125,258 $ 331,419 Total lease assets $ 125,258 $ 331,419 Liabilities: Operating lease liabilities, current $ 183,995 $ 489,407 Operating lease liabilities, net of current - 52,449 Total lease liabilities $ 183,995 $ 541,856 |
Schedule of operating leases | Nine Months Ended September 30, 2020 2019 Operating cash flows for operating leases $ 398,374 $ 340,044 Weighted average remaining lease term (in years) – operating lease 0.4 2.3 Weighted average discount rate – operating lease 14 % 14 % |
Schedule of future minimum lease payments | Years ending December 31, 2020 (3 months) $ 132,791 2021 57,153 Total future minimum lease payments 189,944 Lease imputed interest (5,949 ) Total $ 183,995 |
Schedule of EPS computations | Three Months Ended September 30, Nine Months ended September 30, NUMERATOR: 2020 2019 2020 2019 Basic and diluted - net $ (3,325,880 ) $ (5,225,314 ) $ (9,353,706 ) $ (16,135,767 ) DEMOMINATOR: Weighted average number of shares of common stock outstanding 59,269,390 50,731,929 59,268,523 50,554,113 Weighted average number of shares of common stock underlying vested restricted stock units 722,588 151,186 424,251 103,458 Weighted average number of shares of common stock underlying shares issuable for warrants with minimal consideration 140,678 4,587 140,678 1,546 Basic EPS – weighted average number of shares outstanding 60,132,656 50,887,702 59,833,452 50,659,117 Effect of dilutive securities outstanding - - - - Diluted EPS – weighted average number of shares outstanding 60,132,656 50,887,702 59,833,452 50,659,117 |
Schedule of EPS computations | Nine months ended 2020 2019 Warrants to purchase common stock 5,498,489 - Options to purchase common stock 1,499,000 - Restricted stock units 2,250,000 189,238 Convertible debt - 140,678 Total potentially dilutive securities 7,898,389 329,916 |
Schedule of concentration of customers | Three Months Ended Nine Months Ended Customer 2020 2019 2020 2019 A 29 % - % 51 % - % B 58 % - % 44 % - % C 13 % - % - % - % D - % - % - 44 % E - % 85 % - 36 % F - % - % - 18 % |
OTHER CURRENT ASSETS (Tables)
OTHER CURRENT ASSETS (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Disclosure Text Block Supplement [Abstract] | |
Schedule of other current assets | September 30, December 31, Prepaid insurance $ 171,022 $ 85,201 Other prepaid expenses 29,603 105,013 Deposits 3,000 28,115 Advances for raw material purchases - 450,691 Prepaid marketing costs - 31,579 Total other current assets $ 203,625 $ 700,599 |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property and equipment | September 30, 2020 December 31, 2019 Vehicle $ 149,916 $ 149,916 Computer Equipment 112,616 109,509 Furniture and fixtures 94,053 93,464 Software 61,287 67,287 Leasehold improvements 58,613 58,613 Test Equipment 25,395 20,493 501,880 499,282 Less: accumulated depreciation (315,115 ) (247,036 ) Total property and equipment $ 186,765 $ 252,246 |
INTANGIBLE ASSETS (Tables)
INTANGIBLE ASSETS (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of estimated amortization expense | Year Ending December 31, Estimated Amortization 2020 (3 months) $ 6,688 2021 $ 26,752 2022 $ 26,752 2023 $ 26,752 2024 $ 26,752 |
ACCRUED EXPENSES AND OTHER CU_2
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Disclosure Text Block Supplement [Abstract] | |
Schedule of accrued expenses and other current liabilities | September 30, December 31, Accrued payroll and other benefits $ 2,030,035 $ 2,094,536 D&O insurance financing payable 102,000 33,660 Accrued interest 72,844 437,569 Accrued professional fees 69,449 104,602 Other accrued expenses 64,206 67,848 Accrued rent and facilities costs 61,602 24,584 Sublease deposit 19,332 - Total accrued expenses and other current liabilities $ 2,419,468 $ 2,762,799 |
STOCKHOLDERS' EQUITY (Tables)
STOCKHOLDERS' EQUITY (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Warrants [Member] | |
STOCKHOLDERS' EQUITY (Tables) [Line Items] | |
Schedule of assumptions used in Black-Scholes Model | Stock price $ 2.00 Risk-free interest rate 0.24 % Volatility 45.17 % Expected life in years 3 Dividend yield 0.00 % |
Stock option [Member] | |
STOCKHOLDERS' EQUITY (Tables) [Line Items] | |
Schedule of assumptions used in Black-Scholes Model | Stock price $ 2.00 Risk-free interest rate 0.37 % Volatility 42.03-42.19 % Expected life in years 5.5-5.8 Dividend yield 0.00 % |
DESCRIPTION OF BUSINESS AND B_2
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | ||||
Mar. 27, 2020 | Jan. 31, 2020 | Aug. 30, 2019 | Mar. 31, 2020 | Sep. 30, 2020 | Dec. 31, 2019 | Sep. 28, 2018 | |
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION (Details) [Line Items] | |||||||
Ownership percentage | 100.00% | ||||||
Common stock, par value (in Dollars per share) | $ 0.0001 | $ 0.0001 | |||||
Shares issued (in Shares) | 19,625 | 24,428,681 | |||||
Articles of incorporation, description | In connection with the Closing, we amended and restated our articles of incorporation, effective September 28, 2018 to (i) change our name to Ondas Holdings Inc. and (ii) increase our authorized capital to 360,000,000 shares, consisting of 350,000,000 shares of common stock, par value $0.0001 per share, and 10,000,000 shares of “blank check” preferred stock, par value $0.0001 per share. | ||||||
Business acquisition, description | Also in connection with the Closing, (i) our sole director appointed additional individuals, who previously were members of the board of directors of Ondas Networks and its chief executive officer, to serve on our Board, and our Board subsequently appointed executive officers; (ii) the former holders of the Ondas Networks Shares executed lock-up agreements (the “Lock-Up Agreements”), which provided for an initial 12-month lock-up period, commencing with the date of the Closing, with a subsequent 12-month limited sale period; (iii) we entered into a Common Stock Repurchase Agreement with Energy Capital, LLC, a current stockholder of the Company (“Energy Capital”), pursuant to which the entity sold an aggregate of 32.6 million Company Shares (the “Repurchase Shares”) to us at $0.0001 per share, for an aggregate consideration of $3,260, which Repurchase Shares were canceled and returned to our authorized but unissued shares; (iv) our Board approved, and our stockholders adopted, the 2018 Incentive Stock Plan (the “2018 Plan”) pursuant to which 10 million Company Shares have been reserved for issuance to employees, including officers, directors and consultants; and (v) we entered into a Loan and Security Agreement with Energy Capital, pursuant to which Energy Capital agreed to lend us an aggregate principal amount of up to $10 million, subject to specified conditions. | ||||||
Percentage of outstanding common stock | 41.00% | ||||||
Reverse stock split, description | All share and per share amounts in the condensed consolidated financial statements and related notes have been retrospectively adjusted to reflect the Exchange Ratio in connection with the Acquisition. | ||||||
Stockholders' deficit | $ 13,700,000 | ||||||
Short-term borrowings outstanding | 11,800,000 | ||||||
Long-term borrowings outstanding | 600,000 | ||||||
Cash | 2,100,000 | ||||||
Working capital deficit | $ 14,100,000 | ||||||
Percentage of workforce | 80.00% | ||||||
Description of business activity | On May 13, 2020, we reopened our corporate headquarters and as of September 30, 2020 we have no employees remaining on furlough. | ||||||
CARES Act, description | The CARES Act is an approximately $2 trillion emergency economic stimulus package in response to the Coronavirus outbreak, which among other things contains numerous income tax provisions. | ||||||
Fund received | $ 666,000 | ||||||
Ondas Networks Share [Member] | |||||||
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION (Details) [Line Items] | |||||||
Common stock, par value (in Dollars per share) | $ 0.00001 | ||||||
Conversion of shares (in Shares) | 3.823 | ||||||
Shares issued (in Shares) | 25,463,732 | ||||||
Common Stock [Member] | |||||||
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION (Details) [Line Items] | |||||||
Common stock, par value (in Dollars per share) | $ 0.0001 | $ 0.0001 |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | |||
Jan. 24, 2020 | Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Mar. 31, 2019 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items] | ||||||
Payments of financing cost | $ 201,038 | |||||
Expensed financing costs | $ 0 | $ 1,208,063 | 0 | $ 1,478,695 | ||
Right to Use Asset value | $ 259,926 | |||||
Payment for sublease | $ 9,666 | |||||
Payment of management fee | 457 | |||||
One-time security deposit | $ 19,332 | |||||
Sublease rental income | $ 20,245 | $ 70,858 | ||||
Revenue [Member] | ||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items] | ||||||
Concentration risk, percentage | 10.00% | |||||
Customer B [Member] | Accounts Receivable [Member] | ||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items] | ||||||
Concentration risk, percentage | 99.00% |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Schedule of inventory - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Schedule of inventory [Abstract] | ||
Raw Material | $ 784,297 | $ 372,101 |
Work in Process | 116,709 | |
Finished Goods | 73,994 | 55,415 |
TOTAL INVENTORY | $ 975,000 | $ 427,516 |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Schedule of changes in fair value associated with level 3 liabilities - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Schedule of changes in fair value associated with level 3 liabilities [Abstract] | ||
Balance, beginning of period | ||
Issuances of derivative liability | (32,906) | |
Change in fair value of derivative liability | (136,323) | |
Balance, end of period | $ (169,229) |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Schedule of disaggregation of revenue - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Type of Revenue | ||||
Total revenue | $ 614,026 | $ 88,132 | $ 1,969,598 | $ 313,583 |
Timing of Revenue | ||||
Total revenue | 614,026 | 88,132 | 1,969,598 | 313,583 |
Product [Member] | ||||
Type of Revenue | ||||
Total revenue | 245,075 | 61,182 | 1,043,585 | 212,905 |
Service [Member] | ||||
Type of Revenue | ||||
Total revenue | 16,410 | 26,950 | 53,500 | 100,459 |
Development revenue [Member] | ||||
Type of Revenue | ||||
Total revenue | 351,248 | 866,119 | ||
Other revenue [Member] | ||||
Type of Revenue | ||||
Total revenue | 1,293 | 6,394 | 219 | |
Revenue recognized point in time [Member] | ||||
Timing of Revenue | ||||
Total revenue | 331,528 | 79,166 | 1,170,409 | 281,333 |
Revenue recognized over time [Member] | ||||
Timing of Revenue | ||||
Total revenue | $ 282,498 | $ 8,966 | $ 799,189 | $ 32,250 |
SUMMARY OF SIGNIFICANT ACCOUN_7
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Schedule of deferred warranty activity - USD ($) | 9 Months Ended | |
Sep. 30, 2020 | Dec. 31, 2019 | |
Schedule of deferred warranty activity [Abstract] | ||
Balance at beginning of period | $ 378,850 | $ 20,631 |
Additions | 1,046,250 | 397,269 |
Transfer to revenue | (1,115,882) | (39,050) |
Balance at end of period | $ 309,218 | $ 378,850 |
SUMMARY OF SIGNIFICANT ACCOUN_8
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Schedule of lease costs - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | ||
Components of total lease costs: | |||||
Operating lease expense | $ 80,725 | $ 148,922 | $ 246,680 | $ 445,148 | |
Short-term lease costs | [1] | 2,100 | 11,122 | 7,650 | 38,626 |
Sublease rental income | (20,245) | (70,858) | |||
Total lease costs | $ 62,580 | $ 160,044 | $ 183,472 | $ 483,774 | |
[1] | Represents short-term leases which are immaterial. |
SUMMARY OF SIGNIFICANT ACCOUN_9
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Schedule of ROU lease assets and lease liabilities - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Assets: | ||
Operating lease assets | $ 125,258 | $ 331,419 |
Total lease assets | 125,258 | 331,419 |
Liabilities: | ||
Operating lease liabilities, current | 183,995 | 489,407 |
Operating lease liabilities, net of current | 52,449 | |
Total lease liabilities | $ 183,995 | $ 541,856 |
SUMMARY OF SIGNIFICANT ACCOU_10
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Schedule of operating leases - USD ($) | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Schedule of operating leases [Abstract] | ||
Operating cash flows for operating leases | $ 398,374 | $ 340,044 |
Weighted average remaining lease term (in years) - operating lease | 4 months 24 days | 2 years 3 months 18 days |
Weighted average discount rate - operating lease | 14.00% | 14.00% |
SUMMARY OF SIGNIFICANT ACCOU_11
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Schedule of future minimum lease payments | Sep. 30, 2020USD ($) |
Schedule of future minimum lease payments [Abstract] | |
2020 (3 months) | $ 132,791 |
2021 | 57,153 |
Total future minimum lease payments | 189,944 |
Lease imputed interest | (5,949) |
Total | $ 183,995 |
SUMMARY OF SIGNIFICANT ACCOU_12
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Schedule of EPS computations - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Schedule of EPS computations [Abstract] | ||||
Basic and diluted - net (in Dollars) | $ (3,325,880) | $ (5,225,314) | $ (9,353,706) | $ (16,135,767) |
DEMOMINATOR: | ||||
Weighted average number of shares of common stock outstanding | 59,269,390 | 50,731,929 | 59,268,523 | 50,554,113 |
Weighted average number of shares of common stock underlying vested restricted stock units | 722,588 | 151,186 | 424,251 | 103,458 |
Weighted average number of shares of common stock underlying shares issuable for warrants with minimal consideration | 140,678 | 4,587 | 140,678 | 1,546 |
Basic EPS – weighted average number of shares outstanding | 60,132,656 | 50,887,702 | 59,833,452 | 50,659,117 |
Effect of dilutive securities outstanding | ||||
Diluted EPS – weighted average number of shares outstanding | 60,132,656 | 50,887,702 | 59,833,452 | 50,659,117 |
SUMMARY OF SIGNIFICANT ACCOU_13
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Schedule of net loss per share - shares | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total potentially dilutive securities | 7,898,389 | 329,916 |
Warrants to purchase common stock [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total potentially dilutive securities | 5,498,489 | |
Options to purchase common stock [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total potentially dilutive securities | 1,499,000 | |
Restricted stock [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total potentially dilutive securities | 2,250,000 | 189,238 |
Convertible debt [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total potentially dilutive securities | 140,678 |
SUMMARY OF SIGNIFICANT ACCOU_14
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Schedule of concentration of customers | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Customer A [Member] | ||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Schedule of concentration of customers [Line Items] | ||||
Concentration percentage | 29.00% | 51.00% | ||
Customer B [Member] | ||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Schedule of concentration of customers [Line Items] | ||||
Concentration percentage | 58.00% | 44.00% | ||
Customer C [Member] | ||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Schedule of concentration of customers [Line Items] | ||||
Concentration percentage | 13.00% | |||
Customer D [Member] | ||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Schedule of concentration of customers [Line Items] | ||||
Concentration percentage | 44.00% | |||
Customer E [Member] | ||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Schedule of concentration of customers [Line Items] | ||||
Concentration percentage | 85.00% | 36.00% | ||
Customer F [Member] | ||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Schedule of concentration of customers [Line Items] | ||||
Concentration percentage | 18.00% |
OTHER CURRENT ASSETS (Details)
OTHER CURRENT ASSETS (Details) - Schedule of other current assets - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Schedule of other current assets [Abstract] | ||
Prepaid insurance | $ 171,022 | $ 85,201 |
Other prepaid expenses | 29,603 | 105,013 |
Deposits | 3,000 | 28,115 |
Advances for raw material purchases | 450,691 | |
Prepaid marketing costs | 31,579 | |
Total other current assets | $ 203,625 | $ 700,599 |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Property, Plant and Equipment [Abstract] | ||||
Depreciation expense | $ 24,606 | $ 34,403 | $ 74,079 | $ 102,085 |
PROPERTY AND EQUIPMENT (Detai_2
PROPERTY AND EQUIPMENT (Details) - Schedule of property and equipment - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Property, Plant and Equipment [Line Items] | ||
Property and equipment gross | $ 501,880 | $ 499,282 |
Less: accumulated depreciation | (315,115) | (247,036) |
Total property and equipment | 186,765 | 252,246 |
Vehicle [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment gross | 149,916 | 149,916 |
Computer Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment gross | 112,616 | 109,509 |
Furniture and fixtures [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment gross | 94,053 | 93,464 |
Software [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment gross | 61,287 | 67,287 |
Leasehold Improvements [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment gross | 58,613 | 58,613 |
Test Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment gross | $ 25,395 | $ 20,493 |
INTANGIBLE ASSETS (Details)
INTANGIBLE ASSETS (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |||||
Patent costs | $ 155,507 | $ 155,507 | $ 127,593 | ||
License costs | 241,909 | 241,909 | |||
Accumulated amortization of patent costs | 3,169 | 3,169 | $ 1,249 | ||
Accumulated amortization of license costs | 11,232 | 11,232 | |||
Amortization expense | $ 640 | $ 313 | $ 13,152 | $ 742 |
INTANGIBLE ASSETS (Details) - S
INTANGIBLE ASSETS (Details) - Schedule of estimated amortization expense | Sep. 30, 2020USD ($) |
Schedule of estimated amortization expense [Abstract] | |
2020 (3 months) | $ 6,688 |
2021 | 26,752 |
2022 | 26,752 |
2023 | 26,752 |
2024 | $ 26,752 |
ACCRUED EXPENSES AND OTHER CU_3
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Details) - Schedule of accrued expenses and other current liabilities - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Schedule of accrued expenses and other current liabilities [Abstract] | ||
Accrued payroll and other benefits | $ 2,030,035 | $ 2,094,536 |
D&O insurance financing payable | 102,000 | 33,660 |
Accrued interest | 72,844 | 437,569 |
Accrued professional fees | 69,449 | 104,602 |
Other accrued expenses | 64,206 | 67,848 |
Accrued rent and facilities costs | 61,602 | 24,584 |
Sublease deposit | 19,332 | |
Total accrued expenses and other current liabilities | $ 2,419,468 | $ 2,762,799 |
SECURED PROMISSORY NOTES (Detai
SECURED PROMISSORY NOTES (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||||||
Sep. 04, 2020 | Oct. 28, 2019 | Oct. 09, 2018 | Mar. 09, 2018 | Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | Dec. 15, 2019 | |
SECURED PROMISSORY NOTES (Details) [Line Items] | ||||||||||
Percentage of loan facility | 1.00% | |||||||||
Accreted costs | $ 550,000 | $ 359,828 | ||||||||
Common stock share value (in Shares) | 59,388,085 | 59,388,085 | 59,268,085 | |||||||
Common stock issued | $ 5,939 | $ 5,939 | $ 5,927 | |||||||
Principal balance | 11,254,236 | 11,254,236 | 10,000,000 | |||||||
Debt discount | 351,189 | 351,189 | 252,933 | |||||||
Accrued interest | 72,844 | 72,844 | $ 437,569 | |||||||
Interest expenses | $ 338,415 | $ 343,046 | $ 937,165 | $ 1,022,629 | ||||||
Steward Capital Holdings LP [Member] | ||||||||||
SECURED PROMISSORY NOTES (Details) [Line Items] | ||||||||||
Agreement, description | On October 28, 2019, the Company and Steward Capital entered into a letter of agreement to amend the Agreement, as amended (the “Second Amendment”) wherein the parties agreed to (i) extend and amend the due date for all accrued and unpaid interest starting September 2, 2019 to the Maturity Date (September 9, 2020) and (ii) extend and amend the due date for the 3% fee payable to Steward Capital in connection with the First Amendment and waiver dated June 2019 to be payable on the Maturity Date. | |||||||||
Common stock share value (in Shares) | 120,000 | 120,000 | 120,000 | |||||||
Common stock issued | $ 390,000 | $ 390,000 | $ 300,000 | |||||||
Common stock per share (in Dollars per share) | $ 3.25 | $ 3.25 | ||||||||
Steward Capital Holdings LP [Member] | Loan And Security Agreement Member | ||||||||||
SECURED PROMISSORY NOTES (Details) [Line Items] | ||||||||||
Agreement, description | On September 4, 2020, the Company and Steward Capital entered into the Second Amendment to the Loan and Security Agreement (the “Second Amendment”) to (i) extend the Maturity Date to September 9, 2021 and agree to convert all accrued interest into the note, resulting in a new principal balance of $11,254,236, (ii) make all accrued and unpaid interest from September 9, 2020 through the date of maturity due on the Maturity Date, (iii) on or before October 1, 2020, Company shall issue 120,000 shares of Company’s stock to Steward and (iv) make the fee of 3% of the outstanding principal balance of the loan, or $300,000 (as defined in the First Amendment), due at the updated maturity date of September 9, 2021. | |||||||||
Loan And Security Agreement Member | Steward Capital Holdings LP [Member] | Secured Term Promissory Note [Member] | ||||||||||
SECURED PROMISSORY NOTES (Details) [Line Items] | ||||||||||
Aggregate principal amount | $ 10,000,000 | $ 10,000,000 | ||||||||
Secured term promissory note | $ 5,000,000 | $ 5,000,000 | ||||||||
Effective interest rate | 11.25% | 11.25% | ||||||||
Payment of loan commitment fees | $ 25,000 | |||||||||
Funding in loan facility charges | 100,000 | |||||||||
Debt discount | 50,000 | |||||||||
Funding in loan facility charges | $50,000 | |||||||||
Loan And Security Agreement Member | Steward Capital Holdings LP [Member] | Secured Term Promissory Note [Member] | Share-based Compensation Award, Tranche One [Member] | ||||||||||
SECURED PROMISSORY NOTES (Details) [Line Items] | ||||||||||
Accreted costs | $ 250,000 |
LONG-TERM NOTES PAYABLE (Detail
LONG-TERM NOTES PAYABLE (Details) - USD ($) | May 04, 2020 | Jun. 07, 2016 | Aug. 27, 2020 | Jan. 31, 2020 | Sep. 27, 2019 | Aug. 30, 2019 | Feb. 15, 2016 | Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 |
LONG-TERM NOTES PAYABLE (Details) [Line Items] | ||||||||||||
Company issued (in Shares) | 19,625 | 24,428,681 | ||||||||||
Principal balance of promissory notes | $ 370,051 | $ 370,051 | ||||||||||
Principal amount | 11,254,236 | 11,254,236 | 10,000,000 | |||||||||
Promissory Notes [Member] | ||||||||||||
LONG-TERM NOTES PAYABLE (Details) [Line Items] | ||||||||||||
Promissory notes, description | Pursuant to several amendments to the Promissory Notes through July 2019, (i) the Promissory Notes were extended to September 30, 2021 (the “Maturity Date”), (ii) accrued and unpaid interest on the Promissory Notes totaling $39,921 was transferred to principal, and (iii) interest will be accrued from August 2019 through the Maturity Date. | the Company entered into two 10%, 18-month promissory notes for $100,000 each with an individual (the “Promissory Notes”). Pursuant to several amendments to the Promissory Notes through July 2019, (i) the Promissory Notes were extended to September 30, 2021 (the “Maturity Date”), (ii) accrued and unpaid interest on the Promissory Notes totaling $39,921 was transferred to principal, and (iii) interest will be accrued from August 2019 through the Maturity Date. | ||||||||||
Principal balance of promissory notes | 0 | 0 | 239,921 | |||||||||
Accrued interest | 0 | 9,997 | ||||||||||
Interest expense | 3,865 | $ 5,981 | 15,861 | $ 17,447 | ||||||||
Convertible Promissory Notes [Member] | ||||||||||||
LONG-TERM NOTES PAYABLE (Details) [Line Items] | ||||||||||||
Accrued interest | 31,243 | 31,243 | ||||||||||
Interest expense | $ 11,250 | $ 33,750 | ||||||||||
Convertible promissory note | $ 300,000 | |||||||||||
Description of payment of quarterly gross revenue | The maturity date of the Note is based on the payment of 0.6% of quarterly gross revenue until 1.5 times the amount of the Note is paid. | |||||||||||
Warrants to purchase shares of common stock (in Shares) | 140,678 | |||||||||||
Paycheck Protection Program Loan [Member] | ||||||||||||
LONG-TERM NOTES PAYABLE (Details) [Line Items] | ||||||||||||
Principal balance of promissory notes | $ 370,051 | |||||||||||
Principal amount | $ 666,000 | |||||||||||
Paycheck protection program loan matures term | The PPP Loan matures on the two-year anniversary of the funding date and bears interest at a fixed rate of 1.00% per annum. | |||||||||||
Interest rate per annum | 1.00% | |||||||||||
long term liabilities | $ 396,040 | |||||||||||
Description of paycheck protection program loan | For purposes of the CARES Act, payroll costs exclude compensation of an individual employee earning more than $100,000, prorated annually. Not more than 40% of the forgiven amount may be for non-payroll costs. Forgiveness is reduced if full-time headcount declines, or if salaries and wages for employees with salaries of $100,000 or less annually are reduced by more than 25%. | |||||||||||
Series A Preferred Stock [Member] | ||||||||||||
LONG-TERM NOTES PAYABLE (Details) [Line Items] | ||||||||||||
Company issued (in Shares) | 132,890 |
STOCKHOLDERS' EQUITY (Details)
STOCKHOLDERS' EQUITY (Details) - USD ($) | Aug. 14, 2020 | Jun. 03, 2020 | May 06, 2020 | Jan. 31, 2020 | Aug. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Dec. 31, 2018 | Dec. 31, 2019 | Sep. 28, 2018 |
STOCKHOLDERS' EQUITY (Details) [Line Items] | |||||||||||
Preferred stock, authorized | 5,000,000 | 5,000,000 | 10,000,000 | ||||||||
Preferred stock, par value (in Dollars per share) | $ 0.0001 | $ 0.0001 | $ 0.0001 | ||||||||
Preferred stock, shares Issued | |||||||||||
Preferred stock, shares outstanding | |||||||||||
Certificate of designation series A preferred stock | 5,000,000 | ||||||||||
Percentage purchase price | 25.00% | ||||||||||
Effective interest rate | 25.00% | ||||||||||
Stockholder debt term | 1 year | ||||||||||
Common stock, authorized | 350,000,000 | 350,000,000 | 350,000,000 | ||||||||
Common stock, par value (in Dollars per share) | $ 0.0001 | $ 0.0001 | $ 0.0001 | ||||||||
Common stock, outstanding | 59,388,085 | 59,388,085 | 59,268,085 | ||||||||
Common stock, issued | 59,388,085 | 59,388,085 | 59,268,085 | ||||||||
Number of shares to purchase by stock option | 19,625 | 24,428,681 | |||||||||
Amount of shares to purchase by stock option (in Dollars) | $ 15,479 | $ 4,217,969 | $ 5,268,333 | ||||||||
Restricted stock purchase | 3,000,000 | ||||||||||
2018 Equity Incentive Plan [Member] | |||||||||||
STOCKHOLDERS' EQUITY (Details) [Line Items] | |||||||||||
Common stock reserved for issuance | 10,000,000 | 10,000,000 | |||||||||
Preferred Stock [Member] | |||||||||||
STOCKHOLDERS' EQUITY (Details) [Line Items] | |||||||||||
Preferred stock, authorized | 10,000,000 | 10,000,000 | |||||||||
Preferred stock, par value (in Dollars per share) | $ 0.0001 | $ 0.0001 | |||||||||
Preferred stock, shares Issued | 5,000,000 | 5,000,000 | |||||||||
Preferred stock, shares outstanding | 5,000,000 | 5,000,000 | |||||||||
Amount of shares to purchase by stock option (in Dollars) | $ 222 | ||||||||||
Common Stock [Member] | |||||||||||
STOCKHOLDERS' EQUITY (Details) [Line Items] | |||||||||||
Common stock, authorized | 350,000,000 | 350,000,000 | |||||||||
Common stock, par value (in Dollars per share) | $ 0.0001 | $ 0.0001 | $ 0.0001 | ||||||||
Common stock, outstanding | 59,388,085 | 59,388,085 | |||||||||
Common stock, issued | 59,388,085 | 59,388,085 | |||||||||
Amount of shares to purchase by stock option (in Dollars) | $ 243 | ||||||||||
Warrants [Member] | |||||||||||
STOCKHOLDERS' EQUITY (Details) [Line Items] | |||||||||||
Vesting period | 5 years | ||||||||||
Stock compensation expense (in Dollars) | 0 | $ 83,654 | |||||||||
Warrants outstanding | 5,639,167 | ||||||||||
Weighted-average contractual remaining life | 2 years 4 months 24 days | ||||||||||
Exercise prices decrease (in Dollars per share) | $ 0.01 | ||||||||||
Exercise prices increase (in Dollars per share) | 3.25 | ||||||||||
Weighted average exercise price (in Dollars per share) | $ 3.05 | ||||||||||
Stock Options [Member] | |||||||||||
STOCKHOLDERS' EQUITY (Details) [Line Items] | |||||||||||
Stock compensation expense (in Dollars) | $ 81,174 | $ 833,959 | |||||||||
Stock options to purchase | 1,499,000 | 1,499,000 | 1,499,000 | ||||||||
Stock options exercise price (in Dollars per share) | $ 2.13 | ||||||||||
Weighted-average contractual remaining life | 9 years 7 months 6 days | ||||||||||
Stock option exercise price, decrease (in Dollars per share) | $ 2.13 | ||||||||||
Unrecognized compensation expense (in Dollars) | $ 301,216 | $ 301,216 | |||||||||
Expected weighted average vesting period | 1 year 7 months 6 days | ||||||||||
Securities Purchase Agreement [Member] | |||||||||||
STOCKHOLDERS' EQUITY (Details) [Line Items] | |||||||||||
Agreement, description | the Company entered into securities purchase agreements (the “2020 Purchase Agreements”) with certain purchasers (the “2020 Investors”), which provided for the sale of an aggregate of $4,435,000 and the exchange for debt of $265,779 of the Company’s Series A Convertible Preferred Stock (the “Series A Preferred”) at a purchase price of $2.00 per share (the “Purchase Price”) (the “Offering”). On August 14, 2020 and August 27, 2020, pursuant to the 2020 Purchase Agreements, the Company issued an aggregate of 2,350,390 shares of Series A Preferred to the Investors (collectively the “2020 Closing”). In connection with the 2020 Closing, Eric Brock, the Company’s Chief Executive Officer purchased 157,500 shares of Series A Preferred. The aggregate gross proceeds to the Company from the 2020 Closing was $4,700,779. After payment of offering expenses, the net proceeds to the Company from the 2020 Closing was $4,483,749. | ||||||||||
Issue Price One [Member] | Warrants [Member] | |||||||||||
STOCKHOLDERS' EQUITY (Details) [Line Items] | |||||||||||
Warrants to purchase shares | 143,750 | ||||||||||
Warrants exercise price (in Dollars per share) | $ 2.50 | ||||||||||
Issue Price Two [Member] | Warrants [Member] | |||||||||||
STOCKHOLDERS' EQUITY (Details) [Line Items] | |||||||||||
Warrants to purchase shares | 29,375 | ||||||||||
Warrants exercise price (in Dollars per share) | $ 2.13 | ||||||||||
Issue Price Three [Member] | Stock Options [Member] | |||||||||||
STOCKHOLDERS' EQUITY (Details) [Line Items] | |||||||||||
Number of shares to purchase by stock option | 694,625 | ||||||||||
Issue Price Three [Member] | Warrants [Member] | |||||||||||
STOCKHOLDERS' EQUITY (Details) [Line Items] | |||||||||||
Warrants to purchase shares | 694,625 | ||||||||||
Warrants exercise price (in Dollars per share) | $ 2.50 | ||||||||||
Restricted Stock Units (RSUs) [Member] | |||||||||||
STOCKHOLDERS' EQUITY (Details) [Line Items] | |||||||||||
Vesting period | 2 years | ||||||||||
Stock compensation expense (in Dollars) | 1,050,000 | $ 2,100,000 | |||||||||
Unrecognized compensation expense (in Dollars) | $ 6,300,000 | $ 6,300,000 | |||||||||
Restricted stock purchase | 378,478 | ||||||||||
Shares options issued non-vested | 2,250,000 | 2,250,000 | |||||||||
Weighted average grant-date fair value of exercise price (in Dollars per share) | $ 2.80 | ||||||||||
Weighted-average contractual remaining life | 1 year 6 months | ||||||||||
Weighted average grant-date fair value (in Dollars per share) | $ 0.22 | ||||||||||
Vesting period | 2 years | ||||||||||
Consultant [Member] | Restricted Stock Units (RSUs) [Member] | |||||||||||
STOCKHOLDERS' EQUITY (Details) [Line Items] | |||||||||||
Stock compensation expense (in Dollars) | $ 10,117 | $ 30,357 |
STOCKHOLDERS' EQUITY (Details)
STOCKHOLDERS' EQUITY (Details) - Schedule of assumptions used in Black-Scholes Model - Warrants [Member] | May 06, 2020$ / shares |
STOCKHOLDERS' EQUITY (Details) - Schedule of assumptions used in Black-Scholes Model [Line Items] | |
Stock price (in Dollars per share) | $ 2 |
Risk-free interest rate | 0.24% |
Volatility | 45.17% |
Expected life in years | 3 years |
Dividend yield | 0.00% |
STOCKHOLDERS' EQUITY (Details_2
STOCKHOLDERS' EQUITY (Details) - Schedule of assumptions used in Black-Scholes Model - Stock options [Member] | May 06, 2020$ / shares |
STOCKHOLDERS' EQUITY (Details) - Schedule of assumptions used in Black-Scholes Model [Line Items] | |
Stock price (in Dollars per share) | $ 2 |
Risk-free interest rate | 0.37% |
Dividend yield | 0.00% |
Minimum [Member] | |
STOCKHOLDERS' EQUITY (Details) - Schedule of assumptions used in Black-Scholes Model [Line Items] | |
Volatility | 42.03% |
Expected life in years | 5 years 6 months |
Maximum [Member] | |
STOCKHOLDERS' EQUITY (Details) - Schedule of assumptions used in Black-Scholes Model [Line Items] | |
Volatility | 42.19% |
Expected life in years | 5 years 9 months 18 days |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details) - USD ($) | Sep. 30, 2020 | Mar. 12, 2020 | Dec. 31, 2019 |
Eric Brock [Member] | |||
RELATED PARTY TRANSACTIONS (Details) [Line Items] | |||
Accrued salary | $ 94,218 | $ 141,667 | |
Accrued balance | 94,218 | ||
Stewart Kantor [Member] | |||
RELATED PARTY TRANSACTIONS (Details) [Line Items] | |||
Accrued salary | 2,956 | $ 8,334 | $ 280,209 |
Accrued balance | 274,831 | ||
Thomas Bushey [Member] | |||
RELATED PARTY TRANSACTIONS (Details) [Line Items] | |||
Accrued salary | 70,387 | ||
Accrued balance | $ 70,387 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) | Oct. 14, 2020 | Oct. 26, 2020 |
Subsequent Event [Member] | ||
SUBSEQUENT EVENTS (Details) [Line Items] | ||
Subsequent event, description | (i) Steward Capital waived the repayment requirement under the Agreement if the Company completes a public offering and realizes gross cash proceeds of not less than $20,000,000 and (ii) the Company agreed to repay Steward Capital $5,000,000 if the Company completes a public offering and realizes gross proceeds of not less than $20,000,000. | The proposed maximum aggregate offering is $25,000,000. The Form S-1 has not yet been declared effective by the Securities and Exchange Commission. |